TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Netanyahu Looks to Drastic Housing Measures
1.2 Israeli Cabinet Approves New High-Speed Internet Firm
1.3 Bank of Israel Says Netanyahu's Tax Cuts Boosted GDP
1.4 Discussions Concerning Leviathan Exports Via Cyprus
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 Massachusetts Governor on Innovation Economy Mission to Israel
2.2 Israel Needs 6,000-9,000 New Hotel Rooms By 2015
2.3 RST Granted Israeli Patent for Its Demron Multi-Hazard Protection against CBRN Threats
2.4 First Jezreel Valley Railway Tender Underway
2.5 China Wants Israel as Technology Partner
2.6 Cima NanoTech Raises $15 Million
2.7 Energtek Completes Evaluation of Gas Reservoirs in Licensed Block
2.8 Palestinian Technology Venture Fund MEVCF Launches Operations
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Platts Survey: OPEC Pumps 29.8 Million Barrels of Oil Per Day in February
3.2 Lusio Ships 4,750 LED High Bay Fixtures to Qatar National Convention Centre
3.3 Emirates Airline Now the World's Third Largest Carrier
3.4 UAE Auto Sales Seen Rebounding With 8% Growth
3.5 Intel Acquires Egypt-based SySDSoft
3.6 Turkey Chooses Taggant Technology for Museum Entrance Security
3.7 Ex-Im Bank Backs Sale of GE Gas Turbine Generator Set to Fast-Growing Turkish Market
3.8 Cold Stone Creamery Expands into Cyprus in 2011
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Orbotech Announces the Receipt of First Order for Photovoltaic Systems
4.2 SodaStream Announces the Bio Bottle - a Biodegradable Technology
4.3 Sunflower To Build 50 Small Solar Facilities
4.4 Egypt Investing $34 Billion in Electricity Sector
4.5 Global Immune Technologies Says Greeks to Distribute RenON Hybrid Systems
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Euromoney Lowers Lebanon's Country-Risk Ranking
5.2 Jordan's Annual Inflation Slows Further To 3.8% In February 2011
5.3 Jordan Telecommunications Report for First Quarter of 2011
5.4 UAE to Subsidize Premium Rice & Bread Items at Union Co-Op Effective April 2011
5.5 US Named As Top Trade Partner with Abu Dhabi in 2010
5.6 Oman Ratings Placed On CreditWatch Negative on Possible Economic & Fiscal Pressures
5.7 Saudi Arabia to be 6th Richest Economy by 2050
5.8 Saudi Arabia Freight Transport Report Q1 2011
5.9 S&P Affirms Egypt's Local & Foreign Currency Ratings; Outlook Negative
5.10 Egypt's Minister of Petroleum Sets Priorities Going Forward
5.11 Egypt's Foreign Reserves Plunge $1.7 Billion in February
5.12 Egypt's Suez Canal Revenues Rise 16.3% to $388.7 million in February
5.13 Egyptian Unemployment Rate Reaches 8.9% By End-2010
5.14 Strong Social Stability & Unanimity Over Monarchy Make Morocco's Exception
5.15 Morocco to See Lower Than Forecast GDP Growth in 2011
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey Information Technology Report Q1 2011
6.2 Cyprus GDP Records Increase for Fourth Consecutive Quarter
6.3 Cyprus Inflation Holds At 2.8% in February
6.4 Cyprus Unemployment Trends Upwards Again In February
6.5 Eurozone Leaders Agree To Better Loan Terms for Greece
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Israel & World Jewry Celebrate Purim Holiday
7.2 The Kinneret Passes the Red Line
7.3 First Bedouin Woman PhD is 'Insider-Outsider' in 3 Cultures
7.4 Last Member of Israel's First Knesset Dies
*REGIONAL:
7.5 For Turkish Women the Killing Never Stops
7.6 Oman Sultan Grants Parliament Legislative Powers
7.7 Saudi Population to Reach 30 Million in 2017, Expat Growth to Slow
7.8 Tunisia Unveils Political Roadmap & New Cabinet
7.9 Morocco's King Vows Sweeping Reforms in Speech
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8: ISRAEL LIFE SCIENCE NEWS
8.1 InspireMD Boosts MGuard Production Capacity
8.2 Compugen Positive Animal Model Results for Novel Peptide to Block Protein Interaction
8.3 Pontifax Invests One Million Dollars in Stimatix GI
8.4 Yissum & Hadasit License Regenerative Polymeric Membrane Implants to RegeneCure
8.5 Mazor Robotics' SpineAssist Purchased by University of California, Irvine Medical Center
8.6 Rosetta Green Completes Its Initial Public Offering on the Tel Aviv Stock Exchange
8.7 Kamada Gets Israeli Patent for Ultrapure Transferrin for Pharmaceutical Compositions
8.8 NeuroDerm Phase 2 Study of ND0611 Dermal Patch for Parkinson's Disease
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Agent Vi Defines the Future of Video Analytics with New Versions
9.2 CimatronE New Version on Show at INTEC
9.3 Elbit Systems' Awarded $12.7 Million Order for Integrated Helmet System
9.4 Nova Receives $12 Million Orders From 3 Major Foundries
9.5 Mellanox Delivers Industry's Highest Performing, End-to-End Ethernet Connectivity Solution
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10: ISRAEL ECONOMIC STATISTICS
10.1 CPI Rises 0.3% in February - Above Expectations
10.2 Israel's High-Tech Exports Rising
10.3 Israel's Average Salary Up 5.1%
10.4 Israel Sees Significant Rise in Number of Lawyers
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11: IN DEPTH
11.1 ISRAEL: IVC- KPMG Survey: Israeli Venture Capital Fund Raising - 2010 Summary
11.2 ARAB MIDDLE EAST: Fitch Says Political Risk Continues Pressuring Ratings
11.3 ARAB MIDDLE EAST: Possible Scenarios of Unrest on Travel & Tourism
11.4 JORDAN: Training Up
11.5 IRAQ: Iraq's Petroleum Impasse
11.6 ARABIAN GULF: GCC Countries Invest Abroad to Secure Food at Home
11.7 KUWAIT: Health in Focus
11.8 BAHRAIN: Fitch Downgrades Bahrain to 'A-'; Outlook Negative Ratings
11.9 QATAR: IMF 2010 Article IV Consultation Executive Summary
11.10 UAE: Conclusion of the 2011 Article IV Consultation Mission
11.11 UAE: Abu Dhabi Cleared for Take-Off
11.12 OMAN: Retail Opens Up
11.13 OMAN: On Track
11.14 SAUDI ARABIA: Registers Set To Ring
11.15 YEMEN: Yemen's Road to Economic Turmoil
11.16 LIBYA: Ratings Lowered to 'BB/B' and Suspended by S&P
11.17 TUNISIA: Fitch Downgrades Tunisia to 'BBB-'; Negative Outlook Ratings
11.18 ALGERIA: On the Right Track
11.19 GREECE: Moody's Downgrades Greece to B1 from Ba1, Negative Outlook
11.20 GREECE: IMF Completes Third Review Under Stand-By Arrangement
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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Netanyahu Looks to Drastic Housing Measures
On 13 March, Prime Minister Netanyahu submitted to the cabinet a new plan aimed at dealing with the housing shortage. The plan includes the construction of thousands of housing units nationwide over the next 18 months. Under Netanyahu's plan, national housing commissions will be established to bypass the bureaucracy of local and regional planning and building commissions, and will concentrate all decisions as a one-stop-shop. The new commissions will be set up for 18-month periods. They are intended to deal with the housing shortage, which currently stands at 100,000 apartments. The reform was formulated together with Minister of Finance Steinitz and Minister of Housing & Construction Atias. It will apply only to apartments in the housing starts market above a certain height - which has not yet been decided - nationwide, including in-demand areas. Netanyahu believes that when the 18-month period ends, legislation to reform the Israel Land Administration, which is currently stuck in the Knesset Internal Affairs and Environment Committee, will have been completed. (Globes 07.03)
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1.2 Israeli Cabinet Approves New High-Speed Internet Firm
On 6 March, Israel's government approved a plan to set up a third high-speed internet infrastructure using state-run Israel Electric Corp's power grid. Under the Communication Ministry's plan, IEC would hold 49% of the new communications company while a private investor would own the remaining 51%, the ministry said in a statement. The network would run in part on fiber optics. Communications Minister Kahlon said that the goal of broadband internet for every home is essential for economic growth and to help the weaker sectors. Consumers in Israel currently have two options for broadband Internet at home – cable through HOT and via phone lines from telecoms sector leader Bezeq. (Ynet 09.03)
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1.3 Bank of Israel Says Netanyahu's Tax Cuts Boosted GDP
The Bank of Israel's 2010 Annual Report said the reduction in direct taxes on labor since 2004 has facilitated the growth in GDP per capita without an accompanying increase in gross wages and in parallel with an increase in net wages. The Bank added that, during the past decade, there has been a sharp drop in the rate of increase in real gross wages, from 1.8% annually during the 1990s to 0.02% in next decade. One of the possible explanations for the change in the trend of the average gross wage is the reduction in the tax rate on wages, which made it possible for wages to grow without an increase in cost to the employer.
In 2003, then Finance Minister Netanyahu the government decided on a long-term program to reduce the direct taxation of labor. In 2005, the implementation of the program was in fact accelerated and in 2009 extended until 2016. A good approximation of the average tax rate on wages is the ratio of revenues from the income tax on wages to the total income of employees. Thus, from 1995 until 2000, the average tax rate rose from 29% to 32%, and from 2001 until 2010 declined sharply to 23%. The average real net wage per employee rose 0.7% between 2001 and 2010 which exceeds the average rate of increase in gross wages during that period.
The Bank of Israel concludes, "The reform to lower direct taxes on labor, which was initiated in 2003 and is expected to continue until 2017, has increased the Israeli economy's ability to compete. The reduction in tax rates made it possible for net wages to rise without increasing production costs for the employer and increased the net wages of most of the workers who worked at least 10 months during the year, particular those with higher wages." (Globes 09.03)
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1.4 Discussions Concerning Leviathan Exports Via Cyprus
On 14 March, Prime Minister Netanyahu met in Jerusalem with Cypriot president Christofias. Among the items discussed was the possibility of exporting the natural gas from the Leviathan reserve to Europe, through Cyprus. The Leviathan reserve has about 16 trillion cubic feet of natural gas, twice the amount in Tamar. Since Tamar itself is big enough to supply Israel's natural gas needs for decades, most of the natural gas at Leviathan will be aimed toward export. The two leaders also discussed political issues including the recent turmoil in the region, tourism cooperation and security issues. (Globes 14.03)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 Massachusetts Governor on Innovation Economy Mission to Israel
Governor Deval Patrick, accompanied by a group of state officials and business leaders, visited Israel on the Massachusetts Innovation Economy Partnership Mission 2011. The group explored growth opportunities within the Commonwealth's innovation-based industries – technology, life sciences, clean energy and financial services – and areas of common interest between the state's established and emerging partners in Israel. During the trip, participants took part in roundtables, company visits and meetings with government and business officials with Governor Patrick and the delegation in Tel Aviv, Haifa and Jerusalem. The Massachusetts delegation arrived in Israel on 7 March. Today there are nearly 100 companies with Israeli founders or Israeli-licensed technologies in Massachusetts. In 2009, these companies employed nearly 6,000 people and generated $2.4 billion in direct revenue for the state. Local firms exported over $180 million worth of goods to Israel in 2009 and, at 12.35%, the United States is Israel's largest source of imports. (Various 08.03)
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2.2 Israel Needs 6,000-9,000 New Hotel Rooms By 2015
Research by the Bank of Israel found that the country needs 6,000 - 9,000 new hotel rooms by 2015. The report noted that over the past 10 years, there have been almost no new hotels opened, while the number of hotel rooms in most of the developed countries, and in particular around the Mediterranean, has grown in response to the continuing increases in world tourism. The report outlined the contribution of tourism to the Israeli economy, which contributes to the employment of low-skilled workers and workers in the periphery, populations that are characterized by a relatively low rate of employment.
The value added of tourist services in Israel, including services to Israelis and tourists and flight services, was estimated at about NIS 12 billion in 2007, which represents about 2% of GDP. The industry's labor force is characterized by a high proportion of low-skilled workers and workers from the periphery, which explains the importance of the industry in Israel beyond its contribution to economic growth. The Bank of Israel also said, "Although bed nights constitute only 30% of a tourist's expenditure in Israel, the shortage of hotel room constitutes a barrier to the development of the industry, which provides the tourist with food, transportation, commercial and other services, in addition to accommodation." (Globes08.03)
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2.3 RST Granted Israeli Patent for Its Demron Multi-Hazard Protection against CBRN Threats
Miami, Florida's Radiation Shield Technologies (RST) has been granted an Israeli patent for Demron, the world's first and only fabric that provides total multi-hazard protection against nuclear, biological, chemical, bomb and ballistic threats, infrared radiation and heat stress. Israel Patent No. 167330 recognizes RST's unique technology. The nanotechnology surpasses current NBC suits, which provide limited protection. Unlike other CBRN suits, RST's cool, lightweight, flexible full-body suit is proved to enhance athletic performance and survivability by enabling passive and active heat dissipation while providing unsurpassed chemical, biological, radiological and nuclear (CBRN) protection. Demron's unique characteristics include that it's the only impermeable CBRN fabric that permits heat exchange and enables the wearer to be cooled externally without having to penetrate the suit. In addition to the suit, RST's product line includes ballistic vests and high energy anti-nuclear ballistic blankets. (RST 08.03)
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2.4 First Jezreel Valley Railway Tender Underway
A year after the Israel National Roads Company was given the task of handling construction of the new Jezreel Valley railway line, as part of the Netivei Israel plan, the first tender for the project was published on 7 March. The tender is for the construction of a 6.5-kilometer stretch of the line between Kfar Baruch near Migdal Ha'Emek and Nahal Adashim near Afula. This is the first railway tender that the National Roads Company is responsible for. The value of the tender is lower than the subsequent tenders for the Jezreel Valley railway, which are due to be published later this year. The estimated cost of the Jezreel Valley railway is NIS 4 billion (out of the NIS 27.5 billion budget allotted for the Netivei Israel plan last year). The railway is scheduled to be completed in 2016. The new line will parallel the historic railway line. The Jezreel Valley railway will run 60 kilometers from Haifa to the Sheikh Hussein Bridge over the Jordan River in the Beit She'an Valley. The railway is due to continue to Irbid in Jordan, where it will link with the Jordanian railway system. The Jezreel Valley railway will carry passengers and cargo between western and eastern Israel. The historic Jezreel Valley railway was a branch of the Hejaz railway built by the Ottomans in 1905, linking Haifa with Damascus, crossing the Jordan River at Tzemach. The railway operated until Israel regained independence in 1948 and contributed to the development of Haifa and its environs. (Globes 07.03)
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2.5 China Wants Israel as Technology Partner
Chinese Commerce Minister Chen Deming signed a memorandum of understanding to promote commerce and cooperation between the Israel Export Institute and the Chinese commerce development institute during his recent visit to Israel. The minister's visit and the festive signing ceremony that ensued allowed a glimpse into the backstage collaborations that have been forming between Israeli and Chinese authorities throughout recent years. Addressing an audience in Jerusalem, Deming sent a clear message: China is moving forward and Israel is considered a potential partner that can efficiently cooperate with the regional superpower. The equation is clear – China will bring to the table investment funds and its humongous domestic market and Israel will contribute its knowledge and innovation.
Many initiatives have been geared toward this aim, including the establishment of a green commerce park in China together with Israel; the creation of platforms for the implementation of Israeli technologies in China; collaboration in the fields of water and agriculture; delegation exchanges; seminars; the establishments of mutual high-tech funds and more.
Trade between Israel and China reached some $6.8 billion in 2010 – a 49% increase compared with 2009. Despite the encouraging figures, experts say Israel's export potential is still far from being realized. While China is Israel's second largest trading partner, Israeli exports to China (excluding diamonds) amounted to only 0.13% of the latter's total imports. Tough it is unlikely to match the exporting scope of Japan, India or the United States, Israel can undoubtedly increase its share significantly. One of the channels working toward that end is the joint committee meetings, which is the official reason for the Chinese minister's visit to Israel. The committee marked several successes, namely drafting a financial protocol that regulates bank loans with long term credit for goods heading to China. These meetings have been held since 2000, and enable senior echelons to discuss and resolve commerce issues between the two countries, such as increasing the frequency of flights between Israel and China and promoting tourism to Israel. (Ynet 08.03)
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2.6 Cima NanoTech Raises $15 Million
The Israel Venture Capital Association reports that Cima NanoTech of Caesarea (http://www.cimananotech.com) has raised $15 million in its third financing round from Nikko Antfactory KK, formerly the venture capital arm of Japanese private equity fund Nikko Cordial Securities. In 2006, Cima NanoTech raised capital from Nikko Antfactory, Bridge Capital and Millennium Material Technologies Fund. Cima NanoTech develops nanomaterial-based formulations for transparent conductive coatings in devices such as plasma displays, touch screens and solar cells. The company manipulates materials at the molecular level to make them more effective or more environmentally friendly. (Globes 09.03)
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2.7 Energtek Completes Evaluation of Gas Reservoirs in Licensed Block
Energtek has completed an evaluation of gas reservoirs in the licensed block in Southern Israel. The evaluation was performed following the successful production test, as reported in December 2010, of the NirAm Gas1 well. Based on the analysis of seismic and geophysics data as well as a detailed analysis of the results of the production test, the geological team estimated that the recoverable gas resources (contingent resources) of the reservoir at which the Nir-Am Gas1 was drilled amount to 1.7 BCF (Billion Cubic Feet). In addition, the geological team identified three similar natural gas reservoirs in the Nir-Am block. Prospective gas resources from the identified reservoirs may total as much as 5 BCF. Should these amounts be attainable, they would represent at current market prices tens of millions of dollars. The utilization of Energtek's technologies and know-how would enable the provision of the extracted gas to industrial consumers, significantly increasing the sales value of the extractable gas. In particular, Energtek has already initiated engineering and regulatory activities for a local energy mobile supply project based on the Natural Gas reserves from the Nir-Am Gas1 well. The company has also reported that significant quantities of oil may be present at the Nir-Am block, which is officially licensed to Energtek for oil and gas exploration and exploitation. Energtek develops and applies innovative low-pressure mobile transportation solutions for industrial consumers and fleets of small vehicles. The company is also involved with oil and gas exploration in Israel. (Energtek 09.03)
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2.8 Palestinian Technology Venture Fund MEVCF Launches Operations
MEVCF - The Middle East Venture Capital Fund announced that it has secured $28.7m from leading international companies, foundations and other investors for the first venture fund targeting Palestinian technology companies. The Fund is beginning to evaluate investment opportunities from its office in Ramallah. MEVCF's investors include Cisco, Google, The Soros Economic Development Fund, Skoll Foundation, Jean and Steve Case, and the European Investment Bank, among others. The Fund will be managed by Saed Nashef, a software entrepreneur and industry veteran who recently returned to the region after nearly two decades in the US, and Yadin Kaufmann, a longtime venture capitalist in the US and Israel. The MEVCF fund will invest in startup companies in the internet, mobile and software sectors created by ICT entrepreneurs in Judea and Samaria. Palestinian IT and software exports have grown consistently over the last decade. Several major multinational technology companies including Cisco, HP, Intel and others have begun outsourcing development work to Palestinian software companies, capitalizing on the educated and entrepreneurial population and developed IT infrastructure. (MEVCF 09.03)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Platts Survey: OPEC Pumps 29.8 Million Barrels of Oil Per Day in February
The 12-member Organization of the Petroleum Exporting Countries' (OPEC) crude oil production output jumped to an average 29.8 million barrels per day (b/d) in February, as Saudi Arabia continued to boost production, according to a just-released Platts survey of OPEC and oil industry officials and analysts. This is up 230,000 b/d from an estimated 29.57 million b/d in January. The increase more than offset the drop in Libyan supplies, estimated to have averaged 190,000 b/d over the month, as the deepening conflict hit the North African country's oil production and exports in the final week of February. Excluding Iraq, which does not participate in OPEC output agreements, the 11 members bound by quotas (OPEC-11) pumped an average 27.1 million b/d in February, 190,000 b/d more than January's 26.91 million b/d, the survey showed. Libyan output is estimated to have dropped to around 1.39 million b/d from January's 1.58 million b/d following the withdrawal of foreign oil company staff and consequent production shut-ins. The International Energy Agency estimated that the volume of shut-in production had now reached 1 million b/d.
Saudi Arabia boosted production by 300,000 b/d to 8.7 million b/d, nearly 700,000 b/d more than its assumed OPEC quota. Other increases came from the United Arab Emirates (UAE), Iraq, Iran, Kuwait and Ecuador, while Angolan and Nigerian production dipped by 10,000 b/d and 20,000 b/d respectively. The survey showed that the OPEC-11 exceeded their notional 24.845 million b/d output target by 2.255 million b/d, reducing their level of compliance with the 4.2 million b/d of output cuts agreed in late 2008 to 46.3% from 50.8%. Iraq's 40,000 bpd increase took its production to 2.7 million b/d in February, a new post-2003 high. (Platts 09.03)
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3.2 Lusio Ships 4,750 LED High Bay Fixtures to Qatar National Convention Centre
Overland Park, Kansas' Lusio Solid-State Lighting, a worldwide brand and division of LightWild, announced the delivery of 4,750 high bay LED fixtures to Doha, Qatar, for the Qatar National Convention Centre extension. Scheduled to open later this year, the project will add 850,000 square feet, a significant feat for a convention centre. Lusio lighting was specified by Burns & McDonnell, the Prime Architectural and Engineering firm for the project, and lighting designers Yarnell & Associates and LightWorks. The stringent requirements called for a fixture that could be mounted at 40ft (12m), withstand ceiling temperatures of 115 - 131 degrees F (45-55 degrees C), deliver at least 50 footcandles overall luminance with a 40 degree cutoff, and still meet the centre's strict energy caps. Made in the USA, Lusio fixtures are built with top-quality materials including low glare reflectors, sophisticated heat sinks for superior thermal management, premium LEDs, and robust housings that are comprised of up to 80% recycled aluminum. (Lusio 07.03)
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3.3 Emirates Airline Now the World's Third Largest Carrier
Emirates Airline's growth strategy has just made it the world's third largest carrier by capacity, latest data by Innovata has shown. With 144 aircraft in its fleet, the Dubai-based airline has overtaken US carrier United and is now behind only Delta and American Airlines. The data shows Emirates will produce 16.9 billion available seat kilometers (ASKs) in March 2011, up 9.9% year-on-year, while United's capacity has dropped to just under 16b ASKs. Delta Air Lines and American retain first and second rankings, with 28.4b and 21.8b ASKs. British Airways is ninth in the list. Emirates already has 15 Airbus A380 super jumbos in its fleet, with 75 more to come – plus 53 stretched Boeing 777-300ER aircraft. Other notable movers include Qatar Airways, whose capacity grew more than 20%. (AB 04.03)
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3.4 UAE Auto Sales Seen Rebounding With 8% Growth
The UAE automotive market is predicted to grow by around 8% annually over the next four years, according to a Dubai Chamber of Commerce & Industry study. But fewer sales may be seen in the luxury market, traditionally a popular choice in the UAE, as customers put more emphasis on energy efficiency and value for money, the report added. It said car sales in the country, which were badly hit during the global slump, while total re-exports are expected to increase at a CAGR of 5% in the same period. The Chamber study said this increase in auto sales would be accompanied by a rise in car ownership as a percentage of the population, up to a high of about 57% by 2014. Regarding challenges facing the UAE auto industry, the study said that streamlined regulations for auto-financing were likely to lead to more new car purchases. (AB 02.03)
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3.5 Intel Acquires Egypt-based SySDSoft
Intel Corporation, through its standalone business entity Intel Mobile Communications, announced that it has acquired most of the assets of SySDSoft, a privately held software company based in Cairo and hired approximately 100 of the company's electrical engineers and computer scientists. SySDSoft designs state-of-the-art IP solutions in the software stack and physical layer domain, and RF/analog circuits embedded in mobile platforms. SySDSoft's solutions enhance Intel Mobile Communications' existing multi-communications portfolio, specifically accelerating its 4G LTE efforts with the addition of leading software development and design capabilities. Intel Mobile Communications is an integral part of Intel's strategy to accelerate always-connected computing platforms founded on energy-efficient performance, Internet connectivity and security, and spanning a variety of device and market segments, including laptops, cars, smart phones, tablets and TVs. (Intel 15.03)
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3.6 Turkey Chooses Taggant Technology for Museum Entrance Security
The Ministry of Culture and Tourism in Turkey has recently decided to implement INKSURE's machine readable taggant solution for the security of the country's museum and historical site entrance tickets. The Ministry will implement the solution on entry tickets and smart museum entry cards for the next six years. As of 1 January 2011, the cards include a high-security hot-stamped hologram and the tickets include a hologram label. This solution makes the tickets and cards extremely difficult to counterfeit, yet very easy to authenticate in the field. The hologram contains overt security features created by MTM Security, a Turkish hologram manufacturer and covert security features created by InkSure Technologies, an American machine-readable taggant technology manufacturer. The overt security in the hologram includes a complex foil structure and special effects which makes the hologram difficult to replicate with standard printing equipment. The covert security in the hologram is accomplished with machine-readable taggants (optical codes). New York City's InkSure is an industry leader in taggant technology for brand protection, product authentication and document security. InkSure's taggant technology is applied to tens of billions of consumer items and high-value documents annually. (InkSure 08.03)
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3.7 Ex-Im Bank Backs Sale of GE Gas Turbine Generator Set to Fast-Growing Turkish Market
An Export-Import Bank of the United States (Ex-Im Bank) $37.4 million long-term loan guarantee is supporting the export of GE Energy's aeroderivative gas turbine generator set and related U.S. equipment and services for a power project in Turkey. In addition to GE, Wahlcometroflex, Division of Senior Operations, a small business in Lewiston, Maine, is supplying an exhaust bypass for the project. The Turkish export sale will sustain over 525 jobs at GE's factories in Cincinnati, Ohio, and Houston, Texas, and at its suppliers, small and large, around the United States. Turkey is one of nine dynamic economies with a growing appetite for infrastructure development that Ex-Im Bank has identified as offering U.S. companies the greatest opportunities for increased export sales. The project is the latest of several GE gas turbine power projects that Ex-Im Bank has financed in Turkey. The buyer, Ales, will build and operate the 62MW combined-cycle gas-fired power project in Aydin province in southwest Turkey. (Ex-Im 14.03)
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3.8 Cold Stone Creamery Expands into Cyprus in 2011
Scottsdale, Arizona's Cold Stone Creamery began 2011 with an aggressive international growth plan. Cold Stone Creamery and the brand's parent company, Kahala, have entered into franchising agreements with Gustatus, Ltd. for expansion into Cyprus and Greece. Gustatus is the food and beverage sector of Top Retail Co., which is the leading retailer and fastest growing company on the island. Cold Stone Creamery will be the first of its kind in Cyprus and Greece, serving both premium ice cream and a unique serving experience. The first Cold Stone Creamery to open in this territory is slated for May of 2011 in Limassol, Cyprus, with additional growth targeted for seven stores opening in Cyprus within five years. The targeted growth in Greece is to open eight locations in six years, with the first Cold Stone planned for 2013. (Kahala 08.03)
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Orbotech Announces the Receipt of First Order for Photovoltaic Systems
Orbotech announced receipt by its subsidiary, Orbotech LT Solar, LLC, of the first order for its newly-developed product for the deposition of anti-reflective coating on crystalline silicon photovoltaic wafers for solar energy panels. Following successful initial testing of this product, this beta site order is expected to be delivered during the second quarter of 2011. Product acceptance by the customer is subject to the achievement of certain technical and performance-to-specification approvals by the customer. Because this is a beta site order, the Company will not recognize any revenue from this sale until broader commercialization. Yavne's Orbotech (http://www.orbotech.com) is a leading global provider of yield-enhancing and production solutions for printed circuit boards (PCBs), which are used in various electronic devices, including smartphones and tablets, and yield-enhancing solutions for liquid crystal displays (LCDs) and touch screens. (Orbotech 08.03)
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4.2 SodaStream Announces the Bio Bottle - a Biodegradable Technology
SodaStream International unveiled the new and innovative Bio Bottle, a breakthrough in food storage containers. The Bio Bottle is a technology being applied to the packaging of SodaStream flavors, enabling the packaging to decompose much faster than conventional plastic. SodaStream has partnered with Bio-Tec Environmental to use its EcoPure biodegradable technology for the Bio Bottle. The Bio Bottle is made with special material that helps it biodegrade into organic components in a landfill or compost facility in as little as 5 years instead of the usual 450 years or more. This is based on ASTM D-5511-02 testing. SodaStream flavor packaging will begin adding the technology later this year. Airport City's SodaStream (http://www.sodastream.com) manufactures home beverage carbonation systems, which enable consumers to easily transform ordinary tap water instantly into carbonated soft drinks and sparkling water. Soda makers offer a highly differentiated and innovative solution to consumers of bottled and canned carbonated soft drinks and sparkling water. Their products are environmentally friendly, cost effective, promote health and wellness and are customizable and fun to use. (SodaStream 08.03)
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4.3 Sunflower To Build 50 Small Solar Facilities
Sunflower Sustainable Investments (http://sunflower-sit.com) has signed an agreement to install 50-kilowatt ground photovoltaic facilities that will generate 2.5 megawatts altogether at a cost of NIS 30 million. Ramat Gan based Sunflower currently owns solar farms in Italy, Spain, and Israel, which generate 25 megawatts altogether. The company uses subcontractors to build and maintain the solar farms. Under this latest agreement, Sunflower will build 50 small PV facilities, subject to obtaining the necessary permits. At the current electricity tariff, the facilities are expected to generate NIS 6 million revenue a year, once they are connected to the national grid. (Globes 10.03)
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4.4 Egypt Investing $ 34 Billion in Electricity Sector
Egypt's Minister of Electricity and Energy Younis said that the Egyptian nuclear program for the generation of power is continuing and will be accelerated till the first nuclear station at Al Dabaa has been established. The sector is carrying out a five year plan till the year 2017 with investments totaling $34b, he added. This plan is financed by the ministry without the state budget. Younis added a meeting will be held soon to consider the issue of the tender for the international companies to get the best terms for that. The plan aims at the establishment from four to six nuclear facilities with a total capacity of 4000 megawatt. The first of the stations would be completed in 2019 and all stages would be over by the year 2025. Electrical energy has been provided for around 99.3% of Egypt's population, representing a positive sign for the welfare of the Egyptian citizen due to electricity relation to all development components in all walks of life.
Solar energy represents a promising alternative source in Egypt. Solar radiance hours in areas ideal for using solar energy in Egypt range between 2300 to 4000 hours/year. A solar energy generator station was built at al-Kuraimat, south of Cairo at a capacity of 150 MW. A lighting project for 5 villages in remote areas is under construction by using solar energy. (GAN 08.03)
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4.5 Global Immune Technologies Says Greeks to Distribute RenON Hybrid Systems
Sidney Mines, Nova Scotia's Global Immune Technologies announced a Greek Consortium under lead management of Sunrise Item Hellas, along with several other companies in the solar energy sector, are starting a Marketing Campaign to distribute RenON's Hybrid Solar System in Greece. The Greek Islands are famous and popular places for tourism with remote locations. There, many resorts & hotels demand serious power just to run their laundries. The 24-hr Hybrid Solar System that functions even after the sun goes down lends itself smartly to addressing these issues. The Greek market is expected to produce orders of about €11 million to €13 million per year. (GIT 15.03)
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Euromoney Lowers Lebanon's Country-Risk Ranking
Euromoney magazine said on 7 March that Lebanon's country risk sank by 14 spots to 90 globally due to the deteriorating political situation. In its semi-annual country-risk survey of 185 nations, Euromoney ranked Lebanon 90th worldwide and 12th among 20 nations in the Middle East and North Africa region in March 2011. Lebanon also came in 25th place among 36 upper-middle income countries (UMICs) included in the survey. Lebanon had ranked 76th globally and 12th regionally in the September 2010 survey, while it had ranked 82nd globally and 13th regionally in March 2010, as reported by Lebanon This Week, the economic publication of the Byblos Bank Group. The results of the March 2011 survey reflect the increase in political risks in the MENA region since the beginning of the year, as the cut-off date of the survey was Feb. 23. Globally, Lebanon ranked ahead of Albania, Venezuela and Mongolia, and came behind Argentina, Ukraine and Macedonia. It also ranked ahead of Venezuela and behind Argentina among UMICs.
The rankings of Lebanon on each of the six categories regressed from last September, with its rank on the Access to Bank Finance and Capital Markets declining by 27 spots, followed by Political Risks with a drop of 12 spots, while its rank fell by 3 spots or less on each of the other categories. In parallel, Lebanon got a score of 43.53 points, down 15.7% from 51.66 points in the September 2010 survey. Lebanon's score came below the global mean of 44.43 points and was lower than the MENA and Arab means of 48.52 points and 46.34 points respectively. Lebanon's score was also below the UMIC mean score of 47.92 points.
Lebanon posted the fourth steepest drop in rankings and in scores among MENA countries in the March 2011 survey. The decline in Lebanon's overall score and rank had been driven primarily by the drop in the Political Risks score, which is weighted at 30% of the overall score. Lebanon ranked 81st globally and 10th regionally on the Political Risks category. It ranked ahead of El Salvador and behind Mali, while it came ahead of Tunisia and behind Saudi Arabia regionally. It also came in 97th place worldwide and in 13th place regionally on the Economic Performance category. Lebanon ranked ahead of Kenya and behind Nigeria worldwide and ahead of Syria and behind Algeria at the regional level. (The Daily Star 08.03)
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5.2 Jordan's Annual Inflation Slows Further To 3.8% In February 2011
Jordan's y-o-y inflation reached 3.8% in February 2011, compared to a y-o-y increase of 5.1% in January 2011. The Consumer Price Index fell by 0.5% m-o-m. Transportation costs went up by 10.1% y-o-y in February 2011, compared to a y-o-y increase of 11.1% a month earlier. Rents went up by 5.3% y-o-y, education by 5.9%, fuel and lightening by 4.5% and clothes and footwear by 5.0%. Communications, however, witnessed a y-o-y depreciation in its prices, falling by 6.8%, along with some food items including grains, down y-o-y by 2.9%, meat and poultry by 0.7% and dairy products by 1.1%. (Petra 13.03)
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5.3 Jordan Telecommunications Report for First Quarter of 2011
Research and Markets (http://www.researchandmarkets.com) Jordan Telecommunications Report Q1 2011 says there were a total of 1.956m internet users at the end of June 2010 representing 214,000 net additions since the end of 2009 when there were 1.742m users. This compared to 2009, when there had been just 29,000 net additions, revealing there to be stronger demand for internet services. For the most part, this is being driven by higher personal computer (PC) penetration rates and lower tariffs. The extended forecasts expect that there will be 2.173m internet users by the end of 2010, before increasing at an annual average rate of 11.2% to reach 3.7m internet users by 2015. Jordan Telecom continues to dominate the fixed-line market, with a share of around 99.9%. The TRC states there were 499,278 fixed lines in the market at the end of June 2010, of which Jordan Telecom had 499,000 lines. The number of residential lines continued to dominate the market, with a total of 318,328 representing a y-o-y fall of 3.03%. For the remaining corporate lines there were a total of 180,950, and which represented a y-o-y increase of 1.85%. Despite the increase, this was not enough to offset the overall decline of the fixed-line market, although we note there has been a slowdown in the decline. By the end of 2010, our newly-revised forecasts expect there to be 505,000 lines, with a penetration rate of 8.3%, before falling to 7.1% at the end of 2015. (R&M 09.03)
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5.4 UAE to Subsidize Premium Rice & Bread Items at Union Co-Op Effective April 2011
The UAE is taking measures to subsidize rice and bread to combat rising food inflation, state news agency WAM reported. The Union Cooperative Society, along with the Ministry of Economy, will launch the first campaign to curb inflation through subsidizing premium varieties of rice and Arabic bread effective 1 April 2011 until the end of 2011. Both items will be sold at the Union outlets at 2004 price levels and these measures are expected to widen, going forward, to include larger varieties of essential food items. Annual food price inflation in the UAE rose by 4.8% and 3.9% in December 2010 and January 2011, respectively. It is expect that, going forward, rising food prices would have been the main driver of inflation in the UAE, as well as rising imported inflation (of non-food items) especially in light of a forecast weakening $ against the AED in 2011. In light of the UAE decision to start rolling out food subsidies, the impact of food price inflation on overall CPI level will largely depend on the scale of the planned subsidies and how wide their coverage is. The UAE inflationary environment will remain benign in 2011 given the scale of property market correction occurring in Dubai, which continues to weigh down on the overall CPI index. (WAM 14.03)
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5.5 US Named As Top Trade Partner with Abu Dhabi in 2010
The United States was Abu Dhabi's top trading partner in terms of imports in 2010 when total non-oil foreign trade fell to just under $30b. The UAE capital saw non-oil foreign trade drop by just over 2.5% compared to 2009, according to statistics released by the Department of Finance - General Directorate of Customs in Abu Dhabi. After the US, Saudi Arabia was the second biggest trade partner via land, sea and air ports with Japan in third place. Between the year 2009 and 2010, imports from Turkey saw a significant increase of 49 %, the figures showed. The report also revealed that Brazil was Abu Dhabi's top trading partner for non-oil exports, followed by Norway and the Saudi Arabia. In terms of re-exports, Bahrain ranked first, followed by Qatar and Saudi Arabia. Re-exports to Pakistan grew highest, with an increase of 373 %. Non-oil exports from Abu Dhabi grew to $3.16b, an increase of 22.2 % on 2009. Statistics of the annual foreign trade volumes revealed the growing role of airports, with imports through airports standing at 19.4%, marine ports at 57.4% and land ports at 23.2%. (AB 05.03)
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5.6 Oman Ratings Placed On CreditWatch Negative on Possible Economic & Fiscal Pressures
On 7 March, Standard & Poor's Ratings Services (http://www.standardandpoors.com) said that it has placed its 'A/A-1' long-term and short-term local and foreign currency ratings on the Sultanate of Oman (Oman) on CreditWatch with negative implications. At the same time, we left unchanged Oman's 'AA-' transfer and convertibility assessment. We do not believe recent events have affected the likelihood of the sovereign restricting private sector access to foreign exchange reserves needed for debt servicing. We have also placed the 'A' ratings on Oman Power and Water Procurement Co. SAOC on CreditWatch Negative, given that its ratings are equalized with those of the sovereign.
The CreditWatch Negative placement reflects our view that the current social unrest in the country and the possible repercussions of regional conflicts could increase political risks in Oman, which might eventually also negatively affect economic growth and public finances. As recent events in the region have shown, political risk from popular discontent can mount very quickly and can undermine political stability. If tensions were to escalate in Oman, it could lead to Oman's ratings being lowered within the next three months. Similarly, if the government's fiscal response to political pressures were to undermine Oman's comparatively strong public finances, or if exports of Oman's oil or gas products were to be affected, Oman's external position could weaken and the ratings could be lowered. On the other hand, if the government is able to address public grievances without putting too much burden on public finances and external investor confidence, then the ratings could stabilize at the current levels. (S&P 07.03)
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5.7 Saudi Arabia to be 6th Richest Economy by 2050
Saudi Arabia is set to be the Middle East's richest economy in terms of GDP per capita by 2050, according to a forecast by Citibank. The report forecast that Saudis will have an average wealth of $98,311 by 2050. This is nearly four times the current rate of $24,200 gross domestic product (GDP) per capital. The oil-rich kingdom tops the rankings for the Middle East and will be sixth overall on the global list by 2050, the rankings showed. Singapore is set to top the worldwide rankings with $137,710, with Hong Kong ($116,639), Taiwan ($114,093), South Korea ($107,752) and the US ($100,802) rounding out the top five. With Saudi Arabia on sixth, Canada ($96,375), the UK ($91,130), Switzerland ($90,956) and Austria ($90,158) conclude the top ten. The report found that world GDP will increase from $72 trillion in 2010 to $380 trillion by 2050 and will grow by 4.6% per annum until 2030 and by 3.8% between 2030 and 2050. The Middle East is set to contribute 4% of global GDP by 2030 and by 5% by 2050. In the short-term, Saudi Arabia, which holds around a fifth of the world's proven petroleum reserves and derives 45% of its GDP from the petroleum sector, is set to see its economy grow by 3.9% in 2011, according to a new study by consultants Business Monitor International. As part of a longer-term spending plan, the government plans to spend $155b in 2011 alone, investing in education and infrastructure. (AB 06.03)
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5.8 Saudi Arabia Freight Transport Report Q1 2011
Research and Markets (http://www.researchandmarkets.com) "Saudi Arabia Freight Transport Report Q1 2011" forecast economic growth recovering from 2010 onwards in Saudi Arabia, benefitting from the massive uptick in government spending and gross fixed capital formation. Vast infrastructure plans and a record budget over the coming five years will boost Saudi Arabia's economy through 2014, with real GDP projected to expand an average 3.2% between 2011 - 2014. All these factors will help boost the country's freight transport industry and BMI is forecasting growth across all sectors from road and rail to maritime. Out of all the GCC countries currently developing its rail network, Saudi Arabia and UAE are currently the front runners, with the Saudi North-South Railway and the Landbridge project well under way. National airline expanding: Saudia, national airline of Saudi Arabia, is expanding both its fleet and the number of destinations to which it flies. As are national shipping companies: Vela International, shipping subsidiary of Aramco, took delivery of the vessel the Matar Star during the quarter. Risks To Outlook Saudi Arabia, despite recent efforts to diversify its economy through the construction of industrial cities and attendant factories, continues to be over reliant on the export of oil. Should its key export markets fall then Saudi Arabia could suffer, though as noted above it is taking steps to protect itself against this. (R&M09.03)
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5.9 S&P Affirms Egypt's Local & Foreign Currency Ratings; Outlook Negative
On 10 March, Standard & Poor's Ratings Services (http://www.standardandpoors.com) affirmed its 'BB/B' long- and short-term foreign currency ratings and 'BB+/B' long- and short-term local currency ratings on the Arab Republic of Egypt and removed the long-term ratings from CreditWatch, where they were placed with negative implications on February 1, 2011. They also affirmed the '3' recovery rating on Egypt's senior unsecured foreign currency sovereign debt, indicating a recovery range of between 50% and 70% in a debt restructuring or default scenario. At the same time, S&P maintained Egypt's Transfer and Convertibility Assessment at 'BB+'. The outlook on Egypt's long-term ratings is negative. "The ratings could stabilize at current levels, in our view, if Egypt's political transition strengthens the social contract and if government debt dynamics remain within our forecast of net general government debt reaching a plateau of 62% of GDP," Standard & Poor's credit analyst Mike Noone said. Conversely, if the political transition falters or if concessional external financing does not materialize to finance fiscal deficits--which we forecast to be in the range of 9% to 11% of GDP for the next few years--then we could lower Egypt's ratings later this year or in 2012. (S&P 10.03)
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5.10 Egypt's Minister of Petroleum Sets Priorities Going Forward
Egypt's new Minister of Petroleum Ghurab will prioritize setting a stable background for increasing hydrocarbon output, providing the required petroleum products and gas supplies to the local market, as well as protecting Egypt's oil and gas wealth. The Ministry of Petroleum is further committed to its petroleum agreements with all international oil companies, Ghurab explained adding that a new mechanism to revise Egyptian gas export prices will be enacted to ensure the maximum return to Egypt. Separately, Prime Minister Sharaf has met with Jordan's Minister of Trade and Industry to discuss mutual cooperation venues between both countries at this critical time, as well as the time of re-pumping Egyptian gas back to Jordan after the maintenance work to the gas pipeline, which was damaged in the early days of the revolution, is completed. (Various 08.03)
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5.11 Egypt's Foreign Reserves Plunge $1.7 Billion in February
Egypt's net foreign reserves plunged by $1.69 billion in February, their biggest one-month decline in over a decade as political turmoil drove capital out of the country and put pressure on its currency. The central bank played down the decline but analysts said the figure did not seem to reflect the full extent of capital outflows from the Egyptian economy. A fall in the reserves is the best proxy for the cost under Egypt's managed float of moderating the pound's fall over the past month - around 1.4 % compared to a roughly 5 % fall in the reserves. The street protests that began on 25 January and eventually toppled President Mubarak scared away tourists, foreign investors and to a lesser extent remittances from workers abroad. Reserves fell to $33.32b at the end of February from $35.01 billion a month earlier. The central bank intervened aggressively on 8 February to support the pound and at the time one trader estimated the size of the intervention at "not less than $1 billion and not more than $1.6 billion." Analysts and bankers said both Egyptians and foreigners transferred large amounts of money out of the country in February. The pound is hovering at around LE 5.9 against the US dollar, weakening recently along with foreign reserves. (Il Masry Il Youm 08.03)
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5.12 Egypt's Suez Canal Revenues Rise 16.3% to $388.7 million in February
The Suez Canal Authority announced on 11 March that Suez Canal revenues reached $388.7 million in February 2011, rising 16.3% year-on-year. On a monthly basis, however, receipts fell 6.7% from the $416.6 million earned in January 2011. Statistics on tonnage and traffic are yet to be released by the Authority. The monthly fall in revenues seen in February is seasonal and is not linked with the current political events occurring in Egypt. Traffic in the Suez Canal usually weakens in January and, more notably, February every year, before rebounding once again in March. Pundits continue to believe that the impact of the current political events in Egypt on the Suez Canal is marginal, if any, with the military and government continuing to ensure its smooth operation (which is, anyhow, within a military zone) and the continued flow of traffic activity. Suez Canal monthly earnings have been on an uptrend since the beginning of 2010 and are well on the way to the forecast level of $5 billion for FY2010/2011, signaling the continued recovery in global trade. However, it is felt that the Authority would continue to focus on extending passing vessels with incentives and discounts to increase traffic through the Canal, rather than resorting to increasing transit fees, until a more sustainable pace of global economic recovery and trade movement is seen. On 3 March, the Suez Canal Authority announced leaving its transit fees unchanged (for the third consecutive year) until the end of 2011, as expected. (Beltone 13.03)
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5.13 Egyptian Unemployment Rate Reaches 8.9% By End-2010
Unemployment rate in Egypt has reached 8.9% by December 2010 from 9.4% a year earlier, state-run Egynews reported. Some 90% of the unemployed, who total 3.2 million, have completed higher education and secondary school. The return of Egyptians from Libya is likely to add to the Egypt's unemployed. Separately, the Ministry of Finance is currently working on the five million job applications received as part of its nationwide employment program. Beltone had expected unemployment in Egypt to increase in the short term, as a result of weaker growth prospects, caused by weaker production levels and reduction in investment inflows. The return of Egyptians, who are predominantly of semi and unskilled levels, back from Libya, will add more pressure to Egypt's already challenging unemployment level. (Beltone 07.03)
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5.14 Strong Social Stability & Unanimity Over Monarchy Make Morocco's Exception
The exception of Morocco in the Arab-Islamic world lies in the strong social stability and the unanimity over the Monarchy which distinguishes Morocco, Jose Miguel Zaldo, chairman of the Hispanic-Moroccan Business Committee of the Spanish Confederation of Employers' Organizations (CEOE) said. Miguel Zaldo said that Morocco's stability is due to the fact that the Monarchy, which has the full adherence of all components of society, is perceived by Moroccans as the "guarantor of stability in the country." Other elements contribute to the Moroccan exception mainly social stability owing to Morocco's economic development over the past ten years, Miguel Zalod, also member of the arbitration court's executive committee, added.
The Spanish expert, who is a consultant to leading companies, highlighted that economic development and job creation, among other things, were impressive in the last decade and that Morocco's GDP grew 5% thanks to efforts made by the State to promote sectors with substantial capital gain as the textile industry which accounts for 30% of Moroccan exports. Morocco's economic growth, which is the driving-force to ameliorate the population's situation, does not exclude any region, he noted, recalling that major projects are carried out in the northern region, which used to have a jobless rate of 15%. There is a large margin for free speech in Morocco in addition to democratic achievements, he said, underlining that Moroccans aspire to the improvement of their living conditions. (Marweb.com 08.03)
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5.15 Morocco to See Lower Than Forecast GDP Growth in 2011
Morocco's economy is expected to grow by 4.6% in 2011, below the previously forecast 5% growth, according to the High Planning Commission. The revision in the growth level is based on a lower than expected harvest season caused by lower rainfall. The agricultural and fisheries sector in Morocco employs 35% of the labor force. Morocco is likely to harvest 7 million tonnes of grains in 2011, down from 7.5 million tonnes in 2010 and a record high harvest of 10.2 million tonnes in 2009. (Beltone 03.03)
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey Information Technology Report Q1 2011
Research and Markets (http://www.researchandmarkets.com) "Turkey Information Technology Report Q1 2011" says the size of the strategically located Turkish IT market is forecast to increase from around $7.1b in 2011 to $11.3b by 2015, making it one of the fastest growing in emerging Europe. PC sales contracted in 2009, but low computer penetration and rising incomes should keep the market on an upward path. Turkish IT spending is expected to strengthen throughout 2011, buoyed by a recovery in industrial production and domestic lending growth. A faster-than-anticipated emergence from recession in 2010 left Turkeys IT market in a favorable position. Many firms put investment in new technology on hold because of a deterioration in external demand, but in mid-2010 the Central Bank of Turkey (CBT)s confidence index for the real sector had risen well above the 100 mark, signaling broad optimism. The Turkish IT market is projected to achieve a CAGR of 12% during the 2011-2015 forecast period. Turkey's cultural and geographical position as a hub between Europe and the Middle East and accentuates the significance of the country's large market size for IT vendors. In recent years, PC sales have received new momentum as the focus of demand shifts towards the Anatolian region and this is expected to continue as the rate of PC penetration rises. (R&M 09.03)
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6.2 Cyprus GDP Records Increase for Fourth Consecutive Quarter
Cyprus GDP has recorded an increase by 2.2% in Q4/10, according to second estimates released by Eurostat, the statistical office of the European Union, compared to Q4/09. This is the fourth consecutive quarter during which the Cyprus GDP shows an increase. GDP increased by 0.3% in the euro area (EA16) and by 0.2% in the EU27 during Q4/10, compared with the previous quarter. In the third quarter of 2010, growth rates were +0.3% in the euro area and +0.5% in the EU27. Compared with the fourth quarter of 2009, seasonally adjusted GDP increased by 2.0% in the euro area and by 2.1% in the EU27, after +1.9% and +2.2% respectively. Over the whole year 2010, GDP increased by 1.7% in the euro area and by 1.8% in the EU27, compared with -4.1% and -4.2% respectively in 2009. (FM 04.03)
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6.3 Cyprus Inflation Holds At 2.8% in February
Cyprus inflation held steady in February, with prices rising by 2.8% compared with the same month of the previous year. Using the raw Excel data provided by the Statistical Service for 2010 and 2011, this means that the consumer price inflation rate in February was the same rate as recorded in January. The Statistical Service press release quotes a January rate of 2.9%, instead of the 2.8% yielded using the raw data. The main driving force behind inflation has been rising international oil prices. Price of transport in Cyprus rose by 5.9% over February 2010. Compared with the previous month, prices rose by 0.43%, compared with an increase of 0.49% in February 2010 and only 0.06% in February 2009. The Statistical Service said this was mainly owing to increases in the prices of certain fresh vegetables, air fares and petroleum products. Decreases were recorded in the prices of electricity and gas. For the period January-February 2011, the CPI recorded also an increase of 2.8% compared with the corresponding period of 2010. (FM 06.03)
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6.4 Cyprus Unemployment Trends Upwards Again In February
Registered unemployment trended upwards again in February, with the number of people registering as unemployed rising by 24.5% compared with the year earlier, up from 22.3% in January and 19.3% in December. The total number of registered unemployed was 29,806 persons. The trend was also upwards on a seasonally adjusted basis, with the number of registered unemployed for February 2011 rising by 2.6% over the previous month to reach 25,900 (seasonally adjusted). The main increase relative to the previous year was in retail and wholesale trade (an increase of 1,165), accommodation and food service activities (1,020), construction (744), manufacturing (507), education (429), and transportation and storage (354). Newcomers to the labor market registering as unemployed rose by 1,410. (FM 06.03)
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6.5 Eurozone Leaders Agree To Better Loan Terms for Greece
The leaders of eurozone countries decided at a meeting in Brussels that the repayment period for Greece's €110b loan package should be extended and that the interest rate should be lowered. It was announced early on Saturday that Greece would have 7.5 rather than 3 years to repay the €100b and that the interest rate would be an average of 4.2% rather than 5.2%. Prime Minister Papandreou said these adjustments would lighten the debt load on the Greek people. He also hailed the outcome of the eurozone leader's meeting as a success for the efforts made by the Greek people and the government to convince its partners that its loan terms should be improved. Papandreou said that the improvement in the loan terms would make Greece "more than €6 billion better off". Contrary to early reports, Greece will not have to rewrite its constitution to include a "debt brake" - binding all governments to maintaining public debt below a certain level – said the premier. He also rejected earlier reports that, under pressure from German Chancellor Merkel, Athens was forced to commit to privatize €50b worth of state assets by 2015. He insisted that the privatization program would take place but in a manner to be decided by the Greek government and nobody else. (Ekathimerini11.03)
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Israel & World Jewry Celebrate Purim Holiday
On 19/20 March, most of Israel and Jewry around the world will mark the holiday of Purim. Purim is one of the most joyous and fun holidays on the Jewish calendar. It commemorates a time when the Jewish people living in Persia were saved from extermination. The story of Purim is told in the Biblical book of Esther. The heroes of the story are Esther and her cousin Mordecai, who raised her as if she were his daughter. Esther was taken to the house of Ahasuerus, King of Persia, to become part of his harem. King Ahasuerus loved Esther more than his other women and made Esther queen, but the king did not know that Esther was a Jew, because Mordecai told her not to reveal her nationality. Haman, an arrogant, egotistical advisor to the king, hated Mordecai because Mordecai refused to bow down to Haman, so Haman plotted to destroy the Jewish people. Mordecai persuaded Esther to speak to the king on behalf of the Jewish people. Esther fasted for three days to prepare herself and then went into the king. She told him of Haman's plot against her people. The Jewish people were saved and Haman was hanged on the gallows that had been prepared for Mordecai.
The Purim holiday is preceded by a minor fast, the Fast of Esther (17 March), which commemorates Esther's three days of fasting in preparation for her meeting with the king. The primary commandment related to Purim is to hear the reading of the book of Esther. The book of Esther is commonly known as the megillah, which means scroll. It is customary to boo, hiss, stamp feet and rattle gragers (noisemakers) whenever the name of Haman is mentioned in the service. The purpose of this custom is to "blot out the name of Haman." Jews are also commanded to eat, drink and be merry. In addition, they are commanded to send out gifts of food or drink, and to make gifts to charity. The sending of gifts of food and drink is referred to as mishloach manot (lit. sending out portions). Purim is not subject to the Sabbath-like restrictions on work that some other holidays are; however, some sources indicate that Jews should not go about their ordinary business on Purim out of respect for the holiday. Purim is also celebrated later (20/21 March) in Jerusalem.
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7.2 The Kinneret Passes the Red Line
The level of the Sea of Galilee (Kinneret), Israel's largest water source, topped the "red line" over the past few days and now stands at 212.95 meters below sea level. It surpassed the government-mandated "red line" of -213 meters over the weekend as a result of the recent heavy rains. The Kinneret gained 28 centimeters over the past week; it has picked up a total of 1.17 meters (over 46 inches) so far this winter. It reached its lowest point of this season on 11 December 2010, when it descended to 214.12 meters below sea level. Though the rainy season has not yet ended, no one is expecting the Kinneret level to climb anywhere near -208.8, at which point the seashore city of Tiberias faces flooding and the dam gates of the lake are therefore opened. The lowest the Kinneret has ever been in modern times occurred on 29 November 2001, when it hit -214.87. The sea bed of the Kinneret contains salty springs that do not flow because of the heavy water pressure above. A low water level, however, lowers the water pressure that is exerted, causing concern that salty water would enter the Kinneret from below, thus endangering Israel's only sweet water source. In addition, the supply of fish in the Kinneret has been threatened in recent years; as of this past January, fishing in the Kinneret has been banned until further notice. The Kinneret, which is 47 meters deep at its deepest, is fed by rainwater from various streams in the Galilee and Golan, such as the Jordan River, which are often augmented by melted snow from the Hermon. (Israelnationalnews.com14.03)
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7.3 First Bedouin Woman PhD is 'Insider-Outsider' in 3 Cultures
The first Israeli Bedouin woman to hold a doctorate describes herself as an "insider-outsider in three cultures." Professor Sarab Abu Rabia-Queder, a lecturer at Ben Gurion University of the Negev, Blaustein Institutes for Desert Research, grew up in Beer Sheva, a melting pot for many of Israel's cultures. But as an educated woman, she often found herself on the fringes of the local southern male-dominated Bedouin society, as well as that of the Israelis around her. She also felt connected, and yet somewhat distant, from her mother's northern Arab culture.
Daughter of the first Bedouin physician and his wife, an Arab from northern Israel, she was the first girl from her tribe to go to college. She was one of eight Bedouin women in the first such class at BGU in 1995. Today, there are hundreds supported by the Robert H. Arnow Center for Bedouin Studies and Development -- which provides a platform for advanced research, academic conferences and a series of publications to advance knowledge about the population. Abu Rabia-Queder meanwhile is today a full-time lecturer occupying the D.E. Koshland Jr. Family Career Development Chair in Desert Studies. She teaches courses on the Negev Bedouin and other indigenous peoples as well as Arab feminist literature of the Middle East and North Africa. She and her husband live with their three young sons in a Jewish neighborhood of Beer Sheva. The boys attend a local bilingual school run by the Hagar Association, where Jewish and Arab children learn side by side. (IsraelNN 09.03)
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7.4 Last Member of Israel's First Knesset Dies
The last member of the first Knesset has passed away; Tawfik Toubi, who served as a Knesset member from 1949 to 1990, died on 12 March at the age of 88. Toubi was born in Haifa in 1922. He joined the Communist Party at the age of 18. From 1943 to the re-establishment of the state, he worked at the Public Works Department of the British mandate government. He was first elected to the Knesset on behalf of the Israeli Communist Party in February 1949. In later years he served as part of the New Communist List and the Hadash Party. After more than 41 years in office, he resigned in 1990. During his tenure he served on the Internal Affairs Committee, the House Committee and the Constitution, Law and Justice Committee, among others. From 1993 to 1989, he served as secretary-general of the Communist Party. He was also a member of the World Peace Council, and served as the publisher and editor of Arabic Communist paper "Al Itihad." (Ynet 12.03)
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*REGIONAL:
7.5 For Turkish Women the Killing Never Stops
Every day, a woman is killed in Turkey in the name of "honor," something that should be stopped immediately, the United Nations Population Fund, or UNFPA, said in a statement for International Women's Day. Figures reported by the Turkish press recently show that an average of five women are killed each day in Turkey. Last year, 72 women – including 10 under the age of 18 – were murdered in Eastern and Southeastern Anatolia, according to the report. In the same region, 113 women, including 28 minor girls, committed suicide and 73, including 10 minor girls, attempted to take their own lives in 2010, according to the same statistics. The same branch found that nine women were raped or harassed by security forces, while seven women in the region were forced into prostitution by family violence last year. Almost 1 million girls in Turkey are not going to school and 4 million women have no formal education, according to the UNFPA report. The organization said it was working intensively with Turkish stakeholders to promote an enabling environment for women-friendly communities. (Hurriyet 07.03)
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7.6 Oman Sultan Grants Parliament Legislative Powers
Sultan Qaboos granted legislative power on 13 March to the appointed Oman Council of State, or parliament, in his latest action to appease rare protests that flared up last month. The announcement came a week after the sultan sacked controversial ministers in a major cabinet reshuffle after rare protests flared up last month in the usually placid Arabian Gulf nation. The economy and interior ministers were among at least 12 cabinet members to lose their jobs in the 29-member cabinet. The new amendments would give Oman's representative council the edge over its peers in the Gulf region, where only Bahrain and Kuwait have elected parliaments with legislative and regulatory authorities. Saudi Arabia, Qatar and the United Arab Emirates, have councils that are mostly appointed and serve only as advisory bodies. Oman's Council of State has 57 members appointed by the sultan and serves as the upper house of parliament. The "lower house" consultative council has 83 elected members, but currently serves only as an advisory body matters excluding defense, security and foreign policy, which are the exclusive domain of the sultan. In an effort to placate the protesters, Sultan Qaboos has also announced the creation of 50,000 new jobs, a monthly allowance for registered job seekers and a higher minimum wage for nationals working in the private sector. On 10 March, Oman agreed to set up a $10b development fund for Oman, one of the member states with least oil reserves. (BI-ME 14.03)
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7.7 Saudi Population to Reach 30 Million in 2017, Expat Growth to Slow
Saudi Arabia's population is expected to reach 30 million in 2017, double the figure just 30 years ago, new research by Euromonitor International has revealed. Its analysis of the kingdom's population growth to 2030 also shows the number will hit 36.5 million by the end of the period under review, representing a near-40% rise compared to 2010. The growth to 2030 will be driven by huge increases in the population aged 50+ which will expand by 179 plus, the study said. But the population will remain relatively young, with two-thirds of the population aged 40 or less in 2030. Saudi Arabia, the world's largest oil exporter, needs 2 million homes by 2014 to keep up with the demands of a population that quadrupled over 40 years, Credit Suisse Group estimates. The rate of growth of the population is decelerating sharply decade by decade. In the 1980s the population grew by 63.3% but by the 2020s this is expected to fall to 14.2%. Population density in the kingdom is increasing rapidly, but remains well below the regional average. In 2010 there were an average of 33.4 people per square kilometer in the Middle East and North Africa, compared to 12.2 in Saudi Arabia. The country's low population density is due to its vast desert areas which render large parts of the country inhospitable. Some areas therefore actually have high density and in 2010 more than half of the population lived in the 10 largest cities in the country. (AB 12.03)
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7.8 Tunisia Unveils Political Roadmap & New Cabinet
Interim Tunisian Prime Minister Beji Caid Essebsi announced his new government on 7 March, replacing eight ministers from the previous government. The declaration came after several ministers resigned from the last caretaker administration, accusing it of being too close to the old regime. Among the new ministers are Rifaat Chaabouni, who was appointed higher education minister, and Abderrazak Zouari, who was named regional development minister. However, the new prime minister chose to keep several key positions the same, leaving in place the ministers of defense, interior, justice and foreign affairs. Essebsi's announcement came after weeks of uncertainty surrounding Tunisia's interim government. Caretaker President Foued Mebazaa laid out a plan on 2 March for the transition period. He called for constituent assembly elections to take place 24 July in order to write a new constitution. The formation of a constituent assembly was one of the key demands of political parties and civil society groups. The January 14th front, which includes the communist Labor Party and the Revolution Protection Council, called for suspending the constitution and disbanding the parliament. In addition to drafting a new constitution, the assembly will be tasked with preparing a fresh electoral law, press legislation and selecting the ideal political system for Tunisia, whether parliamentary or presidential. (Magharebia 07.03)
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7.9 Morocco's King Vows Sweeping Reforms in Speech
Morocco's King Mohammad VI promised a sweeping constitutional reform, including real powers for a popularly elected prime minister instead of a royal appointee, as well as a free judiciary. In his first speech after uprisings across the Arab world and less than a month after protests erupted in Morocco for more social justice and limits on royal powers, the king Wednesday pledged to draw up a new draft constitution. He outlined seven major steps, including the way the prime minister is chosen. Instead of being appointed by the king, the prime minister will be drawn from "the political party which leads in the elections" in parliament, he said. The prime minister will have "effective executive power" and be "fully responsible for the government, public administration... and implementing the government's program," the monarch said. He also pledged "expanded individual and collective liberties and the reinforcement of human rights in all dimensions" and spoke of the "will to set up an independent judiciary." The Moroccan monarch announced the formation of a commission to work on the constitutional revisions, with proposals to be made to him by June. A referendum will then be held, he said, without giving a date. The live broadcast was the first time the king has delivered an address to the nation since thousands of people demonstrated in several cities on 20 February demanding political reform and limits on his powers. They were the first protests in the country since the start of the uprisings across the Arab world that toppled the presidents of Tunisia and Egypt this year. (GN 10.03)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 InspireMD Boosts MGuard Production Capacity
InspireMD has expanded its MGuard production facilities to meet the steady increase in demand. The driving forces behind the accelerating demand for MGuard include the recent recommendation of the European Society of Cardiology (ESC) mesh-based protection to be considered for PCI of highly thrombotic or SVG lesions. Currently, this type of approved mesh technology is exclusively produced by InspireMD in its unique MGuard mesh protected coronary stent system. Greater awareness of the MGuard solution among interventional cardiologists worldwide has been contributing to increased MGuard sales. To accommodate this increased demand, InspireMD has enlarged its production workforce and invested in new crimping machinery that can double InspireMD's previous production capacity.
Tel Aviv's MGuard (http://www.inspire-md.com) presents a novel combination of a coronary stent merged with an embolic protection specifically designed for Acute MI patients. The embolic protection is comprised of an ultra-thin polymer mesh sleeve that wraps the stent. The MGuard coronary stent provides permanent embolic protection, without affecting deliverability. InspireMD is an innovative medical device company focusing on the development and commercialization of its proprietary stent system technology, MGuard. InspireMD intends to pursue applications of this technology in coronary, carotid and peripheral artery procedures. (InspireMD 02.03)
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8.2 Compugen Positive Animal Model Results for Novel Peptide to Block Protein Interaction
Compugen announced positive animal model results for CGEN-25068, a novel peptide predicted and selected in silico to block a specific protein-protein interaction known to play an important role in various immune-related disease conditions. CGEN-25068 is one of a number of novel peptides predicted and selected as part of the validation activities for Compugen's Protein-Protein Interaction Blockers (PPI Blockers) Discovery Platform and is the first of these peptides to complete animal model testing. Additional peptides predicted to block targeted interactions in other pathways, primarily cancer-related, are at various stages of validation. Protein-protein interactions are central to many key biological functions and thus the potential therapeutic applications of inhibiting such interactions are wide-ranging and of high industry interest. However, the discovery of drugs for such targeted therapy is extremely challenging and research efforts to find small molecules that inhibit such protein-protein interactions have been largely unsuccessful. The PPI Blockers Platform was developed in order to address this need.
Tel Aviv's Compugen (http://www.cgen.com) is a leading drug and diagnostic discovery company providing novel product candidates addressing important unmet therapeutic and diagnostic needs to pharmaceutical, biotech and diagnostic companies under milestone and royalty bearing – or other revenue sharing – agreements. Unlike traditional high throughput trial and error experimental based discovery, Compugen's discovery efforts consist of in silico (by computer) hypothesis-driven product candidate prediction and selection followed by in vitro and in vivo experimental validation. Compugen' unique in silico prediction and selection capabilities are based on a broad and continuously growing infrastructure of proprietary scientific understandings and predictive platforms, algorithms, machine learning systems and other computational biology tools. (Compugen 07.03)
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8.3 Pontifax Invests One Million Dollars in Stimatix GI
Stimatix GI successfully concluded an investment round to support First-in-Man clinical trials. Pontifax, the venture capital fund chaired by Mr. Eli Hurvitz, has invested $1m in Stimatix GI. Developed by Stimatix GI, a privately funded medical device company focused on continence solutions, the AOS-C1000 Colostomy Management System is designed to allow individuals to discretely manage their colostomy without the need to wear a traditional ostomy pouch. The AOS-C1000 is intended to improve quality of life and offer an elegant, non-surgical and simple to use solution for round-the-clock continence control.
Stimatix GI (http://www.stimatix-gi.com), founded in 2009, operates as part of the Misgav Venture Accelerator. The company develops innovative continence solutions to improve quality of life for stoma patients. The AOS-C1000 artificial sphincter, designed for people who have undergone colostomies, is expected to be its first product to market, followed by the AOS-I1000 for ileostomates and later by the AOS-U1000 for urostomates. The Misgav Venture Accelerator (http://www.misgav-venture.com), founded in 1992, specializes in medical instrumentation, pharmaceutical, and biotechnology companies. The incubator is part of The Trendlines Group (www.trendlines.com), which supports and invests in Israeli startups through its two technology incubators, Misgav and Mofet, and through its Signal Business Development unit. (Pontifax 07.03)
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8.4 Yissum & Hadasit License Regenerative Polymeric Membrane Implants to RegeneCure
Yissum Research Development Company, the technology transfer company of the Hebrew University of Jerusalem, and Hadasit Medical Research Services & Development, the technology transfer company of the Hadassah University Medical Center, announced that they have licensed innovative regenerative membrane implant technology to RegeneCure, which will further develop and commercialize the technology for bone tissue engineering for applications in trauma, spine, and reconstructive cranial and facial orthopedics. Under the terms of the agreement, RegeneCure has received the worldwide exclusive right to develop and commercialize the technology. In return, Yissum and Hadasit will receive license fees, milestones and royalty payments from future sales of the final product.
RegeneCure's MSC scaffolding method improves natural bone healing due to the ability of the tubular implant to attract bone stem cells, enhance their proliferation and rapidly form new bone tissue. RegeneCure has successfully completed a preclinical study to determine the safety and efficacy of the implant in animal models that mimic bone loss that creates a gap in the bone as result of trauma or disease and cannot be repaired spontaneously. The study, which took place in Hadassah Medical Center in Jerusalem, compared between 3 groups: animals implanted with RegeneCure's implant, those implanted with an alternative implant and untreated animals. Eight weeks post implantation, results clearly demonstrate that the healing process of animals implanted with RegeneCure's implant is far better than the alternative implant in all healing parameters. Healing rate measured by quantity of new bone formed was higher and the bone gap was completely bridged and integrated in 100% of the cases.
Yissum Research Development Company (http://www.yissum.co.il) of the Hebrew University of Jerusalem was founded in 1964 to protect and commercialize the Hebrew University's intellectual property. Hadasit Medical Research Services & Development (http://www.hadasit.co.il), the technology transfer company of Hadassah Medical Organization (HMO) in Jerusalem, Israel, was established in 1986. Hadasit promotes and commercializes HMO's continuously generated intellectual property (IP) and R&D capabilities. RegeneCure (http://www.regenecure.co.il) develops regenerative and user-friendly implants that help the body heal faster, with minimal invasive procedures. In 2010, RegeneCure established its state-of-the-art development and manufacturing facilities in Jerusalem. The company brings together a team with vast experience in drug development and entrepreneurs in the field of polymer technology for medical devices. (Yissum 07.03)
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8.5 Mazor Robotics' SpineAssist Purchased by University of California, Irvine Medical Center
Mazor Robotics announced that the University of California, Irvine Medical Center has purchased SpineAssist, Mazor Robotics' surgical robotic system that enables surgeons to conduct minimally invasive and complex spine surgeries in a safe and accurate manner. The UC Irvine Medical Center, renowned for adopting cutting-edge medical technologies, is a world leader in performing robot-assisted surgeries for a variety of medical conditions. SpineAssist is designed to guide the surgeon, who performs the procedure manually with the help of the robotic arm. The system has been scientifically proven to increase the accuracy of spinal implants and significantly lower rates of misplaced screws and neurological deficits. For patients, this translates to fewer complications and revisions; and the minimally invasive technique contributes to faster recovery, with less pain and scarring. Additionally, use of SpineAssist results in less radiation exposure for the patient, surgeon and entire OR team during surgery.
Caesarea's Mazor Robotics (http://www.mazorrobotics.com) is dedicated to the development and marketing of innovative surgical robots and complementing products that provide a safer surgical environment for patients, surgeons and OR staff. Mazor's flagship product, SpineAssist, is a specifically designed surgical robotic system that enables surgeons to conduct spine surgeries in an accurate and secure manner. The system has been successfully used in the placement of thousands of implants in the US and Europe. Multiple peer-reviewed publications and presentations at leading scientific conferences have validated the accuracy, usability and clinical advantages of SpineAssist. (Mazor Robotics 08.03)
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8.6 Rosetta Green Completes Its Initial Public Offering on the Tel Aviv Stock Exchange
Rosetta Green has completed an Initial Public Offering on the Tel Aviv Stock Exchange. The company is now traded under the ticker name RSTG. The company sold units consisting of ordinary shares, Series 1 warrants and Series 2 warrants. Overall 3,405,000 shares, 3,405,000 Series 1 warrants and 3,405,000 Series 2 warrants were sold in the offering. The company is focused on unique genes called MicroRNAs. MicroRNAs function as main bio-switches that control key traits in plants. Identifying and changing the right MicroRNAs can potentially be used to develop plants with significantly improved traits. MicroRNAs are positioned high up in the regulatory network's hierarchy, functioning by regulating the activity and abundance of other genes. This places microRNAs at the very core of regulatory networks in many organisms, including plants. Rosetta Green is developing a unique pipeline of improved plant traits and is currently discussing possible forms of collaboration and licensing arrangements with several leading companies in the agri-biotech industry. The company has several ongoing research collaborations with various companies from Israel, U.S. and Brazil. This includes companies involved in the agriculture, fiber and biofuel industries. Some of the key collaborations include improving traits in wheat, potato, banana, tomato, trees, castor beans and algae.
Rehovot's Rosetta Green (http://www.rosettagreen.com) focuses on identifying innovative genes called microRNAs for the agriculture and biofuel industries. The company specializes in utilizing unique genes that function as "main bio-switches" to control key processes in plants and algae. Rosetta Green uses these bio-switches to develop plants with improved traits for the biofuel and seed industries. The company has so far identified thousands of new bio-switches from economically important plants and has used its technologies to develop plants with improved drought tolerance and algae with increased oil content. (Rosetta Green 03.03)
8.7 Kamada Gets Israeli Patent for Ultrapure Transferrin for Pharmaceutical Compositions
Kamada has received an Israeli Patent for its Ultrapure Transferrin to be used in Pharmaceutical Compositions. This is the second patent issued to Kamada under the same title after being granted with the same patent title by the United States Patent Office (USPTO). Transferrin is a protein found in human blood. It binds to and transports iron in the bloodstream from and to cells. In cellular biology practice, Transferrin is added to cell culture media to ensure that they are adequately supplied with iron. Additionally, its iron binding properties reduce the potential for damage to the cells caused by free radicals formed when other sources of iron are added to cell culture media. Transferrin is also studied for pharmaceutical applications as a potential conjugate material (carrier) to a number of active molecules, including various chemotherapy drugs. By attaching the drug molecule to Transferrin the drug is targeted directly to the site of action thanks to the Transferrin receptors that are found on the target cells. This makes the Transferrin-drug compound a highly efficient pharmaceutical preparation.
Ness Ziona's Kamada (http://www.kamada.com) is a public biopharmaceutical company developing, producing and marketing a line of specialty, life-saving therapeutics using a sophisticated chromatographic purification technology. Utilizing its proprietary know-how, Kamada manufactures more than 10 high quality biopharmaceuticals which are marketed in over 15 countries around the world. Kamada's flagship product, Glassia, was recently approved by the USFDA and is marketed in the US exclusively by Baxter Healthcare. (Kamada 09.03)
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8.8 NeuroDerm Phase 2 Study of ND0611 Dermal Patch for Parkinson's Disease
NeuroDerm announced the enrollment of the first group of patients in its Phase I/II clinical trial of ND0611, a new patch for the treatment of Parkinson's disease. ND0611, a proprietary carbidopa liquid formula administered via a dermal patch, is designed to increase the bioavailability and efficacy of orally- administered levodopa and thus improve treatment of Parkinson's disease. In pre-clinical studies, plasma concentrations of orally-administered levodopa showed markedly less fluctuation, higher area-under-the-curve values and higher trough concentrations after continuous administration of ND0611 together with standard levodopa products (Sinemet, Stalevo and Sinemet CR). A phase I trial in young, healthy volunteers demonstrated that ND0611, co-administered with Sinemet, was safe and tolerable. It also showed that ND0611 increased levodopa clearance half-life, the duration of levodopa concentration in excess of a typical threshold for anti-Parkinsonian effect (1000ng/ml in plasma), and the area-under-the-concentration-time-curve of levodopa.
Ness Ziona's NeuroDerm (http://www.neuroderm.com) is an emerging pharmaceutical company that develops therapies for the treatment of CNS diseases. NeuroDerm's technology is based on proprietary reformulations of well established oral drugs whose low bio-availability is the major impediment to better efficacy. The company's lead products are ND0611, a revolutionary skin patch for the treatment of Parkinson's disease and ND0801, a combination patch for the treatment of ADD/ADHD. Other programs focused at other diseases, including obesity, schizophrenia and Alzheimer's disease, are in different stages of development. (NeuroDerm 09.03)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Agent Vi Defines the Future of Video Analytics with New Versions
Agent Vi has released new versions of its video analytics solutions – Vi-Search (video search and analysis solution) and Vi-System (real-time detection and alert solution) – offering new capabilities, performance enhancements, and new business intelligence applications. In line with Agent Vi's focus on simplicity and ease of use of its products, an innovative Automatic Scene Learning (ASL) algorithm was developed and is incorporated in Vi-System Version 4.0. The ASL algorithm performs automatic calibration of targets in each camera, allowing the software to self-learn each scene and distinguish between people and vehicles. This saves time and labor associated with manually configuring each camera and shortens the time required to become operational. Vi-Search Version 1.2 features additions and enhancements, including search of video recorded from PTZ cameras, enhanced viewing capabilities and shorter search duration. Search through 24 hours of video is now performed within 3 seconds, and in addition, Vi-Search can operate in near real-time, allowing search through video recorded as recent as 3 seconds prior to the search query. This allows an operator to quickly and effectively search, retrieve and respond to events recorded by the surveillance system.
Rosh HaAyin's Agent Video Intelligence (Agent Vi - http://www.agentvi.com) is a leading provider of open architecture, video analytics software deployed in a variety of security, safety and business intelligence applications worldwide. Solutions offered extend from real-time video analysis and alerts to forensic search and post-event analysis, and are fully integrated with multiple third party edge devices and video management systems. (Agent Vi 02.03)
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9.2 CimatronE New Version on Show at INTEC
Cimatron showcased the new version of CimatronE at the INTEC Trade Fair in Leipzig, Germany. Version 10.0 of CimatronE contains over 150 major enhancements and new functionality for mold makers, die makers and manufacturers in the areas of Quoting, Tool Design, Drafting, Electrode Creation and NC Programming. The latest enhancements provide extensive competitive benefits for toolmakers, in a single integrated solution. CAD enhancements provide stronger, more powerful capabilities, including a new built-in Motion Simulator, which specializes in tooling and provides an advanced, event based analysis of kinematics. Die makers will enjoy an easier, more intuitive strip design process and greater automation for tool design. Mold designers will find that handling changes is simpler, with more powerful ECO analysis and implementation. CAM enhancements dramatically increase programming productivity, with background calculations and enhanced multi-core processing. Machining times are reduced, with significant upgrades to rough and cleanup strategies, and there's a new helical finish strategy.
With over 28 years of experience and more than 40,000 installations worldwide, Givat Shmuel's Cimatron (http://www.cimatron.com) is a leading provider of integrated, CAD/CAM solutions for mold, tool and die makers as well as manufacturers of discrete parts. Cimatron is committed to providing comprehensive, cost-effective solutions that streamline manufacturing cycles and ultimately shorten product delivery time. The Cimatron product line includes the CimatronE and GibbsCAM brands with solutions for mold design, die design, electrodes design, 2.5 to 5 axes milling, wire EDM, turn, Mill-turn, rotary milling, multi-task machining, and tombstone machining. (Cimatron 02.03)
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9.3 Elbit Systems' Awarded $12.7 Million Order for Integrated Helmet System
Elbit Systems announced that its wholly-owned U.S. subsidiary, Elbit Systems of America was awarded a $12.75 million delivery order for Integrated Helmet and Display Sight System (IHADSS) spares from the U.S. Army Tank-Automotive and Armaments Command (TACOM), in Rock Island, Illinois. Work on this contract will be performed in Fort Worth, Texas. This delivery order was issued pursuant to an Indefinite Delivery/Indefinite Quantity (IDIQ) contract awarded to Elbit Systems of America, under which a total of more than $50 million in delivery orders have been issued to date. The IHADSS system supports the Apache AH-64 attack helicopter mission by providing an advanced helmet mounted display and sighting system that provides heads up display and accurate line of sight to the pilot and co-pilot. Its capabilities and ease of use have resulted in a solid history of reliability, crew safety and mission success.
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, unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. (Elbit Systems 01.03)
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9.4 Nova Receives $12 Million Orders From 3 Major Foundries
Nova Measuring Instruments announced that 3 major foundries recently placed $12 million orders for its integrated and standalone metrology tools. The tools will support manufacturing and development for both the 4x and 3x technology nodes, and are expected to ship within the first and second quarters of 2011. Many of the orders received are from Chinese based customers who are ramping up after a prolonged period of weaker demand from that market. This recent booking stream, together with additional orders already received from memory customers as well as expected multi-million dollar orders from these and other customers during March, should lead to record quarterly bookings in the first quarter of 2011. Rehovot's Nova Measuring Instruments (http://www.nova.co.il) develops, produces and markets advanced integrated and stand alone metrology solutions for the semiconductor manufacturing industry. Nova is traded on the NASDAQ & TASE under the symbol NVMI. (Nova 03.03)
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9.5 Mellanox Delivers Industry's Highest Performing, End-to-End Ethernet Connectivity Solution
Mellanox Technologies announced its complete end-to-end 10 Gigabit Ethernet connectivity portfolio, providing end-users with best-in-class bandwidth and latency performance, and ease-of-use through a robust fabric management solution. Mellanox's complete set of Ethernet products address the growing performance needs in the High-Performance Computing, enterprise, mega warehouse data centers, financial services, cloud computing, Internet and Web 2.0 markets, and allow companies to scale-out their data center environment to thousands of servers while preserving a simplified, ‘flat' network architecture. Performance is especially critical for financial institutions and other enterprise applications for which every millisecond of improved latency translates to millions of dollars in potential increased profitability. Mellanox's end-to-end Ethernet solutions recently provided Informatica with the highest performance ever achieved on its Ultra Messaging Streaming Edition software: lower than 9 microseconds application-level latency through the network.
Yokneam's Mellanox Technologies (http://www.Mellanox.com) is a leading supplier of end-to-end InfiniBand and Ethernet connectivity solutions and services for servers and storage. Mellanox optimizes data center performance and deliver industry-leading bandwidth, scalability, power conservation and cost-effectiveness while converging multiple legacy network technologies into one future-proof architecture. The company offers innovative solutions that address a wide range of markets including HPC, enterprise, mega warehouse data centers, cloud computing, Internet and Web 2.0. (Mellanox 14.03)
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10: ISRAEL ECONOMIC STATISTICS
10.1 CPI Rises 0.3% in February - Above Expectations
The Consumer Price Index (CPI) rose 0.3% in February 2011, the Central Bureau of Statistics announced on 15 March, compared with analysts' expectations of a rise of only 0.1%. Inflation for the past 12 months is 4.2%, well above the government's 1-3% price stability target. The exceptionally high rise in the CPI in February can be explained by a 0.4% rise in the housing component (services to homeowners) as well as a sharp 5.7% rise in the price of fresh fruit and vegetables and a 1.2% rise in food overall. Telecom prices also rose 1%. The pace of inflation will require an additional rise in the interest rate, if not at the end of this month, then at the end of April. Inflation was offset in February by a 6.3% fall in the price of clothing, a 3.4% fall in the price of vegetables and a 0.8% fall in insurance rates. (CBS 15.03)
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10.2 Israel's High-Tech Exports Rising
On 10 March, the Central Bureau of Statistics announced that high-tech exports, half of total industrial exports, excluding diamonds, rose by an annualized 30.5% in December 2010-February 2011, in trend figures. A breakdown of high-tech exports by segment showed that exports of electronic and computer components rose by an annualized 56.9% in December-February, in trend figures; exports of communications, medical, scientific, and inspection equipment rose by an annualized 18.5%, and pharmaceuticals exports rose by an annualized 13.4%. In February, high-tech exports rose 9%. Exports of pharmaceuticals rose 55% to $500 million. Imports of raw materials, excluding diamonds and energy products, rose by an annualized 35.9% in December-January, reflecting Israel's robust economy. (CBS 10.03)
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10.3 Israel's Average Salary Up 5.1%
The average gross monthly salary of Israeli employees was NIS 8,430 (in current prices) in 2010, 3.7% higher than in 2009, the Central Bureau of Statistics reported on 7 March. The number of salaried employees also rose by 3.7% to 2.92 million. The average salary rose 5.1% to NIS 8,777 (original data, in current prices) in December from NIS 8,350 in November and NIS 8,170 in October. The seasonally adjusted figure was NIS 8,591 in December. The number of salaried employees rose by 7,600 in December to 2.95 million persons. In October-December 2010, the average salary rose by an annualized 0.2% in fixed prices, while inflation in the same period was an annualized 3.9%. As always, Israel Electric Corporation and Mekorot National Water Company employees topped the salary table, with an average salary of NIS 21,137. In contrast, 157,200 employees in the catering and accommodations industry earned an average salary of NIS 4,005. (CBS 07.03)
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10.4 Israel Sees Significant Rise in Number of Lawyers
The number of residents per each lawyer in Israel dropped to 170 in 2010 compared to 275 a decade ago, according to a survey conducted by business information company Dun & Bradstreet Israel. The number of lawyers per judges jumped by 44% in the past decade and the industry's income reached some $360m. According to the survey, Israel's biggest law firm remains Herzog, Fox & Neeman. Fischer Behar Chen Well Orion & Co. came in second, up from the fourth place last year. The Goldfarb, Levy, Eran, Meiri & Co. law firm ranked third. Meitar, Liquornik, Geva & Leshem, Brandwein came in fourth, and Yigal Arnon & Co. was fifth.
Israel's 20 biggest law firms took in more than 100 new lawyers in 2010 – a 6% rise in the number of lawyers they employ. According to the ranking, the number of lawyers employed in the 20 biggest law firms stood at 1,887 at the end of 2010, compared to 1,773 at the end of 2009. The annual income per lawyer in 2010 stood at some $80,000, as part of an improvement in income seen in the past three years. A geographical analysis shows that while most lawyers (72%) are active in Tel Aviv and central Israel, only half of the judges work in these areas. The study also reveals that in 2010 the number of lawyers in the 100 biggest law firms stood at 39 lawyers per office, while the average number of partners was 11 compared to an average of nine interns. The most popular field of specialty in the 100 large offices out of the four leading fields in each office is litigation. (Ynet 09.03)
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11: IN DEPTH
11.1 ISRAEL: IVC- KPMG Survey: Israeli Venture Capital Fund Raising - 2010 Summary
On 8 March, the following data was released by IVC Research. This was based on information collected by IVC Research Center and analyzed by IVC in cooperation with KPMG Somekh Chaikin Israel. Additional details about venture capital fund raising will be available in the IVC 2011 Yearbook, due for release in April.
For Israeli venture capital funds, 2010 was a most difficult year in terms of capital raising. No capital was raised, reminiscent of 2009 and 2003 - the decade's other essentially dry years.
The financial crisis at the end of 2008, which severely impacted institutional investors, was the major impediment to raising new funds. In 2009, only $234 million was raised by Israeli VC funds and $200 million of that amount was raised by just one fund - Sequoia Israel.
Despite improvement in macro economical factors in 2010, Israeli VC funds were not able to attract new capital during the year. Capital raising trends in Israel generally correlate with trends in the US, which experienced a 50% reduction from 2009 levels.
Going forward, IVC's outlook for capital raising is cautiously optimistic, based on a positive outlook for the local economy and an important pro-active step by the government to stimulate investment. In early 2011, Israel's Ministry of Finance announced an incentive program for Israeli institutions to invest in Israeli VC funds. The program is expected to increase investment by $220 million in 2011-2012.
According to IVC CEO Koby Simana, the situation is critical. "Without improvement, it threatens the survival of numerous Israeli high-tech companies that cannot raise needed capital. Moreover, VC funds will not be able to finance new companies or, in some cases, support their existing portfolio companies."
"The government's program for encouraging investment by Israeli institutional investors in local venture capital funds will likely result in an increase both in Israeli venture capital fund raising and in technology investments. However," cautions Simana, "most of the impact of the government plan will be felt in 2012, since local VC funds must first raise substantial amounts - 60% of the total capital of each fund - from foreign investors. It's a real challenge for Israeli VC funds."
Historically, the growth of Israel's venture capital industry is traced to five cycles based on vintage years of fund raising that started in 1992 and peaked in 2000, when more than $2.8 billion was raised. In the three cycles since 2000, Israeli venture capital funds attracted $9.5 billion, 71% of the $13.3 billion that was exclusively allocated to investments in Israeli high technology by Israeli venture capital funds between 1992 and 2010.
The ability of Israeli VC companies to raise follow-on funds in 2011 and 2012 will have a strong impact on the overall performance and future of Israel's high-tech sector, especially start-ups. It is expected that at least one new biotechnology fund, part of the government's program to promote the biotech sector, will be able to close on a round of capital raising in the coming year. One or possibly two new follow-on VC funds and new seed or angel-focused funds will also be able to successfully raise capital.
Ofer Sela, a partner in KPMG Somekh Chaikin's Technology group, said, "As in the global venture capital industry, Israel's VC industry is experiencing a dramatic change. The industry's 10-year negative average return was lower than that of major market indices, yet the VC industry total performance over the last 20 years remains unmatched. We believe that at the end of the current turmoil Israel's VC industry will emerge even stronger. The global VC current trend is to invest more in non-US investments. We believe that Israel will benefit from this trend as more funds will be diverted to Israel from VCs that were less focused on Israel in the past."
According to Ofer Sela, "Israel's VC industry currently lacks two major components at either end of a company's life cycle - VCs that specialize in the seed stage and VCs that operate as growth funds. Additionally, data demonstrate that Israeli VCs that specialize in a specific industry sector, such as software or medical devices, outperform multi-disciplinary VCs. In addition, a specialized VC in the semiconductor sector in Israel can yield a higher return than the general industry. We believe that as part of the transition underway in Israel's VC industry, smaller VCs will be formed that specialize in specific sectors and/or specific stages. They thereby will be differentiated from the rest of the industry and be complementary to the larger VC funds."
According to IVC estimates, at the beginning of 2011 capital available for investment by Israeli venture capital funds is around $1.4 billion. Of this amount IVC estimates that $230 million is earmarked for first investments. The remainder is reserved for follow-on investments. Overall, IVC projects that $800 million will be raised in 2011 by Israeli VC funds for investment in Israeli high-tech industry.
IVC Research Center (http://www.ivc-online.com) is Israel's leading research center providing business leaders with an unmatched wealth of data on Israeli high-tech, venture capital and private equity industries. IVC products and services are used regularly by high-tech companies, venture capital funds, private investors, financial investors and institutions, as well as public entities such as the Office of the Prime Minister, the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist. (IVC 08.03)
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11.2 ARAB MIDDLE EAST: Fitch Says Political Risk Continues Pressuring Ratings
On 03 March, Fitch Ratings (http://www.fitchratings.com) said that the recent outbreak of unprecedented unrest in a number of Middle Eastern countries has put downward pressure on the region's sovereign ratings and will continue to do so, even as new political arrangements emerge. Risks have increased, both political and economic, to varying degrees, even though Fitch's ratings in the region already embodied a large amount of political risk.
In a new report entitled 'Middle East Political Risk Erupts: Negative Rating Pressure to Persist', the agency notes that political risk in various forms has long constrained Fitch's sovereign ratings in the region. Fitch estimates that narrowly defined political risk - including regime legitimacy, stability and effectiveness, internal tensions and external threats - reduced Long-term foreign currency Issuer Default Ratings by an average of four notches for the 11 public ratings in the region, even before recent downgrades. Fitch has downgraded Tunisia ('BBB-'/Negative), Egypt ('BB'/RWN) and Bahrain ('A-'/Negative) by one notch and Libya ('BB'/RWN) by a cumulative four notches. Negative rating pressures persist. There has been latent political risk in these countries for many years but it has now come to the fore.
There is political risk in other emerging market regions, with some countries experiencing at least as high risk as in the Middle East. However, in general, risks in the Middle East are somewhat higher. Moreover, geopolitical risks, which affect several countries simultaneously, are considerably higher in the Middle East than elsewhere.
Political risk tends to be higher at lower rating levels, although it may also be present at higher rating levels but mitigated by other considerations. When latent risks erupt, there may be some tolerance in the rating, so that negative rating action is not automatic or immediate. However, ratings of more highly rated sovereigns, notably members of the Gulf Cooperation Council (GCC), have less tolerance for political volatility, and improved political risk and governance more generally are more important to their ratings improvement than at lower rating levels.
An important common theme in Tunisia, Egypt and Libya and in Yemen (not rated by Fitch), has been weak "voice and accountability" (V&A), as defined in the World Bank's (WB) governance indicators. Libya's V&A score was the lowest of any Fitch-rated sovereign. By contrast, Libya had one of the region's highest WB "political stability" scores, much higher than for its rating peer group. Apparent stability was achieved through a repressive political and security apparatus and was ultimately unsustainable. Where high political stability is associated with low V&A, apparently high political stability scores must be discounted. Fitch says Tunisia's, Egypt's and Libya's ratings always factored in a substantial element of political risk. Risks had seemed to decline in Bahrain, partly driving past upgrades, but risks have now risen anew.
Relatively high levels of human development (per capita incomes, education and health outcomes) mitigate political risk in the richer countries in the GCC. However, as Bahrain demonstrates, this does not necessarily prevent pressure for political change. Recent events in the less advanced countries in the region also provide some support to the idea that relatively small setbacks in development, as occurred during the global financial crisis and are now threatened by rising food price inflation, may have a bigger impact where socio-political grievances are high and difficult to channel through the political system.
Another common factor in the region is the demographic challenge of a young and fast-growing work force, which demands faster GDP growth rates than most countries have achieved over the past decade, and improvements in education in order to equip the work force for employment. Excluding the richest three GCC countries, which have used fiscal resources to generate rapid growth, Fitch estimates that GDP growth will need to be, on average, 1.5% to 2% faster in the coming decade than achieved in the past 10 years. GCC countries have a separate challenge, of creating jobs that their nationals aspire to and are qualified to do. (Fitch 03.03)
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11.3 ARAB MIDDLE EAST: Possible Scenarios of Unrest on Travel & Tourism
Euromonitor International said that turmoil in North Africa and the Middle East led to a change of leadership in Tunisia and Egypt and is currently behind the revolution taking place in Libya. Several other countries in the region were also affected by political tensions.
The extent of the impact the turmoil in Arab countries will have on the travel and tourism industry, however, remains uncertain and will depend on the development of events and, in particular, on which countries will be affected before the wave of uprisings subsides.
A direct impact of the turmoil will certainly affect tourism flows to the countries involved, while in the worst case scenario, it would also impact global air transportation as well as international tourism flows worldwide.
Hampering regional tourism development North Africa and the Middle East recorded the strongest growth development in tourism globally over the last five years, thanks to natural tourism resources, good value for money and proximity to important source markets. The current political unrest is likely to heavily affect their tourism growth potential, in particular in developed destinations such as Egypt, Tunisia and possibly Morocco with a strong infrastructure.
Despite best efforts by Egyptian and Tunisian tourism authorities and travel companies to reassure consumers about a fast return to normality, the development of the political crisis there is not clear year. Political unrest will also have an important impact on tourism flows to countries such as Libya and Algeria, where substantial investment has been made in tourism infrastructure over the last five years, albeit from a low base. Tourism development in these countries is now considered to be postponed for an indefinite time.
Oil prices - a threat for air transportation
After having been severely affected by the recent global economic crisis, the air transportation industry recovered brilliantly in 2010 which marked a return to healthy profits. However, political unrest in a number of countries, which are among the most important world oil suppliers, could have a very negative effect on air travel.
Following the turmoil in Tunisia, Egypt and Libya, oil price exceeded the US$100 per barrel mark for Brent Crude, the highest price in the last two years since the last spike in July 2008. This led to a decline in share prices for the world's major airlines.
If political tensions will stop at Libya, the situation should be kept under control as OPEC member countries, and in particular Saudi Arabia, can use their spare production capacity to make up for missing oil supply from Libya.
However, in case political unrest spreads to other oil exporting countries, in particular Algeria, Iran and even Saudi Arabia, oil price would rise steadily to reach $150 or, according to some analysts, even $200 per barrel. Such significant growth in oil prices would mean sky-rocketing fuel costs and a likely return to losses for airlines.
High oil prices would also translate in higher air ticket prices which would lead in turn to a decline in air trips worldwide and undermine business travel.
A double dip recession?
The risk of a double dip recession has been often considered by analysts during the recent global economic crisis that began in 2008. In the second half of 2010 and beginning of 2011, some optimism was growing towards a general recovery in the world economy, driven by emerging countries, but also by the encouraging economic performance of the US and Germany.
However, a sharp rise in oil prices is capable of reversing this positive trend, increasing the risk of a double dip recession real. Analysts estimate that oil prices higher than $150 per barrel could lead to another recession.
Such a possibility is linked to the worst case scenario regarding the Middle East turmoil spreading to Algeria, Iran and especially Saudi Arabia. The issue is therefore where will the turmoil stop? If it stops at Libya, the impact on world economic growth will most likely be negligible, but if the contagion continues to spread, the impact on the global economy, and subsequent tourism flows, could be significant.
After a 4.5% decline in 2009 and a 5.5% growth in 2010, international tourist arrivals are expected to grow by a healthy 4% in 2011. This forecast will stay valid in the case of a slowdown in political tensions, but may need to be revised according to how the North Africa and Middle East crisis will develop in the months to come. (BI-ME 07.03)
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11.4 JORDAN: Training Up
On 27 February, when outlining his government's proposed plan of action, Jordan's Prime Minister Bakhit told parliament that he was firmly committed to extending financial support to the nation's universities to overcome any funding shortfalls and to continue to expand their activities. Directing more energy and money towards courses that meet the needs of the economy will help give Jordan's education system a sharper focus and provide students with the skills required to find employment after graduation.
Jordan's education system can point to a number of notable achievements, including reducing the adult illiteracy rate below 7%, one of the lowest levels in the Arab world. The country also has one of the highest enrollment and graduation rates at the primary and secondary school grades in the Middle East and North Africa (MENA) region.
However, like many countries around the world, Jordan has at times struggled to match the employment needs and aspirations of its university graduates with vacancies and career paths within the national economy. This in turn has seen some of Jordan's best and brightest seek employment opportunities abroad.
One of the central challenges for Bakhit's administration and the education system as a whole is to bridge the gaps between academia and the economy. The prime minister said that the entire education system would receive due attention and care from the incoming administration, which was in keeping with the instructions given to the premier by King Abdullah when he designated Bakhit as the head of the new government.
In King Abdullah's letter appointing Bakhit, issued on 1 February, the government was reminded of the importance of educational reform, and the prime minister was tasked with developing curricula, improving the school environment and addressing teachers' needs. The letter also contained a call for a comprehensive review of the university and higher education management systems to ensure that universities teach creative thinking and foster the values of openness and pluralism.
This message was underscored by King Abdullah in a mid-February visit to the Hashemite University, located in Zarqa, north-east of the capital. During a meeting with senior university officials, the King said it was vital that institutes of higher learning work to equip students with the skills and knowledge required for them to compete in the labor market and contribute to the process of national development.
This increased focus on education is to be given added impetus via the introduction of a new program. On February 27 Wajih Oweis, Jordan's minister of higher education and scientific research, said the government was in the process of drafting new legislation that would pave the way for the establishment of polytechnic schools at public universities. This initiative aims to reduce the burden on overcrowded bachelor's degree programs, easing demand on some faculties by half, while providing the local labor market with technical specializations, Oweis told a conference in Amman. "The infrastructure is already there. All we need is trainers, and we will have discussions with Canadian, German, Swiss and American experts to attract trainers," he said.
On 6 March, the government tabled a revised budget for 2011, having responded to a request by parliamentary deputies to withdraw the earlier version, which was drafted last October. While there were only minor changes to the total projected spending – with this part of ongoing efforts to rein in the state deficit – there has been a shifting of funding allocations and priorities, with an increased focus on projects that will create employment, especially in less affluent regions.
Jordan has long worked towards reshaping its economy away from a dependency on primary production, industry and services to one based on knowledge, value-added skills and technology. The education system has been charged with helping to meet this target, though so far it is a work in progress. The long-term goal is for Jordan's economy to have strong financial, computing, research and development and technology sectors, industries that not only generate revenue but also provide employment and meaningful remuneration for trained professionals.
Though this is government policy, there is only so much the state can do in paving the way for a knowledge-based economy, particularly given the demands being made on the budget during a time of fiscal retrenchment. There is, therefore, an increasing need for the private sector to support the initiative. Additional funding and assistance for public universities, along with a sharper, employment-orientated focus for higher education, will help provide the skills base for the future Jordanian economy, but further investments will be needed so that the products of the education system can be best utilized by society. (OBG 14.03)
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11.5 IRAQ: Iraq's Petroleum Impasse
On 2 March, Denise Natali wrote in the Carnegie Arab Reform Bulletin (http://www.carnegieendowment.org/arb) that as the Iraqi government seeks to reinvigorate its oil-dependent economy, it faces increasing challenges from regions and groups demanding a greater share of the country's petroleum wealth. The Basra provincial council, for example, is at odds with the Ministry of Oil over control of investment projects in its region. The Kurdistan Regional Government (KRG) insists on the validity of contracts it signed with international oil companies. A national hydrocarbons law could help resolve these tensions, but the complexity of the draft oil law, new leadership of key parliamentary committees, and opposing views on how to reallocate oil revenues are likely to stifle the legislation. Underlying these constraints is the 2005 Iraqi constitution, which - in the attempt to prevent a tyranny of the majority - left revenue and resource-sharing between Baghdad and its provinces unclear, which in turn undermined the viability of economic development projects.
Iraq's petroleum impasse is rooted in the vagaries of the Iraqi constitution and the ethnic and sectarian interests it has encouraged. By devolving large powers to the regions and providing for the distribution of oil revenues to make up for the wrongs of the past, the constitution disempowered Baghdad regarding key oil sector activities.
In addition, many new regional powers are unequal in terms of their institutional capacities, the legal constraints they face, and their natural resources. The Kurdistan Region, for instance, is permitted to exploit and develop natural resources but has no authority to export its crude outside Iraqi borders without Baghdad's permission. Kirkuk has significant oil reserves but no delineated administrative boundaries to ascertain land and resource claims. Basra contains the vast majority of Iraq's oil wealth, while lacking the infrastructure to exploit, produce and export at projected levels.
Poorly crafted consociationalism also has left the fiscal responsibilities of the regions unclear. Baghdad is required to allocate a portion of the national budget to the provinces, yet there is no requirement for timely and transparent payments from the regions to the central government. While the KRG claimed its portion of the national budget, it has not regularly paid its customs taxes to Baghdad. In fact, the KRG continues to smuggle petroleum to Iran without sanction or financial penalty. When the Iraqi Supreme Auditing Office recently requested petroleum receipts and files from the KRG Ministry of Finance, the KRG refused outright.
Nor is there any clear national policy on how to spend Iraq's oil wealth. While the Kurds want Baghdad to use part of their petroleum revenues to pay international oil companies' profits in the north, the southern and central regions are clamoring for greater social services. The 2011 budget has addressed this issue, at least temporarily, by directing a portion of oil revenues to the public food ration system. Still, these revenue allocation issues are likely to become particularly sensitive as Iraq increases its oil production over the next year. At the current $76.5 per barrel and estimated 2.25 million bpd exports, Baghdad could reap over $80 billion in 2011, engendering more squabbling over who gets what.
Disagreements about the legitimacy of the 2005 constitution have aggravated regional resource competition. For the vast majority of Arab Iraqis, the constitution represents the interests of its chief engineers - the Americans, Kurds and small Shiite groups - not those of the larger Iraqi population. The Kurdish autonomy it guarantees and the asymmetrical power and resource distribution it permits have led to a backlash from underdeveloped Sunni Arab regions seeking to protect their marginalized status and get what they consider to be their fair share of oil revenues. In addition to the revenue issue, the uneven availability of energy and petroleum resources for Iraqi consumption remains problematic, as shown by ongoing protests in Iraqi cities from Nasiriyyah to Kirkuk as well as the recent destruction of key Iraqi oil refineries.
Iraqi Prime Minister Nuri al-Maliki, who still needs to consolidate his power, has responded to regional tensions with ad-hoc appeasement measures. In addition to promising early retirement, personal salary cuts and a 100-day government evaluation period, he has promised to allocate one dollar for every barrel in oil-producing provinces and an additional 80 megawatts of electricity daily to Kirkuk. Maliki recently permitted the KRG to recommence its oil exports and recognized the disputed KRG production-sharing contracts, even though key Iraqi oil ministers and parliamentarians continue to deny their legitimacy.
These piece-meal and sometimes secretive arrangements might buy time for Iraqi and Kurdish officials and quell conflict temporarily. Still, they do not address the fundamental source of tensions between the central government and its regions, namely, the character of the Iraqi state.
At minimum, a more coherent federal system is needed to reflect the political realities and economic demands of Iraq's current circumstances. If the goal is to maximize petroleum wealth and limit resource conflict, then clearer lines of authority will have to be drawn among the central and regional governments as well as the provincial councils. Bilateral agreements and a national hydrocarbons law can clarify some issues, such as payment mechanisms and fiscal responsibilities. Ultimately, however, Baghdad's authority might have to expand beyond the limited, enumerated powers accorded to it in the current constitution to a more direct role in managing the country's petroleum resources and revenues.
Denise Natali is the Minerva Fellow at the Institute for National Strategic Studies (INSS), National Defense University and author of The Kurdish Quasi State. (CARB 02.03)
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11.6 ARABIAN GULF: GCC Countries Invest Abroad to Secure Food at Home
Arabian Gulf states are following in the footsteps of China and looking beyond their shores to make heavy investments in agriculture. Less than 40 years ago the UAE was populated by small local communities who lived satisfactorily off the desert land. Their meals consisted mostly of locally sourced livestock and produce. Now, only a few generations later, the dinner tables around the UAE are heaving with rice from India, tuna from Japan, mushrooms from France and meat from Brazil. A steadily growing expatriate population with diverse tastes means demand has rapidly overtaken what the market has to offer. This, paired with worldwide shortages and spiraling prices, has made having secure sources of food a matter of strategic importance for the country.
According to the International Fund for Agricultural Development (IFAD), Arab countries account for more than 5% of the world's population but less than 1% of global water resources. Because of its arid desert climate, which is not conducive to large scale farming, the UAE imports more than 80% of its food, spending Dh2.5 billion in 2010 alone. In order to insulate themselves from market fluctuations, the UAE and the other GCC states are following in the footsteps of China and investing heavily in agricultural land abroad. By shipping the produce home and bypassing world markets, they can cut food costs by up to 25 %.
The UAE Minister of Economy recently cited the main areas of investment for the UAE as Vietnam, Cambodia, Egypt, Pakistan and Romania. While the concept of buying or leasing farmland abroad is not new, the rising food prices have caused a recent flurry of investment activity. Between 2006 and 2008, UAE investments in agriculture abroad increased 45 %. According to the International Food Policy Research Institute (IFPRI), the UAE ranked third in the amount of agricultural land obtained by selected investors between 2006 and 2009. In first and second places were China and South Korea.
Top of the agenda
The issue of rising food prices has been at the top of the agenda at government meetings and economic forums worldwide. The latest report by the World Bank and warnings by non-government agencies reveal that global food prices have reached their highest in 20 years and could increase further because of rising oil prices stemming from the unrest in Libya and the Middle East. The UAE alone has seen prices of edible oil, sugar and rice shoot up by 50 %, the price of vegetables by more than 25 % and fruit by more than 20 % in the last year. The UAE's Federal National Council (FNC) met at the beginning of this year to discuss solutions to the issue.
In order to stem this and limit the effect on low, post-downturn consumer confidence, the Economy Ministry has persuaded some supermarkets and cement producers to rein in prices. The Consumer Protection Department in the Ministry of Economy announced recently that prices of essential foodstuffs would be slashed by up to 40% in supermarkets across the UAE during March. These products include flour, milk, tea, rice, sugar, oil, coffee, pasta and flour. Initiatives have also been implemented to make do with the limited amount of water available such as growing more climate resistant crops and using desalination plants to generate more water.
However with water used in agriculture taking up 80 % of the total water supply, subsidized agricultural schemes are unfeasible and unsustainable on a large scale. During the Arab oil boycott of 1973, the US indicated as a retaliation measures that there could be a boycott of food deliveries to the region which first prompted plans to develop Sudan as a bread basket for the region. Since rising fuel costs contributed to about a fifth of grain price inflation, between 2004 and 2008, GCC countries have turned their focus away from major international food exporting countries like the EU, Russia, Canada, the US, Brazil or Australia and are focusing on nearby areas such as Egypt, Pakistan or Cambodia.
Where to invest?
Leading the rush are international agribusinesses, investment banks, hedge funds, commodity traders, sovereign wealth funds as well as individuals attracted by cheap land. At the end of 2009, UAE-based agricultural investment firm Janan formed an investment plan with Egypt to cultivate around 42,000 hectares of land with wheat, maize and other crops. The project which will extend to 2015 is expected to produce 350,000 tonnes of wheat a year.
Last year, the UAE was also in talks with the Cambodian government to purchase land for rice cultivation. UAE-based Minerals Energy Commodities Holding (MEC) has been working out plans to lease around 100,000 hectares of farmland in Indonesia. Abraaj Capital, a private equity group which manages $5 billion of assets across the Middle East, North Africa and the Indian subcontinent, has purchased land in Pakistan during the past year. Emirates Investment Group (EIG) also put money into farmland in Pakistan when they offered up to a million acres to foreign investors. The UAE also has investments in the Rashid Al Dhahiri Olive Presses Company and the Al Marmouqa Food Company in Jordan. In Morocco, the UAE's Al Qudra Holding Company is investing in various sectors such as farming and fisheries.
In Ethiopia, which is only one of 20 or more African countries where land is being bought or leased, 815 foreign-financed agricultural projects have been approved since 2007. When developed, land will yield roughly two tonnes of grain per hectare. With investments across Asia Pacific and the Middle East reaching 100,000 hectares of land, the newly cultivated land has a potential to produce one million tonnes of grain a year.
Private-Public Partnerships
Local food distributors such as Iffco are forming private-public partnerships to secure agriculture supplies overseas. The company which distributes brands such as Tiffany and Igloo has formed a joint venture with Malaysian agriculture company Felda to grow palm oil in Malaysia. They also co-own 81,000 square kilometers of cattle ranches in Australia. However other smaller local food companies are not financially capable of making similar investments or partnerships. (GN 09.03)
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11.7 KUWAIT: Health in Focus
The health care industry has moved front and centre of the development agenda throughout the Arabian Gulf and wider Middle Eastern region. The industry's resilience to the effects of the global economic crisis over the past two years has whetted the appetite of private investors, while governments are concerned about growing demographic pressure on social services.
This situation should provide ample opportunity for health care providers over the coming decade. According to a recent report by McKinsey & Company, the GCC will require a two-fold increase in the number of hospital beds over the next two decades, with this spurred by a 240% rise in demand for treatment. The region also has the highest per capita incidence of lifestyle-related disease in the world, a fact that is likely to lead to pressure on the supply of specialist facilities and hospitals.
Kuwait is no different in this regard. The country has relatively strong basic health care indicators, but there is increasing pressure on its facilities. The country currently has 19 hospital beds per 10,000 people, compared to 22 in Saudi Arabia, 39 in the UK and 140 in Japan. Although the country's population tends to be quite young on average, and thus requires less health care than an ageing nation like Japan, this undersupply could become a more serious concern over time, particularly given its population growth rate, which the World Bank puts at 2.4%. This will also be compounded by a growing disease burden. Obesity levels, for example, have reached 80.4% for women and 69.5% for men, according to the Kuwait National Development Society.
Despite its declared commitment to social services, spending on health care is relatively low by regional standards. In 2007, the latest year for which comparative figures are available, Kuwaiti spending on health care totaled 1.7% of GDP, compared to 2.7% in the UAE, 3.4% in Saudi Arabia and 8.9% in Jordan. Nonetheless, the government has demonstrated a growing awareness of the need to address this issue.
Kuwait signaled its early intent to remedy shortcomings in its health care provision when the industry was touted as a main beneficiary of the $108b development plan in February 2010. In January 2011, it was announced that the government is working on a strategy to bolster health care facilities with an additional 3500 beds, as well as new laboratories and surgical suites. Following the announcement, the Ministry of Health's undersecretary for engineering affairs, Samir Al Asfour, stressed that the private sector will be instrumental in the execution of this strategy and the development of the sector.
While these plans are in their infancy, it seems clear that investment in the sector will increase steadily over the coming years. Business Monitor International (BMI) predicts that the sector will expand at a compound annual growth rate of 8.47% between 2009 and 2014, to reach KD1.37b ($4.9b). It is estimated that public sector expenditure will constitute almost 75% of this total . Pharmaceutical spending is expected to hit KD143m ($513.4m) by 2014, up from KD106m ($380.5m) in 2009.
These funds will undoubtedly have an impact on the sector, but how new development will be fulfilled and services provided remains a matter of debate. Kuwait has long offered its citizens an expansive cradle-to-grave welfare system that has involved the dispersal of the nation's oil wealth through a number of free services. Mindful of the rising costs, the government is now trying to become more market-orientated, a strategy that is particularly contentious in the provision of social services.
The government has been moving towards implementing a comprehensive health insurance scheme, despite criticism from some opposition circles. In 2010, the government drafted two bills for comprehensive health insurance for Kuwaiti nationals and the establishment of an independent health authority to regulate the system. Under the proposals, the government would pay health insurance fees for citizens, while additional optional services must be met through out-of-pocket expenses. This free insurance would also partially cover overseas treatment for Kuwaiti citizens.
The government hopes that such proposals, which are yet to be put before parliament, will dramatically improve the level of care and reduce the outsized bill for overseas treatment. They will also lead to significant private investment opportunities in the country.
Yet criticism of the plan continues to be voiced. According to Nadeem Al Duaij, chairman of the Kuwait Health Initiative, a non-profit health policy group, "[for-profit insurance] has time and again resulted in poor health outcomes, in inequalities in health care access and delivery, and in an inability to contain rising health care costs. We believe in the need for health insurance to protect the individual from catastrophic health expenditures but this must be done through the adoption of a non-profit social health insurance or similar scheme that is supported by current health policy evidence."
Despite such divided opinion, all sides agree that Kuwait's health system needs prompt attention. As such, with government attention now focused firmly on the sector and increasing funding flowing towards it, the next 12 months could be a crucial time for the country's health care industry. (OBG 15.03)
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11.8 BAHRAIN: Fitch Downgrades Bahrain to 'A-'; Outlook Negative Ratings
On 03 March, Fitch Ratings (http://www.fitchratings.com) downgraded Bahrain's Long-term foreign currency Issuer Default Rating (IDR) to 'A-' from 'A', local currency IDR to 'A' from 'A+'; and Country Ceiling to 'A' from 'A+'. The agency has simultaneously affirmed the Short-term foreign currency IDR at 'F1'. The Outlook on the Long-term IDRs is Negative.
"The downgrade reflects Fitch's view that recent political developments will have a short-term impact on growth and result in further fiscal expansion over the medium term. It also reflects Fitch's judgment that despite the regime's attempts to engage stakeholders in an inclusive national dialogue, any political reform that will appease the protestors is likely to be over an extended horizon," says Purvi Harlalka, Director in Fitch's Middle East and Africa Sovereign Ratings Group. "The Negative Outlook reflects the economic and political uncertainties associated with a drawn-out political process, which increase the risks to the sovereign's credit profile."
The expected weakening in the fiscal outlook is a key rating driver as it follows the rapid doubling of debt to 33% of GDP in 2010 from 16.4% in 2008. However, even at these elevated levels, debt will remain below the forecast 'A' median and Bahrain has a demonstrated track record of fiscal prudence. In addition, the budgetary expansion is more affordable given increasing oil prices and rising oil production.
Nonetheless, low debt, which has counter-balanced several structural weaknesses, including high dependence on a limited hydro-carbon endowment, and social and political tensions, has been the main strength of Bahrain's 'A' rating. This now appears compromised, affording the sovereign less policy flexibility to deal with shocks that might materialize in an uncertain environment.
However, while short term (up to 12 months) political uncertainty has risen, Fitch has a more optimistic view of the medium to long-term (3-5 years) prospects for political reform in Bahrain. Encouraging developments include the agreement on a unified list of demands following talks between the seven main political parties, of both Sunni and Shia affiliation, and the relatively rapid concession to some of these demands by the ruling family.
Moreover, by appointing the Crown Prince, who is a liberal, as the main negotiator on the ruling family's behalf, the regime has signaled its willingness to accommodate the concerns of its people. The Crown Prince, who has also been handed oversight of the security situation, has reined in the security apparatus, further pointing to the regime's conciliatory intentions. The demonstrators have reciprocated by continuing to avoid violence. However, the longer the negotiations take, the more impatient the stakeholders are likely to get, leading to a risk of renewed unrest.
A substantial worsening in the security situation and/or protracted delays in the political reform process would prompt a downgrade. By contrast, a smooth transition to a sustainable political outcome would alleviate the negative rating pressure. (Fitch 03.03)
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11.9 QATAR: IMF 2010 Article IV Consultation Executive Summary
Background
Qatar has weathered the global financial crisis exceptionally well, reflecting the swift and strong policy response by the authorities. The sizeable enhancement of liquefied natural gas (LNG) capacity, large government support to the banking system, and increase in public spending helped sustain high growth rates through the global crisis. Growth has rebounded to 16 percent in 2010 and is projected to accelerate to 20 percent in 2011. Headline consumer price inflation is negative in 2010, reflecting a sharp fall in domestic rents, although non-rent prices have started to rise. The banking system remains sound. While bank credit for consumption and real estate stagnated after 2009, credit to public sector companies increased sharply. The economic outlook remains positive, with the main downside risk being a sharp decline in hydrocarbon prices.
Policy discussions focused on (i) the policy mix required for maintaining macroeconomic stability while sustaining high growth rates in the non-hydrocarbon sectors; (ii) the stance of fiscal policy in the medium term; (iii) strengthening the efficiency of the domestic financial system and regulatory arrangements; and (iv) assessing productivity performance to help design a diversification strategy.
While the current expansive fiscal stance remains appropriate and monetary policy should remain geared towards supporting credit growth, aggregate demand needs to be carefully monitored in order to avoid the emergence of inflationary pressures. Qatar Central Bank (QCB) will have to rely increasingly on macro-prudential instruments to manage the credit cycle and to counter potential surges in capital inflows.
Preserving the policy of saving a share of hydrocarbon wealth is key to maintaining macroeconomic stability and intergenerational equity. Improving productivity will be important to support self-sustaining long-term growth in the non-hydrocarbon sectors.
The exchange rate is broadly aligned with fundamentals. The dollar peg has served as an effective nominal anchor. Nevertheless, it will be important to enhance the technical, institutional and operational capacity, including development of a local debt market, in case an alternative exchange rate regime becomes desirable in the context of the Gulf Cooperation Council (GCC) monetary union.
Establishing a debt management office and setting up a macro-fiscal unit will constitute important institutional reforms to support policy making.
Further improvements in statistics will be essential, and will require greater coordination between various agencies.
Authorities' Views
The authorities pointed out that the countercyclical fiscal stance and the government's support to the banking system ensured financial stability and helped sustain high growth rates through the global crisis. They are mindful of the need to manage the risk of potential overheating arising from demand pressures. Over the medium term, the government budget would continue to allocate increased resources for infrastructure investment, while keeping current expenditure in check.
Major infrastructure upgrades related to the FIFA World Cup 2022, such as the integrated metro/rail systems, roads, and airport, have already been taken into account in the medium-term expenditure profile, since they were planned notwithstanding the outcome of their bid to host the World Cup. Additional expenditure to the government budget is not expected to be significant.
QCB has a range of instruments to manage liquidity. It has further room to reduce interest rates, and can resort to prudential regulation by limiting credit ratios and sectoral exposures to manage both credit growth and potential surges in capital inflows. Inflation is not viewed as an issue of concern in the short term, mainly because of the current excess supply in real estate.
The authorities will continue to save part of the hydrocarbon revenues through their sovereign wealth fund, to facilitate intergenerational equity. They expect non-hydrocarbon revenues to increase as a result of the recently introduced measures to rationalize and broaden the corporate tax base. The establishment of the value-added tax in the context of the GCC monetary union would broaden the tax base further.
Current expenditure would be contained over the medium term by enhancing spending efficiencies, resisting increases in salaries, and shrinking the size of government to the extent possible. Their objective is to fully finance their budgets after 2020 from non-hydrocarbon revenues.
The authorities are committed to the exchange rate peg to the U.S. dollar. They are, however, strengthening the institutional and operational capacity in financial markets, which would prove useful in case an alternative exchange rate system becomes desirable in the context of the GCC monetary union.
QCB is closely monitoring potential risks to the banking system. The central bank published its first Financial Stability Review and intends making this an ongoing process. The authorities' commitment to establish a single financial regulatory authority under the umbrella of the central bank remains undiminished. They continue to align their supervisory and regulatory frameworks with best standards and practices, and plan to implement Basel III proposals early. (IMF 09.03)
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11.10 UAE: Conclusion of the 2011 Article IV Consultation Mission
An International Monetary Fund (IMF) mission visited the United Arab Emirates during February 27-March 7, 2011 to conduct the discussions for the Article IV consultation with the United Arab Emirates. The mission met with Minister of State for Financial Affairs Al Tayer, Minister of Economy Al Mansoori, Governor of the UAE Central Bank Al Suwaidi, other senior government officials, as well as representatives from the business and financial community.
At the conclusion of the visit, the IMF issued the following statement today in Abu Dhabi:
"The economic recovery is gaining strength, supported by a favorable global environment but subject to increased regional uncertainty. While overall growth is expected to remain unchanged in 2011 at 3%, non-oil GDP growth is projected to accelerate from 2% in 2010 to 3% in 2011, reflecting strong tourism, logistics and trade in Dubai; and large public investment spending in Abu Dhabi, including through Government-Related Enterprises (GREs). Despite higher international food prices, CPI inflation is expected to remain moderate at 4%, as rents continue to decline. Higher oil prices are contributing to a marked improvement in the fiscal position and balance of payments.
"Risks to the recovery remain, including from possible economic spillovers of regional events. For example, the current re-pricing of political and sovereign risks in the region could lead to more challenging market conditions, which may put pressure on the corporate sector, including the GREs. The excess supply of property in Dubai and the uncertainty regarding its size will continue to weigh on growth.
"Against this background, macroeconomic policies in 2011 should be geared towards supporting the recovery, and adjusting to economic spillovers from the unfolding events in the region. To this end, the government should avoid contracting the fiscal stance to ease economic recovery, while the central bank's monetary stance should remain accommodative.
"The government's plan to upgrade the infrastructure in the northern Emirates is a step towards more inclusive economic development. Replacing the current subsidies on water and electricity with explicit cash transfers to lower-income households should also be considered. The government intends to launch active labor-market policies to create jobs for nationals. Given the concentration of unemployment in the northern Emirates, launching these programs in these regions, while also relocating some of the government agencies/entities in the north, would be important.
"The ongoing work to complete the restructuring of GREs will help lower borrowing costs. Throughout the process, due regard should be accorded to ensuring the viability of these entities through writing-off impaired assets. Debt rollover needs will remain substantial throughout the medium term and thus need to be monitored carefully. Clarifying and communicating information on GRE liabilities and their financing strategy would improve investor confidence.
"The banking sector remains resilient to shocks, thanks to high capital —including from the government— and strong earnings, although nonperforming loans have doubled since the crisis. The central bank has made important progress in strengthening its financial stability analysis, revamping the regulatory framework and developing macro-prudential policies. It should continue to ensure that banks provision adequately, particularly in light of increasing provisioning needs on Dubai GREs. It also needs to monitor the performance of restructured loans and encourage banks to retain more earnings to handle potential risks in the medium term.
"As the recovery firms up, policies should shift to strengthening the economy's resilience to future shocks. Dubai's debt restructuring experience and increased borrowings of GREs in other emirates call for monitoring the risks posed by these entities more closely. In this context, the authorities have already taken some steps towards better debt management practices, and these should now be built upon. The high dependency on volatile hydrocarbon revenues underscores the need for strong demand management over the economic cycle. In the context of a pegged exchange rate regime, this requires mutually-supportive countercyclical fiscal and macro-prudential policies together with close coordination between various governments in the United Arab Emirates.
"Progress has been made in establishing macroeconomic statistics. However, further efforts are needed for the timely compilation and dissemination of key statistics, including on national accounts, balance of payments, and fiscal accounts. This will also require harmonization of methodologies across emirates.
"The IMF stands ready to assist the United Arab Emirates in the implementation of their economic program, including through the provision of technical assistance, and looks forward to continued policy dialogue in the period ahead." (IMF 07.03)
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11.11 UAE: Abu Dhabi Cleared for Take-Off
Although it is a relatively newcomer to the local economy, the Oxford Business Group feels Abu Dhabi's aerospace industry is proving admirably nimble in its development. As part of the emirate's long-term development plan, Economic Vision 2030, which was released in early 2009, policy experts highlighted aerospace as one of the many areas in which they envisage future growth, with this expected to play a key role in efforts to diversify the economy away from its traditional mainstay, hydrocarbons.
"Abu Dhabi already has the core of infrastructure required to develop a successful aerospace sector. The emirate will concentrate on developing its capabilities in the manufacturing and maintenance of civil and military aerospace equipment and parts, defense electronics and other equipment," Vision 2030 states. "The emirate intends to build on its existing aircraft maintenance business to become a world-class player in the maintenance, services, repair, overhaul and parts manufacturing segments."
In early February, Abu Dhabi showed that it has a strategy to turn that vision into reality. Mubadala Aerospace, a unit of government-owned investor Mubadala Development, announced plans to merge its two civil aircraft maintenance companies. The two businesses involved are Abu Dhabi Aircraft Technologies and Switzerland-based SR Technics, and details regarding the new entity are expected to be announced in the coming months.
For Abu Dhabi's long-term diversification – as well as Mubadala's medium-term goals – the move could be a very profitable one, as industry trends augur well. With the rapid growth of Gulf carriers, the maintenance, repair and overhaul (MRO) industry is expected to grow by 6% per year in the region until 2020, making Mubadala Aerospace's goal of becoming the world's third-largest MRO company – and the largest non-airline-affiliated provider by 2015 – all the more achievable.
Mubadala has set its sights on expansion, firstly in the Asia-Pacific region (due to its impressive growth rates) and then North and South America. Its strategy has still to be finalized as the company is evaluating the correct approach for each region, which could include acquisitions, joint ventures and the creation of new entities.
Meanwhile, another one of Mubadala Aerospace's businesses, Strata (a components manufacturing business based in Al Ain) is also garnering attention in the international aerospace market. In December 2010, one year after completion of the facility, a new aircraft parts plant dispatched its first Airbus A330 wing parts, called flap track fairings. The contract is part of $2.7b in orders Strata has secured from Airbus and other companies. Things are looking good for the firm thanks to the 10 year contracts it has signed with industry heavyweights such as Airbus, Alenia Aeronautica of Italy and Austria's Fischer Advanced Composite Components.
Despite it being early days, the plant is expected to become profitable within five years and deliver high-margin returns from that point on. Strata is targeting the composite parts market, which is estimated to be worth $35b a year, and industry forecasts point to a bright future given the increasing use of lightweight, durable materials in commercial airplanes. It is for this reason that the company has set itself the targets of becoming one of the world's top 20 composite aerospace parts suppliers within the next five years and of reaching revenues of $1b a year by 2020. Given the figures involved in these transactions, it is clear why the emirate selected the aerospace sector to play a major part in its future economy.
Of course Abu Dhabi has plenty of hard work ahead before it can rival established aerospace centers like Montreal, Seattle or Toulouse, but the progress to date demonstrates that when Abu Dhabi sets its mind to developing a new sector, it can succeed, thanks to prudent planning and access to financial resources. For other sectors, meanwhile, a blooming aerospace industry is expected to open up further opportunities in areas including technical services, education and aviation-related finance. (OBG 03.03)
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11.12 OMAN: Retail Opens Up
The Oxford Business Group reported that the recent opening of two hypermarkets in Oman, adding more than 33,000 sq meters of shopping space, has been a welcome boost to the retail sector, alongside new moves to protect the rights of consumers. On 28 February, the LuLu Salalah retail chain opened a three-level outlet next to the Salalah Airport that will be the country's largest. The structure has more than 30,000 sq meters of retail space and features modern facilities including an extended food court, a children's amusement arcade, several international brand shops, a department store and a supermarket.
LuLu is the largest hypermarket chain in the GCC, with local media reporting in February that it has a regional market share of around 35% and combined footfall across its stores of more than 425,000 people per day. "We will be opening more hypermarkets in both existing as well as new markets in Oman and other GCC countries within the next few months," LuLu Group's managing director, Yusuffali MA, commented during the opening ceremonies.
The construction firm that built the new store, Teejan, is currently working on a new LuLu hypermarket in Buraimi, Oman, near the border with the UAE, which will be the biggest in the GCC, with an area of 31,000 sq meters and a total project value of $25.9m.
The LuLu opening follows the launch of another three-level outlet, the Mars Hypermarket, in the capital, Muscat, with a total area of approximately 3700 sq meters. Mars also plans to open outlets in additional cities by 2012. Company officials have said that a store in Barka is in its final stages. "Mars Hypermarket is commencing its business from Muscat's thickly populated residential and commercial area. This is going to be their sixth retail outlet in the sultanate and eighth in the GCC," VT Vinod, the managing director, told local media.
Other retail developments in Oman include the opening of several new outlets at the Muscat City Centre. Marks & Spencer, plus three other fashion retailers, are adding the final touches to new branches. In addition, international bank HSBC has opened its largest customer service outlet in the same shopping centre.
In a move that should buoy the spirits of local shoppers, a royal directive was issued on February 26 to establish an independent authority for consumer protection. Local organizations concerned with consumer rights currently include the Oman Association for Consumer Protection (OACP) and the Consumer Protection Department (CPD) at the Ministry of Commerce.
The OACP is an independent, non-profit, non-governmental organization founded in 2003. Its areas of activity include protecting consumers against unfair or deceptive practices and educating people about the quality, safety and pricing of goods. The OACP handles complaints from consumers, organizes educational conferences and disseminates brochures and publications.
The CPD is generally responsible for monitoring markets and supervising prices. Last September, there were complaints that traders were manipulating food prices in the days and weeks preceding Ramadan. Specifically, there were allegations that vendors were hoarding products to sell them at inflated prices during the holiday. At a meeting organized by the Oman Chamber of Commerce & Industry, traders and representatives from the CPD met to discuss food prices.
Following the announcement of the royal directive, Jai Savli, vice-president at Galfar Engineering and Contracting, told local media that the establishment of the new independent consumer protection authority was a "bold and much-desired move", adding, "I trust this will encompass all avenues of consumer interests in terms of prices, quality, availability and promotion related advertising issues."
In light of the recent increases in food prices – a phenomenon that has affected markets around the world – there have been questions as to whether the proposed authority will be able to investigate this area as well. "One hopes that the new body will have statutory powers to intervene if the consuming public is faced with unjustified price increases of staple foods and other essentials," Hafidh bin Saif, an engineering consultant, told the Oman Observer. Consumers in Oman stand to benefit greatly from the recent developments. Not only will more outlets be available, they will also enjoy greater protection from the government. With prospects for the domestic economy looking up in light of the steady recovery in global markets and the recent increase in oil prices, local shoppers should have more money in their pockets to spend as well. (OBG 09.03)
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11.13 OMAN: On Track
Oman is pushing ahead with plans to deploy a nation-wide rail network, with this excepted to boost the economy by expanding logistics capacity and linking up the Sultanate's ports and production centers. On 31 January, Salim bin Mohammed Al Affani, director-general for physical planning at the Supreme Committee for Town Planning (SCTP) – the state body charged with overseeing the development – told local media that contracts for route design and project management would be awarded by June, with the first services scheduled to begin operations within six years.
"A tender document for pre-qualified firms will be issued soon," he said. "It will take two years for the consultants to design the railway route and another four years to complete construction work." Although Al Affani expects operations on the Sohar-Muscat route to begin by 2017, it will "take more time to complete" the remainder of the 1500-km network.
While fast-moving passenger trains – with speeds up to 350 km per hour (kph) – are likely to catch the public eye, it is the freight component of the planned rail system that is expected to be particularly important for the Omani economy – not to mention profitable.
Under the broad criteria set out by SCTP, freight trains will be required to haul loads of some 10,000 tonnes at speeds of between 80 and 120 kph. Officials project that the railroad, once fully operational, will carry approximately 11m tonnes of freight between Sohar and the UAE, while lines connecting Muscat with Duqm and Salalah together will account for about 7m tonnes. At least six major freight yards have been proposed at strategic points along the network, with cargo-handling facilities to be established at Sohar, Barka, Al Misfah, Ibra, Sinaw and Buraimi.
Given the country's increasing industrialization, coupled with the rapid growth of the mining sector, the transport of heavy cargo is becoming more crucial to the expansion of the economy. Of course, for the Omani rail network to reach its full potential, the country's neighbors will need to keep their own railway projects – interlinking parts of the wider GCC rail network – moving ahead as well.
The planned link between Oman and the UAE is expected to be operational by around 2017, with the lines there part of the region-wide network. When the project is completed, the bloc's six member states – Kuwait, Oman, the UAE, Saudi Arabia, Qatar and Bahrain – will be connected by a railway stretching more than 2100 km.
However, it is uncertain whether the connection to the UAE will be completed by 2017. Media reports in early 2010 said that preliminary contracts for the project would be awarded within 12 months, but it was not until December that the deadline was set for the network's initial operations.
In addition, Oman could be at odds with its GCC partners over its preference for electric-powered trains – a choice based in large measure on environmental concerns – rather than diesel as proposed by the other five Gulf countries. Changing from one type of engine to another when crossing Oman's national borders would add to travel time and reduce the overall compatibility of the regional network.
With the decision to have the entire network electrified, Oman will also have to make further investments in its power generation capacity to maintain the current needed to drive the system, although an expansion of the electricity grid and power stations is already under way.
Located at the entrance to the Gulf with access to the Arabian Sea and the Gulf of Oman, the Sultanate is well placed to serve as a trans-shipment and logistics base for the region. Moreover, as any rail link to the UAE and beyond would bypass the narrow Strait of Hormuz, this land-based option would also offer a secure alternative route for exports.
An efficient rail network could well become a highly profitable operation, with particular benefits for the transport sector. If the broader GCC network is realized according to plan and the links are utilized to their full extent, Oman's planned railway should help to boost the economy while strengthening the country's logistics capabilities. (OBG 14.03)
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11.14 SAUDI ARABIA: Registers Set To Ring
The retail sector in Saudi Arabia appears set for solid medium-term growth, with sales and turnover expected to rise steadily in the coming years as the public begins benefitting from a greater range of product lines and more shopping centers.
The Oxford Business Group says the Kingdom's economy is forecast to expand by between 3% and 4% in 2011, with GDP expected to grow by a similar rate until at least the middle of the decade. Increased disposable income, along with higher consumer confidence, should flow directly into the sector, with analysts predicting the total retail spend in Saudi Arabia will rise to around $100bn by 2013, well up on the $75bn in outlays in 2008.
To help cater to this increased spend, most of Saudi Arabia's major cities are expected to see a strong increase in retail space in the coming years, with the capital, Riyadh, alone expecting an additional 600,000 sq meters or more on top of the existing 2.3m sq meters of leasable area by 2014. Much of this space will come through developments in the suburban areas of the city, reflecting the focus on decentralized living and the government's efforts to improve residential stock, trends that are being mirrored in some of the Kingdom's other large urban centers.
Saudi retailers have benefitted from the increasing urbanization of society, with some 90% of the nation's population now living in cities, meaning that large-scale sales outlets, like malls, typically have a sizeable customer pool within their catchment area. Moreover, shopping malls and their associated food courts and recreational facilities play a larger role in the Kingdom than that of simply commercial outlets – they are also focal points for social activity.
The findings of a recent study by the UN is also of significance for local retailers, with the report showing that some 65% of the Saudi population will be economically active by 2015, with around 46% of them in the key 20-to-44 age bracket, the peak spending demographic. Another study, issued in late February by the UK-based market research consultancy ICD Research, said that the Saudi shopping sector was still dominated by specialist retailers, which accounted for a 62.6% share of sales, with general retailers representing 28.1%.
According to an end-2010 report by property consultant Colliers International on the retail sector in the Middle East and North Africa, regional retailers were "more concerned about ensuring that each brand is perfectly matched to their mall location and are questioning issues such as market positioning, shopper profile, store location, footfall and centre management". The report stated that Saudi Arabia's retailers had taken these concerns into account, with Colliers predicting a strong performance from local retailers, as the country's shopping malls become more competitive and better serve the internal market. It also said that a shift towards community or neighborhood developments was expected to occur, which would help boost different retail formats.
According to the ICD study, the retail market in Saudi Arabia is dominated by the food and grocery segment, which represented 47.2% of total sales, while clothing, accessories and luxury goods are next in the shopping queue. These findings illustrate that unlike some of its neighbors in the Arabian Gulf, the Saudi retail sector is geared towards meeting the needs of a domestic clientele, rather than foreign visitors. Instead of the "build it and they will come" philosophy that seems to have been the norm in some states in the region, resulting in a massive oversupply of floor space, Saudi developers have adopted a market-driven approach that aims to keep just ahead of demand while preparing for the sector's future requirements. (OBG 14.03)
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11.15 YEMEN: Yemen's Road to Economic Turmoil
Gulf News wrote on 8 March that Yemen's economic growth is weak, inflation is high and the employment scenario is grave, with the jobless rate on the rise. There are no projects that could possibly provide a start to tens of thousands of jobless people. The budget deficit is big, too.
All these issues have become catalysts for massive demonstrations against government policies in many of Yemen's major cities, protests that have since acquired strong political overtones, with demands for a change in the regime gaining currency.
Yemen, the Arabian peninsula's poorest country, has a per capita income of $2,600 and per capita GDP growth was a mere 0.9% between 2004 and 2008, according to the 2010 Legatum Prosperity Index. A World Gallup Poll in 2009 reported that a high proportion of people could not afford food and shelter for their families - only 53% were happy with their standard of living.
Not surprisingly, the country has been witnessing protests against deteriorating economic conditions over the last few years. While the number of people taking part in mass protests in Yemen is significantly lower than in Tunisia and Egypt because of its relatively tiny middle class, mass protests in all the Arab countries share one aspect in common. That, according to Abdul Gani Al Iryani, a Yemeni development consultant with various institutions including the World Bank, is: "It reinstates the people's confidence in themselves and in their ability to change."
Hopelessness triggered it all, says a former government official. "The economic situation is at the heart of the [current] crisis [in Yemen]," said Saif Al Assali, Yemen's former finance minister, in an interview with Gulf News. "People have lost hope in any improvement in their standards of living and their future. [But] the general political atmosphere in the region has helped the Yemenis to go to the streets in such a way and call for a change," he added in reference to the protests around the region.
Al Iryani believes economic reforms have remained a cover for the regime's self-interest all these years. "It became an inevitable necessity for the regime to stay in power," he told Gulf News in an interview.
Political Hurdles
However, he reckons, the reasons for not introducing the necessary economic measures were political and underline the need for political reforms. Saif Al Assali complained that "fleets of corruption established in government and other influential centers" fought him when he tried to introduce reforms.
Regional political developments over the past decades further complicated the already-weak Yemeni economy. The 1990-1991 Gulf war was one which led to the return of nearly one million Yemeni workers from the Gulf countries, mainly Saudi Arabia, and that meant a huge loss in terms of their remittances. The other factor was Yemen's civil war of 1994 that drained the economy. In 1997, the Yemeni government was forced to go to the International Monetary Fund (IMF), with which it reached an agreement to increase Yemen's credit and put it on the path of economic reforms.
Under the agreement, the government introduced a slew of unpopular measures such as a reduction in civil service payrolls, elimination of diesel and other subsidies and the introduction of a general sales tax.
Short-Lived Aid Schemes
However, because of the limited progress in implementing economic reforms and Yemen's "failure" to comply sufficiently with the terms imposed by the IMF, the fund suspended its funding of the reforms. The World Bank extended a four-year $2.3 billion economic support package to Yemen in 2002 but this aid initiative met the same fate as the IMF project. As a consequence of Yemen's failure to implement significant reforms, the World Bank announced it would reduce financial aid by one-third over the period starting from July 2005 to July 2008. In late 2006, a meeting of Yemen's development partners pledged $4.7 billion in grants and concessional loans from 2007 to 2010.
Today, the country still faces considerable pressure to implement economic reforms or face the consequences of losing international financial support. With the recent protests, calls to introduce political reforms have intensified.
Several important economic indicators, provided by experts and economists, betray a bleak scenario for the country. According to official figures, unemployment in the country of 23 million hovers around 35%. Unofficially, it is much higher. Nearly half of Yemen's children suffer from malnutrition, close to 40% of the population exists under the absolute poverty line, the budget deficit is around 11%, inflation has reached 20% and is likely to rise further, the country's reserves are diminishing, and the local currency suffers from instability.
"What is more dangerous is that there are no plans on the ground, neither ideas nor projects that show a movement in the right direction," Al Assali said. "Even if we think now of introducing economic reforms, they need one or two years to bear fruit, assuming there is sincerity in our work."
So far, separate offers pitched by the government and the protesters to defuse the tension on the streets have not been accepted by the other side. These proposals include the framing of a new constitution and forming a new government. With politics taking precedence over economics amid the ongoing turmoil, an economic package did not even merit consideration. But even if there was a plan aimed at alleviating the suffering of the people, economists differ in their expectations and outlook.
Having observed it closely over the past few years, Al Assali has no hope for the current government. "It can't keep its promises and can't do anything because it has used all its chances. It can't be sincere in its promises. If it was able to do something, it would have done so in the past five years," Al Assali said. Improving living conditions requires "changing faces, because soiled hands won't work".
To add to the government's insincerity, corruption is a major factor in the crisis whether one looks at it economically or politically, Al Iryani said. Any economic offer now "will be too little too late," he said.
Politics is being looked upon as the agent of economic change. Now, what is required is "devolution of power in a meaningful way and creating constitutional safeguards that would prevent the concentration of power at the centre", Al Iryani said, adding that not all the protesters would be ready to accept such an exit given the belief that there is no substitute for a regime change.
The theme of protests in many Arab countries, including Tunisia and Egypt, was regime change. However protests in Yemen differ from demonstrations in other countries, including Algeria and Libya. "In Yemen, the middle class is very small, that is if it exists," according to Al Iryani. "It is a matter of degree, not a matter of quality."
The prominent Yemeni economist added that poverty is a result of the government's policies, which were designed to help the regime to keep its grip on the people. But the same policies led to economic stagnation and "lack of direct foreign investments", he said.
Foreign investment is the way out, Al Iryani believes. It would "lead to the emerging of a middle class that is independent economically and financially from the state, and this constitutes a threat to the total control", he said. Even if the current regime survives the ongoing unrest, it cannot continue ruling with its erstwhile attitude, according to Al Iryani. A comprehensive package of political, social and economic reforms is needed, he says. "Now, there is a need to distribute power in a meaningful way and create a constitutional safeguard that would prevent the concentration of power at the centre," he said. (GN 08.03)
11.16 LIBYA: Ratings Lowered to 'BB/B' and Suspended by S&P
On 10 March, Standard & Poor's Ratings Services (http://www.standardandpoors.com) said that it lowered its long- and short-term sovereign credit ratings on the Socialist People's Libyan Arab Jamahiriya (Libya) to 'BB/B' from 'BBB+/A-2' and removed the ratings from CreditWatch, where they were placed with negative implications on Feb. 22, 2011. S&P also revised the transfer and convertibility assessment to 'BB' from 'BBB+'.
Following these rating actions, S&P suspended its ratings on Libya due to the imposition of sanctions and because of a lack of reliable economic and political information.
The downgrade reflects heightened political risk, sharply reduced economic output, and uncertainties stemming from a possible regime change, all related to the outbreak of civil war in Libya and the imposition of international sanctions.
We understand that the Libyan central government has neither commercial debt (foreign or local currency) nor sovereign guarantees on the debt of public enterprises or other entities. We believe that the government will not have access to external borrowing because of international sanctions or domestic borrowing because of Libya's undeveloped financial markets. Therefore, we do not believe that the risks of a government default currently exceed those consistent with a 'BB' rating.
The rebellion against the Qadhafi government seen in Libya's eastern region, and particularly the city of Benghazi, which started in mid-February, has escalated into a civil war. The country is divided between the pro-Qadhafi contingent, centered in Tripoli, and the anti-government forces.
The U.S., EU countries and the U.N. have imposed sanctions on Libya. These include the freezing of assets held or controlled by Colonel Muammar Qadhafi, his family, and close advisers, as well as by the Libyan government, central bank, and the sovereign wealth fund (Libyan Investment Authority).
We believe that these sanctions will make financing of any budget deficit or current account deficit difficult or unfeasible. We expect that this, coupled with a sharp drop in oil production from foreign operators, will place severe economic pressure on the Qadhafi government. The longer the civil war carries on, the greater the damage to Libya's economy and public finances.
We are suspending our 'BB/B' ratings and 'BB' transfer and convertibility assessment on Libya due to the imposition of international sanctions which effectively preclude us from maintaining sovereign ratings on Libya and because of a lack of political and economic information. Going forward, if we are able to receive information from official and other sources that we deem sufficient and reliable, and if international sanctions are lifted, we could reinstate the sovereign ratings on Libya. (S&P 10.03)
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11.17 TUNISIA: Fitch Downgrades Tunisia to 'BBB-'; Negative Outlook Ratings
On 02 March, Fitch Ratings (http://www.fitchratings.com) downgraded Tunisia's Long-term foreign currency Issuer Default Rating (IDR) to 'BBB-' from 'BBB' and Long-term local currency IDR to 'BBB' from 'A-' and removed the ratings from Rating Watch Negative (RWN). The Outlooks on the IDRs are Negative. The agency has also downgraded Tunisia's Country Ceiling to 'BBB' from 'BBB+' and Short-term foreign currency IDR to 'F3' from 'F2'.
"The downgrades reflect uncertainties about Tunisia's stability and economic policy during a difficult political transition," says Charles Seville, Director in Fitch's Sovereign Ratings Group. "Although the transition to democracy could well improve confidence in the long term, political upheaval has worsened the short-term outlook for the economy, public finances and financial system."
The Negative Outlook is largely based on the political uncertainty. The interim government, under new prime minister Beji Caid Sebsi, a veteran consensus figure, may prove more durable than its predecessor. However, Fitch believes that there is a risk that Tunisia's first fully democratic elections (scheduled in July) will fail to produce a stable government with a strong mandate that can implement responsible economic policies and inspire investor confidence. The overthrow of the former regime has raised expectations, but any new government will face similar economic challenges, most significantly, high youth unemployment.
The economy appears to be largely functioning normally, apart from disruption by strikes. Nevertheless, Fitch expects the economy to grow by only 1% - 2% in 2011, much lower than the 5% forecast in late 2010 as a result of lost output stemming from the unrest and the impact on tourism and investment. However, Tunisia has demonstrated macroeconomic stability in the face of previous shocks.
Public finances have remained well under control in recent years, but the fiscal deficit will widen in 2011 and the effects on revenue will linger into 2012 as the dent in corporate profits will show up in next year's tax revenues. Extra spending plans announced by the government for compensation, benefits and regional development will clearly exceed the contingency amount in the budget of 0.6% of GDP. Spending on subsidies will also breach the ceiling set by the former administration, especially with global oil prices rising. The long-established gradual decline in Tunisia's debt/GDP ratio may therefore end or even reverse, and is likely to remain under pressure.
Downside risks to the financial sector have increased. The Central Bank of Tunisia (BCT) has disclosed that commercial banks lent TND2.5b to companies connected to the former ruling family, equivalent to 6% of credit to the private sector. This portion of the loan book has become more risky. Non-performing loans (NPLs) are likely to increase from their present level of 12% of assets, partially reversing their reduction in recent years. Two banks are under BCT administration, Banque Zitouna and Banque de Tunisie, but there has been no solvency support from the government.
Fitch notes that the government faces external bond repayments equivalent to $750m in April and September 2011. It expects the government to meet these repayments from sovereign foreign currency deposits held at BCT of $1.5b. Since 14 January, the government has continued to issue treasury bills on the local market.
The exchange rate is a managed float and has remained stable. Foreign exchange reserves, published on a daily basis, have also remained relatively stable since end-2010, within the historical range of 3-4 months of current account payments, suggesting currency pressures have been limited. The current account deficit will widen in 2011, mainly due to lower tourism inflows. However, capital controls and low private sector foreign borrowing reduce Tunisia's vulnerability to external financing difficulties. The governor of the BCT has also raised the possibility of seeking multilateral assistance, although there is no immediate need.
Deterioration in political stability, or concerns over economic policy, could warrant a downgrade, as could problems in the financial sector. A successful election in July, resulting in a stable government, or evidence that public finances and the economy are less affected than feared, would likely result in a revision of the rating Outlook to Stable. (Fitch 02.03)
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11.18 ALGERIA: On the Right Track
The Oxford Business group reported that the Algerian transport sector is picking up speed, with a host of forthcoming urban tram and metro projects set to help alleviate traffic in cities, alongside significant new investments in airport infrastructure and aircraft that aim to improve access to the country's more remote areas. Road transport, particularly private cars and taxis, has long been the dominant form of passenger transport in both urban and rural parts of Algeria.
With an ever-growing number of cars on the road –car imports rose by 3% in 2010 to 285,000 – traffic has become a problem in many areas, especially in and around Algiers. However, with several tram and metro projects scheduled for completion in 2011, traffic on the capital's roads may well ease in the near future, generating a host of positive knock-on effects for the local economy.
Prime Minister Ahmed Ouyahia announced in November last year that the long-delayed, 20-km Algiers metro line is expected to open in 2011, though a firm date has not been set. Some observers have expressed skepticism given previous delays, arguing that the project has been in the pipeline since the 1980s. Transport minister Amar Tou said that construction of the metro was effectively suspended until 2003, but that it will be completed within its budget of €885m.
The first part of the Algiers tram system is also due to open in April, following the announcement in late 2010 by French company Alstom that construction of the section was complete. The 8.7-km stretch of line will run between the Cinq Maisons and Bordj El Kiffan areas in the east of the city. The contract for the tram system was awarded in 2006 to a consortium comprising France's Alstom, Italy's Todini and Algerian firm ETRHB in 2006 at a cost of around €365m. When completed, the entire network will feature 23 km of track and 38 stations.
Work has also begun on the installation of tram lines in the country's second-largest city, Oran, in the west – where 7 km of track had been laid as of November last year – and in the eastern city of Constantine. In February, Entreprise du Metro d‘Alger (EMA) launched a tender for a feasibility study of a potential extension of the Constantine line to the nearby town of Ali Medjeli. Studies are also under way for tram lines in 14 other cities, including Jijel and Skida, as part of the €231b 2010-14 five-year investment plan announced in May last year, which includes €30.6b for transport infrastructure. In line with this, the government has launched tenders for studies of tram projects in Annaba and Setif.
Keen to develop local industry, the government has worked to ensure that as many of the components of new public transport infrastructure as possible are made in Algeria. In keeping with this policy, in November last year Alstom, Algerian state-run company Ferrovial and EMA signed an agreement to establish a joint venture for the maintenance of tram tracks and the assembly of tram and rail locomotive engines and carriages. Alstom is taking a 49% share in the venture, while Ferrovial and EMA are holding stakes of 41% and 10% respectively. The companies are collectively investing AD2.1b (€21m) of capital in the joint venture, which will be based at a factory belonging to Ferrovial in the eastern city of Annaba. Operations are due to commence in 2013.
The air transport sector is also seeing significant new investment. Local press reported in February that, as part of the five-year plan, the government will invest €394m in improving airport infrastructure and upgrading technology. The money will be spent on around 30 projects, including reinforcing the surface of the main runway at Houari Boumediene Airport in Algiers and extending the runway at Setif airport by 500 meters. The investment will also see the construction of 24 heliports around the country.
Also in February, state-owned Air Algerie announced plans to spend €510m on modernizing and expanding its current fleet of 42 aircraft. The investment will include the acquisition of five large, 250-seat aircraft that will replace three Boeing 767s currently in use, expanding its long-haul fleet. The investment plan will also see the company buy four 70-seat aircraft to be used on domestic flights with a view to improving access to southern desert regions, and 11 150-seat aircraft. The firm, which intends to increase annual passenger numbers from 2008's 3.2m to 6m by 2014, is also expecting delivery of four Boeing 737s, which were purchased as part of a previous fleet expansion, during the course of 2011.
With more planes in the skies and trams and metro cars on the rails, the government hopes to keep Algeria moving, with a host of benefits expected from the state-backed infrastructure investment program, ranging from quicker travel times and less-congested roads to improved access to rural areas and easier commutes for urban workers. (OBG 07.03)
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11.19 GREECE: Moody's Downgrades Greece to B1 from Ba1, Negative Outlook
On 07 March, Moody's Investors Service (http://www.moodys.com) downgraded Greece's government bond ratings to B1 from Ba1, and assigned a negative outlook to the rating. The rating action completes a review that commenced on December 16, 2010. Moody's decision to downgrade Greece's rating is driven by three reasons:
1.) The fiscal consolidation measures and structural reforms that are needed to stabilize the country's debt metrics remain very ambitious and are subject to significant implementation risks, despite the progress that has been made to date.
2.) The country continues to face considerable difficulties with revenue collection.
3.) There is a risk that conditions attached to continuing support from official sources after 2013
will reflect solvency criteria that the country may not satisfy, and result in a restructuring of existing debt. Moreover, the risk of a post-2013 restructuring might lead the Greek authorities and investors to participate in a voluntary distressed exchange before that time. The negative outlook on the B1 rating reflects Moody's view that the country's very large debt burden and the significant implementation risks in its structural reform package both skew risks to the downside.
Greece's country ceilings for bonds and bank deposits are unaffected by today's rating action and remain at Aaa (in line with the Eurozone's rating). Greece's Non Prime (NP) short-term rating is also unaffected by this action.
Ratings Rationale
Moody's recognizes the very significant progress that Greece has made in implementing a large fiscal consolidation and introducing the legislation required to support a wide-ranging structural reform program. However, Moody's believes that the Greek government still faces a very significant challenge in its continued execution of the measures required to both increase revenue and achieve efficiency savings as part of the austerity program. Whether relating to improvements in the operating efficiency of state-operated enterprises, to the savings required in the health service or in military expenditure, or to the implementation of deregulation measures passed by parliament, the task facing officials and managers remains enormous. Moody's therefore continues to see large implementation risks to the government's reform plans and, while much of the enabling legislation has been passed, implementation progress has not been sufficiently rapid to mitigate the rating agency's concerns.
Secondly, government revenues have been slow to rebound, which is in part the result of a continued weakness in tax collection mechanisms that Moody's anticipates will improve only slowly. Moody's has long attached great importance to the implementation of measures to increase government revenues alongside the planned cost-cutting measures. As previously stated, the rating agency continues to place particular emphasis on measures to combat the endemic tax evasion that has contributed to the deterioration in Greece's creditworthiness. While the Greek government has made some progress with the collection of value-added taxes (VAT), Moody's notes that progress on income tax collection has been slower to improve -- indeed, revenue shortfalls recorded in 2010 contributed to the upward revision in the country's deficit projections for that year. Moreover, Moody's expects income tax collections to be adversely affected by significant administrative hurdles and by the inevitable resistance to tax compliance among parts of Greek society. Legislation to address these issues is currently before parliament, but will be challenging to implement, both because of human resource limitations (such as skills shortages) and because of vested interests that will be resistant to change.
The third driver of the rating action is the lack of certainty surrounding (i) the precise nature and conditions of support that will be available to Greece after 2013, and (ii) its implications for bondholders. Moody's acknowledges that the IMF and European authorities have expressed very strong support for Greece provided that the country follows through with this economic program. The rating agency's baseline assumption is that this support will continue to be forthcoming and that the Greek authorities will continue to do their best to comply with the conditions contained in the Memorandum of Understanding. However, public statements by European officials have suggested that additional liquidity support after 2013 would be conditional on a solvency evaluation, the result of which is uncertain at this point in time. If Greece were viewed as insolvent at this time, there is some possibility that private creditors would be expected to bear some losses.
Moody's also notes that discussions are reportedly underway among Eurozone policymakers on the design of a longer-term support mechanism, and those discussions may result in changes to the terms of credit provided to Greece by the Troika. Although such changes may reduce the pace and magnitude of the deterioration in Greece's debt affordability metrics, they are unlikely to have a very large impact on the overall debt burden, and would not therefore directly address the issues that are of greatest concern.
Moody's Central Scenario -- And What Could Undermine It
Moody's central scenario remains that bondholders will not bear losses. However, the rating agency believes that the likelihood of a default or distressed exchange has risen since its last downgrade of the Greek government debt rating in June 2010.
Moody's does not believe that continued liquidity support by the Troika and an event of default (including, but not limited to, a distressed exchange via a debt buyback) are mutually exclusive. The precise nature and conditions of future external support for Greece and their implications for bondholders are unclear, and may remain so, even after the greater clarity on permanent crisis resolution mechanisms is achieved. Moody's believes that, over time, the risks surrounding the implementation of the economic program may grow and a solution that requires private-sector creditors to bear losses may become more appealing. This view is reflected in the B1 rating just announced.
Over five-year investment horizons, around 80% of B1-rated sovereigns, non-financial corporates and financial institutions have consistently met their debt service requirements on a timely basis, while around 20% have defaulted.
What Could Change the Rating Up/Down
A further downgrade could follow if the Greek government's commitment to the austerity program were to appear to weaken, or if the Troika's willingness to provide support were to start diminishing.
Conversely, an upgrade could follow if the probability of a default event were judged to be diminishing in likelihood and the pace of fiscal consolidation were to proceed more rapidly than Moody's currently expects -- for example, through the receipt of large amounts of privatization revenues, or if positive surprises to tax receipts were to reveal strong progress in the government's fight against tax evasion. If the Troika were to extend long-term fiscal support to Greece, without imposing losses on bondholders, this could also lead to an upgrade.
Previous Rating Action and Methodology
Moody's previous rating action on Greece was implemented on 16 December 2010, when the rating agency placed Greece's government bond ratings on review for possible downgrade. Prior to that, Moody's last rating action on Greece was taken on 14 June 2010, when the rating agency downgraded Greece's government bond ratings Ba1 from A3 and assigned a stable outlook.
The principal methodology used in this rating was Sovereign Bond Ratings published in September 2008. (Moody's 07.03)
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11.20 GREECE: IMF Completes Third Review Under Stand-By Arrangement
On 14 March, the Executive Board of the International Monetary Fund (IMF) today completed the third review of Greece's economic performance under a program supported by a three-year Stand-By Arrangement (SBA) for Greece. The completion of the review enables the immediate disbursement of an amount equivalent to SDR 3.6 billion (about €4.1 billion), bringing total Fund disbursements under the SBA to an amount equivalent to SDR 12.725 billion (about €14.6 billion).
The SBA, which was approved on May 9, 2010, is part of a cooperative package of financing with Euro area member states amounting to €110 billion over three years. It entails exceptional access to IMF resources, amounting to more than 3,200% of Greece's quota.
Greece's economic program has made further progress toward its key objectives of putting the economy on a path of sustainable growth by boosting competitiveness, strengthening financial sector stability and securing sustainable public finances. The underlying fiscal and broader reforms necessary to deliver the program's medium-term objectives are gradually being put in place, although some major reforms still need to be designed and implemented to build a critical mass necessary to underpin fiscal sustainability and economic recovery.
Following the Executive Board's discussion, Mr. John Lipsky, First Deputy Managing Director and Acting Chair, said:
"Further progress has been made toward the economic program's objectives. Output remains close to the targeted path, underlying inflation remains low, unit labor costs are falling and significant fiscal adjustment is under way. Overall, a measure of stabilization has been achieved.
"Greater emphasis on underlying reforms will be needed during the period ahead. While the 2010 fiscal target was met, the strategy of under-executing the state budget to offset revenue shortfalls and overspending at sub-national levels cannot be sustained.
"To help put the fiscal adjustment on a firmer foundation, it will be important to complete by May a medium-term budget strategy. Ensuring a fair distribution of the adjustment burden remains paramount, and the dialogue with social partners in this process is welcome. Implementation should begin during 2011 to address a projected budget gap. In parallel, the government should redouble efforts to combat tax evasion and control spending, especially at the local government level.
"To support the recovery, structural reforms need to be deepened. Legislation to liberalize regulated professions needs to be fully implemented, as do reforms pertaining to collective bargaining and the pension system. Important next steps include reducing administrative barriers to exports and formulating a strategy to unlock potential in the tourism sector.
"The government's commitment to scale up its privatization and real estate development program is timely. More efficient use of state assets will support the fiscal adjustment efforts, promote growth and employment, and help Greece retire maturing debt.
"The financial system remains stable, and time will be provided to allow banks to deleverage and restructure in an orderly fashion. Capital support through the FSF remains available to viable banks if necessary.
"The authorities are to be commended for their commitment to this ambitious program, which will help Greece return to growth and prosperity," Mr. Lipsky said. (IMF 14.03)
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