TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Netanyahu States "We Must Make the Pie Bigger"
1.2 Fischer Says Standard of Living in Israel 33% Lower Than US
1.3 Netanyahu Cabinet Approves Budget Cut to Pay for Egypt Fence
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 New EDI Alliance To Benefit Both Public and Private Clients
2.2 Apple Buys Israel's Anobit for $500 Million
2.3 Cornell & Technion Win NYCTech Campus Project
2.4 Glilot Capital Partners Invests $1.5 Million in Light Cyber
2.5 Life Technologies Chooses Rhenium to Distribute Products in Israel
2.6 Klarna Closes $155 Million Financing to Accelerate Israel Expansion
2.7 Catalyst & OneGate Set Up $150 Million Chinese-Israeli JV
2.8 Israel Corp Acquires Chilean Power Company
2.9 Mellanox Joins the TA-25 Index on the TASE
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 GM Says Middle East Sales Up 18% in 2011
3.2 Jordanians Express Dismay at Turkish Trade Dominance
3.3 Alpen Says GCC Healthcare to be Worth $44 Billion by 2015
3.4 Tim Hortons Eyes Military Bases in GCC Expansion Spree
3.5 Baker Signs UAE National Agent Agreement with Ali & Sons
3.6 Carlyle Takes Stake in Saudi Food Franchise Operator
3.7 Saudi Arabia Names New Central Bank Governor Amid Economic Challenges
3.8 Egypt Pharmaceuticals & Healthcare Report for Q1 2012
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 CellEra Receives $9.2 Million investment to Bring Affordable Fuel Cells To Market
4.2 Greens Lose Battle to Block Desert Hotel Near Eilat
4.3 Bahrain Explores Creation of Green Energy Agency
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Iraqi Cabinet Approves 2012 Budget
►►Arabian Gulf
5.2 Qatar to Set Up Body to Oversee Infrastructure Boom
5.3 Abu Dhabi Inflation At 1.9% Y-O-Y During First 11 Months Of 2011
5.4 Inflation Falls in Dubai as Food & Housing Costs Drop
5.5 Moody's Says Dubai has $101.5 Billion in Outstanding Debt
5.6 Oman Government to Subsidize Basic Foods
►►North Africa
5.7 PM Ganzouri says Egypt's Economic Situation Worse Than Anyone Imagined
5.8 Egypt's New Finance Minister Promises More of the Same
5.9 Egypt Inflation Rises to 9.1% in November
5.10 Libya's Oil Output Revised Upwards
5.11 Algeria To Keep Majority Stake In Oil Projects
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Cyprus GDP Declines by 0.8% in 3rd Quarter of 2011
6.2 Tourist Arrivals in Cyprus Increases in 2011 & Further Growth for 2012
6.3 Raiffeisenbank Says Bulgaria's Economy to Grow by 2% in 2011
6.4 Bulgaria Defense & Security Report For First Quarter of 2012
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Chanukah Celebrated in Israel & the World Over
7.2 Population Forecast Great Ultra-Orthodox Growth by 2059
*REGIONAL:
7.3 Amnesty Blasts Saudi For Sorcery Beheading
7.4 Egyptian Prime Minister Ganzouri's New Cabinet Sworn In
7.5 Kuwait's Emir Sabah Swears in New Cabinet, Only Minor Changes To Government
7.6 Tunisia Swears In New President
7.7 Greeks Like Their New PM But Not His Government
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8: ISRAEL LIFE SCIENCE NEWS
8.1 EU Grants €2 Million Biotechnology Research Project With Hadassah College Jerusalem
8.2 Hebrew University Research May Lead to Antibiotics of the Future
8.3 Mazor Robotics Sells First Renaissance System in the Houston, Texas Market
8.4 ETView Medical Files with FAD for the VIVASIGHT DL Line of Airway Management Devices
8.5 Atox Bio Raises $3.25 Million for AB103 Treatment of Severe Bacterial Infections
8.6 Yissum Introduces a Novel Technology for Manufacturing an Anti-Malaria Drug in Tobacco
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 BIRD Foundation to Invest $8.1 Million in Nine New Projects
9.2 Israeli Scientist Dan Shechtman Receives Nobel Prize in Stockholm
9.3 DSIT Receives Order for Underwater Security Systems for Protection of Offshore Rigs
9.4 AMOS-5 Communications Satellite Successfully Launched
9.5 GP Synergy Chooses RADVISION for Video Collaboration Programs
9.6 Alvarion Solution Awarded with IBM SAFE Certification for Smart Grid Solutions
9.7 Nova Receives Over $7 Million Orders from a Leading Foundry in Asia
9.8 MTI Wireless Edge 3.3-3.8 GHz 25dBi Parabolic Dish Antennas
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10: ISRAEL ECONOMIC STATISTICS
10.1 Record November for Israeli Tourism
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11: IN DEPTH
11.1 ISRAEL: Infrastructure Report for First Quarter of 2012
11.2 ARAB WORLD: Will a New Economic Equilibrium Emerge from the Arab Spring?
11.3 LEBANON: Lower Yields
11.4 BAHRAIN: Looking up
11.5 QATAR: Tourism Aims Beyond 2022
11.6 UAE: Abu Dhabi Linked by Rail
11.7 OMAN: Economy on the Rise
11.8 OMAN: Shoring up Supply
11.9 SAUDI ARABIA: Opportunities Abound In Saudi Arabia's Fast Growing Retail Market
11.10 TUNISIA: Opening Economic Doors
11.11 TUNISIA: Tunisia's Constitutional Process - The Road Ahead
11.12 MOROCCO: Cultivating New Crops
11.13 TURKEY: Attractive Destination
11.14 GREECE: OECD Report Questions Greece's Ability to Reform
11.15 BULGARIA: Fitch Comments Further on Bulgaria's Outlook Revision Ratings
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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Netanyahu States "We Must Make the Pie Bigger"
"It is impossible to talk about economics and social justice without someone creating added value in the economy - and it is the private sector that creates it," said Prime Minister Netanyahu at the "Globes" Israel Business Conference on 12 December in a comment about the social protest. "People think that economics runs itself," said Netanyahu. "Growth is mostly achieved by the private sector. Those who forget this will find themselves in East Germany or North Korea, or with five-year plans that make just distribution and end up with terrible poverty. In the 20th century, there was an experiment between the free and the unfree economies, and we learned a lesson - free economies meet society's needs."
Netanyahu attacked his critics and the people calling for social justice, saying that they "only talk about how to distribute the pie, but not how to make it bigger. If you're only engaged in distribution, you'll very quickly be left only with crumbs. I tell you that I am dealing with the question how to make the pie bigger. By the way, when the pie gets bigger and the distribution gets better."
Netanyahu said that Israel's problem today was the slowdown in the global economy. "Our pie grows when the world grows. We're an export-oriented economy and our key markets are not about to grow in the near future. Our ability to continue to grow is in doubt, unless we do some new things. What are these new things? First of all, to reach new markets. The finance minister is leaving for India today with my blessing. President Peres recently visited Vietnam with my blessing. We're talking about trips to China with my consent and at my initiative. I tell any minister who wants to go to China, 'Go'. I tell you too, 'Go to China'. Why? Because it's a huge market and if we get a small piece of it we'll achieve the growth that is so critical to our needs."
Netanyahu repeatedly mentioned the government's investment in infrastructures nationwide, noting, among other things, the building of a medical school in Safed ("this is a great revolution") and the move of IDF bases to the Negev, which he called "two very strong anchors." "Our real power lies in the private sector, in entrepreneurship. From paperboys to high-tech businessmen, and by the way a paperboy can one day grow up to manage a high tech company. After all, I started as a dishwasher in the US and became prime minister." (Globes 12.12)
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1.2 Fischer Says Standard of Living in Israel 33% Lower Than US
On 18 December, Governor of the Bank of Israel Prof. Stanley Fischer said that prices in Israel are high and that the standard of living is about two-thirds as high as in the US. In his speech at the Conference on Corporate Governance, Family Firms and Economic Concentration, at the Hebrew University of Jerusalem, Fischer said, "The Israeli economy is open but there are aspects that are closed. It is very hard to find inexpensive cheese. Our real income is high, but our standard of living is not the same as in the US. There is a feeling that this is a result of over-concentration, but it is also connected to agriculture that is not over-concentrated, but that does benefit from much protection." On over-concentration, he said that the problem is not characteristic of Israel alone, but rather of many countries around the world, and that Israel is similar to Singapore on this issue. He quoted an article he read in 2005 that claims that outside the US and the UK, there are large corporations controlled by powerful families that are making realistic and financial investments. "This is the situation in Israel as well," Fischer said. Fischer added that the over-concentration problems Israeli is facing exist in other countries as well: "Israel is between Belgium and Hong Kong, just below Singapore. This is not an unusual situation, but that does not mean that it is the desired one. Even if you are like all the rest, that doesn't mean that you shouldn't aspire to be better." (Globes 18.12)
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1.3 Netanyahu Cabinet Approves Budget Cut to Pay for Egypt Fence
On 11 December, the Netanyahu government approved a 2% cut in all ministries' budget to pay for the construction of the Egypt border fence, which is aimed to block the inflow of illegal immigrants. During the meeting Minister of Defense Barak proposed increasing the cut in the defense budget provided that this was not considered as part of the across-the-board budget cut. Barak sought to avoid the precedent of the Ministry of Defense sharing in an across-the-board budget cut and to prevent the budget cut from coming out of its base budget. Ministry of Defense officials proposed that the ministry share in the financing of the fence. However, Prime Minister Netanyahu sided with Minister of Finance Steinitz and decided that the Ministry of Defense would share in the across-the-board budget cut. The other ministers supported Steinitz unanimously. (Globes 11.12)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 New EDI Alliance To Benefit Both Public and Private Clients
New York's Parter International and Jerusalem's Atid, E.D.I. http://www.atid-edi.com announced a new alliance to better assist international companies with market entry opportunities in North America, Israel and the Middle East. This will also help develop and implement trade and foreign direct investment activities in these markets for economic development agencies. Each firm has more than two decades of experience in serving global companies and economic development agencies. By working together our combined resources and expertise will prove beneficial to clients in search of first-rate support, know-how, and access to a wide range of powerful local contacts. The Alliance will prove particularly valuable for both public and private clients interested in Gathering information about specific markets; Establishing or expanding international sales or physical presence; Representation relating to foreign direct investment, trade, and tourism programs; and Assistance in planning and executing trade missions or participating in trade shows. (EDI 07.12)
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2.2 Apple Buys Israel's Anobit for $500 Million
Apple plans to acquire Israeli start-up Anobit for $350 - 400 million. The deal comes as Apple is about to set up a processor development center in Israel, although the two issues are unrelated. "Globes" named Anobit Israel's third most promising start-up for 2011. The acquisition of Anobit is an unusual step by Apple, currently considered the world's leading computing company. Apple does not make many acquisitions. It has $80 billion in cash, but its mergers and acquisitions pale compared with its computing peers. The company has little hardware operations and its acquisitions in this field are limited. Anobit has developed flash controllers for devices, which are reportedly already embedded in Apple's iPads and iPhones. Apple's Israeli development center will be the company's first such center outside the US. Anobit reportedly had $30-40 million in sales this year, and it needs additional capital to boost production of its products. Its executives originally planned an IPO in 2013. The company had planned to hold another financing round to raise considerable capital from strategic investors in the flash memory industry. Apple may have entered the picture here and went on to acquire the company. Anobit has two product lines: NAND-based embedded flash controllers for smartphones, music players, tablets and other products; and flash memory Genesis Solid State Drives (SSD), which are designed to replace computers' magnetic hard drives that are the current memory mainstay of PCs and storage systems. The acquisition of Anobit will help Apple in the market for flash memory for PCs and mobile devices. (Various 20.12)
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2.3 Cornell & Technion Win NYCTech Campus Project
New York City Mayor Michael Bloomberg selected Cornell University and Technion - Israel Institute of Technology to build his vision for a cutting-edge NYC Tech Campus that will serve as a global magnet for tech talent and entrepreneurship. The campus will have two million square-feet of applied science and engineering buildings on Roosevelt Island in the East River. The Tech Campus is a milestone in New York City's Applied Sciences NYC initiative, which seeks to increase New York's capacity for applied sciences and dramatically transform its economy. New York City will provide $100 million for the site's site infrastructure, construction and related costs. Construction of the first phase of campus is scheduled to begin in 2015. The campus will be organized around three interdisciplinary hubs: Connective Media, Healthier Life and the Built Environment. Cornell will immediately offer Master and Doctoral degrees in areas such as Computer Science, Electrical and Computer Engineering, and Information Science and Engineering. In addition, after receiving the required accreditation, the campus will also offer innovative Technion-Cornell dual Master of Applied Sciences degrees. The NYCTech Campus will host entrepreneurs-in-residence, organize business competitions, provide legal support for startups, reach out to existing companies to form research partnerships and sponsor research and establish a pre-seed financing program to support promising research. In addition, the campus will structure its tech transfer office, which will be on-site, to facilitate startup formation and technology licensing. The NYCTech Campus will also establish a $150 million revolving financing fund that will be solely devoted to start-up businesses in New York City.
Cornell and the Technion were selected due to the large scale and vision of their proposal, the long and impressive track-record of both institutions in generating applied science breakthroughs and spinning out new businesses, the financing capacity of the consortium, the focus of the consortium on the collaboration between academia and the private sector, and the overall capacity of the partnership to execute the project. (Globes 20.12)
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2.4 Glilot Capital Partners Invests $1.5 Million in Light Cyber
Glilot Capital Partners, an early-stage fund focused on Israeli-based software companies, signed a definitive agreement to invest $1.5 million in Light Cyber. Glilot launched its activities in early 2011 and this marks its first investment. Cyber-attacks and APTs result in billions of dollars of losses for enterprises around the globe every year, and have become the number one concern for chief information security officers. Although enterprises are investing in cutting-edge SOCs and ramping up their incident-response capabilities, most APTs are discovered months or years after the incident, long after the damage has been done. This is where Light Cyber's technology comes in, detecting sophisticated attacks and offering full protection for an enterprise's internal network. Tel Aviv's Light Cyber http://www.lightcyber.com was founded in 2011 by information security experts, both serial entrepreneurs who served as officers in an elite technological unit while in the Israel Defense Forces. The company's platform protects organizational networks from within, using a novel anomaly detection and prevention solution to detect intruders in real time, enabling security officers to take preventative action. (Glilot Capital 07.12)
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2.5 Life Technologies Chooses Rhenium to Distribute Products in Israel
New York's Life Technologies Corporation, a global biotechnology company dedicated to improving the human condition, has chosen Rhenium as the principal distributor of its product portfolio for the Israeli market. The deal represents Life's continued growth in the region. Agentek will be authorized to continue to distribute products and fulfill customer orders on behalf of Life Technologies until December 27, 2011. The company, Medogar, which deals with the HLA product range, will continue to operate as the distributor for those products. Financial terms of the deal were not disclosed. (Life Technologies 08.12)
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2.6 Klarna Closes $155 Million Financing to Accelerate Israel Expansion
Stockholm, Sweden's Klarna, an online payments service that lets people shop safely and simply, announced today that it has received $155 million of financing from DST Global and General Atlantic. With the support of its new investors and continuing investor Sequoia Capital, Klarna will use the capital to expand into new geographies, hire more world-class talent and fuel its rapid growth in existing markets. With 6 million shoppers already using Klarna for simpler online payments, Klarna is rapidly becoming the most trusted payment service in Europe. Already today, Klarna handles over $2.5 billion worth of transactions annually for its 14.000 connected merchants. Founded 2005 in Stockholm, the company has grown from three founders to over 600 employees. Klarna is profitable, has doubled its revenues in 2011 and experienced 1,100% growth in Germany, its most recent market entry. Based on this strong foundation, Klarna now prepares to launch new European markets. The investment by DST Global and General Atlantic will facilitate this expansion and help cement Klarna as a leader in online payments. Klarna will now hire 30 new employees for its Israel R&D center after this financing round. In May 2011, Klarna acquired Israeli start up Analyzd for an undisclosed sum. Analyzd, now Klarna's Israel R&D center, has since moved into new Tel Aviv offices and has 20 employees. (Klarna 09.12)
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2.7 Catalyst & OneGate Set Up $150 Million Chinese-Israeli JV
Israel's Catalyst Investments LP and Shanghai-based private equity fund OneGate Capital have secured the first closing of a joint venture China Israel Technology Fund Management Company of $150 million. The joint venture comes four years after the previous fund of Catalyst, a subsidiary of Cuckierman & Co. The companies announced the partnership at the first closing fund during a signing ceremony in Chengdu on 8 December. The Sichuan Chengdu Aba Development Industry has anchored the new fund with an investment. The China Israel Technology Fund Management Company will also raise a second $150 million offshore fund. The China Israel Technology Fund Management Company will be based in Shanghai and Tel Aviv and will be jointly managed by executives at OneGate and Catalyst. It will combine OneGate's network and experience in China with Catalyst's successful track record investing in Israeli and European technology companies. Chinese companies will benefit from Israel's technology and IP, and Israeli companies will gain access to the dynamic Chinese market. The two funds will focus on cleantech, agritech, advanced manufacturing, next generation IT and other sectors where Israeli companies outperform, and which comprise the "seven emerging strategic industries" in China's 12th Five-Year Plan. OneGate and Catalyst will facilitate joint ventures, licensing agreements and outbound M&A on behalf of the Chinese companies they invest in. By leveraging relationships with the Chinese government, local regulatory knowledge and resources, the firms will also help Israeli companies expand into China. (Globes 1.12)
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2.8 Israel Corp Acquires Chilean Power Company
Israel Corporation has acquired Chilean power company Central Tierra Amarilla for a $15 million capital investment into the company, which owes the banks $60 million. Israel Corp subsidiary IC Power will own 75% of Central Tierra Amarilla and a Chilean company will own 25%. The company owns a 155 MW power station that uses open cycle diesel generators. Located north of Santiago, the power station mainly functions as a reserve energy source for local mines. IC Power subsidiary Lima-based Inkia Energy owns power stations producing 3,000 MW in seven countries: Peru, Bolivia, Chile, Panama, El Salvador, Jamaica and the Dominican Republic. (Globes 11.12)
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2.9 Mellanox Joins the TA-25 Index on the TASE
Mellanox Technologies was notified by the Tel Aviv Stock Exchange that Mellanox will be included in the Tel Aviv-25 Index (TA-25), effective 15 December. The prestigious TA-25 index tracks the prices of the shares of the 25 companies with the highest market capitalization on the exchange. It serves as an underlying asset for options and futures, Index-Linked Certificates and Reverse Certificates traded on the exchange and worldwide. The TA-25 Index accounts for over 65% of the Exchange's total market capitalization. Mellanox is also included in the Tel Aviv Stock Exchange TA-100, TA BlueTech-50 and the Tech Index. The TA-25 Index is the TASE's flagship index. Yokneam's Mellanox Technologies http://www.mellanox.com is a leading supplier of end-to-end InfiniBand and Ethernet connectivity solutions and services for servers and storage. Mellanox products optimize data center performance and deliver industry-leading bandwidth, scalability, power conservation and cost-effectiveness while converging multiple legacy network technologies into one future-proof architecture. The company offers innovative solutions that address a wide range of markets including HPC, enterprise, mega warehouse data centers, cloud computing, internet and Web 2.0. (Mellanox 08.12)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 GM Says Middle East Sales Up 18% in 2011
General Motors dealers in the Middle East reported total sales of 10,741 vehicles in November, with sales to individual customers up 68%. GM said total sales are up 18% in the first 11 months of 2011 compared to the same period last year. They were also up on the sales seen during the industry peak in 2008 prior to the global financial crash. Retail sales in November, those to individual customers, increased by 68%, and have increased by 51% in the first 11 months of 2011. So far this year, total sales of its Chevrolet brand are up 22% year-on-year. Year-to-date sales of its Cadillac marque are up 10% after registering its best November sales performance. Sales of Cadillac were 6% higher in November compared to November 2010 - the previous record month. GMC's year-to-date total sales are also up 15% year-on-year in 2011. (AB 16.12)
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3.2 Jordanians Express Dismay at Turkish Trade Dominance
On 12 December, Jordanian businesspeople on told their Turkish counterparts that they were unhappy with the trade balance between the two countries, which is largely in Turkey's favor. At a meeting with a business delegation from Turkey, the Jordan Chamber of Commerce described the free trade agreement, signed between Jordan and Turkey last year, as unfair, and called for striking a balance in trade exchange between the two countries. He said Jordan's businesses will oppose the agreement if it remains in favor of Turkey stressing that the private sector implements the accords that are usually signed by governments. Jordan should not be used as a consuming market or a gateway for Turkish products, he added, urging more businesspeople from Turkey to import Jordanian products and to carry out more investments in the Kingdom. According to official figures, trade exchange between Jordan and Turkey during the first three quarter of this year reached $477 million. Jordanian exports stood at $58.5 million, while imports from Turkey exceeded $418 million. Jordanian exports to Turkey include vegetables and fruits, pharmaceuticals, fertilizers and potash, while imports from Turkey include wheat, barley, chocolates, chemicals, tires, garment and agricultural machineries among other products. 13 December 2011
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3.3 Alpen Says GCC Healthcare to be Worth $44 Billion by 2015
The GCC's healthcare sector is set to grow by an annual rate of 11% and will be worth nearly $44b by 2015, Alpen Capital has said in a new report. Saudi Arabia and the UAE will leave the growth in the region with outpatient and inpatient markets are expected to account for 82% and 18% respectively of the overall market size, Alpen added. The demand for number of hospital beds is expected to be 93,992 in 2015, an addition of 8,669 beds from 2010, which is in line with the expected supply pipeline. Shortage of medical personnel is a key concern in the region, it said, with GCC governments continuing to spend millions of dollars on healthcare imports each year due to lack of sufficient services.
The study said demographic factors are likely to be the main driver for healthcare services in GCC. According to the United Nations, the GCC population is expected to increase at an annual rate of 2.2% during 2010-2015 compared to 1.1% globally. The proportion of obese people in the GCC population is considerably higher than the global average, Alpen added. The study added that the cost of healthcare in the GCC was on the rise due to increasing use of new and advanced technologies. Alpen said the dependence on government spending on healthcare was "a major challenge" for the region. Underlying demand in GCC's healthcare sector is increasingly attracting private equity investors. (AB 17.12)
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3.4 Tim Hortons Eyes Military Bases in GCC Expansion Spree
Tim Hortons, Canada's largest restaurant chain, may open outlets in military bases under a plan to roll out 120 stores in the GCC over the next five years. Canada opened a military base in Kuwait in September, almost a year after the country's supply post in the UAE was closed following a diplomatic spat between the two nations. Tim Hortons, which operates more than 3,600 stores in Canada and the US, kicked off its Arabian Gulf expansion spree with the launch of its first regional store in Dubai in September. The restaurant chain will open four further outlets in the emirate this week, with local franchisee Apparel Group, before spanning out across the GCC. The chain has no immediate plans to expand into Saudi Arabia, but may look to launch in the kingdom if its UAE rollout proves successful. The UAE is home to an estimated 27,000 Canadian expatriates and the Gulf state is Canada's largest trade partner in the Middle East and North Africa. Tim Hortons reported a 40% rise in third quarter profits in November, despite increased competition in the company's core coffee business. (AB 07.120
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3.5 Baker Signs UAE National Agent Agreement with Ali & Sons
Pittsburgh's Michael Baker Jr., Inc., a unit of Michael Baker Corporation, has entered into a national agent agreement with Ali & Sons Company, a diversified business group based in Abu Dhabi, UAE. Additionally, Baker is currently establishing an office in the Umm Al Nar area of Abu Dhabi in support of its business development efforts in the UAE and Middle East region. Ali & Sons Company http://www.ali-sons.com began its meteoric rise by providing quality services to the oil & gas industry. Ali & Sons has since diversified its activities and operations by establishing new businesses across several sectors of the Middle East economies including oil & gas, automotive, commercial, retail, contracting, property management, manufacturing, information technology, merchant banking and infrastructure. Michael Baker Corporation provides engineering, design, planning and construction services for its clients' most complex challenges worldwide. (Michael Baker 12.12)
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3.6 Carlyle Takes Stake in Saudi Food Franchise Operator
Private equity firm Carlyle Group of Washington, DC has acquired a 42% stake in Saudi Arabia's Alamar Foods, the master franchise operator for Domino's Pizza and Wendy's restaurants in the Middle East and North Africa. Carlyle bought the stake from the Al Jammaz Group for an undisclosed amount. Apart from the Domino's Pizza and Wendy's franchises, Alamar also has a food processor called Premier, which supplies fast food outlets. Al Jammaz has operations in agriculture, food services and also provides pilgrimage services in Mecca and Medina through its travel arm. It is the second acquisition which the buyout group has made in the Gulf, following its 30% investment in Saudi Arabia's General Lighting Company in March 2010. It is eyeing a 2013 initial public offering in Riyadh for that investment. (AB 14.12)
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3.7 Saudi Arabia Names New Central Bank Governor Amid Economic Challenges
Saudi Arabia named a new central bank head and shuffled cabinet ministers amidst King Abdullah's record spending plan to fight unemployment and lessen dependency on oil. Fahad al-Mubarak was appointed as governor of the central bank, replacing Muhammad al-Jasser, who was named the new economy and planning minister. Saudi Arabia's drive to create jobs comes amid a wave on popular uprisings in the Middle East, triggered in part by unemployment. King Abdullah announced a $130b spending plan in the first quarter and in August 2010 unveiled a $384b plan to develop transportation, housing and education. The country needs the non-oil economy to expand at an average 7.5% in the next five years to lower joblessness by half to 5%. Non-oil output will slow to 5% in 2012 from 5.4% this year, while growth in oil GDP will grind to a halt next year, IMF data shows. Saudi banks have tightened lending criteria after two family-owned businesses defaulted on at least $15.7b of loans in 2009 and the global credit crisis hurt the economy. Growth slowed to 0.1% in 2009 from 4.2% the previous year. More than half of new jobs went to foreigners between 2004 and 2009, the International Monetary Fund said in a September report. (AB 13.12)
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3.8 Egypt Pharmaceuticals & Healthcare Report for Q1 2012
Business Monitor International's Egypt Pharmaceuticals and Healthcare Report says this market has not been fundamentally changed by the political upheaval. The country still has a large population, an emerging middle class and should continue to grow rapidly economically, provided it does not become too destabilized by political infighting and fiscal overspending by the next government. That said, risks remain high and the country's drug pricing and regulatory regime is in need of overhaul.
Headline Expenditure Projections
Pharmaceuticals: EGP16.69b ($2.96b) in 2010 to EGP17.37b ($2.92b) in 2011; +4.1% in local currency terms and -1.4% in US dollar terms. Forecast up slightly from Q4/11 due to new data. Growth forecast down slightly because of medicine shortages.
Healthcare: EGP60.39b ($10.72b) in 2010 to EGP65.43b ($10.99b) in 2011; +8.3% in local currency terms and +2.8% in US dollar terms. Forecast down significantly from Q4/11 due to new historic data.
Medical devices: EGP2.78b ($493mn) in 2010 to EGP3.02b ($508mn) in 2011; +8.7% in local currency terms and +2.9% in US dollar terms. Forecast down slightly from Q4/11 due to macroeconomic factors.
Business Environment Rating: Egypt's score of 45.7 is down from its Q4/11 score of 46.5. The country's pharmaceutical market is 13th in BMI's proprietary Business Environment Ratings (BERs) for the region.
Key Trends & Developments: A report by the Egyptian Ministry of Finance said the government will try to encourage investment in the healthcare sector and it has assigned EGP10b ($1.67b) for healthcare investment in its FY2011/12 budget. Egypt is experiencing a drastic shortage in affordable medicines according to the UN's Office for the Coordination of Humanitarian Affairs. This shortage has been brought about by a large number of domestic pharmaceutical companies being unable to cope with the increase in raw material prices and the effects of the weak Egyptian pound on production costs. Makram Mahana, chairman of the pharmaceutical industry section of the Federation of Egyptian Industries (FEI), said that 80 of Egypt's 120 domestic drugmakers have had to stop producing medicines as they are no longer profitable and he expected more factories to follow. He estimated that the closures have resulted in a 50% fall in local medicine production, leading to medicine shortages at pharmacies. (BMI 20.12)
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 CellEra Receives $9.2 Million investment to Bring Affordable Fuel Cells To Market
CellEra announced a $9.2m investment round led by Vodafone Ventures, the global venture capital arm of Vodafone Group, together with top-tier Israeli VC firm Carmel Ventures. The two have joined forces with the company's largest shareholder Israel Cleantech Ventures, the leading venture capital fund focused on backing Israel's emerging clean technology companies, as well as B-2-V Partners and private investors. Beyond the available capital, Vodafone's investment will serve to facilitate CellEra's approach to the telecommunications market place and its ability to direct their cost-effective, clean-energy fuel cell technology towards the requirements of global telecommunication operators. While fuel cells have now been recognized as a reliable renewable power generation source allowing mobile network operators to reduce power generation related emissions and end-of-life hazards, wide market acceptance has been hampered to date by their high costs. CellEra's goal is to substantially reduce these costs and allow a rapid return on investment through the development and market introduction of a new form of fuel cell technology, allowing the elimination of high-cost materials and expensive hardware in the fuel cell stack. CellEra's http://www.cellera-inc.com goal is to deliver a clean, efficient, and highly-affordable energy storage & conversion technology. The Pardes Hanna company's disruptive technology is Platinum-Free Membrane Fuel Cell (PFM-FC) for which CellEra is a first commercial mover. PFM-FC alleviates the major cost components of today's fuel cells, including the use of platinum. CellEra's introductory product is targeted at the $3 billion telecommunications supplemental-power market, offering an affordable, clean and safe alternative to lead-acid batteries and diesel generators. (CellEra 19.12)
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4.2 Greens Lose Battle to Block Desert Hotel Near Eilat
Environmental organizations have lost the battle to block a hotel project in Sasgon Valley near the Timna National Park, 30 kilometers north of Eilat, in the Arava. The Southern Regional Planning and Building Commission approved the project by developer Igra Group. The Israel Union for Environmental Defense http://www.iued.org.il, Society for the Protection of Nature in Israel, Green Course and local residents all opposed the project, whose approval contravenes the position of the Ministry of Environmental Protection. Minister of Environmental Protection Erdan asked the Southern Regional Planning Commission to approve an alternative plan further south. He said that a hotel in the Sasgon Valley would destroy its nature, vistas and environment. In line with a court order, the Building Commission told Igra Group to amend its plan, reduced its building rights to 24,000 square meters and limited peripheral projects, such as a swimming pool and recreational areas, in order to minimize the hotel's environmental impact. (Globes 12.12)
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4.3 Bahrain Explores Creation of Green Energy Agency
Spurred by United Nations Development Program (UNDP) initiatives, Bahrain is evaluating a plan to establish an energy agency dedicated to renewable energy and conservation. The potential green energy agency would work in close partnership with the UNDP to further develop solar and wind energy projects in the country in line with the program's goals. A study into the agency's establishment has already been completed. Bahrain has made significant steps in the way of energy conservation, according to Energy Minister Dr. Mirza. Established five years ago, the country's energy conservation committee has worked to conserve large amounts of gas in Bahrain. In addition, the Natural Oil and Gas Authority and the Electricity and Water Authority are currently coordinating to conduct alternative energy projects. (KoB 20.12)
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Iraqi Cabinet Approves 2012 Budget
Iraq's cabinet has approved a draft 2012 budget of $100 billion with a deficit of $14.5 billion. The budget assumes an oil price of $85 and daily oil exports at 2.625 million barrels. The new budget has yet to be approved by the parliament. The deficit will mostly be covered by the $10 billion Development Fund of Iraq (DFI), an account where most of the proceeds of Iraq's oil sales are held. (Beltone 07.12)
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►►Arabian Gulf
5.2 Qatar to Set Up Body to Oversee Infrastructure Boom
The Qatar government is about to set up a powerful Central Planning Office (CPO) to co-ordinate its multi-billion dollar infrastructure expansion plans. The CPO, reporting to the Minister of Municipality and Urban Planning, will oversee all major project work in Qatar as investment in the country's infrastructure accelerates ahead of the FIFA World Cup finals in Qatar in 2022. In October, a senior official said Qatar is set to spend up to $150bn on infrastructure projects over the next 5-6 years as it starts preparing for the 2022 World Cup. The Minister of Economy and Finance also said spending on the oil and gas sector would reach $40bn in the same period. The Qatari government has reportedly allocated 40% of its budget between now and 2016 to infrastructure projects, including $11bn on a new international airport, $5.5bn on a deepwater seaport and $1bn for a transport corridor in the capital, Doha. It will spend $20 billion on roads while stadium construction for the World Cup should cost just under $4bn, with the first venue to be built by 2015. (AB 14.12)
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5.3 Abu Dhabi Inflation At 1.9% Y-O-Y During First 11 Months Of 2011
Recently published data by the Statistics Center of Abu Dhabi (SCAD) show that average consumer prices in Abu Dhabi rose by 1.9% y-o-y in the first eleven months of the year compared to the same period in 2010. The food and non-alcoholic beverages group contributed the largest rise in the overall index, with a share of 66%. This was followed by the housing, water, electricity gas and other fuels group, which accounted for 34.6% of the overall increase, reflecting a rise of 1.7% over the same period. On a monthly basis, inflation increased by 0.6% in November 2011, down from 0.9% in October 2011.
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5.4 Inflation Falls in Dubai as Food & Housing Costs Drop
Dubai's annual inflation rate edged lower to 0.2% in November as food prices dropped and housing costs were steady, latest data showed, as analysts forecast only soft price pressures in the real estate sector next year. Consumer price growth in Dubai has held below 1% for most of the year as bank lending remains slow and the property sector weak in the wake of the emirate's 2009 debt crisis. Inflation was at a three-month high of 0.3% in October. Prices were unchanged on a month-on-month basis in November, after a 0.3% increase in the previous month. , Abu Dhabi's annual inflation rate slowed to a 23-month low of 0.6% in November from 0.9% in October. The UAE has yet to release November consumer price data for the whole seven-member federation. In Dubai, food costs, the second largest consumer expense with an 11% weighting in the index, decreased 0.8% month-on-month after a 0.5% rise in October. Housing prices, the biggest component in the Dubai basket, were unchanged for the second consecutive month in November. UAE central bank governor Sultan Nasser al-Suweidi said in June that inflation this year was likely to be lower than 3% as the real estate sector remained under pressure. (AB 16.12)
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5.5 Moody's Says Dubai has $101.5 Billion in Outstanding Debt
Dubai and its state-owned non-financial companies have outstanding debt of $101.5b and may need further financial support to meet these obligations, Moody's Investors Service announced on 6 December. Although "significant progress" has been made by the government and state-owned companies to tackle maturing debt, Moody's remains concerned about the emirate's maturing debt. Moody's has seen very few real signs of material and voluntary deleveraging. This raises concerns about renewed medium-term pressures when the refinanced obligations become due, as well as Dubai's potential renewed need for further financial support.
Dubai, the Gulf's trade and tourism hub, was on the brink of a default in 2009 and is recovering after a $20b cash injection from the UAE central bank, the Abu Dhabi government and its banks. State-controlled companies including Dubai Holding and Drydocks World are still in talks with lenders to restructure debt, while Dubai World reached an agreement with creditors on about $25b of debt in March. The government has about $27.9b of direct debt, of which $18.45b was raised to capitalize the Dubai Financial Support Fund, Moody's said. State-owned companies have approximately $68.6b in outstanding debt, excluding government guarantees, it said. About $13.8b in bank and bond debt is due to mature between the fourth quarter of 2011 and the end of 2012, with a further $11.2b being restructured. State-owned companies such as Dubai Holding Commercial Operations Group, Jebel Ali Free Zone and DIFC Investments, which have $3.8b worth of debt maturing next year, are all facing refinancing risks and may experience "ratings volatility" as they move closer to the maturity dates, Moody's said. (Moody's 06.12)
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5.6 Oman Government to Subsidize Basic Foods
Oman's government has approved plans to subsidize a basic range of foods basic food products to offset inflation. The list includes what, rice, sugar, flour and local meat. The government will also build $109 million worth of food storage warehouses to offset food inflation caused by spoiled food. The decision comes right after the Omani Central Bank reported annual inflation of 3.8%, even though analysts believe this inflation is temporary. Oman was hit by protests in part of the Arab spring, with Omani's demands focusing on economic concerns rather than a change to their political system. (Beltone 14.12)
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►►North Africa
5.7 PM Ganzouri says Egypt's Economic Situation Worse Than Anyone Imagined
Egyptian Prime Minister Al Ganzouri told Egyptians on 11 December that the economic situation was worse than anyone imagined and that there was a need for austerity to rein in the burgeoning budget deficit. Re-establishing security would be a priority for the "national salvation government" that he unveiled recently. He described the last decade of Mubarak's era as full of policy failings. Ganzouri said the government would not agree to a $3.2 billion facility from the International Monetary Fund (IMF) until the outlook for the budget was clearer. He added that "to save EGP20 billion there has to be austerity, but in sectors that we feel do not affect the Egyptian citizen. I want to reduce this (budget deficit), because the deficit remaining as it is means there will be inflation." Soaring prices were among the political and economic factors that drove people on to the streets to oust Mubarak, and have ticked up again. (Beltone 12.12)
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5.8 Egypt's New Finance Minister Promises More of the Same
Momtaz El-Said's appointment on 7 December makes him Egypt's fourth finance minister this year, but brings with it little promise of new prospects. Said will serve in the new cabinet presented by Prime Minister Kamal al-Ganzouri, who is also an economist. The ruling Supreme Council of the Armed Forces (SCAF) tasked Ganzouri with forming a new cabinet, after the previous one led by Essam Sharaf resigned amid massive protests against military rule in late November. A veteran bureaucrat pulled out of retirement to serve as deputy to outgoing Finance Minister Hazem al-Beblawy, Said currently represents the ministry on the board of the Central Bank of Egypt (CBE). According to regulations enacted in October, the CBE board must include the governor, two deputies, the head of the Egyptian Financial Supervisory Authority, a representative of the finance minister and four members to be appointed by Egypt's president.
Said previously led the ministry's budget division and served as undersecretary to former Finance Minister Youssef Boutros-Ghali, a Mubarak-era technocrat who is currently indicted on corruption charges. The new finance minister said he would not alter the financial year 2011/12 state budget, which has been heavily criticized for insufficiently funding healthcare and education. He did, however, release a statement on 3 December saying that the government would do its best to meet labor demands, such as granting permanent contracts to temporary workers and setting a wage cap. Said has said that it is too early to determine the fate of the $3.2 billion International Monetary Fund loan deal Egypt began renegotiating in November after initially rejecting it in June. The Finance Ministry and CBE have resorted to borrowing from the domestic market to meet financing needs by issuing government securities and treasury bills — an expensive option with one-year notes offering a 14.9% interest rate. The IMF loan is understood to be much cheaper, with a pay-back interest rate of around 3% and has few conditions attached. (AA 08.12)
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5.9 Egypt Inflation Rises to 9.1% in November
CAMPAS said that Egypt's inflation accelerated on rising food prices in November to reach an annual rate of 9.1 from 7.1% in October. The urban consumer price index for November was 120.4 versus 119.2 in October and 110.4 in November 2010. Food and beverage costs, the biggest component in the consumer price index, increased at an annual rate of 11.6% in November, compared with 8.7% a month earlier. Last month, Egypt's central bank said that the risk of higher inflation prompted it to raise benchmark interest rates for the first time in three years, even as the economy slows. Foreign reserves have plunged from $36 billion at the end of 2010 to about $20 billion at the end of November in the wake of the uprising that unseated former President Mubarak. Subsequent political turmoil sent investors and tourists packing. The data showed that the urban consumer price index increased due to rising prices of commodities, such as those of butane gas cylinders, which rose at an annual rate of 38%. As for food and beverage costs, the price of tomatoes rose at an annual rate of 84% and meat by a rate of 6%. (CAMPAS 10.12)
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5.10 Libya's Oil Output Revised Upwards
Libya's oil output has been revised up to 1.5 million bpd by mid-2012, according to Total SA. Libya's state National Oil Cooperation (NOC) also predicts production of 290,000 bpd by the end of December 2011. The NOC has also stated it will delay any additional tenders so it can negotiate better deals and to give the newly appointed managers time to adjust. Libya's oil output has dropped to 45,000 barrels a day due to its civil war, with several violent clashes taking place near oil fields.
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5.11 Algeria To Keep Majority Stake In Oil Projects
Algeria will scrap a controversial amendment in its new energy legislation that would have allowed foreign firms a majority stake in oil exploration ventures, rather than the state owned Sonatrach. The amendment has been met with opposition from senior government officials as well as protests on the streets. The new law will still reduce taxes for foreign firms by taxing profits rather than revenue. It will also give Sonatrach a bigger share of the risk, should the project fail. The law is designed to give foreign energy firms a greater incentive to invest in Algerian projects to meet its output targets. (Beltone 08.12)
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Cyprus GDP Declines by 0.8% in 3rd Quarter of 2011
Cyprus' GDP decreased during the third quarter of 2011, while GDP in the euro area and in the EU27 recorded a small increase, according to estimates released by Eurostat. According to the data, GDP in Cyprus declined by 0.8% during Q3/11, compared with the previous quarter, while GDP increased by 0.2% in the euro area1 (EA17) and by 0.3% in the EU27. During the second trimester, GDP had increased by 0.2% in Cyprus, as well as in the EA17 and EU27. On an annual basis, GDP declined in Cyprus by 0.6% in Q3/11 compared with the corresponding period of 2010, while it increased by 1.4% in the euro-zone and the EU. Greece recorded the highest GDP decline in EU, reaching 5.2%. GDP growth during the third quarter of 2011, compared to second quarter of 2011, was in the euro-zone countries for which data are available as follows: Cyprus -0.8% -0.4% in Portugal, Netherlands -0,3%, Slovenia -0.2%, Belgium 0.0%, Spain 0.0%, Austria 0.3%, France 0.4%, Germany +0.5%, +0.8% Slovakia , +0.8% Estonia, Finland +0.9%. (Eurostat 06.12)
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6.2 Tourist Arrivals in Cyprus Increases in 2011 & Further Growth for 2012
Tourist arrivals in Cyprus have increased by over 10% until October, with a relevant increase in revenue, according to Commerce, Industry & Tourism Minister Antoniadou. She said that there are very good results from priority markets such as Russia, Germany and other Central Europe markets while Cyprus' biggest market, that of the UK, has exhibited stabilization. Noting that 2011 was a successful year for tourism, which supports the Cypriot economy during these difficult times, Antoniadou said that despite the global economic crisis, this positive picture will continue in 2012. (FM 10.12)
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6.3 Raiffeisenbank Says Bulgaria's Economy to Grow by 2% in 2011
In spite of the relative slowdown in the third quarter, Bulgaria's GDP will grow by about 2% in 2011, according to the monthly macroeconomic report of Raiffeisenbank Bulgaria. Domestic consumption is replacing exports as the primary engine of growth but its dynamic remains uncertain with respect to the development of outside factors and their potential effects on demand in Bulgaria. Raiffeisenbank points out that Bulgaria's unemployment rate dropped down to 10.2% in Q3/11 primarily thanks to the seasonal employment in tourism and agriculture, but that is still higher than it was in Q3/10, year-on-year. Bulgaria's monthly inflation in October grew by 0.8% compared with September, reflecting the fall price increases on food and clothing. At the same time, Bulgaria's fiscal positions remain sustainable, with the budget deficit amounting to 1.1% of the GDP, growing by only BGN 16 M in October, the bank notes. (SMN 09.12)
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6.4 Bulgaria Defense & Security Report For First Quarter of 2012
In October 2011 it does not appear that the security issues – or the overall situation of Bulgaria's Defense industry – have changed significantly from the previous quarter. The country faces no obvious threat from inter-state aggression and very limited threat from non-state terrorists. However, BMI's Security Rating with respect to criminal risk is one of the lowest in Europe. In part because of its geographic location, with easy access to Eastern Europe and the Middle East and mainly because of low levels of governance, Bulgaria is a hub for organized crime and illegal trafficking of drugs, arms and people. This will not be affected by the outcome of the slow growth of the economy. Recent developments in the Defense industry include the government's acknowledgement that it may look to sell its stake in Arsenal and renegotiate contracts (so that the Defense Ministry buys less or pays less) with (at least) two major Western European suppliers of materiel – Daimler Chrysler and Eurocopter. The first of these suggests that the government needs the money that it could raise from selling its holding in the country's largest arms producer more than it needs the control that comes with its 36% stake. The contract renegotiations highlight how the Defense Ministry remains short of cash.
On the one hand, the Defense White Paper which was approved by Bulgaria's parliament last year envisages a reduction in size in the country's Defense establishment, together with a wholesale reorganization and modernization so that all three armed services are inter-operable with their counterparts in other NATO countries. On the other, the Defense industry consists mainly of small companies providing small arms and light weapons – and/or a surprising array of (relatively low technology) civilian products to (overwhelmingly) foreign customers. In theory, the Defense Ministry will involve the indigenous producers in the modernization of Bulgaria's armed forces. In reality, it remains to be seen how they will be involved. (R&M 08.12)
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Chanukah Celebrated in Israel & the World Over
Tuesday evening, 20 December, the Jewish world began the observance of the eight day Chanukah holiday. From the Hebrew word for "dedication" or "consecration", Hanukkah marks the rededication of the Temple in Jerusalem after its desecration by the forces of Seleucid Greeks and commemorates the "miracle of the container of oil". The re-dedication followed the liberation of Jerusalem by the Jewish forces, or Maccabees, who were fighting to regain their independence against the Greek invaders. There was only enough consecrated olive oil to fuel the eternal flame in the Temple for one day. Miraculously, the oil burned for eight days, which was the length of time it took to press, prepare and consecrate fresh olive oil. The holiday also celebrates the military victory and the restoration of Jewish independence. The holiday lasts until 9 December.
Though business is permitted during this holiday, the week in Israel is marked by many leaving work early to be with the family at nightfall, in time to light the menorah, or eight branched candelabra. The primary ritual, according to Jewish law and custom, is to light a single light each night for eight nights. As a universally practiced "beautification" of the mitzvah, the number of lights lit is increased by one each night. There is also a custom of eating foods fried in oil as a culinary way of commemorating the Chanukah miracle after the Maccabees won the battle against the Greeks ruling Israel. While the favored fried Chanukah treat of Israelis is the jelly doughnut, most North American Jews prefer latkes, a grated potato-and-onion pancake fried in oil and served with sour cream or apple sauce.
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7.2 Population Forecast Great Ultra-Orthodox Growth by 2059
The Central Bureau of Statistics released a population forecast on 12 December that predicts a significant rise in Israel's ultra-Orthodox (hareidi) population by the year 2059. The forecast was prepared at the request of the Finance Ministry's Budget Division, which had sought a long-term forecast of Israel's population for the coming fifty years. According to the forecast, between 13 and 20 million people will live in Israel in 2059. According to the high population growth forecast, non-hareidi Jews will make up about 37% of the population in 2059, the Arab population will make up about 20% of citizens and the hareidi-religious population will grow to make up about 41% of Israeli citizens. In contrast, data from 2009 showed that non-hareidi Jews made up 70% of the population and hareidim only made up about 10%. As such, the study noted, the forecast will only be accurate if past trends continue. (CBS 12.12)
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*REGIONAL:
7.3 Amnesty Blasts Saudi For Sorcery Beheading
Amnesty International has described as "deeply shocking" Saudi Arabia's beheading of a woman convicted on charges of "sorcery and witchcraft", saying it underlined the urgent need to end executions in the kingdom. Saudi national Amina bint Abdul Halim bin Salem Nasser was executed on 12 December in the northern province of al-Jawf after being tried and convicted for practicing sorcery, the interior ministry said, without giving details of the charges. Saudi Arabia, an absolute monarchy, has no written criminal code, which is instead based on an uncodified form of Islamic sharia law as interpreted by the country's judges Amnesty said the execution was the second of its kind in recent months. A Sudanese national was beheaded in the Saudi city of Medina in September after being convicted on sorcery charges, according to the London-based group. Amnesty put at 79 the number of executions in Saudi Arabia so far this year, nearly triple the figure in 2010. (AB 13.12)
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7.4 Egyptian Prime Minister Ganzouri's New Cabinet Sworn In
On 7 December, Prime Minister Kamal al-Ganzouri's new cabinet was sworn in before Field Marshal Tantawi, head of the ruling Supreme Council of the Armed Forces (SCAF). The new cabinet includes 12 ministers from former PM Essam Sharaf's cabinet. The ministers who have kept their jobs include the ministers of electricity, international cooperation, housing, tourism, social solidarity, petroleum, local development, religious endowments, the foreign affairs, industry, water resources & irrigation and military production. Ganzouri chose Major General Mohammed Ibrahim as Egypt's new interior minister. The new ministers include Momtaz Mohamed al-Said as finance minister. After being sworn in, the new cabinet was instructed by Tantawi to push for democracy in order to achieve a free society, according to official government sources. Tantawi called on the new cabinet ministers to improve the security situation in the country and support the security forces in their work, thus allowing the military to return to their barracks. He also instructed them to prepare financial reform to increase the state's resources and reduce general expenditures.
Despite assurances from the army that it will hand full control to new civilian leaders, the elected parliament and a new president are expected to face a fierce power struggle. The SCAF has already indicated it wants to retain many of its privileges from the Mubarak era, including oversight over military-related legislation, and wants to appoint figures to write the new constitution. The prospect of an Islamist-dominated parliament has also raised fears among liberals about civil liberties, women's rights and religious freedom in a country with the Middle East's largest Christian minority. The Brotherhood stressed throughout campaigning that Islamic values were compatible with democracy, and that it was in favor of individual freedoms and working with other non-Islamist political parties. But Al-Nur, a Salafist group that advocates a fundamentalist interpretation of Islam dominant in Saudi Arabia, has emerged as a powerful new influence and is expected to do well in the remaining rounds of voting. After the voting for the lower house of parliament, which will end in January, Egyptians will then elect an upper house in a further three rounds of polls. A committee to draft a new constitution will then get to work before presidential elections by the end of June 2012. (Various 08.12)
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7.5 Kuwait's Emir Sabah Swears in New Cabinet, Only Minor Changes To Government
Kuwait's Emir Sheikh Sabah al-Ahmad Al-Sabah swore in the new cabinet on 13 December with only minor changes to the government that resigned in November over allegations of corruption. Sheikh Sabah urged Kuwaiti voters to abandon factional, sectarian and tribal allegiances while choosing representatives in an upcoming general election which he said would usher in a new era for the oil-rich Gulf state. Former prime minister Sheikh Nasser Mohammad al-Ahmad Al-Sabah resigned on 28 November over allegations of corruption and after mass rallies demanding his ouster organized by the opposition. One week later, the Emir dissolved parliament for the fourth time in under six years. The new cabinet, which includes only minor changes, is headed by former defense minister Sheikh Jaber Mubarak Al-Sabah, and is comprised of just 10 ministers, all of whom held posts in the previous cabinet. Interior minister Sheikh Ahmad al-Humud Al-Sabah, a senior member of the ruling family, has been entrusted with the defense portfolio, while the foreign affairs, oil, finance, electricity and water ministries remain unchanged. The newly appointed cabinet is the eighth to be formed in Kuwait since February 2006. All previous cabinets were forced to resign over political disputes. A decree for the upcoming election, which must be held within 60 days of the dissolution of the 50-seat parliament, was issued. The new compact cabinet will serve for several weeks as stipulated by Kuwaiti law, which calls on the government to resign after declaring election results. (Beltone 14.12)
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7.6 Tunisia Swears In New President
The Tunisian parliament has elected and sworn in former human rights dissident Moncef Marzouki as president. Marzouki previously ran for elections against former president Ben Ali and was seen as a strong opposition figure. His election is widely seen as a deal between the Islamist Ennahda party and the secular parties. Marzouki will serve for one year until a permanent constitution is passed and general presidential elections are held. (Various 14.12)
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7.7 Greeks Like Their New PM But Not His Government
Greeks like technocrat Prime Minister Lucas Papademos but deeply distrust his coalition government made up of career politicians. Papademos' popularity rose to 60% in December from 55% last month, according to a survey by pollster Public Issue published in the newspaper Kathimerini. The three-party government led by Papademos, a former European Central bank vice president, was installed last month to implement a bailout deal for the debt-laden country before leading it to elections, tentatively set for Feb. 19. But Greeks distrust Papademos's 49-member cabinet consisting of party politicians from the former ruling Socialist PASOK, the conservative New Democracy and the far-right LAOS parties. More than 80% of respondents said they were dissatisfied with the government. In a separate poll by Metron Analysis, just 32% of respondents said they had a positive view of Papademos's government, even though the premier himself was the country's most popular political figure. New Democracy would win elections if they were held today but it would fail to secure an absolute majority in the country's 300-seat parliament, Public Issue said, confirming earlier surveys. New Democracy would win 30% of the vote yielding between 123 and 136 seats, according to the pollster. (Various 11.12)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 EU Grants €2 Million Biotechnology Research Project With Hadassah College Jerusalem
The Joint Management Authority of the European Neighborhood and Partnership Instrument will award a contract of up to €2 million for the Bio-Xplore Project. This project, initiated and directed by Hadassah College, will be implemented in partnership with the Biodiversity and Environmental Research Center of the Palestinian Authority, Leitat Technological Center in Spain and the Hellenic Regional Development Center in Greece. Two US-based universities, Rutgers University of New Jersey and the North Carolina State University, will also participate in the project. Prof Fridlender, Director of Hadassah College's Biotechnology Department, is the inspiration and driving force behind the BioXplore project. The goal of the project is to identify endemic plants from the Mediterranean area that contain compounds that may be valuable for industrial products such as pharmaceutical products, food additives, cosmetics and others. This collaborative research will promote social and financial developments in the Mediterranean Sea Basin Area. As part of the Bio-Xplore project, a Mediterranean branch of the Global Institute for Bio-Exploration (GIBEX-MED) will be created. (Hadassah College 08.12)
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8.2 Hebrew University Research May Lead to Antibiotics of the Future
New research at Hebrew University, in conjunction with the University of Vienna, could help scientists create a new generation of novel, powerful antibiotics to overcome serious public health problems, replacing antibiotics that in recent years have become less effective, as generations of bacteria have developed resistance to them. The research shows for the first time how a stress-induced machinery of protein synthesis can destroy bacteria cells. The research greatly enhances the understanding by researchers of protein synthesis under stress conditions affect bacteria.
Professor Engelberg-Kulka and the other members of the research team described the discovery of a novel molecular machinery for protein synthesis that is generated and operates under stress conditions in E. coli. The study shows how under stress conditions, such as nutrient starvation and antibiotics, the synthesis of a specific toxic protein is induced that causes a change in the protein-synthesizing machinery of the bacteria. This toxic protein cleaves parts of the ribosome and the mRNAs, thereby preventing the usual interaction between these two components.
As a result, an alternative protein-synthesizing machinery is generates. It includes a specialized sub-class of ribosomes, called "stress ribosomes," which is involved in the selective synthesis of proteins that are directed by the sliced mRNAs, and is responsible for bacterial cell death. In other words, the toxic protein disrupts the normal behavior of the E. coli cells, leading to their deaths – thus ridding the body of the bacteria. The discovery of a "stress-induced protein synthesizing machinery" may offer a new way for the design of improved, novel antibiotics that could effectively utilize the stress-inducing mechanism process in order to more efficiently cripple pathogenic bacteria. Research on the project will continue, and Professor Engelberg-Kulka believes that further work in this area "should contribute to our understanding of that fundamental biological phenomenon, the multi-cellular behavior of bacterial cultures." (TechIsrael Staff 12.12)
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8.3 Mazor Robotics Sells First Renaissance System in the Houston, Texas Market
Mazor Robotics signed an agreement for the purchase of a Renaissance system with Spine Associates of Houston and the Houston Orthopedic and Spine Hospital, formerly known as Foundation Surgical Hospital, in Bellaire, Texas. The Renaissance is Mazor's next generation robotic guidance system for spine surgery. The Renaissance system consists of a robotic device that mounts above a patient's spine, as well as a workstation running advanced surgical planning software. The system has been clinically proven to increase the accuracy of spinal implants and significantly lower rates of misplaced screws and the resulting neurological deficits. Investigators of a recent 14-site international multicenter study published in Spine concluded that Mazor Robotics' technology "offers enhanced performance in spinal surgery when compared to freehand surgeries, by increasing placement accuracy and reducing neurologic risks." For patients, this translates to fewer complications and revisions. The minimally invasive technique contributes to a faster recovery, with less pain and scarring. Additionally, the use of Renaissance minimizes radiation exposure for the patient, surgeon and entire operating room team while in surgery.
Caesarea's Mazor Robotics http://www.mazorrobotics.com is dedicated to the development and marketing of innovative surgical robots and complementary products that provide a safer surgical environment for patients, surgeons and OR staff. Mazor Robotics' flagship product, Renaissance, is a state-of-the-art surgical robotic system that enables surgeons to conduct spine surgeries in an accurate and secure manner. (Mazor Robotics 12.12)
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8.4 ETView Medical Files with FAD for the VIVASIGHT DL Line of Airway Management Devices
ETView has successfully completed filing of a Pre-Marketing Notification Application (510(k)) with the US FDA. The Company expects feedback from the FDA during the next quarter and anticipates entering the US market with the VIVASIGHT DL Airway Management System during 2012. Additional pre-market regulatory filings in Europe and Asia are anticipated during 2012. VIVASIGHT DL is a proprietary, single-use disposable medical device, consisting of a dual lumen airway ventilation tube with an integrated continuous high resolution video airway imaging system permitting airway control and lung isolation during certain surgical procedures. Lung isolation is employed to provide one-lung ventilation in patients undergoing thoracic, cardiac, vascular or esophageal surgeries. During lung isolation, temporary visualization of the patient airway is achieved with a fiber optic bronchoscope while the patient is ventilated and the target lung isolated. Intra-operative surgical maneuvers often require repeated imaging and partial blocking of the airway to maintain lung isolation. It is estimated that over 1.9 million lung isolation procedures are conducted world-wide annually4, accounting for over $250m in single-use medical disposables. ETView has pioneered development of the VIVASIGHT platform (previously known as TVT), combining an airway ventilation tube with integrated continuous high resolution airway imaging for patient airway control and lung isolation capability (eliminating the need for fiber optic bronchoscope6 imaging during these procedures).
Misgav's ETView Medical http://www.etview.com has successfully combined airway management with continuous direct airway visualization for medical professionals. ETView's patented VIVASIGHT SL, a single-use disposable medical device, consisting of a single lumen ventilation tube with an integrated continuous high resolution video imaging system is currently sold in Europe, Israel and the US to overcome current limitations and associated adverse surgical events during lung isolation surgeries. (ETView 12.12)
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8.5 Atox Bio Raises $3.25 Million for AB103 Treatment of Severe Bacterial Infections
Atox Bio has raised $3.25 million in an initial closing. The investment was co-led by Esperante and a private US-based investor and will be used to advance AB103, currently in phase 2 clinical studies for the treatment of Necrotizing Soft Tissue Infections (NSTI). AB103 is a rationally designed short peptide acting as a CD28 modulator regulating the host's inflammatory response. AB103 is undergoing a phase 2 study at 7 leading surgical trauma centers in the US, evaluating its clinical benefit in patients with NSTI. In October 2011, the FDA has granted AB103 an orphan drug designation. Ness Ziona's Atox Bio http://www.atoxbio.com will be included as one of the portfolio companies of Integra Holdings, a holding company currently formed by Yissum, the technology transfer company of the Hebrew University of Jerusalem. (Atox Bio 19.12)
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8.6 Yissum Introduces a Novel Technology for Manufacturing an Anti-Malaria Drug in Tobacco
Combating malaria is one of the eight Millennium Development Goals described in the UN Millennium Declaration. A key intervention to control malaria is prompt and effective treatment with artemisinin-based combination therapies. Artemisinin is a natural compound from Artemisia annua (sweet wormwood) plants, but low-cost artemisinin-based drugs are lacking because of the high cost of obtaining the natural or chemically synthesized drug. Now, Yissum Research Development Company of the Hebrew University of Jerusalem, the technology transfer arm of the University of Jerusalem, introduces a novel method allowing artemisinin production in a heterologous (that is, other than A. annua) plant system, such as tobacco. The method was developed by Professor Vainstein from the Robert H. Smith Faculty of Agriculture, Food and Environment at the Hebrew University. Professor Vainstein has developed genetically engineered tobacco plants carrying genes encoding the entire biochemical pathway necessary for producing artemisinin. In light of tobacco's high biomass and rapid growth, this invention will enable a cheap production of large quantities of the drug, paving the way for the development of a sustainable plant-based platform for the commercial production of an anti-malarial drug. The invention is patented by Yissum, which is now seeking a partner for its further development.
Yissum Research Development Company of the Hebrew University of Jerusalem http://www.yissum.co.il was founded in 1964 to protect and commercialize the Hebrew University's intellectual property. Products based on Hebrew University technologies that have been commercialized by Yissum currently generate $2 billion in annual sales. (Yissum 19.12)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 BIRD Foundation to Invest $8.1 Million in Nine New Projects
During its recent meeting, held in Tel Aviv, Israel, the Board of Governors of the Israel-U.S. Binational Industrial Research and Development (BIRD) Foundation http://www.birdf.com approved $8.1 million of funding for nine new projects between Israeli and American companies. In addition to the grants from BIRD, the projects will access private sector funding, boosting the total value of all projects to $22 million. The BIRD Foundation promotes collaboration between Israeli and American companies in various technological fields for the purpose of joint product development. The Foundation assists by locating strategic partners from each country, making the necessary introductions and providing conditional grants of up to $1 million for approved projects.
The nine projects approved by the Board of Governors are in addition to the 830 projects in which the BIRD Foundation has invested over its 34 year history. To date, BIRD's total investment in these projects exceeded $290 million, helping to generate sales of more than $8 billion. The approved projects are:
1. AGM Tonson and EndoStim (St. Louis, MO) will develop a miniaturized implantable device for GERD (Gastro-Esophageal Reflux Disease).
2. EnVerid Systems and Johnson Controls (Milwaukee, WI) will develop a novel air handling technology for reducing energy consumption of HVAC (Heating Ventilation and Air Conditioning).
3. Ginger Software and Houghton Mifflin Harcourt (Boston, MA) will develop an advanced learning platform for English language learners.
4. iFibers and Mirion Technologies (San Ramon, CA) will develop a portable laser thermoluminescence radiation dosimeter.
5. MedCPU and Cleveland Clinic (Cleveland, OH) will develop a patient care decision support system.
6. QualiSystems and OnPath (Marlton, NJ) will develop an advanced platform for network lab management.
7. RAFAEL and Covanta Energy (Morristown, NJ) will develop a biomass-to-fuel mobile system.
8. Semantipedia and Daylight CIS (Laguna Niguel, CA) will develop a web based, semantic platform for Life Sciences.
9. VivoText and Hasbro (Pawtucket, RI) will develop a life-like speech capability for embedded platforms.
The submission deadline for the next BIRD cycle is on 14 March 2012. Approval of projects will take place in June 2012.
The BIRD (Binational Industrial Research and Development) Foundation http://www.birdf.com works to encourage cooperation between Israeli and American companies in the various areas of technology, and provides assistance in locating strategic partners from both countries for developing joint products. (BIRD 20.12)
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9.2 Israeli Scientist Dan Shechtman Receives Nobel Prize in Stockholm
Prof. Dan Shechtman was awarded the Noble Prize in Chemistry for 2011 in Stockholm by Sweden's King Karl Gustav XVI for his discovery of the Icosahedral Phase that opened the field of quasiperiodic crystals. Shechtman is the tenth Israeli to win a Noble Prize. The 70 year old member of the Technion Israel Institute of Technology faculty will receive €1 million. Shechtman's discovery and the ensuing progress in the field resulted in a paradigm shift in the science of crystallography. A new definition of crystal emerged, one that is open to further discoveries. The Technion has won three Nobel Prizes within seven years. For over 25 years, Shechtman has taught 10,000 graduates in his course on technological entrepreneurship, whose guest speakers have included successful and non-successful entrepreneurs and legal, business and marketing experts. (Globes 11.12)
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9.3 DSIT Receives Order for Underwater Security Systems for Protection of Offshore Rigs
DSIT Solutions announced the receipt of its largest order ever for underwater security systems. The contract calls for the delivery of a large number of AquaShield Diver Detection Sonar (DDS) and PointShield Portable Diver Detection Sonar (PDDS) systems that will protect offshore oil platforms, coastal energy terminals and high value vessels against underwater intrusion and sabotage. The value of the contract between DSIT and an undisclosed Asian customer is $12.3 million. Initial delivery of systems is scheduled to begin immediately with the remainder in 2012. The AquaShield DDS boasts a unique combination of features, making it an ideal tool in the hands of the security officer. It offers the longest range threat detection, while its advanced classification algorithms guarantee accurate threat identification with very few false alarms. The system is fully automatic, eliminating the need for a trained sonar operator. It is almost maintenance free and -as testified to by our customers every day- its robust design ensures long years of flawless operation.
Givat Shmuel's DSIT http://www.dsit.co.il develops sonar and acoustic solutions and acts as a system integrator for advanced Security and Safety Command and Control systems. The Company's offerings are designed to provide the latest in technology and its intelligent application for the energy, commercial, defense and homeland security markets. The Company's offerings include: PortView Harbor Surveillance System (HSS), AquaShield Diver Detection Sonar (DDS) and PointShield Portable Diver Detection Sonar (PDDS), Sonar Simulators and Trainers, Mobile Acoustic Ranges (MAR), Underwater Acoustic Signal Analysis (UASA) systems, and Sonar Upgrade Programs (SUP). (DSIT 08.12)
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9.4 AMOS-5 Communications Satellite Successfully Launched
Spacecom, operator of the AMOS satellite fleet, announced that its AMOS-5 satellite has been launched from Baikonur, Kazakhstan. AMOS-5 soared upward aboard a Proton Breeze-M launcher on 11 December. En route to its 17°E orbital position, the satellite separated from the launcher's last stage within nine-and-one-half hours following ignition and has unfolded its solar panels and communication antennas. In the coming weeks, AMOS-5 will undergo a sequence of in-orbit tests, after which its manufacturer, ISS Reshetnev, will officially hand over control of the satellite to Spacecom. Commercial operation of the satellite's pan-African C-band and Ku-band payload is scheduled to commence in early 2012. AMOS-5's high-power 14x72 MHz and 4x36 MHz C-band transponders, combined with 18x72 MHz Ku-band transponders, will enable it to be a prime carrier of African satellite communications traffic in both broadcast and data services in the years to come. Spacecom's AMOS-2 and AMOS-3 satellites co-located at the 4°W orbital "hot spot," together with AMOS-5 at the 17°E orbital position, will provide coverage over many of the world's fastest-growing and highest-demand satellite markets in the Middle East, Central and Eastern Europe and Africa. Prior to launch, Spacecom pre-sold over 55% of AMOS-5 capacity to a variety of customers, including broadcasters, telecom providers, communications companies and government agencies.
Israel's Spacecom (Space-Communication - http://www.amos-spacecom.com), operator of the AMOS-2 and AMOS-3 satellites co-located at 4°W and the newly launched AMOS-5 to be located at 17°E, provides high- quality broadcast and communications services in Europe, the Middle East, the U.S. East Coast and Africa to direct-to-home (DTH) and direct broadcast satellite (DBS) operators, ISPs, telecom operators, network integrators and government agencies. (Spacecom 12.12)
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9.5 GP Synergy Chooses RADVISION for Video Collaboration Programs
RADVISION announced that GP Synergy, a leading provider of general practice education and training, delivering training across Sydney and northwest NSW, has implemented RADVISION's premier video collaboration technology to further the reach of its educational training services. GP Synergy is leveraging RADVISION's high definition (HD) desktop video systems and infrastructure for administrative and board meetings. Participants can connect to calls hosted on a RADVISION SCOPIA MCU using customized GP Synergy-provided systems, comprised of a unique combination of RADVISION's SCOPIA VC240 and SCOPIA Desktop systems. Additionally, remote participants can join the video calls using their laptops over a Wi-Fi or 3G/4G connection. Prior to choosing RADVISION for its end-to-end video solution, GP Synergy was using a different video system that proved cumbersome because the technology wasn't intuitive and the video quality was poor due to spotty networks, thereby limiting caller participation. When GP Synergy's original video contract came up for renewal, the company turned to RADVISION and VMTech for a more comprehensive, flexible, user-friendly alternative. When an off-the-shelf solution seemed unfeasible, they looked to RADVISION to provide a customized solution. The company wanted a system that would be easy-to-use for a large number of participants, that would allow for intuitive content-sharing, and that would adapt to challenging network limitations.
Founded in 1992, Tel Aviv's RADVISION http://www.radvision.com is a leading provider of videoconferencing and telepresence technologies over IP and wireless networks. RADVISION teams with its channel and service provider partners to offer end-to-end visual communications that help businesses collaborate more efficiently. RADVISION propels the unified communications evolution forward with unique technologies that harness the power of video, voice and data over any network. (RADVISION 12.12)
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9.6 Alvarion Solution Awarded with IBM SAFE Certification for Smart Grid Solutions
Alvarion has received IBM's SAFE (Standard Architecture Framework for Energy) certification for its wireless broadband solution for Smart Grid connectivity. The Alvarion and IBM partnership offers power and water utilities, municipalities and telcos the strength of IBM, the industry's leading systems integrator, software and hardware vendor and Alvarion to optimally meet their Smart Grid network infrastructure requirements. This award also marks a new step in the partnership between Alvarion and IBM on the Smart Utilities and Smart Cities markets. IBM has formed partnerships with a limited number of market leaders in order to deliver a comprehensive end-to-end Smart Grid-ready solution offering to meet utilities' needs on a global level. The Alvarion-IBM partnership offers customers the benefit of Alvarion's best-of-breed wireless broadband connectivity solution, integrated with IBM's Tivoli management platform to ensure a reliable, secure and scalable Smart Grid network infrastructure solution. Tivoli will provide monitoring and fault management of the Alvarion wireless broadband infrastructure, as part of the holistic management of the Smart Grid network, allowing the utility to achieve its Smart Grid project objectives within time and budget constraints.
Tel Aviv's Alvarion http://www.alvarion.com provides optimized wireless broadband solutions addressing the connectivity, capacity and coverage challenges of telecom operators, smart cities, security and enterprise customers. Their innovative solutions are based on multiple technologies across licensed and unlicensed spectrums.
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9.7 Nova Receives Over $7 Million Orders from a Leading Foundry in Asia
Nova Measuring Instruments announced that a leading foundry in Asia recently placed over $7 million orders for its integrated and standalone metrology tools combined with its NovaMARS modeling platform. The tools will support manufacturing ramp up in 28nm technology node and development efforts for both 20nm and 14nm technology nodes. The company expects to ship the ordered tools during the current and next quarter. Rehovot's Nova Measuring Instruments http://www.nova.co.il develops, produces and markets advanced integrated and stand-alone metrology solutions for the semiconductor manufacturing industry. Nova is traded on the NASDAQ & TASE under the symbol NVMI. (Nova 12.12)
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9.8 MTI Wireless Edge 3.3-3.8 GHz 25dBi Parabolic Dish Antennas
MTI Wireless Edge released a new 3.3-3.8 GHz single and dual polarity / dual slant 25dBi 2 feet parabolic dish antennas as part of a whole new product line of high performance low cost parabolic dish antennas. These specific antennas are targeted for three main applications: Worldwide WiMAX bands, Small Cell Backhaul for LTE as well as the North American 50MGHz band in the 3.65GHz frequency for PtP (Point-to-Point)/PtMP (Point–to-Multipoint) networks. These antennas will join the current product line that already includes high performance parabolic dishes of single and dual polarity antennas for WiMAX bands, ISM and UNII unlicensed bands, Homeland Security and Public Safety bands for both PtP and PtMP applications. All antennas are built to withstand the toughest electrical and environmental requirements according international standards such as ETSI while maintaining low cost. Tel Aviv's MTI Wireless Edge http://www.mtiwe.com is a leader in the development and production of high quality, low cost, antenna solutions for wireless applications such as WiMAX, Broadband Wireless Access and RFID. MTI supplies antennas for both military and commercial applications from 100 KHz to 90 GHz. MTI flat panel antenna range includes base station, subscriber and Omni Directional antennas for all broad and narrow band wireless applications in both licensed and unlicensed bands. (MTI Wireless 07.12)
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10: ISRAEL ECONOMIC STATISTICS
10.1 Record November for Israeli Tourism
The Central Bureau of Statistics announced on 12 December that 316,000 tourists arrived in Israel in November 2011, 2% up from the corresponding month of 2010, and the highest ever number of tourists for any November, reported. Of the tourists who arrived in November, 282,000 spent more than one night in Israel, up 1% from November 2010. In the first 11 months of 2011, 3.1 million tourists have entered Israel, down 2% from the corresponding period of 2010. Of this number, 2.6 million spent more than one night in Israel, up 1% from last year. The Ministry of Tourism's investment administration also just approved 16 requests for assistance. Six new hotels will open in Jerusalem, Haifa, Rosh Pina and the Western Galilee and hotels in the Galilee and Tiberias will be enlarged. Two buildings in Haifa will be converted into hotels. The projects will add 470 new hotel rooms and see 300 rooms renovated. (Globes12.12)
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11: IN DEPTH
11.1 ISRAEL: Infrastructure Report for First Quarter of 2012
Research & Markets http://www.researchandmarkets.com said Israel's infrastructure and construction indicators from the Central Bureau of Statistics point to a strong rebound in the first months of 2011, corroborating their 2011 forecast for real growth of 4.2% in construction industry value real growth and 4% for infrastructure industry value. BMI forecast similar levels of growth for 2012. They maintain a bullish outlook for the energy and utilities sector following successes in exploration at the massive offshore gas fields (Leviathan and Tamar), which will prompt the construction of new gas transmission and power generation infrastructure, as the country seeks to maximize its chance of energy independence. The main themes in Israel's infrastructure sector include the following:
• The official cancellation of the $3b Tel Aviv Light Rail project scrapes significant value off BMI forecasts for Israel's railway infrastructure industry value. Disputes over various clauses of the concession agreement between the Metro Transport Solutions (MTS) consortium and the Ministry of Finance, as well as failure to arrange financing, had thrown the project into a stalemate for several months before it was finally cancelled. The cancellation of the $3b light rail project and the delays to the Tel Aviv-Jerusalem high speed rail bode badly for growth in railway industry value, while we see upside in the energy & utilities sector from major projects in the pipeline.
• Political and global diplomatic undertones play a major role in tenders for major infrastructure works. With global major engineering companies eager to participate in transport and energy projects in the Middle East, involvement with Israel can prove to be a liability.
• The discoveries of significant reserves of natural gas in offshore Israel will enable the country to achieve a high degree of energy independence. BMI expects a large amount of construction of natural gas-fired power plants in the coming years as production of natural gas is ramped up.
Market Overview: Israel boasts an open and transparent business environment, coupled with low corruption rates and years of technological advantage. It has developed an economy dependent on exports, which is tailored to suit its poor natural resource wealth. However, political unrest in the region and Israel's active involvement therein, has had negative effects on economic performance. The long-term volatility of the shekel and omnipresent security risk weigh down the country's overall score.
The construction industry constitutes a few large players and a large number of small units. Large construction companies are able to maintain high levels of liquidity. Large existing players such as Africa-Israel Investments, Gazit-Globe, Housing and Construction Holding, and Property and Building Corporation have been expanding into Europe, Asia, Africa and the US by purchasing properties or setting up new greenfield projects. They are raising capital from the Israeli stock market, bonds issue or loans in order to finance these ventures. In addition, in recent years the government has focused on cutting through the red tape and assisting both foreign and local developers as much as possible, encouraging investments in Israeli projects. (R&M 08.12)
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11.2 ARAB WORLD: Will a New Economic Equilibrium Emerge from the Arab Spring?
On 9 December, Ibrahim Saif wrote in Sada that in some respects, the Arab world's protests and revolutions embody the anger of populations toward their economic situation; this anger is buttressed by political tensions which stem from the longstanding inability to participate in political and economic decision-making. In many countries in the region, citizens are calling for a "new equilibrium" between economic actors and politicians. Non-oil producing states that suffer from budget deficits are witnessing growing domestic pressures to redefine the relationship between the state and large business (as well as other economic actors, such as labor and small private enterprises) and revise state policies on wage levels, labor conditions and price fixing. Gulf oil countries do not share the same economic problems, but they must still face the repercussions of the former.
Looking back at the growth levels achieved over the past decade before the outbreak of protest movements, economic growth in the Middle East seemed high by all standard measures, and some countries (namely Tunisia and Jordan) were touted as "success stories." Yet when countries like Egypt, Tunisia, Morocco and Jordan started applying economic reform programs in the early 1990s (Syria also witnessed economic transformations, though its policies came later than the other countries), an imbalanced formula emerged: economic growth combined with declining equality in education and basic services. Rather than stabilize, growth benefited only specific groups—becoming a source of tension that increased the frustration of those not reaping the benefits. What was missing from these growth estimates was an assessment of the economic expansion's impact on overall prosperity, the parity of basic services, and the effectiveness of social expenditures.
So what could change with the Arab Spring?
One factor that must not be underestimated is the shift in economic ideology. The long-prevalent focus on growth and the disregard for its side effects, led by powerful global institutions like the World Bank, the IMF, and the WTO, has been in full retreat since the second half of 2008. Western countries' economic policies have been linked to the global financial crisis, leading the Arab countries that once considered these policies the best model to reconsider how to best achieve prosperity. This applies just as much to countries that received economic growth packages as to the wealthy Gulf states that modeled their strategies on European and American markets, now leading a hasty retreat from free market policies. Although no alternative visions exist yet, it is likely that considerations of income disparity and the lack of economic oversight will no longer be thought of as secondary. The concept of "inclusive growth," which entails incorporating marginalized groups and granting diverse economic actors opportunities to take part in economic decision-making is now an acceptable term in Arab policy-making circles.
Naturally, the change in transitioning countries' political structures will also have a deep impact on the structure of their economies. The reform programs of the 1990s were able to disregard the interests of small and medium-sized enterprises and workers in the informal sector (who in Egypt, for example, comprise half of the actual workforce); the agricultural sector was also neglected, as evidenced in its declining share of GDP over the past decade in Morocco, Tunisia, Jordan and Egypt. Instead, reforms centered on major private stakeholders represented in the chambers of industry and commerce, as well as larger enterprises like banking and telecommunications. As a result, assessments of state performance by the World Economic Forum or in the World Bank's business environment snapshots came to be based on the private sector's degree of satisfaction with the status quo; in other words, the private sector's satisfaction with the government.
Given the political environment, these economic transformations were naturally accompanied by large-scale corruption. As parliaments increasingly lost oversight over economic issues, the transfer of ownership from the public to the private sector was completed through deals led by a powerful public-private alliance serving its own narrow interests. A major player in this process was the security sector. Under the guise of preserving stability and fear of the "Islamist alternative," security institutions have not been subject to any form of regulatory oversight from legislatures or anti-corruption watchdogs, and thus have been able to spread beyond the boundaries of security, becoming partners to business dealings in communications sectors, and occasionally in others, like health and education.
An undeclared alliance emerged between security apparatuses and business elites to facilitate the implementation of policies imposed by international institutions. Government bodies defending labor and consumer rights were stripped down, and the percentage of wages to GDP in the Arab countries during the 1990s and the 2000s fell, meaning that the largest share of economic growth strengthened only those already owning assets. Combined with weak institutions, business-security collaboration and feeble oversight, it was natural that corruption would spread, and economies would not diversify or become more competitive.
But over the past year, the security establishment has been gradually losing its grip on power, and its alliance with the business sector has begun to disintegrate. There is now room for civil liberties to flourish at least partially during the transitional period, so much so that trade unions and NGOs are emerging to defend the various groups that had once been marginalized. In Egypt, for example, a new labor union federation was elected, and doctors and teachers organized strikes after Mubarak's fall to improve working conditions. In Tunisia, the General Labor Union has become an active political force in the country's critical transition period. The newly active trade unions and workers' movements in Tunisia and Egypt hint at the future role organized labor could play.
Practically speaking, the Egyptian and Tunisian experiences so far represent a good model. Tunisian civil society has given birth to new movements with concrete demands, among which is a call for a new economic equilibrium. Importantly, they refuse to turn a blind eye to corruption, as had so long been the norm in economic decision-making. There are also political groups (such as Egypt's April 6th and Jordan's Social Left movements) which champion social justice without hesitation toward taxes and economic policies. In Morocco and Tunisia, the economic programs of the Islamist movements that have succeeded clearly differ from the mainstream, but it also remains to be seen how these slogans will be applied in practice. Should these groups make it to the legislature they will be tested on whether they can effectively defend the same mantras.
In the countries that are still weighing options (such as Morocco and Jordan) things look less promising. The demands for change in the Gulf are still coalescing, and it is unclear how the new equilibrium will unfold. Approaches have varied: in some Gulf states (namely Saudi Arabia and Qatar) expansion of public spending, rather than the adoption of radically different policies, has been the answer, but this does not apply for Oman and Kuwait, which have been somewhat more open to reform. Bahrain, meanwhile, has resorted to a security approach to deal with protesters, for which it has received international rebuke.
The hard truth is that a more representative equilibrium is crystallizing. Numerous emerging parties are vying for status, while the traditional powers attempt to preserve the status quo. The challenge now is how the newcomers to the decision-making process can form a coalition, reach a new equilibrium and achieve the economic growth that can help solve their countries' problems.
Ibrahim Saif is an economist and a resident scholar at the Carnegie Middle East Center. He specializes in the political economy of the Middle East, and his research focuses on international trade and structural adjustment programs in developing countries, with emphasis on Jordan and the Middle East. (Sada 09.12)
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11.3 LEBANON: Lower Yields
Lebanon's government is struggling to strengthen the country's agriculture sector, with a lack of investment by successive administrations, a preference by many Lebanese for imports and political uncertainty across the region all contributing to a general production decline.
Agriculture's economic contribution has been falling for many years, with services, construction and even manufacturing all eclipsing farming's share of GDP. According to the International Monetary Fund (IMF), agriculture's contribution to GDP has slipped in the past 15 years from just under 7% to less than 5%. In part, the IMF said the retreat is due to infrastructure shortcomings, relatively high costs and an uncertain political environment.
Though its GDP contribution is slowly dwindling, the number of people employed in the sector remains high, with estimates putting the rate at around 25-30% of the total Lebanese workforce. Due to the reduced cash flow into the agriculture community, there has been an increase in rural poverty, aggravated by a lack of investment in infrastructure and services in some regions.
Yet there is hope for the sector, with the Ministry of Agriculture having successfully argued for an increase in its budget allocation for 2012. Under the government's draft budget, the ministry will have its funding increased in the coming year to $54.4m. While this sum is double the ministry's 2011 allocation, it is still only a fraction of the almost $14b the government plans to disburse next year.
However, there are also no guarantees the additional funds will be released on schedule. Finance Minister Mohammad Safadi's draft has come under fire from many quarters, with criticism that the slowing economy cannot sustain the 6.24% increase in spending. There has also been opposition over plans to raise the value-added tax and impose higher duties on income from interest and real estate transactions.
Another concern for Lebanese farmers are increasingly strident calls for stiffer sanctions against neighboring Syria. Not only is Syria an export market for Lebanese agricultural products, particularly processed foods, but it is also the only country sharing an open land border with Lebanon. As such, if the Arab League or the broader international community calls on Beirut to impose sanctions against Damascus, Lebanon's farmers would be directly affected.
On November 14, Antoine Howayek, the president of the Federation of Agricultural Producers in Lebanon, told a Lebanese daily that should trade sanctions be imposed, this could deal a blow to the agricultural sector. Sanctions would not only cut export trade to Syria, but also sever Lebanon's trade routes to the rest of the Arab world, Howayek said. However, having voted against suspending Syria from the Arab League on November 12, it is unlikely Lebanon would move to enact stringent sanctions against its neighbor.
Despite the many obstacles, the government continues to push for improvements in the sector. In late October, soon after having gained the funding increase for his portfolio, Hussein Al Hajj Hassan, the minister of agriculture, said it was crucial to overhaul agriculture-related legislation and to bolster scientific research to improve output and promote cooperation between public and private sectors. "I stress the importance of food security and safety in the development of the agricultural sector and to guarantee sufficient production and high productivity at reasonable cost, as well as adequate prices for both consumers and farmers," Hassan told a regional conference on food security.
Among the minister's suggestions is for Lebanon to become a center for seed production, rather than a net importer of seed stocks. To achieve this, the country needs to invest in research facilities and draft new legislation, he said. "Lebanon has the ability to become a seeds and saplings exporter. We have the suitable climate, water and soil needed, but we lack appropriate policies," said Hassan.
With so many issues to be dealt with, including a chronic electricity shortage, a stalled privatization program, a contentious budget and a fragile political environment, it may be some time before the government can implement the policies both Hassan and the agriculture sector at large would like to see. (OBG 09.12)
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11.4 BAHRAIN: Looking up
After some difficult months, Bahrain's economy has returned to growth and looks set to accelerate in 2012. While concerns remain about the international climate, public investment and renewed private sector activity are having a positive effect on the country's economic health.
The Kingdom is expecting growth of 5% next year, Sheikh Mohammed Bin Essa Al Khalifa, the chief executive of the Bahrain Economic Development Board, told the international press in late October. Al Khalifa said that the government's stimulus spending, plus financial support from the GCC, would contribute to economic expansion. The GCC has pledged $10b over 10 years to support the state's economic and social development policies, including the building of housing to address the current shortage.
Al Khalifa added that local business representatives and officials were intensifying their promotion of the country as an investment destination, taking steps that have included visits to the UK, US, France, Italy and Germany. In mid-October, for example, Al Khalifa was in the UK, encouraging British firms to invest in Bahrain. He highlighted opportunities in sectors that include infrastructure, construction and manufacturing.
The economy is expected to expand by between 2% and 3% in 2011. This muted growth has been attributed to an uncertain global economic outlook, as well as the effect of social unrest in Bahrain and elsewhere in the Middle East earlier this year. However, despite the slowdown, unemployment remains low, below 4%, the Bahrain News Agency reported in November, and the economy is now picking up.
Public spending, which is particularly focused on the development of infrastructure, will likely boost the economy. Major projects include a 40-km causeway to Qatar and road improvements to ease Manama's chronic traffic problems. Some $37m in infrastructure projects were awarded in July and August alone. Considerable investments are also being made in new mixed-use property developments around the capital, as residents look to move to less crowded areas with more modern accommodation and amenities.
International press reports suggest that business activity is picking up in the fourth quarter as stimulus measures feed through to private sector demand. There is also confidence that Bahrain can maintain, if not enhance, its position as one of the region's leading financial centers – an integral element of its economic diversification program, which aims to reduce reliance on hydrocarbons exports.
Speaking at seminar entitled "The Resilience of Bahrain's Financial Sector", held on November 2 in Manama, Ashraf Bseisu, the CEO of Solidarity Group Holding, a major Bahrain-based provider of takaful (sharia-compliant insurance), said that the Kingdom was well-placed to develop its financial services industry in the wake of the global financial crisis. He added that the country should focus on growing segments such as Islamic finance. "We need to look at niche markets and continue to develop as the leading center for Islamic banking and insurance," he said.
Home to the world's first Islamic financial center, Bahrain has a deserved reputation as a leading player in the field, several speakers noted. Furthermore, opportunities for growth exist regionally, internationally and indeed domestically – the ongoing residential construction program is expected to offer considerable potential for housing finance.
As indicated by the significant amount of public investments that are being carried out, the government is aware of the importance of keeping the economy moving in an uncertain global climate while addressing issues of concern to Bahrainis and international investors alike.
While Bahrain has been one of the world's more open and liberalized economies for some time, the Kingdom fell slightly in the World Bank's 2012 Doing Business overall ease-of-business rankings, from 33 to 38, out of 183 countries. In an October 23 column reviewing the results of the World Bank report, Bahraini MP Jasim Ali urged the GCC countries to continue carrying out reform measures that would likely improve their future rankings. Given its proven history as a reformer, Bahrain should not find it too difficult to make further improvements to the business climate, which would strengthen its efforts to attract international investment. (OBG 08.12)
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11.5 QATAR: Tourism Aims Beyond 2022
Qatar's tourism sector will be one of the big winners of the 2022 FIFA World Cup, with an accelerated building program of hotels, hospitality facilities and entertainment centers aimed at making sure fans will enjoy their stay, though care has to be taken to ensure that once the World Cup is over, visitors keep coming through the turnstiles.
Even before winning the rights to host the 2022 World Cup, Qatar had been working hard to put in place the infrastructure to support a large-scale tourism industry. Some of these developments include an international airport that will be able to process 50m passengers a year and a planned proposal to build a terminal to handle cruise liners.
The finishing touches have been put to the $1.2bn Qatar National Convention Centre, which has already begun staging events ahead of its formal opening before the end of the year, strengthening the country's appeal as a business and congress destination. The center hosted the World Innovation Summit for Education last month and is planning to host the 20th World Petroleum Congress in December. In total, Qatar expects around $25bn to be invested over the coming 11 years in tourism-related projects, according to information compiled by the Qatar Tourism Authority (QTA).
While much of this investment is still to come, Qatar's tourism sector is already expanding, despite regional unrest and concerns over the global economy. The country has posted solid growth in 2011 while many nations in the region have seen arrival numbers slump or only marginally increase. According to data issued by the UN World Tourism Organization (UNTWO) at the end of October, incoming tourism numbers are forecast to increase by between 4% and 5% over the next 12 months — a significant contrast to the drop in visitor numbers across the Middle East, where the agency says there has been an 11% decline.
Indeed, it is possible that Qatar benefitted from the instability in some parts of the Middle East and North Africa. In the first six months of 2011, there was a 39.1% jump in the number of visitors from other GCC states, visitors who may have chosen to stay closer to home rather than travel to other countries in the region that were embroiled in political unrest.
Data issued by the QTA also showed that the first half of 2011 saw a steady rise in hotel occupancy rates, with 63% of beds occupied nightly, up from 61% for the same period in 2010. Additionally, overall arrival numbers climbed 3.12%. Though visitor numbers and occupancy rates peaked in February, coinciding with Qatar hosting the Asian Football Cup, the drop off following the final whistle was negligible, according to the QTA.
This could be significant for Qatar's tourism aspirations deep into the next decade and beyond. While the country is pinning much of its medium-term hopes on the 2022 World Cup and the surge of visitors the event will undoubtedly bring, in the longer term Qatar must be able to maintain the momentum it generates in the lead up to football's premier tournament. To do so, Qatar will need to expand the range of tourism activities it has to offer and hone those already up and running.
The expected growth in tourist arrivals has prompted a flurry of building activity, with QTA data showing 77 new hotels and a further 42 hotel apartments under construction as of mid-2011. Of these, 25 hotels and 10 hotel apartments are scheduled to be completed by the end of 2011, adding just under 6,400 rooms to current availability. In total, it is estimated that some 5000 hotel rooms will come on line every year up until the 2022 World Cup kicks off.
It was important to strike a balance between the needs of a one-off event such as the World Cup, and a longer-term vision for the economy and tourism, Vetry said. Qatar should be able to do that with ease, however, seeing as how it already hosts several annual events, including the Qatar Masters Golf Tournament, Qatar Open, ExxonMobil Open Championship, Qatar Cycling Tour and the Asia Football Cup of Nations.
Though it will be a long time before Qatar has a clear impression of how well its tourism industry will adapt to life after the World Cup, the sector will be well-equipped to meet visitors' needs. The challenge will be to ensure it cashes in on the publicity and goodwill a successful staging of the event will provide. (OBG 13.12)
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11.6 UAE: Abu Dhabi Linked by Rail
Abu Dhabi will soon be connected to the other emirates of the UAE and to the wider region by a broad-gauge rail network that will streamline logistics, boost exports and increase industrial development. On November 15, Richard Bowker, the CEO of Etihad Rail – the state-owned company tasked with developing the UAE's mainline rail network – announced it would soon call for tenders for the second stage of the $11b project. The contracting process for phase two would begin in a matter of weeks, with contracts being awarded by the second quarter or third quarter of next year, Bowker told media at a conference in Abu Dhabi. "This stage is bigger than the first in scale and scope and will connect ports with industrial and urban centers," he said.
That would put the cost of the project's second phase well over $900m, the price tag for the initial stage, which consisted of track construction and associated infrastructure connecting the cities of Habshan, Shah and Ruwais in Abu Dhabi's western region. The link between Habshan and Ruwais is scheduled to be completed by 2013, with the Habshan-Shah line to finish the following year. In late October, Etihad Rail signed a contract with the UAE division of Mumbai-based Dodsal Engineering and Construction and Italian firms Saipem and Tecnimont for the first stage of the project.
The tender for the second stage will be to construct the rest of the line through Abu Dhabi, including logistics centers in and around the capital, as well as the extension of the network to neighboring Dubai. The third and final stage involves pushing the line into the remaining northern emirates and building connections with yet to be constructed rail grids in Saudi Arabia and Oman.
In total, the network will consist of more than 1200 km of track and provide heavy cargo shifting capacity to access ports on both the Arabian Gulf and the Gulf of Oman and thence to the Indian Ocean, a significant advantage should there be any disruption to shipping traffic in the Strait of Hormuz. When completed, the dual-track network will be able to handle an estimated 50m tonnes of freight annually.
Though the first train will not pull out before 2013, Etihad Rail has already signed up several major clients, having struck agreements with cement producer Arkan and Etihad Steel, along with the Abu Dhabi National Oil Company (ADNOC), which intends to use the line to haul sulphur, a by-product of its operations. Customers' increasing interest in freight haulage services helps prove the project's viability, suggested Bowker. "Etihad is now moving from a single-customer railroad to a rail network with multiple customers," he said.
Etihad has already placed orders for locomotives from the US and 240 Chinese-built wagons to carry ADNOC's sulphur. The firm estimates it will carry up to 22,000 tonnes of granulated sulphur a day from Shah and Habshan to the port of Ruwais for export.
While the project will benefit all of the UAE's states, the emirate of Abu Dhabi looks to gain the most from the national rail grid, in the beginning at least. Not only will the first and most of the second segments of the line be built within the emirate, but all of the clients linked to the development so far are Abu Dhabi firms. The emirate will also benefit when the network is linked to the wider GCC rail system in both Saudi Arabia and Oman.
While heavily dependent on hydrocarbons, Abu Dhabi has been actively diversifying its economy, including investing in chemicals and manufacturing. Rail is one of the best methods to move both raw materials and finished products from these industries. As such, it is not surprising that Etihad Rail is 70% owned by the government of Abu Dhabi, with the remaining 30% controlled by the UAE's federal government, of which the emirate is the largest single contributor of funds.
Parts of the Etihad network, especially those to be laid down in Abu Dhabi, will offer challenges to engineers, due to shifting sands and extreme heat. However, officials are confident these can be overcome, and that the emirate is on track to further boost its economy. (OBG 08.12)
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11.7 OMAN: Economy on the Rise
Oman's economy looks set for a period of solid expansion, with the state's pump-priming efforts of the past year having a positive impact on growth. Much of the same is expected in 2012 as the government increasing its spending to create jobs and improve key infrastructure.
In late November, Oman's minister of financial affairs and deputy chairman of the financial affairs and energy resources council, Darwish bin Ismail Al Balushi, briefed the members of the Shura Council on the draft budget for the coming financial year. As detailed by the minister, total spending for 2012 has been set at $26b, with expected revenues forecast to be $22.85b.
The economy should grow by 5.5% this year, with GDP projected to expand by 5% in 2012, the minister said. The increase planned for next year, on top of the above budget spending to date in 2011, will help further stimulate the economy and should push growth to the levels forecast by Al Balushi.
In its 2012 spending program, the government will be increasing expenditure by around 10% over the current year's total, with much of the additional outlays being directed towards projects aimed at boosting the economy and creating employment opportunities for Omanis. "The higher spending will boost employment and create about 30,000 jobs for students expected to graduate in 2012, and 50,000 more jobs will be made available to those who are already on the waiting list," Al Balushi said in his address to the council.
Most of the positions to be created under the 2012 budget will be in the public sector, though the government hopes that the private sector will increase its hiring as the economy expands. The government has moved to encourage Omanis to take up jobs in the private sector, amending the regulations governing employment conditions to shorten the working week to five days, or 45 hours, in line with practices in the public sector, and also raising the minimum monthly wage to $472.
These changes should help put the private sector on an equal footing with the public sector and make employment in the non-state segment of the economy more attractive, said Margaret Purcell, the chief economist with BankMuscat. "Everybody is on a five-day week and the hours are clearly specified, so people do not feel they will be working longer if they are in the private sector," she said in an interview with the Muscat Daily on November 29.
The issue of private sector employers favoring cheaper expatriate labor is likely to remain a challenge. Data issued by the government in late November shows that in the nine months to the end of September, the number of foreign workers in Oman actually grew to 1.06m, up from the 955,000 in December.
Though the finance ministry has penciled in a fiscal deficit of just over $3.1b in the draft budget, a total of roughly 5.4% of GDP, it is quite likely this figure will be drowned out by the flow of black ink into the state ledgers. The prospects for Oman's finances are actually more promising than they first look, given that projections for oil revenue were based on a price of $75 per barrel, short of the $110 mark that crude is trading at as of the beginning of December.
Output from Oman's oil fields is also forecast to increase in the coming year, with production set to rise by 2% to 915,000 barrels per day, further topping up state coffers. With oil revenue representing some 72% of state income, prolonged higher crude prices and increased output will help fund the extended investment program outlined in the budget.
The government will be further comforted by the steady fall in inflation, with the rate of increase in the cost of living easing to 3.7% year-on-year as of the end of September, according to figures released by the government on November 20. The September figure was the lowest in seven months and was well down on the 5.3% posted in August.
Inflationary pressures should remain subdued well into the new year, said Fabio Scacciavillani, a chief economist at the Oman Investment Fund. "Domestic price pressure has been largely subdued, and commodity prices in the global markets have been declining or have stabilized," he told the Muscat Daily on November 21. "We should see a further slowdown in inflation in the coming months."
There is always a chance Oman's economy could dip slightly were oil prices to take an unlikely plunge, but the Sultanate does seem to be well placed for the coming year. With little direct exposure to European debt, and ample reserves to fund any shortfalls should gaps need to be plugged in the budget, Oman is expected to be able to meet most of its targets for 2012. (OBG 20.12)
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11.8 OMAN: Shoring up Supply
The Omani government is moving forward with plans to raise prices for natural gas in an effort to recalibrate the supply-and-demand equation, with local demand for the feedstock rising rapidly on the back of industrial expansion and domestic supplies limited. As reported by the Oxford Business Group, while some producers will doubtless be affected by the move, it is designed to balance the needs of industry with those of the broader economy, keeping local industries running while the government continues to search for additional domestic reserves.
With global market conditions prompting increasing use of the feedstock and the Sultanate's reserves relatively smaller than those of some of its neighbors, a rebalancing is necessary, and the rise will bring Omani natural gas prices more in line with the market, local media has reported.
However, the increase could temporarily impact the expansion plans of several foreign and domestic industrial players, which include iron and steel producer Jindal Shadeed, aluminum producer Sohar Aluminium and global mining firm Vale.
Downstream processing activities, especially in the Sultanate's burgeoning aluminum sector, could also be affected. Oman Aluminium Processing Industries (OAPIL), which is aiming to more than double its processing capacity, is dependent on low-cost gas from the government, according to Hussain Salman Al Lawati, the vice-chairman and managing director of Oman Cables, one of OAPIL's parent companies. "Our expansion will depend on commitment from Sohar Aluminium for liquid aluminum and the government for natural gas," he told The Times of Oman on November 16.
Oman India Fertiliser Company (Omfico), which ships most of the urea it produces to India, has reported the price of gas purchased from the government could increase fourfold. Changes to its contract could increase prices from $0.77 per million British thermal units (mBtu) to $3 per mBtu, thereby increasing imported urea prices by around $60 per tonne. Though the price of urea supplied by Omfico would almost certainly increase from its current price of around $150 per tonne, it would likely still remain far below current market prices, which can reach up to $500 per tonne.
Oman has proven natural gas reserves of around 30trn cu ft, according to the Oil & Gas Journal. The Sultanate produced about 875b cu ft of natural gas in 2010, amounting to around 2.4b cu ft per day, according to the US Energy Information Administration (EIA), and in 2009 exported 208b cu feet of natural gas, coming in only behind Qatar in the region in terms of exports. However, while the Sultanate is a net exporter of natural gas, shortfalls in supply during times of peak demand have led the government to begin importing gas as well. This mostly comes from Qatar and the UAE through the regional Dolphin Pipeline system, which transports 2b cu ft of natural gas per day.
The government is currently investigating ways to increase its reserves, according to the EIA. This would help it meet the demands of export contracts, as well as provide ample supply for domestic consumption, which rose by 135% between 1999 and 2009. This rise was largely due to growth in both the population and the economy. The growth of industry in the Sultanate has also increased demand, and the government has set aside a significant amount of natural gas to fuel industry expansion. "Oman has set aside 5trn cu ft of natural gas for industries in Sohar, as part of a major industrialization drive in [the city]," Frederic Rouyer, CEO of OAPIL, told The Times of Oman in November.
The discussion of raising prices is heating up just as Oman has been accepted to the Gas Exporting Countries Forum, an intergovernmental organization comprising 12 gas-producing countries – including Russia, Iran and Qatar – which together control more than 70% of the world's natural gas. Sergei Shmatko, the Russian minister of energy, told Russia's state-owned news agency RIA Novosti in mid-November that the organization is seeking to expand its global reach. "Requests for admission from several other countries are currently under consideration," he said. "The forum has become an effective platform to discuss very diverse issues of the gas market development."
As Oman has become a more active participant in global energy markets – particularly as an exporter of oil and gas – the need to bring prices in line with global norms has grown more apparent. While a price increase may not receive a warm welcome in many industries, it will aid the Sultanate in maintaining its supply and meeting the population's growing energy demand in the long term. The extra earnings, in turn, will likely help expand domestic industries and create a more solid foundation for maintaining its position as a natural gas exporter. (OBG 08.12)
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11.9 SAUDI ARABIA: Opportunities Abound In Saudi Arabia's Fast Growing Retail Market
Jones Lang LaSalle, the world's leading real estate investment and advisory firm, published a special report titled "Saudi Arabian Retail Landscape – Undoubted Opportunities: Unique Challenges". Focusing on the Kingdom's retail real estate market, the report outlines that whilst Saudi Arabia is subject to many of the same issues impacting the retail sector at the global and regional levels, the local market is characterized by a number of unique challenges. The report highlights the considerable market potential resulting from favorable demographics and domestic demand but outlines how this opportunity is constrained by a number of unique challenges including seasonal aspect of religious tourism, market concentration, recruitment issues, supply chain constraints as well as cultural limitations. The report concludes that while retail spending continues to grow rapidly, new retail space is being developed to the point that there is retail saturation in some areas which is leading to a growing polarization of the winners and losers.
Saudi Arabia is the largest and one of the fastest growing retail markets in the MENA region and continues to attract strong interest from retail brands from across a range of categories as they respond to the many opportunities available, principally driven by the Kingdom's relatively youthful population.
A number of global brands as well as ‘up and coming' retailers from the UAE, Lebanon, Turkey and Asia are currently looking to increase their presence in the country. Responding to this strong demand, the amount of retail floor space in Saudi Arabia has increased rapidly, with the area of mall based retail space increasing by almost 80% in Jeddah and 65% in Riyadh since 2005.
This rapid development has created challenges as well as opportunities as parts of the market are increasingly reaching saturation point. As the sector continues to mature some of the older malls are now starting to lose market share to more modern centers that offer international shopping environments in terms of brand mix facilities, and amenities along with complementary leisure components. This means that some centers are starting to struggle and now require repositioning or possibly even conversion to alternative uses.
The Jones Lang LaSalle report highlights a number of key characteristics that contribute to the unique nature of the Saudi Arabian retail market, each of which will have implications on both existing and proposed projects. These characteristics include:
Cultural Considerations: Visiting malls has developed into a favorite Saudi pastime as there is a limited range of entertainment venues and public spaces in the Kingdom. The attraction of indoor air conditioned malls is further enhanced by the harsh summer weather conditions. Although these factors represent an opportunity for the growth of the shopping and indoor leisure/recreation sector, the retail market is constrained by cultural factors such as the inability of malls to offer cinemas which are a mainstay of their entertainment offer in other markets.
Women represent a significant opportunity for retailers in Saudi but the ease of shopping is reduced by current restrictions on their ability to drive. Another unique cultural consideration is the limitations upon single men visiting malls during week-ends where access is only available to families. This has resulted in the growth of street retail and showroom formats, especially for categories targeting single men such as electronics, menswear, sportswear, watches, fast food, etc.
Importance of Religious Tourism: The 2.5 million pilgrims performing Hajj each year (with many others visiting Saudi to perform Umrah during other times of the year) provides a major boost to the Saudi retail market as well as a challenge due to its extreme seasonality. The Mecca and Medina markets have traditionally been underprovided with retail facilities but large new mixed use developments are now being built around the Grand Mosque incorporating major retail components. While Mecca and Medina will be the primary beneficiaries of retail spending from the millions of pilgrims that flock there for religious occasions such as the Hajj and Umrah, Jeddah is the principle international gateway for such visits. Many of the pilgrims on their way to Mecca and Medina spend a few days shopping in Jeddah after their journey and this provides a huge boost to the city's retail sector that is not currently being fully exploited.
Concentration of franchisors and operators: A handful of groups control the vast majority of the retail brands in Saudi Arabia, with some of the same groups being among the largest shopping center developers and landlords in the country. This unique situation creates both barriers to entry for aspiring independent retailers and also potential conflicts of interest in the relationships between retailers, landlords, investors and lenders. This concentration element has resulted in many malls ending up not only carrying the same brands, but also looking exactly the same which is increasingly becoming unsustainable.
Recruitment: The ability to attract and retain a knowledgeable and qualified workforce is becoming a key differentiator of retail brands globally, so this is not a uniquely Saudi issue. In Saudi Arabia the human resources challenge is increased by workplace segregation, complex labor regulations, the unique permit system for foreign labor and skills gaps among local and expatriate candidates. The underlying theme here is that human resourcing restrictions, whether gender based or otherwise, will pose a challenge in attracting the right talent across the entire retail sector.
Logistics and supply chain management: The ability of retailers to import goods into the country and distribute them efficiently to their stores is currently a challenge. While there have been improvements in these areas in recent years, the supply chain infrastructure in Saudi Arabia remains less advanced than in other markets in the region. The government recognizes the importance of connectivity and has allocated record amounts to infrastructure and transport projects.
While the fundamental economic and demographic drivers within Saudi Arabia remain attractive and suggest the overall retail market will continue to expand over the coming years, retail stakeholders will have to have particular regard to the unique characteristics of the Saudi market. Their ability to adapt to these factors will, to a large extent, determine the success of specific brands as well as specific shopping centers in the increasingly competitive market. (Jones Lang LaSalle MENA 05.12)
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11.10 TUNISIA: Opening Economic Doors
With the country's first post-revolution election now successfully concluded, Tunisia's government once again has begun to focus on economic policymaking, in a bid to mitigate some of the uncertainty brought about by the political instability.
The moderate Islamist Ennahda won 90 of the 217 seats in the October 23 poll, more than three times as many as its nearest rival, the Congress for the Republic (CPR), securing just over 40% of the popular vote. However, while having a strong mandate to form the next government, party officials have been quick to stress Ennahda's commitment to a market economy, one that gives greater emphasis to the private sector.
At the end of October, senior Ennahda official Rached Ghannouchi told the Reuters news agency that the party had a liberal economic program that would encourage investment. "We are committed to providing a climate which is far from corruption and which allows the interest of the investors to be protected," he said. On November 9, Hamadi Jebali, the secretary general of Ennahda – shortly before he became the country's next prime minister later in the month – told a meeting of party officials and representatives of the Association of Stock Market Brokers that the new government would strive to encourage and support both Tunisian and foreign investors. Ennahda would also work with all elements of society and the political sphere to build consensus and a sound economic development scheme, he said.
While stressing its commitment to rebuilding the economy, Ennahda differs from the interim administration it will be replacing in terms of how this will be achieved, and on how to pay for that regeneration.
According to Ridha Saidi, the head of Ennahda's economic bureau, the incoming government is wary of dipping too deeply into the international debt market to fund reforms and new projects. Tunisia's interim government had drafted an economic package, dubbed the Jasmin Plan, which encompassed legislative and regulatory reforms aimed at creating a more open business climate with extensive investments and incentives to boost economic activity. Of the plan's $87bn budget, some 30% was to be raised through overseas borrowings, a level Ennahda saw as too high. "We cannot mortgage the country and future generations," Saidi told local media on November 13. "We pay as much for the debt than we do for the debt's interest itself: it's a lot, and Greece is a great example of what can happen with high debt."
As an alternative, Ennahda has proposed opening up the financial sector to greater participation via sharia-compliant lenders, who are a recent arrival in the country, while also considering making use of sukuk, or Islamic bonds. By encouraging more Islamic banks to enter the local market, and by making use of the products the sector offers, Ennahda officials such as Ridha Chkoundali believe the country's banking industry will be strengthened. "The banking system will be diversified and the Tunisian financial market will therefore be made up of traditional and Islamic banks," said Chkoundali, an economics professor and one of those shaping the party's economic program. "As a result, there will be more competition between the banks," he added.
Another reason that the government may be unwilling to raise loans overseas is the potential cost. In early November – just days after the election results were announced – ratings agency Standard & Poor's (S&P) reaffirmed Tunisia's BBB- rating, with a negative outlook assessment, first assigned to it in March. Such a rating would make lenders slightly wary, especially with the international debt markets deeply troubled by events across the Mediterranean, while interest rates would be at the higher end of the scale.
It its statement, S&P said the outcome of the ballot itself was not a factor in its decision not to improve Tunisia's ratings or outlook. Moreover, the agency said it would be closely following "whether the new government will support the economic recovery by taking medium-term policy measures and pursuing structural reforms while maintaining macroeconomic stability".
While sending out positive messages to local and foreign businesses, the new government will need to act fast to improve the lives of Tunisians on the street. Data issued by the National Institute of Statistics in early November shows that unemployment topped 18% as of the end of May, with just over 700,000 registered as jobless, some 200,000 more than a year before.
With most analysts forecasting modest economic growth at best this year, and with GDP predicted to either remain stagnant or rise by 1%, according to local media, the government will be looking to the new year for signs of recovery, and with it an increase in hiring to help drain off some of the unemployment pool. In order to achieve this and other goals set by the party, such as boosting GDP by 7% annually between 2012 and 2020, increasing per capita income from $4400 to $7000 and making the economy more resistant to external shocks, Ennahda is going to have to work hard alongside both domestic and foreign investors. (OBG 12.12)
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11.11 TUNISIA: Tunisia's Constitutional Process - The Road Ahead
On 9 December Amine Ghali wrote in Sada http://carnegieendowment.org/sada that following the 23 October elections to Tunisia's 217-member Constituent Assembly, all eyes are on the assembly's mandate to draft a new constitution: Will the assembly successfully deliver an approved constitution? Will it reform the economy? Will it tackle the security sector and revamp the judiciary? In short: Will it pave a smooth road to the next stages of institutional reform?
The first sign of how this process will unfold was revealed in the government's formation. Following its acquisition of 90 of the 217 seats of the assembly, Ennahda chose to form a "unity government" and extended offers to other parties proportional to their gains in the elections. Two major parties accepted: the Congress for the Republic (CPR) and Ettakattol party (FDTL). The centrist Ettakattol claims to have accepted the offer for the sake of "national interest" where a unity government might have better chances of handling the difficult challenges of the transition (the greatest of which is actually forming a functional government). A number of progressive political parties which differ ideologically with Ennahda (e.g., the Progressive Democratic Party (PDP), Democratic Modernist Pole (PDM), Afek Tounes, Tunisian Workers' Communist Party (PCOT), among others) have turned down the offer, preferring to remain the opposition. Interestingly, no offer was made to the Popular Petition Party (Aridha Chaabia) of wealthy Tunisian businessman Mohamed Hechim Hamdi, (which performed surprisingly well in the elections), likely due to lingering perceptions of its links to remnants of the old regime.
The three-party coalition, which now holds a comfortable majority of 139 seats, has reached an agreement whereby Ennahda's deputy leader Hamadi Jebeli is expected to become prime minister, while the CPR's veteran human rights activist Moncef Marzouki will occupy the post of president. Ettakattol's leader Mustapha Ben Jaafar heads the constituent assembly. The alliances and counter-alliances of the early post-election phase foreshadow the dynamics to come once discussion of the constitution gets fully underway. The fate of many laws will rest on a compromise among the members of this three-party coalition and this will highlight the difficulty of dissociating political parties' short-term agendas with the assembly's mission of drafting a constitution.
This Wednesday, the assembly met to debate and begin voting on what the Tunisian press has dubbed a "mini-constitution": legislation on institutional procedures and powers that will be in effect until a new, permanent constitution is drafted and approved. Among the contentious issues that have been decided so far are the new prerogatives of the president and prime minister and the balance of power between them. Initial proposals led by Ennahda deprived the presidency of any real power, but following strong opposition from other parties (including those in the coalition) to a "weak presidency," the president will regain several prerogatives although not as many as the prime minister: to outline Tunisia's foreign policy in consultation with the prime minister; to designate the head of government; to sign and promulgate laws passed by the constituent assembly; and to command the armed forces. Article 7 (which passed amidst heated debate on 8 December) also allows the president, the prime minister and the head of the assembly to assume additional powers in "exceptional circumstances" that would prevent the constituent assembly from undertaking its normal activity. Several MPs requested the head of the assembly to provide greater clarification about what "exceptional circumstances" entail. Iyed Dahmani of the PDP opposition party noted much of the opposition came from fear that the clause might provide grounds for a new dictatorship.
Another important feature of the assembly's work is defining its actual goals, which (beyond the task of drafting the constitution) are vague. Given the legislative vacuum pending the general elections, the assembly will see its mission expand, allowing it to act as a regular parliament: discussing and approving the budget of 2012, revising past laws and passing new ones, as well as calling past and present members of the government to account for themselves. Members seem more than willing to take up this new role, which would transform it into an all-powerful legislative body. But these new prerogatives may at best create a diversion away from the constitution's drafting; at worst, they will lead to ideological divergences which will leak into different coalitions as factional interests when they return to the primary business of the constitution. This might undermine the assembly's aim to meet the deadline of one year to deliver a new constitution and to organize the subsequent presidential and legislative elections. Opposition parties, supported by public opinion, are holding the leading coalition accountable to this commitment, which was agreed (in the "Declaration of the Transitional Process") before the elections. On 7 December, 153 members voted against a proposal to extend the mandate beyond one year (39 voted for, and the rest abstained).
The procedural bylaws of the assembly will also affect its ability to deliver on its promises. The drafting process of the permanent constitution is still under debate: Should it involve only the members of the constituent assembly in plenary sessions or drafting committees, or should it be supported by a team of legal experts entrusted with translating assembly discussions into legal provisions? The members of the assembly have decided, however, that constitutional articles will be approved by 50% +1 for all decisions. The alternative was 50%+1 for affairs of state and 2/3 +1 for constitutional articles. While both options would allow a majority party or coalition to impose its views, it is important to remember that Ettakattol and CPR have debated (and opposed) Ennahda regarding the formulation of the assembly's bylaws. As both can be expected to oppose Ennahda on other issues, the definition of "the majority" was paramount.
One question that has been settled is how to finally approve a constitution: it will be passed by a two-third majority and if it is not passed after two readings, it will be submitted to a popular referendum. But outside the assembly, popular opinion may still be galvanized over the coming year to impose a popular referendum on the final draft regardless of the internal assembly vote. This would increase the constitution's legitimacy and the feeling of its "ownership" by all Tunisians.
In terms of the constitution's substance, different coalitions will be facing the crucial question of what model of Tunisia will be embodied in the constitution. The conservatives (Ennahda in coalition with CPR and FDTL) and the confederation of progressives (rather, the "less conservative"; namely, PDP, PDM, POCT and Afek Tunes) have different visions for the future of the country. While the first are advocates for a more conservative approach in a double discourse espousing traditional Islamic values coupled with (but over) "the gains of modernism," the latter are trying to anchor the country into a future built on the values of openness and personal freedoms. These antagonistic approaches will be the core of the debate when attempting to draft the constitution, especially chapters on individual liberties (conservative vs. progressive), the separation of powers (concentrating powers vs. distribution of powers among three branches), and the role of the state (state intervention in the private/moral sphere vs. state guarantor of liberties). Shall the logic of majority/minority be the sole determinant? To do so would risk alienating certain segments of society - namely, those affiliated with progressives (who lost the elections). Or rather, should each side of the spectrum seek to accommodate the other and reach a workable consensus shared by everyone? This would involve the majority seeking to accommodate the minority and involve it at each level: passing laws at qualified majority or sharing presidencies at the different assembly committees. Majority members should remember they are drafting a constitution for all Tunisians and not implementing a legislative program of 4 or 5 years.
Finally, other actors - the media, civil society and political parties not represented in the assembly - are due to play a role in this process. The participatory nature of the first nine months of the transition, in which in which a progression of new laws were drafted governing political parties, the media and civil associations, should be institutionalized in this phase. Opening the process to some form of consultation from stakeholders with expertise and participation of a larger public outside the assembly (both throughout the drafting process and at the constitution's final approval) should be key approaches in improving the population's feeling of acquisition toward this important document, which will steer the political life of Tunisians for the next few decades. The current protests outside the assembly building are reflective of the eagerness of the public to participate in this process.
Amine Ghali is a Program Director at the Tunis-based Al Kawakibi Democracy Transition Center, and work on democracy, reform and transition issues in the Arab world. He is a member of Tunisia's National Commission to Investigate Corruption. (Sada 09.12)
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11.12 MOROCCO: Cultivating New Crops
In a bid to spur greater domestic production and hedge against further price volatility, the Moroccan government has implemented a number of initiatives in recent months to strengthen the cultivation, distribution and sale of agricultural commodities. Given the impact rising commodity prices have had elsewhere in North Africa, Morocco has taken a number of steps to ensure that basic living costs are kept within reach of the most vulnerable segments of the population, including an innovative portal that seeks to provide some transparency on bulk and retail prices.
Asaar, which is Arabic for "prices", is an online database that aims to limit speculation on local food prices. The initiative was implemented by the Ministry of Agriculture and allows public access to the prices for a wide range of products, ranging from fruits to vegetables to cereals and meat. The project covers price points for dozens of outlets, including nine bulk markets, 20 retail markets and 25 souks across the country. Some 220 people have been tasked with ensuring the research is up-to-date, including 60 inspectors who send in new prices via PDAs directly to the site and provide information on any recent price variations or new products.
The internet portal marks only one of a number of moves in recent months by the government to limit fallout from commodity volatility. In September 2010, for example, the government suspended customs duties on soft wheat to ensure regular supply after Russia cancelled most of its exports following inclement weather conditions that dramatically curtailed its crop production.
Given the prominent place Morocco's agricultural sector occupies in the country's economy, boosting production has also been a focus for the government. Currently, agricultural cultivation, husbandry, fishing and processing contributes up to 19% of GDP and is a major job creator, employing approximately 42% of the general working population, and as many as 80% of people in rural areas. However, the limited amount of arable land, which comprises only 13.5% of Moroccan territory, combined with unstable climate conditions, constrains the sector's performance and has led to significant swings in output in past years. The small size of most plots, which average 5 ha or less, and the lack of irrigation also conspire to drag down performance.
As a result, the country has sought to dramatically revitalize the sector with a comprehensive overhaul, spearheaded by the Ministry of Agriculture's Green Morocco Plan (Plan Maroc Vert, PMV). Launched in 2008, the plan is targeting a significant increase in production volumes as well as an improvement in the sector's socioeconomic returns, particularly in terms of poverty reduction, employment and GDP contribution.
The program consists of two phases and should attract Dh150bn (€13.43bn) in investment and create 1.5m jobs by the time it is completed. In late September, Morocco received Dh565m (€50.6m) in aid from the French Development Agency (Agence Francaise de Developpement, AFD) to support the plan's second phase. The AFD's contribution, which seeks to boost revenue for small producers in marginalized areas, will target development in Tanger-Tetouan, Taza-Al Hoceima-Taounate and Fez-Boulemane over the next four years.
Several initiatives under the aegis of the PMV have already been launched, which encompass a range of efforts to improve efficiency and quality along the entirety of the value chain. Sefrou province, in the Fez-Boulemane region, for example, was granted Dh31.8m (€2.8m) in 2011 to develop projects to improve the quality and production of crops such as apples, olives and cereals.
In Oued Ifrane, the PMV program is providing training to 75 farmers to improve revenues from local cereal and olive farms, while a separate project in Timhdit, worth some Dh19.5m (€1.75m), aims to develop a 500-ha plum plantation which would provide 261 farming jobs. Another four projects are planned for the Ifrane province in 2012 to produce crops such as cherries, peaches, plums and apples, all which have higher added value and are less vulnerable to climate change than the production of cereals, for example.
More immediate forms of production support have also been unveiled. Aziz Akhannouch, the minister of agriculture, announced in September that some 130m kg of seeds will be made available to farmers to plant next year's crops, following an increase in the amount of funding for subsidy increases to Dh200m (€17.9m), up from Dh170m (€15.2m) in 2010-2011. (OBG 12.12)
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11.13 TURKEY: Attractive Destination
Already the world's 7th most-popular tourist destination, Turkey has continued to grow in 2011, as economic expansion and political stability raise its profile in the region. The country saw a 10.76% increase in visitors between January to September 2011 compared to the same nine-month period in 2010.
The strong growth makes it likely that visitor numbers will top 30m annually for the first time, rising from 28.6m in 2010 to a projected 31.7m. With revenue from tourism coming in at as much as $25bn annually, the sector continues to both benefit from, and boost, economic growth. Istanbul is still the primary driver for tourism growth, attracting 6.9m tourists in the first 10 months of 2011, already surpassing the full-year figures for 2010. The goal is for 8m visitors for the full year.
But the maturity of the Istanbul tourist market has led some businesses to look further afield for profits. Hilton Hotels Corporation, for example, announced in November 2011 that it had signed contracts for 11 new hotels in Turkey, which it views as its most successful international development market. Only two of these properties will be in Istanbul, with the rest appearing in often-overlooked regional cities, including Diyarbakir, Manisa, Bursa, Kutahya, Mardin and Sanliurfa. Bursa is also seeing the construction of two new hotels from the Starwood group, under the Sheraton and Aloft brands, which are expected to open in 2013.
The country's success in attracting visitors is owed in part to concerted efforts by officials, working mainly out of the General Directorate of Promotion, to market Turkey to foreign tourists and travel operators. The Ministry of Tourism will spend $96.8m this year on TV commercials, advertisements on billboards and internet banners, as well as funding the activities of 40 offices worldwide.
Countries with recently opened offices include Brunei Darussalam, Malaysia, China and India, highlighting Turkey's determination to seek unconventional but growing markets. Meanwhile, the April 2011 agreement with Russia to allow for visa-free travel between the countries should help bolster a market that already provides 13% of visitors.
Another of these unconventional markets is the Middle East, where instability tied to the Arab Spring is driving many people, particularly wealthy Gulf residents, to choose Turkey over Egypt or Syria as a getaway. Arrivals from Arab states have risen by around 200,000 to more than 1.67m this year, for a 13.6% growth rate that makes the Middle East Turkey's fastest-growing tourist market.
The political orientation of Turkey and its competitors have helped spur arrivals, as Prime Minister Recep Tayyip Erdogan has won support among Arabs for his stance against Israel. Meanwhile, there are indications that some Arab tourists perceive France and other European countries, by banning the veil, among other measures, as creating an atmosphere where Muslim visitors are unwelcome. Businesses are catering to this expanding sector, with Turkish Airlines, for example, increasing its routes to Saudi Arabia six-fold.
Another niche area seeing growth is health tourism, where Turkey benefits from lower costs and proximity to Europe. The country saw 74,093 visiting patients in 2008, 91,952 in 2009 and 109,678 in 2010, and sources expect growth of 15% in 2011. Most "health tourists" are residents of Germany, the Netherlands and France with Turkish backgrounds, who return for inexpensive and high-quality medical care.
Turkey's moderate climate and abundance of thermal springs also offer scope for expansion beyond Turkish-heritage visitors. The Ministry of Tourism, seeking to become the world's leader in "thermal tourism", aims to have 50,000 thermal beds installed in the short term, with 250,000 beds as the medium-term target.
One example of the investments being made in this sector is Afyon's Alila Wellness Park, which will bill itself as Europe's largest thermal facility, with 2000 beds. The $80m project would feature two hotels and two spas, and offer a combined "thermal, summer and religious" holiday. The project is being aimed at Turkish tourists primarily, demonstrating the growing clout of Turkey's domestic market.
The continued development and diversification of Turkey's tourism sector parallels the nation's status as an emerging, increasingly sophisticated economy. While dependence on tourism revenues tends to leave countries vulnerable to global economic shocks, Turkey's increasing outreach to the diversified Middle Eastern and Asian tourist markets, coupled with the growth in domestic tourism, should help ensure robust earnings for the short and medium term. (OBG 13.12)
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11.14 GREECE: OECD Report Questions Greece's Ability to Reform
On 8 December, Der Spiegel cited a new OECD report that indicates that Athens may be incapable of such far-reaching changes. Ministries don't communicate, officials don't keep records and oversight is virtually nonexistent. The only thing that might help, it says, is a "big bang."
These days Greece will take all the good news it can get, even if it isn't all that good. This week, the Organization for Economic Cooperation and Development (OECD) released a report indicated that income inequality is on the rise across much of the developed world.
Why is that good news for Greece? The income inequality report overshadowed a separate tome released by the OECD this month which blasted Athens' bureaucracy. Going by the rather bland title "Greece: Review of the Central Administration," the 127-page report can be quickly summed up: The government apparatus in Athens is virtually unable to implement reform. "It is not clear how existing and new entities of (the government) will work together in order to secure the leadership needed for reform, including the necessary strategic vision, accountability, strategic planning, policy coherence and collective commitment, and communication," reads the damning report.
Such reform, however, is urgently necessary. The heavily indebted country remains dependent on aid from Brussels to keep its head above water. Should it ever wish to regain its financial independence and be able to borrow money on the bond markets at reasonable prices, vast adjustments are essential, affecting virtually every area of public life in the country. But even as many reforms have been passed by the government in Athens, implementation has been spotty, the OECD report says.
'Neither the Capacity nor the Ability': "For the first time, we wanted to show -- systematically and with proof -- what isn't working at the administration level and what is preventing Greece from making progress on structural reforms," Caroline Varley, OECD senior policy analyst and co-author of the report, told the German daily Die Welt. "So far, Greece's central governmental apparatus has neither the capacity nor the ability to undertake large reforms."
The report was commissioned by the Greek Ministry of Administrative Reform and E-Governance and provides a detailed examination of the state of central administration in the government. It focuses on efficiency and effectiveness as Athens struggles to introduce necessary reforms.
It found that communication among the country's 14 ministries was appallingly paltry. Furthermore, the huge number of departments within ministries -- many of them consisting solely of a department head and others with just one or two subordinates -- results in widespread inefficiency and lack of oversight.
"Administrative work is fragmented and compartmentalized within ministries," the report writes. "Ministries are not able to prioritize ... and are handicapped by coordination problems. In cases where coordination does happen, it is ad hoc, based on personal initiative and knowledge, and not supported by structures."
Shoddy Record-Keeping: Were such coordination even to take place, the report indicates that administrators do not have access to the necessary data, nor does such data exist in many cases. "The administration does not have the habit of keeping records or the ability to extract information from data (where available), nor generally of managing organizational knowledge," the report found.
The problems found in Greece's central administration, says the OECD, are the result of decades of clientelism and the sheer volume of the laws and regulations that govern competencies within the ministries. The report found 17,000 such laws, decrees and edicts.
How, then, should Greece solve the problem? The OECD proposes a "big bang approach" -- meaning a massive administrative restructuring. This, co-author Varley says, it needs to happen quickly. "Greece has only a small window of time to change and reform itself," she told Die Welt, "and it is getting smaller." (Der Spiegel 08.12)
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11.15 BULGARIA: Fitch Comments Further on Bulgaria's Outlook Revision Ratings
On 13 December Fitch Ratings http://www.fitchratings.com provided further comment on the rating actions it took on Bulgaria. The agency revised its Outlooks on Bulgaria's Long-term foreign and local currency Issuer Default Ratings (IDRs) to Stable from Positive and affirmed the Long-term foreign and local currency IDRs at 'BBB-' and 'BBB', respectively, the Short-term foreign currency IDR at 'F3' and the Country Ceiling at 'BBB+'. "The revision of Bulgaria's Outlook to Stable mainly reflects the deterioration in the growth outlook and heightened financial stress in the eurozone, which is Bulgaria's main trading partner," says Matteo Napolitano, Director in Fitch's Emerging Europe Sovereigns team.
The rating actions form part of a broader review of central and eastern European (CEE) sovereigns that Fitch believes to be exposed to the worsening in economic and financial conditions in the eurozone. Against this backdrop, Fitch believes the probability of an upgrade in the next 12 months has receded and a Stable Outlook better captures the balance of risks. The previous Positive Outlook was assigned by Fitch in a more benign global economic environment in May 2011 and reflected Bulgaria's recovery from recession, turnaround in its current account position, declining external debt ratios and progress with fiscal consolidation.
In December the agency halved its forecast for eurozone growth in 2012 to 0.4% from 0.8% in October and from 1.8% in June. Risks remain on the downside. In view of Bulgaria's openness and trade exposure to the eurozone (total exports are equivalent to 44% of GDP, with 45% going to the eurozone), Bulgarian GDP growth slowed to 0.3% (on a sequential basis) in Q2 and Q3/11. As a result of slowing growth in merchandise exports, the annual growth rate of industrial output volumes has also slowed, to 2% in the three months to October from 11% in Q1. Fitch has revised down its forecast for Bulgarian growth in 2012 to 2.3% in December from 3.8% in June.
Bulgaria's geographical trade structure is somewhat more diversified than that of other CEE countries, with 25% of its exports going to Turkey and other south-eastern European countries (including Romania, Serbia and Croatia). However, Fitch also expects these countries to be hit by the eurozone slowdown in 2012, meaning that growth prospects in Bulgaria will also suffer secondary effects.
Fitch views Bulgaria's underlying domestic strengths as largely unaltered since its last review of the ratings in May 2011. The sharp macroeconomic adjustment since the global financial crisis of 2008-09 has led to a current-account surplus estimated at around 1% of GDP in 2011. Fitch considers the fiscal deficit reduction target for 2012 (1.5% of GDP on an ESA 95 EU-harmonized basis, down from an estimated 2.5% of GDP in 2011) as broadly realistic. However, weaker GDP growth will make it more challenging to reduce the budget deficit, while heightened risk aversion may make it more expensive to issue debt in external markets.
Bulgaria's ratings are also underpinned by low government debt, which Fitch forecasts at under 17% of GDP at end-2011 and a fiscal reserve equivalent to 7% of GDP as of end-October. The macroeconomic policy framework is solid, with foreign-exchange reserves covering 128% of narrow money supply in October 2011 (60% of the total client deposit base) and underpinning the currency board system.
Banks are liquid and well capitalized, with a system capital adequacy ratio of 18% in September 2011, leaving them with a substantial buffer against shocks. However, impaired loan ratios are still increasing, reaching 13.5% of total loans in mid-2011. Approximately 25% of the banking system (as a percentage of assets) is owned by Greek parent banks (and 15% by Italian). Greek-owned subsidiaries do not hold Greek sovereign debt, and hold only low exposures to Greek companies. Strong deposit growth (7.1% in the three months to September) has allowed local subsidiaries to reduce their dependence on parent funding. However, given the tail risk of an extreme deterioration in the financial position of Greek parent banks, we cannot entirely rule out a weakening of confidence in their local subsidiaries.
An improvement in the European macroeconomic and financial environment could allow positive trends in Bulgaria's underlying fundamentals to return to the fore and lead to positive rating actions. Conversely, material intensification of financial stress and a severe recession in the eurozone could lead to a negative rating action, particularly if it generated an adverse shock in the Bulgarian banking sector. (Fitch 13.12)
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