TOP STORIES

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Shekel to Be Globally Convertible
1.2 Stronger Shekel Pushes Debt:GDP Ratio Down
1.3 Minister Ben-Eliezer Signs First License For Private Power Plant

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Yahoo! Research Opens Israel Lab
2.2 Brazil's Padtec S/A Acquires Civcom
2.3 Innovid Media Raises $3 Million For In-Video Product Placement
2.4 Israel's Gigya Raises $9.5 Million to Become Leader In Widget Monetization
2.5 Eyeblaster Announces Planned Initial Public Offering
2.6 Delta Air Lines Starts New Nonstop Service between New York-JFK and Tel Aviv
2.7 WiNetworks Secures $19 Million in Financing
2.8 Microsoft to Expand Investment in Desktop Virtualization With Acquisition of Kidaro
2.9 InRob Continues International Expansion: Secures Manufacturing Facilities in the Philippines

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Qatar Airways Announces New Nonstop International Passenger Service to Houston
3.2 Emirates to Fly to Los Angeles from September
3.3 UAE to Build Three Solar Power Plants in Spain
3.4 UAE to Import US Hardwood Products Worth $25 Million
3.5 Industrial Nanotech Begins Shipment of Million Dollar Order to Distributor in Turkey

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 Arava Institute Teams with Jordan University for Trans-boundary Water Course
4.2 Renewable Energy Park Opens at Arava
4.3 Bat Yam Approves Israel's Second Tallest Skyscraper

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 MENA Countries Flare Natural Gas Worth $10 Billion Every Year
5.2 Jordan's Trade Surplus with US Shrinks by 37.2% in 2007
5.3 UAE Economy Surges 7.4% in 2007
5.4 UAE Top Third Oil Exporter
5.5 UAE to Subsidize Nationals
5.6 UAE Fast Food Price Hikes Hard To Swallow
5.7 US Universities Complete $60 Million Saudi Deal
5.8 Egypt's Urban Inflation Rate Jumps to Highest Level in 11 Months
5.9 Report on Egyptian Imports from Israel Under the QIZ
5.10 Tunisia Ranked Most Competitive African Country in Tourism
5.11 Algeria IMF Article IV Staff Report Released

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:

6.1 Turkish Revision in GDP Pulled Per Capita Income Up By $2,020
6.2 Turkey Lowers Restrictions in New Bill on Malls and Retail Chains

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israel & World Jewry Celebrate Purim Holiday
7.2 Arava Institute for Environmental Studies Hosts Largest Class Ever
7.3 Mawlid Al Nabi Holiday

*REGIONAL:

7.4 Kuwait Cabinet Resigns En Masse
7.5 Thousands Attend First Mass at Qatari Church
7.6 UAE Makes Arabic Official Tongue

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Kamada Signs $4 Million Private Equity Investment Agreement with Shavit Capital Fund
8.2 Students Invent Early-Detection Medical Device
8.3 Hebrew University Launches Genetic Resource for Studies of Common Diseases
8.4 Oramed Pharmaceuticals Successfully Completes Phase 1B Clinical Trials of Oral Insulin Capsule
8.5 ATI Invests $2 Million in Phagolum Sepsis Diagnostic Toolkit

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 New Mobile Phone Technology from Secure Identity Systems Stops Card Fraud Cold
9.2 Altair Samples the World's Most Power-Efficient Mobile WiMAX Processor for Handheld Devices
9.3 Magal Receives an Order to Protect an International Airport in Central Asia
9.4 OpTier's CoreFirst Extends Transaction Visibility to Virtual IT Environments

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's February CPI drops 0.2%
10.2 Israel Records Another Balance of Payments Surplus
10.3 BDI Finds Concentration in Israel's Economy Rising

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11: In Depth

11.1 ISRAEL: Moody's Israel's Ratings on Review for Possible Upgrade
11.2 ARAB WORLD: Illicit Businesses Hit $50 Billion
11.3 QATAR: Dollar Peg to Stay
11.4 ABU DHABI: Sovereign Wealth Still Under Spotlight
11.5 OMAN: Caps and Props
11.6 LIBYA: Politics - Small Government
11.7 CYPRUS: Fitch Affirms Cyprus at 'AA-'; Outlook Stable

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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Shekel to Be Globally Convertible

Beginning in April, the shekel will be convertible on international markets, when the Bank of Israel joins the CLS Bank. As part of the membership, two Israeli commercial banks will become clearing members, with clearing accounts in their systems. A third Israeli commercial bank will function as a liquidity supplier. CLS stands for "Continuous Linked Settlement". The two commercial banks will clear foreign currencies, while other Israeli banks with accounts of foreign banks that are members of CLS Bank will be able to provide those banks with clearing services in shekels using the Bank of Israel's Zahav computerized clearing system. The Bank of Israel's membership in CLS Bank will upgrade Israel's shekel and foreign currency system of payments, which will become immediate and final for almost any currency. The Zahav system handled NIS 5 trillion in more than 145,000 transactions during the fourth quarter of 2007. (Globes 12.030

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1.2 Stronger Shekel Pushes Debt:GDP Ratio Down

The shekel's sharp appreciation against the dollar has contributed to reducing Israel's debt-to-GDP ratio to 80% in 2007. It has also reduced the government's interest payments, which has made available resources for other purposes. The shekel's continuing appreciation since the beginning of 2008 has further reduced the government's debt to 75% of GDP. Some 25% of the national debt is in foreign currency, of which 90% is in dollars. A senior Ministry of Finance official said that the steady reduction in Israel's debt-to-GDP ratio is bringing the country closer to the levels in OECD member states. Reduction of Israel's debt-to-GDP ratio is a condition for joining the organization as a full member. The official added that a further reduction in the debt-to-GDP ratio will enable international rating companies to further upgrade Israel's credit rating in international markets to AA. As part of the 2008 budget, Minister of Finance Bar-On set a debt-to-GDP ratio target of 60%, the OECD average, within 4-5 years. (Globes 12.03)

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1.3 Minister Ben-Eliezer Signs First License For Private Power Plant

On 12 March, Minister of National Infrastructures Ben-Eliezer signed the first license for the production and sale of electricity from a private power station, marking a milestone in the country's power industry. The license is for the power station in Ashkelon owned by Delek Group. The power station is due to begin sales to private customers soon. This license is for six months, during which the regulations covering private power producers will be finalized. About half of the 87-megawatt (MW) power station production capacity goes to the Ashkelon Desalination Facility, in which Delek Group is a partner. The power station is expected to sell the approximately 30-MW surplus to private consumers. Delek Group owns the power station through Delek Infrastructures. The company owns 57% of another private 48-MW power station under construction in Migdal Ha'Emek. (Globes 12.03)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Yahoo! Research Opens Israel Lab

Yahoo! Inc., a leading global internet company, has launched a new research lab in Haifa, Israel, its first in the region. The Yahoo! Research Israel Lab will focus on boiling down complex technology problems into simple solutions to change the game in Web search. Yahoo's new Israel director previously worked at the Information Retrieval Group at IBM's Haifa Research Lab, focusing on research and development for enterprise search systems. Mr. Ronny Lempel, prior to joining IBM, received his BSc., MSc. and Ph.D. in Computer Science at Technion-Israel Institute of Technology. He has authored numerous papers and received several awards for his work on search engine technology, and has twice won the Best Presentation Award at the International World Wide Web Conference. Yahoo! Inc. is a leading global Internet brand and one of the most trafficked Internet destinations worldwide. Yahoo! is headquartered in Sunnyvale, California. (Yahoo11.03)

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2.2 Brazil's Padtec S/A Acquires Civcom

Padtec S/A (Padtec), a Brazilian provider of optical network solutions announced the acquisition of Civcom, a leading Israeli optoelectronic module manufacturer, with HQ and R&D center in Israel. Civcom and Padtec are building a long term relationship whose focus is to have Civcom as a strong player in its market. Today's Civcom portfolio includes a wide variety of high data rate (HDR) tunable transponders with integrated optical dispersion compensation technologies and manageable dispersion compensator modules (MDCM). Civcom's line of products provides worldwide solutions for applications such as Telecom, Military, Research, Avionics and Medical/Biotechnology. Civcom (http://www.civcom.com) is a pioneer in the development and manufacturing of cost saving dynamic optical solutions for communications, test and measurement, and military applications. Civcom's product lines include Free-X, the industry's first ultra-fast solid-state optical switch using patented Solid Free Space (SFS) technology, and Free-Light, the world's first small size widely tunable 10 Gbps 300-pin MSA transponder, which the company added through its merger with XLight Photonics. Civcom is a company with worldwide sales and support, and a manufacturing and R&D center in Petah-Tikva, Israel. (Padtech26.02)

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2.3 Innovid Media Raises $3 Million For In-Video Product Placement

Genesis Partners, an Israel-based fund focusing on seed stage investments, was the sole investor in a $3m funding round of Tel Aviv, Israel's Innovid Media (http://www.innovid.com), developer of an innovative interactive video advertising platform. Jeff Pulver, known as the VOIP expert and organizer of the VON conference, was a seed investor in the company. Innovid's patent pending technology enables the injection of interactive creative objects into the video, creating new ways for product placement and user interaction in millions of online videos. This is a unique model compared to the existing video advertising solutions, which display promo ads before, after or during the video. Innovid's main technology differentiator is the unintrusive nature of the ads. Video content producers will be able to define the advertising real estate and select the brands that will appear in the clip, based on their preference, similar to the way product placement is done on movies and television. Innovid virtually “injects” the animated objects only when the video is playing, offering the ability to dynamically change the advertising depending on the audience. As a result, the video itself becomes a multi purpose advertising space, which is tailored to the customer's interest. (VCC05.03)

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2.4 Israel's Gigya Raises $9.5 Million to Become Leader In Widget Monetization

Israel's Gigya, the widget platform that boosts and tracks the distribution of widgets across the social web, has announced a $9.5m series B round led by Mayfield Fund. Benchmark Capital and First Round Capital also participated in the round after previously investing $650,000 in a single financing round in November 2006. Rumors claim that the first round was much larger, approximately $4m. Gigya originally became popular for enabling easy installation of widgets on any social page or blog, saving the user the trouble of copying and pasting codes into templates. One of Gigya's latest moves on its battle to become the leader in widget monetization was the release of its widget distribution network, which connects advertisers, content providers and social media users, to deliver and track results-driven widget advertising campaigns. Kimberly-Clark, Jive Records, 360i, and Avenue A | Razorfish were some of the first charter advertisers who followed Gigya in this initiative, in the hopes of achieving viral distribution of their widgets across the web. The underlying technology used by Gigya is called “WildFire.” Wildfire has been seeing some good traction and it reportedly tracks hundreds of thousands of widget installs a day, tracking over than 3b widgets impressions per month. Gigya (http://www.gigya.com) is based in Palo Alto, CA and holds its R&D operation in Tel Aviv, Israel. The company has 15 employees. (VCC10.03)

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2.5 Eyeblaster Announces Planned Initial Public Offering

On 10 March, Eyeblaster today a registration statement had been filed with the Securities and Exchange Commission for a proposed initial public offering of its common stock. Eyeblaster intends to apply to list the shares on the NASDAQ Stock Market. Lehman Brothers, Inc. and Deutsche Bank Securities Inc. are serving as joint bookrunners and UBS Securities LLC and Pacific Crest Securities Inc. are serving as co-managers for the proposed offering. Eyeblaster (http://www.eyeblaster.com) is the global leader in rich media ad technology and a worldwide provider of unified digital marketing solutions. Eyeblaster provides interactive agencies, advertisers and publishers the first single solution to create, deliver and manage all forms of digital advertising through one powerful web dashboard. The Eyeblaster platform enables clients to deliver communications across multiple digital channels with 100% user control and no reliance on a ‘middleman vendor' anywhere in the campaign process. Eyeblaster was founded in 1999 and is headquartered in New York, with product development facilities in Ra'anana, Israel. (Eyeblaster10.03)

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2.6 Delta Air Lines Starts New Nonstop Service between New York-JFK and Tel Aviv

On 10 March, Delta Air Lines began new daily nonstop service between New York's John F. Kennedy International Airport (JFK) and Tel Aviv's Ben Gurion Airport. The new service complements Delta's daily nonstop to Tel Aviv from Atlanta Hartsfield-Jackson International Airport. Northeast and Midwest customers will find easy connections to the JFK-Tel Aviv flight from cities like Boston, Chicago, Detroit, Cleveland and Pittsburgh. Delta's new nonstop service between New York-JFK and Tel Aviv will be operated using 767-300ER aircraft with up to 215 comfortable all-leather seats in a two-cabin configuration. Customers flying Delta's award-winning BusinessElite enjoy Delta on Demand featuring first-run and popular classic movies, music, TV programming and video games – all available on demand; a five-course menu including glatt kosher selections on flights to and from Israel; a reinvented wine program launched in February by Master Sommelier Andrea Robinson featuring wines from around the world; new full-size pillows, duvets; modern and stylish dinnerware; and in-seat power outlets (110 Volt) that allow customers to recharge their laptops without the need for an adaptor. (Delta10.03)

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2.7 WiNetworks Secures $19 Million in Financing

WiNetworks has successfully raised $19m in financing. Financing from the third round will be used to expand the Win-Max family of mobile WiMAX base station products and to increase market penetration around the world. The Win-Max family of mobile WiMAX products includes the WiN7000, an all-outdoor compact base station, and the WiN7200, a scalable, single piece mini base station. WiNetworks has already received orders for over $17m and has begun shipments of the WiN7000 Compact Base Stations which will be used in the commercial deployment of mobile, fixed and nomadic WiMAX networks. All Win-Max products are based on the mobile WiMAX 802.16e Wave 2 (MIMO) profile. The WiN7200 Pico Base Station is the next generation of mobile WiMAX base stations that will provide dedicated outdoor coverage and in-building services and capacity. The smaller size allows for indoor/outdoor installations making WiMAX available to indoor broadband users. The WiN7200 Pico Base Station will be available for field trials by mid 2008.

Herzliya, Israel's WiNetworks (http://www.winetworks.com) is an innovative provider of unique WiMAX systems built according to the 802.16e mobile WiMAX standard. WiNetwork's Win-Max systems offer a full range of products including the Compact Base Station, Pico Base Station, and Customer Premise Equipment (CPEs). Win-Max systems are standards-based products supporting mobile, portable and fixed 802.16e-2005 WiMAX. WiNetwork's offers the Win-Max systems in the 1.X (L-Band), 2.X and 3.XGHz frequencies including customized solutions for special frequency ranges. WiNetworks was founded in 2004 and is a principle member of the WiMAX Forum and is leading the development of the new 802.16j WiMAX standard for relay technologies. (WiNetworks05.03)

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2.8 Microsoft to Expand Investment in Desktop Virtualization With Acquisition of Kidaro

Microsoft Corp. announced its intended acquisition of Kidaro, a leading provider of desktop virtualization solutions for enterprises. In combining Kidaro's virtualization technology with its suite of desktop management tools, known as the Microsoft Desktop Optimization Pack for Software Assurance, Microsoft will enable IT professionals to optimize their desktop infrastructure by providing management capabilities for Virtual PCs, streamlining deployments and easing application compatibility issues. Kidaro's seamless user interface and management capabilities allow enterprises to more easily use and manage Virtual PCs. Incorporating Kidaro's innovative solutions into the Microsoft Desktop Optimization Pack further enables virtualization across the enterprise. Managing desktops across an enterprise can be time-consuming, complex and costly. Adding Kidaro's desktop virtualization capabilities to the Microsoft Desktop Optimization Pack suite will provide Microsoft Software Assurance customers who have purchased the add-on subscription with the enhanced ability to do the following: Ramat Gan, Israel's Kidaro (http://www.kidaro.com) technologies will be incorporated into future updates of the Microsoft Desktop Optimization Pack for Software Assurance, which currently includes five key technologies that help enterprises manage their desktops. Founded in 1975, Microsoft is the worldwide leader in software, services and solutions that help people and businesses realize their full potential. (Microsoft12.03)

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2.9 InRob Continues International Expansion: Secures Manufacturing Facilities in the Philippines

InRob Tech has secured use of premises in the Philippines on a full turnkey basis. The premises include floor space, utilities, equipment and machinery that can be used to manufacture various components of mobile robots and other products for both civilian and military applications. These products will be marketed and sold by InRob and its strategic partners. Under the terms of the agreements, InRob has the capabilities to manufacture products with a total value of up to $28,500,000. InRob (http://www.inrobtech.com) is an Israeli-based high-tech company specializing in the planning, manufacturing and service support of advanced wireless and remote control systems, operating all types of robots and other vehicles. The Company is Israel's leader in its field, and supports the IDF (Israeli Defense Forces), Israeli police, and other military and civilian companies dealing with security. (InRob05.03)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Qatar Airways Announces New Nonstop International Passenger Service to Houston

Middle Eastern carrier, Qatar Airways announced it will begin operating three weekly nonstop flights between Houston's George Bush Intercontinental Airport and Qatar's Doha International Airport starting on 10 November 2008, with plans for daily service in December of 2008. This new service will make Qatar Airways the second Middle Eastern carrier to offer nonstop passenger flights to Houston. Qatar is home to the world's third largest gas reserves and is the world's leading exporter of liquefied natural gas. The airline will link these two energy industry hubs for the first time in history. Houston becomes only the third United States destination served by Qatar Airways. Departing from IAH, the Monday, Wednesday and Friday flights will be operated using the carrier's new Boeing 777-200LR aircraft. The aircraft will offer a two-class configuration with 42 Business Class and 217 Economy Class seats. (Qatar Airways05.03)

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3.2 Emirates to Fly to Los Angeles from September

Emirates airline will launch non-stop flights between the Californian city of Los Angeles and Dubai from September 1. The US west coast city will be Emirates' third gateway in the country. Operating daily, the service will be the first non-stop operation connecting Dubai to Los Angeles. Emirates will fly its Boeing 777-200LR on the route, offering 266 seats in a three class configuration and will provide up to 10 tons of cargo capacity from L.A. The new flight runs a distance of 8,339 miles, clocking 16 hours 35 minutes journey time to California, while the shorter return flight will be just less than 16 hours. EK215 will depart Dubai at 08:20 daily and arrive in L.A. at 13:55. EK216 will depart L.A. at 16:45 daily and arrive in Dubai at 19:40 the next day. The non-stop, long haul flight will deliver the highest standards of comfort: Emirates' 777-200LR is fitted with eight luxurious private suites in First class, 42 of its latest lie-flat beds in Business class, and generous space for 216 passengers in Economy class. L.A. is the fourth new destination that Emirates has announced for this year. (TradeArabia 13.03)

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3.3 UAE to Build Three Solar Power Plants in Spain

A joint venture of UAE-based Masdar and Spain's Sener Grupo de Ingenieria plans to invest €800m ($1.23b) in three solar power plants in Spain. The joint venture, named Torresol Energy, aims to build plants that use technology that concentrate solar power, known as CSP plants. The companies plan to license the technology for CSP plants capable of generating 500 megawatts of power in regions of the world where it is sunny by 2012. The joint venture is called Torresol Energy, and will be 60% owned by Sener and 40% owned by Masdar. Independently of Torresol Energy, Masdar is developing CSP plants in Abu Dhabi and aims to complete its first plant in the UAE in the fourth quarter of 2010. Sener is a Bilbao-based privately-owned engineering and technology group. Masdar is owned by the government of Abu Dhabi and has plans to spend $15b on developing sustainable, clean energy. Abu Dhabi is the centre of the UAE's oil and gas production and holds over 90% of the country's oil reserves. The UAE is the world's fifth-largest oil exporter. (Masdar 12.03)

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3.4 UAE to Import US Hardwood Products Worth $25 Million

The UAE's import of US hardwood products is set to touch $25m this year. The study by the American Hardwood Export Council (AHEC) said this growth will be mainly driven by lumber imports, expected to account for 60% ($15m) of the entire US hardwood shipments to the country. According to previously published reports by the US Census Bureau, US hardwood exports to the Middle East and North Africa (MENA) region grew by 32.3% to top $52.2m during the first 10 months of 2007. A breakdown of the exports revealed a big increase across all product lines including the shipment of 5,101 cu. meters of hardwood logs, a staggering 185% rise leading to total exports of $3.9m; the delivery of 13,274 cu meters of hardwood lumber, reflecting a 69% jump to $10.6m; and the shipment of $2.2m worth of regional hardwood veneer imports, an increase of 24.2%. Of the total value of regional imports within this period, the UAE has shelled out $13.2m towards hardwood products to address the growing demand of its booming real estate sector, a 59% increase from 2006, AHEC said. (TradeArabia 06.03)

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3.5 Industrial Nanotech Begins Shipment of Million Dollar Order to Distributor in Turkey

Naples, Florida's Industrial Nanotech, an emerging global leader in nanotechnology, announced the shipment of the first of ten containers of the Company's patented Nansulate energy saving protective coatings to Kolorgen, the Company's distributor in Turkey. The product is being applied at the Denizli Basma ve Boya Sanayii (DEBA) textile plant to reduce energy consumption and protect against corrosion of equipment in their textile facility, one of the regions largest. The order will continue to be shipped and paid for at a rate of one sea container per month for the next ten months and the total order constitutes $1.07m in revenue to Industrial Nanotech. Nansulate is the Company's patented product line of specialty coatings containing a nanotechnology based material and which are well-documented to provide the combined performance qualities of thermal insulation, corrosion prevention, and resistance to mold growth in an environmentally safe, water-based, coating formulation. (IN11.03)

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 Arava Institute Teams with Jordan University for Trans-boundary Water Course

In January 2008, the Arava Institute for Environmental Studies, in conjunction with Jordan University for Science and Technology and A.R. Israeli Technologies, held a ten day advanced international training course entitled: Integrated Water Resource Management and Technology in the Jordan River Watershed. Israeli, Jordanian and Palestinian government officials, water technology engineers, members of non-profit research organizations and other water management professionals attended the course, which provided a comprehensive study of water management in the region. Attending lectures, working on collaborative projects and traveling across Israel and Jordan, the group gained a comprehensive understanding of the issues facing water resources in the Middle East. An interdisciplinary perspective focused on the legal and political aspects of water resource management, economic and managerial principles of the water industry, public policy and institutions in water management, and developments in water technology. The curriculum as well as the participants emphasized a fundamental principle - trans-boundary cooperation. Like the region's water itself, the course conveyed that solutions to water management must know no borders. Participants in the course were given a rare opportunity to apply a collaborative effort to tacking the issues facing one of their region's most critical shared interests. The Arava Institute believes that such frameworks for cooperation built on shared interests "may indeed prove to be the foundation on which long-lasting multilateral political accords will be built." The Arava Institute for Environmental Studies (http://arava.org/new/) is a regional center for environmental leadership. By encouraging environmental cooperation between peoples, the Arava Institute is working towards peace and sustainable development on a regional and global scale. The Institute is situated on Kibbutz Ketura in Israel's Southern Arava Valley - a desert in the Syria-African rift near the Jordanian and Egyptian borders and the Gulf of Aqaba/Eilat. The Institute is home to academic programs, research and public involvement. (AIES 13.03)

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4.2 Renewable Energy Park Opens at Arava

The first of its kind in Israel's Arava region, a renewable energy park initiated by the Arava Institute for Environmental Studies will be a center for research, development and testing of cutting edge renewable energy technology. Currently being developed in Kibbutz Ketura, the renewable energy park will be the first center of renewable energy development in the Arava region, where vast open spaces and abundant sunlight create an ideal environment for solar, wind, and bio-fuel energy development. The park will be part of the new Center for Renewable Energy and Energy Conservation being established at the Arava Institute. The new center will include academic studies and research is in partnership with Ben Gurion University and assisted by researchers of the Weizmann Institute. The establishment of the new center will require an investment of $10m over the next five years and will place the Arava Institute on the map of Israel's leading centers in solar energy expertise. The Arava Institute for Environmental Studies (http://arava.org/new/) is a regional center for environmental leadership. By encouraging environmental cooperation between peoples, the Arava Institute is working towards peace and sustainable development on a regional and global scale. The Institute is situated on Kibbutz Ketura in Israel's Southern Arava Valley - a desert in the Syria-African rift near the Jordanian and Egyptian borders and the Gulf of Aqaba/Eilat. The Institute is home to academic programs, research and public involvement. (AIES 13.03)

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4.3 Bat Yam Approves Israel's Second Tallest Skyscraper

The skyscraper fever now sweeping Tel Aviv is now heading south to neighboring Bat Yam. Recently, an executive committee, consisting of the mayor of Bat Yam, the chief executive, and a select group of council members, approved the building by the Mizrahi Group of the City Center project, comprising three skyscrapers, the tallest of which is 50-storeys (160 meters) high. The Bat Yam has forwarded the plan to the Central Regional Planning and Building Commission for approval. The towers in the City Center complex will consist of two buildings with 324 apartments in 38 floors and a third 50-floor block with 50,000 square meters of space for commerce, offices, and roof observatory. Also included in the plans is a two-storey shopping mall at the project's entrance. The 50-floor building will be the second tallest in Israel, (at present), after the 68-floor, 244 meter-high Moshe Tower in Ramat Gan, and the fifth highest in terms of floors after the 49-floor, 187-meter high Azrieli Circular Tower, the 37-floor, 170-meter high Sheraton City Tower, and the 42-floor, 169-meter high Azrieli Triangular Tower. When completed, the new building will displace the current fifth-placed building, the 42-floor, 158-meter high Yovel Tower in the government complex in Tel Aviv. Azorim Investment, Development and Construction and a group of diamond traders are planning to build a 70-floor tower block at the Elite Junction in Ramat Gan. The building, which will consist primarily of residential properties plus a small number of office properties, will be completed in 2010. (Globes 12.03)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 MENA Countries Flare Natural Gas Worth $10 Billion Every Year

Middle Eastern and North African (MENA) countries are flaring natural gas worth as much as $10b every year, a World Bank body said on 6 March. The Global Gas Flaring Reduction (GGFR) unit of the World Bank urged Gulf oil producers to join a program to reduce emissions caused when gas, which is found when extracting oil and is thought too hard or costly to get to market, is flared off. About 150b to 170b cubic meters of gas is flared annually, adding about 400m tons of greenhouse gases in annual emissions. The Middle East and North Africa contribute about a third of the world's total, second only to Russia. With almost all Gulf countries facing a gas crisis with the exception of Qatar - the world's third largest exporter of liquefied natural gas - the flared gas could be used for re-injection or feedstock in the petrochemicals sector or desalination. About 150b to 170b cubic meters of gas is flared annually, adding about 400m tons of greenhouse gases in annual emissions. (Various06.03)

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5.2 Jordan's Trade Surplus with US Shrinks by 37.2% in 2007

Jordan's trade surplus with the United States fell 37.2% last year to $501m from $798m in 2006, the American Chamber of Commerce in Jordan (AmCham-Jordan) announced on 5 March. The drop was a combination of lower exports to and higher imports from the US. Total exports went down by 6.2% to $1.3b last year from $1.4b in 2006 when the amount was 12.2% higher than the total in 2005. According to the Jordan Yearly Economic and Trade Bulletin for 2007, issued by AmCham-Jordan, local exports from the Qualifying Industrial Zones (QIZs) dropped by 9.7% to $0.9b after peaking slightly above the $1b mark in 2006. Despite the decline, QIZ exports remained the largest component of the commercial activity as they accounted for 69.2% of the total sales to the US last year. In 2006, QIZ exports accounted for 71.9% of total sales. Jordanian Industries are shifting from the QIZ program to the free trade mechanism because it is more accommodating, less cumbersome and less expensive than buying input material from Israel. Jordan's exports under the Free Trade Agreement with the US edged up slightly by 1.2% to $300m. Other factors blamed for the regression were competition from QIZs in Egypt and lack of local dynamism to exploit the benefits of the Free Trade Agreement with the US. The Jordan Yearly Economic and Trade Bulletin for 2007 also showed a 33.4% surge in imports from the US to $831.7m last year compared to $623m in 2006. Imports were mainly transport equipment, road vehicles, cereals and cereal preparations, industrial machinery and equipment and miscellaneous manufacturing articles. The highest growth in imports was registered by transport equipment (262.6%), followed by organic chemicals (125.3%) and paper and paperboard articles (117.8%). About 55% of imports from the US during the first three quarters of 2007 originated from the District of Colombia, California, Ohio, Texas and New York. 6 March 2008

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5.3 UAE Economy Surges 7.4% in 2007

The UAE economy grew 7.4% in 2007 on the expansion of the manufacturing and construction sectors, as well as oil and gas, according to a 9 March announcement by the Ministry of the Economy. Non-oil sectors accounted for 65% of the gross domestic product (GDP) of the second-largest Arab economy last year. Real GDP growth last year came in just below the 7.8% growth forecast in December. The economy should expand by another 7.8% this year, the poll showed. The UAE, the world's fifth-largest oil exporter, has been striving to diversify its economy away from a dependence on energy exports by pouring windfall oil revenues into real estate, financial services and infrastructure. The share of manufacturing sector output to economic growth rose to 13% in 2007 from 12.2% a year earlier, while the building and construction sector's share climbed to 8% from 7.5%, the ministry said. The rise in contribution of non-oil sectors to GDP reflects the success achieved in the country's economic diversification plan. Crude oil production accounted for 35% of the GDP, down from 37.3% in 2006, the ministry said. The UAE economy expanded to $190.1b in nominal terms, up 16.5% from the year earlier, the ministry said in January. (Reuters09.03)

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5.4 UAE Top Third Oil Exporter

UAE has emerged as the third largest oil exporter in the world with its exports standing at 2.6m bpd in 2007. The country is behind Saudi Arabia, which exported around 8.5m bpd in 2006, and Russia, with exports of nearly 6.75m bpd. IMF estimates said UAE's exports could climb to nearly 2.7m bpd in 2008. Saudi Arabia was expected to have exported 6.4m bpd last year and 6.3m bpd this year, while Iran's oil exports were put at nearly 2.5m bpd last year and were projected at the same level this year. Kuwait's oil exports were expected to remain unchanged at 1.6m bpd in 2007 and 2008, while Libya's exports would be equivalent to Kuwait's. In terms of production capacity, the UAE ranked eighth, with output of around 2.94m bpd at the end of 2006. Saudi Arabia was number one with around 10.6m bpd followed by Russia, which had a capacity of nearly 9.67m bpd.

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5.5 UAE to Subsidize Nationals

The UAE is considering a plan to give its citizens discounts on 14 food items, gasoline and cooking fuel to help offset inflation, the executive manager of the Emirates Society for Consumer Protection said on 11 March. The plan would benefit only UAE nationals, who comprise less than a fifth of the 4.5m people living in the Emirates. The cabinet is studying the plan, which will allow UAE nationals to buy rice, bread, tea, sugar, milk, butter and other basic food items at cost. Inflation in the second-largest Arab economy hit a 19-year peak of 9.3% in 2006 and probably accelerated to 10.9% last year, the National Bank of Abu Dhabi (NBAD) said last month. The UAE's economy grew 7.6% last year. Food prices in the UAE, which pegs its dirham currency to the weak US dollar, will probably jump 40% this year after surging 30% in 2007. Under the proposal, the Ministry of Social Affairs will provide nationals with cards they can use at 16 cooperative supermarkets to be eligible for the discounts. Cooperative supermarkets are owned by UAE nationals and generally provide lower prices on some goods. For the 14 food items, the supermarkets would not be allowed to take profits on sales to cardholders. The proposal, drafted by the consumer protection body and Ministry of Economy, also calls for a discount on petrol and tanks of domestic cooking fuel for nationals. The UAE Federal Government also raised salaries of state civil and military employees by 70% from January 1, and both Dubai and Abu Dhabi have set caps on annual rental increases of 5%. Food price inflation is partly driven by the dirham's link to the dollar, which hit record lows against the euro and a basket of major currencies this month. (Reuters10.03)

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5.6 UAE Fast Food Price Hikes Hard To Swallow

Fast food chains in the UAE have hiked prices by up to 30% over recent months prompting calls for a control mechanism to curb further increases, it was reported on 10 March. Fast food prices have risen by an overall average 14% within the past two months. KFC, Pizza Hut and Hardees all registered an average increase of around 10% over the last month, while Burger King increased prices between 15-30%. A meal with two pieces of chicken at Southern Fried Chicken increased by an average of 18% over six months from 9 to 12 dirhams, it was found. McDonald's did not raise prices during the same period, but was considering its options in the face of global price increases. (Various11.03)

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5.7 US Universities Complete $60 Million Saudi Deal

Stanford University and UC Berkeley are to help develop a major campus at Saudi Arabia's $10b King Abdullah University of Science and Technology (KAUST). The US colleges will each receive almost $30m to help the flagship research institute hire 60 faculty staff and create graduate-level courses in six disciplines for its planned opening in September 2009. Stanford is to help design and built the university's departments of maths and computer science, while UC Berkeley will focus on mechanical engineering. Stanford and Berkeley will each receive $10m earmarked for the participating departments, $10m for joint research in the US and $5m for collaborative research conducted at Kaust. Berkeley will also receive $3.3m to cover administrative costs, while Stanford will get $4.4m. Kaust, located on the Red Sea at Thuwal, north of Jeddah, will accept students of both sexes and will not discriminate on the basis of religion or race, officials said. The university, which has one of the world's largest educational endowments from the pocket of King Abdullah, aims to be a global leader in research into energy, environmental sciences, computing, mathematics and engineering. (AB06.03)

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5.8 Egypt's Urban Inflation Rate Jumps to Highest Level in 11 Months

Egypt's urban inflation jumped to an 11-month high in February with surging prices for foodstuffs and beverages, raising pressure on the country's central bank to raise interest rates for a second time this year. The urban consumer price index rose 12.1% in February, from 10.5% to January, the government statistics agency said. Urban consumer prices rose 1.8% during February, compared with 4.0% in the previous month, data said. Egypt's central bank raised the overnight interest rates in February, the first rate change in over a year due to higher food prices and inflationary pressure from surging economic growth. (al-Quds al-Arabi 11.03)

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5.9 Report on Egyptian Imports from Israel Under the QIZ
According to the semi-annual report issued by the Egyptian ministry of trade and industry, the volume of imports from Israel by Egypt since the signing of the qualified industrial zone (QIZ) protocol designed by the United States, Egypt and Israel in December 2004, reached $151m through mid-2007. The Protocol was modified in October 2007 to allow the reduction of the Israeli component of manufactured goods to 10.5% from the original 11.7%. From the introduction of the QIZ in October 2004 and through the first half of 2007, Egyptian exports to the United States under the QIZ reached $1.276b. In the first half of 2007, Egyptian exports to the American markets were estimated at $350m. The Egyptian exports include pants worth $540m, t-shirts $150m, shorts worth $133m, and shirts worth $133m. There were a variety of other items. Under the QIZ, Egyptian exports to the US markets are exempt from tariffs as long as they retain their Israeli component. (al-Sharq 14.03)

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5.10 Tunisia Ranked Most Competitive African Country in Tourism

The 2008 World Economic Forum Travel and Tourism Competitive Index (TTCI) rated Tunisia as the most competitive African country in tourism, Tunisia Online reported. In the Arab World, Tunisia was ranked second, behind Qatar. The report covers 130 countries, of which Tunisia is ranked 39th globally, ahead of Thailand (42nd), Brazil (49th) and Turkey (54th). The index is based on 14 criteria including environmental sustainability, safety and security, health and hygiene, human, natural and cultural resources. (Magharebia 10.03)

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5.11 Algeria IMF Article IV Staff Report Released

The IMF released its Article IV staff report. Algeria's market-oriented economic reforms over recent years started to bear fruits, with higher growth, low inflation, and strong fiscal and external positions. The country needs to sustain its recent favorable economic performance over the medium term to lessen the economy's dependence on hydrocarbon production, and further lower unemployment that remains too high, especially among the youth. The expansionary fiscal stance has boosted liquidity in the banking system, calling for vigilance in monetary policy. So far the central bank has kept inflation in check by mopping up excess liquidity, but further increases in government spending may complicate this task. The central bank is considering an increase in reserve requirements on commercial bank deposits. Moreover, it stands ready to raise further its policy rates in case inflationary pressures intensify. Algeria's fiscal and external positions continue to strengthen, thanks to high hydrocarbon world prices. If inflationary pressures persist, fiscal policy will need to support monetary policy by slowing the pace of the public investment program (PIP). The PIP's large size and the limited absorption capacity call for intensified scrutiny over expenditure quality and efficiency. Algeria's policies have been consistent with external stability. IMF estimates are consistent with the central bank's analysis that the real exchange rate of the dinar is close to its equilibrium level. Progress in tax policy and administration reform has started to yield results. The authorities are now considering a number of further steps toward simplifying and rationalizing the tax system, in line with FAD recommendations. Financial sector reform is key to ensure the effective intermediation of the country's large savings, and strengthen the monetary policy transmission mechanism. The authorities intend to implement the recommendations of the 2007 FSAP update, and improve bank governance and credit risk management. Algeria is close to securing WTO accession. The authorities plan to implement the action plans adopted by the conferences on Maghreb economic integration organized with Fund staff. (IMF17.03)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:

6.1 Turkish Revision in GDP Pulled Per Capita Income Up By $2,020

The Turkish Statistics Institute revised the 2006 GDP up 31.6% to $606b. Per capita income is also revised up to $7,500 from $5,480. The updated national income figures include the period from 1998 to the third quarter of 2007. TUIK said for national income calculations, it replaced 1998 with 1987 as the new base year. The main factor behind the increase in national income stemmed from the growth of the manufacturing industry by more than previous estimations. In former calculations the number of enterprises employing 10 or more employees was forecasted to be 11,293 for 2006, whereas in the new calculation it was 27,813. The other factor for the increase is the housing sector. In the previous calculation the number of buildings was cited as 13m, while in the new calculation the number used was 19.2m. Turkstat noted that the number of unregistered businesses can be calculated more accurately with the new formula, adding that this also had an effect on the rise of national income. They are able to develop a much clearer picture of the economy with the new formula, also noting that the formula complies with EU standards. The manufacturing, housing and services sectors grew in the new data; however, fishing, retail, hotel and restaurant businesses, energy and public services shrank. With the new calculation, the ranking of Turkey among United Nations and International Monetary Fund (IMF) member states will also change. (BGC10.03)

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6.2 Turkey Lowers Restrictions in New Bill on Malls and Retail Chains

The new bill on shopping malls and retail chains drafted by the Turkish Ministry of Commerce & Industry has been submitted to the Prime Ministry for approval. It seeks to eliminate restrictions proposed in the earlier version of the bill. According to the draft, large retail stores and shopping centers will be free to open during all days of the week. The bill also restricts the sale of products using the store's own brand to 20% of the entire assortment. The bill, which uses the “shopping center, large store and retail chain” description for the first time in Turkish law, also requires a start-up retailer to get the permission from municipalities and government offices in order to open a store in any of the three categories. According to the regulation, municipalities will decide how long stores should stay open on a regular business days and holidays. (BGC05.03)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israel & World Jewry Celebrate Purim Holiday

On 20/21 March, most of Israel and Jewry around the world will mark the holiday of Purim. Purim is one of the most joyous and fun holidays on the Jewish calendar. It commemorates a time when the Jewish people living in Persia were saved from extermination. The story of Purim is told in the Biblical book of Esther. The heroes of the story are Esther and her cousin Mordecai, who raised her as if she were his daughter. Esther was taken to the house of Ahasuerus, King of Persia, to become part of his harem. King Ahasuerus loved Esther more than his other women and made Esther queen, but the king did not know that Esther was a Jew, because Mordecai told her not to reveal her nationality. Haman, an arrogant, egotistical advisor to the king, hated Mordecai because Mordecai refused to bow down to Haman, so Haman plotted to destroy the Jewish people. Mordecai persuaded Esther to speak to the king on behalf of the Jewish people. Esther fasted for three days to prepare herself, and then went into the king. She told him of Haman's plot against her people. The Jewish people were saved and Haman was hanged on the gallows that had been prepared for Mordecai.

The Purim holiday is preceded by a minor fast, the Fast of Esther (20 March), which commemorates Esther's three days of fasting in preparation for her meeting with the king. The primary commandment related to Purim is to hear the reading of the book of Esther. The book of Esther is commonly known as the megillah, which means scroll. It is customary to boo, hiss, stamp feet and rattle gragers (noisemakers) whenever the name of Haman is mentioned in the service. The purpose of this custom is to "blot out the name of Haman." Jews are also commanded to eat, drink and be merry. In addition, they are commanded to send out gifts of food or drink, and to make gifts to charity. The sending of gifts of food and drink is referred to as mishloach manot (lit. sending out portions). Purim is not subject to the Sabbath-like restrictions on work that some other holidays are; however, some sources indicate that Jews should not go about their ordinary business on Purim out of respect for the holiday. Purim is also celebrated later (22/23 March) in Jerusalem.

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7.2 Arava Institute for Environmental Studies Hosts Largest Class Ever

The largest group of students in the history of the Arava Institute for Environmental Studies is currently attending this semester, with 48 young leaders participating as students or interns. The diversity of the group reflects the Institute's commitment to building coexistence, including students from Jordan, the Palestinian Authority, Israel, the United States, Canada, Germany, Denmark and Uruguay. The Arava Institute for Environmental Studies (http://arava.org/new/) is a regional center for environmental leadership. By encouraging environmental cooperation between peoples, the Arava Institute is working towards peace and sustainable development on a regional and global scale. The Institute is situated on Kibbutz Ketura in Israel's Southern Arava Valley - a desert in the Syria-African rift near the Jordanian and Egyptian borders and the Gulf of Aqaba/Eilat. The Institute is home to academic programs, research and public involvement. (AIES 13.03)

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7.3 Mawlid Al Nabi Holiday

March 20 will mark the Mawlid al-Nabi, a celebration of the birthday of the Prophet Muhammad, founder of Islam. The day is fixed at the 12th day of the month of Rabi al-Awwal in the Muslim calendar. Muhammad was born about 570 and died in 632. During his life, he established Islam as a religion and, in doing so, replaced tribal loyalty with equality among all Muslims. At a critical point in his life, Muhammad received a vision of the angel Gabriel who called him into service as a prophet. He later received a second vision of Gabriel who told him to "magnify thy Lord." Muhammad then began to preach publicly in Mecca where he had lived for many years. Many people were receptive to his message but others ridiculed him. Because of the opposition of many citizens of Mecca and threats against him, Muhammad fled to Yathrib in 622. This journey of nearly 200 miles is known as the Hegira and is so important that the Muslim calendar begins with the year of the Hegira. The Mawlid al-Nabi was first observed around the thirteenth century and was preceded by a month of celebration. The actual day of Muhammad's birthday included a sermon, recitation of litanies, honoring of religious dignitaries, gift giving and a feast. The festival spread throughout the Muslim world and is celebrated in many countries today. However, some conservative sects (e.g., the Wahhabiyah) consider the celebration to be idolatrous.

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*REGIONAL:

7.4 Kuwait Cabinet Resigns En Masse

The Kuwaiti cabinet resigned on 17 March alleging that the opposition-dominated parliament refused to cooperate, in the latest political crisis to hit the oil-rich Gulf Arab emirate. The move raised the prospects of a new dissolution of parliament and early elections, amid rising sectarian tensions and non-stop confrontations between MPs and the government. Prime Minister Sheikh Nasser Mohammad Al-Ahmad Al-Sabah, a nephew of the emir, handed the letter of resignation to the deputy emir, Crown Prince Sheikh Nawaf Al-Ahmad Al-Sabah, as the ruler is out of the country. During the weekly cabinet meeting, First Deputy Premier and Defense Minister Sheikh Jaber Mubarak Al-Sabah earlier tendered the resignation of cabinet ministers en masse to the prime minister, citing non-cooperation from MPs. Kuwait has been experiencing sectarian tensions after activists from the Shiite minority held a rally last month to mourn former Lebanese Hezbollah terrorist commander Imad Mughnieh, killed in a car bombing in Damascus.

Kuwait has a native population of one million, in addition to 2.2m foreign residents. The country, the fourth largest Opec producer, sits on 10% of global crude reserves and pumps around 2.5m bpd. Under the Kuwaiti constitution, the emir can either accept the cabinet's resignation and ask the current premier or a new one to form a government, or dissolve parliament and call for early elections. Parliament was last dissolved in May 2006 following a standoff with the government, leading to early elections in June in which women took part for the first time. Political parties are banned in Kuwait, although the government allows political groupings, considered as de facto parties, to operate. (AB17.03)

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7.5 Thousands Attend First Mass at Qatari Church

Thousands of Christians took part on 15 March in the first mass at Muslim Qatar's only church, which opened that week despite threats from Islamists. Vatican envoy Cardinal Ivan Dias presided over the Eucharist attended by around 15,000 worshippers at Our Lady of the Rosary Roman Catholic church in Doha. The church, which like elsewhere in the Gulf Arab region has no bells or crosses on its exterior, opened on 14 March ahead of western Christianity's celebration of Easter, which this year falls on 23 March. It is the first of five to be constructed in the gas-rich Gulf state. From early morning, Catholics began arriving at the church, which accommodates around 5,000. Big screens were erected in the grounds to allow the overflow to follow the mass, celebrated during the consecration of the building. The mass was conducted in English, but prayers were also said in Arabic, Urdu, Hindi, Tagalog, Spanish and French for the many nationalities that would worship in the church. Dozens of police were deployed around the church, which cost some $20m, and female officers searched the handbags of women worshippers. Western embassies, particularly from the US and Britain, warned nationals living in Qatar to be extra vigilant after an Islamic militants on the Internet made threats linked to the opening of the church. Worshippers said they were not concerned by the threats. The UAE prides itself on its religious tolerance and cultural diversity and most other Gulf Arab states have long allowed Christians to worship in churches. But Saudi Arabia, which adheres to a rigorous doctrine of Islam known as Wahhabism and is home to Islam's holiest sites, bans all non-Muslim religious rituals and materials. (Various 16.03)

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7.6 UAE Makes Arabic Official Tongue

Arabic has been confirmed as the official language of UAE federal authorities, the government announced on 9 March. The move has been lauded by commentators who have campaigned to combat the growing use of English in government departments. Ebtisam Al-Kitbi, professor of political science at UAE University told UAE daily Gulf News the decision would “enhance the presence of Arab speaking people in the labor market and restore the national identity”. “To my knowledge, there is no nation that allows an invasion of foreign languages in government institutions the way we did in the UAE. The move will correct the imbalance,” she said. “People [in other countries] use foreign languages, but you will never see them in the workplace other than their national languages. English is widely used in the government in the UAE and this is unacceptable,” she added. (Various10.03)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Kamada Signs $4 Million Private Equity Investment Agreement with Shavit Capital Fund

Kamada has signed a $4m private equity investment agreement with Shavit Capital Fund, pending the approval of the audit committee, the board of directors and a general assembly to be held during the months of March & April. The stock price will represent the 45 days of trade preceding the day of signature with a premium of 3%. The final price will be about 8.8% higher than the stock price on the day the agreement is signed between the two sides. The company has successfully accomplished the goals it has set for itself during 2007, including the manufacturing plant's upgrade to FDA/EMEA standards as well as advanced clinical trials with its leading products. In 2008 the firm expects to finalize the Phase III clinical trial with their Intravenous AAT (Alpha-1 Antitrypsin) product and announce its results. Kamada recently announced it signed a $20m financing agreement with US based Hercules Technology Growth Capital, under venture lending terms. The agreement was also aimed at diversifying the company's financing sources and to further finance its strategic plans over the forthcoming years. Kamada is a public (http://www.kamada.com) Israeli biopharmaceutical company developing, producing and marketing specialty life-saving therapeutics marketed in over 15 countries. Several of the company's products are undergoing advanced stages of clinical trials. (Kamada05.03)

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8.2 Students Invent Early-Detection Medical Device

Undergraduate students from the Technion Institute of Technology have invented a novel, non-invasive device that detects respiratory problems at an early stage in premature babies, children and adults in intensive care units (ICU). The device is currently in clinical trials in Israel and is due to start selling in mid-2009. Unlike conventional devices, Pneumedicare claims that their device can immediately “detect deterioration in lung ventilation and partial blockage of air passages, ventilation from only one lung and other common problems” and also less-common but still life-threatening complications such as the accumulation of air between the lungs and chest cavity walls. Early detection of such problems reduces the risks of complications, damage to vital organs and irreversible brain damage.

Migdal HaEmek, Israel's Pneumedicare develops a novel device for continuous monitoring of lung ventilation in mechanically ventilated patients. The device warns on changes in lung ventilation or air distribution in the lungs in earlier stages, before the development of life threatening deteriorations due to decrease in blood oxygenation. It characterizes the nature and the location of the problem. The monitoring is based on quantification of the lung ventilation dynamics by unique mechanical sensors attached to the chest at different sites. The device facilitates monitoring the ventilated patients, allows earlier treatment before the development of irreversible damages and thus improves the safety of mechanical ventilation. (VCC09.03)

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8.3 Hebrew University Launches Genetic Resource for Studies of Common Diseases

Yissum, the Technology Transfer Company of the Hebrew University of Jerusalem Israel, announced the launch of the Hebrew University Genetic Resource (HUGR) platform for research on the genetic basis of diseases. HUGR, a unique case-control DNA database for genetic association studies of common diseases, consists of 15,000 DNA samples from Ashkenazi Jews and represents 16 different diseases. The scientific community can directly access the DNA samples through HUGR (http://www.hugr.org) and test genes of interest in one of the represented diseases. HUGR has already proved useful in various studies, including a recent study where a gene variant that increases the risk of developing schizophrenia in women but not in men, was identified.

HUGR consists of DNA samples collected solely from the Ashkenazi Jewish population in Israel. The genetic and environmental homogeneity of the Ashkenazi Jewish population renders this database especially valuable for genetic studies. Among the 16 diseases represented in the database are diabetes types I and II, several cancers, neurological diseases, psychiatric diseases, hypertension and asthma. For most diseases, there are more than 500 samples per disease and a common panel of over 5,000 healthy controls. Each sample contains extensive phenotypic information, including family history, disease characterization, drug treatments, efficacy and adverse events. Scientists can order genotyping of any single nucleotide polymorphism (SNP) of interest on any of the samples and solely own the results. (Yissum11.03)

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8.4 Oramed Pharmaceuticals Successfully Completes Phase 1B Clinical Trials of Oral Insulin Capsule

Oramed Pharmaceuticals (http://www.oramed.com) has successfully completed Phase 1B clinical trials of its oral insulin capsule. The Phase 1B trial, which utilized healthy volunteers, was focused on finding the optimal dosage for the formulation of Oramed's oral insulin product. Oramed plans to commence Phase 2A clinical trials in Israel in the second quarter of 2008. The Phase 2A study is designed to evaluate the safety and efficacy of Oramed's oral insulin in Type II Diabetic volunteers. Oramed is simultaneously working on completing the requirements for an IND for Phase 2 FDA approved trials. Oramed Pharmaceuticals is a Jerusalem, Israel based company focused on the development of oral delivery solutions based on proprietary technology. Diabetes is one of the most rapidly growing diseases in the world and is one that requires constant and often unpleasant monitoring and drug therapy regimens. Oramed is currently developing an orally ingestible insulin capsule for the treatment of diabetes. The company is also pursuing the development of oral delivery solutions for other drugs and vaccines. (Oramed 11.03)

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8.5 ATI Invests $2 Million in Phagolum Sepsis Diagnostic Toolkit

Ashkelon Technological Industries (ATI) will invest $570,000 in Phagolum Ltd., which is developing a sepsis diagnostic test, the leading cause of death in intensive care units. The diagnostic kit will enable the identification of the different sepsis stages, including early detection and will also be able to identify the cause of infection. The kit will contain biological reagents and proprietary software that will analyze the recorded data. Ashkelon Technological Industries (http://www.ati.co.il), a tech incubator focused on healthcare and cleantech, will invest in the medical device start-up, which was essentially borne out of research carried out at the National Institute for Biotechnology at Ben Gurion University. More broadly, Phagolum is a fiber optic-based sensor that may be adapted to many potential applications, but mainly to medical diagnosis and prognosis including early detection. (Various13.03)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 New Mobile Phone Technology from Secure Identity Systems Stops Card Fraud Cold

A new Israeli technology brought to the U.S. thwarts credit and debit card fraud, and potentially stops ID thieves in the act. This in turn helps banks better protect customers, stem losses due to fraud, and attract new depositors with free identity protection services. The technology, dubbed mConfirm, uses any mobile phone to match the location of a consumer and their payment card. If the locations don't match, the transaction is flagged and risk systems alerted, so that action can be taken immediately. Already proven highly successful at Visa CAL, a major Israeli credit card issuer and processor, mConfirm significantly improves fraud detection and reduces false alert rates without slowing down the transaction process. The mConfirm technology does not require GPS-enabled phones or changes to existing card processing systems. The system uses two factors - location-based behavior analysis and cellular phone location analysis - to develop a fraud risk score, which is the chance a transaction is fraudulent. The system works with some of the most popular commercially available cell phones and domestic wireless networks, including Apple iPhone, RIM Blackberry, LG, AT&T, Nokia, Motorola, Samsung, and even prepaid services. mConfirm simultaneously analyzes the consumer's transaction history, including merchants patronized, amounts spent, dates and times, locations, etc. The technology compares the transaction to the consumer's buying pattern. This comparison is also rated, with differences creating a higher rating, and again signaling higher fraud risk. Card-holder privacy is guaranteed, as no additional customer details are needed – only what the bank already has through its regular transaction processing. Founded in 2004, Jerusalem, Israel's mConfirm (http://www.mconfirm.com) is leading a revolutionary approach to payment-card fraud detection and prevention. The company's unique and innovative solutions are aimed at significantly reducing card fraud losses at point of sale (POS) and ATM transactions. (SIS05.03)

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9.2 Altair Samples the World's Most Power-Efficient Mobile WiMAX Processor for Handheld Devices

Altair Semiconductor (Altair) released the ALT2150 mobile WiMAX baseband processor to leading handheld device and module manufacturers. The ALT2150, the world's smallest and most power-efficient mobile WiMAX processor, implements full WiMAX Forum Wave-2 physical (PHY) Layer and Media Access Control (MAC) functionality, and offers substantial performance enhancements beyond this profile. The ALT2150 is the first in a family of chipsets from Altair crafted to achieve excellent modem performance, while consuming a fraction of the power of any mobile WiMAX chipset available today. Altair's product strategy is unique in the WiMAX chip landscape, with an exclusive focus on battery- operated, handheld devices that impose very strict power consumption and size requirements on semiconductor content. Altair is the first and only mobile WiMAX chip company that developed a proprietary, highly programmable Orthogonal Frequency Division Multiple Access (OFDMA) processor (codenamed O2P), rather than choosing to integrate a conventional communications Digital Signal Processor (DSP). Hod HaSharon, Israel's Altair Semiconductor (http://www.altair-semi.com) is the world's leading developer of ultra-low power, small footprint and high performance mobile WiMAX semiconductors that take broadband bandwidth beyond notebooks and USB adaptors to un-tethered, battery-operated handheld devices. The company's products provide handheld device manufacturers, integrating WiMAX into their products with a highly power-optimized, robust and cost-effective solution. (Altair Semiconductor11.03)

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9.3 Magal Receives an Order to Protect an International Airport in Central Asia

Magal Security Systems announced that it recently received a 7-digit order for perimeter protection of an international airport in Central Asia. The order calls for the design, supply and commissioning of the Omnitrax-Buried Cable system and the Intelli-Wave - Microwave Protection System, both controlled by Magal's StarNet 1000 -Security Monitoring and Control System. Omnitrax is Magal's newest buried cable product utilizing unique ranging technology. This allows pinpointing an intruder's location within the accuracy of a few meters. The order is expected to be completed by the end of Q3/08. Yehud, Israel's Magal Security Systems (http://www.magal-ssl.com) is engaged in the development, manufacturing and marketing of computerized security systems, which automatically detect, locate and identify the nature of unauthorized intrusions. The Company's products are currently used in more than 70 countries worldwide to protect national borders, airports, correctional facilities, nuclear power stations and other sensitive facilities from terrorism, theft and other threats. (Magal 11.03)

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9.4 OpTier's CoreFirst Extends Transaction Visibility to Virtual IT Environments

OpTier announced that its CoreFirst software is the first product to extend transaction visibility to virtual environments to help IT meet dynamically changing business needs. CoreFirst provides organizations with the insight and stability required to manage mission-critical applications running in production within virtualized environments. As organizations increasingly turn to virtualization technology to more economically manage and consolidate their IT resources, visibility into the datacenter is obscured. OpTier's CoreFirst BTM technology - which is deployed in some of the largest companies in the world - provides organizations with visibility and control over their business transactions in virtualized and non-virtualized environments. Working in conjunction with virtualization solutions from partners such as DataSynapse and Sun Microsystems, CoreFirst can be used by companies to add transaction visibility across the many complex layers of disparate production systems and applications created by virtualization. Ramat Gan, Israel's OpTier (http://www.optier.com) provides software solutions that dynamically link business services to underlying IT infrastructure, assuring service delivery and optimizing IT resources. OpTier tracks and monitors all business transactions. (OpTier 10.03)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's February CPI drops 0.2%

The Central Bureau of Statistics announced on 14 March that Israel's CPI for February fell 0.2% to 102.3. There were significant falls in three out of the ten CPI components a drop of 7% in clothing and food, a 1.6% drop in housing, and a 1.3 fall in transportation. Those three segments accounted for a 0.6% drop in the overall index. They were offset by an increase of 6.4% in fruits and vegetables prices and a rise in food prices of 1.3%. Those two segments added 0.4% to the overall index. The shekel's strength contributed to a fall of 0.4% in the overall index. In the previous 12 months, from March 2007 through February 2008, inflation reached 3.6%, above the upper level of the Bank of Israel's target range of 1% to 3%. Specific items that recorded significant changes were tomatoes which fell 12.7%, travel overseas which fell 2.6%, cucumbers which rose over 27%. (CBS14.03)

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10.2 Israel Records Another Balance of Payments Surplus

The Central Bureau of Statistics announced that Israel's balance of payments reached a current account surplus of nearly $5b in 2007, following an $8.5b surplus in 2006 and a $4.3b surplus in 2005. The current account balance includes imports and exports of goods and services, income and transfers. There was a marked 19.1% increase in imports of goods and services, which rose to $73.7b from $61.9b in 2006. Exports of goods and services rose 13.4% to $71.4b from $63b in 2006. For 2007, imports of goods were more than $5.5b higher than exports, while services exports outweighed services imports by $3.1b. The Central Bureau of Statistics attributed the import and export sums to fluctuations in the dollar's value relative to other currencies as well as the increased cost of raw materials worldwide. Tourism services export figures rose 26% in 2007 representing the increase in the number of tourists who arrived in Israel during the year. There has also been a marked increase in recent years in direct investment, both outward and inward bound. The years 2006 and 2007 had the most direct investment in Israel's history, in current dollars. Foreign direct investment in 2007 reached $10.3b, and accounted for 75.5% of all foreign investment in the country during the year. Direct investment overseas, by Israelis, reached $7.1b, down from $15b the previous year. Foreigners also invested $270m in Israeli securities, a sharp drop from $8.8b in 2006. The figures were impacted by bond sales by foreign investors, which reached $2.1b in 2007, compared with 2006 when foreign investors bought fixed income securities. Direct foreign investment represented over 75% of all foreign investment in the country in 2007. (CBS05.03)

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10.3 BDI Finds Concentration in Israel's Economy Rising

BDI Coface, in its annual survey, found that the 19 leading families in the Israeli economy controlled aggregate revenue of $298b in 2007. The Ofer family displaced the Dankner family to go the top of the list for 2007, after coming second in 2006. They were followed by the Tshuva, Weissman, Saban, Arison, Bino and Federman families. The BDI survey also found that the top 500 companies in Israel had an aggregate revenue of NIS 770b in 2007. Of this amount, the top 19 families accounted for 40%, compared with 33% in 2006. The Ofer family's move to the top of the list leads BDI to conclude that "the privatization of the Oil Refineries last year made a significant contribution to the increase in concentration in the Israeli economy." BDI notes that the Ofer family had the largest share of all of the 19 leading families' aggregate revenue - 18.7%. BDI offers an additional reason for the Ofer family's climb to the top - an increase in revenue from its subsidiaries, Zim Integrated Shipping Services and Israel Chemicals. Nochi Dankner, who lost the top slot, holds a 16% share of the aggregate revenue of Israel's wealthiest families. Yitzhak Tshuva climbed one place to third position in 2007 with a 12.1% share, followed in fourth place by David Weissman with 10.2%. Weissman was ranked third in 2006. Shari Arison hung on to sixth position, ahead of Zadik Bino who came seventh. (Globes 10.03)

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11: In Depth

11.1 ISRAEL: Moody's Israel's Ratings on Review for Possible Upgrade

On March 13, Moody's Investors Service (http://www.moodys.com) has placed Israel's A2 government bond ratings and the A2 country ceiling for foreign currency bank deposits on review for possible upgrade. The ratings have carried a positive outlook since May 2006. All other sovereign ratings are affirmed, including the Aa1 country ceiling for foreign currency debt.

The review for upgrade reflects both the resilience of the Israeli economy in response to repeated economic and political shocks and the fiscal consolidation of the past several years. Underlying the country's rating is a history of financial and political support from the United States and the Jewish Diaspora.

Moody's review will primarily focus on the continued ability of the government to stay the course on debt reduction notwithstanding a fractious domestic and regional political environment and the ever-more challenging global credit climate. "Its ability to absorb economic and political shocks without fundamentally subverting its prudent fiscal strategy nor undermining its economic vibrancy distinguishes Israel favorably relative to an emerging market," according to Kristin Lindow, Moody's lead sovereign analyst for Israel.

Lindow observed that Israel's high per capita income, its competitive high-tech and industrial sectors, and strong government effectiveness are more akin to an advanced developed country. Moody's believes that advanced economies with strong institutional foundations and deep capital markets can better manage relatively large levels of government debt and are generally less volatile in terms of economic performance and policy.

But Lindow stressed that Israel's policy track record itself tells a compelling story about the country's ability to withstand shocks and its payment capacity. Aside from a large government debt, explicit credit challenges include a low labor force participation rate and persistently high inflation. "Until a little more than a decade ago, indexation sustained stubbornly high inflation that substantially raised the servicing costs of the government's large domestic debt," said Lindow. "A successful disinflation program, reinforced by a robust monetary policy framework and, more recently, fiscal orthodoxy has significantly reduced the debt and debt servicing burdens. Other structural reforms have brought down unemployment while raising labor participation."

Fiscal discipline has been sustained in the face of economic and political pressures, said Ms. Lindow, including heightened military spending during and after the Second Lebanon War in 2006. She said that this track record underscores Israel's strong commitment to lowering the large public debt.

In contrast to the large, expensive domestic debt, Moody's said that Israel's external debt and debt service is very manageable. About 70% of the government's external debt is sourced from US loan guarantees or State of Israel Bonds at favorable costs of funding. State of Israel Bonds are sold mainly to Jewish communities outside of Israel, a group with deep and ready pockets to finance the Jewish state, especially during times of domestic or regional conflict. "These ample sources of liquidity are key credit strengths underlying Israel's high credit rating," said Lindow.

Lindow pointed to Israel's precarious security environment and the very poor outlook for the resumption of a peace process with the Palestinians as another critical credit challenge. "Ongoing regional and domestic conflict continues to complicate policymaking, contributes to outsized budgetary defense expenditures and also is an obstacle to increased investment and stronger growth," cautioned Moody's. "These factors are likely to constrain Israel's rating from reaching substantially higher rating levels."

Lindow said that in spite of the substantial economic costs extracted by the political conflicts, Israel's high-tech sector is boosting GDP growth and government revenues. Though below potential, Israel's economic growth has been steady and quite strong. "Although Israel is not a commodity-producing country, it has posted consistent current account surpluses in recent years, and the country is already a large net external creditor," said Lindow. "These are key ingredients that help to insulate Israel's external sector from adverse global financial conditions." (Moody's13.03)

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11.2 ARAB WORLD: Illicit Businesses Hit $50 Billion

Intellectual property (IP) fraud across the Arab world is estimated to run at $50b annually-a figure that Arab League Assistant Secretary-General for Economic Affairs Dr. Muhammad bin Ibrahim al-Tuwaijri earlier this month described as an "epidemic". In many countries across the region, well over half the software in use is believed to be counterfeit. According to the organization representing the world's commercial software industry, the Business Software Alliance (BSA), software piracy rates in 2006 reached 84% in Algeria, 79% in Tunisia, 73% in Lebanon, 66% in Morocco, 63% in Egypt and 61% in Jordan. In the Gulf Cooperation Council (GCC) countries, the rates stood at 64% for Kuwait, 62% for Oman, 60% for Bahrain, 58% for Qatar, and 52% for Saudi Arabia. Only the United Arab Emirates (UAE), at 35%, came in at the average global piracy rate for business software. It is also the only Arab country in a world list of top 20 countries with the lowest piracy rates for 2006.

But even in the UAE, the value of counterfeited products across-the-board-from cosmetics, pharmaceuticals and tobacco to automobile spare parts in 2006 was, according to a recently released KPMG study, estimated to run almost to $700m and to have cost the country around $1.7b in lost non-oil GDP, $110m in lost tax revenue and some 31,000 lost job opportunities.

In a world in which legitimate businesses are estimated to be losing up to $700b annually to IP piracy and counterfeiting, IP rights and protection literally represent foreign concepts in the Arab world. Subsequently, the illegal pirating of business software, DVDs, music CDs and computer games is posing an increasing threat for legitimate business in Arab countries.

But steps are now being taken by organizations such as the Arab League to start to combat what has become a serious pressing problem among Arab countries. In an effort to inform and educate Arab businesses, consumers and right holders about IP rights and protection and the damage that piracy and counterfeiting can cause, the Arab League-the Egypt-based umbrella policy-making body serving the interests of Arab countries-is, in association with the Saudi Arabian-based consumer and brand protection organization Himaya [protection] Universal, sponsoring Arab World Protect 2008: The first Arab Consumer and Brand Protection Forum, in Jeddah in October. A forum focusing on the economic importance and socioeconomic impact of IP protection was also held early this January in Abu Dhabi

IP forums such as the UAE-hosted event last month and the Saudi-hosted Arab World Protect 2008 in October have a long way to go in educating Arab businesses and consumers on IP and forging effective tools in enforcing IP rights. In the International Intellectual Property Alliance's (IIPA) major annual report released in late February, Middle Eastern Arab countries did not fare well: Yemen, Iraq and Syria were not even mentioned in the 2008 IIPA report. (Bahrain Tribune29.02)

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11.3 QATAR: Dollar Peg to Stay

Qatari officials have moved quickly to downplay suggestions that the emirate is about to sever its currency link with the US dollar, denying media reports that the peg could be removed as soon as the beginning of April. As reported by the Oxford Business Group, Qatar has repeatedly said it had no plans of following Kuwait's example and going it alone in dropping the peg between the riyal and the dollar, preferring to move in consensus with the other states of the Gulf Cooperation Council (GCC).

However, on March 12 an international news agency ran a story citing an unnamed senior official from the Qatari Central Bank saying a decision would be taken in April to either cut the link with the dollar or revalue the riyal. "Everything will be clear by the end of this month because our fiscal year ends on March 31, so by April the central bank will make an announcement," the article quoted the official as saying. The article also quoted Prime Minister Sheikh Hamad bin Jassim bin Jabr Al Thani's recent comment that he was "studying all options" concerning the currency peg. The article came the same day as the dollar hit new lows against both the Japanese yen and the euro, the currencies of two of Qatar's biggest trading partners.

Following the release of the story, Qatari officials hastened to deny a possible move to de-peg. Abdullah bin Hamad Al Attiyah, Qatar's deputy prime minister and minister of energy and industry, said the same day the country had no immediate plans to sever the dollar link or to act without the full concurrence of its GCC partners. "All Gulf countries should be together," he said during an interview with local media. "No country can go alone outside a strong economic bloc."

The following day Sheikh Abdullah Saud Al Thani, the governor of the Central Bank, also denied the media speculation. "The view of the Central Bank of Qatar until the moment is there is no change in policy about depegging from the dollar," he said on the sidelines of a meeting with officials of the European Central Bank in Germany. "We are still pegging the riyal against the dollar and we will continue at the moment."

However, Al Thani's use of the phrase "at the moment" could be telling, indicating that while a decision has not been made, the question of whether to cut the link with the dollar is being given earnest consideration. The peg between the Gulf currencies and the US dollar has been widely blamed for fueling price rises, nowhere more than in Qatar, where inflation hit a high of 13.74% in the fourth quarter 2007. Perhaps up to one-third of Qatar's inflation is caused by the link to the dollar, with prices of non-dollar imports being driven up due to the pegging of the two currencies.

In an interview with an international news agency in February, Sheikh Hamad said the Qatari riyal was undervalued by up to 30%.

Though reluctant to cut the dollar link, Qatar has been trying to rein in inflation through other means. On March 4, the government announced a two-year freeze on rent increases on all leases signed after January 1, 2005. The move was taken after rents increased by an average of 27.7% last year. The freeze replaced a 10% cap on increases put in place by the government that had failed to curb the blowout in rent rises. Analysts predict that the freeze could lop as much as 40% of Qatar's inflation rate, though it remains to be seen if it will be more effective than the cap it replaces. Were the freeze to be combined with a decoupling of the dollar peg, Qatar's inflation rate could plummet.

While hints have been dropped and flags, false or real, have been flown over severing the link with the dollar, it appears that Qatar is unwilling to take the step just yet. However, if depegging gains further support in other capitals of the Gulf, it is unlikely that Qatar will protest too loudly. (OBG14.03)

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11.4 ABU DHABI: Sovereign Wealth Still Under Spotlight

The past few weeks have seen renewed calls from the US and EU for Sovereign Wealth Funds (SWFs) to sign-up to voluntary regulations. In a sign of intent on the part of the US government, two senior figures visited Abu Dhabi Investment Authority (ADIA) executives in the same week late February.

Senator Evan Bayh (Democrat, Indiana), chairman of the Senate subcommittee on security and international trade and finance, met with senior executives of ADIA to raise his concerns about sovereign wealth transparency. Sen. Bayh has already chaired one Senate hearing on SWFs, and has written recently in the Wall Street Journal that more are needed.

The second delegation was led by Clay Lowery, a US Treasury dept. official. He was in Abu Dhabi to discuss formal investment guidelines for SWFs. The Treasury is understood to prefer a voluntary code of conduct, as outlined by the G7 last year, to be administered by the International Monetary Fund (IMF), which is currently drawing up such guidelines. Sen. Bayh has already said he does not believe these will be sufficient to protect US national interests, and has called for primary legislation requiring "passive investment" by foreign governments.

For its part, the EU published its own preliminary proposals on SWFs late February. While arguing SWFs "are not a big bad wolf at the door", Commission President Jose Manuel Barroso nonetheless said a voluntary code of conduct was required to "avoid some funds being run in an opaque manner or used for non-economic objectives". The Commission called for "greater clarity and insight into the governance of SWFs and improving the quality of information they provide to markets on their size, investment objectives, strategies and source of resources".

Sovereign wealth has been attracting attention for several years in the US, but particularly since the sub-prime crisis. Current interest was arguably triggered by the highly publicized recapitalization of Citigroup by ADIA and the Kuwait Investment Authority (KIA) last November. That particular investment generated new controversy this week when Sameer Al Ansari, CEO of Dubai International Capital (DIC), was reported to have told delegates at an investment conference in Dubai that not even sovereign wealth could save the troubled US bank.

Ansari's comments, if indeed they were ever made, were quickly retracted, with DIC releasing a statement saying it has never expressed an opinion on the investment merits or financial condition of Citi. Further, we have not been privy to any non-public information about the Company, neither has Citi approached Dubai International Capital for a capital raise. Dubai International Capital maintains an ongoing relationship with Citi and has substantial respect for the company.

The curious incident may recall the dog that never barked, but Ansari's comments appear to reflect nothing more than market opinion: Citi has seen a further third fall of its share price despite ADIA's intervention, with shares now trading below $22. Ansari later added that he agreed with the need for further transparency to remove the "mystique" surrounding Gulf funds.

Indeed, the recent interest surrounding SWFs may perhaps prompt ADIA to reconsider its traditional reticence. Despite being the world's largest SWF, with funds estimated at anywhere between $600bn and $900bn, the Authority does not employ any PR, and its website consists of only a single page. ADIA's attitude to some extent reflects its origins: it was established in the 1970s to diversify Abu Dhabi's current account surplus beyond gold and short-term paper. Yet both ADIA, and indeed the oil that funds it, have grown in value remarkably since those days. It is increasingly inevitable that if ADIA wishes to continue to pursue publicly-listed stocks and shares, it will open up to some extent.

There is no doubt either though that Gulf funds are not the target of current EU and US concerns. As Bayh noted, "the oil-rich nations of the Gulf have a long track record of passive investing, but Russia's recent behavior and China's drive for economic advantage raise serious concerns about how sovereign funds might be used". ADIA, it would seem, is currently in the unfortunate position of being caught in the cross-fire of a much bigger rock fight. (OBG07.03)

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11.5 OMAN: Caps and Props

The Oxford Business Group observed that Oman is going flat out to try to curb rising inflation, planning to implement a ceiling on rental increases, looking to limit price hikes on a basket of staple goods and boost agricultural production to ensure self-sufficiency. Oman's inflation rate hit 8.29% at the end of December, a 16-year high, with the consumer price index being driven by rising food and rental costs. Increasing costs of food, beverages and tobacco accounted for nearly one third of Oman's consumer inflation, while rents rose by an estimated 11% last year.

On March 10, a member of a committee set up by the government to examine measures to ease the burden of climbing rental costs announced new legislation would shortly be introduced to cap annual rent increase at 7%, the same figure as that adopted in Dubai. The major overhaul of rental laws would bolster the rights of tenants and set a minimum lease period of four years for residential properties and seven years for business premises, according to Khalil Bin Abdullah Al Khonji, the chairman of the Omani Chamber of Commerce and Industry (OCCI).

The government was also planning to provide land just outside Muscat to private developers for constructing affordable residential property as a means to increase housing stocks and bring down rental pressure brought on by supply shortages, Al Khonji said. However, the sultanate's overheated construction sector is under pressure to complete the orders it already has on its books.

Oman's rental market has being hit by soaring prices for construction materials, with the cost of cement and steel having recently been increased by 20% and 11% respectively. With the price of pre-fabricated concrete also having gone up by 25% in the past month, driven by shortages of supply and higher demand, some construction projects have been delayed, further tightening the housing and office market.

The OCCI's Contractors' Association has called for the state to act to rein in price rises or face even longer delays in completing projects. The association's chairman, Sheikh Ali Bin Abdullah Al Badi, also put part of the blame for skyrocketing prices and shortages on the government itself. "If the government is not able to find alternatives and ensure sufficient supplies then why has it approved projects worth billions of rials?" Al Badi was reported as saying on March 10.

Though not directly affecting rents, Oman's continued pegging of its currency with the US dollar has been a force behind rising inflation, pushing up the costs of imports, in particular foodstuffs. In his role as OCCI chairman, rather than as a member of the rent committee, Al Khonji called for Oman's food suppliers and distributors to cap prices on a number of staple food items. "The idea is to cater to the needs of the lower middle class and those sections of society for whom the slightest price can cause a major dent in their budget," Al Khonji told local press on March 10.

The basic items included on the OCCI's list are rice, wheat flour, sugar, lentils, cooking oil, tea, milk powder, evaporated milk and ghee. The chamber has established a group to oversee the scheme and keep the prices of these goods down. The government is already moving along similar lines, with a ministerial committee unveiling an action plan on March 6 outlining a series of proposals to curb price rises and overcome shortages of supply for some commodities.

Oman's minister of commerce and industry, Maqbool bin Ali Sultan, said the committee's recommendations included increasing quotas for local fishermen and lifting seasonal bans on the importing of some fish species and the catching of some varieties in local waters. The committee also recommended boosting agricultural output by providing technical and financial assistance to primary producers, including establishing projects to increase cattle, sheep and poultry farming, he said. At the same time, imports of live cattle and goats from neighboring countries should be allowed, as long as health standards were met, said Ali Sultan. One other recommendation of the committee was that basic foodstuffs, mainly those also identified by the OCCI, be subject to price control and support, along with cement, and reinforcing bars for the construction industry.

Though subsidies will help keep prices down in the short term, they will prove a drain on the state's coffers, while there is only so much inflation the private sector will be prepared to soak up before passing it on to consumers. Past attempts to police a rent cap have not met with outstanding success either, with landlords often allegedly able to get around restrictions. The committee's longer-term recommendations to boost food availability hold out promise for the future, but it is in the here and now that Omanis are being hit in the hip pocket. For that pain to ease, a number of stars must align, with the weakening of the US dollar needing to regain some of its lost strength or be decoupled from Oman's rial. (OBG11.03)

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11.6 LIBYA: Politics - Small Government

The Economist Intelligence Unit reported that the Libyan leader, Muammar al-Kaddafi, has taken the traditional conservative quest for smaller government to a new plane by calling for the dissolution of the country's existing administrative structure and the disbursement of oil revenue directly to the people. Colonel Kaddafi's tirade against what he described as the "octopus" of government, which has sucked up Libya's massive oil wealth and provided little of value in return, came during his opening address to the General People's Congress (GPC), an annual gathering of the popular committees that notionally hold power in his "jamahiriyya" (entity of the masses).

Frustration

His speech reflected the widespread frustration with the failure of Libya to take advantage of the combination of rising oil prices and a dramatic improvement in relations with the West to press ahead with economic development and modernization. Over the past five years, Colonel Kaddafi has lent his support to a core group of Western-educated officials who have sought to reform the economy through opening the system up to private sector investment. However, progress has been painfully slow, owing to the lack of effective centralized decision-making. Public investment in infrastructure and services has similarly been held back by the chaotic state of the Libyan regulatory and administrative systems. The one notable exception has been the oil and gas sector, which has thrived on the considerable autonomy that it has been accorded.

Mirage

Ministers, officials and foreign investors in Libya have tended to await the GPC season with trepidation, as there is always the risk that Colonel Kaddafi will go off on one of his eccentric tangents. His speech on March 2nd is likely to go down in Libyan history as one of the classics in this genre.

His premise was that the GPC every year considers the annual budget, on this occasion $37bn, based on estimated oil export revenue. The funds are paid into the central bank and disbursed to various government departments, or committees, and public sector companies in the hope that the capital spending targets are achieved. However, Colonel Kaddafi said that it doesn't happen like that: "It is like the cloud that fills the desert, and you think it is water, but when you reach it you find that it is nothing." He said that the people had lost confidence in the government and the public administration, and had grown to believe that the country's wealth was being systematically plundered for personal gain.

He proposed that from now on oil revenue would be paid directly to every Libyan family every month. They would then decide on their spending priorities, individually or in the form of ad hoc committees interested in investing in a new agricultural or industrial project, or in education, health or housing. These committees would also decide how much tax to pay to the remaining centralized institutions.

Inflation Strategy

Colonel Kaddafi spent much of his speech presenting examples of how the new system would work in practice. He discussed the possible inflationary impact of handing out all of this spending power. His proposed remedy was for the people to take control of prices through finding out the fair value of goods through the internet.

The GPC will remain in session for several days, and is likely to devise means to tone down some of Colonel Kaddafi's proposals. The Libyan leader, having let off steam, can be expected to acquiesce in a somewhat less dramatic change in the system of government than that suggested in his speech—indeed, he said at the end of his oration that the current system could be maintained on a temporary basis. For all the blather about people's rule, Colonel Kaddafi must surely be aware that Libya is not that different from other military- and family-based autocracies in the Middle East—many of which are facing similar difficulties in translating oil wealth into broad-based socio-economic benefits—and that his subjects might ultimately hold him accountable for the state's failures and injustices. (ViewsWire10.03)

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11.7 CYPRUS: Fitch Affirms Cyprus at 'AA-'; Outlook Stable

On 10 March, Fitch Ratings (http://www.fitchratings.com) has affirmed the Republic of Cyprus's Long-term foreign currency Issuer Default rating (IDR) at 'AA-' (AA minus) with a Stable Outlook and Short-term foreign currency rating at 'F1+'. The agency also affirmed the local currency IDR at 'AA-' (AA minus) with a Stable Outlook and the Country Ceiling at 'AAA'.

"Membership of the euro area - which renders transfer and convertibility risk negligible - and fiscal improvements over the last five years have helped Cyprus achieve its current ratings," says Chris Pryce, a Director in Fitch's Sovereign team. The country formally joined the union on 1 January 2008.

Cyprus is a modern, predominantly services-based economy. It has a significant tourist industry, a growing business services sector and a long-established capitalist economy. Its income per head compares reasonably well with its rated peers. Economic growth has been robust, averaging around 3.6% over the past decade and inflation has been contained. The balance of payments current account deficit is around 6% but it is quite well-covered by foreign direct investment. As a member of the EMU, Cyprus's fiscal performance and economic flexibility to respond to shocks are more important as a driver of sovereign ratings than its external finances. In 2007 the Republic recorded its first overall government surplus in several decades and public debt fell to 60% of GDP (2006: 65.2%) by the end of the year. Surpluses, albeit smaller one, are expected this year and next, and the country's debt ratio is expected to fall sharply to below 50% of GDP by end-2008, thanks largely to the use of financial assets (totaling about 6% of GDP at end-2007) to pay down debt in 2008. There are, however, two big uncertainties.

"It still has to confront one of the largest threats to long-term fiscal stability from an ageing population in Europe as well as the continuing political division of the island," says Mr. Pryce. The banking sector is also relatively weak in comparison to sovereigns in the 'AA' category although there have been improvements with the Fitch Bank System Indicator (BSI) rising to 'C' (adequate) from 'D' (weak) in 2007 to reflect an upward revision to the rating of a major bank.

The election of a new president, Demetris Christofias, seems likely to break the logjam in negotiations between the Greek Cypriot and Turkish Cypriot communities associated with his hard-line predecessor, Tassos Papadopoulos. Broad-based political support for resumption of talks now seems to exist and negotiations could begin in months under the auspices of the UN. While any final resolution is a distant prospect, re-unification would have sizeable economic benefits although there would also be a short-term fiscal cost.

While population ageing and its impact on public expenditure was not the subject of open debate in the recent election, Fitch understands that extensive discussions have taken place among the social partners (primarily trade unions, employers and the government) last year and an element of agreement on proposed reforms exists. The government's Stability Program presented to the EU in December 2007 assumed that there will be phased increases of 1.3% every five years in social security contributions until 2037 as well as stricter eligibility criteria for pensions. There has apparently been no agreement on proposals to lift the retirement age to 65 or to reduce benefit levels. If the agreed reforms are implemented, the fiscal threat will be reduced at least in the shorter term but the long-term problems will remain and become a more significant adverse factor in the Republic's credit position. Implementation of deep-seated pension reforms will be necessary in order to prevent ageing pressures becoming a more significant adverse factor in the Republic's credit position in the longer term. (Fitch10.03)

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- Israeli Shekel conversions done at a rate of NIS 3.50 = $1.00
- Turkish Lira conversions done at a rate of NTL 1.2 = $1.00
- Euro conversions done at a rate of € 1.00 = $1.50
- Jordanian Dinar conversions done at a rate of JD 1.00 = $1.41
- UAE Dirham conversions done at a rate of Dh 3.67 = $1.00
- Omani Rial conversions done at a rate of OR 0.385 = $1.00
- Pakistani Rupee conversions done at a rate of Rs 60 = $1.00

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