• Netanyahu Sets Out His Rules For Growth
• Barclays is Bullish on Israel
• US Hardwood Exports to Middle East May Hit Record
• Algeria Unveils Renewable Energy Strategy
• Egyptian Pound Lowest Versus Dollar in More Than Five Years
• Greek PM Papandreou Slams Rating Firms
• MOROCCO: Positive Tale for Retail

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Netanyahu Sets Out His Rules For Growth
1.2 Fischer Says Israel Should Adopt the Norwegian Model
1.3 VAT to Remain at 16%
1.4 Government Nationalizes Tel Aviv Light Railway
1.5 Ministers Pass Investment House Transparency Bill

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Barclays is Bullish on Israel
2.2 Cadbury Considers Returning To Israel
2.3 Magic Software Listed on the Tel-Aviv Stock Exchange's Mid-Cap 50 (YETER 50) Index
2.4 XTL Biopharmaceuticals Joins Three Indexes on TASE
2.5 NICE Recognized as Worldwide Leader in Speech Analytics by DMG Consulting
2.6 ClickSoftware Honored in the 2010 Mobile Star Awards
2.7 Mobixell Networks Completes $10 Million Financing Round
2.8 Altair Semiconductor Leads 2010 Worldwide LTE Chipset Rollout
2.9 Magic Software Strengthens Global Presence with a New Acquisition
2.10 Elbit Systems of America Completes Acquisition of M7 Aerospace for $85 Million

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 US Hardwood Exports to Middle East May Hit Record
3.2 The Pharmaceutical Market in Jordan
3.3 Boeing Opens Qatar Office
3.4 Deloitte Says Dubai Needs 2.5 Million More Tourists to Match Hotel Growth
3.5 Victoria's Secret Store Arrives in Dubai
3.6 LaserCard Receives $2.1 Million in Orders for Saudi Arabia National ID Card Program
3.7 Eni Signs Deal with Libyan Government
3.8 Cummins Announces Plans for First Manufacturing Site in Turkey

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 One Network to Install 10MW of Large Scale SolarEdge Power Harvesting Systems in France in 2011
4.2 SodaStream Awarded Green GOOD DESIGN for Sustainable & Environmentally Friendly Product
4.3 Plea to Protect Palm Trees In Bahrain
4.4 Egypt to See Its First Two-Solar Powered Villages
4.5 Egypt to Combat Mislabeling of Organic Products
4.6 Algeria Unveils Renewable Energy Strategy
4.7 $200 Million 45 MW Solar PV Project Successfully Launched in Bulgaria

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Gulf Power Grid to Include UAE by Mid-2011
5.2 From Kuwait to Oman Gulf Railway to be Completed by 2017
5.3 Jordan Seeking Bids for One or Two Nuclear Plants
5.4 Google Signs $10 Million Agreement With Jordan
5.5 United Nations Lifts Gulf War Sanctions on Iraq
5.6 Kuwait to Build Nuclear Power Plants
5.7 World Cup Win Launches $60 Billion Projects Boom in Qatar
5.8 At 77 Million Tonnes of LNG, Qatar is the World's Leading Producer
5.9 Qatar Unveils Commercial Court in Wake of World Cup Win
5.10 Dubai's Annual Inflation Up 0.5% in November
5.11 Egyptian Pound Lowest Versus Dollar in More Than Five Years
5.12 Egypt's Annual Inflation Unexpectedly Decelerates in November 2010
5.13 Suez Canal Receipts Fall To $412.8 Million in November
5.14 Egypt Plans to Build First Nuclear Plant by 2019
5.15 Egypt Considering New Exclusions From Ration Card
5.16 Egypt to Offer Private Initiative Projects Over Next 5 Years
5.17 Pakistan Pharmaceuticals & Healthcare Report Q1 2011

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkish Jobless Rate at 11.3% in September
6.2 Turkey's Lowest Income Quintile Spends Most For Food & Least for Education
6.3 Turkey Entry Bid Scores Mixed Points in EU Debate
6.4 Turkey Retail Report for First Quarter of 2011
6.5 Cypriots Living at Risk of Poverty Reach 128,000
6.6 Agreement for Exclusive Economic Zone between Israel and Cyprus
6.7 IMF Completes Second Review Under Stand-By Arrangement for Greece
6.8 Greek PM Papandreou Slams Rating Firms
6.9 Greece Pledges To Accelerate State Asset Sales
6.10 Greece's Jobless Rate Hits a 10-Year High
6.11 IMF Mission Chief Upbeat on Bulgaria's Economy
6.12 Bulgarian Inflation Rises
6.13 Bulgaria Commits To Painful Railway Reforms to Get World Bank Loans

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israeli Flag Flies at Dubai Sports Complex
7.2 Begin & Rabin to Appear on New Israeli Banknotes

*REGIONAL:

7.3 Iraq Approves Prime Minister Maliki's New Government
7.4 Public Space Smoking Ban Becomes Effective In Bulgaria

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Teva Announces Successful Results of Phase III Study with Oral Laquinimod for Multiple Sclerosis
8.2 Medisafe 1 Technologies Demonstrates Syringe Locking Device
8.3 Tift Selects Minicom's Remote Access Management Solution for Data Consolidation
8.4 Clearstep and Objet to Collaborate on Digital Orthodontic Solution
8.5 Yissum Introduces a Novel Method for Forensic DNA Profiling
8.6 Stimatix GI Study for Effectiveness of the AOS-C1000 Colostomy Management System
8.7 Biological Signal Processing Signs US Distribution Agreement With Synergistic Medical Network
8.8 Compugen's Positive Effect of CGEN-15001 in Animal Model of Rheumatoid Arthritis
8.9 UT Southwestern Medical Center & Rabin Medical Center Announce Joint Agreement
8.10 PROLOR Biotech Granted SME Designation by the European Medicines Agency

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Kontera Introduces Mobile Solutions for Related Information and Context-Based Advertising
9.2 Silent Communication Enhances Visual Voicemail Mobile Client
9.3 Wavion & Vipitel Partner for High Speed Internet Access for Mexican State of Aguascalientes
9.4 BoneTone HDClear Chip Delivers Quality Voice Communications in Noisy Environments
9.5 Commtouch Releases Seventh Generation Messaging and Web Security Technology
9.6 RADVISION Receives Frost & Sullivan 2010 Best Practice Award
9.7 Magic Software Signs a New Deal with Aviapartner
9.8 Ethernity Networks' Field Programmable Carrier Ethernet Switch Offering
9.9 N-trig Pen and Multi-Touch Technology Now Operating with Android

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's CPI Rise Lower Than Expected
10.2 Israel's Income from Tourism Reaches Record $4.4 Billion in 2010

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11: IN DEPTH

11.1 JORDAN: The Old & New Lessons of Jordan's November Elections
11.2 KUWAIT: Fuelling the Future
11.3 BAHRAIN: Conclusion of the 2010 Article IV Consultation Mission
11.4 QATAR: 2010 Article IV Consultation - Concluding Statement of the IMF Mission
11.5 EGYPT: Prospects & Opportunities in the Environmental Industry
11.6 EGYPT: Agribusiness Report for Q1 2011
11.7 MOROCCO: Positive Tale for Retail
11.8 PAKISTAN: The Pharmaceutical Market in Pakistan
11.9 TURKEY: IMF's Second Post-Program Monitoring Discussions
11.10 TURKEY: Turkish-Arab Economic and Military Cooperation: How Far Will it Go?

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Netanyahu Sets Out His Rules For Growth

On 13 December at the "Globes" Israel Business Conference in Tel Aviv, Prime Minister Netanyahu said "In the past decade, the Israeli economy has been growing rapidly. Our target should be to be among the top 15 countries in terms of GDP per capita within 15 years. This target is possible; it's not easy, but it's possible."

Netanyahu presented five basic rules for growth. The first, which he said many countries have forgotten, is to not allow government spending to exceed its income. "We've set rules that other countries are now forced to set, and we did it back in 2003," he said. "Keeping the fiscal framework is critical and cannot be avoided, just as a household or business cannot avoid it. This may be one of the strongest lessons of the recent decade. If you want more defense, education and welfare, you have to cut something else. There's no free money."

Netanyahu's second rule is that "a growing economy is an economy in which you invest - investors and workers." He asserts that it is necessary to cut the tax rate to a competitive level. "We must ensure profits as much as possible," he said. He has promised to cut the company tax rate to 18% in 2016 from the current level of 26%. "We'll cut taxes and then we'll achieve the growth needed for the handicapped, the elderly, the Holocaust survivors and the education system."

Netanyahu's third rule is to foster innovation, which Israel needs to achieve growth. "The added value comes from the renewed education system," adding that he intends to including economics in the primary school curriculum.

Netanyahu's fourth rule is to develop proper infrastructures, including water infrastructure. "Water consumption increases with the rise in GDP and population growth. We need more water and we'll get it. We also need expressways to the Negev and Galilee, a train to Eilat to link the Red Sea with the Mediterranean, and more." He also claimed that infrastructures could be a path to peace, through the construction of a Middle Eastern railway.

Netanyahu's fifth rule is to support the ability to conduct business with minimal government intervention. "We must let the business sector function. The reform of the Israel Land Administration is derived from this."

"We see these rules in successful countries, and we see where the societies that have forgotten these rules are," Netanyahu said. "I look at Warren Buffett. He looks at simple and clear rules and what gives him the result is consistency in their application. Yes, Warren Buffett. The rules are ultimately very simple." (Globes 13.12)

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1.2 Fischer Says Israel Should Adopt the Norwegian Model

On 13 December, Governor of the Bank of Israel called for Israel's adoption of the Norwegian model and for the setting up of a large investment fund that will take in the royalties and taxes received from the gas and oil discoveries in Israel. The fund would then invest the money overseas. "If there is something out there (in the Mediterranean) that is big in relation to the size of the economy, then we should deal with it as other countries have done," Fischer said, referring to the gas discoveries, and the possibility of Israel being infected with "Dutch disease", that is, appreciation of the local currency thanks to royalty and tax receipts, harming the competitiveness of local industry. "One looks first to Norway, which set up a fund to take the state's receipts from the discoveries and invest them," Fischer said. Norway currently has the benefit of a fund that manages surpluses amounting to $440 billion, originating from the state's revenues from oil.

Fischer listed some of the main problems he sees facing the economy, linking education and poverty: "Everyone understands the problem and sees that our standard continues to fall in international tests. Poverty is concentrated in two populations, Arab Israelis and the Ultra-Orthodox. Among the Ultra-Orthodox, the problem is that a small proportion of the men go out to work and so it is no surprise that this population is poor. Among the Arab Israelis, it is difficult for the women to find work, because in their culture there is discrimination, and a desire that the woman should be close to home. Unless we deal with these problems, we will not be able to continue to grow and progress as a developed country." Fischer also mentioned another problem: backward infrastructures. "Every decision here takes three times as long as in Western countries," he said.

Fischer also spoke about macro-economic challenges facing Israel. "The Bank of Israel Law defines three goals for the Bank of Israel. The first is to maintain price stability, meaning inflation of 1-3%. This is the main goal under the law. Besides that, we have to support other goals of government policy, mainly growth and employment, and according to the new law, we need to deal with social gaps, insofar as we are able to have an effect on that matter."

As in every speech he has made recently, Fischer also commented on two burning issues in the economy: the appreciation of the shekel, and soaring home prices. He stressed that he would continue to buy dollars on the market, and said, "One of the threats to growth is the exchange rate. As people responsible for a small, open economy that exports 46% of its GDP, we have to be concerned about the exchange rate. We will continue to intervene in the foreign exchange market as the need arises, and we must be ready for all kinds of scenarios that are liable to happen." (Globes 13.12)

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1.3 VAT to Remain at 16%

On 13 December, the Knesset Finance Committee decided that the VAT rate would remain at 16% until 2013. VAT (value added tax) was raised from 15.5% to 16.5% by temporary order from 1 July 2009 until 31 December 2009. On 30 December 2009, the government decided that in 2010 VAT would be 16%. The change from 15.5% to 16.5% and then to 16% was due to expire in January 2011. The rate was then supposed to return to 15.5%. The Knesset Finance Committee made clear that unless another order is brought before it, VAT will return to a rate of 15.5% in 2013. (Globes 13.12)

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1.4 Government Nationalizes Tel Aviv Light Railway

On 12 December, the Netanyahu cabinet unanimously approved the nationalization of the Tel Aviv light railway project and will finance its construction out of the national budget. The nationalization of the project comes after the Ministry of Finance cancelled Metro Transport Solutions' (MTS) franchise for the project several months ago, after it failed to secure financing. The Metropolitan Mass Transit System Co. will carry out the project. The 22 kilometer (11 kilometers of which will be underground) Red Line will link Petah Tikva, Bnei Brak, Ramat Gan, Tel Aviv-Jaffa and Bat Yam. The line will have 31 stations. NIS 1.4 billion worth of work to prepare the route is due to end in 2011. The overall project will cost NIS 11 billion and will be operating by 2017. The cabinet also decided to establish a steering committee to oversee the project (including adherence to timetables and budgets), monitor implementation of this decision, resolve disputes that may arise in its implementation, approve work plans and facilitate the line's construction. (Globes 12.12)

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1.5 Ministers Pass Investment House Transparency Bill

The ministerial legislative committee has passed a private members' bill requiring private investment houses to file reports as if they were public companies. The bill applies to all investments houses with more than NIS 100 million in assets under management. The bill will now go for a pre-reading by the Knesset plenum and then to the Knesset Finance Committee. The bill requires investment houses to convene board of directors meetings at least once per quarter and to prepare financial reports pursuant to Israel Securities Authority regulations for public companies. The financial reports will not be disclosed to the public. The investment houses may subsequently, be required to publish the financial reports in the same way as privately owned insurance companies or banks that are not listed on the TASE. Privately owned investment houses account for an estimated NIS 220 billion of the NIS 600 billion in assets under management by the industry as a whole. The assets are in mutual, provident, and advanced training funds, portfolio management and ETFs. Despite this, the privately owned investment houses are not supervised by the Securities Authority or the Ministry of Finance's Supervisor of Capital Markets, Insurance and Savings. Consequently, the privately owned investment houses can operate with no transparency. (Globes 21.12)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Barclays is Bullish on Israel

On 8 December, Barclays Capital observed that Israel's economic performance is improving and the economy appears headed for a full recovery, save that there is a growing risk of inflation. Barclays predicts that Israel's GDP will grow by 4% in 2011 and 4.2% in 2012, assuming the continuation of strong trends in consumption and investment into 2011-12. However, inflation is rising and becoming a macroeconomic risk. It may rise from the current 2.5% to 2.7% in 2011. The analysts also see Israel's offshore gas reserves as supplying all of Israel's energy needs for the next 40 years. In the end, Israel may be exporting natural gas and continuing to import oil, with the possibility of eventually becoming a net exporter of energy. They estimate that Israel's natural gas production will increase from $1 billion in 2010 to about $6 billion per year in 2016, amounting to 2.4% of GDP at current prices. (Globes 08.12)

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2.2 Cadbury Considers Returning To Israel

British confectionery company Cadbury is considering re-entering the Israeli chocolate market through its Israeli representative, Globrands. The company plans to focus on chewing gum in the coming year, but the chocolate will be introduced in 2012, based on a big distribution center in Modi'in at a total investment of some $5 million. Cadbury tried to enter the Israeli market in 2002, but was blocked aggressively by the Elite company. Globrands plans to invest some $1.65 million in the coming year in an attempt to conquer a significant share of the Israeli gum market, which is controlled by the Wrigley company and led by the Orbit brand. The Israeli chewing gum market generates some NIS 330 million. Wrigley controls 70% of the market and the second biggest brand is Strauss' Must gum. Cadbury's Trident gum entered Israel in May 2009, but despite its goal to conquer some 30% of the market, it only managed to capture 0.1%. Globrands' main obstacle was the kosher certification issue. Cadbury's Turkish factory recently began manufacturing four types of gum and four types of sweets in kosher production lines. The Cadbury gums will be sold in supermarkets and 10,000 marketing points where Globrands sells its cigarettes and in 10 Burger Ranch stores as an initial pilot. The company is also in negotiations with the Hamashbir Lazarchan department store and the AM:PM chain of convenient stores. (Ynet 12.12)

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2.3 Magic Software Listed on the Tel-Aviv Stock Exchange's Mid-Cap 50 (YETER 50) Index

Magic Software Enterprises was notified by the Tel-Aviv Stock Exchange (TASE) that its shares were included on the Mid-Cap 50 Index as of 15 December 2010. Inclusion in this exclusive index places Magic Software amongst the top 150 most valuable companies listed on the TASE. The Mid-Cap 50 Index was launched on 1 July 2007. It includes the 50 shares with the highest market capitalization (amongst other criteria determined by the TASE) that are not included in the TASE-100 index (100 companies in Israel with the highest market capitalization). TASE is the only public market for trading securities in Israel, playing a major part in Israel's economy. TASE lists approximately 610 companies.

Or Yehuda's Magic Software Enterprises (http://www.magicsoftware.com) is a global provider of cloud and on-premise application platform solutions – including full client, rich internet applications (RIA), mobile and software-as-a-service (SaaS) modes – and business and process integration solutions. The company's award-winning, code-free solutions give partners and customers the power to leverage existing IT resources, enhance business agility and focus on core business priorities. Magic Software's technological approach, product roadmap and corporate strategy are recognized by leading industry analysts. (Magic Software 10.12)

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2.4 XTL Biopharmaceuticals Joins Three Indexes on TASE

XTL Biopharmaceuticals was notified by the Tel Aviv Stock Exchange (TASE) that XTL has been included in the following TASE Indexes; "Yeter" Tel Aviv, "Tel Tech", and "Biomed", effective 15 December 2010. Herzliya's XTL Biopharmaceuticals (http://www.xtlbio.com) is engaged in the development of therapeutics to treat diseases for which no medical cure has yet been discovered. The Company is focused on developing a drug for the treatment of multiple myeloma and Hepatitis C. The Company has acquired Bio-Gal, which developed a unique treatment for multiple myeloma cancer patients based on human recombinant erythropoietin (EPO), a genetically engineered version of a natural hormone produced by the kidneys. The drug has been approved for marketing by the FDA and has for many years been sold for billions of dollars across the world for the treatment of severe anemia. The Company has commenced its preparations for a phase 2 clinical trial. Additionally, the Company has an agreement with Presidio Pharmaceuticals, an American biotechnology company, to develop a drug for the treatment of Hepatitis C based on the Company's DOS technology. Pursuant to the agreement, XTL is entitled to payments and royalties based on certain milestones and sales. (XTL 09.12)

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2.5 NICE Recognized as Worldwide Leader in Speech Analytics by DMG Consulting

NICE Systems has been recognized as the worldwide leader in speech analytics implementations, with a 34% market share, in the new "2010/2011 Speech Analytics Product and Market Report" by DMG Consulting LLC, a leading analyst firm. NICE also has the highest number of customers and garnered the highest overall score received for vendor satisfaction. According to DMG Consulting, "Analytics is a major focus for NICE, and they have made and continue to make significant investments in R&D, marketing, and resources in this product area. NICE has a large installed base of WFO customers to whom they can up-sell their speech analytics solution. DMG expects analytics to continue to be a growth area for NICE for the next few years." The report highlights the differentiators of the NICE solution as including nine out-of-the-box packaged business solutions that come with pre-defined categories, reports, views, lexicons and alerts that address specific contact center and vertical challenges. Another differentiator is the NICE solution's capability to analyze both sides of a conversation between agents and customers, regardless of how the call is captured. Additionally, the report highlights the completion of the first phase of integration with recently acquired eglue into the NICE SmartCenter suite of solutions. This is highlighted as enabling users to issue real-time next-best-action recommendations via call-outs to agents, based on screen events, to support continuous improvement.

Ra'anana's NICE Systems (http://www.nice.com) is the worldwide leader of intent-based solutions that capture and analyze interactions and transactions, realize intent, and extract and leverage insights to deliver impact in real time. Driven by cross-channel and multi-sensor analytics, NICE solutions enable organizations to improve business performance, increase operational efficiency, prevent financial crime, ensure compliance and enhance safety and security. (NICE 09.12)

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2.6 ClickSoftware Honored in the 2010 Mobile Star Awards

ClickSoftware Technologies announced that its Mobility Suite has been named as a winner, in three categories, in the ninth annual Mobile Star Awards program, hosted by mobile technology news portal MobileVillage.com. ClickSoftware was recognized in the following categories: 1. APX Alarm Success Story won the Superstar Award in the category - Success Story: Asset Tracking & Field Service, 2. The ClickSoftware Mobility Suite won the Superstar Award in the category - Enterprise Software: Field Service, 3. The ClickSoftware Mobility Suite won the Shining Star in the category - Enterprise Software: Workforce Management. As in past years, the Mobile Star Awards program showcases "best of" entries in dozens of categories covering including mobile apps, wireless network solutions, enterprise mobile software, enterprise success stories, technology visionaries, and more.

Tel Aviv's ClickSoftware (http://www.clicksoftware.com) is the leading provider of automated workforce management and optimization solutions for every size of service business. Their portfolio of solutions, available on demand and on premises, creates business value through higher levels of productivity, customer satisfaction and operational efficiency. Their patented concept of 'continuous planning and scheduling' incorporates customer demand forecasting, long and short term capacity planning, shift planning, real-time scheduling, mobility and location-based services, as well as on-going communication with the consumer on the expected arrival time of the service resource. (ClickSoftware 09.12)

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2.7 Mobixell Networks Completes $10 Million Financing Round

Mobixell Networks has raised $10 million from major global investors, enabling the company to further pursue its ambitious growth strategy by providing mobile rich-data optimization and management solutions to mobile operators. The round, which was led by Azini Capital, included existing investors; Escalate Capital, Intel Capital and smac partners. The new investment will facilitate the company's flagship product, Mobixell Seamless Access, to further support mobile operators achieve overall network efficiency, web and video consumption as well as data services monetization, while simultaneously improving end-user experience and reducing operators' total cost of ownership (TCO). Seamless Access provides intelligent optimization techniques for media and video, including behavioral based optimization, caching, content aware transcoding and network aware optimization (dynamic bit rate adaptation and automatic cell congestion detection). Ra'anana's Mobixell Networks (http://www.mobixell.com) is a global provider of rich media, mobile internet and broadband solutions. These solutions enable mobile operators to achieve their 'least cost, smartest pipe' strategy by intelligently managing surging mobile data and video traffic while giving subscribers an exceptional user experience. (Mobixell Networks 13.12)

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2.8 Altair Semiconductor Leads 2010 Worldwide LTE Chipset Rollout

Hod HaSharon's Altair Semiconductor (http://www.altair-semi.com), a leading developer of ultra-low power, small footprint and high performance 4G LTE chipsets, announced year-end achievements for 2010, highlighted by the company's worldwide leadership position in commercializing 4G LTE chipsets for use in a wide-range of products, including USB modems, CPEs, Smartphones and handheld devices. In February 2010, Altair announced a strategic interoperability testing (IOT) cooperation with ZTE Corporation, which had successfully demonstrated one of the first commercial-grade LTE systems. In July, Altair announced a partnership with IPWireless, a leading provider of 3GPP technology for new applications and markets, to develop a suite of multi-band LTE modem products that will support key frequency bands ideally suited to global LTE deployments. Altair announced in November that it had been selected by Polish service provider Mobyland to power the first commercial-grade deployment available on an 1800MHz LTE network. The device, an LTE USB modem, supports multiple frequency bands including the 800MHz digital dividend band, 1800MHz and 2.5GHz. Throughout 2010, Altair conducted extensive IOT with four tier-one infrastructure vendors in nine distinct LTE FDD/TDD bands, which included advanced system level testing with mobility and hand-over scenarios, while simultaneously demonstrating Category-3 throughputs of 100Mbps down and 50Mbs up. (Altair 13.12)

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2.9 Magic Software Strengthens Global Presence with a New Acquisition

Magic Software Enterprises signed a purchase agreement to acquire its South African distributor, Magix Integration (Pty) Ltd. Magic Software is expanding its global presence in South Africa with the acquisition of Magix Integration's operations relating to Magic Software products. Magic Software will now control 51% of Magix Integration with an option to increase its holdings to 75%; for a total investment of up to $2.5 million to be paid over the next year. Magix Integration specializes in the software integration and application development of Magic software platforms as well as the support of large-scale and complex systems in the public and financial sectors in South Africa. Magix Integration has a broad base of blue chip customers across the public sector in South Africa including the Department of Correctional Services, Department of Energy, and Financial Services Board, as well as the private sector with customers such as Discovery, Soviet and PG Glass.

Or Yehuda's Magic Software Enterprises (http://www.magicsoftware.com) is a global provider of cloud and on-premise application platform solutions – including full client, rich internet applications (RIA), mobile and software-as-a-service (SaaS) modes – and business and process integration solutions. The company's award-winning, code-free solutions give partners and customers the power to leverage existing IT resources, enhance business agility and focus on core business priorities. (Magic Software 13.12)

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2.10 Elbit Systems of America Completes Acquisition of M7 Aerospace for $85 Million

Elbit Systems of America, a wholly owned subsidiary of Israel's Elbit Systems, announced that it acquired 100% of M7 Aerospace LP (M7 Aerospace) in an $85 million all cash transaction. Located in San Antonio, Texas, M7 Aerospace is an integrated service company offering a full suite of aviation services in the areas of Aerostructures Manufacturing, Government Logistics Support Services, Maintenance, Repair & Overhaul, Engineering Services, Aircraft Parts and Support, Supply Chain Management and Purchasing. M7 Aerospace will join the Elbit Systems of America Services and Support Solutions business unit, as a part of the company's strategy to enhance offerings of comprehensive large fleet, multi-site contractor logistics support, life cycle contractors and depot support for fleets operated by the United States military. M7 Aerospace will also bring world class capabilities in avionics upgrades, special mission modifications, reset programs and airframe modification and repair for numerous aircraft platforms operated by both commercial and military customers.

Elbit Systems of America is a leading provider of high performance products and system solutions focusing on the commercial aviation, defense, homeland security and medical instrumentation markets. Haifa's Elbit Systems (http://www.elbitsystems.com) is an international defense electronics company engaged in a wide range of programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems (UAS), advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. (Elbit Systems 15.12)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 US Hardwood Exports to Middle East May Hit Record

American hardwood exports to the Middle East will set a record this year as export activity in the region has posted strong and significant increases, the American Hardwood Export Council (AHEC) said. Recent statistics from the US Department of Agriculture reveal that the value of American hardwood exports between January and September has grown to $75.621 million - marking a 53.9% increase from the $49.135 million posted during the same period in 2009. The figures also reveal that American hardwood lumber exports to Bahrain amounted to $200,000 in the first three quarters of this year, reaffirming the country's preference and growing demand for specialty American hardwoods. Underlining the increase in exports of American hardwood logs, lumber, veneer and flooring across the Middle East region are key figures that show a 118.5% increase in exports of US hardwood flooring from January to September compared to the corresponding period last year. During this period, there was also a 59.2% increase in US hardwood lumber exports, a 55.5% rise in hardwood veneer exports and a 42.8% growth in log exports. Some market experts are pointing out that re-stocking or over-stocking are key reasons for the increase. (TradeArabia 21.12)

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3.2 The Pharmaceutical Market in Jordan

Research and Markets' (http://www.researchandmarkets.com) "The Pharmaceutical Market: Jordan" report says that since its accession to the WTO, Jordan has demonstrated its commitment to WTO rules, in particular the TRIPS agreement. However, Jordan's pharmaceutical regulatory environment has been criticized, mainly by international manufacturers, which accuse Jordan of regulatory discrimination in favor of domestic producers. Jordan has a relatively strong level of domestic production; however, the majority is exported, resulting in a market still dependent on imports. Most imported pharmaceuticals are retail medicaments from countries located in Western Europe, such as Switzerland, Germany and the UK, while exports are primarily semi-finished and retail medicaments destined for other countries in the MENA region. The largest pharmaceutical company in Jordan is Hikma Pharmaceuticals, with a market share of over 10%. The company has a number of manufacturing facilities in Jordan, as well as R&D facilities. In October 2010, Hikma announced it was to acquire an injectables business from a US company, which will significantly enhance the scope of the company's injectables business worldwide. (R&M 21.12)

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3.3 Boeing Opens Qatar Office

Boeing has opened its first office in Qatar, primarily to support the Gulf state's military forces. The US manufacturing giant said that the location will also provide a base for its civil aircraft arm, Boeing Commercial Airplanes. It will enable Boeing to maintain the in-person contact necessary to further develop their close working relationship with Qatar, as part of our overall strategy to build partnerships with customers. Last year, Boeing delivered two C-17 Globemaster III airlifters to the Qatari air force and will seek to sell more equipment, including maritime strike attack aircraft, reconnaissance rotorcraft and tactical aircraft to the country. (AB 08.12)

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3.4 Deloitte Says Dubai Needs 2.5 Million More Tourists to Match Hotel Growth

Deloitte announced that Dubai will need to attract an additional 2.5 million tourists annually to absorb an estimated 60% increase in hotel rooms over the next five years. Dubai, which has around 50,000 rooms, may struggle to maintain occupancy and rates as a further 30,000 rooms are likely to be added. The emirate has spent billions of dollars to transform itself into an international tourist destination. It built the sail-shaped Burj Al Arab hotel and opened a 160-room Armani designed hotel in the Burj Khalifa, the world's tallest tower. Horserace complex Meydan and Dubai Mall are also among the attractions that have been built. Even if half of the expected construction is canceled, 15,000 rooms would be a fairly big increase for Dubai to absorb. The number of visitors will need to go up to about 12 million from 9.5 million now. Average hotel occupancy has fallen to 70% from 80% in 2007, while the revenue per available room is estimated at $240, down from $300 in 2007, according to Deloitte. (BI-ME 08.12)

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3.5 Victoria's Secret Store Arrives in Dubai

The UAE's first stand-alone Victoria's Secret store, owned and operated by M.H. Alshaya Co., opened on 14 December in Mirdif City Centre. The opening follows the launch of its first ever Middle East outlet in Kuwait's Marina Mall just two weeks before. The new stores primarily offer Victoria's Secret beauty and branded accessories. The new larger stand-alone stores will give customers access to a much wider range from the brand. Along with the beauty products and exclusive branded accessories, the stores will offer a limited assortment of the brand's best-selling innerwear, sleepwear and loungewear. Victoria's Secret is a division of the Limited Brands family of companies that also includes Bath & Body Works, Henri Bendel, White Barn Candle Co., and C.O. Bigelow Apothecary stores. (BI-ME 14.12)

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3.6 LaserCard Receives $2.1 Million in Orders for Saudi Arabia National ID Card Program

Mountain View, California's LaserCard Corporation, a leading provider of secure ID solutions, has received follow-on purchase orders valued at approximately $2.1 million for chip-ready, optical security media-based credentials for the Saudi Arabia National ID Card program. Delivery is scheduled to begin this quarter and be completed in the current fiscal year. The ID cards are issued to Saudi citizens nationwide for identification, e-government and regional travel purposes. LaserCard's advanced ID credentials are trusted by governments worldwide to protect the personal identification of their citizens, foreign residents and government employees, and to provide official documentation such as driver licenses and vehicle registration cards. (LaserCard 09.12)

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3.7 Eni Signs Deal with Libyan Government

Italian energy company Eni announced it signed a memorandum of understanding with the Libyan government to build a shipping port and desalination plant. Eni Chief Executive Officer Scaroni signed the MoU in the presence of Libyan Prime Minister al-Mahmudi during a ceremony in Tripoli. The MoU outlines the undisclosed terms for construction of a shipping port and related infrastructure, a water desalination plant and 1,000 houses in an area near the Gulf of Sidra. The Italian company said it signed a memorandum in 2006 with the Gaddafi Development Foundation and Libya's state-owned National Oil Corp. to help build an "innovative program of social projects" in the country. Eni is one of the most-active foreign companies operating in Libya. British energy company BP was to start drilling for oil in the Gulf of Sidra in November, but announced plans to delay the project because it decided not to use the previously scheduled drilling platform for unexplained "operational reasons." (UPI 20.12)

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3.8 Cummins Announces Plans for First Manufacturing Site in Turkey

Columbus, Indiana's Cummins will break ground in early 2011 on a multi-phased manufacturing site at the Aegean Free Trade Zone in Izmir, Turkey. The Company plans to first build a filtration manufacturing plant and follow with a facility to produce alternators for its power generation business. Production is expected to begin at the 1 million square foot site in early 2012 and Cummins expects to employ 800 people in Turkey within five years. Cummins Filtration will open its production facility first, followed by Cummins Generator Technologies, which produces alternators. Cummins is investing $70 million in the facility and related production equipment, with 85% of the products made in Turkey to be exported to Cummins' customers across Europe, the Middle East, Asia and Africa. Cummins chose the site in Turkey after a thorough selection process that gave consideration to more than 20 locations in Northern Africa, Europe and Asia. The facility will complement similar Cummins production and logistics facilities in France, Belgium and the U.K. Cummins, a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. (Cummins 08.12)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 One Network to Install 10MW of Large Scale SolarEdge Power Harvesting Systems in France in 2011

SolarEdge Technologies and France's One Network, a leading distributor and installer of photovoltaic and tracking systems, announced their collaboration. One Network is marketing the complete range of SolarEdge three phase solar inverters 8kW, 10kW and 12.5kW, PowerBoxes – module-integrated power optimizers, and PV monitoring portal. The distributed architecture of the SolarEdge solution allows optimization of power production and remote monitoring of the PV system at the module level. This architecture provides for flexible design, greater power production, high reliability and improved maintenance. The system is also equipped with SolarEdge's cutting-edge SafeDC mechanism that automatically shuts down module voltage during installation, maintenance and firefighting.

Hod HaSharon's SolarEdge (http://www.solaredge.com) provides end-to-end distributed solar power harvesting and PV monitoring solutions, allowing maximum energy production for faster return on investment. The SolarEdge PowerBoxes are DC-DC power optimizers that perform MPPT per individual panel while monitoring performance of each panel and communicating across existing power lines. Moreover, PowerBoxes maintain a fixed DC string voltage, allowing optimal efficiency of the SolarEdge PV inverter, which is tailor made to work with power optimizers. As a result, the SolarEdge system provides optimal power, eliminates design constraints, provides comprehensive panel-level and whole-system visibility for monitoring and maintenance alerts, addressed safety hazards and provides anti-theft mechanisms. The company works with industry-leading partners to embed its active electronics directly into PV panels. (SolarEdge 08.12)

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4.2 SodaStream Awarded Green GOOD DESIGN for Sustainable & Environmentally Friendly Product

SodaStream's SodaStream Crystal home soda maker has been awarded the prestigious 2010 Green GOOD DESIGN Award. The Crystal was chosen as an outstanding example of green design by a panel of global design leaders, from among thousands of submissions in over 45 countries. The Crystal allows consumers to make soda and sparkling water at home in an elegant glass carafe, significantly reducing the waste caused by transportation and disposal of plastic bottles. The award is conferred by The European Centre for Architecture Art Design and Urban Studies and The Chicago Athenaeum: Museum of Architecture and Design, and has been given to some of the world's most innovative manufacturers and design firms.

Airport City's SodaStream (http://sodastream.com) manufactures home beverage carbonation systems, which enable consumers to easily transform ordinary tap water instantly into carbonated soft drinks and sparkling water. Soda makers offer a highly differentiated and innovative solution to consumers of bottled and canned carbonated soft drinks and sparkling water. The products are environmentally friendly, cost effective, promote health and wellness and are customizable and fun to use. In addition, our products offer convenience by eliminating the need to carry bottles home from the supermarket, to store bottles at home or to regularly dispose of empty bottles. (SodaStream 14.12)

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4.3 Plea to Protect Palm Trees In Bahrain

An urgent plea has gone out to protect palm trees, one of the iconic symbols of Bahrain. Environmentalists are calling on authorities to implement existing laws that protect green land and palm trees. They also want decision-makers to introduce a new law to safeguard farmers who have invested in rented land. According to the Environment Friends Society (EFS), at least 70% of farms in Bahrain have been lost in the last few decades and more are being targeted. In 2004, some 65% of farms had been lost, so today maybe 30% are left. EFS has launched a national campaign that calls for Bahrainis and authorities to defend what is left of Bahrain's farms. EFS first called on authorities to implement existing laws for the protection of palm trees and the country's green belt in 2003. Until now these laws were being violated and very few farms had been saved in what was once known as the land of a million palm trees. (TradeArabia 08.12)

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4.4 Egypt to See Its First Two-Solar Powered Villages

Egyptian Electricity & Energy Minister Younnis announced Egypt will soon see its first two solar-powered villages. Through a joint-venture between the Italian Environment and Land Ministry and Egypt's Renewable Energy Authority, solar power will supply the Siwan villages Umm al-Sughair and Ain Zahra. The project was funded by an Italian grant worth E£3m. Over the coming year, the first electricity plant, partially powered by thermal solar energy, will be opened by the project organizers in Egypt. The plant will produce 140 MW of power, including a 20 MW solar component. Though small in scale, this is a positive step toward diversifying Egypt's sources of energy and incorporating alternative means into the country's energy mix. To meet the existing power bottlenecks, and meet the growing demand for energy, both by industry and households, the government's plan is to triple its current installed power capacity by the year 2027 through adding 58,000 MW at a cost that is estimated at $100 - 120 billion. This, of course, is expected to take place through conventional, along with alternative, energy sources of energy. The government expects the latter will produce around 20% of total power generation by 2020 (12% of which will come from wind). The energy sector has, historically, attracted around $2 billion, on average, each year. With the boom in the economy and the increase in demand for energy, both domestically and internationally, investments to the sector have risen significantly. Of the $6.8 billion in FDI flowing to Egypt in FY2009/2010, around $3.6 billion targeted the energy sector. (Beltone 18.12)

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4.5 Egypt to Combat Mislabeling of Organic Products

Egypt will begin tightening the regulation and monitoring of the organic food industry, namely in regards to the accurate labeling and specification of products. On 13 December, Trade & Industry Minister Mohamed Rachid announced that the measures are meant to protect consumers from fraud and deception; and that agencies and companies involved in the implementation of this resolution have three months to comply with its provisions. Egyptian organic farmers grow a variety of crops, including grapes, citrus, dates mangoes and strawberries, vegetables, cereals and spices as well as non-food crops including cotton and medical plants. While much produce is exported, primarily to Europe, Egypt is also one of the few African countries that enjoys domestic demand for a number of organic products. The ongoing expansion of the domestic market continues to diminish the local producers' reliance on export sales, thereby encouraging buoyant investment activity in the sector. In a bid to capitalize on this growing demand, Rachid explained that some companies are illegally manipulating the specifications and labels of non-organic products and offering them to consumers as organic. The ministry's decision defined organic products as those that utilize internationally-recognized methods in the entire production process, up until the product's arrival to the end-consumer. The products must also be approved by the Egyptian Organization for Standards and Quality. (DNE 14.12)

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4.6 Algeria Unveils Renewable Energy Strategy

The Algerian government is undertaking an aggressive new renewable energy development plan. Over the next 20 years, Algeria hopes to produce as much electricity from renewable sources as it currently produces from its natural gas power plants. Algerian Energy Minister Yousfi announced on 6 December in Algiers that the Ministry hoped to soon unveil a new renewable energy development plan to the government. This is would be an ambitious solar, wind and geothermal energy plan. The main purpose of this new policy is to prepare the country for the post-petrol era. While Algeria remains a significant producer of hydrocarbons, which are currently the main source of foreign income for the country, its internal demand is constantly growing. Co-operation agreements for alternative energy have already been signed with a number of countries, including France, the United States, Brazil, Russia, China and Germany.

Another aspect covered by the new plan is safeguarding Algeria's position as a European energy supplier and future provider of "clean" energy. With protection of the environment becoming an increasingly important political issue and with the inexorable rise in oil prices, there are many incentives to develop policies which encourage the use of alternative sources of energy. It was in line with this trend that Algeria started the construction in 2007 of a hybrid power station using both solar energy and natural gas to produce 180 MW of electricity, alongside plans for a solar electricity plant in the Sahara with a capacity of 150 MW. In the near future, Algeria is expected to manufacture its own gas turbines and it also hopes to design and build power stations using its own national companies. President Bouteflika gave the government the task of coming up with measures to encourage investment and capitalize on the results of scientific research, particularly in renewable energies, to benefit the economy. He also ordered the government to bring a credible national plan to develop new and renewable energies before the Council of Ministers in 2011. (Magharebia 14.12)

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4.7 $200 Million 45 MW Solar PV Project Successfully Launched in Bulgaria

The largest Solar PV project in Bulgaria and one of the largest in the EU was officially launched on 13 December 2010. The 45 MW project consisting of one 20 MW solar photovoltaic installation and one 25 MW solar photovoltaic installation in the villages of Samovodene and Zlataritsa is currently under construction with almost 5 MWs already completed. The project was created by a partnership of California - based renewable energy company NEOptions, the Bulgarian Development Collaborative and SDN Co., a South Korean producer of power generators, solar modules and marine propellers. NEOptions' contribution to the endeavor was a combination of in-depth knowledge of the proposed projects and strong working relationships built over time with the other partners. NEOptions also participated in the preparation of the solicitation materials, project description and initial engineering in order to attract a viable investor for the 45 MW PV project. (NEOptions 16.12)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Gulf Power Grid to Include UAE by Mid-2011

The United Arab Emirates will be linked to the Gulf's power grid by mid-2011 while links to Oman and Egypt are still under study. Arabian Gulf countries last year completed the first phase of a regional power grid that they hope will help them meet rapidly rising regional demand and smooth out capacity at peak times to avoid power outages. The grid currently links Kuwait, Saudi Arabia, Bahrain and Qatar. The network has seen about 200 cross-border power transfers since operations started in July 2009. While the network is currently mainly used for emergency transfers to avoid power outages, officials hope it will in the future create a Gulf-wide market to trade power. The countries need to bilaterally agree on prices while the GCCIA has decided on tariffs to use the network's capacity. An extension to include Oman in the network is still under study and that Saudi Arabia and Egypt have agreed to study linking up their networks under the umbrella of the Arab League. (TA 15.120

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5.2 From Kuwait to Oman Gulf Railway to be Completed by 2017

GCC Secretary General Abdulrahman Al-Attiyah said the railway linking the six Gulf Cooperation Council (GCC) would be completed in 2017, with the railway stretching from Kuwait to Oman. Following the 31st GCC summit, Al-Attiyah said next year's summit would witness economic feasibility studies and research about the "vital and important project." The multi-billion-dollar 2,117-kilometer-long railway project, to carry passengers and cargo, would pass through all six GCC countries in a drive to facilitate movement of citizens and goods with least possible cost. (KUNA 07.12)

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5.3 Jordan Seeking Bids for One or Two Nuclear Plants

Jordan will seek proposals in early January for the construction and operation of as many as two nuclear power plants, the chairman of the Jordan Atomic Energy Commission said. Jordan will announce results of the proposals in March, Khalid Touqan said. It plans in addition to sign nuclear cooperation accords with Italy, Turkey and Romania within two months. Jordan has already signed nuclear cooperation agreements with Argentina, Canada, China, France, Japan, Russia, South Korea, Spain and the UK. It plans to build a reactor by 2019. Touqan's commission has preselected possible technologies from Atomic Energy of Canada Ltd, Russia's ZAO Atomstroyexport and Paris based Atmea, a venture between France's Areva and Mitsubishi Heavy Industries Ltd of Japan. The first call for proposals will be for the three groups of pre-selected companies to build the reactor. The second will be to choose an operator, he said. The operator will also own about 50% of the reactor. GDF Suez of France and companies from Russia and Canada have expressed interest, Touqan said. Jordan plans to build its first reactor in Majdal, an area about 40 kilometers north of Amman. The commission chose Majdal partly because a site it considered initially in southern Jordan would have proven more expensive. Areva, the world's largest maker of reactors, signed agreements with Jordan earlier this year for the protection of planned nuclear installations and for the exploration and mining of uranium. Jordan estimates it has 70,000 tons of uranium deposits, based on studies the National Resources Authority made in the 1990s. Areva will announce in February the results of its own studies of uranium reserves. (AB 14.12)

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5.4 Google Signs $10 Million Agreement With Jordan

Google and the Jordanian Ministry of Communication & Information Technology have signed a $10 million strategic agreement. Under the deal, Google will support Jordanian organizations' efforts to promote their products and services using Google's advertising platforms, while reinvesting $2.5 million in the local ICT sector. The agreement coincided with Google's biggest ever event in Jordan, developer days bringing together more than a thousand participants ranging from professional developers and webmasters to small business entrepreneurs, computer science professors and students. G-Jordan, which ran from 12 – 14 December, was designed to provide an informal environment for local participants to engage in open dialogue with technology and product experts as they experience Google technologies first hand. As part of the $10 million agreement with the Jordanian government, Google will reinvest 25% of the amount back into the local Jordanian market, growing local Jordanian digital media start-ups, incubation venture capital, angel funding of the information technology sector and potentially training students in online advertising. (TradeArabia 15.12)

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5.5 United Nations Lifts Gulf War Sanctions on Iraq

United Nations mandates imposed on Iraq as a result of the 1991 and 2003 wars, including those relating to weapons of mass destruction and nuclear power, were lifted at a meeting in New York of the Security Council. The council also gave Iraq the green light to develop a civilian nuclear program, ending 19-year-old restrictions aimed at preventing the country from developing atomic weapons. In the wake of its 1990 invasion of Kuwait, Iraq was banned from importing chemical and nuclear technology that could be used in atomic, chemical and biological weapons program. While the news opens the door for Iraq to develop a civilian nuclear program, Iraq is expected to sign on to a slew of international treaties such as the Nuclear Non-Proliferation Treaty (NPT). Under the NPT, Iraq will be subject to unannounced spot checks on any nuclear activities. The meeting also saw the termination of the oil-for-food program, which stipulated that Saddam Hussein's regime was only allowed to sell oil in order to raise funds for humanitarian purposes. The initiative will be phased out by June 2011. Iraq was also called upon to fulfill its obligations to Kuwait, including reparations for the 1990 invasion. Baghdad will keep paying 5% of its oil revenues as war reparations, most of it to Kuwait, despite Iraq's calls for a renegotiation of those payments so it can use more of its oil money for must-needed development projects. Around $22bn is still due. (Various 16.12)

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5.6 Kuwait to Build Nuclear Power Plants

Kuwait is looking to diversify its power resources by setting up its first national committee to utilize nuclear energy for peaceful purposes, in cooperation with the GCC countries. The Kuwaiti National Committee for Utilizing Nuclear Power for Peaceful Purposes said that Kuwait seeks to build four 1,000 MW nuclear power plants to produce electricity. They hope that by 2013, Kuwait will issue a bid for its first nuclear project and launch its first nuclear power plant by 2020-2022. The main challenge is abiding by government procedures and safety and security laws to execute such project within the appointed period. The committee also appointed two international advisors to study six possible locations to build the nuclear power plant, though the advisors' final report would not be submitted until the end of this year. (Global Arab Network 06.12)

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5.7 World Cup Win Launches $60 Billion Projects Boom in Qatar

Qatar's successful bid to host the FIFA World Cup in 2022 is set to launch a $ 60 billion construction boom in the Gulf state according to the Middle East Economic Digest (MEED). In a detailed analysis of the impact of Qatar's World Cup success on the country, MEED estimates that projects worth approximately $55-$60 billion that had been planned will now go ahead. A $4 billion stadium building program will see the construction of nine new eco-friendly, cutting-edge football stadiums and the expansion of three existing stadiums. The stadium program includes the construction of the 86,000 seat Lusail Stadium, which will host the tournament's opening and final matches. Other new stadiums will be: Al-Wakrah Stadium, Al-Khor Stadium, Education City Stadium, Sports City Stadium, Al-Shamal Stadium, Doha Port Stadium, Qatar University Stadium and Umm Sal Stadium. The existing Al-Rayyan, Al-Gharafa and Khalifa stadiums will be upgraded.

Additionally, Qatar will build over 80,000 new hotel rooms by 2022, 10,000 to 15,000 of which will be ready by end of 2010. This comes as the country's answer to FIFA's requirement that the host country should have 60,000-room capacity. Doha has said it will provide 80,000 to 90,000 by 2022. A $20 billion road improvements and expansion program will include the $687 million Lusail Expressway, Doha Expressway, Dukhan Freeway and the Doha Bay Crossing.

Another $25 billion rail network will cover the construction of a metropolitan railway in Doha, a high-speed rail link between New Doha International airport, Doha city centre and across the proposed Qatar-Bahrain causeway into Bahrain, in addition to a freight line that will link up with the wider GCC rail network. The $4 billion Qatar-Bahrain Causeway with its 45km long fixed link between Qatar and Bahrain was put on hold in June. As an important component of the World Cup Bid in FIFA's evaluation report, the scheme will now be given renewed impetus. (BI-ME 10.12)

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5.8 At 77 Million Tonnes of LNG, Qatar is the World's Leading Producer

Qatar has achieved 77 million tonnes per annum (Mta) of liquefied natural gas (LNG) production capacity, reconfirming the country's position as the world's leading producer of LNG with the largest production capacity – by far. This achievement realizes the vision of the Emir of Qatar, Sheikh Hamad bin Khalifa Al Thani, who set the target for the end of 2010. This milestone brings to fruition years of investment in infrastructure and expertise which has enabled Qatar to go from zero to 77 Mta in a mere 14 years. (QNA 14.12)

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5.9 Qatar Unveils Commercial Court in Wake of World Cup Win

The Qatar Financial Centre (QFC), the Gulf state's banking hub, has opened its first civil and commercial court and regulatory tribunal, the latest move by the emirate to bring its financial laws in line with international standards. QFC Civil and Commercial Court and Regulatory Tribunal, which is fronted by former British lord chief justice Lord Woolf, aims to offer both litigation and dispute resolution in commercial rows in Qatar's business community. The court will operate under "international common law". The centre is likely to play an important role following the construction frenzy triggered by Qatar's 2022 World Cup win. Some 900 contracts in the tiny emirate were activated in the day after the bid decision. Lawyers from international firm Simmons & Simmons said the need for a large number of stadiums, hotels and infrastructure projects will create a surge of demand for legal services. (AB 16.12)

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5.10 Dubai's Annual Inflation Up 0.5% in November

Dubai's annual inflation accelerated to 0.5% in November 2010 from 0.28% in October, according to the Dubai Statistics Center. This was led predominantly by an increase in food prices by 4.2% in November from 2.1% in October. Meanwhile, housing costs remained in negative territory, for the 8th consecutive month, contracting -1.9%, annually, in November from -2% in October. On a monthly basis, a better indicator of on-the-ground changes in prices (excluding the base effect), Dubai's inflation rose, marginally, 0.1% in November from -0.01% in October 2010, with food prices (+0.7% m-o-m) leading the monthly inflation and housing costs (-0.1% m-o-m) dragging it down. The inflationary environment in Dubai remains very benign, given the scale of property market correction occurring, which continues to weigh down the overall CPI index (housing costs weigh more than 40% of the total Index). It is expected that any pick-up in inflation, going forward, will be led by the rising global food prices, as well as imported non-food items, especially in light of a weakening USD against the AED. It is forecast that inflation in Dubai will average 0.5% in 2010, and will remain tame throughout 2011, rising to 2.7%. (Beltone 16.12)

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5.11 Egyptian Pound Lowest Versus Dollar in More Than Five Years

On 20 December, the Egyptian Pound crossed the EGP5.80 mark against the US Dolalr, for the first time in over five years, ending the day at EGP5.804/USD and bringing overall depreciation against the USD since the beginning of the year to date to 5.82%. Beltone continues to be believe that changes in the USD/Euro rate will, largely, determine the rate at which the EGP depreciates over the short and medium terms (by virtue of the forecast widening in merchandise trade, and thus, current account deficit). The EGP/USD exchange rate has been relatively stable throughout the May to October 2010 period, after concerns over the Greek debt problems had earlier in the year led to a rapid depreciation of the EGP against the USD (coinciding with the USD strengthening against the Euro). With Ireland's debt situation surfacing in Q4/10, another round of Euro weakness against the USD started, strengthening the USD and adding further pressure on the depreciating EGP, to date. It must be noted also that a possible seasonal sell off of foreign investors' EGP holdings could have also exacerbated the recent depreciation of the EGP ahead of the Christmas holidays.

On that note, Beltone believes that the main determinants for the EGP/USD exchange rate will remain to be the local supply and demand of foreign exchange. The ongoing domestic increase of foreign exchange proceeds from tourism, Egyptian workers' abroad, the Suez Canal and investments could curb the pace with which the EGP would weaken against the USD. Meanwhile, this increased supply of foreign exchange compares to moderate and predictable demand from the business private sector for foreign exchange for importing, on the back of the still gradually recovering domestic economic environment, which is expected to continue to pick up, albeit not to the extent of applying significant pressure on the local foreign exchange demand. Beltone maintains their forecast of widening in the current account deficit that will lead to continuing weakening of the EGP against the USD as the fiscal year progresses to average around 5.75 to the USD in FY10/11, and to depreciate further going forward to an average of EGP5.90 in FY11/12. (Beltone 21.12)

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5.12 Egypt's Annual Inflation Unexpectedly Decelerates in November 2010

An unexpected fall in annual food price inflation was behind the deceleration in Egypt's annual headline inflation (urban) to 10.18% in November 2010 from 10.97% in October 2010. Annual food price inflation fell to 17.10% in November from 19.31% in October 2010. Monthly inflation, a better indicator of on-the-ground changes in prices (taking away the base effect), contracted, for the first time in 10 months, and fell to -0.81% in November from 1.37% in October and from an average of 1.14% since the beginning of the year, also on the back of food prices, which fell -2.24% in November compared to -0.16% in October. While most food items witnessed an incremental increase during the month of November (red meat and poultry,+0.4% m-o-m, grains and bread, +2.6%, fruits, +1.2%, dairy, cheese and bread +1.0%) this was, nonetheless, diluted by the impact of a sharp contraction in vegetables prices of 17.6%, reversing the past few months' trend of escalating vegetables' prices, which had peaked at 21.7% m-o-m in September, before moderating, albeit remaining high, at 6.4% in October 2010, led by prices of tomatoes, green beans and potatoes on higher consumption levels ahead of Ramadan and supply shortages in the domestic market. Apart from food prices, most other CPI items saw limited monthly changes in November 2010, except for clothing and footwear, which rose 2.2% m-o-m in November compared to -1.1% in October 2010. (Beltone 09.12)

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5.13 Suez Canal Receipts Fall To $412.8 Million in November

Suez Canal revenues fell to $412.8 million in November 2010 from $427 million in October 2010. The Suez Canal Authority said that revenue growth has accelerated on annual basis to 12.9% from 7% in October 2010, but fell -3.3% on a monthly basis compared to +4.1% growth in October 2010. The November out-turn was broadly in line with forecasts of $415 million, as there was an expected seasonal slowdown in trade movements around the month of November to affect the Canal's earnings, before moderately rising to a forecast level of $420 million and $425 million in December 2010 and January 2011, respectively. Coming from a low base, annual growth in canal earnings has rebounded, strongly, since the beginning of 2010 signaling the continued recovery in global trade, which has been driven by an overall improving global economic outlook, inventory re-stocking and fiscal stimulus spending, and their implication on higher traffic activity in the canal. (SCA 09.12)

5.14 Egypt Plans to Build First Nuclear Plant by 2019

Egypt's minister of electricity says the country plans to build its first nuclear power and have it fully operational by 2019. The state-owned MENA news agency said that Egypt also plans to build three more nuclear plants by 2025. Egypt plans to open international bidding for the plant's construction at the end of the year. The facility is expected to cost between $1.5 billion and $1.8 billion. President Mubarak first announced plans to build a number of nuclear power plants in 2007, reviving a program that was publicly shelved in the aftermath of the 1986 Chernobyl accident at a Soviet nuclear plant in what is now the Ukraine. (Various 12.12)

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5.15 Egypt Considering New Exclusions From Ration Card

Cairo plans to exclude those whose monthly fixed income exceeds EGP1,000 from the ration card. This is in an attempt by the Ministry of Social Solidarity to ensure only the lower-income brackets are prioritized in receiving the subsidy. Those excluded, however, will continue to be entitled to receive subsidized butane gas, in accordance with the new coupons' mechanism of distributing the butane canisters, and their new electronic cards will contain their entitled share of butane canisters. It had been announced, previously, that under the new proposed butane canisters distribution scheme, each family comprising one to three individuals will be entitled to one canister, a canister and a half for a family of four-to-five individuals, and two canisters for families of more than six individuals. The proposed price is expected to be EGP5.00/canister, with an additional EGP2.00 for home delivery. The mechanism also includes the option of providing canisters with a partial subsidy and without a ration card, in which case the price will be EGP25.00/canister. Butane gas is the energy product most subsidized by the Egyptian government and mostly used by the low-income class and higher income groups who reside in areas that are not linked to the national gas grid. The liberalization of canister prices, for non-ration card holders, could have negative repercussions on inflation, when implemented fully on a national level, and could create a black market for the canisters, while being implemented, partially, in some areas. (Beltone 15.12)

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5.16 Egypt to Offer Private Initiative Projects Over Next 5 Years

Egypt plans to offer billions of dollars worth of transport, energy and other projects in partnership with private firms over the next five years after rules to ease such deals are approved. Egypt is eager to get private companies more involved in education, healthcare, infrastructure and other sectors traditionally handled only by the government to boost economic growth and trim its budget deficit. But its 'public-private partnership' program still faces obstacles, including limitations on local bank financing, foreign exchange rate fluctuations, red tape and competition from nearby countries with similar programs. Orascom Construction Industries won the country's first public-private partnership concession last year in a 50-50 joint venture with the water division of Spain's FCC. Finance Minister Boutros Ghali said Egypt aimed to draw E£100 billion ($17.3b) of investment into public-private partnerships over the next five years. (Various 14.12)

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5.17 Pakistan Pharmaceuticals & Healthcare Report Q1 2011

Research and Markets' (http://www.researchandmarkets.com) "Pakistan Pharmaceuticals and Healthcare Report Q1 2011" cites that in BMI's Asia Pacific Business Environment Ratings (BERs) for Q1/11, Pakistan remains 16th, having dropped one place compared with the previous quarter due to the addition of a more attractive market Sri Lanka to their proprietary ratings system. Globally, Pakistan ranks 75th of the 83 markets surveyed. While its fundamentals may sound attractive (large population and emerging economy), Pakistan is at risk of experiencing years of instability and militant activity, although an outright collapse of the state is unlikely unless the core province of Punjab becomes ungovernable. Meanwhile, due to its strategic importance, Pakistan's foreign allies will do everything they can to ensure its stability, although foreign drug makers will continue to take a cautious stance regarding direct investment in the country. BMI calculates that the total value of prescription drugs and over-the-counter (OTC) medicines in Pakistan will stand at $1.79b for 2010. The Pakistani pharmaceutical sector is expected to experience huge losses during FY10/11 as a result of uncertainty in the industry, according to Pakistan Pharmaceutical Manufacturers Association chair Mian Asad Shujur Rehman. He said the prevailing uncertainty is likely to hinder export earnings from the sector. Rehman's comments follow the enactment of the 18th amendment, under which powers have been transferred from the central government to the provinces. He said that the devolution of power would create ambiguity among drug manufacturers of all sizes and prevent local and foreign investors from investing in the sector, thus also affecting trade. (R&M 09.12)

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkish Jobless Rate at 11.3% in September

The unemployment rate in Turkey declined by 2.1% in September to 11.3%, according to official data released by the Turkish Statistics Institute, or TurkStat, on 15 December. The monthly decline compared to August was 0.1. Data showed that the number of unemployed in Turkey fell to 2.93 million in September. Meanwhile, 483,000 people were laid off in the same month. Stripped from seasonal effects, September data showed that the number of people employed declined by 4,000 compared to August, while the number of jobless also fell by 30,000 people. Youth unemployment fell 3.1% to 21.2%, while non-agricultural unemployment fell 2.6%age points to 14.3%. However, the data showed that the number of jobless who are not seeking work, or those that have lost hope of finding a job, has increased by 34,000 to 1.88 million people, compared to last year. (Hurriyet 15.12)

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6.2 Turkey's Lowest Income Quintile Spends Most For Food & Least for Education

The lowest income households spent one-third of their earnings on food and only 0.7% for education in 2009, whereas in the highest quintile, people allocated 3.1% of their income for education while spending only 17.4% for food. According to the Household Consumption Expenditures Survey of the Turkish Statistics Institute (TurkStat) for 2009, spending for rent and household needs constituted the largest part of household expenditures countrywide in the last year with a share of 28.2%. With respect to consolidated results including all households across the country, money allotted for food and non-alcoholic drinks came in second at 23%. Transportation spending was third with 13.6%. Households defrayed 6.2% of their income for home appliance purchases, while education found itself at the bottom of the list at 1.9%.

When compared to the results of the same survey in 2008, the percentage allotted to housing and rent has declined, while other major expenditure items rose. The survey estimated that the average monthly consumption expenditure per household was TL 1,688, with a big difference between rural and urban areas at TL 1,181 and TL 1,891, respectively. The survey takes into account a classification of quintiles depending on income levels. Accordingly, the lowest quintile embodies households with a monthly income of at most TL 815, whereas households in the highest income bracket have a monthly income of at least TL 2,499. (Zaman 15.12)

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6.3 Turkey Entry Bid Scores Mixed Points in EU Debate

European Union governments sent a mixed message of praise and criticism towards Turkey and its EU accession effort on 14 December, underlining persistent divisions in the bloc over Ankara's membership prospects. During an annual debate on enlargement held by EU states in Brussels, the bloc expressed "deep regret" about Turkey's failure to patch up relations with EU member Cyprus and pressed Ankara to show improvement "without further delay". EU ministers welcomed, at the same time, Turkey's recent constitutional reforms as an "important" step towards improving human rights and Ankara's support to EU bodies tackling migration. "Negotiations (with Turkey) have reached a more demanding stage," ministers of foreign and European affairs said in a statement after the meeting. Britain, Finland, Sweden and Italy had pushed the EU recently to give stronger backing to Turkey's entry efforts and accelerate growth of the bloc, troubled by concerns among many EU states over the cost at a time of Europe's economic woes. But the push ran into long-standing opposition from Cyprus, with Nicosia pressing on Tuesday for a more critical stance over the Turkish-controlled breakaway north which only Ankara recognizes as a state. France and Germany are also hesitant about Turkish entry. (FM 15.12)

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6.4 Turkey Retail Report for First Quarter of 2011

Research and Markets' (http://www.researchandmarkets.com) "Turkey Retail Report Q1 2011" predicts that the country's retail sales will grow by nearly 14% by 2014, from $219.89b in 2011 to $249.51b. Underlying economic growth; an expanding population, especially in urban areas; rising levels of disposable income; and the continued development of organized retail infrastructure are key factors behind the forecast growth in Turkish retail sales, which should expand an average 4.6% per year throughout the forecast period. Turkeys nominal GDP is predicted to be $883.59bn in 2011, with growth of 4.7% expected, somewhat down on 2010s 6.3%. Average annual GDP growth of 5.3% is predicted by BMI between 2011 and 2014. With the population increasing from 76.6 million in 2011 to an estimated 79.1million by 2014, GDP per capita is forecast to grow by nearly 60% to $18,375 by the end of the period. The BMI forecast for consumer spending per capita is for an increase from $8,188 in 2011 to $12,948 by 2014. Turkey has a large, growing and young population. Each year, 750,000 young people join the workforce and, with an increasing level of urbanization, many are abandoning the agricultural sector in order to seek better paid work in other areas. Nevertheless, unemployment is a problem, reaching an estimated 12.0% by the end of 2010. (R&M 15.12)

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6.5 Cypriots Living at Risk of Poverty Reach 128,000

In 2008 the number of Cypriots living at the risk of poverty stood at 128.000 people or 16.2% of the population. At the same time 64.000 people, or 8.2% of the population, were severely materially deprived, meaning that they had living conditions constrained by a lack of resources such as not being able to afford to pay their bills, keep their home adequately warm, own a car or a telephone. Eurostat data show that 81 million Europeans or 16.5% of the total EU population were at risk of poverty, while after social transfers, meaning that their disposable income was below their national at-risk-of-poverty threshold, while 41.5 million (or 8.7% of the population) were severely materially deprived. The same data show that in Greece, 20.1% of the total population was at the risk of poverty in 2008. This is the highest rate among Eurozone members and the fourth highest percentage in the EU, following Latvia (25.6%), Romania (23.4%) and Bulgaria (21.4%). (FM 14.12)

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6.6 Agreement for Exclusive Economic Zone between Israel and Cyprus

Cyprus and Israel signed a bilateral agreement delineating their respective exclusive economic maritime zones in the eastern Mediterranean on 17 December. The move reflects the close relationship and ongoing cooperation between the two countries. It was signed by Cyprus' Minister of Foreign Affairs Kyprianou and Israel's National Infrastructure Minister Landau. In light of the recent discovery of a wealth of natural resources in the Mediterranean Sea, the delimitation of Israel's borders will play an important role in securing Israel's vital economic interests, by providing certainty to investors and offering clarity to Israel's neighbors as to the precise location of Israel's maritime borders and its right to natural resources at sea.' (FM 17.12)

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6.7 IMF Completes Second Review Under Stand-By Arrangement for Greece

On 17 December, the Executive Board of the International Monetary Fund (IMF) completed the second review of Greece's economic performance under a program supported by a three-year Stand-By Arrangement (SBA) for Greece. The completion of the review enables the immediate disbursement of an amount equivalent to about €2.5 billion, bringing total disbursements under the SBA to about €10.58 billion. The SBA, which was approved on May 9, 2010, is part of a cooperative package of financing with Euro area member states amounting to €110 billion over three years. It entails exceptional access to IMF resources, amounting to more than 3,200% of Greece's quota, and was approved under the Fund's fast-track Emergency Financing Mechanism procedures. The IMF feels their supported program has continued to perform well and the Greek authorities are to be commended for their determined implementation of difficult and ambitious macroeconomic policies and structural reforms. Inflation is falling and competitiveness improving. Given pressure points in the public sector and still unfavorable investor sentiment, comprehensive and timely reforms remain essential to secure renewed growth and sustainable public debt dynamics, while protecting vulnerable groups. (IMF 17.12)

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6.8 Greek PM Papandreou Slams Rating Firms

Greek Prime Minister Papandreou slammed international credit rating agencies on 20 December for their repeated downgrades of European economies such as Greece. At the same time he expressed optimism regarding the likelihood of an extension of the repayment period for the country's €110 billion bailout loan. Moody's and Fitch are both considering fresh downgrades to Greece's rating, which is already close to junk level for investors. Papandreou railed at the "unacceptable logic on their part." Speaking at a Cabinet meeting, he added that all the European Union leaders at the recent summit in Brussels were positive about a possible extension to the time Greece will have to repay its emergency loan. He also blasted the EU countries who do not approve of the idea of a Eurobond, saying that they were guilty of not assuming their responsibilities.

Meanwhile, Finance Ministry data showed that the budget deficit narrowed 27% in the first 11 months of the year to €18.7 billion, against a targeted annual reduction of 33.2%. The deficit reduction during the January-November period is mainly due to a significant cut in spending. Budget expenditures declined by 6.4% year-over-year, while primary expenditures decreased by 10.1% against an estimated 9% annual decline. Public investment budget expenditures declined by 12.2% and PIB revenues by 6.8%, compared to the same period in 2009.

Ordinary budget net revenues in the year to November increased by 4.8%, which represents an improvement compared to the 3.7% increase over the first 10 months. This is mainly due to increased VAT receipts, reflecting higher tax rates as well as better tax compliance resulting from the battle against tax evasion and an incentives scheme for the settlement of outstanding tax cases. It is expected that total revenues in December will be further increased due to the payment of road tax, the extension of the tax settlement period and the expected inflow of PIB revenues at the end of the year. The Finance Ministry announced that in the six weeks it has been running the tax amnesty program has netted €770 million from the settlement of tax cases spanning the 2000-09 period. (ANA 20.12)

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6.9 Greece Pledges To Accelerate State Asset Sales

Greece plans to accelerate a program of state-asset sales that the government hopes will raise €7 billion over the next three years, helping reduce the European's Union's highest debt as a percentage of GDP. An inter-ministerial committee decided on 15 December to immediately appoint advisers to draw up an inventory of the state's commercial real-estate assets. The inventory should be completed by June, the Finance ministry said. Plans include establishing tradeable special purpose vehicles to group "mature public real-estate assets" and appointing advisers to extend the operating contract for the Athens International Airport and assess options for the state's stake in the airport and in Public Gas Corp., a natural-gas supplier.

Greece is selling assets, changing labor laws, cutting wages and reorganizing state-run companies to meet conditions of a €110 billion EU-led bailout in May. The government will also seek advice in Q1/11 on extending the concession Opap SA has on sports- betting in the country and for "an assessment of the best available options for the management" of the government's 34% stake. Strategic investors will be sought for Hellenic Defense Systems SA and the Horse Racing Organization ODIE, two unprofitable public enterprises, regional airports, Hellenic Post Offices SA and the state lottery system. The government said earlier this month it plans to hire advisers by the end of the year to oversee the sale of as much as €1.1 billion of assets next year. Greece is seeking as much as €200 million from the sale of a stake in Public Gas Corp and estimates a sale of 49% in Trainose, which operates railway services, could raise as much as €35 million. (BI-ME 16.12)

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6.10 Greece's Jobless Rate Hits a 10-Year High

Greece's unemployment hit a 10-year high in the third quarter with austerity measures promised in exchange for funding from the IMF and the European Union expected to further weigh on the labor market. The jobless rate rose to 12.4% in the three months to September, from 11.8% in the second quarter and 9.3% in the same period a year earlier, the Hellenic Statistical Authority (ELSTAT) said on 16 December. The statistics service said the number officially out of work was 621,938, with unemployment a much higher 24.2% in the 15-29 age group. Conditions are worst in northern Greece's Macedonia region where the unemployment rate is in the range of 13.2 to 14.8%. Jobs fast dried up in the manufacturing and construction sectors over the last year as a total of almost 140,000 positions disappeared across all sectors in 12 months, ELSTAT data showed. Economists at Alpha Bank see unemployment averaging at 12.3% in 2010, up from 9.4% in 2009 and 7.4% in 2008. In September Greece's jobless rate was 2.3% higher than the average in the 16 countries that share the euro but lower than Spain's 19.8% unemployment. Greece has been in recession for more than two years, with the economy shrinking an annual 4.6% in the third quarter after the government slashed spending and raised taxes in an effort to narrow a budget deficit of 15.4% of GDP in 2009. The economy is forecast to stop contracting in the second half of 2011. (Kathimerini 17.12)

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6.11 IMF Mission Chief Upbeat on Bulgaria's Economy

The International Monetary Fund expects Bulgaria's economy to grow 0% to 0.4% in 2010, facing a sluggish recovery from last year's crisis, according to IMF's new mission chief for the country. She pointed out that another reason for the improving economy is the due to the so-called "big fixing", in which the current account deficit is constantly shrinking and may even go down to 2-3% at the end of the year. Bulgaria, the European Union's poorest country went through its first recession in 12 years in 2010 after a three-year lending boom stalled and foreign investments dried up. At the beginning of October the IMF wrapped up its two-week review and projected Bulgaria's economy to grow from 0% to 0.4% in 2010. It said this year's inflation will be moderate, while the current account deficit is expected to fall below 3% of GDP. Earlier this year, the government adopted a package of austerity measures, freezing public pays and pensions in a bid to reduce the bloating deficit. It revised up to 1% its economic growth forecast for this year, pinning its hopes on increasing exports. (SMN 16.12)

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6.12 Bulgarian Inflation Rises

Bulgarian consumer price inflation accelerated to 4.6% year-on-year in November from 3.9% a month earlier, mainly due to a spike in food prices. The CPI figure exceeded the government's end-year inflation forecast of 4.1%. On a monthly basis, inflation in November was 0.7%, up from a 0.6% increase in October, pushed up by the prices of flour and vegetables, the data showed. Food prices rose 1.2% on the month, while nonfood prices increased 0.4% and prices of services were 0.5% higher. (Reuters 14.12)

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6.13 Bulgaria Commits To Painful Railway Reforms to Get World Bank Loans

Bulgaria's Cabinet and the World Bank have signed a "memorandum of understanding" for reforms in the Bulgarian state railways company BDZ. The exact sums of the loans that Bulgaria will get from the international financial institution have not been completely negotiated yet, announced Finance Minister and Deputy PM Djankov. The memorandum is a framework agreement which outlines the key reform priorities in the Bulgarian railway sector. According to Transport Minister Tsvetkov, the talks for the World Bank loans for BDZ are to be finalized in the months to come. Tsvetkov said the signing of the agreement with the World Bank is "a hope for stabilization" since the Bulgarian state railway company BDZ is in a dire financial situation at the moment. In his words, the loan for reforms in BDZ, which is the state-owned operator of freight and passenger railway transport, will probably amount to about BGN 460m, while the loan for the National Railway Infrastructure Company (NKZI), the state body managing the railroads, will add another BGN 140m in a loan from the World Bank. Tsvetkov said the Bulgarian government has sent a notification to the European Commission about its intention to provide state aid to the state railway companies, and expects the Commission to give a green light to the reform plan. The reforms in the ailing Bulgarian state railways to be supported by the World Bank refer to a five-year reform period, which started in 2009.

The reforms yet to be carried out will emerge to be extremely painful causing thousands of layoffs, among other cuts, and have brought about the criticism by railroad syndicates who vowed to strike with determination to amend the deal with the World Bank. According to Bulgaria's Transport Minister, however, the reforms have already started to bear fruit by reducing the year-on-year loss of the BDZ company by BGN 12-15m in 2010. The Bulgarian governments in the past 20 years have been unwilling to try to privatize the railways because of the strategic importance of the railway sector, and the concerns that a private owner would shut down unprofitable routes, and will lay off thousands of people. (SMN 16.12)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

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7.1 Israeli Flag Flies at Dubai Sports Complex

Israel's flag flew for the first time at a pool in Dubai on 14 December as the national swim team representing the Jewish State arrived for the opening of a worldwide competition. Israel's five-member team is competing in the 10th FINA World Short Course Swimming Championship that began on 15 December. It is also the first time the world swimming competition is being held in an Arab city. The sports complex, named for the Crown Prince of Dubai, was opened just in time for the international swimming competition. An undercover security unit greeted the team upon landing and escorted the swimmers to a hotel separate from the rest of the competitors. Their equipment was also scrutinized at the airport by security personnel, who will guard the Israelis around the clock. Initial reports said the Israeli swimmers were not provided with entry visas, nor did they receive entry stamps in any of their passports, although the Dubai government had allegedly guaranteed visas on arrival. Jordanian Air refused to take the delegation to Dubai without the visas, causing further delays. Ultimately, the team did not arrive until the day before competitions began, giving the swimmers barely a day in which to prepare for the meet. Israel's representative to the International Olympic Committee was also initially prevented from obtaining a visa. Finally, the Israelis were granted visas some 24 hours prior to the start of the competition. (IsraelNN15.12)

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7.2 Begin & Rabin to Appear on New Israeli Banknotes

The State of Israel's new series of banknotes will have the faces of three Israeli Nobel Prize laureates on them – Prime Ministers Menachem Begin and Yitzhak Rabin and writer Shmuel Yosef Agnon. The poetess Rachel will appear on a fourth banknote. The only one of the four who already appears on an existing banknote is Agnon, whose face can be seen on NIS 50 bills. Bank of Israel Governor Stanley Fischer made the decision after exploring candidates recommending by an advisory committee, which is subject to the government's approval. Fischer's decision integrates into the new series officials representing the political and cultural aspects of Israel's history – two statesmen who signed peace treaties with Israel's neighbors and two prominent figures from the literature and poetry fields. The Bank of Israel governor noted in his decision that it was important to historically commemorate the nation's leaders for the sake of future generations, adding that the figures selected serve as an important lesson in the legacy of the people of Israel. The Bank of Israel will issue the new series as of 2012 in bills worth NIS 20, 50, 100 and 200. The new banknotes will include security and identification marks to make it difficult to forge them. (Various 21.12)

*REGIONAL:

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7.3 Iraq Approves Prime Minister Maliki's New Government

Iraq's parliament approved Prime Minister Nuri Al-Maliki and his new government on 21 December, nine months after an inconclusive election left politics in limbo and delayed investments to rebuild the country after years of war. Lawmakers voted into office Maliki and a new slate of ministers, elevating Oil Minister Hussain Al-Shahristani to deputy prime minister for energy and leaving in place Kurdish veteran Foreign Minister Hoshiyar Zebari. Highlighting the ethnic and sectarian divides that pervade the war-ravaged country, parliament had to postpone the vote by a day after last-minute factional disputes and political horse-trading over posts delayed the government's formation. Former Prime Minister Iyad Allawi, who failed to gain enough support for a parliamentary majority after his cross-sectarian Iraqiya bloc won the most seats, told lawmakers his Sunni-backed coalition would participate fully in the government. Maliki has yet to decide on permanent choices for some positions, including sensitive security-related ministries such as defense and interior. While Shahristani was minister, the oil ministry reached a series of deals with oil majors that could boost Iraq's output capacity to 12 million barrels per day, rivaling global leader Saudi Arabia, from about 2.5 million barrels per day now. For international oil companies, Shahristani's continued control over the oil sector will be seen as assurance that contracts he agreed will be honored in the absence of formal guarantees, since Iraq still lacks a new hydrocarbons law. (Various 21.12)

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7.4 Public Space Smoking Ban Becomes Effective In Bulgaria

The smoking ban in public spaces became effective on 19 December, the Bulgarian Health Ministry announced. Smoking spaces inside restaurants, coffee shops and bars, in commercial and administrative buildings and in railroad stations, and airports, must have walls and tight-closing doors and good ventilation equipment. Owners of coffee shops and restaurants with less than 50 square meters have the right to decide themselves if the establishment will be a smoking or entirely non-smoking space. In case smoking is allowed, individuals under the age of 18 would not be admitted as they are banned from smoking in all indoors spaces. In larger establishments, at least 50% of the space must be dedicated to non-smokers. In night clubs, smoking will be allowed at all times regardless of how large they are. Open-space coffee shops and restaurants inside shopping malls are becoming non-smoking facilities. Owners face fines for inadequate ventilation and lack of sings designating the non-smoking sections and the smoking ban for those under 18. The Health Ministry further informs that despite the fact the order is effective beginning 19 December, the checks of health inspectors for violations will begin after the holidays on 3 January 2011. (SMN 20.12)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Teva Announces Successful Results of Phase III Study with Oral Laquinimod for Multiple Sclerosis

Teva Pharmaceutical Industries and Sweden's Active Biotech announced initial results from the two-year Phase III ALLEGRO study, which demonstrated that relapsing-remitting multiple sclerosis (MS) patients treated with 0.6 mg daily oral laquinimod experienced a statistically significant reduction in annualized relapse rate compared to placebo. Additional clinical endpoints, including significant reduction in disability progression, as measured by Expanded Disability Severity Scale (EDSS), were also achieved. Laquinimod demonstrated a significant reduction in the progression of disability which may be explained by its unique mechanism of action that includes neuroprotective properties. Laquinimod may therefore be a promising therapeutic option for the MS community. Laquinimod was safe and well-tolerated. The overall frequencies of adverse events were comparable to those observed in the placebo group. No deaths were reported in laquinimod-treated patients. Overall incidence of infections was similar between the two arms of the trial. Additional analyses of the ALLEGRO study data are ongoing, and detailed results will be submitted for presentation at a leading scientific conference during H1/11.

Israel's Teva Pharmaceutical Industries (http://www.tevapharm.com) is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. Teva's branded businesses focus on neurology, oncology, respiratory and women's health therapeutic areas as well as biosimilars. (Teva 09.12)

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8.2 Medisafe 1 Technologies Demonstrates Syringe Locking Device

Medisafe 1 Technologies Corp. conducted an official demonstration of its barcoded syringe locking device at Israel's National Ministry of Health. Several government officials were present at the demonstration including Deputy Minister Litzman. Jerusalem's Medisafe 1 Technologies (http://www.medisafe1.com) seeks to effectively prevent unauthorized administration of a drug or medicinal substance by hypodermic needle. Medisafe's patented technology is a medical assembly with a locking mechanism that is intended to ensure the substance cannot be released from the hypodermic needle without positive pre-matching between the substance and its intended patient. (Medisafe 1 Technologies 09.12)

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8.3 Tift Selects Minicom's Remote Access Management Solution for Data Consolidation

Minicom Advanced Systems announced the successful implementation of their Remote Access Management (RAM) solution at Tift Regional Medical Center of Tifton, Georgia. A full service hospital campus serving twelve counties in South Central Georgia, Tift Regional is in the final stages of a multi-year consolidation of two data centers into a single, purpose-built facility. After a competitive evaluation and test installation, Tift Regional chose to replace all of its existing KVM switches and server monitoring systems with the Minicom RAM solution. The Minicom RAM solution includes Minicom KVM IP switches and Mincom's AccessIT remote management software, and is capable of providing remote access and control of servers and devices via in-band software (i.e. RDP, VNC) and out-of-band tools including KVM server access, console servers, PDUs and service processors (such as ILO, DRAC and IPMI). Jerusalem's Minicom Advanced Systems (http://www.minicom.com) provides KVM remote access, extension and management solutions designed to expedite and simplify IT services. Tailored for IT managers who need secure, centralized, and seamless access to their mixed IT environments, these solutions enable local, remote, in-band and out-of-band access and management. Minicom's unique approach maximizes past investments in IT infrastructure, installation and training while adding innovative technology, resulting in reduced costs and increased productivity. (Minicom 08.12)

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8.4 Clearstep and Objet to Collaborate on Digital Orthodontic Solution

Objet Geometries announced collaboration with the UK's Clearstep Laboratories, a leading provider of digital orthodontic solutions. Objet's high resolution, 3D printing systems will facilitate Clearstep to become more efficient in manufacturing custom-made orthodontic clear aligners on a mass scale. Working together, Clearstep and Objet will bring the advantages of digital printing technology to orthodontics. The Clearstep Solution is a series of clear, removable aligners designed to align the patient's teeth, which both orthodontists and dentists use as an alternative to traditional metal braces. The clear aligners consist of individual parts vacuum-formed using Objet's printed models. The Clearstep manufacturing center is one of the most advanced digital production center in the UK. The production is heavily supported by Objet 3D printing systems, which help to reduce the time required for the clear braces production process.

Rehovot's Objet Geometries (http://www.objet.com), the innovation leader in 3D printing for rapid prototyping and additive manufacturing, provides 3-dimensional printing systems that enable manufacturers and industrial designers to reduce cost of product development and dramatically shorten time-to-market of new products. Objet's ultra-thin-layer, high-resolution 3-dimensional printing systems and materials utilize PolyJet polymer jetting technology, to print ultra-thin 16-micron layers. The market-proven Objet Eden line of 3D Printing Systems and the Objet Alaris30 3D desktop printer are based on Objet's patented office-friendly PolyJet Technology. (Objet 08.12)

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8.5 Yissum Introduces a Novel Method for Forensic DNA Profiling

Yissum Research Development Company introduced a novel method for identifying a suspect's DNA even in complex DNA mixtures. The novel strategy consists of checking the DNA mixture and the suspected individual's DNA for 1000-3000 single letter changes (polymorphisms) which are relatively rare in a relevant population. This novel DNA profiling method will enable the police to investigate even complex crime scenes containing DNA from multiple individuals and discern with high reliability the presence or absence of DNA from a specific suspect. Current DNA profiling methods check a few such "polymorphic" sites and if they all match exactly to the suspect's DNA, one can establish with extremely high certainty that the DNA found in the crime scene belongs to the suspect. But if the DNA found in the crime scene is a mixture from more than 2 individuals, which is often the case, current DNA analysis methods are inefficient. This invention enables one to establish with a very high level of certainty if a suspect's DNA is present in a mixture of DNA that comprise even up to 10 individuals. The procedure involves analyzing the DNA mixture for 1000-3000 polymorphic sites where DNA letter changes are rare in the population (found only in about 5% to 10% of the population). Thus, a suspect will carry about 100-200 of these rare letter changes. If the DNA mixture collected in the crime scene does not include the suspect's DNA, there is almost no chance that all of his/her 100-200 specific and rare letters will be present. On the other hand, if all these rare polymorphisms are present, then the only logical explanation is that the mixture included the suspect's DNA. Consequently, the method presented can establish with high certainty whether the suspect's DNA was present or absent in the DNA mixture collected from the scene of the crime.

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. Ranked among the top technology transfer companies in the world, Yissum has registered over 6,100 patents covering 1,750 inventions; has licensed out 480 technologies and has spun-off 65 companies. (Yissum 13.12)

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8.6 Stimatix GI Study for Effectiveness of the AOS-C1000 Colostomy Management System

Stimatix GI reported that the AOS-C1000, a unique colostomy management device, met primary and secondary endpoints in pre-clinical in-vivo animal studies. Primary endpoints of repeatable stoma sealing for continence control as well as secondary endpoints regarding tissue pathology and survival were met confirming the AOS-C1000 as capable of enabling repeatable colostomy site (stoma) sealing for continence control. The AOS-C1000 Colostomy Management System is designed to allow individuals to discretely manage their colostomy without the need to wear a traditional ostomy pouch. The AOS-C1000 is intended to improve quality of life and offer an elegant, non-surgical and simple to use solution for round-the-clock continence control. The AOS-C1000 Colostomy Management System hermetically seals the colostomy site without the use of adhesives, prevents leakage and odor . Waste matter is stored inside the body eliminating the need to wear a suspended pouch. As designed, the AOS-C1000 provides the individual complete control over continence, restoring confidence and improving quality of life. Stimatix GI is preparing for first-in-man clinical trials to commence during H2/11 and recently announced that it is raising $2.6 million towards this end.

Misgav's Stimatix GI (http://www.stimatix-gi.com), founded in June 2009, has offices in Misgav, Israel and is a portfolio company of The Trendlines Group's Misgav Venture Accelerator. Stimatix develops innovative continence management devices for people with stoma intended to improve quality of life. The AOS-C1000, designed for people with colostomies, is expected to be the first product to market, followed by the AOS-I1000 for ileostomates, and subsequently the AOS-U1000 for urostomates. (Stimatix GI 13.12)

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8.7 Biological Signal Processing Signs US Distribution Agreement With Synergistic Medical Network

Biological Signal Processing (BSP) signed a US non exclusive distribution agreement with California's Synergistic Medical Network to distribute and market its products to physicians in clinics and hospitals throughout the United States. BSP's innovative products are based on its proprietary, patented HyperQ technology which offers first line diagnostics of unmatched performance for the detection of Ischemic Heart Disease (IHD). The groundbreaking HyperQ technology utilizes advanced signal processing techniques for extracting and analyzing valuable clinical information from high-resolution ECG signals, providing a novel diagnostic tool with superior accuracy, compared to conventional stress ECG analysis. To date, over 15,000 patients have been tested using HyperQ systems, in routine use and in clinical studies, with outstanding results. BSP's product line includes the HyperQ EX-300, a second generation hybrid system which offers all the functionalities available in first tier Stress ECG machines coupled with the unique HyperQ analysis. The company also offers the HyperQ AD-100, an add-on system with the HyperQ technology which is incorporated in parallel to existing standard stress ECG systems, catering to the vast installed base of physicians wishing to benefit from the clinical advantages of the technology without the need to replace their existing installed Stress ECG system.

Founded in 2000, Tel Aviv's BSP (http://www.bsp.co.il) is dedicated to providing novel, risk free and highly reliable solutions for the diagnosis and monitoring of cardiovascular disease. BSP's proprietary HyperQ technology is implemented in cardiac systems that offer accurate, low-cost and risk free cardiac monitoring and allows, for the first time, an effective diagnosis of ischemic heart disease in broad populations. BSP shares are traded on the Tel Aviv Stock Exchange since 2006. (BSP 13.12)

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8.8 Compugen's Positive Effect of CGEN-15001 in Animal Model of Rheumatoid Arthritis

Compugen announced that administration of CGEN-15001 in an animal model of rheumatoid arthritis (RA) dramatically ameliorates the clinical symptoms of the disease. These results, combined with earlier results in an animal model of multiple sclerosis (MS), strongly support the therapeutic potential of CGEN-15001 for multiple autoimmune diseases and inflammatory conditions. The recently completed study of CGEN-15001 utilized the collagen-induced arthritis (CIA) animal model. This well accepted animal model of RA manifests an autoimmune disease with clinical and pathological similarity to human rheumatoid arthritis. Upon treatment of mice with established RA disease, impressive therapeutic effects of CGEN-15001 were observed. Furthermore, CGEN-15001 showed efficacy similar to that observed through TNF-alpha blockade with TNFR-Fc, ENBREL, a widely used biologic disease modifying anti-rheumatic drug (DMARD). In the study, both ENBREL and CGEN-15001 were administered at the same dose and frequency.

The CIA model of RA is the second well recognized animal model of autoimmune disease in which CGEN-15001 has shown dramatic therapeutic potential; previous studies with CGEN-15001 demonstrated similar beneficial effects in an animal model of multiple sclerosis. Furthermore, in both the animal models of RA and of MS, the significant clinical potential for this novel molecule was underscored by the pronounced therapeutic effects demonstrated when CGEN-15001 was administered in the presence of established disease. These promising results in the two different autoimmune disease models further support the development of CGEN-15001 as a therapeutic agent for autoimmune and inflammatory diseases, such as multiple sclerosis, rheumatoid arthritis and inflammatory bowel disease. CGEN-15001 is a novel soluble Fc-fused protein comprised of the extracellular domain of a novel B7-like negative co-stimulatory protein, CGEN-15001T, discovered by Compugen through the Protein Family Members Discovery Platform.

Tel Aviv's Compugen (http://www.cgen.com) is a leading drug and diagnostic product candidate discovery company. Unlike traditional high throughput trial and error experimental based discovery, Compugen's discovery efforts are based on in silico (by computer) product candidate prediction and selection utilizing a broad and continuously growing infrastructure of proprietary scientific understandings and predictive platforms, algorithms, machine learning systems and other computational biology tools to address important unmet therapeutic and diagnostic needs - either for Compugen or its partners. Compugen's growing number of collaborations covering the further development and commercialization of Compugen discovered product candidates all provide Compugen with potential milestone payments and royalties on product sales or other forms of revenue sharing. (Compugen 14.12)

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8.9 UT Southwestern Medical Center & Rabin Medical Center Announce Joint Agreement

Dallas' UT Southwestern Medical Center and Rabin Medical Center, Israel, two of the world's top academic medical centers, have entered into an innovative affiliation agreement for the next five years. The internationally recognized institutions will collaborate on faculty and student exchange programs, as well as the development of joint studies, research and training activities and other educational programs of mutual interest. In celebration of this strategic collaboration, Rabin Medical Center will fund a fellowship to be awarded to a student selected by UT Southwestern to attend RMC. The joint agreement calls for UT Southwestern and Rabin to collaborate on Joint research conferences and symposia; Reciprocal exchange of students, post-graduate trainees or faculty in the areas of medicine, nursing, collaborative research projects, exchange of publications, reports or other academic information; Exchange of cooperation regarding the organization, delivery and management of health care services; and Professional development. The new program took effect on 15 December 2010, and continues through 15 December 15, 2015 and annually thereafter if both institutions choose not to opt out of the agreement.

Established in 1996 in memory of the late Prime Minister Yitzhak Rabin by combining two existing hospitals, Rabin Medical Center has Israel's only dedicated transplant facilities capable of performing kidney, lung, heart and liver transplants. Rabin Medical Center's Cardiothoracic Surgery Department and its Oncology Institute are the largest in the country, and its heliport and Level 1 Trauma Center provide vital emergency services throughout the region. (UTSMC 15.12)

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8.10 PROLOR Biotech Granted SME Designation by the European Medicines Agency

PROLOR Biotech announced that the European Commission and the European Medicines Agency (EMA) has granted PROLOR the designation of "Small and Medium Sized Enterprise" (SME). The SME program is an initiative by the EMA to address the particular needs of small and medium size companies developing medicinal products in Europe. Companies that are granted SME designation are able to seek scientific advice, protocol assistance, and other information and training from dedicated EMA personnel during the drug candidate clinical development process, up through submission of a European marketing authorization application (MAA). Ness Ziona's PROLOR Biotech (http://www.prolor-biotech.com) is a clinical stage biopharmaceutical company applying unique technologies, including its patented CTP technology, primarily to develop longer-acting, proprietary versions of already approved therapeutic proteins that currently generate billions of dollars in annual global sales. The CTP technology is applicable to virtually all proteins, and PROLOR is currently developing long-acting versions of human growth hormone, which is in Phase II clinical development, and factor VII, factor IX, interferon beta and erythropoietin, which are in preclinical development, as well as an anti-obesity peptide and agents for atherosclerosis and rheumatoid arthritis. (PROLOR BIOTECH 20.12)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Kontera Introduces Mobile Solutions for Related Information and Context-Based Advertising

Kontera continues its mission of delivering relevant information to users with the announcement of two new mobile offerings. The first solution is a related content product, and the second is a relevant ad offering for publishers and brand advertisers. The new solutions are powered by the Kontera Synapse Platform, and span the major mobile devices including mobile phones and tablets that run Apple's iOS or Google's Android operating systems. Kontera's mobile solutions are already live across its more than 15,000 publishing partners. Kontera's new mobile solutions use advanced semantic analysis combined with real-time web-trends and user context analysis to predict consumers' interests. The new mobile solutions include both related information as well as highly targeted advertising.

Herzliya Pituah's Kontera's (http://www.kontera.com) real-time Synapse Platform uses sophisticated semantic and web trend analysis to understand and instantly react to user's intent with relevant information and Ads. With Kontera users find information that is relevant to their interests, publishers increase interaction with their content, and advertisers gain greater targeting precision and brand engagement. Kontera delivers its capabilities to the market through multiple partners. It is the exclusive in-content analysis and engagement platform for more than 15,000 web publishers, for whom it analyzes more than 3 Billion monthly page-views in real time. The company delivers relevant content and ads to more than 140 million unique users each month. (Kontera 09.12)

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9.2 Silent Communication Enhances Visual Voicemail Mobile Client

Silent Communication has enhanced its popular Silent VVM visual voicemail mobile client with new voice-to-text -presentation capabilities, enabling mobile device users with even greater flexibility to manage their voicemail via a single easy-to-use, on-screen interface. Utilizing Silent Communication's serverless Device and Network Agnostic (DANA) deployment technology, mobile network operators are enabled to roll out this enhanced service to any device on their network simultaneously, spanning mobile operating systems including Android, BlackBerry, Symbian and Java, Windows Mobile, Java and Brew. The Silent VVM mobile client affords mobile users the ability to manage voicemail with the same ease in which they manage SMS, MMS or email. Users can browse voice messages visually, listen to messages with one click, and respond to voice messages via call back, SMS, MMS and/or email. With the new addition of voice-to-text capabilities, users can choose to view text transcriptions of their voice messages, thereby achieving the ability to manage voicemail from end-to-end in environments where audio message playback is impractical.

The pioneering provider of Device and Network Agnostic (DANA) mobile client solutions, Tel Aviv's Silent Communication (http://www.silentcom.com) works with mobile network operators, device manufacturers and value added service (VAS) providers to rapidly expand deployment and revenue opportunities for mobile Value Added Services. Silent Communication applies its advanced, serverless DANA deployment technology to popular services to ensure that they operate on any device and on any network. (Silent Communication 08.12)

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9.3 Wavion & Vipitel Partner for High Speed Internet Access for Mexican State of Aguascalientes

Wavion and Vipitel, a wireless service provider in Mexico, announced the deployment of Wavion's Wi-Fi base stations for high speed internet access in the state of Aguascalientes, Mexico. The project was initiated by the government of the state of Aguascalientes. The goal was to offer free Wi-Fi to the whole state, comprised by 10 municipalities with a population of 1.5 million. The network includes 38 Wavion base stations: WBS-2400 and WBS-5800, working in the 2.4 GHz and 5.8 GHz respectively. The Wavion base stations were installed on poles and roof-tops along the city streets. The 2.4 GHz network provides internet access to the citizens of the state and the 5.8 GHz network provides the backhaul. The complete system was designed and implemented by Wavion and Contrasys – Wavion's partner headquartered in Mexico City.

Yokneam's Wavion Wireless Networks (http://www.wavionnetworks.com) is a worldwide technology leader in outdoor Wi-Fi applications in metro and rural areas with deployments in more than 60 countries. The company's true digital Beamforming and Space Division multiple access (SDMA) technologies are the first and only to resolve the significant performance, penetration and profitability challenges facing large scale metro and rural deployments. Featuring Wavion Base Stations (WBS), in 2.4 GHz and 5 GHz unlicensed bands and in 700MHz licensed band, Wavion offers end-to-end solutions including access, backhaul, CPEs and management solutions. (Wavion 13.12)

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9.4 BoneTone HDClear Chip Delivers Quality Voice Communications in Noisy Environments

BoneTone Communications announced the launch of HDClear, the company's new chip solution for Bluetooth, wired, cordless (DECT) headsets and mobile and cordless phones. This next-generation chip leverages BoneTone Communications' unique signal processing technology, which deploys a combination of off-the-shelf standard and bone conduction acoustic components and an in-depth understanding of the propagation of acoustic waves. HDClear raises the bar on mobile device sound quality. Mobile device headset users benefit from the chip's high-quality, uninterrupted voice communications in any noisy environment. HDClear provides complete user privacy, as user locations are not disclosed by background noise, which is either fully eliminated, or alternatively, can be replaced with any preferred background sound. HDClear offers seamless integration with Bluetooth and cordless baseband processors, as well as with Smartphone processors, while a stand-alone version, HDClear-S, is available for wired headsets. The chip's compact design is combined with a minimum of external passive components that require low power, making HDClear very cost-efficient. HDClear chip samples and reference designs will be available in Q1/11.

Rosh-HaAyin, BoneTone Communications (http://www.bonetonecom.com) develops and markets innovative chip solutions that enhance audio and voice quality for mobile devices. Leveraging the company's unique signal processing technology, combined with off-the-shelf standard and bone conduction acoustic components, the HDClear chip improves voice call intelligibility. The HDMobileSurround chip enables mobile device users, via a small form-factor headset, to enjoy surround sound while gaming or watching movies on the go, similar to a home theater experience. (BoneTone 14.12)

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9.5 Commtouch Releases Seventh Generation Messaging and Web Security Technology

Commtouch announced the launch of its seventh generation Recurrent Pattern Detection technology. RPD technology is at the heart of new versions being released for each of the company's messaging and Web security products, which are integrated into the products of security and networking vendors and into service providers' infrastructure. Among the many new features and improvements, the newly released versions include Commtouch Mail Sort, the industry's first solution that automatically distinguishes personal emails from valid mass mailings such as newsletters, to enable better inbox management. It also has enhanced monitoring capabilities that can easily be added to existing network monitoring systems to ensure that administrators have a clear picture of network activity behind the scenes.

Commtouch's new automatic Mail Sort feature enables service providers and vendors to offer a new inbox-sorting feature to their end-customers. The distinction between individual and large-scale messages is handled automatically in the Commtouch GlobalView Network unlike services such as Google's 'Priority Inbox' and Microsoft Hotmail's 'Sweep,' which require training by end users. With the Mail Sort feature, end-users will be able to easily identify their personal mail as higher priority than their newsletters and other "bulk-mailed" material.

Netanya's Commtouch (http://www.commtouch.com) provides proven internet security technology to more than 150 security companies and service providers for integration into their solutions. Commtouch's GlobalView and patented Recurrent Pattern Detection (RPD) technologies are founded on a unique cloud-based approach, and work together in a comprehensive feedback loop to protect effectively in all languages and formats. Commtouch's Command Antivirus utilizes a multi-layered approach to provide award winning malware detection and industry-leading performance. (Commtouch 14.12)

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9.6 RADVISION Receives Frost & Sullivan 2010 Best Practice Award

RADVISION has been selected by industry analyst Frost & Sullivan for the Frost & Sullivan China Best Practice Award – 2010 Excellence in Video Technology Innovation of the Year in recognition of the Company's "remarkable efforts and innovative contribution in the video technology field." The award from Frost and Sullivan is important recognition of the Company's efforts. Each year, Frost & Sullivan presents this award to the company that has carried out new research, which has resulted in innovations that have or are expected to bring significant contributions to the industry in terms of adoption, change and competitive posture. This award recognizes the quality and depth of RADVISION's research and development program, as well as the vision and risk-taking that enabled it to undertake such an endeavor. RADVISION noted that its long-term investment and research in video technology has successfully helped enterprises and service providers build efficient video communication networks, and is removing barriers to the development of unified video communication, thereby promoting the advancement of video technology.

Tel Aviv's RADVISION (http://www.radvision.com) is the industry's leading provider of market-proven products and technologies for unified visual communications over IP, 3G and IMS networks. With its complete set of standards-based video communications solutions and developer toolkits for voice, video, data and wireless communications, RADVISION is driving the unified communications evolution by combining the power of video, voice, data and wireless – for high definition video conferencing systems, innovative converged mobile services, and highly scalable video-enabled desktop platforms on IP, 3G and emerging next-generation IMS networks. (RADVISION 14.12)

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9.7 Magic Software Signs a New Deal with Aviapartner

Magic Software Enterprises announced that its wholly owned subsidiary, HERMES Logistics Technologies, a leading provider of air cargo management solutions, has signed a deal to deliver its state-of-the-art HERMES cargo management system to Aviapartner. The HERMES cargo management system, powered by Magic Software's award-winning application platform, will increase Aviapartner's productivity and efficiency. Aviapartner recognizes its need to invest in a future-proof cargo handling solution, solidifying its customers' expectations, blending both reliability and a high level of service. Aviapartner was awarded the IATA Safety Audit for Ground Operations (ISAGO) certification following the successful completion of a comprehensive audit of its Brussels Head office and 8 stations in its European handling network. With an initial roll-out at the Amsterdam and Frankfurt stations, HERMES will provide Aviapartner with a wave of refreshed processes, embracing the need to supply customers with a consistent level of service and quality. Or Yehuda's Magic Software Enterprises (http://www.magicsoftware.com) is a global provider of cloud and on-premise application platform solutions – including full client, rich internet applications (RIA), mobile and Software-as-a-Service (SaaS) modes – and business and process integration solutions. The company's award-winning, code-free solutions give partners and customers the power to leverage existing IT resources, enhance business agility and focus on core business priorities. (Magic Software 14.12)

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9.8 Ethernity Networks' Field Programmable Carrier Ethernet Switch Offering

Ethernity Networks announced the availability of a combined carrier Ethernet switch with TDMoP, SAToP and CESoPSN solutions. These solutions have been certified by several early customer engagements and will start deployment in Q1/11. This will enhance current Ethernet Mobile backhaul offerings. The ENET Fabric Flow Processor integrates Packet Processing, Traffic Management and IWF (protocol InterWorking Function) functionality, using a zero copy operation. The addition of TDMoP technology to the field proven ENET Fabric Flow Processor enables OEMs to use a single chip that combines a high performance carrier Ethernet switch, and PWE3 SAToP and CESoPSN solution. This combined pseudo wire and carrier Ethernet switch solution positions the ENET as the only solution available in the market that combines a high performance carrier Ethernet switch and PWE3 on a single chip, to support newer cellular site ring topologies. Equipped with up to 8 10/100/1000 Ethernet ports and 32 E1s/T1s, OEMs will be able to design an ultra low cost cell tower aggregator to support cascaded, Point to Point, or Ring topologies with G.8031/G.8032 protection switching. Furthermore ENET's programmable interface options will enable smoother migration from hybrid TDM/Packet Backhaul to a pure Packet only backhaul, by simple firmware upgrade. This will enable users to plug in a newer packet base interface module instead of a legacy TDM interface module, using the exact same hardware platform.

Lod's Ethernity Networks (http://www.ethernitynet.com) develops and provides FPGA based carrier grade flow processors for telecom platforms enabling the Programmable Network. The ENET architecture is based entirely on Ethernity technology protected by five patents. Ethernity Networks' products target the Broadband Access, Mobile Backhaul and Metro Ethernet arenas, which are the growth engines in telecommunications for the next ten years. (Ethernity 15.12)

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9.9 N-trig Pen and Multi-Touch Technology Now Operating with Android

N-trig, providers of DuoSense a pen and projected capacitive multi-touch solution enabled over a single digitizer, announced that it is now compatible with the Android operating system. Android is increasingly becoming the operating system of choice for the fast expanding slate and mobile PC segment. The DuoSense solution offers the Android community a comprehensive package for both pen and multi-touch development. Utilizing N-trig hardware, devices running over Android can expand conventional slate functionality by using both the DuoSense pen and multi-touch capabilities. The combination of DuoSense and Android opens up new windows of opportunity for the Android pen community to utilize the N-trig Digital Pencil to expand functionality from traditional media consumption and create pen-enabled applications for more precise and creative on-screen user interaction. N-trig's DuoSense solution will be integrated in a number of Android slates due to be launched in 2011.

Founded in 1999, Kfar Saba's N-trig (http://www.n-trig.com) is a global operation, maintaining its R&D facility, corporate headquarters and management in Israel, sales, OEM and ISV support in Austin, Texas and San Jose, California, and ODM, operations and supply chain support in Taipei, Taiwan and Tokyo, Japan. N-trig DuoSense, a dual-mode interface, powered by a single digitizer, uses pen and projected capacitive multi-touch to create onscreen digital input, for a true Hands-on computing experience for mobile computers and other digital products. Offering a complete and highly usable solution to the ever-increasing demand for productivity on the move, the DuoSense Digital Pencil utilizes inherent pen capabilities to enable greater levels of interactive creativity, and the N-act gesture vocabulary comprises a library of gestures for performing actions and tasks directly on the screen. (N-trig 21.12)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's CPI Rise Lower Than Expected

Israel's Consumer Price Index (CPI) rose only 0.1% in November, reported the Central Bureau of Statistics on 15 December. Pundits had generally expected a rise of 0.3%. The prices of cucumbers fell 27%, and tomato prices fell 16%. Over the past month, fuel rose 2.7%, communications rose 2.1% as cellular companies raised their rates, and there was a seasonal rise in the clothing component. The housing component of the CPI was unchanged. Inflation, measured by the CPI, is now at 2.3% over the past twelve months, and over the year to date (January-November) period.

Capital market economists estimate that November's low CPI will allow Bank of Israel Governor Stanley Fischer to postpone raising the interest rates at least by another month, despite the fact that the inflation for the next 12 months is currently estimated to reach 3%, coming very close to the upper limit of the government's target rate. If Fischer does postpone raising interest rates, it is because he is concerned that the hike will perpetuate the flow of foreign capital into Israel, which in turn will cause the shekel to grow stronger against the dollar and euro. (CBS 15.12)

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10.2 Israel's Income from Tourism Reaches Record $4.4 Billion in 2010

Income from tourism reached a record $4.4 billion in 2010, the Israel Hotels Association announced on 21 December. Preliminary estimates also showed that a record 3.4 million tourists will have visited Israel in 2010. This figure is higher than the Ministry of Tourism prediction. The Hotels Association said that 2.8 million tourists stayed in Israel for more than 24 hours. Income from tourism rose 33% from $3.3 billion in 2009 when the industry was adversely affected by the war in Gaza. Hotel income in 2010 was also an all time record of NIS 8.1 billion not including VAT. The hoteliers also expressed optimism over 2011. Some 80% of hoteliers believe that the upward trend in hotel overnights from foreign tourists will continue next year. A quarter expect the number of foreign tourists coming to Israel to rise by at least 10% next year, mainly through a rise in tourists from Europe. Seventy percent of hoteliers expect record occupancy in 2011, but 5% of hoteliers fear that tourism will fall in 2011. (Globes 20.12)

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11: IN DEPTH

11.1 JORDAN: The Old & New Lessons of Jordan's November Elections

Adriana Qubaia wrote on 21 December in the Middle East Political & Economic Institute (http://mepei.com) that after King Abdullah II dissolved Jordan's Lower House through a Royal decree in November of last year, he entrusted the government with preparing for a new round of parliamentary elections. More importantly, the king also asked the government to amend the temporary Electoral Law.

This was largely seen as an unjust law hindering tangible political pluralism. Not only did the king's direct request send a hopeful message to citizens wishing for meaningful political reform in the country, but the subsequent steps, which included inviting international electoral observers to monitor the elections for the first time, signaled to the international community that Jordan is eager to prove its commitment to democratization. The government obliged and set 9 November 2010 as the date for the new elections. As the election drew closer, these reforming steps turned into poorly realized policies with long-term consequences. However, the hailing of Jordan's election as fair by international electoral observers engulfed the discussion in the narrow discourse on elections, and side-lined other perspectives from Jordanian actors and public.

The old habit of aesthetic democratization

Political analysts and academics have argued that authoritarian regimes in the Arab world have successfully subverted the democratization discourse in ways that ensure maintaining their grip on power domestically while affirming their democratizing image internationally. Jordan has not escaped this critique. Indeed, for many Jordanians last month's election was nothing but a cruel reminder of an all-too familiar political game, starting with the controversial Electoral Law and ending with the election itself.

Passed by another Royal decree in 1993, the "one person, one vote" principle distributes voting power unequally among Jordanian citizens. Moreover, political analysts argue the law favors Jordanians of tribal origin (loyal to the Crown) and discriminates against Jordanians of Palestinian origin (often seen as allied with the opposition such as the Islamic Action Front: the country's Islamists and most organized opposition party). In addition, the "one person, one vote" system eliminates the opportunity to vote for a list of candidates, thereby making it increasingly difficult for political parties to run on a shared platform. The consequence of this law is a turn toward politics based on family name, size, and reputation, or what has been referred to as tribalism.

For many Jordanians, this does not necessarily deviate from the way in which a number of political institutions are run. Yet what is different and remains troubling today, is that the government - appointed by the King - failed to abolish the "one person, one vote" system, which in turn causes the very act of elections to remain aesthetic. This is one consequence that the international democratization discourse has to address more directly. Although political observers acknowledge this, the discourse continues to place too much weight on the act of election itself rather than on actual improvements in democratic conditions.

The chances of women's empowerment

Perhaps more troubling are the potential effects this law has on women's role in politics and their empowerment. On the positive side, the amended Electoral Law raised the number of seats allocated to women from a quota of 6 to 12, and at least one woman was voted in as the representative of a Bedouin district. Although 13 women have been elected to the 120 member parliament, the number of running female candidates actually decreased from 199 in 2007 to 142 in this November's election. The decline in participation did not go completely unnoticed. Yet, as the director for Arab Women Media Watch Centre, Iqbal Tamimi, argued, the voices of women voters and a thorough analysis of their participation remained rather absent.

In the same way that authoritarian regimes have manipulated the democratization discourse to their advantage, a similar effect - albeit perhaps unrecognized as willful - could be at stake with women's representation and empowerment under the Electoral Law. Although one should be careful in drawing direct causal links between phenomena that are separated from their contexts, there is little doubt that Jordanian tribal communities, who are benefiting from the Electoral Law, are patriarchal communities with narrow room for female political representation. This is not to say that patriarchal values are only present in tribal communities. But it is to suggest that if the Electoral Law favors tribal communities - who largely chose the candidates that should run as their representatives in this election - then this move has the consequence of keeping power in the hands of men and reducing the opportunities for other family members, mainly women, to participate.

The opposition and the boycott

So is there a point in running in an election that is governed by a law favoring tribal Jordanians and individuals with familial clout as opposed to political parties? After its largely negative experience in the 2007 elections - widely seen as rigged - the Islamic Action Front (IAF) decided that participating under such conditions would only further legitimize the election as a false sign of democratic progress. The effects of that decision remain to be seen, but some consequences have already emerged. For example, some IAF members decided to run in the election as independents against the party's decision, which is causing further internal tensions within IAF lines.

Other players have also expressed their opposition to the entire electoral process. For example, the youth committee of the Jordanian Democratic Popular Unity Party launched a boycott campaign under the slogan "Boycott for Change," arguing that the elected parliament will not represent their voices. Though rather small, the campaign received some attention from Jordanians. In a recent poll by Jordan's Center for Strategic Studies, 25% of those polled answered they had heard of the campaign, in contrast with 52% who reported hearing of the government's immense "Let Us Hear Your Voice" campaign. However, the boycotting campaign seemed to receive little international attention, at least until the government arrested a few of its members. Once more, the discourse of a free and democratic election prevailed, and a serious discussion of the campaign's potential significance was side-lined in its favor. This leaves many questions unexplored, such as the difference between the percentage of Jordanians opposing a boycott (73%) and the 53% voter turn-out rate.

In conclusion, the internationalized democratization discourse still holds much power in Jordan's international image and in turn it greatly influences the way in which elections are conducted and which principles of the electoral process are highlighted. Often this approach leads to underestimating or completely missing the importance of the on-the-ground realities in which elections are conducted.

Adriana Qubaia specializes in research concerning the Middle East region and gender issues. She obtained her BA in Middle East Studies from Middlebury College. Specializing in Gender Studies at the Central European University in Budapest, she recently completed her Master's dissertation titled, "Children of the Nation: Palestinian and Israeli National Bodies". (MEPEI 21.12)

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11.2 KUWAIT: Fuelling the Future

Kuwait is looking to increase natural gas production from new and existing fields in an effort to wean the local electricity sector off using oil as a main feedstock. Sami Al-Rushaid, the chairman and managing director of the Kuwait Oil Company, told a conference on 29 November that the emirate plans to raise gas production to 127m cubic meters a day to meet domestic demand. Kuwait currently produces around 32m cu m, with all but 4m cu m a by-product of its oil extraction industry.

However, while Kuwait is believed to have ample untapped domestic reserves, with estimates of some 1.7trn cubic meters, even the planned increase may not meet daily shortfalls. According to Al-Rushaid, demand will rise from the present level of around 62m cu m a day to 141m cu m by 2030, more than double present consumption, and four times current local production.

This has raised concerns over a long-term gap, which Farouk Al-Zanki, the chief executive of Kuwait Petroleum Corp (KPC), acknowledged during an industry conference in Doha on November 30. "The plan is to burn less oil than gas, but if worse comes to worse we will continue to use expensive fuel," said Al-Zanki.

Some of the projected increase in gas production will result from KPC's plans to boost oil output by around 33% by 2020, with the associated gas adding to the resources available to the utilities sector. However, the greatest increase will come from dedicated gas exploitation projects. The development of new gas reserves for use by the power industry is becoming a higher priority and the Ministry of Electricity and Water plans to invest $21bn over the next four years to boost water and electricity production.

However, plans to better exploit gas reserves depend to some extent on striking an agreement with Iran over the development of the offshore Dorra field, which lies between the two neighbors, as well as Saudi Arabia, and is estimated to contain non-associated gas reserves of between 370bn and 566bn cubic meters. However, while Kuwait and Saudi Arabia reached a deal on their shared maritime border in 2000, no such treaty has been signed with Tehran. The dispute between Kuwait and Iran has stretched over some five decades and does not appear much closer to resolution, though talks are continuing.

While preparing to boost spending on its gas sector, Kuwait still plans to focus most of its upstream and downstream energy investments on oil production. On November 29, KPC announced plans to spend $90bn in the next five years as part of its strategy to boost oil production capacity to 4m bpd by 2020. (OBG 08.12)

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11.3 BAHRAIN: Conclusion of the 2010 Article IV Consultation Mission

An International Monetary Fund (IMF) mission visited Manama during 1-13 December to conduct the 2010 Article IV Consultations. At the end of the visit, the following statement was issued:

"The economy of Bahrain has managed the global crisis well. The global crisis produced a sharp fall in oil prices, a tightening of global capital markets, and declines in regional and local real estate markets. High initial levels of bank capital and sound prudential norms established by the Central Bank of Bahrain (CBB) ensured the resilience of the financial system, without recourse to the extensive direct interventions seen in many countries. The wholesale banking system started a deleveraging process at the beginning of 2009 with balance sheets continuing to be scaled back, reflective of a move to more conservative portfolios.

"The near-term outlook is favorable. Buoyed by the rebound in oil prices, the continuing recovery in the global economy, and fiscal stimulus, growth is expected to accelerate from the 3% recorded in 2009 to 4% in 2010 and further to 5% in 2011. Inflation is anticipated to remain contained at around 2.5% next year.

"Managing the recovery and the exit from fiscal stimulus creates a number of policy challenges but also provides an opportunity to address underlying imbalances. Increased government borrowing in the last couple of years has increased debt levels and highlighted the need to rebalance the fiscal accounts in order to ensure the existence of sufficient fiscal space to respond to external shocks in the future. Reorienting spending away from untargeted subsidies - accompanied by compensatory transfers to needy households - would provide room for an increase in public investment as well as providing fiscal savings. Non-oil revenues are currently low, and broadening the revenue base would not only raise revenues but also provide insurance against fluctuations in oil prices.

"Given the exchange rate peg and the monetary easing in the US, interest rates are expected to remain low. The CBB's existing macro-prudential tools have worked well in preventing excesses from building up in the domestic financial system and will continue to play a key role in insulating the economy from fluctuations in global capital markets. With private sector credit growth gradually recovering, this will provide additional support for growth. The current high level of excess liquidity within the banking system provides an opportunity to foster the growth of the domestic debt market and push out the yield curve. A further strengthening of debt management capacity would be beneficial. While Islamic products have been an important growth area, there remain areas of uncertainty in the legal and regulatory framework that should be remedied.

"The large number of new entrants to the labor market anticipated over the next decade places a premium on ensuring the creation of new employment opportunities, especially with growth anticipated to be below historical averages. Regional GCC markets are likely to play an important role in fostering growth. Accelerating integration initiatives could provide important impetus to investment." (IMF 13.12)

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11.4 QATAR: 2010 Article IV Consultation - Concluding Statement of the IMF Mission

Qatar has weathered the global financial crisis exceptionally well, reflecting the quick and strong policy response by the authorities. Growth has rebounded, and is projected to accelerate to 20% in 2011, while inflation will remain subdued. Continuing public investment in infrastructure will keep growth high in the medium term and support non-hydrocarbon growth. Improving productivity will be key to greater self-sustaining long-term growth in the non-hydrocarbon sectors. While the current expansive fiscal policy remains appropriate and monetary policy should remain geared towards supporting credit growth, aggregate demand should be carefully monitored in order to avoid the emergence of inflationary pressures. The central bank will have to rely increasingly on macro-prudential instruments to manage the credit cycle and to counter potential surges in capital inflows. Establishing a debt management office and setting up a macro-fiscal unit will constitute important institutional reforms to support policy making. Further improvements in statistics will be essential, which will also require greater coordination between various agencies.

1. This statement presents the preliminary assessment of the 2010 Article IV mission to Qatar. The mission met with H.E. Yousef Kamal, Minister of Economy and Finance, H.E. Abdulla Bin Saoud Al-Thani, the Governor of Qatar Central Bank, senior government officials, as well as representatives of the financial sector and non-financial private sector.

Current Economic Developments

2. Real GDP growth in 2010 is projected to rebound to 16%, up from 8.6% in 2009. The non-hydrocarbon sector is expected to grow by 10%. A doubling of natural gas capacity, timely intervention in the banking system, and ongoing large public investments has kept Qatar on a high growth path. While average consumer prices are projected to decline by 2.6%, reflecting declining rents, core inflation (excluding food and rents) will average 2.5%. The overall fiscal and current account balances are projected to record surpluses of 9.7% of GDP and 17.3% of GDP, respectively.

3. The banking system is profitable and well capitalized. Profitability was 20% higher in the first three quarters of 2010, compared to the same period of 2009. Banks are well capitalized with a capital adequacy ratio of 17.4%, low nonperforming loans ratio of 1.9% and a provisioning coverage of 85% at end August 2010.

4. Qatar has taken advantage of an improved external financing environment to raise external funds. The government issued several tranches of bonds in 2009 to create a sovereign benchmark yield curve aimed at facilitating issuances by government-owned corporates and commercial banks. As a result, the external borrowings of the sovereign and corporates doubled to $70 billion between 2008 and 2010. Qatar's sovereign and guaranteed external debt is mostly long term and the debt servicing profile does not indicate potential refinancing difficulties in the foreseeable future.

Outlook and Risks:

5. The economic outlook for 2011 remains strong. A further increase in LNG capacity and activity in the non-hydrocarbon sectors will boost growth and further increase fiscal and external surpluses. Real GDP growth is projected at 20%, as a further LNG capacity of 15.6 million tons is added. Continued growth in the manufacturing sector, a pickup in construction sector, and sustained activity in financial and government services, transportation and communication would drive the non-hydrocarbon sector growth of 9.5%. Nonetheless, inflation will remain subdued at 3.0%, as rents are expected to remain low. The fiscal and external balances are projected to post surpluses of $13 billion and $39 billion, respectively.

6. Continued government investment will keep growth high beyond 2011. While the self-imposed moratorium on increasing gas production after 2012 will lead to a sharp tapering of growth in the hydrocarbon sector, government investments will support an average growth in non-hydrocarbon sectors of 9% during 2012 - 15. Headline inflation is projected at 4% over the medium term, as rents stabilize due to a gradual narrowing of the current excess capacity in real estate. Non-rent inflation, however, could resurge as the recovery in international commodity prices affecting Qatar's import basket and growth in domestic demand continue. The fiscal and external balances are projected to remain in surplus through 2015.

7. The banking system is resilient to credit and market risks based on the mission's stress tests. The mission compliments the authorities for publishing their first Financial Stability Review. Their analysis of the banking system risks and the candid presentation of the results demonstrate a clear commitment to monitor potential risks. The mission encourages the authorities to pursue this on an ongoing basis and widen the scope of the stress tests to cover cross border, contagion and concentration risks.

8. A fall in natural gas prices poses the main risk to the outlook. The tail risk of a collapse in hydrocarbon prices would also have adverse implications for hydrocarbon revenues and could result in an uncertain outlook for investment, and consequently Qatar's non-hydrocarbon growth prospects. Additionally, shocks in the global financial environment might affect Qatar's access to, and pricing of, international funding.

Short-term Challenges

9. Although bank credit to the private sector seems to have slowed down, the outlook for credit looks positive, given the large ongoing government led investments and the strong measures taken by the authorities to strengthen the capital of banks. Continued growth in the nonoil sector will provide additional demand for credit. The commencement of operations of the central bank's credit bureau will increase transparency, promote information sharing among banks and help reduce investor risk aversion.

10. The main challenges for monetary policy will be to support credit growth without fuelling inflationary pressures or short-term capital inflows. The central bank is closely monitoring liquidity in the financial system and has a range of instruments, including certificates of deposit and reserve requirements, to manage it. Although the central bank already reduced policy interest rates by 50 basis points recently, there remains further scope to reduce rates in view of the existing high spreads compared to U.S. rates Given the pegged exchange rate regime, the central bank will have to rely increasingly on macro-prudential instruments to manage the credit cycle and to counter potential surges in capital flows, which it is ready to use when the situation warrants.

11. The current expansionary fiscal stance remains appropriate, but aggregate demand should be carefully monitored in order to ward off inflation going back to the high levels experienced before the crisis. Although spending has increased substantially, fiscal buffers remain and fiscal sustainability is not at issue in the medium term.

Medium-term Challenges

12. Preserving the policy of saving a share of hydrocarbon wealth is key to maintaining macroeconomic stability and intergenerational equity. The policy of saving a share of the hydrocarbon wealth through the sovereign wealth fund has served Qatar well. Apart from acting as a tool for sterilization, it created savings for a large countercyclical response to the crisis. Fiscal policy will need to continue to maintain a careful balance between spending on infrastructure to sustain non-inflationary growth, and saving and investing part of hydrocarbon surpluses abroad in order to generate sufficient income to finance future budgets. Achieving their objective of fully financing the budget from 2020 onwards with income from its sovereign wealth fund assets would require fiscal consolidation beyond 2011, combined with structural reforms. A careful reappraisal of future projects of government owned companies, particularly in the real estate sector, rationalizing energy subsidies, and diversifying the revenue base would therefore be appropriate.

13. In the context of the Government's National Development Strategy, the mission encourages the authorities to strengthen its public financial management framework and to conduct a review of the efficiency of spending, particularly in view of the large capital expenditure program. The creation of a macro-fiscal unit in the Ministry of Economy and Finance would help develop a medium-term budget framework.

14. The rising sovereign and government-owned enterprises' debt levels underscore the need for setting up a more systematic medium-term debt strategy and an institutional framework for debt management. The mission notes that the authorities have made some initial advances in preparing a framework for setting up a debt office along with efforts to collate and disseminate debt statistics.

15. The exchange rate is broadly aligned with fundamentals. The dollar peg has served as an effective nominal anchor. Nevertheless, it will be important to enhance the technical, institutional and operational capacity, in case an alternative exchange rate regime becomes desirable in the context of the GCC monetary union. In this context, the mission welcomes the authorities' intention to develop the domestic bond market. This entails addressing regulatory and market infrastructure, fostering demand for instruments, and building the supply of securities.

16. The mission underscores the importance of reducing moral hazard and fostering a sound risk management culture in the banking system. The authorities supported the banking system in 2009 through two rounds of capitalization, and purchases of local equity and real estate assets from banks. The lessons learnt from the crisis highlight the importance of building capacity in banks to assess risks, greater information sharing among them and improving corporate governance and transparency.

17. The mission sees merit of complementing regulatory reforms at the national level with the implementation of global regulatory reforms. The central bank plans to implement Basel III proposals early. Almost all banks are above the minimum threshold for common equity requirement of 4.5% and all banks have Tier 1 capital over the prescribed 6% under Basel III. The commitment to establish a single regulator for the financial system under the umbrella of the central bank is an appropriate response to addressing regulatory and supervisory gaps and strengthening financial sector reforms.

Enhancing Productivity to Sustain Long-term Growth

18. Improving productivity is key to greater self-sustaining long-term growth in the non-hydrocarbon sectors. Since Qatar's constant hydrocarbon production after 2012 would limit their overall capacity to finance investments; it will be crucial to improve productivity. Qatar's main challenge will be to move from attracting low skilled temporary workers to highly skilled workers in the long term and provide the institutional framework to encourage investment in innovation. Meanwhile, ensuring the efficiency of expenditure will also contribute to improving productivity. The government believes that private participation in the delivery of economic and social infrastructure can induce substantial efficiency gains in the way these services are delivered and can provide the market with the quality and affordable services it needs to remain globally competitive. As part of this strategy, a recently issued Government decree established a Public Private Partnership (PPP) Department within the Ministry of Business and Trade.

Statistical Issues

19. While progress has been made in improving data quality, and coverage, there is scope to improve timeliness, quality and periodicity of all strands of economic data. The mission underlines the need for greater coordination among the various ministries, the central bank, Qatar Statistical Authority and the General Secretariat for Development Planning in this regard. (IMF 08.12)

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11.5 EGYPT: Prospects & Opportunities in the Environmental Industry

Research and Markets' (http://www.researchandmarkets.com) release of Frost & Sullivan's "Economic 360 for Egypt: Growth Prospects and Emerging Opportunities in the Environmental Industry" says Egypt is a democratic semi presidential republic with the National Democratic Party in power. Both investment and exports were adversely affected by the global economic crisis leading to lower economic growth. However, through policy reform, it is achieving robust economic growth rates. Favorable demographic factors, a well defined legal system and an impetus to science and technology are expected to speed up economic development. Major environmental issues like air pollution and water shortages are being overcome by appropriate Government policies and programs. Air filters, desalination equipment, groundwater extraction and waste disposal equipment are poised for growth as a result of the Government's environmental initiatives

Research Overview

The environmental industry has taken centre stage in recent times and has been accorded top priority by governments in both developed and developing countries. With international agreements such as the Kyoto Protocol coming into force, even the Middle Eastern countries such as Egypt have jumped on the Green bandwagon. The global environmental industry is poised for growth due to the adoption of strong policy initiatives. General economic policies greatly affect the environmental industry, and industry-specific policies provide added thrust. The economy of a country plays a huge role in strengthening and boosting the industry with its effective trade ties and inflows of foreign direct investment (FDI). These factors are vital for the growth of the environmental industry.

The rising levels of pollution in Egypt have spawned an urgent need for environmental equipment and services in the country. Besides, the Nile Delta, the site of most industries in the country, has been endangered due to rising sea levels. Such critical situations have sensitized the public and the Government to the fragility of the environment. The Government has reacted by bolstering the environmental industry and implementing the National Environmental Action Plan (NEAP). The laws and penalties for erring organizations have also given a boost to the pollution abatement equipment industry in Egypt. The country's sound macroeconomic policies have largely insulated it from the global economic downturn and the industry is expected to bounce back to form by 2013. The Government has allocated substantial funds for investments in the infrastructure and social sectors, which translates to considerable opportunities in the fields of waste management and air pollution reduction.

With a projected increase in the population and changing demographic trends, there will be a greater focus on environmental initiatives and pollution abatement equipment. The escalating demand for water coupled with depleting water resources are making a strong case for recycling services and water treatment equipment in Egypt. Although desalination is not widely deployed, its demand is likely to increase alongside renewable energies. Advancements in environment-friendly technologies, treatment technologies, regional and infrastructural opportunities, as well as favorable political and economic policies are also likely to boost the environmental industry in Egypt. (R&M 09.12)

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11.6 EGYPT: Agribusiness Report for Q1 2011

Research and Markets' (http://www.researchandmarkets.com) "Egypt Agribusiness Report Q1 2011" report says that although Egypt is one of the world's largest wheat importers, the country appears able to withstand the rise in wheat prices. This is partly because it can maintain its subsidy program designed to soften the blow of price increases. Moreover, the country is forecast to have over 4mn tonnes of wheat ending stocks in 2010/11, which is high by recent historical standards. The elevated supply of wheat has meant that domestic food price inflation has actually decreased in recent months. Finally, the currency has traded flat over the last few months, which has mitigated the rising cost of imports.

In a bid to counter rising prices of meat and poultry, the Egyptian government is trying to increase the supply of poultry in the market. This is being done by encouraging imports, ostensibly by exempting them from insurance premiums normally required for all imports. Although the decision to support importers should help in the short term, it does not address some of the underlying issues of the poultry sector. In particular, given that wheat is a staple good in the country, there is still some popular opposition to using grains for feed as opposed to food consumption.

The beef industry took a hard hit between 2004/05 and 2009/10, with production falling by 36%, due in large part to rising prices causing consumers to switch to poultry. However, BMI expect production to record a strong recovery on the back of rising demand and government initiatives. As beef becomes increasingly popular among Egyptian consumers and as profit margins begin to look more attractive, local producers will take the opportunity to cater to such demand growth. Consequently, BMI are currently forecasting an increase in production of 31% to 426,000 tonnes by 2014/15. Despite the growth, the country should remain in a supply deficit over the forecast period. (R&M 08.12)

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11.7 MOROCCO: Positive Tale for Retail

Morocco's retail sector is set to undergo a major shift in the coming years, as observed by the Oxford Business Group, as large-scale purpose-built retail areas become more prevalent but moves away from traditional small-scale shops to massive retail malls may be slowed by incremental growth in consumer spending.

The retail sector is a major contributor to the economy, representing around 12.8% of GDP and providing employment to some 1m people, approximately 13% of the total workforce. Although large segments of the sector, notably grocery retailing, are still concentrated in smaller outlets such as corner shops, there is an increasing trend for shoppers in urban areas to make use of hypermarkets, particularly as a major new development improves regional coverage.

One of the highest-profile projects is the Morocco Mall, set to open its doors early next year. Located on the corniche of Casablanca, the shopping centre has a floor area of 200,000 sq meters, making it the largest retail outlet on the continent outside of South Africa. The developer and owner, the local Aksal Group, hopes the $250m centre will have footfall of 15m or more a year. The mall is scheduled to have more than 250 shops and food outlets, and also feature a large aquarium and an IMAX cinema. The headline tenant is to be up-market French department store Galeries Lafayette, which has signed up to take a 15,000 sq metre, three-storey placement in the complex. As of the end of August, 85% of all retail space had been leased, with Aksal officials confident the remainder would be taken up by the time the mall opened.

According to Philippe de Fraiteur, director of strategy and development for Aksal Group, most of the work on the project has been completed with the retailers now in the process of fitting out, preparing and staffing their premises. The official opening of Morocco Mall is scheduled for February 2011, de Fraiteur told local media.

Morocco's economy has been predicted to expand by 4.5% next year, with growth for 2010 projected to come in at around 3.2%. Though not spectacular, this steady rise in GDP should encourage retailers, as should the slow but sure improvement in consumer sentiment over the past year or so.

A number of reports have shown consumer confidence on the rise. A recent study conducted by online employment and career agency Bayt, in conjunction with international survey firm YouGov, found that almost 50% of those questioned in Morocco were strongly optimistic about the future of the country's economy, while just 11% felt there would be a worsening over the next year. Just as importantly for retailers, an increasing number had a positive outlook over their personal financial situation, with 43% saying in September they had higher expectations for the next 12 months

However, one encouraging factor is the strong performance of Morocco's tourism industry, which has a direct impact on the retail sector. While geared to the domestic market, the Morocco Mall will likely appeal to increasingly significant segment of foreign visitors. According to Tourism and Handicrafts Minister Yassir Znagui, speaking during a visit to the US in early November, tourist arrivals will be up 14% this year, following on from a 6% rise in 2009. (OBG 09.10)

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11.8 PAKISTAN: The Pharmaceutical Market in Pakistan

Research and Markets' (http://www.researchandmarkets.com) "The Pharmaceutical Market: Pakistan" report says that the recent flooding disaster in August 2010 has and will continue to have a detriment effect on the macro-environment. Excessive rainfall in Pakistan's Indus river basin caused widespread flooding, killing around 1,600 people and forcing 2 million people from their homes. The spread of communicable diseases, especially water-borne ones such as diarrhea and typhoid, and hunger among survivors has resulted in more deaths in the aftermath of the disaster. This will add to the woes of a country where poverty is rife and standards of living are defined by substandard sanitation, malnutrition and an already widespread incidence of communicable diseases exists. This has put particular strain on the Ministry of Health and the healthcare services it provides, as the already weak system has become overwhelmed.

The country is largely dependent on foreign relief aid, in terms of both medical supplies and food & water, to combat the effects of the flooding. Politically, this natural disaster could undermine President Zardari's weak coalition government, crucially at a time when co-operation with the USA is paramount for the fight against the Taliban in the region. Economically, this will severely affect the country's GDP growth target, as it will cost billions of dollars to rehabilitate victims and rebuild destroyed infrastructure.

IPR continues to be a major concern amid patent issues and the prevalence of counterfeit drugs. As a signatory to the TRIPS agreement, Pakistan had been given until 2004 to bring its patent law in line with WTO requirements, but to date, intellectual property rights protection for pharmaceuticals remains very weak. Pakistan remains on the US Trade Representatives (USTR) Priority Watch List in 2010. The USTR noted that there had been various improvements with respect to IPR protection in 2009, including the government's recognition of IPR protection as a key area in its economic reforms, and enhanced co-ordination of IPR enforcement efforts.

However, serious concerns remain about inadequate IPR protection and enforcement. The USTR stated that Pakistan needs to improve the protection against unfair commercial use of pharmaceutical test data, and should establish an effective system to address the patent issues of pharmaceutical products. Counterfeit drugs are also a major problem in the country. The Pakistan Medical Association (PMA) alleged that nearly half of drugs available in the country were counterfeit and that the population spent around three-quarters of their household health budget on drugs in 2009, half of which may be fake or unfit for human consumption.

The pharmaceutical market is small and equally split between multinational and domestic companies. Espicom projects the market to grow at a fairly high single digit CAGR in the forecast period. By 2015, it will remain as one of the smallest pharmaceutical markets in the Asia Pacific region in size terms, slightly smaller than Malaysia. The per capita expenditure is projected to remain as one of the lowest rates in the Asia Pacific region and around double that of Bangladesh. Imported retail medicaments account for around a fifth of the market, although manufacturers rely heavily on imported raw materials for production. Pharmaceutical imports increased over the 2004-2008 period, with retail medicaments accounting for nearly half of this growth. There were over 400 pharmaceutical manufacturers registered with the Ministry of Health in 2008, with multinational companies representing less than 10.0% of the total plants. Multinational companies account for around half of the market by value, although local producers have a far greater share in terms of volume. With the vast majority of domestic manufacturing focused on the production of generics for the local market in addition to significant pharmaceutical imports, the balance of pharmaceutical trade remains considerably negative. (R&M 21.12)

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11.9 TURKEY: IMF's Second Post-Program Monitoring Discussions

A. Recent Developments, Outlook and Risks

1. The Turkish economy maintained its strong post-crisis recovery throughout 2010. With growth expected to exceed 8% this year, output will surpass its pre-crisis level by a comfortable margin, one of the few countries in Europe to achieve this milestone. Employment is also continuing to recover, although higher labor force participation - itself a sign of rapid recovery - is slowing the fall in the unemployment rate. Headline inflation remains highly volatile and elevated, but core inflation recently fell to an historic low partly reflecting temporary factors, including base effects, exchange rate appreciation and price setting still attuned to the previous phase of the economic cycle, that more than offset the rapidly closing output gap.

2. The current account deficit, dormant during the crisis when external financing was scarce, reemerged assertively this year. Abundant low-cost external savings relaxed residents' borrowing constraints and, together with the inadequate competitiveness due to structural factors, pushed up imports and suppressed exports. As a result, the current account deficit is expected to more than double in 2010 to nearly 6% of GDP. Inadequate competitiveness is also drawing capital away from tradable sectors and into real estate, energy and retail trade.

3. Push and pull factors are expected to continue to drive short-term capital inflows next year, keeping domestic demand strong and the current account deficit elevated. Low interest rates in advanced countries, favorable near-term growth prospects and healthy balance sheets of the Turkish government and banks, as well as less-leveraged households than in much of Europe, will continue to underpin inflows. Inadequate competitiveness, the rising current account deficit and potentially-volatile short-term inflows highlight Turkey's continued exposure to market sentiment, including contagion concerns from problems in Europe. Most inflows next year will continue to be intermediated through banks, driving credit, domestic demand and imports. In all, for 2011, growth is expected to reach 4%, the current account deficit to widen to around 6% of GDP, and year-end inflation to reach 6%.

B. Policy Recommendations

4. Policies that discourage excessive uptake of external savings and limit resource-misallocation and pricing risks will temper the magnitude of the economic correction if capital inflows slow or reverse. The authorities' policy response during and in the immediate aftermath of the global financial crisis was broadly appropriate and paved the way for the subsequent rapid recovery. However, the external environment has evolved rapidly, and Turkey's policies should continue adjusting to successfully navigate the challenges ahead. A combination of macro-prudential and fiscal tightening, and a rebalancing of foreign currency purchases with liquidity withdrawal, underpinned by structural reforms to improve competitiveness, is warranted. The effectiveness of measures directly targeting the size and composition of cross-border flows erodes over time, hence, they should not be used until all other policy levers have been fully deployed, as detailed below.

Monetary and exchange rate policy

5. Safeguarding systemic financial stability is a sine qua non for consistently achieving price stability, and similar tools can be used to support both goals. Rapid credit expansion that boosts domestic demand and widens the current account deficit can trigger exchange rate volatility that exerts upward pressure on prices and wages, particularly in the non-tradable sector. Standard interest rate tools may be less effective at delivering price and financial stability in the context of a huge global pool of yield-seeking liquidity to the extent capital inflows increase. Instead, greater use should be made of instruments that directly control the quantity of liquidity and lower the return from financial intermediation, as communicated by the Central Bank of Turkey (CBT).

6. Several tightening measures have recently been implemented, but liquidity remains excessive. Reserve requirements were raised to pre-crisis levels and remuneration was halted. The CBT's overnight borrowing rate was drastically cut, in large part to discourage short-term lira conversion through currency swaps. Repo funding was also scaled back and banks remain net demanders of CBT liquidity, consistent with the negative differential between cost of funds and yields on assets. However, much-increased central bank purchases of foreign currency - that might be seen as a response to strengthened capital inflows to more quickly build reserve buffers - have also expanded liquidity, facilitating more and cheaper financial intermediation, including short-term carry trade.

7. Moderating injections and increasing withdrawals would create more appropriate liquidity conditions. Large purchases require aggressive action to soak up injected liquidity that may push sterilization instruments beyond their effective capacity. Hence, large purchases may be perceived as unsustainable, making the exchange rate a one-way bet and encouraging speculative inflows. To limit this possibility and restrain liquidity, foreign currency purchases as a share of financial inflows should be reduced. This would also avoid any misperception that the CBT might be focused on short-term competitiveness while remaining sanguine on the longer-term threat from inflation. Increasing reserve requirements on both lira and foreign-currency liabilities would withdraw liquidity and widen the intermediation wedge. In addition, extending coverage, including to other credit providers and instruments, would encourage longer duration funding and limit circumvention.

8. The option to raise interest rates should be preserved. Conditions requiring an increase in interest rates may arise within the CBT's policy horizon, including the need to normalize real interest rates, particularly if direct tightening measures are not effective in protecting the credibility of the inflation target or preserving financial stability. Therefore, excessive comfort from the expectation that interest rates will remain low for an extended period should be avoided to discourage the financial and real sectors from lengthening their duration mismatches.

Macro-Prudential policy

9. Financial sector regulation and supervision should continue to focus on limiting the buildup of risks to systemic financial stability and macroeconomic sustainability. Systemic risk in the financial sector generally arises when the incentives faced by many market participants are aligned, but each one individually ignores the effect of its actions on the entire economy. Systemic risk may be detected in a less timely manner if supervision is focused on individual financial institutions' health. Further exploiting synergies between supervision and monetary policy would enhance the efficiency of macro-prudential oversight and the effectiveness of the policy response.

10. Macro-prudential measures should target risk at its source, typically where financial activity is most intense. Crisis-era relaxation of regulations for restructuring loans and general provisioning is no longer necessary and should be withdrawn in full. Moreover, regulatory standards and guidelines should be tightened. In the context of dynamic housing construction, rapid growth of housing loans (including withdrawal of equity), and credit concentration to both developers and end-buyers for the same property pose risks if unchecked. We welcome the BRSA's decision to establish legal ceilings on loan-to-value for residential and all other real estate loans no higher than required for securitized mortgages. In addition, raising the Resource Utilization Support Fund levy on new housing credits to the level applicable to other loans, and eliminating preferential tax treatment of real estate investment companies would help. To build countercyclical buffers and prevent the accumulation of systemic risk through rapid growth of general-purpose loans and foreign-currency lending to unhedged borrowers, general provisioning requirements on these loans should be raised above the pre-crisis level. (IMF 17.12)

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11.10 TURKEY: Turkish-Arab Economic and Military Cooperation: How Far Will it Go?

On 15 December, Aram Nerguizian wrote in the Carnegie Arab Reform Bulletin (http://www.carnegieendowment.org/arb) that expanded economic and security relationships with Arab states have emerged as crucial complements to Turkey's diplomatic efforts to engage the Arab Middle East since the 2002 rise of the Justice and Development Party (AKP) to power. These efforts point to a Turkey that is increasingly committed to and confident about its growing role in the region, but Ankara's approach towards Arab countries faces regional obstacles and is constrained by pre-existing foreign policy prerogatives.

Economic and Trade Ties

Turkey has pushed to reach free trade agreements across the Arab world, signing agreements with Syria, Morocco and the Palestinian Authority in 2004, Tunisia and Egypt in 2005, Jordan in 2009 and Lebanon in November 2010. The deal with Lebanon, which has yet to be ratified by the country's parliament, would gradually liberalize trade between the two countries while protecting Lebanon's vulnerable agricultural sector. Lebanon imported some $698 million worth of goods from Turkey (mainly oil products and raw metals) and exported some $206 million (mainly scrap metal and raw goods) in 2008, according to Lebanon's Ministry of Economy and Trade.

Syria has benefited particularly from stronger ties to Turkey since the 2004 agreement. Despite years of hostility and continued disputes over scarce water resources, improved relations with Ankara have helped Damascus develop a more comfortable regional role. These ties have helped counter the political isolation imposed on Syria by the U.S. 2004 Syria Accountability Act and balance Syria's alliance with Iran, an inclination Turkey encourages as a means of checking Iran's influence in the Levant.

At the same time, Lebanon and Syria retain some reservations about improving ties with the powerful Turkish economy. Unlike the Gulf States, Lebanon and Syria are not rentier states and need to be concerned about their lack of any real competitive advantage. While the true value of Turkey's relationship with Syria lies in breaking its international isolation, Lebanon has no such imperative and must evaluate the relationship more on its economic merits. It has been more successful in increasing exports of services than of goods over the last decade, and the future impact of lifting trade tariffs on Lebanese producers remains unclear.

The Gulf Cooperation Council (GCC), led by Saudi Arabia, has supported a more assertive economic and security role for Turkey in order to counterbalance Iranian influence in the Levant and the Gulf region. At the economic level, investors from the GCC have made billions investing in Turkey's real estate, banking, health care, education and communication sectors. Gulf investments in Turkey grew from negligible levels in 2003 to nearly $2 billion by 2008, and trade between Turkey and the GCC grew from under $2 billion in 1998 to over $8 billion in 2009.

Turkish-GCC trade and investment remain limited, however, when compared to more established patterns. In 2009, EU's trade with the Turkey was 14 times that of the GCC, totaling over 40% of Turkey's trade for the year. The GCC states for their part continue to have the United States as a leading trade partner. U.S. exports to the GCC in 2009 were worth over $29 billion (three times what they were in 2003) and GCC exports to the United States also totaled over $29 billion, according to the U.S. Department of Commerce.

Moreover, despite years of talks Turkey and the GCC have failed to reach a trade agreement. Following the 2009 real estate crisis in the Gulf, the GCC countries currently lean towards regional economic protectionism, in this case guarding against cheap Turkish raw materials (particularly iron and steel) and other goods.

Military Ties

Military cooperation between Turkey and the Arab world has also increased, but this has happened recently enough that there are limited tangible results so far. Turkey and Kuwait signed a military cooperation agreement in mid-2009 to establish a legal framework for the expansion of military-to-military cooperation. Saudi Arabia and Turkey signed a military cooperation agreement in May 2010 that covers training, scientific research and technological development. Another area for Saudi-Turkish cooperation is the modernization of hundreds of American-made M113 armored personnel carriers (APCs) by the Turkish company FNSS.

In the Levant, Syria has also benefited from increased military cooperation with Turkey, conducting a second joint military exercise with its northern neighbor in late 2010, a show of cooperation that Syria flaunted as a means of signaling its strengthened regional position and strategic depth. For its part, Jordan contracted with the Turkish firm TAI to upgrade 17 American-made F-16/AM/BM multirole fighter aircraft.

There are still significant limits on Turkey's security role in the region, however, particularly given the prevalence of U.S. security agreements. Restrictions on how countries can use and modernize systems provided by the United States mean that Turkish efforts to modernize Jordanian and Saudi military hardware would have been impossible without the formal approval and tacit support of Washington. Ankara's joint military activities with Arab states have also remained sufficiently low-profile that they do not irritate the United States too much; combined operations with Syria, for example, have been limited in scope and did not include the mobilization of meaningful military assets or elite units.

Pre-existing Turkish commitment and prerogatives are also at odds with an effort to bolster its security role in the Arab world. Ankara cannot ignore ongoing and future multi-billion dollar military sales deals with Israel and has already signaled its intention to ease strained relations with Tel Aviv. Ankara's warm ties with Tehran also go against the dominant view in the Gulf that Iran's nuclear program and hegemonic aspirations present a clear and present danger to the region's Arab states.

In short, Turkey has become the most recent and perhaps one of the most important additions to the Middle East balance, but it has yet to secure a definitive position in the region and its true power remains untested. For now Arab states are using economic and military relations with Turkey to counterbalance Iran, Israel and the United States, but they continue to harbor concerns about Turkish "neo-Ottoman" tendencies.

Aram Nerguizian is a Resident Scholar with the Arleigh A. Burke Chair in Strategy at the Center for Strategic & International Studies (CSIS). (CARB 16.12)

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