TOP STORIES

• Finance Ministry Moves Against Excessive Public Sector Salaries
• Startup Supplier of High-Tech Seals Signs First Distributor in Israel
• Report Finds Israel Can Drastically Cut Oil Dependency
• Passenger Traffic on the Rise At Jordan Airport
• Turkey & Russia to Build New Pipeline from Samsun to Ceyhan
• Ramadan Begins on 21 August
• Israel Emerges From Recession

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Bank of Israel Ends Dollar Purchasing Program
1.2 Finance Ministry Moves Against Excessive Public Sector Salaries
1.3 Bank of Israel Intervenes as Shekel Strengthens
1.4 Finance Ministry Seeks To Boost Competition in Credit Cards

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Osem Continues Expansion in Worldwide Kosher Sales
2.2 Boxee Receives $6 Million Catalyst
2.3 Zion Oil to Switch Stock Exchange Listing to NASDAQ
2.4 Orckit-Corrigent Strengthens Its Sales Effort in Latin America
2.5 Startup Supplier of High-Tech Seals Signs First Distributor in Israel

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 ClearCube Technology Announces Expansion Into Middle East Markets
3.2 Office Depot Set for its Debut in Kuwait
3.3 Industrial Nanotech Signs for Sales and Distribution in Saudi Arabia
3.4 VSE Awarded Follow-on Work Supporting Foreign Military Sales Program for Egyptian Navy
3.5 Leading Turkish Hospital Group Selects Varian Equipment for Major Expansion
3.6 PLC Systems Announces Distribution Agreement for RenalGuard in Bangladesh & Pakistan

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 Report Finds Israel Can Drastically Cut Oil Dependency
4.2 Tamar Gas Field Even Bigger Than First Thought

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Jordan's Trade Balance Deficit Falls By 31.6%
5.2 Revenues of Jordan's Exports To Iraq Rise By 22%
5.3 Jordan's Fuel Imports Bill Drops By Half In 6 Months
5.4 Jordan Secures $14.7 Million Airport Security Grant
5.5 Passenger Traffic on the Rise At Jordan Airport
5.6 Gulf Air to Start Baghdad Service from 1 September
5.7 Bahrain Air to Start Iraq Flights
5.8 Qatar To Produce 5m Boepd By 2014
5.9 Abu Dhabi Hotels Top World List for Room Rates Growth
5.10 RAK to Build New Island to Host America's Cup
5.11 Saudi Inflation Drops To Two-Year Low
5.12 Egyptian Inflation Falls To 9.8% in July
5.13 Suez Canal Revenues Rise in July
5.14 IMF Increases Pakistan Loan to $11.3 Billion
5.15 Moody's Changes Pakistan's Outlook to Stable From Negative

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Inflation Figures of Turkey Announced
6.2 Turkey's Foreign Trade To Contract Further By Year-End
6.3 Nabucco Top Priority For Ankara
6.4 Turkey & Russia to Build New Pipeline from Samsun to Ceyhan
6.5 Cyprus Is Officially In Recession
6.6 Cyprus Trade Deficit Shrinks By More Than A Quarter In June
6.7 Cyprus Records Negative Inflation Rate In July 2009
6.8 Bulgaria Registers 0.6% Deflation in July, Zero 2009 Inflation
6.9 Bulgaria's Foreign Trade Gap Starts Closing Due To Crisis
6.10 Bulgaria's New Car Sales Drop By Over 50% Year-On-Year
6.11 Bulgaria Achieves Kyoto Protocol Targets

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Ramadan Begins on 21 August
7.2 Hebrew Month of Elul Begins on 20 August
7.3 Israel Sends Emergency Aid To Typhoon-Struck Taiwan
7.4 Number of Druze & Arabs in Israel's Civil Service Increasing

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*REGIONAL:

7.5 Smoking in Iraq
7.6 Egypt Issues First National ID Issued for Bahais

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Teva Announces Approval and Launch of Oxaliplatin Injection
8.2 Masimo & Oridion to Integrate Capnostream20 Monitors into the Masimo Patient SafetyNet System
8.3 U.S. FDA Approves Protalix's Treatment Protocol for prGCD

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Dongwoon Selects Tower as Sole Manufacturing Partner for High Volume LED Lighting Devices
9.2 BroadLight to Power the Accton GPON ONT Product Line
9.3 SiSense's PrismCubed Brings Enterprise-Class Business Intelligence to SMBs at a Fraction of the Cost
9.4 Mobileye Announces the Expansion of its Aftermarket Product Line With Mobileye C2-170
9.5 Frost & Sullivan Recognizes Sonotron NDT for Leadership in the NDT Equipment Market
9.6 ClickSoftware Awarded Patent for a Method and System for Sharing Knowledge in the Field
9.7 Plasan Awarded Sub-Contract for Additional 1,700 M-ATV Armor Kits
9.8 N-trig Earns "Compatible with Windows 7" Logo
9.9 DroidSecurity Launches Security Suite for Android
9.10 Elbit Systems to Supply the Finnish Army With Communication Systems
9.11 RiT to Address SMB Market With EPV - Real-Time Rack Connectivity Management Solution

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's July Inflation Matches Estimates
10.2 Israel Emerges From Recession
10.3 Israel's Industrial output Increases By 2% in June
10.4 Israel's High Tech Leads Export Recovery
10.5 Unemployment Benefit Claims Trend Declines
10.6 Israel's National Expenditure on Education Rises
10.7 August Traffic So Far Breaks New Records at Ben Gurion

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11: In Depth

11.1 A Special Report On The Arab World: Waking From Its Sleep
11.2 IRAQ: Foreign Oil Firms in Iraq Play the Waiting Game
11.3 KUWAIT: Fitch Affirms 'AA': Outlook Stable Ratings
11.4 KUWAIT: A Class Act
11.5 BAHRAIN: Industrious Kingdom
11.6 UAE: Ras Al Khaimah - The Nature of Tourism
11.7 OMAN: Moody's Outlook For Omani Banks Remains Stable
11.8 SAUDI ARABIA: IMF Executive Board Concludes 2009 Article IV Consultation
11.9 PAKISTAN: IMF Completes Second Review Under Stand-By Arrangement
11.10 TURKEY: Report Examining Turkey's Lucrative Tourism Industry
11.11 TURKEY: Oil and Gas Report Q3 / 2009
11.12 CYPRUS: IMF Executive Board Concludes 2009 Article IV Consultation
11.13 BULGARIA: Oil and Gas Report Q3 - 2009

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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Bank of Israel Ends Dollar Purchasing Program

On 10 August, the Bank of Israel announced that it will end its program of daily purchases of $100m in the foreign exchange market, one which began in July 2008. The move follows an earlier announcement the Bank would act in the foreign exchange market in the event of unusual movements in the exchange rate deemed inconsistent with underlying economic conditions, or when conditions in the foreign exchange market are considered disorderly. The shekel-dollar exchange rate fell 0.70% to NIS 3.885/$ following the announcement and the shekel-euro exchange rate fell 2.12% NIS 5.501/€. Bank of Israel said that it would still intervene "when necessary", but that it would not announce when, except in its monthly foreign currency reserves announcements. (Globes 10.08)

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1.2 Finance Ministry Moves Against Excessive Public Sector Salaries

Ministry of Finance Director of Wages Levin has set up a salaries enforcement unit as part of a move by the government against excessive salaries in the public sector. The unit began working in early August. It will review the approval process of excessive salaries at public agencies financed by the budget. The investigators will find the managers who approved the salaries so that disciplinary action can be taken against them, including disciplinary hearings if necessary. (Globes 05.08)

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1.3 Bank of Israel Intervenes as Shekel Strengthens

On 18 August, the Bank of Israel intervened to stop the strengthening of the shekel. The shekel strengthened against the dollar to a rate below NIS 3.80/$ in early inter-bank trading, but the trend changed as the session wore on. By late morning, the shekel-dollar exchange rate was up 0.5% on the previous day's representative rate at NIS 3.83/$. After an early fall, the shekel-euro exchange turned around and was up 1% to NIS 5.414/€. Foreign exchange market players estimate that the Bank of Israel bought dollars to the tune of $100-200 million and acted to weaken the shekel against the entire basket of currencies. Falls in stock markets around the world are strengthening the dollar against leading currencies, as investors' appetite for risk falls and they return to invest in dollar-linked instruments. Economically, the unexpectedly strong second quarter growth figures for Israel, as well as the high inflation, are supporting the shekel. However, the Bank of Israel has already shown that a sharp fall in the shekel-dollar exchange rate could lead to another intervention in the foreign currency market. (Globes 18.08)

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1.4 Finance Ministry Seeks To Boost Competition in Credit Cards

The Ministry of Finance has initiated a bill to open the credit card and the cross-clearing market to full competition. The bill will be submitted to the ministerial committee on legislation in a few weeks. Accountant General Oren is responsible for the staff work on the bill, which will probably include clauses to encourage the entry of new credit clearing companies into the market. The bill is based on the recommendations of a committee headed by former Accountant General Zelekha, which were submitted in February 2007 and approved by former Minister of Finance Baron in March 2008. The bill will be submitted to the Knesset in October, when it begins the winter session. The bill's main item calls for the full cross-clearing of all credit cards and credit card brands. Partial cross-clearing was implemented in October 2006 as part of a settlement between Israel's three credit card companies - Isracard, Leumi Card and Israel Credit Cards-Cal (ICC-Cal) (Visa) - and Antitrust Authority director general Kan. That settlement does not include the clearing of exclusive brands, such as American Express, Diners Club and Isracard. The settlement gives Isracard a significant competitive advantage: if a business wants to work only with one clearing company, only Isracard can provide the service for all credit cards. The settlement also includes a clause, put in at the insistence of Isracard, which stipulates that in the event of legislation on clearing, all the credit card companies have the right to notify to the Restrictive Trade Practices Tribunal within 90 days that the settlement is null. Isracard will reportedly quit the settlement in response to the legislation, and will not allow its competitors to clear its credit cards. Under the settlement, the credit card companies undertook to cross clear all credit cards and to gradually reduce their cross-clearing fees from 1.25% of a transaction in 2006 to 0.875 in July 2012. The fee is currently 1.1%, and the next reduction, to 0.975%, will come into effect in July 2010. (Globes 09.08)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Osem Continues Expansion in Worldwide Kosher Sales

Osem continues its worldwide expansion with special emphasis on the kosher market. Israel's largest manufacturer of instant soups and prepared salads has announced a deal to acquire Yarden G.B. Ltd, a British distributor of kosher food products for the sum of $3.2 million plus an additional amount for the company's inventory. Yarden markets kosher food products to supermarkets and stores who specialize in kosher foods in Britain and also has exclusive rights to distribute Osem's Sabra prepared salads. Osem said that the acquisition of the company will enable the Osem group to expand its presence in the UK markets especially for its Sabra ready made salad line. The company is also looking to become a leader in the kosher market in Britain. Yarden G.B. had sales of ₤7m in 2008 and its clients include the Tesco and Sainsbury supermarket chains. Osem, which is controlled by Nestle SA, is looking to boost its sales abroad by acquiring companies overseas. In the last year, it bought Tribe Mediterranean Foods, a US maker of humus and prepared salads and FoodTech International, an American company that produces meat substitutes. Kosher food sources say that kosher foods in Europe have been growing at a rate of 8%-10% a year, which is significant for the world's third largest kosher market. Israel's kosher market is valued at approximately $15b, while the US is at $12b. The European kosher market is believed to be about 10% of that amount. (KTN10.08)

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2.2 Boxee Receives $6 Million Catalyst

Boxee received a $6m round of financing led by Boston-based General Catalyst with participation by prior investors Spark Capital and Union Square Ventures. Boxee closed their Series A late last year, but given the momentum and opportunities they have seen over the past few months, the company brought in a new partner and additional funds. Hod HaSharon's Boxee (http://www.boxee.tv) is a free, open-source software platform that integrates personal media with Internet media along with social networking. Boxee's social networking component allows users to share information about what they're listening to or watching with other Boxee users or friends on social networks like twitter, Facebook, etc. Boxee is designed for your TV and use of a remote control. To get Boxee on your TV you'll need to first connect your computer to the TV screen. You will most likely need an DVI/VGA to HDMI cable (but it depends on the specific input/output on your computer and TV). Boxee is based on the Award winning open-source project XBMC, and also incorporates the XUL framework (which is the basis for the Mozilla browser). (Boxee12.08)

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2.3 Zion Oil to Switch Stock Exchange Listing to NASDAQ

Zion Oil & Gas approved the decision to switch the listing of its common stock and common stock purchase warrants from the NYSE Amex to the NASDAQ Global Market (NGM). The Company also announced that it has received approval from NASDAQ to list its common stock and warrants on the NASDAQ Global Market. It is anticipated that Zion's securities will commence trading on NASDAQ on September 2, 2009. Zion's common stock will continue to trade under the symbol 'ZN' and Zion's warrants will trade under the symbol 'ZNWAW'. Zion's management is scheduled to participate in the opening bell ringing ceremony on that date. The Company believes that listing the Company's common stock and warrants on the NASDAQ Global Market will provide the Company with opportunities to increase investor and analyst attention and provide the Company's investors with a better environment for trading shares of the Company. Zion's common stock currently trades on the NYSE Amex under the symbol 'ZN' and Zion's warrants trade under the symbol 'ZN.WS.'

Zion Oil & Gas (http://www.zionoil.com), a Delaware corporation, explores for oil and gas in Israel in areas located on-shore between Haifa and Tel Aviv. It currently holds two petroleum exploration licenses, the Joseph and the Asher-Menashe Licenses, between Netanya, in the south, and Haifa, in the north, covering a total of approximately 162,000 acres and the Issachar-Zebulon Permit Area, adjacent to and to the east of Zion's Asher-Menashe license area, covering approximately 165,000 acres. Zion's total petroleum exploration rights area is approximately 327,000 acres. (Zion17.08)

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2.4 Orckit-Corrigent Strengthens Its Sales Effort in Latin America

Orckit Communications announced the establishment of a new office in Brazil to extend its presence in Latin America region. This investment is reflecting the company's efforts to leverage the latest CM-4000 CE+T portfolio success at Mexico to the entire Latin America region. Tel Aviv's Orckit (http://www.orckit.com) facilitates telecommunication providers' delivery of high capacity broadband residential, business and mobile services over wireline or wireless networks with its Orckit-Corrigent family of products. With 20 years of field experience, a reputable list of worldwide Tier-1 customers and sound leadership, the Company has a firm foothold in the ever-developing world of telecommunications. Orckit-Corrigent's product lines include Carrier Ethernet + Transport (CE+T) switches - an MPLS-based portfolio enabling advanced packet as well as legacy services over packet networks with a wide set of transport features, and Personalized Video Distribution systems - an advanced video distribution portfolio, optimized for IPTV, enabling multiple HD streams per home over the existing DSL infrastructure. (Orckit10.08)

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2.5 Startup Supplier of High-Tech Seals Signs First Distributor in Israel

Newark, California's Applied Seals North America, an international supplier of durable elastomeric sealing products used in manufacturing semiconductors, solar cells and pharmaceutical products, has signed BTS Baruch & Co. Technologies & Supplies to provide distribution, local engineering support and some final testing of Applied Seals' products for customers throughout Israel's high-technology industries. Headquartered in the city of Herzliya, BTS has a dozen customer service professionals in Israel. The company maintains local product inventories in several locations, enabling fast delivery and service calls. BTS is a member of the Hirshberg Brothers Group, one of Israel's largest suppliers of raw and process materials, process equipment, and medical and scientific instruments. In addition to having its own technical staff, BTS has access to the group's technologists who contribute their broad expertise in process technologies, quality assurance and logistics. Applied Seals' products are manufactured by GMORS, the largest producer of sealing products in Taiwan and parent company of both Applied Seals North America and its sister company Applied Seals Co., which is based in Taiwan. In addition to supplying the microelectronics, biomedical and chemical processing industries, GMORS provides sealing products for every major automobile manufacturer in the world. (Applied Seals 17.08)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 ClearCube Technology Announces Expansion Into Middle East Markets

Austin, Texas' ClearCube Technology, the leader in centralized and virtual computing, announced today a new joint venture that will expand its presence in the Middle East. The new company, ClearCube Middle East, will enhance ClearCube's global footprint and deliver a full range of products, services and support to customers in the Middle East and South Asia regions. The ClearCube Middle East office will serve Kuwait, UAE, Bahrain, Qatar, Oman, Yemen, Saudi Arabia, Pakistan and India. ClearCube Technology is the pioneer and market leader in centralized and virtual computing, hardware and management software. By deploying ClearCube Blade solutions, customers have dramatically reduced their support costs while improving the security and availability of their computing infrastructure. (ClearCube 10.08)

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3.2 Office Depot Set for its Debut in Kuwait

Office Depot Inc., the global supplier of office products and services, is launching its first store in the Persian Gulf. In cooperation with local retailer M.H. Alshaya Co, the company will launch its first one stop shop for office supplies in the ME at The Avenues Mall, Kuwait. The opening this month comes as the first step in a series of store launches in Kuwait and the region, continuing the brand's dramatic growth over the last 20 years since its establishment. The flagship store will offer around 5,000 products and services over 900 square meters of floor space to businesses as well as private costumers. Office Depot products include general office supplies, computer supplies, business machines and related supplies, as well as office furniture from international brands and its own private brands, which include Office Depot, Foray, Ativa and Real Space. The stores also contain a copy, print and ship centre. The company currently has 1,604 retail stores worldwide. (AB03.08)

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3.3 Industrial Nanotech Signs for Sales and Distribution in Saudi Arabia

Naples, Florida's Industrial Nanotech, an emerging global leader in nanoscience solutions, announced that the Company has signed an agreement with the Chairman of Saudi Environmental Projects, Prince Abdullah bin Mosaad Bin Abdulaziz Al-Saud, for the sales and distribution of the Company's patented product line of award winning, energy saving protective coatings containing a nanotechnology based material and which provide the combined performance qualities of thermal insulation, corrosion prevention, resistance to mold growth, fire resistance, chemical resistance and lead encapsulation in an environmentally safe, water-based, coating formulation. The Nansulate Product Line includes industrial, residential, agricultural and solar thermal insulation and asset protection coatings. Prince Abdullah bin Mosaad Bin Abdulaziz Al-Saud is one of the Kingdom's prominent businessmen and industrialists. He is the founder and chairman of the largest paper manufacturing and processing paper industrial facilities outside the USA, Europe and Japan. He is the Chairman and CEO of The Saudi Paper Manufacturing Group, which includes the Saudi Paper Manufacturing Company, the Saudi Recycling Company and the Saudi Company for Environmental Enterprises. (INTK17.08)

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3.4 VSE Awarded Follow-on Work Supporting Foreign Military Sales Program for Egyptian Navy

Alexandria, Virginia's VSE Corporation reported that its International Group's GLOBAL Division has received an award to continue work being conducted in Alexandria, Egypt. The $32.8m In-Country Technical Assist award will enable GLOBAL Division to provide Management, Engineering, Technical, Training and Logistics support for the Egyptian Navy FMS programs and ex-United States Navy transferred ships either in port or at sea, as necessary to support ship operations, training and maintenance. Additionally, the contract provides continuing funding to support an Industrial Training School, a Damage Control and Fire Fighting School, and provides continuing support to assist the Egyptian Navy in improving their shipyard infrastructure. VSE's International Group provides engineering, industrial, logistics and foreign military sales services to the U.S. military and other government agencies. VSE is a diversified Federal Services company of choice for solving issues of global significance with integrity, agility and value. (VSE17.08)

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3.5 Leading Turkish Hospital Group Selects Varian Equipment for Major Expansion

The first hospital group in Turkey to offer cancer patients advanced RapidArc radiotherapy treatments has acquired four additional treatment machines from Palo Alto's Varian Medical Systems. Acibadem Healthcare Group, based in Istanbul, has expanded its radiotherapy facilities in Turkey from three to five with new centers in Adana and Kayseri. RapidArc treatments have commenced at Acibadem's Maslak Hospital in Istanbul, enabling the hospital to extend more advanced care to more patients. Doctors at Maslak are using the technology to carry out image-guided IMRT (intensity modulated radiotherapy) treatments on a range of tumors. RapidArc delivers a precise and efficient treatment in single or multiple arcs of the medical linear accelerator around the patient and makes it possible to deliver image-guided IMRT two to eight times faster than is possible with conventional IMRT. Varian Medical Systems of Palo Alto, California, is the world's leading manufacturer of medical devices and software for treating cancer and other medical conditions with radiotherapy, radiosurgery, proton therapy and brachytherapy. (Varian 10.08)

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3.6 PLC Systems Announces Distribution Agreement for RenalGuard in Bangladesh & Pakistan

Franklin, Massachusetts' PLC Systems, a company focused on innovative cardiac and vascular medical device-based technologies, has entered into a three year exclusive agreement with Medimen (Pvt.) Ltd., headquartered in Pakistan, for distribution of its RenalGuard System into Bangladesh and Pakistan. Medimen is an established distributor of medical technology and devices in this region, and has previously worked with PLC on distribution of the Heart Laser System. Medimen has already launched RenalGuard in Bangladesh, and will target early adopters in both countries who recognize the benefits of utilizing the unique fluid balancing capabilities of RenalGuard in a cath lab setting during cardiovascular imaging procedures for patients at higher risk of Contrast-Induced Nephropathy (CIN). (PLC Systems 10.08)

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 Report Finds Israel Can Drastically Cut Oil Dependency

Globes reported that Israel's oil imports will total $4.5 billion in 2009, half the total in 2009, according to new report by the Friedrich Ebert Stiftung affiliated Macro Center for Political Economics that was submitted to the Knesset this week. The report, written by Dr. Amit Mor and Dr. Shimon Seroussi, states that Israel could cut its oil imports by 20%, saving $1 billion a year at current prices, through energy conservation and the sophisticated use of electricity and fuel in more efficient and cheaper ways. Mor and Seroussi are co-CEOs of Eco Energy Ltd., an economic consulting and investment firm.

The report is part of the Senat Project of the Israeli Institute for Economic and Social Research, which publishes weekly working papers on public issues. These papers are distributed to MKs, ministries, economic enterprises and non-profit organizations. The report notes a downward trend in Israel's oil consumption, thanks to the reduction of the use of crude oil and diesel to generate electricity with the changeover to natural gas by the Israel Electric Corporation (IEC), which began in 2004.

Consumption of oil products by Israel and the Palestinian Authority has been falling steadily. Oil consumption was 11.4 million tons in 2008, 2% less than in 2007, and 8% less than in 2003. The report expects this downward trend to continue in the coming years, with the completion of the national natural gas infrastructure and the hook-up of power stations and major industrial plants to the natural gas pipeline.

The current recession also reduced Israel's oil consumption by 10% compared with the corresponding period of 2008. Macro Center general director Dr. Roby Nathanson, who edited the report says, "Israel is sharing in a global trend that emphasizes the increased use of renewable energy sources and additional sources of gas. Israel imports more than 90% of its crude oil from Russia and other countries of the former Soviet Union, where there are many internal conflicts, a fact that jeopardizes the oil supply. The Senat report points out to the MKs that it is possible to reduce energy consumption by applying a range of methods for conservation and energy efficiency, regulatory and legislative amendments, encouraging the use of fuel-efficient vehicles, and so on." (Globes 17.08)

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4.2 Tamar Gas Field Even Bigger Than First Thought

Noble Energy has notified its partners, including Delek Group and Isramco that the gross mean resources in the Tamar natural gas field offshore from Haifa are 16% larger than the previous estimate, and amount to 207 billion cubic meters. The previous estimate was 178 billion cubic meters. Netherland, Sewell and Associates Inc. made the estimate. Tamar's proved and probable reserves are now estimated at 218 billion cubic meters, of which 170 billion cubic meters is proven. The proved and probable reserves are the basis for the partnership's development plans. Noble Energy unit Noble Energy Mediterranean Inc. owns 36% of the Tamar prospect. Delek owns 31.25% through Delek Energy Systems subsidiaries Delek Drilling LP and Avner Oil and Gas LP. Isramco owns 28.75% and Alon Israel Oil Company unit Dor Gas Exploration LP owns 4%. (Globes 11.08)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Jordan's Trade Balance Deficit Falls By 31.6%

Jordan's trade balance deficit (difference between exports and imports) fell by 31.6% in the first 6 months of this year to JD2376 million compared to JD3472.2 million in the same period of last year, according to figures released by the Department of Statistics. The volume of total exports declined by 11.7% to JD2313.7 compared to JD2620 million in the same period. The volume of national exports also fell by 11.3% from JD1982.5 million in the first six months of 2008 to JD1758.6 million in the same period of 2009. The data showed a drop in re-exports by 12.9% to JD555.1 million compared to JD637 million. The figures indicated a decline in imports in the first 6 months of this year by 23% to JD6489.7 million compared to JD6092.7 million. Imports from countries of the Greater Free Trade Arab Zone, the EU and non-Arab Asian countries declined, while imports from NAFTA countries including the United States witnesses rose, according to the data. (Petra12.08)

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5.2 Revenues of Jordan's Exports To Iraq Rise By 22%

Revenues of Jordan's exports to Iraqi rose by 22.5% in the 6 months of this year, according to official figures. The figures showed that the Kingdom's exports to Iraq stood at JD318.8 million during January-June this year compared to JD260.1 million in the same period of last year. Iraq absorbed fifth of Jordan's exports to become Jordan's main trade partner among 100 countries. Iraq also accounted for one third of Jordan's exports to countries of the Greater Arab Free Trade Zone. Jordan's exports to Iraq consist mainly of vegetables, machinery and transport equipment. (Petra12.08)

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5.3 Jordan's Fuel Imports Bill Drops By Half In 6 Months

The value of Jordan's imports of fuel derivatives dropped by half during the first six months of this year compared to the same period of the year before, according to statistical report. The country's imports of crude oil particularly gasoline and diesel amounted to a total value of JD737 million compared to JD1493.9 million, showed foreign trade figures released recently by the General Statistic Department. (Petra12.08)

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5.4 Jordan Secures $14.7 Million Airport Security Grant

Jordan has secured a multi-million dollar loan to complete a security overhaul at Queen Alia International Airport (QAIA). A memorandum of understanding (MoU) was signed with the Japanese government in early August for the provision of a $14.7m grant, which has been earmarked for the purchase of security equipment such as x-ray inspection and explosive detection systems. In addition, the latest in handheld metal detectors will also be introduced at the airport for cargo and passenger operations. The signing of the memorandum reflects the strong ties between the two countries and comes as a result of King Abdullah's visit to Japan last April. (ASC11.08)

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5.5 Passenger Traffic on the Rise At Jordan Airport

Airport International Group (AIG) has reported a 13.39% increase in aircraft movements at Jordan's Queen Alia International Airport (QAIA) last month, compared to the same period in 2008. The first six months of this year meanwhile saw an extra 28,428 passengers passing through the airport, representing 1.4% growth over H1/08. Figures show that June 2009 was the highest month for passenger traffic over the period with 426,286 travelers, an increase of 5.28% compared to June last year. The rehabilitation and expansion works at Jordan's QAIA continue with the new passenger terminal extending over 85,000 square meters. AIG, under the terms of a 25-year concession agreement with the Jordanian authorities, is responsible for the operation of the airport, the rehabilitation of existing facilities and the construction of the new terminal. (ASC30.07)

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5.6 Gulf Air to Start Baghdad Service from 1 September

Bahrain's national carrier Gulf Air will commence services to Baghdad on 1 September and add two more destinations in Iraq (the holy city of Najaf and Erbil in the north) by the end of the month. Flights to Iraq's capital Baghdad went on sale online from 6 August, as well as via travel agencies and Gulf Air sales office. Gulf Air will initially operate a five times weekly service to Baghdad using an A320 narrow body aircraft. The airline hopes to increase this to a daily service in the near future. Gulf Air will become the first GCC airline to offer direct flights to Iraq. (TradeArabia 05.08)

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5.7 Bahrain Air to Start Iraq Flights

Bahrain Air confirmed that it is to start flying to Baghdad and Najaf - the seven flights a week comprising two to the Iraqi capital and five to Najaf. The new services commence on 28 August. In addition to the Iraq flights the carrier also confirmed it has added Saudi capital Riyadh to its network, bringing the total number of destinations to 19. Flights to Riyadh are due to start on September 28. Gulf Air also announced it will start flying to Baghdad from September 1. (ASC12.08)

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5.8 Qatar To Produce 5m Boepd By 2014

Qatar's total oil and gas capacity should reach 5 million barrels of oil equivalent per day (boepd) in 2014 when planned energy expansion projects are completed. That would be up from around 2.8 million boepd combined oil and gas output in 2008. The Gulf state, the world's largest exporter of liquefied natural gas, could produce a total of 23 billion cubic feet per day (cfd) of natural gas per by 2014. Output of natural gas last year was about 7.4 billion cfd, according to BP's 2009 annual statistical review. The 2014 total, including domestic supply and gas piped to the UAE, is equivalent to about 4.2 million boepd. Added to oil production of around 800,000 barrels per day (bpd), the total would be around 5 million boepd. Qatar is one of Opec's smallest producers, and pumped around 720,000 bpd in July. Qatar aims to boost LNG capacity to 77 million tonnes per year in 2010. Current capacity is 45-46 million tonnes. Qatar, which holds the world's third-largest gas reserves, was expected to produce 12 million tonnes of propane and butane per year by 2014, with total petrochemical production to reach 4.3 million tonnes per year by 2015. (TA17.08)

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5.9 Abu Dhabi Hotels Top World List for Room Rates Growth

Abu Dhabi could soon become the most expensive city for business travelers, according to latest research. The UAE capital was the only city to record a growth of 5% in real terms in a bi-annual hotel survey by Hogg Robinson Group (HRG), an international business travel company. The average room rate grew from AED1,330 in 2008 to AED1,390 in 2009, pushing the city up the ranking from eighth place last year to second this year. The survey found that in Middle Eastern cities demand continues to outstrip supply, except in Dubai which saw a 24% drop in room rates – one of the largest decreases in the survey. The emirate has continued to suffer from a fall in demand from the banking and finance sector, coupled with an exodus of expatriates and migrant workers due to the financial downturn. (AB09.08)

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5.10 RAK to Build New Island to Host America's Cup

On 5 August, it was announced that a 22-hectare purpose-built island will host the teams when the 2010 America's Cup takes place in Ras al-Khaimah, UAE. The island will be part of the Al Hamra Village lagoon, a new luxury resort with more than 3,500 homes on the coast of Ras al-Khaimah. No cost to the project has yet been announced. Sheikh Saud Bin Saqr Al Qasimi, Crown Prince of Ras al-Khaimah, expressed his satisfaction at the news that his emirate had been chosen. News that the emirate had won the world's most prestigious sailing race was announced earlier on Wednesday when the Cup holders, Swiss sailing team Alinghi and its yacht club, the Societe Nautique de Geneve, issued a statement. By custom, the defending America's Cup champions have the right to choose the location for the race which is due to start on 8 February 2010. After training in the UAE this winter, team officials said they felt it was the best fit for this race, which features what should be the two fastest boats in the competition's 158-year history. Alinghi, which is owned by Swiss pharmaceutical heir Ernesto Bertarelli, will face off in three head-to-head races against rival BMW Oracle, backed by software mogul and Oracle founder Larry Ellison. The America's Cup is the latest major sports conquest for the UAE, and follows Abu Dhabi's inclusion in the Formula One calendar. (AB05.08)

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5.11 Saudi Inflation Drops To Two-Year Low

Saudi Arabia's annual inflation rate fell to 4.2% in July, its lowest level in two years, due mainly to a slowdown in the rise of home rents and food prices. Inflation rates have been declining rapidly in the largest Arab economy as commodity prices slumped and a stronger US dollar helped reduce import costs for the major oil exporter, which pegs its riyal to the dollar. Saudi Arabia's cost of living index stood at 122.2 points in July versus 121.5 points in June, the official Saudi Press Agency said citing data from the statistics authority. Annual inflation in June reached 5.2%. The index stood at 117.3 points in July 2008, which led then to an annual inflation rate of 11.1%, the highest in at least 30 years, as the economy boomed and global commodity and oil prices soared. Last month's rate puts inflation at its lowest rate since July 2007, when it recorded an annual increase of 3.83%. The annual rise in the rental index - which includes rents, fuel and water - eased to 13.5% in July down from 15% in June and 17.7% in May. For food and beverages the annual increase was 1% in July down from 1.7% in June and 2.4% in May. Analysts expect the start of the Muslim fasting month of Ramadan around August 21 to cause a spike in food prices as families stock up for evening meals. Saudi Arabia said last year it would invest around $400 billion in the next five years, mainly to enhance infrastructure in the country of around 25 million people. Imported labor adds to pressures generated by rapid demographic growth among the native population of over 17 million. (TA17.08)

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5.12 Egyptian Inflation Falls To 9.8% in July

Urban consumer inflation in Egypt fell to 9.8% in the year to July, down from 10.0% in the year to June, figures from Egypt's state-run Capmas statistics agency indicated. The figures were above forecasts by three analysts, who had cited rates ranging from 8 to 9%. The Capmas index for urban inflation was 136.6 in July 2009 compared to 124.4 for July 2008, indicating an inflation rate during the period of 9.81% or 9.8% when rounded. The index for urban inflation in the year to June had indicated a rise of 9.96% or 10.0% when rounded. Capmas gave the inflation rates as 9.9% for both June and July, without explaining the discrepancy. Inflation has been declining steadily, but analysts had said spending ahead of Ramadan, the Muslim fasting month which starts later in August, could put a break on any further decline. Ramadan is traditionally a period when Egyptians and other Muslims visit family or friends to break the fast, often with large meals after sunset when the fasting day ends. (Capmas 10.08)

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5.13 Suez Canal Revenues Rise in July

Egypt's Suez Canal Authority posted July numbers that signal a steady rebound for one of the government's primary income sources. Revenue for the canal in July hit $382.9 million, about a 10% jump from $348.2 million in June. Revenue in June grew 1.7% month on month, so July numbers indicate that revenue is rebounding at a faster rate. Not only is this good news for Egypt, but a month on month increase in canal revenue indicates a rehabilitation of global trade, which many see as a sign that the global economy may be emerging from recession. The number of vessels passing through the canal in July also improved over June, rising from 1,401 to 1,521. Year-on-year, this was an 18% decline. Tonnage passing through the canal was up by more than 5 million. Improved performance for July can't undo the harsh reality that revenue is still significantly off its performance from a year ago. July's posting represents a 22% fall from the July, 2008 haul of $490 million. The 22% fall, though, showed an improvement over June's year on year decline of 26%. These latest numbers give credence to the argument that the worst of the global recession is in the past. Revenue has continued a steady month-on-month recovery for much of the year.

In a broader context, despite a decline in revenue as a result of global economic tumult, the canal registered its second highest ever annual revenue numbers for the 2008-2009 fiscal year. Earning $4.7 billion for the 12 months ending in June, the latest fiscal year came second only to the 2007-2008 fiscal year with a haul of $5.2 billion. The largest share of the ships passing through the Suez is bound for Europe. Many analysts still fear that Europe will be among the slowest economies to recover, fueling fears that revenues from the Suez could take some time to reach their pre-recession levels. Analysts tend to agree that revenue will continue to improve in the 2009-2010 fiscal year, but they're generally pessimistic that it can reach 2007-2008's benchmark of $5.2 billion.

The Suez Canal remains one of the government's three primary forms of revenue, and a decline in income, therefore, has come with consequences. First among the consequences is a nearly $100 billion budget deficit. The decline in canal revenue has contributed only marginally to this spending gap, but it has had a much more direct impact on the country's foreign currency reserves, which have fallen 8.7% over the past year. One other hopeful sign that the recovery of canal revenue may be able to outpace that of international trade is the ongoing project by the government to deepen the canal from 56 feet to 72 feet. A lot of the larger ships, that the canal can't accommodate, are currently made to sail around the Cape of Good Hope in South Africa. Deepening the canal would corner more of the trade passing from eastern ports in places like the Persian Gulf, India and China to Europe and the US. (DNE16.08)

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5.14 IMF Increases Pakistan Loan to $11.3 Billion

On 7 August, the IMF increased its loan to Pakistan by $3.2b to a total of $11.3b and said some of the money would be available immediately as the government deals with increased security costs. The IMF said Pakistan's...outlook for 2009/10 remains difficult, with the government needing to assist almost three million people displaced by fighting between security forces and Taliban militants...." The IMF felt that a rebound in agriculture following a bumper wheat crop helped maintain growth. However the estimate of real gross domestic product growth for 2008/09 has been lowered to 2% from 2.5% due to increasing weakness in large-scale manufacturing, exports and private sector credit. The Fund is projecting growth of 3% for 2009/10. The IMF Deputy Managing Director said that Pakistan's economy continues to stabilize with reforms in the financial sector and the foreign exchange market has been progressing and steps have been taken to strengthen the social safety net. He said the monetary policy of Pakistan should remain vigilant about preventing a resurgence of inflation. The relaxation of the fiscal policy stance, electricity tariff increases and the rebound in oil prices will add to inflationary pressures that monetary policy needs to combat. (BR09.08)

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5.15 Moody's Changes Pakistan's Outlook to Stable From Negative

Moody's Investors Service (http://www.moodys.com) has changed the outlook for Pakistan's B3 foreign and local currency sovereign bond ratings to stable from negative. Moody's has also changed to stable from negative the outlooks on the B3 country ceiling for foreign currency bank deposits and the B1 country ceiling for foreign currency debt. The stable outlook was prompted by the recent augmentation of Pakistan's IMF program by $3.2 billion to more than $11 billion, and several ongoing policy and structural reforms. Meanwhile, remittance inflows from overseas Pakistanis have remained strong. These developments avert the likelihood of external payment arrears over the next 12 to 18 months, and they provide greater re-assurance about the finance-ability of Pakistan's current account and fiscal deficits. The IMF program augmentation would help to safeguard foreign currency reserve adequacy against the risks of further deceleration in private capital flows or delays in bilateral assistance while also providing bridge financing for fiscal requirements. Pakistan's civil and state institutions appeared to be coalescing, and that a socio-political consensus was firming against religious extremism. In Moody's opinion, Pakistan's ability to stabilize its political institutions and forge a robust response to Islamic militancy carries a substantial humanitarian cost, but such developments are gaining international confidence in the country's state and political institutions. Moody's last rating action on Pakistan was on December 12, 2008, at which time the outlook was changed to negative following a review for possible downgrade. (Moody's17.08)

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Inflation Figures of Turkey Announced

On 10 August, Turkish Board of Statistics (TUIK) announced that consumer prices index increased 0.25% and producer prices index dropped 0.71% in July 2009. Annual inflation rate in consumer prices index increased to 5.39%, while it dropped to 3.75% in producer prices index as of July 2009. According to 12-month averages as of July, annual inflation was 8.52% in consumer prices and 5.47% in producer prices. (TUIK10.08)

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6.2 Turkey's Foreign Trade To Contract Further By Year-End

Turkey's annual exports are expected to total $91.7b while its imports will be $118.9b for 2009, according to estimates based on the first six months of the year. In 2008, Turkey made $131.5b worth of exports while the country's imports totaled $201.4b. Figures from the Turkish Statistics Institute (TurkStat) for the January-June period of this year indicate that the foreign trade deficit will decrease to $27.2b by the end of the year. In its latest foreign trade indices report, TurkStat said Turkey's exports decreased by 30.6% to $47.7b and imports dropped by 41.1% to $62.3b in the first half of 2009 when compared to the same period of last year. The latest figures suggest that by the end of the year, the main importer of Turkish products will be Germany, with $8.4b, while the highest share of Turkey's imports will come from Russia, with an estimated $16.6b. (ZAMAN11.08)

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6.3 Nabucco Top Priority For Ankara

Nabucco remains a top priority for Ankara as its recent agreement on the rival South Stream project with Moscow concerns only permission to use its territory. Russian Prime Minister Putin secured an agreement with Ankara on 7 August for the construction of the South Stream natural gas pipeline in its territorial waters in the Black Sea. South Stream will travel from the Russian port city of Novorossiysk to Varna, Bulgaria, through the Black Sea. It will then run to Italy and Austria through the Balkans. Despite the agreement on South Stream, Ankara says the $10.3b Nabucco gas pipeline for Europe remains its top priority. Turkish officials state that Nabucco and South Stream are two separate projects that have complementary objectives. Vulnerability to Russian dependence on natural gas was exposed in January when gas giant Gazprom shut off gas supplies to Ukraine following a dispute with Kiev over gas debts and contracts. Around 80% of all Russian gas bound for Europe runs through Soviet-era pipelines in Ukraine, prompting a rush toward diversification. Ankara stressed that it is not a partner to South Stream, only a host nation. Ankara in June hosted a major summit on Nabucco, establishing Turkey as a key energy player in the region. Its pipeline company BOTAS is a shareholder in the project consortium as well. (Various09.08)

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6.4 Turkey & Russia to Build New Pipeline from Samsun to Ceyhan

Russia will sign an accord with Turkey on building a pipeline for sending Black Sea oil to the Mediterranean, bypassing congestion at the Bosporus Straits as Bulgaria may back out of a similar project. OAO Gazprom, Russia's largest company, and Turkey's Calik Holding AS will sign an accord to build a pipeline between the northeastern port of Samsun and a terminal at Ceyhan on Turkey's Mediterranean coast, Russian Energy Minister Shmatko announced. Increased oil output from the Caspian region as Kazakhstan's Kashagan field plans to begin output will add additional tanker shipments via the Black Sea. Tankers have been delayed as much as a month in passing through the Bosporus Straits because of weather and seasonal conditions. Gazprom Deputy Chief Executive Officer Medvedev in July 2008 said the company's liquids arm Gazprom Neft would be interested in joining the Samsun-Ceyhan pipeline project planned by Italy's Eni SpA and Calik. Gazprom Neft is also a partner in the Bourgas - Alexandroupolis project. (Reporter05.08)

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6.5 Cyprus Is Officially In Recession

Cyprus officially recorded a recession in April-June, as GDP contracted over the previous period for the second quarter in a row. According to the latest "flash" estimate from the Statistical Service, real GDP (seasonally adjusted) contracted by 0.5% in the second quarter, having shrunk by 0.6% in the first quarter. The economy thus met the recession criterion of two consecutive quarters of quarter on quarter decline. The initial estimates for the first quarter had shown zero growth rather than contraction, therefore new data coming in must have been more downbeat than the Statistical Service had initially estimated. Compared with the same period of the previous year, real GDP also contracted, by 0.7% (seasonally adjusted) or 1.0% (not seasonally adjusted). The detailed data will be released in a few weeks. In the meantime, the Statistical Service reported that there were "very negative growth rates" for hotels and restaurants and negative performances for manufacturing, construction, wholesale and retail trade and transport activities. On the other hand, financial intermediation (banking) and broad services (mainly the public sector) continue to record positive growth rates but at a decelerating rate, said the Statistical Service. (FM13.08)

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6.6 Cyprus Trade Deficit Shrinks By More Than A Quarter In June

Cyprus' trade deficit shrank by more than a quarter in June, according to preliminary data from the Statistical Service, Cystat. According to the provisional data, total imports/ arrivals reached €462.2m, of which €329.4m were arrivals from other member states of the EU and €132.8m imports from third countries. Total exports/dispatches amounted to €81.8m, of which €52.1m were dispatches to other member states of the EU and €29.7m exports to third Countries. The trade deficit was €380m, a fall of 26.4% compared with the €517m recorded in June 2008. The Statistical Service also published full data for the period January-May 2009. In January-May, total imports/arrivals (covering total imports from third countries and arrivals from other member states) amounted to €2,312.7m, compared with €2,964.4m in January-May 2008. Total exports/dispatches (covering total exports to third countries and dispatches to other member states) in January-May 2009 reached €396.1m, compared with €478.7m in January-May 2008. The trade deficit was €1,916.6m in January-May 2009, compared with €2,485.7m in January-May 2008. During May 2009 total imports/arrivals (covering total imports from third countries and arrivals from other member states) were valued at €486.6m. Total exports/dispatches (covering total exports to third countries and dispatches to other member states), including stores and provisions in May alone amounted to €91.3m. Exports/dispatches of domestically produced goods, including stores and provisions, reached €53.1m, whilst exports/dispatches of foreign goods, including stores and provisions, amounted to €38.2m. (Cystat10.08)

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6.7 Cyprus Records Negative Inflation Rate In July 2009

The rate of increase of the Harmonized Index of Consumer Prices (HICP) for July 2009 recorded a negative rate of inflation -0.8%, down from 0.1% in June 2009, according to the Statistical Service says. According to the Statistical Service, a year earlier, in July 2008, the rate was 5.3%. (CSS10.08)

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6.8 Bulgaria Registers 0.6% Deflation in July, Zero 2009 Inflation

In July 2009, Bulgaria registered deflation for the third consecutive month, National Statistical Institute data shows. After registering a deflation of 0.3% in May and 0.4% in June, the July deflation is 0.6%. Hence, Bulgaria's overall inflation for the first seven months of 2009 has been reduced to 0%. In January 2009, Bulgaria had an inflation of 0.8%, in February – 0.1%, in March a small deflation of 0.2%, and in April - an inflation of 0.7%. Bulgaria's inflation for the period between January and July 2009 is 4,5% compared to the same period of 2008. Food prices registered a decrease of 1.5% in July 2009; alcohol and tobacco prices declined by 0.4%, whereas clothes and shoes became cheaper by 1.8%; rent and housing bills - by 1.6%. Health care prices registered an increase of 3%, entertainment and leisure activities - by 4.8%. (SMN13.08)

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6.9 Bulgaria's Foreign Trade Gap Starts Closing Due To Crisis

Bulgaria's negative trade balance is becoming smaller thanks to the effects of the global economic crisis. This has become clear from preliminary data released on 11 August by the National Statistical Institute. Thus, in H1/09, Bulgaria had a negative trade balance of BGN 5,5 B, which is BGN 4,1 B (about 42%) smaller than in the first half of 2008. In the first six months of 2009, Bulgaria exported goods for BGN 10,6 B - a 30,3% decrease compared to the same period of 2008, and imported goods for BGN 16 B - a 35,3% decrease compared to January-June of 2008. Bulgaria's export in June 2009 declined by 28,7% down to BGN 1,95 B year-on-year, whereas the import declined by 42,3% down to BGN 2,6 B year-on-year. Over 64% of Bulgaria's export was destined for the EU in the first half of 2009, and over 60% of the total import came from there. Bulgaria's trade with third, i.e. non-EU countries was worth BGN 10.2 B, which is a 39.6% drop compared to the same period of 2008. The export for those countries has declined by 37.5%, and the import from them has declined by BGN 40.7%. (SMN12.08)

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6.10 Bulgaria's New Car Sales Drop By Over 50% Year-On-Year

The sales of new cars, trucks, and buses in Bulgaria fell in July 2009 by the staggering 52,4% compared to July 2008. This becomes clear from the data released on 11 August by the Union of Car Importers. In July 2008, a total of 5 306 new vehicles were sold in Bulgaria, whereas in July 2009 their number went down to 2 524. A total of 17 376 new cars, trucks, and buses were sold in Bulgaria in the first seven months of 2009 compared to 35 495 new vehicles that were sold in the same period of 2008. This is a decline of 51,05%. Toyota remains the most popular car brand in Bulgaria with a total of 1 815 new cars sold since the beginning of 2009. Volkswagen is second with 1 674 sales, followed by Peugeot (1 477 sales) and Opel (1 475 sales). Mercedes has sold 234 new trucks in Bulgaria in 2009 so far, followed by Iveco with 156 trucks, and Man with 78. (SMN12.08)

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6.11 Bulgaria Achieves Kyoto Protocol Targets

Bulgaria's CO2 emissions reached 52.8m tons in 2008, making it one of the few EU countries to achieve its targets under the Kyoto Protocol. Global carbon dioxide emissions in 2008 rose 1.94 % year-on-year to 31.5b tons, German renewable energy industry institute IWR said, based on official information and its own research on 65 countries worldwide. Kyoto set Bulgaria a target of an 8% reduction in carbon dioxide emissions based on 1990 statistics, when Bulgarian emission reached 75m tons. Currently the emissions are 30% less. A larger reduction was only seen in two other members of the European Union - Romania (44%) and Lithuania (53%). (SMN12.08)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Ramadan Begins on 21 August

Ramadan in 2009 will start on Friday, 21 August and will continue for 30 days until Saturday, 19 September. It is the ninth month of the Muslim calendar. The Month of Ramadan is also when it is believed the Koran was sent down from heaven. Fasting is one of the Five Pillars of the religion of Islam and one of the highest forms of Islamic worship. Abstinence from earthly pleasures and curbing evil intentions and desires is regarded as an act of obedience and submission to God as well as atonement for sins, errors and mistakes. Muslims fast during Ramadan from the moment when it first starts to get light until sunset. Muslims fast as an act of faith and worship towards Allah, seeking to suppress their desires and increase their spiritual piety. Fasting together as a worldwide community - Ummah - affirms the brotherhood and equality of man before Allah. This fast lasts the entire month. Ramadan is a time when Muslims concentrate on their faith and spend less time on the concerns of their everyday lives. It is a time of worship and contemplation. During the Fast of Ramadan other strict restraints are also placed on the daily lives of Muslims. They are not allowed to smoke and sexual relations are also forbidden during fasting. At the end of the day the fast is broken with prayer and a meal called the iftar. In the evening following the iftar it is customary for Muslims to go out visiting family and friends. The fast is resumed the next morning. It is also a period in which business activity is significantly slower and usually no major business decisions are taken.

The last ten days of Ramadan are considered highly blessed, especially the 27th night which is also called the 'Night of Power', or the 'Night of Destiny'. It is believed that on this night the prophet Muhammad received the first revelation of the Koran. For many Muslims, this period is marked by a heightened spiritual intensity and they may spend these nights praying and reciting the Koran. After 30 days of fasting, the end of the month of Ramadan is observed with a day of celebration, called Eid-el-Fitr.

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7.2 Hebrew Month of Elul Begins on 20 August

Elul, the twelfth month of the Jewish civil year, will begin on 20 August. The month of Elul is a time of repentance in preparation for the High Holy Days of Rosh Hashanah and Yom Kippur. The Talmud writes that the Hebrew word "Elul" can be expanded as an acronym for "Ani L'dodi V'dodi Li" - "I am to my Beloved and my Beloved is to me." Elul is seen as a time to search one's heart and draw close to God in preparation for the coming Day of Judgment, Rosh Hashanah, and Day of Atonement, Yom Kippur.

During the month of Elul, there are a number of special rituals leading up to the High Holy Days. It is customary to blow the shofar every morning (except on Shabbat) from Rosh Hodesh Elul (the first day of the month) until the day before Rosh Hashanah. The blasts are meant to awaken one's spirits and inspire him to begin the soul searching which will prepare him for the High Holy Days. As part of this preparation, Elul is the time to begin the sometimes-difficult process of granting and asking for forgiveness. It is also customary to recite Psalm 27 every day from Rosh Hodesh Elul through Hoshanah Rabbah on Sukkot (in Tishrei). Aside from the blowing of the shofar, the other major ritual practice during Elul is to recite selichot (special penitential prayers) either every morning before sunrise during the week before Rosh Hashanah (Ashkenazi tradition) or every morning during the entire month of Elul (Sephardi tradition). Many Jews also visit the graves of loved ones throughout the month in order to remember and honor those people in our past who inspire us to live more fully in the future.

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7.3 Israel Sends Emergency Aid To Typhoon-Struck Taiwan

On 13 August, a shipment of water-purification equipment was sent to victims of typhoon "Morakot" in Taiwan. As soon as the extent of the destruction was known, head of the Israeli Economic & Cultural Office in Taiwan turned to the authorities in Taipei and proposed that Israel send emergency aid to Taiwan. All agreed that the most immediate need was clean drinking water and, accordingly, over the weekend a shipment with water purifiers, containers, and hundreds of easy-to-use personal water-purification kits was sent to hard-to-reach areas struck by the disaster. The equipment, made by the Israeli company Water Sheer, was donated by the Ministry of Foreign Affairs. As soon as the equipment arrived in Taipei, it was brought straight to Kausiung in southern Taiwan, one of the worst-struck areas, where water was given to those in need. (MFA18.08)

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7.4 Number of Druze & Arabs in Israel's Civil Service Increasing

Israel's Civil Service Commission (CSC) said the number of Druze and Arabs employed in the ranks of the civil service has increased from 193 to 578 over the past six years. According to the CSC, while in 2003 only 4.2% of its employees were Druze or Arabs, they now constitute 11.6% of civil service personnel. Also, the number of Druze and Arab women now employed by the various government bureaus rose from 66 in 2003, to 282 in 2008. The data further revealed that that 70.9% of all Druze and Arab workers have an academic education, 11.4% of them have PhDs and 9.2% have a Master's degree. Some 36% of Druze and Arab workers were employed by the Interior Ministry, 16% by the Science and Technology Ministry, 8.5% by the Ministry of Social Affairs, 8% by the Health Ministry and 7% are employed by the Education Ministry. (MFA18.08)

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*REGIONAL:

7.5 Smoking in Iraq

The Economist (http://www.economist.com) reported that its the health and safety measure Iraqis have not been waiting for. The government in Baghdad last week banned smoking in public buildings. Anyone found lighting up will have to pay a fine equivalent to $4,300, enough to buy 17,200 packs of cigarettes at the local price of about 25 cents. As soon as parliament ratifies the cabinet-imposed ban, Iraqi smokers will be forced to loiter on street corners exposed to car bombs and 45-degree heat in the summer. But according to a recent study, smoking kills an average of 55 Iraqis a day, compared to a current average of ten deaths daily from terrorist shootings or bombings. So the government argues that it is perfectly reasonable to outlaw smoking on public-health grounds. Nonetheless, the ban has done nothing to improve the already low opinion many Iraqis have of their democratically elected government. In parliament though, the ban is popular. Islamists want to get rid of tobacco outright. Of course, many ministers and MPs smoke too, often in their offices. But, given their elevated positions, few rules apply to them. (Economist13.08)

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7.6 Egypt Issues First National ID Issued for Bahais

Following years of legal battles and calls for state recognition, two Bahais issued their first national ID in which the religious affiliation field was left blank, instead of falsely listing Islam, Christianity or Judaism as their religion. Sixteen-year-old twins were issued their ID cards after a legal battle which ended last March with Egypt's Supreme Administrative Court upholding, definitively, the right of Egyptian Bahais to obtain personal identification documents without stating their religious affiliation. The Administrative Court in January 2008 had allowed Bahais to leave the religious affiliation field on birth certificates and identity cards blank. The case was brought forward by the Egyptian Initiative for Personal Rights (EIPR). EIPR's case against the Interior Ministry relied on the argument that forcing Bahais to list their religion as one of the three religions officially recognized by the state constitutes a violation of the right to freedom of belief, equality and privacy, in addition to being a violation of Islamic Sharia. The teenage twins have been unable to obtain birth certificates and have been prevented from enrolling in school as a result, forcing their father to send them to school in Libya. Even though the court ruled in favor of the Bahais in 2008, none of them have been able to issue official documents. Without these documents Egyptian citizens cannot access state services such as healthcare and education, and face criminal penalties if they fail to produce an ID card on request by a police officer. The Administrative Court ruled in favor of Bahais in April 2006, but this verdict was subsequently overruled on appeal in December of the same year. (DNE09.08)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Teva Announces Approval and Launch of Oxaliplatin Injection

Teva Pharmaceutical Industries announced FDA approval and launch of Oxaliplatin Injection. Teva's 505(b)(2) New Drug Application provides for the use of Oxaliplatin Injection, 50 mg/10 mL and 100 mg/20 mL for adjuvant treatment of stage III colon cancer in patients who have undergone complete resection of the primary tumor and treatment of advanced colorectal cancer. In June, the U.S. District Court for the District of New Jersey granted summary judgment in Teva's favor on the issue of non-infringement with regard to Debiopharm's U.S. Patent No. 5,338,874. The patent is listed in the Orange Book for Sanofi-Aventis' Eloxatin (oxaliplatin injection). Sanofi-Aventis and Debiopharm have appealed this decision. Sanofi-Aventis has also sued the FDA seeking to rescind all approvals granted to date for Oxaliplatin Injection pending resolution of the outstanding appeal. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the world's leading generic pharmaceutical company. The Company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients, as well as animal health pharmaceutical products. (Teva11.08)

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8.2 Masimo & Oridion to Integrate Capnostream20 Monitors into the Masimo Patient SafetyNet System

Irvine, California's Masimo, the inventor of Pulse CO-Oximetry and Measure-Through Motion and Low-Perfusion pulse oximetry, and Oridion jointly announced an agreement to establish compatibility and connectivity between Oridion Capnostream20 portable bedside monitors and the Masimo Patient SafetyNet remote monitoring and clinician notification system. The agreement provides for joint development of a two-way interface allowing Patient SafetyNet to retrieve, analyze and display physiological data from Capnostream monitors, while managing bi-directional communication and alarm features to facilitate earlier recognition of and clinical response to adverse respiratory events that require immediate clinical intervention. Oridion Capnostream monitors feature two industry-leading technologies--Oridion's patented Microstream sidestream Smart Capnography, and Masimo SET Measure-Through Motion and Low-Perfusion pulse oximetry--that together provide clinicians with an early warning of a possible life-threatening deterioration in their patients' physiological status. Oridion Microstream technology enables the most accurate and reliable assessment of breathing quality for patients requiring continuous ventilation monitoring, providing clinicians with timely recognition of changes that may lead to a decline in respiratory status or airway compromise. Masimo SET is the most accurate and reliable pulse oximetry technology, clinically proven in more than 100 independent and objective studies to provide the most trustworthy SpO2 and pulse rate measurements even under the most difficult clinical conditions, including patient motion and low peripheral perfusion. Masimo Patient SafetyNet will be the first remote monitoring and clinician notification system to feature Oridion's newest Smart Capnography algorithm--Integrated Pulmonary Index (IPI)--enabling real-time tracking and trending of EtCO2, respiration rate, pulse rate and SpO2 for an inclusive assessment of the patient's ventilatory status with a single index parameter.

Jerusalem's Oridion Systems (http://www.oridion.com) is a global medical device company specializing in patient safety monitoring. Oridion develops proprietary medical devices and patient interfaces, based on its patented Microstream technologies, for the enhancement of patient safety through the monitoring of the carbon dioxide (CO2) in a patient's breath. These products provide effective, proven airway management and are used in various clinical environments, including procedural sedation, pain management, operating rooms, critical care units, post-anesthesia care units, emergency medical services, transport, alternate care and other settings where patients' ventilation may be compromised and at risk. (Oridion11.08)

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8.3 U.S. FDA Approves Protalix's Treatment Protocol for prGCD

Protalix BioTherapeutics announced that the U.S. FDA has approved the Company's treatment protocol for prGCD, the Company's proprietary plant-cell expressed recombinant form of glucocerebrosidase (GCD) for the treatment of Gaucher disease. The treatment protocol allows physicians and other care-providers to treat patients of Gaucher disease with prGCD in the United States and additional countries world-wide while studies of prGCD continue as part of the Company's ongoing pivotal Phase III clinical trial. Prior to accepting the protocol, the FDA reviewed available data from the Company's on-going Phase III clinical development programs. The treatment protocol is a multicenter, open-label trial designed to allow physicians and other care-providers to treat patients of Gaucher disease with prGCD during the expected shortage of Cerezyme and thereafter. Cerezyme is a mammalian cell expressed version of glucocerebrosidase and the only enzyme replacement therapy currently approved for Gaucher disease. The treatment protocol allows patients enrolled in the protocol to continue being treated with prGCD until its anticipated marketing approval from the FDA. The Company will provide the drug free of charge to patients enrolled in the protocol.

Carmiel's Protalix (http://www.protalix.com) is a biopharmaceutical company. Its goal is to become a fully integrated biopharmaceutical company focused on the development and commercialization of proprietary recombinant therapeutic proteins to be expressed through its proprietary plant cell based expression system. Protalix's ProCellEx presents a proprietary method for the expression of recombinant proteins that Protalix believes will allow for the cost-effective, industrial-scale production of recombinant therapeutic proteins in an environment free of mammalian components and viruses. (Protalix17.08)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Dongwoon Selects Tower as Sole Manufacturing Partner for High Volume LED Lighting Devices

Seoul, South Korea's Dongwoon Anatech, a fast growing analog semiconductor provider, today announced it has selected Tower Semiconductor as its sole manufacturing partner for high volume, energy saving LED lighting devices used in both home and industrial applications. Tower was chosen for its 20V to 60V scalable LDMOS power management process technology which provides design optimization and the lowest die size at any given breakdown voltage. Due to the high market demand for LED drivers, Dongwoon Anatech is expanding from Korea to China, U.S., and Japan markets, introducing four new devices this year. Dongwoon Anatech's major customers are Samsung and Sony to which they have shipped 155 million units since the company was formed in 2006. Tower's advanced power management process includes 20V to 60V scalable Rdson NLDMOS/PLDMOS devices as well as advanced CMOS and bipolar NPN devices needed in today's complex power management ICs. It also includes industry leading RF and Thermal modeling, predictive parasitic extraction switch, high voltage ESD solutions, and extremely dense 5v and 1.8v digital cell libraries for "digital intensive" designs. Migdal Ha'Emek's Tower Semiconductor (http://www.towersemi.com), a global specialty foundry leader, manufactures integrated circuits with geometries ranging from 1.0 to 0.13-micron and provides complementary technical services and design support. (Tower05.08)

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9.2 BroadLight to Power the Accton GPON ONT Product Line

BroadLight announced that Taiwan's Accton has selected BroadLight's 2nd generation of GPON System on Chip, BL2345 and BL2348, for its wide portfolio of GPON Customer Premises Equipment. Representing a major win for BroadLight, Accton leadership in the access market strengthens BroadLight position in the GPON market. Accton Technology Corporation develops networking and communications solutions for networking, computer, and telecommunications vendors. Ramat Gon's BroadLight (http://www.broadlight.com) is a fabless semiconductor company supplying semiconductor devices and solutions to equipment vendors for FTTH applications around the globe. Its technology spans from optical access to home networking which enables the delivery of highly integrated, low-cost, end-to-end (E2E) solutions from the central office to the customer premise. As a result, BroadLight is the leader in GPON semiconductor devices and software and is currently powering some of the world's largest PON deployments. (BroadLight 10.08)

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9.3 SiSense's PrismCubed Brings Enterprise-Class Business Intelligence to SMBs at a Fraction of the Cost

Netanya's SiSense (http://www.sisense.com) announced the next generation of their successful Prism product, called PrismCubed. Providing enterprise-class business intelligence functionality that is easy to create and maintain, PrismCubed is an easy to use, low cost tool for in-depth, end–to-end business intelligence, capable of visual representation and ad-hoc queries of large amounts of integrated data from several data sources. SiSense's PrismCubed satisfies SMBs' requirement for sophisticated, multidimensional analysis of accurate day-to-day business data, which until now, was limited to expensive BI tools used by resource-rich enterprises. With no coding, programming or scripting necessary, PrismCubed can be implemented quickly, with limited technical resources and at a very low cost. Small and mid-sized businesses have multiple data sources that need to be integrated, and that need was previously served only by expensive tools that were difficult to implement. With PrismCubed, companies can easily and dynamically perform information analysis from existing company databases, deploy them to users and create a scalable and secure solution. The product's interface is designed to make it extremely easy to use for business intelligence application creation, including intuitive dashboards and guided analytics from multi-sourced and disparate data. PrismCubed allows users to perform all data preparation, integration, synthesis and joins using a visual workflow, enabling the development of a robust and accurate business intelligence practice regardless of company size or resources. (SiSense10.08)

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9.4 Mobileye N.V. Announces the Expansion of its Aftermarket Product Line With Mobileye C2-170

Mobileye N.V. announced the expansion of its aftermarket product line with the introduction of the new Mobileye C2-170. The new product is a driver-safety system developed specifically for aftermarket applications and can be easily fitted in any passenger and commercial vehicles. The Mobileye C2-170 is a modern, comprehensive, single-camera-based safety solution for accident prevention and mitigation. Based on Mobileye's acclaimed vehicle and lane detection technologies, the new product employs a premium-quality, high visibility display unit, which features clear, powerful display icons and comes with customization options. A three-in-one safety solution for accident prevention and mitigation, the Mobileye C2-170 provides drivers with warnings against collision with a vehicle ahead (both on highways and urban roads), unintended lane-departure and insufficient distance-keeping. Mobileye (http://www.mobileye.com) is headquartered in The Netherlands, with R&D in Israel. Mobileye is a technological leader in the area of advanced image sensing and processing technology for automotive applications, with a product offering covering the entire range of vision applications. Mobileye's unique monocular vision platform works as a third eye to help drivers improve safety and avoid accidents, and revolutionizes the way we drive. Mobileye's products of containing proprietary software algorithms bundled on the EyeQ system-on-chip have been integrated into BMW, GM and Volvo models since 2007.

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9.5 Frost & Sullivan Recognizes Sonotron NDT for Leadership in the NDT Equipment Market

Based on its recent analysis of the nondestructive testing (NDT) equipment market, Frost & Sullivan recognized Sonotron NDT with the 2009 Global Frost & Sullivan Award for Product Line Strategy of the Year, for its line of high-quality NDT equipment marketed to a broad clientele. Sonotron NDT's ability to provide cost-efficient, high quality products that seamlessly integrate the industry's latest standards and technologies has cemented its position as an innovative solution provider in the NDT equipment market. To remain competitive in this market, Sonotron NDT focuses on its core strengths - superior performance, continuous innovation, and commitment to product development. The Sonotron NDT product line includes high-performance yet affordable and easy-to-use NDT equipment to meet the demands of diverse target markets with ease. Today, the product line comprises ten standard products from simple high-end flaw detectors to complicated automated testing systems. Through 2007 and 2008 Sonotron NDT added seven new products to its portfolio; the most sophisticated of them are ISONIC PA AUT, ISONIC AUT 16/32, ISONIC 2009 UPA Scope, ISONIC 2008, and ISONIC 2006.

Headquartered in Israel, Sonotron NDT (http://www.sonotronndt.com) was founded in 1993 and has a strong global presence. It has consistently delivered top-of-the-line products and services used for multiple applications across a wide range of industries including aerospace, oil, gas & petrochemical, power generation, military and nuclear among others. (Frost & Sullivan 11.08)

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9.6 ClickSoftware Awarded Patent for a Method and System for Sharing Knowledge in the Field

ClickSoftware Technologies been granted United States Patent # 7,565,338, titled "Method and System for Sharing Knowledge". The new patent relates to a method and system for capturing and sharing knowledge between the qualified personnel of a company and users or between users and qualified personnel associated with different companies. Specifically, it provides the technology basis for field technicians to post their need for help or information when experiencing difficulties with a specific job. The software automatically searches existing knowledge bases for answers, and also notifies other colleagues in the field whose profile indicates that they are available for help and have the relevant expertise to answer the question. This notification effectively creates a collaboration environment ("chat room") where documents, video, voice and text may be shared between all participants. Furthermore, this collaboration is stored for use the next time a similar problem is encountered, so that the knowledge bases are continuously improved and expanded. The collaboration capability leverages the popularity and power of social networking, delivered in a unique real-time fashion: Since the field technician needs "on the spot" answers, the innovation includes real-time alerts in order to instantly create an ad-hoc team and equip it with the required communication channels.

Tel Aviv's ClickSoftware (http://www.clicksoftware.com) is the leading provider of mobile workforce management and service optimization solutions that create business value for service operations through higher levels of productivity, customer satisfaction and cost effectiveness. Combining educational, implementation and support services with best practices and its industry-leading solutions, ClickSoftware drives service decision making across all levels of the organization. (ClickSoftware )

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9.7 Plasan Awarded Sub-Contract for Additional 1,700 M-ATV Armor Kits

Plasan has won an additional contract for the delivery of 1,700 armor kits for the U.S. Army's Multipurpose All-Terrain Vehicle (M-ATV) as sub-contractor to Oshkosh Defense. Plasan has met the first production milestone in the $1.05 billion contract awarded by U.S. Department of Defense to a team led by Wisconsin-based Oshkosh Corporation and Plasan North America to produce 2,244 M-ATVs for deployment in Afghanistan. Plasan North America and its local sub-contractors have made advance preparations to comply with strict composite specifications and a tight delivery schedule. Through the application of the modular Kitted Hull concept, developed by Plasan, all armor parts and components are sent to the vehicle's manufacturer where they are applied to the vehicle at the assembly line, thus improving efficiency and reliability. Plasan's production capabilities are complemented by a comprehensive supply chain that encompasses suppliers of materials, equipment and solutions throughout the U.S. This extensive network enables the production capacity the necessary flexibility to expand or reduce production volumes according to demand.

Kibbutz Sasa's Plasan (http://www.plasansasa.com) provides customized survivability solutions for tactical wheeled vehicles, aircraft, naval platforms, civilian armored vehicles and personal protection. A recognized global leader and industry veteran, Plasan's survivability solutions offer the optimal combination of protection, payload, and cost by combining in-house R&D, design, prototyping and manufacturing capabilities. Plasan's success is a combination of innovation, a high level of commitment and a full range of in-house capabilities. As a preferred supplier to the Israel Defense Forces and an approved supplier to ministries of defense around the world, Plasan's solutions have been tried and tested by dozens of armed forces in the most demanding battlefields such as Lebanon, Iraq and Afghanistan. (Plasan07.08)

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9.8 N-trig Earns "Compatible with Windows 7" Logo

N-trig, providers of DuoSense solution combining pen and capacitive touch in a single device, announced that it has earned the Windows 7 logo, enabling computers with DuoSense functionality to take full advantage of the true multi-touch capabilities for up to 4 fingers in Windows 7. With Microsoft Corp.'s advent of Windows 7 combined with the DuoSense solution, the door is open to create a new standard in PC interfacing, which offers ISVs the ability to develop applications that allow users to interact directly with their products in completely new ways, further helping to break down the barriers between people and their computers. N-trig has worked closely with Microsoft to ensure the most natural and simple transition from the mouse to the finger. This enables today's users who are already accustomed to touch screens, whether at grocery stores, movie theatres or cash point machines to be able to interact directly with their computers, using their fingers to manipulate items on the screen for a more fun, interactive and productive user experience. N-trig's DuoSense technology can currently be found in Dell's Latitude XT/XT2 and HP's TouchSmart tx2. In conjunction with the public launch of Windows 7, the company will also be announcing additional OEM design wins. Kfar Saba's N-trig (http://www.n-trig.com) is revolutionizing the way people interact with computers by providing the industry's first dual-mode pen and touch input device. N-trig's DuoSense technology is the only combined pen, touch, and multi-touch interface for today's advanced computing world. (N-trig18.08)

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9.9 DroidSecurity Launches Security Suite for Android

DroidSecurity launched DroidSecurity Internet Security Suite, the first full-featured consumer anti-malware and physical security app for Google's Android operating system. DroidSecurity Internet Security Suite is a powerful, mature security application that provides a wide-range of protection against viruses/malware and SMS/text spam, plus enables users to track lost smartphones and remotely wipe data for enhanced security and control. The core platform was publicly beta-tested by Android users under the DroidHunter brand, and was downloaded over 100,000 times during the six-month beta. DroidSecurity Internet Security Suite is the first Android antivirus application to leverage the Java Virtual Machine (JVM) technology. Tel Aviv's DroidSecurity (http://www.droidsecurity.com), makers of the first full-featured Android anti-malware application DroidSecurity Internet Security Suite, was founded in 2009. DroidSecurity Internet Security Suite is the first Android application to leverage the Java Virtual Machine (JVM) technology. (DroidSecurity18.08)

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9.10 Elbit Systems to Supply the Finnish Army With Communication Systems

Elbit Systems was awarded a contract valued at €17 million to provide Finland's Ministry of Defense with high speed radio and data transmission communication systems to be delivered during 2010 - 2012. The General Manager of Elbit Systems Land and C4I -Tadiran noted that the selection of the Tadiran family of communication systems by the Finnish Ministry of Defense attests to the quality of these systems as well as to the customer's satisfaction by the performance of similar, previously acquired systems. Haifa's Elbit Systems (http://www.elbitsystems.com) is an international defense electronics company engaged in a wide range of defense-related programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned air vehicle (UAV) systems, advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. The Company also focuses on the upgrading of existing military platforms and developing new technologies for defense, homeland security and commercial aviation applications. (Elbit Systems18.08)

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9.11 RiT to Address SMB Market With EPV - Real-Time Rack Connectivity Management Solution

RiT Technologies introduced a new product aimed at the small-to-medium-sized Enterprise market: the EPV(TM) Real-Time Connectivity Management solution. The innovative EPV solution, based on RiT's advanced infrastructure management technologies, is designed with small-to-medium enterprises in mind. As a standalone solution that requires no additional software or server installation, EPV is easy to deploy. Once implemented, EPV collects information continuously regarding connections within the enterprise's patch panels and communication racks. All connectivity changes are detected immediately, enabling the system to send notifications and alerts the moment a change occurs. All connectivity information and notifications can be accessed via Internet web browsers through a user-friendly, permission-based GUI making the system particularly valuable for the management of remote sites. As an additional advantage, EPV can be easily upgraded to RiT's PatchView, the industry-leading full-featured intelligent infrastructure management (IIM) solution, enabling customers to grow as required from initial installations to large-scale deployments.

Tel Aviv's RiT (http://www.rittech.com) is a leading provider of intelligent solutions for infrastructure management, asset management, environment and security, and network utilization. RiT Enterprise solutions address datacenters, communication rooms and workspace environments, ensuring maximum utilization, reliability, decreased downtime, physical security, automated deployment, asset tracking, and troubleshooting. RiT Environment and Security solutions enable companies to effectively control their datacenters, communications rooms and remote physical sites and facilities in real-time, comprehensively and accurately. (RiT18.08)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's July Inflation Matches Estimates

On 14 August, the Central Bureau of Statistics announced that Israel's Consumer Price Index (CPI) rose by 1.1% in July, in line with market estimates. This makes year-to-date inflation 3.2% and inflation for the twelve months to the end of July 3.5%, above the government's price stability target range of 1-3%. The biggest contributor to the July inflation figure was water charges, which rose 26.7%, in the wake of the drought levy the government imposed in the 2009-2010 budget. The leisure and recreation item rose 11.3%, contributing substantially to the rise in the general index. Other notable rises were in vehicle oils and fuels (3.4%) and fresh produce (8.4%). On the other hand, the housing item rose just 0.4%, compared with projections of a 2% rise. Automobile insurance fell, as did prices of furniture and of clothing and footwear (-5%), because of summer sales. Despite warnings that the CPI might surprise with a sharp rise in July, the figure, as mentioned, is in line with estimates, and therefore no change is expected in the Bank of Israel's interest rate policy. (Various14.08)

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10.2 Israel Emerges From Recession

Israel's economy expanded a preliminary 1% in Q2/09, after six months of contraction, as exports and consumer spending increased. The economy shrank 3.2% in the previous quarter, the Jerusalem-based Central Bureau of Statistics announced, revising a previously reported 3.7% contraction. Bank of Israel Governor Fischer has pushed the key interest rate to a record low of 0.5% and purchased foreign currency and government bonds to bolster the economy to curb the impact of the global recession. He has already begun to reverse the monetary easing, announcing on July 27 that he would halt bond purchases and on Aug. 10 that he would end set purchases of foreign currency. The Bank of Israel predicted that the GDP will shrink 1.5% this year, the biggest annual drop in Israel's 61-year history. Exports, which account for about 45% of GDP, increased an annualized 5.8% in the second quarter, the bureau said. Prime Minister Benjamin pushed a two-year budget through parliament last month that includes spending to spur growth and help companies hurt by the credit crunch. Israel's TA-25 Index, a benchmark of Tel Aviv's biggest stocks, has surged by some 46% in 2009. (Hurriyet Daily News 16.08)

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10.3 Israel's Industrial output Increases By 2% in June

The Central Bureau of Statistics announced on 18 August that Israel's industrial output rose by a seasonally adjusted 2.1% in June 2009, compared with May, the first growth so far in 2009. Industrial output rose even if high-tech output, the economy's growth engine, is excluded. The growth in industrial output encompassed all sectors: high-tech output, including pharmaceuticals, rose by 2.2% in June, mixed high-tech (such as chemicals, refining, and machinery) output rose by 1.1%, mixed low-technology output (such as mining and quarrying, plastics, and metals) rose by 2.9%, and low-technology output (such as textiles, printing, and food) rose by 1.9%. Trade and services proceeds also rose by a seasonally adjusted 3.5% in June, and reached the level before the collapse of Lehman Brothers in September 2008. Proceeds rose in all sectors: wholesale proceeds rose 3.3% in June, retail proceeds rose 1.5%, accommodations and catering services proceeds rose 3.5%, financial services proceeds rose 7.6%, business services proceeds rose 3%, and computer services proceeds rose 2.5%. (CBS18.08)

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10.4 Israel's High Tech Leads Export Recovery

Israel's industrial exports, including high tech but excluding diamonds, have begun to recover and are the main growth engine for the economy. On 12 August, the Central Bureau of Statistics announced that exports rose by an annualized 11.3% in May-July 2009 in trend figures, after falling by an annualized 15.9% in February-April. High-tech exports, 52% of total industrial exports, rose by an annualized 10.1% in May-July, after rising by an annualized 11% in February-April. Export of goods totaled $3.6 billion in July, and imports totaled $4.2 billion, resulting in a trade deficit of $600 million. The trade deficit averaged $400 million a month in January-July, 63% less than the monthly average of $1.1 billion in 2008. Exports of electronic components rose by an annualized 136.6% in May-July. Most of the increase was due to the new Intel Corporation Fab 28 at Kiryat Gat. Exports of electronic components rose to $416 million in July from $136 million in July 2008. Exports of communications, monitoring, scientific and medical equipment rose by an annualized 8.5% in May-July.

The slump in exports of mixed high-tech goods, including chemicals, has eased. They fell by an annualized 17.6% in May-July, after falling by an annualized 49.4% in February-April. Mixed low-technology exports rose by an annualized 12% in May-July, after falling by an annualized 40% in February-May.

The slump in imports has also slowed. Import of goods fell by an annualized 5.4% in May-July, after falling by an annualized 37.1% in February-May. Imports of raw materials fell by an annualized 0.9% in May-July after falling by an annualized 39.5% in February-April, while the fall in imports of investment goods (excluding ships and planes) slowed to an annualized 22.3% in May-July, after falling by an annualized 47.7% in February-April. Imports of durable goods rose by an annualized 20% in May-July, mainly because of a 30.7% annualized increase in vehicle imports, ahead of the introduction of the green taxation in August. Imports of consumer goods, including durable goods, rose by an annualized 7.2% in May-July, after falling by an annualized 14.9% in February-April. (CBS12.08)

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10.5 Unemployment Benefit Claims Trend Declines

Globes reported that Israel's employment situation is showing signs of recovery based on the increase in exports and tax revenues. The National Insurance Institute reports 17,500 new claims for unemployment benefits in July 2009, similar to the figure in June and some 5% fewer claims than in May. Were it not for the coming into effect in June of the directive extending unemployment benefits shortening the eligibility for unemployment to nine months from twelve months, the number of new claims would have been even lower. The directive, jointly formulated by the Ministries of Finance and Social Services, enabled 2,100 additional unemployed persons to claim benefits. National Insurance Institute director general Dominici said that the decline in new claims for unemployment benefits was in line with the easing in the economic crisis as reflected in macroeconomic data. She said that the decline also indicated that the wave of layoffs that began in Q4/08 was ebbing. (Globes 05.08)

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10.6 Israel's National Expenditure on Education Rises

National expenditure on education continued to rise in 2008 albeit at a more moderate rate than in 2007. Total expenditure reached NIS 60.3 billion, 3% more than 2007, which was 6% more than 2006. National expenditure on education is 8.3% of GDP. National expenditure on education includes the ongoing expenses of all public and private institutions of education from pre-school through higher education. Expenses are divided into two: public expenses of the state and local authorities and private expenses of households and donations and grants received from Israel and abroad. Household expenditure includes tuition fees, purchase of books and private lessons. According to the Central Bureau of Statistics, the percentage of state expenditure on education fell to 75% in 2008 from 76% - 77% between 2004 and 2007, but in absolute terms expenditure rose by NIS 3 billion to NIS 45.2 billion. Over the same period the rate of private expenditure on education rose to 25% of all national expenditure amounting to NIS 15 billion. Some 88% of educational services are provided by government, local authorities and non-profit organizations, while 12% is provided by private individuals and businesses. (Globes 11.08)

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10.7 August Traffic So Far Breaks New Records at Ben Gurion

Israel Airports Authority (IAA) reports that passenger traffic at Ben Gurion International Airport rose by 8% in the first week of August compared with the corresponding week of 2008 to a record high figure. The number of flights increased by 6.1% in the first week of August compared with the corresponding week last year. IAA expects August 27 to be the busiest day of the year at Ben Gurion with 56,000 travelers passing through Ben Gurion on 360 flights. IAA also reported that 1.2m passengers flew out of Ben Gurion in July, 2.7% fewer compared with the corresponding month in 2008. German airline Lufthansa recorded an 11.2% increase in passengers in July compared with the corresponding month last year, while US Airways, which began operating six weekly flights to Philadelphia last month, carried 13,000 passengers. El Al Israel Airlines recorded a 5% fall in passengers, while its charter subsidiary Sun D'Or International Airlines registered a 4% increase. (Globes 11.08)

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11: In Depth

11.1 A Special Report On The Arab World: Waking From Its Sleep

In A special report on the Arab world which The Economist (http://www.economist.com) published in 1990, the headline at the top of this page was "When history passes by." That was when the communist dictatorships of eastern Europe were beginning to wobble and fall. In the Arab world, however, authoritarian rule remained the order of the day. Whereas western Europe was making massive strides towards political and economic union, the Arabs remained woefully divided. Much Arab opinion remained fixated on the struggle with Israel, in which the Arabs seemed unable to hold their own, let alone prevail.

To revisit the Arab world two decades later is to find that in many ways history continues to pass the Arabs by. Freedom? The Arabs are ruled now, as they were then, by a cartel of authoritarian regimes practiced in the arts of oppression. Unity? As elusive as ever. Although the fault lines have changed since Saddam Hussein invaded Kuwait 19 years ago, inter-Arab divisions are bitter. Egypt, the biggest Arab country, refused even to attend April's Arab League summit meeting in Doha. Israel? Punctuated by bouts of violence and fitful interludes of diplomacy, the deadly stalemate continues. Neither George H. Bush at Madrid in 1991 nor Bill Clinton at Camp David in 2000 nor George W. Bush at Annapolis in 2007 succeeded in making peace or even bringing it visibly closer.

The stubborn conflict is a reminder that in some doleful ways history has not passed the Arabs by at all. They have seen plenty of history of the wrong sort these past two decades. It includes a good deal of violence: the Arab world has been caught up in wars both major and minor, not only between Arabs and outsiders, such as those with Israel, but also between, and within, Arab states.

Indeed 1990, the year Saddam invaded Kuwait, was something of a turning point. America's quick eviction of his army from the tiny oil state after only 100 hours of ground fighting looked at the time like a triumph. But a case can be made that this was in fact the starting-point of a whole sorry sequence of events encompassing the rise of al-Qaeda, Osama bin Laden's September 11th strikes on the American mainland and - in Arab eyes - America's no less traumatic liberations of Afghanistan in 2001 and Iraq in 2003 in its war against terror.

Wars can happen anywhere. What makes the Middle East especially prone to them? Just count the ways. First is oil. In the late 1990s Bin Laden wrote a letter to Mullah Omar, the leader of the Afghan Taliban, in which he pointed out that 75% of the world's oil was found in the Persian Gulf region and that "whoever has dominion over the oil has dominion over the economies of the world." So long as that remains broadly true, the interests of energy-hungry powers from near and far will continue to grind against each other there.

Second is the continuing and worsening Arab, and lately also Iranian, conflict with Israel. Since 1990 thousands more Arab and Israeli lives have been thrown into the maw of this voracious struggle – among the latest Palestinian onslaughts was the one that was launched by Arafat to collapse Clinton's Camp David peace summit in 2000, as well as Israel's defense in attacks by Hezbollah from Lebanon in 2006 and from the Hamas in Gaza at the beginning of 2009.

The last and perhaps greatest underlying cause of instability arises from the nature of the Arab states themselves. Elections are widespread in the Arab world. Yet, hardly any of the 21 actual states that belong to the Arab League can plausibly claim to be a genuine democracy. In the absence of democracy, Arab states therefore rely to an extraordinary degree on repression in order to stay in power. From time to time this system of control breaks down.

A spectacular example came in Algeria in 1991, when the army blocked a promising experiment in free elections that was starting to unfold under President Chadli Benjedid. After an opposition Islamist party won in the first round of parliamentary elections, the generals blocked the second, and so detonated a gruesome civil war that lasted almost a decade and may have killed 200,000 people. In the 1990s internal terrorism stalked Egypt too: radical Islamist movements such as Islamic Jihad and the Jamaat Islamiya claimed more than 1,000 lives. And although most of Egypt's erstwhile jihadists have long since renounced violence, others - notably Ayman al-Zawahiri, Bin Laden's number two - went on to found and lead al-Qaeda.

Tribes with flags

The political instability of the Arab world is in turn connected to another problem: the missing glue of nationhood. Many years ago an Egyptian diplomat, Tahsin Bashir, called the new Arab states of the Middle East "tribes with flags" (though he exempted Egypt). His point still holds. In countries as different as Lebanon and Iraq, ethnic, confessional or sectarian differences have thwarted programs of nation-building. That is why Iraq fell apart into Sunni, Shia and Kurdish fragments after the removal of Saddam despite decades of patriotic indoctrination. Syria could follow suit if the minority Alawi sect of the ruling Assad family were somehow to lose control of this largely Sunni country. Sudan has seen not one but two civil wars between its Arab-dominated centre and the non-Arab minorities in its south and west.

In reviewing this litany of troubles, it is necessary to remember that what people call "the Arab world" is a big and amorphous thing, and arguably (see article) not one thing at all. It would be a distortion to portray the whole region as a zone of permanent conflict. However bloody they have been, the wars in Iraq, Algeria, Sudan or on the borders of Israel have not disrupted ordinary life in the whole Arab world. Most Arabs have been touched by the violence only through their television screens (though, as we shall see, the powerful emotions such images stir up have real-world consequences too). Many Arab countries can look back over the past two decades and see elements of progress to be proud of, including, in some places, rising prosperity and a slow but steady expansion of personal freedom.

Yet the years of conflict cannot just be written off, as if the various outbreaks of internal or inter-state violence were just local aberrations or the product of bad luck, or as if they had no bearing on the region's future prospects. It is not just that, if you add all the bloodletting together, up to am citizens of the Arab world may have perished violently since 1990, and that killing on this scale cannot but leave deep scars. The disturbing point for the future is that none of the underlying causes of conflict enumerated above has disappeared. On the contrary, each appears to be taking on the characteristics of a chronic condition.

Take the contest over energy resources. This stands little chance of abating at a time when the energy appetites of China and India continue to grow and when a beleaguered America and a rising Iran are competing for domination of both the Levant and the Persian Gulf. In most Arab countries the glue of nationhood is still weak: the sectarian conflict in Iraq may intensify again as America begins to withdraw its forces (and Shia-Sunni tensions have spread beyond Iraq). Lastly, in almost any Arab country, at almost any time, political and social discontent is in danger of tipping into violence - even, some insiders and outsiders are beginning to argue, into revolution. (The Economist06.08)

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11.2 IRAQ: Foreign Oil Firms in Iraq Play the Waiting Game

The Economist (http://www.economist.com) writes that for some conspiracy theorists, the war in Iraq was always about gaining control of the world's third-largest oil reserves for Western energy firms. True or not, things are not panning out that way. In early July most big oil companies turned their backs on the first opening of Iraqi production to foreign investors since Saddam Hussein nationalized the industry 37 years ago.

The oil ministry, which wants to lift crude output from 2.4m barrels a day (b/d) last year to 6m b/d by 2017, hoped a much-delayed licensing round for eight of the country's biggest oil- and gasfields would bring international firms - with their capital and expertise - back to Iraq. But the televised auction proved embarrassing for Hussein al-Shahristani, Iraq's oil minister. Just one contract was awarded, to a joint venture between BP and China's CNPC, which beat a bid from Exxon Mobil and Petronas of Malaysia. That contract covers the Rumaila oilfield, Iraq's second largest. BP and its partner must now increase its output from 1m b/d to 2.85m b/d within six years. Their reward will be $2 a barrel, half the amount BP originally sought.

Oil firms balked at the miserly terms Iraq was offering for other fields. But Mr. Shahristani claimed a moral victory from the auction, saying he had sent the oil firms a "message that there are people in Iraq who are protecting Iraq's wealth". That approach may win him support in parliament, where nationalists have accused him of preparing to sell the family silver. But according to Bill Farren-Price, an oil analyst at Medley Global Advisors, a consultancy, some companies may have stayed away from the auction in the belief that Iraq will soon have a new oil minister more sympathetic to their interests.

The reluctance to accept Iraq's terms also suggests renewed self-confidence on the part of big oil firms despite bruising encounters with resource-rich governments in the recent past. Among the giants ready to test Baghdad's resolve is ConocoPhillips, which was rumored to want $26 a barrel to develop the 2.3-billion barrel Bai Hassan field.

Something will have to give. Foreign firms still have a tremendous thirst for oil like Iraq's, which is very cheap to produce and refine. Iraq, with its widening budget deficit, has an urgent need to turn its riches beneath the ground into wealth above it.

A round of new negotiations between the companies and the ministry is likely. But obstacles remain. Iraq is still without an oil law, which undermines faith that contracts will be honored. A deadly terrorist explosion in Kirkuk coincided with both the auction and the start of the withdrawal of American forces from Iraq's cities. An oil law may have to wait until after parliamentary elections next year. Security is an even more distant prospect. (Economist 02.07)

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11.3 KUWAIT: Fitch Affirms 'AA': Outlook Stable Ratings

On 6 August, Fitch Ratings (http://www.fitchratings.com) affirmed Kuwait's Long-term foreign currency and local currency Issuer Default Ratings (IDR) at 'AA'. The Outlooks on both Long-term IDRs are Stable. The Country Ceiling is affirmed at 'AA+', and the Short-term foreign currency IDR at 'F1+'.

"Kuwait has been hit by the fall in oil prices and falling global equity markets, but these have only temporarily halted the growth in its external assets," says Charles Seville, Associate Director in Fitch's Sovereign and International Public Finance team. "However, the financial sector is suffering from the spill-over of the global financial crisis and the after-effects of a domestic lending boom."

Kuwait's fundamental strengths leave it well-placed to face these challenges. The sovereign external balance sheet is one of the strongest of any country rated by Fitch. Based on the Kuwait Investment Authority's periodic disclosures to the National Assembly, and the agency's own assumptions, Fitch estimates sovereign net foreign assets at$256bn or 174% of GDP at end-2008, superior to Saudi Arabia ('AA-'/Outlook Stable) and comparable to Abu Dhabi ('AA'/Outlook Stable). Sovereign external assets minus central bank reserves are equivalent to six years of government spending at FY2009 (April 2008-March 2009) levels.

Kuwait is the world's fourth-largest oil exporter and estimates its reserves at 100b barrels of oil, or 100 years of production. Hydrocarbon reserves per capita are the third-highest in the world, behind Abu Dhabi and Qatar.

Among all the oil producers rated by Fitch, Kuwait's public finances are among the most resilient to a drop in oil prices, with a breakeven oil price for FY2010 of around$30/barrel for the Kuwaiti basket. Based on its assumption that Brent averages$57/barrel in FY2010, Fitch forecasts a general government surplus, including government investment income, of 19% of GDP, and a current account surplus at a similar level. The government will continue to accumulate external assets through 2011.

Fitch believes there is a very high probability that the Kuwaiti government would subscribe capital to support the country's banks should the need arise. It guaranteed all bank deposits in November 2008 and the KIA underwrote a capital-raising undertaken in December by Gulf Bank (Individual rating 'F', Long-term IDR 'A+') after it made a large one-off loss on a customer-driven derivatives trade.

Commercial banks face deterioration in asset quality as an economic slowdown follows several years of strong lending growth. Non-performing loans rose to 5% of assets in December 2008, and Fitch understands that they have climbed further in 1H09. However, the agency believes that the likely costs of shoring up banks' capital - were this to be required - would be small compared with sovereign wealth.

Around half of bank lending is to risky sectors such as lending for equity purchase, real estate and investment companies. The value of real estate transactions has halved in 2009 and the stock market is 50% below its June 2008 peak. Exposure to the troubled investment company sector, which accounts for 11% of banks' lending portfolio, is a particular concern. Two of the most prominent investment companies, The Investment Dar and Global Investment House, have defaulted on external debt.

A financial stability law passed by decree in March 2009 provides several mechanisms for helping banks, investment companies and the productive sector, although take-up has been limited. In a bid to ease the flow of credit, the law offers a guarantee on 50% of new lending to the productive sector and to investment companies that can prove their solvency to CBK-approved consultants.

The political climate has long delayed economic reforms and has hampered the response to the financial crisis. The political system in Kuwait is the most open in the Gulf, with the government held accountable by an active legislature, but political effectiveness is lower than in rated peers. The emir's decision to dissolve the National Assembly in March 2009 was symptomatic of a lack of cooperation between MPs and the executive. There is room for only cautious optimism that it will improve following May's parliamentary elections. (Fitch06.08)

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11.4 KUWAIT: A Class Act

While Kuwait's education system was listed in a 2008 report issued by the World Bank as the leading proponent of educational reform in the Arab world (along with Jordan), it still has many challenges to face as it tries to shape the leaders of the future. Kuwait has a mix of private and public schools and universities, with non-state education at all levels becoming increasingly popular. However, the rapid expansion of the fee-paying segment, as well as the higher demands being placed on the public education network by a growing population, has meant that resources have at times become overstretched and results uneven.

The education system also has its share of critics, with a series of debates being waged ahead of the new school year, set to begin in late August. While recent discussion has focused on issues such as segregation in the classroom and suggested reforms to the Islamic component of the curriculum, there have also been calls to improve the overall standard of education in Kuwait to meet both international standards and the needs of the expanding economy.

Among the proposals have been the establishing of new state universities that would offer a broader range of specialized courses to train Kuwaitis to take over positions in the workplace currently held by expatriates, raising admission standards at Kuwait University and increasing funding for pre-tertiary education so that students can achieve these standards. Even the World Bank has weighed in on the debate. In its July 18 edition, Al Watan reported that the World Bank had warned Kuwait that unless further reforms were made to its education system, especially increasing the number of teaching days in the academic year, major academic institutions could cease to recognize the country's high school certificates. This would mean that the tertiary education options for young Kuwaitis would be restricted.

Abdullah Al Sharhan, the chairman of the Board of Trustees, who said that the present secondary education system is not equipping all students for the next stage of the learning process, supported this view. "Many students are ill-prepared to enter directly into tertiary level courses from high school and they must enroll in a foundation year, which is a bridge year between high school and university," he told OBG.

Another difficulty facing universities in Kuwait is finding sufficient teaching staff, particularly for courses such as engineering that are in high demand. The increasing competition in the Gulf region, along with the political situation in the region and the employment policies of the state of Kuwait, have made it challenging to recruit highly trained and qualified faculty members, Marina Tolmacheva, the president of the American University of Kuwait, said in an interview with OBG. "The field of engineering is stressed due to the limited supply of faculty," she said. "Therefore, the number of engineering programs, introduced by private universities, has not reached the levels to which the council for private universities had anticipated."

The need for Kuwait to address these problems is very real, helping to bridge the gap between workplace supply/demand and provide professional-level employment to graduates. "With over 20,000 contractor jobs available in Kuwait, there is a huge demand for engineers," said Al Sharhan. "Most students graduating in this field will find employment almost immediately out of university."

While coming under criticism from some quarters, the government has been working to expand and improve the country's educational system. At the primary and secondary levels, it announced plans in mid-July to open 16 new schools in the 2009-10 academic year and a further nine in 2011, while later the same month, the minister of education and higher education, Moudhi Al Humoud, said there would be a speeding up of plans to introduce state-of-the-art technological applications in the country's educational process.

As part of the ministry's program of further modernizing the education system, the minister said there would be a greater emphasis on e-learning, through the provision of relevant educational equipment and practical interactive materials, together with an educational portal and wireless networks at schools. This would help create a conscious and self-educated generation capable of keeping abreast of global technological advancements, she said. Though continuing to invest heavily in education, with the portfolio receiving around 12% of the state budget, Kuwait may not be reaping the full value of these investments. While having high levels of graduates passing out from both its secondary and tertiary institutions, there remains the question of whether the focus has been on quantity or quality. (OBG12.08)

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11.5 BAHRAIN: Industrious Kingdom

Although Bahrain is looking to expand its manufacturing base, seeking to strengthen existing industries while also trying to attract new producers, the Kingdom intends to do this with a healthy tinge of green. Industrial production is one of the key planks in Bahrain's long-term program of diversifying the economy away from a dependence on hydrocarbons, a program given impetus by the Kingdom's dwindling oil reserves. Such is its success that non-energy based industry now accounts for around 13% of Bahrain's GDP.

While Bahrain's financial sector has become one of the driving forces of the economy, contributing around 22% of GDP, industry is still one of the major contributors to export trade. Analysts expect the rate of GDP growth to slow somewhat this year, with most predictions of expansion ranging between 2.0 to 4%, the slowdown mainly due to a fall in demand for exports in traditional markets. However, continuing investments in projects such as the Hidd industrial area, as well as in infrastructure, should see the manufacturing sector well placed to take advantage of the foreseen pick up in the global economy in 2010.

Apart from establishing dedicated industrial estates, Bahrain has also put in place measures to attract manufacturers to the Kingdom. New industries setting up in one of Bahrain's free trade zones can benefit from a series of state-backed incentives, including a 10-year tax holiday, exemption from import duties on raw materials and equipment, duty-free access to the markets of all members of the Gulf Cooperation Council (GCC) and easy access to the US thanks to a free trade agreement signed in 2004.

Not only do Bahrain's industries have duty-free admission to GCC markets, they have access to Saudi Arabia via the King Fahd Causeway and thence to the rest of the region. The regional transportation network will be improved further with the construction of a second causeway linking Bahrain with Qatar. The 40-km causeway will carry a broad gauge rail line, a major boost to industries needing to move moving heavy cargos to clients and dependent on bulky imports to keep their plants operating.

These improved transport links will be a major asset to Aluminium Bahrain (Alba), the backbone of the Kingdom's industrial success. Quite aside from being Bahrain's leading manufacturer, Alba also has a series of side industries built around the plant's 870,000-tonne annual output. These include Gulf Aluminium Rolling Mill Company, Bahrain Atomisers International, Bahrain Aluminium Extrusion Company and Midal Cables, all of which produce for both the local and export markets. Between them, they account for around one-third of Alba's output, with the rest destined for GCC and Asian markets.

Though aluminum prices have dipped sharply in the past year, falling from their peak of $3200 per tonne last year to around $1660, Alba is still operating at full capacity and is planning to expand output to 1m tonnes in the next two to three years.

However, while promoting growth in the sector, officials are also conscious of the need for balance, becoming increasingly aware of a potential downside to such projects - the impact on the island's environment. In September, work will begin on an eight-month study to assess air and sea pollution levels, including measuring pollutants from the Kingdom's industries.

According to Adel Al Zayani, the director-general of the Public Commission for the Protection of Marine Resources, Environment and Wildlife, the results of the study could have a bearing on the extent of future industrial development in Bahrain. "This will be a planning tool that can be used to decide if additional industries can be accommodated in the country," Al Zayani said in an interview with the Gulf Daily News on July 10.

Depending on the finding of the study, Al Zayani said the commission could ask the Ministry of Industry and Commerce to restrict new industrial developments to those that would not add to pollution levels and request existing manufacturers to reduce emission levels. "We must get measurements to find out what is acceptable or not acceptable and this study is our tool," he said.

Stricter guidelines in the future should not discourage further industrial development, though they may add to overall set-up costs, and indeed should benefit Bahrain as it gains a reputation as a green industrial hub, a reputation worth having as environmental protection becomes more of a factor in trade. (OBG18.08)

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11.6 UAE: Ras Al Khaimah - The Nature of Tourism

The Oxford Business Group stated that it may have just been one line in a much larger report on the state of the property sector of the UAE, but a single sentence in a recent press release by real estate firm CB Richard Ellis encapsulated one of the main focuses for the direction of tourism in Ras Al Khaimah (RAK).

Though talking about the emirate's attractiveness as a second-home location for local and international investors, CB Richard Ellis also had this to say: "RAK has naturally occurring characteristics in the form of mountains and sea that provide some potential for tourism and leisure-based projects in the future." RAK officials and representatives of the tourism industry might disagree with one phrase in the above statement, that being "in the future". As far as RAK is concerned, the future of tourism and leisure based-projects, especially those focusing on eco-tourism, is now.

Over the past few years, there have been increasing efforts to promote RAK as an outdoor tourism destination. While continuing to develop top end tourist projects, especially along the coastal strip, RAK has been at pains to stress its credentials as an adventure and eco-tourism destination. Along with the water-sports activities associated with resort holidaying, RAK also offers mountain climbing, trekking and bike tours, as well as four-wheel drive safaris and camping in either the hills or the desert dunes. A far cry from the theme parks springing up across the Gulf, RAK hopes that its back-to-nature approach will appeal to those seeking a more authentic taste of Arabia.

Apart from trying to create a niche market, such off-the-beaten track holidays bring with them the added advantage of requiring local guides and experts, further boosting employment in the more remote regions of the emirate. While having potential RAK also has rivals in adventure and eco-tourism in the Gulf region Oman in particular is promoting itself as an alternative holiday destination. Whilst RAK might not be able to challenge Oman in the scale and the breadth of its offering, it can use its compactness as a draw, promoting the very fact that sand and surf, along with its increasing array of five-star hotels and resorts, are so close to mountains, cliffs and exotic hinterland wildlife.

RAK has set itself the ambitious target of increasing tourist arrivals from the estimated 215,000 in 2008 to 2.5m by 2012. Furthermore, the emirate hopes to treble its number of hotel rooms by adding a further 3700 rooms to its books, with an estimated $5bn worth of new projects either under way or on the drawing boards.

Most of the planned new developments are along RAK's coastal strip, though the close proximity of the inland wilderness, combined with its easy access by road, means that a hard day's adventure can be followed by an evening of luxury.

Policymakers are understandably keen to strike a balance between achieving its potential and preserving its natural assets - the very attractions that give the emirate its distinct appeal. This will not be allowed to happen, according to Hillary McCormack, the manager of the state tourism authority RAK Tourism, with development being carried out at a measured pace to ensure the heritage and culture of the emirate is preserved. "The government first evaluates every developer's product and, when necessary, guides them to assure the sustainability and success of the projects," McCormack said in a recent interview with OBG. "The authorities keep a close look on development, as we want to make sure we preserve the environment."

Though the natural environment may be protected, the business environment has become more of an issue. While officials are sticking to their predictions of a massively increased tourist footfall by 2012, the global financial crisis has had an affect on RAK's tourism industry and its ambitious plans for the future. In late April, Mohamed Sultan Al Qadi, the chief executive officer of real estate developer RAK Properties, said the company had put $1.1bn worth of projects on hold, many of them in the tourism sector. "We were going to build 11 hotels, but it has been put on hold because of the financial crisis and we're now building one hotel," Al Qadi told the Reuters news agency.

Of course, these projects have just been put on hold, not cancelled, and are expected to be revived when the economic climate recovers. Most of the other major tourism developments being carried out in RAK are still on track and officials are expecting a 10% increase in visitor numbers this year, many attracted by the emirate's mix of luxury and landscape. (OBG06.08)

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11.7 OMAN: Moody's Outlook For Omani Banks Remains Stable

The fundamental credit outlook for the Omani banking system is stable, primarily reflecting the relative remoteness from the global economy, but also the resilience of the country's economy to the global recession, says Moody's Investors Service (http://www.moodys.com) in its new Banking System Outlook on Oman.

Moody's stable outlook for the Omani banking system expresses the rating agency's view on the likely future direction of fundamental credit conditions in the industry over the next 12 to 18 months. It does not represent a projection of rating upgrades versus downgrades.

"The system's stable outlook reflects the resilience and continued growth of the Omani non-oil economy, the still adequate domestic liquidity in the banking sector and the strong financial ratios of Omani banks," says Elena Panayiotou, Moody's lead analyst for the Omani banking system. Moody's adds that the country's non-oil economy should be spared the worst effects of the global financial crisis over the short to medium term.

The system's fundamental credit conditions face some downward pressure that could arise from a continued severity of the financial crisis, a deepening slowdown in global and local economies and a possible drop in oil prices. "However, despite the macroeconomic slowdown, and in line with Moody's base-case scenario, we believe that sustained domestic demand and continued capital expenditure should continue to support operating conditions, at least over the short to medium term," explains Christos Theofilou, Moody's back-up analyst for the Omani banking system.

Large Omani banks have well-established franchises that underpin their BFSRs. Moody's expects the likely slower economic growth in the short to medium term to lead to lower credit growth, while tighter liquidity conditions are expected to shift franchise development efforts towards deposit mobilization. In the medium to long term, the rating agency expects the government's diversification strategy to continue to boost economic activity in the country and to create further growth opportunities for the banking sector.

In terms of risk positioning, Moody's notes the Omani banks' weak but improving corporate governance standards as well as the low independence of the banks' respective board members. Other constraining factors are the sizeable credit risk concentrations in the banks' books and their rising levels of credit risk. However, in Moody's view, liquidity management among Omani banks is gradually improving and is satisfactory overall. Combined with the willingness and ability of the authorities to support the banking system, these liquidity levels should help to ease any short-term pressure. Moreover, given the rising foreign participation in Omani banks, the rating agency expects further gradual improvements in this area.

Omani banks have managed to sustain strong and stable recurring earnings power in the past, and this is supporting their BFSRs. Looking ahead, however, Moody's expects profitability metrics to come under increasing pressure due to increased competition, lower interest rates and the existing interest rate caps. "Moody's believes that the more challenging credit environment will lead to lower volume growth and higher loan loss and other provisioning. However, this should not lead to adverse pressure on Omani banks' ratings, unless it results in a substantial weakening of franchises," explains Mr. Theofilou.

The high credit risks faced by the six Moody's-rated Omani banks should continue to constrain their ratings. Although the system's credit quality metrics are improving, thereby alleviating pressure on some banks' ratings, they remain poor compared with those of banks in other GCC countries. In addition, Moody's notes that Oman's rapid credit expansion in recent years raises concerns about the future performance of loans under less favorable economic conditions. However, given the rating agency's assumptions, the impact of this should be moderate, limited to individual borrowers and somewhat offset by recoveries and write-offs. Should the macroeconomic environment deteriorate, Moody's expects stress on riskier and more leveraged sectors of the economy to exert pressure on asset quality.

Adequate capitalization levels remain a key strength of the Omani banking system, providing a buffer to absorb future unforeseen losses. Moody's recently conducted stress tests which have demonstrated the ability of the six rated Omani banks to absorb losses under a worst-case scenario. Although the rating agency expects banks' capital ratios to remain under pressure due to market conditions, it does not anticipate any adverse stress on ratings to stem from their capital adequacy. (Moody's05.08)

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11.8 SAUDI ARABIA: IMF Executive Board Concludes 2009 Article IV Consultation

On July 13, 2009, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Saudi Arabia.1

Background

Saudi Arabia confronts the current global crisis with stronger fundamentals compared with previous downturns. In recent years, the authorities consolidated their macroeconomic position, strengthened the financial sector, and implemented structural reforms to boost private-sector led growth. The consolidation of Saudi Arabia's economic position has not gone unnoticed: Saudi Arabia was ranked first among Arab countries for four consecutive years and 16th globally by the latest World Bank's Doing Business Report.

Against this backdrop, the economy delivered another strong performance in 2008 despite global headwinds. Real GDP, buoyed by a sustained broad-based expansion in the non-oil sector (4.3%) and higher oil production grew by 4.4%. Inflation, after accelerating in the first half of the year (11.1% in July year-on-year), subsided to 5.2% y/y in April 2009 owing to weaker demand and lower import prices.

High oil prices contributed to record fiscal and external current account surpluses in 2008, despite an expansionary fiscal stance and a surge in imports. Part of the fiscal surplus was used to repay domestic debt, which fell by about 5%age points to about 13½% of GDP. Foreign direct investment (FDI) inflows remained high at about $23 billion despite the global crisis and SAMA's NFA rose to $438.5 billion (93% of GDP).

Monetary policy contended with rising inflation in the first half of 2008 and the fallout from the intensification of the global crisis in the second half. The authorities responded forcefully by lowering reserve requirements, cutting policy rates, and providing liquidity and deposit guarantees. Despite a slowdown in credit in the fourth quarter, broad money and private sector credit grew by 18% and 27%, respectively.

The banking system has weathered the global crisis. It remains profitable and well capitalized with low nonperforming loans. However, the stock market tumbled by 46% in the last quarter of 2008, shedding half its value.

The outlook remains broadly positive. Non-oil GDP growth—the appropriate measure of job-creating economic activity in oil-exporting countries is projected to grow by 3.3% in 2009 supported by an expansionary fiscal stance. However, lower oil production would lead to a contraction in overall GDP of almost 1% for the first time since 1999. Inflation is expected to retreat to about 4.5%. The fiscal and external accounts are projected to be in surplus, albeit at a much lower level, owing to a fall in oil revenues and the expansionary fiscal stance. There are some downside risks associated with the speed and depth of the global recovery and the normalization of global financial markets.

Executive Board Assessment

Executive Directors noted that Saudi Arabia confronts the current global crisis from a position of strength, reflecting a track record of prudent macroeconomic policies and structural reforms that have enhanced the economy's resilience. Although overall real GDP is projected to contract slightly in 2009 owing to lower oil demand, the non-oil sector expansion continues to be robust and inflation is declining. Directors considered that the most important short-term challenges are to preserve financial sector stability and mitigate the domestic impact of the global recession.

Directors welcomed the measures taken to enhance bank liquidity and stabilize the inter-bank market. They commended efforts to strengthen further the financial regulatory and supervisory frameworks, including measures to improve banks' risk management systems, implement remaining Financial Sector Assessment Program (FSAP) recommendations, and assess the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework. These measures have helped the banking system to remain profitable and well-capitalized. Nevertheless, Directors encouraged continued vigilance in identifying and responding to any evolving risks. They underscored the importance of regular stress testing of the banking system, and encouraged the authorities to update the resolution framework for financial and non-financial institutions, further enhance transparency and disclosure by the corporate sector, and review institutional mechanisms for cross-border and cross-sector supervision.

Directors considered that the exchange rate peg to the U.S. dollar has provided a credible and stable nominal anchor and contributed to macroeconomic stability. Directors noted the staff's view that the likely undervaluation of the Saudi riyal in 2008 was temporary and expected to close over the medium term. Some Directors encouraged the authorities to consider a more flexible exchange rate regime for the Gulf Cooperation Council (GCC) monetary union, in consultation with other members of the union. Directors encouraged progress toward the monetary union by developing operational responsibilities and the governance structure of the future central bank, harmonizing macroeconomic statistics, and establishing an efficient payments system.

In view of the policy constraints posed by the peg to the U.S. dollar, Directors saw fiscal policy as key to macroeconomic stability and non-oil growth. They commended the authorities for their decisive fiscal response to mitigate the impact of the global recession on economic activity. The fiscal stimulus package, which was the largest relative to GDP among G-20 countries, appropriately focused on capital spending and would contribute both to diversified domestic growth and the global recovery. At the same time, Directors stressed that fiscal policy would need to be managed flexibly to safeguard medium-term sustainability, and that spending should be adjusted once the recovery has taken firm hold.

Directors commended the authorities for their leadership role in stabilizing world oil markets by maintaining their capacity expansion plans despite lower oil prices. They encouraged the authorities to continue basing their capacity expansion decisions on medium to long-term demand conditions.

Directors supported the authorities' efforts to implement second-generation reforms in the judicial, education, and financial sectors, aimed at further improving the environment for private sector development. They welcomed the continued liberalization of the trade regime, consistent with the authorities' commitment to a free and open trade system. Directors commended the authorities for the substantial assistance extended to developing countries, including their active support for the Heavily Indebted Poor Countries (HIPC) initiative and their contributions to the "energy for the poor" initiative. (IMF18.08)

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11.9 PAKISTAN: IMF Completes Second Review Under Stand-By Arrangement

On 7 August, the Executive Board of the International Monetary Fund (IMF) completed the second review of Pakistan's economic performance under a program supported by a Stand-By Arrangement (SBA).

To help the country address increased balance of payment needs, the Board also approved an augmentation of access by an amount equivalent to SDR 2,067.4m (about $3,236.3m), bringing the total financial support to an amount equivalent to SDR 7,235.9m (about $11,327m), equivalent to 700% of Pakistan's quota or 6.3% of its GDP.

The Board also approved the extension to end 2010 of the arrangement, originally approved on November 24, 2008

The completion of the review enables the immediate disbursement of an amount equivalent to SDR 766.7m (about $1,200.2m), bringing total disbursements under the program to an amount equivalent to SDR 3,402.6m (about $5,326.5m). The Board agreed that a portion of the augmented access could be used to finance priority spending until the disbursements of donor support pledged for 2009/10 are received.

Pakistan will also benefit from the proposed allocation of Special Drawing Rights (SDRs), which, once approved, will supplement its reserves.

The Executive Board also approved Pakistan's request for a waiver for the non-observance of two end-June 2009 structural performance criteria on submission to parliament of legislative amendments to (i) enhance the effectiveness of the State Bank of Pakistan in banking supervision; and to (ii) harmonize the income tax and sales tax laws and reduce exemptions for both taxes. The Executive Board also approved Pakistan's request for a waiver for non-observance for the end-June quantitative performance criterion on the fiscal deficit, which according to preliminary information was missed by an amount equivalent to 0.9% of GDP.

Following the Executive Board's discussion on Pakistan, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:

"Pakistan's economy has continued to stabilize. Reforms in the financial sector and the foreign exchange market have been progressing, and steps have been taken to strengthen the social safety net. These achievements are appreciable, considering the security developments that resulted among others in the large number of internally displaced persons (IDPs), the global economic recession, and the difficult domestic political environment.

"The end-2008/09 fiscal deficit target was missed, due partly to unforeseen security- and IDP- related expenditures but also to excessive spending by provinces and revenue shortfalls, owing partly to delayed implementation of tax reforms. The unresolved energy sector problems have continued to undermine Pakistan's growth potential and burden public finances.

"A durable solution to the problem of low tax revenue should start with the early implementation of VAT and the ongoing tax administration reform. These reforms will make the economy less vulnerable, provide the steady flow of resources needed to reduce poverty, develop basic infrastructure and strengthen the government's ability to deal with the pressing needs of the population, which are now compounded by the large number of IDPs.

"The recent agreement with World Bank and Asian Development Bank staffs on the electricity sector reform signals a desire to address the deep-seated problems in that sector, including the resolution of the intercorporate circular debt, which burdens the energy sector enterprises, and the elimination of tariff differential subsidies within a year from now, making additional fiscal resources available for priority spending.

"The macroeconomic outlook for 2009/10 remains difficult, and the external position is subject to considerable downside risks. The donor support pledged in Tokyo and the augmentation of access under the IMF-supported Stand-By Arrangement by about $3.1b will help mitigate these risks and enable the implementation of the government's fiscal program; however, this financing is temporary and should be used as a bridge until the revenue reforms bear fruit.

"The 2009/10 budget aims to provide adequate space for priority spending. This includes spending on IDPs, support for poor households, and other well-targeted social spending.

"Monetary policy should remain vigilant about preventing a resurgence of inflation. The relaxation of the fiscal policy stance, electricity tariff increases and the rebound in oil prices will add to inflationary pressures that monetary policy needs to combat.

"The increased flexibility of the exchange rate and the timely elimination of the State Bank of Pakistan's provision of foreign exchange for imports of diesel and other refined products will improve the functioning of the foreign exchange market, make Pakistan's economy more resilient to external shocks, and will contribute to further strengthening of its international reserves position.

"The accelerated reforms to strengthen central bank independence and the legislative amendments to increase its supervisory powers will enhance the monetary policy framework and help strengthen the banking system," Mr. Portugal said. (IMF07.08)

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11.10 TURKEY: Report Examining Turkey's Lucrative Tourism Industry

Research and Markets (http://www.researchandmarkets.com) has announced the addition of the "Turkey Tourism Report Q3 2009" report to their offering.

Overview

Turkey achieved a strong performance in the tourism sector last year, the report estimates that foreign visitor arrivals increased over 13% year-on-year (y-o-y) to nearly 26.4 million visitors; although the growth rate slowed compared with 2007. However, following a trend of weaker quarterly growth during the course of 2008, the latest data show further deterioration in arrivals as anticipated. In Q1/09, figures show a fall in foreign visitor arrivals (excluding Turkish citizens residing outside the country) of about 2% y-o-y (this compares with annual growth of about 18% in Q1/08).

Hospitality

The latest hospitality sector data are for Q1/09 and reveal that the total number of tourist (foreign and domestic) room nights amounted to over 45.7 million nights, an increase of 3.8% y-o-y. The number of foreign tourist room nights - 68% of the total - rose a relatively strong 10% y-o-y to about 31.1 million nights in Q1/09, which is a favorable outturn given the decline in foreign visitor arrivals over the same period.

Forecast Scenario

Data on foreign visitor arrivals for Q1/09 are broadly in line with our view which remains unchanged this quarter - of negative growth in arrivals of -3.5% y-o-y in 2009. This is set against a background of severe worsening of economic conditions in Turkey's major source markets, including Germany, Russia, the UK and the eurozone. Modest recovery in arrivals should take place next year. The weakness of the Turkish lira against the US dollar and the euro, as seen in 2008, is also expected to continue during the course of this year (subject to significant volatility in the near term), which will assist the competitiveness of Turkey's tourism sector. From 2010 however, the forecasts appreciation of the lira against both currencies, dampening growth in visitor arrivals to Turkey over the latter part of the forecast period.

Turkish Airlines

In financial results for 2008, Turkey's national airline, Turkish Airlines (THY), reported a net profit of $874m, up a strong 26% compared with a year earlier. Revenue was up a similar annual percentage to $4,719m, with proceeds from international traffic accounting for 78% of total revenue, while 22% was from domestic traffic. Fuel costs, meanwhile, accounted for 34% of total operating costs, compared with 27% in 2007. Latest results for Q1/09 show THY achieved a net profit of $94m, which was down 45% y-o-y (but only a fall of 24% in Turkish lira terms). While operating revenue increased by 18% y-o-y, the decrease in fuel prices reduced the share of fuel costs in total expenses from 32% to 22% (compared with a year earlier). The number of passengers carried also increased 8% y-o-y to 4.9mn. In May 2009, as part of a large-scale expansion plan, THY and Boeing signed an order for five Boeing 777- 300ERs at a current cost of $1.36bn. (R&M17.08)

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11.11 TURKEY: Oil and Gas Report Q3 / 2009

Research and Markets (http://www.researchandmarkets.com) has announced the addition of the "Turkey Oil and Gas Report Q3 2009" report to their offering.

The latest Turkey Oil & Gas Report forecasts that the country will account for 6.23% of Middle Eastern (ME) regional oil demand by 2013, while providing an insignificant contribution to supply. Regional oil use of 8.24mn barrels per day (b/d) in 2001 rose to an estimated 10.86mn b/d in 2008. It should average 11.09mn b/d in 2009 and then rise to around 12.08mn b/d by 2013. Regional oil production was 22.87mn b/d in 2001, and in 2008 averaged an estimated 25.94mn b/d. It is set to rise to 28.99mn b/d by 2013. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 14.63mn b/d. This total had risen to an estimated 15.18mn b/d in 2008 and is forecast to reach 16.58mn b/d by 2013. Iraq has the greatest production growth potential, followed by Qatar.

As regards natural gas, the region in 2008 consumed an estimated 386bn cubic meters (bcm), with demand of 511bcm targeted for 2013, representing 32.3% growth. Production of an estimated 407bcm in2008 should reach 625bcm in 2013 (+53.8%), which implies net exports rising to 115bcm by the end of the period. Turkey's share of gas consumption in 2008 was an estimated 9.20%, while it makes no meaningful contribution to production. By 2013, its share of demand is forecast to be 9.36%.

In terms of the OPEC basket of crudes, the average price in Q1/09 was an estimated $45.78/bbl, down 13% from the $52.51 recorded during the previous three months. During the second quarter, there has been little change to our view of oil market developments. The author is forecasting an average OPEC basket price of $51.30/bbl, with the March gains being retained in April, before further recovery to a possible $57.00 is seen by June. For 2009, we are still assuming an average OPEC basket price of $52.00/bbl (-45% y-o-y). The author's full-year forecast implies Brent Crude at $53.73, WTI averaging $54.90/bbl and Urals at $52.66 for 2009.

For the whole of 2009, the author's assumption for gasoline is an average $56.89/bbl, with the price peaking at a forecast monthly average of $64.75 in December 2009. The overall y-o-y fall in 2009 gasoline prices is put at 44.1%. For gasoil in 2009, the author's forecast is for an average price of $69.35/bbl, assuming a monthly high of $94.48/bbl in December. The full-year outturn represents a 42.8% fall from the 2008 level. The monthly average jet fuel price is forecast to range from $53.75 in February to $96.76/bbl in December, proving an annual level of $71.78/bbl. This compares with $124.95/bbl in 2008. Turkish real GDP is now forecast by the author to shrink by 5.7% in 2009, following estimated growth of 1.1% in 2008. We are now assuming 1.7% growth in 2010, 4.2% in 2011, 5.4% in 2012, followed by 5.7% in 2013. We expect oil demand to rise from an estimated 673,000b/d in 2008 to 736,000b/d in 2013. State upstream company TPAO and some international oil companies (IOCs) are attempting to raise domestic oil output, but our estimates assume 37,000b/d of 2009 oil and liquids production sinking to 27,000b/d by the end of the forecast period. Gas production will remain insignificant, but consumption is expected to rise from an estimated 36.5bcm to 47.8bcm by the end of the forecast period, requiring imports of 47.0bcm. (R&M17.08)

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11.12 CYPRUS: IMF Executive Board Concludes 2009 Article IV Consultation

On August 5, 2009 the Executive Board of the International Monetary Fund (IMF) concluded the 2009 Article IV consultation with Cyprus.

Background

The global crisis is beginning to affect Cyprus. The economy has been relatively shielded from the crisis so far, recording positive growth in the first quarter of 2009, well above the euro area. The financial sector has not required public capital injections. The relative resilience is due to the elimination of exchange rate risk following euro adoption, conservative financial sector practices with limited exposure to toxic assets and strict supervision, and a domestic demand-based growth with less reliance on manufacturing exports. However, the economy is beginning to slow in response to the global crisis. Growth is projected to fall sharply in 2009 as banks and the private sector restructure balance sheets. On current policies, a tepid but uncertain recovery is expected to begin starting 2010.

Despite its resilience so far, the economy is slowing down and risks are increasing. The overheating of the economy in 2007–08 has left the private sector highly leveraged, and banks and households exposed to the property market. The expected slowdown will increase credit risk in banks, which, in some plausible but unlikely extreme scenarios, could have systemic implications given the size and concentration of the banking sector. The government and the Central Bank of Cyprus (CBC) have taken action to ensure the soundness of the banking system. There has been significant progress in implementing EU Directives and recommendations made by the recent Financial Sector Assessment Program (FSAP). In particular, deposit insurance coverage and funding has increased; a crisis management law is being drafted to empower the government to preemptively address liquidity or insolvency problems; and a legal and regulatory framework for covered bonds has been initiated to facilitate the availability of refinancing under the ECB's facilities. Nevertheless bank soundness indicators are being adversely affected by the economic environment.

Large current account deficits partly indicate competitiveness problems especially in the manufacturing and tourism sectors. In particular, the backward-looking automatic indexation mechanism (COLA) has recently contributed to wages outstripping productivity increases. The external position would therefore be vulnerable if the current sources of financing - foreign direct investment and non-resident deposit flows into the banking system - were to decline. While there has been progress - albeit slow - in implementing the wide-ranging structural reforms of the government's National Reform Programme, reforming the COLA is not part of the agenda at this juncture.

The largely revenue-based fiscal consolidation has started unwinding. This is due to softening growth, the lapse of temporary revenue-generating factors, and increases in untargeted social spending starting 2008. Although important pension reforms were recently enacted, they rely mainly on contribution increases and do not yet fully address the large ageing-related increases in pension expenditures. Fiscal policies could potentially become unsustainable if current policies, which significantly increase the inelastic component of budget spending (especially payroll), are implemented.

Executive Board Assessment

The Executive Directors noted that Cyprus has weathered the crisis well. The overheating of the economy in 2007–08 has given rise to certain risks that would need to be managed carefully as the economy slows. Policies would need to mitigate short-term risks while ensuring medium-term sustainability.

Directors endorsed the government's objective to achieve a balanced budget over the medium term. They noted that, based on strengthened policies, the budget deficit will need to decline by about 1/2 - 3/4% of GDP a year with a significant upfront correction to avoid unfavorable debt-deficit dynamics going forward. Directors emphasized that fiscal adjustment should rely on reducing public consumption, particularly the wage bill and on broader public administration reforms. They considered that the temporary stimulus measures should be allowed to expire once the recovery sets in, and the social support measures should be carefully targeted to the needy. Directors welcomed the passage of pension reforms. A few Directors considered that additional pension reforms may be necessary in future, including raising the retirement age and better aligning public and private benefits.

Directors recommended the adoption of a medium-term budget framework and more effective management of public sector liabilities. The government's recent initiative in this area could be further enhanced by monitoring contingent liabilities and minimizing the possibility of moral hazard and adverse selection in public sector aid programs.

Directors were reassured that financial sector risks appear to be manageable. Nonetheless, given the size and concentration of the financial sector, they expressed concern that problems can potentially become systemic, underscoring the importance of early detection of risks and intervention to preserve financial sector stability. They encouraged the Central Bank of Cyprus (CBC) to enhance monitoring of banks' funding, cross-border exposures, and counterparty risk management. With the potential for a further deterioration in asset quality, the CBC should require higher capital buffers, particularly from systemically-important banks.

Directors recommended that supervision and the safety net be further improved over the medium term. They noted that Cyprus' reputation as a financial center relies on continued effective supervision by an independent and accountable central bank. In the view of most Directors, a single supervisor for all credit institutions and a more integrated supervisory structure in the CBC should be considered. The stress-testing framework should be enhanced and supervisory and financial stability resources bolstered. Directors welcomed Cyprus' participation in a Financial Sector Assessment Program (FSAP), and called for implementation of its recommendations.

Directors underlined the importance of improving competitiveness to assist the recovery and support external viability. They encouraged the authorities to reverse the deterioration in productivity and unit labor costs by implementing the broad-ranging National Reform Program, including cutting red tape, streamlining the bureaucracy, and implementing other structural reforms. Directors supported eliminating the automatic wage indexation mechanism (COLA) or mitigating its impact through productivity improvements and better targeting. (IMF17.08)

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11.13 BULGARIA: Oil and Gas Report Q3 - 2009

Research and Markets (http://www.researchandmarkets.com) announced the addition of the "Bulgaria Oil and Gas Report Q3 2009" report to their offering.

The latest Bulgaria Oil & Gas Report from the author's forecasts that the country will account for 2.19% of Central and Eastern European (CEE) regional oil demand by 2013, while making no meaningful contribution to supply. CEE regional oil use of 4.65mn barrels per day (b/d) in 2001 rose to an estimated 5.39mn b/d in 2008. It should average 5.33mn b/d in 2009 and then rise to around 5.85mn b/d by 2013.

Regional oil production was 8.83mn b/d in 2001, and in 2008 averaged an estimated 12.93mn b/d. It is set to rise to 14.39mn b/d by 2013. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 4.18mn b/d. This total had risen to an estimated 7.54mn b/d in 2008 and is forecast to reach 8.54mn b/d by 2013.

As regards natural gas, the region in 2008 consumed an estimated 636.7bn cubic meters (bcm), with demand of 737.8bcm targeted for 2013, representing 13.0% growth. Production of an estimated 778.7bcm in 2008 should reach 906.1cm in 2013, which implies net exports rising from 141.9bcm in 2008 to 168.3bcm by the end of the period. Bulgaria's share of consumption in 2008 was an estimated 0.57%, while it has no significant share of production. By 2013, its share of demand is forecast to be 0.72%.

In terms of the OPEC basket of crudes, the average price in Q109 was an estimated $45.78 per barrel (bbl), down 13% from the $52.51/bbl recorded during the previous three months. During the second quarter, there has been little change to our view of oil market developments. The author is forecasting an average OPEC basket price of $51.30/bbl, with the March gains being retained in April, before further recovery to a possible $57.00 is seen by June. For 2009, we are still assuming an average OPEC basket price of $52.00/bbl (-45% year-on-year). The author's full year forecast implies Brent crude at $53.73, WTI averaging $54.90/bbl and Urals at $52.66 for 2009.

For the whole of 2009, the author's assumption for gasoline is an average $56.89/bbl, with the price peaking at a forecast monthly average of $64.75 in December 2009. The overall y-o-y fall in 2009 gasoline prices is put at 44.1%. For gasoil in 2009, the author's forecast is for an average price of $69.35/bbl, assuming a monthly high of $94.48/bbl in December. The full-year outturn represents a 42.8% fall from the 2008 level. The monthly average jet fuel price is forecast to range from $53.75 in February to $96.76/bbl in December, proving an annual level of $71.78/bbl. This compares with $124.95/bbl in 2008.

Bulgarian real GDP is now forecast by the author to fall by 3.1% in 2009, following 2008 growth of 5.8%. We are assuming a further 1.5% contraction in 2010, followed by growth of 2.4% in 2011, 3.0% in 2012, and 3.4% in 2013. Oil demand beyond the weakness of 2009/10 is forecast to rise by up to 2.0% per annum, which suggests that consumption could reach 128,000b/d by 2013. Imports can be expected to grow in line, as exploration efforts in the largely privatized hydrocarbons sector by small international oil companies (IOCs) do not appear likely to deliver increased domestic crude volumes. Gas consumption is rising well ahead of domestic supply. While gas output could reach 1.1bcm by the end of 2013, demand is heading for 5.30bcm, requiring imports of 4.20bcm. (R&M18.08)

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- Israeli Shekel conversions done at a rate of NIS 4.00 = $1.00
- Turkish Lira conversions done at a rate of NTL 1.60 = $1.00
- Euro conversions done at a rate of € 1.00 = $1.25
- Jordanian Dinar conversions done at a rate of JD 1.00 = $1.41
- UAE Dirham conversions done at a rate of Dh 3.66 = $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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