TOP STORIES

• SCHOTT Solar & SolarEdge Partner to Develop Power Harvesting System
• Israeli Suit Manufacturer Bagir Eco Initiative Produced in Egypt
• Middle East Retail Forecast To Return To Growth of 14% for 2009-2013
• Atid, EDI Represents US States at ILSI Biomed 2009
• IDF Developing Sabbath-Friendly Keyboard & Computer Screen
• EGYPT: Plans To Deepen Suez Canal May Make Up For Lost Revenue

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Finance Ministry Releases Green Car Taxation Plan

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Tessera Completes Acquisition of Dblur Assets
2.2 SCHOTT Solar & SolarEdge Partner to Develop Power Harvesting System
2.3 Greylock Partners Invests in Leading Israeli Content & New Media Company The Box
2.4 Agent Video Intelligence Receives i-LIDS Certification by UK's HOSDB for Use

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Accumetrics Announces Distribution Channels in Israel and Cyprus
3.2 Israeli Suit Manufacturer Bagir Eco Initiative Produced in Egypt
3.3 Turkey Approves ExxonMobil–TPAO Agreement to Explore Black Sea

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 The Shekel Completes One Year in the CLS System
4.2 Government Sues Jerusalem Light Rail Franchisee

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Middle East Retail Forecast To Return To Growth of 14% for 2009-2013
5.2 Iraq-Kuwait Spat Over War Payments
5.3 Gulf States Sign Monetary Union Pact
5.4 UAE Inflation 4.9% in January - April
5.5 UAE Expat Workers' Remittances Exceed $10 Billion
5.6 Saudi Arabian Pharmaceutical Market Worth $1.9 Billion
5.7 Egypt Petroleum Production Up 7.14%

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkey Unveils New TRY 3.1 B Stimulus Plan
6.2 IMF Says Turkey's 2009 Fiscal Policy Should Be "Expansionary"
6.3 Turkish Exports Post a 40% Drop in May
6.4 Cyprus Tourism Revenues Take 7.5 % Dive
6.5 Greek Inflation at 41-Year Lows in April
6.6 Greek Retail Sales Fall in March

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7: GENERAL NEWS AND INTEREST

*REGIONAL:

7.1 Lebanese Elections Deals Setback to Hezbollah
7.2 Qatar's Population Reaches 1.65 Million, Up 6.5%

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Atid, EDI Represents US States at ILSI Biomed 2009
8.2 BioLineRx Announces Positive Preliminary Results From the Phase I/II Trial of BL-1040
8.3 OPGAL's Fever Detecting System Can Help Contain the Spread of Swine Flu
8.4 Compugen Awarded Grants From Israel Office of Chief Scientist
8.5 D-Pharm Receives FDA Clearance to Commence a Phase III Trial of DP-b99 in Acute Stroke Patients
8.6 EarlySense's EverOn System Receives FDA Clearance and CE Mark Certification
8.7 Kamada Reports Positive Proof-of-Concept Data for Inhaled Alpha-1 Antitrypsin in Bronchiectasis
8.8 Yissum Introduces Novel Compound for the Treatment of Osteoporosis

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 IDF Developing Sabbath-Friendly Keyboard & Computer Screen
9.2 Alvarion Selected to Deploy the First Mobile WiMAX Network in Papua New Guinea for Telikom PNG
9.3 Tata Teleservices Provides Wi-Fi Coverage in Mumbai with Wavion Base Stations
9.4 Ralink & Celeno Partner to Address Growing Demand for Wireless High Definition Video Streaming
9.5 Avnet to Market Axxana's Phoenix Disaster Recovery System in Mexico
9.6 ATK & Elbit Systems Conduct Successful Flight Test of GATR from Helicopter
9.7 Waves MaxxAudio Delivers Next Generation Tools for PC Manufacturers
9.8 Alvarion & Iberbanda Expand WiMAX Network
9.9 Voltaire Announces Vantage 8500 Ethernet Switch for Scale-Out Data Centers
9.10 VocalTec Strengthens Its Position in the Ukraine
9.11 Leading International Financial Institution Successfully Deploys Optibase Corporate IPTV Solution

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10: ISRAEL ECONOMIC STATISTICS

10.1 April Sees 13,000 More Israelis Unemployed
10.2 Israel's Unemployment Rate Rises Sharply To 7.6%
10.3 Car Sales in Israel Drop For Nearly All Brands

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11: In Depth

11.1 JORDAN: Tax Regime Change
11.2 KUWAIT: Moody's Confirms Sovereign Ratings But With Negative Outlook
11.3 KUWAIT: New Faces, Same Potential for Trouble
11.4 BAHRAIN: Fitch Affirms 'A'; Outlook Stable
11.5 BAHRAIN: Building on a Solid Base
11.6 BAHRAIN: Holding Out Well
11.7 UAE - Middle East Economy: Show-stopper?
11.8 UAE: The Medical Device Market
11.9 SAUDI ARABIA: Health Infrastructure Development Second In Budget for Capital Expenditure
11.10 EGYPT: Plans To Deepen Suez Canal May Make Up For Lost Revenue
11.11 TUNISIA: Economy Shaken
11.12 MOROCCO: Electoral Reform with Public Relations Value

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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Finance Ministry Releases Green Car Taxation Plan

Globes reported that in 8 June, the Minister of Finance and the Minister of the Environment released details of the reform of car taxation designed to help cut air pollution, adopting the recommendations of the inter-ministerial committee. The committee comprised representatives of the Finance, Environment, Transport and National Infrastructures ministries. Under the new plan, purchase tax on new vehicles will be raised from the current 75% to 92% on all models apart from hybrid vehicles, on which the tax rate will remain 40%, and electric vehicles, on which the tax rate will be only 10%. After the tax rise, a rebate will be given of between zero and NIS 15,000, depending on the level of pollution that a vehicle emits. Pollution levels have been divided into fifteen groups according to a formula that weights different kinds of emissions. The formula was developed by the Ministry of Finance and the Ministry of the Environment. From 1 August, all vehicles will be classified into the various groups, and in accordance with those classifications the rebate offsetting part of the purchase tax rise will be given. The Ministry of Finance claims that for more than half the vehicles on sale in Israel in 2009, the level of purchase tax will remain the same, or will even fall. The ministry says that almost all the additional tax will fall on vehicles in the highest pollution group. (Globes 08.06)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Tessera Completes Acquisition of Dblur Assets

San Jose, California's Tessera Technologies announced that it has completed its acquisition of certain assets of Dblur Technologies, an Israel-based developer of software lens technology for cell phone cameras and other imaging applications. Tessera announced it had signed the acquisition agreement on 30 April 2009. Under the terms of the agreement, Tessera acquired certain of Dblur's assets including intellectual property and specified customer agreements. In addition, Tessera hired certain former Dblur employees. Herzliya's Dblur was established in 2000 to meet the challenge of providing handset and camera module vendors the ability to produce functional and high-performance modules, while breaking the cost, size and complexity constraints of mobile camera design. Dblur's goal is to use its unique patent pending Software Lens Technology to create a new camera module design standard, to revolutionize the mobile optics and imaging world. (Tessera27.05)

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2.2 SCHOTT Solar & SolarEdge Partner to Develop Power Harvesting System

Germany's SCHOTT Solar and SolarEdge announced a joint design partnership agreement to develop and test a novel PV panel-integrated power harvesting system embedded directly into SCHOTT Solar's modules. The outcome of the joint efforts will maximize power generation throughout the solar lifecycle while dramatically reducing complexities and costs. While the solar industry has taken enormous strides to speed cell efficiency and other innovations, there are widely adopted array designs and system architectures that inherently create room for improvement. New architecture and standard design activate considerable power per solar field, as well as monitoring. Poor roof utilization, fire and maintenance safety issues and ineffective panel theft prevention measures can be avoided.

SolarEdge (http://www.solaredge.com) is a provider of smart, holistic PV power harvesting and monitoring solutions for maximum energy and cost efficiency. The company works with industry-leading partners to embed its active electronic solution directly into PV panels. Unlike centralized architectures that cannot optimize the power of each panel, only SolarEdge performs MPPT per panel while communicating across existing power lines for granular visibility and control. As a result, our systemic holistic approach provides more power from any given installation, eliminates design constraints, provides complete visibility, solves all safety issues and provides anti-theft without increasing power harvesting costs. (SolarEdge27.05)

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2.3 Greylock Partners Invests in Leading Israeli Content & New Media Company The Box

The Box, one of Israel's leading content and creative companies, announced that Greylock Partners has invested several million dollars in the company. Greylock's investment will be used to accelerate The Box's international expansion, including hiring new staff and officially opening its US office in the Los Angeles area, as well as ramping up activities in London and Paris. The Box is Greylock Israel's first content oriented investment. One of the world's leading venture capital firms, Greylock Partners has been investing in Israel since 2001 through a dedicated fund. Greylock's significant investments include Facebook, LinkedIn, Zip Car and DoubleClick.

The Box creates and produces innovative, cross platform new media campaigns for some of the world's leading brands including, Nike, Coca Cola, Orange, Doritos and Disney. The company recently launched "CelebZ," a 30-minute prime-time animated series where viewers can actually create 25% of the show's content using The Box's proprietary innovative interactive content creation platform. A companion Web site lets viewers drag and drop characters, backgrounds, scripts and music to create sketches – which are put to a nationwide vote, with the winning sketch then professionally produced and integrated into the next week's episode. The series is currently aired on the "Yes Stars" channel of Israel's Yes satellite network, and will soon to be produced in other territories worldwide.

Tel Aviv's The Box (http://www.theboxsite.com) is one of Israel's leading content company. Founded in 2003, the company is divided into -two divisions – Original content and Advertising. The Box specializes in the creation of true cross platform content for the benefit of both advertisers as well as the entertainment of TV viewers, internet and mobile users. (Greylock06.06)

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2.4 Agent Video Intelligence Receives i-LIDS Certification by UK's HOSDB for Use

Agent Video Intelligence (Agent Vi) announced the certification of its Video Analytics software, Vi-System 3.3 service pack 1, by the UK Home Office Scientific Development Branch (HOSDB) for both primary detection systems for operational alerts as well as event based recording in sterile zone monitoring applications. Vi-System is one of a select group of video analytics products that have been approved by the HOSDB for government use. The HOSDB Library for Intelligent Detection Systems (i-LIDS) is an image library used to test video analytic product performance against an objective and professional benchmark. Experts at HOSDB conduct yearly testing of video analytics solutions from companies world-wide. To date, a limited number of video analytics providers have received i-LIDS certification as "primary" detection systems for operational alerts in sterile zone monitoring applications. The certification as "Primary System" indicates that a detection system can operate as a standalone system, without the support of a secondary system, due to its superb detection capabilities.

Vi-System is based on Agent Vi's patented distributed image processing architecture which enables providing the highest detection performance using a fraction of the computational resources required by competing products. A dual core server running Vi-System software can detect, track and analyze various human, vehicle and object behaviors captured by surveillance systems for 100 cameras simultaneously; it then automatically reports such activities accurately and in real-time to pre-designated security personnel. As a result of Vi-System's capabilities, security operators can increase their awareness of events of interest, while saving labor and significantly reducing the potential for human error.

Founded in 2003, Tel Aviv's Agent Vi (http://www.agentvi.com) is a pure-software video analytics company that provides video analytics solutions for a variety of security, safety, traffic, business intelligence and operational efficiency applications around the world. Agent Vi's open-architecture technology seamlessly integrates with existing video equipment and IP infrastructure on networks of any size, making video analytics feasible, affordable and scalable. (Agent Vi09.06)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Accumetrics Announces Distribution Channels in Israel and Cyprus

San Diego's Accumetrics announced it has signed new distribution agreements for its VerifyNow System in both Israel and Cyprus. Medtechnica will oversee distribution of all VerifyNow products in Israel, while Z.S. Curemed will be the sole distribution channel in Cyprus. These distribution agreements continue to expand Accumetrics' reach in both scope and geography, and add to the growing numbers of countries outside of the United States and Europe where physicians have access to the VerifyNow System. The VerifyNow System assesses response to antiplatelet therapies, such as aspirin, Plavix and GP IIb/IIIa inhibitors. As response to these drugs varies, the tests help physicians ensure their patients on antiplatelet medications are receiving the optimal benefit.

Founded in 1958, Medtechnica, Ltd. has become one of the largest medical equipment suppliers in Israel. Medtechnica is the sole distributor, in Israel, of leading international manufacturers of medical equipment, including Phillips Medical Systems, Olympus Medical, Maquet, 3M Medical and among others. Established in 2001 in Cyprus, Curemed has grown to become one of the leading companies in the sectors of Interventional Cardiology and Intensive Care. Curemed focuses on promotion, sales and support of innovative Interventional Cardiology and Intensive Care devices to Public and Private Hospitals in Cyprus. (Accumetrics09.06)

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3.2 Israeli Suit Manufacturer Bagir Eco Initiative Produced in Egypt

A working relationship between the Middle East and Israel is possible and one innovative Israeli suit manufacturer has taken the initiative to extend its hands across the Egyptian border resulting in a union that is respectful, friendly and profitable. The outreach has been successfully achieved by Bagir Ltd. by way of its newest sustainable tailored clothing called ECOGIR, which is made from recycled plastic bottles and is manufactured at Metco, a tailored clothing factory in Port Said (50% of what Bagir manufacturers in Port Said is exported to the United States with the other 50% going to the UK market).

It all began in 2004, when the U.S. signed a historic trade partnership with both Egypt and Israel. The agreement, signed by then Egyptian Minister of Foreign Trade and Industry Rachid and Israeli Vice Prime Minister Olmert, created Qualified Industrial Zones (QIZs) in Egypt, which allow for duty-free export of certain Egyptian goods that contain Israeli inputs to the U.S. This was a result of President Bush's plan to promote closer U.S. trade ties with the Middle East, which strengthen development, openness and peaceful economic links between Israel and its neighbors. These industrial zones create a daily opportunity to build business and personal relationships among Egyptians, Israelis and Americans. (Bagir 03.06)

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3.3 Turkey Approves ExxonMobil–TPAO Agreement to Explore Black Sea

Exxon Mobil Corporation announced the Turkish government approved an agreement between its affiliate ExxonMobil Exploration and Production Turkey B.V. and the Turkish national oil company (TPAO) to explore two deepwater blocks in the Black Sea. ExxonMobil and TPAO signed the agreement in November 2008 to jointly explore deepwater prospects in the Samsun Block, which measures approximately 2 million acres (8,500 square kilometers) and the eastern portion of 3921 Block, which measures approximately 5 million acres (21,000 square kilometers). Water depths reach an approximate 6,500 feet (2,000 meters). ExxonMobil will be the operator and will earn a 50% interest in both offshore blocks. TPAO and ExxonMobil intend to collaborate and utilize the skills and operational abilities of both companies during all phases of the block evaluation and potential development.

TPAO, Turkey's sole national oil company, was founded in 1954. Since its foundation, TPAO has made pioneering efforts in all branches of petroleum industry and implemented significant and strategic investments successfully. In addition to vast onshore and shallow water operating experience in Turkey, TPAO has interests in various projects in Azerbaijan, Kazakhstan and Libya. ExxonMobil affiliates or predecessor companies have been operating in Turkey for more than 100 years. In 1905, the Vacuum Oil Company began selling lubricating oils in Turkey and in 1911 the Standard Oil Company of New York began selling kerosene. Mobil Oil became the first international company to receive an oil exploration permit in Turkey when the Grand National Assembly (Meclis) passed the new Petroleum Law in 1954. Today, ExxonMobil's presence in Turkey includes a lubes blending plant in Istanbul as well as finished lubricants, aviation fuels and marine fuels sales in important markets throughout the country. (ExxonMobil08.06)

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 The Shekel Completes One Year in the CLS System

In its first year as an eligible currency in CLS Bank the average daily volume of Israel Shekel foreign currency transactions was NIS 17.75 billion ($4.8b). The highest volume in a single day was NIS 39 b ($10.6b). Some 38 CLS Member banks are active in shekel settlement. CLS Bank is an international consortium bank established to reduce settlement risk in foreign exchange transactions and international payments. Daily average foreign exchange transactions cleared via CLS reached $3.3 trillion in 2008, with a peak daily value of over $10 trillion. CLS operates only between financial institutions; however the efficiencies and risk reduction it provides benefits all market participants. The customer of a bank can be assured that his foreign exchange transactions will not be subject to settlement risk, and a more efficient system reduces overall costs. Moreover, the entry of the Shekel into the system has brought the Israeli consumer additional benefits, such as easier access to internet and e-commerce payments in shekels, and the ability to choose shekel payments when using a credit card abroad.

The Shekel was accepted as an eligible currency and entered the system in May 2008, following the successful completion of a multi year project led by the Bank of Israel. It became one of 17 leading currencies (which comprise 95% of total global volume) for which FX transactions can be settled on a global risk free basis. CLS has 59 Member banks and 4,700 participants. The inclusion of the shekel in CLS was recognition of the standing of the Israeli economy as well as the stability and efficiency of the banking and payment systems in Israel. It also improves the financial infrastructure of Israel, reducing risk and increasing efficiency, especially important in view of the financial crisis of the recent past. The BOI notes that the FX market in Israel has continued to operate smoothly and efficiently during the period, a sign of the underlying resilience of Israel's economy and the stability of Israel's financial system. (BOI26.05)

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4.2 Government Sues Jerusalem Light Rail Franchisee

Having already declared that it would not allow more delays in the Jerusalem light rail project, on 6 June the government filed a claim with court arbitrators against project franchisee CityPass over delays in the project. The government asked arbitrators to enforce the contract to complete the line by September 2010, the deadline agreed to in the compromise agreement signed last year. CityPass had requested a second postponement for the project until June 2011. The government has also asked the arbitrators to delay a NIS 32.5 million payment to CityPass, out of the NIS 150 million set-up grants for the project. The government stated that CityPass failed to use scores of available workdays, knowingly putting it in a position where it would not be able to meet the project timetable. CityPass said in response that the request for an injunction was a groundless legal maneuver by the government that was filed in response to CityPass' claims for the many delays caused by the government. (Globes 06.07)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Middle East Retail Forecast To Return To Growth of 14% for 2009-2013

The Middle East has emerged as a key market for retailers across the world. The region is witnessing rapid transformation in retail industry, driven by changing market dynamics and rapid economic transformation. Over a period of time, the retail culture across the Middle East has evolved from traditional outlets to large shopping malls, hypermarkets, supermarkets and organized chains. The changing consumer demographics in countries like Saudi Arabia and UAE, presence of large expatriate population, rising purchasing power and abundance of petro dollar has attracted various premium and luxury brands to the region. The Middle East retail industry was valued at around $200 billion and by the end of 2008, this value swelled more than $ 400 billion. The report anticipates that there will be a marginal effect of the 2008 financial crisis on the retail market in the Middle East, and it will see a growth of around 14% during 2009-2013.

Strong economic fundamentals and a well protected banking system will shield the region from the aftermath of the financial crisis. Although the declining oil prices may be a cause for concern for most of the oil exporting countries, it will be short-lived as improving economic conditions and increasing fuel consumption will drive the oil prices upwards. Saudi Arabia and UAE are the most dynamic retail markets across the region. These two markets have continued dominating the retail industry landscape for more than a decade and will continue to do the same in the coming years, the report said. The presence of large expatriate population and the majority of the region's retail investment in these countries has helped to maintain the growth momentum. (BI-ME 08.06)

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5.2 Iraq-Kuwait Spat Over War Payments

Iraqi and Kuwaiti lawmakers traded accusations over UN-imposed reparations Iraq must make to its smaller neighbor, which it invaded in 1990 under former dictator Saddam Hussein. Kuwait insists Iraq remain under United Nations chapter seven rules, meaning Iraq must continue to pay 5% of its oil revenues to Kuwait and other claimants in war reparations. The row has prompted some Kuwaiti politicians to call for the withdrawal of their ambassador to Baghdad, whose appointment last year was hailed as a breakthrough in hitherto frosty ties between the two countries. Kuwait wants Iraq to stay under chapter seven rules until issues including border demarcation and compensation for Kuwaiti property lost or damaged during Iraq's invasion are resolved. Iraq relies on oil revenues for almost all its income, and flagging output and a fall in oil prices from last year has hit its budget hard, exacerbating misgivings in paying reparations to Kuwait for an invasion conducted by a former Iraqi leader. Iraq's majority and now dominant Shiite Muslims feel they were just as much victims of Saddam as Kuwait was. Kuwaiti deputies say the decision to lift the chapter seven rules is up to the United Nations. Iraqi government spokesman Ali Al-Dabbagh said Iraq wanted calm, diplomatic solutions to issues outstanding with Kuwait, and that Iraq would do what it could to meet its demands, but in return wanted it to not "stand against" ending chapter seven. "Chapter seven means Iraq is still considered a threat to international peace and security. For that reason Iraq wants to exit from chapter seven," he said. (Various04.06)

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5.3 Gulf States Sign Monetary Union Pact

On 24 May, Saudi Arabia, Kuwait, Qatar and Bahrain signed an accord creating a pared-down monetary union, after the UAE became the second country to abandon the project. The ceremony was attended by foreign and finance ministers and central bank governors of the six-nation Gulf Cooperation Council (GCC) in the Saudi capital Riyadh. It comes as a confidence-building measure after the shock decision by the UAE, the second-largest Arab economy, to leave the plan in protest after a 5 May decision to base the joint central bank in Riyadh. In doing so, it stirred doubts whether the project would proceed or, if so, whether the new currency bloc would be of much benefit to the energy-exporting region. The UAE withdrawal was not the first setback. Oman opted out in 2006 and earlier this year the GCC abandoned an initial 2010 deadline for issuing common notes and coins. The UAE's foreign minister said it would consider rejoining the Gulf monetary union if the terms change and its neighbors agree to allow a joint central bank to be based in the country. However, Saudi Finance Minister Al Assaf said earlier that the location of a Gulf central bank would not be open for renegotiation. (Reuters07.06)

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5.4 UAE Inflation 4.9% in January - April

The UAE Ministry of Economy released its first-ever monthly inflation data, announcing that inflation was an annual 4.94% in the first four months of 2009. Consumer prices fell 2.7% in the same period, reflecting a drop in housing costs in a declining property market. The consumer price index stood at 113.07 points at the end of April compared with 116.18 points at the end of January. The decline was due mainly to a 5% drop in the housing index over the period to 113.01 points in April compared with 118.94 points in January. Rising house prices were one of the drivers of inflation in the UAE in recent years and price rises peaking at a 20-year high of 12.3% in 2008, the ministry said. Food and beverage costs rose an annual 4.84% while housing costs advanced 4.99%. Real estate prices are slumping in the UAE, particularly in the emirate of Dubai, where residential real estate prices fell an average 41% in the first three months of the year. (Various03.06)

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5.5 UAE Expat Workers' Remittances Exceed $10 Billion

The foreign workers in the UAE transfer more than $10b per annum to their home markets, making UAE the second highest performer in the GCC in fund remittance. The Money Transfer International (MTI), the global trade association, in its report said the GCC has the potential to drive growth in the remittance sector even though the global economy is in slow down. During March 2009 alone, the volume of remittance from the UAE to Pakistan topped $174m. More than 40% of all Overseas Filipino Workers (OFWs) are based in the Middle East and 10.5% live and work in the UAE. Remittances to the Philippines from the UAE reached more than $584m in 2008. According to MTI data, Saudi Arabia, UAE and Kuwait are the GCC's best performers, with UAE slated as the third largest sender of remittances, worldwide. On the back of this anticipated growth in the region, MTI recently launched its Gulf chapter in the Kingdom of Bahrain. (TradeArabia 02.06)

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5.6 Saudi Arabian Pharmaceutical Market Worth $1.9 Billion

Research & Markets (http://www.researchandmarkets.com) has announced the addition of the "The Pharmaceutical Market: Saudi Arabia" report to their offering. Multinational manufacturers, who for years have enjoyed a relative free hand in supplying the Saudi Arabian market with little obstruction, are beginning to feel the heat, as the government starts to squeeze margins with annual price cuts of 1% per annum which began in 2008. Imported pharmaceuticals have, for a long time, dominated nearly 85% of the market. Around ten multinational manufacturers have managed to command a 50% share of the market in value terms, but this could very well change with the price cuts. Saudi Arabia is the largest and richest of the Gulf States due to its vast reserves of oil and natural gas. This means however, that the country's wealth, and the economy, is dependent on the fluctuating price of oil. There is little domestic production in Saudi Arabia, therefore the vast majority of the market is provided by imports. However, Saudi Arabia imports a large amount of semi-finished medicaments which are then re-labeled, repackaged and exported. In 2006, imports were valued at $1.9 billion, a rise of 12.5% over 2005. Germany and Switzerland were the leading suppliers. In contrast, exports amounted to just $102.1 million. The pharmaceutical market is valued at $1.9 billion in 2008, equal to $77 per capita. Annual growth is predicted to be 5.1%, bringing the market to $2.5 billion or $87 per capita by 2013. In terms of value, the country is comparable to Egypt. (R&M27.05)

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5.7 Egypt Petroleum Production Up 7.14%

Egypt's production of crude oil, condensates and biogas hit 2.955 million tons in April, up 7.14% from April 2008, according to figures from Egypt's Statistical Indicators. April's numbers were down slightly from March 2009 production levels, which reached 3.033 million tons, but up from February levels of 2.759 million tons. Petroleum production levels have remained relatively stable since the onset of the world financial crisis, showing overall growth throughout 2008 and into 2009. Last year's growth numbers showed a 6.3% increase in production. Egypt's petroleum industry has been bolstered by active government investment and new partnerships formed under the auspices of Petroleum Minister Fahmy. Over the past five months the Egyptian cabinet has approved 17 new petroleum agreements constituting $3.5 million in investments. (DNE08.06)

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkey Unveils New TRY 3.1 B Stimulus Plan

Turkish Prime Minister Erdogan unveiled a new stimulus package on 4 June to boost employment and new investment. Investment incentives include slashing corporate tax to 2 – 10% depending on region, which stands at 20% currently. Moreover, loan guarantee fund with a size of TRY1 billion for SME's is finally established. According to the plan, 65% of the loan used by SME's will be guaranteed and total amount of guaranteed credit is expected at TRY10 billion. The overall cost of the package is estimated by local press at TRY3.1 billion; however, Erdogan refrained from putting a price tag on the package, noting that its cost will be dependent on entrepreneurs' applications to incentives. (Reporter05.06)

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6.2 IMF Says Turkey's 2009 Fiscal Policy Should Be "Expansionary"

Turkey's fiscal policy will have to be expansionary in 2009 given a shrinking economy, but fiscal deterioration if unchecked can add pressure on debt and long-term interest rates, an IMF representative said on 29 May. The IMF expects Turkey's economy to contract by 5.1 % this year due to the effects of the global economic crisis and the government has implemented stimulus measures, including tax cuts and higher spending. Turkey and the IMF are engaged in negotiations over a loan deal. Protracted talks have failed to produce a loan accord, expected to reach $45 billion, due to differences on public sector spending and fiscal reforms. Turkey's previous $10 billion IMF stand-by agreement expired in May 2008 and the current talks are aimed at a new three-year stand-by, but the government is increasingly reluctant to agree to the spending cut demands coming from the fund. (Hurriyet31.05)

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6.3 Turkish Exports Post a 40% Drop in May

Turkish exports dropped 39.97% to $7.35 billion in May compared to the same period in 2008, according to data released Monday by the Assembly of Turkish Exporters, or TIM. Turkey sold exports worth $35.8 billion during the first five months of the year. Turkey's year-on-year exports as of May have also declined 9.95% to $108.44 billion. The industrial sector, once again, pulled most of the weight, as it was responsible for 85% of Turkey's total exports. Still, exports implemented by the sector were 42.65% lower compared to last year. The sector was able to bring in $6.25 billion in May. The agricultural sector contributed 12.5% of Turkey's total exports. The exports of the sector totaled $180.1 million, which was a decline of 11.14% compared to the same period last year. The mining sector's exports declined 42% to 180 million during the same period. Iron and steel saw a decline of 44.85%. The only industry that was able to implement exports above $1 billion was automotive and its suppliers' industry with $1.33 billon. Last month Turkey's top 10 importers were Germany, France, England, Italy, Iraq, Egypt, Russia, the UAE, the US and Spain in that order. (Hurriyet02.06)

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6.4 Cyprus Tourism Revenues Take 7.5 % Dive

Revenues in Cyprus's vital tourism sector plunged 7.5 % in the first four months, signaling a difficult year ahead amid the global recession. Tourism revenues, which account for 12% of GDP in the government-controlled south of the island, fell to an estimated €232.3m in the four months to April from €251m last year. In April, revenues from holidaymakers reached €107.4m from €107.8m in the same month of 2008. Tourism income for last year as a whole fell 3.5 % to €1.79 billion from €1.85 billion in 2007. (AFP30.05)

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6.5 Greek Inflation at 41-Year Lows in April

Greek consumer price inflation eased further in May to a 0.5% annual rate, after dropping to a 41-year low in the previous month. The year-on-year inflation rate for April was 1%. Consumer prices in the euro zone stopped growing year-on-year in May for the first time, posing a risk of deflation that could damage economic recovery. (Reporter09.06)

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6.6 Greek Retail Sales Fall in March

Greece's retail sales by volume fell 18.3 % year-on-year in March after a 13.7 % drop in February, data by the country's statistics service showed on 29 May. Retail sales by revenues dropped 17.6 % year-on-year in March after a 12.9 % drop in the previous month. The decline of private consumption continues at an accelerated pace, as all components of retail sales, particularly durable consumption goods, shrink at a very rapid pace. The impact of uncertainty on consumer confidence was evident at the end of the sales period, and this implies there will be just a marginal recovery of retail sales in the coming months. (Reuters30.05)

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7: GENERAL NEWS AND INTEREST

*REGIONAL:

7.1 Lebanese Elections Deals Setback to Hezbollah

The outcome of the 7 June Lebanese elections, in which the pro-Western alliance led by Saad Hariri eked out a narrow victory over the Hezbollah-led alliance, was welcomed in Israel as a rare piece of good news from the country's northern neighbor. The struggle for power between Hariri's March 14 coalition and the Hezbollah-led March 8 alliance mirrored the regional standoff between pro-Western moderates and pro-Iranian radicals.

Lebanon's new political map emerged after the assassination of Prime Minister Rafik Hariri in February 2005. With observers blaming Syria for the killing, Shiite Hezbollah held a huge pro-Syrian demonstration in Beirut on March 8 of that year. This gave birth to the pro-Syrian March 8 alliance comprised of Hezbollah, the Shiite Amal party and Michel Aoun's Christian Free Patriotic Movement. A huge counter-demonstration took place on March 14, giving birth to a coalition of Sunni Muslims, Druze and other Christian factions known as the March 14 coalition. Led by the slain politician's son, Saad, the coalition called for the withdrawal of Syrian troops from Lebanon. This precipitated the so-called Cedar Revolution, which forced Syrian troops to leave the country.

Ever since, the fault line in Lebanese politics has run through a sharp pro- and anti-Syria/Iran divide rather than the strict denominational differences of old. In the 7 June vote, the March 14 alliance increased its strength slightly, winning 71 seats to 57 for the radicals. While the outcome of the election is good news for pro-Western moderates, it did little to change the status quo: The split before the vote had been 70-58 in the 128-seat legislature. Now, much will depend on the kind of government the winning alliance forms. If there is no national unity government, the situation easily could deteriorate into the kind of internal unrest that led to the Hariri assassination. Hezbollah already has warned the May 14 alliance not to even think of trying to disarm its militia.

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7.2 Qatar's Population Reaches 1.65 Million, Up 6.5%

Qatar's population grew 6.5% to 1.65 million in the first five months of the year from December, the Qatar Statistics Authority announced on 2 June. The country's population grew from 1.55 million people at the end of December. Foreign workers make the majority of the population of Qatar, the world's biggest exporter of liquefied natural gas. (Reuters 03.06)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Atid, EDI Represents US States at ILSI Biomed 2009

Atid, EDI (http://www.atid-edi.com), a Jerusalem based business consulting firm, will represent their client states of Georgia, Illinois and Pennsylvania at the upcoming Israel Bio Med conference, taking place on 15 – 17 June in Tel Aviv. ILSI Biomed 2009, Israel's premier life sciences conference, showcases Israel's most advanced companies and technologies. This basket of events offers a unique opportunity to gain full access to the latest information available in the field. Furthermore, networking and exploring business relationships at an event with such a magnitude and diverse mix of attendees could only be matched by attending several years' worth of other congresses. The US states will be promoting locally made products and seeking to discuss potential partnerships with Israeli bioscience companies considering locating facilities in the US.

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8.2 BioLineRx Announces Positive Preliminary Results From the Phase I/II Trial of BL-1040

BioLineRx announced positive preliminary results from the ongoing phase I/II clinical trial designed to assess the safety and feasibility of BL-1040, the first injectable device designed to address cardiac remodeling, in 20- 30 patients at several sites in Germany and Belgium. To date, 15 patients were successfully treated with BL-1040 with no complications. Moreover, six months follow up results from the first 5 patients show BL-1040's efficacy in preventing cardiac remodeling and preserving cardiac function. BL-1040 represents a breakthrough approach to supporting cardiac tissue damaged as a result of acute myocardial infarction (MI), improving cardiac function and survival. BL-1040 is a resorbable liquid polymer that is administered via the coronary artery during standard catheterization and flows into the damaged heart muscle. BL-1040 undergoes a liquid to gel phase transition within the infarcted cardiac tissue and forms a protective "scaffold" that enhances the mechanical strength of the heart muscle during recovery and repair, thereby preventing pathological enlargement of the left ventricle after the MI. BL-1040 is excreted naturally from the body within six weeks after injection, leaving behind a stronger, more stable heart muscle.

Jerusalem's BioLineRx (http://www.biolinerx.com), a clinical stage drug development company traded on the Tel Aviv Stock Exchange, is dedicated to building a robust pipeline of promising therapeutics for unmet medical needs. The Company's leading programs are BL-1020 for the treatment of schizophrenia and BL-1040 for the treatment of damaged heart tissue post-acute myocardial infarction. Additional products under development include compounds for the treatment of cancer and CNS, cardiovascular, infectious and autoimmune diseases. BioLineRx advances projects from early stage discovery and lead generation to advanced clinical trials. BioLineRx partners with researchers, universities and biotech companies to further the development of promising compounds. (BioLineRx01.06)

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8.3 OPGAL's Fever Detecting System Can Help Contain the Spread of Swine Flu

As a part of the global effort to stop the spread of the Swine Flu, Opgal, an Israeli high-tech company, announced the launch of a thermal imaging system that can detect individuals with elevated body temperatures in airports, train stations and other transportation hubs. The Fever Detector and Alarm System (FDA), created by OPGAL, is based on sophisticated Infra-Red Thermal Imaging technology that can detect differences in body temperature smaller than 0.5°C. One of the symptoms of Swine Flu is a high body fever of over 100.4° F (38C). The FDA system can flag individuals with elevated body temperatures that pass within its detection cameras. The announcement by OPGAL comes just after the World Health Organization raised its pandemic alert level to Phase 5, the next-to-highest level in the worldwide warning system. The Fever Detector & Alarm System consists of an uncooled, highly-sensitive infrared thermal camera integrated with customized software and sophisticated algorithms. The system screens real-time thermal images to detect individuals passing through its field of view whose body temperatures exceed a pre-set threshold. When the camera detects such an individual it gives off an alarm and the specific person can be pulled aside for further evaluation. Over the past few weeks, before the system was officially released to the market, OPGAL sold dozens of its IR cameras to system integrators to be implemented as part of their own applications for Swine Flu detectors. In 2003 OPGAL sold more than 300 units of a similar thermal scanner to Asian nations during the SARS crisis. Founded in 1983 and owned by Rafael and Elbit Systems, Karmiel's Opgal (http://www.opgal.com) is a leading manufacturer of thermal and optical imaging products for use in public safety, paramilitary, navigation and search and rescue operations. (Opgal03.05)

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8.4 Compugen Awarded Grants From Israel Office of Chief Scientist

Compugen has been notified by the Office of the Chief Scientist of Israel (the OCS) that it will receive grants totaling approximately $500,000 to support the Company's drug and diagnostic product candidate discovery activities and continued capabilities enhancement. The product candidate programs that will be supported by this funding are focused on discovering additional drug targets for antibody therapeutics and preclinical nucleic acid biomarkers for drug induced toxicity. These activities, in large part, will be based on modifying and enhancing certain of the Company's ten existing discovery platforms. In addition, a portion of the funding will support the Company's ongoing activities with respect to extending and enhancing its predictive discovery capabilities infrastructure.

Tel Aviv's Compugen (http://www.cgen.com) is a leading drug and diagnostic product candidate discovery company. Unlike traditional high throughput trial and error experimental based discovery, Compugen's discovery efforts are based on in-silico (by computer) prediction and selection utilizing a growing number of field focused proprietary discovery platforms accurately modeling biological processes at the molecular level. The resulting product candidates are then validated through in vitro and in vivo experimental studies and out-licensed for further development and commercialization under various forms of revenue sharing agreements. (Compugen03.06)

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8.5 D-Pharm Receives FDA Clearance to Commence a Phase III Trial of DP-b99 in Acute Stroke Patients

D-Pharm announced that its Investigational New Drug (IND) application for a pivotal Phase III clinical trial of DP-b99 in acute ischemic stroke patients has been approved by the US FDA. D-Pharm plans to initiate the trial in the coming months, in over 100 clinical sites in North America, Europe, South Africa and Israel. The forthcoming Phase III trial is a randomized, double blind, placebo-controlled study (study acronym MACSI: Membrane Activated Chelator Stroke Intervention). It is designed to compare the effect on ischemic stroke outcome between a placebo group and a group of patients treated with 1 mg/kg/day of DP-b99 for 4 consecutive days.

Prior to the IND submission D-Pharm successfully completed the program outlined at the pre-IND meeting held with the FDA in January 2008. The program included additional toxicity studies, a drug interaction study with rtPA, and an interaction study with warfarin in healthy volunteers, as well as scale-up and optimization of the DP-b99 manufacturing process. DP-b99 is a unique neuroprotective drug that addresses an array of brain damaging processes occurring in stroke patients and emerged from D-Pharm's proprietary Membrane Activated Chelator (MAC) platform technology. D-Pharm successfully completed extensive testing of DP-b99 in pre-clinical and then in Phase I and Phase II clinical studies. Both preclinical and clinical studies indicate a favorable efficacy and safety profile for DP-b99. In the recently completed Phase IIb trial in 150 ischemic stroke patients, DP-b99 increased by two-fold the percentage of patients that completely recovered from ischemic stroke. DP-b99 may be administered within a nine hour therapeutic window.

Rehovot's D-Pharm (http://www.dpharm.com) is a clinical stage, biopharmaceutical company pioneering the development of lipid-like therapeutics and has generated a rich pipeline of patent protected proprietary products. D-Pharm's pipeline includes advanced clinical stage products DP-b99 for treatment of acute ischemic stroke patients and DP-VPA, a novel drug for treatment of epilepsy, bipolar disorder and prophylaxis of migraine. DP-460 is in preclinical development intended as an oral, disease-modifying therapy for Alzheimer's disease. (D-Pharm08.06)

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8.6 EarlySense's EverOn System Receives FDA Clearance and CE Mark Certification

EarlySense announced that its EverOn contact-free patient supervision system has been cleared for marketing by the U.S. FDA and has received a CE Mark certification from KEMA, a Dutch notified body, in accordance with the EC-Directive 93/42/EEC. Both allow EverOn for use with children and adults, in a home, hospital or clinical setting. In November 2007, EarlySense announced the FDA clearance of the ES-16, the predecessor of the EverOn system. EverOn is a wireless patient supervision system installed underneath a bed mattress. There are no leads or cuffs to connect to the patient. The system measures patient vital signs and movements and alerts nurses or caregivers of any change in condition. EverOn detects heart and respiration rates, bed entries and exits, as well as patient movement. EverOn also helps medical staff to better implement patient turns, which can positively influence the treatment and the prevention of pressure ulcers. EverOn's trend line display is designed to assist clinicians in monitoring the progression of a patient's health and support improved medical decision making. Ramat Gan's EarlySense (http://www.earlysense.com) is bringing to market a pioneering technology designed to advance proactive and preventive patient supervision to enable better patient outcomes. (EarlySense08.06)

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8.7 Kamada Reports Positive Proof-of-Concept Data for Inhaled Alpha-1 Antitrypsin in Bronchiectasis

Kamada announced positive proof of concept data from a phase II, proof of concept study with its Inhaled Alpha-1 Antitrypsin (AAT) in bronchiectasis. The results indicate that Inhaled AAT, via an optimized eFlow platform nebulizer (PARI Pharma GmbH), provides a positive indication as to its ability to decrease the inflammatory process in the lung. Furthermore, as reported previously, the safety profile demonstrated in this study is very good and is comparable to the one seen in previous studies with Kamada's inhaled AAT. The Phase 2 trial, conducted at the Rabin Medical Center in Israel, was a placebo controlled, double-blind, randomized trial that enrolled twenty one patients with bronchiectasis. Patients were randomized 2:1 to Inhaled AAT or placebo for 12 weeks. This study was designed to investigate safety and tolerability of Inhaled AAT and to explore its impact on lung inflammation. Kamada's Inhaled AAT is a high purity alpha-1 antitrypsin preparation that Kamada manufactures using sophisticated, in house developed chromatographic purification methods. The inhaled AAT utilizes an optimized eFlow platform nebulizer (PARI Pharma GmbH), has been designated an Orphan Drug for the treatment of bronchiectasis, alpha-1 deficiency and cystic fibrosis, in the U.S. This designation grants Kamada various benefits such as research fund support, tax incentives, reduced official fees and seven years of exclusive distribution rights, if the company's product is first on the market.

Ness Ziona's Kamada (http://www.kamada.com) is a public biopharmaceutical company developing, producing and marketing a line of specialty life-saving biopharmaceuticals. Licensed and marketed worldwide, several of these specialty therapeutics are currently undergoing advanced clinical trials. (Kamada09.06)

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8.8 Yissum Introduces Novel Compound for the Treatment of Osteoporosis

Yissum Research Development Company introduced today a new compound for the treatment of osteoporosis. Professors from the School of Pharmacy at the Hebrew University of Jerusalem invented a new drug candidate for the treatment of osteoporosis that both inhibits bone resorption and stimulates bone formation. It activates the cannabinoid receptor (CB2), which is involved in the regulation of bone remodeling and in slowing down and rescuing bone loss. Importantly, this drug has no psychoactive effects. The new drug was successfully tested in preclinical trials. Osteoporosis is characterized by an imbalance between bone formation and resorption resulting in net bone loss thus weakening the skeleton and increasing susceptibility to fractures. Most anti-osteoporotic drugs in clinical use are anti-resorptive and used mainly to prevent postmenopausal bone loss. Use of Parathyroid Hormone (PTH) (1-34), the only clinically approved bone anabolic agent, is restricted to 18 months, because of bone cancer risk and possible development of tolerance. Therefore, this new drug, which has a bone anabolic effect with potentially fewer side effects, answers an unmet medical need.

Yissum Research Development Company (http://www.yissum.co.il) of the Hebrew University of Jerusalem was founded in 1964 to protect and commercialize the Hebrew University's intellectual property. Products based on Hebrew University technologies that have been commercialized by Yissum currently generate $1.2 Billion in annual sales. Ranked among the top technology transfer companies in the world, Yissum has registered 6100 patents covering 1750 inventions; has licensed out 480 technologies and has spun out 65 companies. (Yissum09.06)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 IDF Developing Sabbath-Friendly Keyboard & Computer Screen

The IDF Rabbinate is hard at work on the development of a special touch screen that would make it possible to use vital computer systems without violating Sabbath. Operational considerations mandate the use of computer systems like ‘Masua' or ‘Sheder Cham 400' during the Sabbath. These systems inform their operators of the location of IDF units during operations and battles. Other systems, like the IDF's medical information system, named CPR, must also be used on Sabbath. The IDF Rabbinate has developed two options for Sabbath-friendly screens. One is a specially designed touch screen and another is an add-on that is connected to a regular screen and turns it into a touch screen, for all intents and purposes. There is no decision yet as to which system will be put into use.

Another project, currently in its pilot phase, involves special Sabbath keyboards. Three prototype Sabbath keyboards have been put into experimental use in recent months, after being approved by the military's Computer and Information Systems Center (MAMRAM) and Information Security Department. The Rabbinate is awaiting feedback from the soldiers who use them, in order to decide if they are preferable over the virtual keyboard/Sabbath mouse combination currently being used by the IDF. The IDF is also examining the possibility of changing the incandescent bulbs in the IDF's communications equipment with LEDs (light emitting diodes), since turning on an incandescent light involves the actual lighting of a fire, which is explicitly forbidden by the Torah. An LED is activated by an electrical current – an act forbidden by the Sages and not by the Torah, and thus more flexibly permitted in cases of dire necessity.

Rabbinate crews are also planning to install special electrical switches that will enable opening of electrical gates on Sabbaths in IDF bases that use them. The device is currently being tested at five entrances to IDF bases. The Sabbath-friendly switch is one of the Rabbinate's earliest developments. It also saves the IDF money, because manufacturing it inside the IDF is cheaper than buying it outside the army. The internal mechanics and electronics of the Sabbath mouse, which was developed by the Tzomet Institute for Halacha and Technology, employ the Talmudic concept of ‘grama,' which allows an observant Jew to indirectly cause certain events to take place on Sabbath, without direct action on his part. The same concept makes it possible to re-adjust certain Sabbath timers during the Sabbath. (IsraelNN05.06)

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9.2 Alvarion Selected to Deploy the First Mobile WiMAX Network in Papua New Guinea for Telikom PNG

Alvarion was chosen to deploy the first Mobile WiMAX network in Papua New Guinea for Telikom PNG. The country's telecommunications leader plans to provide nationwide coverage using Alvarion's end-to-end Mobile WiMAX 4Motion solution at the 2.3 GHz frequency band. Alvarion's local partner for this project is Telrad Networks. Telikom PNG is wholly owned by the government and responsible for providing telecommunications services in Papua New Guinea. The operator's first network in the capital city of Port Moresby was launched this month and is expected to provide connectivity to approximately 1,500 users. The second network to be deployed in the city of Lae is planned to go live in Q2/09. Further expansion is expected at the end of 2009, extending the network to all regional cities as part of the master plan to achieve nationwide coverage for 55,000 end-users. Papua New Guinea has a population of almost 6 million and Internet penetration rate below 2%. WiMAX presents an ideal business case for enabling mobile broadband to mass consumers. By building a network based on Alvarion's leading platform, Telikom PNG can cost-effectively offer a wide range of voice and data services to the people of Papua New Guinea.

Tel Aviv's Alvarion (http://www.alvarion.com) is the largest WiMAX pure-player with the most extensive WiMAX customer base and over 250 commercial deployments around the globe. Committed to growing the WiMAX market, the company offers solutions for a wide range of frequency bands supporting a variety of business cases. Through its OPEN WiMAX strategy, superior IP and OFDMA know-how, and ability to deploy end-to-end turnkey WiMAX projects, Alvarion is shaping the new wireless broadband experience. (Alvarion02.06)

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9.3 Tata Teleservices Provides Wi-Fi Coverage in Mumbai with Wavion Base Stations

Tata Teleservices (Maharashtra) Limited (TTML), one of the fastest-growing telecom service providers across Maharashtra and Goa, and Wavion announced the completion of a large scale deployment of Wavion WBS-2400 Base Stations in the district of Navi-Mumbai, India. The WBS-2400 base stations will provide high-speed wireless (Wi-Fi) connectivity to small and medium enterprises and residences of Navi-Mumbai. Wavion's WBS-2400 spatially adaptive beamforming base stations provide extended range, improved indoor penetration and better interference resilience. Yokneam's Wavion (http://www.wavionnetworks.com) is transforming the metro Wi-Fi and rural markets with a new category of spatially adaptive base stations. The company's digital beamforming and SDMA technologies are the first and only to resolve the significant performance, penetration and profitability challenges facing large scale metro and rural deployments. (Wavion01.06)

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9.4 Ralink & Celeno Partner to Address Growing Demand for Wireless High Definition Video Streaming

Celeno Communications and Hsinchu, Taiwan's Ralink Technology Corporation, a leading developer of 802.11x solutions, announced a broad-based collaboration to provide best-in-class Wi-Fi home networking designs optimized for HD video distribution. The first product based on this partnership is the CLR230 802.11n chipset that will be sold by Celeno. The joint solution combines the Celeno CL1300 chipset and the new CLR230 chipset. The CLR230, based on Ralink's RT2880 and RT2850 chips, benefits the solution with Ralink's leading-edge radio and baseband technology, its high-volume production efficiencies, and its cost-optimized design methodologies. The CL1300 serves as an Access Point Wi-Fi chip and uses implicit transmit beam forming to stream wired-quality HD video streams concurrently to multiple CLR230 clients throughout the home, across multiple walls and floors with no packet loss. 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. Founded in 2005, the company is backed by blue chip investors including Cisco systems, Greylock Partners and Pitango Venture Capital. (Celeno 01.06)

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9.5 Avnet to Market Axxana's Phoenix Disaster Recovery System in Mexico

Axxana has partnered with Avnet Technology Solutions Mexico, EMC's largest channel partner in that country, to distribute Axxana's Enterprise Data Recording (EDR) solutions in Mexico. Axxana recently announced commercial availability of its first product, the Phoenix RP System, which is integrated with and augments EMC's RecoverPoint Asynchronous Long Distance Replication. Axxana's technology is the first-ever to enable 100% disaster recovery with no data loss and without distance limits between data centers, all with a significant cost savings. The Phoenix System enables organizations to significantly save on Capex and Opex by utilizing existing asynchronous replication solutions to save data in a remote location, while at the same time, locally protecting a synchronous copy of the most recent write operations in a disaster proof, new generation, storage device. Axxana's solution combines airplane flight data recorder (Black Box) expertise with newly developed technologies to create a hardened Enterprise Data Recording (EDR) storage system capable of withstanding extreme conditions to preserve critical business data in the event of a disaster. Tel Aviv's Axxana's (http://www.axxana.com) disaster recovery solution represents a new domain in data protection, Enterprise Data Recording (EDR). Serving enterprises around the world and working in close conjunction with some of the most prestigious names in the data storage industry, Axxana has introduced a solution that will alter the economics behind data protection and disaster recovery. (Axxana01.06)

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9.6 ATK & Elbit Systems Conduct Successful Flight Test of GATR from Helicopter

Elbit Systems and Minnesota's Alliant Techsystems have successfully conducted flight tests of the Guided Advanced Tactical Rocket (GATR). In a recent demonstration, conducted in Israel, GATR was deployed from a helicopter using a "lock-on before launch" method to engage an off-boresight target at a range of approximately 3 kilometers. ATK and Elbit Systems validated flight worthiness, safe separation launch, and autonomous laser designated guided flight through a series of tests. The laser designated guided flight, launched from a standard 2.75 inch launcher, resulted in a direct impact on the target. Originally announced in July 2008, GATR benefits from a robust design, which combines combat-proven performance, a minimum smoke signature and the reliability of an ATK-produced propulsion system, similar to a system employed on millions of rockets produced for the United States Army. GATR contains a guidance and control system built with the experience of Elbit Systems' heritage in high-performance laser seekers. It employs advanced acquisition, tracking and guidance algorithms to achieve one-meter accuracy against stationary and moving targets. In its tactical configuration, GATR will incorporate an Insensitive Munitions (IM) rocket motor and a family of IM warheads to include blast/fragmentation and penetration. GATR is a low-cost, precision strike weapon that minimizes collateral damage, while providing stand-off deployment against a wide array of target sets.

Haifa's Elbit Systems (http://www.elbitsystems.com) is an international defense electronics company engaged in a wide range of defense-related programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned air vehicle (UAV) systems, advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. (Elbit 01.06)

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9.7 Waves MaxxAudio Delivers Next Generation Tools for PC Manufacturers

Waves Audio announced the debut of its new MaxxAudio 3 and MaxxAudio LE for PC manufacturers. The third version of MaxxAudio introduces new features which will deliver a vastly improved audio experience to the end user. MaxxAudio 3 next generation processors feature new and improved bass management for small speakers, patented center detection and dialog enhancements, new loudness control, and powerful new EQ tools. MaxxAudio LE is designed to accommodate the emerging market for small, portable and low powered devices. MaxxAudio LE also features very flexible controls, including an easy, intuitive user interface that accommodates a wide range of screen sizes. The first MaxxAudio LE evaluation versions will be shipping in July 2009, and support Windows, Linux and Android operating systems.

MaxxAudio (http://www.maxx.com) is a suite of audio processors that brings professional sound to consumer electronics. It substantially improves the sound of small loudspeakers and delivers comprehensive sound enhancement to a wide range of products. MaxxAudio allows manufacturers to market their product as having "Enhanced Audio Capabilities" with no increased hardware costs. Tel Aviv's Waves (http://www.waves.com) is the world's leading developer and provider of audio signal processing tools, with award-winning software and hardware for the professional and consumer electronics audio markets. Waves has more than fifteen years of expertise in the development of psycho-acoustic signal processing algorithms which leverage knowledge of the human perception of hearing to radically improve perceived sound quality. (Waves 01.06)

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9.8 Alvarion & Iberbanda Expand WiMAX Network

Alvarion announced it was selected by Iberbanda, Spain's leading WiMAX carrier partially owned by Telefonica, to expand the current WiMAX network at 3.5GHz in Catalonia. The expansion results from a tender won by Iberbanda to supply WiMAX services to the Government of Catalonia. Using Alvarion's innovative technology, Iberbanda will double the offered throughput to its end users. The BreezeMAX platform encompasses an extensive range of advanced features, enabling operators to customize the network configuration fit for their specific needs. This includes indoor, outdoor, rural, suburban and dense urban deployment options. Tel Aviv's Alvarion (http://www.alvarion.com) is the largest WiMAX pure-player with the most extensive WiMAX customer base and over 250 commercial deployments around the globe. Committed to growing the WiMAX market, the company offers solutions for a wide range of frequency bands supporting a variety of business cases. Through its OPEN WiMAX strategy, superior IP and OFDMA know-how and ability to deploy end-to-end turnkey WiMAX projects, Alvarion is shaping the new wireless broadband experience. (Alvarion27.05)

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9.9 Voltaire Announces Vantage 8500 Ethernet Switch for Scale-Out Data Centers

Voltaire announced the Vantage 8500, a high-performance, high density, scale-out, Layer 2 core 10 Gigabit Ethernet switch optimized for enterprise data centers and cloud computing environments. The Voltaire Vantage 8500 is the industry's largest non-blocking 10 Gigabit Ethernet switching platform and enables users to benefit from new levels of efficiency, scalability and lower latency, while simplifying and consolidating network tiers to lower infrastructure expenses. The Voltaire Vantage 8500 features 288 wire speed, 10 Gigabit Ethernet ports in a 15U high chassis making it the world's largest non-blocking Ethernet data center switch. The switch features a unique scale-out stacking option enabling more than 3,400 non-blocking ports in a single switching fabric for scalability that is far beyond any alternative solution in the market. Future versions of the switch are expected to include even denser line cards for higher port counts. The Vantage 8500 is based on converged enhanced Ethernet (CEE) technology to provide InfiniBand-like capabilities to the data center such as a lossless switching fabric, multi-pathing, virtualization, fabric-wide congestion management and QoS.

Ra'anana's Voltaire (http://www.voltaire.com) is a leading provider of scale-out computing fabrics for data centers, high performance computing and cloud environments. Voltaire's family of server and storage fabric switches and advanced management software improve performance of mission-critical applications, increase efficiency and reduce costs through infrastructure consolidation and lower power consumption. (Voltaire08.06)

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9.10 VocalTec Strengthens Its Position in the Ukraine

VocalTec Communications announced that its Essentra VoIP softswitch has received Class-4, Class-5 and Lawful Interception certification from the Ukrainian Scientific Research Institute of Radio and Television; this is part of VocalTec's ongoing measures to position itself as a significant provider of VoIP solutions across the Ukraine. VocalTec is one of the first companies to receive such certification, which validates that VocalTec's Essentra softswitch solutions meet all technical requirements and standards for commercial deployment throughout the Ukraine. This is the fifth certificate of regulatory conformance awarded to VocalTec across Russia and the CIS, making it easier for operators to deploy VocalTec's NGN solutions. Additionally, and in support of VocalTec's strategy towards the Ukraine, VocalTec has established a local R&D center located in Lviv. This R&D center joins the company's global R&D team in developing and delivering innovative VoIP services and technologies. The development center, together with VocalTec's marketing and business development initiatives in the Ukraine and across the region, continue to solidify VocalTec's position, allowing the company to better serve its growing customer base. Herzliya's VocalTec Communications (http://www.vocaltec.com) is a global provider of carrier-class multimedia and voice-over-IP solutions for communication service providers. A pioneer in VoIP technology since 1994, VocalTec provides proven VoIP trunking, VoIP peering and residential/enterprise VoIP application solutions that enable flexible deployment of next-generation networks (NGNs). (VocalTec08.06)

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9.11 Leading International Financial Institution Successfully Deploys Optibase Corporate IPTV Solution

Optibase announced that a major international financial services company has deployed an Optibase corporate video solution in its continental headquarters in Europe and North America and plans to deploy the service in its Asian headquarters as well. The Optibase solution enables bank employees to securely access live and on demand video such as financial information and breaking news in trading rooms and at their desks, and serves as a flexible, cost-efficient platform for intra-organizational messaging and corporate training. It provides the strict control that is essential in the banking industry, ensuring that each video channel or on-demand program is accessible only to the appropriate branch office, group or individual. Based on Optibase's MGW 5100, MGW 1100 and MGW 1000 encoding and streaming platforms, the system simultaneously processes and streams live TV channels, internal VOD, live organizational events and more. Its distributed architecture provides independent local control of the regional system on each continent as well as real-time communication across the entire organization. The regional systems are linked via the bank's secured worldwide fiber network to maximize security. The flexible modular system can be easily expanded to accommodate additional employees and services.

Herzliya's Optibase (http://www.optibase.com) provides video over IP solutions, specializing in video encoding, decoding and streaming for federal and state government agencies, Telco operators, enterprise organizations and the world's leading broadcast service providers. With a collection of open, standards-based products, Optibase enables its customers to take full advantage of video distribution over their IP network, ensuring superb video quality in a scale of bit-rates for simple and effective video streaming to desktops, STBs and VOD applications. (Optibase09.06)

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10: ISRAEL ECONOMIC STATISTICS

10.1 April Sees 13,000 More Israelis Unemployed

On 31 May, the Israel Employment Service announced that more than 13,000 workers joined the ranks of job seekers in April. For the period of August to December 2008, the average monthly rate increased 4.5% over the previous month. This January, the rate rose by 4%, in February by 2.8%, in March by 1.5% and in April by 0.5%. An additional 13,060 people were dismissed in April. The number of job seekers with at least two days of being unemployed rose 2.1%, in seasonally adjusted terms, to 213,000 compared with the previous month. The number of unemployed jumped 3.1% in January, 2.9% in February and 2.6% in March. From May 2008 until this April, the number of unemployed increased by a monthly average of 1.9%, after four years when the monthly average declined by 0.5%. During April, the number of people who registered for work at the Employment Service rose 3%, in seasonally adjusted terms, to 235,000 from 228,600 the previous month. More than a third of the job seekers, 74,700, were out of work more than 270 days over the past 12 months. (IES31.05)

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10.2 Israel's Unemployment Rate Rises Sharply To 7.6%

The Central Bureau of Statistics announced on 27 May that Israel's unemployment rate surged to 7.6% of the civilian labor force during Q1/09 from 6.5% in Q4/08. The labor force totaled 3.01 million in the first quarter, of whom 228,000 were unemployed. The Central Bureau of Statistics defines an unemployed person as someone who did not work at all during the determining week, actively searched for work during the preceding four weeks, and could have begun to work during the determining week had a job been offered. As in the preceding quarter, the unemployment rate for women was greater than for men. The unemployment rate for women aged 26 - 64 rose to 7% in the first quarter from 5.9% in the preceding quarter, while the unemployment rate for men aged 25 - 64 rose to 6.5% from 5.5%. (CBS27.05)

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10.3 Car Sales in Israel Drop For Nearly All Brands

The Israel Motor Vehicles Importers Association announced that 12,917 vehicles were delivered in May 2009, substantially more than in April, but 27% fewer than in May 2008. During January - May 2009, 60,477 new vehicles were delivered, 37% fewer than in the corresponding period of 2008. Deliveries of private cars fell 36% to 49,592. Mazda had the most deliveries in January-May, at 9,648 cars, 43% fewer than in the corresponding period. Hyundai was in second place, with 7,240 deliveries, down 29%. Toyota was in third place, with 6,571 deliveries, down 36%. Ford was in fourth place, with 4,270 deliveries, down 20%. Nissan was in fifth place, with 3,709 deliveries in January-May, 65% more than in the corresponding period. It was the only leading brand to see an increase in deliveries. Vehicle industry sources predict a massive increase in deliveries in June as rental agencies buy cars for the summer tourist season, importers offer clearance discounts, and because of the expectations of a rise in prices when the Ministry of Finance's environmental taxes, slated for July, come into effect. (Globes 03.06)

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11: In Depth

11.1 JORDAN: Tax Regime Change

The Oxford Business Group noted that a proposed income tax law by the Ministry of Finance (MoF) is set to overhaul the tax regime in Jordan, significantly reducing the burden for both corporations and individuals and streamlining the government's collection operations. Under the new regime, which unifies Jordan's disparate collection of tax laws, firms in the banking, financial, insurance, leasing and telecommunications sectors would see their income tax rates reduced to 25% from the current rate of 30-35%. Those operating in lower bracket sectors, including industry and agriculture, would have their tax rate reduced from 15% to 12%.

Jordan's corporate tax structure is already one of the most efficient and transparent in the region. According to PricewaterhouseCoopers' "Paying Taxes 2009" survey, Jordan ranks 22nd out of 181 countries around the world in terms of the ease of paying taxes, making it the highest-ranked country in the region outside the Gulf Cooperation Council. Jordan fared particularly well in two out of the three broad categories used to evaluate corporate tax regimes around the world: total number of tax payments required (where it ranks 22nd out of 181 countries) and the total tax rate (33rd). The kingdom fares slightly worse in the amount of time required for businesses to comply with tax laws and regulations, coming in at 84. Unifying income tax legislation under one comprehensive legal structure should help Jordan improve its position further.

The efficiency of Jordan's system is clear, particularly in these lean times, and tax revenues have remained surprisingly strong this year. Jordan's tax revenues increased by 10.4% in the first four months of 2009 over the previous year. Between January 1 and April 30, the government recorded $1.65b of tax revenues compared to $1.50b during the same period last year, according to preliminary numbers released by the MoF. Revenues from taxes on goods and services, income and profits are the primary sources of tax revenues. Others include financial transactions, namely a real-estate tax and taxes on international trade and transactions.

Goods and services tax revenues were $716.7m, or 43% of total tax revenues, in the first four months of 2009 compared to $723.6m, or 48%, in the same period last year. The decrease in the contribution of goods and services taxes to the total figures reflects the slowdown of inflationary pressures in the kingdom. Over the same period, taxes on income and profits accounted for 46%, or $761.1m, of total tax revenues as opposed to $564.2m, or 38% of total tax revenues, in 2008.

The vast majority of income tax revenue was collected from corporate sources and projects, totaling $670.1m, or 88% of income tax revenues, up until April of this year, with the remainder paid by individuals. Banks and institutions were the biggest group of contributors, accounting for JD232.7m ($328.8m) on income and profits. This represents nearly 20% of all government tax revenues from January though the end of April.

Individual citizens would also stand to benefit from changes proposed under the new unified tax law, which would see household income separated into three tiers. The first tier, representing the first JD24,000 ($34,000) of a household's income, would be fully exempt from income taxes. The second tier, representing the next JD10,000 ($14,200) of household income, would be taxed at a rate of 6%. The final tier, representing any household income above JD34,000 ($48,270), would be taxed at a rate of 12%.

The streamlined new structure would allow the Income and Sales Tax Department (ISTD) to focus its energy on tackling the issue of tax evasion and non-payment by reducing the sheer numbers of citizens who are required to pay taxes. According to the ISTD, there are approximately 580,000 taxpayers registered with the department but only 280,000 of them settle their accounts.

According to the minister of finance, Bassem Al Salem, "Around 110,000 married and single individuals will benefit from exemptions in the bill." As the law is still in its draft form, some changes and modification can be expected and the MoF has started a public dialogue to gather input and reactions from a broad range of stakeholders. Meetings have already been held with other government representatives and future meetings are planned with members of the business community, trade unions, social institutions and professional associations. Nonetheless, the ministry remains confident that the proposed reform will prove popular. Salem concludes, "The proposed law will have a positive effect on the national economy and will bring up the growth rate by 1-2% on average in the medium term." (OBG05.06)

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11.2 KUWAIT: Moody's Confirms Sovereign Ratings But With Negative Outlook

On 9 June, Moody's Investors Service (http://www.moodys.com) announced confirmed Kuwait's Aa2 sovereign ratings but has applied a negative ratings outlook. This rating action concludes a review that was initiated on 19th March 2009. Specifically, the ratings affected by today's action are Kuwait's local and foreign currency government bond ratings and its country ceiling for foreign currency bank deposits, which were confirmed at Aa2 but with a negative outlook. Kuwait's country ceiling for foreign currency bonds remains at Aa2 with a stable outlook while its local currency ceilings also remain at Aa2.

"Today's rating action balances two considerations. On the one hand, Moody's recognizes that Kuwait's fiscal and economic strengths remain superior to most rating peers despite some adverse fallout from the global crisis. Yet on the other, Moody's is concerned by the contentious relationship between the government and the parliament which, in our opinion, is causing a gradual erosion of institutional strength." says Mr. Tristan Cooper, Head Analyst for Middle East Sovereigns at Moody's in Dubai.

Institutional strength and policy predictability form a core consideration in Moody's sovereign bond rating methodology and are particularly important for inclusion in the highest rating categories. The erratic and tumultuous policy environment in Kuwait has somewhat weighed on Moody's opinion of Kuwait's sovereign creditworthiness. Moody's notes the recent election of a new parliament and the formation of a new government in Kuwait. However, it remains to be seen whether these developments will lead to a sustained improvement in the policy environment.

Moody's is careful to stress the many positive elements that support Kuwait's very high investment-grade ratings. These include an exceptionally strong government balance sheet and net external asset position, wide fiscal and current account surpluses, a high level of GDP per capita, and extensive oil reserves. Such strengths should enable Kuwait's economy and public finances to absorb shocks, including potentially the further materialization of contingent liabilities stemming from the financial sector, without affecting the government's capacity to repay its debt obligations. Moody's cautions, however, as with some other countries in the region or those having sovereign wealth funds, transparency regarding the government's financial assets is poor.

"Our negative sovereign ratings outlook reflects our concerns regarding the effectiveness and efficiency of the policy framework in Kuwait and indicates that there is still some downward pressure on Kuwait's sovereign ratings. Kuwait's ratings would be lowered should the discord between the government and parliament translate into a more significant degree of political inefficiency that weakened the ability of the authorities to address potential economic and financial challenges. Robust crisis management capabilities are ultimately protective to creditors' long-term interests. However, we would also be ready to move the outlook back to stable if the relationship between the government and the parliament were to improve, thereby easing the formulation and implementation of policy and enabling Kuwait to move forward in its efforts to develop and diversify its economy." concludes Mr. Cooper.

The time horizon of rating outlooks is generally 12 to 18 months. Moody's last rating action on Kuwait was implemented on 19 March 2009, when the rating agency placed the country's sovereign ratings on review for possible downgrade. (Moody's 09.06)

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11.3 KUWAIT: New Faces, Same Potential for Trouble

Hesham al-Awadi wrote in Carnegie's Arab Reform Bulletin that the results of Kuwait's national assembly elections on 16 May came as a surprise. For the first time since being granted suffrage in 2005, women were able to win four seats in the 50-member assembly, while the share of Islamists (Muslim Brotherhood and Salafists) waned, as did that of organized political movements at large in favor of liberal-leaning independent MPs. Shia, who comprise about 25% of Kuwait's population, were also able to expand their influence in parliament, picking up nine seats as compared to five in the previous assembly. Overall, 40% of the assembly members are new.

Despite the change in the assembly brought about by Kuwaiti voters and the optimistic note sounded by the election of women, a genuine transformation is not at hand. The future of the parliament and of democracy in Kuwait will still rely more on the makeup of the new government and its ability to put forward an economic program that can rescue the country from its stalled development path, as well as on the prime minister's willingness to be subjected to parliamentary questioning should MPs resort to this measure as they have in the past.

One historic aspect of the new National Assembly is the election of four women. One of them, Massouma al-Mubarak, took the top slot in her district, while another, Aseel al-Awadi, came in second in hers, outperforming veteran politician and former national assembly speaker Ahmed al-Saadoun by 891 votes. Although Rola Dashti only took seventh place (following two failed attempts in previous elections), she still came in ahead of prominent Islamist politician Walid al-Tabtabai.

The victory of Dashti, a liberal Shi'a in a Sunni-majority district, and al-Mubarak, a Shi'a who received heavy Sunni support, suggests an unexpected transformation in Kuwaiti society. Although sectarian divisions between Shi'a and Sunna had some impact on voters' choices, their importance has declined among younger urban voters. The religious pretexts employed by Islamists in preventing women from reaching parliament also appeared to fall on deaf ears; two of the four women elected do not wear the hijab (headscarf). Overall, voters seemed frustrated and ready to give women a chance for change.

The other notable change in the assembly is the declining popularity of organized political movements in general, especially Islamist ones. The Islamic Constitutional Movement (known by its Arabic acronym, Hadas) fell from three seats to a single seat, with only Jaaman al-Harbash reelected with support that was more tribal than ideological. The Salafist Movement's share dropped from four seats to two, and the National Islamic Alliance (Shi'a) fell from two seats to one. The backlash against political organizations affected not only Islamists, but liberals as well, with the Kuwait Democratic Forum and National Democratic Alliance each dropping down to only a single seat. Although the idea of officially legalizing political parties is currently being discussed as a step towards further political liberalization, the victory of a significant number of independents - though some do have ideological loyalties - suggests that the popular mood in Kuwait might not be ready for such a move.

Despite the change brought about by the election results, this does not rule out the possibility that the assembly could be dissolved before it completes its session in 2013. Although there was 40% turnover in the assembly members, underlying factors remain that could create tension between parliament and the government. First, the new assembly includes some MPs who have insisted on questioning the prime minister, which since 2006 has led to the government stepping down five times and the national assembly being dissolved three times. No fewer than four of what the pro-government media label "the trouble-making MPs," who use their constitutional right to question the prime minister, were reelected, showing that these MPs have substantial electoral support. Parliamentary questioning may be delayed for a short time, but will not disappear as a feature of Kuwaiti democratic practice.

Second, Sheikh Nasser al-Mohammed al-Sabah will once again head the cabinet, as he has done since 2006. Sheikh Nasser became prime minister after Crown Prince Sheikh Nawaf al-Ahmed stepped down from the position, and after objections were raised against Defense Minister Sheikh Jaber al-Mubarak as a possible alternative. Although Sheikh's Nasser's popularity has risen since he returned from a recuperative trip abroad, parliamentary questioning could still start up again as a result of the way he runs his government.

As for the new cabinet announced on May 29, 40% of its members are different from the previous one. This will help a bit to ease tensions with parliament. Despite the lower number of women in the new government (down to one, compared with two in the previous government) and an increase in the number of ministers from the ruling family, the introduction of seven new ministers has generated some optimism in public opinion. Although the quota system was applied to guarantee proportional representation of various tribes and ideological persuasions, many of the new ministers are professionals with expertise in their respective fields. Thus the cabinet is viewed as more technocratic in nature. But regardless of the temporary optimism, tension will continue to plague relations between the two branches as long as the government does not come forth with a comprehensive economic development plan.

Given these factors, the government will have no option but to take advantage of the new assembly's makeup - with which the political leadership overall is quite pleased - by proposing a comprehensive program to jumpstart Kuwait's stagnant economic development. Perhaps the presence of liberal-leaning, more pro-government MPs can strengthen cooperation between the two branches, and help make a push towards the Kuwaiti dream of transforming the country into a global financial center. But there is also now a preponderance of opinion, within both the state and society, that parliamentary questioning of government officials is proper. Therefore the possibility that MPs will resume their efforts to pin down the prime minister, and that the parliament will be dissolved again, possibly unconstitutionally, continues to loom on the horizon.

Hesham al-Awadi is a professor of international studies and director of the Gulf Studies Center at the American University in Kuwait. Paul Wulfsberg translated this article from Arabic. (ARB-CEIP June/09)

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11.4 BAHRAIN: Fitch Affirms 'A'; Outlook Stable

On 28 May, Fitch Ratings (http://www.fitchratings.com) affirmed the Kingdom of Bahrain's Long-term foreign currency Issuer Default Rating (IDR) at 'A' and Long-term local currency IDR at 'A+', both with Stable Outlooks. The agency has also affirmed Bahrain's Country Ceiling at 'A+' and Short-term foreign currency IDR at 'F1'. Fitch has simultaneously assigned Bahrain's forthcoming $500m, five-year sovereign sukuk issue a 'A' rating, in line with its Long-term foreign currency IDR.

"Bahrain can finance higher fiscal deficits resulting from the downturn in world oil prices without undue strain on its debt ratios, while the wholesale and domestic banks have for the most part been resilient to financial shocks," says Charles Seville, Associate Director in Fitch's Sovereign team.

Fitch last affirmed Bahrain's ratings in December 2008, while awaiting the announcement of a budget for 2009 and 2010 which would clarify the government's fiscal response to falling oil prices. The agency also noted, at that time, the uncertainty over the future performance of the wholesale and domestic banking sectors amid the global economic slowdown and financial crisis.

The lower oil price has negatively impacted Bahrain's public finances. Despite some mild adjustment in spending in the 2009-10 budget, the fiscal deficit is forecast by Fitch to be wider than the 'A' median. However, the agency believes that the Bahraini government will be able to finance wider fiscal deficits in 2009-10. At the budget oil price assumption of $40/b, and assuming some government under spending, the deficit would be 7% of GDP in 2009, pushing up the debt burden to 26% of GDP in 2009. At an average oil price of $50/b, the deficit would be closer to 4% of GDP.

The agency believes that the general government debt burden will remain below the 'A' median in 2009-10, but Fitch cautions that if oil prices stay relatively low beyond 2010, a further fiscal adjustment will likely be necessary to stabilize the debt burden. If Bahrain failed to take action, under this scenario, Fitch believes it would be negative for the rating. The agency believes that political risk is higher in Bahrain than elsewhere within the Gulf Cooperation Council (GCC). Although wider political participation has been positive for Bahrain's rating, it could make cutting spending more difficult.

The wholesale banking sector appears to be weathering the global banking crisis, but medium-term concerns persist. Given the weakness of the global financial industry, it may be some time before Bahrain recovers its 2004-2008 average growth rate of 7% per year. However, the biggest wholesale banks are already rethinking their business models. They have received a capital injection from their mainly sovereign owners and are not a contingent liability for the government.

Domestic lenders' exposure to falling real estate markets, and a slowdown in lending following a boom, will cause their balance sheets to weaken. However, official stress tests still show that they would be, on average, resilient to a severe shock to non-performing loans, with capital well above regulatory norms. The need for government fiscal support thus seems unlikely. However, the government is a significant shareholder in some leading banks and could therefore have to contribute to capital raising if required. By adding to the debt burden, this would have negative rating implications for the sovereign ratings. (Fitch28.05)

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11.5 BAHRAIN: Building on a Solid Base

Bahrain appears to be riding out the worst of the global recession, with the economy expected to expand this year and the crucial finance industry apparently well protected against any future shocks. The Oxford Business Group commented that having been the region's first proponent of economic diversification after it was realized that the country's oil resources were in decline, Bahrain worked to broaden the base of its economy, identifying the financial sector as a market on which to focus.

Bahrain's financial sector is one of the mainstays of the country's economy, contributing 27% of GDP. As such, given the somewhat parlous state of the world's banking and financial industry of late, it could be expected that Bahrain's economy could also be suffering. This is far from the case though, with solid performances being recorded across the board and the Kingdom's GDP predicted by the IMF to grow by 2.6% this year, double the regional average of 1.3%.

On May 28 international ratings agency Fitch reaffirmed the Kingdom's long-term foreign currency issuer default rating (IDR) at 'A' and its long-term local currency IDR at 'A+', assigning both with stable outlooks. The agency also confirmed Bahrain's country ceiling rating at 'A+' and short-term foreign currency IDR at 'F1'. According to Charles Seville, an associate director with Fitch's sovereign team, the finances of both the state and the banking sector remain fundamentally sound. "Bahrain can finance higher fiscal deficits resulting from the downturn in world oil prices without undue strain on its debt ratios, while the wholesale and domestic banks have for the most part been resilient to financial shocks," Seville said.

While Fitch said some medium-term concerns remained for the wholesale banking sector, it appeared to be weathering the global banking crisis and was looking to emerge from it even stronger. "Given the weakness of the global financial industry, it may be some time before Bahrain recovers its 2004-08 average growth rate of 7% per year," the report said. "However, the biggest wholesale banks are already rethinking their business models. They have received a capital injection from their mainly sovereign owners and are not a contingent liability for the government."

Rasheed Al Maraj, the governor of the Central Bank of Bahrain (CBB), said the findings of the report were a vote of confidence in the Kingdom's economy and in the finance sector, which had grown by 5.6% last year. The confirming of Bahrain's sovereign credit rating was significant, he said in a statement issued on May 28, especially in light of the current international market situation, and the sharp decline in oil prices in comparison to last year. "This rating is a testament to the Kingdom's strong position as the regional centre for banking and finance," said Al Maraj.

It is not just the financial sector that is exhibiting resilience amidst the global downturn. Figures released by the government in mid-May showed that the contribution of the non-oil sectors to the national economy grew by 7.2% last year, with the telecommunications sector expanding by 8.8% and the construction industry by 8.5%. Inflation is also easing, with the consumer price index dropping to 3.1% in April, down from 4.3% the month before and half the level of growth of 12 months ago.

Though there will be additional pressures on the state budget in the coming year, as the government looks to ramp up capital works investments to stimulate growth, these pressures are not the same as in some of the neighboring economies. Bahrain's 2008 budget recorded a surplus of $986m on total revenues of $6.9bn, and with the country's economy still solidly in the black, drastic measures are not called for.

While there is less need for pump priming, which is not to say investments are not being made. On May 15 Talal Al Zain the chief executive of Mumtalakat, the investment arm of the Kingdom of Bahrain, said the holding would for the time being concentrate on domestic investments, including its existing blue-chip portfolio. "Right now, my focus really is on the existing portfolio companies which is mostly in the Bahrain market," Al Zain said in an interview with the Reuters news agency. "I'm just taking advantage of what's happening and just investing within my portfolio company." Most economic indicators show that the Bahraini economy has not only avoided slipping into recession but should indeed expand this year, proof positive that the policy of diversification and openness, along with a sound regulator base, have served the country well in troubled times. (OBG05.06)

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11.6 BAHRAIN: Holding Out Well

Jasim Ali, a Member of Parliament in Bahrain, observed that notwithstanding adverse effects of global financial crisis, Bahrain's economy scored notable achievements in 2008 in terms of growth of gross domestic product (GDP) and fiscal results. Likewise, results of the first few months point out declining inflationary pressures in 2009.

Nonetheless, the full negative impact of the credit crunch could emerge in 2009, as last year witnessed a mixture of extremes. Oil prices reached a record $147 per barrel by June, only to drop to $32 per barrel by the year-end. Oil is uniquely vital for Bahrain's economy by virtue of accounting for three quarters of treasury income.

Official statistics put the country's GDP growth rate in constant prices at 6.3 % in 2008. Albeit lower than that of 8.4 % achieved in 2007, but the result of 2008 could not be downplayed given the global economic downturn. The lower figure is partly attributed to fall of oil production from the onshore field. Output from Bahrain Field decreased notably by five % in 2008 reaching about 33,000 barrels per day. The field suffers from age factor, as production dates to 1932. Not surprisingly, oil authorities recently sealed a production and sharing agreement with Occidental Holding of the US and Mubadala of the UAE to develop the field, in a 20-year contract. As partners, Occidental, Mubadala and Bahrain's National and Gas Authority (Naga) hold 48 %, 32 % and 20 % of the new project, respectively.

The deal calls for doubling the field's output in five years. Yet, Naga officials expect production from the Bahrain field to reach 100,000 barrels in eight years. To be sure, Bahrain's main source of oil comes from its 150,000 barrels per day share from Abu Saafa. Saudi Arabia controls the offshore field, which boasts production of 300,000 per day.

According to official figures, crude oil and natural gas comprised 12.8 % of GDP in 2008, down from 13.5 % in 2007. However, the figure underscores the role of oil in the economy, as oil refining is included in the manufacturing sector. Nearly half of Bahrain's manufacturing activity relates to refining of crude oil into petroleum products such as diesel.
In fact, other statistics provide proof of dominance of the petroleum sector in the economy. The sector accounted for nearly 80 % of total budgetary revenues as well as exports in 2008.

Separately, the budget posted a resounding surplus of $1.4 billion in the fiscal year 2008, thereby reversing a projected deficit of $984 million. The outstanding outcome primarily relates to higher average oil in the year against a projected figure of $40 per barrel. Total revenues stood at nearly $6.9 billion, up 27 % versus income generated in 2007. Still, total expenditures increased by 13 % on the back of steady investments on infrastructure projects, especially the expansion of the road network. The authorities carried out 77 % of all planned capital projects in 2008, up from 73 % in 2007.

Similar to earlier practices, the authorities set aside a portion of the surplus to the following fiscal year, in this case $463 million. The balance was destined to strengthen the country's reserves to cover matters such money in circulation and imports. Fortunately, released statistics are reassuring about inflation in 2009. The consumer price index fell from 4.3 % in April to 3.1 % in March this year. Fall of inflationary pressures mirror forecast for fellow Gulf Co-operation Council (GCC) countries. Inflation fell from 6% in March to 5.21 % in April in Saudi Arabia. Clearly, Bahrain has cause for celebration. (GN30.05)

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11.7 UAE - Middle East Economy: Show-stopper?

The Economist Intelligence Unit observed that the announcement that the United Arab Emirates (UAE) has decided to withdraw from the proposed monetary union between Gulf Co-operation Council (GCC) member states is a body blow to the project. The defection of such a key economic player - both within the region and globally - raises questions about the feasibility of the other member states proceeding with the union. The affair also has implications for future political relations between the six member states.

The decision was announced by the UAE Foreign Ministry on 19 May, stating that the GCC General Secretariat had been informed. It did not offer any reason. However, the UAE government had made clear its deep disappointment at the GCC decision on 5 May to select Riyadh as the headquarters of the GCC monetary council, which will set out the framework for monetary union and evolve into a central bank.

Saudi Snub

The UAE's displeasure had been implicitly conveyed by the absence of the country's president and the ruler of Abu Dhabi, Sheikh Khalifa bin Zayed al-Nahyan, from the 5 May meeting in Riyadh, which had been attended by all of the heads of state of the other four member states that were still committed to monetary union (Oman had earlier pulled out). The UAE was represented by its prime minister, Sheikh Mohammed bin Rashid al-Maktoum, the ruler of Dubai, which suggested that the government already had an inkling that the headquarters decision would not go the way of the UAE, and specifically Abu Dhabi. After the Riyadh meeting the UAE government formally registered its reservations about this decision, noting that the UAE had first expressed its wish to host the new institution in 2004, before any other GCC member state, and pointing out that the UAE does not currently have any GCC bodies based on its soil.

Given that the UAE had maintained its interest in hosting the GCC central bank and had signed up to a GCC summit declaration at the end of last year affirming the group's commitment to monetary union, it is likely that the decision to withdraw was largely motivated by political considerations, rather than stemming from any change of heart about the nature of the project, which ultimately envisages the launch of a common currency. At present GCC currencies are pegged to the dollar (apart from in Kuwait, where the dollar is the main component of a reference basket), but it is likely that the new currency would evolve towards a progressively more flexible arrangement.

What next?

The absence of the UAE, which has the second-largest GDP in the GCC and which has aspirations to become a major regional and international financial centre, raises questions about the feasibility of the entire monetary union project, which was scheduled to go into effect by 2010. Much will depend on the reaction of the four remaining states. Saudi Arabia is unlikely to be deterred by the UAE move, and has sufficient leverage over Bahrain to ensure that at least two governments will remain on board. Qatar has made a big effort in recent months to improve its relations with Saudi Arabia, after a period of estrangement, and it would be surprising to see it risk jeopardizing this through pulling out of the monetary union. Qatar might also see in the UAE move an opportunity to promote its own financial centre, which is a rival to the Dubai International Financial Centre (DIFC) - the DIFC has been one of the most insistent advocates of the case for a common currency. Kuwait has always prided itself on its more progressive approach to exchange rate policy, as the only GCC member state to have experience of moving away from the dollar peg, and, on balance, seems likely to stay the course.

Whatever happens, the UAE's move is likely to create a legacy of ill feeling among the GCC member states, which could hamper the wider efforts to achieve greater economic integration. It is also not clear to what extent the decision was debated at a UAE federal level. There is little doubt that the offence of Riyadh being named the location of the GCC monetary council was most keenly felt in Abu Dhabi. (ViewsWire 20.06)

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11.8 UAE: The Medical Device Market

Research and Markets (http://www.researchandmarkets.com) has announced the addition of the "The Medical Device Market: UAE" report to their offering.

The UAE's economy is heavily dependent on the price of oil. Per capita GDP is very high, ranked around 15th in the world, and in 2009 was estimated at $35,760. Real GDP growth of just 1.3% is expected for 2009, but this projected to rise to 4.5% in 2010. As a percentage of GDP, healthcare expenditure is low, but in per capita terms, spending is among the top 20 highest in the world. Overall health expenditure is estimated at $5.4 billion in 2009, equal to 2.6% of GDP. Per capita spending is $926.

The federal government has plans to introduce a national health insurance scheme throughout the country over the next three years. This scheme has already started in Abu Dhabi and Dubai. A wide range of public health facilities are run by the Ministry of Health, including hospitals, Primary Healthcare Centers, School Health and Maternity & Child Health Units. In addition, there are facilities run by other public sector bodies, including the police and the armed forces. The private sector is far more active in the provision of primary care than hospital services.

The UAE is committed to improving its health sector and as such, is investing a significant amount in the construction and renovation of health facilities. In addition, in August 2007, the Ministry of Health announced details of the '2008-10 Strategic Framework', which will focus on enhancing regulatory practices, improving the level of scientific, technical and administrative personnel focus and the upgrading of health facilities. Imports account for an estimated 96.6% of the market in value terms and growth is expected to remain strong over the forecast period taking into account the country's limited domestic production capability. The market, estimated at $600 million in 2009, is projected to grow at an average 6.4%, reaching $819 million in 2014. (R&M28.05)

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11.9 SAUDI ARABIA: Health Infrastructure Development Second In Budget for Capital Expenditure

Research and Markets (http://www.researchandmarkets.com) has announced the addition of the "The Medical Device Market: Saudi Arabia" report to their offering.

Although the price of oil, which contributes significantly to the country's GDP, has been low, the Saudi government is continuing to invest heavily in health infrastructure development, which in 2009, was second only to education & manpower in terms of budget allocation for capital expenditure. Government capital health spending for 2009 will be on establishing new health centers, 86 new hospitals with a capacity of 11,750 beds and further development of the Saudi Red Crescent.

New healthcare facilities, coupled with the government's plan to recruit more healthcare personnel from overseas to work in these new centers, will inevitably see a spike in procurement of medical equipment and supplies and other capital goods needed for these new centers.

In 2007, the Saudi government established the National Company for Unified Purchase of Medicines and Medical Appliances, to act as the sole supplier of medicines and medical appliances to government health institutions. The company was set up to bring down the prices of medical devices and pharmaceuticals by preventing overcharging.

The SFDA have been given the task of developing and enforcing a regulatory system for medical devices. This will include establishing licensing procedures for manufacturers and suppliers. In what is a first step in developing a regulatory framework for medical devices, the SFDA in 2007 started the Medical Devices National Registry (MDNR), which is a voluntary web based project involving the registration of manufacturers, agents and suppliers in the country.

The government is working on expanding the health insurance sector, which in 2009, is valued at around $1.3 billion. This is expected to increase by a further $533 million in the short term with new regulations introduced in January 2009 that will further expand the insurance scheme to Saudi nationals working in small and medium enterprises in the private sector. The large private sector companies already provide health insurance for their employers. (R&M27.05)

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11.10 EGYPT: Plans To Deepen Suez Canal May Make Up For Lost Revenue

Daily News Egypt (http://www.thedailynewsegypt.com) reported that the Suez Canal has long been one of Egypt's most essential sources of revenue, but 2009 has the potential to be a transformative year for the canal. While revenue took a significant hit at the beginning of 2009, infrastructure changes in the canal later this year might mean a positive swing in revenue.

The canal represents the third in a triumvirate of critical revenue streams for the country. After tourism and remittances from abroad, the Suez generates billions of dollars annually as shipping companies choose the canal as a means to save time traveling between the east and Europe.

But since the start of the year, there has been a dramatic shift — brought on both by conditions economic and political — that has left canal waters a little emptier.

First, the onset of the global economic recession took its toll. Consumers in Europe and North America were simply consuming less. As a result, global trade slowed and fewer ships were using the canal and paying the transit tolls. Piracy off the coast of Somalia also had an impact. With pirates growing more brazen, a number of shipping companies lost millions as their ships fell hostage off the horn of Africa. Many shipping companies, as a form of insurance, chose to send their vessels the long way - around the Cape of Good Hope - to avoid any risks.

Revenue fell dramatically. March numbers were off 21% from what they were in March 2008. They stabilized somewhat heading into April, when revenue was 22% off April numbers the previous year. Canal revenue was down 29% year-on-year in May, Reuters reported. March revenue was $327.9 million, while the April haul was $346.9 million. Canal traffic is cyclical, so the increase between March and April does not necessarily represent a rebound for the canal.

In April, 1,712 ships passed through the canal, representing more than a 13% drop in traffic from April the previous year. Thirty percent of Europe's oil passes through the canal; so do many of the manufactured goods consumed by Europeans.

A New Plan

Despite the latest slumps in canal revenue, the government has been busy following through on a plan that would send the canal's fortunes soaring and break the streak of months of slumping revenue. The plan, that is already underway, is to increase the depth of the 120-mile canal so that ships that draw up to 66 feet can seek passage. "The expansion of the canal from around 56 feet to the targeted 72 feet will allow a significant increase in vessels, accommodating the passage of larger vessels, currently passing around Africa," said investment bank Beltone Financial in a note.

Even though the Suez represents a major source passage for ships carrying oil to Europe, deepening the canal would contribute particularly to shipping companies' abilities to send their largest oil tankers through. According to the Suez Canal Authority, the move would open the canal up to nearly all container ships and the bulk carrier fleet. Still, only 60% of the world's tankers with full cargo can pass through. The decrease in oil tankers has contributed to decline in canal revenue. Even with the deepening of the canal, which is expected to reach completion this year, therefore, a spike in the numbers of oil tankers is not likely to occur until demand bounces back.

Oil tankers in April decreased in number to 266, down from 298 in April the previous year. That represents a 10.7% decrease in oil tankers, as compared to an overall 13% decrease in traffic. This means that other goods, like manufactured products, have been greater contributors to the decrease in revenue.

Across The Board

The decline in revenue that the Suez has experienced is magnified by the fact that the government has lost revenue practically across the board, including from its top revenue source: tourism. In early May, the government reported an 18% decline in tourism over the beginning of 2008, putting pressure on over 10% of the workforce that contributes to the industry. The government depends on industries like the Suez Canal and tourism to help pay wages of civil servants, to contribute to healthcare and education across the country, and to continue subsidizing staple goods such as wheat and gasoline. The decline in canal revenue is expected to put a major dent in the government's earnings.

"Canal revenues have totaled $4.1 billion, in the 10-month period of fiscal year 2008/2009, with our expectations of total revenues of $4.7 billion, compared to $5.2 billion in fiscal year 2007/2008," said Beltone in a note. While deepening the canal may not contribute much at a time when a global recession has meant a decreased appetite for trade, the government stands to profit handsomely once the economy makes a comeback. (DNE08.06)

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11.11 TUNISIA: Economy Shaken

The Economist Intelligence Unit reported that the Tunisian government has announced a development strategy under which it plans to double exports and triple investment in key industries by 2016. But the sharp recession in Europe, on which Tunisia relies heavily for the sale of its goods, makes it a difficult time to embark upon such a mission.

Blessed with neither an abundance of natural resources nor a large population, Tunisia has focused on creating an open and dynamic business environment to attract international businesses. To this end it has been an enthusiastic advocate of free trade, and in 1996 it became the first country in the Middle East and North Africa to sign an Association Agreement with Europe. The 12-year period of putting this agreement into effect ended in 2008, heralding free trade in all sectors other than agriculture.

European Embrace

Its strategy has enjoyed considerable success. Of the 5,700 industrial companies registered in Tunisia at the end of 2008, 2,966 of them were under foreign ownership - more than half of the total. Between 1996 and 2007, industrial exports increased by a factor of four and now represent 84% of exports, up from 40% in 1995. In 2008, total exports were worth almost €11bn ($15bn) and accounted for more than 50% of Tunisia's GDP. The EU accounted for more than three-quarters of total exports in 2008, according to government figures, and is the source of 94% of foreign direct investment (FDI) into Tunisia.

Tunisia has now become a victim of this success. While the Tunisian economy has been largely insulated from the direct effects of the international banking crisis, it is suffering from the impact of the broader economic crisis in European demand for its exports. According to the latest government figures, export revenue for April 2009 fell by 22.1% year on year to TD1.58bn ($1.13bn), following year-on-year falls of more than 20% in February and March (in dollar terms the decline has been even steeper).

Tunisia's export earnings rely overwhelmingly on three sectors: textiles, food and mechanical/electrical. Together, these account for 87% of exports, 62% of FDI and 83% of jobs. All three have been severely hit by the dramatic fall in European demand. Mechanical/electrical exports grew by more than 16% a year in the past five years to become the country's largest export earner, grossing €3.5bn in 2008. But in April, export earnings from this sector dropped 15.5% year on year to TD514m, following similar falls throughout the first quarter. There were comparable declines in sales of textiles and food.

The fall in export earnings will have a knock-on effect on economic growth. The government has trimmed its own real GDP growth forecast for 2008, but only to 4.5% from 5%. The Economist Intelligence Unit predicts growth of just 1% in 2009, recovering to 2.6% in 2010. The fall in industrial output also will directly hit government finances. The finance minister, Mohammed Rachid Kechiche said at the end of April that he expects a government deficit of 3.5% in 2009, slightly higher than the targeted 3%, but this too seems optimistic - we forecast a fiscal deficit of 5.8% of GDP this year.

Silver Lining

With exports declining, falling input costs will mitigate the negative impact on Tunisia's trade balance, while falling energy costs will mean lower government expenditure on subsidies. Overall import spending fell by 16.8% in April compared with the same period of 2008, following similar falls in the first three months of the year.

The economy is also enjoying success in other areas. High rainfall in recent months is expected to ensure a good harvest in 2009 and will provide water reserves for irrigation. While tourism revenues could be hit later in the year during the European holiday season, so far they have been robust.

Although the real estate projects market has been hit by the withdrawal or postponement of investment by Gulf companies such as Sama Dubai, other projects are going ahead in the industrial, power, and oil and gas sectors. Plans for Airbus Industrie to outsource some of its manufacturing activities to Tunisia, for example, will be a major boon to the country's industrial exports development, and a large-scale phosphate fertilizer project is planned at Sra Ouertane.

The strategy unveiled by the government at the end of April also demonstrates an appreciation of the need to move into more high-value activities. Under the program, Tunisia hopes to increase the share of export earnings of emerging industries such as electronics, and information and communication technology (ICT) to 45% in 2016, from 25% today. This will be a difficult task, but there are already promising signs. The ICT sector grew by 17.8% in 2008, increasing its share of GDP to 10% from 2.5% in 2002, and it has continued to grow despite the effects of the economic downturn.

Tunisia's targets for 2016 may be ambitious in light of the impact of Europe's economic struggles on its key export sectors. But the country's continued determination to stay ahead of the curve in terms of its industrial development strategy offers hope that once the worst effects of the downturn are over, strong growth will return. (ViewsWire26.05)

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11.12 MOROCCO: Electoral Reform with Public Relations Value

Geoffrey Weichselbaum and Michael Meyer-Resende wrote that "More women elected," "Higher Voter Turn-Out," "Fewer Seats for the Islamic Party" may well be the headlines after Morocco's local elections on 12 June. Such outcomes would not mean, however, that Moroccans are becoming more egalitarian, eager to vote, or secular. They would be a direct result of electoral reforms in December 2008. While the changes were generally positive, they focused on issues that will improve Morocco's image rather than on long-standing deficits in the transparency of elections.

The 2007 elections to the lower house of parliament were marked by a low turnout of 37% of registered voters. Given that many of those eligible do not register, the actual turnout was estimated to be a dismal 25% of the electorate. Even if voter apathy persists in the local elections, a technical change will give the impression that more voters went to the polls. Recent changes to registration regulations resulted in three million voters being taken off the lists for a variety of reasons, including failure to respond to inquiries by the administration or double inscriptions. With 1.6 million new voters registered this year, there are 1.4 million fewer voters than in the 2007 elections. The total number of registered voters is now close to 14 million out of an estimated 20 million eligible. Given that turnout is measured against registered voters, the percentage would be higher if the same number of people went to the polls in June as in 2007. The Ministry of the Interior estimates an automatic statistical increase in turnout of 8%.

The recent electoral reforms also introduced mechanisms that will favor the election of women to local councils, notably the introduction of lists reserved for female candidates. This may propel the percentage of women in local councils beyond 11%, up from less than one% in the 2003 local elections. While this will be a positive change, an increased number of female council members should not be understood to be the result of societal change. It is rather a top-down attempt to effect such change.

These local elections will be the first test for the new Party for Authenticity and Modernity, founded by former Deputy Minister of the Interior Fouad Ali Al-Himma. The party champions better policy performance, and good results in the local elections will be decisive to gain momentum, with the next direct parliamentary elections due in 2012. The Islamist Party of Justice and Development (PJD) will also be looking to perform well; its results in the 2007 parliamentary elections (10.9%) fell short of what many analysts had expected.

The election law uses two different electoral systems: a proportional list-based system in larger municipalities and single member constituencies with the first-past-the-post system in smaller municipalities in the countryside. The latter (used in 1,411 municipalities throughout the country compared to 92 larger municipalities) favors those parties that are strongest in rural areas, such as the conservative Istiqlal party and the Popular Movement. For parties with more support in the cities, such as the PJD, it will be difficult to win seats in the countryside.

The recent change of the law increased from 25,000 to 35,000 inhabitants the threshold that divides small from large municipalities. The government says that this change ensures that municipalities use the same electoral system they used five years ago, even if their population grew in the meantime. In terms of seats won across the country, this law change favors the traditional conservative parties.

While the recent changes to the electoral law are positive, they conspicuously avoid any of the long-demanded steps that would make the elections overall more transparent. The aggregation and publication of polling station results countrywide remains difficult to follow for anybody except the administration, which does not publish these data. There is still no legal framework for non-partisan election observation. The lack of a framework resulted in frictions between the domestic observers and the administration in the 2007 elections and deterred domestic groups from launching a large observation effort for the June 2009 elections. Observers report on shortcomings, and when detailed results are promptly published it may turn out that they do not always add up. That would not be the story that Moroccan authorities hope the media will tell about the elections: higher voter turn-out, more women elected, and no dramatic increase in support for the PJD.

Geoffrey Weichselbaum and Michael Meyer-Resende are associates at Democracy Reporting International, a Berlin-based group promoting political participation. (ARB-CEIP June/09)

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