TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Fischer Closes Foreign Currency Reporting Loopholes
1.2 Bank of Israel to Hold Competition for New Banknotes Design
Back to Top
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Buzzilla Raises $1 Million
2.2 Broadcom to Buy SC Square for $42 Million
2.3 Intel Israel to Produce New Ivy Bridge Processor
2.4 Israel Acquires Additional Lockheed Martin C-130J Super Hercules
Back to Top
3: REGIONAL PRIVATE SECTOR NEWS
3.1 US Luxury Operator Nikki Beach Considers Qatar & UAE Resorts
3.2 UAE Signs Deal with Boston-Based Hospital for Abu Dhabi Rehab Unit
3.3 First Biltmore Hotel Outside LA Planed for Abu Dhabi
3.4 UAE Auto Market Expected To Rise by 8% CAGR to 2014
3.5 UK Private Jet Firm Expands to Saudi Arabia
3.6 SeaChange Powers TTNET IPTV for Multi-Screen Video Service in Turkey
Back to Top
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Plan Approved For Solar Array Near Eilat
Back to Top
5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Lebanon Forecasts 2.5% Growth In 2011
5.2 Lebanon's Salameh Forecasts 2011 Inflation at 6%
5.3 Lebanon's Budget Deficit Swells By 37.76% in First Quarter
5.4 Lebanese Banking Sector Grows by 2.8% in First Quarter
5.5 Jordan's Inflation Reaches 4.5% In April
5.6 GCC Set To See 6.5% Average Growth In 2011
5.7 China Set to be GCC's Top Trade Partner in 2020
5.8 Kuwait Net Budget Surplus Grows To $23.5 Billion
5.9 Deutsche Bank Says Saudi Economy Stable Amid Regional Uprisings
5.10 Qatar's Annual Inflation Steady at 1.7% and Sees Flat Monthly Growth
5.11 Master Plan for Qatar to Be Presented to Cabinet
5.12 FDI Into UAE Reaches $10 Billion in 2010
5.13 UAE's Retail Sector Set To Reach $28.1 Billion by 2015
5.14 Abu Dhabi Considering $13 Billion Investment in Brazil
5.15 Abu Dhabi Plans Major Revision of Food Retail Sector
5.16 Abu Dhabi Sees 10% Increase in Visitors in First Quarter
5.17 Saudi Arabia's Non-Oil Exports Increases by 23% in 2010
5.18 Economic Losses of E£70 Billion from Onset of Political Unrest To Date
5.19 Egypt Has Up To $12 Billion Funding Gap Says IMF
5.20 Egypt's State Budget Deficit to Widen To 9.38% of GDP
5.21 Egypt's Suez Canal April Revenues up at $434.6 Million
5.22 FDI Into Egypt Falls by 30% in First Quarter
5.23 Egypt Offers Financial Perks to Boost Ailing Tourism
5.24 Omani Government Approves Establishment of First Islamic Bank
5.25 Algeria Announces Budget Spending Increase & Waives Duties on Staple Foods
Back to Top
6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkish Inflation Accelerates To 4.3% In April
6.2 Turkish Car Sales Surge By 64% In The First Four Months
6.3 Cyprus Per Capita Tourism Spend Up 2.7% In First Quarter
6.4 Greece Denies Report About Leaving The Euro
6.5 Bulgaria's Annual Inflation Rate Reaches 5.6%
6.6 Bulgaria's New Car Market Starts To Improve in First Quarter
Back to Top
7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Memorial Day Remembers Israel's 22,867 Fallen
7.2 Israel's Population Numbers 7,746,000
*REGIONAL:
7.3 Kuwait's New Cabinet Sworn In, Though Structure Largely the Same
7.4 Bahrain's King To Lift State Of Emergency Starting 1 June
7.5 Saudi Arabia Tightens Controls on Media
7.6 Muslim Brotherhood's Justice & Freedom party aims at 50% of Parliament
7.7 Labor Day in Egypt Marks Establishment of Significant Leftist/Socialist Parties
7.8 Turkey Celebrates Ataturk, Youth and Sports Day on 19 May
Back to Top
8: ISRAEL LIFE SCIENCE NEWS
8.1 Teva to Acquire Cephalon in $6.8 Billion Transaction
8.2 MacroCure Raises $13 Million
8.3 OrSense Closes $18 Million Private Financing to Accelerate Commercialization
8.4 TowerJazz & Medigus Release Second Generation of World's Smallest Medical Camera
Back to Top
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 LucidLogix Virtu to Bridge Discrete Graphics on ASUS Motherboards with Intel Z68 Chipsets
9.2 Ness Technologies Named Software Product Development Partner to StepStone Solutions
9.3 Mellanox Accelerates Hadoop & Memcached for Web 2.0 Applications
Back to Top
10: ISRAEL ECONOMIC STATISTICS
10.1 Israeli Jobseeker Numbers Unchanged In March
10.2 Israel Has 12th Highest Gasoline Prices in the West
10.3 OECD Says Economic Gaps in Israel Widening
Back to Top
11: IN DEPTH
11.1 ISRAEL: Summary of Israeli Private Equity Deals – Q1/11
11.2 MIDDLE EAST: Economic Costs of Political Unrest Start to Emerge
11.3 LEBANON: Debt Dynamics
11.4 JORDAN: Opening Up Agriculture
11.5 BAHRAIN: Kingdom of Silence
11.6 TUNISIA: A New Image
11.7 GREECE: Moody's Places Ratings on Review for Possible Downgrade
Back to Top
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Fischer Closes Foreign Currency Reporting Loopholes
On 5 May, Governor of the Bank of Israel Prof. Fischer said the reporting rules announced in January were being instituted. Bank officials said that the changes were intended to close loopholes discovered since the new rules came into effect. In January, the Bank of Israel ordered the banks to report all foreign currency swap deals and treasury bills of more than $10 million made in one day by foreign residents. The new directive extends this reporting requirement to shekel-foreign currency options and repo deals in treasury bills. The Bank of Israel also extended the definition of swap deals to include swaps of foreign currency options, even if they are not actually called swaps. The Bank of Israel expanded the list of institutions that must file the reports from banks, members of the Tel Aviv Stock Exchange (TASE) and anyone buying or selling foreign currency for a third part and who has an account at a bank or TASE member to their affiliated companies.
The Bank of Israel found that international financial institutions with accounts at Israeli banks, and were therefore required to file reports, could avoid the requirement by carrying out foreign currency transactions by foreign affiliated companies that had no bank account in Israel, and the reporting requirement therefore did not apply. The new rule requires subsidiaries and affiliates to file the reports. The changes will come into effect on 1 July. (Globes 05.05)
Back to Table of Contents
1.2 Bank of Israel to Hold Competition for New Banknotes Design
Bank of Israel will for the first time hold a public competition for graphic designers wishing to design its new banknote series. Details about the competition will be published on the Bank of Israel's website and in newspapers. Over the next two to three years, the Bank of Israel will be issuing a new series of banknotes, to replace the current series, which has been in circulation since 1999. According to the Bank of Israel, the redesigned series will incorporate advanced security features. The new series will contain the current denominations of NIS 20, 50, 100, and 200. The government recently approved the decision reached by Governor of the Bank of Israel Prof. Fischer to adopt the recommendation of the Committee for the Planning of Banknotes, Coins, and Commemorative Coins, regarding the portraits which will appear on the banknotes. NIS 20 bill: Rachel Bluwstein ("Rachel the poet"); NIS 50 bill: the poet Shaul Tchernichovsky; NIS 100 bill: poet and author Leah Goldberg; and NIS 200 bill: poet Natan Alterman. (Globes04.05)
Back to Table of Contents
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Buzzilla Raises $1 Million
Buzzilla has raised $1m at a company value of $20m, after money, in its first financing round, from veteran investor Jack Lahav. The company said that it will use the proceeds to improve its content scanning and analysis technology and to expand to international markets. The company is based on search technology developed by Omgili. Until 18 months ago, Buzzilla was a subsidiary of interactive ad agency of TBWA Digital Israel. Buzzilla severed its ties with TBWA when Rami Yehoshua acquired it in September 2009. Buzzilla's (http://buzzilla.com.br) technology scans websites and social content sites to find in real time messages and responses on forums, blogs, Facebook, Twitter, and talkbacks. It analyzes the information to learn about consumer conduct, which can help advertisers analyze the status of their brands, improve their services, and measure the effectiveness of ad campaigns. (Buzilla 27.04)
Back to Table of Contents
2.2 Broadcom to Buy SC Square for $42 Million
Irvine, California's Broadcom Corporation, a global innovation leader in semiconductors for wired and wireless communications, signed a definitive agreement to acquire SC Square, a leading security software developer based in Israel. With SC Square, Broadcom is acquiring an expert team of engineers focused on security, which is an essential ingredient across Broadcom platforms. This acquisition is part of Broadcom's strategy to acquire innovative technologies and high quality teams with a solid track record of execution. In connection with the acquisition, Broadcom expects to pay approximately $41.9 million, net of cash assumed, to acquire all of the outstanding shares of capital stock and other equity rights of SC Square. Tel Aviv's SC² (http://www.scsquare.com) is a world leader in the provision of Security Chip and Communication solutions. The company offers a wide variety of solutions meeting the latest security needs. SC² Smart Cards are designed with state-of-the-art cryptographic algorithms and solutions, tailored to the specific requirements of customers. SC² solutions include e-Health, e-ID, e-Passport, Citizen cards, Signature cards, e-Employee cards, e-Banking solutions including worldwide credit card companies and transportation. (Broadcom 08.05)
Back to Table of Contents
2.3 Intel Israel to Produce New Ivy Bridge Processor
Intel Israel will produce Intel Corporation's new Ivy Bridge processor, even though Intel Israel did not develop the technology. The company's Fab 28 in Kiryat Gat will be one of Intel's two fabs to produce the processor. Intel spent $2.7b to upgrade Fab 28 to 22-nanometer production technology. Intel unveiled its next-general Ivy Bridge processor on 4 May at a virtual event, which the company touted as the "most important technology announcement of the year." The solution Intel found to run forward and increase the number of processors on silicon chips has been on the agenda for a long time, and marks a fundamental change in chip design of the past 50 years: changing the transistors' operating space on processors to operate in three dimensions. Intel designed the Ivy Bridge processor to utilize a more complex silicon structure that includes an additional silicon layer on the wafer around which the flow control is more efficient than for regular transistors. (Globes 05.05)
Back to Table of Contents
2.4 Israel Acquires Additional Lockheed Martin C-130J Super Hercules
Bethesda, Maryland's Lockheed Martin has received an Undefinitized Contract Action from the U.S. Government for the Foreign Military Sale of an additional C130J to Israel, with funding for advanced procurement items for a third aircraft. Israel ordered its first C-130J in April 2010 and will receive that aircraft in spring 2013. The next two aircraft will be delivered in late 2013 and late 2014 respectively. The contract also covers a number of items to meet Israel's unique operational requirements. The Israeli Air Force's new Super Hercules are the longer fuselage or "stretched" variant of the C-130J. Israel's aircraft are being modified during production with non-developmental items, which include an Enhanced Service Life center wing, two embedded Global Positioning Systems and a Universal Aerial Refueling Receptacle Slipway Installation aerial refueling system. (Lockheed Martin 28.03)
Back to Table of Contents
3: REGIONAL PRIVATE SECTOR NEWS
3.1 US Luxury Operator Nikki Beach Considers Qatar & UAE Resorts
US-based ultra luxury beach club operator Nikki Beach is set to open a resort and spa in Qatar, with the first phase of the project opening by the end of this year. The Nikki Beach Hotels & Resorts concept was launched in 2008 and company chiefs say there are eight projects worth $200m in the pipeline including one in the UAE with two or three more being finalized. The brand's next opening, The Pearl Nikki Beach Resort & Spa, will be a boutique beachfront resort with 47 luxury villas and spa suites, the company said in a statement. The Pearl resort, located on The Pearl island of Qatar will open in two phases. Other Nikki Beach resorts in development are scheduled to open by 2014 in Cyprus, Greece, Croatia, the UAE and the Cape Verde Islands. The company also created some specialty concepts, such as VIP lounges, a music production company, a lifestyle magazine, a clothing line for staff uniforms and beachwear and an event management company. (AB 03.05)
Back to Table of Contents
3.2 UAE Signs Deal with Boston-Based Hospital for Abu Dhabi Rehab Unit
The UAE has signed an agreement with a US hospital as part of plans to open a new 200-bed drugs rehabilitation unit in Abu Dhabi in 2014. The National Rehabilitation Centre (NRC) - the national addiction response body in the UAE mandated with rehabilitation and treatment of people addicted to substance abuse - signed a partnership deal with McLean Hospital, based in Boston. The McLean Hospital is a comprehensive mental healthcare system affiliated with Harvard University. The partnership agreement is aimed at improving services and rehabilitation programs in the UAE. The partnership agreement between NRC and McLean Hospital will lead to the opening of the new NRC building in Abu Dhabi. McLean Hospital sent a high-level delegation to Abu Dhabi in January to lay the foundations for the joint venture action plan and a NRC delegation will visit McLean Hospital soon to attend a range of programs that focuses on the treatment of addiction to alcohol and drugs in Boston. (AB 07.05)
Back to Table of Contents
3.3 First Biltmore Hotel Outside LA Planed for Abu Dhabi
Millennium and Copthorne Hotels said on 1 May that it aims to triple its portfolio in the Middle East and North Africa in less than three years. The company, with more than 120 owned and managed hotels across 20 countries, said it would open a Biltmore-branded hotel in Abu Dhabi in 2013. The property in the Al Bateen area of Abu Dhabi is currently in the final design stage and will be based on the original Biltmore Hotel in Hollywood, which was the setting of many of Hollywood's most memorable scenes. The company is due to add 12 new properties to its portfolio of 12 operating hotels this year, with 52 signed management agreements in the pipeline, it added. (AB 01.05)
Back to Table of Contents
3.4 UAE Auto Market Expected To Rise by 8% CAGR to 2014
According to recent market research, the UAE automotive market is predicted to grow by around 8% annually over the next four years. It said car sales in the UAE would see a compound annual growth rate (CAGR) of 8 % to 2014, while total re-exports are expected to increase at a CAGR of 5 % in the same period. Growing vehicle ownership and increasing industrial development are bringing about a plethora of change in the global marketplace for lubricating oils and greases. While demand in the developed countries has either slowed down or remained relatively unchanged, the emerging economies are leading the growth surge according to industry research by Global industry Analysts. The global market for lubricating oils and greases, which includes both commercial automotive and industrial lubricants, is expected to be 10.5b gallons annually by 2015. A recent market trend is that lubricants from the UAE are gaining popularity and market share in the rising markets around the immediate region and beyond. Today, a significant part of the demand from CIS, Afghanistan, Pakistan, India, Sri Lanka, Bangladesh and Africa is being fulfilled by UAE suppliers. (BI-ME 02.05)
Back to Table of Contents
3.5 UK Private Jet Firm Expands to Saudi Arabia
Private Jet Charter, one of the world's largest independent jet brokers and consultants, has set up a presence in Saudi Arabia to cater to rising demand from wealthy customers in the kingdom. The company's CEO said Saudi Arabia now commanded half of the air charter business in the Middle East. Offices have been set up in Jeddah and Riyadh, adding to Private Jet Charter's existing Middle East presence in Dubai. The demand for private jets in the kingdom was down to the recession that has forced some companies to halt their flight operations or sell off their corporate jets. (AB 30.04)
Back to Table of Contents
3.6 SeaChange Powers TTNET IPTV for Multi-Screen Video Service in Turkey
Acton, Massachusetts' SeaChange International, the leading global multi-screen video company, announced details of its role in TTNET's nationwide IPTV service, Tivibu Ev (Tivibu Home), part of its multi-screen video service that is currently available in 30 cities across Turkey. As the systems integrator and a primary technology provider for Tivibu Ev, SeaChange assembled a multinational team of engineers, project managers and technology partners to build one of the world's newest and most advanced television services. Tivibu Ev consists of more than 100 linear multicast channels of standard- and high-definition television; 3,100-plus hours of standard- and high-definition video-on-demand (VOD) content; start-over TV functionality; and up to 90 minutes of pause time for live TV. Commercially launched in February, Tivibu Ev is marketed and sold by TTNET, a Turk Telekom company and operator of communication services throughout Turkey. (SeaChange 09.05)
Back to Table of Contents
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Plan Approved For Solar Array Near Eilat
The National Planning and Building Commission today approved Arava Power Company's 35-40 MW photovoltaic array at Kibbutz Ketura. The plan will now go to the regional planning and building commissions for comments and the public's objections. This measure will enable final approval of the play by the end of the year. Arava Power's PV array is the first large solar field to reach the advanced planning stages. The array could meet one third of Eilat's electricity needs. The array's location in the southern Arava Valley guarantees more than 2,200 effective hours of sunlight a year. The company's environmental impact statement says that the array will save 60,000 tons of carbon dioxide emissions a year. Kibbutz Ketura does not farm the site of the array because of a shortage of water suitable for crops. Arava Power and Kibbutz Ketura have been working on the project for 30 months as a national infrastructure project. (Globes 03.05)
Back to Table of Contents
5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Lebanon Forecasts 2.5% Growth In 2011
The Lebanese Finance Ministry projected GDP growth in Lebanon at 2.5% in 2011 and 4% the following year. The projections were part of the 2012 draft budget which caretaker Finance Minister Hasan prepared. The new draft budget still needs the approval of the Cabinet and the Parliament but this seems highly unlikely as a new government has yet to be formed four months after the resignation of the Saad Hariri's Cabinet. The ministry noted that the draft budget would be transparent and all development projects would be completed to meet citizens' priorities.
According to the draft budget, government spending will fall from 29.2% in 2012 to 27.7% in 2014. Projected revenues for 2012-14 are estimated at 23% of the country's GDP. The deficit-to-GDP ratio will be reduced in the total budget from 6.9% in 2012 to 5.1% in 2014. Primary surplus, excluding the cost of debt servicing, will rise to 2.5% in 2012 and to 4.1% in 2014. The Finance Ministry said the new draft budget would not include any reforms because this decision was up to the next Cabinet.
Analysts and economists argue that it is very unlikely that the new Cabinet, which will be headed by Prime Minister-designate Najib Mikati, will adopt the new draft budget. The new finance minister is expected to be caretaker Economy and Trade Minister Mohammad Safadi, who will probably continue most of the policies adopted by his predecessors but may make some modifications.
The 2010 budget was modified many times during heated Cabinet sessions last year as caretaker Telecommunications Minister Charbel Nahhas insisted on dropping all types of taxes such as a planned increase of the Value-Added Tax (VAT). Among the biggest challenges facing the new Cabinet is financing the public debt, securing funds for development projects and reducing the budget deficit. A quick look at the budget deficit statements in the past three months shows the deficit is rising to alarming levels as a result of the absence of a government, slow economic growth and a fall in state revenues. (TDS 09.05)
Back to Table of Contents
5.2 Lebanon's Salameh Forecasts 2011 Inflation at 6%
On 5 May, Lebanese Central Bank Governor Salameh projected inflation in Lebanon to jump to 6% from the current 4% due to the rise in commodity prices. “In light of the rise of basic commodities worldwide and the monetary expansion which we are witnessing among developed countries, our main concern is to preserve the purchasing power of the Lebanese society,” the governor argued. The steady increase in the prices of gasoline and other basic commodities in the country over the past few months has prompted trade unions as well as taxi drivers to call for a nationwide general strike in order to compel the authorities to alleviate the pressure on citizens, and low-income families in particular. The Central Bank is empowered to intervene in the market to stabilize the Lebanese pound and keep inflation at acceptable levels. The Central Bank governor noted that many countries in which the Lebanese work have experienced crises and political turmoil and this in turn has affected the Lebanese economy. He added that the 2.5% GDP growth projected by the IMF is due to the difficult political conditions in the country. Most Lebanese banks that are operating in Egypt, Syria and Jordan have stressed that the political turmoil in those countries had little effect on the lenders. (The Daily Star 06.05)
Back to Table of Contents
5.3 Lebanon's Budget Deficit Swells By 37.76% in First Quarter
Lebanon's budget deficit in the first three months of 2011 rose by LL794 billion ($529.3 million) or 37.76% of spending while the primary surplus in the same period registered a deficit of LL218 billion, the Finance Ministry said on 5 May. The ministry attributed the high deficit to a sharp fall in government revenues and an increase in spending. Analysts and observes fear that the sharp differences between some of the ministers in the caretaker Cabinet could harm the country's economy and have warned of negative effects on public finance if the ministers do not tone down their rhetoric. A dispute between caretaker Finance Minister Hasan and caretaker Telecom Minister Nahhas has seen the latter withhold revenues from landline and cellular networks from the Finance Ministry. Hasan warned that her ministry may be unable to pay the salaries of public staff at the end of the month or finance $1.2 billion in Eurobonds at the end of May if the Telecom Ministry does not release the revenues. Nahhas also said that since the start of his term, his ministry had transferred close to $1.7 billion in telecoms revenues to the Central Bank. He also alleged that all finance ministers who held office in the past 17 years have “plundered the state's coffers.”
According to the Finance Ministry's monthly bulletin, the budget deficit up to March 2011 reached 37.76% of spending or LL1.655 trillion, an increase of LL794 billion. The deficit in the first three months of 2010 reached LL861 billion or 21.83% of spending. The primary surplus, excluding the cost of debt servicing, recorded a deficit of LL218 billion, compared to a surplus of LL582 billion in the same three months of 2010. Total government revenues in the first three months of 2011 reached LL2.728 trillion, or a drop of LL356 billion (or 1.55%) compared to the same period of 2010. Total government spending in the same reporting period reached LL4.383 trillion, compared to LL3.954 trillion in the same period of 2010, an increase of 11.09%. (The Daily Star 06.05)
Back to Table of Contents
5.4 Lebanese Banking Sector Grows by 2.8% in First Quarter
The Lebanese banking sector grew by 2.8% in Q1/11, a slower rate than growth seen in Q1/10. Measured in domestic bank assets, the sector registered $132.5 billion at end of March 2011 from $128.9 billion at end of December 2010. More specifically, Q1/11 lending activity grew 4.3% y-o-y. Customer deposits continue to be a main source of funding, accounting for about 82% of total assets. First quarter deposit growth is largely attributable to the $3.4 billion rise in foreign currency deposits, as those in local currency shrunk by $2.5 billion because of conversions that took place in January 2011. The deposit dollarization ratio thus increased to 65.9% from 63.2% as at December 2010, still lower than the decade highs. The loan dollarization ratio was flat at about 80%. (Beltone 08.05)
Back to Table of Contents
5.5 Jordan's Inflation Reaches 4.5% In April
Inflation in April reached 4.5% driven by increases in the prices of several services and commodities. According to the Department of Statistics (DoS), prices of transportation increased by 6.9% over the same month of last year, meat and poultry by 6.6%, rentals by 5.3% and education by 5.9%. The DoS report also indicated that inflation during the first four months of this year increased to 4.4%. (DoS 10.05)
Back to Table of Contents
5.6 GCC Set To See 6.5% Average Growth In 2011
GCC economies are set to grow by an average of 6.5% this year, up from 5.1% last year, the Washington-based Institute of International Finance (IIF) has said in a new report. It said the rise would be buoyed by higher oil production and large increases in government spending, with Qatar seeing the highest level of growth at 18.1%. Analysts also said higher oil prices - up from $80 per barrel in 2010 to $115 in 2011 - and production levels would help lift the GCC's budget revenues from hydrocarbon exports from $362 billion in 2010 to $533 billion in 2011. The IIF added that the combined external current account surplus of the GCC was projected to rise from $129 billion in 2010 to $292 billion this year. Gross foreign assets of the GCC countries in 2011 are projected to rise to $1.7 trillion (against foreign liabilities of $0.5 trillion) and of the Arab countries to $2.2 trillion (against total foreign liabilities of $0.7 trillion).
The report said that despite the turmoil in the Middle East and North Africa region, it did not expect to see "significant shifts" in funds being managed by sovereign wealth funds (SWFs), which currently handles more than a third of total funds. While the new order in the region could bring about more open, inclusive, and accountable governments, the achievement of stable democracies with robust and effective institutions will require fundamental political and economic reforms and will take time. In the oil-importing countries, the economic toll from the political turmoil will translate into a sharp drop in growth rates in 2011, with a likely rebound in 2012. For the countries directly affected by the turmoil, it expects real GDP growth to slump from an average of 4.4% in 2010 to -0.5% in 2011. (AB 08.05)
Back to Table of Contents
5.7 China Set to be GCC's Top Trade Partner in 2020
China is expected to be the GCC's most important economic partner by 2020, according to a new report by the Economist Intelligence Unit (EIU). The emergence of China and India and the growing economic importance of sub-Saharan Africa present massive opportunities for the GCC, the report said. By 2009 the emerging-market share of GCC trade had reached 45%, according to the report, up from 15% in 1980, with an average of 11% per year growth, as the region looks to shift investments from developed to developing countries. As well as China, South Korea, Singapore, Malaysia and India will remain important as providers of technology and know-how for GCC states. It added that trade with Africa will focus on agriculture, with the region investing in Africa's arable land and establishing export-oriented farming businesses. The EIU said that Asia will be the most important emerging-market region for the GCC because of its rising demand for oil. In Asia and some parts of the Middle East, GCC countries will invest heavily in infrastructure, the report added. (EIU 10.05)
Back to Table of Contents
5.8 Kuwait Net Budget Surplus Grows To $23.5 Billion
Kuwait's net budget surplus increased to 6.5b dinars ($23.5b) in its 2010/11 fiscal year as oil income jumped, while spending remained trailing the original plan. The net figure is after a transfer of 10% of revenues to a fund for future generations, managed by the country's sovereign wealth fund. Before the transfer, the fiscal surplus reached 8.5b dinars, or 23.1% of Kuwait's GDP, above market expectations and 6.4b seen in the previous fiscal year. Expenditure came in at 12.4b dinars in fiscal year 2010/11, which ended in March, well behind the original plan of 16.3b dinars. The budget included spending on a four-year, 30b-dinar development plan, which is aimed at diversifying the crude-reliant economy and increasing the role of the private sector. Revenue reached 20.9b dinars in the year to March 31, more than double the 9.7b plan. Kuwait had set its 2010/11 budget with a deficit of 6.6b dinars, assuming that crude, its main revenue earner, would fetch $43 per barrel. (Various 02.05)
Back to Table of Contents
5.9 Deutsche Bank Says Saudi Economy Stable Amid Regional Uprisings
Saudi Arabia's economy should not face any major disturbances as political upheaval in the region may stunt the growth of a number of Arab economies, Deutsche Bank (DBK)'s regional chairman said. The Saudi economy will grow at 7% or 7.5% this year, Henry Azzam said at a conference in Dubai. The two most stable governments in the region are those of the United Arab Emirates and Qatar, “helped by government largesse,” he said. While Tunisia and Egypt are the only two nations to have toppled their leaders, Libya is embroiled in a civil conflict and unrest in Syria, Bahrain and Yemen has left hundreds dead and sent oil prices soaring 23% this year. The region's crude exporters have better economic prospects this year than fuel importers as prices rise and governments attempting to placate regional popular uprisings spend more of their oil revenue, the IMF said on 11 April. Qatar, holder of the world's third-largest natural gas reserves, is forecast to grow by 20% this year and Saudi Arabia, with the world's biggest oil reserves, by 7.5%. The events taking place in the Middle East are on a par with the fall of Berlin Wall and the growth sparked by that, Azzam said. Egypt's economy is likely to deteriorate further before it improves, he said. The IMF cut its growth forecast for Egypt to about 1%, from its pre-revolution forecast of 5%. (BI-ME 01.05)
Back to Table of Contents
5.10 Qatar's Annual Inflation Steady at 1.7% and Sees Flat Monthly Growth
Annual inflation in Qatar has remained broadly unchanged at 1.71% in March 2011, compared with 1.78% in February 2011, according to the Qatar Statistics Authority. Annual food price inflation has risen to 5.24% in March 2011 from 4.40% in February 2011, while housing costs declined by 5.09% on a y-o-y basis in March 2011 compared with the 5.68% decline seen in February 2011. The release of March inflation figures puts Q1/11 inflation at 1.66% y-o-y up from -0.1% in Q4/10 and -4.4% in Q1/10. On a monthly basis, which is more indicative on the on-ground changes in consumer prices during the month (excluding the base effect), the widening contraction in housing costs (falling 0.42% m-o-m in March from 0.11% in February) weighed down the acceleration seen in monthly food prices (which rose 0.7% m-o-m in March from 0.3% in February), and led to an overall flat monthly growth in Qatar's inflation in March 2011.
Pundits note that rising food prices, a weaker forecast US dollar should continue to support inflation in Qatar going forward pushing the y-o-y change in inflation levels higher to average around 1.9% in 2011 from a deflation of -2.4% in 2010, before gaining more ground in 2012, as an expected rise in imported inflation starts to have a more visible impact on other non-food items. At this level, however, inflation continues to be weighed down by the decline in housing costs, led by rental costs. With inflation no longer a concern as it was before the global financial crisis and, given that it is not expected to rise significantly over 2011-2012, monetary policy in Qatar will remain accommodative and focused on supporting credit growth, especially to the private sector. (Beltone 02.05)
Back to Table of Contents
5.11 Master Plan for Qatar to Be Presented to Cabinet
Qatar's Minister of Municipality and Urban Planning will present a comprehensive long-term master plan that will guide the physical development of Qatar to the Council of Ministers. The Master Plan for Qatar is based on Qatar National Vision 2030 and rolling it out will take place as per the guidelines of the National Development Strategy 2011/16 where the Minister of Municipality and Urban Planning had indicated that Qatar would spend about $10b on infrastructure projects this year.
In its FY2011/2012 budget, mega and infrastructure projects spending (including beginning of construction of Doha International Port and continuing with New Doha International Airport construction) are expected to absorb nearly 41% of total expenditure, or QAR58b, in FY2011/2012. This is part of Qatar's overall planned $65b of infrastructure spending. Executing the Master Plan for Qatar and other urban regeneration initiatives planned by the Qatari government all further confirm the view that going forward, non-hydrocarbon real GDP growth (forecast at 10 - 12% between 2010 and 2012) that is backed by the government's investment spending will be the main driver of overall real GDP growth, especially with LNG capacity utilization is reached and moratorium on new gas developments is not expected to be lifted before 2015. This is also given the urgent need to upgrade and expand Qatar's power and infrastructure bases to accommodate future growth needs as most investments in the past had predominantly been geared toward developing Qatar's hydrocarbon industry. (Beltone 03.05)
Back to Table of Contents
5.12 FDI Into UAE Reaches $10 Billion in 2010
The UAE attracted more than 279 foreign direct investment (FDI) projects in 2010 that are worth $10 billion, according to the Undersecretary of the Abu Dhabi Department for Economic Development (ADDED). This represents one of the highest levels of FDI inflows in the region and the UAE could further benefit from the current political turmoil in the region in attracting more FDI.
Up until 2008, the UAE had been one of the primary destinations for FDI inflows in the GCC region, second to Saudi Arabia. The UAE, however, saw a significant retrenchment, both in the inflow and outflow of FDI after the financial crisis. In 2009, FDI inflows into the UAE fell to $4 billion (7.7% of Gross Fixed Capital Formation) from $13.7 billion in 2008 (26.7% of GFCF). Meanwhile, as the government opted to focus its attention on supporting the domestic economy, holding back on external investments, outflow of FDI from the UAE also fell to $2.7 billion in 2009 from $15.8 billion in 2008. The statement coming from ADDED, thus, reiterates that this trend is reversing, and while it remains below its pre-crisis levels, it is expected that FDI inflows into the UAE will continue to gradually increase over the coming two to three years. The UAE's sound infrastructure base, relatively sophisticated and open market, and with the regulations in place (compared to other countries in the region), in addition to its status as an important trade and services hub, makes it an attractive destination for business and multinationals to set operations in. Countries like the UAE and Qatar will largely benefit increased investment levels (both in the form of FDI and portfolio) arising from the political events in the region. (Beltone 04.05)
Back to Table of Contents
5.13 UAE's Retail Sector Set To Reach $28.1 Billion by 2015
The UAE's retail sector will grow from an estimated $21.5b this year to $28.1b by 2015, according to a new report by Business Monitor International. Retail sub-sectors predicted by BMI to show strong growth over the forecast period include over-the-counter pharmaceuticals, with sales expected to increase by more than 30% to $420m by 2014. Key factors behind the forecast are strong underlying economic growth (despite the recent problems in Dubai), increasing household consumption, growing acceptance of modern retailing concepts and expatriate wealth. The report added that car sales are forecast to rise by more than 20%, from an expected $12.8b in 2011 to $15.45b by 2014. It said sales of consumer electronics will increase from a forecast $3.2b in 2011 to $3.9b by 2014, a rise of more than 19%. Food sales are predicted to rise by nearly 25% to be worth $9.5b by 2014.
BMI said that retail sales across the Middle East and Africa (MEA) countries in 2011 were predicted to amount to $196.6b. The report added that the UAE's nominal GDP in 2011 is predicted to be $299.1b, with growth of 3.9% predicted for the year. BMI said it expected average annual GDP growth of 3.9% between 2011 and 2015. Average household spending power in the UAE stands at $14,400 per annum, according to property consultants Colliers International, with Emirati households accounting for the lion's share of this spending, with an average of $23,000, while Western, other Arab and Asian households have an annual spending power of $19,500, $13,500 and $10,000 respectively. (AB 03.05)
Back to Table of Contents
5.14 Abu Dhabi Considering $13 Billion Investment in Brazil
Abu Dhabi's Mubadala is considering a multi-billion dollar investment in a range of industries in Brazil. The Mubadala chairman met with the Brazilian minister of Development, Industry and Foreign Trade in early May to discuss opportunities. Brazilian officials were told that the company had $13b available to invest in the fields of oil and gas, aluminum, semiconductors, infrastructure and aerospace. According to the ministry, the meeting was called by Mubadala, which is keen to do business in Brazil. Mubadala will return to Brazil next month to also seek investment opportunities in the agribusiness sector. Brazil is one of the fastest growing major economies in the world with an average annual GDP growth rate of over 5%. Mubadala, established in 2002 by the Abu Dhabi government to handle the diversification of the emirate's investments, owns stakes in high profile companies such as the US-based AMD and GE. Last month it posted a loss of $85.76m for 2010 due to mark to market write-downs. Earlier this month, Mubadala said it plans to boost spending to about $16.3b this year. The company will deploy a "substantial" portion of capital and investment expenditure over 2011 to 2015 on real-estate, oil and gas, and public-private partnership projects. Abu Dhabi, home to more than 7% of the world's proven crude reserves, is seeking to diversify from oil by investing in industries such as real estate and aerospace. (AB 30.04)
Back to Table of Contents
5.15 Abu Dhabi Plans Major Revision of Food Retail Sector
Abu Dhabi's food retailing sector is set for a major shake-up, designed to raise quality standards. Rashed Mohamed Al Shariqi, director general of Abu Dhabi Food Control Authority (ADFCA), said "a comprehensive plan to develop the retail stores sector" was underway, adding that more details would be announced later this year. Al Shariqi added that the modernization of the retail and grocery sector would force shops to adopt global food safety procedures "more rigorously". ADFCA and Abu Dhabi Department of Economic Development will work together to implement the proposed improvement plans for the grocery sector. A recent government study showed that there are about 1,300 grocery stores in Abu Dhabi. (AB 30.04)
Back to Table of Contents
5.16 Abu Dhabi Sees 10% Increase in Visitors in First Quarter
Abu Dhabi saw a 10% rise in hotel guests in the first quarter of this year, with increases also recorded for guest nights, occupancy levels, revenue and length of stay. According to the latest figures from the Abu Dhabi Tourism Authority (ADTA), some 510,114 guests stayed in Abu Dhabi's hotels in the first three months of this year producing 1.56m guest nights - up by a quarter on the same period in 2010. March alone achieved a 9% rise in hotel guests with some 180,931 people checking into the emirate's hotels. While the Q1 mainstay was the domestic market, the UK came in as the top overseas producer with 37,710 guests during the quarter - a 20% rise on Q1/10. India rose to be the second largest overseas producer with its 23,614 Q1 turnout being up 28% on the same time last year while the US was in third place with 23,190 guests. Regionally, Saudi Arabia proved to be the top GCC source market with 13,119 guests - up 44% on 2010 producing 29,327 guest nights, leaving the kingdom in 6th place on the international market rankings. (AB 29.04)
Back to Table of Contents
5.17 Saudi Arabia's Non-Oil Exports Increases by 23% in 2010
Saudi Arabia's non-oil exports increased y-o-y by 23% in 2010 to reach SAR134.6 billion, data by the Central Department of Statistics and Information showed. The most significant growth in Saudi Arabia's non-oil exports is witnessed in plastic exports, which grew 79% y-o-y in 2010 to reach SAR 42.2 billion, followed by the petrochemical exports, which rose y-o-y by 36% to reach SAR40.2 billion in 2010. Demand from Asia led the growth in Saudi Arabia's non-oil exports, whereby non-oil exports to China rose 54% y-o-y in 2010 with an export value of SAR13.5 billion. Non-oil exports to Singapore grew 88% to reach an export value of SAR8.2 billion in 2010 and non-oil exports to India grew 41% to reach SAR6.6 billion. The UAE is still considered the top export destination in terms of Saudi non-oil exports, with an export value of SAR14.7 billion in 2010. Asia has taken the lead from the GCC in terms of Saudi Arabia's top non-oil export destination, with a share of 29% to total non-oil exports in 2010, followed by the GCC with a share of 24% of total Saudi non-oil exports. Demand from Asian buyers started to improve in the second half of last year and outstripped available supply from Saudi Arabia in the fourth quarter. (Various 04.05)
Back to Table of Contents
5.18 Economic Losses of E£70 Billion from Onset of Political Unrest To Date
The National Institute for Planning estimates the losses in the Egyptian economy at E£70 billion, since the onset of the political events to date (25 January to 5 May). The losses are incurred in the manufacturing, tourism and construction sectors, in addition to Suez Canal receipts and other sectors. The report does not include losses incurred in the Egyptian stock market. The report expects that remittance inflows in Egypt will decline in 2011, to less than $7 billion. The Head of the National Institute for Planning said that the Egyptian economy is on the brink of a major crisis, especially with the deterioration in the NIR position to reach $28 billion at the end of April 2011, which in effect limits Egypt's capabilities to secure its needs from imported goods. (Al Ahram 08.05)
Back to Table of Contents
5.19 Egypt Has Up To $12 Billion Funding Gap Says IMF
Egypt has indicated it needs up to $12b to meet a funding gap but has yet to formally request a loan from the IMF. Egypt has said it was seeking $10 billion in funding from international lenders and rich nations to cope with the fallout from the mass protests that toppled the country's long-time leader Hosni Mubarak in February. The IMF head said earlier in April that the fund would likely make available $35 billion in loans to oil-importing countries in the Middle East and North Africa where popular uprisings have occurred. Egyptian Finance Minister Radwan said that his government was in talks with the IMF for an up to $4 billion loan. A collapse in tourism and foreign investment following the protests have hit revenues hard and sent the economy of the most populous Arab country into an estimated 7% contraction in January-March. The IMF projects Egypt's economic growth to plunge to 1% this year, well below its long-term average, after a 5.1% expansion in 2010, the regional report showed. Egypt's budget deficit may top 10% of GDP in the coming fiscal year as the government responds to demands for jobs and higher wages, Radwan said earlier. (Various 28.04)
Back to Table of Contents
5.20 Egypt's State Budget Deficit to Widen To 9.38% of GDP
Egypt's state budget deficit is forecast to widen to 9.38% of GDP in the 2011/12 fiscal year, Finance Minister Radwan said. This compares to an expected deficit of about 8.5% for the 2010/11 fiscal year ending on 30 June. The draft budget due to be presented to the cabinet foresees revenue of E£342.6b and spending of E£500.7b. Furthermore, Planning & International Cooperation Minister Faiza Abu el-Naga announced a development plan worth E£230b to kick-start the economy. She said that 55%of the plan, which still needs to be approved by the government, would come from the private sector. The rest would come from the public sector. The plan envisages adding E£1.7b for extra spending on health, education, training and vocational education. Beltone had projected a fiscal deficit of E£157b in FY11/12 and according to the revenues and expenditures outlined in the new budget, the MoF expects a deficit of E£158b in FY11/12, bringing their total estimates for the value of the deficit almost exactly in line. Beltone expected an expenditure growth of 13.6% to reach E£458b, while the government is expecting an expenditure growth of 24.3% to reach E£500.7b. (Beltone 03.05)
Back to Table of Contents
5.21 Egypt's Suez Canal April revenues up at $434.6 Million
Revenue from Egypt's Suez Canal rose 15.9% year-on-year to $434.6 million in April, and rose 5.1% from a month earlier. Revenue in April 2010 was $374.9 million. Revenue in March 2011 was $413.5 million. The waterway is a vital source of foreign currency in Egypt, along with tourism, oil and gas exports and remittances from Egyptians living abroad. (Various 10.05)
Back to Table of Contents
5.22 FDI Into Egypt Falls by 30% in First Quarter
Foreign direct investment in Egypt fell y-o-y by $400 million in Q1/11. Foreign investment in Q1/11 reached $1.2 billion. A fund worth E£1 billion would be set up to encourage investment in Egypt, whereby Arabian Gulf states have agreed to take on some of the fund's cost.
Comparing the reported FDI figure of $1.2 billion in Q1/11 to the $1.7 billion FDI recorded in Q1/10 (from BOP accounts), FDI actually contracted by $500 and not $400 as reported, which represents a 30% annual contraction in Q1/11. Beltone had expected a bigger annual contraction in Q1/11 of around 50%, as this period should have represented the height of the political turmoil, whereby decisions of expansions and greenfield investments are expected to have been postponed. Therefore, this reported FDI figure, when confirmed by official figures of the balance of payments, is actually above expectations. Beltone expected that FDI inflows to drop by 50% in FY10/11 to reach around $3.2 billion. However, if the reported FDI figure is confirmed, this will represent an upside potential to total FDI inflows in FY10/11. (Beltone 04.05)
Back to Table of Contents
5.23 Egypt Offers Financial Perks to Boost Ailing Tourism
Egypt is offering financial incentives to tour operators in the UAE and Europe in a bid to lure back visitors and maintain chartered flights. Cairo has said it will subsidize half-full inbound flights until October and offer cash benefits to travel agents in exchange for running marketing campaigns for Egypt. The deputy minister of tourism said that if Dubai operators run campaigns for Egypt, they will pay a dollar against a dollar spent. Tourism, a backbone of Egypt's economy, has slowed to a trickle in the wake of the revolution ousted President Mubarak and saw embassies worldwide issue travel warnings against travel there. The aftermath has left Egypt's travel industry in crisis, with the country's tourism minister predicting 2011 revenue will be 25% lower than the previous year. An estimated $1.8b was wiped from the industry between February 1 and April 5. The fallout has also taken a toll on the aviation industry, with a number of carriers scaling back or scrapping Egyptian routes. Job losses in the tourism industry were kept to a minimum after the government stepped in to subsidize salaries during the height of the crisis. Efforts to bolster Egypt's ailing travel industry have been welcomed by analysts who warn it may be years before business returns to pre-crisis levels. (AB 04.05)
Back to Table of Contents
5.24 Omani Government Approves Establishment of First Islamic Bank
It was reported that the government of Oman has approved the establishment of the first Islamic bank, to specifically offer sharia-compliant products and services. It was not immediately understood whether conventional banks already operating in the country would be allowed to open Islamic banking windows. Oman is the only state amongst the six Gulf Cooperation Council (GCC) members which has not so far set up a bank specifically offering products and services complying with Islamic law. (Various 03.05)
Back to Table of Contents
5.25 Algeria Announces Budget Spending Increase & Waives Duties on Staple Foods
At a recent cabinet meeting chaired by President Bouteflika, the government approved amendments to the 2011 budget which would increase public spending by 25%. The extra spending would be concentrated on pay increases for public sector workers, higher state subsidies on flour, milk, cooking oil and sugar, creating work for young unemployed people and building new houses. The budget measures are contained in a draft supplementary budget for 2011 that was approved by the cabinet, yet still need to be approved by parliament. In addition, the draft supplementary budget law waived VAT and customs tariffs on imports of cooking oil and raw and white sugar. (Beltone 03.05)
Back to Table of Contents
6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkish Inflation Accelerates To 4.3% In April
Turkey's consumer prices rose slightly by 0.87% in April, bringing the annualized rate of inflation to 4.26% -- a rate still below the 41-year low witnessed in December 2010, the Turkish Statistics Institute (TurkStat) said on 3 May. According to the data, the month-on-month consumer price index (CPI) increase was 0.87% in April 2011, while the producer price index (PPI) was up by 0.61%. The annual CPI was 4.26% in the past month, meaning it is still below the 41-year low of 6.4% witnessed in December 2010 despite the slight rise. The yearly PPI in the same month came in at 8.21%. (TurkStat 03.5)
Back to Table of Contents
6.2 Turkish Car Sales Surge By 64% In The First Four Months
Turkey's car and light commercial vehicle market reached a new peak in the January-April period. According to data from the Automotive Distributors Association, or ODD, total sales in the first four months of the year rose by 64% on an annual basis, from 157,982 units to 259,182. In January, the market grew by 123%, while growth in February, March and April stood at 88%, 51% and 41.1%, respectively. In the four months of the year, car sales surged by 70.3% to 176,730 units, according to ODD data. In January alone, the passenger car market grew by 137%. Annual growth decreased to 88.9% in February, to 59.1% in March and to 47.3% in April. The light commercial vehicle market expanded by 52%, reaching sales of 82,452 units in the first four months. A similar monthly decline between January and February was observed in the sales of these vehicles as well. The declines may be interpreted as an indication that credit growth in Turkey is slowing down, as consumers face higher interest rates in car loans. In contrast, diesel car sales doubled compared to the first four months of last year. Around 60% of all car sales in the period were comprised of diesel cars, compared to 51% last year. (ANA 05.05)
Back to Table of Contents
6.3 Cyprus Per Capita Tourism Spend Up 2.7% In First Quarter
Revenue from tourism outperformed arrivals in March, with inflows from tourism rising by 1.3% to €66.4m compared with €65.6m in the corresponding month of the previous year. This was a month in which tourism arrivals fell by 4.7% to 98,964. The same pattern was seen for the whole of the first quarter. For the period January - March 2011, the Passenger Survey estimates that revenue from tourism rose by 3.1% to €133.1m compared with €129.2m in Q1/10. Total arrivals in the same period rose by only 0.3%. The average spend per tourist has thus risen by 2.7%, from €630 in the first quarter of 2010 to €647.2 in the first quarter of 2011. (Sapientaeconomics 03.05)
Back to Table of Contents
6.4 Greece Denies Report About Leaving The Euro
On 6 May, Greece was forced to deny that it has any intention of leaving the eurozone or that it was discussing a potential exit with its European partners after a report in Germany's Der Spiegel Online suggested finance ministers were meeting in Luxembourg to talk about Athens reverting to the drachma. Deputy Finance Minister Sachinidis and the Finance Ministry h formally rejected these claims. The euro fell sharply on the foreign exchange markets in late trading and Athens said that the claims made by Spiegel Online were damaging for Greece and the single currency. “Such articles are not only provocative but also highly irresponsible as they undermine Greece's efforts and those of the eurozone and serve only the interests of speculators,” said the Finance Ministry. Greece's assertion that no secret meeting was taking place in Luxembourg was backed up by other eurozone members. (Various 06.05)
Back to Table of Contents
6.5 Bulgaria's Annual Inflation Rate Reaches 5.6%
Bulgaria's annual inflation rate reached 5.6% in March 2011, according to the country's National Statistical Institute's consumer price index (CPI). The consumer price index in March 2011 compared to February 2011 was 100.6%, i.e. the monthly inflation was 0.6%. The inflation rate since the beginning of the year (March 2011 compared to December 2010) was 2.4%. The annual average inflation, measured by CPI, in the last 12 months (April 2010 - March 2011) compared to the previous 12 months (April 2009 - March 2010) was 3.5%. The harmonized index of consumer prices (HICP) in March 2011 compared to March 2010, i.e. the annual inflation, was 4.6%, while the monthly inflation in March 2011 compared to February 2011 was 0.4%. The inflation rate since the beginning of the year (March 2011 compared to December 2010) was 1.4%. The annual average inflation, measured by HICP, in the last 12 months (April 2010 - March 2011) compared to the previous 12 months (April 2009 - March 2010) was 3.7%. The consumer price index (CPI) is the official measure of inflation in Bulgaria. The Harmonized Index of Consumer Prices (HICP) is the comparable measure of inflation across EU member states. HICP is one of the criterions of price stability and for readiness of Bulgaria to join the euro-zone. (SMN 13.04)
Back to Table of Contents
6.6 Bulgaria's New Car Market Starts To Improve in First Quarter
The market of new cars in Bulgaria has registered a modest but nonetheless tangible year-on-year growth in the first quarter of 2011. A total of 4,638 new cars were sold in Bulgaria in January-March 2011 vs. 3,956 sales in the same period of 2010, a growth of 17%, according to data of the Association of Car Importers. In March, a total of 1,816 new cars were sold, compared to 1,358 in February and 1,464 in January. Bulgaria's all time record first quarter in terms of new car sales was in 2008 when a total of 15 224 new cars were sold in the country, just months before the economy got into a depression and the market collapsed. The total number of vehicles, including cars, trucks, buses, and motorcycles, sold in the first quarter of the year is 4,888 vs. 4,116 in Q1/10. The most popular brand in Q1/11 in Bulgaria was Volkswagen with 567 new car sales, followed by Toyota with 427 sold vehicles. Ford is third with 414 sales, Peugeot comes in fourth with 369 sales, followed by Dacia with 357 and Skoda with 302. Mercedes is the leader in the sales of new buses and trucks – a total of 45 in the first quarter. Peugeot has the lead in the sales of new motorcycles – 42, or 67% of all motorcycles sold in Bulgaria in this period. (SMN 13.04)
Back to Table of Contents
7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Memorial Day Remembers Israel's 22,867 Fallen
Israel's Memorial Day, observed on 8/9 May, remembered those who fell in defense of the state. A total of 22,867 Israel Defense Force soldiers have fallen in battle or died during service over the course of Israel's history. Over the past year, 183 soldiers joined that list; though not all of causes specifically related to their military duties. Most of the recent casualties died during their conscript service. There are currently 4,999 women living in Israel who lost a husband to war, according to the Defense Minister. There are 2,543 Israeli children who lost a parent in service and 3,252 couples and 4,315 individual parents who lost a child. In total, 18,361 people are currently defined as bereaved relatives of the first degree, a number which does not include the siblings of fallen soldiers. Memorial Day also commemorates civilians murdered by terrorists. A total of 2,443 Israeli civilians have been murdered by terrorists since 1950; 13 were killed over the course of the past year.
Back to Table of Contents
7.2 Israel's Population Numbers 7,746,000
On the 63rd anniversary of Israel's rebirth, its population stood at 7,746,000 people, a 2% increase (150,000 residents) compared with 2010. In comparison, on the night of its re-establishment, the State of Israel consisted of only 806,000 residents. The Central Bureau of Statistics stated that nearly 5,837,000 of the population are Jewish (75.3%). The Arab population stands at 1,587,000 people (20.5%) and the remaining 4.2% are immigrants and their children, who are not listed as Jewish by the Interior Ministry. They comprise 322,000 residents. Since last year's Independence Day, exactly 178,000 babies have been born in Israel and 43,000 people have died. Approximately 24,5000 immigrants arrived in the country, while nearly 12,000 chose to leave Israel. Another 7,500 people joined the general population, but CBS data do not state where they came from. Over 70% of the Jewish population are native-born Israelis, and more than half of them are at least second generation Israelis. In contrast, only 35% of the population were native-born in 1948. Also in 1948, there was only one city with more than 100,000 residents – Tel Aviv - Jaffa. In the present day there are 14 cities with more than 100,000 residents each, six of which have more than 200,000 people, including: Jerusalem, Tel Aviv-Yafo, Haifa, Rishon Lezion, Ashdod and Petah Tikva.
Back to Table of Contents
*REGIONAL:
7.3 Kuwait's New Cabinet Sworn In, Though Structure Largely the Same
The Emir of Kuwaiti swore in a new 16-member Cabinet on 8 May. The new Cabinet is little different from the previous government; all the key ministers have returned, with the exception of the oil portfolio. That was given to Mohammad Al-Busairi, the communications minister in the previous Cabinet, who is replacing a member of the Sabah family. All other ruling family members (the ministers of defense, interior and foreign affairs, in addition to deputy premier for economic affairs Sheikh Ahamd Al-Fahd Al-Sabah) were retained in the new Cabinet.
With the structure of the cabinet being broadly the same, a significant change in the economic policy and reforms that are pushed by the government are foreseen. The change in the oil ministry will also have a limited impact on Kuwait's energy policy, which is generally undertaken by the Supreme Petroleum Council. There are indications that friction between the newly sworn in government and some of the MP's began immediately, only minutes after the formation of the new government, when MPs said the Cabinet is far below expectations. (Beltone 09.05)
Back to Table of Contents
7.4 Bahrain's King To Lift State Of Emergency Starting 1 June
Bahrain's King has ordered that the state of emergency be lifted starting 1 June. Bahrain declared emergency law in March 2011 due to protests calling for more political freedom, a constitutional monarchy, and for putting an end to sectarian discrimination. The state of emergency was originally due to expire mid-June.
Back to Table of Contents
7.5 Saudi Arabia Tightens Controls on Media
Saudi Arabia has tightened its control of the media, threatening fines and closure of publications that it feels jeopardizes its stability or offended clerics. "All those responsible for publication are banned from publishing ... anything contradicting Islamic Sharia Law; anything inciting disruption of state security or public order or anything serving foreign interests that contradict national interests," the state news agency SPA. Saudi Arabia follows an austere version of Sunni Islam and does not tolerate any form of dissent. It has no elected parliament and no political parties. The tighter media controls were set out in amendments to the media law issued as a royal order. They also banned stirring up sectarianism and "anything that causes harm to the general interest of the country."
Almost no Saudis in major cities answered a Facebook call for protests on 11 March, in the face of a massive security presence around the country. Minority Shi'ites have staged a number of street marches in the Eastern Province, where most of Saudi Arabia's oil fields are located. Shi'ites are said to represent between 10 and 15% of the country's 18m people and have long complained of discrimination, a charge the government denies. Clerics played a major role in banning protests by issuing a religious edict which said that demonstrations are against Islamic law. In turn, the royal order banned the "infringement of the reputation or dignity, the slander or the personal offence of the Grand Mufti or any of the country's senior clerics or statesmen." King Abdullah has strengthened the security and religious police forces, which played a major role in banning protests in the kingdom. The amendment detailed punishments for breaking the media laws, including a fine of half am riyals ($133,000) and the shutting down of the publication that published the violation, as well as banning the writer from contributing to any media. (AB 30.04)
Back to Table of Contents
7.6 Muslim Brotherhood's Justice & Freedom party aims at 50% of Parliament
Egypt's Muslim Brotherhood said its newly formed party Justice and Freedom aims to take 45 – 50% of Parliamentary seats in September 2011 elections but will not field a candidate for the presidency. In addition, the Muslim Brotherhood named three of its leaders, Mohamed Mursi, Essam Elarian and Mohamed Saed Elkatatny, to be the party's head, deputy and secretary general, respectively. The party's three top officials will resign from their posts in the group before joining the party. Mohamed Mursi, the newly appointed head of the Brotherhood's Justice and Freedom Party, refused to rule out contesting a presidential vote and said it was too early to discuss the party's plans. Mursi said the group will announce the program and regulations of its new political party this week. The Brotherhood said after Mubarak's fall that it did not seek power through a majority in Parliament and would not go after the presidency.
The Muslim Brotherhood's ambition to assume political power has solidified with the formation of their party and their seeking half of parliamentary seats. With no economic and clear political agenda publicly announced, fears over the future of Egypt under their political influence would heighten. Pundits believe the party could be successful in winning at least 35 – 40% of Parliamentary seats, whereby they will constitute the largest represented organized political party (with the remaining seats being held by independents and other fragmented newly formed parties) and influence policy decisions in the coming parliamentary term. Having said that, it is crucial that the party communicates its political and economic agenda as soon as possible to avoid the ambiguity regarding their presence in the political sphere. This is harming the confidence levels in Egypt's economy, both domestically and internationally. There is a possibility that the Justice and Freedom party adopts the free market and economic openness path that Egypt has embarked upon especially since 2004, while focusing on social equity and justice, thereby maintaining a positive and conducive climate for investment. (Beltone 02.05)
Back to Table of Contents
7.7 Labor Day in Egypt Marks Establishment of Significant Leftist/Socialist Parties
On Labor day, 1 May, the establishment of the Democratic Labor Party, bearing the slogan “Freedom, Dignity, Social justice”, was announced. In addition, the Egyptian Communist Party announced that it would openly resume its activities and submit documents necessary for registering the party with the Committee for Political Parties' Affairs. This party aims to help workers' struggle for social justice by establishing minimum wages, abolishing agricultural bank debts, and ending all forms of privatization. The party will also demand the lifting of investment restrictions currently in place and the adoption of citizenship rights, including land ownership and equality. The 25 January revolution allowed the party to resume its work publicly after years of secrecy. The party was established as a Marxist-Leninist organization in 1922 and operated secretly between 1924 and the mid-1960s, when it was dissolved. The party was reestablished in 1975. (Al Masry Al Youm 02.05)
Back to Table of Contents
7.8 Turkey Celebrates Ataturk, Youth and Sports Day on 19 May
The Commemoration of Ataturk, Youth and Sports Day, or simply Ataturk Commemoration (Atatürk'ü Anma) or Youth and Sports Day (Gençlik ve Spor Bayramı), is an annual Turkish national holiday celebrated on May 19 to memorialize the start of the Turkish War of Independence. May 19, 1919 is the day Mustafa Kemal Ataturk, then Mustafa Kemal, who would become independent Turkey's first president, landed on the main peninsula of Turkey to begin leadership of the liberation effort. In early 1920, Kemal convened the first Turkish Grand National Assembly in Ankara, and by 1922 all of Anatolia was freed from foreign rule. The independent Republic of Turkey was declared a year later. During the course of his term as president, Ataturk himself proclaimed May 19 as "Youth and Sports Day." In the aftermath of Ataturk monumental legacy the day serves to honor the country's founder.
Back to Table of Contents
8: ISRAEL LIFE SCIENCE NEWS
8.1 Teva to Acquire Cephalon in $6.8 Billion Transaction
On 2 May, Teva Pharmaceutical Industries and Cephalon announced that their Boards of Directors have unanimously approved a definitive agreement under which Teva will acquire all of the outstanding shares of Cephalon for $81.50 per share in cash, or a total enterprise value of approximately $6.8b. The transaction is not conditioned on financing and is expected to be completed in Q3/11. The transaction reinforces Teva's long term strategy of building out its branded and specialty pharmaceuticals business through diversification and expansion of the company's product portfolio and pipeline. The combined company will utilize its complementary commercial, R&D and operational capabilities. It will capture value by providing customers with a broad spectrum of specialty branded products. The combined company's sizable branded portfolio represents approximately $7b in sales, with a robust pipeline including more than 30 late-stage compounds. The transaction will create immediate and sustainable value in niche therapeutic areas including CNS, oncology, respiratory and pain management. The combined company will become a leader in specialty pharma.
Israel's Teva Pharmaceutical Industries (http://www.tevapharm.com) is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. Teva is the world's largest generic drug maker, with a global product portfolio of more than 1,450 molecules and a direct presence in about 60 countries.
Frazer, Pennsylvania's Cephalon is a global biopharmaceutical company dedicated to discovering, developing and bringing to market medications to improve the quality of life of individuals around the world. Since its inception in 1987, Cephalon has brought first-in-class and best-in-class medicines to patients in several therapeutic areas. Cephalon is one of the world's fastest-growing biopharmaceutical companies, now among the Fortune 1000 and a member of the S&P 500 Index. (Teva 02.05)
Back to Table of Contents
8.2 MacroCure Raises $13 Million
MacroCure has raised $13m in a financing round led by Viola Private Equity, which invested $10m. Current investors Docor International Management and Pontifax Fund also invested $3m. The financing round brings the total amount invested in MacroCure to $26m since it was founded in 2008. Petah Tikva's MacroCure (http://www.macrocure.com) has developed CureXcell, a cell-based therapy for chronic wounds, which uses activated white blood cells obtained from healthy donors aged18 - 40. The product is sold in Israel. The company is planning an international Phase III clinical trial of the product on skin ulcers in the legs of diabetics, in order to enter foreign markets. (Globes 27.04)
Back to Table of Contents
8.3 OrSense Closes $18 Million Private Financing to Accelerate Commercialization
OrSense closed a $18m financing led by Israel Healthcare Ventures (IHCV). Participating venture capital organizations include current investors: IHCV, STAR Ventures and Lewis Trust Private Equity division. The funds raised will be used to accelerate commercialization activities of the Company's products for non-invasive monitoring of various blood parameters. During 2010, OrSense has received FDA clearance for its non-invasive multi parameter monitor for continuous and spot measurement of normal and low signal oximetry for use in hospitals and outpatient sites. OrSense has also received CE approval for the first non-invasive spot and continuous monitor of hemoglobin for anemia screening and hemorrhage detection applications. This has enabled the Company to focus on the marketing and sales of non-invasive monitors of hemoglobin and oxygen saturation for which it has secured key clients and won tenders, while competing with current invasive and emerging non-invasive solutions. OrSense customers include blood donation facilities, hospital departments, public screening program and outpatient facilities. The Company's products are based on its proprietary optical technology, Occlusion Spectroscopy, which eliminates the need for needle-stick blood tests, and overcomes key obstacles of competing approaches. OrSense's devices were tested on 8000 subjects, in over 40 clinical trials in over 20 sites worldwide.
Ness Ziona's OrSense (http://www.orsense.com) is a medical device company developing and marketing non-invasive monitoring systems for measurements of oxygen saturation, hemoglobin, glucose and other blood parameters. The Company's FDA cleared NBM 200MP is a non-invasive blood oximetry monitor for use in hospitals. OrSense's non-invasive hemoglobin/hematocrit monitor was granted the CE approval and was tested on over 8,000 patients and donors at more than 20 sites in the U.S. and Europe. The Company's products are based on its proprietary Occlusion Spectroscopy technology, which overcomes key obstacles that hinder the performance of competing approaches. (OrSense 02.05)
Back to Table of Contents
8.4 TowerJazz & Medigus Release Second Generation of World's Smallest Medical Camera
Medigus and TowerJazz announced successful sampling of the second generation of TowerJazz's CMOS imager that serves in Medigus' line of disposable miniature cameras. The image sensor, a high performance product at a low cost, combines superb sensitivity, high resolution and dynamic versatility, allowing customers a variety of potential medical applications in growing markets such as cardiology, bronchoscopy, gastroenterology, gynecology and orthopedic and robotic surgery. The use of disposable cameras eliminates the need for the very expensive and time consuming sterilization process commonly associated with endoscopic procedures. The imager was developed using TowerJazz's best-in-class sensor design and production technologies, while the camera was developed using Medigus' electronic, optic and integration platform technologies. The disposable camera sensor will be manufactured in TowerJazz's Fab2 using its 0.18-micron CMOS image sensor process and will be integrated into the camera produced in Medigus' manufacturing facilities. In this second generation miniature camera, Medigus and TowerJazz are using advanced technologies, including TSV (through silicon via) for packaging which minimizes the camera's size and reduces production costs in high volumes. The camera's diameter is only 0.99 mm, the first video camera in the world with a diameter smaller than 1 mm.
Omer's Medigus (http://www.medigus.com) is a medical device company specializes in developing innovative endoscopic procedures and devices. Medigus is a pioneer developer of a unique proprietary endoscopic device for the treatment of GERD, one of the most common chronic diseases in the western world. Medigus has an advanced technology platform that includes the necessary elements for developing a wide range of endoscopic procedures. The platform includes various CCD and CMOS video cameras developed by Medigus and single use endoscopes.
Migdal HaEmek's Tower Semiconductor (http://www.towerjazz.com), the global specialty foundry leader and its fully owned U.S. subsidiary Jazz Semiconductor, operate collectively under the brand name TowerJazz, manufacturing integrated circuits with geometries ranging from 1.0 to 0.13-micron. TowerJazz provides industry leading design enablement tools to allow complex designs to be achieved quickly and more accurately and offers a broad range of customizable process technologies including SiGe, BiCMOS, Mixed-Signal and RFCMOS, CMOS Image Sensor, Power Management (BCD), and Non-Volatile Memory (NVM) as well as MEMS capabilities. (Medigus 02.05)
Back to Table of Contents
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 LucidLogix Virtu to Bridge Discrete Graphics on ASUS Motherboards with Intel Z68 Chipsets
LucidLogix announced that its' Virtu GPU virtualization software will be integrated into various SKUs of ASUS motherboards based on the Intel Z68 chipsets. Virtu allows the systems to simultaneously take full advantage of both the low-power best-in-class media processing features of the 2nd generation Intel Core processor graphics and the 3D gaming performance of add-in cards with graphics processing units (GPUs) from AMD and NVIDIA. Utilizing its knowledge and capabilities to serve generic graphics processors, Lucid has developed an important improvement for media and gaming PC users. Until now, once a discrete GPU was attached to a desktop computer, the integrated GPU became inaccessible. Now with Lucid virtualization it is possible to run one or two discrete GPUs and still utilize the transcoding performance and lower power of the Intel® HD graphics in the 2nd generation Intel Core processor. ASUS will make Virtu available in various motherboard SKUs based on the Z68 chipsets where the Virtu brand will be featured on the board's packaging for system integrators and end users.
Kfar Netter's Lucid Technologies (http://www.lucidlogix.com) has reinvented multi-core graphics with its HydraLogix real-time distributed processing engine and its recently introduced Virtu GPU virtualization software. Lucid is a fabless SoC and software provider, headquartered in Kfar Netter, Israel with sales and marketing in Silicon Valley. (LucidLogix 02.05)
Back to Table of Contents
9.2 Ness Technologies Named Software Product Development Partner to StepStone Solutions
Ness Technologies announced that its Software Product Labs business unit was selected as a software product engineering partner to StepStone Solutions, a global provider of talent management solutions, in a three-year engagement. Ness and StepStone inaugurated the software development lab in Mumbai, India in November 2010. The 60-person Ness team is leveraging Ness' Adaptive Agile framework for distributed teams to help StepStone Solutions accelerate the development its SaaS-based talent management systems. The Ness capability adds to other development centers operated by StepStone Solutions around the world, allowing the company to increase the depth of resources it applies to the development of world-class products.
Ness Technologies (http://www.ness.com) is a global provider of IT and business services and solutions with specialized expertise in software product engineering; and system integration, application development, consulting and software distribution. Ness delivers its portfolio of solutions and services using a global delivery model combining offshore, near-shore and local teams. StepStone Solutions delivers world class technology for finding, recruiting, retaining, managing and developing people. (Ness 03.05)
Back to Table of Contents
9.3 Mellanox Accelerates Hadoop & Memcached for Web 2.0 Applications
Mellanox Technologies has introduced application acceleration technology targeting two key Web 2.0 applications; Hadoop and Memchached. Hadoop and Memcached are popular open source software platforms used for distributed computing and memory object caching. Utilizing Mellanox's 40Gb/s InfiniBand adapters and switches, the acceleration software enables world-leading performance and scalability. When used with Mellanox 10/40GbE NICs and switches, the acceleration software provides best-in-class Ethernet performance. The Hadoop performance results, demonstrated with the known Terasort benchmark (an I/O intensive benchmark for Hadoop), showed that the total job runtime was cut in half when using Hadoop-Direct and Mellanox RDMA-enabled ConnectX-2 InfiniBand or 10GbE with RoCE-enabled network adapters compared to traditional Ethernet alternatives. Hadoop-Direct is transparent to Hadoop users and applications, and does not require any modification for existing application and usage models. Memcached services, when running over Mellanox's networking hardware and acceleration software, deliver two to three times more transactions per seconds with up to 10 times faster response time. The results provide web developers with faster web application services while using fewer servers.
Yokneam's Mellanox Technologies (http://www.mellanox.com) is a leading supplier of end-to-end InfiniBand and Ethernet connectivity solutions and services for servers and storage. Mellanox products optimize data center performance and deliver industry-leading bandwidth, scalability, power conservation and cost-effectiveness while converging multiple legacy network technologies into one future-proof architecture. The company offers innovative solutions that address a wide range of markets including HPC, enterprise, mega warehouse data centers, cloud computing, Internet and Web 2.0. (Mellanox 09.05)
Back to Table of Contents
10: ISRAEL ECONOMIC STATISTICS
10.1 Israeli Jobseeker Numbers Unchanged In March
The number of jobseekers was barely changed at 199,902 in March 2011 from 199,785 in February, the Israel National Employment Service reported on 5 May. However, the number is down from 208,100 in March 2010. The number of unemployed fell to 180,400 in March, 0.6% few than in February and down 14.8% from the peak of 211,600 in July 2009. 37.9% of the unemployed were jobless for more than 270 days in the preceding 12 months. The number of hard-core unemployed rose 0.2% to 71,692 in March from the previous month. A reported 12,371 persons lost their jobs in March, including 1,670 people who voluntarily resigned, 0.9% more than the 12,274 persons who lost their jobs in February. Demand for workers rose 15.8% to 29,681 in March from 25,638 in February. (Globes 05.05)
Back to Table of Contents
10.2 Israel Has 12th Highest Gasoline Prices in the West
The price of 95 octane gasoline costs NIS 7.62 per liter in Israel, after rising NIS 0.91 per liter since January 1. Based on a survey of gasoline prices by US monthly "The Atlantic", Israel has the 12th highest price of gasoline in the West. France tops the list, at NIS 9.24 per liter, followed by Denmark, Greece, the Netherlands, Belgium, Portugal, Sweden and Germany, where the price of gasoline is over NIS 8 per liter, or over $9 per gallon, according to "The Atlantic". The price in Finland, Italy and the UK is also higher than in Israel, followed by Ireland, the Czech Republic, Austria, and Spain, where it costs over NIS 7 per liter. The price of gasoline is NIS 4.17 per liter in Canada and NIS 3.52 per liter in the US, or around $4 per gallon. (Globes 08.05)
Back to Table of Contents
10.3 OECD Says Economic Gaps in Israel Widening
Economic gaps in Israel are the widest among all developed countries, according to a new document released by the Organization for Economic Cooperation and Development (OECD), adding that Israel is a leading country in income inequality. The report says that from the late 1980s to the end of 2010, the average household income of a family of the poorest 20% of the population in Israel dropped at an annual rate of 1.1%, while the average household income of a family of the richest 20% rose an at annual rate of 2.4%. This phenomenon – the strong growing stronger while the weak become even weaker – has not been detected in any other developed country. The social gaps in OECD countries have indeed widened, but the average income of a family from the poorest 20% rose by 1.4% and the average income of a family from the richest 20% rose by 2%. OECD economists note in the document that in Israel the income of a family belonging to the richest 10% is 14 times bigger than the income of a family in the poorest 10%, compared to an average of only nine to one in other OECD countries.
This deep gap puts Israel in the third place in the income inequality list, after Mexico and Chile and alongside the United States. Israel maintains the second or third place according to other inequality measures as well. The organization ascribes the growing gaps in most developed countries to the ramifications of globalization (cheap workforce in Asia), changes in family formation (ageing population) and tax and benefit policies aimed at easing the tax burden on the rich and cutting the transfer of payments to the poor. (Various 08.05)
Back to Table of Contents
11: IN DEPTH
11.1 ISRAEL: Summary of Israeli Private Equity Deals – Q1/11
On 4 May, the findings of the IVC-GKH Quarterly Private Equity (PE) Survey conducted by IVC Research Center were released. This Survey is sponsored by Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co. (GKH), a leading Israeli corporate law firm specializing in M&A, joint ventures, venture capital and equity and debt financing. The Survey reviews Israeli private equity deals involving Israeli and foreign PE funds and other investors - both Israeli and foreign. This quarter is based on the activity of 34 private equity funds of which 16 are Israeli and 18 are foreign private equity funds.
In the first quarter of 2011, 11 private equity deals were closed in Israel, with an aggregate deal value of $216 million. This amount was down 68% from 2010's quarterly average of $668 million and 74% below the $826 million (17 deals) of the previous quarter. Q4/10 had included an exceptionally large deal - Apax's buyout of Psagot Investment House for $576 million. Q1/11 was also 78% under the $979 million of Q1/10 (19 deals), which was the highest quarter in 2010 based mainly on two large cleantech-related deals in which Better Place raised $350 million and BrightSource raised $200 million.
In the first quarter of 2011, private equity deals valued at over $50 million represented 49% of total aggregated deal value. Deals valued at $20 million to $50 million accounted for 16%, while deals valued at under $20 million accounted for the remaining 35%. In the fourth and first quarters of 2010, deals valued at over $50 million accounted for 70% and 71%, respectively, of total aggregated deal value.
The industrial sector was the most attractive area for private equity funds in Q1/11, accounting for 29% of total deal value. The infrastructure sector followed with 26%. In Q4/10, the financial sector attracted 72% of capital invested, followed by real estate with 8%. In Q1/10, the most attractive sector was cleantech with 56% of total deal value, followed by the industrial sector with 12%.
"The Israeli private equity industry spreads its investments over diverse sectors, with no specific focus. The most important factor in attracting PE investment is company revenue levels," notes Marianna Shapira, Research Manager at IVC. "Successful companies with international sales and high overall revenues have the best chance of appealing to PE funds, especially foreign ones," concludes Shapira.
The average deal in the first quarter of 2011 was valued at $20 million, compared to $49 million in the previous quarter and $51 million in the first quarter of 2010.
Israeli Private Equity Deal Types
This survey reviewed the following types of financing deals in the Israeli private equity arena: straight equity, buyouts, mezzanine, distressed debt and turnaround/distressed equity.
Straight equity deals accounted for $95 million (six deals) or 44% of total deal value in Q1/11, compared to $35 million (five deals) in the previous quarter, and $670 million (six deals) in Q1/10.
Buyout deals (three) were valued at $82 million or 38% of aggregate deal value in Q1/11, which compares with $621 million or 75% in Q4 2010 and $122 million or 13% in Q1/10.
One mezzanine financing accounted for $36 million or 17% of aggregate deal value, compared to $68 million (three deals) or 8% in the previous quarter, and $63 million (one deal) or 6% in Q1/10.
One distressed debt deal was reported in Q1/11 in an amount of $3 million (1%), compared to six deals valued at $102 million (12%) in the previous quarter, and six deals valued at $124 million (13%) in Q1/10.
In Q1/11, the three largest Israeli private equity deals accounted for 65% of aggregate deal value. Israeli Infrastructure Fund (IIF) closed a buyout of Hayovel Lines, a toll highway operator of Highway 431, for $55 million. Silver Lake followed with a $50 million straight equity deal for Prime Sense. FIMI had the third largest deal - a $36 million mezzanine financing of Alon Brands.
Israeli Private Equity Funds
IVC online database includes 27 Israeli private equity management companies, with total managed capital of $7.1 billion. Of these, six Israeli companies had been established since 2009.
According to Rick Mann, Managing Partner of GKH, "What we see from Q1/11 results is that PE funds with a strong local presence still represent the bulk of all private equity deals in Israel. Foreign PE funds are typically involved only in the larger PE deals, and those deals do not occur every quarter. I expect, however, that along with the continued investment activity of the local PE funds, we will see foreign PE funds entering into several large transactions during the course of 2011."
About IVC
IVC Research Center is Israel's leading research center providing business leaders with an unmatched wealth of data on Israeli high-tech, venture capital and private equity industries. IVC products and services are used regularly by high-tech companies, venture capital and PE funds, private investors, financial investors and institutions, as well as public entities such as the Office of the Prime Minister, the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist.
IVC owns and operates the IVC Online Database (http://www.ivc-online.com) containing over 8,000 Israeli high-tech companies, venture capital funds, investment companies, angels and technology incubators, as well as news updates and lots more. Among IVC products and publications are the IVC Quarterly Survey, which examines capital raising trends by Israeli high-tech companies, and the most comprehensive guide to Israeli high technology and venture capital – the IVC 2011 Yearbook. (IVC 04.05)
Back to Table of Contents
11.2 MIDDLE EAST: Economic Costs of Political Unrest Start to Emerge
On 05 May, Fitch Ratings (http://www.fitchratings.com) said that official data published since political unrest in the Middle East and North Africa (MENA) erupted in Q1/11 shows a mixed picture for the countries most directly affected. "Egypt appears to be the hardest hit, with Tunisia somewhat less affected, while Bahrain's public and external finances have improved compared to Fitch's previous forecasts due to the increase in oil prices," says Richard Fox, Fitch's Head of Middle East and Africa Sovereign Ratings group.
Fitch has downgraded three countries in MENA in 2011. Tunisia, by one notch to 'BBB-'/Negative; Egypt, by one notch to 'BB'/Rating Watch Negative (RWN); and Bahrain, by three notches to 'BBB'/RWN. Libya's sovereign rating was also downgraded, by a cumulative seven notches, before being withdrawn on 13 April.
Political unrest was the immediate trigger for these downgrades, but expectations of economic damage, both short-term and possibly longer-term, were contributory factors, to varying degrees. "Changing political realities will have implications for economic policy and will keep ratings under negative pressure, although so far there have been no signs of any radical departure from previously sound policy regimes," Fox added.
Fitch notes that the economic impact in all three countries will be mitigated by increased external financial assistance: Egypt and Tunisia primarily from multilateral agencies and Bahrain from its Gulf Co-operation Council (GCC) partners. This will help support their recovery into 2012.
Official data published so far in 2011 is limited on all three countries. Lack of high-frequency indicators, especially for the real economy, is a region-wide problem. However, the evidence available suggests Egypt has been hardest hit, with GDP falling by 7% in Q1/11. Tourism was amongst the sectors hardest hit, with arrivals dropping by 80% in February compared with a year earlier. However, the sector started to pick up in March with occupancy rates increasing, but remaining 50% down on the year. By contrast, some sectors, such as telecoms and agriculture, were largely unaffected. Moreover, given the strength with which the economy entered the crisis, Q1/11 growth was probably still positive year-on-year and for the year ending June (FY11) should still be 2% - 3%, depending on the pace of rebound during the current quarter.
Egypt's external sector has been hard hit, with not only tourist arrivals suffering, but foreign direct investment also down and strong outflows of portfolio investment. Official reserves fell by $6.6b in Q1/11 and further falls are likely until external revenue and financing recover. However, Fitch forecasts the current account deficit (CAD) to be a manageable 3% of GDP, with remittances and Suez Canal receipts holding up. Reserve loss is likely to be mitigated in the second half by increased external borrowing from multilaterals. A July $1b Eurobond maturity was essentially pre-financed last year.
Inflation is a bigger problem in Egypt than in either Tunisia or Bahrain, entering the crisis in double digits and rising to 11.5% in March due to rising food and fuel prices and exchange rate weakness. Egypt's fiscal position will also be the hardest hit, with the budget deficit approaching 10% of GDP in fiscal 2011, although the debt ratio will rise only slightly. However, the authorities seem to be working to reduce the deficit in FY12, beginning in July.
Tunisia's tourism sector will also be a key cause of its slower growth in 2011 - expected by Fitch to be 0%-1% - although the likely 25% fall in tourism is likely to be smaller than Egypt's. However, Tunisia is more affected by turmoil in Libya, reducing exports and remittances. It is likely to have the biggest CAD increase, to over 5% of GDP, although its reserve loss in Q1 has been the least of the three countries. A €450m Eurobond was repaid in April.
Bahrain will fare best of the three in 2011, with higher oil prices buoying public and external finances and a promised $1b (5% of GDP) of annual GCC assistance funding increased public spending intended to placate political grievances. Deposits in local retail banks have remained steady, although wholesale banks' consolidated balance sheets shrank by 15% in Q1. Longer-term reputational damage to the financial sector could be of more concern. Moreover, Bahrain is furthest away from a lasting resolution to its political problems, which could hamper its medium-term economic prospects. (Fitch 05.05)
Back to Table of Contents
11.3 LEBANON: Debt Dynamics
Despite the ongoing political stalemate, the Oxford Business Group says that Lebanon's economy looks set for continued expansion in 2011, albeit at a somewhat reduced pace. Continued uncertainty may result in higher costs for borrowing when the country seeks to finance its growing budget deficit.
A number of agencies forecast Lebanon's economy to expand by 5.5% this year, down from the 7.5% GDP increase in 2010 and the average 8.5% from the past three years. However, these predictions generally carry with them a caveat, such as that from Standard Chartered Bank in a report issued in late March, which said that while the Lebanese economy was expected to exhibit its usual resilience, a slowdown was likely due to political volatility.
The prime minister designate, Najib Mikati, has been unable to form a cabinet, despite having been given the mandate to do so in late January, and further delays would stall much-needed fiscal reforms and measures to maintain or increase state revenue. This in turn could see the state deficit swell and necessitate raising more public debt, either through direct borrowings or the issuing of bonds on local or international capital markets.
The government issued a seven-year bond as recently as December 2010. Amounting to some L£1.5trn ($992.78m), the bond is part of an effort to shift public debt from foreign currencies to the Lebanese pound. Issued at a 7.9% coupon rate, the bonds will mature in 2017 and according to the finance minister, Raya Al Hassan, the issue was heavily subscribed, an indication of ongoing confidence in the economy.
However, figures released by the credit-default swap (CDS) and bond-pricing firm, CMA Datavision, showed that the spreads on five-year CDSs for Lebanon widened by 17% between Q4/10 and Q1/11. The five-year bonds ended the first quarter at 347.7 basis points, widening by 49.6 points over the previous quarter. Over the course of the previous year the spread widened by only 28.5 basis points. Nevertheless, Lebanon's 17% rise was significantly less than those of other countries in the region over the same period, including Bahrain (74%), Saudi Arabia (66.4%) and Egypt (42.6%).
Still, there is ample money in the Lebanese economy, with domestic banks holding deposits equivalent to around 275% of GDP and the country boasting a proud record of having never defaulted on an international debt. However, the price for the lack of political stability may have to be paid, in part at least, with higher rates for bonds and local papers.
There are some indicators that Lebanon will have to find funds to finance state activities, despite the fact that some outlays, such as capital works projects, are expected to be put on hold until the new cabinet is formed. With the economy slowing, revenue from real estate taxes and tourism have eased, according to figures issued by the Ministry of Finance in early April, while the deficit as of the end of February stood at $555.5m, just under 31% of total government spending. This compares to the $195m deficit, equivalent to 12.02% of outlays, that the government was running one year before.
At present at least, Lebanon is not likely to experience any difficulties in servicing its existing debts, according to Nassib Ghobril, the head of the research and analysis division at Byblos Bank. “We will not face problems in terms of debt at the moment, because our liquidity levels are good,” Ghobril said in an interview with the Daily Star on April 6, though he warned that this situation could change if state spending rose at a time when the economy was sluggish. “The last thing we need is for our borrowing needs to grow,” he said.
Should those needs grow, it might cost the state more to borrow. At the end of March, Barclays Capital downgraded its recommendation in its emerging markets credit portfolio on the country's external debt, lowering it from the neutral weighting it had assessed it at as of December 2010 to underweight. This revision put Lebanon's external debt rating at the same level as Egypt and Tunisia.
An additional disincentive for investors looking to buy into debt papers, Barclays said Lebanon's external debt posted the second-steepest decline in returns among five countries in the Middle East and North Africa region, ahead of Egypt but behind Tunisia, Qatar and Abu Dhabi over the three months ending March 31. Barclays cited a slowdown in economic growth and a declining primary surplus as major risks to Lebanon's debt dynamics.
On April 8, the CMA issued its latest report setting out the 10 most risky sovereign debtors, with Lebanon joining Egypt and Bahrain as newcomers to the top ranking, a result of rising costs for debt insurance as confidence in their debt stocks fell. “As the Middle East enters a turning point in its history, the cost of debt insurance widened out this quarter as bond investors move to the sidelines, waiting for the unrest to pass,” the CMA report said.
Thus, despite the expectations of continued growth and the abundant liquidity in the local banking system, outsiders are remaining cautious about the country's prospects moving forward and it may take greater clarity in the situation, both domestically and regionally, before borrowing costs and CDS spreads ease. (OBG 02.05)
11.4 JORDAN: Opening Up Agriculture
Jordan's farmers have been offered the chance to rebuild a long lost export market as Saudi Arabia gets set to resume imports of a range of the Hashemite kingdom's produce. However, with the role played by agriculture in the Jordanian economy dwindling over the past 50 years and competition for scarce water resources getting more intense, so the Oxford Business Group feel local growers may only be able to reap a limited harvest from Riyadh's new open door policy.
At the beginning of April, Saudi Arabia announced it was to restart importing vegetables from Jordan after more than 20 years, a break stemming from concerns over Jordan's excessive use of pesticides. While the imports will be subject to stringent monitoring by Saudi officials, it is an opportunity to expand what was once Jordan's largest export market for fresh vegetables.
The plan by Riyadh coincides with a decision by the Saudi government to scale back efforts to promote its own agricultural self-sufficiency, having found that the cost of providing water supplies to local farmers outweighed the benefits of domestic production.
Saudi Arabia is not alone in struggling to balance efforts to develop food security with a shortage of natural resources. The greatest restriction on Jordan's agriculture sector is the lack of water, a situation that has only worsened in recent years in what is one of the world's driest countries. Jordan is also heavily urbanized, with World Bank figures putting the country's rural population at little more than 21% of the total and agricultural workers making up less than 10% of the national workforce.
The rural community has seen its contribution to GDP drying up over the past few decades. Half a century ago, agriculture accounted for 40% or more of national output, but with urbanization, an economic shift towards services-based sectors and the depletion of water resources, agriculture long since ceased to be a growth industry.
According to a recent report by the International Water Association (IWA), while agriculture makes up 4% or less of GDP, irrigation of farmlands consumes three-quarters of the nation's water supply, leaving scant reserves for domestic use or other sectors such as industry, which generates 30% of GDP.
The IWA's report suggests that better water management could see enhanced outcomes for the sector, and notes that the price charged to farmers does not fully reflect the cost of supplying water for irrigation or the resulting end product. The organization recommends that tariffs be raised to better represent expenses and provide an economic incentive for farmers to be more efficient.
One area where Jordan could do better is in the transmission of water, with improved pipes and more efficient pumping equipment reducing losses. Currently, up to half of Jordan's usable water is lost in the delivery system, more than twice generally accepted levels. Large quantities of water are also siphoned off illegally, adding to the state's losses. By upgrading the distribution network and strengthening the system of monitoring water usage and metering, Jordan could reduce physical and financial losses, meaning that more resources could be made available for agriculture.
Improving awareness among farmers could also reinforce best practices when it comes to water usage. According to Raed Al Tabini, one of the authors of the IWA report, Jordan's water crisis is due in part to inefficient farming and irrigation practices. “Farmers over-pump water and over-irrigate their crops,” he said in an April 14 interview with The Jordan Times. “If we don't address the whole of the problem – including both wasteful consumers in Amman and wasteful farmers in Mafraq – it will never be solved.”
The choice of crop is an important factor as well, with the Department of Statistics reporting that farmers tend to grow water-intensive foods such as citrus fruits, tomatoes, strawberries and melons. This has meant that the cost of production – both for the farmers and the wider water economy – is high, while output remains limited. Education and training programs that encourage farmers to switch to crops that require less water could see costs drop and yields rise.
Such changes would fit in with the government's plans to correct water policies and implement a supply-oriented approach to management. In early April Jordan hosted Efficient 2011, an international water event organized by Ministry of Water and Irrigation, USAID and the IWA, to discuss innovative solutions to global water challenges.
Schemes such as increasing desalination of water from the Red Sea may serve to plug some of the leaks in Jordan's water deficit, but the high cost of processing salt water means that such methods are not economically viable for widespread agricultural purposes.
Unlike some of its neighbors, Jordan does not have extensive energy resources that can be utilized to power desalination plants. Even with the planned construction of a nuclear power station, the country will likely continue to struggle to deploy enough electricity generation capacity to meet commercial and private needs, let alone have an excess to purify enough water to green the desert lands.
While it is unlikely that Jordan will ever fully abandon agriculture as a mainstream component of the national economy, the question of how much agriculture the country can afford is likely to be asked more frequently unless alternative sources of water can be found to sustain the farming industry. (OBG 06.05)
Back to Table of Contents
11.5 BAHRAIN: Kingdom of Silence
On 4 May, Toby C. Jones commented in the Carnegie Arab Reform Bulletin (http://www.carnegieendowment.org/arb) that an eerie silence and a paralyzing sense of fear currently grip Bahrain. Since mid-March, when tens of thousands of protesters last took to the streets demanding political reform, Bahraini security and military forces have engaged in an ongoing, systematic and brutal campaign to crush the country's pro-democracy forces. The crackdown has been sweeping and shocking. Dozens of activists have been killed. Hundreds more have been imprisoned and tortured. Bahrain's leading independent newspaper, al-Wasat, is expected to close down on May 10.
Provocative government actions belie claims that all the monarchy seeks is to re-establish law and order. It is apparent, instead, that the government is using martial law to carry out a vendetta against those who challenged the authority of the ruling al-Khalifa. Checkpoints have been set up to harass the country's Shi'a citizens, who make up the majority of Bahrain's native population and of its political opposition. Security forces have laid siege to the island's hospitals and arrested scores of medical personnel, in what appears to be an especially inhumane and spiteful kind of intimidation. For weeks police and pro-regime supporters roamed the streets of Shi'a villages destroying cars and other property. Those who supported the protests now fear leaving their homes, lest they be publicly accosted or, worse, arrested and disappeared.
The regime is also taking dramatic steps to quiet critics. Authorities have targeted newspapers, journalists, and bloggers in order to stymie public criticism, to control reporting about the scale of the crackdown, and to frighten into silence those who might speak out. In the last few weeks Bahraini blogs and twitter feeds that are normally vibrant have gone quiet, stunned into submission by the brutality of what is happening around them.
They have reason to fear. Those who have spoken out or who have attempted to report events going on around them are paying a high price.
The Cautionary Tale of al-Wasat
In early April government officials took aim at Bahrain's largest independent newspaper, al-Wasat, and accused it of “deliberate news fabrication and falsification.” Al-Wasat's editor Mansoor al-Jamri resigned in an effort to deflect criticism from the newspaper. Instead, al-Jamri and two of his staff members will likely face a politically motivated trial. Al-Jamri was replaced with the pro-government Obaidly al-Obaidly. On 5 April, authorities arrested Karim Fakhrawi, one of the newspaper's founders and a member of the opposition political society al-Wefaq; on April 12 Fakhrawi died mysteriously while in police custody. On 22 April, police extended their assault on al-Wasat by beating and arresting the columnist Haidar Muhammad al-Naimi, whose whereabouts and fate remain unknown. In light of these pressures, members of al-Wasat's board of directors and the paper's investors have reportedly decided to cease publication as of 10 May.
Those associated with opposition political groups have been hit the hardest, but they are not the only ones to have felt the brunt of the regime's assault on speech. Two of Bahrain's most prominent bloggers, Mahmood al-Yousef and Muhammad al-Maskati, were arrested in early April for bearing witness to developments in the country. Although both have been critical of the violence deployed by state security, neither belongs to the country's opposition. For weeks they routinely appealed for calm and encouraged the government and protesters to avoid provocation and escalation. Their detentions sent a clear signal that the regime's tolerance for being off message was very low.
Mobilizing State Media
In addition to serving as a form of punishment, the regime's crackdown on public and social media reflects its struggle to control the narrative. Alongside the silencing of critical voices, authorities have also mobilized state-controlled media to assert their dominance and to offer an alternative view of the country's domestic conflict. Bahrain's national TV station led the way in detailing the public case against al-Wasat on 2 April when it broadcast a program outlining charges that the paper had published fake news. The station has launched similar campaigns against prominent activists as well, including the human rights advocate Nabeel Rajab.
Bahrain TV's most important role has been to frame the country's domestic struggle not as a contest of democracy versus autocracy, but as a sectarian clash. The state media has used the specters of Iranian meddling and the potential empowerment of the country's Shi'a population to frighten the smaller Sunni community into supporting the political status quo and the current crackdown.
Bahraini state media have also, however, served to expose the regime's extreme tactics. On 28 April authorities revealed that four activists had been sentenced to death and three others to life imprisonment for their alleged roles in the deaths of two Bahraini policemen. The seven men were tried in closed military courts. Sensitive to claims that the government had not given the men a fair trial, Bahraini officials released a video of the men allegedly confessing to the murders.
More damning than the purported confessions, which were likely extracted under pressure, was the appearance of an eighth man, Ali Isa Saqer, on the video. Saqer died in police custody on 9 April. After announcing his death, authorities claimed that he had created “chaos in the detention center.” An unruly prisoner or not, the images of Saqer's body showed signs of devastating physical abuse. Whether Saqer's presence on the video was intended or not, the message of his treatment was unmistakable. It is the same message that the regime has been sending through its abuse of the media.
The regime has few powerful challengers when it comes to the media. The domestic independent media has been cowed. The regional media, most notably the two most widely-watched satellite news stations, Qatar-based al-Jazeera and Dubai-based al-Arabiya, have kept their distance from Bahrain, apparently due to Qatari and Saudi support for the crackdown. Although the Bahraini government has allowed a handful of Western journalists into the country, many others have been forbidden entry. Journalists who maintain contacts with Bahrainis report that they are increasingly unwilling to go public with their stories out of fear of retribution.
Despite Bahraini rulers' claims to be exposing the true nature of the uprising as an Iranian plot to destabilize the kingdom, it is clear that they are solely concerned with protecting themselves and punishing their rivals - and that they will use any means necessary to accomplish both. For the present, Bahraini citizens are left to with little to do other than ponder their fate and do so in silence. The current quiet is misleading, however: the conflict between a monarchy determined to preserve authoritarian rule and a majority population keen to secure a voice for itself is far from over.
Toby C. Jones is assistant professor of Middle East history at Rutgers University. He is the author of Desert Kingdom: How Oil and Water Forged Modern Saudi Arabia (Harvard, 2010) and is an editor at Middle East Report. (CARB 06.05)
Back to Table of Contents
11.6 TUNISIA: A New Image
Following a moderately successful 2010 and signs of growing interest from foreign investors, the Tunisian tourism industry was hit hard by political turmoil in early 2011. Although by all accounts it is likely to be a challenging year, the natural advantages that have made Tunisia one of the major holiday destinations for European tourists mean it is well positioned to recover from the crisis over the longer term. The return of foreign operators, indications of increasing interest from British tourists, and government and other efforts to boost the sector also point towards recovery.
According to the World Travel and Tourism Council's (WTTC) 2011 Tunisia report, international visitor numbers to the country are expected to reach 6.7m this year, generating €2.92b in revenue (It is not possible to compare the 2010 and 2011 reports due to changes in the WTTC's methodology).
Foreign interest in the sector was strong last year and is expected to continue in spite of the political turbulence: the WTTC expects it to see €707m in investment in 2011. For example, according to Chinese media, a deal to fund a range of local projects was struck in late April between Tunisia's minister for commerce and tourism, Mehdi Houas, and China's deputy minister of commerce, Fu Ziying, with this including the development of a luxury tourism complex.
Several European groups also announced investment projects in late 2010, although there has been little news about most of them in the wake of the former government's resignation. For instance, in December 2010 Spanish group RIU Hotels and Resorts was reported to be planning to open its tenth hotel in the country, a resort property on the island of Djerba. Also in December, Accor Hotels announced plans to begin operations in Tunisia in 2011 by opening two properties, namely a Novotel and an Ibis hotel in Tunis, as well as a branch of its Accor Academy hospitality training institution. The move comes on the back of a statement from Accor co-founder Gerard Pelisson, who noted that it was “not normal” that Accor, which operates dozens of hotels in Morocco and Algeria, did not have a significant presence in Tunisia.
The political turmoil of early 2011 had a predictably negative impact on the sector, with both tourism arrivals and receipts thought to have fallen by around 40% year-on-year in January and February, according to local media. In the months since the departure of the former president, Zine El Abidine Ben Ali, the sector, like others, has been affected by strikes, and the rest of the year is likely to be challenging.
The country's traditional dependence on package tourism has also limited its bounce-back potential, as other destinations, such as Turkey, increase in popularity and accessibility. Nevertheless, Tunisia has numerous natural advantages as a tourism market – proximity to Europe, good year-round weather and a long Mediterranean coastline – and the industry appears set to recover with time.
“The revolution will help boost our tourism industry in the mid to long term,” Habib Ammar, the director-general of the Tunisian National Tourist Office (ONTT), told the press. “I'm confident that our visitor numbers will triple or even quadruple over the next five years.”
The government, which is emphasizing the modern and democratic nature of the new Tunisia as a selling point for tourists, is also working to get the sector back on track. For example, the Ministry of Tourism in mid-February launched a new campaign called “I Love Tunisia” to promote the country to foreign tourists. The campaign has targeted France, Tunisia's largest source market, which typically accounts for around 20% of international visitors. The campaign has been rolled out via French newspapers, television channels and social media.
“People look at the map and see Tunisia and Libya next door to each other, so the idea of the campaign is to create a positive impression and reassure the world that Tunisia is once again a safe place to visit,” ONTT's Ammar told the press.
Efforts to boost the number of Algerian visitors are also under way. Long a key source market – nearly 1m Algerians visit the country every year – arrivals from Algeria fell off in the early months of 2011, although the government is now using a variety of means to win them back, including rolling out advertising campaigns in Algeria media, offering guided tours and workshops for Algerian journalists, and sending representatives to tourism fairs in Algiers and Oran during April.
Other signs point to the sector getting back on its feet. Charter flights from the UK to Tunisia resumed in early March, with Thomas Cook offering 16 flights a week to the country during the winter season, though some of the major UK travel agencies have slightly reduced the number of flights they plan to offer to the country during summer.
The UK is emerging as an increasingly important source market, with holidays in Tunisia booked through UK tour operators having grown 31% year-on-year in 2010, according to the Association of British Travel Agents (ABTA), with a total of 350,000 Britons having visited the country. In a report published at end-2010, ABTA was optimistic about further growth in British visitor numbers to Tunisia thanks to recent refurbishments and upgrades of hotels.
In addition, arrivals from Russia also look set to increase going forward following the green light from the country's Federal Tourism Agency in late April, with the first Moscow-Tunis flight after a three-month break scheduled for April 24th. According to the Russian Tourism Industry Union, around 150,000 Russians visit Tunisia every year.
Demand also remains strong in Tunisia's main European market, France. A survey carried out in February in France found that Tunisia remained the favored holiday destination of approximately a quarter of respondents, who cited the weather, attractive prices and the Tunisian people as among the country's enduring advantages.
Speaking in March during a visit to Tunisia, the French secretary of state for tourism, Frederic Lefebvre, pledged France's support for the sector and said that France was contributing to the Tunisian authorities' efforts to market the “true image of the new Tunisia”. (OBG 09.05)
Back to Table of Contents
11.7 GREECE: Moody's Places Ratings On Review For Possible Downgrade
On 9 May, Moody's Investors Service (http://www.moodys.com/) placed Greece's B1 local and foreign currency government bond ratings on review for possible downgrade. Moody's decision to initiate this review was prompted by:
(1) revisions to fiscal metrics, most notably the significant upward revision of the 2010 general government deficit;
(2) increased uncertainty about the sustainability of Greek sovereign debt in the context of potential delays in the achievement of fiscal consolidation targets; and
(3) concerns about the probability and the implications of a delayed and weaker economic recovery.
Moody's review will focus on the factors that will drive the country's debt dynamics over the next few years.
Moody's says that a multi-notch downgrade is possible if it concludes that there is large risk that Greece's debt metrics are on an unsustainable path. In Moody's view, such conditions would materially increase the risk of debt restructuring over the short to medium term. Under such conditions, euro area policymakers have stated that future loans from the Exchange Stability Mechanism would be extended only if private creditors were to bear some of the losses. If the path of Greek debt-to-GDP were to appear unsustainable, then Greece might itself have an incentive to seek a change in the terms of its debt obligations.
Greece's country ceilings for bonds and bank deposits are unaffected by the review and remain at Aaa (in line with the euro area's rating). At this point of time, however, due in large part to systemic risk within Greece, the highest rated domestic issuer or securitization is rated A3.
Rationale For Review
The Greek fiscal and economic reform package remains at least as ambitious as it was when Moody's last reviewed the government's rating. Moody's continues to believe that the government will face a very significant challenge in meeting the targets stipulated by this package. Additionally, Moody's notes a series of recent setbacks that prompted it to initiate this review of Greece's ratings.
First, Greece's 2010 general government deficit has come in at 10.5% of GDP, which is significantly higher than the levels estimated by government and international observers earlier this year. This increase in the 2010 budget deficit relative to prior expectations is due to higher-than-expected budget deficits at the local government level and at government-owned hospitals, along with generally disappointing tax and social contribution collections due to the slowing of economic activity.
Second, when combined with ongoing difficulties in tax revenue generation and collection, this larger 2010 deficit outcome raises further questions about the government's ability to achieve the deficit reduction target for 2011.
Third, Moody's is concerned about signs that the potential need for an additional fiscal austerity program is likely to deepen and prolong the recession and may further undermine domestic political support for the reform program.
Factors To Be Considered In The Review
In light of the growing challenges that the Greek government's economic and fiscal adjustment program faces, current market sentiment as well as sustained commentaries about the likelihood of a debt restructuring, Moody's views Greece's return to financial markets in 2012 as increasingly unlikely. Through discussions with both the Greek government and the Troika, the review will also attempt to ascertain the relevance of the increasingly public discussion -- based in part on comments by unnamed public officials with apparent in-depth knowledge of ongoing discussions -- about different ways for the Greek government to restructure its government debt (most of which would be captured by Moody's default definition). A restructuring could come about either due to a unilateral action on the part of Greece, or through a framework jointly developed by Greece and the Troika, perhaps in the context of the provision of additional official support through the ESM in 2013. The Troika's decision about whether or not to support or require a restructuring may depend, in part, on the likely contagion effect of a Greek restructuring on other European sovereigns, on the capital strength of the ECB, and on Greek banks as well as non-Greek banks with exposures to Greece. Moody's ratings review will therefore partly focus on the costs and benefits of a possible restructuring of Greece's debts, as a supplement to Moody's debt sustainability analysis.
In addition, Moody's intends to closely review the feasibility of the government's privatization plan, since it plays a key role in the government's fiscal strategy for 2011-2015. In Moody's view, a successful execution of the government's privatization plan is essential if the government is to achieve a sustainable debt position. Moreover, while the money raised through successful execution will have a direct impact on the debt reduction program, Moody's also believes that the Greek government's approach to implementing this program is a valuable signal of its ability and willingness to overcome broader political and institutional challenges to the reform process. During the review, Moody's will assess the credibility of the privatization targets and consider what steps the government plans to take to avoid the privatization process being materially delayed by these factors. State asset sales realized during the review process could be considered during the review process. (Moody's 09.05)
Back to Table of Contents
The Fortnightly newsletter is a free service of Atid, EDI. We are a team of economic and trade development consultants, headquartered in Jerusalem, but active throughout the region and beyond. EDI works with an international clientele interested in identifying and researching business opportunities in the region. We also serve as the regional representative offices for a number of U.S. states and bilateral Chambers of Commerce.
EDI's other services include development of feasibility studies and tailored research reports, as well as identification of potential joint ventures for commercial clients. For more information on how we may better assist you, please visit our Web site at: http:// www.atid-edi.com.
|
