TOP STORIES

• Israel Invited To Join OECD
• Over 30% of Brazil's Poultry Meat Exports Go To Middle East
• Greek Crisis May Trigger GCC Single Currency Reassessment
• Bulgaria Government Reforms Budget Instead Of Hiking VAT
• Pimi Agro Successful Trial Results of SweetGuard in the Treatment of Sweet Potatoes
• Israel's Incoming Tourism Rises By 44% In January - April
  

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Israel Invited To Join OECD
1.2 Netanyahu & Fischer Celebrate Israel's Entry Into the OECD
1.3 Israel Closes Down its Wisconsin Plan
1.4 VAT & Corporate Tax May Be Cut in 2011

2: ISRAEL MARKET & BUSINESS NEWS

2.1 Elbit & Ness JV NessBit Supplies the Israeli MoD with $25 Million Intelligence System
2.2 The IDF Awards $50 Million UAS Contract to Elbit Systems
2.3 Thresher Industries Purchased by Israel's Senergy
2.4 Cotendo Closes $12 Million Investment Round
2.5 Burger King Branches To Be Rebranded As Burger Ranch

3: REGIONAL PRIVATE SECTOR NEWS

3.1 Starwood Hotels Continues Global Expansion with a Focus on the Middle East
3.2 Over 30% of Brazil's Poultry Meat Exports Go To Middle East
3.3 First International Dual-Branded Wendy's and Arby's Restaurant Opens in Dubai
3.4 Grace Forms Saudi Arabian Construction Joint Venture
3.5 GE & Saudi Arabia Partner to Fuel Kingdom's Vision for Sustainable Economic Growth
3.6 New Oil Field Found In Egypt's West Desert
3.7 American Company Sunpower in the Greek Market
3.8 Classic American Restaurant Johnny Rockets to Open in Cyprus
3.9 Green Light for Cyprus Golf Project in Larnaca
3.10 PPD Opens Pharmacovigilance and Medical Communications Center in Bulgaria

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 SolarEdge Launches Solar Power Harvesting System in Italy
4.2 GAMA & GE Launch Their First Wind Projects in Turkey

5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Greek Crisis May Trigger GCC Single Currency Reassessment
5.2 Kuwait Plans To Quadruple Gas Output By 2030
5.3 Qatar Expects 1.1 Million Tourists In 2010
5.4 UAE & Oman Seal Power Grid Agreement
5.5 Egypt GDP Extends Rebound and Rises 5.8% in Third Quarter
5.6 Egypt's Annual Inflation Falls To 11.3% in April
5.7 Egypt's Minister of Investment Announces Official End to Privatization
5.8 Suez Canal Revenues Inch Down to $374.9 Million in April 2010

6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkish Trade Deficit Doubles To $5 Billion In March
6.2 Cyprus Inflation Up To 2.44% In April
6.3 Cyprus Healthcare Expenditure Just Under €1 Billion In 2007
6.4 Greek Parliament Passes Divisive Bill
6.5 Greece & Qatar Consider Joint Energy Projects
6.6 Qatar Planning To Build LNG Receiving Plant in Greece
6.7 Bulgaria Government Reforms Budget Instead Of Hiking VAT
6.8 EC Says Bulgaria Economy to Start Recovery by End 2010
6.9 IMF Advises Bulgaria To Keep Eye On Banking System Liquidity

7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Shavuot Holiday to be Marked on Eve of 27 May
7.2 First-Ever Arabic Language Spokesman for Prime Minister's Office

*REGIONAL:

7.3 Bahrain's Bid To Ban Alcohol Fails
7.4 Turkey Celebrates Ataturk, Youth and Sports Day on 19 May
7.5 Greece's Last Cremation Obstacle Goes

8: ISRAEL LIFE SCIENCE NEWS

8.1 PolyTouch Medical Submits Premarket Application for PatchAssist for Hernia Repair
8.2 Pimi Agro Successful Trial Results of SweetGuard in the Treatment of Sweet Potatoes
8.3 Pimi Agro Cleantech Raises $2 Million
8.4 Compugen Discovers Drug Target for Treatment of Multiple Myeloma

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Taiwanese LED Manufacturer Places an Order for QC3 Diffractometer from Jordan Valley
9.2 Magal Enters Completion Phase for Two Safe City Projects in Israel
9.3 ClickSoftware Introduces SaaS-based End-to-End Service Chain Optimization
9.4 TowerJazz Announces Next-Generation SiGe Technology for High Volume Consumer RF Applications
9.5 Italian Operator NGI Selects Alvarion for WiMAX Network Expansion

10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's Foreign Trade Slumped In April
10.2 Israel's Incoming Tourism Rises By 44% In January - April
10.3 In 2008 Israeli Households Averaged 3.2 People & 2.1 Mobile Phones

11: In Depth

11.1 LEBANON: Lebanese Municipal Elections on Time, But Reform Delayed
11.2 LEBANON: Power Up
11.3 BAHRAIN: Retail Sales Will Grow To $5.26 Billion By 2014
11.4 BAHRAIN: Pharmaceuticals and Healthcare Report Q2 2010
11.5 UAE: United Arab Emirates Retail Report Q2 2010
11.6 OMAN: Oil and Gas Report for Q2 2010
11.7 EGYPT: Egypt Retail Sales to Grow to $141.66 Billion by 2014
11.8 LIBYA: Oil and Gas Report for 2010's Second Quarter
11.9 YEMEN: Riyal on the rocks?
11.10 EGYPT: Reducing Automobile Tariffs
11.11 MOROCCO: The USFP and the Moroccan Monarchy: the Power of Patronage
11.12 GREECE: Europe & IMF Agree €110 Billion Financing Plan With Greece
11.13 GREECE: IMF Approves €30 Billion Loan for Greece on Fast Track
11.14 GREECE: Moody's Reiterates Stance & Maintains Review for Downgrade

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Israel Invited To Join OECD

On 10 May, OECD countries agreed to invite Israel (along with Estonia and Slovenia) to become a member of the Organization, paving the way for the group’s membership to grow to 34 countries. During nearly three years of accession negotiations, the three countries were reviewed by 18 OECD Committees with respect to their compliance with OECD standards and benchmarks. The invitation to Israel to join the OECD acknowledges the efforts already made to reform the economy, including in such areas as combating corruption, protecting intellectual property rights and ensuring high standards of corporate governance, while looking forward to further reforms. Israel will contribute to OECD work in a number of specific areas, as Israel’s scientific and technological policies have produced outstanding outcomes on a world scale. Israel was invited to open accession talks in 2007. The OECD will welcome the three future members at a special ceremony during the annual meeting of the OECD Council at ministerial level on 27 May in Paris. The meeting will be chaired by Italian Prime Minister Berlusconi. (OECD 10.05)

1.2 Netanyahu & Fischer Celebrate Israel’s Entry Into the OECD

"This is a great day" for Israel and for the economy, Netanyahu said after the Organization for Economic Co-operation and Development (OECD) unanimously accepted the Jewish State as a member. Israel’s acceptance is another feather in the Prime Minister’s "economic hat" that he has been wearing since being Finance Minister in the Sharon government. He won wide praise for bringing the country out of the economic doldrums and into a period of unprecedented growth and stability. The OECD granted Israel "observer status" more than a decade ago, and its efforts to win the coveted position as a full-fledged member culminated on 10 May. The new status formalizes Israel’s change from an emerging market to a developed market, which has significance in the financial world.

Governor of the Bank of Israel Prof. Stanley Fischer said "The decision by the OECD to add Israel as a member of the organization is an important milestone in Israel's integration into the global economy, and reflects Israel's commitment to comply with advanced international standards." Fischer added that Israeli membership in the OECD would strengthen investors' confidence in the standing of the Israeli economy and should encourage investment. He praised the OECD's reports on Israel and expressed the hope that the OECD would help promote reforms in Israel, including in the education system, participation in the labor force, narrowing inequality and environment enforcement. He also thanked the OECD for uncovering bureaucratic obstacles through its business friendliness index report. Fischer praised the OECD's expertise on the financial sector, and noted that there are international equity funds that only invest in OECD member states. Israel's accession to the organization will therefore expand investment opportunities in Israeli government bonds and in the economy. (Various 10.05)

1.3 Israel Closes Down its Wisconsin Plan

Israel’s controversial Wisconsin Plan (known as the Orot Letaasuka program in Hebrew), will soon be shut down, following its rejection on 29 April by a Knesset committee. Participants will return to receiving services from government-run employment offices. Members of the Knesset's Labor, Welfare & Health Committee voted to end the program. The committee rejected a request from Finance Minister Steinitz to extend the program for one more year. The Wisconsin Plan, launched in Israel in 2004, aimed to increase participation in the workforce by forcing welfare recipients to find employment. The program was run by private companies, which had the goal of getting thousands of people off the benefits list. Participants were required to spend time each week in a Wisconsin Plan employment center. Those who could not find work were often required to take on full-time volunteer work in order to continue receiving state benefits. Critics accused the companies of forcing welfare recipients off the benefits list even if they had not managed to find suitable employment. Former participants in the plan have been asked to report to their local government-run employment offices beginning on May 9 in order to ensure that they continue receiving benefits. The Israel National Employment Services will administer tests aimed at helping welfare recipients find employment. (IsraelNN29.04)

1.4 VAT & Corporate Tax May Be Cut in 2011

Globes postulated that Prime Minister Netanyahu will continue to implement his planned tax reduction program without making any changes. According to the original plan, corporation tax is due to be reduced by 1% to 24% at the start of 2011, decreasing state revenues by NIS 650 million. In addition, VAT will be reduced from 16% to 15.5%, returning to the rate that it was before the economic crisis. This will result in a loss of NIS 1.8 billion in state revenues. The Ministry of Finance supports the continuation of this tax cut plan. (Globes 03.05)

2: ISRAEL MARKET & BUSINESS NEWS

2.1 Elbit & Ness JV NessBit Supplies the Israeli MoD with $25 Million Intelligence System

Elbit Systems and Ness Technologies were awarded through their joint venture NessBit, a contract valued at approximately $25 million by the Israeli Ministry of Defense to supply an information management system for the Israeli Air Force. Elbit Systems and Ness Technologies will equally share the project, in the amount of $12.5 million each, to be performed over the next four years. "NessBit" was established in order to develop the unique technological capabilities required for such a high-profile project.

Haifa’s Elbit Systems (http://www.elbitsystems.com) is an international defense electronics company engaged in a wide range of programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems (UAS), advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. 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. (Ness 03.05)

2.2 The IDF Awards $50 Million UAS Contract to Elbit Systems

Elbit Systems was awarded an Unmanned Aircraft System (UAS) contract from the Israeli Ministry of Defense, valued at approximately $50 million. Under the contract, Elbit Systems will supply the Israeli Defense Forces (IDF) with its brand new Hermes 900 unmanned systems along with additional Hermes 450 unmanned systems to expand the IDF's current Hermes 450 fleet. In addition, the Company will supply the IDF with an enhancement of its existing UAS intelligence capabilities. The contract will be carried out over a three-year period. With enhanced endurance, the Hermes 900 allows flight altitude of more than 30,000 ft, large payload capacity and flight capabilities in adverse weather conditions. The Hermes 900 is based on the highly reliable and combat proven Hermes® 450 UAS, which has accumulated over 170,000 flight hours. The new Hermes 900 allows seamless integration with the IDF's existing Hermes 450 UAS thanks to its universal command & control ground station (UGCS), which enables advanced mission management, automatic taxiing, autonomous flight and automatic takeoff and landing systems common to all the UAS in the Hermes family. These advantages allow all Hermes 450 operators to immediately integrate the Hermes 900 into the existing UAS fleet, using the current infrastructure.

Haifa’s Elbit Systems (http://www.elbitsystems.com) is an international defense electronics company engaged in a wide range of programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems (UAS), advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. The Company also focuses on the upgrading of existing military platforms, developing new technologies for defense, homeland security and commercial aviation applications and providing a range of support services. (Elbit 02.05)

2.3 Thresher Industries Purchased by Israel’s Senergy

Hanford, California’s Thresher Industries announced that the buyer of the company is Senergy, a global leader in renewable energy, headquartered in Israel. Senergy, established in 1995, specializes in all types of renewable energy; from solar panels, solar lighting systems, fully self contained portable shelters, wind generators and solar powered refrigeration units for trucks. Thresher offers Senergy the opportunity to produce its own main components, thereby eliminating its need for outsourcing and reduce internal costs significantly. This merger will also allow Senergy (http://senergy.co.il) the opportunity to further establish itself in the U.S. Market. Thresher Industries is a leading manufacturer of low carbon footprint conventional and custom machined die castings made from 100% recycled aluminum and metal matrix composites. (Thresher 04.05)

2.4 Cotendo Closes $12 Million Investment Round

Cotendo closed a new round of equity financing led by Tenaya Capital and joined by its current investors - Sequoia Capital and Benchmark Capital. Cotendo will use the $12 million in Series C financing to scale its domestic and international market expansion, as well as accelerate the development of innovative technology. Cotendo's comprehensive CDN and Site Acceleration Suite includes high-performance acceleration of dynamic and static content, intelligent load balancing, performance monitoring, real-time reporting and more. The Cotendo suite significantly improves the ability of internet content providers - including high-volume transactional enterprises, online retailers, financial services companies, advertising networks, professional news and social media sites - to offer fast, secure and reliable 'whole site' acceleration of both static and dynamic content to online customers and site visitors. By improving web site performance and reliability, the Cotendo suite enhances the user's experience, increases site conversions and loyalty, and enables businesses to achieve a greater investment return on their web presence.

Cotendo (http://www.cotendo.com) is a CDN and Site acceleration services provider and an innovator of software-focused site acceleration technologies. Cotendo's full suite of CDN and site acceleration services is addressing an important unmet need that internet content and web application providers have for application-level flexibility and sophisticated management of performance and costs. The company is headquartered in Sunnyvale, California with R&D based in Kfar Netter, Israel. (Cotendo 04.05)

2.5 Burger King Branches To Be Rebranded As Burger Ranch

Globes reported that Israel's Burger King chain is to be rebranded as Burger Ranch. The decision to rebrand comes 18 months after the Orgad Brothers, who own the Burger King franchise in Israel, acquired Burger Ranch after the hamburger chain had gone into liquidation. Dispensing with the Burger King franchise will save the Orgad Brothers significant royalty payments to the global burger company. Burger Ranch currently has 52 outlets in Israel, while Burger King has 55 branches. Burger Ranch opened in Israel in the 1970s. (Globes 10.05)

3: REGIONAL PRIVATE SECTOR NEWS

3.1 Starwood Hotels Continues Global Expansion with a Focus on the Middle East

Starwood Hotels and Resorts Worldwide will operate all nine of its world-class brands in the Middle East by 2013, including St. Regis, The Luxury Collection, W, Westin, Le Meridien, Sheraton, Four Points by Sheraton, Aloft and Element. Focused on opening the right properties in the right places with the right partners, Starwood remains on-track to expand its Middle Eastern portfolio by 40% by the end of 2015. Underlining Starwood’s commitment to the Middle East region, the hotel group also announced plans to debut the design-led W Hotels brand in the UAE with the signing of W Abu Dhabi, which is set to open in 2013. W Abu Dhabi will be the second W in the Middle East following W Doha, which opened in mid-2009. Located on the waterfront of Al Bateen Wharf, W Abu Dhabi will be part of a multi-component development, including high-end retail stores, restaurants and residences, with stunning views over the marina and the open sea. Starwood also has plans to open W Hotels in further high-profile destinations such as Amman and Marrakech. Starwood’s existing portfolio of compelling brands in the Middle East is led by best-in-class Le Meridien, Westin and Sheraton hotels. The enhancement of the Sheraton brand continues to be a focus for Starwood with an investment of $1.5 billion committed to opening new Sheraton hotels and renovating existing Sheraton properties in the EAME region by 2012. Flagship properties, including the Sheraton Oman, which is set to re-open later this year, are being revitalized to maintain the brand’s leading position in the Middle East. (Starwood 03.05)

3.2 Over 30% of Brazil's Poultry Meat Exports Go To Middle East

More than 30% of Brazil’s poultry meat exports are transported to the Middle East, the South American country’s leading market for the commodity, with Saudi Arabia, the United Arab Emirates and Kuwait among the top buyers. Brazil shipped around 1.4 million tons of chicken in 2009, representing a 22.7% growth from 2008 and revenues of $1.9 billion. Exports are expected to grow further in 2010, with January data revealing a 37% sales increase to $141.8 million over the corresponding period in 2009. Brazil is the world’s third largest exporter of poultry products, selling the meat to more than 150 countries. (BI-ME 28.04)

3.3 First International Dual-Branded Wendy’s and Arby’s Restaurant Opens in Dubai

Wendy’s/Arby’s International, a subsidiary of Wendy’s/Arby’s Group, jointly announced with Al Jammaz Group, the opening of the first international dual-branded Wendy’s and Arby’s restaurant in Dubai, United Arab Emirates. The dual-branded Wendy’s and Arby’s restaurant is located in the Festival City Mall, in the Festival City area of Dubai. The restaurant features a single counter and menuboard for ordering and a dedicated seating area, as well as bistro-style seating around the perimeter of the restaurant space. Al Jammaz Group’s first free-standing, dual-branded Wendy’s and Arby’s restaurant is scheduled to open this summer and will be located in the Emirate of Ajman. The restaurant will feature a pick-up window to serve drive-thru customers. In June 2009, Wendy’s/Arby’s Group announced a 10-year development agreement with Al Jammaz Group to build dual-branded Wendy’s and Arby’s restaurants in portions of the Middle East and North Africa. A subsequently revised development schedule calls for the construction of approximately 80 dual-branded restaurants over the same time period, with an initial focus on development in the United Arab Emirates. All Wendy’s and Arby’s restaurants located outside of North America are franchised. Al Jammaz Group, established in 1975 by Founder and President Abdulaziz Al Jammaz, is a well-diversified and fast-growing Saudi conglomerate whose activities cover a wide variety of business categories such as Agriculture, Foods, Retail, IT, Travel & Tourism, Investments and Logistics. The company operates more than 200 stores of leading international franchises in the Middle East and North Africa. (Wendy’s/Arby’s Group 11.05)

3.4 Grace Forms Saudi Arabian Construction Joint Venture

Columbia, Maryland’s Grace Construction Products, an operating segment of W. R. Grace & Co., has formed a joint venture in Saudi Arabia with the Khalid Ali Alturki & Sons Company (Alturki), a Saudi family owned investment and development company which controls a portfolio of premier businesses in the local construction market. The joint venture is a key component of Grace’s overall business strategy to enter fast developing regions and expands Grace’s construction footprint significantly in the Middle East. Grace Saudi Arabia LLC is preparing to open two manufacturing facilities in 2010; one in Dammam and the other in Jeddah. These cities were selected given their close proximity to major metropolitan centers in the eastern and western areas of the Kingdom. Both facilities will produce concrete admixtures that improve the durability and working properties of concrete used in commercial, institutional and residential construction, as well as additives used in cement processing to improve energy efficiency and enhance the characteristics of finished cement. Employees at these locations will also be responsible for technical service and support to customers. Grace Saudi Arabia LLC received its certificate of registration on April 18, 2010. Grace is the majority shareholder and will oversee day-to-day operations. Grace is a leading global supplier of catalysts and other products to petroleum refiners; catalysts for the manufacture of plastics; silica-based engineered and specialty materials for a wide range of industrial applications; sealants and coatings for food and beverage packaging, and specialty chemicals, additives and building materials for commercial and residential construction. (Grace 29.04)

3.5 GE & Saudi Arabia Partner to Fuel Kingdom’s Vision for Sustainable Economic Growth

Saudi Arabia’s Ministry of Commerce & Industry and General Electric Company (GE) announced a strategic partnership aimed at building a sustainable economy through a focus on industrialization, research and education, and creating new jobs for Saudi nationals. This partnership marks GE’s ‘company to country’ approach in Saudi Arabia to become a trusted partner in the Kingdom’s developmental goals. Further strengthening its 70-year relationship with the Kingdom, GE signed a memorandum of understanding (MoU) with Saudi Arabia’s Ministry of Commerce & Industry at the US-Saudi Business Opportunities Forum, held in Chicago to highlight the economic collaboration between Saudi Arabia and the United States. The MoU underscores the commitment of GE to contribute to the Kingdom’s sustainable growth and competitiveness by investing and sharing competencies, technology and knowledge transfer, and creation of skilled industrial and technical jobs in the following industries; energy, healthcare, transportation and water, in alignment with the National Industrial Strategy of Saudi Arabia. The Saudi Ministry of Commerce & Industry is responsible for driving economic diversification through industrialization, and will launch the $16 billion National Industrial Strategy in May 2010 to strengthen the Kingdom’s manufacturing sector and double the industrial output of the GDP. Through the MoU with Ministry of Commerce & Industry, GE will lay the framework for a comprehensive partnership to explore manufacturing opportunities in the Kingdom for local and export markets. Both will also potentially partner on international development projects, working with donor and government funding organizations, with a focus on Africa and the Islamic world. In addition, GE will provide expertise in the establishment of a world-class export development fund for the Ministry as well as stress-testing the National Industrial Strategy prior to the national launch. (GE 28.04)

3.6 New Oil Field Found In Egypt's West Desert

Kuwaiti oil and gas company Kuwait Energy has discovered oil in the East Ras Qattara field in Egypt's Western Desert. The Diaa-1 well encountered oil in February 2010 in the Upper and Lower Bahariya formations and in the Kharita formation at a depth of approximately 10,700 to 12,000 feet. The well produced as much as 1,600 barrels of oil a day in a production test from the Kharita formation. Kuwait Energy operates in Kuwait, Indonesia, Iraq, Cambodia, Pakistan, Oman, Yemen, Egypt, Russia and Ukraine. The company said last year it aims to increase daily production from 11,000 barrels of oil equivalent to 15,000 barrels this year. (GN 05.05)

3.7 American Company Sunpower in the Greek Market

San Jose’s Sunpower, one of the strongest players of the global photovoltaic market, has moved into Greece. Following the acquisition of Sunray by Sunpower for $277m in February, the US giant will be present in the Greek market through its subsidiary Energy Ray. Sunpower is one of the largest companies in the construction of photovoltaic panels in the world, is based in California and has a presence in North America, Europe, Australia and Asia. Globally, Sunpower has installed more than 200 MW and have signed contracts for another 300 MW. Energy Ray has submitted applications to generate 67 MW through its photovoltaic parks. Sunray is active in Italy, Greece, Spain, France and Israel. In all five markets Sunray develops various stages (study, applications and already licensed) of photovoltaic parks and has a total output of 1.2 GW. (GoG 10.05)

3.8 Classic American Restaurant Johnny Rockets to Open in Cyprus

Lake Forest, California’s Johnny Rockets announced Magusa, in Northern Cyprus, as the first Mediterranean location to serve the Original Hamburger. The restaurant celebrated its 12 May grand opening with classic Cadillac and Harley Davidson displays, timeless music from Elvis Presley and Chuck Berry tribute shows and rock 'n' roll dancers. The new 3,500-square-foot restaurant offers the timeless menu and authentic decor that have created the global appeal of Johnny Rockets. Signature offerings include grilled-to-order hamburgers, American Fries and hand-dipped shakes, along with special items like the Bacon Cheddar Double, the St. Louis and Philly Cheese Steak sandwich. The Magusa menu has been developed with Halal standards in mind, to ensure it suits local customs. Artisan Food and Beverage Group Ltd is part of a local family business specializing in commercial and residential real estate, property development, property management and construction. The Magusa location is the first Johnny Rockets restaurant from the Artisan Food and Beverage Group, which holds exclusive Johnny Rockets franchising rights in Northern Cyprus with plans to open three more restaurants. (Johnny Rockets 11.05)

3.9 Green Light for Cyprus Golf Project in Larnaca

The MedGolf Group, a joint-venture partnership between Hassapis Land Developers, Demes Karapatakis’ DJK Corporation and Sakyrco has secured the green light to develop the Larnaca Golf Resort and Country Club at an initial cost of €60m. The Cypriot consortium has secured and acquired an area of 1.5 million sq. meters in the Tersefanou area, next to Larnaca airport, where it will build and develop an 18-hole golf course, clubhouse, village square, purpose-built function rooms, spa facilities and more than 500 private properties. The course, costing about €8 – 10m, will take 24-30 months to be completed since the grass that will be planted needs at least 18 months to grow. The desalination plant, which will supply the water for the project will cost €6m and will also be completed within 24-30 months. MedGolf has signed an exclusive contract with the Professional Golfers Association (PGA) which will manage the golfing facilities and develop an on-site PGA National Golf Academy. The agreement with the PGA is exclusive and is the only one allowed in Cyprus. By signing the agreement, the golf course will be able to host major international events including the Ryder Cup games in the future and this is expected to be a major selling point for the resort. (FM 30.04)

3.10 PPD Opens Pharmacovigilance and Medical Communications Center in Bulgaria

Wilmington, N.C.’s PPD announced the opening of a pharmacovigilance and medical communications center in Sofia, Bulgaria, delivering its full range of drug safety, medical information and medical writing services to meet growing client demand. PPD will offer medical information call center support, adverse event capture, safety case processing and reporting and periodic report writing services from Bulgaria, building upon more than 19 years of safety and medical communications expertise. Sofia will become the company’s largest safety center and its third European hub for medical communications contact center services. This infrastructure gives PPD the capability to provide biopharmaceutical companies with global and regional support for pre- and post-approval drug safety and medical information. With multiple medical and pharmacy schools in the area, Sofia offers a large pool of highly trained health care professionals with extensive language capabilities. The center employs physicians, pharmacists, nurses and medical specialists who provide safety and medical information support services, including product inquiries, adverse event and product complaint intake, case processing and reporting of drug safety concerns. PPD is a leading global contract research organization, celebrating 25 years of providing drug discovery, development and lifecycle management services. (PPD 05.05)

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 SolarEdge Launches Solar Power Harvesting System in Italy

SolarEdge Technologies, a provider of Distributed Solar Power Harvesting and PV monitoring solutions, is expanding its activity to Italy announcing a partnership with Albatech S.r.l, a leading Italian distributor of quality solar products and supplier of solutions for turn-key photovoltaic plants. The SolarEdge power harvesting solution includes PowerBoxes, which are module-integrated power optimizers, multi-string solar inverter and a monitoring portal. This unique end-to-end solution enables production of up to 25% more energy from PV installation, while reducing costs and complexities. The Italian PV market is the second largest PV market in Europe, exhibiting a double-digit growth rate in the last few years. The market is diversified and includes roof-top, commercial and large-scale PV installations. The SolarEdge solution allows Installers and system owners of all system types to benefit from constraint-free design, real-time module-level monitoring, improved maintenance at reduced cost, optimal site-area utilization, theft prevention mechanisms, enhanced safety and extraordinary reliability, which all contribute to faster return on investment.

Hod Hasharon’s SolarEdge (http://www.solaredge.com) provides the world's first end-to-end Distributed Solar Power Harvesting and PV Monitoring solution, allowing maximum energy production at a lower cost. The SolarEdge PowerBoxes are DC-DC power optimizers that perform MPPT per individual panel while monitoring performance of each panel and communicating across existing power lines. Moreover, PowerBoxes always maintain a fixed DC string voltage, allowing optimal efficiency of the SolarEdge multi-string PV inverter, which is tailor made to work with power optimizers. (SolarEdge 03.05)

4.2 GAMA & GE Launch Their First Wind Projects in Turkey

GAMA Energy A.S., a joint venture between GAMA Holding A.S. and GE unit GE Energy Financial Services, announced their first wind energy projects in Turkey, the 22.5 MW Sares and 10 MW Karadag wind farms in the country’s western region. The projects, costing a total €54 million, feature GE’s 2.5-megawatt wind turbines. GAMA Energy, based in Ankara, is developing and investing in the projects while TSKB, the Industrial Development Bank of Turkey, is arranging and leading €44 million in debt financing. Additional details of the financial transactions were not disclosed. GE Energy is supplying 13 turbines and will operate and maintain them under a services agreement. The projects’ power will be sold to the merchant market or will benefit from the Turkish regulated feed-in tariff. Construction of the Sares wind farm begins next week and is expected to be completed by the end of this year. Construction of the Karadag project is planned to begin later this year, with completion during the first quarter of 2011. According to GAMA Energy’s estimates, the wind farms are expected to generate enough electricity to power approximately 59,000 average Turkish homes and avoid approximately 80,000 tons a year in greenhouse gas emissions. Turkey’s Ministry of Energy and Natural Resources aims to generate 20% of its electricity production from renewable resources by 2020. In wind energy, the country has developed just 600 MW of an estimated potential 88 gigawatts. (GAMA 29.04)

5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Greek Crisis May Trigger GCC Single Currency Reassessment

Exceptional strains in the Eurozone stemming from Greece’s debt crisis could have severe implications for the GCC single currency, Saudi finance firm Jadwa Investment has warned. Much of the preparatory work in the GCC was based on what preceded the introduction of the euro and technical support from the European Central Bank has been used widely. Therefore, should stresses in Greece or elsewhere irrecoverably damage the eurozone, it may lead to a reassessment within the GCC. Although a single currency for the GCC came one step closer in March via the inaugural meeting of the monetary council, Oman and the UAE have both withdrawn their support for the project. The Jadwa report also said that Greece’s problems, with its high budget deficit, had been partly based on its ability to draw on its Eurozone membership in order to borrow cheaply abroad. The bank said this scenario was unlikely to replicated in the GCC due to the similarity of the Gulf nations’ oil-based economies, meaning that imbalances between those nations were less likely. (AB 27.04)

5.2 Kuwait Plans To Quadruple Gas Output By 2030

Kuwait plans to produce more than 4 billion cubic feet per day (cfd) of gas by 2030, according to state owned Kuwait Oil Co (KOC), nearly quadruple current output. The Gulf Arab state does not have enough natural gas to meet power demand and burns a large volume of oil products at power stations. Like its oil exporting neighbors, Kuwait has been slow to develop its gas reserves to meet domestic demand. Kuwait's pumps around 1 billion cfd of gas from oilfields, and 145 million cfd from gas fields not associated with oil. The 4 billion cfd target would include a huge rise in non associated gas output to 2.7 billion cfd. The non associated gas would come from the neutral zone the country shares with neighboring Saudi Arabia and from fields within Kuwait. It included output from the Dorra field. However, that field is shared with Iran and has been a bone of contention between Kuwait and Tehran since the 1960s. The two have yet to strike a deal on how to develop it. Kuwait is plugging the gap between supply and demand with imports of liquefied natural gas (LNG). Tight supply has been exacerbated by OPEC member Kuwait's adherence to the producer group's oil output restrictions since late 2008. As most of Kuwait's gas is a by product of oil production, when it pumps less crude, it pumps less gas. To counter this constraint, Kuwait is working on a scheme to increase output of non associated gas fields to 1 billion cfd by 2016. In February, state run Kuwait Oil Company signed a five year service contract with Royal Dutch Shell to develop gas fields in the country's north. (AB 27.04)

5.3 Qatar Expects 1.1 Million Tourists In 2010

The number of tourists visiting Qatar is expected to rise by 10% from 1 million in 2009 to 1.1 million in 2010, according to the Qatar Tourism Authority. The hotel occupancy rate was 70% during the Q1/10. The number of hotel rooms in Qatar has risen from only 2,700 to 8,500, and will reach 15,000 by 2011, the chairman said. A new exhibition center, to be completed by late 2012 with a total area of 80,000 square meters, is expected to attract up to 2.5 million tourists a year by 2015. Qatar’s $14.5 billion international airport, due open at the end of 2012, will cater to 25 million to 48 million passengers a year. At least 2.5 million tourists per year are expected to visit Doha by 2015. Tourism is one of the niche sectors Qatar is trying to promote to increase the contribution of services sectors to its economic growth. (Various 11.05)

5.4 UAE & Oman Seal Power Grid Agreement

The UAE and Oman signed a power grid agreement, linking both country's electricity grids. The agreement will allow both countries to enhance power resources to support development through linking their electricity grids. UAE officials have estimated that annual peak demand for electricity was likely to rise to more than 40,000 MW by 2020, reflecting cumulative annual growth of about 9%. Gulf countries have completed the first phase of a regional power grid that they hope will help them meet rapidly rising regional demand and smooth out capacity at peak times to avoid power outages. (Bloomberg28.04)

5.5 Egypt GDP Extends Rebound and Rises 5.8% in Third Quarter

Egypt's gross domestic product grew at an annualized 5.8% in the three months to end-March, driven by a rise in the manufacturing, tourism and Suez Canal sectors. Growth was 5.1% in the previous quarter. The global downturn has curbed tourism in the Arab world's most populous country as well as foreign direct investment and Suez Canal revenues, slashing growth to 4.7% in 2008/09 from a record high 7.2% in 2007/08. But the government and analysts say there are signs of a turnaround, and Economic Development Minister Osman said in March he expected economic growth to slightly exceed 5% in fiscal 2009/10, which ends on June 30. Government officials said in March growth would accelerate in the next two years to 6.5% in 2011/12, ending June 2012, from a projected 5.8% in 2010/11 as Egypt shakes off the global economic crisis. The Suez Canal is a vital source of foreign currency in Egypt, along with tourism, oil and gas exports and remittances from Egyptians living abroad. Tourism grew 18.8% and Suez Canal receipts grew 10.5% in the third quarter of 2009/10, the Cabinet said in a statement. Manufacturing output grew 5.8%. (DNE 10.05)

5.6 Egypt’s Annual Inflation Falls To 11.3% in April

Egypt’s annual headline inflation declined to 11.3% in April 2010, from 12.2% in March, as the annual change in food prices, clothing, furniture, transportation and hospitality costs dropped, according to data released by the government statistics agency CAPMAS. The monthly change in headline inflation rose, however, by 0.9% in April, from 0.8% the previous month, as the monthly change in food prices and hospitality costs rose to 1.8% and 0.3%, respectively. The urban consumer price index for April rose to 146.4 versus 131.5 a year ago. The Central Bank of Egypt (CBE) has begun to move towards making inflation targeting its main policy goal; however, it will take some time before the monetary instruments are fully in place. The CBE has been loosening monetary policy since the beginning of 2009 on the back of a gradual deceleration in the rate of inflation, which bottomed out at 9% in August 2009, from a peak of 23% in August 2008. (DNE 10.05)

5.7 Egypt’s Minister of Investment Announces Official End to Privatization

Egyptian Minster of Investment Mohieldin announced, in the first such official release, that the privatization program has ended, with the exception of offering minority stakes in some public companies to Egyptians. This official announcement follows consultations with the Cabinet, the Minister said. The Minister indicated that stakes in public companies still owned by the government will remain in government ownership, whether of profitable or losing companies. The only privatization method that will be implemented will be the offering of minority stakes in some public companies to Egyptians, with the government maintaining majority ownership of these companies, with profitable companies being developed and losing companies restructured, going forward. This announcement follows news released previously on the offering of stakes in public companies under the new asset management program, for which a special law was being drafted by the government. The Minister did not confirm whether this law has been shelved or not. The number of remaining public enterprise companies is estimated to be around 153 companies. (Beltone 06.05)

5.8 Suez Canal Revenues Inch Down to $374.9 Million in April 2010

Suez Canal revenues registered $374.9 million in April 2010, compared to $379.4 million in March 2010, showed data released by the Suez Canal Authority. Revenues registered annual growth of 8.1% in April 2010, compared to 15.7% in March 2010, with revenues dropping by 1.2% on a monthly basis in April. The number of oil and non-vessels reached 259 and 1195 vessels in April, compared to 309 and 1207 in March. Total tonnage of vessels passing through the Canal declined to 65.7 million tonnes in April, from 68 million in March 2010, as tonnage of oil vessels declined to 8.1 million tonnes, from 10.2 million tones in March 2010, while non-oil vessels tonnage inched up to 58 million tonnes in April, from 57 million tonnes in March 2010. Revenues are slightly below expectations of $400 million for April, as a higher number of vessels was expected to pass through the Canal during the month. Non-oil vessels traffic and tonnage have improved slightly in April with the decline in oil vessels traffic and tonnage negatively affecting Suez Canal performance in April. It is expected the Canal revenues to continue to rise gradually, totaling $4.7 billion in FY2009/2010, compared to $4.7 billion in FY2008/2009 and $5.2 billion in FY2007/2008, as global trade improves, especially between Asia and the US. A better recovery in FY2010/2011 is foreseen, especially in revenues, if the Canal Authority decides to raise transit fees in 2011, potentially raising revenues to $5 billion. (SC09.05)

6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkish Trade Deficit Doubles To $5 Billion In March

Turkey’s trade deficit expanded to $5 billion in March from $2.4 billion in the year-earlier period, the Turkish Statistical Institute (TurkStat) announced on 30 April. The trade gap more than doubled in March from a year earlier, the fifth consecutive expansion as the economy accelerates out of recession, drawing in raw materials from abroad. The deficit has been widening since Turkish manufacturers stepped up purchases of raw materials and consumers began buying more imported goods with the rebounding economy. The economy likely grew more than 10% in the first quarter. Turkey returned to growth on an annual basis in the last quarter of 2009, when it expanded 6% after four quarters of contraction. Exports rose 22% from a year earlier to $10 billion in March. Imports gained 43% to $15 billion, the most since September 2008, the agency said. Oil imports were the largest single product, worth $3 billion, while iron and steel imports rose 78% to $1.4 billion. The rate of exports covering imports dropped to 66.5% in March while it was 77.5% in the same month of 2009.

Turkey's intermediate goods imports rose by 34.6% between January and March over to the same period last year. The country's capital goods imports rose by 23.9% in the period of January-March compared to the corresponding period last year. Turkey's exports to European Union member countries climbed 33.3% in March over the same month of 2009. In March, the main partner country for exports was Germany with $917 million. Germany was followed by Italy, France and Britain respectively. (Hurriyet 30.04)

6.2 Cyprus Inflation Up To 2.44% In April

Cyprus’ Statistical Service announced that its annual inflation rose in April by 2.44%, compared with a rise of 2.4% in March. Over the previous month, prices rose by 0.70% to 112.76. The Statistical Service said that this was mainly owing to increases in the prices of petroleum products, electricity and certain clothing and footwear items. Decreases were recorded in the prices of certain fresh vegetables and fruit. For the period January-April 2010, the CPI recorded an increase of 2.5% compared with the corresponding period of 2009. Meanwhile, the EU-harmonized consumer price inflate rate (HICP) for April 2010 increased to 2.5% from to 2.3% in March 2010 and 0.6% in April 2009. For the period January-April 2010, the HICP recorded an increase of 2.5% over the corresponding period of 2009. (FM 10.05)

6.3 Cyprus Healthcare Expenditure Just Under €1 Billion In 2007

Expenditure on health services in 2007 is estimated at €959.6m, according to a report just published by the Statistical Service. The Report entitled "Health and Hospital Statistics" provides statistical information on the medical services of the public sector. Out of the total, €458.3m was spent by the public sector and €501.3m by the private sector. Healthcare expenditure as a percentage of GDP decreased from 6.3% in 2006 to 6.0% in 2007. The Statistical Service said that total health expenditure for 2008 will be published "at a later stage". In 2008, 66.429 patients were admitted for treatment and discharged from the general hospitals. The disease category "Injury, poisonings and certain other consequences of external causes" accounted for the highest share, accounting for 14.5% of in-patients. This was followed by "symptoms, signs and abnormal clinical and laboratory findings not elsewhere classified", accounting for 10.3%. Diseases of the digestive system accounted for 9.3% and diseases of the circulatory system 9.1%. Surgical operations performed on in-patients rose by 22.1% over the previous year to reach 33,810. General surgery accounted for 27.4% of all operations performed on in-patients, operations of orthopedic surgeons 23.5% and operations of gynecology-maternity surgeons 12.4%. Out-patient attendances increased by 4.8% over the previous year, reaching 1,668,200, of which 67.0% represented attendances at general hospitals. During 2008 a total of 392,740 patients visited the Casualty Departments of the general hospitals, recording an increase of 0.8% over the previous year. The report provides, inter alia, data on in-patients, surgical operations, out-patient attendances, bed-occupancy rates, information on medical, nursing and paramedical personnel and various other health indicators. (FM 04.05)

6.4 Greek Parliament Passes Divisive Bill

On 6 May, the toughest set of austerity measures that Greece has ever seen were approved by Parliament in a vote that caused substantial political fallout in PASOK and New Democracy. The legislation containing the drastic public spending cuts and tax hikes, designed to help Greece find more than €30 billion over the next three years, was approved by 172 of the 300 MPs and opposed by 121. Although the bill was voted through in principle (it has yet to be voted on article by article as parliamentary procedure demands), the government did not come through the vote unscathed. Three of its deputies simply voted "present" rather than casting their ballot in favor of the bill. Responding with unprecedented speed, Prime Minister Papandreou expelled the three from the parliamentary group.

Former Foreign Minister Bakoyannis suffered a worse fate as she was expelled from New Democracy, the party her father Constantine Mitsotakis once led and is currently the honorary president of. Bakoyannis piqued current conservative leader Samaras by voting for the measures when all ND deputies had been instructed to oppose them. There has been speculation since then that the ex-foreign minister would form her own party. The government needed just a simple majority to see through the bill, but it received the support of the MPs from the right-wing Popular Orthodox Rally (LAOS), whose leader Karatzaferis said that he could see no other option. The Communist Party (KKE) and the Coalition of the Radical Left (SYRIZA) voted against the measures.

During the debate that preceded the vote, Papandreou underlined that the measures, which are attached to an €110 billion bailout package put together by the IMF and the eurozone members, are Greece’s only hope. "Either we vote for this or condemn the country to bankruptcy," he said. "I have not yet heard an alternative solution." The prime minister added that he understood people’s anger at politicians and pledged that any cases of corruption would be referred to prosecutors. He also called on former Prime Minister Karamanlis to speak up about his time in office, which Papandreou labeled as Greece’s "most wasteful and corrupt" government. (eKathimerini 07.05)

6.5 Greece & Qatar Consider Joint Energy Projects

On 3 May Qatar said it was interested in investing $6.66 billion to develop energy projects in debt-laden Greece. The two countries signed a non-binding memorandum of understanding to export Qatari liquefied natural gas (LNG) to Greece and build LNG terminals in the Mediterranean country. Greece, the euro zone's least competitive economy, is starving for foreign investment to help balance its payments deficit. Qatar is the world's biggest exporter of LNG and its economy relies heavily on gas sales. The agreement includes plans for a €3.5 billion LNG terminal with a capacity of 7 billion cubic meters in western Greece, to be built by Qatar Petroleum, the Emirate's state oil company. The two countries will set up a joint committee to look further into the projects. (Various 04.05)

6.6 Qatar Planning To Build LNG Receiving Plant in Greece

Qatar is looking to lock in a new market for its natural gas exports in Greece by offering to build a receiving plant. Much of the new output of LNG coming on stream this year and next was planned for the US market, but an oversupply there has led Qatar Petroleum to seek higher prices in Europe and east Asia. Qatar has offered to pump €5 billion into building a port facility to convert LNG into gas that would be used in power stations and heavy industry. The two countries also agreed in principle for Qatar to supply regular shipments of LNG to Greece but did not specify how much. The Greek prime minister, welcomed the agreement "at this time of economic hardship" as the country’s government struggles to emerge from a huge fiscal debt. If built, the re-gasification terminal would be the third in Europe in which Qatar Petroleum, a government-owned company, holds a major equity share. The others are in Britain and Italy. (Beltone 06.05)

6.7 Bulgaria Government Reforms Budget Instead Of Hiking VAT

Bulgaria PM Borisov has confirmed that his center-right GERB government will not increase Value Added Tax (V.A.T) from the current 20%. After a number of u-turns which saw the government suggesting V.A.T rises of between 2-4%, on 5 May Borisov stated that "VAT will not be raised," after a meeting of the cabinet. He added that an updated 2010 budget will provide additional funding for health care, tobacco growers, transport and general infrastructure projects and that no taxes will be raised in 2010. Finance Minister Djankov continued that "our goal is to make Bulgaria the best place for doing honest business in Europe." Djankov said that the government had chosen the more difficult path of reform and savings, instead of raising value added tax. The selected plan includes "an abrupt introduction of structural reforms in health, education, pensions and administration, additional cost cuts of 20%," he added. PM Borisov informed that the cost saving measures would add an extra BGN 900 M to treasury by the end of 2010, with an extra BGN 500 M expected to be gained from tobacco, alcohol and iron taxes and crack downs on illegal sales. Borisov concluded that the situation in the region must be kept a close eye on by the GERB government regarding the economic problems in Greece and Romania; "when the bear plays in the neighbors it is likely he will come and play in our garden too." (SMN 06.05)

6.8 EC Says Bulgaria Economy to Start Recovery by End 2010

The global economic downturn had a severe effect on Bulgaria’s economy, but brought about a welcome adjustment in some of the imbalances, says an analysis of the European Commission. The document is part of the institution’s spring economic forecast, presented by EU Commissioner for Economic & Monetary Affairs Rehn. It points out that as a result of the downturn the budgetary balance swung from a surplus of 1.8% of GDP at the end of 2008 to a deficit of 3.9% of GDP, as the implemented measures to curb expenditures and improve tax compliance were not enough to offset the significant revenue shortfall. However, the European experts point out that the undertaken fiscal consolidation measures helped to stabilize the fiscal position and avoid the accumulation of a much larger general government budget deficit. The European Commission expects budget deficit to shrink to 2.8% at the end of 2010, in line with EU rules, and go further down to 2.2% the next year. The current-account deficit is expected to shrink from 9% of GDP in 2009, to 6% and slightly above 5% of GDP in 2010 and 2011 respectively. Some of the budgetary components are subject to uncertainties, the document says.

On the expenditure side, social spending could exceed the funding allocated in the budget for 2010 in case of unfavorable labor-market developments. Downsizing in items such as capital expenditure could affect the economy’s potential and growth prospects in the medium term even though they are important for keeping government spending under control, it says. Additionally, freezing salaries, intermediate consumption and pensions could affect negatively the already weak domestic demand in 2010 and trigger further decline in indirect tax revenue. The European Commission praised the Bulgarian authorities for their relatively good track record in achieving their fiscal targets and the strong commitment to maintaining strict fiscal discipline. (SMN 06.05)

6.9 IMF Advises Bulgaria To Keep Eye On Banking System Liquidity

The Board of Directors of the IMF has approved the annual monitoring report for Bulgaria. The IMF Executive Directors have pointed out that even though the Bulgarian economy is expected to recover in 2010, the country continues to face risks, announced Bulgaria’s Finance Ministry. According to the IMF Board, the Bulgarian financial system remains stable which is due to both the substantial capital reserves, and the consistent supervisory policy. Yet, the Executive Directors have emphasized the growth of non-standard credits in the country, and increased risks stemming from the possibility of parent banks to reconsider their current behavior. As a result, the IMF recommends that Bulgaria should be alert with respect to financial supervision, especially as far as the liquidity of its banking system is concerned. According to the IMF Board, this supervision should be exerted in closer cooperation with the supervisory bodies of the countries whose banks have substantial share in the Bulgarian banking system. The overall policies of the Bulgarian government directed at maintaining macroeconomic stability have been evaluated positively by the Executive Directors of the Fund. Yet, they have remarked that the reduced inflow of capital to Bulgaria will have a negative effect on consumer demand, which necessitates measures on part of both the state and the private sector such as acceleration of the structural reforms in order to increase the productivity of the Bulgarian economy. The IMF Board has confirmed the crucial role of the currency peg for Bulgaria’s economic stability as well as the need for active economic policies in order to prepare the country for its future accession to the Eurozone. In this respect, the Fund believes that the deepening of reforms is the way to demonstrate the flexibility and adaptability of the Bulgarian economy despite the limitations obeyed as part of the currency peg.

The IMF Directors outlined the challenges before Bulgaria’s fiscal policy in 2010, which have to do with the reduction of revenues, and the higher state expenditures caused by older debts. They have supported the plan of the Bulgarian government to apply a package of anti-crisis measures in order to solidify the country’s financial stability. According to the IMF Board, Bulgaria has to focus on projecting state revenues in the medium run rather than on current financial results in every single year since the former approach would make public spending more predictable and will reduce the need to rectify the state budget within the fiscal year. (SMN 05.05)

7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Shavuot Holiday to be Marked on Eve of 27 May

On 18/19 May, the Jewish world will observe the holiday of Shavuot. Shavuot is the second of the three major pilgrim festivals (Passover being the first and Sukkot the third) and occurs exactly fifty days after the second day of Passover. This holiday marks the anniversary of the day when the Jewish People received the Torah at Mount Sinai. This is a biblical holiday complete with special prayers, holiday candle lighting and kiddush, with many forms of work and labor are prohibited. The word "Shavuot" means "weeks": It marks the completion of the seven-week counting period between Passover and Shavuot. During these seven weeks the Jewish people cleansed themselves of the scars of Egyptian slavery and became a holy nation ready to enter into an eternal covenant with G d with the giving of the Torah. Before the giving of the Torah the Jews were a family and a community. The experience of Sinai bonded the Jews into a new entity: the Jewish people; the Chosen Nation. This holiday is likened to their wedding day - beneath the wedding canopy of Mount Sinai, G d betrothed the Jews.

7.2 First-Ever Arabic Language Spokesman for Prime Minister's Office

For the first time in its history, Israel’s Prime Minister's Office has added an Arabic-language spokesman to its media relations staff. The spokesman will also coordinate between the different informational elements in the Israeli government that deal with Arabic audiences, as part of the National Information Directorate. The new spokesman is Ofir Gendelman, who until now was the Foreign Ministry's Spokesman for Arabic Media. The appointment and structural change was made as part of the efforts to improve Israel's information dissemination globally. Sources in the PMO explained that the appointment is meant to strengthen Israeli informational activity vis-à-vis Arabic-speaking audiences, to present Israeli viewpoints directly and to increase these audiences' exposure to Israeli content and initiatives on diplomatic, security, economic, social and cultural matters. (IsraelNN05.05)

*REGIONAL:

7.3 Bahrain’s Bid To Ban Alcohol Fails

The bid by Bahrain’s parliament’s to ban alcohol in Bahrain collapsed, with MPs rejecting amendments agreed by the Shura Council which would have banned only Muslims from buying and consuming alcohol. The Shura bill stipulated that non-Muslims would still be able to buy and consume alcohol in 'designated areas'. MPs had proposed a total ban, which means that the bill must go back to Shura for reconsideration, though it is likely to run out of time since this session was the last of the current parliament's four-year term. Later this year the Shura Council will be dissolved until a new parliament is elected and the new Shura Council is appointed. Parliament's foreign affairs, defense and national security committee deemed Shura's amendments a loophole that would allow the continuation of alcohol buying and consumption for Muslims. It said that this was in view of the Constitution banning differentiating between people according to their faith, religion or belief. Parliament voted in favor of a complete alcohol ban in March, but the bill had been changed by the Shura Council, who said it breached the rights of non-Muslims. Shura's amended version stated that non-Muslims would only be allowed to consume alcohol in designated places approved by the government and in their homes. (TradeArabia 05.05)

7.4 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.

7.5 Greece’s Last Cremation Obstacle Goes

On 10 May, Greece took the last step toward permitting and creating the facilities so that people who choose so can be cremated, which until recently had been banned. In a joint decision by the Health, Environment and Interior ministries, the final framework that allows for the creation of crematoriums has been approved. The legislation calls for such facilities to be built next to cemeteries and comply with specific regulations on emissions, while municipalities will be responsible for running them. As regards the tough emission limits that have to be observed by these facilities, the Greek government is relying on already existing limits that are being used in Germany, where cremation has been allowed since 1934. The municipalities that manage the crematoriums will have the sole right to issue a license for someone to be cremated. They will also be able to fulfill a family's wishes to scatter a loved one's ashes in a specific place, such as at sea. Although cremation has been allowed in the UK since 1884 and France in 1887, Greek lawmakers only approved legislation in 2006 allowing for the cremation of the dead to take place in Greece for the first time in the country's history. The new law permitted the cremation of people who request this method instead of burial as long as their religion also allows it. The law still forbids cremation for Orthodox Christians. The Church of Greece opposes the practice for believers, arguing that Orthodox traditions only allow for burial. The previous law also banned cremation for other faiths. This made matters particularly difficult for Muslims in Greece who had to send their dead abroad to be cremated. (Kathimerini 11.05)

8: ISRAEL LIFE SCIENCE NEWS

8.1 PolyTouch Medical Submits Premarket Application for PatchAssist for Hernia Repair

PolyTouch Medical has filed a Premarket 510(k) Application with the US FDA for PatchAssist, an Innovative Laparoscopic Mesh Deployment and Placement Device that enables accurate mesh placement in laparoscopic ventral hernia repair potentially reducing procedure time by 30%-50%. PatchAssist is a standalone surgical mesh placement device that is compatible with all common hernia meshes and supports a wide span of mesh sizes including the largest mesh sizes in the market. PatchAssist enables surgeons to choose their preferred mesh during LVHR procedures.

PolyTouch Medical (http://www.polytouch-med.com) was founded in March 2009 and is located in the Misgav Venture Accelerator, Israel. Realizing the need for an improved method for mesh deployment and placement, PolyTouch has developed PatchAssist (patents pending), a novel and proprietary mesh deployment and placement device initially targeting laparoscopic ventral hernia repair (LVHR). PatchAssist is a standalone surgical mesh placement device that is compatible with all common hernia meshes enabling the surgeons to choose their preferred mesh during LVHR procedures and it supports a wide span of mesh sizes including the largest mesh size category. PatchAssist enables accurate abdominal cavity mesh placement, potentially reducing procedure time by 30%-50%. PolyTouch plans to introduce the PatchAssist device into the U.S. market in the beginning of 2011. (PolyTouch Medical 03.05)

8.2 Pimi Agro Successful Trial Results of SweetGuard in the Treatment of Sweet Potatoes

Pimi Agro Cleantech completed its first commercial trial utilizing SweetGuard in the treatment of sweet potatoes. Similar to Pimi's SpuDefender, StoreGuard and SeedGuard patented technologies, SweetGuard is aimed at preventing the decay of sweet potatoes which may occur during storage and prior to packing and distribution. Pimi developed SweetGuard in order to reduce losses from the micro flora and contamination which may occur during the storage of sweet potatoes. According to market data sweet potatoes can suffer up to 40% yield loss during storage. The trials were carried out in two cooperative farms, with two separate packing houses that export sweet potatoes from Israel to Europe. In these trials, SweetGuard demonstrated efficacy in various areas of post-harvest treatment, including significantly reducing the sweet potato decay in storage, reducing the fungal and bacterial population in the atmosphere of the storage room, increasing the quality of the roots and decreasing root decay, and increasing the appearance of the crop. As a result of these trials, the two cooperative farms have decided to include SweetGuard in their regular working program for the crop season beginning in the summer of 2010.

Kibbutz Alonim’s Pimi Agro CleanTech (http://www.pimimarion.com) was established in 2004 with the vision of developing environment-friendly (organic) alternative solutions to current chemical treatments of agricultural harvest, such as fruits, vegetables and grains, thus improving the well being of consumers, growers and the environment in general. Pimi has invested years of research in developing eco-friendly solutions for pre and post harvest treatments of fruits and vegetables. The company's technology platform is based on a unique formulation of Stabilized Hydrogen Peroxide (STHP) and benefits from a world wide patent protection, 16 granted patents (3 in the US) and 23 pending Patents, filed in 35 different countries and the EU. (Pimi Agro 15.01)

8.3 Pimi Agro Cleantech Raises $2 Million

Pimi Agro Cleantech closed a private placement with US institutional investors. The company filed a prospectus to list for trading on the Bulletin Board in August 2009. Registration for listing on the Bulletin Board is different from an ordinary IPO, since the Bulletin Board is designed for small-cap companies that do not meet the threshold conditions of NASDAQ or the New York Stock Exchange. Pimi Agro notified the US SEC of an investment of $2.08 million at a company value of $16 million, as part of a larger $4 million financing round, which is due to be completed soon. Investors in the round were the Iowa’s TSA Trust Fund, PFFI Retirement Foundation and Oregon Orate OSGP Fund. There was no offering to the public. Spark Kick-Off Investments advised the company.

Kibbutz Alonim’s Pimi Agro CleanTech (http://www.pimimarion.com) was established in 2004 with the vision of developing environment-friendly (organic) alternative solutions to current chemical treatments of agricultural harvest, such as fruits, vegetables and grains, thus improving the well being of consumers, growers and the environment in general. Pimi has invested years of research in developing eco-friendly solutions for pre and post harvest treatments of fruits and vegetables. The company's technology platform is based on a unique formulation of Stabilized Hydrogen Peroxide (STHP) and benefits from a world wide patent protection, 16 granted patents (3 in the US) and 23 pending Patents, filed in 35 different countries and the EU. (Various 06.05)

8.4 Compugen Discovers Drug Target for Treatment of Multiple Myeloma

Compugen announced the discovery and initial experimental validation of CGEN-928 as a drug target for the treatment of multiple myeloma. In recently completed studies, CGEN-928, a membrane protein which previously had no known function or potential clinical utility, demonstrated broad expression in human multiple myeloma tumor cells, including drug resistant and aggressive primary tumor cell lines. In addition, the protein’s expression profile indicates its possible use as both a diagnostic and prognostic marker for multiple myeloma. The potential of CGEN-928 to address these important unmet medical needs was initially predicted through the use of Compugen’s Monoclonal Antibody Targets Discovery Platform. Patent applications covering the use of CGEN-928 for these and additional therapeutic and diagnostic purposes have been filed by the Company.

Earlier evaluation by Compugen of the in silico predicted CGEN-928 transcript demonstrated high expression levels in multiple myeloma samples compared with various normal tissue samples. Studies were then performed with two independent experimental systems confirming the existence of the CGEN-928 protein on the membranes of cells derived from the bone marrow of multiple myeloma patients, as well as on the membranes of primary tumor cell lines both from cell culture and grown in mice. These experimental results, demonstrating CGEN-928’s broad expression in multiple myeloma tumor cells, support its potential therapeutic value in the treatment of multiple myeloma, including in patients with an aggressive and drug resistant form of the disease. These findings also indicate that CGEN-928 may offer the diagnostic potential to detect a broader population of multiple myeloma cells, including critical drug resistant tumor cells.

Tel Aviv’s Compugen (http://www.cgen.com) is a leading drug and diagnostic product candidate discovery company. Unlike traditional high throughput trial and error experimental based discovery, Compugen’s discovery efforts are based on in silico (by computer) prediction and selection utilizing a growing number of field focused proprietary discovery platforms accurately modeling biological processes at the molecular level. (Compugen 11.05)

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Taiwanese LED Manufacturer Places an Order for QC3 Diffractometer from Jordan Valley

Jordan Valley Semiconductors (JVS) has received multiple orders for its new QC3 diffractometer system from leading LED manufacturers, including Jiangsu Canyang Optroelectronics (CanYAng), a major LED chip manufacturer in ASIA. QC3 is designed and optimized to provide best cost/performance quality control systems for high-brightness LED (HB-LED) manufacturing. The purchase of the QC3 system by a market leader such as Can Yang is a testament to Jordan Valley's successful acquisition of Bede in 2008 and leveraging of its technology. JVS vastly improved the speed and effectiveness of this metrology tool, while reducing its price, in order to offer an unparalleled cost /performance solution to the rapidly-expanding HB-LED manufacturing market. Embodying the advantages of the company's other solutions in the semiconductor quality control niche, the QC3 has been configured to provide symmetric and asymmetric measurements for all common semiconductor wafers, such as GaAs, InP, Si, GaN (thick buffers). Among its benefits, QC3 is designed for ease of use, reliability and high performance at unmatched low cost-of-ownership.

Migdal Ha’Emek’s Jordan Valley Semiconductors (http://www.jvsemi.com), the leader in X-ray metrology solutions for advanced semiconductor fabs, develops and supplies superior metrology equipment for quality control of thin films based on rapid, non-contacting and non-destructive X-ray technology. The company offers the Semiconductor Industry the most comprehensive array of tools, based on advanced XRR, XRF , WAXRD, SAXS, VUV and HRXRD technologies, ideal for both blanket and patterned wafers. (JVS 28.04)

9.2 Magal Enters Completion Phase for Two Safe City Projects in Israel

Magal Security Systems is in the final stages of implementation with two safe city projects in Savyon and Nazareth, Israel. Both projects provide integration of multiple security products and systems including cameras, emergency buttons, and locating systems. In Savyon, the focus of the project is on the safety of children in schools and daycare centers. An important element of the solution is a truck-mounted mobile surveillance kit which constantly transmits video into the central Command & Control center. In Nazareth, the security system provides first responders with the tools for critical event management in shopping malls, schools, parks and other sensitive sites. The unique advantage of the system is the ability to incorporate a sophisticated and scheduled Video Motion Detection (VMD) technology for PTZ cameras that points to different areas of interest during different times of the day and night. In both cases, all elements of the security system are integrated into a single real-time Command and Control system (Magal's Fortis). Security personnel are supported by a user-friendly GUI, which includes check lists, sensor displays and a situation awareness map. Multiple sensors and data sources rely on a wide band wireless network and GIS (Geographical Information System) engine, which synchronizes all events into a single cohesive information system. Events are logged and automatically communicated by email and text messages to security personnel.

Yahud’s Magal S3 (http://www.magal-ssl.com) is a leading international provider of security, safety and site management solutions and products. Over the past 40 years, Magal S3 has delivered tailor-made solutions to hundreds of satisfied customers in over 80 countries. Magal S3 offers a broad portfolio of unique products used to protect sensitive installations in some of the world's most demanding locations and harshest climates. (Magal S3 28.04)

9.3 ClickSoftware Introduces SaaS-based End-to-End Service Chain Optimization

ClickSoftware Technologies announced ClickSoftware OnDemand, the first holistic enterprise-level SaaS-based workforce management and optimization solution. The major innovation, available today, adds a new choice for customers who can now buy and deploy ClickSoftware's entire ServiceOptimization Suite, in a highly scalable, reliable and flexible on-demand model. Encompassing the full suite of solutions - including flagship offerings ClickMobile, ClickSchedule and ClickRoster - ClickSoftware OnDemand delivers a new way for customers to access the power of a proven portfolio of solutions that can streamline operations and improve efficiencies across the entire service organization. Built on the technology that drives the world's most successful service organizations - from Best Buy to Telstra to Direct Energy - ClickSoftware OnDemand gives service businesses a more flexible way to schedule customer appointments, dispatch the right personnel and resources, and ensure responsive service is done right - the first time. With a rapid implementation, customers can be delivering faster and better service within days.

Tel Aviv’s ClickSoftware (http://www.clicksoftware.com) is the leading provider of automated workforce management and optimization solutions for every size of service business. Their portfolio of solutions, available on demand and on premise, create business value through higher levels of productivity, customer satisfaction and operational efficiency. Their patented concept of 'continuous planning and scheduling' incorporates customer demand forecasting, long and short term capacity planning, shift planning, real-time scheduling, mobility and location-based services, as well as on-going communication with the consumer on the expected arrival time of the service resource. (ClickSoftware 06.05)

9.4 TowerJazz Announces Next-Generation SiGe Technology for High Volume Consumer RF Applications

TowerJazz announced design kit availability for its next-generation 130nm SiGe BiCMOS technology (SBL13) for high volume consumer RF applications. The SBL13 process combines SiGe bipolar performance with a mature 130nm CMOS copper (Cu) backend to achieve high performance RF with more integrated digital logic. The technology is targeted at wireless RF and digital TV tuner applications which together are >$1B markets and where higher performance, lower cost and higher digital integration are required. SBL13 is the first SiGe BiCMOS process to be built in its Israeli fab, and TowerJazz is the only foundry with SiGe BiCMOS in more than one fab, enabling unique manufacturing flexibility for high-performance RF designs. The SBL13 process is well-suited for WLAN transceivers, cell phone transceivers and TV tuners. By combining a mature 130nm Cu CMOS platform and a rich IP offering, it enables the design of complex baseband and demodulator functions at less than one-half the die size of a 0.18um process. A 100GHz SiGe bipolar device enables integration of low-noise and low-power RF and a high voltage SiGe device enables integration of power amplifiers and drivers.

Migdal Ha’Emek’s Tower Semiconductor (http://www.towerjazz.com), the global specialty foundry leader, and its fully owned U.S. subsidiary Jazz Semiconductor, operate collectively under the brand name TowerJazz, manufacturing integrated circuits with geometries ranging from 1.0 to 0.13-micron. TowerJazz provides industry leading design enablement tools to allow complex designs to be achieved quickly and more accurately and offers a broad range of customizable process technologies including SiGe, BiCMOS, Mixed-Signal and RFCMOS, CMOS Image Sensor, Power Management (BCD), and Non-Volatile Memory (NVM) as well as MEMS capabilities. (TowerJazz 10.05)

9.5 Italian Operator NGI Selects Alvarion for WiMAX Network Expansion

Alvarion announced that NGI, part of the BT Italia Group, is expanding its network using Alvarion’s BreezeMAX Extreme 5000, the industry’s first 802.16e WiMAX solution for license-exempt frequency. NGI’s network, operating in the 5.4 GHz license-exempt band, provides high-speed broadband services to Italian residential and business customers in underserved areas. NGI has offered successful broadband services to Italian residential and business customers since 1999 and currently provides wireless services to twenty thousand customers. The new expansion will occur in Lombardia, Veneto, Emilia Romagna, Liguria, Friuli Venezia Giulia, Valle d’Aosta and Piemonte regions, covering approximately 100,000 square kilometer, targeting the many locations in Italy that are not covered by or receive DSL services. The expansion of the network will be implemented with the BreezeMAX Extreme solution. Tel Aviv’s Alvarion (http://www.alvarion.com) is a global leader in 4G wireless communications with the industry’s most extensive customer base with hundreds of commercial WiMAX deployments. Alvarion’s industry leading solutions enable true open 4G and vertical applications for service providers and enterprises. Through an OPEN WiMAX strategy, superior IP and OFDMA know-how and ability to deploy large scale end-to-end turnkey networks, Alvarion is delivering the true 4G broadband experience today. (Alvarion11.05)

10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s Foreign Trade Slumped In April

On 11 May, the Central Bureau of Statistics announced that Israel’s foreign trade fell sharply in April. There was a major slowdown in imports of consumer goods in April, while exports fell 19% last month from NIS 4.79 billion in March to NIS 3.88 billion. Imports fell by 11.5% from NIS 5.12 billion in March to NIS 4.53 billion in April. Imports of diamonds were down 15% from March to NIS 556 million in April, while exports of diamonds fell 3% to NIS 714 million in April. Import of consumer products fells 17% in April compared with March to NIS 265 million. On annualized basis the rate of imports fells by 11.2% between February and April 2010 compared with a rise of 28% over the preceding three months. (CBS 11.05)

10.2 Israel’s Incoming Tourism Rises By 44% In January - April

The Central Bureau of Statistics announced in 10 May that 1.08 million visitors entered Israel between January and April 2010, some 44% more than during the corresponding period of 2009. This was also 13% more than the previous record of 938,000 for the corresponding months of 2008. It should be noted that tourism was affected by Operation Cast Lead in January 2009. Seasonally adjusted figures show a monthly average of 224,000 tourist entries in February-April (an annualized rate of 2.7 million tourists), up from a monthly average in November - January (an annualized rate of 2.5 million tourists). At the same time, more than one million Israelis made overseas trips in January-April, 10% more than during the corresponding period of last year, but 2% fewer than during the corresponding months of 2008. (CBS 10.05)

10.3 In 2008 Israeli Households Averaged 3.2 People & 2.1 Mobile Phones

On 5 May the Central Bureau of Statistics announced that Israel had 2,313,400 households, with an average of 3.2 people per household, according to the 2008 census. It was also found that 71% of households have a personal computer, but that there is variability by district. Some 78% of households in the Central District and 74% of households in the Tel Aviv District have computers, compared with 64% of households in the Jerusalem and Southern districts. In the Judea and Samaria District, 77.5% of households have a computer. Internet access is 90% nationwide, and reaches 94% in the Tel Aviv and Central districts, and 80% in the Jerusalem District. Some 62% of households have at least one car. More than 72% of households in the Central District have at least one car, compared with half of households in the Jerusalem District. The nationwide average number of mobile telephones is 2.1 per household. (CBS 05.05)

11: In Depth

11.1 LEBANON: Lebanese Municipal Elections on Time, But Reform Delayed

Karam Karam, writing in the Carnegie Arab Reform Bulletin (http://www.carnegieendowment.org/arb), says Lebanon’s municipal elections, which began on May 2, started a four-stage process that will see voting on May 2, 9, 23 and 30 in the governorates of Mount Lebanon and Beirut, the Bekaa, the south and the north respectively. The government mandated that municipal council elections be held every six years in 1998, following a hiatus that lasted some 35 years. Since the end of the civil war in 1990 and the Taif Accord that stipulated constitutional reforms, Lebanon has held five parliamentary elections and two rounds of local elections, the latter most recently in May 2004. The structural reforms - particularly those pertaining to electoral reform and administrative decentralization - written into the Accord, however, have never been implemented. The issue of reform has been raised before and after each of the elections held since 1990 without ever being translated into concrete measures, and the same is true this time around.

Regarding this year’s local elections, the Ministry of Interior and Municipalities put forward a bill to reform electoral laws in late 2009 (the government was only announced in November, following months of wrangling after the June parliamentary elections). By the time the cabinet reviewed the bill and submitted it to the parliament, it was already March 2010. The relevant parliamentary committees (the Administration and Justice, Financial, and Defense and Interior Committees) held inconclusive discussions and ran out of time. The Minister of Interior and Municipalities was obligated to call for the elections by March 30 in order to allow for them to be held on time in May—but under the old electoral law.

Proposed reforms in the bill would have constituted a fundamental challenge to the majority of the parliamentary blocs and political forces. The reforms include adopting a system of proportional (party list) representation, closed slates, a 20% quota for women, ballots pre-printed by the Ministry of Interior and Municipalities, and allowing university professors and government employees (below a certain level) to run for the municipal councils. These changes would have strengthened the role of political parties in the system and allowed broader and more accurate representation of society in the parliament.

The proposed reforms also would have required parties to attain a greater degree of internal cohesion based on political platforms, a factor that is sorely lacking in most political parties in Lebanon. The parties opposed a proportional electoral system and closed slates out of fear of fragmentation and internal disputes, because the reforms would have required them to select candidates from among their ranks. They prefer instead to maintain the current majority system, in which citizens vote for individual candidates and seats are allocated per district based on predetermined confessional divisions.

Although the parties are aware that the proposed reforms would enable an effective party system to displace traditional family-based rivalries eventually, for now the inertia of the present system is too great to overcome. Reformed electoral laws, expanded municipal powers, and administrative decentralization each would threaten the patronage networks and favoritism that have dominated politics since the establishment of the Lebanese Republic. From 2006 to 2008, Lebanon went through a paralyzing political crisis; even after the 2009 parliamentary elections, there was a wide gap between political forces that had to be overcome before an inclusive national unity government could be formed. With painful memories of this political crisis still fresh, there is a strong preference among Lebanese politicians to avoid a potential destabilizing showdown over the local elections. The political parties thus are defining the municipal elections as family and clan-based races aimed at local development and services, with no significant role for the political parties.

This fact has become apparent in the electoral alliances and slates that have emerged across a range of constituencies, even those that were expected to host tough electoral battles, such as the districts under the influence of the Christian parties. For example, Hezbollah and Amal have allied in all of the Shi’i-majority districts (the south, the Bekaa and the southern suburbs of Beirut), while in Mount Lebanon there is also no real competition for the Progressive Socialist Party. In Beirut proper, the emphasis is on equal divisions along sectarian lines, as is the case in a number of other politically sensitive cities such as Sidon, Jounieh and Amchit. In the Matn district (which has a large concentration of Maronite Christians), recent adversaries such as Michel Aoun's Free Patriotic Movement, the Phalange, the Lebanese Forces, and Michel Murr have set aside their differences for these elections.

Even as foot-dragging by the government and parliament has delayed reforms, the limited time available between when the elections were announced and when they are being held has hampered any dialogue that might have been held on the municipal councils and their role in local development. Instead parties have been hiding behind the slogan that "development is a family and local affair," exposing their own incompetence and inability to provide effective policies for the country at large. The question remains: how can parties claim that municipal elections are about families and local development, not politics, when it is clear that Lebanese politics is built around families and services?

Karam Karam is a political science researcher and program director at the Lebanese Center for Policy Studies. (ARB 28.04)

11.2 LEBANON: Power Up

Lebanon's government is looking at a range of options to solve the country's chronic electricity shortages that threaten to slow economic development. The Oxford Business Group says that it will take much time and money to overcome years of low investments and unwillingness to reform the sector in order to meet the country's growing needs.

Though the Lebanese economy performed well in 2009 and is expected to post growth of 5.8% this year, this figure could be even better if the country has a reliable source of power. Much of the country experiences some form of electricity rationing, with scheduled power cuts or reductions in supply being a regular part of life for most Lebanese. The cost of these cuts runs across the economy, with loss-making state monopoly Electricite du Liban (EDL) being one the biggest drains on the budget, while shortages restrict industrial productivity.

Furthermore, Lebanon has to import 96% of its energy consumption, including almost all of the fuel used by EDL's power stations and the increasing numbers of private generators used to meet the shortfall in state production. This leaves Lebanon very vulnerable to price fluctuations and disruptions to supply. With oil prices again on the rise, EDL's import bill is also increasing, potentially adding to the $1.5bn of losses it recorded last year.

EDL also suffers from illegal electricity connections across the country - avoiding meters and amounting lost revenue for the company - as well as unpaid bills.

Though EDL has around 2,200 MW of installed generation capacity, the utility is usually only able to keep 1,600 MW operational. With national demand now well over 2300 MW and rising, the need for additional capacity and upgrades to existing facilities and the country's distribution network is a matter of urgency for consumers and the economy.

On April 15, the finance minister, Raya Hafar Hassan, unveiled the draft budget for this year, with the document including funding for new power stations and the installation of electricity transportation networks. In total, the draft budget allocates $322.6m for new capital works, with the proposed power stations set to bridge the gap between existing demand and the current shortfall in production.

Of course, the cabinet has to give its approval to the budget and then the Finance Ministry has to find the funds for the new power stations and the many other projects and recurrent spending requirements of the state, all without further adding to public sector debt, which stood at around 147% of GDP as of the end of February.

Though immediate plans are to further increase the use of hydrocarbons as fuel for electricity generation, Lebanon has set itself a target of generating 12% of its electricity through renewable resources by 2020, in particular looking at a mix of solar and wind energy to help it achieve this goal, though there are a number of obstacles to overcome. One of these is the relatively small size of the country, with the limited available space and the high cost of land restricting the deployment of solar farms, which require a large area for panels to be spread over.

Another problem faced by proponents of renewable energy is that EDL's tariff system has been left unchanged since the late 1990s when oil was trading at $25 a barrel, effectively providing heavily subsidized electricity to the public. Even though alternative energy has become more cost-effective as new technology is developed, it would be impossible for renewables to compete with traditional means of power generation unless the playing field was at least leveled, if not tilted in their favor.

The current government was committed to renewable energy, and to resolving the country's electricity shortages, though there was much work that needed to be done, the water and energy minister, Gebran Bassil, told a seminar on alternative energy held in Beirut in late March. "We are not ready on the technical and legislative levels, but we are committed to deal with these issues as soon as possible," Bassil declared. "The problem in Lebanon has always been that of a political decision, but I can assure you that today we have both the will and the decision to go on with this project." A study has been commissioned to determine the best locations across the country for wind power generation, with a goal of generating up to 500 MW of power via wind-turbine installations, the minister said.

Though an additional 500 MW of clean power and the 700 MW of conventional capacity planned for in the budget will improve the situation, it will only be a step in a much longer road towards Lebanon ensuring power security. Some estimates put the country's requirements for new generation capacity at 3000 MW over the coming decade. Given the existing shortfall and the fact that most of EDL's facilities are ageing and in need of upgrades, Lebanon still has a long way to go before it can guarantee power to the people. (OBG 04.05)

11.3 BAHRAIN: Retail Sales Will Grow To $5.26 Billion By 2014

Research and Markets (http://www.researchandmarkets.com) "Bahrain Retail Report Q2 2010" forecasts that the countries retail sales will grow from an estimated $2.66bn in 2009 to $5.26bn by 2014. Key factors behind the forecast growth in Bahrain's retail sales are a favorable long-term economic outlook, growing interest in Western styles of retailing and a steady rise in disposable income.

Bahrain's nominal GDP in 2009 was $15.13bn, with that year’s decline of 0.1% expected to turn into growth of 1.3% in 2010 as the economy begins to recover. Average annual GDP growth of 1.95% is predicted by BMI between 2009 and 2014. With the population forecast to increase from 1.01mn in 2009 to 1.09mn by 2014, GDP per capita is predicted to rise to $26,547.

Statistics from the Ministry of Culture and Information's tourism affairs division show that tourist arrivals have risen by an average of 10-15% a year over the past three years. In 2007, Bahrain attracted 5.5mn tourists, 4.9mn of them from other Gulf Cooperation Council (GCC) member countries. Tourism arrivals are projected to rise by an average of 2.5% per annum over the next decade. Bahrain's retail market will also continue to benefit from events such as the annual Formula One grand prix in Sakhir, which has generated hundreds of millions of dollars in revenues since it became a fixture on the racing calendar in 2004.

In 2005, 71.2% of the Bahraini population was described by the UN as economically active, with 40.7% in the 20-44 age range crucial for retail sales. By 2010, 72.7% of the population is expected to be economically active but the proportion of those in the 20-44 age band is forecast to fall to 39.9%. A very high level of urbanization is contributing to a vibrant retail sector. In 2005, more than 90% of the population was classified by the UN as urban, and this is forecast to increase to 91% by 2010. About 89% of the population live in the two principal cities of Manama and Muharraq.

Retail sub-sectors that are predicted to show strong growth over the forecast period include automotives, with sales forecast to rise by more than 20% during the forecast period, from $0.86bn in 2009 to $1.03bn by 2014. Sales of consumer electronics are predicted to increase from $0.44bn in 2009 to $0.55bn by the end of the forecast period, a rise of 25%. Over the counter (OTC) pharmaceutical sales are expected to increase by almost 20%, from $0.013bn in 2009 to $0.015bn by 2014.

Retail sales for our set of Middle East and Africa (MEA) countries in 2009 amounted to an estimated $412.28bn, based on the varying national definitions. Total consumer spending for the region based on BMI’s macroeconomic database amounts to $704.94bn. In 2009, the UAE, Saudi Arabia, Egypt and South Africa together accounted for an estimated 78.3% of regional retail sales, and their combined share is expected to rise to 82.2% by 2014. For Bahrain, the estimated 2009 market share of 0.6% is expected to increase to 0.8% by 2014. (R&M 30.04)

11.4 BAHRAIN: Pharmaceuticals and Healthcare Report Q2 2010

Research and Markets (http://www.researchandmarkets.com) "Bahrain Pharmaceuticals and Healthcare Report Q2 2010" says that in 2009 Bahrain's pharmaceutical market was worth only BHD43mn ($112mn), but it is expected to grow to BHD45mn ($120mn) in 2010, as the market recovers from the global economic slowdown. With private expenditure accounting for around half of total spending, the pharmaceutical market is sensitive to macroeconomic trends. Drug spending in 2009 was driven upwards by the outbreak of swine flu, which forced the government to spend an extra BHD5mn ($13.2mn) on drugs. Other factors driving up drug expenditure include an expanding population (within 10 years the total population of the Gulf Cooperation Council (GCC) is expected to increase by a third to 53mn), increased consumption and the growing cost of medical imports.

Growth should be comfortably above 4% in the 2010-2014 period. In the longer term, however, drug expenditure growth will slow, and will stand at 3.86% per annum in the 2014-2019 period, partly due to increased government cost-cutting as it tries to battle swelling health expenditure.

Health spending is Bahrain is being driven higher by chronic disease. The GCC nations have the highest obesity rates worldwide. Indeed, Bahrain has the sixth highest prevalence of obesity in the world at 28.9% of the population. This is partly due to poor diet but is also a result of the sedentary lifestyles that are a necessity in the country due to the scorching heat. According to a recent study by the health ministry, 94% of the population in Bahrain eats fast food an average of three times a week, while only 37% of the male population is deemed as being active. The knock-on effect of this obesity epidemic will be manifest in an increased prevalence of cardiovascular disease and diabetes.

In January 2010, the health minister of Bahrain stated that medicine prices in the country are among the lowest in the GCC region, with the exception of Saudi Arabia, where the large market permits cheap prices. Medicine prices are approved by the health minister, who in turn has stated that they cannot be brought lower than current levels. Suggestions for the establishment of a government-run pharmaceutical import firm or factories were also rebuffed, with the minister asserting that such a move would lead to subsidized drugs, which remain financially unfeasible. Despite the fact that medicine prices appear affordable in Bahrain, patients are still driving to Saudi Arabia to buy their prescription drugs, which can be up to 50% cheaper by comparison. To counter this, the Ministry of Health has proposed a plan to restrict profit margins on pharmaceuticals sold in pharmacies or other outlets to 45% to ensure prices are kept low, which could have an impact on overall market expenditure over the forecast period. (R&M 11.05)

11.5 UAE: United Arab Emirates Retail Report Q2 2010

Research and Markets’ (http://www.researchandmarkets.com) "United Arab Emirates Retail Report Q2 2010" forecasts that the UAE's retail sales will grow from an estimated $107.26bn in 2009 to $150.52bn by 2014. Key factors behind the forecast are strong underlying economic growth, increasing household consumption, growing acceptance of modern retailing concepts and expatriate wealth.

The UAE’s nominal GDP in 2009 was $229.8bn, with last years 3.2% decline expected to turn into growth of 2.8% in 2010 as the economy begins to recover. The authors predict average annual GDP growth of 3.0% between 2009 and 2014. With the population increasing from 4.7mn in 2009 to an estimated 5.5mn by 2014, GDP per capita is forecast to rise by 31% by the end of the forecast period to $64,527. Average household spending power in the UAE stands at $14,400 per annum, according to property consultants Colliers International. Emirati households account for the lion’s share of this spending, with an average of $23,000, while Western, other Arab and Asian households have annual spending power of $19,500, $13,500 and $10,000 respectively.

While Emiratis actively contributed to retail sales, the buying power of the country's expatriate residents was the major source of success, a study by Indian research firm RNCOS said. Tourism is also a massive factor in stimulating retail growth, with the UAE expecting more than 11mn tourists every year by 2010. Growing urbanization is also a factor in the buoyancy of the retail sector. Abu Dhabi in particular is highly urbanized, with the Urban Planning Council (UPC) projecting that Abu Dhabi City's population will rise to 1.3mn by 2013. In 2005, 85.5% of the UAE’s population was classified by the UN as urban and this is forecast to increase to 86.3% by 2010.

Retail sub-sectors are predicted to show strong growth over the forecast period include over the counter (OTC) pharmaceuticals, with sales expected to increase by almost 75%, from $0.27bn in 2009 to $0.46bn by 2014. Automotive sales are forecast to rise by 59%, from $9.7bn to $15.4bn, during the forecast period. Sales of consumer electronics are predicted to increase from $2.6bn in 2009 to $3.7bn by 2014, a rise of 40%.

Retail sales for our set of Middle East and Africa (MEA) countries in 2009 amounted to an estimated $412.28bn, based on the varying national definitions. Total consumer spending for the region based on the macroeconomic database amounts to $704.94bn. In 2009, the UAE, Saudi Arabia, Egypt and South Africa together accounted for an estimated 78.3% of regional retail sales, and their combined share is expected to rise to 82.2% by 2014. For the UAE, the estimated 2009 market share of 26.0% is expected to reduce to 23.3% by 2014. (R&M 10.05)

11.6 OMAN: Oil and Gas Report for Q2 2010

Research and Markets’ (http://www.researchandmarkets.com) "Oman Oil and Gas Report Q2 2010" report forecasts that the country will account for just 0.64% of Middle East regional oil demand by 2014, while providing 2.68% of supply. Regional oil use of 8.11mn barrels per day (b/d) in 2001 rose to an estimated 11.38mn b/d in 2009. It should average 11.66mn b/d in 2010 and then rise to around 12.68mn b/d by 2014. Regional oil production was 22.88mn b/d in 2001 and averaged an estimated 24.83mn b/d in 2009. It is set to rise to 27.19mn b/d by 2014. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average of 14.77mn b/d. This total had eased to an estimated 13.44mn b/d in 2009 and is forecast to reach 14.51mn b/d by 2014. Iraq has the greatest production growth potential, followed by Qatar.

In terms of natural gas, the region consumed an estimated 404.6bn cubic meters (bcm) in 2009, with demand of 542.1bcm targeted for 2014, representing 34.0% growth. Estimated production of 411.9bcm in 2009 should reach 655.4bcm in 2014 (+59.1%), which implies net exports rising to 113.0bcm by the end of the period. In 2009, Oman consumed an estimated 3.21% of the regions gas, with its market share forecast at 3.13% by 2014. It contributed an estimated 6.56% to 2009 regional gas production, and by 2014 will account for 5.34% of supply.

Oman's real GDP is assumed by BMI to have risen by 1.7% in 2009, compared with 13.0% growth in 2008. We are assuming average annual growth of 2.7% in 2010-2014. We expect oil demand to rise from an estimated 64,000b/d in 2009 to 82,000b/d in 2014. Partly state-owned Petroleum Development Oman (PDO) accounts for more than 90% of the oil and gas produced in the country but relies on international oil companies (IOCs) to maintain volumes. Our estimates assume 785,000b/d of 2009 production, with output peaking at an average 835,000b/d in 2010, before volumes sink to 730,000b/d by the end of the forecast period. Gas production should reach 35.0bcm by 2014, up from an estimated 27.0bcm in 2009. Consumption is expected to rise from an estimated 13.0bcm to 17.0bcm by the end of the forecast period, allowing exports of 18.0bcm. (R&M 10.05)

11.7 EGYPT: Egypt Retail Sales to Grow to $141.66 Billion by 2014

Research and Markets (http://www.researchandmarkets.com) "Egypt Retail Report Q2 2010" predicts that the country's retail sales will grow from $76.40bn in 2009 to $141.66bn by 2014. Key factors behind the forecast growth in Egypt's retail sales are an extremely large and youthful population, the emergence of a more affluent middle class, a vibrant tourism industry and the growing acceptance of modern retail concepts.

Egypt's nominal GDP was $189.80bn in 2009, with growth set to slow further, from 4.7% in 2009 to 3.5% in 2010, as the economy struggles to regain its pre-crisis vigor. Average annual GDP growth of 4.7% is forecast by BMI between 2009 and 2014. With the population increasing from 78 million in 2009 to an estimated 84 million by the end of the forecast period, GDP per capita is predicted to rise by 70.5%, reaching $4,163.

Egypt's substantial population makes it the largest market in the Arab world, with the population of the Cairo area alone over 15 million people in 2008. Alexandria is also a large city, with a population of more than 4million.

In 2005, 63.3% of the Egyptian population was described by the UN as economically active, with 36.3% in the 20 - 44 age range crucial for retail sales. By 2010, 65.1% of the population is expected to be active, while the proportion of those in the 20 - 44 age band is forecast to reach 37.4%.

Increasing urbanization is also contributing to growth in the retail sector. In 2005, 42.3% of the population was classified by the UN as urban, and this is forecast to increase to 43.2% in 2010. The country's retail market also benefits from high tourist spending, with official data showing that foreign tourist arrivals totaled almost 12.8 million in 2008, a 19% year-on-year (y-o-y) increase. Despite a 5.5% drop in tourist arrivals in the first nine months of 2009, and a 6.4% drop in tourism revenue, Egypt has an enduring historical appeal that should sustain its competitiveness compared with other holiday destinations. Although BMI expects the tourist market to remain subdued over the next two years, we estimate that visitor numbers will increase further, to nearly 18 million, by the end of the forecast period.

Retail sub-sectors that are predicted to show strong growth over the forecast period include over the counter (OTC) pharmaceuticals, with sales expected to more than double, from $0.42bn in 2009 to $0.84bn by 2014. Automotive sales are forecast to rise by more than 166%, from $7.87bn in 2009 to $20.96bn by 2014, while sales of consumer electronics are predicted to increase from $2.86bn in 2009 to $4.93bn, a rise of more than 72%. (R&M 30.04)

11.8 LIBYA: Oil and Gas Report for 2010’s Second Quarter

Research and Markets’ (http://www.researchandmarkets.com) "Libya Oil and Gas Report Q2 2010" forecasts that the country will account for 7.74% of African regional oil demand by 2014, while providing 16.07% of supply. African regional oil use of 2.93mn barrels per day (b/d) in 2001 rose to an estimated 3.57mn b/d in 2009. It should average 3.63mn b/d in 2010 and then rise to around 4.08mn b/d by 2014. Regional oil production was 7.77mn b/d in 2001, and in 2009 averaged an estimated 9.64mn b/d. It is set to rise to 11.83mn b/d by 2014. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 4.83mn b/d. This total had risen to an estimated 6.07mn b/d in 2009 and is forecast to reach 7.75mn b/d by 2014.

In terms of natural gas, in 2009 the region consumed an estimated 123bn cubic meters (bcm), with demand of 194bcm targeted for 2014. Production of an estimated 248bcm in 2009 should reach 385bcm in 2014, which implies net exports rising from 125bcm in 2009 to 191bcm by the end of the period. In 2009, Libya consumed an estimated 5.44% of the regions gas, with its market share forecast at 4.08% by 2014. It contributed 7.27% to estimated 2009 regional gas production and by 2014 will account for 9.09% of supply.

Libyan real GDP is assumed by BMI to have fallen by 2.0% in 2009, compared with 6.1% growth in 2008. We are assuming average annual growth of 6.0% in 2010-2014. We expect oil demand to rise from an estimated 268,000b/d in 2009 to 320,000b/d in 2014. State-owned National Oil Corporation (NOC) accounts for some 40% of oil production and all gas production, but it has a growing number of international oil company (IOC) partners contributing to a forecast rise in oil production from an estimated 1.69mn b/d in 2009 to 1.90mn b/d by 2014. The state itself has far more ambitious volume goals that may be frustrated by OPEC quota policy. Gas production should reach 35.0bcm by 2014, up from an estimated 18.0bcm in 2009. Consumption is expected to rise from around 6.7bcm to 7.9bcm by the end of the forecast period, allowing exports of 27.1bcm.

Between 2009 and 2019, we are forecasting an increase in Libyan oil and gas liquids production of 47.9%, with volumes rising steadily to 2.50mn b/d by the end of the 10-year forecast period. Oil consumption between 2009 and 2019 is set to increase by 42.4%, with growth slowing to an assumed 4.0% per annum towards the end of the period and the country using 390,000b/d by 2019. Gas production is expected to rise to 55bcm by the end of the period. With demand rising by 43.8% between 2009 and 2019, there should be export potential increasing to around 45bcm, via pipeline and in the form of LNG. (R&M 10.05)

11.9 YEMEN: Riyal on the rocks?

The Economist Intelligence Unit reported that in a telling reflection of Yemen's worsening economic and political plight, the governor of the Central Bank of Yemen (CBY) since 1997, Ahmed Abdel-Rahman al-Samaawi, was dismissed on 21 April. His dismissal comes in the wake of growing signs that the CBY is losing control of the Yemeni currency, as the riyal's depreciation has accelerated since the start of the year.

Historically, the CBY has restrained the pace of Yemeni riyal depreciation, allowing it to decline by an average of around 3.5% against the US dollar over most of the last decade. However, having stabilized at around YR200:US$1 between 2008 and mid-2009, the currency has begun to slip, reaching YR207:US$1 by the end of the year. Although the CBY has since December stopped publishing monthly economic updates, according to its daily exchange rate newsletter the rate was around YR225:US$1 by mid-April.

Panicky

In response to the declining currency, the CBY's actions have become increasingly panicky. In February the then governor, Mr Samaawi, sought to discourage the country's commercial banks from transferring their customers' riyal deposits into dollars, by threatening "procedures against the violating banks". However, with the local currency continuing to decline, in late March the CBY sought to support by the riyal by hiking the minimum deposit rate twice in the space of three days, from 12% to 20%. Although the simultaneous injection of some $116m in the exchange market at the end of the month offered a temporary respite, the riyal's weakening has since resumed.

Households exposed

Yemeni policymakers' fears surrounding the increasingly frail riyal are both economic and political. On the former front, Yemen is heavily reliant on imports to meet the bulk of its basic needs (including foodstuffs), which means that any weakening of the riyal rapidly affects the population's cost of living - a situation hardly helped by the decision of the government in April to raise import tariffs on 71 basic commodities. In a country where one-third of the population are estimated to be "food insecure", and almost 12% "severely food insecure" - a term used to describe households that spend up to 30% of their income on bread alone - such shifts in prices obviously have a serious impact.

It is this wide-scale vulnerability that lies behind the CBY's previous determination to protect the value of the riyal; however, unfortunately for it and the population as a whole, this policy has become increasingly unsustainable. The CBY has already spent some $847m this year shielding the riyal, compared with $1.02b over the whole of 2009, which in turn comes on the back of sharp falls in its foreign-exchange reserves during 2009 (by the end of the year they were more than 20% below their peak of October 2008). With oil reserves depleting and production falling, foreign-exchange reserves are only likely to diminish further in the coming years, although the coming on stream of a second liquefied natural gas (LNG) train should offer some respite.

Combustible

Unrest associated with rising living costs will only add to the combustible political scene. Protests across the south are becoming increasingly bloody, and the ceasefire in the northern Saada region, between the government and Zaydi Shia rebels, is looking shaky. The riyal crisis is another element in this unstable mixture. Already a series of well-attended demonstrations took place in the capital, Sanaa, and elsewhere last week to protest against rising prices, and the General Federation of Workers’ Trade Unions (GFWTU) has threatened to go on strike if public-sector wages are not increased - an unpalatable demand for the government given that it is confronted by a fiscal deficit that is estimated to have widened to over 10% of GDP last year.

Too late to float

At the start of 2007 the IMF advised Yemen that, in light of its declining oil reserves, it should adopt a "softly managed" float to allow the riyal to reach a more appropriate exchange rate. At the time, such an option may have been realistic, given rising oil prices (and thus Yemeni oil export receipts) at the time. However, the risk is growing that Yemen will instead witness an uncontrolled currency collapse, with the CBY, the government, and the population at large reduced to hapless bystanders. (EIU 23.04)

11.10 EGYPT: Reducing Automobile Tariffs

The Egypt automotive industry has staged a comeback in the first months of 2010, following disappointing sales figures in 2009. According to the Oxford Business group, this strong performance appears to dispel the worry that Egypt's reduction of tariffs in line with free-trade agreements could push out local manufacturers.

In March, GB Auto, Egypt's largest automobile assembler with a 30% market share, posted a net income of €12.12m for Q4/09, a more than six-fold annual increase from €1.63m. GB Auto's CEO, Raouf Ghabbou, told international press that his company's recovery began in third-quarter 2009.

On the back of these strong results, the company announced it would soon begin producing buses and trailers for the Middle East and Africa. "We will start exporting from the second quarter of this year," Ghabbou said. Most neighboring countries lack developed auto industries, and Egypt has the competitive advantage over European and Asian manufacturers in its low-cost production and proximity. Iraq is already receiving GB Auto vehicles as of February, and the company has said it expects to send 36,000 units this year.

The Automotive Marketing Information Council reported in March that Egypt's January 2010 automobile sales were up 63% year-on-year, from 10,765 to 17,551 units. The growth was led by passenger car sales, which were up 96.4% from 7105 to 13,951 units.

The spike in car sales can be attributed to rising consumer confidence as the global economic crisis appears to be in remission, and World Trade Organization (WTO) agreements coming to play in 2010 are expected to generate further growth. A signatory to the WTO's General Agreement on Tariffs and Trade (GATT), Egypt began phasing out tariffs in 2004, which generated a huge boost in auto sales. The aim is to eliminate them by 2019, and a new Egypt-EU trade agreement has gone into effect this year, targeting the reduction of tariffs on European imports. "Cars imported to Egypt from Europe will see a 10% decrease from the current Customs rate starting in 2010," Ali Tawfik, the chairman of the Egyptian Auto Feeders Association, told local press in August 2009.

Khaled Youssef, the head of the automotive division at Egyptian International Motors, told OBG, "The major shift in market shares will not begin to happen until 2011-12, as the tariff reduction increases each year." Similar trade agreements with South Korea and Japan, which make up the bulk Egyptian auto imports, are also expected.

While the GATT will help Egypt to become better integrated into the global economy, it also means local manufacturers must bring the Egyptian auto industry up to international standards fast, or risk extinction. "The reduction in customs tariffs on car imports will exert considerable pressure on local manufacturers, as the tariffs were the sole reason why establishment in the Egyptian market was seen as an attractive endeavor by foreign assemblers," said Youssef.

The Agadir Agreement between Egypt, Morocco, Tunisia and Jordan has also relaxed trade barriers. Coming into force in 2007, the pact was designed to create a regional free trade area. However, according to local press, the deal has not resulted in much lower prices for cars in Egypt because few cars qualify as imports as they are partially assembled in Egypt. For example, Renault cars, some of the most popular on the Egyptian market, are imported from Morocco but do not qualify for a tariff reduction despite having 40% Moroccan inputs.

The market will change as more vehicles start being imported tariff-free into Egypt, but local manufacturers are in a strong position as Egypt is one of the fastest-growing markets in Africa: in January 2010, Business Monitor International estimated that retail sales will increase from €57.3bn in 2009 to €106.3bn in 2014, due mostly to population growth, which is projected to grow from 78m to 84m in the same period. With car demand on a steep ascent, there is room for both domestic auto manufacturing and imports in the medium term. (OBG 30.04)

11.11 MOROCCO: The USFP and the Moroccan Monarchy: the Power of Patronage

Maati Monjib notes in the Carnegie Arab Reform Bulletin that in an April 21 letter published in local newspapers, three of the top leaders of the Socialist Union of Popular Forces (USFP) informed party leader Abdelwahed Radi that they were freezing their membership in the political bureau until the next party congress was held. One of the three was Ali Bouabid, the forty-something son of USFP founder Abderrahim Bouabid, who represents a youthful faction within the party that believes that the policy of unconditionally backing the monarchy has stalled democratic reforms. The three were upset at Radi’s statement, upon his election as speaker of parliament’s lower house, which constitutional reform was in the hands of the king alone. They argued that Radi was renouncing one of the most important decisions of the last USFP party congress, namely to seek "political and constitutional reform to extricate the country from the crisis of its struggling democracy."

This controversy within the USFP is emblematic of problems inside other political parties as well, which struggle with how to pursue their principles in light of Morocco’s patronage based system and the centripetal force of the monarchy. Changes inside the USFP - which has participated in every Moroccan government since 1998 - over the last decade are also at the heart of the current problems.

Paying a Heavy Price to Be Speaker

In the first round of voting for the position of parliamentary speaker in April, Abdelwahed Radi did not receive an absolute majority, although he was the only nominee from the pro-government ruling coalition. The reason behind this perplexing failure is that the monarchy completely controls the workings of Moroccan politics, including in the parliament. The Party of Authenticity and Modernity (PAM), founded less than two years ago by Fouad El Himma (a close friend and classmate of King Mohammed VI and his former deputy minister of interior), claimed 55 members of the House of Representatives practically overnight. PAM thereby formed the largest bloc in parliament, although its founders among them had won only three seats in the 2007 legislative elections. Dozens of parliamentarians left their own parties to join the PAM, to the extent that the palace itself intervened to stop the situation from getting out of control, as wholesale defections exposed the corruption of the entire political process. Radi became speaker only with the PAM’s tacit support. The price he paid was abandoning the USFP’s constitutional reform platform, which sought to check the king’s sweeping powers while strengthening the government and parliament.

Driss Lachgar Syndrome

Radi’s surrender of principles in order to become speaker - after having promised that, if elected leader, he would devote himself entirely to party affairs - came on the heels of another similar move by high-ranking USFP leader Driss Lachgar. Lachgar’s decision to join the government as minister for parliamentary relations surprised the public and raised suspicions about his motives. Since the 2007 elections, Lachgar had been pressing constantly for constitutional reform and opposing the pro-monarchy PAM. He had also been arguing that the left should find common ground with the Islamist Party of Justice and Development in order to shift the balance of power towards a true democratic transformation that would give elected institutions a central role in setting Morocco’s course.

Lachgar’s about-face, announced after closed-door negotiations with PAM leaders, was interpreted by most independent media as evidence of deep-rooted corruption and created suspicion that many of those criticizing the palace’s authoritarianism were only doing so in order to cut deals later, renouncing their talk of reform once they were in power.

From Party of Principle to Patronage Network

Since joining the government and failing to realizing its stated goals of democratizing Moroccan institutions and redistributing wealth, the USFP has seen its traditional support base in the major cities dwindle. The USFP has strayed from its progressive, modernist roots and is now relying more and more on conservative rural elites, who have come to control many of the party's decision-making positions. The relationship between the USFP leadership and support base is becoming one of patronage more than of shared ideological beliefs. This transformation within the USFP has weakened its hand in bargaining with the monarchy, a situation that applies to other Moroccan political parties as well. In the words of Mohamed Grine, a leader of the Progress and Socialism Party, in a recent interview with the local paper al-Massae’, "the way the leftist parties have catered to the notables has been politically suicidal."

Maati Monjib is a professor and researcher at l’Institut des Etudes Africaines, at Mohammed V University in Rabat. Paul Wulfsberg translated this article from Arabic. (Carnegie ARB 04.05)

11.12 GREECE: Europe & IMF Agree €110 Billion Financing Plan With Greece

On 2 May, Greece reached agreement with the International Monetary Fund (IMF), the European Commission and the European Central Bank (ECB) on a focused program to stabilize its economy, become more competitive and restore market confidence with the support of a €110 billion (about $145 billion) financing package.

Negotiators finalized details of the package, involving budget cuts, a freeze in wages and pensions for three years, and tax increases to address Greece's fiscal and debt problems, along with deep reforms designed to strengthen Greece’s competitiveness and revive stalled economic growth.

In Athens, Greek prime minister, George Papandreou, announced the unprecedented deal, meant to shore up Greek finances with decisive upfront measures and prevent a crisis of confidence from undermining the Greek economy and spreading to other members of the eurozone and elsewhere. The measures, representing a break from the past, aim to bring Greece’s public finances under control and modernize the Greek economy.

In a joint statement, European Union Economic and Monetary Affairs Commissioner Olli Rehn and IMF Managing Director Dominique Strauss-Kahn said they recognized the sacrifices that will have to be made by the Greek people, but they were necessary to rebuild the Greek economy. "We believe that the program is the right thing to do to put the economy back on track. Importantly, the authorities have also designed their program with fairness in mind," they added.

Improving the business climate

In a separate statement, Strauss-Kahn said that though the initial implementation period would be difficult. "We are confident that the economy will emerge more dynamic and robust from this crisis - and able to deliver the growth, jobs and prosperity that the country needs for the future."

Steps by the government include strengthening income and labor market policies; better managing and investing in state enterprises, and improving the business environment.

Reforms to fight waste and corruption - eliminating non-transparent procurement practices, for example, are also being undertaken, along with measures to clamp down on tax evasion and step up prosecution of the worst offenders.

Subject to reviews

The eurozone will contribute roughly two-thirds of the total financial assistance and the 186-member IMF one-third. The IMF Executive Board is expected to review the package, agreed at mission level, under its fast-track procedures. It is expected to go to the Board for approval within the week.

IMF support will be provided under a three-year €30 billion (about $40 billion) Stand-By Arrangement (SBA) - the IMF’s standard lending instrument. In addition, euro area members have pledged a total of €80 billion (about $105 billion) in bilateral loans to support Greece’s effort to get its economy back on track. Implementation of the program will be monitored by the IMF through quarterly reviews.

Greece’s defining moment

"This is a defining moment for Greece," said Poul Thomsen, who heads the IMF negotiating mission to Athens. "The global economic crisis exposed Greece’s weak fiscal position. Revenues have declined significantly, while spending, especially on wages and entitlements has risen sharply.

"What the government has committed to is a tough, front-loaded program that will correct things for the future, although it will take time. Indeed, it will be a multi-year effort," Thomsen explained. "The authorities have already begun fiscal consolidation equivalent to 5% of GDP and further legislative action is expected this week. There is also an emphasis on fairness, with measures to protect the most vulnerable. The authorities are asking the Greek people to share the burden fairly across all levels of society," he added.

With Greece’s deteriorating fiscal position came downgrades of government bonds by rating agencies, putting pressure on financial agencies. Investors started backing out of Greek bonds, driving up their yields. Policymakers also feared a potential spread of the crisis to other eurozone countries. The IMF’s "focused conditionality" aims to tackle the twin issues of debt and competitiveness.

Twin challenges

Greece faces a dual challenge. It has a severe fiscal problem with deficits and public debt that are too high; and it has a competitiveness problem. Both need to be addressed for Greece to be placed on a path of recovery and growth.

First, the government’s finances must be sustainable. That requires reducing the fiscal deficit and placing the debt-to-GDP ratio on a downward trajectory. Since wages and social benefits constitute 75% of total (non-interest) public spending, public wage and pension bills - which have grown dramatically in recent years - have to be reduced. There is hardly any other room for maneuver in terms of fiscal consolidation.

Second, the economy needs to be more competitive. This means pro-growth policies and reforms to modernize the economy and open up opportunities for all. It also means that costs must be controlled and inflation reduced so that Greece can regain price competitiveness.

Rigorous fiscal adjustment

With the budget deficit at 13.6% of GDP and public debt at 115% in 2009, adjustment is a matter of extreme urgency to avoid the debt spiraling further out of control. Accordingly, the Greek government plans to implement rigorous fiscal measures, far-reaching structural policies and financial sector reforms. Key elements of the reform package are:

• Fiscal policies. Fiscal consolidation - on top of adjustment already under way - will total 11% of GDP over three years, with the adjustment designed to get the general government deficit under the 3% level by 2014 (compared with 13.6% in 2009).
• Government spending. Spending measures will yield savings of 5% of GDP through 2013. Pensions and wages will be reduced and frozen for three years, with payment of Christmas, Easter, and summer bonuses workers abolished, but with protection for the lowest-paid.
• Government revenues. Revenues measures will yield 4% of GDP through 2013 by raising value-added tax, and taxes on luxury items, and tobacco and alcohol, among other items.
• Revenue administration and expenditure control. The Greek government will strengthen its tax collection and raise contributions from those who have not carried a fair share of the tax burden. It will safeguard revenue from the largest tax payers. It will also strengthen budget controls. The total revenue gains and expenditure savings from these structural reforms are expected to gradually total 1.8% of GDP during the program period.
• Financial stability. A Financial Stability Fund, funded from the external financing package, is being set up to ensure a sound level of bank equity.
• Entitlement programs. Government entitlement programs will be curtailed; selected social security benefits will be cut while maintaining benefits for the most vulnerable.
• Pension reform. Comprehensive pension reform is proposed, including by curtailing provisions for early retirement.
• Structural policies. Government to modernize public administration, strengthen labor markets and income policies, improve the business environment, and divest state enterprises.
• Military spending. The plan envisages a significant reduction in military expenditure during the period.

"The fiscal adjustment is large," said Thomsen, "but given the starting point, where there is significant space to trim expenditure and spread the tax burden, the measures are feasible and hence we see them as being durable. The alternative would be much worse for the Greek people and the Greek leaders know that." (IMF02.05)

11.13 GREECE: IMF Approves €30 Billion Loan for Greece on Fast Track

On 9 May, the International Monetary Fund (IMF) approved a €30 billion three-year loan for Greece as part of a joint European Union-IMF €110 billion financing package to help the country ride out its debt crisis, revive growth and modernize the economy. The program approved by the IMF’s Board makes about €5.5 billion immediately available to Greece from the Fund as part of joint financing with the European Union, for a combined €20.0 billion in immediate financial support.

In 2010, total IMF financing will amount to about €10 billion and will be partnered with about €30.0 billion committed by the EU. The joint financing means that Greece will not have to tap international financial markets until 2012, providing a breathing space for Greece to get its economy back on track.

The IMF’s Executive Board met to approve the front-loaded package, under which enabling parliamentary measures have been approved up-front and financial support is fast-tracked, as European finance ministers worked in Brussels on measures to prevent fallout from the Greek crisis spreading to other parts of the European Union, and vowed to defend the euro.

Exceptional Access

The Stand-By Arrangement, which is part of a joint package of financing with the European Union amounting to €110 billion (about $145 billion) over three years, entails exceptional access to IMF resources, amounting to more than 3,200% of Greece’s quota, and was approved under the Fund's Emergency Financing Mechanism procedures.

Addressing the crisis

The Greek government, which on 6 May secured parliamentary approval for its program, has designed an ambitious policy package to address the economic crisis facing the nation. Greece faces a dual challenge. It has a severe fiscal problem with deficits and public debt that are too high; and it has a competitiveness problem. Both need to be addressed for Greece to be placed on a path of recovery and growth.

First, the government’s finances need to be sustainable. That requires reducing the fiscal deficit and placing the debt-to-GDP ratio on a downward trajectory. Since wages and social benefits constitute 75% of total government expenditure, this means that the public wage and pension bills have to be reduced. There is hardly any other room for maneuver in terms of fiscal consolidation.

Second, the economy needs to be more competitive. This means pro-growth policies and reforms to modernize the economy and open up opportunities for all. It also means that inflation be reduced below the euro area average, including by keeping wages and labor costs flat, so that Greece can regain price competitiveness.

Why not restructure debt?

It is felt that Greece should not opt for restructuring its debt, as debt restructuring would create more problems than it could potentially solve, with a default making things much worse.

• Restructuring debt would not help Greece’s capacity to grow. The type of fiscal and structural reforms being put in place under the Government’s program are designed to do that – to bring down costs, to make the labor market more flexible and to improve the business and investment climate.
• The web of economic and political inter-linkages - including that Greek bonds are held by a wide variety of private investors and public entities - severely complicates alternatives to the program the government has put in place. Any perceived positive near term effects of a debt restructuring need to be weighed against contagion effects.
• Most of the adjustment in Greece is needed to eliminate its large primary deficit (the deficit net of interest payments). This is the main issue for Greece, not the level of the debt.

But prudent debt management is part of the government’s strategy and it is updating its tools to ensure that risk is adequately managed.

Financial stability and recovery

The program aims to safeguard Greece’s financial sector stability. As the banking system goes through a period of deflation, which is expected to impact profitability and bank balance sheets, the safety net for dealing with solvency pressures will be expanded by establishing a Financial Stability Fund (FSF).

Real GDP growth is expected to contract sharply in 2010–2011, and recover thereafter with unemployment peaking at nearly 15% of GDP by 2012. The frontloaded fiscal adjustment in 2010-11 will suppress domestic demand in the short run; but from 2012 onward, improved market confidence, a return to credit markets, and comprehensive structural reforms, are expected to lead to a rebound in growth. Despite the difficulty in implementing the measures, two recent opinion polls show majority support for the government’s program, which is designed with fairness in mind.

Inflation is expected to remain below the euro average. The needed adjustment in prices is expected to come from domestic demand tightening, both through fiscal adjustment and efforts to moderate public wages and pensions, and other costs in the economy. Due to their demonstration effects, private sector wages are also expected to moderate. This will help restore price competitiveness. (IMF 09.05)

11.14 GREECE: Moody's Reiterates Stance & Maintains Review for Downgrade

On 29 April, Moody's Investors Service (http://www.moodys.com) announced that it expects to complete its review of Greece's A3 sovereign bond rating shortly after the details of the euro area/IMF program are unveiled. Moody's has consistently maintained that Greece's short-term liquidity and restructuring risks are negligible given the depth of international commitment to maintaining regional financial stability. Moody's believes that the appropriate repositioning of Greece's rating should therefore be based on the country's medium-term credit fundamentals.

Moody's has previously indicated that a multi-notch downgrade is likely, and that the specific magnitude of the downgrade will depend on the level of ambition of the multi-year economic and fiscal program; the likelihood that Greece adheres to it consistently; and the levels at which debt will stabilize/reverse (as compared to peers). The details of the euro area/IMF package will provide crucial credit information covering: economic and fiscal assumptions; mechanisms of support for the banking system; adjustment measures to be implemented over several years under the program; and the total amount of financing, which will determine how long the Greek government will be sheltered from hostile market conditions.

Based on the balance between the size and content of the package, Moody's will assess (1) whether public debt metrics can be stabilized credibly through a fiscal effort that is both decisive and not socially disruptive to the extent of rendering it unachievable, and (2) at what level stabilization will take place. The very high projected level of public debt in Greece is neither unsustainable nor unbearable. The service of the debt consumes approximately 14% of government revenues, compared with 20%-30% in the 1990s. However, stabilizing the debt will require a tightening of the primary balance by approximately 12% of GDP in the coming years, which will require considerable commitment and sacrifice by the Greek government and population.

Should, however, the mobilization of external support continue to be fractious and/or should the Greek government and people fail to fully deliver on and acquiesce to ambitious policy adjustments, Moody's indicates that this would inflict significant damage to Greece's creditworthiness.

Moody's previous rating action with respect to the government of Greece was implemented on 22 April 2010, when its long-term debt ratings were downgraded to A3 from A2 and placed on review for possible further downgrade. The government's P-1 short-term rating was also placed on review for possible downgrade. (Moody's 29.04)

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