TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Netanyahu Government Approves Maritime Economic Zone Proposal
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 Morgan Stanley Says Israeli Inflation Has Peaked
2.2 Mintz Levin Israel Innovation Road Trip for 15 Pioneering Technology Start-Ups
2.3 Ohio-Israel Agricultural Initiative Welcomes Afimilk USA to Ohio
2.4 Omek Interactive Raises $7 Million in Series C Financing Led by Intel Capital
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Dubai's DAE Cancels $2.8 Billion Boeing 737 Order
3.2 Subway on Track to Double Egypt Stores in 2011
3.3 Proposed Legislation Advocates Trade Between Indian Country and Turkey
3.4 JW Marriott Opens First Hotel in Turkey
3.5 Greece Auto Report Q3 2011
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Cabinet Raises Rooftop Solar Energy Quota by 110 MW
4.2 SolarEdge PV Approved for US DOE's Energy Efficiency and Renewable Energy Projects
4.3 15th International CleanTech Exhibition and Conferences Sees NIS 250 Million in Deals
4.4 Kuwait & US Firms Sign Clean Energy Agreement
4.5 France Funds Solar Project in Morocco With € 100.3 Million
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Lebanon's Budget Deficit Rises To 25.47%
5.2 FDI in Lebanon at 12.6% of GDP in 2010
5.3 Jordan's GCC Bid Could Lead To Influx of Cheaper Labor
5.4 Arab Unrest Takes Toll on Jordan Tourism Traffic
►►Arabian Gulf
5.5 GCC Ready for Customs Union Launch By 2015
5.6 S&P Reviewing UAE, Qatar, Jordan for Emerging Market Status
5.7 UAE Non-Oil Trade Rebounds in 2010 Though Volumes Continue to Contract
5.8 Construction of UAE Rail Network Now Slated for Fourth Quarter Start
5.9 Dubai's Inflation Accelerates To 0.8% Monthly in June, Led By Food Prices
5.10 Dubai Ruler Endorses $7.8 Billion Dubai Airports' Expansion Program
5.11 Oman Inflation Reaches a 25-Month High in May Due to Food Prices
5.12 Oman Non-Oil Exports Surge 32%
5.13 Saudi Arabia's Annual Inflation Increased Slightly to 4.7% in June 2011
►►North Africa
5.14 Egypt Urban Headline Inflation Eased Slightly To 11.8% in June 2011
5.15 Suez Canal Revenues Reach $445.2 Million in June 2011
5.16 Egypt Gets New Finance Minister in Cabinet Reshuffle
5.17 Egypt's Tax Revenues Rise 15.6% Annually to E£169.7b In Fy10/11
5.18 Tunisia's Tourism Revenues Fall by 51% in First Half
5.19 Morocco's Exports to USA Up 56% in 2010
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey Retail Report Q3 2011 - A Large, Growing & Young Population
6.2 Cyprus Harmonized Inflation - Analysis
6.3 Bulgaria's Annual Inflation Rate Reaches 5.6%
6.4 Bulgaria's New Car Market Starts To Improve in First Quarter
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Israel Recognizes South Sudan
7.2 Ramadan to Begin on 1 August
*REGIONAL:
7.3 Egypt's Parliamentary Elections to Take Place By November 2011
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Hebrew University Study Sheds Light on Early Development of Cancer
8.2 Gamida Cell-Teva JV Continues Phase III Study of StemEx for Leukemia & Lymphoma
8.3 Procognia Signs Agreement with Leading Life Science Japanese Company – CTCLS
8.4 EarlySense's Contact-Free Patient Monitoring System Approved for Sales in Canada
8.5 Israeli Researchers Identify Protein That May Slow Down Pancreatic Cancer
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Nova Unveils Multi-Channel NovaMARS Software Engine for Advanced 3D Structures
9.2 Briza Colors Brings a Breath Of Fresh Air To Diamonds
9.3 Automotive Leasing Companies Implementing Mobileye's Leading Driver Safety Solution
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10: ISRAEL ECONOMIC STATISTICS
10.1 Finance Ministry Reports Israeli Economy Slowing Down
10.2 Israel's First Quarter Growth Revised Down To 4.6%
10.3 Israel's Food Prices Rise By 12.7% in 3 years
10.4 April - May Sees 3.5% Decline in Israeli Exports
10.5 June Tourism to Israel Reaches a Record High
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11: IN DEPTH
11.1 ISRAEL: Summary of Israeli High-Tech Company Capital Raising – Q2/2011
11.2 LEBANON: Fitch Affirms Lebanon at 'B'; Outlook Stable
11.3 KUWAIT: Pharmaceuticals and Healthcare Report Q3 2011
11.4 QATAR: Industrial Intent
11.5 EGYPT: Risk Alert – Revolution Hits Roadblocks
11.6 EGYPT: Taking Matters Into Its Own Hands
11.7 EGYPT: An Independent Voice for Egypt's al-Azhar?
11.8 TUNISIA: Libya Stalemate Is Bad News for Tunisia
11.9 TUNISIA: Energy Investment Continues To Flow
11.10 ALGERIA: Development Talks See Tangible Results
11.11 MOROCCO: 'BBB-' foreign-currency rating affirmed by Standard & Poor's
11.12 MOROCCO: Reforming the Constitution, Fragmenting Identities
11.13 GREECE: Fitch Downgrades Greece to 'CCC'; Off RWN
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Netanyahu Government Approves Maritime Economic Zone Proposal
On 10 July, the Israeli cabinet approved the Ministry of Foreign Affairs' proposal for Israel's exclusive economic zone in the Mediterranean. The motion comes after Lebanon submitted to the UN maps, which mark maritime borders that infringe both on Israel's special economic zone and the natural gas and oil reserves that may exist there. The cabinet approved the coordinates of the border of Israel's exclusive economic zone with Lebanon. Israel will ask the UN to determine the borders of the exclusive economic zone, which give Israel exclusive rights to fishing, oil and gas drilling, and other economic activities. Israel claims that the border of its exclusive economic zone with Lebanon runs along a line 90 degrees from the coastline, which runs a roughly northeast direction to a point equidistant from the shores of the country across the sea - Cyprus. Lebanon claims that the border should be a straight continuation of the east-west land border. The difference between the two lines reaches up to 15 kilometers, and the Lebanese claim touches on the Alon license, owned by Delek Group and Noble Energy. The geologic structures in the area are believed to have natural gas and oil.
Claims in Lebanon following the Tamar discovery in 2009, that it was in Lebanese waters, soon died down, but the announcement of the Leviathan discovery in June 2010, reawakened calls in Lebanon for the government to act to prevent Israel from allegedly stealing Lebanon's natural resources. In October 2010, the UN rejected Lebanon's request that it demarcate its maritime border with Israel. (Globes 10.07)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 Morgan Stanley Says Israeli Inflation Has Peaked
Morgan Stanley believes that inflation in Israel may have peaked - provided that there "is no major administrative of exogenous factor-oriented price hike". It says that the 0.4% rise in the Consumer Price Index (CPI) in June marginally raised the inflation rate for the preceding 12 months to 4.2% from 4.1% in May, but it believes that the inflation will fall toward 3.5% by the end of the year. Morgan Stanley adds that while this rate is above the government's 1-3% inflation target, "we expect the trend to continue and CPI inflation to enter the band toward the middle of 2012." Morgan Stanley believes that the Bank of Israel will not raise the interest rate at the end of July, but that it will make two more rate hikes this year to 3.75%. It notes that the housing item (rent) of the CPI, which rose by 0.47% in June, was the lowest monthly increase in five months "which should give some comfort to policy makers." Morgan Stanley notes that the seasonal increase in footwear and clothing prices was much lower than in 2007-10, suggesting "some marginal slowdown in domestic demand." Morgan Stanley concludes that the shekel's appreciation will slow, due to the rise in the trade deficit, the lower current accounts surplus and slower pace of interest rate hikes. It believes that the main driver of the shekel-dollar exchange rate will be the interest rate spread with that of the US Federal Reserve Board. (Globes 17.07)
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2.2 Mintz Levin Israel Innovation Road Trip for 15 Pioneering Technology Start-Ups
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo partnered with BootCamp Ventures to host an Israel Innovation Road Trip consisting of 15 Israeli start-up technology companies seeking their first round of Series A financing from institutional investors. The presentations took place in Boston and NY between 11 – 13 July. The Road Trip gave 15 of Israel's most innovative technology start-ups the chance to present before panels of seasoned investors and entrepreneurs and an interactive audience of investors. The emphasis of the event was on the presenting companies, each of whom will provide a 30-second elevator pitch and six minute focused investor presentation. BootCamp Ventures http://www.bootcampventures.com is a boutique pre-and post-investment advisory firm working with innovative technology companies seeking capital and business partnerships. Headquartered in Israel with operations in Turkey and partnerships in Europe, the company was founded by American professionals, providing a multi-disciplinary approach to technology ventures. Partners bring experience in venture capital, entrepreneurship, marketing and finance to raise the value of promising start-ups. (Mintz Levin 11.07)
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2.3 Ohio-Israel Agricultural Initiative Welcomes Afimilk USA to Ohio
The Ohio-Israel Agricultural Initiative of the Cleveland-based Negev Foundation congratulated S.A.E. Afikim (Afimilk) in their establishment of a logistics center in Massillon, Ohio. This North American base of operations began work on 12 July 2011. Israel's S.A.E. Afikim (Afimilk) is a global leader in developing, manufacturing and marketing cutting-edge computerized systems for modern dairy-farm milk production and herd management. The company has now announced that it is setting up an independent business, S.A.E. Afikim USA (Afimilk USA) to serve North American dairy farmers. Its new Ohio-based logistics center will employ experienced dairy professionals from Ohio and across the US to provide in-depth know-how and support. Since 2004, the Initiative presented S.A.E. Afikim in the Israel Agriculture Pavilion at the annual Farm Science Review tradeshow in London, Ohio, and served as a resource to the company's activities in Ohio. The Initiative also sponsored delegations of Ohio farmers and agribusinesses to Israel, where the participants were hosted by S.A.E. Afikim, saw the Afimilk system in various dairy farms throughout Israel, visited the Afimilk booths at Israeli tradeshows, and toured the Afimilk facility at Kibbutz Afikim. As a result of these Initiative-sponsored activities, many Ohio dairy farmers are aware of the Afimilk products and their value to the farmer. (OIAI 09.07)
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2.4 Omek Interactive Raises $7 Million in Series C Financing Led by Intel Capital
Omek Interactive received $7 million in the closing of the first part of its Series C Funding round led by Intel Capital, Intel's global investment organization. Omek's Beckon technology converts the raw depth map data from 3D cameras into an awareness of people in front of the camera. Peoples' movements or positions can then be converted into commands that control hardware or software, enabling device manufacturers and application developers to create gesture and body tracking interfaces which are natural and accessible. Omek will use the investment to expand its product and technology teams, develop new products for specific target markets, and extend its business development and technical support presence in key customer regions.
Beit Shemesh's Omek http://www.omekinteractive.com is transforming the way people interact with their devices and applications, by providing tools and technology that enable manufacturers and software developers to add natural user interfaces (NUIs) to their products. Omek's gesture recognition and body tracking software is being incorporated into TVs, set-top boxes, computers and peripherals, interactive signs, medical and fitness devices, and into the content and applications that run on these devices. Omek's tools work with all major 3D cameras, and support a broad range of processors and operating systems – giving customers the flexibility to take advantage of the latest technology, while maintaining portability for their applications. (Omek Interactive 12.07)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Dubai's DAE Cancels $2.8 Billion Boeing 737 Order
Boeing has lost an order for 35 single-aisle 737s from Dubai Aerospace Enterprise, the leasing company that cancelled its remaining order from Airbus recently. The Boeing jet order was valued at about $2.8b at list prices. Dubai Aerospace still has 15 747-8 jumbo jets and six 777s on order from Boeing. The state-owned UAE company was set up in 2006 with the goal of becoming one of the world's biggest aircraft lessors. It ordered 200 airliners from Airbus and Boeing at the 2007 Dubai air show, only to scale back the plans when its finances weakened during the global recession. Airbus said that Dubai Aerospace had dropped orders for 34 single-aisle A320s and 11 A350 widebodies, leaving it with no more purchase contracts after previous cancellations in the past year. The lessor has also cut its planned purchase of 15 Boeing 787 Dreamliners and the other 32 737s it had ordered. (AB 15.07)
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3.2 Subway on Track to Double Egypt Stores in 2011
US fast food chain Subway said it is on track to double its outlets in Egypt this year under a plan to operate 90 locations in the Arab state by 2017. The sandwich chain plans to grow its outlets in Egypt from four to eight in 2011, despite the impact of a popular uprising that ousted President Hosni Mubarak from power in February. The unrest has crippled the economy of the Arab world's most populous state, hurting crucial revenue from tourism and industrial output. Subway, which has more than 250 restaurants across the Arab world, said in March it would double the number of stores it had in the UAE over the next five years. The company plans to operate 130 outlets in the Gulf Arab state by the year-end. Established in 1965 in Connecticut, US, Subway now has more than 34,000 outlets in nearly 100 countries around the world. As well as 106 shops in the UAE, Subway also operates 44 restaurants in Saudi Arabia and in Kuwait, 17 in Qatar, 11 in Jordan and Bahrain, nine in Oman and five in Lebanon. (AB 13.07)
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3.3 Proposed Legislation Advocates Trade Between Indian Country and Turkey
Representative Tom Cole (R-Oklahoma) introduced new legislation on 24 June that will facilitate American Indian economic development by encouraging trade and investment relationships between tribes and Turkish companies. Called the Indian Tribal Trade and Investment Demonstration Project Act of 2011, H.R. 2362 was referred to the Committee on Natural Resources, and a hearing on the act is expected to occur in the coming weeks. A member of the Chickasaw Nation, Rep. Cole is the only enrolled member of an American Indian tribe in Congress. The proposed legislation states: “Congress finds that the public and private sectors in the Republic of Turkey have demonstrated a unique interest in bolstering cultural, political, and economic relationships with Indian tribes and tribal members uneconomic regulatory, statutory, and policy barriers are preventing more robust relationships between the Turkish and Indian tribal communities; and it is in the interest of Indian tribes, the United States, and the United States – Turkey relationship to remove or ameliorate these barriers through the establishment of an Indian Tribal Trade and Investment Demonstration Project.” The bill establishes a limited demonstration project that will authorize up to six tribes or tribal consortia to partner with Turkish companies to establish commercial ties without requiring federal government approval. Turkish companies' interest in working with Indian Country, coupled with their strengths in construction, uniquely positions them to help spur private-sector economic growth and create jobs. The activities authorized by the legislation would be funded by private sector entities, without any expenditure of federal funds. (ICTMN 11.07)
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3.4 JW Marriott Opens First Hotel in Turkey
Luxury hotel brand JW Marriott has announced the opening of its first hotel in Turkey under a management agreement with leading Turkish contractor Ozkar Insaat. The 24-storey JW Marriott Hotel Ankara, designed in a rich palate of colored glass, is expected to quickly become a towering landmark in Turkey's vibrant capital city. Conveniently located in the heart of the political and business center of Ankara, the new 413-room hotel offers easy access from Ankara Esenboga Airport, convention and conference venues, Ankara culture and education centers and archaeological sites. In addition, the hotel's outdoor terrace is one of the largest outdoor function spaces in Ankara. (TradeArabia 13.07)
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3.5 Greece Auto Report Q3 2011
Research and Markets http://www.researchandmarkets.com "Greece Autos Report Q3 2011" says vehicle sales data for the first four months of 2011 have shown that Greek consumers have given a cold response to the vehicle scrappage scheme introduced by the government on February 21 2011. The European Automobile Manufacturers' Association (ACEA) estimates that passenger car sales in Greece fell nearly 51% y-o-y, to 35,458 units, in the first four months of this year, while commercial vehicle sales were down nearly 53.4% y-o-y, to 2,604 units, in the same period. The results testify BMI's expectations of the scheme proving to be ineffective owing to Greece's high level of taxation on the purchase of new cars and high ownership costs. Meanwhile, the Greek economy contracted a hefty 4.8% in the first quarter of 2011 compared with the same period a year earlier, prompting us to expect the depression to continue throughout the year.
R&M has therefore revised down their previous car sales forecast this year. Weakening business confidence will mean that sales of commercial vehicles will fall at least 7% y-o-y in 2011. The net result will be a close to 6.3% y-o-y drop, to just over 146,000 units, by the end of the year. Although vehicle sales growth is expected to enter positive growth territory from 2012, overall recovery will be modest, reaching only 168,600 units by the end of 2015. (R&M 15.07)
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Cabinet Raises Rooftop Solar Energy Quota by 110 MW
On 17 July, the cabinet increased the electricity production quota of rooftop solar energy facilities by 110 MW. It also set generous production quotas for biomass and wind energy facilities. The approval, part of the government's 2020 renewable energy program, came after months of wrangling. The cabinet set an interim goal of 1,550 megawatts electricity production by renewable sources at the end of 2014, and a target of 2,760 megawatts by the end of 2020. Minister of National Infrastructures Uzi Landau said, "The task is not complete, despite the security and certainty that today's decision provides. We will continue to promote every megawatt of renewable energy and help every entrepreneur so that Israel will meet the target of 10% of its energy coming from renewable sources by 2020."
In the first stage, by 2014, solar energy production by all type of facilities is capped at 1,430 megawatts, wind energy production is capped at 830 megawatts and production by biogas, biomass and waste is capped at 210 megawatts. The cabinet also decided in principle to immediately lift the 460-megawatt quota of large solar farms. The quota is less than the original quota of 500 megawatts. Electricity rates were kept unchanged. The increase in the small (up to 50-kilowatt photovoltaic) rooftop facilities over four years: an additional 20 megawatts in 2011, and 30 megawatts a year in 2012-14, for a total of 110 megawatts. Biogas facilities received an extra quota of 160 megawatts, biomass and waste facilities received an additional 50 megawatts, wind farms received an additional 800 megawatts and new technologies received 50 megawatts in 2012-15. The cabinet also allocated NIS 10m to Ministry of National Infrastructures' chief scientist for the development of facilities that incorporate innovative technologies. (Globes 17.07)
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4.2 SolarEdge PV Approved for US DOE's Energy Efficiency and Renewable Energy Projects
SolarEdge Technologies announced that its solar PV inverters qualify for US local, state and federal projects, funded by the American Recovery and Reinvestment Act of 2009 (ARRA), and administered by the Office of Energy Efficiency and Renewable Energy (EERE), of the US Department of Energy. The SolarEdge leading technology complies with a waiver of the Recovery Act Buy American provision and is therefore eligible for nationwide US projects and programs. The waiver approves use of inverters that permit optimal output of four or more types of modules per array connected to one inverter, as presently no product manufactured in the US has been found by EERE applicable to satisfy the needs of ARRA funding grantees utilizing arrays of diverse types and sizes of modules. The complete text of the waiver is available on this link. The SolarEdge inverters are part of the company's advanced solution that also includes module-level power optimizers and monitoring software. SolarEdge maximizes the return on investment across the solar photovoltaic system's lifecycle, through maximum power point tracking and remote diagnostics for each PV module. Safety is ensured with automatic module shut off during installation, maintenance and fire-fighting.
Hod HaSharon's SolarEdge Technologies http://www.solaredge.com provides end-to-end distributed solar power optimization and PV monitoring solutions, allowing maximum energy production for faster return on investment. The SolarEdge power optimizers perform MPPT per individual panel while monitoring performance of each panel and communicating across existing power lines. Moreover, a fixed DC string voltage is maintained, allowing optimal efficiency of the SolarEdge PV inverter, which is tailor made to work with power optimizers. As a result, the SolarEdge system provides optimal power, while enabling flexible design and optimal roof utilization. (SolarEdge 11.07)
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4.3 15th International CleanTech Exhibition and Conferences Sees NIS 250 Million in Deals
Tens of thousands of visitors from 89 countries attended the 15th annual "CleanTech" conference and exhibition which ended on 6 July. After two days of meetings between the hundreds of exhibitors and dozens of delegations from Jordan, Canada, Paraguay, Ghana, Nigeria, China, India, Poland, Italy and Germany, the value of transactions due to be signed as a result of the exhibition stands at about NIS 250 million. Among the most prominent examples: the SUNTECH company in the field of solar energy is expecting to finalize deals worth tens of millions of dollars following the exhibition; five delegations from Jordan dealing with agriculture showed interest in solutions for water and solar energy, and the president of a Polish company who came to the exhibition looking for a business partner in the field of wind energy, for distribution in Europe, was seen at the booth of the ISRAWIND company that participated in the exhibition.
The 15th annual CleanTech International Conference and Exhibition () dealt this year with the expansion of business opportunities in the global clean-tech market which generates hundreds of billions of dollars. The exhibition, which concentrated this year in particular on water technologies, renewable energy, green building, recycling and energy efficiency, enabled hundreds of exhibitors from Israel and abroad to reveal the best of developments, inventions and innovations dealing with environmental issues to the Israeli audience and to dozens of delegations from around the world. This year all the advanced technologies, patents and developments that are making the world a lot greener and more ecological were shown at the conference: wind turbines for the home, green applications, a shower head with LED lighting, a thermal camera to detect gas leaks, ecological toilets for the home, water-saving taps, and an environmentally-friendly combustion engine. (Mashov 07.07)
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4.4 Kuwait & US Firms Sign Clean Energy Agreement
Nevada-based AVEC Corporation signed a deal with the National Technology Enterprises Company (NTEC) in Kuwait. The agreement calls for co-development and deployment of AVEC clean energy technology in the Gulf state, which is one of the world's largest oil producers. The deal will begin with presentations on the potential of the energy technologies to government officials. Under the agreement, NTEC will join AVEC and its regional partner, GCC International, to provide the investment and marketing access needed to deploy large numbers of AVEC products. Mandated by the Kuwait Council of Ministers, NTEC was created to play a key role in servicing major stakeholders in Kuwait with their technology needs. NTEC's business model involves using investment tools such to initiate and stimulate technology projects in Kuwait. AVEC Corporation is a global solutions provider that owns, develops, invests in and licenses revolutionary technologies including solar, wind and geothermal alternative energy systems. Kuwait's power demand is growing at approximately 7-10% per year, and at this rate, the country estimates it will reach national peak load demand of 25,000MW by year 2025. (AB 06.07)
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4.5 France Funds Solar Project in Morocco With € 100.3 Million
The French Agency for Development (AFD) decided to give Morocco an appropriation of € 100.3 million in order to support the implementation of its solar energy plan and the construction of a solar power plant in Ouarzazate. The sum is composed of a loan of €100 million and a donation of €300,000. The AFD underlined the importance of the plan, launched in 2009 with the aim of raising the capacity of power production from solar energy to a minimum of 2000 MW by 2020. While Morocco imports 97% of its energy needs, it has one of the most abundant solar resource in the world. (MAP 10.07)
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Lebanon's Budget Deficit Rises To 25.47%
Dwindling government revenues and rising expenditures took their toll on Lebanon's already high deficit in the first five months of 2011, as the new finance minister is pressed to produce the 2012 draft budget before the end of this year. Lebanon's budget deficit in the first five months of this year jumped to 25.47% (or LL1.833 trillion) of spending from 19.48% (or LL1.303 trillion) in the same period of last year. The primary surplus, excluding the cost of debt servicing, in the same reporting period fell to LL713b compared to LL1.228 trillion in the same period of last year, a decrease of LL515b. Total government revenues up to May of this year reached LL5.363 trillion, falling by 0.42% compared to the same period of last year. Tax revenues, including income tax, VAT and Customs, rose surprisingly by 5.96% but the non-income tax such as proceeds from the telecoms sector decreased by 37.11%. On the expenditures side, government spending reached LL7.196 trillion, an increase of 7.58% compared to the same period of last year. More than 48% of the government's revenues go to cover the cost of debt servicing and 35% covers the salaries of government employees.
The budget deficit has been sharply falling over the past five months after the Cabinet of then Prime Minister Saad Hariri collapsed following the resignation of 11 ministers. Some economists argue that the tense political atmosphere coupled with deteriorating conditions in Syria and other Arab states had devastating effects on the economy in general and the state's finances in particular. New Finance Minister Mohammad Safadi has an overwhelming task ahead of him and has to produce an acceptable 2012 draft budget before the end of this year. The budget will probably not call for new taxes to appease the trade unions and opposition parties that are searching for any excuse to undermine the government of Prime Minister Najb Miakti.
Lebanon's public debt, which is more than $52b, is another big challenge for the Finance Ministry, although there is serious doubt that the Cabinet, with its current composition, could do anything to cut the size of this debt before the end of its term. (TDS 13.07)
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5.2 FDI in Lebanon at 12.6% of GDP in 2010
Figures issued by the Arab Investment and Export & Guarantee Corporation (AIEGC) show that foreign direct investment (FDI) in Lebanon totaled $4.96b in 2010, constituting an increase of 3.2% from $4.8b in 2009. FDI inflows to Lebanon came above the $3.6b average FDI inflows per Arab country in 2010. Lebanon was the fourth largest recipient of FDI in nominal terms among 18 Arab countries in 2010, unchanged from 2009. Lebanon posted the fifth highest growth rate in FDI among Arab countries and the second highest rate among the top five recipients of FDI last year, and was one of five Arab economies that saw an increase in FDI in 2010. Aggregate FDI to Arab economies declined by 23.4% year-on-year, global FDI increased by 0.7%, FDI to developing economies grew by 9.7%, and FDI in West Asia decreased by 16.3% in 2010. FDI inflows to Lebanon accounted for 7.7% of total FDI in Arab countries in 2010 compared to 5.6% of aggregate inflows in 2009. Further, FDI inflows to Lebanon were equivalent to 12.6% of GDP in 2010, highest in the Arab world, but down from 13.7% of GDP in 2009. Lebanon came ahead of Qatar at 10.4% of GDP, Jordan at 6.2% of GDP, and Sudan at 5.4% of GDP in 2010. (TDS 13.07)
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5.3 Jordan's GCC Bid Could Lead To Influx of Cheaper Labor
Jordan's bid to win membership to the Gulf Cooperation Council (GCC) could result in an influx of cheaper labor from the country to the GCC states, a new report said. A study published by the Dubai Chamber of Commerce and Industry said Jordan had the "most efficient and low cost labor force in the region", which could benefit the UAE, Saudi Arabia, Kuwait, Bahrain, Qatar and Oman. "Jordan has one of the highest literacy rates among Arab countries and it has remained a major supplier of high caliber professionals to Gulf countries," the study said. "Rough estimates suggest some 600,000 Jordanians are working in the GCC. Free movement of labor from Jordan to the GCC would not only help the GCC acquire cheap labor, but it will also add considerable remittance to Jordan. Foreign remittance accounts for 9% of Jordan's GDP," it added. In May, the Gulf Cooperation Council said it was considering requests by Morocco and Jordan to join its Gulf Arab political bloc.
Analysts said at the time that the unexpected announcement of the request by the two Arab countries may be a sign that Gulf leaders are seeking to cement ties with other monarchies against a wave of popular protests that have swept the Arab world. The Dubai Chamber study said that if Jordan was to become a member of the GCC, with the eased visa policies, the number of visitors to both sides may also "increase considerably". "Jordan has already been a popular tourist destination for many Arab countries. According to data from the Jordan Ministry of Tourism, between 2009 and 2010 some 1.65 million visitors from the six GCC states entered Jordan," the study added. According to the IMF, Jordan's GDP growth in 2011 is expected to be around 4.2% and above 5% for the next coming five years. However, unemployment has remained a major problem for the Jordanian economy and was 12% last year, but this is expected to slide slightly to 11.5% in 2011. (AB 13.07)
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5.4 Arab Unrest Takes Toll on Jordan Tourism Traffic
Jordanian tourism revenue dropped 10.6% in the first five months of 2011 from a year earlier due to regional turmoil, according to the Jordan Tourism Board. Revenue decreased to JD793m ($1.12b) and the number of tourists dropped by 11% to 2.6m during the period. The downward trend will continue, and there will definitely be a drop by the end of this year in revenue and in the number of tourists. Tourism revenue, which makes up 14% of GDP, had risen 17% to JD2.4b last year compared with 2009. The total number of Arab visitors to Jordan in the first five months dropped 8% to 1,667,354 compared with the same period last year, according to an e-mailed statement from the Tourism Ministry. The number of European visitors fell 9.9% to 391,756. Tourism employs about 45,000 people nationwide. Jordan currently has 24,000 hotel rooms and has plans to add another 5,000 rooms through a number of projects, including a $200m resort on the Dead Sea. (AB 13.07)
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►►Arabian Gulf
5.5 GCC Ready for Customs Union Launch By 2015
Saudi Arabia announced that the Gulf Cooperation Council will complete measures to establish a regional customs union by 2015. The members need to resolve outstanding issues before the implementation of the union. Saudi Minister of State for Financial Affairs Al Tayer said in May that the regional customs union is on course to be implemented by 2015 by the bloc, which includes Saudi Arabia, Kuwait, Oman, Qatar the UAE and Bahrain. The UAE pulled out of plans for a regional monetary union in May 2009. The GCC agreed in 2001 to set up a monetary union similar to the euro area by 2010. Oman opted out of the project in 2007. Saudi Arabia, Kuwait, Qatar and Bahrain are still part of the project. (GN 12.07)
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5.6 S&P Reviewing UAE, Qatar, Jordan for Emerging Market Status
The UAE, Qatar and Jordan is under review for a potential upgrade to an emerging market status by Standard & Poor's, an executive said, a coveted status seen boosting foreign fund inflows to the region. The Gulf countries are currently classified as "frontier" by most index compilers due to restrictions on foreign ownership limits, low liquidity and prospects of further developing trading and settlement systems in the bourses. Last month, influential index complier MSCI extended a review on whether to upgrade Qatar and the UAE to emerging market status to December, saying it would allow market participants more time to give their feedback on new systems introduced by the Gulf states. S&P is currently in talks with institutional investors and other market participants and will conclude its consultation process by August 26, the executive said. It will then pass on the feedback to its index committee who will then make a decision whether to upgrade or not, the executive said. An upgrade to emerging market will force fund managers who benchmark to the emerging market index to allocate funds to the region, thereby increasing liquidity and putting the region in the radar of global investors. Many asset managers in the MENA region switched to Standard & Poor's indices last year in the wake of MSCI's move to drop Saudi Arabian stocks from its compilation after a dispute with the bourse. The UAE was classified as an emerging market for the first time by index provider FTSE Group last year . (BI-ME 12.07)
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5.7 UAE Non-Oil Trade Rebounds in 2010 Though Volumes Continue to Contract
UAE non-oil foreign trade has increased 14% y-o-y in 2010 to reach AED754.4 billion after contracting 16% y-o-y in 2009, said the Ministry of Trade. Non-oil exports accelerated 27% y-o-y in 2010, from 8.2% in 2009, to account for 11%, or AED83.1 billion, of total 2010 foreign trade. Asian markets were the largest destination of UAE exports taking up to 47%, followed by European markets with 23%, while American and African markets, combined, accounted for only 8%. Traditional partners, such as India and Switzerland, took the lead. The increase in UAE's exports to India alone reached AED6.1 billion in 2010, or a third of the total increase, followed by Switzerland, with AED4.7 billion. Non-traditional partners such as Norway received additional AED2.6 billion, or 15%, of UAE exports, and Brazil with AED2.8 billion, or 16% of the total increase.
Re-exports, which accounted for 25% of total foreign trade, increased 25% y-o-y to reach AED185.9 billion in 2010, after contracting 9.3% y-o-y in 2009. Imports, which accounted for two thirds of the UAE's total foreign trade, grew 8% y-o-y to reach AED485.4 in 2010, after falling 20.9% in 2010. Imports from Asia account for 48% of the UAE's total imports from the world. India topped the UAE's imports list with more than AED83.4 billion in 2010.
Pundits say this data signals a strong rebound in the nominal value of UAE's total non-oil foreign trade in 2010, on the back of a recovery in the global economic environment, particularly with the Asia Pacific region with which trade links are strongest, and increase in commodity prices. Despite this nominal recovery, trade volumes did not witness the same level of recovery. Total non-oil foreign trade volume has, in fact, continued to contract in 2010, falling 5% y-o-y from 25% in 2009. Imports volumes fell 2.7% in 2010 from 21.5% in 2009, exports volumes fell 11.2% in 2010 from -36.3% in 2009 and re-exports' volumes fell 1.2% in 2010 from -5.2% in 2009. The narrowing of the rate of contraction, however, signals a significant improvement in real foreign trade volumes, which we expect will shift toward positive growth in 2011. Anecdotal evidence already suggests that the UAE has witnessed a continued recovery in its foreign trade indicators in 2011, backed by an improvement in sentiment levels, strengthening of domestic demand, robust economic activity in India and other Asian trade partners, and was further boosted by the regional political turmoil. (Beltone 06.07)
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5.8 Construction of UAE Rail Network Now Slated for Fourth Quarter Start
Construction work on the UAE's railway network is now scheduled to start in the final quarter of the year, developer Etihad Rail has said. The company created to oversee the UAE's ambitious rail expansion said in April that work was due to start in the summer. Etihad now says work would now start between October and December on the first phase of the 1,200km UAE railway network - a 266km route in the Western Region of Abu Dhabi. The network is due to begin carrying its first shipment of freight in 2013. The railway will run through Taweelah, giving the Khalifa Industrial Zone Abu Dhabi added connectivity for its future tenants. The network will also form a vital part of the planned GCC railway - linking to Saudi Arabia via Ghweifat in the west and to Oman via Al Ain in the east. The rail company hopes to complete its $10.9b rail project in the next seven to eight years. Etihad Rail, capitalized at AED1b, is 70% owned by Abu Dhabi's government and 30% by the UAE federal government. It recently changed its name from Union Railway. (AB 15.07)
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5.9 Dubai's Inflation Accelerates To 0.8% Monthly in June, Led By Food Prices
Inflation in Dubai accelerated to 0.8% on a monthly basis in June 2011, its highest level in 10 months, from 0.04% in May, led by food price inflation. The Dubai Statistics Centre said food prices increased by 3.8% m-o-m in June 2011, rising sharply from the 0.53% m-o-m level seen in May 2011, its highest level since June 2008. That food prices led acceleration in inflation is not surprising. It was expected that with housing costs continuing to see lackluster growth, or declining, the main driver of inflation in Dubai (and UAE-wide) will stem from food prices and imported inflation (owing to the weak US dollar outlook). This, in fact, could be expected to extend into the coming months which will coincide with the build-up to Ramadan (starting early August 2011), although the restrictions imposed by the government over some of the local retailers should limit the inflationary impact that is caused by the increased consumption levels during Ramadan. The overall inflationary environment in Dubai should remain muted as housing costs declines will continue to outweigh other increases in prices. (Beltone 07.07)
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5.10 Dubai Ruler Endorses $7.8 Billion Dubai Airports' Expansion Program
Dubai's ruler has endorsed the $7.8 billion Dubai Airports and airspace expansion program, which will boost the capacity of Dubai International Airport from 60 to 90 million passengers per year by 2018. The plans encompass airspace expansion, focusing on optimizing runway capacity and implementing efficient systems in order to accommodate and manage additional aircraft movements. As airspace opens up, additional aircraft movements will be accommodated on the ground, with the addition of a new taxiway and a 60% increase in the number of stands needed to park and service aircraft. Beyond Concourse 3, which will boost capacity to 75 million passengers when it is completed at the end of 2012, Dubai Airports will commission the construction of additional terminal space and concourse areas comprising an extra 675,000sqm of floor space --twice the footprint of London Heathrow Terminal 5. This includes the expansion of Terminal 2 and the construction of a new concourse -Concourse 4- which will be connected to Terminal 1 to facilitate check-in and baggage servicing. The plan aims at generating 22% of total employment and 32% of Dubai's GDP by 2020, and responds to a 10-year traffic forecast that projects international passenger and cargo traffic will increase at average annual growth rates of 7.2% and 6.7%, respectively. (Beltone 07.07)
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5.11 Oman Inflation Reaches a 25-Month High in May Due to Food Prices
Annual inflation in Oman has reached a 25-month high in May 2011 of 4.4% y-o-y, compared to 4.1% in April 2011, due to rises in the price of food, according to the Ministry of Finance. On a monthly basis, Oman's CPI inched up 0.4% m-o-m in May 2011 from 0.3% m-o-m in April 2011. Food costs, which account for the largest weight of 30.4%, jumped by 0.9% m-o-m in May 2011 after a 0.3% dip in April 2011. (OMoF 09.07)
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5.12 Oman Non-Oil Exports Surge 32%
Oman saw the value of its non-oil exports rise to RO2.448 billion in 2010 a jump of 32.4% over the previous year. This success is in line with the export strategy developed by the Public Authority for Investment Promotion & Export Development which identified thrust products and target markets for 2006 - 2010. Non-oil exports have increased significantly in minerals, up 52.8% on 2009; chemical products reached RO709 million, a rise of 129.6% on the previous twelve months; and live animals and associated products grew by 27% on 2009. The 2010 non-oil export figures clearly demonstrate that Omani exporters are moving in the right direction and that efforts in helping domestic exporters find business in emerging markets such as Yemen, Kenya, Tanzania, Syria, Sudan, Iran, Libya and India are paying dividends. The Authority is also focusing on the growing Indian market, initially by carrying out market research. Oman organized business matchmaking events in Mumbai and New Delhi. During 2010 they saw non-oil Omani exports to India grow by 47.5%. (BI-ME 10.07)
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5.13 Saudi Arabia's Annual Inflation Increased Slightly to 4.7% in June 2011
Saudi Arabia's annual inflation increased slightly to 4.7% in June 2011, data by the Central Department of Statistics showed. Saudi Arabia's annual inflation increased from 4.6% in May to 4.7% in June 2011, on slightly higher food prices. Inflation in June 2011 remained the same, on a monthly basis, standing at 0.4%. Observers anticipated that the slowdown in inflation was temporary, as the expected increase in money supply should put pressure on inflation, going forward. Moreover, the upcoming month of Ramadan (beginning of August 2011) will increase pressures stemming from food prices, as demand for food increases during the month of Ramadan. (Various 10.07)
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►►North Africa
5.14 Egypt Urban Headline Inflation Eased Slightly To 11.8% in June 2011
Egypt's urban headline inflation eased to 11.8% y-o-y in June 2011, data by Egypt's statistics agency (CAPMAS) showed. Annual headline inflation had increased to 12.1% in April 2011, on higher food prices and began to decelerate in May to 11.9% and continued the deceleration pace in June 2011. Headline inflation increased slightly on a monthly basis from 0.2% in May 2011 to 0.4% in June 2011. It had begun to ease considerably on a monthly basis in May 2011 falling from 1.25% in April 2011 to 0.2% monthly inflation in May 2011. Annual inflation slightly eased in June 2011 on lower food prices compared to June last year. However, on a monthly basis, inflation inched up in June 2011 as prices of food and tobacco increased at an accelerated pace from May 2011. (Beltone 10.07)
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5.15 Suez Canal Revenues Reach $445.2 Million in June 2011
Suez Canal revenues reached $445.2 million in June 2011, increasing by 16% y-o-y, data released on 10 July by the Suez Canal Authority. Annual growth of Suez Canal revenues of 16% in June 2011 comes in higher than the 10% recorded in June 2010. Suez Canal revenues grew m-o-m by 2% in June 2011, improving from the 0.5% monthly growth seen in May 2011, but has still not reached the high monthly growth rates recorded in April 2011 and March 2011 of 5% and 6.4%, respectively. The annual increase in revenues in June 2011 is on the back of an annual increase in the total tonnage of passing vessels of 12%. The number of vessels increased by 1% y-o-y in June 2011, and increased by 3.8% on a monthly basis. Oil tankers represented 25% of total vessels that passed through Suez Canal in June 2011, compared to 22% in May 2011. The number of oil tankers increased by 2% y-o-y in June 2011, compared to a contraction of 11% y-o-y in May 2011.
Beltone feels that Suez Canal revenue and traffic data since January 2011 indicate that the monthly activity in the Suez Canal has not been affected by the political events in Egypt, in line with their expectations. They believe that the impact of the current political events in Egypt on the Suez Canal is marginal, if any, with the military and government continuing to ensure its smooth operation (which is, anyhow, within a military zone), and in view of the continued flow of traffic activity, Suez Canal monthly revenues have been increasing since the beginning of the current fiscal year, and have reached $5 billion during FY10/11 (ending June 2011). Suez Canal revenues will remain unaffected by the political events in Egypt, providing Egypt with a secure source of foreign currency. They expect Suez Canal revenues to reach $5.3 billion by end - FY11/12 (ending July 2012). (Beltone 11.07)
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5.16 Egypt Gets New Finance Minister in Cabinet Reshuffle
On Sunday, 17 July, Egypt picked a new finance minister as part of a cabinet reshuffle demanded by protesters camped out in central Cairo, and the outgoing minister said policy-making had become "confused". Samir Radwan, the outgoing minister, was replaced by Hazem el-Beblawi, who was picked as an economic adviser and one of two deputies to Prime Minister Essam Sharaf. Sharaf has yet to announce his new cabinet although the ministers of finance, industry and foreign affairs have already quit. He promised change after protesters took to the streets accusing the government of moving too slowly with reforms. Radwan was appointed shortly before Mubarak left office. The justice, interior, education, culture and information ministers were expected to stay.
Radwan had negotiated a $3b loan facility from the International Monetary Fund to help cope with a spiraling budget deficit. But after reaching a deal, Egypt said in June it no longer needed the money. Radwan said the budget had been revised to cut the deficit in response to demands from a national dialogue and concerns in the ruling military council about building up debts. Beblawi, 74, was an adviser to the Arab Monetary Fund in Abu Dhabi and who will now also take on the finance portfolio. Beblawi received a doctorate from the University of Paris in 1964 and worked as professor of economics at the University of Alexandria until 1980. He was then chief executive of the state Export Development Bank of Egypt and executive secretary of the United Nations Economic and Social Commission for Western Asia (ESCWA). (TA 17.07)
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5.17 Egypt's Tax Revenues Rise 15.6% Annually to E£169.7b In Fy10/11
Tax revenues grew by 15.6% y-o-y FY2010/2011 (July - June), reaching E£169.7b, following an announcement by Minister of Finance Radwan. Revenues exceeded the original budget plan by E£3.7b, Radwan explained. Experts believe that based on the data, the figure announced by the minister would imply tax revenues have nearly seen flat growth in FY2010/11, and not accelerated as suggested, since total tax revenue reported last year (FY09/10) amounted to E£170.5b. They therefore believe the minister was referring only to the aggregate of income and sales tax, which combined account for c.85% of total tax revenues and c.55% of total revenues. The acceleration in Egypt's tax revenue growth in FY2010/2011 was expected and broadly in line with views on overall growth in revenues, given that the first half of the fiscal year was spared from the current political turmoil. Going forward, total government revenue growth is slated to decelerate, on the back of the forecast slowdown in domestic economic activity, where real GDP growth of 2.5% is expected in FY11/12. (Beltone 13.07)
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5.18 Tunisia's Tourism Revenues Fall by 51% in First Half
Tourism revenues reached $450.5 million, falling 51% y-o-y, according to the Ministry of Tourism. Incoming tourists fell by 39%, and 3,000 jobs were lost in the sector since the start of 2011, said the head of the National Tourism Office (ONTT). In addition, overnight stays and tourism income fell by 50%. The tourism sector represents 7% of Tunisia's GDP, and employs a total of 400,000 people. Tunisair, the national airline, has seen a 20% drop in the number of regular and charter flights since the beginning of the year. (Various 10.07)
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5.19 Morocco's Exports to USA Up 56% in 2010
Morocco's exports to the United States rose 56% in 2010 over 2009, with food products making up 18% of these exports, Moroccan minister of foreign trade announced. Abdellatif Maâzouz, who inaugurated the Moroccan pavilion at the 57th Summer Fancy Food Show, highlighted the innovative character and the high quality of the Moroccan products exhibited in the show by 26 Moroccan firms. He insisted that the US market gives enormous opportunities for the Moroccan exports, especially with the Free Trade Agreement signed between the two countries, which entered into force in 2006. The Moroccan products exhibited in this show include fruits and vegetables, sauce, condiments, sea products, olive and argan oil and safran. (map.ma 12.07)
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey Retail Report Q3 2011 - A Large, Growing & Young Population
Research and Markets' http://www.researchandmarkets.com "Turkey Retail Report Q3 2011" report predicts that the country's retail sales will grow by nearly 13% by 2015, from $229.91b in 2011 to $259.28b. Underlying economic growth; an expanding population, especially in urban areas; rising levels of disposable income; and the continued development of organized retail infrastructure are key factors behind the forecast growth in Turkish retail sales, which should expand an average 3.2% per annum throughout the forecast period. Turkey's nominal GDP is predicted to be $825.9b in 2011 with growth of 4.3% expected, down substantially on 2010's 7.9%. Average annual GDP growth of 4.9% is predicted by BMI between 2011 and 2015. With the population increasing from 76.6mn in 2011 to a forecast 79.9mn by 2015, GDP per capita is forecast to grow by 58% to $17,076 by the end of the period. Turkey has a large, growing and young population. Each year, 750,000 young people join the workforce and, with an increasing level of urbanization, many are abandoning the agricultural sector in order to seek better paid work in other areas. Nevertheless, unemployment is a problem, reaching an estimated 11.0% in 2010. They forecast a drop to 10.0% in 2011, and to 6.5% by the end of the forecast period. (R&M 17.07)
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6.2 Cyprus Harmonized Inflation - Analysis
The EU-harmonized inflation rate in Cyprus continued to climb in June, hitting 4.5% compared with 4.1% in May and 3.5% in April. The average for the first six months is 3.6% but looks like it is climbing towards 4% for the whole year. High inflation adds to the public and private-sector wage bill, owing to the widespread practice of wage indexation. The highest increase was recorded in clothing and footwear, prices of which were 11.3% higher than in June 2010. The average for the first six months was just 4.9%. The June upturn might just point to a modest recovery in a sector that, by the first quarter of 2011, had seen four consecutive quarters of decline in sales volumes. The second highest increased was in alcoholic beverages and tobacco prices, which rose over the year earlier by 10%, thanks to recent increases in tobacco duties. For the first six months as a whole, prices of alcohol and tobacco are up 8.3% over the same period of the previous year.
Tax changes have also affected food and non-alcoholic beverages prices, which rose 8.5% year on year in June and 3.5% for the first six months. VAT at the reduced rate of 5% started to be applied to food and medicines from January 2011. Another area caught by regulation as well as rising international prices is housing, water, electricity and gas. Prices in this category were 7% higher than the year earlier in June and 7.6% higher for the whole of the first half. (Sapienta Economics 19.07)
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6.3 Bulgaria's Annual Inflation Rate Reaches 5.6%
Bulgaria's annual inflation rate reached 5.6% in March 2011, according to the country's National Statistical Institute's consumer price index (CPI). The consumer price index in March 2011 compared to February 2011 was 100.6%, i.e. the monthly inflation was 0.6%. The inflation rate since the beginning of the year (March 2011 compared to December 2010) was 2.4%. The annual average inflation, measured by CPI, in the last 12 months (April 2010 - March 2011) compared to the previous 12 months (April 2009 - March 2010) was 3.5%. The harmonized index of consumer prices (HICP) in March 2011 compared to March 2010, i.e. the annual inflation, was 4.6%, while the monthly inflation in March 2011 compared to February 2011 was 0.4%. The inflation rate since the beginning of the year (March 2011 compared to December 2010) was 1.4%. The annual average inflation, measured by HICP, in the last 12 months (April 2010 - March 2011) compared to the previous 12 months (April 2009 - March 2010) was 3.7%. The consumer price index (CPI) is the official measure of inflation in Bulgaria. The Harmonized Index of Consumer Prices (HICP) is the comparable measure of inflation across EU member states. HICP is one of the criterions of price stability and for readiness of Bulgaria to join the euro-zone. (SMN 13.04)
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6.4 Bulgaria's New Car Market Starts To Improve in First Quarter
The market of new cars in Bulgaria has registered a modest but nonetheless tangible year-on-year growth in the first quarter of 2011. A total of 4,638 new cars were sold in Bulgaria in January-March 2011 vs. 3,956 sales in the same period of 2010, a growth of 17%, according to data of the Association of Car Importers. In March, a total of 1,816 new cars were sold, compared to 1,358 in February and 1,464 in January. Bulgaria's all time record first quarter in terms of new car sales was in 2008 when a total of 15 224 new cars were sold in the country, just months before the economy got into a depression and the market collapsed. The total number of vehicles, including cars, trucks, buses, and motorcycles, sold in the first quarter of the year is 4,888 vs. 4,116 in Q1/10. The most popular brand in Q1/11 in Bulgaria was Volkswagen with 567 new car sales, followed by Toyota with 427 sold vehicles. Ford is third with 414 sales, Peugeot comes in fourth with 369 sales, followed by Dacia with 357 and Skoda with 302. Mercedes is the leader in the sales of new buses and trucks – a total of 45 in the first quarter. Peugeot has the lead in the sales of new motorcycles – 42, or 67% of all motorcycles sold in Bulgaria in this period. (SMN 13.04)
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Israel Recognizes South Sudan
On 10 July, Israel recognized the Republic of South Sudan, which declared independence the day before. Minister of Interior Yishai called for the immediate negotiations with the South Sudanese government on the repatriation of thousands of South Sudanese refugees who arrived in Israel over the past several years. IsraAID: The Israel Forum for International Humanitarian Aid in partnership with the Jewish Federation of Greater Toronto, the American Jewish Committee and local agencies in South Sudan will send a humanitarian aid cargo to assist the people of South Sudan on behalf of the Israeli and Jewish people as a goodwill gesture between both communities. IsraAID teams have already begun assessing the longer term needs on the ground for a long term aid mission for women, children, and elders in the most severely affected communities in the country. (Globes 10.07)
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7.2 Ramadan to Begin on 1 August
Ramadan (Ramazan in Turkey) is the ninth month of the Islamic calendar, which lasts 29 to 30 days. It is the Islamic month of fasting, in which participating Muslims refrain from eating and drinking and is intended to teach Muslims about patience, humility and spirituality. Muslims fast for the sake of God (Allah) and to offer more prayer than usual. Compared to the solar calendar, the dates of Ramadan vary, moving backwards by about eleven days each year depending on the moon; thus, a person will have fasted every day of the calendar year in 34 years' time. Muslims believe Ramadan to be an auspicious month for the revelations of God to humankind, being the month in which the first verses of the Qur'an were revealed to the Islamic prophet, Muhammad. There are many disagreements each year however, on when Ramadan starts. This stems from the tradition to sight the moon with the naked eye and as such there are differences for countries on opposite sides of the globe. For the year of 1432 Hijri, the first day of Ramadan was determined to be August 1, 2011.
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*REGIONAL:
7.3 Egypt's Parliamentary Elections to Take Place By November 2011
Parliamentary elections in Egypt will take place by November 2011, based on an announcement by the Supreme Council of Armed Forces (SCAF). The registration and campaign period will begin in September, as stipulated by the constitutional declaration approved by the March referendum. But the actual voting will only be around a month and a half after that.
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Hebrew University Study Sheds Light on Early Development of Cancer
Researchers at the Hebrew University of Jerusalem report they have discovered the molecular basis for the breakage of DNA during the development of cancerous tumors. The DNA encodes all the genetic information needed to build the cell's proteins, and as such, breaks in the DNA disrupt the variety of proteins in the cell and lead to changes in its function. These changes can lead to defects in the control of cellular proliferation, which results in the development of cancer. The researchers, using innovative technologies, the two were able to characterize for the first time the DNA regions that are the most sensitive to breakage in the early stages of cancer development. They found that along the fragile regions there are certain areas which cause interference in the process of DNA replication and sometimes even halt it. To allow completion of DNA replication, the fragile regions operate mechanisms that are usually used under stress. As a result, under these conditions of replication stress (an example of which are the early stages of Cancer development), the cell has no additional resources for coping with the stress and damage is thus caused to DNA.
The results of this study shed a new light on the molecular mechanism that encourages the development of cancerous tumors. Other recent studies have focused on events that occur in cells in the initial stages of tumor development, in order to identify the primary events that occur in cells that contribute to the development of cancerous growth on the one hand, and of events that can inhibit this process on the other. The results of this study allow, for the first time, to identify and characterize the properties of DNA which regulate the process of duplication in fragile regions during the initial stages of tumor development. In the future, these discoveries may lead to new approaches for prevention and/or treatment of cancer. Israel has a prominent place in cancer research. This includes, for example, diagnostic methods such as development of an early detection device for head and neck cancers at the Technion, diagnostic blood tests, and in treatment methods such as Tel Aviv University's targeted nano-chemotherapy research and pharmaceutical innovations. (IsraelNN17.07)
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8.2 Gamida Cell-Teva JV Continues Phase III Study of StemEx for Leukemia & Lymphoma
The Gamida Cell-Teva Joint Venture (JV) announced that the Data Monitoring Committee (DMC) has independently reviewed data collected from the first 70 patients enrolled in the pivotal registration, Phase III clinical trial of StemEx and has recommended that the JV continue to enroll patients in the StemEx study. This marks the last protocol mandated DMC review of the StemEx study. StemEx is being evaluated as a therapeutic treatment for adolescents and adults with blood cancers such as leukemia and lymphoma, who cannot find a family related matched bone marrow donor. The DMC for the Phase III StemEx study was comprised of an independent group of medical and scientific experts who reviewed safety and efficacy data from participating sites to assess treatment benefit (or harm) to study participants. The DMC had no major safety concerns and recommended that accrual on the study continue.
StemEx is a graft of an expanded population of stem/progenitor cells, derived from part of a single unit of umbilical cord blood and transplanted by IV administration along with the remaining unit of non-manipulated cells. The StemEx study is currently enrolling adolescents and adults with high-risk hematologic malignancies, at clinical sites in the U.S., Italy, Spain and Israel.
Jerusalem's Gamida Cell http://www.gamida-cell.com is a world leader in stem cell population expansion technologies and stem cell therapy products for transplantation and regenerative medicine. The company's pipeline of stem cell therapy products are in development to treat a wide range of conditions including blood cancers such as leukemia and lymphoma, solid tumors, autoimmune diseases, metabolic diseases and non-malignant hematological diseases. Gamida Cell's therapeutic candidates contain populations of adult stem cells, selected from non-controversial sources such as umbilical cord blood, which are expanded in culture. (Gamida Cell 12.07)
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8.3 Procognia Signs Agreement with Leading Life Science Japanese Company – CTCLS
Procognia signed an agreement with CTC Laboratory System Corporation (CTCLS) to sell, distribute and market the glycoanalysis product, the GlycoScope in Japan. CTCLS will receive some percentage from the revenue based on agreed transfer price between the companies. CTCLS will be responsible for all the sales and marketing activities of the GlycoScope and will bare all the costs relating to these activities in Japan. As a unique member of Itochu Techno-Solutions Corporation (CTC), CTCLS has evolved into one of Japan's leading solution providers that specializes in the integration of R&D support systems for life sciences companies. GlycoScope is an analytical tool designed specifically for pharmaceutical companies and research labs. It is used to identify the glycosylation structure of glycoproteins during the research, development and production phases of biological drugs, and can also be used for other applications such as stem cell research, vaccine development and more. Renowned for its world-leading position in the field of glycobiology, with special expertise in glycoanalysis, Ashdod's Procognia's http://www.procognia.com advanced proprietary tools provide fast, accurate and highly efficient High Throughput glycoanalysis. Procognia's unique technological platform offers a range of advantages compared to existing technologies, and is relevant to many applications. (Procognia 11.07)
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8.4 EarlySense's Contact-Free Patient Monitoring System Approved for Sales in Canada
EarlySense's patient monitoring system has been cleared for sales in Canada. The EarlySense patient monitoring system for hospitals and nursing homes has been commercially launched thus far in the U.S., Europe and Israel. EarlySense's contact-free patient monitoring system automatically and continuously monitors a patient's vital signs and movement, from the moment the patient enters the bed, using a contact-free sensor that is placed under the mattress. The system records and documents the cardiac, respiratory, and motion parameters for a full hospital unit. It alerts staff when significant changes in a patient's condition take place, as well as when a patient needs turning to avoid pressure ulcers or is leaving the bed and is in danger of falling. Nurses are informed of patient status changes, via a wireless, infrastructure-free communication system, on the patient's bed side monitor, at the nurse's station, on their mobile phones and on a large screen display mounted in a prominent spot on the wall in the department. Timely alerts of patient deterioration help make hospital Rapid Response Teams more effective. Ramat Gan's EarlySense http://www.earlysense.com is bringing to market an innovative technology designed to advance proactive and preventive patient supervision to enable better patient outcomes. The company's flagship product is an automatic, continuous, contact-free, patient monitoring solution that follows and documents a patient's vital signs and movement. There are no leads or cuffs to connect to the patient, who has complete freedom of movement and is not burdened by any irritating attachments. (EarlySense 12.07)
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8.5 Israeli Researchers Identify Protein That May Slow Down Pancreatic Cancer
Researchers from the Cancer Research Center at Sheba Medical Center in Tel Hashomer studied the behavior of the protein klotho, a natural hormone emitted by the brain and kidneys that is known to retard the aging process. The protein is named after the Greek mythological fate that spun thread to keep a person alive. A study done by Sheba in 2008 found that when injected into laboratory cultures of breast cancer cells, klotho prevented them from multiplying. Later, researchers discovered that mutations of this protein greatly increase the risk of women developing breast cancer: Women carrying the BRCA1 or BRCA2 mutation have a 50 to 85% chance of developing breast cancer, while the rate in the general population is only 11%.
The current study for the first time examined whether klotho could be used to treat cancer in mice. The mice used had pancreatic cancer, which is considered a particularly aggressive cancer that spreads rapidly: The average life expectancy of someone with advanced pancreatic cancer is only six months, and there are no effective treatments. The researchers first noticed that healthy pancreatic cells contained klotho, whereas cancerous cells did not. That means that testing pancreatic cells for klotho could provide an early indication of the presence of the cancer. They then injected the cancerous mice with klotho, and discovered that it not only prevented the cancer from spreading, but actually caused it to shrink. The results of the study, which was funded by the Israel Cancer Association, are due to be published soon in the journal "Clinical Cancer Research." The researchers' next goal is to search for ways to reduce the side effects. The researchers are also looking into cooperating with commercial firms to advance the project. (Various 13.07)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Nova Unveils Multi-Channel NovaMARS Software Engine for Advanced 3D Structures
Nova Measuring Instruments introduced its fifth generation of the award-winning NovaMARS Optical CD application development solution. The new NovaMARS 5.0 is geared towards addressing the industry's transition to novel chip design concepts such as 3D gates, recently introduced as part of the transition to sub-30nm technology nodes, in both memory and logic. The NovaMARS 5.0 is optimized for speed of recipe development, ease of use, and accuracy of solution for the most complex 3D scatterometry applications for the 2x and 1x technology nodes. The new NovaMARS 5.0 scatterometry engine has the ability to combine data from multiple optical channels directly on the tool during measurement. This multi-channel capability complements existing Holistic Metrology elements, which are part of Nova's product offering, such as injection, multi-stack, and global fit. Together, these elements provide the most comprehensive algorithmic solution to date for the development of scatterometry applications. More detailed reproduction of complex 3D structures is now possible by extraction of fine shape parameters, enabling process control of advanced devices like FinFET non-planar transistors. Rehovot's Nova Measuring Instruments http://www.nova.co.il develops, produces and markets advanced integrated and stand-alone metrology solutions for the semiconductor manufacturing industry. Nova is traded on the NASDAQ & TASE under the symbol NVMI. (Nova 12.07)
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9.2 Briza Colors Brings a Breath Of Fresh Air To Diamonds
Briza Color Diamonds http://www.brizacolors.com is bringing the colors of the rainbow to diamond jewelry. The Ramat Gan-based company specializes in providing color-enhanced diamonds in commercial quantities and at reasonable cost. A pioneer in this field, Briza enables jewelry designers and manufacturers to meet the growing demand for color with diamonds, adding value to their designs. Although the company has been creating color-enhanced diamonds for the past ten years, recently they launched a new line of pastel shades - Ice Blue, Pine Green and Sunny Yellow - which brings their palette in line with the latest trends in high fashion jewelry the world over. Briza says that they use the same process nature uses to create colored diamonds. Naturally colored diamonds, which occur in only one percent of gem quality stones, are created after a long "pregnancy" by mother earth, with specific conditions of pressure, temperature and time. Briza says that almost all diamonds have the potential for color, and like premature babies need to be nursed into full color maturity. Briza does this by using high atmospheric pressure and temperature in highly controlled laboratory conditions. Briza is the only company in Israel producing color-enhanced diamonds, and one of the few companies in the world. Today Briza's color catalogue includes three shades of blue, four of green, three of yellow, two cognacs, as well as red and black. The company is always seeking to come out with new colors to keep up with demand. Right now they are working to perfect shades of pink and purple, which have resisted so far Briza's attempts to create a consistently excellent product. (Briza July 2011)
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9.3 Automotive Leasing Companies Implementing Mobileye's Leading Driver Safety Solution
Jerusalem's Mobileye http://www.mobileye.com, the global leader in driver safety systems and collision prevention and mitigation technologies, announced a major win in the Japanese market. Mobileye's unique vision-based platform, driven by its proprietary chipset and algorithms, works as a third eye, analyzing the risk of forward collision, lane departure, insufficient following distance and pedestrian hazards in real time through visual and audio alerts. Sumitomo Mitsui Auto Service Co., the top leasing company in Japan with an inventory of 540,000 vehicles, will integrate Mobileye's real-time driver assistance solution into its leased vehicle offering. Mobileye provides additional safety assurance for Sumitomo Mitsui's drivers, as well as those sharing the road, in an effort to prevent and mitigate accidents. The company is currently equipping its own fleet with Mobileye C2-270 collision prevention systems, and soon will begin equipping its customers' vehicles. Sumitomo Mitsui believes that the excellent driver safety functions in Mobileye's product offering can help it achieve a high penetration rate in its customers' fleets over the next months and years. (Mobileye 13.07)
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10: ISRAEL ECONOMIC STATISTICS
10.1 Finance Ministry Reports Israeli Economy Slowing Down
On 11 July, the Finance Ministry reported a slowdown in most economic measures in May: Exports are dropping, the industry is in an ongoing freeze, taxation was down 2% in the second quarter, the inflation rate remains high and supermarkets are experiencing a drop in sales. The Ministry releases a "Red Lights" report once a month, including key economic figures and measures about the economy. There was encouraging data come from the real estate sector, which has been a cause for concern until now. According to the report, May saw a drop in the median price of new apartments, in addition to a 14% decrease in the volume of realty deal compared to the same period last year. A significant improvement has also been recorded in the labor market, with the unemployment rate falling to 5.8% in April – a nearly full unemployment situation. The unemployment rate stood at 5.9% in March, at 6% in February and at 6.1% in January. In April 2010, the unemployment rate stood at 6.7%.
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10.2 Israel's First Quarter Growth Revised Down To 4.6%
On 17 July, the Central Bureau of Statistics revised its GDP growth figure downward for Q1/11 to an annualized 4.6% from 4.8%. GDP rose by annualized 7.7% in the fourth quarter of 2010 and 4.7% in the third quarter. First quarter GDP growth was driven by public and private consumption, exports of goods and services, investment in fixed assets, and imports of goods and services. Business product rose by an annualized 5.2% in the first quarter, down from 8.7% in the preceding quarter; private consumption rose by 9%, up from 7%; investment in fixed assets rose by an annualized 26.1%, up from 19.6%; public consumption rose by an annualized 2.9%; exports of goods and services rose by an annualized 12%, up from 10.5% in the preceding quarter; and imports goods and services rose by 28.9%, up from 17.4%. Per capita private consumption was driven by a 42.8% annualized rise in consumption of durable goods in the first quarter, after a 47.9% rise in the preceding quarter. (CBS 17.07)
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10.3 Israel's Food Prices Rise By 12.7% in 3 years
The rise in food prices in Israel over the past three years was 5.5 times higher than in Europe, according to a comparative survey conducted by the Knesset's research and information center for the Economic Affairs Committee. Food prices went up by 12.7% on average during that period, compared to an average price hike of 2.2% in Europe. The price comparison was conducted after an analysis and adjustment of the different component in each basket, taking into consideration the overall expenditure per family.
In Israel today, food spending is double the average spending of a European family. The difference is in consumption habits, although Israelis buy less food due to the higher prices compared to Europe. In addition, in Europe food prices include restaurant rates, which are not part of the Israeli index. The survey was based on figures compiled by the Central Bureau of Statistics in Israel compared to Eurostat data. It presents both the changes in prices in other industries, especially housing expenses which include rent and apartment maintenance costs.
According to the survey, apartment maintenance expenses rose by 32% on average per Israeli family compared to only 14.5% in Europe. A comparative segmentation of food prices in Israel compared to different countries in Europe points to a higher than average difference. It turns out that bakeries' bread production cost went up by 48% in the past years, while the prices of subsidized bread rose by only 40%, meaning the bakeries allegedly absorbed the difference but were compensated by the government.
The price difference which helped supermarkets earn a pretty penny is prominent in the ready food category. While industrialists' cost saw a 14.5% increase in the past few years, consumer prices went up by more than double – 35%. A relatively small difference was found in the dairy products category between the costs of dairies that went up by 25%, while consumer prices rose by 30%. A dramatic difference was recorded in the prices of wine and alcoholic beverages. The prices charged by wineries went up by 4.2%, while the consumer price rose by an average rate of 30%. (Various 13.07)
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10.4 April - May Sees 3.5% Decline in Israeli Exports
Israel's export of goods, excluding diamonds, totaled $7.4 billion in April-May 2011 – a 3.5% drop compared to a 5.5% rise in the past six months, the Israel Export and International Cooperation Institute (IEICI) announced. This is the first drop recorded in export volumes since August-September 2010, when exports fell by some 8%. However, despite the drop in recent months, it's too early to determine a change of direction in exports, as the export figures for April-May were still 5% higher than the export volumes in December-January, and about 10% higher than the export volumes in October-November. The drop in export volumes compared to the two previous months is evident in all industries: The high-tech industries recorded a 3.3% decrease. Excluding medicine exports (which went up by 16% to $1.3 billion), high-tech exports saw a sharp drop of 8.3%, teaching $2.1 billion. The export of communication, control and medical-scientific equipment recorded a 4% drop in April-May compared to previous months, as did the export of electronic components, which fell by 4.5%, and the export of aircraft which saw a sharp decline of 30%.
Exports to the US in April-May, which totaled some $1.9 billion, was a 7% drop compared to the previous two months. On the other hand, exports to European Union countries were up 12%, totaling some $2.7 billion. The growth trend continued in exports to Asian countries with a 3% rise, totaling $1.4 billion. The rest of the countries recorded a sharp drop of close to 22%. (IE&ICI 05.07)
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10.5 June Tourism to Israel Reaches a Record High
The Ministry of Tourism announced that a record 262,000 tourists and day visitors entered Israel in June, 1% more than in June 2010, and 25% more than in June 2009. Tourist entries (tourists who stayed for more than one night) also reached an all-time high of 228,300 in June (87% of total visitors), 7% more than in June 2010 and 4% more than in June 2009. The figures say 1.6 million visitors arrived in H1/.11, similar to the 1.63 million visitors in the first half of 2010, suggesting that this will be a record year for tourism. Some 1.4 million of the entries were tourists, 4% more than in the first half of last year. According to June reports, 1,161,914 passengers passed through Ben Gurion Airport on 9,055 international and domestic flights in June. There were 1,093,689 international passengers in June, 11.25% more than in June 2010. The number of international flights rose by 9.36% to 8,220 flights in June, compared with the corresponding month. Ben Gurion Airport handled 68,225 domestic passengers in June, 24.4% more than then 54,838 domestic passengers in June 2010. Israeli airlines carried 434,388 passengers in June, 39.7% of all passengers at Ben Gurion Airport during the month, but 2.5% fewer than in June 2010. The greatest increases in departing passengers in June, compared with the corresponding month, were to Ukraine, Greece and the Netherlands. Some 40,900 tourists arrived on direct flights to Eilat in the first half, 38% more than in the first half of last year. (MoT 11.07)
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11: IN DEPTH
11.1 ISRAEL: Summary of Israeli High-Tech Company Capital Raising – Q2/2011
On 13 July, the following findings were released by the IVC-KPMG Quarterly Survey conducted by IVC Research Center http://www.ivc-online.com in cooperation with KPMG Somekh Chaikin Israel. This Survey reviews capital raised by private Israeli high-tech companies from Israeli venture capital funds, foreign and other investors. The Survey is based on reports from 130 investors, of which 53 were Israeli management companies and 77 were other – including foreign – investment entities.
In the first half of 2011, 285 companies raised $1.048b, 82% above the $577 million raised in the first half of 2010. The second quarter of 2011 was the best in two years, with 145 Israeli high-tech companies raising $569 million from venture investors – both local and foreign. This reflects a 19% increase from $479 million raised by 140 companies in Q1/2011 and a 66% increase from $343 million raised by 104 companies in Q2/2010.
"High-tech capital raising in the first half of the year almost doubled from the first six months of 2010," observed Koby Simana, CEO of IVC Research Center. "The increase largely reflects a major jump in mid to late-stage investments. Companies at these stages require substantial financing to continue their expansion. We believe that investor support during a company's expansion and marketing stages is crucial and evidence of strength and maturity in the high-tech sector."
In Q2/11, 84 companies attracted more than $1 million each. Of these, four raised more than $20 million, 17 raised between $10 million and $20 million and 16 raised from $5 million to $10 million each.
Israeli VC Fund Investment Activity
In the first half of 2011, Israeli VC funds invested $297 million, a 76% increase from the corresponding period in the previous year. The Israeli VC fund share was 28%, about the same as in the first half of 2010. In the second quarter of 2011, Israeli venture capital funds invested $160 million in Israeli companies - the highest quarterly amount in the last three years in Israeli companies. The amount was up 17% from the previous quarter, and 76% above investments made in the second quarter of 2010.
Ofer Sela, partner in KPMG Somekh Chaikin's Technology group, said: "the Israeli VC backed companies are in their best potential ever, with a record number of companies generating substantial revenue and backed by experienced entrepreneurs and investors. The crisis is in the Israeli venture capital funds where significant number of funds are struggling to raise new and follow-on funds. This is demonstrated by the low level of seed investments made during the last 12 months compared to the seed investments made in 2007, the year in which most Israeli VCs raised their last fund."
First investments in the first half of 2011 accounted for 25% of Israeli VC fund investments, compared to 31% in the first half of 2010. The average first investment was $1.95 million, while the average follow-on investment was $1.2 million. In the second quarter, first investments by Israeli VC funds accounted for 26% of their total investments, compared to 23% and 36% in Q1/2011 and Q2/2010, respectively. The average first investment by Israeli VC funds was $2 million, while the average follow-on investment was $1.24 million.
Investment Rounds Excluding Israeli VC fund Participation
Investments in Israeli high-tech companies in the first half of this year, where Israeli VC funds did not take part, reached $331 million, 83% above the $181 million invested in the year-earlier period.
Capital Raised by Sector
In the first half of 2011, the Internet sector led capital raising with $255 million or 24% of total capital raised, a 155% increase from the $100 million raised in the year-earlier period. Life Sciences followed with $237 million or 23%, an increase of 21% from the year-earlier period. Communications attracted $176 million or 17%.
In Q2/2011, the Internet sector led capital raising for the first time in the past decade, with $169 million or 30% of total capital raised. Communications followed with $121 million (the most raised for this sector in three years) or 21%, life sciences with $110 million or 19% and Software with 17%.
Capital Raised by Stage
Seed companies attracted just 3% of capital raised in the first half of 2011, compared to 5% in the same period in 2010. Mid stage companies led capital raising in both periods with 46% and 48%, respectively. Early stage companies followed with 26% and 33%, respectively. Mid and late stage companies together raised $749 million, an increase of 108% from the first half of 2010 when mid and late stage companies attracted $360 million.
In the second quarter of 2011, seed companies attracted 2% of total capital raised, compared with 3% in the previous quarter and 5% in the second quarter of 2010. Mid stage companies led capital raising with $249 million or 44% of the total capital raised.
Ofer Sela of KPMG explained that "the global hype in mobile internet makes its impact on Israel as well, where the mobile and internet applications are boosting both the communication and Internet sectors investments, these two areas of investments are characterized by a short period of uncertainty regarding the business model of these companies this is the main reason why the majority of seed investments made by micro-funds and angels were focused in these areas and we expect this trend to continue".
IVC Research Center is Israel's leading research center providing business leaders with an unmatched wealth of data on Israeli high-tech, venture capital and private equity industries. IVC products and services are used regularly by high-tech companies, venture capital funds, private investors, financial investors and institutions, as well as public entities such as the Office of the Prime Minister, the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist.
IVC owns and operates the IVC Online Database http://www.ivc-online.com containing over 8,000 Israeli high-tech companies, venture capital funds, investment companies, angels and technology incubators, as well as news updates and lots more. Among IVC products and publications are the IVC Quarterly Survey, which for over 14 years has been analyzing capital raising trends by Israeli high-tech companies, as well as the most comprehensive guide to Israeli high technology and venture capital – the IVC 2011 Yearbook. (IVC 13.07)
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11.2 LEBANON: Fitch Affirms Lebanon at 'B'; Outlook Stable
On 5 July, Fitch Ratings http://www.fitchratings.com affirmed Lebanon's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'B' and Short-term foreign currency IDR at 'B'. The agency has simultaneously affirmed the Country Ceiling at 'B'. The Outlook is Stable.
"The affirmation of Lebanon's ratings reflect the fact that its substantial foreign exchange reserve buffers, lower debt levels, and reduced interest costs, relative to the previous decade, mitigate the downside risks to political stability, growth and public finances in 2011," says Purvi Harlalka, Director in Fitch's Middle East and Africa Sovereign Ratings Group. "The already low rating embodies a measure of tolerance for political volatility. However, an outbreak of violent conflict resulting from either internal political strife or a spillover of tensions from neighboring Syria could put the rating under negative pressure."
Output rose briskly (7%) in 2010, fuelled by rising non-resident deposits (up 11.5%), record numbers of tourist arrivals (2.2 million, up 17% from 2009) and a robust property market. The inflows continued to push down interest rates and dollarization and drive up private credit growth to 24% - the highest rate in the Middle East. They also shored up the balance of payments to a surplus of $3.5b, causing Lebanon's stock of foreign exchange reserves to reach an all-time high of $42b (including gold).
However, the collapse of the national unity government in January and the wave of Arab uprisings caused a drop in confidence. The growth in non-resident private deposit inflows, which are a key driver of activity, slowed to 14% y-o-y in Q1/11, from 34%. Nevertheless, this slowdown comes off a high base ($18.5b at end 2010). Meanwhile tourism (-13.4% y-o-y) and property sales also declined significantly in Q111 and dollarization increased slightly to 66.2% in April, from 63.2% in December 2010. Together with high oil prices, these trends led to a quarterly balance of payments deficit ($400m in Q1/11).
As a result, the growth outlook for 2011 has deteriorated to 2.5%, as per Fitch estimates, from the 7%-8% of 2008-2010. The deteriorating situation in Syria also bodes ill for economic prospects, given its potential to further impact confidence. Although Lebanon's direct exposure to Syria is small (only 5.6% of Lebanon's exports and 1.9% of its imports went to/came from Syria in 2010), a lot of its goods exports are transported through Syria. However, the formation of a new coalition government in June, under the leadership of Najib Mikati, a business-friendly politician, restores some stability and could improve the economic and fiscal outlook for H2/11.
On current trends, a cut in gasoline taxes (0.7% of GDP), slowing consumption and investment and an increase in spending on public wages and roadwork means that the fiscal deficit is likely to widen to between 9%-10% of GDP in 2011 from 8% in 2010. Despite this, Fitch expects debt to stabilize below 135% of GDP in 2011 where it would nevertheless remain the third-highest of all Fitch-rated sovereigns after Japan and Greece. General government debt fell to 137% of GDP in 2010 from 179% in 2006.
A sustained reduction in sovereign debt brought about by strong growth and fiscal discipline would improve Lebanon's creditworthiness. By contrast, a sustained increase in debt would cause the rating to be lowered.
Debt sustainability is supported by the size and depth of the local banking sector (3.35x GDP in 2010), which is the main holder of Lebanese paper (56% of the total outstanding by end-2010). The resilience of this investor base, which mediates the funds repatriated by the wealthy Lebanese diaspora into the economy and government debt, underpins the stability of public finances and is vital to the rating.
As a result, the risk of sustained deposit flight prompted by political instability is the primary risk to Lebanon's rating. Although deposit flight is not unprecedented during periods of turbulence, such as in the wake of the Hariri assassination in 2005 and the Hezbollah led war with Israel in 2006, it is usually temporary and deposit inflows tend to return quite quickly. On the domestic front, the refusal by Hezbollah, which has two ministers in the current coalition government, to arrest the individuals named in the indictment issued by the Special Tribunal for Lebanon, which is investigating the Hariri assassination, could inflame domestic tensions and curtail government effectiveness. Meanwhile, the worsening of the unrest in Syria could adversely affect Lebanon. Fitch's base case does not envisage the outbreak of sustained episodes of violence but such an outcome would adversely affect the rating.
Lebanon's high per capita income, liberal business environment, and the credibility of its exchange rate regime support its creditworthiness. The latter is especially relevant in the context of the high rates of dollarization and Lebanon's vulnerability to political and external shocks. (Fitch 05.07)
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11.3 KUWAIT: Pharmaceuticals and Healthcare Report Q3 2011
Research and Markets http://www.researchandmarkets.com "Kuwait Pharmaceuticals and Healthcare Report Q3 2011" says Kuwait remains one of the most attractive regional markets for pharmaceutical investors. Its affluent population has traditionally had a preference for patented medicines, which comprise over 67% of the total market's value. Epidemiological factors, particularly the rising prevalence of diabetes and similar chronic diseases, will continue to drive market growth. BMI expects the annual pharmaceutical values growth in Kuwait to outstrip that of inflation, indicating continued commercial opportunities for drug makers. Headline expenditure projections are as follows:
Pharmaceuticals: $905m in 2010 to $1.02b in 2011; +10.7% in local currency terms.
Healthcare: $2.92b in 2010 to $3.29b in 2011; +10.5% in local currency terms.
Medical Devices: $294m in 2010 to $332m in 2011; +10.5% in local currency terms.
Key Trends & Developments
In April 2011, the Kuwaiti Ministry of Health announced that it make health insurance for expatriates in the country compulsory. Local press reported over the course of May 2011 that expatriates in Kuwait are worried about the proposed scheme, which would require them to pay $473 for receiving treatment in three hospitals and 15 clinics. They are concerned about the financial implications of the health insurance scheme, in addition to a hike in food prices, fees at the private schools, rent and other expenses. However, the scheme does allow families to receive discounts for certain services. Kuwait's health ministry is set to provide free medical and consultation services to Bedouins, according to the Assistant Undersecretary for Financial Affairs.
In March 2011, Kuwait called on the members of the Gulf Cooperation Council (GCC) to consider implementing a single cost, insurance and freight (CIF) charge for pharmaceuticals across the region. The move would standardize drug prices and would also be in line with BMI's view that the GCC will use its increased collective bargaining power to lower the purchasing prices for pharmaceuticals. However, given that most drugs purchased at retail prices in Kuwait are bought by expatriates - who are not covered by government insurance - the authorities may not feel the pressure to further reduce distribution mark-ups. (R&M 15.07)
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11.4 QATAR: Industrial Intent
After several years of substantial economic expansion, Qatar was recently named the wealthiest nation in the world in terms of GDP per capita. However, with many of the oil and gas related projects nearing fruition, focus is turning to manufacturing and other non-hydrocarbons businesses and the role they will play in the local economy.
In mid-June the US-based business magazine Global Finance reported that Qatar's per capita annual GDP (based on purchasing power parity) amounted to just over $90,000, making it the wealthiest country in the world by this measurement. This achievement caps a period of rapid economic expansion. In 2007 and 2008 real GDP growth exceeded 20% per year. In 2010 this figure amounted to 16.3%, and the economy is expected to increase by a further 20% this year, according to the IMF. Indeed, the Fund has called Qatar “one of the fastest growing economies in the world”.
Expansion is expected to continue into the future, albeit at a slower pace. The IMF has projected that GDP will increase by 7% in 2012, followed by 4% in 2013. However, unlike in recent years, the non-hydrocarbons sector is expected to expand while projections show that oil-and-gas economic activity will stabilize.
Samba Financial Group, a Saudi banking firm, noted this economic shift in a recent report. “A key factor in the medium-term projections is the recognition that the contribution from the hydrocarbons sector to growth will drop off dramatically as the 20 year gas-based investment program comes to an end and the last of the major projects come on stream in 2012,” the report stated. “This then leaves the non-hydrocarbons sector as the driver of future real GDP growth.”
Much of this expansion will be led by the state-backed Industries Qatar (IQ), which controls most of the country's petrochemicals and metal production capacity. In late April, IQ released its first quarter results, reporting revenues of QR4bn ($1.1bn). Net profits amounted to QR2.1bn ($567m), representing a 73% increase over the same period in 2010. These financial results came on the back of strong showings by its steel unit, along with improved earnings from its petrochemicals and fertilizer companies. According to Abdulrahman Ahmad Al Shaibi, the group's chief coordinator, this performance “vindicate30” the company's “volume-based, capital investment strategy”.
With IQ committed to investing a further QR12bn ($3.3bn) over the coming five years, it is expected to continue to lead the sector. However, smaller private manufacturing operations are being encouraged to play a larger role in the economy too. R Seetharaman, the CEO of Doha Bank, says that small and medium-sized enterprises (SMEs) in the manufacturing sector are helping to strengthen industry's contribution to GDP, a strong indication that Qatar's economic diversification program is working.
Government support for SMEs, which includes tax holidays, exemption from some Customs duties, lower energy costs and access to credit, has been instrumental in accelerating industrial development, Seetharaman said in comments carried by the Gulf Times on June 14. The role of smaller industrial businesses will likely be boosted by the move to establish a parallel stock market attached to the main Qatar exchange. This would allow more SMEs to go public, giving them the opportunity to raise additional capital.
According to Hashim Al Sayed, a Doha-based stock and financial analyst, the plan to set up a second-tier market would benefit the firms themselves and the national economy as a whole. “The country's crucial economic diversification drive is expected to be bolstered with a junior stock market coming into existence,” he said in an interview with The Peninsula in late May, days after the announcement that studies would be conducted into setting up the parallel bourse.
Although Qatar's smaller manufacturers will likely never challenge the economic dominance of IQ, they will provide both an outlet for the entrepreneurial initiative that the government is trying to foster and generate employment opportunities. With support being provided by the state, Qatar is creating an environment in which industries large and small are being given an opportunity to flourish. (OBG 18.07)
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11.5 EGYPT: Risk Alert – Revolution Hits Roadblocks
On 11 July, the Economist Intelligence Unit observed that Egyptians returned to Tahrir Square on July 8th in the biggest demonstration since the former president, Hosni Mubarak, stood down. They came to voice their disappointment over the absence of tangible progress since the revolution, with many professing to have lost faith in the country's military leadership. Youth groups have threatened to stage a general strike and engage in civil disobedience if their demands are not met. Such ongoing upheaval threatens to derail the transition process and may give the ruling military council cause to delay elections, which are scheduled to take place in September. Its impact on Egypt's already weakened economy would be pronounced.
Point by point
It is five months that the Mubarak regime collapsed, but Egyptians feel they have little to show for it. At the heart of the latest unrest, which began in late June, is a demand for justice for those killed during the revolution. Recent incidents, including police clashes with victims' families in Cairo and the release on bail of police officers accused of killing demonstrators in Suez, are seen as signs that not much has changed. Slow progress on the trials of members of the former regime has also angered Egyptians.
Responding to the latest protests in a televised speech on July 9th, the prime minister, Essam Sharaf, appeared worn out by the pressures of office. He promised that all police officers implicated in attacks on protesters would be suspended, and courts handling their cases would focus on these exclusively to speed up the process. In addition, he said he would establish a permanent mechanism for national dialogue and had asked the social solidarity minister to set up a committee to deal with demands for greater social justice. But many Egyptians have dismissed Mr. Sharaf's promises as too little too late, and several presidential hopefuls have echoed this view: Mohammed ElBaradei, Amr Moussa, Abdel Moneim Aboul Fotouh, Hamdein Sabahy, and Ayman Nour have urged the army council to respond effectively to the demands of the revolution.
Since the revolution, the opposition movement has struggled to present a united front and articulate a coherent set of demands. Now several political groups have drawn up a list of clear, if still broad-ranging, requirements. These include calls for the country's leadership to define the competencies of the Supreme Council of the Armed Forces versus the government; for the prime minister to be allowed to dismiss and appoint new ministers and governors; for the cabinet to be purged of ministers associated with the old regime; and for the dismissal of the interior minister. In addition, the demonstrators have demanded that all police officers facing charges of killing protesters during the revolution be fired immediately, and called for the dismissal of the public prosecutor as well as for the public trial of the former president, Hosni Mubarak, and members of his regime.
Other demands include issuing a law to bar members of the former ruling National Democratic Party from standing in parliamentary and local council elections; freeing all civilians tried by military courts and retrying them in civilian courts; and abolishing a law banning strikes and demonstrations. In addition, the protesters want the government to scrap the new 2011/12 budget in favor of one that would address the needs of Egypt's poor.
Re-reshuffle
At an emergency meeting with youth leaders on July 10th, Mr. Sharaf vowed to reshuffle his cabinet completely by July 17th and replace governors by July 25th or resign, according to Al Ahram, an Egyptian daily. Another reshuffle would not appear to have much point. The current cabinet is set to remain in place only until after the September elections and has itself admitted that it does not have a popular mandate. It is difficult to see what yet another personnel change at this stage would achieve.
Meanwhile, there has been no response to the latest developments from the army council. This is somewhat strange for a body that has issued 66 communiqués to the public since February 17th, and its silence has only fuelled public anger further.
Time for an election
Elections are only two and a half months away at most, based on reassurances from the government and military council that they will go ahead in September. But Egyptians have been left in limbo. The country's leadership has yet to announce a firm date for the vote, although it has issued an amended electoral law, which was generally ill-received. With no confirmation of an electoral timetable, those in favor of postponing the vote will feel emboldened and are likely to step up their campaign. Meanwhile, those against a delay, mainly nascent Islamist parties, will be growing increasingly anxious. This state of uncertainty, aggravated by the army council's silence on the subject, will do little to bring about greater political stability. Activists are now calling for a general strike and another "million-person" protest on July 12th. (Risk Briefing 11.07)
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11.6 EGYPT: Taking Matters Into Its Own Hands
With its recently passed budget for the 2011-12 fiscal year, Egypt has established a revised set of ambitious targets for tackling its public expenditures. Having rebuffed aid offers from several international organizations and countries, the Oxford Business Group says the move is a sign that the country will steer clear of a rising budget deficit on its own accord.
Passed on June 22, the budget set public spending at LE490.6b ($82.2b), down 4.65% from the LE514.5b ($86.2b) forecast in its draft released earlier in the month. The final budget also cut the deficit for the year from LE170b ($28.5b) to LE134.3b ($22.5b). This is still 8.6% of GDP but is down from the 9.5% expected in the 2010-11 fiscal year and a significant drop from the 10.9% forecast in the draft budget.
In response, Fitch Ratings approved of the country's lowered budget deficit in early July, saying it sends a strong signal to the international community at a politically precarious time. The ratings agency affirmed Egypt's “BB” long-term foreign currency Issuer Default Rating on June 28 and assigned it a Negative Outlook, removing it from Rating Watch Negative.
For several months, it seemed as if Egypt would be happy to accept monetary aid from the International Monetary Fund (IMF) and the World Bank to meet what was expected to be an 11% budget deficit. In mid-May, for example, the IMF announced that Egypt was looking for $10b-12b in financing from international lenders up to mid-2012. In late June the finance minister, Samir Radwan, confirmed this, saying that he expected to make up the deficit through the local markets, grants and funds from friendly countries and international organizations.
Also in early June Egypt said it was prepared to accept a $3b loan from the IMF, which was to be given over the next 12 months to promote the economy and, in particular, to help decrease the country's deficit. But in an abrupt turnaround at the end of the month, the country said it no longer needed the loan, partially as a result of popular pressure, according to sources quotes by the BBC. The military council also declined to accept $4.5b in funding from the World Bank that was to have been made available over the next 24 months, with $1b to be used in fiscal year 2010-11 and another $1b to be used in fiscal year 2011-12.
Egypt has also decided against tapping the international bond market for the time being, given that yields on 10-year Egyptian Eurobonds have dropped to 5.7% from over 7% in late January. Its last Eurobond, issued almost a year before former President Hosni Mubarak was ousted in February, was oversubscribed and the government had been planning to repeat this success with another long-term issue. However, it could be November or December before Egypt attempts to make use of the international markets again.
Instead, Egypt is now looking to accept aid from countries closer to home, such as Qatar and Saudi Arabia, both of which Radwan said have pledged to provide Egypt with about $500m for budgetary support. Another $2b from the US to forgive debt and guarantee infrastructure bonds, plus $10b investment from Qatar for infrastructure, are also expected to be forthcoming.
Egyptians appear to be divided over whether to accept monetary aid from the likes of the IMF and Western countries such as the US, as they fear the strings that have traditionally been attached to such funding could compromise the country's political transformation. It is as yet unclear what “strings” could be attached to funding from Arab Gulf countries, however. Ratna Sahay, the deputy director of the Middle East and Central Asia Department of the IMF, said that the IMF would be willing to help Egypt if it came back with requests for funding or assistance in the future.
“The Fund would work with the authorities to assess the situation at the time of any future request,” Sahay said. “Any arrangement would seek to support an economic program that is fully owned by the government and one that would help achieve the goals of the authorities and Egyptian people. Generally speaking, if the authorities anticipate that there might be a need to borrow externally, it is always better for any country to request an IMF arrangement at an early stage when economic challenges are less daunting.”
This last part is key to Egypt's short-term economic prosperity, as international investors typically look to IMF-backed funding arrangements as an indicator of economic performance. Going it alone, with some help from its neighbors, could backfire if Egypt's budget deficit for 2011-12 turns out to be higher than expected.
Still, with parliamentary elections scheduled for September and presidential elections set to be held after that, demonstrating political security is also a key component of a stable economy. Radwan, the finance minister, said in June he expects the growth rate for the 2010-11 fiscal year to be 2.6%, with GDP expansion for 2011-12 of between 3% and 3.5%. If Egypt can do this without international assistance, and can carry off successful elections and transfer of power in the autumn, it should be able to bring back international investors soon thereafter. (OBG 14.07)
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11.7 EGYPT: An Independent Voice for Egypt's al-Azhar?
Ahmed Morsy wrote in the Carnegie Arab Reform Bulletin http://www.carnegieendowment.org on 13 July that the Grand Sheikh of al-Azhar, Ahmed al-Tayeb, presented on June 20 what has been dubbed “The Al-Azhar Document,” an eleven-point program addressing many of the issues Egypt has faced since the January revolution. Based on a broad consensus of the eminent Islamic institution's religious figures, the document advocates “a modern democratic state based on a constitution” which would guarantee citizens' equal rights and the separation of powers. Al-Tayeb frames democracy as “the modern formula for the Islamic precept of shura (consultation),” which he explains as the true guarantor of pluralism and accountability to the people.
The resulting blueprint sketches out post-revolutionary priorities: reforming education and anti-corruption efforts, reducing unemployment, and maintaining international treaties. The document also presses for independence of al-Azhar from state control. Most important is the document's treatment of the relationship between religion and the state; it supports “the people's representatives endowed with the power of legislation in accordance with the precepts of true Islam—a religion which has never throughout its history experienced a religious or a theocratic state.”
Al-Azhar represents one of the most respected sources of religious scholarship and guidance in the Muslim world and rulers have tapped into the institution's credibility for political purposes since its founding in 970 AD. Muhammad ‘Ali, who ruled Egypt from 1805 to 1848, laid the modern groundwork for manipulation of the university by forcibly nationalizing 623,000 acres of land that had been endowed to mosques in order to gain additional state revenue. Under this model more than a century later, President Gamal Abdel Nasser not only placed all waqf (religious endowment) land under the purview of a Ministry of Religious Endowments, but added to al-Azhar University's unique Islamic model European-style degrees and salaries for professors and imams - effectively rendering them government employees. Nasser also claimed appointment of the Grand Sheikh as a prerogative of the Egyptian president, replacing the university's system of internal election. By 1963 al-Azhar had become a full-fledged state institution, allowing Nasser to remove or discredit his opponents on the inside.
Given this context, it is not surprising that following the January revolution al-Azhar should try to regain independence. Coalitions of imams have formed to advocate for independence, resulting in a March 13 rally that went largely unnoticed in the shadow of Tahrir Square's mass protests. Over a thousand imams marched from the Nour Mosque in Abbassiya to the offices of the Supreme Council of Armed Forces (SCAF). They called for investigation of corruption charges leveled at the Ministry of Religious Endowments and the reversal of Nasser's 1961 law that put al-Azhar's budget under state control and made the Grand Sheikh a presidential appointee. Since then, imams have continued protesting. For example, a group of imams joined the July 8 sit-in at Tahrir Square, where they distributed fliers for a mass rally in support of al-Azhar's independence to be held on July 23, the anniversary of the 1952 coup d'état.
While the al-Azhar Document criticizes “the abuse of religion to disunite and otherwise pit citizens against each other,” it also emphasizes the 1980 constitutional amendment stating Islam is Egypt's official religion and shari'a is the primary source of legislation. The responses to this inherent contradiction are divided as ever, even within the Muslim community. Deputy Muslim Brotherhood Guide Rashad Bayoumi welcomed the formula, remarking that it “demonstrates accurately the meaning of a secular state in Islam.” In contrast, Sheikh Gamal Qotb (former head of al-Azhar's Fatwa Committee) called it “window-dressing,” saying that the document fails to recommend mechanisms for reform. Others still, such as Mamdouh Ismail, the Salafi founder of the Egyptian Renaissance Party, refuse to comment on “anything issued by al-Azhar as long as it is headed by a National Democratic Party member,” a reference to al-Tayeb's appointment by former President Mubarak.
Ismail's reaction illustrates the conflict between al-Azhar, the bastion of Sunni Islamic orthodoxy, and the Salafis - despite their common interest in the university's independence. Al-Azhar was used for decades to combat those the government viewed as extremists, particularly during Egypt's period of Islamist terrorism in the 1990s. With the al-Azhar Document, al-Tayeb effectively rejects Salafi demands for a theocratic state, leading some to decry the document as lukewarm or secular. The Salafi Liberation Party even presented an “advisory memorandum” to al-Tayeb on July 6, calling on him to abolish the document, which they found to be “contrary to God's law.”
Despite Salafi objections (or in some cases because of them), many prominent Egyptians have offered their support for the document. Literary critic Salah Fadl said the document “confirms al-Azhar's respect for others' values and ideals. The institution has been regarded as a symbol of enlightenment and moderate Islam throughout history...and the document will help it regain its former prominence.” Deputy Prime Minister Yehia El Gamal commended it as “one of the most important charters issued to date,” and Rifaat al-Saeed (head of the leftist Tagammu' Party) voiced similar support alongside Christian business tycoon Naguib Sawiris (head of the Free Egyptians Party) - both confirmed anti-Islamists. Spokespersons of the Coptic Church, though skeptical of any religious intervention in politics, welcomed the document as an illustration of the institution's commitment to equality for all citizens.
Human rights activists and other secularists are less enthusiastic. Advocacy organizations express concern over the document's “vagueness,” pointing out that safeguards needed to prevent rights abuses are noticeably absent. Others are dissatisfied by the continued support for Islamic law as the basis for legislation; secularist writer Salah Elissa argues that “if new laws need the consent of al-Azhar, then that immediately means we are in a religious (not civil) state.” Ikram Lamie, spokesman for the Evangelical Church in Egypt, reiterated a similar concern, stressing that religious figures should not interfere in political matters. But spokesmen for the drafting committee have remarked that al-Azhar would have only an advisory role in legislation, as before, and a secular Supreme Constitutional Court would be responsible for approving new laws.
Supporting a democratic state in the new Egypt will require institutions truly independent of a government stranglehold, and al-Azhar's role in the coming days could prove a vital example for other nationalized institutions long oppressed by the Egyptian government's intervention, particularly the judiciary and public university system. As noted by Nabil Abdel Fattah, a political analyst and one of the drafters, “This statement was established through calm dialogue to establish an agenda to unite the people, separate from slogans and propaganda.” As such it represents an attempt to deal with an explosive issue seriously and peacefully - a positive step in itself.
Ahmed Morsy holds an MA in Political Science from the American University in Cairo; Amirah Ismail also contributed to writing this article, and has an MA in Middle East Studies from George Washington University. (CARB 13.07)
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11.8 TUNISIA: Libya Stalemate Is Bad News for Tunisia
The military and political stalemate in neighboring Libya has dashed Tunisians' hope of an early economic recovery and return to employment for the country's restive youth. Tunisia's high-earning tourism industry is at a virtual standstill because the conflict between the Libyan government and rebel forces has kept away tourists who canceled when Tunisian President Zine el-Abidine Ben Ali was ousted in the Jasmine Revolution in January.
The crisis in Libya affected Tunis in different ways, U.N. data indicated. By last count, more than 250,000 Libyan nationals have sought shelter and thousands more will follow if allowed. International interest in Tunisia after the Jasmine Revolution has focused on the likely role of radical Islamists in the emerging administration, Marc Lynch of the Elliott School of International Affairs at George Washington University said in a Foreign Policy Web site article.
More worrying than the Islamic threat, however, is unemployment and other economic problems since Ben Ali's departure, researcher Francis Ghiles wrote in an analysis on the Qatari-owned al-Jazeera Web site. Economic challenges facing Tunisia, above all unemployment, are more serious than the question of Islamism and call for action from the West, Ghiles wrote.
Regional instability resulting from a prolonged military campaign in Libya presents a serious strategic threat to its northern neighbor, Tunisia. "The pictures of fighting in Libya being flashed across Western television screens are complicating the task of the Tunisian government" as it seeks to convince European tourists, a major source of foreign exchange earnings over many years, to return.
After Ben Ali's departure from Tunis and the outbreak of conflict in Libya, tourism arrivals fell 42% to 928,000 in April when compared with the same period in 2010. Tourism losses so far run more than $1.2 billion. Ben Ali was tried in absentia and sentenced to 15 1/2 years in jail for possessing illegal drugs and weapons. Ben Ali and his wife Leila Trabelsi were earlier sentenced to 35 years in prison for embezzlement and misuse of state funds. He fled to Saudi Arabia where he lives despite international calls for his extradition to face the charges.
Tunisia has also been deprived of remittances and other income from Libya, estimated at more than $1 billion and Ghiles cited professional estimates of material losses in Tunisia. The Jasmine Revolution unrest caused damage worth $2 billion to buildings and infrastructure. A further $600 million was added to Tunisia's imports of oil and products and foodstuffs, both moving upward in international markets.
Also absent from the Tunisian economy are big-spending Libyans who earlier visited frequently to benefit from the country's liberal atmosphere and night life. A survey by Ernst and Young said many Tunisian businessmen are more worried about the fallout from Libya than from the current situation in Tunisia. Foreign direct investment declined 24.1% to $420 million during the first four months of the year and industrial production fell 9.4%. Production in the mining sector dropped by 60%, due to continued strikes. Gross domestic product fell 3.3% during the first three months and isn't expected to be more than 1% for 2011. Tunisian unemployment rose from an estimated 14% at the end of 2010 to 19% and is said to be in excess of 800,000. (UPI 08.07)
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11.9 TUNISIA: Energy Investment Continues To Flow
While Tunisia's oil and gas sector has taken a few knocks over the course of 2011 as a result of the fallout from the Arab Spring, the Oxford Business Group reported that investment by energy companies both large and small continues to flow as firms keep a clear eye to the country's long-term potential. Many players operating in the sector have been unaffected by the unrest, and some are even doubling down, identifying opportunities to increase their exposure to a promising market as a result of the political transition.
Upstream production in Tunisia is relatively modest, particularly when compared to the North African country's massive hydrocarbons-producing neighbors. Libya has the eighth-largest oil reserves and Algeria has the 10th-largest gas reserves in the world, but Tunisia's capacity is far more limited, with the world's 50th-largest oil reserves and 58th-largest gas reserves according to BP's 2011 “Statistical Review of World Energy”.
Demand in Tunisia outstrips supply, and the nation imports both gas and oil, but plans are afoot to transform the country into a gas exporter by 2014, with the intention of pumping 1.5b cu meters of gas to Italy via the Transmed pipeline. To achieve this, several field projects on and offshore are in the works, with an estimated $3.2b due to be spent on major upstream gas projects in the process, including: the South Tunisian Gas Projects, which will funnel gas from four southern concessions to Gabes; the development of the Hasdrubal offshore field, operated by UK-based BG Group; the Chergui field, handled by the UK's Petrofac; and the Maamoura and Baraka offshore fields, which are supervised by Italian major ENI.
BG Group, one of the largest foreign investors in the country, itself announced in May that it intended to invest $300m its Miskar and Hasdrubal fields. The investment will also allow for the drilling of new wells in the Sfax region.
While the focus has largely been on Tunisia's gas sector, the oil segment – which churns out around 80,000 bpd according to BP's “Statistical Review of World Energy” – has been exhibiting signs of growth as well. In February, Austrian energy major OMV completed its $866m purchase, first announced in January , of the Tunisian assets of the US firm Pioneer Natural Resources. OMV said that both firms' operations continued during the height of the protests at the beginning of the year. The deal will add 5800 tonnes of oil equivalent (toe) – 10% gas and the rest oil – to the Tunisian output of OMV, which produced 6500 toe from its two concessions in the south of the country.
The firm's Tunisian production levels are also set to receive a boost from the Durra field, which Indonesian partner Medco said in early May would begin production of around 3000 bpd from June. OMV owns a 30% stake in the field alongside Medco, which holds a 20% stake, while ETAP has the remainder.
Smaller firms have also been demonstrating a strong interest as well as confidence in the Tunisian energy sector in recent months. In June, New Zealand Oil and Gas announced that it had won a two-year prospecting permit for in the southern Gulf of Gabes, having submitted an application in August 2010. The company's chief executive, David Salisbury, said that Tunisia had stood out among the countries the firm was considering because of “its combination of good prospectivity, established exploration and production activity levels, reasonable fiscal terms and ease of doing business”.
Some companies have also identified new opportunities to increase their exposure to Tunisia arising from the political turmoil itself. Irish explorer Petroceltic in May, for example, announced plans to invest up to $100m to acquire interests in Tunisia and Egypt this year, most likely through farm-in deals with firms already operating in the region but having difficulties securing debt-based financing as a result of the unrest.
The unrest has had other limited consequences for Tunisian operators as well. An increase in protest activity over employment and pay in the wake of the political uprising has raised concerns about the possibility of disruptions in the short term. Demonstrators blockaded BG Group offices at Nakta, for example, in mid-May, in spite of a number of offerings by the British company to address protestor concerns, while local fisherman took part in an extended sit-in at Petrofac's headquarters, calling for compensation for the company's project's impact on their livelihood.
However, in spite of this, operators have opted to push forward with their investment plans and ride out their short-term uncertainty in a bid to capitalize on the country's longer-term appeal. With BG continuing to pour capital into the country, on top of the $3b it has already invested, and smaller operators launching new prospecting operations, the upstream potential for this small North African country looks sizable. (OBG 11.07)
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11.10 ALGERIA: Development Talks See Tangible Results
A joint push by both the French government and private sector to increase business in Algeria has borne fruit in recent weeks, with several major industrial projects confirmed in sectors including pharmaceuticals, construction materials and automotive manufacturing. The intertwined relationship of the two countries has long underwritten strong commercial links, but this latest round of deals come as major firms from other countries such as Germany, the US and South Korea are also showing interest in Algerian industry.
A visit by a French business delegation – led by Jean Pierre Raffarin, special envoy for Franco-Algerian economic cooperation, and Pierre Lellouche, the minister of state for foreign trade – to the Algeria-France Partnership Forum held in Algiers at the end of May, has helped pave the way for more than 12 projects, giving a significant boost to French investment in the Algerian industrial sector.
Among the biggest announcements in recent weeks has been the purchase of Oran-based Alver, a formerly state-owned glass-packaging firm, by Verallia, a subsidiary of major French materials conglomerate Saint Gobain. Alver, which employs 474 people and produces over 60,000 tonnes of glass product a year, has reportedly been a target for Saint Gobain for nearly two years.
Similarly, Axa, the France-based insurance giant, signed a pair of shareholder agreements to set up one life and one non-life insurance company in the North African country. The company will hold 49% of the total company, the maximum allowed under law, in conjunction with the Banque Exterieure d'Algerie and the relatively young sovereign Fonds National d'Investissement (FNI), marking one of the first times the FNI has entered into a joint venture with a foreign firm.
Meanwhile, French pharmaceuticals major Sanofi-Aventis announced in early June that it will build a factory at Sidi Abdallah in the capital Algiers at a cost of AD6.6bn (€63.4m).
The facility, which will be the company's third in Algeria, will eventually produce 80% of the products it distributes in Algeria. The director-general of Sanofi-Aventis's local unit, Thierry Lefebvre, said the investment was a testament to the bright outlook of the pharmaceuticals sector in Algeria.
The hundreds of meetings between Algerian and French diplomats and business leaders also covered a potential investment by French automotive giant Renault. Algeria's minister for industry, small and medium-sized enterprises and investment promotion, Mohamed Benmeradi, said in May that negotiations with Renault over the establishment of a factory in the country were going “very well” and that he hoped the two sides would come to an agreement in the coming months.
Benmeradi said the French firm had agreed that 50% of components used to manufacture cars at the facility would be locally produced. As discussions reportedly stand at the moment, if the project were to go ahead, it would likely be located at Rouiba, around 20 km from Algiers, and involve an investment of approximately €1bn. Production at the factory would reach 150,000 vehicles annually after three years.
According to Benmeradi, the two sides are still negotiating issues surrounding the marketing and sale of the factory's output. Benmeradi said that the bulk of the vehicles produced at the facility would be intended for sale in Algeria, in line with the government's goals to spur local industry in order to reduce imports, though 10% of its output could be exported. Car imports in the first three months of 2011 increased by 40% over the same period in 2010, from 62,711 units to 88,027. This brought the value of imports during the period up from AD62.4bn, (€598.9m) to AD79.9bn (€766.8m).
Renault is not the only firm that appears to be interested in manufacturing cars in Algeria. In late May a local representative of German automotive giant Volkswagen told Algerian press that negotiations that began last November between the firm and the government over a potential factory in the country were going well and that a government delegation was due to travel to Germany for in-depth talks on the matter in June. Benmeradi has also said that a number of South Korean automobile companies are interested in manufacturing operations in the country.
The first Algeria car could be built in the country by 2014, the CEO of the National Industrial Vehicles Company (l'Entreprise nationale des véhicules industriels, SNVI) predicted in June. The prospects for car manufacturing in Algeria are spurring interest and investment in other sectors; for example, steel manufacturer ArcelorMittal, who already has invested huge amounts of capital in the country, is reportedly considering a 700,000-tonnes-per-annum steel facility in Oran to supply the automotive industry.
The fate of some of the other projects covered in the negotiations appears uncertain. In the petrochemicals sector, for example, the negotiations do not seem to have yet resolved disagreements between Algeria and French energy giants Total and Sonatrach over a $5bn ethane cracker project announced in 2007; some reports suggest that the dispute is centered on the pricing of gas feedstock for the cracker.
Nevertheless, recent developments demonstrate major investor interest across a range of industrial sectors in Algeria from both French and other companies, and further signs of progress are likely in coming months. (OBG 11.07)
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11.11 MOROCCO: 'BBB-' foreign-currency rating affirmed by Standard & Poor's
On 14 July, Standard & Poor's Ratings Services http://www.standardandpoors.com/ has affirmed the 'BBB-' foreign-currency long-term rating on the Kingdom of Morocco. At the same time, S&P lowered the local-currency long-term sovereign credit rating to 'BBB' from 'BBB+' on the change of its methodology for rating sovereign governments. The ratings agency also affirmed the foreign- and local-currency short-term ratings at 'A-3' and 'A-2', respectively. The outlook is stable. S&P's transfer and convertibility assessment for Morocco remains 'BBB+'.
This rating action follows the implementation of Standard & Poor's Ratings Services' revised methodology and assumptions for sovereign ratings. Under S&P revised methodology, the gap between the local and foreign currency ratings on most of our rated sovereigns, worldwide, is narrowing. This is because the agency believes governments are likely to have fewer incentives to differentiate between their local and foreign currency debt in the event of a debt restructuring, given the increasing globalization of markets.
"In accordance with our criteria for sovereign ratings, the local currency rating on Morocco is one notch higher than the foreign currency rating. This is based on our view that Morocco's monetary policy is conducted independently and will transition to a more flexible exchange rate regime in the medium term. In addition, we view active local-currency fixed-income and money markets as relatively deep, accounting for more than 30% of GDP, and we see no significant additional rating constraints related to fiscal flexibility concerns," it said.
The ratings on Morocco are supported by the government's overall track record of prudent fiscal management and its commitment to pursuing credible policies to reduce its fiscal deficit and debt following the current deterioration. In a tense political climate, the government was able to accommodate some of the population's economic and social demands. However, external and fiscal accounts are deteriorating, mostly because of commodity-price increases.
In the last few months, Morocco's political situation has been tense in the context of the Arab Spring. A revised constitution was adopted by referendum on July 1, 2011, by an overwhelming majority of Moroccans. The modifications are in line with what was announced by King Mohammed VI in March. However, limited but ongoing public protests have persisted after the announcement of the constitutional revision process, and we expect demands for political and socioeconomic change will continue in the medium term.
Although this tension has affected credit demand and investment, we forecast real GDP growth of nearly 5% in 2011, owing in part to a healthy performance from the agricultural sector. We forecast agricultural production to grow by more than 7%, boosting domestic activity.
High commodity prices coupled with expenditure pressures stemming from sociopolitical tensions are weighing on the fiscal accounts. We forecast the central government's fiscal deficit to reach at least 5% of GDP in 2011, largely because of the doubling of subsidies for basic goods, mostly fuel, to about 4.8% of GDP. However, we believe that the general government deficit will remain below 3% of GDP and the net general government debt burden will stay around 30% of GDP over the next three years as we expect local government and social security funds to continue generating surpluses. In our view, reforming the subsidy system is key to making room for growth-enhancing expenditure, while preserving fiscal sustainability. With GDP per capita of $2,900 in 2010 and with still high levels of poverty and illiteracy, Morocco has pressing social needs in our opinion.
We expect external indicators will stabilize in the medium term despite the deterioration of Morocco's current account balance on higher fuel imports in 2011. Exports, tourism, and remittances have recovered well in 2010, and we expect this trend will continue despite the protracted recovery in Western Europe, Morocco's main trade partner. We forecast the current account to fall back to about 4% of GDP by 2014. In light of the steady foreign-exchange-reserve accumulation of the past five years, Morocco's gross external financing needs to current account receipts plus usable reserves will likely remain moderate at 90% in 2012.
The stable outlook balances our view of Morocco's progress in modernizing its economy and overall strong external position and track record of prudent fiscal management against the weaknesses we see in its economic structure. In particular, growth and domestic demand are still highly correlated with agricultural production, which is subject to weather vagaries.
We could raise the ratings if the government were to put a credible lid on subsidies, or if the debt burden decreased further. We could also raise the ratings if per capita growth picked-up significantly and standards of living increased, although we see this as less-likely in the short term.
Conversely, we could lower the ratings if the deterioration in external accounts were to persist. We could also lower the ratings if fiscal consolidation were delayed, endangering medium-term fiscal sustainability - in particular if the new government emerging from the upcoming elections failed to put forward early, and subsequently implement, a politically credible and financially consistent strategy to reduce the budgetary impact of subsidies. In accordance with our sovereign ratings criteria, we could lower the local currency ratings if the transition to a more flexible exchange rate arrangement became less probable within the ratings horizon. (S&P 14.07)
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11.12 MOROCCO: Reforming the Constitution, Fragmenting Identities
Mr. Younes Abouyoub commented on 6 July in the Carnegie Arab Reform Bulletin http://www.carnegieendowment.org/arb that most Moroccans applaud the bold decision of King Mohamed VI to include in the preamble of the newly proposed constitution the official recognition of Tamazight as a state language alongside Arabic, the first official acknowledgement of Amazigh (Berber) identity on a constitutional level in a North African country. In fact, this inclusion is what some analysts have speculated led to the overwhelming approval of the July 1 constitutional referendum; Thomson Reuters reported that 98.5% of the population voted in favor, with a 73% turnout of registered voters. Skeptics cast doubts over that figure, citing voting irregularities, and point out that the king's play of the Berber identity card is no more than a bid to pass off a cosmetically new constitution while holding on to his monarchy. Those who are more cynical suggest that the consequences might be dire, and lead Morocco down the road to the Algerian model of tension between those of Arab and Berber origins.
The second preamble paragraph of the amended constitution outlines the national identity of Morocco:
"[Morocco is] a sovereign Muslim State, committed to the ideals of openness, moderation, tolerance and dialogue to foster mutual understanding among all civilizations; A Nation whose unity is based on the fully endorsed diversity of its constituents : Arabic, Amazigh, Hassani, Sub-Saharan, African, Andalusian, Jewish and Mediterranean components."
The recognition of Tamazight is quite a shift; as recently as 2005, when Amazigh activists Ahmed Dgharni and Omar Louzi attempted to launch a political movement advocating Berber identity, their Moroccan Amazigh Democrat Party (PDAM) was banned by the Ministry of the Interior in 2007, and later legally dissolved on the grounds that ethnic-based parties were (and still are) prohibited in Morocco.
While Amazigh revival movements are a relatively recent trend in Morocco, Berber identity politics in the region are nothing new. During the colonial period, the French administration implemented policies intended to sow discord between Berbers and Arabs, while actively pushing a Francophone culture. The so-called “Berber Decrees” issued in May 1930 attempted to institutionalize two distinct legal systems in Morocco, one based on local “customary” laws for those considered “Amazigh” and another based on Islamic law for “Arabs.” Later nationalist movements in Algeria and Morocco reacted with a distinct emphasis on a pan-Arab unity and the role of the Maghreb in the Arabic-speaking world. The quest for a national and regional identity emphasized Arab while marginalizing Amazigh throughout North Africa, suppressing Berber identity for fear of breakaway movements - the most famous being the Berber Spring of 1980, which resulted in the arrest of hundreds of Berber activists in Kabyle and a general strike that lasted for weeks.
While the policy of “dual identity” succeeded in creating major social schisms in post-independence Algerian society, it failed in Morocco, where after centuries of intercultural exchange and intermarriage it has become difficult, if not entirely impossible, to distinguish a “pure Amazigh” from a “pure Arab.” From a historical point of view, claiming an Arab or Amazigh ancestry in Morocco amounted to nothing more than the political stressing of subjective identities, with one or the other emphasized at times and downplayed at others as the relation between movements and cultural changes in population were mediated by power. Claiming the Arab-Islamic title of sharif (noble) evoked a prestigious lineage connected to the Prophet Muhammad, giving the claimant the political legitimacy associated with the “commander of the faithful.” On the other hand, other Moroccan leaders have stressed an Amazigh pedigree so as to associate with such figures as Abdelkrim al-Khattabi, the Berber revolutionary who defeated the Spanish army during the battle of Anoual in 1921. It follows that Amazigh and Arab identities are not mutually exclusive, and that being one or the other is a cultural acquisition common to all Moroccans, even those who choose not to identify as such.
While historically different than Algeria, Morocco is not immune to a possible rift between what have hitherto been two fluid identities if the ongoing political reforms fail to deliver a truly citizen-based identity. Amazigh activists and pan-Arabists across Morocco have returned to the question of identity politics along the divisive model: within the Royal Institute of Amazigh Culture (IRCAM), scholars question whether Morocco rightly belongs to the “Arab world,” while pan-Arab activists respond that Morocco's Islamic identity is proof enough, accusing IRCAM of fostering ethnic divisions by choosing the neo-Tifinagh alphabet (rather than the Arabic) to write out Tamazight. Some Amazigh scholars and activists, such as the IRCAM member Meriem Demnati, have expressed concern that Morocco will follow Algeria's example of “second-rate formalization,” in which the recognition of Berber identity is devoid of practical application. Such activists have become fierce critics of the Islamist Party of Justice and Development and the nationalist Istiqlal Party, which they accuse of being “Amazighophobe Arabists” bent on preventing official recognition of Amazigh identity and language. That said, ethnicity-based political parties (even ones advocating Berber identity issues) command little popular support, and are also still illegal under the newly approved constitution.
The king's official recognition will also be felt elsewhere in the region. Ferhat Mehenni, President of the Provisional Kabyle Government (Kabyle being the Amazigh equivalent in Algeria) hailed the constitutional reforms in Morocco, predicting that they will provoke other groups to press for similar constitutional recognition of Amazigh culture and language. Hitherto, other North African nations have, at most, recognized the vague “national” status of Amazigh, but left Arabic as the sole “official language” of state business. Mehenni has suggested that it will not be long before Algeria's constitution will be changed if a working model gets underway next door.
Younes Abouyoub, Ph.D. researches political sociology at the Department of Middle Eastern, South Asian and African Studies at Columbia University. (CARB 06.07)
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11.13 GREECE: Fitch Downgrades Greece to 'CCC'; Off RWN
On 13 July, Fitch Ratings http://www.fitchratings.com downgraded Greece's Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'CCC' from 'B+. The Short-term foreign currency IDR is also downgraded to 'C' from 'B' and the Rating Watch Negative (RWN) on all three ratings has been removed. The agency has affirmed the euro area Country Ceiling at 'AAA', which is applicable to all euro area member states, including Greece.
The downgrade follows the assigning of a RWN on Greece's ratings on 20 May. At that time, Fitch stated that it would resolve the RWN in light of the conclusion of the fourth review of Greece's economic program by the IMF and that in the absence of a fully-funded and credible EU-IMF program, Greece's sovereign ratings would likely be lowered to 'CCC'. Moreover, Fitch's previous rating of 'B+' was premised on the judgment that provision of new money would not be conditional on private sector participation in any new and enhanced EU-IMF program that would potentially result in a default event.
This rating downgrade reflects the absence of a new, fully-funded and credible EU-IMF program for Greece, coupled with heightened uncertainty surrounding the role of private creditors in any future funding, as well as Greece's weakening macroeconomic outlook.
New money is required to address Greece's fiscal funding shortfall that would otherwise emerge in 2012 - a key weakness of the current EU-IMF program highlighted by Fitch at the turn of the year. Fitch had expected the uncertainty surrounding new money, along with the role of private creditors, to be resolved with the completion of the fourth review of the current EU-IMF program earlier this month. The agency notes that while the main parameters of a new multi-annual adjustment program were discussed at an Ecofin meeting on 11-12 July, no further clarity on the volume and the terms of new money or the nature of private sector participation was forthcoming.
Fitch remains of the opinion that any additional financial support for Greece will only be credible in providing a path to fiscal solvency if it is fully funded beyond the end of the current program in mid-2013. New European Commission estimates of gross fiscal financing needs of EUR172b up to mid-2014 imply substantial additional EU-IMF financial support over and above the EUR110b already committed. However, the agency is concerned that reliance on privatization receipts of EUR30b and largely unquantifiable private sector participation to supplement official new money would leave a new program vulnerable to future funding shortfalls, subjecting Greece to continuing uncertainty. While asset sales of EUR5b look attainable in 2011, the privatization program will become increasingly challenging.
Fitch believes any new program must be backed by credible policy targets. The successful passage through parliament of the Medium Term Fiscal Strategy at the end of June sent a strong message that the Greek authorities remain fully committed to the EU-IMF program. However, official new data for the first six months of 2011 point to expenditure overruns and revenue shortfalls, highlighting the urgent need for recently legislated new measures for 2011, while there are growing doubts about the capacity of the Greek economy to withstand further fiscal consolidation in a climate of continuing economic and financial uncertainty. Thus, a further contraction in economic activity of some 4% of GDP now looks likely in 2011, followed by a weak recovery in 2012.
Fitch's 'CCC' rating encapsulates substantial credit risk and acknowledges that default is a real possibility. As previously stated by Fitch, private sector involvement would likely be viewed as a sign of sovereign credit impairment and could trigger a rating default event. (Fitch 13.07)
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