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TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Fischer Foresees GDP Growth May Drop Below 1.5%
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 N-trig Secures $24 Million of New Funding
2.2 Aladdin Knowledge Systems Enters Into Merger Agreement with Vector Capital Affiliate
2.3 Herley's Israeli Subsidiary is Awarded a $7.1 Million Contract
2.4 Tower Semiconductor Receives $20 Million of Cash Investment From Israel Corp.
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Office Depot Makes Middle East Franchise Move
3.2 First Solar to Supply Modules for Masdar City Solar Power Project
3.3 Sunquest & Healthcare Solutions Announce Distribution Agreement in the Persian Gulf
3.4 Turner Construction Dubai Staff Move To Abu Dhabi As Contracts Dry Up
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4: ISRAEL MACRO-DEVELOPMENTS
4.1 Noble Energy Announces Significant Natural Gas Discovery at Tamar Well Offshore Israel
4.2 Israel Issues First Solar Licenses
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 HSBC Says Persian Gulf Growth To Slow Abruptly in
5.2 Non-Oil Trade Between India and the UAE Grows 24% to $29.02 Billion
5.3 Dubai Sees $1.1 Billion Budget Deficit
5.4 Dubai Signs Trade Partnership with Australia
5.5 Hotel Occupancy in Dubai Drops 14%
5.6 Egypt's Positive Tourism Numbers Likely To Drop In 2009
5.7 Saudi Economy May Contract by 0.9% in 2009
5.8 Saudi Arabia Reveals Design Plans For Mega-Port
5.9 Contract Talks with Bechtel for Egypt's 1st Nuclear Station
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey Seeks Alternatives After Ukraine Gas Cut
6.2 Turkey's Unemployment Rate Soars To 10.9% In October
6.3 Cyprus Cuts Economic Growth Forecast to 2.1% in 2009
6.4 Cyprus Harmonized Inflation at 4.4% in 2008
6.5 Greece's December inflation +2% While 2008's Was 4.2%
6.6 Moody's To Keep Bulgaria's Ratings Unchanged Despite Crisis
6.7 Bulgaria Seeks Natural Gas Supplies From Greece & Turkey
6.8 Bulgaria Looks for EU Funding For Gas Storage Expansion
6.9 Bulgarian Nuclear Power
6.10 Bulgarian Tourist Arrivals Up 14.6% in 2008 on Year
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7: GENERAL NEWS AND INTEREST
*REGIONAL:
7.1 Kuwaiti Prime Minister Unveils New Cabinet
7.2 Greek Prime Minister Sacks Finance Minister In Reshuffle
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Zetiq Reports Success in Clinical Trial Aimed to Identify and Diagnose Cervical Cancer
8.2 Cheetah Medical's FDA Clearance for its NICOM Hemodynamic Monitoring System
8.3 BioLineRx Approved to Complete Phase 1/2 Clinical Trials of BL-1040
8.4 Oridion Signs Strategic Development and Marketing Agreement with Global Healthcare Company
8.5 IIS Receives CE Mark Approval for Marketing
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 ECI Telecom Named as the Leading Vendor in Packet-Optical Transport Systems
9.2 Discretix Showcases Automotive Security Solutions
9.3 Easy Energy Announces Its Newest Innovative Product, the YoGen Bat, Internal Charger For Cell Phones
9.4 It's Mission Accomplished for Optibase in United States Air Force Race
9.5 RiT Technologies Launches Strategic New Solution Family
9.6 AudioCodes Gateways Enable Broadvox Expansion in IP Communication Market
9.7 Mellanox Delivers Microsoft Logo Qualified InfiniBand Adapters for Windows HPC Server 2008
9.8 ZON Multimedia Places First-Time Order for ECtel's Fraud Management Solution
9.9 Aladdin Announces HASP SRM SaaS Pass
9.10 RRsat to Distribute Two Additional TV Channels Over Russia Via Gascom's Yamal-201 Satellite
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's December CPI falls, But Much Less Than Expected
10.2 Israel's Trade Deficit Rises $3.5b
10.3 Israel's Car Imports Fall Sharply In Second Half Of 2008
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11: In Depth
11.1 ISRAEL: Moody's A1 Credit Rating Not Threatened By Credit Crisis & Gaza Conflict
11.2 ISRAEL: Merrill Lynch Sees No growth in Israel's Economy in 2009
11.3 ISRAEL: 2008 Summary of Israeli High-Tech Company Capital Raising
11.4 LEBANON: 2008 Year in Review
11.5 JORDAN's $502 Million Pharmaceuticals and Healthcare Industry for Q4/2008
11.6 BAHRAIN Leads MENA Region on Economic Freedom
11.7 OMAN: Protectionism at Bay
11.8 SAUDI ARABIA: Healthcare Market Forecast To 2012
11.9 EGYPT: 2008 Year in Review
11.10 EGYPT: IMF Executive Board Concludes 2008 Article IV Consultation with the Arab Republic of Egypt
11.11 ALGERIA: Health of the Nation
11.12 TURKEY: Fitch Affirms Turkey's 'BB-' Rating, Outlook Stable
11.13 TURKEY: Fitch Rates Turkey's $1 Billion 2017 Eurobond 'BB-'
11.14 GREECE: S&P Places Ratings On CreditWatch Negative on Heightened Risks
11.15 GREECE: New Economy Minister Faces Some Crucial Fiscal Decisions
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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Fischer Foresees GDP Growth May Drop Below 1.5%
On 11 January, Bank of Israel Governor Stanley Fischer said the Bank of Israel will probably lower its 2009 economic growth estimates because of the global recession. Israel's gross domestic product will probably post the slowest growth since 2002 as the US and Europe, the country's biggest export markets, struggle with recession. Fischer said he expected Israeli economic growth to show the "first signs" of renewed growth later this year. The recovery will "take time," Fischer said. "It depends mainly on the world economy," he said. "I expect that by the end of this year the US economy will start growing, mainly because of the new Obama administration's programs about to get under way. I expect to see the first signs of growth before the end of this year." Fischer said the Gaza fighting should have a limited impact on the economy, based on the country's experience in the Second Lebanon War, which lasted about a month in 2006. "The economy returned immediately to its prewar situation," he said. "This time the impact will be a function of the fighting's duration. If it ends relatively soon, the economic impact will be very small over the long run." (Bloomberg12.01)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 N-trig Secures $24 Million of New Funding
N-trig has completed a fund-raising round of $24m from investors, including Aurum Ventures, Challenger, Canaan Partners, Evergreen Venture Partners and Microsoft Corp. With this new round of funding, N-trig plans to continue working with leading OEMs to create multi-touch notebooks and convertible computers for the mainstream marketplace. The company's multi-touch technology will enable OEMs and ISVs to build new interface standards for both enterprise and consumer markets. N-trig's touch technology is currently deployed in Dell's Latitude XT, and was recently launched on HP's TouchSmart tx2. The company also plans to announce more OEM design wins in the coming year, representing industry standardization of the N-trig hardware in the marketplace and further breaking down the barriers between the user and their computer. N-trig's DuoSense takes established technology to new levels, enabling a more intuitive and natural personal computing experience. Using zero-pressure capacitive touch, DuoSense technology offers cutting edge mobility and productivity, for software and hardware that is easily integrated, and provides the user with the ability to use our two most basic input devices – the pen and our fingers.
Kfar Saba's N-trig (http://www.n-trig.com) is revolutionizing the way people interact with computers by providing the industry's first dual-mode pen and touch input device. N-trig's DuoSense technology is the only combined pen, touch, and multi-touch interface for today's advanced computing world. N-trig's DuoSense dual-mode digitizer uses both pen and zero-pressure capacitive touch to provide a true Hands-on computing experience for mobile computers and other digital input products over a single device. DuoSense enables greater mobility and usability in the next generation of computing devices and notebook PCs, enabling new market opportunities for OEMs and ODMs to introduce computer products which offer a more intuitive and interactive experience. (N-trig12.01)
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2.2 Aladdin Knowledge Systems Enters Into Merger Agreement with Vector Capital Affiliate
Aladdin Knowledge Systems has entered into a definitive merger agreement to be acquired by an investor group lead by Vector Capital, a leading private equity firm specializing in the technology industry, in a transaction valued at approximately $160m. The transaction is subject to certain closing conditions, including the approval of Aladdin's shareholders, antitrust regulatory approvals and the satisfaction of other customary closing conditions. Approximately 14% of Aladdin's outstanding shares in the aggregate are held by an affiliate of Vector Capital, and Directors of Aladdin, have entered into a voting agreement for 19% of the outstanding shares pursuant to which they have agreed to vote all of their shares in favor of the transaction. There is no financing condition to consummate the transaction. The transaction is expected to close following the satisfaction of all closing conditions, which is anticipated to occur in the next two to three months. The transaction will be presented to Aladdin shareholders for approval at Aladdin's Extraordinary General Meeting, which will be scheduled as soon as practicable.
Tel Aviv's Aladdin Knowledge Systems (http://www.Aladdin.com) is an information security leader with offices in 15 countries, a worldwide network of channel partners, and numerous awards for innovation. Aladdin eToken is the world's #1 USB-based authentication solution, offering identity and access management tools that protect sensitive data. Aladdin SafeWord two-factor authentication technology protects companies' important information assets and applications. Aladdin HASP SRM boosts growth for software developers and publishers through strong anti-piracy protection, IP protection and secure licensing and product activation. Aladdin eSafe delivers real-time intelligent Web gateway security that helps protect data and networks, improves productivity and enables compliance. (Aladdin12.01)
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2.3 Herley's Israeli Subsidiary is Awarded a $7.1 Million Contract
Lancaster, Pennsylvania's Herley Industries announced that Herley General Microwave Israel (GMIC) has been awarded a contract valued at approximately $7.1m to produce complex integrated microwave assemblies for a radar program for the international market. Herley Industries is a leader in the design, development and manufacture of microwave technology solutions for the defense, aerospace and medical industries worldwide. (Herley 13.01)
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2.4 Tower Semiconductor Receives $20 Million of Cash Investment From Israel Corp.
Tower Semiconductor announced a $20m cash investment in the Company by Israel Corp, pursuant to the agreement between the parties announced on September 25, 2008. According to the terms of the agreement, Israel Corp. has invested $20m for Tower's equity equivalent capital notes based on a $0.26 value per share. The equity equivalent capital notes have no voting rights, no dividend rights, are not tradable, do not carry interest, are not linked to any index and are not redeemable. Migdal Ha'Emek's Tower Semiconductor (http://www.towersemi.com) is a pure-play independent specialty wafer foundry. Tower manufactures integrated circuits with geometries ranging from 1.0 to 0.13-micron; it also provides complementary technical services and design support. In addition to digital CMOS process technology, Tower offers advanced mixed-signal & RF-CMOS, Power Management, CMOS image-sensor and non-volatile memory technologies. Through access to the process portfolio of its wholly owned subsidiary, Jazz Semiconductor, Tower offers RF CMOS, Analog CMOS, Silicon and SiGe BiCMOS, SiGe C-BiCMOS, Power CMOS and High Voltage CMOS. (Tower 07.11)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Office Depot Makes Middle East Franchise Move
Office Depot will bring its brand to the Middle East after striking its first franchise agreement in the Persian Gulf. The company has signed a deal with M.H. Alshaya to sell office products and services under the Office Depot moniker. Alshaya has been awarded the franchise rights for all six of the GCC countries, with the first four stores scheduled to open in Kuwait City and Dubai this year. Expansion in the Gulf comes at a time when the company is finding the going tough in its home market. Back in October it announced plans to close 112 under-performing stores throughout North America and reduced the number of store openings in 2009 to 20, down from an earlier estimate of 40. News of Office Depot's foray into the Middle East comes just a month after rival Office1 Superstore boosted its own Middle East credentials by signing a master franchise agreement with Scientific for Computers & Systems (SCS) in Jordan. SCS, which sells products from vendors such as Acer, HP and Symantec, will oversee the opening of an Office1 store in April, with two further outlets set to follow shortly after. According to US-based Office1, it sees potential for up to 20 franchises in Jordan. (AB18.01)
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3.2 First Solar to Supply Modules for Masdar City Solar Power Project
Tempe, Arizona's First Solar has been selected by Masdar Abu Dhabi Future Energy Company to supply 5 MW of its thin film solar modules to be part of the largest grid-connected photovoltaic (PV) system in the Middle East. This system will supply power to Masdar City, the world's most ambitious sustainable development to date, with plans to be the world's first carbon-neutral, zero waste, car-free city powered entirely by renewable energy sources. The PV plant is being designed and constructed by Abu Dhabi based solar power system integrator Enviromena Power Systems. Construction has begun, and the system is expected to be commissioned and producing power by the end of the second quarter of 2009. First Solar manufactures solar modules with an advanced semiconductor technology and provides comprehensive PV solutions that significantly reduce solar electricity costs. (First Solar 15.01)
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3.3 Sunquest & Healthcare Solutions Announce Distribution Agreement in the Persian Gulf
Tucson, Arizona's Sunquest Information Systems, a market leader in laboratory and diagnostic information systems, and Healthcare Solutions (HCS), a leading healthcare information consulting firm and part of the Al Babtain Group, announced that they have signed an agreement for HCS to distribute Sunquest solutions and technologies in the Persian Gulf region. The agreement is a strategic milestone for both companies, strengthening Sunquest's mission to increase international market share and HCS's commitment to bring innovative healthcare technology to the region. HCS and Sunquest first collaborated in the support of the Sunquest Laboratory Information System at the Department of Health & Medical Services (DOHMS), which was jointly implemented in 2003. The solution covers four hospitals and 20 healthcare centers and provides an integrated clinical environment that streamlines workflow and provides improved clinical and operational outcomes. HCS, which is based in Dubai, UAE, will provide localized sales, implementation and first-line support for Sunquest's laboratory information solutions and technologies. HCS partners with reputable organizations to commonly leverage mutual clients' long-term investments in their IT infrastructure. HCS is a leading healthcare information consulting firm and part of the Al Babtain Group, specialized in supporting healthcare system integration, implementation, reporting, billing/insurance, and operating managed healthcare organizations. (Sunquest16.01)
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3.4 Turner Construction Dubai Staff Move To Abu Dhabi As Contracts Dry Up
Staff from the regional operations of US firm Turner Construction International have been transferred to Abu Dhabi as construction contracts in Dubai dry up. The construction management firm has moved its team of engineers and project, construction and design managers from Dubai, where it has had recent projects delayed or cancelled, to Abu Dhabi where it has two ongoing projects. The firm is pinning its hopes on infrastructure and development projects backed by governments. In addition to two projects in Abu Dhabi, the firm is also managing construction of the $27b King Abdullah Economic City in Saudi Arabia, and is engaged in contracts in Qatar and Kuwait. As the Gulf feels the affects of the economic slowdown, private sector projects are drying up as investors and speculators beat a hasty retreat from the market. Turner is the leading general builder in the US, ranking first or second in all major segments of the building construction field. In the Gulf, Turner specializes in management of construction schemes, employing around 500 people, with recent projects including the Burj Al Arab, Dubai International Financial Centre (DIFC), Kempinski Hotel on Palm Jumeirah in Dubai and Emirates Palace hotel in Abu Dhabi. (AB19.01)
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4: ISRAEL MACRO-DEVELOPMENTS
4.1 Noble Energy Announces Significant Natural Gas Discovery at Tamar Well Offshore Israel
Noble Energy announced on 17 January a natural gas discovery at the Tamar prospect in the Matan license, offshore Israel. The Tamar #1 well, located in approximately 5,500 feet of water, was drilled to a total depth of 16,076 feet to test a subsalt, lower-Miocene structure in the Levantine basin. Formation logs identified more than 460 feet of net pay in three high-quality reservoirs. The thickness and quality of the reservoirs encountered were greater than anticipated at the well location. Noble said Tamar represents their first exploratory well offshore Israel in more than five years and they are extremely excited by the results. This is one of the most significant prospects that we have ever tested and appears to be the largest discovery in the company's history. Early indications are that the resources identified are very substantial, at least equal to our pre-drill estimated gross mean resources of over three trillion cubic feet. Subject to the collection of additional data, the resource estimate for Tamar could further increase. Production testing at Tamar will be performed after the well is completed. Noble Energy and its partners may keep the rig to drill up to two additional wells in the basin. Pending positive test results, one well could be an appraisal at Tamar. In addition, the partners are considering drilling a second subsalt, lower Miocene prospect. Noble Energy operates the well with a 36% working interest. Other interest owners in the well are Isramco Negev 2 with 28.75%, Delek Drilling with 15.625%, Avner Oil Exploration with 15.625% and Dor Gas Exploration with the remaining 4%. (Noble Energy 17.01)
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4.2 Israel Issues First Solar Licenses
On 7 January, the Public Utility Authority announced the first licenses to build photovoltaic (PV) and thermal solar-energy plants in Israel have been granted,. The Arava Power Company received the first PV license in Israeli history, allowing it to build a 4.9 megawatt solar plant at Kibbutz Ketura in the Eilot region of the Arava desert. The first solar thermal plant of 100 kilowatts will be built by Edig Solar. The licenses must be approved by National Infrastructures Minister Ben-Eliezer. The Arava Power Company also praised the Public Utility Authority for its diligent work in creating the license. According to the authority, the licenses will be granted for 18 months, at the end of which the plants are expected to have been built, connected to the grid and financially viable. Arava said it would begin building the power plant at a cost of NIS 120m as soon as the new feed-in tariffs for medium-sized plants were approved. A rate of NIS 1.80 per kilowatt hour will make the project viable economically. The plant would cover about 80 dunams, the authority said. Arava recently worked out an agreement with 15 kibbutzim in the Negev and Arava to use their land for solar fields. Edig Solar uses technology developed at the Weizmann Institute of Science in Rehovot. The plant is expected to become operational in March. (JP08.01)
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 HSBC Says Persian Gulf Growth To Slow Abruptly in
Gulf Arab oil producers are poised to witness an abrupt slowdown in economic growth this year and could face recession if average crude prices fall toward $25 a barrel, HSBC said. HSBC said in a research note that 2009 will feel like recession in much of the Gulf, but economic deceleration is not likely to lead to derailment. Though the bank thinks Gulf states will be ready to run deficits, dramatically reduced revenues will likely lead Gulf governments to pare back spending plans. HSBC expects oil prices to average $45 a barrel this year - less than half the average 2008 price, forcing at least Saudi Arabia, Bahrain and Oman to run fiscal deficits as they keep spending to sustain their economies. The bank said Saudi Arabia's budget deficit is likely to hit about $26.5 million this year - higher than the finance ministry's $17.3 billion projection last month. The kingdom posted surpluses of $378.1 billion in the 2003-2008 period. Economic growth rates across the oil-exporting region would slow abruptly this year to as low as 0.8% in Saudi Arabia, 0.9% in Kuwait and 1.1% in the United Arab Emirates, HSBC said. The three largest Gulf economies posted growth in real gross domestic product (GDP) of 4.3%, 6.7% and 7.1% last year. If oil prices fell to $25 a barrel this year, all Gulf states, except possibly Qatar, would fall into recession, HSBC said. GDP growth in Qatar, the world's largest exporter of liquefied natural gas, is likely to fall to 9.8% this year from 15.2% in 2008, HSBC said. (Reuters18.01)
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5.2 Non-Oil Trade Between India and the UAE Grows 24% to $29.02 Billion
Non-oil trade between India and the UAE rose 24% to $29.02 billion in the 2007-2008 fiscal year, making UAE India's third-largest trading partner after the United States and China. India's fiscal year runs from April to March. India's non-oil exports to the UAE in the last fiscal year rose to $15.47 billion from $13.61 billion, a year earlier. India's non-oil imports from the UAE during 2007-2008 were valued at $13.56 billion, higher than $9.79 billion in 2006-07 financial year. Figures for India's crude oil and oil product imports from the UAE and India's exports of petroleum products to the UAE were not immediately available. India's major exports to the UAE comprise petroleum products, finished precious and semi-precious jewellery, machinery, textiles and apparel and cereals. India's imports from the UAE are mainly crude oil, petroleum products, raw pearls and precious metals, electrical machinery and equipment and iron and steel. (GN19.01)
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5.3 Dubai Sees $1.1 Billion Budget Deficit
Dubai expects to post its first budget deficit in 2009 as major infrastructure projects weigh on the Gulf emirate's budget,. The government fiscal deficit was expected to reach $1.14b in a 2009 budget based on an oil price of $45 a barrel, said Nasser Al-Sheikh, director-general of Dubai's finance department. He said that though operationally Dubai is at a surplus of $817m, but adding investment in infrastructure, the deficit is $1.1b. Total government spending in 2009 was expected to reach Dh135b, up 11% from last year, Sheikh said, with Dh37.7b of that to be spent on the public sector alone. These projects would not however be delayed or cancelled, he said. Total revenues in 2009 were estimated at Dh138b, a 4% increase from 2008. The deficit represents 1.3% of Dubai's gross domestic product at the end of 2007, Sheikh said, predicting a balanced budget within two to three years. A committee set up by the government to tackle the impact of the global credit crunch, to which Sheikh belongs, has focused mainly on the emirate's once-booming property sector, he said. The United Arab Emirates' central bank set up a Dh50b emergency bank lending facility in September and the government has injected part of a Dh70b rescue facility into bank deposits. Dubai's sovereign debt stands at $10b while debts of state-affiliated firms amount to $70b. (Various11.01)
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5.4 Dubai Signs Trade Partnership with Australia
Dubai has established a new trade partnership with Australia in a bid to create strategic alliances between the two economies, the Dubai Export Development Corporation (EDC) announced. The Tradelink Partnership with the Australian Trade Commission (Austrade) will focus on trade development, country-specific projects, export opportunities, exhibition participation and training activities, EDC said. EDC hopes that the partnership between the two bodies will boost the organization's current campaign to have "Made in Dubai" recognized as a stamp of quality across the world, it said. Dubai's exports to Australia in 2007 totaled Dh206.04m, up 34% from 2006. Exports of stone, cement, ceramic and glass products to Australia rose significantly over this period, according to EDC. They reached Dh74.51m in 2007 compared to Dh 55.48m in 2006, while textile products exports doubled from Dh 16.33m in 2006 to Dh 32.91m in 2007. (GN12.07)
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5.5 Hotel Occupancy in Dubai Drops 14%
Hotel occupancy rates in the Gulf's tourism hub Dubai fell 14% in the third quarter compared to the same period a year earlier, latest data from the emirate's Department of Tourism showed. The occupancy rate for hotel beds declined to 75.2% from 83.1% a year earlier, the data showed, while the number of guest-nights in hotels dropped 3.5%. But the number of hotel rooms available grew 13.3%, and the number of beds rose 9.9%. Total revenue by hotels in the second quarter rose 11.6% to $694.2m, compared to the previous year. The tide has turned quickly in Dubai as slumping oil prices and the global financial meltdown put an end to the glitzy emirate's property boom, forcing companies to slash jobs and cancel some dramatic expansion projects. (Various12.01)
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5.6 Egypt's Positive Tourism Numbers Likely To Drop In 2009
Egypt received 12.8 million tourists in 2008, with a 15.3% increase in tourist arrivals, according to Tourism Minister Garranah. Over the year, the industry grew at a rate of 25% until the global economic crisis hit in September. Since then, tourism numbers began dropping in the last four months of 2008. The global tourism sector grew by only 2%. In FY2008, tourism contributed around 7% to Egypt's GDP with revenues rising 16% to reach $11b. Despite the growth, the minister said there will be layoffs within the tourism sector in the coming period, with forecasts of a sharp drop in tourism numbers. As a whole, the sector contributes around 20% to the total foreign currency flow, the minister said. (Various13.01)
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5.7 Saudi Economy May Contract by 0.9% in 2009
EFG-Hermes announced that Saudi Arabia's economy is set to contract 0.9% this year on sharp crude production cuts, although the non-oil sector could cushion the decline as the government boosts spending. But the investment bank, which had previously seen 2.4% growth in the kingdom, expects the economy to come roaring back in 2010 with growth of 4.7%. Economists have slashed their forecasts for real gross domestic product (GDP) in the Gulf region as major economies plunge into recession and oil prices collapse to virtually a quarter of their record level last July. EFG Hermes said in a research note that Saudi Arabia's non-oil sectors would likely expand about 4.3% in 2009, down from 5.2% in 2008. The Saudi economy probably grew 4.2% in 2008, the finance ministry said in December. The ministry is projecting the Gulf state will this year post its first deficit since 2002 as fiscal spending grows to spur an economy wounded by oil prices at less than $40 a barrel, down from $147 a barrel in July. (Various12.01)
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5.8 Saudi Arabia Reveals Design Plans For Mega-Port
Final blue prints for the sea port being built as part of King Abdullah Economic City (KAEC), the largest ever private finance initiative in Saudi Arabia, were unveiled on 17 January. The Jeddah-based port is being built by Emmar Economic City (EEC), a consortium headed by Emaar and a number of high profile investors from the Kingdom, and will be the consortium's flagship development in the country. The port is part of the $26.6 billion KAEC project that will also house an industrial district, financial island, education zone, resorts and residential area. Based on initial forecasts, the project and its several components, will create up to 500,000 employment opportunities in the various industries and service-oriented companies that will open in the city. The port was designed in coordination with Halcrow, the international consultancy specializing in the provision of planning, design and management services for maritime projects and will be the largest in the Red Sea and one of the top 10 ports in the world. It will have the capacity to handle 20 million TEU (twenty foot equivalent container units). Groundwork on KAEC is already underway on the project's first boulevard – a 15 km long stretch that features over 3,000 palm trees. Excavation work for the first city canal to run through the Red Sea Village has started. (AB18.01)
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5.9 Contract Talks with Bechtel for Egypt's 1st Nuclear Station
On 12 January, Egypt's Nuclear Energy Authority began the first round of talks with Bechtel, the international company that won the tender for the country's nuclear power plant project, on their contract terms. In December, the US company Bechtel Power won a 10-year contract worth $180m to consult on and help design Egypt's first nuclear power station. Egypt said in October 2007 it would build several civilian nuclear power stations to meet its energy needs. The company will choose the technology and the site for the reactors, ensure quality control for the project, train personnel to run the power plant and provide other technical services until the plant starts operations. Bechtel will consider five locations for the first nuclear plant, starting with Dabaa on the Mediterranean coast west of Alexandria, the site where the Egyptian government was planning to build a power station in the 1980s. (MENA 07.01)
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey Seeks Alternatives After Ukraine Gas Cut
Turkey is getting more natural gas directly from Russia and may increase imports from Iran to maintain supply after Russian shipments via Ukraine were cut, Energy Minister Guler said. Flows from the Ukraine pipeline, which passes through Bulgaria and normally provides 40m cubic meters a day, were cut on 7 January, Guler told reporters in Ankara. The country consumes about 130m cubic meters a day, he said. The reduction to southeastern Europe stems from a dispute over prices between Russia's OAO Gazprom and Ukraine. Gazprom cut supplies of the fuel to Ukraine on Jan. 1 after talks broke down with utility NAK Naftogaz Ukrainy on contract renewals for 2009. A similar dispute interrupted supplies to Europe in 2006. The flow of gas that comes directly from Russia through the Blue Stream pipeline under the Black Sea has increased to 48m cubic meters a day from its normal rate of 35m cubic meters a day. Turkey may also draw on more natural gas from a pipeline from Iran. Daily use of the pipeline could rise to 28m cubic meters from 15m cubic meters, Guler said. Turkey also has storage tanks in Silivri in the west of the country and a liquefied gas terminal in Aliaga that can be used to support supply. The Silivri tanks are adding 15m cubic meters a day to the Turkish network and Aliaga 18m. (Bloomberg07.01)
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6.2 Turkey's Unemployment Rate Soars To 10.9% In October
The latest Household Labor Survey, released on 15 January by the Turkish Statistics Institute (TurkStat), shows that the unemployment rate in Turkey in October 2008 soared to 10.9%, a 1.2% increase over the same month in 2007. According to the survey results, the unemployment rate in urban areas was at 12.8%, while it was 7.8% in rural areas. The labor force participation rate (LFPR) was at 49.1% in October 2008. In terms of numbers, the amount of unemployed people in Turkey increased by 385,000 to 2.68 million in the 12 months to October 2008. Over the same period, the total non-institutional population of Turkey (i.e., excluding those serving in the military, students and prisoners) increased by 759,000 to 69.88 million; in this group, the number of those who are of working age increased by 763,000 to 50.21 million. When assessing the active labor force and the unemployment rate, TurkStat does not count those who are not actively seeking work, approximately halving the number of those who are counted in the statistics.
During the same period, even though the number of unemployed grew, the number of those employed increased even more, by 635,000 to 21.94 million people. Workers employed in the agricultural sector increased by 384,000, while those in the non-agricultural sector increased by 251,000. Of those working in October 2008, 26.9% were employed in agriculture, 19.8% in industry, 6% in construction and 47.3% in the service sector. The figures show a 1%age point increase in those employed in the agriculture sector and a 0.4%age point drop in those working in industry and services during the 12 months to October 2008. Those employed in construction decreased by 0.2%age points. (TurkStat15.01)
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6.3 Cyprus Cuts Economic Growth Forecast to 2.1% in 2009
Cyprus cut its economic growth forecast to 2.1% in 2009 from an earlier projection of 3%, and expects a small fiscal deficit this year, on the back of a sharp reduction in home consumption and expectations that the European Commission will proceed with a major downward revision of its growth forecast for the euro-zone. Finance Minister Stavrakis told a news conference that the GDP rate of growth for 2009 is slashed from the original target of 3% to 2.1%. The Unemployment rate is seen deteriorating to 4.5% from the original forecast of 4.2%. Stavrakis is also projecting a deterioration in the fiscal balance and now forecasts a 0.8% deficit as opposed to the original 0.4% surplus. The growth forecast is more in tune with Central Bank staff projections of 2% growth in 2009. Cyprus registered a surplus of 1% of gross domestic product in 2008 with the GDP growth rate at 3.7%, the unemployment rate at 4%, and the public debt to GDP ratio at 49.5%. (FN09.01)
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6.4 Cyprus Harmonized Inflation at 4.4% in 2008
The EU-harmonized inflation rate (H ICP) in Cyprus fell for the second consecutive month in December, by 1.01% compared with a fall of 1.2% in November. The largest fall was recorded in housing, electricity, water and gas, which fell by 4.89% compared with the previous month, as a result of falling international oil prices. Transport prices also recorded a sharp fall compared with the previous month of 3.63%. The annual HICP rate in December 2008 was 1.8% compared with 3.7% in December 2007 and 3.1% in November 2008. According to the Cypriot Statistical Service, for the period January- December 2008, the HICP increased by 4.4% compared with 2.2% in 2007, although the index produces an inflation rate of 4.3%. The consumer price inflation rate in the same period was 4.7%. (FM07.01)
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6.5 Greece's December inflation +2% While 2008's Was 4.2%
Greece's consumer price index fell to 2% on the year in December, compared to a 2.9% rise in November, largely due to the sharp fall of fuel prices, the National Statistics Service said. December's data were the lowest since Sept 1999. On a monthly basis, inflation dropped 0.5% compared to a 0.4% rise in 2007. Inflation averaged 4.2% in 2008, slightly lower than government's forecast of 4.3%. In 2007, inflation stood at 2.9%. The harmonized consumer price index averaged 2.2% in December versus 3% in November, the NSS said. (NSS12.01)
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6.6 Moody's To Keep Bulgaria's Ratings Unchanged Despite Crisis
Moody's international rating agency plans to keep Bulgaria's rating unchanged despite the global financial crisis, mainly due to its favorable investment climate and its budgetary stability, said the agency. Moreover, Moody's plans to keep Bulgaria's government bond rating at Baa3. ‘The economy has stabilized, growth has been strong and output has diversified,' said Moody's Vice President Kenneth Orchard, adding that ‘the ratings are underpinned by a prudent fiscal policy and low and declining debt levels.' Meanwhile, he noted that ‘the ratings balance the country's positive developments against a number of concerns, such as the existence of a currency board arrangement alongside a large current account deficit and rapid growth in private-sector external debt.' In September, Moody's changed the outlook on the Baa3 foreign and local currency ratings of the government of Bulgaria to stable from positive. The outlooks on the A1 country ceiling for foreign currency debt and the Baa3 country ceiling for foreign currency deposits were also moved to stable from positive, has said Moody's. (Moody's12.01)
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6.7 Bulgaria Seeks Natural Gas Supplies From Greece & Turkey
Bulgaria has initiated talks with Greece and Turkey asking for natural gas supplies, following the ten-day halt of the Russian supplies due to the country's dispute with Ukraine, said Bulgarian Prime Minister Stanishev. Referring to the country's talks with Greece, Bulgarian Economy & Energy Minister Dimitrov stated that they are discussing an option to open the transit gas pipeline aimed at securing about two million cubic meters (MCM) per day. It is also likely for Bulgaria to receive condensed gas supply from the terminals near Athens. Meanwhile, Dimitrov underlined the country's need to use the transit pipeline systems of both countries, saying that ‘in case Turkey allows us to open the taps, we will start the reverse gas supplies from Turkey to Bulgaria immediately.' Bulgaria has already said that it will seek around €900 million aid from the European Union (EU) in a bid to ease its energy dependence on Russia. As a result, the country will be able to have access to alternative routes and sources of natural gas. The country is totally dependent on Russian gas, as the country covers 92% of Bulgaria's total natural gas needs. (SNA16.01)
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6.8 Bulgaria Looks for EU Funding For Gas Storage Expansion
Bulgaria has expressed its interest in providing European Union (EU) funding for the expansion of its gas storage infrastructure, according to media reports. The country is totally dependent on Russian gas, as the country covers 92% of Bulgaria's total natural gas needs. After the halt of Russian natural gas supplies, Bulgaria officially introduced austerity measures in a bid to limit the natural gas consumption, following the gas dispute between Russia and Ukraine. Under a special ordinance of the Minister of Energy and Economy, the country's daily natural gas consumption will be reduced to 5.7m cubic meters (MCM) per day from regular 12-18 MCM consumption per day. Moreover, the ordinance provides for limited gas supplies for plants with non-stop production cycles that cannot switch to other energy sources, as well as for Bulgaria's public heating utility companies which provide heating to hospitals, schools, kindergartens, and other social institutions. (Reporter12.01)
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6.9 Bulgarian Nuclear Power
Bulgaria plans to restart a nuclear power reactor it shut in 2006 if the halt in Russian natural gas supplies drags on and if Brussels approves, Prime Minister Stanishev said on 16 January. “Technical preparations (for the restart) have been begun by the government and the nuclear power plant,” Bulgarian national radio quoted Stanishev as saying. “A decision would be taken in a dialogue with our partners and based on the developments of the gas crisis,” he said. The European Union newcomer, one of the hardest-hit in the Moscow-Kiev gas price row, fears the cuts in Russian gas supplies threaten to cause power blackouts. (Reuters17.01)
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6.10 Bulgarian Tourist Arrivals Up 14.6% in 2008 on Year
Bulgaria's tourist arrivals rose by 14.6% in 2008 as compared to last year on a preliminary basis, said the Head of Bulgaria's State Tourist Agency. Bulgaria sees some 6.5 million tourist arrivals in 2009, in line with the projected arrivals in 2008. Bulgaria's tourism revenues are likely to increase by €50m by 2011. Under the European Regional Development program, the country expects to attract 70.000 more tourists by 2011. Bulgaria's tourism revenues rose by 12% in the first eight months to €1.5b, year-on-year. The country's tourist arrivals exceeded 4.3 million in the first eight months, up by 15% on the year. Tourism generates about 10% of Bulgaria's gross domestic product. (SNAs08.01)
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7: GENERAL NEWS AND INTEREST
*REGIONAL:
7.1 Kuwaiti Prime Minister Unveils New Cabinet
On 12 January, Kuwaiti Prime Minister Sheikh Nasser Mohammad Al-Ahmad al-Sabah formed a new cabinet, the fourth since March 2007. Kuwait's foreign minister has been appointed acting oil minister in the new cabinet as the Gulf Arab state tries to end a political standoff which has delayed reforms in the Opec producer. The cabinet replaces the outgoing government that resigned on 25 November. Sheikh Mohammad al-Salem al-Sabah, a key member of the ruling family, will stay foreign minister and also take over from the outgoing oil minister. Changes in the oil ministry usually have little impact on Kuwait's energy policy which is decided by a council including industry experts. Prime Minister Sheikh Nasser al-Mohammad al-Sabah had resigned along with his cabinet in November after three parliamentarians moved to question him. But Kuwait's ruler, who has the last say in politics, reappointed his nephew. The political impasse is threatening economic reforms to attract more investment and soften the impact of a global credit crunch which is increasingly hitting Kuwait despite its enormous oil wealth. Key portfolios such as defense, interior or information remain in the hands of the ruling family. The acting oil minister's main task will be to restore confidence among investors after Kuwait cancelled a $17b project with Dow Chemical after opposition from MPs, just weeks after signing the deal. He will also have to decide on the fate of a $15b refinery which has been put on hold after parliament launched an investigation, and a multi-billion tender to upgrade two refineries which has also been delayed. Kuwait is the world's seventh-largest oil exporter and sits on 10% of global crude reserves. (GN12.01)
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7.2 Greek Prime Minister Sacks Finance Minister In Reshuffle
On 7 January, Greek Prime Minister Karamanlis sacked his finance minister in a broad cabinet reshuffle to try to shore up his government's popularity, hit by riots, scandals and economic woes. Finance Minister Alogoskoufis, was ousted after being criticized even from within his own party for a series of misfired policies. Alogoskoufis was replaced with one of his deputies, Yannis Papathanassiou, 55, who faces the tough task of balancing budget revenue needs with measures to help the poor as the global downturn begins to hit Greece. A series of scandals and discontent with economic measures have eroded the ruling New Democracy's support and saw the opposition socialists lead opinion polls for the first time in years, raising the specter of snap elections. Alogoskoufis, credited with an EU-applauded fiscal tightening soon after New Democracy swept to power in 2004, drew fire for basking in a consumer-driven GDP growth of about 4% and neglecting a ballooning public debt and current account deficit, threatening jobs.
Adding to the government's troubles, a police shooting of a teenager on 6 December sparked the worst riots in decades. Analysts said the violence was fuelled by lingering public discontent as the world financial crisis begins to bite. Unions had been battling Alogoskoufis' privatization plans and industrialists had repeatedly asked for measures to boost eroding Greek competitiveness. He appeared to seal his fortunes when he announced a series of tax collecting measures in late August as other European economies braced for collapse. He unveiled a €28b bank support package before any measures to aid the poor, who officially make up one fifth of the Greek population. Various07.12)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Zetiq Reports Success in Clinical Trial Aimed to Identify and Diagnose Cervical Cancer
Zetiq Technologies, a subsidiary of Bio-Light, has successfully completed the first arm of its cervical cancer clinical trial, aimed at identifying and diagnosing cervical cancer in biopsies via the Zetiq proprietary differential coloring stain. The goal of the trial was to demonstrate and measure the ability of Zetiq's technology to accurately diagnose the presence of cervical cancer cells and the stage of the disease, including in early stages of malignancy, in cervical biopsies. The study reviewed 60 biopsy samples obtained from the archive of Meir MC in Israel which were selected by an unrelated party. The study results demonstrated 100% correlation between the diagnosis based on Zetiq's technology and diagnosis based upon H&E staining, the current gold standard diagnostic tool used to identify cervical cancer. The study included both Biopsy samples without any abnormal findings (control cases) as well as biopsy samples from advanced disease stages, including from early pre malignant stages of the disease. The company's technology was able to diagnose the samples by both a color stain of the cancer cells as well as the morphological cell changes. On the basis of the positive results, Zetiq intends to pursue the development of its diagnostic product for diagnosis of cervical cancer. The second arm of the study, aimed at implementing the technology as a screening survey application to point to potential cases of cervical cancer, is still ongoing. Zetiq's technology, known as CellDetect, uses Dual analysis of both color discrimination and morphological analysis to differentiate between cancerous and normal cells. Ramat Gan's Zetiq (http://www.zetiq.co.il) is a subsidiary of Bio-Light Life Science Investments, a management and holding company specializing in biomedical technologies. Bio-Light is traded on the Tel Aviv Stock Exchange under the symbol TASE: BOLT. (Zetiq08.01)
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8.2 Cheetah Medical's FDA Clearance for its NICOM Hemodynamic Monitoring System
Cheetah Medical has been granted 510(k) marketing clearance by the U.S. Food and Drug Administration (FDA) for the NIBP functionality, provided by SunTech Medical, in its NICOM Reliant Hemodynamic Monitoring System. The NIBP Option for the NICOM System platform and other feature enhancements add new parameters to provide a comprehensive suite of information for functional cardiac and systemic vascular monitoring – all without the need for invasive cardiovascular monitoring methods that are associated with increased potential costs and patient risks. The new parameters include Noninvasive Blood Pressure (NIBP), Total Peripheral Resistance (TPR), Stroke Volume Variation (SVV), Cardiac Power (CP) and Change in Thoracic Fluid Content (TFCd). The NIBP Option for NICOM Hemodynamic Monitoring Systems sold in the U.S. is the product of an ongoing global OEM agreement between Cheetah Medical and SunTech Medical, the market leader in OEM NIBP clinical grade monitoring technology.
Cheetah Medical's unique, patented BIOREACTANCE® Technology noninvasively measures stroke volume (SV) and cardiac output (CO) with validated accuracy compared to invasive methodologies. BIOREACTANCE Technology has been used to monitor over 2,000 patients effectively in a variety of clinical settings including medical and surgical intensive care, perioperative care, emergency medicine, heart failure, hemodialysis and exercise testing. Numerous clinical studies validating the performance and clinical efficacy of BIOREACTANCE Technology have been published to-date in peer-reviewed medical publications worldwide, with more studies underway. Tel Aviv's Cheetah Medical (http://www.cheetah-medical.com) delivers accurate noninvasive cardiac output (CO), noninvasive blood pressure (NIBP), thoracic fluid content (TFC) and other vital hemodynamic monitoring parameters to provide continuous, clinically actionable data for fluid and drug optimization in acute and ambulatory care settings, including intensive care, emergency, perioperative care and outpatient cardiology. The NICOM System uses Cheetah Medical's proprietary BIOREACTANCE technology which has validated performance accuracy and faster directional changes compared to invasive CO measurement methods, with less potential costs and risks. (Cheetah08.01)
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8.3 BioLineRx Approved to Complete Phase 1/2 Clinical Trials of BL-1040
BioLineRx announced that the Independent Safety Monitoring Board (ISMB) for the BL-1040 pilot study authorized the completion of the Phase 1/2 study and enrollment of the additional 25 patients. The ISMB's decision is based on safety assessments of the first 5 patients to complete at least 30 days of follow up following treatment with BL-1040 without noticeable adverse events. BL-1040 is a breakthrough treatment for preventing further heart damage following acute myocardial infarction (MI). The pilot Phase 1/2 multi-center open label study is designed to assess the safety and preliminary efficacy of BL-1040 in up to 30 patients.
BL-1040 represents a breakthrough approach to support cardiac tissue damaged as a result of acute MI, improving cardiac function and survival. The novel myocardial implant is a resorbable liquid polymer that is administered via the coronary artery during standard catheterization and flows into the damaged heart muscle. The liquid polymerizes within the infarcted cardiac tissue and forms a protective “scaffold” that enhances the mechanical strength of the heart muscle during recovery and repair, thereby preventing pathological enlargement of the left ventricle after the MI. It is excreted naturally from the body within six weeks after injection, leaving behind a stronger, more stable heart muscle.
Jerusalem's BioLineRx (http://www.biolinerx.com), a clinical stage drug development company traded on the Tel Aviv Stock Exchange, is dedicated to building a robust pipeline of promising therapeutics for unmet medical needs. The Company's lead programs include BL-1020 for the treatment of schizophrenia, currently in Phase 2b trials; and BL-1040 for the treatment of damaged heart tissue post-myocardial infarction, currently in a Phase 1/2 study. Additional products under development include compounds for the treatment of cancer and CNS, cardiovascular, metabolic, infectious and autoimmune diseases. BioLineRx advances projects from early stage discovery and lead generation to advanced clinical trials. BioLineRx partners with researchers, universities and biotech companies to further the development of promising compounds. (BioLineRx12.01)
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8.4 Oridion Signs Strategic Development and Marketing Agreement with Global Healthcare Company
Oridion Systems announced an agreement with a global healthcare company that is a market leader in medication infusion systems. Under this agreement, Oridion's Capnostream carbon dioxide (CO2) monitor using Microstream capnography technology will be incorporated into a PCA infusion device at a future date, allowing hospital patients to control the flow of their pain medication within specified limits. By enabling connectivity between the Capnostream and PCA device, clinicians will be able to monitor their patients' end tidal (CO2) levels. Clinicians using Microstream are more likely to detect respiratory depression than clinicians monitoring with pulse oximetry alone. This is particularly important when administering potent pain medication.
Jerusalem's Oridion Systems (http://www.oridion.com) is a global medical device company specializing in patient safety monitoring. Oridion develops proprietary medical devices and patient interfaces, based on its patented Microstream technologies, for the enhancement of patient safety through the monitoring of the carbon dioxide (CO2) in a patient's breath. These products provide effective, proven airway management and are used in various clinical environments, including procedural sedation, pain management, operating rooms, critical care units, post-anesthesia care units, emergency medical services, transport, alternate care and other settings where patients' ventilation may be compromised and at risk. (Oridion 15.01)
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8.5 IIS Receives CE Mark Approval for Marketing
Innovative Implant Solutions (IIS) received the European CE Mark approval to market its first product, the ImplantLock device, providing standard, root-form implants with the ability to secure real-time "Functional Immediate Loading" or "Immediate Functional Occlusion" regardless of bone density and height. The patent- pending ImplantLock device is an add-on anchor that provides standard, root- form implants with the ability to secure real-time "Functional Immediate Loading" or "Immediate Functional Occlusion", regardless of bone density and height. The device can be used to support standard implants of any length including very short implants (down to 6.0 mm in length) and thus reduce the need for many bone augmentation and sinus lift procedures. In addition, the device enables safe and stable "Immediate implants' placement after tooth extraction. Jerusalem's Innovative Implant Solutions (http://www.implantlock.com) is an Israeli start up company focusing on developing a line of implantology related dental product operating within the framework of Van Leer Ventures in Jerusalem as part of the Chief Scientist incubator program. IIS has recently obtained a special grant of a third year incubator support by the Chief Scientist of the Ministry of Trade and Industry in Israel. (IIS06.01)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 ECI Telecom Named as the Leading Vendor in Packet-Optical Transport Systems
ECI Telecom announced that Heavy Reading has recognized ECI as the leading vendor in the report, “Packet-Enabled Optical Networking Quarterly Market Tracker, Q3 2008,” which tracks the newly defined packet-optical transport system (P-OTS) product category. ECI captured leadership in this segment for the past three quarters. P-OTS refers to the combination of connection-oriented Ethernet, SDH/SONET and WDM ROADM capabilities, all integrated in one converged platform. Such platforms bring significant capital expenditure and operating cost reduction to carriers evolving from legacy TDM services to next-generation packet and optical services because this approach implements fewer platforms, less manpower, less power consumption and simplified management. ECI's P-OTS solution is based on the XDM Multi-Service Transport Platform (MSTP), which integrates WDM, SDH/Sonet and packet capabilities such as Carrier Ethernet. The XDM is managed by ECI's LightSoft network management system which is unique in its ability to provide a complete view of the network from the physical connection through the network layers. This ability to manage multiple layers in the network from one management tool is a cornerstone of ECI's 1Net strategy for managing transitions in network evolution.
Petah Tikva's ECI Telecom (http://www.ecitele.com) delivers innovative communications platforms to carriers and service providers worldwide. ECI provides efficient platforms and solutions that enable customers to rapidly deploy cost-effective, revenue-generating services. ECI has consistently delivered customer-focused networking solutions to the world's largest carriers. The Company is also a market leader in many emerging markets. ECI provides scalable broadband access, transport and data networking infrastructure that provides the foundation for the communications of tomorrow, including next-generation voice, IPTV, mobility and other business solutions. (ECI12.01)
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9.2 Discretix Showcases Automotive Security Solutions
Discretix is presenting its innovative security technologies to the automotive industry during the 2009 International Consumer Electronics Show in Las Vegas. Unique within the digital security realm, Discretix offers a range of solutions that can ensure world-class security for vehicle control systems and engine controllers, as well as for digital content used in car infotainment systems. Discretix' range of embedded solutions deliver robust security for many purposes including access to logging and diagnostics data, anti-cloning, software updates, platform code integrity verification as well as car-to-car/car-to-road/road-to-car communication. Discretix' technologies also can be used to protect against illicit activity such as part cloning, GPS information hacking and mileage manipulation. Depending on the technology employed, Discretix' broad range of robust embedded security solutions can protect data and systems at any level from component to chipset, as well as guarantee the safety and security properties of the overall solution. Kfar Netter's Discretix' (http://www.discretix.com) security solutions are deployed in a wide range of consumer electronics devices enabling services and applications, while protecting the device and its contents. Discretix' products include embedded security co-processors and a broad range of security applications. The solutions are tightly integrated into the device, enhancing security without compromising the user experience. Discretix, a privately-owned company, serves the needs of some of the world's best-known semiconductor and device manufacturers and has been consistently ranked among the leaders of the embedded security market. (Discretix 07.01)
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9.3 Easy Energy Announces Its Newest Innovative Product, the YoGen Bat, Internal Charger For Cell Phones
Easy Energy has started the development of the first prototype of its patent-pending, ultra-slim, hybrid electric energy source, known as the YoGen Bat, an internal battery charger for cell phones. The Company is developing the patent-pending YoGen Bat as the next generation charger for their YoGen suite of products and anticipates a swift completion of their prototype development and ensuing market launch in the near future. Easy Energy (http://www.easy-energy.biz) is the sole owner of the YoGen product suite(man-powered charger products) and the YoGen Max(a foldable Laptop charger that requires no external power source). The company is headquartered in Las Vegas, Nevada with Offices in Nahariya, Israel. (Easy Energy12.01)
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9.4 It's Mission Accomplished for Optibase in United States Air Force Race
Optibase announced that its tactical video solution provided H.264 coverage of the Joint Communication Support Element's (JCSE) 28th Mattar Relay Race at MacDill AFB. The annual race serves as a showcase for new communication technology solutions prior to field deployments. The race is named for the former JCSE commander LTC George G. Mattar who was killed on January 13, 1982 when his flight, Florida Airlines #90, crashed into the waters of the Potomac River. Vehicle-mounted cameras provided the video feed to Optibase MGW platforms that were co-located on the vehicle: Optibase MGW Micro, a small ruggedized video encoder and the MGW 1100, a rack-mounted 12-channel video encoder. The video was compressed in the H.264 format and transmitted to JCSE headquarters via tactical IP radio and satellite uplinks. Using Optibase's EZ TV Player, spectators viewed the race in real-time on the big screen at the JCSE headquarters.
Herzliya's Optibase (http://www.optibase.com) provides professional encoding, decoding, video server upload and streaming solutions for telecom operators, service providers, broadcasters and content creators. The company's platforms enable the creation, broadband streaming and playback of high quality digital video. Optibase's breadth of product offerings are used in applications, such as: video over DSL/Fiber networks, post production for the broadcast and cables industries, archiving; high-end surveillance, distance learning; and business television. (Optibase 13.01)
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9.5 RiT Technologies Launches Strategic New Solution Family
RiT Technologies announced a strategic new solution family: Paladin Solutions for real-time, active Environment and Security Management. The innovative Paladin solutions, based on technology from one of RiT's business partners, are designed for 24/7 active monitoring and real-time analysis of a premises' temperature, power usage, physical access and many other environmental and security parameters. Taking a preventive rather than a reactive approach, the system consists of both software and hardware components, and is designed to interface fully and easily with the sensors and equipment of other vendors. Paladin's scalable modular architecture enables it to be deployed in a broad variety of mission-critical environments, and to grow as required from initial installations in datacenters to communications rooms, remote stations and other facilities - whether for utilities, telecommunications service providers, military/governmental installations, or other types of organizations.
Paladin solutions are differentiated by their ability to actively protect the environment and security of virtually all types of local and remote premises from a central station. Paladin solutions are designed to provide 24/7 collection and analysis of data from practically any type of sensor, as well as from cameras and other types of security equipment. When the system senses a developing situation, it alerts and responds automatically and immediately, minimizing damage and downtime by setting in motion a chain of user-defined actions, each based on the system's unique business logic capabilities.
Tel Aviv's RiT (http://www.rittech.com) is a leading provider of intelligent solutions for infrastructure management, asset management, environment and security, and network utilization. RiT Enterprise solutions address datacenters, communication rooms and workspace environments, ensuring maximum utilization, reliability, decreased downtime, physical security, automated deployment, asset tracking, and troubleshooting. RiT Environment and Security solutions enable companies to effectively control their datacenters, communications rooms and remote physical sites and facilities in real-time, comprehensively and accurately. RiT Carrier solutions provide carriers with the full array of network mapping, testing and bandwidth qualification capabilities needed for access network installation and service provisioning. RiT's field-tested solutions are delivering value in thousands of installations for top-tier enterprises and operators throughout the world. (RiT13.01)
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9.6 AudioCodes Gateways Enable Broadvox Expansion in IP Communication Market
AudioCodes and Dallas, Texas' Broadvox, a worldwide leader in providing integrated managed VoIP services to SMB, Enterprise and Carrier customers, announced that Broadvox will be offering SIP Trunking into the large installed base of businesses that operate TDM PBXs, leveraging the AudioCodes Mediant 1000 Media Gateway. As part of this effort, Broadvox has certified the Mediant 1000 Media Gateway as interoperable with Broadvox GO! SIP Trunking products which provide unlimited local and long distance calling with discounted toll-free and international calls. The AudioCodes Mediant 1000 is a highly scalable and modular media gateway that in this application, converts the Broadvox SIP Trunking services to a wide range of traditional TDM telephone line interfaces including T1/E1, CAS, PRI-ISDN, BRI-ISDN, analog FXS and FXO. Supporting up to 120 ports, the Mediant 1000 fits many SMB and enterprise communications needs. The Mediant 1000 also includes IP-to-IP mediation capabilities for multi-vendor SIP integrations.
Lod's AudioCodes (http://www.audiocodes.com) provides innovative, reliable and cost-effective Voice over IP (VoIP) technology, Voice Network Products and Value Added Applications to Service Providers, Enterprises, OEMs, Network Equipment Providers and System Integrators worldwide. AudioCodes provides a diverse range of flexible, comprehensive media gateway, and media processing enabling technologies based on VoIPerfect - AudioCodes' underlying, best-of-breed, core media architecture. The company is a market leader in VoIP equipment, focused on VoIP Media Gateway, Media Server, Session Border Controllers (SBC), Security Gateways and Value Added Application network products. (AudioCodes12.01)
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9.7 Mellanox Delivers Microsoft Logo Qualified InfiniBand Adapters for Windows HPC Server 2008
Mellanox Technologies announced that its line of 20 and 40Gb/s InfiniBand adapters has passed Microsoft Windows Hardware Quality Labs testing for Microsoft Windows HPC Server 2008. The verification process at Microsoft included a long-duration of commercial applications testing on large-scale clusters to ensure the highest performance, reliability and scalability. The software stack enables deployment of high-performance clustering and data centers in Windows Server-based environments. This is evidence of Mellanox's commitment to produce high quality InfiniBand products designed to maximize Windows-based cluster productivity. Yokneam's Mellanox Technologies (http://www.mellanox.com) is a leading supplier of end-to-end connectivity solutions for data center servers and storage that fully optimize data center performance. Mellanox products deliver market-leading bandwidth, performance, scalability, power conservation and cost-effectiveness while converging multiple legacy network technologies into one future-proof solution. (Mellanox 15.01)
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9.8 ZON Multimedia Places First-Time Order for ECtel's Fraud Management Solution
ECtel announced that ZON Multimedia, Portugal's largest triple-play operator, selected ECtel's fraud management solution, FraudView 8.2, to protect revenue through real-time detection and prevention of fraud losses. ECtel's solution was selected over several competing systems due to its advanced capabilities and superior performance. ECtel's FraudView 8.2 provides ZON Multimedia with a wide variety of unique, state-of-the-art fraud detection and prevention technologies, including risk management capabilities, new subscriber evaluation, best in class network traffic and usage monitoring. Zon joins other leading companies that have chosen the newest version of FraudView. ZON Multimedia is the leading Pay TV operator in Portugal, with over 1.5 million subscribers and 100% geographical Pay TV coverage in over 2.7 million homes. The company is the second largest internet provider with the fastest internet speeds in Portugal of up to 30 Mbps. Additionally, ZON is Portugal's second-largest telecommunications firm, with a 75% share of the country's cable television market. FraudView, the most comprehensive fraud management solution for telecom operators, is designed to meet the needs of wireline, wireless, convergent and next-generation communication service providers. FraudView enables real-time detection and prevention of numerous fraud types, both internal and external, allowing its users to stem revenue losses across all business lines and services.
Rosh Ha'Ayin's ECtel (http://www.ECtel.com) is a leading global provider of Integrated Revenue Management (IRM) solutions for communications service providers. A pioneering market leader for nearly 20 years, ECtel offers carrier-grade solutions that enable wireline, wireless, converged and next generation operators to fully manage their revenue and cost processes. ECtel serves prominent Tier One operators, and has more than 100 implementations in over 50 countries worldwide. (ECtel14.01)
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9.9 Aladdin Announces HASP SRM SaaS Pass
Aladdin Knowledge Systems announced general availability of Aladdin HASP SRM SaaS Pass. Utilizing Aladdin's award-winning HASP SRM solution, SaaS Pass (see diagram) allows on-demand software providers to maximize their revenue by preventing users from sharing their username and password with unauthorized individuals. SaaS Pass allows login access to software-on-demand only from specific, pre-activated machines - ensuring the highest level of secure and controlled access to the hosted application and sensitive end-user data. The SaaS Pass solution is based on a small client application installed on the end-user's PC that communicates over the internet with the service provider's Web application. The client application, which was pre-activated for the specific PC (using a HASP SRM software key), collects and passes the user name and password to the Web application for validation. To ensure the highest level of security, the user's password and a server-generated, time-stamp validation string are encrypted using the HASP SRM AES 128-bit encryption engine before they are sent to service providers' Web application. Integrating SaaS Pass requires minimum changes to the service provider's Web application, and supports any existing username database.
Tel Aviv's Aladdin Knowledge Systems (http://www.Aladdin.com) is an information security leader with offices in 15 countries, a worldwide network of channel partners, and numerous awards for innovation. Aladdin eToken is the world's #1 USB-based authentication solution, offering identity and access management tools that protect sensitive data. Aladdin SafeWord two-factor authentication technology protects companies' important information assets and applications. Aladdin HASP SRM boosts growth for software developers and publishers through strong anti-piracy protection, IP protection and secure licensing and product activation. Aladdin eSafe delivers real-time intelligent Web gateway security that helps protect data and networks, improves productivity and enables compliance. (Aladdin13.01)
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9.10 RRsat to Distribute Two Additional TV Channels Over Russia Via Gascom's Yamal-201 Satellite
Global Communications Network has been chosen to distribute two additional Russian-speaking channels, Smile of Child and Bridge TV, over Russia via Gascom's Yamal 201 Satellite at 90 degrees East. RRsat has already started to distribute the channels from its teleport in Israel via Gascom's Yamal-201 Satellite, which will broadcast these channels over all of the CIS. Smile of Child is an international, Russian-speaking channel broadcasting 24-7, targeting 4-12 year olds, which is currently viewed in 160 countries, and is retransmitted by over 450 cable networks in Russia alone. Bridge TV is a Russian satellite music channel presenting a modern and positive view on life and music. The channel targets young and active individuals. These two channels join three additional Russian-speaking channels, CNL Siberia, CNL Europe and TBN, which are already distributed by RRsat via the Yamal-201 Satellite. Omer's RRsat Global Communications Network (http://www.RRsat.com) provides global, comprehensive, content management and distribution services to the rapidly expanding television and radio broadcasting industries. Through its proprietary "RRsat Global Network," composed of satellite and terrestrial fiber optic transmission capacity and the public internet, RRsat is able to offer high-quality and flexible global distribution services for content providers. (RRsat 15.01 )
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's December CPI falls, But Much Less Than Expected
The Central Bureau of Statistics announced on 15 January that Israel's Consumer Price Index (CPI) fell by 0.1% during December, in contrast to expectations of most economists of a drop of around 0.5%. For 2008 as a whole, inflation reached 3.8%, above the target range of 1-3%. The items that showed the most significant price drops in December were energy, with a fall of 5%, and tomatoes, which fell 41%. Other areas with sharp falls included fresh fruits, overseas travel, meat and poultry, cosmetics, furniture, medicines, and glasses. Telephone bills and car prices jumped, and there were also rises in the housing section, and a 12% jump in clothing. December is the second month in a row in which the CPI fell, as November showed a drop of 0.6%. (CBS15.01)
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10.2 Israel's Trade Deficit Rises $3.5b
On 13 January, Israel's Central Bureau of Statistics (CBS) announced that while Israeli exports and imports both had a record year, the trade deficit increased by $3.5b. Export of goods in 2008 rose by 10.6% compared with 2007 to $50.8b. Import of goods in 2008 rose by 15.0%, compared with 2007, to $64.5b. The trade deficit in 2008 totaled $13.7b compared with $10.2b in 2007. A drop of 1.2% was recorded in the trade deficit, excluding ships, aircraft, diamonds and fuels. In 2008, exports as percentage of imports constituted 74.1%, a drop of 3.9% compared with the previous year. The CBS also notes that despite the new record-high exports, trend data of manufacturing export pointed to a drop of 20.3% at an annual rate, during the last three months of 2008.
In 2008, manufacturing exports (excluding diamonds) totaled $39.9b, a rise of 17.2%. Agricultural exports dropped by 5.4%, and totaled $1.3b. Diamond exports (polished and rough) totaled $9.6b, down from $10.5b in 2007. A breakdown of manufacturing export data, by technological intensity, compared with 2007, points to a rise in all groups: high tech industries (8.8%), medium-high technology industries (27.7%), medium-low technology industries (26.1%) and low technology industries (1.8%). A breakdown of data on import of goods, by use, points to a rise in most groups: a rise of 12.6% in import of raw materials (excluding diamonds and fuels); a rise of 20.6% in import of machinery, equipment and vehicles for investment; and a rise of 18.1% in import of consumer goods. The 2008 trade figures, compared with 2007, were influenced mainly by the rise in prices, which continued throughout 2008, as well as by changes in the value of the dollar against other currencies in which import and export transactions are conducted. (CBS13.01)
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10.3 Israel's Car Imports Fall Sharply In Second Half Of 2008
According to figures published by the economics division of the Tax Authority there were 189,289 passenger cars imported in 2007, only 2% more than the 185,171 cars imported in 2007. This contrasts with a 30% increase in car imports in 2007 compared with the previous year. 2008 was a tale of two halves of the year. In the first half of the year, car imports rose by 23% compared with the corresponding period of 2007. However, in the second half of the year car imports were down by 20% compared with the corresponding period in 2007. (Globes 13.01)
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11: In Depth
11.1 ISRAEL: Moody's A1 Credit Rating Not Threatened By Credit Crisis & Gaza Conflict
On 7 January, Moody's Ratings Agency (http://www.moodys.com) issued a report stating that Israel's present political and financial shocks do not pose an immediate threat to the country's risk profile, including its A1 rating and stable outlook.
"Our main concern for the credit rating is fiscal, given the unknowns over the cost of the military conflict with Hamas in Gaza - Israel is the only A-rated issuer with an active state of war on its territory - and the ability of the government's fiscal intervention program to deal with the credit crunch and difficult conditions in Israel's capital markets," said Joan Feldbaum-Vidra, Moody's analyst for Israel and author of the report.
She said Israel's continued rating stability is delicately poised, driven by the expectation that the fiscal impact of these shocks will be relatively short in duration, paid for by savings in other areas, and, most importantly, that liquidity will remain fully available. The government's ample access to credit is a crucial underpinning for the country's high ratings given its susceptibility to shocks. "The large government debt along with the difficult security situation has capped Israel's government bond ratings at A1," said Feldbaum-Vidra.
To the extent that the interruption in the favorable debt trends caused by the near-term slowdown in growth, higher defense costs and the price tag for capital market interventions will be short-lived and not exaggerated in size, the rating can maintain its stable outlook, said the analyst. Moody's said Israel's rating was upgraded to its present level in April 2008 based partly on the assessment that the structural decline in the government's debt burden would continue.
"Moody's central scenario is for Israel's government debt-to-GDP ratio to temporarily reverse direction, moving back upward from the current 80 per cent level, before returning to a virtuous cycle subsequently," said Feldbaum-Vidra. "Even in this period of severe global uncertainty, this is consistent with Moody's practice of maintaining its ratings through temporary dislocations."
However, she said, any change in Moody's assessment of Israel's shock-absorption capacity would drive a rating adjustment. She further explained, "The fact that Israel has weathered severe shocks in the past increases our level of comfort in its high rating, although we do remain concerned about the 'untested waters' now being confronted."
"Should any development - external or local - bring that assumption into question enough to impair Israel's debt repayments capacity in a meaningful and durable way, its A1 rating would be likely to come under downward pressure," said Feldbaum-Vidra. (Moodys07.01)
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11.2 ISRAEL: Merrill Lynch Sees No growth in Israel's Economy in 2009
On 11 January, Merrill Lynch released a report finding that Israel's economy is facing one of its most challenging times since 2001-2002. The investment house does not expect the security situation to substantially impact Israel's economy, saying that similar situations, as well as elections, have not previously had major influences on the local market. However, the global financial crisis and slowdown are expected to weigh on the economy.
Merrill says that the US and Europe account for 73% of Israel's exports, so the global crisis has a significant impact. However, Merrill finds that the Bank of Israel has been one of the world's "most proactive", which should limit some of the downside. According to Merrill, the stress on Israel's economy will bring the Bank of Israel's interest rate to 1% by the end of the first quarter of 2009.
Merrill analyst Turker Hamzaoglu cut the bank's growth forecast for Israel's economy to 0%, from 1%. It expects a slight upturn in the second half of 2009, after a contraction in the first half of the year. Hamzaoglu also expects only a modest recovery of 1.5% GDP growth in 2010.
With Israel's trade partners expected to sink deeper into recession, and its exports falling more than its imports, Merrill forecasts Israel's current account surplus to erode completely in 2008 and to slip into a deficit of 1% of GDP in 2009. While "Israel has consistently delivered smaller than targeted budget deficits over the past five years", writes the analyst, "This is likely to change. As growth has slowed and spending needs have increased, the fiscal deficit is likely to rise to 4.2% of GDP in 2009."
The bank also expects 2009 inflation to reach 1.2%, with the Consumer Price Index (CPI) reaching negative territory by the third quarter of 2009. Merrill sees the global recession hitting Israel in reduced foreign trade, tighter credit for Israeli companies, and the effect of investment flows on shekel rates.
Merrill notes that external demand is the main channel through which the global recession will impact Israel. Hamzaoglu says, "The fact that 75% of Israel's manufacturing exports are the products of high-tech sectors still represents a silver lining. However, the global recession and credit crunch not only calls for a contraction in the impaired balance sheets of Anglo-Saxon households but also the same for corporates. Considering that Israel was growing above potential, building up inflationary pressures in the first three quarters of 2008, a sharp downturn in external demand will drag down both GDP growth and inflation."
While strong financial markets in Israel helped the economy to get past the onset of the global slowdown, as credit dried up in September and October, "Israeli companies were cut out of the capital markets and redemptions accelerated with plummeting corporate bond prices." Merrill finds that the net effect of less credit being available in 2009 should drag down both growth and inflation.
Referring to unemployment, Merrill says, "Having come down to an estimated 6.2% in 2008 from 7% in 2007 its lowest level in well over a decade unemployment is expected to jump back to 6.8% in 2009 and 7.1% in 2010. Company surveys already point to deep cuts in employee numbers in the fourth quarter of 2008, which is likely to put further pressure on wages. Official data suggests wages were down 2% and 5% in nominal and real terms, respectively, in the third quarter of 2008 compared with the second quarter of 2008. This should put a cap on private consumption in 2009 despite the aggressive monetary stimulus given by the Bank of Israel." (ML11.01)
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11.3 ISRAEL: 2008 Summary of Israeli High-Tech Company Capital Raising
The following are the findings of the Quarterly Survey conducted by the IVC Research Center, which for more than 10 years has been at the forefront of venture capital and private equity research in Israel. This Survey reviews capital raised by private Israeli high-tech companies from Israeli venture capital funds and from other investors. The Survey is based on reports from 82 venture investors of which 48 are Israeli management companies and 34 are other – mostly foreign – investment entities.
In 2008, 483 Israeli high-tech companies raised $2.08 billion from local and foreign venture investors, 18% above the $1.76 billion raised in 2007 and 28% above 2006 levels.
"While 2008 was an exceptional year for capital raising” said Zeev Holtzman, Chairman of IVC Research Center and Giza Venture Capital, “the global recession cannot be ignored. In the upcoming year investments in Israeli high-tech companies will undoubtedly be lower." Holtzman nevertheless remains optimistic regarding Israeli high technology as a whole: "2009 will be a tough year for all companies, maintains Holtzman, “yet Israeli high-tech industry will continue to be a highly abundant source of technology innovation.”
In the fourth quarter, 109 Israeli high-tech companies raised $394 million - 22% below the $503 million raised in the fourth quarter of 2007, and 34% below the $600 million raised in the previous quarter – the highest third quarter reported in the last eight years.
The average financing round was $3.61 million, compared to $4.37 million in the fourth quarter of 2007 and $4.83 million in the previous quarter.
Seventy-six companies attracted more than $1 million each. Of these, 18 companies raised $5 million to $10 million each, nine companies raised $10 million to $20 million, and one company raised over $20 million.
Israeli VC Investment Activity
In 2008, Israeli VCs invested $780 million in Israeli high-tech companies, 38% of the total amount invested in Israeli high-tech companies. This compared to $678 million or 39% in 2007 and $651 million or 40% in 2006.
In the fourth quarter, Israeli VCs invested $151 million, which accounted for a 38% share of the total invested in Israeli high-tech companies. The remainder came from foreign investors as well as non-VC Israeli investors.
According to Efrat Zakai, Director of Research at IVC, “As predicted, 2008 was a record year in terms of capital raising, in large part due to numerous companies that sought sufficient funding to sustain themselves in the approaching recession. Israeli VC funds, working to support their portfolio companies, focused on follow-on rounds with less capital directed to first-time investments."
In 2008, First investments made by Israeli VCs were 31% of the total amount invested by Israeli VCs, compared to 43% in 2007. The average First and Follow-on investments in 2008 were $2.6 million and $1.15 million, respectively.
Israeli VC Activity in Foreign Companies
Israeli VCs invested $57 million in companies outside Israel during 2008 (in addition to their investments in Israeli high-tech companies), compared to $50 million in 2007 and $60 million in 2006. Eleven of the 33 investments were First investments and the remainder were Follow-ons.
Capital Raised by Sector
In 2008, the Communications sector led capital raising with $516 million or 25% of total capital raised, followed by Software with $407 million or 20% and the Semiconductors sector with $323 million or 16% of total capital raised. Internet firms continued to attract investor attention with 14% of capital raised in 2008 and 15% in 2007. In the last two years, Internet investment has soared from the minute levels of the preceding few years.
Capital Raised by Stage
In 2008, 70 Seed companies attracted $104 million or 5% of capital raised. The Seed company share of capital raised was well below the 8% average of the previous four years.
IVC Research Center (http://www.ivc-online.com) is Israel's leading research center providing business leaders with an unmatched wealth of data on Israeli venture capital, private equity and high-tech industries. IVC products and services are used regularly by venture capital funds, private investors, high-tech companies, financial investors and institutions, as well as public entities such as the Office of the Prime Minister, the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist. (IVA19.01)
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11.4 LEBANON: 2008 Year in Review
By most measures, surmises the Oxford Business Group, Lebanon had a good year in 2008, enjoying a return to political stability, avoiding the worst of the global economic crisis and witnessing strong growth in a number of key sectors. While Lebanon still felt the effects of the international financial crisis and the ensuing slowdown of the world's economy, much of the impact of these events was mitigated by a mixture of sound fiscal policies implanted by the country's central bank as well as Lebanon's long experience at weathering storms.
The country's most important event of 2008 was the signing in mid May of the Doha Accord, a deal brokered by Qatar and the Arab League to allow former chief of staff General Michel Suleiman to be elected president, as well as clear the way for a multiparty government and the reconvening of the national parliament. Lebanon had been left without a head of state since November 2007, when Emile Lahoud stood down at the end of his extended term. Though there were 19 attempts to recall parliament to vote on electing a new president, these were all blocked by the opposition.
Under the agreement struck in Doha, parties aligned with Prime Minister Fouad Siniora gained 16 of the 30 ministerial positions in the new national unity government, with 13 going to the Hezbollah bloc and its Christian allies and a further three appointed by the president. President Suleiman used his inauguration speech to stress the need for national reconciliation and for all parties to work together in rebuilding the country and the economy. "Emerging from economic stagnation and activating the economy requires political and security stability," he told the parliament on May 26.
By and large, the government has heeded the president's call, though deep divisions of ideology and policy have slowed some pressing reforms. In particular, consensus could not be reached on the oft delayed plan to privatize two cellular phone licenses, a measure the government hopes will earn around $6bn, which it intends to use in paying off some of the state debt.
At the beginning of the new year, Finance Minister Mohamad Chatah said that debt stood at $45.65bn as of the end of September, and was expected to rise to $47bn following the calculation of year-end figures - roughly 170% of gross domestic product (GDP).
One of the greatest drains on the budget was caused by state utility Electricite du Liban (EDL), with subsidies to the electricity monopoly costing the state $1.2bn in the first 10 months of the year, accounting for more than 15% of budgetary expenditures and 20% of revenue, according to the Finance Ministry. Like the sale of the two mobile phone licenses, it is expected that any major overhaul of EDL will be left until after the June general election.
The signing of the Doha Accord also sparked a surge in industrial investments, with just under $154m spent on machinery and equipment imports up until the end of October, an increase of 11.4% on the same 10 month period in 2007, according to statistics released by the Ministry of Industry at the beginning of the new year.
The standout for the Lebanese economy in 2008 was the banking sector, which was barely touched by the trouble in the international financial markets. On November 26, Central Bank Governor Riad Salameh said the combined assets of the country's banks stood at more than $100bn, almost four times GDP.
Of equal importance was the fact that none of Lebanon's banks had been exposed to the fall out from the US mortgage meltdown, due to central bank regulations banning local lenders from buying up sub-prime debts packages, setting tight ceilings on loan levels for real estate projects and requiring banks to have at least 30% of their assets in cash.
Tourism had a good year, with overseas arrivals topping 1.10m for the January to October period, the industry's best result since 2004 and a 29% increase compared to the same period of 2007, according to Tourism Ministry figures released at the beginning of December.
While the Lebanese economy remained in positive territory in 2008, and is expected to continue to do so in the new year, the global crisis is likely to make more of an impact in the coming 12 months. On January 5, the finance minister announced that the projected growth rate for 2009 had been lowered from 5% to 3-3.5%, which he told a press conference was in part a reflection of the cooling of the economies in the Gulf states. Though the revised rate is still very much in the positive, it is still just half of the 6% expansion rate that was initially expected.
In the first half of 2008, high oil charges and commodity prices pushed up inflation, which topped 14% in July before starting a steady retreat. By the end of November, the official inflation rate had fallen back to 8%, according to figures released by the central bank in late December, and is expected to fall further in 2009.
A reflection of the increasing stability in the Lebanese economy was the decision by Moody's investor service agency to upgrade its outlook for the country's ratings from negative to stable in late March - a move it said was based on the resilience of Lebanon's public finances in the face of numerous political shocks. This resilience paid further dividends in mid December, when the agency revised its outlook on Lebanon's sovereign ratings to positive from stable, citing the "improvement in Lebanon's political and economic environments since the signature of the Doha Agreement in May".
Looking towards 2009, there could be squalls on the horizon for the Lebanese economy, with remittances from expatriate workers, estimated to be worth $5.5bn annually, expected to drop if the Gulf states fall prey to the global downturn. The lead-up to the mid-year election is also expected to ramp up political tensions. However, having shown remarkable resilience for so long, Lebanon is likely to take these hurdles in its stride. (OBG09.01)
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11.5 JORDAN's $502 Million Pharmaceuticals and Healthcare Industry for Q4/2008
Research and Markets (http://www.researchandmarkets.com) has announced the addition of the "Jordan Pharmaceuticals and Healthcare Report Q4 2008" report to their offering.
In the Business Environment Ratings Table for Q4/08, Jordan is placed in seventh position out of the 15 markets surveyed in the Middle East and Africa (MEA) region. Jordan's position fell by one spot in relation to Q3/08, with Saudi Arabia improving its score and rising up the table. Nevertheless, Jordan has considerable commercial potential in regional terms, which is boosted by friendly relations with the West and growing Arab regional cooperation and high drug prices. While the overall market is small in global terms (less than $340m in 2007), expenditure on pharmaceuticals should grow at an average of 8.2% year-on-year (y-o-y) over the forecast period (2008 - 2012), topping $502m.
Jordanian pharmaceutical producers have been suffering from rising manufacturing costs, strong competition in the unbranded generics sector and the absence of price increases for drugs. A number of them recently posted - at best - mixed financial results. The leading producer, Hikma, reported that its Q1/08 group revenue increased by an impressive 33.4% to $299.9m, while operating profit declined a disappointing 9% to $47.1m. Similarly, Dar Al Dawa (DAD)'s recorded sales of $11.8m in Q1/08, which was a 2.7% decrease on the same period last year. Meanwhile, the net profit margin was 18.4%, compared to 28.6% in Q1/07, which was partly blamed on a rise in the amount of recalls - specifically expired goods held by wholesalers. In July 2008, Jordanian Pharmaceutical Manufacturing (JPM) also announced disappointing net profits of $2.3m for 2007, down 22.6% on its 2006 results. The fall in profitability appears all the more concerning when contrasted against its sales performance, which improved by 30.4% y-o-y to reach $29.8m.
Other healthcare sectors are also expected to record similar growth rates. For example, the value of Jordan's medical device market - estimated at $75m in 2007 - is forecast to average 7.6% y-o-y, broadly in line with health expenditure trends. Growth should be driven by a strengthening private healthcare sector, which is itself being buoyed by medical tourism. As Jordan's medical device market is almost entirely dependent on imports, foreign producers stand to benefit, as especially as the country is seen as a gateway to the East Mediterranean region. At the same time, however, domestic players will continue to struggle, with Arab Food & Medical Appliances filing for bankruptcy in January 2008.
The government set the target of carving out a share of the global medical tourism market, which reached a value $20bn in 2005. By 2010, the government hopes that the combined value of medical tourism from the public and private sectors will be worth $1bn a year to the Jordanian economy. This target should drive significant upgrading of equipment and supplies. In April 2008, construction of the Baqaa Basin Hospital, a 100-bed government health facility, began. The development should be completed by the end of 2009, with the government pledging more than $7m of medical devices and equipment for the hospital. (R&M08.01)
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11.6 BAHRAIN Leads MENA Region on Economic Freedom
Bahrain has been ranked as the 16th freest economy in the world and most free in the Middle East and North Africa region in the annual Index of Economic Freedom, published by the Heritage Foundation and The Wall Street Journal. Bahrain was the only Middle Eastern country to be ranked amongst the top 20 freest economies in the world and has been ranked No.1 in the GCC for 15 years, since the launch of the Index in 1995.
Bahrain's ranking of 16th was an improvement on its 2008 ranking of 19th. With an average total score of 74.8%, Bahrain's position in the top 20 puts it alongside Switzerland (9th), United Kingdom (10th) and Japan (19th) and ahead of Germany (25th), Spain (29th) and France (64th). The Index of Economic Freedom 2009 ranked 179 countries across 10 areas of economic freedom -- business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom. An overall average was then calculated from these scores.
Bahrain again scored highly in the business freedom, trade freedom and fiscal freedom categories and made a significant improvement in the area of labor freedom, improving its score from 40 in 2008 to 85.1 in 2009. Bahrain scored well above the global average in a total of 9 out of 10 of the areas measured and equal to the average in the tenth.
Annual analysis that accompanies the publication of the Index confirms the tangible benefits of living in freer societies. Higher levels of economic freedom are associated with a higher level of per capita gross domestic product (GDP) and GDP growth rates also increase as a country's economic freedom score improves.
Sheikh Mohammed Bin Essa Al-Khalifa, Chief Executive of the Bahrain Economic Development Board (EDB), said: "Bahrain's ranking is further endorsement of our strong pro-business environment from highly regarded institutions such as the Heritage Foundation and The Wall Street Journal. "Economic freedom is more important than ever for businesses during these difficult times. For Bahrain it supports growth and contributes to long term stability. The results of this year's Index further demonstrate Bahrain's status as a location from which international companies can access markets across the Gulf. This position is reinforced by Bahrain's strong business track record and experience, fair and effective regulation, well developed infrastructure, our educated, skilled work force and open, hospitable and tolerant environment."
The Index of Economic Freedom 2009 is the 15th released by the Heritage Foundation and Wall Street Journal. The Index tracks the march of economic freedom around the world. Since 1995, the Index has measured economic freedom by looking at 10 benchmarks that gauge the economic success of countries around the world. Each one of the 10 freedoms is graded using a scale from 0 to 100, where 100 represents the maximum freedom. A score of 100 signifies an economic environment or set of policies that is most conducive to economic freedom. The 10 freedoms measured are: business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom. (EDB13.01)
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11.7 OMAN: Protectionism at Bay
Amidst the growing fears of declining trade and global protectionism, Oman kicked off 2009 on a positive note, with the implementation of a free trade agreement (FTA) with the US on January 1.
The enforcement of the Oman -US FTA, which was signed in January 2006, strips away most of the remaining trade barriers between the two countries. Under the deal, Oman will provide immediate duty-free access to American goods, barring certain vegetables and other select agricultural products like tobacco, which will be gradually brought to duty-free status over a 10 year period. In return, the US will eliminate tariffs on virtually all imported consumer and industrial products from Oman, with a few designated categories subject to a more gradual decrease.
The agreement, which comes on the back of a Gulf Cooperation Council FTA with Singapore, represents a significant boost for Omani exporters, who will be allowed to access the $14trn US economy with few impediments. Exports to the US represent a growing chunk of Oman's trade volumes, which totaled 3% and 4% of total exports in 2005 and 2006 respectively.
The agreement makes the Sultanate one of only four Arab countries (the others being Bahrain, Jordan and Morocco) to have concluded an FTA with the US. Given the stringent legal requirements for US bilateral trade agreements, the implementation of the FTA underscores the robust nature of Oman's labor, environmental and intellectual property laws. As a result, the FTA looks set to provide secondary and tertiary benefits to the Omani economy, in the form of job creation, increased investment and increased liberalization.
While the level of consumption in America has dropped significantly following the credit crisis - with the US trade deficit growing to nearly 29% in November 2008 - it is only a matter of time until it rebounds, bringing with it demand for exports of all kinds, including Omani products. The relative strength of the greenback at the start of 2009 is a sign that importing goods will become less financially painful.
Another FTA between the GCC and Singapore, was inked in December 2008. The so-called GSFTA is the first trade agreement signed by the GCC with an Asian trading partner, reflecting the strong ties between the GCC and Singapore, not only through trade, but also in the fields of technology exchange and banking. The agreement is expected to provide a boost to the two-way flow of investment, trade, and business opportunities.
Given the growth of capital and trade flows in recent years, the GSFTA is a logical step. Between 2002 and 2007 GCC-Singapore trade grew by 127%. However, prior to the agreement, only 10% of Singaporean goods had duty-free access to the GCC. Now, virtually all (99%) consumer and industrial goods will flow into the region without tariffs. In return, all goods of GCC-origin will enter Singapore untaxed.
With the GSFTA now in place, it is likely that additional trade agreements between Asian nations and the GCC will be signed in the near future. Currently, negotiations are already underway on an FTA between the GCC and India.
Amidst the GCC push for increased trade liberalization, Oman is emerging as a leader. The country already boasts extensive trade ties with India, for example. In 2005 the value of direct trade between the two countries totaled $480m, building on demand from the large in-country Indian community. By 2007 this number, bolstered by the 2006 start of the Omani-Indian Fertilizer Company, reached $1.8bn and is expected to breach the $2bn mark in 2008.
Prime Minister of India, Manmohan Singh told OBG, "Against the background of [the global downturn], I suggest there is an even greater need for us to join hands to shape the counter-cyclical growth strategies by focusing on the real economy. India and Oman are well placed to convert this challenge into an opportunity."
The GCC is looking westwards as well. As of mid-January, an FTA between the GCC and the EU looks to be drawing to a conclusion following over 10 years of negotiations. Should the agreement be signed, Oman and the GCC will be able to leverage their energy exports to help correct a trade imbalance that currently stands in the EU's favor. Even as trade volumes slow and calls for protectionism increase, Oman and the GCC are laying the groundwork for future growth with this spate of FTAs. With the Doha round of negotiations in stasis, the Gulf states are setting an encouraging example as they pursue a growing number of bilateral and regional agreements and keep the specter of protectionism at bay. (OBG20.01)
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11.8 SAUDI ARABIA: Healthcare Market Forecast To 2012
Research & Markets (http://www.researchandmarkets.com) has announced the addition of the "Saudi Arabian Healthcare Market Forecast to 2012" report to their offering.
According to a new report, "Saudi Arabian Healthcare Market Forecast to 2012", the Saudi Arabian healthcare market is witnessing rapid growth and will continue to expand exponentially in future. The country's rapidly increasing population, due to which demand is outpacing supply, can be regarded as the main push for the market. As the incidences of a number of lifestyle diseases, such as obesity, diabetes and hypertension, in the country amongst the highest in the world, these will significantly boost the healthcare spending in future.
Government plays a central role in providing healthcare services in the kingdom, accounting for around 75% of the total healthcare spending in the country. The government accounted for 67% of the total hospitals and 77% of the total hospital beds in the country in 2006. The government expenditure on healthcare, however, is increasing faster than its total income; as a result, government may resort to cost cutting measures in future.
The report says that due to increasing pressure on the public healthcare system, the government is rapidly promoting the involvement of private healthcare in the country. So big investment will be seen from the private sector in the forecasted period, and according to our estimates, the private sector will account for 62% for all new beds installed during 2006-2012.
However, slump in crude oil prices due to economic recession can hit the nation's economy. But the fast diversification of the country's economy into other sectors will provide it a buffer against the severe impact of economic turmoil. Despite some challenges such as shortage of skilled workers, dependency on oil and bureaucratic issues, the market's future will remain bright with all three sectors - hospital services, pharmaceuticals and medicals devices - expected to show sustained growth.
"Saudi Arabian Healthcare Market Forecast to 2012" gives an extensive and objective analysis on the Saudi Arabian healthcare market. It has segmented the healthcare industry into hospital services, pharmaceuticals and medical devices. It provides analytical and statistical information on these segments, including their market size, demand, supply, segmentation and key players. It also features an analysis on the future directions, supplemented with facts and figures. Thus, the report serves as a useful guide for healthcare companies, government officials, consultants and investors who are planning to enter the Saudi Arab healthcare market. (R&M12.01)
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11.9 EGYPT: 2008 Year in Review
The Oxford Business Group reported that 2008 was a year of healthy growth for the Egyptian economy but the country has not escaped the slowdown resulting from the global financial crisis. Bread shortages in the first half of the year led to social unrest, prompting the government to take immediate and concerted action to stave off a potential crisis. While the country managed to avoid further strife thanks to the government's emergency measures, 2008 has served as a timely reminder of the difficult challenges accompanying Egypt's economic growth.
While inflation has taken its toll on the country, reaching a 16-year high of 22% in July 2008, Egypt's economy continued to expand at a steadily clip, albeit with slightly moderated expectations for the coming months. Gross Domestic Product (GDP) grew by 7.2% in the fiscal year ending June 30, although Finance Minister Youssef Boutros-Ghali announced in October that the country's growth would likely slow slightly to 6% in the current fiscal year, after three consecutive years of more than 7% growth.
The strong figures for the first half of the year underline the continued success of Egypt's move towards economic liberalization, initiated by the 2004 reformist cabinet and led by the prime minister, Ahmed Nazif. The 2007/08 fiscal year GDP growth was spurred in large part by dramatic income increases from some of the country's biggest economic earners, including the tourism sector and the Suez Canal. Tourism, which accounts both directly and indirectly for 11.3% of GDP, saw a 32% increase in revenues, bringing $10.8bn into the economy. Likewise, revenues from the Suez Canal rose by 23.6% to a record $5.2bn, local media reported.
Other sectors of the economy have seen significant growth as well over the past year, particularly the construction and telecommunications sectors, which have expanded by 14.8% and 14.2%, respectively.
Additionally, the steady inflow of Foreign Direct Investment (FDI) into the Egyptian economy has stimulated spending in a number of sectors. The Central Bank of Egypt stated that FDI jumped from $11.1bn in the 2006/2007 financial year, to $13.2bn in 2007/08. Around half of this went into greenfield investments, a third of which was directed towards the energy sector, according to local media. Real estate has also seen a surge in growth and received $400m in foreign investment this year. The industry and manufacturing sector has been particularly successful in attracting new foreign operators, who have been lured by Egypt's geographical location, large labor pool and competitive input costs.
At a time when traditional investment from countries like the US and Europe is facing a slowdown, Egypt is reaping the benefits of a significant wave of investment from its Gulf neighbors as they are looking to diversify their assets. In the 12-month period ending in June 2007, the six Gulf Cooperation Council (GCC) member states poured a total of $2.5bn into Egypt for new ventures and market expansion. The United Arab Emirates (UAE), for example, has a strong presence in the country's telecoms sector, following the $2.9b purchase by Etisalat in 2007 of a mobile operator license, while Kuwait-based bank NBK bought a 99.77% stake in Al Watany Bank of Egypt.
Mahmoud Mohieldin, Egypt's minister of investment, revealed this week that the UAE was the third biggest foreign investor in his country, with investments worth $2.9bn at the end of 2008. More recently, Dubai Group has acquired a 49% stake in an Egyptian glass manufacturer in partnership with Cairo-based private equity firm Citadel Capital while the Kuwait Fund for Arab Economic Development (KFAED) has announced it would be significantly increasing its investments in Egypt, with a loan of $105m to the state-owned West Delta Electricity Production Company to expand a power plant in Abu Qeir, about 40km east of Alexandria.
Egypt is also attracting new comers, such as China, India and Turkey, which are currently expanding their presence on the Egyptian FDI map. Additionally, the Libyan government announced its intention to take its investment in the Egyptian economy up to $10bn within the next two years. According to the Egyptian Ministry of Investment, Libya is already among the top 10 investors in Egypt.
Benefiting from the influx of foreign corporations, Egypt's outsourcing sector has also boosted its international profile. The country was awarded the prize for best outsourcing destination of 2008 by the British National Outsourcing Association (NOA), as a result of its young, multilingual workforce, low operating costs and developed infrastructure. However, despite the record numbers of FDI inflows and steady expansion, signs hint at slower growth to come. Beltone Financial, a regional investment bank, issued a report on September 10 that revised its growth expectations from 7.5% to 6.6% for the financial year of 2008/2009, and from 7.8% to 5.8% for 2009/2010.
While Egypt's direct exposure to the financial crisis has been more or less limited, the European economic downturn does pose a more significant threat to the Egyptian economy. Cyrus Sassanpour, representative for the International Monetary Fund in Egypt, told OBG that he believes a slowdown in the European economy could impact Egypt in two related ways. First, it could potentially reduce imports of Egyptian products, as European consumers look elsewhere for cheaper goods. Secondly, the Egyptian pound could strengthen versus the euro. This would not only make Egyptian exports more expensive, but could affect areas such as tourism, by making Egypt more expensive for European holidaymakers. As prices go up, European travelers might be spurred to pursue other, cheaper Mediterranean locations.
The slowdown in the country's primary trading bloc has also spurred Egypt to diversify its export partners, thereby reducing its dependence on traditional export destinations. Over the past few months, members of the Egyptian government have met with officials from Brazil, Malaysia and India to examine the possibility of boosting trade and investment ties. As part of the drive to boost regional cooperation, a new pipeline was inaugurated in July to supply Egyptian gas to Jordan, Lebanon and Syria. Egypt and Libya are also looking to enhance their economic ties and taking advantage of their geographical proximity, with the announcement of two major cross-border investment projects in the energy sector. According to the Central Bank of Egypt, trade between the two countries grew 39% last year to $267m. Egyptian exports to Libya reached $141m in the financial year 2006/2007, while Libyan exports to Egypt jumped 75%, reaching $126m.
Certainly, while the global slowdown will likely hamper Egypt's trading prospects in the short-term, the country's low costs and competitive workforce will continue to underpin steady growth through 2009. Similarly, the downturn will eventually lessen pressure on the consumer price index, slowing inflation and allowing for more stable price increases. Egypt's long-term economic development looks set to benefit from the global upheaval as well, provided it continues to reduce its dependency on the European and US markets and diversify its trade links with other emerging markets. (OBG09.01)
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11.10 EGYPT: IMF Executive Board Concludes 2008 Article IV Consultation with the Arab Republic of Egypt
On December 22, 2008, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Arab Republic of Egypt.1
Background
Economic performance since 2004 generally has been impressive, underpinned by a supportive external environment and the structural reform program that has included the liberalization of foreign trade, investment, and the exchange market, the privatization of state entities, and measures to strengthen bank balance sheets and banking supervision. Annual GDP growth in the post-reform period was more than double the average of the previous decade, driven by large-scale foreign and domestic investment.
With the onset of the global crisis the policy challenges facing the authorities have changed radically. For most of the period since the last Article IV consultation, the most pressing issue has been to contain inflation when monetary and fiscal policies were constrained by limited exchange rate flexibility, large-scale capital inflows and the growing cost of fuel and food subsides. By the time of the October-November 2008 consultation mission, inflation appeared to be past its peak and the more urgent challenge was to maintain growth and balance of payments stability in the context of the global financial turmoil and a rapidly deteriorating international economic outlook.
Real GDP growth averaged 7% in 2005/06-2007/08 and was relatively broad based across manufacturing, hydrocarbons, construction, services, tourism and agriculture. The main drivers of demand have been private consumption and investment, aided by strong foreign direct investment. Though reports of skilled labor shortages have been widespread, official unemployment has remained stubbornly high at 8%. Inflation reached a peak of 24% in August, reflecting a combination of world commodity price developments, changes in administered prices, and pressures from buoyant domestic demand; with the subsequent decline in commodity prices, inflation fell to 20% in October.
Net international reserves were $35 billion in September 2008, but reserve accumulation has slowed sharply since mid-year. Though exports, remittances, and receipts from tourism and the Suez Canal remained strong, a surge in imports because of buoyant domestic demand and trade liberalization all but eliminated the current account surplus by mid-2008; and in August-October there was an abrupt reversal of portfolio flows as foreigners investors pulled out of the equity and government bond markets. The central bank responded to the portfolio outflows by running down its foreign currency deposits with commercial banks.
In the year through mid-November, the stock market fell by about 50% and spreads on Egyptian bonds widened by about 175 basis, though these falls were less than the average for emerging market economies. In September, Moody's and Fitch downgraded their investor outlook for Egypt.
The limited flexibility of the pound against a weak U.S. dollar and the partial sterilization of capital inflows raised non-U.S. dollar import prices and created the monetary conditions that ignited second-round inflation effects. The nominal effective exchange rate appreciated by over 6% between January and September 2008, and accelerating inflation appreciated the real effective exchange rate by 21%.
The central bank increased policy interest rates by 275 bps (to 11½ and 13%) in the first eight months of the year, but market interest rates responded slowly until the abrupt reversal of capital inflows in August-October drained some bank liquidity. The growth of broad money supply, which accelerated sharply under pressure from capital inflows slowed from 24% in March to 14% in September.
The central government deficit narrowed to 6.8% of GDP in 2007/08, notwithstanding pressures from sharply increased subsidies, but the deficit at the level of the general government widened to 7.8% GDP, mainly reflecting increased financial investments by the social insurance fund. The 2008/09 budget left the central government deficit broadly unchanged and included significant increases in pensions, wages and food subsidies to mitigate adverse social effects of high inflation, to be met by a wider income tax base and increases in administered prices of fuels and other products.
The banking system has largely withstood the global financial crisis. Information through end-September shows net foreign assets positions of banks and the deposit base have been stable, and the flow of credit to the private sector has continued to grow at the 13-14% annual rate of the previous three years. Nevertheless, to encourage continued confidence in the banking system, the central bank reiterated its existing guarantee of all bank deposits.
Progress with structural reform has been mixed: (i) administered prices of fuels and other items were increased sharply, but fuel subsidies continued to grow under pressure from rising international prices; (ii) a property tax reform was approved by the parliament and will be effective in January 2009, but the introduction of the VAT has been delayed until at least late 2008/09; and (iii) the clean up of nonperforming loans of public enterprises continued, but the privatization program suffered a setback in July when bids for state-owned Banque du Caire, the third largest bank, were below the minimum targeted by the government and the auction was cancelled.
Executive Board Assessment
Directors commended the Egyptian authorities for their sound macroeconomic management and economic reforms to date. Directors considered that the policy challenges facing the authorities have changed significantly since the onset of the global financial turmoil and the rapid deterioration in the international economic outlook. While the Egyptian economy has withstood the global slowdown relatively well, net exports and foreign direct investment are likely to weaken as external conditions decline further in the months ahead. Under these circumstances, and with inflation past its peak, the priority will be to maintain growth and balance of payments stability. Directors were therefore pleased that Egypt's recent economic reforms have provided the authorities some room for maneuver to cautiously undertake countercyclical policies in the event of an economic slowdown.
Directors supported the authorities' fiscal policy aimed at striking a balance between bolstering short-term activity and ensuring medium-term fiscal sustainability. The size and composition of the proposed fiscal stimulus in 2008/09 to support growth and employment are broadly appropriate. Directors also noted that the envisaged acceleration of public infrastructure spending to address existing bottlenecks will result in only a modest deviation from the planned medium-term consolidation path.
Directors noted that Egypt's medium-term outlook remains sound. They welcomed the authorities' recognition of the particular challenges and uncertainties in the period ahead, and their readiness to act in a timely manner if balance of payments pressures heighten. On the fiscal front, Directors urged the authorities to remain vigilant regarding the challenges posed by the still high levels of the fiscal deficit and public debt, the short-maturity of debt, and the back-loaded adjustment effort required to meet the revised fiscal deficit targets. They considered, however, such challenges to be manageable given the authorities' good record on reform and fiscal consolidation. Notwithstanding the strong record, Directors stressed that, now more than ever, Egypt should persevere with its medium-term fiscal consolidation efforts to reduce the country's vulnerabilities.
Directors welcomed the authorities' intention to move cautiously with policy rates until there are clear signs that the pressure on the balance of payments has stabilized. They noted that judging the timing of an interest rate cut is complicated by the risk that a rate cut could accentuate recent pressures on central bank reserves and the exchange rate. Directors saw scope for the authorities to allow for greater exchange rate flexibility to help deal with pressures on central bank reserves. Directors noted the staff's assessment that the real effective exchange rate of the Egyptian pound is broadly in line with fundamentals.
Directors noted that the banking system has coped well with the recent global financial shocks. This resilience is attributable to the authorities' ongoing banking sector reform efforts - including a strengthening of banking supervision and regulation, a cleanup of nonperforming loans, as well as conservative investment and funding practices. Egypt's healthy bank balance sheets and low level of financial integration suggest that there are good prospects that financial intermediation will not be impeded by the international crisis.
Directors commended the authorities for their determination to maintain the reform momentum in difficult circumstances. They encouraged them to focus on reforms that support domestic demand and promote private investment, so as to ensure that Egypt is well placed to take advantage of the eventual recovery in the international economy. Reforms that restructure the public finances to support fiscal consolidation also deserve priority. Directors attached importance to the early introduction of the VAT, which would have the best prospect of yielding the revenue gains needed for the envisaged medium-term fiscal adjustment. They welcomed recent government efforts to broaden the privatization program.
Directors encouraged the authorities to press further with food and fuel subsidy reforms, and welcomed their intention to improve the efficiency and targeting of food subsidy programs. Consideration should be given to introducing automatic adjustment mechanisms for domestic fuel prices to minimize distortions, while strengthening cash-based social programs to protect vulnerable groups.
Several Directors stressed the importance in the current circumstances of further improving the timeliness of the publication of key macroeconomic data, particularly regarding the balance sheet of the Central Bank of Egypt. (IMF15.01)
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11.11 ALGERIA: Health of the Nation
Algeria's health sector is in the midst of significant reform, as the government seeks to improve service delivery and promote local pharmaceutical manufacturing in a bid to reduce the country's dependence on imported products. According to the latest figures issued by the World Health Organization (WHO), Algeria spends the equivalent of 3.5% of its Gross Domestic Product (GDP) on providing health services. With Algeria's GDP estimated at $130bn for 2008, this would put health expenditure at $4.5bn. Similarly, the WHO estimates that 9.5% of Algeria's total government expenditure goes toward the health sector, notably higher than neighboring Morocco's 5.5% or the 6.5% outlay from Tunisia.
Recent years have seen a gradual shift away from the policy of state provision of all health services, as a result of the spread of private sector medical facilities, which have grown from two clinics in 1990 to over 250 today, and the end of the government monopoly on the pharmaceutical industry.
The gradual change in the composition of the health sector is partially a result of Algeria's changing demographic trends. According to a report published in the WHO bulletin of last November, the government needs to develop a broader strategic vision for the provision of health care so as to take into account the massive transformations in Algerian society over the past 30 years.
A factor adding urgency to the reform of the country's health services sector is the rapidly expanding population, which is predicted to reach 40m by 2025, up from the current figure of 34m. To meet this growing demand, the government has moved to increase the number of hospital beds from 52,000 in 2007 to a projected 64,500 this year. While this would give a ratio of one bed for every 527 Algerians, it would still lag behind the population curve - in 1998, for example, the WHO recorded a much-higher figure of one bed per 476 citizens.
To try and catch up with the increasing demand, the government intends to open seven new hospitals and a number of other health service centers this year, as part of its latest $150bn five-year plan. The 2005 - 2009 program committed $2bn to modernizing and expanding the health care system, with 65 general hospitals, 76 polyclinics, 168 health centers and 40 treatment rooms planned. A large number of these new facilities will be built in the southern and high plateau regions, since these areas have the least access to quality health care.
Despite the increase in capital investments, the Algerian health system is grappling with more challenges than simply limited supply. In November and again in December health workers went on strike to pressure the government into improving conditions, including pay rises of up to 300%. According to reports in the local media, unions representing medical personnel claim the salaries have fallen far behind those of many workers in the oil industry and that low wage levels are putting a strain on health services providers.
One segment of the health industry that Algeria is looking to promote is the pharmaceutical industry. The provision of prescription drugs and over-the-counter (OTC) health products is big business in Algeria. According to Rachid Zaounai, the general director of the public pharmaceuticals company Saidal, the market is expected to grow five times its current size by the end of 2010, with the sector worth an estimated $8bn by 2015. Considering the increase in disposable incomes and the rising awareness of health issues, expenditure on OTC healthcare products is set to grow even further.
According to Slim Belkessam, an adviser to the minister of health, domestic production meets 30% of Algeria's pharmaceutical requirements, with the remaining 70% provided for by imports, which cost around $2bn a year. "We want to reduce the import bill, promote the local production, create jobs and ensure transfer of technology to some specific products," Belkessam told the local press.
As a testament to the government's support of the local pharmaceutical sector former Health Minister Amar Tou banned in December 2007 the import of foreign-made pharmaceutical products, a measure designed to both support the local drug manufacturing industry and to reduce expenditure on pharmaceuticals. While his decree was however overturned in July 2008, after it was found that local suppliers could not meet all of the country's medicine needs, the Health Ministry nonetheless announced in October a list of 359 medicines produced locally that could not be imported.
Under the government's new policy, international firms wishing to export medical products to Algeria must invest in the domestic pharmaceutical industry by setting up production or research facilities within two years of obtaining an import license. While the restrictive policies have proved challenging for foreign companies hoping to enter the local market, Algeria's bid for WTO membership will likely loosen the regulations for domestic competition. Though the government is committed to improving health services, a predicted fall in revenue due to lower global energy prices in 2009 is expected to cut the state surplus and make it more difficult to boost expenditure beyond present levels, especially as the state raised spending on other areas such as defense, infrastructure and housing. (OBG16.01)
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11.12 TURKEY: Fitch Affirms Turkey's 'BB-' Rating, Outlook Stable
On 14 January, Fitch Ratings (http://www.fitchratings.com) affirmed the Republic of Turkey's Long-term foreign currency Issuer Default Rating (IDR) at 'BB-' (BB minus) and the Long-term local currency IDR at 'BB', with Stable Outlooks. At the same time, Fitch affirmed Turkey's Short-term IDR at 'B' and Country Ceiling at 'BB'.
"Turkey has proved relatively resilient, so far, to the global credit crunch, helped by its strong banking system," says Edward Parker, Head of Emerging Europe in Fitch's Sovereigns team. "Nevertheless, Fitch expects GDP to contract this year and believes the timely agreement of a new IMF loan program will be important in helping to moderate fiscal and external financing risks in the current uncertain global environment."
The Turkish economy is slowing sharply. Fitch estimates real GDP growth will fall to just 1.8% for 2008 (despite growth of 4.5% in H108) and to minus 0.5% in 2009. The agency views the external financing outlook as the main risk facing the country, given current global financial conditions. It forecasts the current account deficit will narrow to around $23bn (3.6% of GDP) in 2009 from $43bn in 2008, helped by lower oil prices and weak domestic demand. Nonetheless, medium- and long-term amortization of $53bn (including non-resident holdings of domestic debt), plus short-term debt of $50bn represent a large financing requirement, relative to foreign exchange (FX) reserves of $70bn.
However, such concerns are partly mitigated by Turkey's strong banking sector, which is moderate in size, well-capitalized, has a close to balanced net external debtor position, no significant open FX position and a low loan-to-deposit ratio of only around 80%. Households are long foreign currency, with low FX debt and sizeable FX bank deposits. The private sector has external deposits of around $70bn, part of which could be drawn to meet debt payments, as was shown in the balance of payments data for November. The sovereign's $1bn eurobond issue last week demonstrated its continued market access.
Nonetheless, the external financing outlook is uncertain and challenging. How it develops will be a key driver of the sovereign rating. Fitch believes the agreement of a new IMF loan program would be important to buttress private sector confidence in refinancing maturing debt and potentially to meet part of the external financing requirement. Turkey's 2009 budget is based on a GDP growth assumption of 4%, which appears unrealistic in the present economic climate. A fiscal adjustment, which would likely be a condition of an IMF program, would help to guard against risks of unsettling market confidence and crowding out the private sector in the event of lower capital inflows, and would limit pressures on government debt issuance.
Turkey's sovereign ratings are underpinned by its high GDP per capita, which at $9,310 (in 2007 at market exchange rates) is the highest in the 'BB' rating category. Prior to the current economic downturn, real GDP growth averaged 6.9% in the five years to 2007. Other credit strengths include its favorable business climate and governance, its customs union with the EU, its track record in attracting FDI, low commodity price dependence and good modern debt service record. On the other hand, political risk is a weakness weighing on the ratings. Although tensions have eased since the summer, further bouts of instability are possible. (Fitch Ratings 14.01)
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11.13 TURKEY: Fitch Rates Turkey's $1 Billion 2017 Eurobond 'BB-'
On 8 January, Fitch Ratings (http://www.fitchratings.com) assigned the Republic of Turkey's forthcoming $1bn eurobond, due on 14 July 2017, a 'BB-' (BB minus) rating. The Turkish Treasury reported the pricing of the bond today. The eurobond has a coupon rate of 7.5% and a spread over US Treasury Bonds of 501 basis points. The rating is in line with Turkey's Long-term foreign currency Issuer Default Rating, which has a Stable Outlook.
"Turkey's sovereign eurobond issue highlights its continued international capital market access in challenging global financial conditions and its relative resilience, so far, to the credit crunch," says Edward Parker, Head of Emerging Europe in Fitch's Sovereigns team. "Nevertheless, Turkey faces a challenging near-term outlook and Fitch believes the timely agreement of a new IMF loan program will be important to reduce fiscal and external financing risks."
Fitch estimates that Turkey's real GDP growth will fall sharply to 1.8% for 2008 and to minus 0.5% in 2009, compared with growth of 4.5% in H1/08. The agency views external financing risks as the main uncertainty facing Turkey. Fitch forecasts the country's current account deficit will narrow to around $23bn (3.6% of GDP) in 2009 from $43bn in 2008, helped by lower oil prices and weak domestic demand. Nonetheless, medium- and long-term amortization of $53bn (including non-resident holdings of domestic debt), plus short-term debt of around $50bn represent a large financing requirement, relative to foreign exchange (FX) reserves of $70bn. The external financing outlook might be challenging in current global financial conditions.
However, such concerns are partly mitigated by Turkey's strong banking sector, which is moderate in size, well capitalized, has a close to balanced net external debtor position, has no significant open FX position and a low loan-to-deposit ratio of only 80%. The private sector has external deposits of $71bn, part of which could be drawn to meet debt payments. Households are long foreign currency, with very low FX debt and sizeable FX bank deposits.
Nonetheless, Fitch believes the timely agreement of a new IMF loan program will be important to meet part of the "ex-ante" external financing requirement and in buttressing private sector confidence in refinancing maturing debt. Turkey's 2009 budget is based on a GDP growth assumption of 4%, which appears unrealistic in the present economic climate. A fiscal adjustment, which would likely be a condition of an IMF program, would help to guard against risks of unsettling market confidence and crowding out the private sector in the event of lower capital inflows, and would limit pressures on government debt issuance.
Turkey's sovereign ratings are underpinned by its high GDP per capita, which at $9,310 (in 2007 at market exchange rates) is the highest in the 'BB' rating category. Prior to the current economic downturn, real GDP growth averaged 6.9% in the five years to 2007. Turkey's other strengths include its favorable business climate and governance, its customs union with the EU, its track record in attracting FDI, low commodity price dependence and good modern debt service record. (Fitch08.01)
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11.14 GREECE: S&P Places Ratings On CreditWatch Negative on Heightened Risks
On 9 January, Standard & Poor's Ratings Services (http://www.standardandpoors.com) announced that it placed its 'A/A-1' long- and short-term foreign and local currency sovereign credit ratings on the Hellenic Republic on CreditWatch with negative implications.
"The CreditWatch placement reflects our view of an increased risk of a difficult and protracted adjustment to what we see as Greece's large economic and fiscal imbalances, exacerbated by the current global financial situation," said Standard & Poor's credit analyst Marko Mrsnik. “What we view as a relatively high dependency of Greece's banking sector on external funding, including temporary ECB facilities, coupled with what we believe is a likely deterioration in Greek banks' asset quality in Greece and of such banks' affiliates in Southeastern Europe, imply that credit growth could decline sharply, leading to a marked reduction in domestic demand. We believe this will negatively affect Greece's public finances, which, in our view, are weakly positioned to weather a sustained economic slowdown.”
In our opinion, domestic demand has driven past growth performance as mirrored in Greece's large current account deficit. In the absence of external financing sources, we believe it likely that this current account deficit will be unwound, increasing the probability of a hard landing for the Greek economy. As there has, in our view, been little discernible improvement in fiscal consolidation despite the previously favorable economic and financial conditions, we see Greek public finances entering the economic downturn with a deficit and gross debt estimated, respectively, at 3.5% of GDP and 94.1% of GDP in 2008. We are of the opinion that the growth forecasts underlying the 2009 budget are overly optimistic and will likely make the 2% of GDP deficit target unattainable next year, with the deficit likely, in our view, to be significantly higher.
In our opinion, weak public finances leave the government without appropriate fiscal capacity to cushion the economic impact of the ongoing downturn. The government's ability to react is, we believe, further limited by its current low parliamentary support and eroding public support, especially since the onset of the economic crisis and the December 2008 riots.
"A resolution of the CreditWatch action is likely this month pending further information from the Greek government regarding its response to intensifying economic and fiscal pressures," said Mr. Mrsnik. "We are in the process of assessing the risk of what we see as a sharp deterioration in Greece's economic growth, and, subsequently, on the government's budgetary position," he added. (S&P09.01)
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11.15 GREECE: New Economy Minister Faces Some Crucial Fiscal Decisions
Ekathimerini commented that the new conservative Cabinet will have its last chance to put Greece on the path to sustainable growth if it chooses to put the good of the country before its own political interests by opting for a comprehensive set of binding economic measures. Unfortunately, the history of Greek administrations does not favor such an outcome.
It is a common ritual: Most Greek politicians and political parties fail to live up to the people's expectations after coming to power. To some extent, they have only themselves to blame. After all, they are the ones who help mold the public's expectations, usually by promising tax breaks, higher pensions and larger salaries to civil servants before the general elections in hope of garnering their votes.
The question of who is going to pay the bill for the promised tax cuts and increased budget spending comes later and the answer is usually the same: fight tax evasion, do away with public sector waste and speed up economic growth.
Of course, everything changes when politicians come to power and face economic reality. Many of their initial promises are forgotten or delayed until later and their main effort is to blame their predecessors for their inability to fulfill them.
The socialist PASOK party played this card in the fall of 1993 when it succeeded the conservatives and the latter did the same when it came to power in March 2004.
However, the new conservative government cannot play the same card this time around. The new finance minister, Yiannis Papathanassiou, succeeds a conservative colleague and friend of his, Giorgos Alogoskoufis, and has to deal with an overshooting of the 2008 budget deficit to around 3.5% of gross domestic product (GDP).
This fiscal overshooting threatens to put Greece under the EU's excessive budget deficit procedure for a second time since 2005 and, even worse, stifle its efforts to borrow the necessary funds on international markets to finance its 2009 borrowing needs. The country should be able to borrow 2b euros or more when it taps the international markets for three-, six- and 12-month T-bills tomorrow, but it is not certain that it can manage to do the same for bigger sums in medium- and long-term bonds later.
Papathanassiou, who is liked by many in the market because of his business background and pro-market philosophy, cannot do much for the government's slim parliamentary majority and the riots hurting the ruling party's standing in the polls.
He is in a good position though to convince Prime Minister Costas Karamanlis and Public Works Minister Giorgos Souflias, who appears to have a significant role in the formation of economic policy, to take a set of unpopular short-term and long-term economic measures to convince the markets and international credit rating agencies of the country's willingness and ability to put its public finances in order. Already, Standard & Poor's has sent a warning signal by putting Greece's debt on negative credit watch as of 9 January, noting the credit watch will be likely resolved this month after receiving new information from the Greek government on how it plans to deal with the adverse implications of a sharply slowing economy on this year's public finances.
Of course, the need for a set of painful economic measures contrasts with the statement Papathanassiou made during his acceptance speech at the Finance Ministry, namely that economic policy cannot put new burdens on the little guy, such as small and medium firms.
It is understood that the new finance minister will want to safeguard employment as much as possible for economic and political reasons. After all, employment affects consumption spending, which comprises more than 80% of Greek GDP and therefore directly affects economic growth and public finances. At the same time, much lower employment will also hurt the government's political chances for re-election.
So, Papathanassiou and the government will have to find a set of measures that boost or maintain employment, while ensuring a budget deficit of below 3% of GDP this year and in the medium-term. This means measures that combine targeted spending cuts and tax increases along with long-term reforms in the public sector should be adopted as soon as possible to send the right signals to Greece's international borrowers and the markets in general. It is understood that such a set of economic measures is not likely to boost the ruling party's chances if early elections are held in the next few months or later this year. It is, however, the right and responsible thing to do. Can this conservative government break with past practices? History is not on its side, but we should give it the benefit of the doubt. In a few months, we will know the outcome. (ANA12.01)
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- Israeli Shekel conversions done at a rate of NIS 4.00 = $1.00
- Turkish Lira conversions done at a rate of NTL 1.60 = $1.00
- Euro conversions done at a rate of € 1.00 = $1.25
- Jordanian Dinar conversions done at a rate of JD 1.00 = $1.41
- UAE Dirham conversions done at a rate of Dh 3.66 = $1.00
- Omani Rial conversions done at a rate of OR 0.385 = $1.00
- Pakistani Rupee conversions done at a rate of Rs 60 = $1.00
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