TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Prime Minister Netanyahu Fully Adopts Sheshinski Gas Taxes
Back to Top
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Virginia Government To Assist Five Israeli Cleantech Companies
2.2 Magic Software Announces New Partnership with Quistor
2.3 Groupon Expands Local Commerce Platform to Israel
2.4 Viola Private Equity Invests $7 Million in Zend Technologies
2.5 Volkswagen Seeks More Israeli Suppliers
2.6 Fast food Chain McDavid to Reopen in Israel
2.7 Silver Lake Sumeru Announces Investment in PrimeSense
2.8 Covertix Attracts Investment From Kima Ventures
Back to Top
3: REGIONAL PRIVATE SECTOR NEWS
3.1 Arabian Gulf Wood Prices Stable Over Past 6 Months
3.2 French Retailer Auchan Closes Dubai Hypermarket
3.3 Turkish Car Sales Hit Record-High
Back to Top
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Enlight to Install 16 Small PV Facilities
4.2 Petra Solar Launches Research Center in Amman
4.3 Wind Projects to Help Egypt Reach 2020 Energy Target
Back to Top
5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Jordan Approves $225 Million Package To Lower Commodity Prices
5.2 Jordan Considers Cost Of Living As Public Protests Increase
5.3 Upsurge in Jordan's Exports & Expat Remittances
5.4 Jordan Inflation Rebounds to 6.1% Annually in December 2010
5.5 Bahrain in World's Top 10 for Economic Freedom
5.6 Bahrain Plans Hefty Budget Outlays in 2011-2012
5.7 Qatar is the Rising Star in the GCC Building Construction Industry
5.8 Egypt Annual Urban Inflation Rises Slightly in December 2010
5.9 Egypt's Orascom Forms JV for Nuclear Power Projects
5.10 Egypt Sees 13% Increase in Garment & Textiles Exports to United States
5.11 Saudi Arabia's Inflation Ends Year with 5.3% Average
5.12 Morocco Achieves 3% Economic Growth in Third Quarter
5.13 Islamabad Postpones IMF-Backed Tax Reform
Back to Top
6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey Pharmaceuticals and Healthcare Report Q1 2011
6.2 Turkey Powers Through With 3rd Nuclear Plant Project
6.3 World Bank Forecasts Turkish Growth to Stand Around 4%
6.4 Ban on Alcohol Ads Strikes Turkey's Efes Pilsen
6.5 Cyprus HICP Inflation Shows Jump in December
6.6 Greece's Deficit Fell by 36.5% in 2010
6.7 Austerity Drives Greek Unemployment To New High
6.8 Bulgaria's New Car Sales Down 65% in 2 Years
Back to Top
7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Tel Aviv Fast Lane Is a World First
*REGIONAL:
7.2 Lebanese Cabinet Resignations
7.3 Jordan in 2030 Future Demographics
7.4 Dubai Court Rules Brandishing Middle Finger Can Lead To Deportation
7.5 Tunisia's Ben Ali Finds Refuge In Jeddah Palace
Back to Top
8: ISRAEL LIFE SCIENCE NEWS
8.1 TransPharma Successful Phase 1 Trial of ViaDerm-Calcitonin for Musculoskeletal Disorders
8.2 Medisafe 1 Technologies National Implementation by Israel's Pharmaceuticals Administration
Back to Top
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 GM & Powermat to Put Added 'Charge' in Chevy Volt
9.2 Elbit Systems' Brazilian Subsidiary to Supply 30mm Unmanned Turrets to Brazilian Army
9.3 Jordan Valley Semiconductors Order From China's Invenlux for QC3 HRXRD Tool
9.4 BroadLight Issued Two New Processor Architecture Patents
9.5 YCD Multimedia Introduces New Solution Based on Retalix Software & HP Hardware
9.6 NanoMaterials Enters Indian Market With Second Largest Petroleum Company HPCL
9.7 SiSense Prism Business Intelligence Solution Selected by WeFi to Analyze Massive Data Sets
9.8 Elbit Systems to Supply Korea Airborne EW Suites and MWS Valued at $29 Million
9.9 New Design Wins from Major Customer to Boost Silicom's Revenues by $2 Million
9.10 NICE Introduces New Real-time PCI Solution for Payment Card Industry Compliance
Back to Top
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's 2010 Inflation Rate Totals 2.7%
10.2 Israel's Polished Diamond Exports Up 48% in 2010
10.3 More than 20% of Israeli Families Receive Welfare Aid
10.4 Strong Shekel Cost Israeli Exporters $3.3 Billion in 2010
10.5 Israel's Car Imports Rise By 30% in 2010
Back to Top
11: IN DEPTH
11.1 ISRAEL: Summary of Israeli High-Tech Company Capital Raising - 2010
11.2 ISRAEL: Strong Fundamentals Faced by Tough Policy Choices
11.3 ISRAEL: Barclays Sees Natural Resources Supporting Israeli Economy From 2011
11.4 JORDAN: Economy Takes Priority
11.5 JORDAN: Plan in Place
11.6 BAHRAIN: A Year in Review 2010
11.7 QATAR: Year in Review 2010
11.8 UAE: Abu Dhabi - Year in Review 2010
11.9 EGYPT: Fitch Affirms Egypt's Rating at 'BB+'; Outlook Stable
11.10 EGYPT: The Rise of Retail
11.11 ALGERIA: Highs and Lows in Education
11.12 ALGERIA: Targeting Tourism
11.13 TUNISIA: Pressing Issues For Olive Industry
11.14 TURKEY: Breeding Hope for the Meat Industry
11.15 GREECE: Fitch Downgrades Greece to 'BB+'; Outlook Negative Ratings
11.16 BULGARIA: Forecasts, Must-Dos & Risks for 2011
Back to Top
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Prime Minister Netanyahu Fully Adopts Sheshinski Gas Taxes
Prime Minister Netanyahu said on 18 January that his government fully accepts the recommendations of the Sheshinski Committee in regard to taxation of profits from Israel's natural gas fields. Netanyahu said that he intends to set up a fund for education in elementary schools and high schools with the money earned from taxing the natural gas profits. He added that some of the money would go towards defense. He said, "Until recently we criticized Moses, one of mankind's great historical leaders because he did not know how to navigate. Firstly because it took him 40 years to lead the Children of Israel several kilometers and secondly because he came to a place without water, gas and oil." He added, "Now it is clear that he did not make a mistake. We have succeeded in creating, without natural resources, one of the world's leading economies. We lead the developed countries with our growth rate, and we have found gas, a lot of gas although not as much as the public has been talking about. This gas can now help us nurture excellence." Netanyahu continued, "Therefore, I have decided to set up a fund for the fruits of the revenues. The fund will be dedicated to three aims: education, education and education, and one other thing - defense. So that we can enjoy the fruits, we must bring the gas out from under the sea. We must get it out. To get it out we need the proper balance between two requirements: incentives for business and benefits for the citizens of the State of Israel."
The tax rate on gas, including royalty and company tax, stands at nearly 30% and is among the lowest in the world. The taxation rate recommended by the Sheshinski Committee would both cut tax breaks on entrepreneurs and also add a new special levy, and would grow over the next 8 years from a rate of 50% now to 62%. This rate depends on company profits and a rate of 50% on all new gas reservoirs that will begin functioning by 2014; including, presumably, the oil field Meged, which is valued at an estimated $830 million. Gas exploration companies including the Delek Group have in recent months waged a battle against the recommendations, putting intensive pressure on decision-makers and threatened that they will stop the development of projects. The cabinet is expected to approve the Sheshinski Committee's recommendations next month. They would then need to be passed into law by the Knesset. The Finance Ministry expects that the final vote will be taken in mid-April. (Various 18.01)
Back to Table of Contents
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Virginia Government To Assist Five Israeli Cleantech Companies
Virginia has launched a program to support and encourage Israeli cleantech companies; via the Virginia Israel Advisory Board (VIAB) and with the collaboration of the Zysman, Aharoni, Gayer, & Co. (ZAG) law firm, a Dominion Resources commercialization team is now in Israel to interview 25 cleantech companies, of which five will receive aid packages. The program is directed at companies close to commercialization of their products and which are targeting the US market. The chosen companies will receive financial, technological, and management assistance and will open offices in Virginia. The Virginia government and ZAG are cooperating with Dominion Resources, which has a market cap of $25 billion. Dominion Resources is one of the largest US energy products and transportation companies, operating in 12 states. This is not the first time that Virginia is investing in Israeli companies. A year ago, VIAB launched the Virginia Israel Biosciences Commercialization Center to support biotechnology companies. Twelve Israeli companies currently participate in the program, and $18 million has been invested in them. (Globes 10.01)
Back to Table of Contents
2.2 Magic Software Announces New Partnership with Quistor
Magic Software Enterprises announced a new partnership deal with Quistor, Europe's largest Oracle JD Edwards system integrator. Quistor, with its extensive customer base throughout Europe, will be using Magic Software's iBOLT code-free business integration platform to extend the capabilities and usage of Oracle's JD Edwards EnterpriseOne and JD Edwards World ERP systems. iBOLT will enable Quistor to integrate quickly and easily with the entire range of business processes within the enterprise and business environment. With more than 50 iBOLT adapters, wizards, services and methods, iBOLT allows organizations of any size to create continuous business processes based on JD Edwards. The solution utilizes Magic Software's proven metadata-based business integration framework to empower business analysts and JDE administrators to manage business processes using code-free, visually-oriented process design tools. Through integration, iBOLT helps users get more value from their IT investments by automating manual and repetitive workflows and freeing sales teams to focus on selling. With an integrated view of company data, management and employees can make more informed business decisions, get more value from each business interaction and achieve faster time to market for their products and services. Or Yehuda's Magic Software Enterprises (http://www.magicsoftware.com) is a global provider of cloud and on-premise application platform solutions and business and process integration solutions. The company's award-winning, code-free solutions give partners and customers the power to leverage existing IT resources, enhance business agility and focus on core business priorities. Magic Software has partnerships with global IT leaders including SAP AG, salesforce.com, IBM and Oracle.
Back to Table of Contents
2.3 Groupon Expands Local Commerce Platform to Israel
Chicago's Groupon announced the launch of Groupon Israel via acquisition of daily deal site Grouper (http://www.grouper.co.il). Terms of the deals were not disclosed. Using the principles of collective buying, Groupon negotiates unprecedented discounts with popular businesses and shares them with subscribers via free daily emails. The deals are activated only when a minimum number of people agree to buy, encouraging subscribers to share the promotion with family and friends. By guaranteeing a large number of new customers, Groupon has created a powerful new marketing vehicle for local merchants in thousands of cities worldwide. The acquisitions continue Groupon's rapid global growth and extend its reach. Serving Tel Aviv and surrounding cities since March 2010, Grouper is widely recognized as the first and largest deal site in Israel. (Groupon 10.01)
Back to Table of Contents
2.4 Viola Private Equity Invests $7 Million in Zend Technologies
Viola Private Equity made a growth equity investment of $7 million in Zend Technologies. Viola's investment adds to the Company's previous internal round raised from its existing investors, including Greylock Partners, Index Ventures, Azure Capital Partners, Intel Capital, SAP Ventures and others, which was announced in May 2010. All together the financing round amounts to $16.5 million. Zend , the world's leading provider of open-source and commercial solutions for developing and managing PHP Web applications, achieved record revenue growth in 2010, signing up a high number of enterprise customers, including NYSE Euronext, General Electric and Cisco. Revenue from the Company's Web application server product line has grown extensively in 2010, as more companies chose the Zend solution for running their business-critical applications on-premise or in the cloud. With this investment, Zend is well-capitalized for the launch of new cloud offerings, partner initiatives and expansion of its global sales force to support enterprise business growth.
Herzliya Pituah's Viola Private Equity (http://www.violape.com) is a buyout and growth capital technology fund focusing on investments in established, private or public, companies, in particular: technology companies and other companies in a growth/expansion phase with international activity. The fund invests money directly into the companies and/or acquires holdings from existing shareholders. The Fund acquires substantial holdings in companies, aiming to lead and contribute to their development and growth. Ramat Gan's Zend Technologies (http://www.zend.com), the PHP Company, is the leading provider of software and services for developing, deploying and managing business-critical PHP applications on-premise and in the cloud. The Zend family of products includes Zend Server Web application server, Zend Studio IDE and Zend Framework. (VPE 10.01)
Back to Table of Contents
2.5 Volkswagen Seeks More Israeli Suppliers
Volkswagen is tightening business relations with Israeli suppliers, appointing a new Israel procurements manager to foster ties with current suppliers and find new ones. The appointment comes after Volkswagen signed an offset agreement with Israel's Ministry of Industry, Trade & Labor's Industrial Cooperation Authority. Over the next six years, Volkswagen will buy components from 15 Israeli companies, including Israel Chemicals, Iscar, Eltam Ein Hashofet, Foamotive, Palziv, Raval and Tadir Gan. The agreement came after the Ministry of Finance's Government Motor Vehicles Administration signed a deal with Volkswagen for cars for civil servants and the IDF. Volkswagen's sales in Israel total $12-15 million a year. The Ministry of Industry says that the carmaker has made €150 million in reciprocal contracts to date, including €20 million in 2010, under previous agreements. Industrial Cooperation Authority said that the Volkswagen deal creates opportunities for Israeli manufacturers of components for the car industry. (Globes 11.01)
Back to Table of Contents
2.6 Fast food Chain McDavid to Reopen in Israel
Kosher fast food chain McDavid is returning to Israel. The chain operated in Israel in the 1980s and 1990s, before competition from MacDonald's and Burger King forced it out. McDavid will open its first branch in Upper Nazareth soon and the chain's franchisee promises to open more branches across the country over the coming year. McDavid's menu will include the Hot-David frankfurter, with self service condiments, a David Kids meal that includes a surprise, chicken wings in chili sauce, a spicy Mexican style hamburger and a double schnitzel. All items can be made spicier at the customer's request. A regular meal will cost NIS 29.90. (Globes 11.01)
Back to Table of Contents
2.7 Silver Lake Sumeru Announces Investment in PrimeSense
Menlo Park, California's Silver Lake Sumeru has made a strategic investment in PrimeSense. The transaction marks Silver Lake's first investment in Israel's growing technology sector. Financial terms were not disclosed. Through its proprietary Natural Interaction Technology, PrimeSense enables 3D mapping and gesture recognition capabilities in consumer electronics such as televisions, gaming systems, and personal computers. Tracking body movements and gestures, PrimeSense technology sets a new paradigm by allowing consumers to operate electronic devices without a handheld device or a remote control. Silver Lake Sumeru is the $1.1 billion middle market tech-focused fund within Silver Lake.
Tel Aviv's PrimeSense (http://www.primesense.com) is the leader in sensing and recognition solutions, enabling consumer devices to "see" environments and allowing users to control and interact naturally with those devices in a simple and intuitive way. PrimeSense offers affordable solutions for consumer markets including visual/home computing, interactive entertainment and consumer electronics. PrimeSense products include the PS1080 System on Chip and NITE middleware, as well as the PrimeSensor 3D sensor, plus cross-platform enabling software to make application development easy and intuitive. (Silver Lake Sumeru 12.01)
Back to Table of Contents
2.8 Covertix Attracts Investment From Kima Ventures
Covertix announced it has secured strategic investment from Kima Ventures. The funding will be used by Covertix to enter the growing European market, strengthen its product offering and boost its international sales and marketing outreach. Kima Ventures is a French-based venture capital fund that focuses on strategic investments in early stage technology companies around the world. Covertix answers the growing need for information leakage protection and sensitive data security by offering independent file-level surveillance and control. The company's flagship product SmartCipher protects sensitive data wherever it goes - both inside and outside the organization even when used by 3rd parties, stolen or lost. Covertix recently began implementing the SmartCipher data security solution at selected enterprise customers in Europe. Kfar Saba's Covertix (http://www.covertix.com) develops solutions to equip enterprise organizations with independent file-level surveillance and control, protecting sensitive data, inside and outside the organization. Covertix' flagship product SmatCipher, secures and monitors confidential and sensitive documents, by automatically tagging digital assets according to file context and content, continuously tracking and securing files, at any point or method of usage. (Covertix 12.01)
Back to Table of Contents
3: REGIONAL PRIVATE SECTOR NEWS
3.1 Arabian Gulf Wood Prices Stable Over Past 6 Months
According to statistics released by Danube Building Materials, the UAE leader in construction, building materials and shop fitting industries, wood prices began to stabilize starting Q3/10 and have remained stable ever since. The price for MDF has been $285 per cu m, while the Malaysian hardwood plywood was priced at $495 per cu m. The pricing for film face plywood was pegged at $375 per cu m, and the Meranti Wood pricing saw an increase of 0.67% from $750 to $755 per tonne. The price of American ash wood meanwhile saw a 1.2% decrease and was priced at $825 per cu m. The price of European beech wood increased by 1.19%, from $550 to $555, while African Teak Wood called Iroko has been priced at $1,100 per cu m, according to the report. (TradeArabia 11.01)
Back to Table of Contents
3.2 French Retailer Auchan Closes Dubai Hypermarket
The UAE's poor economic climate has forced French retailer Auchan and local partner RetailCorp to close the Auchan hypermarket in the shopping mall of DragonMart in Dubai. Auchan signed in 2008 an agreement with Nakheel, a Dubai World company, to create a joint-venture called Hypercorp LLC to operate across the Arabian Gulf. In August 2009, it opened its first Auchan hypermarket in Dubai with Retailcorp, also part of state-controlled Dubai World. Auchan is the world's 11th largest food retailer, with 1,278 stores in 13 countries and 2009 sales of €39.7 billion. The company competes with listed rivals Carrefour and Casino. (AB 07.01)
Back to Table of Contents
3.3 Turkish Car Sales Hit Record-High
Turkey's automotive market saw a turnover of a total of 760,913 vehicles during 2010, the highest figure since 2005, according to official data. Turkey's automotive sales reached 99,461 vehicles in the final month of last year, representing an increase of approximately 74% compared to same period in 2009, according to the Automotive Distributors' Association, or ODD. The sales of passenger cars and light commercial vehicles also increased in 2010, up by 36.6% on 2009 figures, with sales totaling 557,126 vehicles. The 2010 total of 760,913 sales even surpassed the highest figure of the last 10 years registered in 2005, which hit 723,845 units. Passenger car sales in 2010 totaled 509,784, representing a 37.9% increase compared to 2009 sales. With this figure 2010 surpassed the 466,748 sales made in 2000. Light commercial vehicle market sales totaled 251,129 units, representing an increase of 34.1% compared to 2009 sales. This was the second biggest market volume in the light commercial vehicle market since 2000. During December, 2010, the light commercial vehicle market saw a turnover of 48,908 units, representing a 54.1% increase compared to the same period in 2009. Diesel engine cars saw a 69% increase in 2010 sales compared to a year earlier and constituted 54% of total passenger car sales. (ANA 11.01)
Back to Table of Contents
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Enlight to Install 16 Small PV Facilities
Rosh Ha'Ayin's Photovoltaic power systems integrator Enlight Renewable Energy Solutions (http://www.enlightenergy.co.il) has won two separate tenders by the Hod Hasharon Municipality and the Ramat Hanegev Regional Council to install 13-16 PV facilities, for the generation of 500-700 kilowatts of electricity. Enlight estimates the total investment in setting up the facilities at NIS 7.5-10 million, depending on how many are built. The company estimates revenue from the systems from sales to Israel Electric Corporation at NIS 1.5-2 million a year over 20 years. The systems will be built pursuant to the regulations for PV facilities of up to 50 kilowatts published by the Public Utilities Authority (Electricity) in November 2010. (Globes 11.01)
Back to Table of Contents
4.2 Petra Solar Launches Research Center in Amman
South Plainfield's Petra Solar, the New Jersey based pioneer and market leader in grid-tied, pole-mounted, distributed solar generation systems which include a Smart Grid backbone for utilities, announced its continued international expansion with the launch of a research and development center in Amman, Jordan. This new office will enable Petra Solar to provide regional technology expertise that is geared to the needs of its partners in the Middle East. The launch of a R&D center in Jordan further demonstrates Petra Solar's ongoing commitment to expanding its international business, and developing the solar and Smart Grid markets in new regions around the world. Petra Solar is actively partnering with key Middle Eastern companies on solar and Smart Grid initiatives and is developing research agreements with leading regional institutions. The Jordan office is the result of a meeting last spring between Petra Solar's founder, Dr. Shihab Kuran and King Abdullah II of Jordan. This collaborative effort with the Jordanian government will promote local economic development and create green jobs in Jordan. Petra Solar is the pioneer of SunWave, a new technology that combines distributed solar energy generation with Smart Grid communications and improved grid reliability features to create a comprehensive utility grade solution. (Petra Solar 11.01)
Back to Table of Contents
4.3 Wind Projects to Help Egypt Reach 2020 Energy Target
Egyptian Minister of Electricity & Energy Younes said Egypt will produce 2.6 GW of energy through the construction of new wind energy projects, which will be undertaken by both the private and public sectors. Funds for the projects that will add 540 MW of power have been raised through the German Development Bank, the European Investment Bank and the Spanish and Japanese governments. A second round of funding would flow from Abu Dhabi, the French Development Agency, the German Development Bank, the Spanish government, with Japan possibly to follow, which would finance a 200 MW wind farm west of the Nile. The 2.6 GW will be a "big boost" to 7,200-7,500 MW of power that must be produced to attain the 20% renewable energy objective by 2020. Currently only 500 MW of power are derived from wind energy farms in the Zaafarana area in the Gulf of Suez. The added 2.6 GW capacity is crucial given that according to figures released by the World Bank, Egypt's energy grew an average of 7% annually between 1997-2004, and will continue at around the same pace - 6-7% - until 2014. Egypt is also inviting bids for the construction of a 1,000 MW wind-energy park in the Gulf of Suez in the Gabal El-Zeit area via a tender, which will be open in September, at the international level. Currently, renewable energy sources contribute 14% to the energy mix, and should wind sources reach their anticipated target, they would represent 12% of the 20% total. (DNE 11.01)
Back to Table of Contents
5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Jordan Approves $225 Million Package To Lower Commodity Prices
On 11 January, the Jordanian government approved a $225 million package to lower some food and fuel prices. The measures include the exemption of kerosene, widely used for domestic heating, and gasoline from the imposition of sales tax until the end of 2011, which will lead to a cut in prices by 6% and 5%, respectively. The package has $28.2 million allocated for sugar, rice, and frozen poultry, sold in state-run supermarkets, leading to cuts in prices ranging 8.5 - 13.5%. The cabinet will also enforce price caps on food price rises. Finance Minister Abu Hammour said that the targeted budget deficit for 2011, which was previously projected at 5% of GDP and already includes $240 million dedicated for bread subsidies, is not affected by the new measures. (Various 12.01)
Back to Table of Contents
5.2 Jordan Considers Cost Of Living As Public Protests Increase
Jordan's government has unveiled a number of measures to curb spiraling commodity costs as hundreds took to the streets to protest at the rising price of basic goods. On 15 January, Minister of Industry and Trade Amer Hadidi told the cabinet his ministry plans to introduce new competition laws which will prohibit overpricing, maintain prices within normal levels, and toughen punishments of offenders. Hadidi said the ministry is also in the process of drafting a consumer protection law to protect the rights of consumers. The government permit hikes in the prices of staple foodstuffs and will forward to the parliament legislation needed for broader government intervention in the market to control prices and maintain competitiveness. He added that his ministry is planning to release a monthly bulletin showing the prices of ten basic commodities based on Jordan Customs Department's data and prices in world markets. If commodity prices are found to be high, the military and civil consumer corporations will import stocks of the commodity in order to stabilize the price. The government has allocated a budget of around $28.2m to carry out this initiative. The moves come as it was reported that on 14 January hundreds of Jordanians marched through the streets of Amman and other cities to protest rising prices of basic commodities. (AB 16.01)
Back to Table of Contents
5.3 Upsurge in Jordan's Exports & Expat Remittances
The Governor of the Central Bank of Jordan (CBJ) recently commented that Jordan saw an upsurge in national exports and expatriate remittances in 2010. In a briefing to the House of Representatives' Financial Committee on the CBJ's future monetary and fiscal policy, Governor Sharif Fares Sharaf said national exports had seen a turnaround in 2010, recording growth of 15.9%. This compared to a drop of 19.8% in the same period in 2009. Also back in the black were expatriate remittances, which rose 1.4% in 2010, against a drop of 5.6% in 2009. Tourism levels, which represent around 11% of Jordan's gross domestic product, also soared 19.3% last year, compared to a dip of 0.6% in 2009. While Sharaf said Jordan had recorded real growth in GDP in 2010, he said it was still below target. He also reiterated the Jordanian dinar's peg to the US dollar: "This policy has a key role in attracting domestic and foreign investments which will boost the national economy's efficiency and competitiveness." (AB 07.01)
Back to Table of Contents
5.4 Jordan Inflation Rebounds to 6.1% Annually in December 2010
Jordan's y-o-y inflation reached 6.1% in December 2010, compared to a y-o-y increase of 5.6% in November 2010, Reuters reported. Annual inflation averaged 5.0% in 2010, compared to an average of -0.6% in 2009 and 14% in 2008. The m-o-m increase of 1.2% during December 2010 in the consumer price index level was attributed to increases seen in prices of transportation, fuel and some major food items. The government projects inflation to remain stable at 5% in 2011 and has no intention to raise interest rates. However, a tightening monetary policy could be adopted if inflation picks up beyond 5%. (Beltone 10.01)
Back to Table of Contents
5.5 Bahrain in World's Top 10 for Economic Freedom
Bahrain is among the world's top 10 most economically free nations according to the annual Index of Economic Freedom, published on 13 January by The Heritage Foundation and Wall Street Journal. The Kingdom is 10th of 183 economies worldwide, up three places from last year to one behind the United States and six ahead of the UK in the influential rankings. Bahrain remains the most free of 17 nations in the Middle East and North Africa (MENA) region and the only in MENA to have featured in the world's top 20 since the launch of the Index in 1995. The report cites a commitment to structural reforms and an openness to global commerce that have enabled Bahrain to become a financial hub and regional leader in economic freedom. The findings, which also show Bahrain to have the most improved 'score' (+1.4 to 77.7 of 100) of the top 10 countries, reflect the success of a decade of social and economic reforms. Such reforms are now enshrined in Bahrain's Vision 2030, the blueprint for the development of the country's economy, government and wider society over the coming decades. The Index of Economic Freedom measures 10 specific freedoms such as Trade, Business, Fiscal and Financial. The Index also highlights that as one of the region's least oil-dependent economies – the most diversified in the Gulf – Bahrain benefits from a competitive tax regime; a sophisticated financial sector that facilitates the free flow of capital and foreign investment; a modern communications and transportation infrastructure; reliable regulatory structure; and a cosmopolitan outlook. (BI-ME 13.010
Back to Table of Contents
5.6 Bahrain Plans Hefty Budget Outlays in 2011-2012
Bahrain plans to spend $14.1b over the next two years and oil prices need to rise to $97-$100 per barrel to balance its budget, the finance ministry said on 6 January. Such a spending level would be greater than analysts' expectations and proportionately exceed the $5.8b outlays initially foreseen for the 2010 budget. Facing a rising subsidies bill and dragged down by its struggling banking sector, the small non OPEC energy producer has the weakest fiscal position among Gulf Arab nations. The island kingdom's finance ministry expects revenues of $11.67b based on an oil price estimate of $80 per barrel for its two year draft budget for 2011 and 2012. Finance Minister Sheikh Ahmed bin Mohammed al Khalifa said that the government will cover the expected deficit through loans and Islamic bonds, or sukuk. The 2011 budget deficit is set at $988.5m, well below an original plan of $3.4b for 2010, which analysts now believe will be sharply undershot due to the conservative oil price estimates it was based on. The shortfall is set to rise to $1.16b in 2012. This year's deficit is roughly in line with the actual outcome of 2009, although rollover costs from the previous year boosted it to around 10% of gross domestic product, the first budget shortfall since at least 2005. The ministry said that about half of spending will be on subsidies, including for gas and electricity. (AB 06.01)
Back to Table of Contents
5.7 Qatar is the Rising Star in the GCC Building Construction Industry
Research and Markets (http://www.researchandmarkets.com) "Qatar - the Rising Star in the GCC Building Construction Industry" states that what is unique about Qatar is not that it is among the fastest growing nations in the world or that it has a vast reserve of natural gas which has helped its expansion and diversification plans in recent years, but that it has managed to withstand the downturn through its strong economic fundamentals and a prudent mix of fiscal policies supporting a relatively small population of which a large proportion are expatriates. Its construction industry has received a massive fillip from the largely government backed projects and planned diversification projecting Qatar as a global tourist destination along with smart easing of controls on foreign ownership of freehold property to lure the global investors to aid its investment and diversification programs. The building construction industry of Qatar witnessed construction contract awards to the tune of $8.67 billion in 2009, which is expected to increase to $10 billion by 2012.
The announcement that Qatar will host the 2022 FIFA football World Cup tournament is expected to spur significant investments to spill over to its Construction market. This presents an extended opportunity for global investors and companies involved with construction, property and infrastructure development to assess the potential in investing within this highly stable economy. It is estimated that Qatar will invest around $60 billion to $70 billion in hotel, leisure, tourism, sports, recreational and infrastructure projects as it prepares to host the FIFA World Cup in 2022. Under its ambitious Qatar National Vision 2030 program, the kingdom has aimed to self sustain its development and provide high standards of living to its people. (R&M 07.01)
Back to Table of Contents
5.8 Egypt Annual Urban Inflation Rises Slightly in December 2010
Egypt's annual headline inflation (urban) rose slightly in December 2010 registering 10.36% from 10.18% in November 2010, new data from government statistics agency, CAPMAS, revealed. Monthly inflation, a better indication of on-the-ground changes in prices (taking away the base effect), contracted for the second consecutive months and fell to -0.63% in December from -0.81% in November. Annual food price inflation remained relatively unchanged at 17.15% in December 2010 from 17.10% in November 2010. While most food items witnessed an increment increase during the month of December (grains and bread +2.7% m-o-m, fruits +0.3%, dairy, seafood +0.7%, Sugar and confectionary +5.6%) this was, nonetheless, diluted by the impact of a sharp contraction in vegetables prices of 13.2% monthly. Vegetable prices had peaked at 21.7% m-o-m in September, before moderating albeit remaining high at 6.4% m-o-m in October and contracting to -16.6% m-o-m in November. Apart from food prices, most other CPI items saw limited monthly changes in December 2010, except for tobacco, which rose 2.58% m-o-m compared to no change in November 2010. Annual core inflation rose to 9.65% y-o-y in December 2010 from 8.58% in November 2010, the Central Bank of Egypt said in a statement. Monthly core inflation increased by 0.18% m-o-m in December 2010 compared to 0.69% in November. Inflation overall, however, and specifically food price inflation, now running at over 17%, remains uncomfortably and unsustainably high. (Beltone 11.01)
Back to Table of Contents
5.9 Egypt's Orascom Forms JV for Nuclear Power Projects
Orascom Construction Industries , Egypt's biggest listed builder, has formed a joint venture with state-owned Arab Contractors to bid on nuclear power projects in the Middle East. Orascom said that the joint venture will bid on Egypt's first nuclear power plant, planned to be located in Dabaa on the country's Mediterranean coast, in February. The companies aim to take advantage of growing interest in nuclear power projects across the region. OCI has already formed a joint venture with US bank Morgan Stanley to invest in Middle East infrastructure projects. OCI's venture with Arab Contractors "aims to benefit from these recently announced regional investment programs in the nuclear power sector", the companies said in a statement. Egypt plans to build four nuclear plants as it seeks to boost its current installed power capacity of around 23,500 MW by an additional 58,000 MW by 2027. The country suffered intermittent power cuts last summer as the system struggled to meet fast-growing demand. (AB 16.01)
Back to Table of Contents
5.10 Egypt Sees 13% Increase in Garment & Textiles Exports to United States
Egypt's exports of garments and textiles to the United States increased during the period from January to October 2010 by 13% reaching $857 million compared with $770 million during the same period the previous year. This came in a report received by Minister of Trade & Industry Rashid from the head of the trade representation department on Egyptian garment and textile exports to the US. The report is part of following up the implementation of a national strategy on increasing exports to EGP 200 billion by 2013. The report said the growth was due to an increase in quantities of exported textiles and yarn by 16% and of carpets and linen by 20.6%. Egypt is number 17 on the list of major countries exporting garments and textiles to the American markets and number 16 among garment exporting countries. (SIS 02.01)
Back to Table of Contents
5.11 Saudi Arabia's Inflation Ends Year with 5.3% Average
Saudi Arabia's annual inflation fell to 5.4% in December 2010, while overall annual inflation in 2010 inched up to 5.3%, after slowing down to 5.1% in 2009 from its record high of 9.9% in 2008, the Central Department of Statistics and Information (CDSI) data showed. Annual inflation fell to 5.4% in December 2010 from 5.8% in November 2010. The deceleration was mainly on the back of easing inflation rates in food and rents, owing to the base effect. Actual annual inflation for 2010 of 5.3% is broadly in line with expectations. Food price inflation was the main contributor to the overall annual increase in CPI in 2010, which reached 6.2% in 2010 compared to 1.9% in 2009, followed by renovation, rent, fuel and water sub-index. However, this sub-index has seen a deceleration in its price increase in 2010 when compared to 2009. Inflation in renovation, rent, fuel and water fell to 9.5% in 2010, after recording a price increase of 14.1% in 2009. Housing supply had remained a problem in 2010, however a slowing housing demand on the back of the financial crisis somewhat eased the pressure on rents in 2010 as compared to 2009. Nevertheless, housing demand started to pick up by mid 2010, as increased oil revenues poured into the Saudi Arabian economy. Annual inflation has been slowing down for the past three months of 2010 after reaching an 18-month high of 6.1% in August 2010, to average 5.3% for the whole year of 2010. (Beltone 11.01)
Back to Table of Contents
5.12 Morocco Achieves 3% Economic Growth in Third Quarter
Morocco's economy achieved a growth rate of 3% in Q3/10 versus 4.9% a year earlier, the High Planning Commission (HCP) said. Figures issued by the Commission shows that the Gross Domestic Product (GDP) increased by 3.4% compared to the same period in 2009, which means a 0.4% rise in prices. It said that the non-agricultural GDP augmented by 4.7% instead of 1.5% a year before, while the agricultural value added decreased by 8.4%, against an increase of 29.4% in Q3/09. Except the fisheries sector which witnessed a downturn of 1.4% against an increase of 14.4%, all non-agricultural activity sectors delivered good performances, notably the mining sector which grew by 21.7% versus a drop of 21.9% last year. (MAP 30.12)
Back to Table of Contents
5.13 Islamabad Postpones IMF-Backed Tax Reform
On 7 January, Pakistani Prime Minister Yousuf Raza Gilani announced the deferral of an IMF-backed tax reform. The reformed general sales tax, which Pakistan has been discussing with the IMF for more than a year, was supposed to be introduced in July last year to boost tax revenues. Gilani reversed a plan to increase oil prices to win back the support of the Muttahida Qaumi Movement (MQM), after the party withdrew from the ruling coalition in a move that denied the government parliamentary majority. The MQM confirmed afterwards that it would rejoin the coalition. Analysts warned that the decision to delay the RGST would further intensify concerns over the government's ability to reform Pakistan's troubled economy. The RGST is a key part of Pakistan's agreement with the IMF and its postponement could put the $11 billion package in jeopardy. The IMF said that raising the ratio of government revenue to national income was essential to returning Pakistan's public finances towards sustainability and the sales tax was an indispensable component in this effort. (Financial Times 09.01)
Back to Table of Contents
6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey Pharmaceuticals and Healthcare Report Q1 2011
Research and Markets (http://www.researchandmarkets.com) "Turkey Pharmaceuticals and Healthcare Report Q1 2011" says Turkey remains one of the most promising pharmaceutical markets in Central and Eastern Europe (CEE) in the long term. However, there are numerous short-term challenges for drugmakers operating in the country. BMI forecasts the country's pharmaceutical market will reach $21.34b by 2014, up from $10.84b in 2009. Turkey is the second largest pharmaceutical market in CEE, behind Russia. BMI's outlook for pharmaceutical companies operating in Turkey has improved over the last quarter, and is now third in CEE, despite the regional average declining. Price erosion mechanisms and negative alterations to Turkey's reimbursement regime have contributed to BMI's pharmaceutical market growth projection of 2.87% for 2010, a noticeably meager forecast compared with previous years. BMI forecasts growth of 10.02% in local currency during 2011. While this projection reflects continued industry pressures, the majority of these factors have now been priced into the market over the last two years. BMI remains concerned that good manufacturing practice (GMP) compliance issues are exasperating the already lengthy market authorization procedures and will hamper long-term pharmaceutical market growth projections. In July 2010, the EU requested that Turkey suspend the new requirements on GMP as they impose a 'de facto ban' on imports of certain products. Instead, the EU suggested that Turkey develop its manufacturing in line with international harmonization initiatives for GMP. However, Turkey has yet to formally respond.
Turkey's macroeconomic environment is highly favorable for multinationals seeking entry. The economy will experience a healthy rebound in 2010, though a looming downturn in eurozone, US and Asian demand has prompted us to revise BMI's 2011 growth forecast down to 4.66%. BMI stand by their view that Turkey is among the best positioned emerging markets in the long term. Its domestically-oriented economic structure, diversified industrial sectors, healthy local capital market, pro-reform government and greater leverage potential all suggest that the economy is set to outperform its CEE peers. (R&M 07.01)
Back to Table of Contents
6.2 Turkey Powers Through With 3rd Nuclear Plant Project
Leading French companies have offered Turkey to build what should become the country's third nuclear power plant, with projects for two other underway. This was announced by Turkey's Energy Minister Yildiz. Yildiz said leading French energy companies Areva, GDF and EDF are interested in the proposed project. He did not elaborate on the details of the project, but said talks with French authorities are continuing. Tekirdag in European Turkey and the capital Ankara are the most likely locations for Turkey's third NPP. In May 2010, Turkey reached an agreement with Russia for the construction of what will become Turkey's first nuclear power plant in Mersin's Akkuyu district. According to the agreement, Russia's state-run Atomstroyexport JSC will construct four 1,000 MW reactors at the Akkuyu nuclear power plant and will have a controlling stake in the project. The project is estimated to cost about billion and was approved by Turkey's Parliament in mid-July. Turkey's Akkuyu NPP is viewed in Bulgaria as a competitor to the potential second Bulgarian NPP at Belene on the Danube where Atomstroyexport is supposed to construct two 1,000 MW reactors.
After months of talks, at the end of 2010 Japan appeared to have grabbed from South Korea a deal for the construction of a nuclear power plant in Turkey, which should become Turkey's second, to be located in Sinop on the Black Sea. South Korea and Turkey began formal talks in March and were expected to reach an intergovernmental agreement during last month's G20 summit in Seoul, but a deal was not reached due to outstanding differences such as establishing "fair" electricity prices, according to the report. Turkey began negotiating with Japan on the construction of a nuclear power plant in the province of Sinop, in the Black Sea region, at the beginning of December of this year after talks with South Korea failed last month when the two sides failed to reach a common understanding on issues such as price and purchasing guarantees and the state's share. Turkey's potential third NPP in Tekirdag or Anakara is expected to be ready by 2023. Analysts have commented that Turkey wants to become independent of electricity imports, which is why it is planning the construction of nuclear reactors with a combined power of 5 000 MW. Turkey's first two NPP projects are expected to cost $40b in total; no estimate has been mentioned with respect to the French offer for a third NPP. (Various 10.01)
Back to Table of Contents
6.3 World Bank Forecasts Turkish Growth to Stand Around 4%
On 12 January, the World Bank's "Global Economic Prospects: 2011" report forecast Turkey's year-end growth would stand around 4.1%. The report said Turkey would grow around 4.3% in 2012. In Europe and Central Asia, the regional aggregate is dominated by Russia and Turkey, which together comprise nearly 75% of regional GDP. It posted strong outturns of 3.8% and 8.1%, respectively. Turkey's recovery was more vibrant - a reflection of strengthening domestic demand, supported by rising foreign capital inflows, and an accommodative monetary and fiscal policy. Unemployment rates appear to have peaked and are falling in Russia and Turkey, the report said. The pickup in Turkish imports is a partial reflection of the sharp increase in foreign capital contributed to an appreciation of its currency inflows, which helped boost credit growth and contributed to an appreciation of its currency." (Hurriyet 13.01)
Back to Table of Contents
6.4 Ban on Alcohol Ads Strikes Turkey's Efes Pilsen
Turkey's leading basketball club will be forced to either change its name or shut down completely under a new bylaw on sponsorships by tobacco and alcohol brands that was published in the Official Gazette on 7 January. The team, Efes Pilsen, was established by a major brewery company and uses the name and logo of the company's most popular brand of beer, something that has been banned under the newly effective law. The Tobacco and Alcohol Market Regulatory Authority, or TAPDK, issued a bylaw in May that set new ground rules for commercial ads, sponsorship deals and promotion campaigns in the marketing of alcoholic spirits and drinks. With the bylaw, which went into effect with its publication in the Official Gazette, the tobacco and alcohol watchdog banned the use of alcohol-related content in sports activities and sports-associated promotion campaigns, sponsorship agreements and commercials. This includes the use of names, logos, emblems or signs in sports clubs, organizations, services or any sports activities that could be associated with alcoholic drinks and spirits.
Efes Pilsen, which won 13 league titles and is the only Turkish side to claim a European trophy, with its Korac Cup victory in 1996, is the biggest sports club that will be affected by the change. It is the top basketball club in the country and the top sports team sponsored by an alcohol beverage brand. Under the bylaw, the team must decide how to comply with the ban within a period of one year. At the very least, the team will have to drop the word Pilsen, referring to the pilsner type of beer, from its name, while completely shutting down the basketball team could also be a possibility.
The scope of the bylaw is not limited to sports, but also includes regulations on sales locations, wholesale and retail sales, commercial ads, inspections and sanctions of tobacco and alcohol products. Under the regulations, the dispensing of tobacco and alcohol products from vending machines will no longer be permitted, nor would the use of such products as gifts or rewards for games and betting. Furthermore, wholesale or retail sellers of such products will need to obtain a sales permit and possess a physical workplace location, meaning that selling the goods by mail or other type of order will only be possible from that address. Presenting alcohol and tobacco products as an indispensable part of certain social occasions is also no longer permitted under the bylaw, which additionally limits beverage brands' sponsorships of cultural events. (Hurriyet 07.01)
Back to Table of Contents
6.5 Cyprus HICP Inflation Shows Jump in December
Inflation accelerated in December according to the EU-harmonized consumer price index (HICP), with prices rising over the year earlier by 1.9%, compared with 1.7% in November. However, this was lower than the EU average for December, which Eurostat reported at 2.2%. For the year as a whole the HICP inflation rate was 2.6% in 2010, up from only 0.2% in 2009. The national consumer price inflation rate in the same period was 2.4%. As with the national index, the largest rise was recorded in housing, water, electricity and gas, which has been influenced by rising oil prices and higher electricity tariffs. (FM 11.01)
Back to Table of Contents
6.6 Greece's Deficit Fell by 36.5% in 2010
Athens has managed to contain the budget deficit in 2010 to €19.6 billion, not through collecting the revenues it had hoped for but via extensive cuts in salaries, pensions and other spending. The Finance Ministry announced on 10 January that the 2010 deficit was actually €1 billion smaller than that used as a starting point for the 2011 budget. It went down by 36.5% from 2009 to €19.6b, against a forecast for a 33.2% decline. The deficit in 2009 had stood at €30.87b. Crucially, the ministry announced that €433m paid out to local authorities did not burden the 2010 figures but was included in the 2009 deficit, which immediately signified an improvement on 2009 by over €850m. Defense spending was another factor that helped bring the budget deficit down, as it shrank by a significant €470m last year. Primary expenditure fell by 10.7%, against a 9% target, while net revenues expanded by 5.5% against a 6% target. The figures serve to boost hopes for a better execution of this year's budget, with the ministry turning its attention to improving the performance of tax collection mechanisms. (Various 11.01)
Back to Table of Contents
6.7 Austerity Drives Greek Unemployment To New High
Greece's unemployment rate hit a new record in October as an austerity program designed to slash the budget deficit led to more job cuts, impacting more than a third of the workforce aged 24 and under. The unemployment rate jumped to 13.5% from 12.6% in September and 9.8% in October 2009, statistics service ELSTAT showed, marking its highest reading since Greece started compiling monthly jobless data in 2004. A record 684,047 people were officially without work, a 39% increase year-on-year. Employment is suffering as the Greek economy goes through its deepest recession in almost 40 years, hurt by austerity measures to shore up the country's finances and meet the terms of a €110b EU/IMF bailout. Greece's jobless rate was the fourth-highest in the 16-member euro zone in October after Spain, Slovakia and Ireland, 3.4% higher than the bloc's average. The government expects unemployment to average out at 14.6% this year, as the economy goes through its third consecutive year of recession. Unemployment stung young people hardest, with the jobless rate reaching 35% in the 15-24 age group and 18% for those aged 25 to 34. (FM 13.01)
Back to Table of Contents
6.8 Bulgaria's New Car Sales Down 65% in 2 Years
New vehicle sales in Bulgaria went 25% down in 2010, according to data of the Association of Automobile Makers (AAM) and its authorized representatives in Bulgaria. The total number of purchases of new cars, trucks, and buses in 2010 was 28,085. In 2009, AAM registered a slump of 54% or a total of 26,813 sales compared to nearly 60 000 in 2008. After 9 years of constant rise (2000 – 2008), the sales in the last two years went down by the drastic 65%. Some 18,820 new cars were sold from January to December 2010, or 27% less compared to 2009. AAM data, however, does not include all sales, since some dealers are not members of the Association. Toyota is still the leader on the Bulgarian market with a 10% market share, but Toyota sales in 2010 were down 32% compared to 2009, when the market share was 11%. Ford comes second with 9% of the market, despite the fact its sales were down 15% compared to 2009, replacing Opel (49% down), Peugeot (33% down) and Volkswagen (25% down). Ten automobile makers sold over 1,000 new automobiles in 2010, but none has reached sales of over 2,000, compared to 2009, when 9 companies sold over 1,000 automobiles and 5 of them sold over 2,000. Sales of trucks and buses were up 14% in 2010, with Mercedes having a 40% share of these sales. Motorcycle sales in 2010 were down 31% compared to 2009, with Peugeot topping the sales. (SMN 12.01)
Back to Table of Contents
7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Tel Aviv Fast Lane Is a World First
The fast lane to Tel Aviv that opened recently is the first of its kind in the world to apply an innovative dynamic toll system whose rates vary with traffic congestion. The system shows drivers a toll that varies in accordance with rush hour and off-peak times. It is also supposed to predict traffic volume, calculate demand (in other words, the highest toll that a driver will be prepared to pay for using the fast lane), and taking into account the cost of work time lost while stuck in traffic. The system was developed by Siemens, the technology vendor chosen by Shafir Civil and Marine Engineering, the fast lane franchisee. The system cost NIS 120 million, including the set-up cost and the financing and maintenance cost during the franchise period. (Globes 10.01)
Back to Table of Contents
*REGIONAL:
7.2 Lebanese Cabinet Resignations
The 12 January resignation by two Hizbullah cabinet members, and eight others from the Amal (Shia) and Aoun Maronite block and one from the president's nominated cabinet members, provided enough resignations for the government to fall. PM Hariri, who had been in Washington cut short his visit and was returning to Beirut via a visit to President Sarkozy. The key point of the resignations was the demand of Hizbullah and its allies for the government to withdraw support for the UN Special Tribunal for Lebanon (STL), which was set up to investigate the assassination of Prime Minister Rafik Hariri in 2005. The other members of the cabinet, Sunni, Maronite Christian parties and Druze members, have continued to back the STL. The reason behind the Hizbullah and allies' reaction to the STL is that it is expected that members of Hizbullah will be indicted for the assassination. PM Saad Hariri will continue to run the caretaker government, but will be unable to enact legislation, so Lebanon returns to political stalemate and uncertainty. This uncertainty, and fear in some quarters, will hamper Lebanese economic recovery, ahead of the STL announcing its findings. The local market to remain weak for the foreseeable future. (Beltone 13.01)
Back to Table of Contents
7.3 Jordan in 2030 Future Demographics
Research and Markets (http://www.researchandmarkets.com) said that in 2030, the population of Jordan will reach 8.6 million, an increase of 33.1% from 2010. The population of Jordan is a predominantly young one, with 65.9% of the population in 2010 aged 30 or younger. An ageing process is underway, however, with the population aged 45+ expected to expand by 142% between 2010 and 2030. (R&M 06.01)
Back to Table of Contents
7.4 Dubai Court Rules Brandishing Middle Finger Can Lead To Deportation
A top Dubai court has upheld a ruling that foreigners who brandish their middle finger can be deported from the United Arab Emirates. The ruling by the Court of Cassation came in the case of a Pakistani man who was sentenced to one month in prison followed by deportation for flashing his middle finger - an insulting gesture in many countries - at two people. The court based its ruling on a local law that allows foreigners to be deported for 'committing indecent acts.' Dubai occasionally makes headlines for serious criminal sentences imposed on members of its large expatriate community for 'indecent' acts. Last year, a British couple was jailed and deported for kissing in public. (BI-ME 10.01)
Back to Table of Contents
7.5 Tunisia's Ben Ali Finds Refuge In Jeddah Palace
Tunisia's former President Zine al Abidine Ben Ali and his family have found refuge in Saudi Arabia after being swept from power in Tunis. Following weeks of violent protest, Ben Ali, president for more than 23 years, fled to Saudi Arabia 14 January, arriving after France turned him away. The Saudi government welcomed Ben Ali and his family but did not say how long they would stay. Pundits said the Saudis had welcomed Ben Ali to help stabilize Tunisia. The violence and rapid turn of events in Tunisia sent shockwaves across the Arab world, where authoritarian rulers are deeply entrenched, but face pressures from growing young populations, economic hardship and the appeal of militant Islam. (AN 15.01)
Back to Table of Contents
8: ISRAEL LIFE SCIENCE NEWS
8.1 TransPharma Successful Phase 1 Trial of ViaDerm-Calcitonin for Musculoskeletal Disorders
TransPharma Medical announced successful results of a Phase I clinical trial of its self-applied ViaDerm-Calcitonin product for the treatment of musculoskeletal disorders such as osteoarthritis and musculoskeletal pain. The Phase I study was an open label single dose cross-over trial to assess the safety, pharmacokinetics (PK) and pharmacodynamics (PD) of ViaDerm-Calcitonin in 12 postmenopausal women treated with 4 different transdermal Calcitonin doses (60-300 mcg) compared to 100IU of Miacalcin, the subcutaneous injected form of the Calcitonin. Study results demonstrated a clear PK dose response corresponding to the escalating doses of the ViaDerm-Calcitonin patches. Furthermore, a single administration of ViaDerm-Calcitonin resulted in a statistically significant reduction of bone resorption and cartilage degradation biomarkers, CTX-I and CTX-II, similar to the reduction obtained with daily injections of 100 IU Miacalcin. All doses of ViaDerm-Calcitonin were safe and well-tolerated and demonstrated a favorable profile with regard to skin safety.
Established in 2000, Lod's TransPharma Medical (http://www.transpharma-medical.com) is a specialty pharmaceutical company focused on the development and commercialization of drug products utilizing its proprietary active transdermal drug delivery technology. The company aims to develop multiple drug products through strategic partnerships with leading pharmaceutical companies and through independent product development. TransPharma currently has 3 drug products in clinical trials: ViaDerm-hPTH (1-34) product for the treatment of osteoporosis developed in collaboration with Eli Lilly and currently in Phase 2b clinical studies; ViaDerm-GLP1 agonist for the treatment of type II diabetes that has completed phase 1b clinical study; and the ViaDerm-Calcitonin which has completed a Phase 1 clinical trial. (TransPharma Medical 11.01)
Back to Table of Contents
8.2 Medisafe 1 Technologies National Implementation by Israel's Pharmaceuticals Administration
Medisafe 1 Technologies Corp. announced it has received endorsement for the national implementation of its barcoded syringe locking device, from Israel's Pharmaceuticals Administration. The endorsement was received as the final of a series of meetings with Health Ministry officials. The latest meeting was conducted with the Chief Technical Officer of Israel's Pharmaceuticals Administration. Members of the Pharmaceuticals Administration were particularly pleased with the lifesaving benefits of the syringe-locking device, as well as the locking device's ability to reduce theft by individuals wishing to intentionally use or sell prescription medications. Following official endorsement, Medisafe 1 Technologies has been in discussion with a leading Israeli pharmaceuticals company to partner in streamlining the production process the introduction of the device at Israeli Medical Centers. The pharmaceuticals company also expressed interest in advancing the development of Medisafe 1 Technologies' proposed locking-device for blood transfusion bags. Jerusalem's Medisafe 1 Technologies (http://www.medisafe1.com) seeks to effectively prevent unauthorized administration of a drug or medicinal substance by hypodermic needle. Medisafe's patented technology is a medical assembly with a locking mechanism that is intended to ensure the substance cannot be released from the hypodermic needle without positive pre-matching between the substance and its intended patient. (Medisafe 1 Technologies 10.01)
Back to Table of Contents
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 GM & Powermat to Put Added 'Charge' in Chevy Volt
General Motors and Powermat announced a commercial agreement that will eliminate the need for charging cords for personal electronic devices in many future Chevrolet, Buick, GMC and Cadillac products beginning mid-2012. GM Ventures, the company's venture capital subsidiary, will invest $5 million in Powermat to accelerate the technology's development and support efforts to grow Powermat's business globally. Powermat's technology allows electronic devices – smart phones, MP3 players and gaming devices – to be charged safely and efficiently. The Chevrolet Volt, conceived as a reinvention of the automobile that would help reduce America's dependence on oil, while providing the assurance of an extended driving range, will be one of the first GM vehicles to offer this technology. The technology is expected to revolutionize how electronic devices are charged in a car.
Neve Ilan's Powermat (http://www.powermat.com) was the first company to perfect inductive-based wireless charging and to bring it to consumers in a widely available, meaningful way via mainstream retail channels. The undisputed leader in wireless charging, Powermat leads the category in all facets including technology, retail footprint, consumer experience, and brand. Powermat allows users to enable their electronic devices once with a Powermat receiver and then set down up to three devices on the charging mat for fast, safe and effective wireless charging. It's simple, effortless, and provides consumers with first-of-its-kind freedom from the need to constantly plug/unplug as well as the angst of running on empty. (GM 08.01)
Back to Table of Contents
9.2 Elbit Systems' Brazilian Subsidiary to Supply 30mm Unmanned Turrets to Brazilian Army
Elbit Systems announced that its Brazilian subsidiary, Aeroeletronica (AEL) was awarded a framework contract, valued at up to approximately $260m for the supply of UT30 BR 30 mm Unmanned Turrets to the Brazilian Army's Land Forces, as part of the Guarani Project. This award follows an award of a contract to Elbit Systems in 2009 to supply several Unmanned Turrets in an open tender in which leading global manufacturers took part. The contract calls for Elbit Systems' UT30 BR to be installed onboard a few hundred of Iveco 6x6 APCs, according to a schedule and a multi-year funding profile to be defined by the parties. Haifa's Elbit Systems (http://www.elbitsystems.com) is an international defense electronics company engaged in a wide range of programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems (UAS), advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. The Company also focuses on the upgrading of existing military platforms, developing new technologies for defense, homeland security and commercial aviation applications and providing a range of support services. (Elbit Systems 06.01)
Back to Table of Contents
9.3 Jordan Valley Semiconductors Order From China's Invenlux for QC3 HRXRD Tool
Jordan Valley Semiconductors announces a new order from Invenlux Optoelectronics (China) for its QC3 HRXRD tool, a high throughput, multiple wafer size diffractometer, used for the quality control of epi layers in the LED production line. InvenLux Optoelectronics (China) Co. covers a full spectrum of LED technologies including MOCVD growth, LED device design and processing, material and device characterization, and LED packaging and testing for volume LED production and advanced R&D. QC3 has been designed to provide characterization for all common semiconductor materials, such as GaAs, InP, Si and GaN (thick buffers) for high-brightness LED (HB-LED) manufacturing industry. This system is also perfectly suited for the analysis of multilayer structures such as HEMTs and HBT, due to the systems capability to determine thickness and composition of all the layers within the stack, especially any graded composition layers within the HBT structures. These are determined from first principles using the Jordan Valley RADS software, the original and still industry-leader HRXRD simulation software. The tool is ideal for measuring MQW thickness, In composition, tilt and twist and its high intensity gives higher precision for better throughput. The tool includes rocking curves in seconds, fast triple axis scans in less than 1 minute, reciprocal space maps in a few minutes and 300mm wafer stage with custom wafer-size settings for multiple wafers, as well as full robot automation systems offered for comprehensive factory automation.
Migdal Ha'Emek's Jordan Valley Semiconductors (http://www.jvsemi.com), the leader in X-ray and VUV metrology solutions for the semiconductors industry, develops, manufactures and sell fully automated metrology tools for advanced technology nodes based on non-contacting and non-destructive tools. The company offers the Semiconductor Industry the most comprehensive array of metrology tools, based on technologies such as XRR, XRF, WAXRD, SAXS, HRXRD and VUV. (JVS 05.01)
Back to Table of Contents
9.4 BroadLight Issued Two New Processor Architecture Patents
BroadLight announced its issuance by the US Patent Office of two new patents, Patent No. 7,643,753 "Enhanced passive optical network (PON) processor" and Patent No. 7,801,161 "Gigabit passive optical network (GPON) residential gateway." Patent number 7,643,753 relates to an enhanced passive optical network (PON) processor adapted to serve a plurality of PON applications. The PON processor is a highly integrated communications processor that can operate in different PON modes including, but not limited to, a gigabit PON (GPON), a broadband PON (BPON), an Ethernet PON (EPON), or any combination thereof. In an embodiment of the present invention the provided PON is fabricated on a single integrated circuit (IC). Patent number 7,801,161 relates to a gigabit passive optical network (GPON) residential gateway comprising a microprocessor for processing packets that includes: voice data and packets as well as video data; dual packet processors for performing GPON and residential gateway processing tasks; a plurality of Ethernet media access control (MAC) adapters for interfacing with a multitude of subscriber devices; a GPON MAC adapter for interfacing with an optical line terminal (OLT) of the GPON and a digital signal processor (DSP) for processing voice signals.
Ramat Gan's BroadLight (http://www.broadlight.com) is a fabless semiconductor company supplying processors to equipment vendors for fiber access applications around the globe. BroadLight enables service delivery with its highly integrated processors and software for central office and customer premises equipment. A worldwide leader in fiber access semiconductor and software, BroadLight powers all the GPON deployments worldwide. (BroadLight 10.01)
Back to Table of Contents
9.5 YCD Multimedia Introduces New Solution Based on Retalix Software & HP Hardware
YCD Multimedia has integrated YCD|RAMP (Retail Advertising & Merchandising Platform) with Retalix Store and Customer Marketing solutions and HP's retail hardware solutions to bring a solution that fully automates the creation of in-store campaigns. By integrating YCD|RAMP with the Retalix® Customer Management and Marketing Suite (Loyalty and Promotions), retailers get a fully compliant, synchronized, in-store digital campaign solution. The idea is that consumers are only presented with the most relevant content – such as product price and availability - triggered in real time, and based on Retalix Promotion Management application. Together with optimal suggestive selling capabilities, which can be integrated with the loyalty system, retailers also have built-in measurement and reporting tools at their disposal, allowing for real-time campaign impact analysis and optimization, and resulting in an increase in sales and a positive impact on ROI. The combined solution is fully compliant with HP's new line of retail products, which are especially designed to address the unique requirements of retailers using POS digital media.
Kibbutz Shefayim's YCD Multimedia (http://www.ycdmultimedia.com) provides marketers with tools to create, manage, measure and distribute digital media in the retail environment. From large-format displays that promote products based on real-time inventory levels to small shelf-level interactive displays, YCD's flexible platform combines strategy, professional services and technology to increase profits, optimize product mix and enhance the customer experience. Ra'anana's Retalix (http://www.retalix.com) is a leading provider of software solutions to retailers and distributors worldwide. The Company's product and services help its customers automate and synchronize essential retail and supply chain operations, encompassing stores, headquarters and warehouses. Specializing in the food industry, Retalix serves customers in more than 50 countries. (YCD Multimedia 10.01)
Back to Table of Contents
9.6 NanoMaterials Enters Indian Market With Second Largest Petroleum Company HPCL
NanoMaterials announced that Hindustan Petroleum Corporation Limited (HPCL), India, has launched two new advanced lubricant products, the Rhino and HP Numaro Uno, both of which are powered by NanoLub, a unique performance-enhancing nanotechnology product. NanoLub, which contains billions of spherical nano-particles, is NanoMaterials' proprietary nanotechnology-based line of lubricant-enhancing additive products that significantly reduce friction and wear. These particles, based on safe tungsten disulfide, provide super-lubricating properties to oils and greases and are sold as concentrates or pastes either to lube manufacturers as an additive or as after-market products. The launch of the Rhino, a fully formulated gear oil with dual anti-friction and anti-wear capabilities, and HP Numaro Uno, a new engine oil targeted for the aftermarket, set HPCL as the first company to introduce nano lubricants into the market in India. Ness Ziona's NanoMaterials (http://www.apnano.com) is a private nanotechnology company founded in 2002. The company was granted an exclusive license by YEDA Research and Development Co., the commercial arm of the Weizmann Institute, to manufacture, commercialize and sell a new class of nano particles based on inorganic compounds. NanoLub, a green, environmentally friendly material, is a registered trademark of NanoMaterials. (NanoMaterials 11.01)
Back to Table of Contents
9.7 SiSense Prism Business Intelligence Solution Selected by WeFi to Analyze Massive Data Sets
SiSense announced that its Prism BI software was selected by WeFi to analyze and report on a rapidly-growing database of more than 600 million rows of data. WeFi is a Web-based business dedicated to helping its millions of users find and enjoy the more than 75,000,000 Wi-Fi access points around the world cataloged in its system. WeFi was looking for a business intelligence solution that would quickly perform advanced reporting and analysis over large amounts of data, including the behavior of millions of WeFi users, the performance and activity of wireless networks to which its users are connected and the activity records of active clients. Furthermore, the company wanted a solution which would allow its analysts and management to design and customize reports, dashboards and analytics without heavy involvement of IT staff. SiSense was chosen over competing in-memory BI vendors for its shorter implementation time, faster query response performance, better scalability, lower total cost of ownership and more user-friendly report/dashboard design. Soon after deploying Prism, the company's business users were already creating their own reports and analyses. WeFi is currently running most of its reporting and BI dashboards over Prism, using an off-the-shelf PC with a Xeon 5520 CPU, 64GB RAM and Windows 2003 as its server.
SiSense (http://www.sisense.com) is redefining business intelligence (BI) by making enterprise-grade BI available to any company or department, large or small. SiSense's mission is to allow its customers to set themselves up with high-performance reporting, interactive dashboards and ad hoc business analytics in hours or days, without the expense, hardware or much longer time frames required for conventional data warehouse or OLAP-based solutions. SiSense's unique, cutting-edge technologies enable even those without prior BI experience to quickly and easily implement a full-fledged, end-to-end BI solution without compromising on functionality, scalability, manageability, flexibility, governance, collaboration or ease-of-use. Tel Aviv's WeFi (http://www.wefi.com) is dedicated to helping its users find, connect and enjoy Wi-Fi anywhere around the world. WeFi provides the tools that allow its user community to map the global Wi-Fi network. The company's dedicated community has already discovered over 75,000,000 access points around the world. WeFi is funded by Lightspeed Venture Partners, Pitango Venture Capital and Gemini Israel Funds. (SiSense 11.01)
Back to Table of Contents
9.8 Elbit Systems to Supply Korea Airborne EW Suites and MWS Valued at $29 Million
Elbit Systems announced that its subsidiary, Elisra Electronic Systems was awarded a contract valued at approximately $29 million to supply the Korean Government with Airborne Electronic Warfare (EW) Suites and Missile Warning Systems (MWS) for its ROKAF CN-235 Transporters. The advanced and integrative EW suites include protection systems against various threats. Haifa's Elbit Systems (http://www.elbitsystems.com) is an international defense electronics company engaged in a wide range of programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems (UAS), advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. The Company also focuses on the upgrading of existing military platforms, developing new technologies for defense, homeland security and commercial aviation applications and providing a range of support services. (Elbit Systems 11.01)
Back to Table of Contents
9.9 New Design Wins from Major Customer to Boost Silicom's Revenues by $2 Million
Silicom announced that one of its largest customers, a worldwide leading provider of application acceleration, virtualization and cloud computing solutions, has selected Silicom to supply an additional three products, including two encryption cards and one special networking card. Based on the customer's forecasts, Silicom expects the volume of purchase orders for these cards to ramp up gradually to approximately $2 million per year, bringing the customer's purchases from Silicom to a total of approximately $5 million per year. In parallel, the customer continues to discuss with Silicom additional projects and applications in which Silicom's standard and specialized products meet the functional requirements of its popular appliances. Kfar Saba's Silicom (http://www.silicom.co.il) is an industry-leading provider of high-performance networking solutions designed to increase the throughput and availability of networking appliances and server-based systems. Silicom's large and growing base of OEM customers includes most of the market-leading players in the areas of WAN Optimization, Security and other mission-critical gateway applications. Silicom's products include a variety of multi-port 1/10 Gigabit Ethernet server adapters, innovative internal and external BYPASS solutions and advanced Smart adapters, including SSL encryption solutions and Redirector adapters. (Silicom 12.01)
Back to Table of Contents
9.10 NICE Introduces New Real-time PCI Solution for Payment Card Industry Compliance
NICE Systems announced new capabilities with NICE SmartCenter's Interaction Recording, that help contact centers ensure compliance with the recently updated requirement of the Payment Card Industry Data Security Standards (PCI-DSS) Council. The PCI Data Security Standard (DSS) applies to all organizations that hold, process, or exchange credit and debit cardholder information. Non-compliant companies risk losing their ability to process credit card payments and being audited and/or fined. The updated requirement bans the audio recording and storage of sensitive cards validation codes and encourages contact centers to implement solutions that prevent the storage of this data. The new solution from NICE helps organizations meet this mandate by leveraging the company's real-time desktop analytics for automatically pausing and resuming audio and screen recordings containing sensitive information. The result is a recorded interaction that doesn't contain the sensitive information as defined by the PCI DSS, such as the 3 or 4-digit card verification number. Furthermore, the solution enables the multiple stored recordings to be played back seamlessly and in accordance with the original call flow. It is available off-the-shelf with out-of-the-box capabilities that require no customization efforts, ensuring reliable and seamless compliance with complex regulatory requirements.
Ra'anana's NICE Systems (http://www.nice.com), is the leader of intent-based solutions that capture and analyze interactions and transactions, realize intent, and extract and leverage insights to deliver impact in real time. Driven by cross-channel and multi-sensor analytics, NICE solutions enable organizations to improve business performance, increase operational efficiency, prevent financial crime, ensure compliance and enhance safety and security. (NICE 12.01)
Back to Table of Contents
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's 2010 Inflation Rate Totals 2.7%
On 14 January, the Central Bureau of Statistics announced that December's consumer price index rose by 0.4%. As a result, Israel's inflation rate totaled 2.7% in 2010, making it the first year since 2005 in which the Bank of Israel has managed to meet the annual inflation goal set by the government (1-3%). Last month saw price hikes in the following products: Footwear (11.5%), clothing (9.3%) and cucumbers (25.2%). The rise in the December CPI was partially compensated by sharp drops in the prices of tomatoes (21.4%) and vacations (2.3%). The entire year saw a rise in the prices of fresh vegetables (22.4%), fresh fruit (19.9%), cigarettes (11.8%) and footwear (11.7%). These price hikes were partially compensated by reductions in the prices of electricity (8.3%), chicken (4.6%) and trips abroad (3%). (CBS 14.01)
Back to Table of Contents
10.2 Israel's Polished Diamond Exports Up 48% in 2010
The Ministry of Industry, Trade & Labor announced that Israeli exports of net polished diamonds jumped 48.1% to $5.8 billion in 2010, as the industry recovered from the global financial crisis and expanded its presence in Asia. The diamond processing sector is one of Israel's largest and accounts for a significant part of its total exports, which were about $80 billion last year. Net rough diamond exports grew 62.1% to $3.1 billion in 2010, while polished diamond imports rose 68% to $4.2 billion and rough diamond imports grew 51% to $3.8 billion. The United States remained Israel's largest export market with 41% of total exports, or $2.4 billion. Hong Kong accounted for 25%, India 5%, Switzerland 4%, China 3% and the rest of the world 22%. (Ynet 05.01)
Back to Table of Contents
10.3 More than 20% of Israeli Families Receive Welfare Aid
The Ministry of Welfare & Social Services announced on 5 January that over 430,000 Israeli families requested assistance during 2010. Overall, the ministry has seen a 45% increase in the number of people seeking aid over the past 10 years. When the sharp increase in Israel's population is taken into account, the statistics show a smaller rise in the percentage of needy families – 20.2% of the population received ministry assistance in 2009, compared to 17.8% in 1998. Approximately 200,000 of those helped by the ministry were new immigrants.
The Ministry found that families living in northern and southern Israel were more likely to need aid than were those living in the center of the country. Poverty was a major factor, with poor families being twice as likely to need help as were financially secure families. Country of origin played a part as well, with immigrants from Ethiopia most likely to need assistance while native Israelis who can trace their roots to Asia or Africa remain more likely to need aid than those of European descent. Old age was the most commonly cited reason for people to seek aid, with 30.5% saying they sought help for an age-related issue, whether financial or health-related. Another 24.4% of those getting ministry care were children whose parents were unable to care for them properly. Some 21% were forced to seek help due to poor health, while 17.8% suffered primarily from low income or unemployment. Another 3% were referred to the Ministry's professionals due to violence and a similar number were treated for addiction or crime. (IsraelNationalNews 05.01)
Back to Table of Contents
10.4 Strong Shekel Cost Israeli Exporters $3.3 Billion in 2010
A survey by the Manufacturers Association of Israel among exporters found that the strong shekel cost business $3.3 billion in 2010. The survey found that the loss in export deals totaled $2.3 billion, and the loss on domestic deals was $1.1 billion. Half the companies in survey said that their competitiveness in international markets was harmed in 2010, to the point of losing customers. Dozens of manufacturers warned of further erosion in export profit margins in 2011. They said that net profits fell 15% last year. The Manufacturers Association found that most Israeli manufacturing sectors showed signs of recovery from the global crisis by the second of 2009, but that the trend stopped in the second half of 2010. (Globes 12.01)
Back to Table of Contents
10.5 Israel's Car Imports Rise By 30% in 2010
The Israel Tax Authority announced that 30% more cars were imported to Israel in 2010 than in 2009. 224,212 cars were imported in 2010, up from 172,459 cars in 2009. Tax revenues from car imports rose by a smaller rate of 14.5%, which the Tax Authority attributes to the switch to greener cars with lower taxes. The Tax Authority said that the green reform resulted in the import of less polluting cars and lowered the average effective tax rate. Trend figures for car imports show that imports began to increase in March 2010, and that the trend strengthened during the second half of the year. The trend picked up further toward the end of year because of concerns about price hikes for cars at the beginning of 2011. The Tax Authority attributes most of the increase in car imports to greater purchases by leasing companies, especially of the Mazda 3, Hyundai I30 and Hyundai I20. The purchases were aimed at meeting demand for tourist rentals, as well as purchases deferred from 2009. (ITA 17.01)
Back to Table of Contents
11: IN DEPTH
11.1 ISRAEL: Summary of Israeli High-Tech Company Capital Raising - 2010
On 17 January, the IVC-KPMG Quarterly Survey was released. Conducted by the IVC Research Center in cooperation with KPMG Somekh Chaikin Israel, this Survey reviews capital raised by private Israeli high-tech companies from Israeli venture capital funds, foreign and other investors. The Survey is based on reports from 95 investors of which 48 are Israeli management companies and 47 are other – including foreign – investment entities.
In 2010, 391 Israeli high-tech companies raised $1.26 billion from local and foreign venture investors. The amount raised was 13% above the $1.12 billion raised in 2009, but 39% below the $2.08 billion raised in 2008. In the fourth quarter, 100 Israeli high-tech companies raised $344 million from venture capital funds and other venture investors – both local and foreign. The amount was up slightly from the $341 million raised in the third quarter of 2010, and 25% above the $275 million raised in the last quarter of 2009.
The average company financing round was $3.44 million in Q4 2010, just under $3.55 million of the previous quarter, and sharply above the $2.22 million of the fourth quarter 2009. Sixty-five companies attracted more than $1 million each. Of these, three companies raised more than $20 million each, six companies raised $10 million to $20 million each, and nine companies raised from $5 million to $10 million each.
Israeli VC Fund Investment Activity
In 2010, Israeli VC funds invested $371 million or 30% of the total amount invested in Israeli high-tech companies, which compared to $410 million or 37% in 2009 and $780 million or 38% in 2008. Investment activity continued to show a decline in the percentage of investment from Israeli VC funds.
Koby Simana, CEO of IVC Research Center said: "While there has been a steady recovery in the amounts raised by local high-tech companies since the end of 2008, a major boost won't occur until new funds are raised by Israeli VCs. Unfortunately," projected Simana, "VC fund raising is unlikely to pick up the pace before 2012."
In the fourth quarter, Israeli VC funds invested $93 million or 27% of the total capital invested in Israeli high-tech companies, compared to $109 million invested in the previous quarter, and $102 million invested in Q4 2009. The remainder came from foreign investors as well as from non-VC Israeli investors.
In 2010, First investments were 29% of the total amount invested by Israeli VC funds, the same as in 2009. Average first and follow-on investments were $1.79 million and $0.89 million, respectively.
In the fourth quarter, first investments made by Israeli VC funds accounted for 25% of their investments, compared to 28% in the third quarter, and 27% in the fourth quarter of 2009. The average first investment by Israeli VC funds was $1.92 million, while the average follow-on investment was $0.87 million.
Israeli VC Fund Activity in Foreign Companies
Israeli VC funds invested $43 million in foreign companies during 2010 (in addition to their investments in Israeli high-tech companies), compared to $80 million in 2009 and $57 million in 2008. Six of the 31 investments were first investments, with follow-ons accounting for the remainder.
Capital Raised by Sector
In 2010, the Life Sciences sector led capital raising with $350 million or 28% of total capital raised, followed by Communications with $238 million or 19%, and the Internet with $222 million or 18%. The Semiconductors sector followed with 13% of capital raised in 2010, compared to 8% and 15% in 2009 and 2008, respectively.
The life sciences sector led capital raising in Q4/10 with $101 million or 29% of capital raised, followed by the semiconductors sector with $75 million or 22%.
"Israel continues to be a center for excellence in life sciences in general, and in the medical devices sub-sector in particular. Medical devices was the most active area in 2010, both in terms of capital invested and the number of companies that raised capital. The ongoing increase in life expectancy and healthcare costs will continue to give impetus to medical devices over the foreseeable future," observed Ofer Sela, a partner in KPMG Somekh Chaikin's Technology group. "The changes we are all experiencing as consumers of media and services are dominant factors in higher investments directed to communications and semiconductors, particularly in mobile application-related sub-sectors. Industry analysts predict that by 2014 the number of mobile internet users will have surpassed the number of PC internet users today, leading to further investment in infrastructures that drive this market." commented Sela.
Capital Raised by Stage
In 2010, 45 Seed companies attracted $38 million, the smallest amount raised by seed stage firms since 2004. The seed share of total capital raised was just 3%, compared to an average of 7% over the previous seven-year period. Mid Stage companies led capital raising, attracting 46% of investment.
In the fourth quarter of 2010, seed companies attracted 2% of total capital raised, compared with 1% in the previous quarter and 4% in the fourth quarter of 2009. Early Stage companies captured $143 million or 42% of the total capital raised.
IVC Research Center is Israel's leading research center providing business leaders with an unmatched wealth of data on Israeli high-tech, venture capital and private equity industries. IVC products and services are used regularly by high-tech companies, venture capital funds, private investors, financial investors and institutions, as well as public entities such as the Office of the Prime Minister, the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist. IVC owns and operates the IVC Online Database (http://www.ivc-online.com) containing over 8,000 Israeli high-tech companies, venture capital funds, investment companies, angels and technology incubators, as well as news updates and lots more. Among IVC products and publications are the IVC Quarterly Survey which for over 14 years has been examining capital raising trends by Israeli high-tech companies, as well as the most comprehensive guide to Israeli high technology and venture capital – the IVC 2011 Yearbook to be published in April 2011. (IVC 17.01)
Back to Table of Contents
11.2 ISRAEL: Strong Fundamentals Faced by Tough Policy Choices
On 18 January, Tevfik Aksoy wrote in Morgan Stanley (http://www.morganstanley.com) that Israel's economy is characterized by robust growth on domestic demand: Strong domestic demand, boosted by fixed investments as well as private consumption, provided robust growth in 2010 which we forecast to have reached 4%Y. Exports performance displayed a mixed picture, with strong numbers in the first two quarters (7.6%Q saar and 16%Q saar, respectively) followed by weak 3Q (0.7%Q saar). The BoI's tremendous efforts to keep the currency from appreciating helped to some extent. But with rather weak external demand for Israeli exports, the contribution of net exports to headline growth remained rather weak, if not negative in 3Q.
Some boost to growth in late 2010: Despite the challenging picture facing exports, that has some 40% share in national income, the overall state of the economy had been positive and signaling the continuation of a healthy growth rate in the coming quarters. The S-index that is used as a proxy for real GDP growth moderated in 3Q10, but since then it had been improving. Based on our expectation of unchanged policy implementation by the BoI, moderate growth in global demand and marginal support from fiscal policy, we project real GDP growth at 3.8%Y in 2011 and 3.5%Y in 2012.
The main risks to these forecasts are threefold: First, external and, in the case of rising weakness in demand for Israeli exports (in particular the high-tech sector), domestic demand might not suffice to carry the whole burden. This is especially true as the base effects will not be providing any statistical carry-over advantage this year. The second is related to the inflation outlook and the possibility of the BoI having the need to hike the policy rate faster than expected, leading to a slowdown in domestic demand. The third risk to growth forecasts would be related to the currency. If the BoI decides to give up its heavy defense of the currency from strengthening, the exporters' situation could deteriorate, leading to a noticeable slowdown.
Inflation challenges to escalate in 2011: At 2.7%Y as of end-2010, headline inflation is within the target range of 1-3% for the time being. However, due to the adverse impact of base effects and the ongoing issue of rising (at least not easing) housing (rental) prices, we believe that inflation will exceed 3% in early 2011. In fact, unless a noticeable decline in housing prices takes place, inflation might remain outside the target range for a good part of 2011. However, as the base effects get stronger later in 2011 and the BoI gradually hikes rates, we believe that inflation will return inside the target band. We forecast CPI inflation at 2.6%Y in 2011 and 2.5%Y in 2012, but the housing price inflation keeps risks on the upside, in our view.
Policy rate outlook: At 2%, the policy rate remains too low, with a real interest rate of around -0.5%. While the BoI had been intending to normalize rates for some time, it has been a very gradual process due to the concerns surrounding currency appreciation. At this juncture, our base case is that the BoI might raise the policy rate very gradually by around 25bp per quarter to reach 3% at year-end. In our view, rates should increase faster and more in order to contain inflation pressures, especially ahead of the gradual return of external demand. We believe that the BoI would not hesitate to hike rates faster in order to maintain price stability; however, there seems to be a clear policy dilemma of trying to defend the currency from appreciating against all the fundamental forces pointing to the otherwise.
The fiscal policy implementation has been encouraging: The government's 2010 budget deficit target of 5.5% of GDP had been undershot significantly and the fiscal results point to a deficit of 3.7% of GDP. This had been a commendable achievement following the deficit of 2009. More importantly, the biennial budget law for 2011-12, which had been approved at the Knesset at end-2010, sets the budget deficit target at 3% of GDP in 2011 and 2% in 2012. In our view, these targets are reasonable and achievable, especially if the growth rate remains strong and the government's intention of lowering the debt to GDP ratio stays intact. The fiscal position is likely to benefit from the natural gas finds in the coming years once the new platforms become operational.
Debt dynamics to improve gradually: Lowering the debt to GDP ratio to the Maastricht criteria of 60% had been the authorities' aim for some time, but the global crisis-led widening in the budget deficit, slow growth and the decline in the primary surplus changed the course in 2009. With the economic recovery in place, improved fiscal policy and low real interest rates, we expect debt to GDP to gradually decline to 64% by 2020, especially on the back of the proposed deficit targets set out for the next couple of years. Needless to say, achievement of this target would improve the country's risk profile even further and possibly leading to lower borrowing costs for the corporate sector.
The natural gas find is promising: In 2009, there was an important discovery of a major gas field (Tamar field) off the coast of Israel that created optimism regarding the country's future position in the global energy market. Earlier in 2010, a new discovery again in the Mediterranean added further upside to the story as the new find (Leviathan field) is predicted by authorities to be twice as large as Tamar. While it is still early to make strong assumptions, we view this topic to present serious upside for the Israeli economy. Israel's fuel imports stand at around $9-10 billion a year, which is roughly 4.5% of GDP.
Considering that the current account is already in surplus at around 4% of GDP (which is likely to ease to around 2.5% in 2011), one can easily imagine the potential positive impact of the usage of natural gas domestically. At some point in the future, Israel might become self-sufficient in energy production and consumption, but more than that it is also conceivable to expect the country to become an energy exporter once the necessary infrastructure is put in place. Clearly, this whole process will take years to bear fruit because of the heavy investment requirements for extraction, transportation and the integration into the system. But these are all potential areas where the overall investment in Israel might pick up fast, which would support the economy via faster growth and a rise in employment. At the outset, once the natural gas story starts to materialize, it is very likely that the shekel will face even further appreciation pressures, and quite possibly the only way to handle the matter would be to set up a sovereign fund like almost all energy-exporting countries have in place.
FX interventions a top agenda item: As a response to the significant appreciation pressures in the currency, the BoI has been trying various forms of interventions. Since abandoning the daily FX purchases in August 2009, the BoI has been engaged in direct interventions that reached sizeable amounts at times. The level of FX reserves, which was seen as rather low in the past, surged to exceptionally high levels.
By almost every measure such as its ratio to GDP, coverage of months of imports, ratio to short-term debt, etc., the size of reserves at $70 billion looks very high in comparison to international standards. While it can be argued that the high level of FX reserves would serve well against potential geopolitical risk scenarios, it is also quite costly, given the need to sterilize. The issue of FX interventions and the associated costs of sterilization had been voiced by the Ministry of Finance, but so far Governor Fischer has not changed his stance. (MS18.01)
Back to Table of Contents
11.3 ISRAEL: Barclays Sees Natural Resources Supporting Israeli Economy From 2011
With the Tel Aviv Stock Exchange (TASE) at record high levels, and natural gas discoveries offshore from Israel capturing investor interest around the world, Globes reported that on 10 January Barclays Capital published a bullish outlook for Israel's economy in 2011.
Barclays analysts say, "Tel Aviv's main indices kick off 2011 at or near all-time highs, with a strong economic backdrop continuing to provide support…The banking sector is well capitalized, the emerging energy sector remains squarely in focus and the local technology sector is capitalizing on the fastest-growing trends in tech. While the markets are high, (they) still see opportunity." They add that the move to MSCI classification of Israel as a developed market from emerging market "was smoother than we expected and opens up Israel to a broader range of potential new investors and flows of capital."
Barclays analysts claim that 2011 is a year of transition for Israel's economy, from one based only on human resources (as seen in the development of the high tech industry) to one based on natural resources, chief among them the natural gas discovered offshore from Israel, and Dead Sea resources. "Israel's economic performance is improving. Growth has broadened and strengthened; the economy seems to be well on the way to full recovery." Yet the analysts warn that "inflation is rising and presents a possible macroeconomic risk." They add that Israel will transform from a high debt to a low debt country in the next decade.
The Barclays analysts say that they have little to add to the political discussion that has not already been said, but that in their opinion, while the political situation appears stuck to them, "given the relative stability it should not be a headwind for the economy or markets in 2011." Barclays forecasts the shekel-dollar exchange rate to end 2011 at around NIS 3.50/$. The interest rate is expected to rise to 3% by the end of the year.
A major risk to Israel's economic growth, say the analysts, remains its dependence on exports. "Any economic weakness in the US, Europe or Asia will certainly be felt in Israel given the high level, over 40%, of exports as a percentage of GDP. The economy will need to balance the threat of inflation, currency appreciation and low global rates to stay on track."
Looking at the developing energy sector in Israel, Barclays says that a risk it poses to the economy is that it will lead to a strong appreciation of the shekel, hurting domestic industries. "In our view, the accumulation of foreign reserves by the Bank of Israel has been an appropriate response to the existing current account surpluses. However, when energy production kicks up, the efforts of the Bank of Israel will need to be supplemented. The government will need to use its tax-royalties windfall from energy production in ways that prevent excessive currency appreciation. We expect that it will establish a sovereign wealth fund to channel some of the foreign exchange earnings out of local markets. In addition, the government could use some of the funds to finance major infrastructure improvements that would further improve private sector productivity."
The analysts are also impressed with the Netanyahu government's fiscal policy, saying "Fiscal prospects are excellent as revenues have been rising rapidly on higher economic growth. The Israeli government is actively lowering its deficits and debt. It is keeping expenditures under control and the buoyant economy is contributing to revenue collection." They say that while the official upper limit on the deficit for 2010 is 5.5%, it appears that the 2010 deficit will be 3.5-4% of GDP as revenues have been better than anticipated. In addition, says Barclays, according to the recent IMF report, the government is planning to reduce the deficit to 3% in 2011 and 2% in 2012. "In the next few years the government plans to lower the deficit to 1% of GDP per annum. This will help bring overall government debt levels towards the 60% of GDP target sooner. The government is putting a priority on bringing down the level of government debt, which is quite high. If outperformance on revenue continues, tax cuts could be expected." (Globes 10.01)
Back to Table of Contents
11.4 JORDAN: Economy Takes Priority
Jordan's new government has committed to strengthening the economy while also reducing debt levels, though at least to some degree its success or failure will depend on the health of regional and global economies. Opening the new session of parliament on 28 November, King Abdullah II said the government of Prime Minister Samir Rifai, which was formed following parliamentary elections on 9 November, would be focusing on a seven-point policy plan of economic, social, and political reforms. The King said that these reforms were closely interconnected and essential to ensure development and growth.
While Jordan faced enormous economic challenges as a result of the global crisis, these could be overcome by adopting viable economic policies, said King Abdullah. "Improving the performance of the economy will continue to top our priorities due to the direct impact such an improvement will have on the quality of life of our people," he said. "The fiscal policies will continue to be geared towards curbing the budget deficit and consolidating financial stability. The government will also focus on improving the investment environment, stimulating economic growth and developing self-sufficiency."
On 21 November, responding to the King's decision to re-appoint him as prime minister and give him the mandate to form the new government, Rifai said that improving the national economy would take priority. "The government managed to achieve progress in some objectives, but was still working to realize better results in other objectives that normally require longer-term efforts, particularly those associated with the economic situation due to their reliance on the financial resources and the conditions of the international economy," he said in a letter sent to King Abdullah. Though acknowledging that more needed to be done, Rifai did note that there had been some marked improvements in a number of key areas, including in attracting foreign investment.
Indeed, the government has made progress in addressing some of the underlying weaknesses in the Jordanian economy since first coming to office in December last year. One of its major achievements was to reduce the budget deficit by 35% over the first three quarters of the year compared to the same nine months in 2009. This was in part a result of increased domestic revenues and a rise in foreign assistance, with one of the largest contributors being the tax on goods and services, which brought in an additional $277m, according to data released by the Ministry of Finance on 28 November.
By contrast, earnings from taxes on trade and international transactions as well as income and profits declined by $162m over the nine month period, most likely a reflection of the prolonged recovery of the global economy. The improved deficit performance was also aided by a reduction in state expenditure, though this only represented a 0.6% lowering of spending, with little left to be trimmed in an already stretched budget, which faces growing demands for social services support and economic stimulus requirements.
Though Rifai's government has strengthened the state's fiscal position, it is still struggling to reduce net public debt, which rose by $1.4bn in the nine months ending September 30, lifting the total to $15.2bn. This puts state debt at an estimated 55.4% of GDP, a 2.2% increase on the close of the third quarter in 2009.
Over the past year, the government has also had to contend with a stubbornly high unemployment rate estimated at 13%. However, while committed to reducing the deficit, it has been difficult for Rifai to increase spending on programs that would create jobs, though a number of long-term capital works projects, such as the planned national rail network and large-scale irrigation schemes, will help stimulate growth and improve the employment situation.
Some of this growth will depend on how well the global economy performs in the coming year, a fact acknowledged by Finance Minister Mohammad Abu Hammour. Speaking on 7 November, when he handed down the 2011 budget, the minister said the target of trimming the deficit to 5% of GDP while projecting a slight increase in expenditure presupposed a more robust global economy. "The budget for next year was prepared according to expectations that the regional and international economies are recovering from the repercussions of the global recession," said Abu Hammour.
Though the Jordanian government has done well to reduce the deficit in 2010, it may have difficulty in meeting at least some of its targets for next year, especially as some of its major trading partners in Europe are seeing their own economies slowing again. This in turn could impact on foreign capital inflows and on donor support, both vital to Jordan's economy. While the policy program outlined by King Abdullah sets a clear path for the country's future, there is the risk of potholes that could slow the journey. (OBG 03.01)
Back to Table of Contents
11.5 JORDAN: Plan in Place
Jordan's Ministry of Planning and International Cooperation (MOP) has released its Executive Development Program (EDP) for 2011-13, with $8.4b to be distributed among 24 different economic sectors. Approximately half of the money for the program will come from state budget allocations, with the remainder being funded by government agencies and international sources. Funds from the latter are expected to amount to $1.8b.
Around 55% of the spending will be allocated to infrastructure, water, housing and transportation projects; about 20% to social welfare; 14% to education; 6% to improving business practices; 3% to modernizing technical training; 2% to financial and administration reforms; and 1% to legislation.
Some of the EDP's planned projects will rely on public-private partnerships for funding, particularly for large projects such as the National Railway Network, the tender for which was recently delayed until 2011. "The program is also expected to provide donors with a concrete medium-term action plan from the government with specific projects, priorities and development goals, in addition to the targets outlined at the macro-economic level and those related to fiscal policies," Jafar Hassan, the minister of planning and international cooperation, told The Jordan Times in November.
This is good news for investors, and indeed for the government, which said in November that it expected the amount of foreign grants and loans to the country in 2010 to be 31% higher than those in 2009. Foreign grants totaled $404.6m in the first 10 months of the year, almost doubling the amount for 2009, the Ministry of Finance announced. Much of the foreign assistance has been directed to water, sewage, energy, health and education projects, the MOP said.
However, the World Economic Forum's "2010-11 Global Competitiveness Report", released in September 2010, highlighted several obstacles to investing in the country. It pointed to declines in a number of areas, including institutions, infrastructure, macroeconomic stability, education and financial markets. As a result, Jordan placed 65th out of 139 countries, down from 50th out of 133 the year before. The report indicated that the main issues that need to be addressed were with tax regulations and rates, bureaucracy, labor rules, access to financing and an inadequately educated workforce.
Jordan also slipped a few notches in the "2011 Doing Business Report", from 107 in 2010's report to 111 (out of 183 economies) in the current version. It improved in areas relating to starting a business and dealing with construction permits, but declined in others, such as access to credit and investor protection. "There are a lot of complaints by investors because investment promotion services are in decline and the problem is that this issue is not being addressed," Jawad Anani, a former Royal Court chief who has also held several ministerial posts, told The Jordan Times last month. "Our focus should be on improving our economic ranking, which requires upgrading administrative and government efficiency."
In the meantime though, the banking sector is looking outside the country's borders, specifically to the Gulf, to help boost the economy. Bankers have told the media that Jordan's prospects for 2011 depend on the economic recovery of the Gulf countries, which traditionally have been the main source of remittances and foreign direct investment, particularly for the real estate sector. "The speed of recovery in the sector will depend on the Gulf economies recovering fully by reviving inflows, remittances and improving business climate," Marwan Awad, the CEO of Ahli Bank and chairman of Jordan's banking association, told Reuters recently.
Debt remains an issue going forward, however. According to the IMF, government debt was forecast to reach 67.1% of GDP by the end of 2010, while the fiscal deficit came down during the course of the year, falling by around 35% to $808.91m, compared with $1.23b during the same period in 2009. If Jordan can address its debt burden while steering a prudent course into 2011, the outlook for its economy should be promising, particularly if, as expected, it is helped along by growth in key regional markets in the Gulf. (OBG 17.01)
Back to Table of Contents
11.6 BAHRAIN: A Year in Review 2010
Bahrain's economy posted solid results across 2010, with expansion in most sectors, inflation well in hand and a positive outlook going into the new year. The Oxford Business Group also said that iIn December, a report by the International Monetary Fund (IMF) estimated GDP growth at 4% in 2010, up on the 2009 figure of 3%. The IMF assessment predicted that this growth would accelerate to 5% in 2011 thanks to higher oil prices and careful management of the economy by the government and the Central Bank of Bahrain (CBB).
However, the IMF report also expressed caution over increased debt levels, stating that these have "highlighted the need to rebalance the fiscal accounts in order to ensure the existence of sufficient fiscal space to respond to external shocks in the future".
CBB data has shown that the country's debt to GDP ratio was 27.3% as of the end of the first half of the year, a marked rise on a ratio of 8.5% in the same period of 2008. The increase could be addressed by further fiscal reforms, including reducing subsidies, the IMF said. Much of the debt is the result of higher state spending to stimulate the economy and strengthen the country's infrastructure, a move seen as vital if Bahrain is to develop itself as regional financial and logistics centre. Many analysts believe the spending levels are manageable, with ratings agency Fitch saying in December, "Bahrain's track record of fiscal prudence has created enough fiscal space to accommodate a planned increase in capital spending". The financial services sector remains central to the Bahraini economy, and the sector's resilience was an underlying cause of the kingdom's solid growth and stability during the global recession.
Though most of the kingdom's lenders had a solid year – increasing profits, capitalization and holdings – a few smaller banks recorded operating losses and saw capital adequacy levels fall below those mandated by the CBB. This trend of the big getting bigger and smaller lenders facing difficulties could lead to a round of mergers and acquisitions in the coming year.
The Bahrain Stock Exchange (BSE) broke through a 1600-point barrier in early April before falling to the 1364 mark in the first days of July. However, the market ended the year's trading at around 1430 points, roughly where it opened at the beginning of 2010. Better things are predicted for the BSE next year, both in terms of quantity and quality. In late December, the CBB announced plans to transfer management of the exchange to a board composed of representatives from the local financial sector early in the new year, a move many analysts believe will spark greater interest in listing on the bourse and raise trade volume. Currently there are some 50 firms traded on the BSE, though analysts believe this could double in the next few years.
The year closed on a positive note with Fitch rating agency confirming Bahrain's long-term foreign and local currency Issuer Default Ratings (IDRs) at A and A+ respectively and the outlook for long-term IDRs assessed as stable. This outlook reflected the confidence in the economy as a whole and the banking sector in particular to the stresses from the global downturn and regional property markets over the last two years, said the Fitch report, issued on December 22.
The performance of the economy has been helped by a cooling of inflation, with year on year consumer price increases at just 1.3% as of the end of November, according to data issued by the Central Informatics Organization in late December. Though some sectors of the economy, in particular the construction and real estate industries, are still in the process of recovering from the sharp downturn in 2008, there are signs of improvement. Going into the new year the construction industry can look forward to benefiting from government commitments to boost spending on low cost housing and infrastructure, with some $1.3bn to be invested in water and electricity developments. Meanwhile, the property market is also picking up, though at a cautious rate.
While Bahrain remains susceptible to external shocks, the success with which the kingdom's economy saw off the global recession and the further strengthening of the financial sector means the kingdom has positioned itself for steady growth going forward. (OBG 05.01)
Back to Table of Contents
11.7 QATAR: Year in Review 2010
2010 was a banner year for Qatar, as reported by the Oxford Business Group. Without doubt, the biggest local story in 2010 was FIFA's decision to award Qatar the right to host the 2022 World Cup. Though many were surprised when international football's governing body named Qatar as the venue for the tournament at the beginning of December, Doha is set to win over critics by spending $60b or more to stage the world's most watched sporting event, and has vowed to combine high technology with even higher environmental standards to do so.
While a feel-good story in itself, winning the bid to host the 2022 World Cup will be even bigger news for Qatar's economy. The projects associated with staging the event are likely to spur a range of sectors, with the construction, hospitality, banking and transport industries just some of those set to gain from the significant levels of funding that will flow over the coming decade.
Even without the projected spending boom, Qatar's economy is surging. While year-end figures have yet to be compiled, it seems more than likely that the 16% expansion predicted for GDP will easily be met and possibly surpassed. According to figures released by the Qatar Statistics Authority on January 2, GDP grew by a stunning 21.1% in Q3/10 compared to the same term the year before. With the third-quarter GDP up 13.1% on the preceding quarter, and the economy continuing to build in the final months of the year, the 16% growth rate predicted by the IMF in October could well be exceeded.
Looking ahead, the IMF has forecast that GDP growth will continue at the same pace or faster, suggesting that Qatar's economy could grow by up to 20% in 2012, in part a result of the first wave of spending on World Cup related projects but also on other high-profile infrastructure work, much of is related to transport and logistics. These include the ongoing work on Qatar's new $13b international airport, up to $20b worth of roads and highways, and looking further down the track, up to $40b of light and mainline railways set to be built in the coming years.
Though Qatar is investing heavily in diversification, oil and now increasingly predominantly natural gas will continue to be the foundation of the economy for the foreseeable future. It is a foundation that is steadily expanding. In mid-December, Qatar marked another milestone, achieving its targeted liquefied natural gas (LNG) production capacity of 77m tonnes a year, a level that was scheduled to be reached in 2012. However, having fast-tracked infrastructure projects Qatar was able to bring the latest of its massive gas-processing trains at the Ras Laffan Industrial City up to speed two years early, with production set to start in February. Doha also has other energy projects in the pipeline, including the $8.6b Barzan gas facility, which will process the natural gas take from Qatar's North Field for use by the country's own burgeoning industrial base, including planned petrochemicals plants.
Though Qatar's economy is expected to remain in robust health for the foreseeable future, amongst possible clouds on the horizon, inflation is a key consideration. Throughout 2010 price rises remained at moderate levels, with year-on-year inflation running at just over 3% as of the end of November. While a far cry from the 15.2% rate for 2008, there are concerns that price rises will start to edge up again in the new year, as a stronger economy and increased consumer spending power fuel demand.
One of the factors that has helped to reduce Qatar's inflation rate over the past two years has been falling rental costs. However, the expected influx of overseas workers needed to develop the range of infrastructure schemes planned over the next decade, along with the World Cup venues and associated projects, could see additional pressure put on the rental market, resulting in a new price surge. Having closed out 2010 as the fastest-growing economy in the world, and with prospects going forward looking equally strong on the back of government and World Cup-linked spending, Qatar seems set for a prosperous and profitable new year. (OBG 14.01)
Back to Table of Contents
11.8 UAE: Abu Dhabi - Year in Review 2010
The Oxford Business Group announced that 2010 will be remembered in Abu Dhabi for the local government forging ahead with a counter-cyclical spending regime aimed at boosting the economy and buttressing the Economic Vision 2030.
The Union Railway, a nationwide rail project, offers a good example of this. In early September, bidding began for the first round of lucrative packages related to the planned UAE-wide link. It was seen as a sign of the government's commitment to carrying on with plans hatched before the crisis. Over the medium to long term the project is expected to help create a thriving small- and medium-sized enterprise (SME) sector in Abu Dhabi and the wider UAE for businesses specializing in locomotive supplies, maintenance and manufacturing. In addition, the railway is also going to play an important role connecting business and industry with the country's sea and aviation infrastructure. It is all part of a strategy to boost the efficiency of manufacturing and heavy industrial exports in the future.
As the different phases of the railway progress it will eventually link up with another important government-backed project, the Khalifa Port and Industrial Zone (KPIZ). The project, which is another integral plank in the government's long-term diversification goal, pressed ahead with tendering a $131m infrastructure package in early October to Greek contractor, Consolidated Contracting Engineering & Procurement.
Shortly afterwards, Abu Dhabi Ports Company (ADPC), the government entity behind the project, also awarded a $285m infrastructure works contract to Al Habtoor Leighton Group. Construction began immediately and is scheduled to end in July 2012.
Based around the idea of industrial clusters, the strategy is to attract tenants from a wide range of industries. KPIZ will cater to base-metal specialists, heavy machinery, transport-vehicle assembly, chemicals, shipyards, building materials, processed foods and beverages, light manufacturing and assembly, SMEs, trade and logistics, information and communication technology and alternative energy, as well as others.
Supplying the necessary power for Abu Dhabi's growing industrialization was a focus for the emirate in 2010, following the selection of Korea Electric Power Corporation (KEPCO) as the prime contractor for the UAE's first four nuclear power plants in December 2009. In 2010 Emirates Nuclear Energy Corporation (ENEC) identified a preferred site on government land in Barka, in the Western Region of Abu Dhabi for the reactors, which are scheduled for completion between 2017 and 2020. The $20.4b master plan means the benefits to the economy should be felt far and wide. In total, KEPCO expects to subcontract around $15b worth of the project, awarding up to 200 contracts to provide components such as steam generators, turbines and piping.
Meanwhile, the nascent technology industry also flexed its financial muscles in 2010. Government-owned Advanced Technology Investment Company (ATIC) announced that it plans to invest between $6-$7b building its semiconductor manufacturing facility in the capital. The 12-inch wafer fabrication facility, the industry's most sophisticated, is expected to begin production by 2015. It will be the first microchip producer in the Middle East. Over the long term, the aim of building such a manufacturing plant is to turn the emirate into a hub for semiconductor production.
As outlined in the Economic Vision 2030 developing a sustainable technology sector is a key pillar to industrial diversification and set to be a significant GDP contributor to Abu Dhabi's economy in the future. For today, however, the government's policy of investing billions of dollars across the economy helps to bolster growth in the non-oil economy, owing to the multiplier effect of so much construction work being carried out within the local market. Most importantly, though, is the impact government's efforts will all have on 2011.
As countries in the West suffer anemic growth and budget cuts, the UAE capital can expect a GDP growth rate of nearly 8% (3.8% in real terms) in 2011. In addition to this the emirate – thanks to the government-led recovery in 2010 – will benefit from a boost of investments of nearly 15%. Exports will increase 9.5%, while imports will jump, says the study, by a healthy 8%. (OBG 10.01)
Back to Table of Contents
11.9 EGYPT: Fitch Affirms Egypt's Rating at 'BB+'; Outlook Stable
On 12 January, Fitch Ratings (http://www.fitchratings.com) affirmed the Arab Republic of Egypt's Long-term foreign currency Issuer Default rating (IDR) at 'BB+' and Long-term local currency IDR at 'BBB-'. Both ratings have Stable Outlooks. Fitch has also affirmed the Short-term foreign currency IDR at 'B' and the Country Ceiling at 'BB+'.
"Egypt's economy proved resilient to the global financial crisis and is now in recovery mode," says Richard Fox, Head of Middle East and Africa Sovereign Ratings at Fitch. "Strong external indicators remain the key support for Egypt's rating. By contrast, progress reducing high deficit and debt ratios will remain limited this year and inflation is a challenge in the face of rising food prices. The pace of reform has also slowed as elections loom and political uncertainties increase."
Egypt's strong external indicators survived the global recession essentially unscathed. The current account deficit remains small and covered by FDI, reserves are rising again and Egypt remains a significant overall net external creditor, unlike most countries in the 'BB' and 'BBB' rating categories. The sovereign debt structure is comfortable, the debt service ratio low and external liquidity high.
The economy demonstrated increased resilience during the global recession, testament to the increasing diversity of growth drivers, encouraged by reforms since 2004. At its worst, GDP growth sank to 4.1% at the end of 2008 but recovered consistently to over 5% a year later and to approaching 6% now. Unemployment began falling again early in 2010.
Inflation is currently the main challenge for macro management. Headline inflation has fallen over the past year but rose slightly to 10.3% in December, while core inflation, excluding the most volatile prices, jumped to 9.3%. Egypt's inflation has been consistently higher and more volatile than its rating peers and the tools available to the central bank to control it remain under-developed. With global commodity prices rising, and food having a high weight in both headline and core indices, there are upside inflation risks.
High inflation also hampers efforts to reduce the budget deficit through higher indirect taxes. The FY/11 budget (year to June 2011) envisages a slight reduction in the deficit to 7.9% of GDP, but this will hardly dent the debt ratio of over 70% of GDP, even if, as is often the case, the deficit comes in below budget. Moreover, rising commodity prices may increase pressure on subsidy and other spending. The government has restated its aim of reducing the deficit to 3% of GDP, but not until FY/15. A significant start towards this aim is unlikely until after this year's presidential election. Fiscal weakness remains the main drag on Egypt's rating.
On the structural front there has been some progress, with Egypt's position in the World Bank's 'Doing Business' report rising close to its peers in the 2010 report. Per capita income has also risen relative to the 'BB' median since 2004, though the level is still 20% below the median. Although the resumption in growth is encouraging, reforms will need to be invigorated if growth of 6%-7% is to be sustained, given low saving and investment rates and other structural constraints. Presidential elections are scheduled for September 2011, with the ruling National Democratic Party scheduled to announce its candidate in July. President Mubarak has not yet announced whether he will run for re-election, but whether he does or not, Fitch's base case is that reforms will continue, given the imperative of creating jobs for Egypt's young and fast growing labor force. (Fitch 12.01)
Back to Table of Contents
11.10 EGYPT: The Rise of Retail
Over the greater part of the last decade, Egypt's retail sector has undergone a transformation while increasing its importance in the national economy. The Oxford Business Group says that the resiliency that the sector displayed throughout the global downturn was partly due to strong domestic demand and growing consumer spending habits.
Since government-enacted reforms in 2004 the retail sector's contribution to GDP grew steadily from $9.67b in 2005 to $19.48b in 2009 and is expected to reach $25.33b in 2010. However, despite the substantial advances made in the marketplace, there is an under-supply of retail space.
Currently, much of the Egyptian retail market is comprised of small, local shops. This fact, combined with its vast, growing population, has made Egypt an attractive destination for international retailers. Egypt boasts the largest population in the Arab world at around 83 million, while its growth rate remains high, at 1.8%, according to World Bank statistics from 2009. As a result Egypt's consumer base is growing at an estimated 2% per year as its young population and rising middle class continue to drive the development of the sector.
Indeed, the growing number of retail malls and centers herald a market on the rise. The $800m City Stars, the country's largest retail space with 150,000 sq meters, opened in 2004 and attracted over 22m customers in its first year. The UAE-based Al Futtaim group plans to open its own mixed-use retail space in 2012, Cairo Festival City, which will encompass 160,000 sq meters of leasable space for retail and leisure. Other retail centers such as the Dandy Mega Mall and Maadi City Centre have also emerged in recent years.
Business-friendly reforms have had a significant impact on attracting international brands to shopping centers via reductions in tariffs and customs, tax cuts and privatisations. A prime example of this is the UK's Marks & Spencer, which opened in December 2010, while Ikea, the Swedish furniture giant, also announced its entrance into the Egyptian market in April of 2010 by leasing space for its first store in the upcoming Cairo Festival City. Spanish firms Zara and Mango, along with numerous other internationally recognized brands, have also made their way into the growing mall segment.
Grocery chains and hypermarkets have also taken advantage of the country's changing consumer landscape as Carrefour, Spinneys and the locally owned Hyper One brand have all launched stores. "Egypt is a very attractive market for retailers due to its large, growing population. We are also seeing a great deal of socio-economic movement as a result of the country's economic growth," Herve Majidier, Carrefour's country head, told OBG. Egypt's young middle class, armed with increasing purchasing power, is also slowly changing consumer spending habits, and modern retail models, such as e-commerce and buying on credit, are becoming ever more popular.
While credit card expenditure is on the rise, total levels remain relatively low at present. Plastic is becoming more widely accepted, however, and consumer use of credit lines is also growing more sophisticated. According to Tarek Elhousseiny, general manager of Visa for North and West Africa, "Consumer mentality on spending has matured recently in Egypt. One of the signs is the steady growth in credit card penetration, as well as the fact that we have seen the ratio between total spending and open balances grow at a lower rate, i.e. consumers are not maximizing lines of credit."
E-commerce has also begun to emerge as a viable retail outlet in the country, contributing nearly $2.1b, including bill payments, to retail sales in 2009. While the country remains a largely cash-based society, a much greater shift toward online sales is expected.
According to Omar Soudodi, general manager of leading e-commerce site souq.com, "The first movers in the Egyptian e-commerce market have generally been under the age of 35, as the youth of Egypt has been exposed to technology at an early age. However, with time we are seeing the average age increase and expect e-commerce to continue its strong upward growth trend."
Despite the vast potential for growth in virtually all retail segments, there are still concerns for investors such as the country's uncertain political future, high logistics costs, unnecessary red tape and, perhaps most importantly, the country's double-digit inflation. According to government statistics the urban consumer price inflation fell to 10.2% year-on-year in November 2010 from 11% in October – which is the lowest in 15 months. Prices of food and beverages, which account for 44% of Egypt's price basket, fell to 17.1% in November from 19.9% in October.
With an easing of inflationary pressure, ongoing reforms from a business-friendly government and a likely increase in spending ahead of the upcoming presidential elections, the main constraints on growth could very well be out of the equation by the second half of 2011, clearing the way for continued expansion in the local retail sector. (OBG 13.01)
Back to Table of Contents
11.11 ALGERIA: Highs and Lows in Education
This has been a historic year for the Algerian education sector, with a record percentage of students passing national exams and government initiatives expanding schooling subsidies. However, teachers continue to call for changes and have threatened to strike.
In July, the government reported that the percentage of students who had passed the national baccalaureate exam on their first attempt had reached a record 61%, compared to 45% the previous year and twice the percentage in 2000. The authorities were also pleased to announce that – for the first time since Algeria's independence – 49 high school students had passed the exam with a mark of better than 18 (out of 20).
However, alongside the good news came reports that Algerian teachers, who had gone on strike at the beginning of the year, may do so again. The Autonomous Education Workers' Union (Le Syndicat autonome des travailleurs de l'education et de la formation, SATEF) has called for an overhaul of the remuneration, retirement and social benefits systems for teachers, as well as regular payments of allowances and bonuses. This union would also like to help "alleviate teachers' daily stress" by improving medical services in the workplace.
In response to such demands – and in order to address other related problems – the Minister of Education, Boubekeur Benbouzid, held a national conference of regional educational leaders at the beginning of September in Algiers. Benbouzid used the occasion to unveil a new action plan designed, according to a statement released by the Ministry of Education, "to correct inter- and intra-regional disparities" and "to achieve the highest global standards in education".
The new policy includes a controversial provision that has already upset many of Algeria's teachers. In order to tackle absenteeism, the government would mandate regional directors to monitor all educational institutions and to report on teachers' work attendance records. A teacher who accumulates three unexcused absences will be dismissed.
The action plan also includes provisions to monitor and improve school attendance among students. A new administrative system will ensure better coordination and follow-up, giving special attention to students who repeat a class or drop out of school. Reiterating the prohibition against excluding children under the age of 16 from public education, Minister Benbouzid has also insisted on giving underperforming students the chance to repeat a class or to enroll in vocational training.
Moreover, the state plans to provide special assistance to regions suffering from low educational performance. During the 2010/11 school year, such regions will benefit from new infrastructure projects, including 570 cafeterias, 258 half-board accommodation units and 13 dormitories. The government has also decided to offer incentives to encourage teachers to work in underdeveloped parts of the country.
This program underscores the government's determination to offer the same opportunities and resources to all schools and students. In particular, the state has placed emphasis on the need to improve the primary school enrollment rate in Algeria's rural regions, which is currently below the national average of 98%.
Such measures come on the heels of recent efforts to assist students in need. In 2010, the government allocated €63.8m to provide free textbooks to approximately half of the country's 8m students. Likewise, it has extended education subsidies amounting to €29.5 per student, while providing free tutoring for students preparing for the national exams.
Algeria has made progress since 2000, when the government conducted a national assessment of the educational system. The percentage of six-year-old children enrolled in full-time education has increased from 93% in 2000 to 98% in 2010, reaching international standards. Similarly, the repetition rate among primary school students is down to 13.6%, nearly 4% lower than in 2003/04.
To build on this past success, the state has announced plans to spend AD420bn (€4.1bn) on education between 2010 and 2014. As Benbouzid concedes, there is still plenty of work ahead. The sector must cope with a rapidly growing population, regional disparities, overcrowded classrooms and dissatisfied teachers. However, as Benbouzid said during a speech marking the start of the 2010/11 academic year, "With a third of Algeria's population in school, the future is on our side." (OBG 05.01)
Back to Table of Contents
11.12 ALGERIA: Targeting Tourism
Algeria plans to put tourism at the forefront of a drive to diversify the economy, attract foreign direct investment and create jobs. While the country has faced tough competition from neighboring Morocco and Tunisia – both well-established tourism destinations – to attract more visitors and revenues, major initiatives have been launched with the aim of improving its position.
The Oxford Business Group says that while around 1.9 million tourists visited in 2009, a year-on-year increase of almost 8%, the vast majority of them (or around three-quarters) were Algerian expatriates returning home. Revenue generated by tourism in Algeria for that year was estimated at $330m, compared to $3.4b in Tunisia.
A National Tourism Development Plan (Schema Directeur d'Amenagement Touristique, SDAT) launched in 2008 aims to increase the number of tourists to 2.5m by 2015 and 20m by 2025. The plan features five main pillars: promoting Algeria as a prime tourist destination, developing high-quality tourist centers, introducing quality controls, encouraging public-private partnerships and attracting investment.
The government has recently taken steps to tap into Algeria's potential as a destination for eco-tourism and beach holidays. On December 9, the tourism ministry declared that $624m would be mobilized to renovate and modernize 47 hotels and resorts built across the country in the 1970s. While the package is still awaiting approval by the Council of State holdings (Conseil des participations de l'Etat, or CPE), $26.9m will be allocated immediately to the renovation of nine hotels in the south of the country.
Similarly, 49 agreements for tourism projects were signed with Algerian investors on the sidelines of the 11th International Tourism and Travel Show (SITEV 2010), which took place in Algiers at the beginning of December. The hotel projects are expected to create 7767 jobs and expand capacity by 5200 beds. Coming on top of 474 projects launched by the SDAT back in 2008 – representing a total bed capacity of 45,000 and generating 68,000 jobs – the new developments will bring capacity up to 50,000 beds (with the government aiming for 70,000 beds by 2015). In early December, also announced were the construction of 20 bungalow-style holiday villages, including six in the Sahara and 14 in the country's northern regions.
The renovation and modernization of the five-star Hotel El Aurassi, estimated at $75.6m, and launched as part of the SDAT plan in late October 2009, will be completed in July 2011. The construction of 24 hotels by the Mehri group – in partnership with the French chain Accor – is also on track. The first hotel opened close to Houari Boumediene Airport at the end of January 2009, and four more are under construction in Constantine, Oran and Tlemcen.
To ensure private tourism ventures are up to international standards, the government has adopted the Quality Tourism Plan Algeria (Plan Qualite Tourisme Algerie, PQTA). Under the plan, tourist businesses will work with researchers to identify weaknesses and areas for improvement. The ministry's own research department will then conduct anonymous inspections to determine whether the businesses are working up to standard. As of the end of 2010, only 10% of tourist facilities in Algeria had joined the program.
The government has also highlighted the importance of training in the tourism sector. There remains a lack of Algerian hotel schools that offer specialized training, though new training programs have been launched. For instance, the Tourism Management Company (Entreprise de Gestion Touristique EGT) of Annaba and the Tourism Training Institute of Tizi Ouzou, specializing in training for hospitality and tourism, have signed a partnership agreement to train the EGT's staff.
Significant obstacles in the way for the industry's growth remain a lack of quality infrastructure is one of them, and crucially for tourists, security. According to a survey published last October by the Gallup polling group, only 39% of Algerians feel safe walking alone at night in the city where they live. (OBG 13.01)
Back to Table of Contents
11.13 TUNISIA: Pressing Issues For Olive Industry
The Oxford Business Group observed that while Tunisia is the world's third-largest olive exporter after Spain and Italy, with 70% of the crops grown on its 1.7m hectares of olive plantations sold abroad, the Mahgreb country is taking steps to consolidate its global position.
According to the International Olive Oil Council (IOC), total world consumption of olive oil should increase to 2.98m tonnes in 2010-2011, a year-on-year rise of about 1%. However, due mostly to climatic reasons global production is expected to decrease by 2.5% over the same period.
Tunisia is expected to suffer one of the largest drops in production, from 160,000 tonnes in 2009-2010 to 110,000 tonnes in 2010-2011, a decrease of 31.3%, according to Ministry of Agriculture estimates. Farmers blame climate change for the dry weather that has led to the lower yield. Ministry officials said in December that to meet foreign demand, Tunisia will have to dip into its stockpile from the previous season, with 25,000 tonnes of stocks used to raise exports.
Olive oil accounts for half of the country's agricultural exports, which all together represent 10% of total exports. Tunisia is the world's second-largest exporter after the EU (438,000 tonnes) and ahead of Syria (50,000 tonnes), Morocco (40,000 tonnes) and Turkey (38,000 tonnes).
Tunisian olive farmers say export quotas set by the EU - due to pressure from the bloc's own olive oil manufacturers - are unfair and damaging the industry. The EU limits Tunisian imports to 1,000 tonnes in January and February when demand is strong, only increasing in the last months of the year when demand in Europe stagnates. Tunisia benefits from a sunnier climate that ripens the olives more quickly, allowing them to be harvested a few months earlier than European competitors on the northern shores of the Mediterranean. During a mid-December working session on the 2010-2020 outlook for the industry, the Ministry of Agriculture stressed the need to counterbalance market fluctuations by creating service cooperatives of producers, mill owners, and exporters. These cooperatives will purchase surplus olive oil, store it and make it available to exporters at times of highest global demand, said the ministry.
However, the country is also taking a number of steps to increase the visibility of Tunisian products, both in traditional markets and further afield. The Chamber of Commerce and Industry (CCI) of Sfax also recently launched Darezzit.com, a website promoting Tunisian olive oil. The website allows producers to consult data on offers and purchase requests made by partners of the CCI. It also provides industry news as well as indicators like olive oil prices on international markets and a directory of mills and regulations relating to exports.
Currently, the majority of olive oil is exported unprocessed and in bulk, but the country is aiming to increase its share of higher-quality exports in the global market. In January 2010, the Ministry of Industry launched "100% Tunisian", a website that aims at promoting Tunisian olive oil in the US. Representing more than 50 producers, the site includes information on where to purchase Tunisian olive oil and seeks to draw in representatives and distributors abroad. Rassaa Abdelaziz, secretary of state for Renewable Energy and Food Industries, recently announced the 2011 launch of a Tunisian quality label for olive oil and in early November, unveiled plans to raise the production of packaged and processed olive oil (as a share of total olive oil production) to 10% from 2011.
Bottled exports reached 7,570 tonnes in 2010, representing 7.6% of Tunisian olive oil exports and 11% of revenues. It is a sharp rise from 2006, when just 1,600 tonnes of bottled olive oil were exported. That year, the Fund for the Promotion of Processed Olive Oil (Fonds de Promotion de l'Huile d'Olive Conditionne, FOPROHOC) was created, in order to encourage producers to enhance export value by processing their oil to international quality; the fund offers annual subsidies of up to €37,000 for pertinent investments. The number of Tunisian companies exporting packaged olive oil has since increased from nine in 2006 to 36 in 2010 while a number of export firms have received support from Foprohoc for marketing programs.
Tunisian olive oil producers have also begun to explore new export markets such as China. In December Tunisia's National Office of Olive Oil (ONH) and the IOC organized a joint campaign promoting Tunisian olive oil in Chinese newspapers and television channels. Similarly, Poulina Group Holding (PGH), the Tunis-based conglomerate, recently built a bottling factory in Jiangsu, 150 km from Shanghai. It is estimated that the annual consumption of olive oil in China will reach 100,000 tonnes in five years, a considerable market that Tunisia will be hoping to move in on before its European rivals. (OBG 12.01)
Back to Table of Contents
11.14 TURKEY: Breeding Hope for the Meat Industry
Turkey's government has relaxed import restrictions to ease a crisis in the livestock industry which has led to skyrocketing meat prices. But, as noted by the Oxford Business Group, as its best efforts falter, cattle-farmers are considering a high-tech embryo transfer system that could one day create a half-Angus, half-Turkish super breed.
A combination of problems with feed supply, pasture decline and disease, along with extreme price fluctuations and an alleged lack of government support, have seen retail prices of beef climb to above TL25 (€12.76) per kg over the past two years, more than double the EU average. Pricier cuts of lamb can sell for over TL50 (€25.8) per kg.
The skyrocketing livestock prices took a toll on this year's celebrations for Eid Al Adha, the Muslim festival of sacrifice, held in November. The average price for sacrificial sheep in the 30-35 kg range was between TL450 (€229.65) and TL575 (€293.4) in 2009, while this year saw prices per head soar as high as TL700 (€357.18) for animals weighing only 16 to 20 kg. Given the costs, many Turks worried that they would be unable to sacrifice an animal at all. Some consumers spoke of downgrading their purchases, opting to sacrifice sheep instead of cattle, or chickens instead of sheep. In Istanbul it became a common joke that "this year, we will sacrifice tomatoes".
In the lead up to Eid the government slashed the livestock import tax from 135% to 40% until the end of the year – meat imports had been all but banned since the mad cow disease scare of the 1990s. However, the tax cut only caused a surge of demand in neighboring Hungary, Romania and Bulgaria that saw their meat prices rocket.
In October, the Ministry of Agriculture sourced 40,000 head of live cattle from South America, again with scant effect on market prices. Compounding the crisis, the local daily Today's Zaman revealed in October that some farmers were using illegal hormone injections to beef up their cattle. The injections, often obtained through veterinarians or the black market, can add as much as 20 kg to the weight of sheep and goats and 60 kg to cattle. This came on top of reports a month earlier that an 11-ton shipment of listeria and salmonella-contaminated meat earmarked for dog food had made its way on to the Turkish meat market.
Along with the health fears being raised by the meat price crisis, officials have pointed to detrimental effects on the economy. Turkish state minister and deputy premier, Ali Babacan, said in March that volatility in the meat market was driving a significant percentage of inflation. "Our overall inflation rate is 10.2% and 1.7 points of this figure is derived from meat prices. If meat prices had increased parallel to overall inflation, inflation figures would have been around 8.5%, instead of 10.2%," Babacan told local press. Around 100 meat suppliers went bankrupt in Istanbul last year, impacting on local butchers and makers of sucuk, a spicy beef sausage. In May the crisis claimed Oral Et integrated facilities, a meat-processing firm which had employed 350 in the eastern province of Erzurum.
Historically, the agriculture sector has been Turkey's largest employer and a major contributor to GDP, although its share of the economy has fallen consistently over several decades. The decline has been particularly acute in animal husbandry, with the over 44m ha of grass and pasture available for raising cattle dropping to 12m ha by the 1990s.
Given the failure of imports to impact on market prices, some cattle farmers are now pinning their hopes on introducing new breeds. In June, the local chamber of commerce in the north-western province of Bursa drafted a plan to allow farmers import the Angus breed, which is thought to be well-suited to Turkey's climatic and natural conditions. But some see this solution as not enough. New embryo transfer technology, under which domestic cattle would be able to birth domestic Angus cattle, would be the fastest, cheapest and most effective means to bring prices down. While the prospect of the new technology creating a half-Turkish, half-Angus hybrid may give heart to long-suffering consumers, butchers and producers, it will do little to address deeper problems of the sector thought to be related to the alleged influence of cartels and speculators on the supply chain. (OBG 04.01)
Back to Table of Contents
11.15 GREECE: Fitch Downgrades Greece to 'BB+'; Outlook Negative Ratings
On 14 January, Fitch Ratings downgraded Greece's Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'BB+' from 'BBB-' and its Short-term IDR to 'B' from 'F2' and removed them from Rating Watch Negative. The ratings Outlook is Negative. The agency has simultaneously affirmed the euro area Country Ceiling at 'AAA', which is applicable to all euro area member states, including Greece.
The downgrade acknowledges that while Greece's economic and fiscal performance under the EU-IMF program has in many respects exceeded expectations, its heavy public debt burden renders fiscal solvency highly vulnerable to adverse shocks. Moreover, despite the significant progress made in reducing the budget deficit in 2010 - by 6% of GDP despite a severe recession - the fiscal consolidation effort will still have to be sustained over several years to firmly anchor confidence in Greek sovereign creditworthiness.
Weaker-than-originally-budgeted revenue performance in part reflects the continuing weakness of tax administration and the prevalence of tax evasion. Moreover, the Eurostat review of Greek fiscal statistics resulted in larger-than-expected upward revisions to the 2009 budget deficit to 15.4% of GDP from 13.6% and consequently the outturn for 2010 is expected to be 9.4% rather than the original target of 8.1%. Fitch has, however, incorporated into its current rating assessment the commitment of the Greek government to take additional fiscal measures to meet the 2011 target despite this upward revision, underscoring the strong political commitment to the IMF-EU program. Nonetheless, general government debt/GDP is currently projected by Fitch to peak at close to 160%, while interest payments/revenue are expected to rise to 20% by 2014, even under a favorable base-case scenario of effective implementation of the EU-IMF program and modest economic recovery beginning in the latter half of 2011.
Despite episodes of civil unrest, Fitch judges that the political commitment to the ambitious fiscal consolidation and structural reform program agreed with the EU and IMF remains very strong and that the path to sustainable economic recovery and solvency is achievable. The outcome of the local elections strengthened the government's mandate in support of the EU-IMF program and despite the discussions surrounding the 'European Stability Mechanism' and 'burden-sharing' by private creditors, Fitch continues to believe that the IMF and EU remain fully committed to the success of the program agreed with the Greek authorities. Preliminary estimates suggest that pension reforms agreed in 2010 (and supplemented by further planned reforms) will dramatically reduce the fiscal cost of aging, cutting the projected increase in pension spending between 2009 and 2060 to 2.5% from 12.5% of GDP.
The Negative Outlook reflects that public debt sustainability is still very fragile and renewed access to market financing uncertain. The economy is forecast to contract 3% this year, following an estimated contraction of 4% in 2010, while the current account deficit is expected to narrow to 8% of GDP from around 10% in 2010. Failure of the economy to 'rebalance' and emerge from recession would place further downward pressure on Greece's ratings. Fitch believes it is vital that the economy begins to show some evidence of rebalancing and recovery from H211 to stabilize public debt dynamics.
Full and effective implementation of the fiscal and structural reforms agreed under the EU-IMF program would greatly strengthen fiscal institutions and credibility while transforming the competitiveness and flexibility of the Greek economy and its ability to sustain growth over the medium-term. Failure to implement structural reforms and remain on track with the IMF-EU program would materially weaken prospects for growth and hence public debt sustainability and likely lead to further rating downgrades. Conversely, a stronger- than-expected economic recovery, allied with effective implementation of the EU-IMF program, could prompt a revision in the rating Outlook to Stable.
While the IMF-EU program assumes that Greece attains market access in 2012, Fitch believes that in the current market environment a high degree of uncertainty surrounds this goal and unfilled financing gaps could resurface. Therefore, the evolution of market sentiment towards Greece throughout 2011 will be closely monitored by Fitch. In the absence of a more receptive investor environment to Greek government debt, Fitch will look to official creditors for a clear and timely statement of support that addresses the need for increased funding beyond 2011. Lack of clarity on additional funding for the IMF-EU program would put downward pressure on the ratings. (Fitch 14.01)
Back to Table of Contents
11.16 BULGARIA: Forecasts, Must-Dos & Risks for 2011
On the face of it, Bulgaria in 2011 will be a tale of two events – the (failed) accession to the Schengen area and the local and presidential polls in the fall. There is much more than that, as reported by the Sofia Morning News.
Economy and Finance - Tightening the Belts Again!: Bulgaria is recovering, though sluggishly, from a deep recession, in which it plunged with the onset of the global economic crisis last year. If the government wants to attract investments and return to growth, it will have to stick to its tight fiscal policy. That means pursuing doggedly its ambition to halve the budget deficit to 2.5% of GDP and aim at growth of 3.6% in 2011.
Unlike its neighbors, Bulgarians were spared radical austerity programs. This could help the economy pick up, driven by rising exports and a debt-to-GDP ratio of just about 16%. The risk is that the cabinet, just like its predecessors, may loosen the purse strings to maintain its popularity ahead of local and presidential polls in the autumn.
Bulgaria is planning to sell bonds amounting to €1b on the international market in 2011 to shore up its finances. But it will be very hard for the government to tap international markets at favorable interest rates if it fails to keep the budget deficit below the forecast level and growth undershoots the ambitious goal.
Tight fiscal policy is a crucial requirement for yet another reason. Finance Minister Simeon Djankov has vowed to make another shot at the eurozone waiting room ERM II in H2/11 after the country has, hopefully, demonstrated that next year's budget deficit will fall below the European Union's ceiling of 3% of GDP in line with the Maastricht criteria. For a number of reasons and for the time being this goal remains just wishful thinking. Djankov's belt-tightening policy is likely to continue to draw criticism of creating the illusion of a healthy economy on the back of the people, who are three times poorer than the average EU citizen. The odds are the gap between skeptics and optimistic figures, rattled off by politicians, will grow even wider in 2011.
Bulgaria's government should finally go ahead with the planned sale of tobacco company Bulgartabac Holding AD, Sopot-based Vazovski Mashinostroitelni Zavodi or VMZ, the country's biggest military plant, and minority stakes in E.ON-operated electricity distributor. This step is a must-do task in 2011 due to the sorry performance of the state-owned companies.
Bulgaria in EU - In Schengen or not in Schengen?: Bulgaria will most probably fail to join the Schengen area in March 2011, a target date that was set as early as in 2007, during the term of the previous Socialist-led government. Hungary, which currently holds the EU presidency, may decide to put this issue on the agenda of the Council of Interior Ministers of the EU, due on February 24, but the decision will most probably be negative. The next deadline to be set for Bulgaria is expected to be November this year.
Bulgarian experts are unanimous that the country meets the technical requirements. The real problem rather seems to be the threat of information leakages and Greece's porous border with Turkey. The reluctance of France, The Netherlands, Germany and Austria to let the Balkan country join the Agreement in 2011 is both because of domestic politics and the voters in their own countries and because they really believe the entry into Schengen will be premature, just as the EU entry. A possible refusal by Brussels to admit Bulgaria into Schengen will be yet another sign that the integration processes within the EU have stalled. Still, Bulgaria has to do everything possible to join this internal club. The sooner Bulgaria joins the club, the sooner it can reap the benefits from membership - joining an inner circle of European integration; better trade, investments and tourism; facilitating citizens' travel and stay in other Schengen countries.
Domestic Affairs - Two Crucial Votes in One: Anyone who follows the news in Bulgaria will confirm that time is already ticking away for Bulgaria's presidential and local pre-election campaign. What Bulgarians need to do is look carefully at the main runners and take their time to size them up. It does matter! Incumbent Socialist President Parvanov was re-elected for a second five-year term in 2006 and isn't eligible to run in next year's presidential elections. The candidates in the 2011 elections will probably inspire more than one out of six million voters, the turnout during the previous vote in 2006, but the winner, whoever he is, will be as pathetic to call himself president of all Bulgarians, as anyone can be.
Bulgaria's Prime Minister Boyko Borisov has expressed conviction that his party has among its ranks at least five likely nominees able to sweep the elections for the high, though largely ceremonial, office of president. He has even hinted to journalists that he might run for president. Meanwhile, internet forums in Bulgaria are overflowing with calls for the highly popular Kristalina Georgieva, currently the EU's humanitarian aid commissioner, to run in next year's presidential elections. The ruling party GERB is unlikely to nominate Interior Minister Tsvetanov, as initially planned, because of the string of discrediting information revealed about him recently, but will Kristalina Georgieva decide to run? Or maybe Boyko Borisov's real political goal is to become president?
Whatever the answer to these questions, the most disputed aspect of the vote is the prospect of former special agent of the State Agency for National Security (DANS) and controversial businessman, Aleksei Petrov, running in it. Given that, we can look forward to shocker surprises in these elections!
The power that Socialist President Parvanov handed to the ethnic Turks has given him a bad reputation. Still rumors say that the Socialist Party will run together with the ethnic Movements for Rights and Freedoms, seeking a successor with allegiance to Parvanov.
Bulgaria nationalist leader Volen Siderov has also said he is determined to run again for the office. Siderov has been promoting openly his racist beliefs, which disgusted many Bulgarians but fascinated others. The popularity of the national leader however has weakened tremendously over the last year. So there is no risk of Siderov's making a breakthrough and inciting ethnic tension, something that has brought dramas in the Balkan region. Bulgaria, unlike many neighbors, has so far managed to stay clean of ethnic conflicts and this certainly won't be the end of the ethnic peace in the country.
But why should these people want to become president? Despite the mostly ceremonial duties of the post, the president can name figures to bodies like the secret service, the media watchdog and others to extend his influence. President Parvanov did not miss that chance. One thing is for sure – there will be a dirty and prolonged campaigning prior the local and presidential elections in the autumn. No more of the sluggish and lackluster campaigns Bulgarians have seen in the last ten years.
Meanwhile the specter of early elections will pop in and out of the war of words on the political battlefield, but will certainly not happen in real. Should the government of the center-right GERB party, led by Boyko Borisov, collapse, all hell will break loose with dozens of small parties fighting for power.
Energy - Time for Big Decisions: The fate of two of the biggest and most controversial energy projects in Bulgaria – nuclear power plant Belene and South Stream natural gas pipeline – should be decided by the government in the first months of 2011.
2010 saw much uncertainty on part of the Borisov Cabinet with respect to the fate of the Belene Nuclear Power Plant. On the one hand, PM Borisov slammed the project as having been used by former governments to drain budget money, on the other he eventually came around with respect to declaring the importance of the project for the future of the Bulgarian economy. By the end of the year, it reached a certain level of progress in talks with Russia and Rosatom's subsidiary Atomstroyexport, and with some foreign companies interested in having shares in the project. In November the Bulgarian Energy Holding picked HSBC, one of UK's biggest banks, for a consultant to help it decide how to proceed and attract new investors for the planned Belene nuclear power plant. Will HSBC manage to do all this during the next two months? Will Sofia be forced to make yet another concession without having an idea about the profitability of the project? These are questions, whose answers will become clear in the next few months. Until then the government had better start talking figures.
Unlike the nuclear power plant project, South Stream is moving confidently ahead. Sofia and Moscow established a 50/50 joint venture in November 2010 for the building of the Bulgarian part of the Russian-led natural gas pipeline and the due diligence should be ready by the end of February. An investment decision for the construction of the pipeline is expected in the spring, but when it will actually begin is an open question.
In 2011 Bulgaria's government should finally make its mind about how to restructure the energy holding, which groups the country's top energy assets. The Bulgarian Energy Holding was created in 2008 with the merger of five state-owned companies - the National Electricity Company NEK, the gas monopoly Bulgargaz, the Maritza Iztok Mines, the Maritza Iztok 2 Thermal Plant, and the Kozloduy Nuclear Power Plant into a €4b energy giant. It is expected that the holding will come to include only the thermal and nuclear power plants, together with the National Electricity Company NEK, after which a minority stake will be listed on the stock exchange.
Environment - Going Green at Last?: Bulgaria should start to properly implement EU waste law. In other words it should have a network of waste disposal depots and water purifying stations in place. Otherwise the country will be forced to pay hefty fines, worth millions of euros. Finding a solution to Sofia ongoing waste problems was a politically sensitive issue in the months before the parliamentary elections in the summer of 2009, which Boyko Borisov won by a large margin. A repeat of the scenario is not ruled out ahead of the local poll in 2011.
Bulgaria is expected to have its carbon emissions trading rights under the Kyoto Protocol restored by the United Nations in the first months of 2011. The ban was imposed on Bulgaria on June 30, 2010, for failing to pass appropriate climate legislation in time and provide an emissions inventory for 2007 and 2008. The ban also prevented Bulgarian companies from selling carbon permits in the European Union emissions-trading system.
In 2011 Bulgaria's government should finally map out its strategy about how the business with renewable energy will develop. A new Renewable Energy Sources Act is in the pipeline, due to be voted in parliament this year. The act aims to meet obligatory targets set by EU's Directive on the Promotion of the use of energy from renewable sources - a16 % share of RES on the final consumption of energy in 2020 and at least 10% share of renewable energy in final consumption of energy in transport by the same deadline. Bulgaria's renewable energy legislation has long been expected to be harmonized with EU laws in order to attract major foreign investors.
In 2011 Bulgaria should, though belatedly, start to liberalize its water sector and provide legislation about who does what. Bulgaria's water sector remains one of the least reformed systems in the country. Except for Sofia municipal water supply, which has been granted on concession to a foreign investor, all other units in the sector are either owned by the state or the municipalities. The cash-strapped country cannot afford to upgrade and maintain all units in the system – from the dam to the end users – and they have been left to the mercy of time and vandalism. Obsolete water and sewage networks made of asbestos cement cause huge leaks and hurt the quality of the water.
Health Care - Put Life Support Back On!: After a year in which hospitals across the country suspended planned operations and reduced admission of emergency cases, switched into a war-time regime and even tapped into the reserves, meant to be used in case of natural disasters, the health care sector faces huge problems - understaffing, supply shortages, brain drain, bribes to doctors and nurses to ensure better treatment, high debts and chronic lack of money. These will hardly be solved in 2011.
In recession-battered Bulgaria, the government spends just 4.2% of its GDP on health. All employed and self-employed Bulgarians are obliged to make monthly health insurance contributions of 8% of their income to the Health Insurance Fund, but it has been plagued by corruption and funds siphoning is no exception there. Besides the health insurance contributions that the state pays for the people under its wing are meager. The only solution is breaking the monopoly on the market, where the National Health Insurance Fund now is the only player. This is not however something, which we will witness in 2011.
In 2010 hundreds of cancer and HIV-positive patients faced a shortage of life-saving medicines because of a delay in tenders for their purchase. This year the health ministry will not conduct these tenders and the payment for the expensive medicines will be transferred to the health insurance fund or the hospitals. People, who wish to be treated by a doctor of their choice at medical facilities, will have to pay between BGN 250 and BGN 700 while to select a team they will need between BGN 350 and 950.
In 2011 the government will steer clear of any radical decisions, which might hurt its popularity prior the elections. That's the reason why the closure or privatization of hospitals and their assets will be delayed. What the government must do in fact is prepare a National Health Care Map, which will make much more clear the number and location of the hospitals Bulgarians need.
Agriculture - Sowing the Seeds of Trust: The highlight in the sector in 2011 will be the launch of Bulgaria's Food Safety Agency, due at the beginning of February. It will include the currently existing National Veterinary Service, National Plant Protection Service, National Grain and Grain Products Service, and a unit in the public health body, which is responsible for food safety. It is still not clear who will head the agency, but Boyko Borisov should be more than careful as staff policy in the sector has often been a washout with dire consequences. Suffice it to mention the case of Kalina Ilieva, former head of a Bulgarian agency overseeing hundreds of millions of euros in EU farm aid, who was disgraced and dismissed for producing a fake diploma. (SM 11.01)
Back to Table of Contents
The Fortnightly newsletter is a free service of Atid, EDI. We are a team of economic and trade development consultants, headquartered in Jerusalem, but active throughout the region and beyond. EDI works with an international clientele interested in identifying and researching business opportunities in the region. We also serve as the regional representative offices for a number of U.S. states and bilateral Chambers of Commerce.
EDI's other services include development of feasibility studies and tailored research reports, as well as identification of potential joint ventures for commercial clients. For more information on how we may better assist you, please visit our Web site at: http://www.atid-edi.com.
|
