TOP STORIES

• Israel Drafts Multi-Faceted Plan to Fight Women Trafficking
• U.S. Now Leading Food Destination of Israeli Products
• Illinois Economic Delegation Visits Jordan
• Israel Enjoying Longest Growth Period In Its History
• Ankara Unveils Economic Action Plan for Last Quarter Of 2007

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Knesset Finance Committee Receives Finance's Budget Proposal
1.2 Israel Drafts Multi-Faceted Plan to Fight Women Trafficking
1.3 Israel's Adoption of Negative Income Tax Mired In Bureaucracy
1.4 Knesset Gets Economic Arrangements Bill For 2008

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Israel & Egypt to Boost Exports to US
2.2 LivePerson Completes Acquisition of Kasamba
2.3 ICAP Agrees to Acquire Traiana
2.4 U.S. Now Leading Food Destination of Israeli Products
2.5 Frutarom Acquires Germany's Gewurzmuller & Blessing Biotech
2.6 Sales of Organic Foods Soar in Israel
2.7 Israeli Food Market Grows to $8.6 Billion
2.8 Zion Oil & Gas Awarded Joseph Exploration License
2.9 DHL Strengthens Presence in Israel Acquiring Flying Cargo
2.10 Intel Capital Invests $11 Million in Jordan Valley Semiconductors
2.11 Acro Signs a Non-Binding Letter of Intent to Acquire RAY Detection Technology Group

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Illinois Economic Delegation Visits Jordan
3.2 Syniverse Wins Saudi Telecom Anti-Fraud Contract
3.3 Arabic Computer Systems to Support GigaTrust Solutions in Saudi Arabia
3.4 Oshkosh Truck to Provide 35 Heavy Equipment Transport Vehicles to Egyptian Ministry of Defense

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 Israel Enjoying Longest Growth Period In Its History
4.2 Stanley Fischer Named One of World's Seven Leading Bankers

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Iraq Budget Targets Water & School Investments
5.2 Inflation Takes Some Luster Off Qatar's Economy
5.3 IMF Upbeat on UAE Economy, Warns About Inflation
5.4 $61 Billion Arabian Canal to Reshape New Dubai
5.5 Dubai Metro Works Going As Per Schedule
5.6 Oman Decides Against Foreign Exchange Peg Shift
5.7 Oman August Inflation Hits Highest In 16 Years
5.8 Saudi Non-Oil Exports Worth $21.1 Billion In 2006
5.9 Pakistan's July-September Trade Deficit At $3.6 Billion

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:

6.1 Turkey's CPI Below Consensus With 1.03%
6.2 Ankara Unveils Economic Action Plan for Last Quarter Of 2007
6.3 Turkish Household Debt Exceeds 25% Of Revenue
6.4 Athens Stays Firm on Decision to Keep Olympic Airlines Alive

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7: GENERAL NEWS AND INTEREST

7.1 Turkey Celebrates Republic Day - Cumhuriyet Bayrami
7.2 Turkish Referendum Crisis May Be Averted

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Teva Announces Approval of Generic Actonel
8.2 BrainStorm on the Verge of a Breakthrough Towards Developing a Cure for Lou Gehrig's Disease
8.3 Oridion Launches its Fully Integrated Remote Monitoring System & SARA Software
8.4 BioLineRx Investigates Raising Additional Capital & Listing on the NASDAQ

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 ECI Telecom Enhances Hi-FOCuS MSAN with New Traffic Management Capabilities
9.2 Operax & Orca Interactive Integrate Technologies, Bringing QoS to IPTV
9.3 Media Layers & Unisurf Launch Israel's First Commercial Off-Portal Mobile Advertising Service
9.4 Alvarion Chosen by Ertach Argentina for Its First Mobile WiMAX Technology Trial in South America
9.5 Gilat's Spacenet Rural Communications Provides Connectivity to Peru Following Earthquake
9.6 Shanghai Pudong International Airport Places a 7-Digit Order for NICE's IP-Based Video Solution
9.7 Optibase IPTV Encoding Platforms Will Be Installed at Bharti Airtel, India
9.8 TraceGuard Completes Second Pilot Program of CompactSafe System at Ben Gurion Airport
9.9 Microsoft Certifies Voltaire InfiniBand Solutions for Windows
9.10 Horizon Delivers Revolutionary Single Chip Native 1080/60p High Definition Transcoder

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's CPI Declined By 0.5% in September
10.2 Israel's Budget Surplus Continues To Rise
10.3 Nearly 1 Million Passengers Pass Through Ben Gurion During September
10.4 Number of Jobseekers Fell In August
10.5 Israel's Venture Capital Investments Grow in First Half of 2007
10.6 September's Most Stolen New Vehicle in Israel San Yang Motorbikes & Mazda Cars

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In Depth

11.1 Summary of Israeli High-Tech Company Capital Raising Q1-Q3/2007 Survey
11.2 Moody's Issues Annual Report on Jordan
11.3 LEBANON: Making Easy Work of Business
11.4 BAHRAIN: Concrete Ties
11.5 QATAR: Building Integration
11.6 ABU DHABI: Media and Entertainment
11.7 UAE: No. Emirates - Catching the Sun
11.8 UAE: N. Emirates - Healthy Industry
11.9 OMAN: Looking to Curb Inflation
11.10 SAUDI ARABIA: Record Surplus
11.11 EGYPT: Economy Plain Sailing?
11.12 EGYPT: World's Top Reformer
11.13 MOROCCO: Politics - King's man
11.14 TURKEY: Construction Abroad

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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Knesset Finance Committee Receives Finance's Budget Proposal

The 2008 budget was presented to the Knesset Finance Committee by Finance Minister Bar-On on 8 October. The House is slated to approve its first reading shortly thereafter, and second and third readings by the end of December. During the committee meeting the treasury's director general noted that exports would be somewhat adversely affected by the U.S. sub-prime crisis. The deputy director of budgets said that although the economy is in the midst of one of the longest positive business cycles in Israel's history, it was felt that there are also some worrisome signs of a slowdown in the next years. The 2008 budget will be $75.375b, exceeding $75b for the first time. According to the proposed budget, the economy will grow at a rate of 4.2% next year, and private consumption will increase by 4.3%, while public consumption will go up by less than half of that - 2.0%. Employment rates will increase from 56.5% in 2007 to 57.2%, and unemployment will drop from an average of 7.5% this year to 7.2 in 2008. The budget contains two sections: the regular budget of $54.1b, and the development and capital accounts budget totaling $21.275b. The 2008 budget expenditures will be 1.7% higher than in 2007. The defense budget constitutes the largest slice from next year's huge budget, at $12.625b (including U.S. assistance). The Education Ministry's budget for next year will be $6.9b and $1.525b is to be allocated to higher education. (Various09.10)

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1.2 Israel Drafts Multi-Faceted Plan To Fight Women Trafficking

Jerusalem has formulated a multi-faceted plan to fight trafficking in women. Under the plan, it will work to prevent foreign women from being sold into prostitution in Israel, reduce prostitution here and keep Israeli women from being sent abroad to work in the sex industry. The plan was prepared by a committee including the directors general of nine government ministries, and representatives of the police and anti-women trafficking organizations. Five teams are now being formed to draft operative steps for the next several months and to calculate the budget needed. The plan includes 30 measures of prevention, enforcement and protection. It seeks to make monitoring the border with Egypt a top priority - that is where most foreign women are brought into Israel. Under the plan, the women would be returned safely to their country of origin and would receive medical treatment in Israel if necessary. A PR campaign is to be launched in Israel and in the women's home countries in order to explain the implications for victims of human trafficking. The committee also recommended more economic measures to limit profits from human trafficking, in part by involving police tax-fraud investigators. The committee also noted that resources are necessary to translate the testimonies of victims and to enable proper police questioning, so that their handlers can be prosecuted. Due to increased enforcement and prevention, current estimates state that less than 1,000 women are trafficked into Israel a year. (Various04.10)

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1.3 Israel's Adoption of Negative Income Tax Mired In Bureaucracy

The negative income tax reform is reported by Globes to be stalled due to a dispute between the Ministry of Finance and Finance Committee chairman MK Misezhnikov (Yisrael Beitenu). Their main disagreement concerns the age cut-off for eligibility: Misezhnikov wants to include people over 45 with children over 18, while the Ministry of Finance wants to apply the initiative on families earning less than half the minimum wage and with children under the age of 18. As a result of the dispute, the negative income tax will not be submitted to the Finance Committee in the coming weeks. In response to media reports that the parties had reached an agreement, Misezhnikov said that the reports would actually delay an agreement. Globes 14.10)

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1.4 Knesset Gets Economic Arrangements Bill For 2008

The government today submitted the 2008 economics arrangements bill to the Knesset, one week after submitting the NIS 314 billion 2008 budget bill. MKs have been given a 48-hour extension to study the economics arrangements bill and are due to hold a plenum debate on both bills on 17 October. Each MK may speak at the dais in favor or against the budget. A separate first vote will then be held on the budget bill and economics arrangements bill. The debate will likely continue through midnight and the first vote will only be held on 18 October, when the Knesset usually is not in session. The 2008 economics arrangements bill includes most of the items included in the original version. This include an NIS 86 monthly health tax on housewives, cancellation of the long school day, delaying the rise in the minimum wage to NIS 4,600 a month, cancellation of the construction of a new hospital in Ashdod, abrogation of the Eilat Law, a NIS 1 billion cut in government mortgage aid and its transfer to the banks and capital market, a cut in housing aid to immigrants, and cancellation of the NIS 100m location loan. The bill also includes a NIS 6 billion budget cut, in part to cover a NIS 1.3 billion supplement for defense as promised by the Brodet committee. The 2008 economics arrangements bill also includes the following reforms: privatization of the Postal Bank and converting it into a commercial bank, privatization of the Israel Police 100 emergency call center and traffic report center, increased competition in the cellular market by granting mobile virtual network operator (MVNO) licenses, and the elimination of barriers to Internet access. (Globes 15.10)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Israel & Egypt to Boost Exports to US

On 11 October, it was announced that Egypt and Israel are to lower the threshold of Israeli components required in Egyptian products for them to be exported to the United States duty-free. The deal aimed at boosting exports from so-called Qualifying Industrial Zones (QIZ) was signed by Egyptian Trade Minister Rashid during a visit to Cairo the same day by his Israeli counterpart Minister Yishai. This agreement will reduce the proportion of Israeli components from 11.7% to 10.5%. Egypt enjoys the exemptions under a Qualified Industrial Zones (QIZ) agreement signed with Israel and the United States in 2004. The aim was to promote economic cooperation between Israel and Egypt and help Israeli companies export. Since the agreement came into effect in February 2005, 203 Egyptian-based companies have exported to the United States eligible goods worth $1.28b. The two sides also signed a letter to the U.S. Trade Representative requesting the designation of eight new QIZ areas in Upper Egypt, the south of the country. Most products exported from Egyptian QIZ factories are textiles. (Various09.10)

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2.2 LivePerson Completes Acquisition of Kasamba

LivePerson announced the completion of its acquisition of Kasamba (http://www.kasamba.com), an Israel based leading online provider of live expert advice delivered to consumers via real-time chat. LivePerson has acquired all of the outstanding capital stock of Kasamba in exchange for approximately 4.1 million shares of LivePerson common stock and $9m in cash. LivePerson will also assume approximately 624,000 outstanding options as part of the transaction. Accelerating LivePerson's expansion into the business-to-consumer market, the acquisition extends the value the company delivers to its growing base of business customers through a community that will connect consumers with experts in a broad range of categories. This community can provide a central forum where consumers can interact with experts, existing LivePerson customers and trusted advisors to make more informed online buying decisions. Kasamba has created one of the world's largest communities of chat-based paid experts, with more than a million monthly site visitors. The acquisition solidifies LivePerson's commitment to expand its global presence as a leader in real-time online solutions, through a direct link with online consumers seeking trusted expert advice. LivePerson will issue shares of its common stock to Kasamba's shareholders in a private placement. LivePerson is a provider of online conversion solutions. LivePerson is headquartered in New York City with a development office in Tel Aviv, Israel. (LivePerson03.10)

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2.3 ICAP Agrees to Acquire Traiana

The UK's ICAP, the world's premier interdealer broker, has agreed to acquire all of the share capital of Traiana. Traiana is a private company and a leading provider of automated post-trade processing services to financial institutions. The agreement is conditional on regulatory approval. The consideration for 100% of the share capital of Traiana is $238m payable in cash and $9m of ICAP shares that will vest within four years. The acquisition of Traiana will be initially financed using a new acquisition facility on similar terms to ICAP's existing £350 million facility. Traiana provides global banks, broker/dealers, buy-side firms and e-trading platforms with solutions to automate post trade processing of financial transactions. Its Harmony network is used by over 50 of the world's leading banks and has become the market standard for post-trade processing of FX transactions. Traiana's technology is used to process tens of thousands of deal tickets every day and contributes to the orderly growth of the global financial markets. To date Traiana has invested $90m to achieve critical mass in its markets. Traiana (www.traiana.com) is headquartered in New York City with offices Ramat Gan, Israel. (ICAP10.10)

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2.4 U.S. Now Leading Food Destination of Israeli Products

In the first half of the year, exports of food from Israel to the United States increased by 20% to $435.9m, according to new data released by the Israel Export Institute. Israel exports food to 90 countries worldwide and reports show that the leading country of export is the U.S., with exports reaching $46m in H1/07 (an increase of 17%). Up until recently, the U.S. lagged behind Europe as Israel's largest food trading partner. The highest area of growth is export to Russia, where an increase of 47.5% amounting to $28.9m was reported. In the first half of the year, processed fruit and vegetable export increased by approximately 18.8% to $148.6m compared to the same period last year. Export of chocolate increased by 44.7% to $6.5m. Food export to the European Union increased by 11.6% to $194m compared to same period last year, the main increase being to Germany &ndash $19.3m (an increase of 37.8%). Export of food to Holland increased by 22% to $40.4m, export to France increased by 10.3% to $26.7 m and export to China increased by 36.4% to $18.2m. (KT08.10)

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2.5 Frutarom Acquires Germany's Gewurzmuller & Blessing Biotech

Frutarom has signed an agreement to acquire 100% of the share capital of the German companies Gewurzmuller GmbH and Blessing Biotech GmbH (together the Gewurzmuller Group), in consideration for a cash payment of $67m. Frutarom is financing the acquisitions with a long-term loan. The price-tag for Gewurzmuller is based on a multiple of 7.1 on the company's earnings before interest, taxes, depreciation and amortization for 2007. Blessing Biotech's starter culture is based on fermentation processes by enzymes and microorganisms. Starter cultures control the taste, color, texture, and shelf-life of products. Starter cultures are used in the food industry, especially for meat, dairy products, and baked goods. Frutarom said that the acquisition of Gewurzmuller is part of the company's strategy for rapid growth as one of the top-ten countries in the food flavors industry. The acquisition is synergetic with the business of German savory flavors, seasonings, and specialty functional ingredients manufacturer GewurzMuhle Nesse, in which the company acquired a 70% stake for &euro18.4 million in early 2006, and its business in Israel. Haifa, Israel based Frutarom (http://www.frutarom.com) is a global company that develops, manufactures, markets and sells flavors and fine ingredients. Founded in 1933, the Company has over 70 years of experience in its industry. Frutarom has a strong local presence in its key target markets. Frutarom's broad product portfolio comprises over 15,000 products, focusing on flavors and natural fine ingredients. Frutarom is listed on the LSE and the TASE. (Frutarom15.10)

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2.6 Sales of Organic Foods Soar in Israel

The widespread adoption of modern agricultural biotechnology products is enabling farmers to make 'green' agricultural choices, and organic agriculture has become one of the fastest growing sectors, achieving an annual growth rate of 25%, according to the Israel Export Institute. Israel's organic market focuses mainly on fresh produce, including olives, tomatoes, cucumbers, mangoes, green and red peppers, carrots, avocados, potatoes, grapefruit, grapes and wine. The majority of Israel's organic products are exported to Europe where Israel is able to fill the gap during the off-season. According to the Israel Bio-Organic Agriculture Association (IBOAA), organic farming in Israel accounts for about 1.5% of total agricultural production in Israel, and some 10% of fresh export. Today, 400 farmers cultivate about 7,000 hectares of organically grown crops. The demand for organic produce is increasing steadily in Israel, and today there are many organic orchards throughout the country. (KT15.10)

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2.7 Israeli Food Market Grows to $8.6 Billion

The Israeli food market has grown by 4.8% in the past 12 months and is now estimated to be worth $8.674b. StoreNext Israel which analyzes consumer trends for supermarket chains and independent retailers sponsored a conference where it released the findings. Maariv newspaper reports that according to the data, Israeli consumers now prefer expensive higher quality products and supermarkets are competing for their business by offering private label products. The Yediot Achronot newspaper reported that the StoreNext data was based on 1,500 sale points and revealed that the public has also become more health conscious. Pro-biotic yogurt drink sales have gone up 11%, yogurt products jumped 38%, bottled water 27% and granola bars sales went up by 50%. StoreNext also noted that more people are buying granulated coffee over instant, extra-virgin olive oil instead of regular, and enriched milk. Sales of diet sodas, frozen pizza and chicken sales have dropped as have the sales of ready-made foods. (KT15.10)

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2.8 Zion Oil & Gas Awarded Joseph Exploration License

Zion Oil & Gas of Dallas, Texas and Caesarea, Israel, announced that the company was awarded effective October 11, 2007 Petroleum Exploration License No. 339/ &ldquoJoseph.&rdquo The Joseph License covers approximately 83,000 acres on the Israeli coastal plain between Netanya and Caesarea immediately south of Zion's 79,000 acre Asher-Menashe License. The acreage comprises approximately 85% of the lands previously held by Zion under the Ma'anit-Joseph License and includes both the Ma'anit structure, on which the company drilled the Ma'anit #1 well to a total depth of 15,842 feet and plans to drill the Ma'anit-Rehoboth #2 well to Triassic and Permian targets, and the Joseph lead located south of Ma'anit. The primary term of the Joseph License runs through October 10, 2010 and is extendable to a maximum of seven years. In the event of a discovery on the Joseph License, Zion will be entitled to convert the relevant portions of the license to a 30-year production lease, extendable to 50 years. Zion Oil & Gas, a Delaware corporation, explores for oil and gas in Israel in areas located on-shore between Haifa and Tel Aviv. It currently holds two petroleum exploration licenses between Netanya on the south and Haifa on the north covering a total of approximately 162,000 acres. (Zion15.10)

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2.9 DHL Strengthens Presence in Israel Acquiring Flying Cargo

DHL, the leading logistics company and subsidiary of Deutsche Post World Net, reached an agreement to acquire FC (Flying Cargo) International Transportation Ltd, the International Freight Forwarding unit from the privately owned Flying Cargo Group, based in Tel Aviv, Israel. DHL Global Forwarding will acquire 100% of the business. It has been agreed not to disclose financial details. The transaction is subject to regulatory approval and is expected to be closed in the next few weeks. The management of FC (Flying Cargo) International Transportation remains unchanged for at least the next two years. In Israel, FC (Flying Cargo) International Transportation is the market leader in Air and Ocean Freight and has been the agent of DHL Global Forwarding in the country for many years. The acquisition enables DHL Global Forwarding to establish a strong presence in the Israeli International Forwarding market. The company considers the acquisition a selective move, as Israeli trade growth is strong and FC (Flying Cargo) International Transportation provides a solid customer base in highly attractive sectors, like Healthcare and Electronics. (DHL16.10)

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2.10 Intel Capital Invests $11 Million in Jordan Valley Semiconductors

Intel Capital, Intel's global investment organization, announced that it is the sole investor in a $11m round of funding into Jordan Valley Semiconductors. In return, Intel Capital will receive a significant stake in the Israeli company. The advanced X-ray metrology solutions from Jordan Valley enable accurate and precise measurements for various thin-film applications in semiconductor manufacturing, and drive new advancements for the technology industry. Jordan Valley Semiconductors (http://www.jordanvalleysemi.com) provides semiconductor metrology solutions for thin films based on novel, rapid, non-contacting, and non-destructive X-ray technology. They offer a comprehensive family of solutions based on advanced X-Ray Reflectivity (XRR), X-Ray Fluorescence (XRF), and Small Angle X-Ray Scattering (SAXS) technologies. These tools are fully automated, production ready, and ideal for both blanket and patterned wafers. Jordan Valley's X-ray technology enables accurate and precise characterization of all film types&mdashincluding single layers and multilayer stacks, high k and low k materials, metals and dielectrics, amorphous, poly-crystal and single-crystal films. Research, development and manufacturing are based in Migdal Ha'Emek, Israel. (Intel Capital 16.10)

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2.11 Acro Signs a Non-Binding Letter of Intent to Acquire RAY Detection Technology Group

New York's Acro, a developer of explosive detection solutions, announced it has signed a non-binding letter of intent to acquire RAY Detection Technology Group (RAY) in an all-stock transaction. RAY develops and provides advanced inspection and detection systems. The parties agreed that upon the execution of a definitive agreement, Acro will provide Ray an interim financing, in accordance with an agreed working plan. RAY's products are based on a proprietary technology, Discovery CERT, enabling trace automated sampling of bulk goods and cargo for the detection of explosive, chemical, and biological threats. Discovery CERT streamlines high-volume screening in airports, seaports, rail stations, border crossings, and government buildings, among others, allowing rapid inspection of goods, ranging from a single bag to an entire cargo pallet. RAY's systems have performed successfully during real-time airport testing, conducted by aviation, airport security, and anti-terror authorities of the US and Israel governments, with collaborative participation by European security agencies. Acro's current flagship product is ACRO-P.E.T., a pen-like peroxide explosive tester for the detection of improvised explosives. The company recently signed an agreement with LSRI - Life Science Research Israel Ltd., a subsidiary of IIBR - Israel Institute for Biological Research, to incorporate IIBR's long-proven technology into Acro's pen-like device, allowing the detection of commercial and military explosives. RAY Detection Technology Group is an Israel-based company, developing and providing advanced technology solutions for screening cargo, mail and luggage. RAY's innovative solutions enable automated sampling of bulk goods and cargo, detecting explosive, chemical, and biological threats. (Acro16.10)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Illinois Economic Delegation Visits Jordan

The American Chamber of Commerce in Jordan hosted an official delegation from the state of Illinois to help Jordanian companies enter the U.S. market, as well as find representation for Illinois companies in Jordan. The visit, which will continue until October 20, was a result of joint cooperation between the chamber and the Amman-Chicago twinning agreement committee. On the sidelines of the visit, the chamber will host a special day for new graduate students to inform them about chances of completing their higher studies in U.S. universities. The visit was also arranged in coordination with Atid, EDI (http://www.atid-edi.com), a Jerusalem based business consulting firm that represents Illinois' trade interests in the Middle East. (Various16.10)

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3.2 Syniverse Wins Saudi Telecom Anti-Fraud Contract

Tampa, Florida's Syniverse Technologies, a leading provider of technology and business solutions for the global telecommunications industry, announced that Saudi Telecom Company (STC) will implement the most advanced roaming fraud protection available almost a year ahead of a GSM Association's (GSMA) October 2008 deadline for member companies. STC will deploy Syniverse DataNet, a solution developed in conformance with the GSMA's Near Real-Time Roaming Data Exchange (NRTRDE) initiative, to ensure data records that track subscriber roaming activity are exchanged more rapidly between home and visited operators. Saudi Telecom Company (STC) is the largest mobile operator in MENA and is the incumbent telecom provider in Saudi Arabia. STC has more than 15 million mobile customers and more than 400 global roaming relations. (Syniverse08.10)

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3.3 Arabic Computer Systems to Support GigaTrust Solutions in Saudi Arabia

Herndon, Virginia's GigaTrust, the Intelligent Rights Management products and services company for corporate e-mail and content security, has entered into a partnership with Arabic Computer Systems (ACS) Ltd. to have ACS resell and support GigaTrust products and services in Saudi Arabia. Both GigaTrust and ACS focus on the enterprise, with GigaTrust providing software for companies that want to build and manage a Microsoft Rights Management Services (RMS) deployment. GigaTrust helps its customers take RMS beyond the enterprise network by offering solutions that enable a secure content supply chain collaboration all the way to &ndash and onto &ndash the BlackBerry. Arabic Computer Systems (ACS) is Saudi Arabia's leading Information Technology Company, successfully serving the technology needs of the top enterprises in Saudi Arabia for the past two decades. (GigaTrust03.10)

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3.4 Oshkosh Truck to Provide 35 Heavy Equipment Transport Vehicles to Egyptian Ministry of Defense

Wisconsin's Oshkosh Truck Corporation has been awarded a contract to provide 35 specially-designed Heavy Equipment Transport (HET) military vehicles to meet logistics and transport requirements set by the Egyptian Ministry of Defense. Valued at more than $16m, the contract includes the 35 HETs, 35 trailer kits, training services and support, and field service representative support. This contract is the second contract in 2007 for Oshkosh Truck and the Egyptian Ministry of Defense. The HET is designed to transport battle tanks, fighting and recovery vehicles, armored vehicles or construction equipment and their crews so they arrive in mission-ready condition. Under a contract from earlier this year, Oshkosh Truck is providing initial orders of its Medium Tactical Truck (MTT), valued at $4.9m, and also supplies the Egyptian military with its M977 HEMTT 8X8 logistics vehicle. The first Oshkosh Truck military vehicles went into service in Egypt in 1990 and have been fully supported by Oshkosh since that time. (Oshkosh15.10)

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 Israel Enjoying Longest Growth Period In Its History

The Central Bureau of Statistics announced on 16 October that Israel's GDP is expected to grow by 5.2% in 2007 and business product will grow by 6%. The GDP rose by 5.3% in 2006 and business product rose by 6%. The Central Bureau of Statistics also predicts that GDP per capita will rise 3.4% in 2007 to an all-time high of NIS 92,700 ($22.600). Private consumption will rise 6% this year, and is up 15% in 2005-07. The standard of living will rise by 4.2% and will have risen by a cumulative 7.1% in 2005-07. Exports are predicted to rise 8.1% and imports by 9.4%. Investment in fixed assets will rise by 10.4% this year and will have grown 25% in 2005-07. The figures indicate that Israel is concluding its fifth consecutive year of rapid growth: cumulative growth in 2003-07 will be 23.5%. This is longest period of growth since regaining independence in 1948. (CBS16.10)

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4.2 Stanley Fischer Named One of World's Seven Leading Bankers

&ldquoGlobal Finance&rdquo has selected Governor of the Bank of Israel Prof. Stanley Fischer as one of the world's seven leading central bankers, giving him an &ldquoA&rdquo. The international journal said that Fischer had successfully handled the economic effects of the Second Lebanon War and strengthened the central bank's position. &ldquoGlobal Finance&rdquo praised Fischer's interest rate policy. It added that, despite Israel's political instability, the Bank of Israel continued to focus on keeping inflation within the 1-3% target range. It noted that Fischer has been able to promote his reform agenda and strengthen his position at the bank, while focusing on monetary policy. (Globes 16.10)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Iraq Budget Targets Water & School Investments

Iraq has prepared a $42 billion budget for 2008, an increase of $1 billion on this year, says Iraqi Finance Minister Jabor. Jabor said $10b would be spent on investment projects outside the Baghdad region, focusing on schools and water projects. An additional $4b unspent this year would be rolled over into next year, boosting spending to $46b. Also, some amounts from 2007 will be given to the ministries and provinces. This will provide extra money for the budget, around $46b. Jabor said Iraq calculated 2008 revenues based on assumed oil exports of 1.7 million bpd at $50 per barrel. Average exports in 2007 have been 1.6 million bpd. The 2008 budget also assumes an exchange rate of 1,260 dinars to the US dollar, the same as this year. But the government may strengthen the Iraqi currency to 1200 to the dollar during the course of the year. The Government strengthened the dinar by 13% against the dollar last year after raising interest rates to limit the use of dollars in the economy and stem inflation. This helped boost central bank foreign currency and gold reserves to $22b, he said. Iraq's dependence on oil revenues will fall to 88% next year from 94% because of income from telecommunications. (Various10.10)

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5.2 Inflation Takes Some Luster Off Qatar's Economy

Qatar is enjoying dramatic economic growth on the back of surging gas revenues, but the Gulf state is battling an increasingly high rate of inflation led by high housing costs, officials and analysts say. Inflation hit 12.8% in Q2/07 after reaching 14.78% in Q1, according to statistics provided by Qatar's Planning Council. The International Monetary Fund (IMF) measured inflation in Qatar - which sits atop the world's third largest gas reserves - at 11.8% in 2006 and projected a drop to 10% this year. Qatar's gross domestic product grew by 6.3% in real terms in 2005 and 8.8% in 2006, according to the IMF, as world oil prices rocketed to new record levels and Qatar pumped out more natural gas. Qatar's oil and gas sectors account for 60% of the economy, according to various sources, while the IMF put nominal GDP in 2006 at $52.7b. Also contributing has been the severe drop in the rate of the dollar-pegged riyal against other major currencies, which increases the cost of imports. The "imported inflation" resulting from pegging the Qatari currency to the weakening dollar, a situation prevailing in most oil-producing Gulf countries, including Saudi Arabia and the UAE. The Doha government is working on introducing a new law for house rental to address the rise in housing costs, adding that about 2,000 housing units were under construction in 2007 and another 6,000 should be ready by 2009. As well, the government has frozen the demolition of old neighborhoods which were being cleared to give way to new high-rises, as the move was creating higher demand for property during construction time. Qatar's population, which was just 522,000 in 1997, has grown rapidly to reach an estimated 900,000 residents, with a native population of only around 200,000. This small population, combined with high income from energy exports, propelled Qatar to rank among the top countries measured by GDP per capita. Qatar has proven reserves of more than 25 trillion cubic meters of natural gas, the third largest in the world. It also produces about 700,000 barrels of crude oil daily. (AFP04.10)

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5.3 IMF Upbeat on UAE Economy, Warns About Inflation

Medium-term economic prospects in the UAE look bright, with the pace of growth likely to remain strong in 2007 but slowing from next year, the IMF said, warning that high inflation needed to be contained. The medium-term prospects look bright, supported by a continued favorable outlook for energy prices given sustained global demand, a strong investment momentum, and an improved domestic business climate, the IMF said in its 2007 annual economic consultations with the state. The IMF directors agreed that the key challenges will be to ensure sustained non-inflationary growth and further diversification of the economy' less reliant on oil. Strong domestic demand and housing shortages in the UAE have led to sharp increases in rents and added to upward pressure on other prices. As a result, the consumer price index inflation exceeded 9% in 2006, pushing inflation to a 19-year high.

The IMF said that although assessing inflation was complicated by the UAE's weak data, the rate of price increases was too high. They acknowledged, however, that the anticipated reduction of capacity constraints - especially in the housing market - is likely to reduce inflation pressures over the medium term,' the IMF said, adding that fiscal policy could play a bigger role in regulating domestic demand. In particular, expenditure increases - including by public and quasi-public entities - should be consistent with the country's absorptive capacity. This, together with efforts to alleviate capacity constraints, would help subdue inflation and support a continued economic expansion with macroeconomic stability. The IMF said that the current peg of the dirham currency to the dollar has served the UAE well' and that the exchange rate of the dirham was in line with fundamentals. Except for Kuwait, which in May dropped the dollar peg in favor of a basket of currencies to ward off inflation; the remaining five states of the six-nation GCC have kept their currencies linked to the dollar. IMF directors noted the authorities' commitment to work closely with other GCC member countries to reach consensus on the appropriate future exchange rate regime to be adopted as part of the GCC currency union. The IMF said UAE authorities should strengthen business regulations and bank supervision, given the rapid credit growth and buoyant real estate market. It also called for closer scrutiny of financial services companies such as banks, insurance companies and securities firms. (IMF10.10)

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5.4 $61 Billion Arabian Canal to Reshape New Dubai

Dubai unveiled a 75-km canal that will reshape the southern part of Dubai and transform the massive Jebel Ali landmass into an island. New Dubai's latest mega-project, Arabian Canal, will be one of the world's biggest and most expensive engineering feats, costing $61b. The giant project will be built in two parts - an $11b, 75km canal which will snake from the Palm Jebel Ali to the Palm Jumeirah and a $50b "city within a city" that will cover 20,000 hectares along the canal's southern flank. Developed by Limitless, the global real estate arm of Dubai World, the project will transform the arid terrain that stretches from the outskirts of New Dubai to Jebel Ali. Up to 150 meters wide and six meters deep, the canal will flow inland from Dubai Waterfront, passing to the east of the new Dubai World Central International Airport before turning back towards Palm Jumeirah. (GN09.10)

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5.5 Dubai Metro Works Going As Per Schedule

The second phase of the Dubai Metro project, known as the Green Line, is making substantial progress with 11% of the work completed. The line has six stations underground and 12 elevated stations and is designed to pass through the central business districts of Dubai which has resulted in road diversions. The northern and southern section of the line is progressing as planned with the piling works in progress at Al Qusais 2 station and commencement of Diaphragm walls in Salahuddin and Palm Deira. The Green Line will run from Al Ittihad Square through Deira and Bur Dubai to Burjuman, through Health Care City to Jadaff in the South, and from Al Ittihad Square through the intersection of Al Nahda and Damascus Road to Al Qiyadah intersection toward Al-Qusais Area. (TradeArabia 14.10)

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5.6 Oman Decides Against Foreign Exchange Peg Shift

Oman considered measures including unshackling its rial currency from the tumbling US dollar and price caps to contain rising inflation but decided against such moves, the commerce minister said. Oman, like other Gulf Arab oil producers, is struggling to contain inflation because its central bank traditionally follows shadow US interest rate policy to maintain the relative value of its dollar-pegged currency. Oman's inflation accelerated to 5.98% in the year to July, the highest level this year. The dollar peg was partly to blame because the US currency's decline was driving up the cost of imports, Commerce Minister Makboul bin Ali bin Sultan said. Rapid economic expansion, a construction boom, and the impact of record oil prices on transports costs were also to blame, he said. The government had decided against price caps, dropping the dollar peg, subsidizing some goods, or introducing ways to monitor prices, bin Sultan said, responding to reports and opinion pieces in the Omani media. Inflation is rising across the Gulf Arab region, where a quadrupling of oil prices in the past five years is driving rapid economic growth. Oman, one of the five Gulf oil producers that agreed with Kuwait to peg its currency to the dollar to prepare for monetary union, was committed to keeping the value of its rial unchanged, the central bank governor said last month. But like Saudi Arabia and Bahrain, Oman held back from reducing interest rates to match the Sept. 18 cut in the United States, saying domestic economic considerations took precedence when deciding monetary policy. HSBC expects Oman's $35.3 billion economy will expand by 6.5% this year, the second-fastest pace in six years. (ONA08.10)

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5.7 Oman August Inflation Hits Highest In 16 Years

Annual inflation in Oman accelerated to 6.47% in August, the highest in 16 years, as food costs and rents jumped. Oman, like other Gulf Arab oil producers, is struggling to contain inflation because its central bank traditionally follows US interest rate policy to maintain the relative value of its dollar-pegged currency. The government considered measures including unshackling the rial currency from the tumbling US dollar and price caps to contain rising inflation but decided against such moves. Inflation was 5.98% in July. The food, beverages and tobacco component of the index surged 12.1%. The dollar peg was partly to blame for rising inflation because the US currency's decline was driving up the cost of imports. The dollar fell to a record low against a basket of six currencies this October. Rapid economic expansion, a construction boom, and the impact of record oil prices on transport costs were also to blame. Inflation is rising across the Gulf Arab region, where a quadrupling of oil prices in the past six years is driving rapid economic growth. Oman is committed to keeping the value of its rial unchanged, the central bank governor said last month. But like Saudi Arabia and Bahrain, Oman held back from reducing interest rates to match the Sept. 18 cut in the United States, saying domestic economic considerations took precedence when deciding monetary policy. (Reuters 11.10)

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5.8 Saudi Non-Oil Exports Worth $21.1 Billion In 2006

The number of factories in Saudi Arabia reached 3,808 in the first quarter of 2007, with a total capital of $81.8b, according to a report released by the Ministry of Commerce and Industry recently. It said that these factories employ 415,000 workers. The data showed that the largest industrial ventures are in the manufacturing, chemicals and plastic products sectors, followed by ceramics, construction materials, textiles, metal products, equipment and foodstuffs. The report said that the value of the Kingdom's industrial exports in 2006 stood at $21.1b for non-oil products that were exported to more than 120 countries. Petrochemical products worth $6.44b topped the Kingdom's exports list excluding crude oil in 2006, followed by plastic products valued at $4.838b and commodities worth $4.986b. The Kingdom also re-exported products and commodities valued at $3.3b. (SAMA09.10)

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5.9 Pakistan's July-September Trade Deficit At $3.6 Billion

Pakistan's trade deficit has amounted to $3.6b during the first quarter (July-September) of the current fiscal year, 13.53% higher than $3.17b of last fiscal year. According to the Federal Bureau of Statistics (FBS) on 9 October, during the first quarter of this fiscal year, the country's exports fetched $4.456b, while imports cost $8.06b, against $4.25b exports and $7.42b imports of same period of last year. The data shows that during the period under review, Pakistan economy pulled in 8.51% more imports than last year, while exports rose only by 4.77%. It has been observed that each month imports growth exceeds exports, which results in widening of the trade gap. However, the country's imports declined by 0.46%, to $2.73b, in September 2007 from $2.75b of August 2007, comparing to the same month's imports with the corresponding September 2006 ($2.44b), up by 12%. Independent economists say that though trade deficit is considered as a good omen for a growing economy (as our economic managers think), in Pakistan's case it is very large and requires immediate attention. It is pertinent to note that during 2006-07, the government had targeted imports at $28b and exports $18.6b with trade deficit of $9.4b, but at the end of the year, it surpassed the deficit target to reach $13.53b. During 2006-07, Pakistan also missed its export target by a wide margin of $1.59b, and breached the import target by $2.54b. (BR10.10)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:

6.1 Turkey's CPI Below Consensus With 1.03%

Turkey's CPI remained within forecast in September with 1.03% in September m-o-m. The CPI was up by 4.19% during the first nine months of 2007. The Producer Price Index (PPI) increased to 5.02% on an annual basis, whereas CPI came down to 7.12% from 7.40%. Due to seasonal factors, food and beverages prices increased by 2.29%, education prices by 2.28% and clothing by 1.62% during September. Among the CPI components, house wares, communication (due to cut in Turk Telecom tariffs) and entertainment prices went down in September by 1.24%, 0.50%, and 0.74%, respectively. Housing and rent prices which increased by 0.97% mom in September, was up by 8.99% y-o-y, down from 9.04% a month ago. Core inflation continued to decline. CBT defined core inflation figure food and energy went down to 6.14% in Sept from 6.73% in August. Since the CPI came in below 1.2%, 0.18% below the IMF performance criteria for the third quarter, the Turkish Central Bank will not write a letter to government and IMF. Agriculture prices which increased by 3.01% in September, draw PPI to a higher than expected level. (BGC04.10)

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6.2 Ankara Unveils Economic Action Plan for Last Quarter Of 2007

Turkey aims to make permanent the economic growth to achieve stronger stability in coming years, said State Minister & Deputy Prime Minister Ekren on 9 October. Ekren announced government's action plan for the last three months of this year. Ekren said the government would soon announce the five-year action plan for the period between 2008 and 2013, noting that economic reforms will not slow down and the new period will focus on 5 key policies on economy. Ekren summarized these policies as "comprehensive rise in employment, strong industry, technological advance, human resources and macro-economic stability." He also said that the government will improve investment climate by the help of incentives, while making better the overall and sector-specific productivity as major reforms. Ekren pointed out that between 2002-2006 Turkey passed through an "uninterrupted growth" period, which led to an economical normalization. Ekren noted that while forming the new five-year action plan they are reviewing documents of previous AK Party government, as well as considering the development plan and the EU harmonization program. The next five years would be a time of low public debt and high employment. The government will also concentrate on labor force and exert effort to improve competitive capacity in labor market and increase employment. Ekren said the government also plans to review levels of tax and other burdens on employers in order to reduce the size of the underground economy. It has also been informed that the government would send a long-delayed social security reform back to parliament for approval. Ekren said the government will highlight privatization and it will be one of the 3 key economic policies in the short-term together with social security and energy reforms. (TNA10.10)

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6.3 Turkish Household Debt Exceeds 25% Of Revenue

Turkish households have tended to spend more over the course of the last five years, with debt stemming from credit card use and personal loans surpassing 25% of total earnings. In 2002 an ordinary household had debt amounting to 4.3% of its disposable income, but as of March 2007 this figure had hit 25.5%. These figures, taken from central bank and Banking Regulation and Supervision Agency (BDDK) data by the Ankara Chamber of Commerce (ATO), highlight the fact that Turks' propensity to consume has increased almost eightfold while their inclination to save has deteriorated. The ATO's study, published yesterday, showed that Turkish households' debt to banks and consumer finance institutions was YTL 6.5 billion at the end of 2002. This figure had grown to YTL 87.1 billion by September 2007, against only YTL 71.9 billion in December 2006. In other words, the rate of increase is 21% in the first nine months alone. This marks a much faster growth in spending than the increase in wages and other types of household earnings. On average, earnings have risen as much as inflation for salaried workers and civil servants, or a figure of between 8 and 10%. Similarly the entire economy grew only 7.2% on average during the period between 2002 and 2006. Meanwhile, financial assets held by Turkish households expanded at a much lower pace. Assets such as time deposits, stocks, Treasury bills and individual insurance premiums rose only 3.3% in the first four months of 2007. (Today's Zaman15.10)

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6.4 Athens Stays Firm on Decision to Keep Olympic Airlines Alive

The Greek government will do its best for Olympic Airlines to continue operations and become privatized, said Transport Minister Hatzidakis after his meeting with the prime minister on 8 October and the resignation of Olympic's head Karatzalis. He had been expected to step down following the departure of the ministry's general secretary Stavropoulos, once the ministerial change took place. Speaking in Parliament, Hatzidakis added that privatization can take place under two conditions: first, that the staff of the airline is left untouched and, second, that the airline continues to cover its current flight schedule, including unpopular and island routes across the country. (Kathimerini09.10)

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7: GENERAL NEWS AND INTEREST

7.1 Turkey Celebrates Republic Day - Cumhuriyet Bayrami

On 29 October, Turkey will celebrate the 84th anniversary of the establishment of the Turkish Republic., known as Independence Day or Republic Day (Cumhuriyet Bayrami). This holiday commemorates the proclamation of the Turkish republic by Kemal Ataturk in 1923. One of Ataturk's greatest reforms, the proclamation of the new Turkish state as a republic on 29 October 1923 gave the Turkish nation the right to exercise popular sovereignty by representative democracy. Paving the way for the proclamation of the republic was the abolishment of the office of Ottoman Sultan ruling since 1218, and ordering the last members of the Ottoman Dynasty to leave the country. Many cities and towns hold parades. It is one of Turkey's most important patriotic national holidays. The celebrations begin the afternoon of 28 October.

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7.2 Turkish Referendum Crisis May Be Averted

AKP and the Nationalist Movement Party (MHP) have agreed on a legal solution to circumvent a possible legal crisis likely to be caused if a referendum due on 21 October is held. The AK Party is planning to change the 19th article of the law being submitted for popular vote which would change the Constitution. Work on the new proposal is likely to be submitted to Parliament for approval. The Supreme Election Board announced that there was no law setting a minimum rate of participation in a referendum or an election to determine its validity. Thus the Board said that even if participation was only 20%, more than half of the votes that are valid would be adequate to declare a result. (BGC05.10)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Teva Announces Approval of Generic Actonel

Teva Pharmaceutical Industries announced that the U.S. FDA has granted final approval for the Company's Abbreviated New Drug Application (ANDA) to market its generic version of Procter and Gamble Actonel (Risedronate Sodium) Tablets, 5 mg, 30 mg and 35 mg. Teva's AB-rated Risedronate Sodium Tablets are indicated for treatment and prevention of postmenopausal and glucocorticoid-induced osteoporosis, and treatment of Paget's disease. Teva is currently in patent litigation concerning this product in the U.S. District Court for the District of Delaware. A trial was held in November, 2006 but a decision has not yet been reached. In connection with the pending patent litigation, Teva agreed to provide 30 days advance notice to Procter & Gamble of any launch activities and has not yet provided such notice. As the first company to file an ANDA with a Paragraph IV patent certification, Teva has been awarded 180 days marketing exclusivity for this product, which will begin to run from the date of commercial marketing. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Jerusalem, Israel, is among the top 20 pharmaceutical companies in the world and is the leading generic pharmaceutical company. The company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients, as well as animal health pharmaceutical products. (Teva 08.10)

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8.2 BrainStorm on the Verge of a Breakthrough Towards Developing a Cure for Lou Gehrig's Disease

BrainStorm Cell Therapeutics announced that the Company is initiating a series of efficacy and safety studies toward a cure for Amyelotrophic Lateral Sclerosis (ALS). ALS, or Lou Gehrig's disease, is a rare and incurable neurodegenerative disease characterized by rapid loss of motor neurons leading to impaired motor-function and progressive paralysis. The scientific team at the Tel Aviv University Neuroscience laboratory has transplanted BrainStorm's human neurotrophic factor (NTFs) producing cells into transgenic mutant SOD mice (mice with mutated human genes and the most common animal model of the human disease). Preliminary results demonstrated remarkable effect on the deteriorated motor function as measured by performance on running rotational rods. The transplanted cells were isolated from human bone marrow, expanded in vitro and induced to differentiate into cells that produce neuroprotective factors including GDNF and BDNF, which have been shown to protect neurons in certain neurodegenerative diseases. The company is moving forward with additional studies and further results will be analyzed and reported accordingly.

BrainStorm Cell Therapeutics (http://www.brainstorm-cell.com) is an emerging company developing adult stem cell therapeutic products, derived from autologous (self) bone marrow cells, for the treatment of neurodegenerative diseases. BrainStorm's cell therapeutic approach is based on the transplantation of the patient's own bone marrow-derived mesenchymal stem cells, which are stimulated to differentiate ex-vivo into NTF producing cells. These cells, when administered back into the patient, are believed to provide neuroprotection of motor-neurons. This results in improved motor function as well as improvement of the clinical symptoms. BrainStorm's large-scale efficacy studies will provide additional data to support the initial pilot study. (BrainStorm08.10)

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8.3 Oridion Launches its Fully Integrated Remote Monitoring System & SARA Software

Oridion Systems is launching its total solution Microstream Monitoring System (MSM), powered by the Bernoulli Enterprise system. The MSM system, a wireless technology for continuous central station monitoring, is the only fully integrated ventilation and oxygenation remote patient monitoring system that directly responded to the Anesthesia Patient Safety Foundation (APSF) recommendation for improved Anesthesia Patient Safety Foundation (APSF) recommendation for improved ventilation and oxygenation monitoring for patients receiving patient controlled analgesia. Included in the 2006 APSF recommendations was the endorsement of remote access to alarms, especially on the general floor environment where higher patient-to-nurse ratios often do not allow on-going visual contact with the patient as in other areas, such as the intensive care units and emergency room. The MSM system helps improve patient safety because it instantaneously alerts clinicians via wireless technology that a patient is in respiratory distress. With the MSM system, clinicians have the benefit of closely monitoring not just oxygenation status (oxygen carried in the blood), but also the essential ventilation parameter - end-tidal carbon dioxide. Clinical studies have demonstrated conclusively that carbon dioxide monitoring is the earliest indication of a change in a patient's ventilation.

Jerusalem, Israel's Oridion Systems (http://www.oridion.com) is a global medical device company specializing in patient safety monitoring. Oridion develops proprietary medical devices and patient interfaces, based on its patented Microstream technologies, for the enhancement of patient safety through the monitoring of the carbon dioxide (CO2) in a patient's breath. (Oridion Systems15.10)

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8.4 BioLineRx Investigates Raising Additional Capital & Listing on the NASDAQ

Jerusalem, Israel's BioLineRx (http://www.biolinerx.com) announced that its Board of Directors has directed the Company's management to investigate various alternatives for raising additional capital and the listing of the Company's ordinary shares for trading on The NASDAQ Stock Market, in each case subject to market conditions and other considerations. This decision was based in part on the Board's determination that a dual listing in the United States and the raising of additional capital will enhance shareholder value through the potential for increased liquidity. BioLineRx, a clinical stage drug development company traded on the Tel Aviv Stock Exchange, is dedicated to building a robust pipeline of promising therapeutics for unmet medical needs. The Company's leading programs are for schizophrenia and treatment of damaged heart tissue post-myocardial infarction. Additional products under development include compounds for the treatment of cancer and CNS, cardiovascular, metabolic, infectious and autoimmune diseases. BioLineRx advances projects from early stage discovery and lead generation to advanced clinical trials, regulatory approval and marketing. (BioLineRx 16.10)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 ECI Telecom Enhances Hi-FOCuS MSAN with New Traffic Management Capabilities

ECI Telecom announced new features to the Hi-FOCuS-5 Multi-Service Access Node (MSAN) family of products. With the MSAN's new traffic management capabilities, service providers experience increased flexibility through optimal bandwidth management, improving efficient delivery of IPTV and other video services. Supporting over one million IPTV subscribers, the Hi-FOCuS MSAN continues to drive innovation in all areas of access infrastructure. This capability allows carriers higher flexibility when deploying video networks, through higher and more differentiated quality of service (QoS) granularity, as bandwidth can be managed at different levels, depending on the service requested and the customers' needs. This capability allows greater resolution in service providers' offering and enables them to make use of innovative business models. ECI's equipment is also able to distinguish multicast traffic from unicast traffic within the same stream and prioritize them to avoid traffic congestion towards the network, thus providing service providers with better efficiency in their networks. Petah Tikva, Israel's ECI Telecom (http://www.ecitele.com) delivers innovative communications platforms to carriers and service providers worldwide. ECI provides efficient platforms and solutions that enable customers to rapidly deploy cost-effective, revenue-generating services. (ECI Telecom09.10)

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9.2 Operax & Orca Interactive Integrate Technologies, Bringing QoS to IPTV

Stockholm, Sweden's Operax, the leading vendor of dynamic Resource and Admission Control solutions for IP service quality, and Orca Interactive offer a comprehensive solution allowing operators to manage their service expansion while ensuring Quality of Service (QoS) for advanced video and IPTV services. Operax provides pre-IMS and IMS-compliant, carrier-grade dynamic Resource and Admission Control solutions to operators worldwide, allowing them to guarantee end-to-end QoS for any IP session. Combining these advanced technologies with Orca Interactive&lsquos highly flexible IPTV middleware, the new solution will enable operators to quickly deploy new applications and services without reconfiguring their network infrastructure. In addition, the new solution will help provide leverage in the face of growing competition from incumbent cable and satellite pay-TV operators, as well as broadcasters and service providers offering Internet video streaming over operators' existing infrastructures. Optimizing network capacity, the Orca RiGHTv will ensure that subscribers are constantly met with first-rate video offerings for high definition television and video-on-demand (VOD). By guaranteeing service quality, IPTV operators can increase customer satisfaction and loyalty, whilst boosting operational efficiency through optimal allocation of network resources based on cost and availability. Ra'anana, Israel's Orca Interactive (http://www.orcainteractive.com) is a market pioneer and innovation leader in providing IPTV middleware and applications, bringing the power of next generation interactive TV to help service providers and broadband network operators drive growth. (Operax 09.10)

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9.3 Media Layers & Unisurf Launch Israel's First Commercial Off-Portal Mobile Advertising Service

Media Layers, the pioneer in real time personalized video and rich-media mobile advertising and Unisurf, Israel leading mobile internet Company and the creator of 1212, Israel's leading on-portal and off-portal mobile search service, announced the launch of Israel's first on- and off-portal mobile advertising service over mobile search. Based on Media Layers' SMART solution, users of the 1212 mobile search engine will be presented with rich media mobile ads, personalized in real time according to their handset model, search context, time and other parameters. The service is available to subscribers of all Israeli mobile operators and includes video clips, banners, search links and other rich media ads. Furthermore, it includes intuitive &ldquoClick-to-X&rdquo feedback mechanisms to enable users to complete the advertising or promotional cycle. At a second phase, the service will be expanded to work with additional Unisurf services such as mobile video services.

Herzliya Pituah, Israel's Media Layers (http://www.mlayers.com) is the world pioneer in real time, personalized, rich media mobile advertising. Its SMART solution provides a one-stop-shop synchronizing players across the entire value chain &ndash mobile operators, advertisers and content providers &ndash enabling them to target users with highly relevant and valuable video and other rich media ads. Unisurf (http://www.unisurf.co.il), a joint venture of Unicell and InfoGin, is Israel's leading provider of intelligent mobile search and surf (S&S) solutions. Unisurf operates the 1212 service, Israel's first and leading mobile search service. (Media Layers 08.10)

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9.4 Alvarion Chosen by Ertach Argentina for Its First Mobile WiMAX Technology Trial in South America

Alvarion was chosen to deliver Ertach Argentina's first Mobile WiMAX solution for trial in South America. Alvarion's IEEE 802.16e 4Motion&trade solution is to be tested and then planned to be deployed in the city of Rosario, targeting SME and corporate users with primary fixed and nomadic broadband services; high-speed internet and advanced voice services. Leading the way to new and promising technologies in Argentina and South America, Ertach turned to the WiMAX leader Alvarion, based on the mutual positive past experience between the two companies. As Ertach expands in telecommunications, the deployment project planned in Rosario is meant to provide a compelling solution to satisfy the growing demand for Mobile WiMAX, first in Argentina and then throughout the rest of South America. With more than 3 million units deployed in over 150 countries, Tel Aviv, Israel's Alvarion (http://www.alvarion.com) is the world's leading provider of innovative wireless broadband network solutions enabling Personal Broadband to improve lifestyles and productivity with portable and mobile data, VoIP, video and other services. (Alvarion10.10)

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9.5 Gilat's Spacenet Rural Communications Provides Connectivity to Peru Following Earthquake

Gilat Satellite Networks' business unit, Spacenet Rural Communications, contributed to Peru's disaster recovery efforts by deploying a SkyEdge VSAT network and offering free telephony services in the aftermath of the August 16th earthquake. Spacenet Rural worked closely with Peru's Civil Defense Institute to deploy Gilat's VSAT systems in the army bases of the country's affected zones and in the central office in Lima. Phones connected to the army's VSAT network provided the primary communications channels in the days following the disaster and are being used up until now. In addition, in the days following the earthquake, all Spacenet Rural telephony services were free for use throughout the country and remained free to citizens in the country's affected zones for weeks afterwards. Gilat's Spacenet Rural business unit provides rural internet and telephony services primarily in Latin America. Spacenet Rural's network was one of the only network in Peru not to be negatively impacted by the earthquake.

Petah Tikva, Israel's Gilat Satellite Networks (http://www.gilat.com) is a leading provider of products and services for satellite-based communications networks. The Company operates under three business units: (i) Gilat Network Systems (GNS), which is a provider of network systems and associated professional services to service providers and operators worldwide; (ii) Spacenet Inc., which provides managed services in North America for businesses and governments through its Connexstar service brand and for consumers through its StarBand service brand; (iii) Spacenet Rural Communications, which offers rural telephony and Internet access solutions to remote areas primarily in Latin America. (Gilat10.10)

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9.6 Shanghai Pudong International Airport Places a 7-Digit Order for NICE's IP-Based Video Solution

NICE Systems announced that Shanghai Pudong International Airport has placed a 7-digit order to provide its IP-based video solution with content analytics. Shanghai Pudong Airport will use the NICE solution to enhance the safety and security for a capacity of tens of millions passengers per year. Shanghai Pudong International Airport is a major international gateway into China, handling more than 17 million passengers on international flights in 2006. The airport is planning to increase its capacity with a total of three terminals, two satellite halls and five parallel runways, for a final capacity of 80 million passengers per year. In selecting NICE's solution Shanghai Pudong Airport will benefit from an advanced IP video security solution with real time event management, and high level of redundancy, for remotely monitoring and managing activities throughout the airport campus. NICE's solution constitutes an open IP video platform with a high-availability architecture, supported by unique features, to ensure non-stop surveillance under any condition for mission critical applications. Ra'anana, Israel's NICE Systems (http://www.nice.com) is the leading provider of Insight from Interactions solutions and value-added services, powered by the convergence of advanced analytics of unstructured multimedia content and transactional data &ndash from telephony, web, email, radio, video, and other data sources. (NICE10.10)

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9.7 Optibase IPTV Encoding Platforms Will Be Installed at Bharti Airtel, India

Optibase announced that Airtel Broadband & Telephone Services (B&TS), India's largest private broadband and telephone service provider, chose Optibase H.264 Media Gateway (MGW) 5100 IPTV encoding platforms for its planned IPTV service offerings. Bharti Airtel is currently undertaking IPTV trials in a thousand households and is planning to launch its IPTV services in the last quarter of the current calendar year. Optibase's carrier grade TV streaming platforms, incorporated in UTStarcom IP-based end-to-end networking solution, will be utilized by Bharti Airtel to supply high-quality H.264 video. The first introduction of IPTV services in India took place two years ago. Having installed video over IP solutions in three out of the four major IPTV Indian service providers; Aksh Optifibre Limited, Time Broadband Services Pvt. Ltd (TBSL) and Bharti Airtel Limited, Optibase is becoming pivotal in driving the growth of IPTV deployment in India. With Optibase's advanced H.264 streaming platforms, Indian service providers have the ideal IPTV offering to attract new customers and preserve current ones, by using a cost effective combination of top quality picture resolution at low bit rates. Herzliya, Israel's Optibase (http://www.optibase.com) provides professional encoding, decoding, video server upload and streaming solutions for telecom operators, service providers, broadcasters and content creators. The company's platforms enable the creation, broadband streaming and playback of high quality digital video. Optibase's breadth of product offerings are used in applications, such as: video over DSL/Fiber networks, post production for the broadcast and cables industries, archiving; high-end surveillance, distance learning; and business television. (Optibase 10.10)

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9.8 TraceGuard Completes Second Pilot Program of CompactSafe System at Ben Gurion Airport

TraceGuard Technologies has completed a second pilot program of its CompactSafe system at Ben Gurion International Airport in Israel. In the course of the pilot program, CompactSafe was operated by Israel Airport Authority (IAA) personnel, who own and operate security equipment at Ben Gurion Airport, in several screening locations at the airport. Over 4,000 passenger items were screened by IAA operators with the CompactSafe. The objectives of the pilot program were: to demonstrate the effectiveness of using an automated screening system, to verify CompactSafe's performance and durability in a realistic operational setting, and to better acquaint the personnel of the IAA with CompactSafe and its capabilities. Earlier this year, TraceGuard completed a pilot in which its personnel had operated CompactSafe at Ben Gurion with the permission of the IAA. CompactSafe inspects complex items at passenger and baggage screening checkpoints, and works in conjunction with security equipment currently in use to improve accuracy and efficiency in detecting explosives. The system is specifically designed to extract traces of explosives from items such as laptops, electronic devices, shoes and similar size items that are carried in the carry-on luggage, and can also be adapted to improve detection for narcotics and other hazardous materials. TraceGuard Technologies (http://www.traceguard.com) develops innovative security technologies and solutions for enabling explosives detection through automated trace extraction. TraceGuard is a US public company traded on the Over-The-Counter Bulletin Board (OTC BB:TCGD). TraceGuard maintains an R&D Center in Tel Aviv, Israel. (TraceGuard15.10)

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9.9 Microsoft Certifies Voltaire InfiniBand Solutions for Windows

Voltaire announced the immediate availability of its InfiniBand host stack software GridStack for Windows v2.5 that has passed Microsoft Windows Hardware Quality Labs (WHQL) testing for Microsoft Windows Server 2003 and Windows Compute Cluster Server 2003 operating systems. Customers can now deploy Voltaire's switches and software to maximize performance and scalability of Windows-based clusters and grids with the added benefit that the solution has been certified by Microsoft. Voltaire solutions, which deliver 10 &ndash 20 Gigabits/second performance and low latency, improve the performance of applications running on distributed computing environments. Voltaire GridStack for Windows v2.5 now carries the &ldquoDesigned for Windows&rdquo logo from Microsoft. Herzliya, Israel's Voltaire (http://www.voltaire.com) designs and develops server and storage switching and software solutions that enable high-performance grid computing within the data center. Voltaire refers to its server and storage switching and software solutions as the Voltaire Grid Backbone. (Voltaire15.10)

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9.10 Horizon Delivers Revolutionary Single Chip Native 1080/60p High Definition Transcoder

Horizon Semiconductors announced the immediate availability of industry's first single chip multi-standard native 1080/60p Transcoder for the triple-play/quad-play Cable, Satellite and IPTV Set-Top Box, Digital Video Recorder and Home Media Center, Blu-Ray/HD-DVD player and recorder, iVDRs, place shifting boxes and location-free TV markets. Horizon's Hz4010 supports a wide range of features and capabilities specifically designed to meet the emerging requirements of the Cable, Satellite, IPTV and Blu-Ray/HD-DVD markets. The Hz4010 incorporates a multi-standard high definition video CODEC natively supporting resolutions of 1080/60p and below, and implementing leading compression standards including AVC (up to HP@L4.2), VC-1 (AP@L3 and MP@HL), MPEG-2 (MP@HL), MPEG-4/H.263 & DV/HDV, an advanced video pre/post-processor featuring motion compensated spatio-temporal noise reduction filtering, frame rate conversion and advanced scaling, a high performance audio CODEC engine enabling transcoding between various audio formats such as MPEG-1, AC-3, Dolby Digital Plus, DTS, AAC and WMA, a programmable high-bandwidth transport processor, as well as a multi-standard conditional access/digital rights management security processor. Horizon's Hz4010 is provided with a comprehensive software stack and a reference hardware platform designed to significantly accelerate OEM/ODM development cycle.

Herzliya, Israel Horizon Semiconductors (http://www.horizonsemi.com) a leading provider of highly integrated silicon solutions that enable secured video and audio compression & transmission for the consumer electronics and home entertainment markets. Using proprietary technologies and advanced design methodologies, Horizon designs, develops and supplies complete system-on-a-chip solutions and related hardware and software applications. (Horizon15.10)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's CPI Declined By 0.5% in September

The Central Bureau of Statistics announced that the Consumer Price Index (CPI) fell by 0.5% in September 2007, to 101.4 points (100 baseline = 2006 average), in line with forecasts. In August, the CPI rose 0.7%, which had been beyond expectations. Trend data show that inflation ran at 4.6% in the months of June through September, in annualized terms. Inflation was 2.3% in January-September and is projected to near the ceiling of the 1-3% inflation target for the year as a whole. The September drop in the CPI reflects the shekel's appreciation against the dollar. Four items in the CPI fell: housing -0.8%, transport and communications -1.2%, culture and entertainment -3.1%, and clothing and footwear -3.6%. Three items rose: food 0.5%, household maintenance 0.6%, and fruits and vegetables 3.2%. Basic inflation (the CPI excluding housing, and fruits and vegetables) also fell by 0.5%. The Bank of Israel is now expected to leave the interest rate unchanged at 4% at its upcoming meeting at the end of the month, and it is expected to remain unchanged through the end of the year. (CBS15.10)

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10.2 Israel's Budget Surplus Continues To Rise

An analysis of government spending shows that the budget surplus continued in September. Figures published by the Ministry of Finance on 10 October, adjusted to include tax receipts, reveal that the government posted a surplus of $50m for the month. Including net credit, the surplus was $125m, and together with domestic activity the surplus totaled $225m. The trend toward tighter budget performance has been now been in effect for some time. The government's accrued deficit for the twelve months from October 2006-September 2007 narrowed to $100m, although the deficit for September 2006 already included the initial government expenditure for the Second Lebanon War. The total expenditure by ministries in January-September reached $32.75b, compared with $31.55b in the corresponding period in 2006. Government revenue in September totaled $4.925b, of which $3.9b were tax receipts. (Globes 10.10)

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10.3 Nearly 1 Million Passengers Pass Through Ben Gurion During September

Ben Gurion Airport handled 981,000 passengers during September 2007 on 7.615 international and domestic flights, 28.5% more than in September 2006, the Israel Civil Aviation Authority reports. The airport handled 30,042 domestic passengers during the month, 7.9% fewer than September last year. Part of the increase in international traffic can be attributed to the fact that the Jewish holiday season fell entirely in September this year, whereas Sukkot fell in October last year. Israeli airlines carried 387,746 passengers during September, 40.8% of all passengers carried, and 9.5% more than in September last year. Charter airlines had the largest increase in passenger traffic. Turkish airline Onur Air was the number one charter airline, carrying 86,000 passengers during the month. The most popular destination for Israelis was the Turkish resort of Antalya, the destination of 87,000 persons during September, 274% more than in September 2006. 142,000 Israelis visited Turkey during the month, 15% of all outgoing Israelis. Romania and Italy were also popular destinations. Air Canada had the largest drop in passengers, down 7.3% compared with August. The Central Bureau of Statistics reports 183,000 tourists visited Israel during September, 86% more than the 99,000 who entered the country in September 2006. 1.6 million tourists entered Israel in January-September, 14% more than during the corresponding period in 2006 and 15% more that during the corresponding period in 2005. The Ministry of Tourism predicts 2.3 million tourist entries for 2007 as a whole and 2.8 million in 2008. (Globes 16.10)

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10.4 Number of Jobseekers Fell In August

The Israel National Employment Service announced that the number of jobseekers fell to 203,100 in August, 5.5% fewer than in July. Despite the positive trend, data indicate that the number of jobseekers with academic degrees and those who do not need income support fell by only 0.9%. The number of jobseekers defined as &ldquounemployed&rdquo fell by only 0.4%, albeit the number of these jobseekers has been falling steadily since January. The number of jobseekers over 50 rose and their proportion of all jobseekers increased. The Employment Service recently admitted that older jobseekers are finding it more difficult to get new jobs, and it is preparing a program for the government to provide incentives to hire them. (INES10.10)

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10.5 Israel's Venture Capital Investments Grow in First Half of 2007

Investments in Israeli first-stage high tech companies continued to grow in the first half of 2007, according to a recent survey conducted by the Shiboleth law firm. The survey shows that 46% of venture capital investments in the first six months of the year were made in first-stage high tech companies, compared with only 35% of such investments in the second half of 2006, and 21% in the first half of last year. Another optimistic sign is that 65% of the rounds in H1/07 were at a higher company value than previous fund raising rounds and only 31% of all fund raising took place at lower valuations for the firms than in the past. Nevertheless, even though the 65% figure for fund raising at higher company values has held steady since the start of 2005, the percentage of high-tech companies raising funds at lower company values is rising. At the start of 2005 the figure was only 19% of all funding rounds, while this year the figure has reached 31%. Another interesting development this year is the rise in the number of funding rounds that the venture capital funds utilized as their first rights of refusal to participate - 53% of fund raising in the first half of the year compared with 43% in the same period of 2006. (Various04.10)

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10.6 September's Most Stolen New Vehicle in Israel San Yang Motorbikes & Mazda Cars

The Israel Police announced that the most stolen new vehicle in September was the San Yang motorbike. This September, 97 San Yang owners found their new bikes missing. Since the start of the year, 679 San Yang motorbikes have been stolen. Even though two-wheeled vehicles make up only 3% of all vehicles sold in Israel, their share among stolen vehicles is a significant 12%. As opposed to car thefts, motorbikes are not smuggled into the Palestinian controlled areas, but are chopped up here in Israel for parts, said police. In total, 2,209 vehicles were stolen in September, a 23-percent drop compared to the 2,871 stolen in September, 2006. The most stolen brand for the first seven months of 2007 is Subaru, with 3,319 thefts. But only 124 of these vehicles were new, meaning less than four years old. The number two was Mitsubishi, with 1,838 vehicles stolen, only 100 of which were new. Third place went to Mazda, the most stolen new car. Since the start of 2007, 1,588 Mazdas were stolen, including 462 new vehicles. (Various09.10)

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In Depth

11.1 Summary of Israeli High-Tech Company Capital Raising Q1-Q3/2007 Survey

IVC Forecast: Israeli High-Tech Capital Raising to Reach $1.7 Billion in 2007

The following are the findings of the Quarterly Survey conducted by the IVC Research Center, which for more than nine years has been at the forefront of venture capital and private equity research in Israel. This Survey reviews capital raised by private Israeli high-tech companies from Israeli venture capital funds and from other investors. The Survey is based on reports from 80 venture investors of which 49 are Israeli management companies and 31 are other &ndash mostly foreign &ndash investment entities.

In the third quarter of 2007, 108 Israeli high-tech companies raised $414m from venture investors &ndash both local and foreign. The quarterly amount was 9% above the $381m raised in the third quarter of 2006, but down 5% from the $436m raised in the previous quarter.

&ldquoQ3 figures indicate 2007 may set a five-year record with high-tech investments reaching $1.7 billion,&rdquo said Zeev Holtzman, Chairman of IVC Research Center and Giza Venture Capital. &ldquoIn order to complete the positive picture, we hope that the intensive investment activity will be expressed in substantial exits of over $500m in the upcoming year that will enable the Israeli VC industry to show significant returns on their investments.&rdquo

The average company financing round was $3.83m in Q3, compared with $4.38m in the third quarter of 2006 and $3.69m in Q2 of this year. Seventy three companies attracted more than $1m. Of these, 13 companies raised between $5m and $10m each, 11 companies raised between $10m and $20m each, and three companies raised over $20m.

In the three first quarters of 2007 Israeli high-tech companies raised $1.256 billion, 10% above the $1.145 billion raised in the corresponding period of 2006.

Israeli VC Investment Activity

In Q3, Israeli VCs invested $172m in Israeli companies, compared with $142m invested in Q3 2006 and $193m invested in Q2. The Israeli VC share of the total amount invested in Israeli high-tech was 42%, with the remainder of capital coming from foreign investors as well as non-VC Israeli investors.

First investments accounted for 51% of total dollar investments by Israeli VCs in the third quarter, compared with 44% in the in the third quarter of 2006 and 38% in Q2. The average First investment by Israeli VCs was $3.25m, while the average Follow-on investment was $0.83m.

In the first three quarters of 2007, the Israeli VC fund share of investments in Israeli high-tech companies was 43%, compared to 41% in the corresponding period in 2006.

Capital Raised by Sector

In Q3/07, the Communications sector led capital raising with $83m or 20% of capital raised followed by Semiconductors with $74m or 18% of total capital raised. The amount raised by Semiconductor companies reflected two especially large financing rounds aggregating over $50m. The Software and the Internet sectors share third place with 17% of capital raised. &ldquoInternet companies attracted $71m, up ten-fold from the third quarter last year and the most raised by this sector since the first quarter of 2001,&rdquo remarked Efrat Zakai, Director of Research at IVC. &ldquoThe Internet sector show consistent increase and capture more distinguished part of the total funds. From the beginning of 2007 internet companies captured 14% of total capital raised, this compared with 6% in the first three quarter of 2006 and only 2% in 2005 parallel period.&rdquo

Capital Raised by Stage

Eighteen Seed companies attracted $28m, 7% of the total amount raised in Q3, compared to $20m (5%) in the third quarter of 2006 and $51m (12%) in the previous quarter. During the first three quarters of the year, Seed companies attracted 11% of the total funds, compared with 7% in Q1-Q3 2006.

Israeli VC Investments in Foreign Companies

Israeli VCs invested $9m in nine foreign companies during Q3 2007, compared to $6m invested in foreign companies in the third quarter of 2006 and $18m invested in the previous quarter. All nine investments were Follow-on investments. In the first three quarters of 2007, the Israeli VCs invested $36m in foreign companies.

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 venture capital, private equity and high-tech industries. IVC products and services are used regularly by venture capital funds, private investors, high-tech companies, 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 publishes the most comprehensive guide to Israeli venture capital and high technology companies &ndash the IVC Yearbook. Among IVC products and publications are the Quarterly Survey, which examines capital raising trends by Israeli high-tech companies; the quarterly Israel Venture Capital Journal (IVCJ), which reviews developments in the venture capital, private equity and high-tech industries; and a comprehensive online database containing over 5,500 Israeli high-tech companies, venture capital funds, investment companies and technology incubators, as well as news updates and lots more. (IVC15.10)

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11.2 Moody's Issues Annual Report on Jordan

In its annual report on Jordan, Moody's Investors Service (http://www.moodys.com) says its Ba2 foreign currency government bond rating is underpinned by generally sound economic policies, robust growth and comfortable external liquidity but is constrained by low GDP per capita, an oversized albeit easing public debt, and the country's vulnerability to exogenous shocks.

"Jordan's sovereign ratings are supported by the government's generally sound economic policies, the impetus for which comes from King Abdullah himself," says Tristan Cooper, a Moody's Vice President-Senior Analyst. "These have contributed to a vigorous rate of GDP growth and have spurred a dramatic increase in foreign investment in recent years."

Indeed, inflows of FDI and other long-term private capital have enabled the central bank to continue to accumulate foreign exchange reserves in the face of a wide current account deficit. "Despite an ongoing, low-level threat from Islamist militancy and rumbling discontentment about the rising cost of living, the domestic political situation is essentially stable and conducive to investment under an effective leadership," Mr. Cooper continues. "Jordan also enjoys strong and improving relations with most of its regional neighbors, the US and other G8 countries."

Jordan's ratings are constrained by a number of factors, according to the Moody's report, foremost of which is the country's vulnerability to exogenous shocks. "The steep rise in international oil prices since 2003 coupled with a sharp fall in external grants has precipitated a marked deterioration in the external current account and raised underlying fiscal pressures.", notes Mr. Cooper. While Jordan's strong international relations, particularly with the US, will ensure a degree of foreign support in times of economic difficulty, the level of support will remain unpredictable.

"The excessive, albeit declining, level of public and external debt also constitutes a negative factor, as does the country's relatively low GDP per capita and high unemployment," Mr. Cooper says. "There is a risk that rapid credit growth in recent years could start to affect the financial strength of commercial banks. Finally, the tense regional political environment, especially the turmoil in Iraq, is a source of disquiet."

The outlook on Jordan's ratings is stable. While Moody's remains concerned by the size of the current account deficit, the agency notes that the deficit continues to be financed comfortably with non-debt creating sources. "We will continue, however, to monitor closely the nature and sustainability of capital inflows as well as the level of overall external liquidity. We are mindful of the fact that Jordan has a fixed exchange rate regime with a volatile balance of payments, and that around 60% of the large public debt stock is denominated in foreign currencies" cautions Mr. Cooper. The rating agency's report, "Jordan: 2007 Credit Analysis," is a yearly update to the markets and is not a rating action. (Moody's08.10)

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11.3 LEBANON: Making Easy Work of Business

Libanpost and government officials signed an agreement at the end of September that is expected to simplify the business registration process in Lebanon. The Oxford Business Group reported that the International Finance Corporation (IFC), a member of the World Bank Group, worked with the government to design the new process. The initiative was the result of one of eight advisory programs undertaken by the IFC in an effort to restart the economy following the summer Hezbollah launched war of 2006.

The new business registration process, aimed at making the set up of a business simpler, cheaper and faster, is anticipated to be launched by the end of this month. Currently, registering a business involves numerous trips to government offices, various fees and a large amount of paperwork.

The initiative is being touted by the government as likely to reduce the overall time, cost and complexity of the process by almost half and to cut the number of steps and trips to government offices from the current 12 to 17 down to a maximum of six. "The reform sends a very positive message to the private sector and entire investment community," said Thomas Mouillier, IFC regional program manager for business regulatory reforms. Efforts were made to standardize the process by making it possible to register a new business with a single form that can be submitted to any branch of Libanpost, Lebanon's official mail service network, along with the necessary fees.

Within an average time frame of a week, Libanpost will deliver a certificate of registration approved and stamped by the commercial registry, the tax identification number issued by the ministry of finance and all other relevant documentation to the business owner. The IFC has worked with Libanpost to ensure that documents will be circulated between the various government agencies in a timely manner.

The announcement comes as Lebanon was placed 85th in Doing Business 2008, an annual survey by the IFC that ranks 178 economies on the ease of conducting business in the respective countries. The survey is based on the appraisal of 10 indicators of business regulation that track the time and cost to meet government requirements in business start-up, operation, trade, taxation and closure.

In a year-on-year comparison with the previous report's results, although Lebanon moved up one place overall, it lost ground in seven of the categories, with its largest fall taking place in the starting a business category where it dropped 10 places. The survey reports it currently takes an average of 46 days to open a business in Lebanon, compared to the regional average of 38.5. The average cost to open a business in Lebanon is 94% of gross national income (GNI) per capita, compared to the regional average of 66%.

The Lebanese government has often stated its aim to reduce the bureaucracy businesses have to endure in a bid to entice more investment. In the last decade, serious efforts were made to modernize the regulatory framework to facilitate foreign and local investment in the country. These have included a 2001 change in the law that simplifies foreigners' access to acquiring property and the investment development law of 2001, which offered investment incentives to businesses.

However, in the year surveyed by the IFC's report, Lebanon failed to undertake any reforms related to the ease of doing business, while other countries in the region were highlighted for their progress. Egypt scooped the position of top reformer in the world, while Saudi Arabia was placed as the seventh-fastest reformer globally and was credited for undertaking one of the boldest reforms by eliminating layers of bureaucracy previously associated with setting up a business. The survey focuses on reform as it views it as a catalyst for investment, citing the fact that equity returns are highest in countries that are reforming the most. "Investors are looking for upside potential, and they find it in economies that are reforming-regardless of their starting point," said Michael Klein, World Bank/IFC vice president for financial and private sector development.

The initiative has yet to be tested but officials hope it is the beginning of a new phase. "This agreement is a successful and concrete step toward creating a friendlier environment for investors in Lebanon," said Sami Haddad, minister of economy and trade. "It sets the stage for other reforms that are needed to attract more investment into the country." (OBG08.10)

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11.4 BAHRAIN: Concrete Ties

Bahrain and Qatar have long enjoyed strong links, the two countries often co-operating at economic, diplomatic and political levels. As per the oxford business Group, this connection is to be further strengthened and given solid form.

Long on the drawing board, plans to physically link the island kingdom of Bahrain with Qatar moved a step closer on September 29 with the signing of a memorandum of understanding (MoU) with French construction firm Vinci and its Qatari partner, the state owned company Diar Real Estate and Investment Co., to build a network of causeways and bridges connecting the two countries. The 40km causeway will be one of the world's largest over water traffic links, and is designed to serve both as a multi-lane highway and to carry the track for a high-speed train to connect Manama with Doha. The causeway will have one landfall near the village of Askar on Bahrain's eastern coast and the other at Ras Ashiraj on Qatar's western shore. Estimates for the $2bn project put the cost of the construction component of the causeway at 60% of the total budget, with the remaining 40% required for reclamation work.

The lead agency for the $2bn project is the Qatar-Bahrain Causeway Foundation (QBCF), set up by the two governments to push forward the scheme. Ahmad Hassan Al Hammadi, Bahrain's ambassador to Qatar and the chairman of the QBCF, told the signing ceremony in Doha that construction work on the project would start in around seven months, with a completion date set for 2011. "The details of the project will be worked out and mentioned in the final contract scheduled to be signed within the next four months," he said. Long dubbed the "Friendship Causeway", the link will contribute to strengthening ties between the two countries and their people, according to Al Hammadi.

The causeway will also strengthen its economic ties with the mainland, as it will cut costs for freight haulage and as the road and rail link give Bahraini nationals the opportunity to commute to Qatar for work.

Bahrain already has one concrete link with the mainland, the 25 km long King Fahd Causeway connecting the kingdom with Saudi Arabia. Opened in 1986, the causeway had an immediate impact on Bahrain's economy, with many Saudis visiting the kingdom annually, some attracted by Bahrain's more liberal laws regarding entertainment. On average, some 20,000 vehicles cross the causeway daily, according to Saudi officials. However, according to reports, numbers have dropped off after Bahrain tightened up its regulations governing nightclubs and bars.

Currently, up to 80% of the almost 5m tourists who visited Bahrain in 2006 traveled across the existing causeway, according to a report prepared last year by Global Investment House, with numbers projected to rise when the causeway is completed, reducing what was previously a 125 km road trip through Saudi Arabia from Qatar.

The new causeway will also cut travel time from nationals of other Gulf states who wish to drive to Bahrain. Presently, they have to take the indirect route through Qatar and Saudi Arabia. Though the trip has been simplified by Riyadh, which dropped the requirement for transit travelers from Gulf Co-operation Council states to have their passports stamped, it is still a round about route for many visitors.

Though there have been some concerns raised over the environmental impact of the massive project, these have been downplayed by the QBCF, with environmental impact studies showing the new causeway will only have a minor effect on the waters it will span. One study said shrimp stocks would only be reduced by around 1% with the planned design to allow water flow causing little impact on the sea or its bed. (OBG05.10)

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11.5 QATAR: Building Integration

Although on the rise, trade among members of the Gulf Co-operation Council (GCC) is low compared to trade with other economic blocs. The Oxford Business group observed that the recent push for implementation of a common currency in the region, now scheduled for 2015, has led many analysts and financiers to question the rationale. With regard to GCC integration, the real question has been in seeking to find out what the drivers behind this further push truly are.

A consultant at a leading global consultancy firm told OBG, "The impetus for integration will either be political, economic or a combination of both. The level of political impetus currently varies from country to country, and there seems to be quite a diversity of opinions as to what the goals of such integration should ultimately be. Considering economic factors, although cross-border deals and agreements between countries are increasing, it's not clear how anchored to the vision of GCC integration as whole these really are."

According to figures released by the International Monetary Fund, trade amongst the GCC members in 2005 amounted to roughly $16.7bn in exports and $5.5bn in imports, excluding oil. Qatar and Bahrain combined accounted for nearly one third and one fifth of intra-GCC exports and imports respectively, so alliances and co-operation between the two make economic sense. The GCC Secretariat's latest statistics report that more than 14,000 licenses were issued to citizens within the region in 2005 for businesses between GCC members and that number is expected to increase.

When looked at separately, some projects seem relatively small from a GCC standpoint. However, these seemingly unrelated projects are the key to interlinking the region and providing the necessary boost in trade to help move the region towards better linkages. New infrastructure links, such as the Qatar-Bahrain Causeway, are seen as bringing the European style of open borders closer to becoming a reality and helping in strengthening the business environment in both countries. Such efforts will have a knock-on effect throughout the greater GCC region.

Current independent estimates show that around 8% of all trade in the region is between GCC members, a sharp contrast to the 50% in intra-EU trade prior to its implementation of a common currency in 2002. Therefore, financial and market observers see that increasing intra-GCC trade should come first, if the rationale is purely economic.

By working towards common goals of stability and economic growth, countries participating in efforts to build infrastructure and provide good legal and regulatory framework can significantly enhance intra-GCC trade numbers. In improving legal and regulatory framework, the environment for trade and investment becomes much more feasible and can grow at a healthy, sustainable pace.

"Some of the challenges affecting business in Qatar include the scarcity of highly qualified local professionals, the need to improve local levels of entrepreneurship compared to other markets, and a lack of long-term integration of expatriate professionals into the local labor pool," said the consultant. "Making the regulatory burden less onerous and more in tune with international norms can only help to achieve these goals."

Spyros Pavlides, Gulf region senior coordinator for Archirodon, an international construction group active in the region, including the Qatar-Bahrain Causeway project, told OBG that continued investment in infrastructure is key to ongoing growth and success in the Qatari economy. "This project will have a broad impact for all of Qatar with its effects to be felt in all sectors of the economy, particularly in relation to labor and trade," said Pavlides.

Pavlides said, "It is highly important for Qatar to focus on infrastructure and capacity related projects, particularly with regard to trade. In order to compete on a global scale, trade capacity is of great significance, so along with transportation improvements, the causeway will essentially connect Qatar to another significantly important port in the region. This allows access for both importing and exporting, thus, delaying the significantly higher cost of constructing an entirely new port as demand continues to increase."

The rail aspect of the causeway project includes preliminary designs for a magnetic levitation railway with an option of extension to the United Arab Emirates (UAE) and Oman. This rail system should have significant impact in further building relations and business ties between the two countries. The route is seen as a natural continuation of other important links in the GCC region, such as the existing 25km King Fahd Causeway between Saudi Arabia and Bahrain and another proposed causeway between Qatar and the UAE. The move forward for such significant projects in Qatar is in line with efforts to link all six members of the GCC community by rail and road. "This [causeway] will exponentially increase trade capacity for both countries, thus enhancing the overall marketplace for the entire region," said Pavlides. (OBG11.10)

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11.6 ABU DHABI: Media and Entertainment

Abu Dhabi aims to become the "cultural capital of the region" and is exploring a variety of ways to achieve this goal. The government has recently turned its attention to the film and entertainment industry to achieve its ambitions and to further diversify the economy.

A major breakthrough came when Warner Bros Entertainment made their first footprint in the emirate at the end of September. The production company partnered with the Abu Dhabi Media Company (ADMC) and real estate development firm Aldar Properties in a multi-billion dollar, multimedia deal. The deal includes developing a theme park, hotel and multiplex cinemas as well as a $500m film production fund and a $500m videogame fund. Construction of the Warner Bros-licensed theme park is set to begin in 2009 and the first jointly owned multiplex cinemas will open the following year.

The film fund is designed to finance and produce big-budget films and video games to be sold internationally. The two companies will work together to make films in Arabic and create other local content. By bringing in foreign expertise the emirate hopes to benefit from the knowledge transfer provided by Warner and bring credibility to their productions. Barry Meyers, chairman of Warner Brothers, said, "We're anxious not just to be exporters of American films, but to be partners and support local films."

The ADMC is the government arm involved in both of these agreements. Created in June of this year, it is commissioned to oversee all media-related activities in the emirate and expand its regional influence on the industry. Aside from the projects already announced with Warner, the new company is hoping to launch an English newspaper next year. Riyad Al Mubarak, chief executive of the ADMC, said Abu Dhabi wishes to become a modern media voice that is realistic, dispassionate and factual.

Building on its desire to become the film capital of the Middle East, Abu Dhabi will be hosting the first Middle East International Film Festival next week at the Emirates Palace hotel. Over 50 films, representing various nations, will be screened during the week. Gerhard Bosse, executive assistant manager of Emirates Palace, told OBG the festival is one more step in the right direction to put Abu Dhabi on the map and create awareness.

"The film festival complements the overall progression of developments here in Abu Dhabi and for developing the film industry," festival executive director, Nashwa Al Ruwaini, told media. "It really is the icing on the cake. You need the film festival to make all the other film-related projects that are happening here happen."

The festival will be the launching point for what is anticipated to become an annual conference, the Film Financing Circle (FFC), which will focus on fostering growth in the region's developing film industry and put Abu Dhabi at the forefront of this expansion. It will bring together international financiers and film executives in an attempt to create new filmmaking opportunities in the Middle East and to establish Abu Dhabi as a major filmmaking centre.

Another initiative of the FFC is the Abu Dhabi Film Fund. This will create a link between Europe, the US and the rest of the world to co-produce and finance films. The fund will consider projects in any budget range and will primarily focus on financing projects from the region. It is designed to be profitable and the returns will be used to encourage local Emirati talent in the form of grants and other financial support. The founders of the fund hope to attract the power and expertise of Hollywood to the emirate to help build interest in the film industry and talent in the local community. (OBG12.10)

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11.7 UAE: No. Emirates - Catching the Sun

With concern building over the United Arab Emirates' (UAE) rapidly growing carbon footprint, Ras al-Khaimah (RAK) has taken the lead in developing new green energy technologies. The sun-drenched northern emirate has embarked on a project to harness solar energy with the aid of state-of-the-art technologies.

The UAE has been labeled by the World Wildlife Fund as one of the leading per capita contributors to global warming in the world largely due to the energy consumption habits of Emiratis and their penchant for gas-guzzling vehicles. In response, the government of the UAE is taking steps towards reducing the country's dependence on fossil fuels and creating a greener society by using solar energy. Worldwide energy consumption is expected to reach the equivalent of 20bn tons of petrol a year by 2050, but experts believe that an area covering just 0.05% of the globe's surface with solar panels could provide enough energy to satisfy a quarter of that demand.

While the federal government is coming up with new green initiatives, RAK is leading the solar revolution and is now at the forefront of developing new technologies. The RAK government has invested $5m in research and development for a pilot project that aims to capture the sun's rays out at sea and turn them into electricity and hydrogen.

Known as the solar island, the project involves building floating disc-shaped islands that will be placed just off the RAK coastline. The prototype for the solar island is currently being developed by the Swiss Centre for Electronics and Microtechnology. Funded by the RAK Investment Authority, it will be tested in the desert before the first sea trials are conducted some time next year. It is hoped to be operational by the end of 2008.

While the prototype may be an impressive 100 meters in diameter, the plans for the completed solar farm envisage an island with a diameter of five kilometers and which will be 20 meters high. The island will use electric hydrodynamic motors, fixed at intervals along the circumference, to adjust its position in line with the movement of the sun, allowing maximum energy yield. The island will be designed to operate in both open water or close to the shore. Under the scheme, the energy generated by the solar island could be used to feed both thermal and desalinization plant.

One of the great benefits of the technology is that it is relatively inexpensive, with the cost of the prototype itself working out to less than $100 per sq meter. Using a thermal energy reservoir, the prototype island is expected to supply energy for 24 hours a day and can achieve a peak generating capacity of 1 MW. The average power generation will be around 250 kilowatts with annual energy production predicted to be 2.2 gigawatt-hours.

Solar energy panels use photovoltaic cells, which use semiconductor silicon technology to convert sunlight particles known as photons into electrons. On the island, a concentrator system will be used to heat water to generate steam, which will be used to produce electricity. The electricity will be used to make hydrogen that can be stored on the island until it is shipped elsewhere, negating the need for costly pipes to the mainland.

However, there remain some significant hurdles to overcome, most notably making sure the island can withstand everything the sea can throw at it. Laboratory tests have proved in theory the island will be able to survive at sea, but this has yet to be proven in a real life sea trial. While there is a long way to go yet, the future looks bright for solar energy in the UAE with the government aiming for a target of $20bn worth of investments from both the public and private sectors in solar energy infrastructure over the next decade. (OBG10.10)

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11.8 UAE: N. Emirates - Healthy Industry

With the largest industrial base of the all the emirates, Ras Al Khaimah has long been considered the workshop of the United Arab Emirates (UAE) and one of the pillars has been the pharmaceutical industry. With billions of dollars of investments being made in recent years, the industry is now rapidly growing into a major player.

The pharmaceutical industry in the Middle East is now worth around $8bn, with 196 producers competing for around 70% of the local market. Ras Al Khaimah has placed itself at the centre of that industry by both investing in the home grown industry while aggressively pursuing foreign investment in the emirate's free industrial zones. The Ras Al Khaimah free zone, which includes three industrial zones, is now the fastest growing economic free zone in the Gulf Cooperation Council (GCC). There are currently 10 chemical companies based in the emirate and three of them are wholly foreign owned entitities. The industry also employs more that 1500 workers and is expected to be a key industry for both job creation and skills development going forward.

Ras Al Khaimah-based Gulf Pharmaceutical Industries, known as Julphar, has become a leader in pharmaceutical production in the region thanks to some hefty investment made by the government in recent years. Julphar currently has 477 pharmaceutical products patented in the UAE and is seeking more patents abroad. Earlier this year, Julphar acquired 12.2% of India's SMS Pharmaceutical for $7.5m. The company is one of the biggest producers of Ranitidine HCL in the world and has US FDA approval as an active pharmaceutical ingredients (API) manufacturer and a considerable API portfolio.

Julphar currently has a five year plan to expand into new markets and to increase its sales worldwide. The company plans to invest $272m in various expansion programs that will see the building of 11 new manufacturing plants of which seven will be built within the UAE. Meanwhile, the company is expanding rapidly abroad with four new manufacturing plants being built in Morocco, Sudan, Afghanistan and Bangladesh. According to reports, Julphar will invest $217m in the company's UAE expansion while spending $78.5m on foreign ventures.

To prepare for such a rapid expansion, Gulf Pharmaceutical Industries is also planning to transform itself into a holding company and to open up the various operations to public ownership. Shaikh Faisal Bin Saqr Al Qasimi, the company's chairman, was recently quoted in the local press as stating that the move was aimed at diversifying the company's investments. The plan is to issue 8m shares to the country's pharmacists and physicians in appreciation for their efforts.

To facilitate this expansion, the Ras Al Khaimah government has granted Julphar 2.5m sq ft of free land. The company is building an extra 160,000 cubic meters of storage capacity to accommodate the production of the raw materials in the company's new plants. The first of the two new plants to be built in the UAE is expected to be operational by the end of 2007. The two latest factories will be called Julphar 8 and 9 and will specialize in antibiotic powders and ointment products with a combined capacity of 50m units. When completed, it is expected that Julphar 8 and Julphar 9 will increase sales to $612m.

Construction work for two more factories called Julphar 10 and 11 also began in 2007 and the plants are set to be operational by June 2009. The plants will produce biotech products and will have a capacity of 37m units a year. Under the plans, four of the proposed seven plants in the UAE will be focused on finished pharma products while the remaining three plants will produce raw materials. Analysts view the production of raw materials as a strategically vital part of the company's plan to expand and increase sales. Currently the company imports the majority of its raw material needs from American and European companies. Producing raw materials in-house, so to speak, will be a vital development if the company is to keep prices low and remain competitive. (OBG04.10)

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11.9 OMAN: Looking to Curb Inflation

Oman is investigating ways to push the sultanate's spiraling inflation rate down as price rises hit a 16-year high, breaking through the 6% barrier in August. Though the government is trying to ease inflationary pressures, the Oxford Business Group observes that its commitment to an open market economy and the dollar peg limit its options to a degree.

The latest figures released by the Ministry of National Economy on October 11 showed that the annualized inflation rate had come in at 6.47% in August. This was well up on the 5.98% for the 12 months ending in July and more than double Oman's 3.2% inflation rate for 2006. The prime culprit in accelerating inflation was rental expenses, which increased by an overall average of 7.5% as of the end of August.

The government has already acted to rein in this component of the consumer price index. In late September, the government announced it was imposing a 15% cap on individual rent increases on existing leases. The restriction will be in place for at least two years. Even before the cap came into effect, there was some easing of rent rises on the inflation rate, with the August level of increases down on the 8.5% recorded for the year ending the previous month.

Before the release of the August figures, Makboul bin Ali bin Sultan, the Commerce & Industry Minister, said there were a number of factors pushing up prices in Oman, including a construction boom, strong economic growth and rising transport costs. He also singled out the falling value of the US dollar, to which the Omani rial is pegged, as a cause of inflationary pressure, with the costs of non-dollar imports being driven up by the weakening greenback.

One measure the government has ruled out, at least for the moment, is uncoupling the link between the Omani rial and the US dollar, a step taken by Kuwait in May. Bin Sultan also said the state would not move to introduce restrictions on the levels of price rises or subsidies on some staple products. "The authorities have studied all of these solutions and found that they would not be useful in view of the (government's) strategy, which is based on free trade and market economics," he said.

Hamood Sangour Al Zadjali, the executive president of the Central Bank of Oman, also ruled out ending the US dollar peg. Though acknowledging that the depreciating dollar was a factor pushing up inflation, along with price increases on goods imported into Oman, Al Zadjali said the bank was opposed to suggestions of uncoupling the present currency link. "The Central Bank remains firmly committed to maintaining the parity and peg of the Omani rial to the US dollar," Al Zadjali told the local media on October 1. "For an open economy like Oman, the fixed peg to the US dollar works as the strongest source of stability, which is very essential for promoting trade and investment." The government has, however, ended the requirement that Omani banks use their holdings of foreign currencies as part of their mandated 3% monetary reserves, a measure Al Zadjali said would help contain inflationary trends.

Rising prices in several sectors have influenced the inflation rate. In addition to rental expenses, another cost that rose above the year-on-year average was food, beverage and tobacco prices, which jumped by 12.1% in the year to August, the ministry data said. The July figure for the same basket of products was 11.3%. While some of Oman's inflation is imported, spurred by overseas conditions, other factors could be seen as a one off, such as the high cost of repairing damage caused by Cyclone Gonu, which swept across the sultanate in June and caused as much as $3.9bn in damage, according to estimates of the ministry of economy. Up to $2.58bn of damage was to Oman's infrastructure, with transport, utilities and communications all severely hit.

Oman's construction industry was already hard pressed to keep up with demand, with the business, retail, residential and tourism sectors all vying for the industry's limited resources. With the added requirements placed on it by the need to rebuild after Gonu, wages and materials costs in the construction industry have shot up. While the increases in inflation were worrying, the present rate was still seen to be within a moderate range when the strong levels of growth in the Omani economy, expected to be around 6.5% this year, were taken into account, said Al Zadjali. Oman's inflation rate also compared well to those of other countries in the region, he said. (OBG16.10)

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11.10 SAUDI ARABIA: Record Surplus

The Oxford Business Group reported that Saudi Arabia recently unveiled a record budget surplus for the fourth consecutive year. It achieved a surplus of $77.5bn for 2006 thanks to high oil prices.

The Saudi Arabian Monetary Agency (SAMA), the Saudi equivalent to a central bank, had initially projected a surplus of $14.7bn and a revised final figure of $58bn back in 2005. The projected surplus for 2007 is $5.3bn. Oil prices this year have topped $80 a barrel. As Saudi Arabia bases its budget estimates on oil revenues below market levels to allow for fluctuations, the difference between government forecasts and actual figures is no surprise.

The budget surplus was achieved despite record public spending by the government, which amounted to $105bn and went mostly towards development projects and the repayment of some public debt. The kingdom's balance of payments also registered a surplus of $99bn for 2006.

Meanwhile, the country faces a concern with rising inflation. In 2006 inflation was 2.2%, reaching 3.8% in July 2007. According to John Sfakianakis, chief economist at Riyadh-based SABB, the inflation is driven by a massive influx of liquidity. Basel Algadhib, chief executive of Morgan Stanley Saudi Arabia, told OBG, "Yes, inflation is a worry especially in areas such as rent and food, but what people have to remember is we've enjoyed a near zero inflation rate for a very long time."

In 2006, the private sector saw growth of 6.4%, the highest in 25 years. At the same time, the public sector grew by 6.1%, the highest level in nine years. These economic successes have been attributed to an increased level of domestic and foreign investments in various sectors.

The news of the budget surplus has been met by escalating speculation that it is time for the kingdom to revalue the Saudi riyal. On announcing the surplus, Hamad Al Sayari, governor of SAMA, said the kingdom has no plan to revaluate the dollar-pegged riyal. "We are not considering any change," he told local press, putting an end to mounting speculation it might strengthen its currency, after SAMA held back from matching last week's US interest rate cut.

The Saudi riyal, which has been effectively pegged to the US dollar since 1986, has come under pressure to revaluate due to the idea that the Saudi currency is now out of kilter. The high oil prices of recent times and the strength of the domestic economy should result in a strengthening of the riyal. Oil accounts for the vast majority of both budget and export revenues, 91% and 88% respectively. However, the recent weakness of the US dollar is causing the riyal's external value to depreciate, while inflationary pressures are causing its internal value to deteriorate, leading to questions regarding the dollar-pegging policy.

"The dollar is the main currency for the kingdom's exports as they are priced in dollars. Payments are also done in dollars. Many countries to which we export are linked with dollar in one way or another," the SAMA governor explained. He said the kingdom's monetary policy was based on what would be best for the domestic economy and what investors would find attractive. "It is not necessary for us to follow a cut in the interest rate, especially when there is high liquidity...We think exchange rate stability and transparency are important for investors."

Meanwhile, according to a recent World Bank report, Saudi Arabia has made great progress in improving the Saudi business environment's attractiveness for investors. In its fifth annual "Doing Business" survey it rates reforms undertaken to improve the business climate of a 178 countries. Saudi Arabia improved its ranking from 38 to 23. Saudi Arabia tops the poll as the best place to do business in entire Middle East, ahead of Kuwait (40th) and the United Arab Emirates (68th). The report also ranks Saudi Arabia ahead of advanced economies such as France (31st) and Austria (25th). (OBG04.10)

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11.11 EGYPT: Economy Plain Sailing?

The Economist Intelligence Unit reported that the Egyptian prime minister, Ahmed Nazif, was in Port Said on September 20th to witness the launch of the second phase of the container terminal that started operations three years ago at the north-eastern approaches to the Suez Canal. The success of this venture, in which the Netherlands-based APM Terminals has a 60% stake, has stemmed in large part from the achievement of Mr. Nazif's government&mdashwhich is of a similar vintage&mdashin reviving the fortunes of the Egyptian economy, which is growing at an annual average rate of about 7%. The expansion project envisages doubling the terminal's capacity to 5.1m TEUs by 2011&mdashand, as such, is a clear vote of confidence in the future prospects of the Egyptian economy, an assessment shared to a large extent by the IMF in its preliminary notes on a recently completed Article IV consultation.

There are some clouds on the horizon, however. Foreign investors are growing increasingly anxious about the question of the succession to President Hosni Mubarak, and Egypt's recent macroeconomic improvement has come on the back of years of underachievement, which has left a challenging legacy of social deprivation.

Supply side

The headline figures are almost uniformly encouraging. Real GDP growth accelerated in the fiscal year 2006/07 (July 1st-June 30th) to 7.1%, according to preliminary official data. This is close to the Economist Intelligence Unit's estimate of 7% growth and follows growth of 6.8% in 2005/06. The rapid economic expansion over the past two years has been helped along by a string of economic reforms implemented by the government since mid-2004, including sharp cuts in custom duties and in corporation and income-tax rates, the latter to a flat rate of 20% with a generous exemption for low-income earners. The economic acceleration is reflected in the robustness of recent economic indicators. Investment growth is estimated to have risen to above 25% in 2006/07. Foreign direct investment (FDI) swelled to $11.1bn in 2006/07, from around $6.1bn the previous year and negligible amounts in the years of stagnant growth of 2002/03 and 2003/04 (averaging $500m/year). Moreover, the hydrocarbons sector no longer dominates FDI inflows as used to be the case. From 80% of total FDI in 2003/04, the share of oil and gas in FDI fell to 65.1% in 2004/05 and 30% in 2005/06. A positive development has been the strong increase in the share of new establishments (greenfield investments) and expansions in the FDI-mix, from minute in 2003/04 to 23.7% in 2004/05 to a majority of FDI in 2005/06 (54.8%).

Other positive factors include a growing diversification of the economy, with a strong increase in output growth in manufacturing and in services. Export earnings are rising fast and imports of capital equipment and semi-finished products for re-exports are increasing strongly (although this is leading to a widening of the trade deficit, it augurs well for the soundness of the manufacturing industries). Annual export growth has risen from 0.6% in 2001/02 and 15.2% in 2002/03 to 32.3% in 2005/06 and 33% during the first three quarters of fiscal 2006/07. Export earnings are expected to have topped $20bn in fiscal 2006/07, up from just $7bn in 2001/02.

Could do better

However, there is still some way to go. Despite the recent impressive performance of FDI, given the size of Egypt (with a population of 76m), there ought to be considerable scope for growth, and in comparison with other developing countries on a similar growth path, such as Malaysia, Egypt's FDI numbers are still on the low side. Two reasons account for this. First, despite a much improved business environment, bureaucratic obstacles abound. In spite of the best efforts of the Ministry of Investment and the investment authority, GAFI, permissions still take a long time to obtain, red tape remains pervasive and corruption is still rife, especially among low-level officials. Issues remain with regard to the availability of land for industrial use or construction, and it still takes about six to eight months to register a property (this is however reduced from 18 months previously).

Second, investors continue to be worried about the question of what will happen when President Mubarak, finally steps down or dies. His current mandate runs until 2010, but he is 79 and appears frail. Recently, an official from Standard and Poor's, the rating agency, highlighted that the succession question is one of the issues that is preventing Egypt from attaining investment grade (Egypt is currently one notch under investment grade with most rating agencies). Moreover, Egypt has a recent history of policy reversals, such as the liberalization and privatization program in the early 1990s which petered out half-way through the decade without achieving much. What investors are looking for are signs that the current reforms and policies are becoming institutionalized. While it appears clear that the pro-businesses policies are supported by a broad consensus in the government (and benefit from the backing of the president), they could still be reversed.

Social agenda

Despite robust economic growth, the vast majority of Egypt's population has yet to feel the benefits of the recovery in terms of rising living standards, as the government's promised "trickle-down effect", which eventually will lift living standards for the poor, is taking some time to materialize, and there is growing resentment against the government as its reform policies so far seem to have benefited mainly the relatively small business elite. Conscious of this, the government has stepped up its social agenda and plans to announce a raft of social measures in the autumn, mainly aimed at improving Egypt's healthcare and education systems.

At the same time, the government is aware of the pressing need to carry on with fiscal consolidation. With a central government budget deficit estimated at around 7.5% of GDP for fiscal 2006/07, the fiscal accounts continue to act as a drag on the economy. The IMF stresses that reducing the budget deficit is vital in order to raise national savings and to support monetary policy in containing inflation. As part of the consolidation process, the government intends to proceed with reform of the sales and property tax systems within this fiscal year. However, the imperative to reduce the deficit limits the funds available to the government to redress Egypt's social problems. Hence the way forward will necessarily be a delicate balancing act between on the one hand providing a stimulating business environment and maintaining economic stability, and, on the other, making sure that an increasing share of the population can partake in the spoils of economic growth.

Fortunately for the government, the economic fundamentals are better than at any point in the last three decades. Real GDP is expected to post growth above 7% over the next two years and growth is becoming increasingly diversified, insulating the economy against a sudden shock to oil prices or a panic in the stock market from the recent financial turmoil in the global markets. Inflation has risen, but is likely to be contained by the Central Bank which is gradually moving towards inflation targeting as its official policy. With liquidity conditions still fairly easy and with an expanding economy, this is the best time for the government to implement the harsher economic reforms which will set Egypt on a sustainable growth path. Provided it has the necessary political courage, and enough time, to do so. (EIU29.09)

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11.12 EGYPT: World's Top Reformer

Egypt has been awarded the title of "world's top reformer" by Doing Business 2008, an annual report by the World Bank and the International Finance Corporation (IFC). The Oxford Business Group added that the report praised Egypt, saying the government had "pulled out all the stops [...] its efforts cut deep" after a disappointing performance last year. Egypt topped the table by making more economic reforms in the 2006/2007 period than any other country surveyed, according to Michael Klein, World Bank/IFC vice president for financial and private sector development. He noted that equity returns are highest in the countries that are reforming the fastest.

The report surveys 10 different areas of business regulation in 178 countries worldwide, tracking the time and cost required to meet government requirements in business start-up, operation, trade, taxation and closure. Egypt was considered to have made significant progress in five areas: improving the process of starting a business, licensing, property registration, getting credit, trading across borders and business closure. However, there was less progress in employment legislation, investor protection, the tax code and contract enforcement.

Several reforms have made it easier to start a business in Egypt, according to Klein, including a huge cut in the minimum capital required to do so from $8,930 to $180. The average start-up time and cost have been halved to nine days and $385 (28.6% of gross national income [GNI] per capita), respectively.

Particularly important legislative changes included the reduction of red tape in getting building licenses and the establishment of one-stop-shop service centers for exporters and importers and other businessmen and investors at the country's ports. Costs of registering property have also been cut, leading to a 39% increase in registration fee income in the first six months after the reform was introduced. A new private credit bureau has also been established, which will improve credit access, particularly for small- and medium-sized enterprises and micro companies.

While some have argued Egypt has reformed quickly over the past year from a relatively low base of significant over-regulation, Klein said, "investors are looking for upside potential and they find it in economies that are reforming, regardless of their starting point". The response to the Doing Business report from within Egypt has been positive. "As you know, business in Egypt is good, the whole picture is good ... of course the report helped," said Teymour El Derini of Beltone Financial, noting that it had boosted the confidence of companies that have already invested in Egypt that the country's future is dynamic and secure.

The news that Egypt had come top in the World Bank and IFC's reform listings caused a rebound on the Cairo Stock Exchange after four days of falling stocks. Market giant Orascom Construction Industries led the charge, with its shares rising 6% to 464 pounds ($83.01). Overall, the main benchmark Case 30 Index surged 1.4% to 8529.93 points, and another key index, Hermes, hit 75,099.66 points, an increase of 1.2%. Foreign investors accounted for almost 35% of buying across the exchange; indicative of the enthusiasm they have for Egypt's companies even while other exchanges were taking a hit from the global squeeze on credit.

However, beyond the extremely positive press and market response it has generated, the report reveals areas in which Egypt still has significant room for improvement. For example, while workers are relatively easy to hire, they are somewhat difficult to fire by regional and global standards, taking away any incentive to create jobs. The report scores Egypt 60 on ease of firing workers, on a scale on which 0 is least regulated and 100 most. The regional average is 31.2, and the average of wealthy Organization for Economic Co-operation and Development (OECD) member countries is 27.9.

Doing Business 2008 also estimates that a medium-sized company spends 711 hours in tax payment procedures annually, compared to an average of 236.8 hours and 183.3 hours in the region and OECD member states respectively.

Egypt also lags in the ease and cost of business closure. The report states that the average time period for business closure is 4.2 years, compared to 3.7 years in the region as a hole and 1.3 years in OECD member states. Average costs are high in Egypt, at 22% of GNI per capita, compared to 13.9% in the region and 7.5% in OECD member countries. To compound this, recovery rates on closed businesses are very low, at 16.6 cents on the dollar, as opposed to 25.8 cents and 74.1 cents in the dollar in the respective comparator groups.

Despite these caveats, Doing Business 2008 is overall very upbeat, and the market response shows that investors and business people are convinced the business climate in Egypt is improving rapidly, with commensurate economic gains. Egypt is increasingly becoming a better business destination and should the pace of reform continue, barriers to participation will continue to fall. (OBG03.10)

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11.13 MOROCCO: Politics - King's man

The Economist Intelligence Unit reported that Abbas el-Fassi, the newly appointed prime minister of Morocco, is close to completing the formation of a new government, based on a coalition of his Istiqlal party, which won the general election on September 7th, and at least four other parties. The government is likely to have broadly similar orientation to the outgoing administration, reflecting both its similar make-up and the overarching role of the king, Mohammed VI, in setting the policy agenda.

Due Reward

Mr. Fassi has, in effect, been rewarded for his success in heading off the challenge of the moderate Islamist Parti de la justice et du developpement (PJD). His conservative nationalist Istiqlal party, Morocco's oldest, won 52 of the 325 seats, with the PJD coming second with 46. The Islamist party is highly unlikely to be included in the new government, although it would have been difficult to have excluded it if it had won the largest number of seats.

The king is under no constitutional obligation to call the leader of the largest party to form a government&mdashin 2002, he entrusted this task to Driss Jettou, a former interior minister without party affiliation. Istiqlal's success owed much to the creditable performance of four of the party's departmental ministers in the Jettou government (Mr. Fassi was a minister of state without portfolio), and there had been speculation that the king would choose one of these relatively youthful figures ahead of the party's leader, who is aged 67. Adel Douiri (tourism), Karim Ghellab (transport) and Taoufiq Hejira (housing) had been mentioned as the main contenders.

However, the king has chosen to respect the party hierarchy by putting Mr. Fassi in charge. He is a veteran of Moroccan politics, having held several ministerial and ambassadorial posts since the 1970s. His reputation suffered a knock in 2002 when thousands of unemployed Moroccans were defrauded by a UAE firm claiming to be offering jobs on cruise ships. The firm had managed to secure a license from an agency affiliated to the Ministry of Labor&mdashwhich was headed by Mr. Fassi at the time&mdashdespite having a record of similar scams in other countries in the Middle East and Africa. Mr. Fassi did not admit to any wrongdoing, and no officials were found to be at fault in subsequent investigations. His party's success in the election seems to indicate that he has managed to put this affair behind him.

Social Focus

Istiqlal fought the election on a platform of seeking to tackle Morocco's social ills through increasing spending on rural development and through lowering tax rates for small- and medium-sized enterprises. To create jobs for the rural population, Istiqlal presented a plan envisaging the expansion of agriculture with an emphasis on subsistence and stock farming, while at the same time developing alternative economic activities such as traditional fishing, rural tourism and crafts. It suggested raising the skills levels of the rural labor base by allocating $150 per child to improve schooling.

The plan also provides for the construction of 50 small dams for a total outlay of $560 billion, and for investments in water management programs, including developing drought-resistant crops. To address urban poverty, the party pledged to improve access to housing by increasing the maximum maturity of loans to 60 years; to reform the pension regime; and to reduce income tax for low-wage earners. Istiqlal's plans for small businesses included reducing corporation tax to 25% for medium-sized companies and to 15% for small companies from its current level of 35%, and boosting the venture capital sector.

Istiqlal is expected to reserve six portfolios for itself in the new government, with the four other main partners in the coalition&mdashthe Union socialiste des forces populaires (USFP), the Parti du progres et du socialisme, the Rassemblement national des independents and the Mouvement populaire&mdashgetting four cabinet seats each. This raises the question of whether the USFP will be able to retain its traditional grip on the Ministry of Finance, or whether one of the rising stars of Istiqlal will be given this key portfolio. (EIU02.10)

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11.14 TURKEY: Construction Abroad

Turkey's heavyweight construction companies are continuing to win big contracts abroad, with a large number of tenders being won in neighboring states. While energy infrastructure continues to propel business forward, the construction of transport, residential and tourism facilities are also earning Turkish contractors strong profits in the Arab world, Commonwealth of Independent States (CIS) and Africa.

According to the Turkey's state planning organization, half the foreign tenders in the period between January and July of 2006 were won in the Middle East (equivalent to $3.4bn at the time), followed by Africa ($1.6bn) and the CIS ($1.5bn). Analysts say that the proportion of foreign construction bids won by Turkish construction firms in each region continues to grow today.

A swell in petrodollars over recent years, along with the demand for new infrastructure in countries with public money to spend, has played into the hands of Turkey's large contractors. In September for instance, Turkish Minister of State Kursad Tuzmen confirmed that Turkish construction companies had won contracts worth $2.5bn in Libya in the first eight months of 2007 alone. This comes as a large part of the $15bn worth of construction projects expected to be undertaken by Turkish contractors in 2007 according to data from the state planning organization in 2006. Some construction analysts now expect the figure to surpass the projection by a couple of billion.

"In the global construction market we have seen an acceleration of business in our field, especially in the construction of industrial plants and particularly in power plants," Ergil Ersu, an executive member of the board of directors at Gama Holding, a Turkish engineering and construction heavyweight, told OBG.

Gama is also currently working on energy-related construction projects in Qatar, Yemen Saudi Arabia, Libya, Russia, Macedonia and Ireland. Three natural gas power plant tenders have been won by joint ventures including Gama Power Systems - a subsidiary of the holding company - in Ireland, Russia and Macedonia, amounting to $600m. "We're in a fortunate position in that we have excess demand for our services," said Ersu.

Turkey's construction companies are not focusing purely on energy-related tenders abroad. Gama Energy for instance is involved in a $880m four-year construction project, known as the Disi Water Conveyance Project, to supply water from southern Jordan to Amman. In September, it was announced that Turkish construction company Yuksel Insaat along with Qatar-based Midmac won a $202m road construction tender in Qatar as part of the Ras Abu Aboud road enlargement project. In August, Ucgen Insaat ,a subsidiary of Turkey's constructing and contracting Ucgen Group, announced that it had been commissioned to build 20 hotels in Iran over three years, securing a $140m loan from the Central Bank of Iran to this end.

Turkey's airport development, management and operating brand TAV - now separated into two companies, TAV Havayollari and TAV Insaat - has also developed a reputation as an airport constructor and operator both at home and abroad. In early October TAV Havayollari participated in bids for the management of three Saudi airports (Riyadh King Khaled International, Damman King Fahd International and Jeddah King Abdulaziz International airports.) TAV Havayollari's sister company, TAV Insaat, also won the tender for the construction of Tripoli International airport as part of a consortium in August. The company built the Tbilisi and Batumi airports in Georgia and is involved in the construction of the Enfidha airport in Tunis, Doha airport in Qatar and Egypt's International Cairo airport.

However, not all is positive for Turkish contractors plying their trade abroad. "We are suffering substantially from a weak dollar and strong lira because most of our contracts are paid in the US greenback," Ersu told OBG. (OBG15.10)

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- Israeli Shekel conversions done at a rate of NIS 4.00 = $1.00
- Turkish Lira conversions done at a rate of NTL 1.20 = $1.00
- Cypriot Pound conversions done at a rate of C£ 1.00 = $1.60
- Jordanian Dinar conversions done at a rate of JD 1.00 = $1.41
- UAE Dirham conversions done at a rate of Dh 3.70 = $1.00
- Omani Rial conversions done at a rate of OR 0.385 = $1.00
- Pakistani Rupee conversions done at a rate of Rs 60 = $1.00

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