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TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Lieberman Takes Yisrael Beiteinu Out of Olmert's Government
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 Answers.com Works with Nokia
2.2 Gazit-Globe Announces Its First Acquisition in Brazil
2.3 Gad Dairies to U.S. Markets
2.4 True Religion Engages Positive, Ltd as Its New Distributor for Israel
2.5 Boeing Signs with EL AL for Landing Gear Repair and Overhaul Services
2.6 ICL to Acquire Henkel's Water Treatment Business
2.7 RxElite Announces Acquisition of Assets of FineTech Laboratories
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 US Hardwood Exports to MENA Tops $52 Million
3.2 Gulf IT Spending To Rise 11.6%
3.3 Jordan & Canada Hold Financial Talks
3.4 Coverall Cleaning Concepts Expands Franchising to Kuwait & Qatar
3.5 UAE Market for Outsourced IT Services Growing
3.6 UAE Annual Food Import at $4 Billion
3.7 Danube to Invest $27.22 Million in the UAE Steel Industry in 2008
3.8 Saudi Kingdom Represents 65% of GCC Pharmaceutical Market
3.9 Saudi Prince Alwaleed Confirms Added Citigroup Investment
3.10 Primavera Strengthens Presence in Greece
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4: ISRAEL MACRO-DEVELOPMENTS
4.1 Ministries Clash Over Solar Power Technology
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Jordanian Expatriates' Remittances On The Rise
5.2 Iraq's Budget Mired in Parliamentary Debate
5.3 GCC Making Long-term Investments in Canada
5.4 UAE-US Highlighted by Bush Visit
5.5 Dubai Budget Surplus To Hit $3.103 Billion in 2008
5.6 Saudi Arabia's Inflation Reaches 6.5% in December
5.7 UK Railway Experts in Saudi Arabia to Tap Market
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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:
6.1 Erdogan Unveils Government Five Year Action Plan
6.2 Turkey To Help US Transport Iraqi Oil
6.3 Turkish Credit Card Debt Soared By 523% Since 2002
6.4 Greek PM to Visit Ankara on 23 January
6.5 Bank of Greece on Aging Population
6.6 Cyprus & Malta Upgraded Following Entry to Eurozone On 1 January
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7: GENERAL NEWS AND INTEREST
*REGIONAL:
7.1 The World Islands in Dubai is Now Complete
7.2 Burj Dubai Now Towers at 600 Meters
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Can-Fite & NIH Continue M-CRADA to Investigate CF101 for Uveitis Treatment
8.2 Israeli Companies Develop Fortified Dairy Products for Women 30-40 Years Old
8.3 Teva Specialty Pharmaceuticals & UCB Announce U.S. Respiratory Collaboration Agreement
8.4 Kamada Completes Phase I Studies with Aerosolized AAT for the Treatment of Lung Diseases
8.5 Teva Announces Approval of Pravastatin Sodium Tablets, 80 Mg
8.6 Oramed's Insulin News That's Easy To Swallow
8.7 Teva to Acquire CoGenesys
8.8 FDA Approves Cheetah Reliant for Noninvasive Cardiac Output Monitoring (NICOM)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 N-trig Releases Multitouch Technology
9.2 Bezeq Selects Personeta's TappS NSC as Its Next Generation Service Platform
9.3 Integra5 Expands Converged Services Leadership with PC Caller ID Rollouts
9.4 RADA Receives a $1.4m RAFAEL Order for New Generation Litening Airborne Targeting Pod
9.5 Elbit Systems Awarded $40 Million in Several Contracts for the Supply of Thermal Imaging Systems
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel Inflation Hit 5-Year High Of 3.4% In 2007
10.2 Israel's State of Economy Index rose 1.2% in December
10.3 Israel's Unemployment at 13-Year Low
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11: In Depth
11.1 ISRAEL: Summary of High-Tech Company Capital Raising in 2007
11.2 LEBANON: 2007 Year in Review
11.3 IRAQ: Economy's Oil Surge?
11.4 KUWAIT: 2007 Year in Review
11.5 BAHRAIN: 2007 Year in Review
11.6 BAHRAIN: Changing Climate
11.7 QATAR: 2007 Year in Review
11.8 UAE: Abu Dhabi - 2007 Year in Review
11.9 UAE: Dubai - 2007 Year in Review
11.10 SAUDI ARABIA: 2007 Year in Review
11.11 SAUDI ARABIA: Economy in a Free For All?
11.12 EGYPT: 2007 Year in Review
11.13 TURKEY: 2007 Year in Review
11.14 TURKEY: World's 74th Freest Economy
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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Lieberman Takes Yisrael Beiteinu Out of Olmert's Government
Minister of Strategic Affairs Lieberman has resigned and has taken his party, Yisrael Beiteinu, out of the ruling coalition of Prime Minister Olmert. Yisrael Beitenu is a center-right party with 11 seats. Their departure from the Olmert government leaves behind a coalition of 67. The ultra-Orthodox Sephardi Shas party may follow him out, creating a potential condition of a minority government without minimal stability. Lieberman explained that the reason for his departure was the government's violation of his "red lines" including negotiations on "core issues" with the Palestinians. He rejected the concept of "land for peace" and asserted that the morning after any withdrawal there would be an uprising of Israeli Arabs demanding autonomy and demands for further concessions. He expressed an interest in joining forces with Binyamin Netanyahu's Likud party, on condition that the Likud would accept his 4 principles which focus on the idea of population and land transfers between Israel and the Palestinians as the only possible basis for a settlement. Shas is deliberating to remain in the government. It spiritual leader, Rabbi Ovadia Yosef, said the party would leave if negotiations on Jerusalem began. (Various16.01)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 Answers.com Works with Nokia
Answers Corporation, creators of Answers.com, announced that it is working with Nokia to offer owners of Nokia Series 40 and S60 devices access to its collection of over four million answers. The service is being made available in the Download! client on Nokia devices. The service features a convenient lookup box offering quick definitions on any word or phrase. This mobile "virtual library" covers subjects like history, business, literature, geography, sciences, arts, music, food, movies and technology. Jerusalem, Israel's Answers Corporation (http://www.Answers.com) operates the award-winning Answers.com answer engine, delivering comprehensive content on over four million topics spanning health, finance, entertainment, business and more. Content includes over 180 licensed titles from leading publishers such as Houghton Mifflin Company, Barron's, Encyclopedia Britannica, All Media Guide and others; original articles written by Answers.com's editorial team; and user-generated questions & answers from Answers.com's industry-leading WikiAnswers (wiki.answers.com). (Answers Corporation 09.01)
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2.2 Gazit-Globe Announces Its First Acquisition in Brazil
Gazit-Globe announced the acquisition of its first shopping center in Brazil. The purchase price of $31.3m was satisfied in cash. The 14,238 square meters (GLA) shopping center, which is anchored by a Carrefour supermarket, situated on a 22,840 square meter land parcel, with the potential for further expansion. This acquisition is in line with Gazit's strategy in the country of acquiring and developing well located income - producing properties in areas with strong demographics. Tel Aviv, Israel's Gazit-Globe (http://www.gazit-globe.com) is a multinational real estate investment company listed on the Tel Aviv Stock Exchange as part of the TA-25. The Company is an owner, developer and operator of income-producing properties around the world and focuses mainly on supermarket-anchored shopping centers. In addition, the Company is active in the senior housing and the medical office building sectors in North America. It also continues to seek and execute on opportunities in its business and/or in similar asset classes, both in regions where it operates and in other regions. (Gazit-Globe 10.01)
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2.3 Gad Dairies to U.S. Markets
Gad Dairies continues to expand its exports to the U.S. as the company began marketing its products to Albertsons and Supervalue, two major supermarkets with kosher sections. The agreement with these two chains will place Gad Dairy products in more than 2,000 stores across the U.S. In the first stage, six products will be exported including the popular Feta Bulgarian cheese, Feta made from sheep's milk, labane with olive oil and hyssop, malabi, Bulgarian cheese and gourmet cubed Bulgarian cheese. Gad Dairies estimates that the exports will reach almost a half a million dollars. The dairy's exports soared in 2007 by 71% compared to 2006, to over $1m. (KT22.01)
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2.4 True Religion Engages Positive, Ltd as Its New Distributor for Israel
Vernon, California's True Religion Apparel has engaged Positive, Ltd., as the company's new distributor in Israel for the Fall 2008 season. Credited with styling many Israeli celebrities, Positive, Ltd. currently represents brands such as Ed-Hardy, Butterfly, Christian Audigier, Rnt, Maschera, and We-r. Israel represents an important strategic market for True Religion as it looks to expand its footprint and awareness within the Middle East. True Religion Apparel is a growing, design-based premium inspirational brand. The company designs, manufactures and markets True Religion Apparel products, including its premium True Religion Brand Jeans. (TrueReligion17.01)
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2.5 Boeing Signs with EL AL for Landing Gear Repair and Overhaul Services
Boeing's) Commercial Aviation Services organization has reached an agreement with El Al Israel Airlines to perform repair and overhaul services on landing gear for the carrier's Boeing 777 airplanes. By utilizing the Boeing Service Center Repair Network, customers receive quick, reliable service anywhere in the world. With this service, airlines have access to landing gear repair and replacement, which keeps their planes flying. El Al Israel Airlines is the first airline to sign up for Boeing's 777 landing gear program. Under this agreement, Boeing offers customers a "rotable" program which will enable customers to exchange worn, unserviceable or time-expired landing gear for overhauled or restored landing gear from a pool controlled by Boeing. After being placed in the pool, the customer's landing gear would undergo necessary repairs and then be placed back in the pool for other customer exchanges. Boeing Commercial Aviation Services, a unit of Boeing Commercial Airplanes, provides products, services and integrated solutions to improve fleet utilization, reduce costs, leverage leading-edge information management, and ensure passenger well-being. (Boeing 16.01)
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2.6 ICL to Acquire Henkel's Water Treatment Business
Israel Chemicals Ltd. (ICL) announced that ICL Performance Products has acquired substantially all the business operations and the assets of the Industrial Water Treatment business unit (HWT) of Düsseldorf, Germany's Henkel KGaA for €60m. After the acquisition, HWT will become a part of the ICL Performance Products segment, giving the segment annual revenues of approximately $1.1b (based on 2006 data). HWT is a major European supplier of water treatment chemicals, solutions, services and equipment especially for industry, including, inter alia, steel & coke production, power generation, metal-working, chemical, petrochemical, food & beverage industries, where it has applications for cooling towers, power stations, boilers, drinking water and waste water treatment as well as water conditioning. Its primary target markets include Germany, France, Spain, Italy and Turkey. ICL intends to integrate HWT into the water treatment business of ICL Performance Products with the goal of realizing operating synergies in the purchase of raw materials, complementary products and geographical markets.
ICL Performance Products is one of the core operating segments of ICL , a multinational producer of a broad range of chemicals and chemical-based products. ICL is one of the world's leading fertilizer and specialty chemicals companies. ICL produces approximately a third of the world's bromine and approximately 10% of its potash. ICL is a leading supplier of fertilizers in Europe and a major player in specialty fertilizer market segments. One of the world's most integrated manufacturers and suppliers of phosphate products, ICL has become the world's leading provider of pure phosphoric acid and a major specialty phosphate player. (ICL13.01)
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2.7 RxElite Announces Acquisition of Assets of FineTech Laboratories
Meridian, Idaho's RxElite, a developer, manufacturer, and marketer of specialty generic prescription drug products, announced its acquisition of the business and assets of FineTech Laboratories (http://www.finetechlab.com), located in Nesher, Israel, for $6.2m in cash and 18,632,383 shares of RxElite common stock. Combining the ability to develop and manufacture complex active pharmaceutical ingredients with RxElite's robust generic manufacturing and distribution capability is a major step for RxElite. RxElite has acquired the physical facilities, the intellectual property and patents of FineTech and has retained all FineTech employees. FineTech's team of 29, including 20 Ph.D. level scientists, conducts proprietary research and development and manufactures complex APIs at its state-of-the-art manufacturing facility in Israel. This facility operates in compliance with U.S. Food and Drug Administration's current good manufacturing practices (cGMP) standards. FineTech successfully passed its first FDA inspection in October 2004. RxElite develops, manufactures, and markets generic prescription drug products in specialty generic markets. (RxElite10.01)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 US Hardwood Exports to MENA Tops $52 Million
US hardwood product exports to the Middle East and North Africa (Mena) region reached $52.2m during the first ten months of 2007. The figure was an increase of 32.3% from the same period in 2006, according to the United States Census Bureau. In an effort to further maximize the increased demand for US hardwood in the region, the Pennsylvania Hardwoods Development Council (PA HDC) and the American Hardwood Export Council (AHEC) will be taking part in the upcoming Dubai Wood Show 2008, along with 15 hardwood exporting companies exhibiting at the American Hardwood Pavilion. The remarkable boost in large-scale real estate projects in the region has continuously driven up the demand for wood and wood products, particularly in the case of hardwood lumber, sparking greater interest from leading American hardwood producers. Pennsylvania will also be represented at the event by their Eastern Mediterranean Regional Office.
Leveraging this tremendous growth, US wood exporters shipped a total of $28.4m worth of hardwood lumber to the MENA region from January to October 2007; reflecting an increase of 24.0% over the same 10 months in 2006. The UAE's imports accounted for $13.2m of the total amount, which corresponds to a 59% increase from the country's $8.3m imports of US hardwood products in 2006 during the same period. Of the UAE's total hardwood imports, US hardwood lumber shipments grew by 54.2% to reach $ 8.4m. Included among the participating companies are Bradford Forest, Interforest Lumber and Matson Lumber Company. The Indiana State Department of Agriculture and West Virginia Development Office will also be present to provide general information on products, species and applications. (TradeArabia 12.01)
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3.2 Gulf IT Spending To Rise 11.6%
The IT spending in the Gulf countries could surge 11.6% to $8.56b this year. Last year, IT spending in the Gulf Cooperation Council totaled $7.67b, according to an International Data Corp (IDC) report. Saudi Arabia will lead the IT spending, followed by the UAE in 2008. IDC said the Saudi Kingdom will spend $3.76b, or 11.28% more than what it spent in 2007. The UAE will spend $2.99b this year compared to $2.66b last year. The Persian Gulf's total IT spending in 2006 stood at $6.82b. IDC believes IT spending will rise by 14 to 15% each year for the next three years. In the UAE, IT spending is likely to grow by 19 to 20%. Growth is coming from all areas of technology, but the hardware segment still accounts for the major share of spending, followed by software and services. Specific IT industries that will see interest include storage, security, as well as enterprise applications such as ERP (enterprise relationship management) and CRM (customer relationship management). Last year, 67% of the UAE's total IT spending was hardware, while it was 60% for Saudi Arabia. IDC said the data storage segment is growing 40 to 50% per year. IT investment in the region is relatively small, with the GCC representing only 2.7% of the total global industry spending. (TradeArabia 12.01)
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3.3 Jordan & Canada Hold Financial Talks
Jordanian Minister of Finance Kasasbeh discussed with his Canadian counterpart Flaherty scopes of bilateral ties and ways of promoting economic and financial relations between Jordan and Canada. The meeting also touched on the bilateral commercial ties, buy-back of Jordan's outstanding debt to Canada, supporting reform as well as preparations to discuss signing the Jordanian-Canadian free trade agreement. Kasasbeh briefed the Canadian official on the performance of the Jordanian economy, highlighting chances of joint cooperation. He also noted the push the bilateral ties received in the last few years. Jordanian exports to Canada stood at $10m in the first 11 months of 2006, while the Kingdom's imports reached $53m. (Petra20.01)
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3.4 Coverall Cleaning Concepts Expands Franchising to Kuwait & Qatar
Boca Raton, Florida's Coverall Cleaning Concepts, a leading provider of commercial cleaning services, announced a Territory franchise agreement that will bring the company's services to businesses in Kuwait and Qatar for the first time. The Territory Franchise Owner in both Kuwait and Qatar is American General Trading & Contracting (AGT), a 14-year-old Kuwait-based construction and logistics firm with military and commercial clients throughout the Middle East and branch offices in Qatar and Iraq. The agreement will enable AGT to enhance and expand its existing janitorial offerings in order to take advantage of brisk business growth in Kuwait and Qatar. AGT's janitorial division will operate under the Coverall Cleaning Concepts name in both countries. AGT plans to open a Coverall Cleaning Concepts Support Center in Kuwait in March 2008 and a separate office in Qatar several months later. Like other Support Centers in the Coverall Cleaning Concepts network, each location will function as a sales office, training center, and central point of contact for local businesses interested in using the company's cleaning services. Coverall Cleaning Concepts is one of the world's leading commercial cleaning franchising companies with a worldwide network of more than 90 Support Centers and 9,000 Franchise Owners. (CCC17.01)
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3.5 UAE Market for Outsourced IT Services Growing
The market for outsourced IT services in the UAE is expected to hit $170.5m in 2010 from the $81.27m recorded in 2006, according to the latest IDC reports. According to IDC, the UAE's IT market began experiencing unprecedented growth in 2005 and this led to the IT services market accounting for a total value of $413.73m. The data revealed that the continued economic growth in the country and a number of IT and general development initiatives by the UAE Government has increased the need for IT services. Outsourcing accounted for 15.3% of the total IT services market in 2005 and by the year 2010, the market is set to comprise 22.4% of the local IT market's earnings. Pointing out the factors that have led to a surge in outsourcing in the UAE, Tapas Roy, Chief Operating Officer, Raqmiyat said : ''The drivers of outsourcing make business sense in the UAE as they have done elsewhere in the world. Businesses in the UAE will increasingly outsource to remain competitive. Added to these, he went on, are factors such as leveraging the provider's extensive investments in technology, methodologies and people, and reducing the burden of managing IT resources while retaining control of strategic decision making. (Mena 09.01)
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3.6 UAE Annual Food Import At $4 Billion
The UAE's annual food import bill stands at a staggering $4b and the figure is expected to surge in the coming years thanks to the economic growth, tourism boom and the surging population. Limited trade restrictions, high per capita incomes and growing demand from an ever- increasing population in the region is adding to the potential for agribusiness industries in the booming marketplace, a food expert was quoted as saying in the Gulf News. The diverse lifestyles of the GCC countries - with more than 200 nationalities in the UAE alone with varied eating habits - provided further opportunities to explore a growing market. Recent research has identified plans to invest $580b in over 900 hotels and resorts across the Middle East by 2020 with more than 200 projects worth $23b under construction in the Arabian Gulf due to be completed in the next few years. Dubai imports 80% of the UAE's consumable items per year and 30-40% of these are re-exported. Annual food imports to the UAE alone amount to a staggering $3.5-$4b. (GN19.01)
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3.7 Danube to Invest $27.22 Million in the UAE Steel Industry in 2008
Danube Building Materials, a leader in the construction, building materials, and shop fitting industry, has announced its plans to invest $27.22m in the UAE steel industry in 2008, a move which is set to render steel as one of the largest segments of its business. This is in line with the company's aim to leverage the burgeoning demand within the UAE construction sector, which currently expends 5m tons of steel products on an annual basis. In addition to the ever-increasing number of property developments, the local steel market has been witnessing impressive growth due to the widespread availability of energy in the UAE to support the manufacturing of steel products, which has prompted Danube to capitalize on the ideal business prospects to expand its own range of products.
Laying the pillar for important industries as well as the base for manufacturing activities, the flourishing steel industry in the UAE mirrors the country's rapid development in the economic and industrial sectors. The UAE has been a significant contributor to the overall development of the GCC's steel trade, which currently includes 45 working factories with a total value of $2.8b and employing more than 11,000 workers. The potency of the local market has provided a steady supply of steel to sustain industries that manufacture steel-based products in the region, which has grown to comprise 136,000 employees working at 1,725 factories in 2005, and attracting $6.5b worth of investments.
Danube's foray into the steel industry will involve large-scale imports of steel products from Turkey, China, Taiwan, Korea, South Africa, Ukraine, Russia, India, Saudi Arabia and Iran, which will then be processed as per customer requirements. Maintaining a high level of quality across all its products, the $272m company is currently in the process of initial market testing to ensure the smooth delivery of its products to customers upon the launch of its full-fledged operations next year.
Danube is one of the largest building materials suppliers in the UAE and the region with an extensive portfolio of over 10,000 products ranging from MDF, plywood, timber, laminates, veneers to sanitary fittings, hardware, ironmongery, steel, aluminum and glass among others. In 2004, the company began its operations in Jebel Ali with a 19,000 square meter warehouse cum office, which serves as its regional hub and caters to booming markets in UAE, Oman, Bahrain and India. (Mena Report 07.01)
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3.8 Saudi Kingdom Represents 65% of GCC Pharmaceutical Market
Saudi represents 65% of the $2.7 billion GCC pharmaceutical market, Pharma World Holdings — the first 3PL provider within the GCC — said on 15 January. Of the $1.7b Saudi market, therapeutic classes make up 80%, with systematic hormones making up $291m, Alimentary T & metabolism represent $260m, respiratory system comprises $162m, G.U. system & sex hormones make up $145m, nervous system covers $128m, cardio system makes up $121m and musculo-skeletal system constitutes $111m. These figures only represent the private market, excluding tender business, which is thus very encouraging for manufacturers looking to get into the area. Imports represent 80-85% of the Saudi market, which is growing astronomically. Pharma World Holdings is establishing a distribution and warehousing hub at the JAFZA free zone, just outside of Dubai, which will offer logistical services never before seen in the region. It provides a one-stop 3PL offering for international as well as local manufacturers. Additionally, the company can handle the return inventory levels and provide outsourcing support for all distribution associated requirements. (Arab News 16.01)
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3.9 Saudi Prince Alwaleed Confirms Added Citigroup Investment
Saudi Prince Alwaleed Bin Talal, a longtime Citigroup shareholder, confirmed his participation in Citigroup's $12.5b private placement and public offering of preferred shares. The size of Prince Alwaleed's investment is in line with maintaining direct and indirect interest below the 4.9% ownership threshold, according to a release from his private office. This is the second time Prince Alwaleed has contributed capital to strengthen Citigroup's balance sheet, after pumping $590m into what was then known as Citicorp in 1991. Currently, Kingdom Holding, which is 95%-owned by Prince Alwaleed, owns a 3.6% stake in Citigroup. The struggling financial-services giant will get $6.88b from the placement, bolstering its balance sheet as well as helping to maintain regulatory capital levels. Other investors include the Government of Singapore Investment Corp., Capital Research Global Investors and former Chairman and Chief Executive Sandy Weill and his family. (Dow Jones 15.01)
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3.10 Primavera Strengthens Presence in Greece
Philadelphia, Pennsylvania's Primavera Systems announced that it has further expanded sales, support and training resources by appointing Atlantis Research, Greece as a new Primavera Authorized Representative (PAR). Atlantis Research has significant expertise in project consulting services in both the public and private sector. The company has significant experience in supporting customer bids for development funding from the European Union (EU) and Greek government as well as in providing portfolio, program and project management expertise and training. Primavera is a software company that provides business solutions for a project-driven world. The company helps organizations identify which projects are most important, and makes it easy for people to work collaboratively on those projects and deliver them successfully. (Primavera 17.01)
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4: ISRAEL MACRO-DEVELOPMENTS
4.1 Ministries Clash Over Solar Power Technology
A major dispute has erupted between the Ministries of Finance and National Infrastructures over which solar energy technology should be employed at the solar energy power station planned for Ashelim. The Ministry of National Infrastructures wants to use photovoltaic technology, whereas the Ministry of Finance wants to rely solely on solar panels. Minister of National Infrastructures Ben-Eliezer is threatening to ask the cabinet to explicitly include both technologies in the tender for the power station. Infrastructure Ministry sources said that they were not prepared to accept that Israel's solar power station lag similar stations in other countries. They therefore insist that photovoltaic technology be included as a criterion in the tender. The Ministry of Finance says that the high cost of photovoltaic technology makes it suitable for small and household facilities, but not for large power stations producing hundreds of megawatts. The $600-700m BOT (build, operate, transfer) tender for the construction of two 250-MW power stations at Ashelim is due to be published during the first quarter. It will provide 2.5% of Israel's energy consumption when completed, at an estimated cost of $0.12-0.15 per kw/h, compared with $0.05-0.06 per kw/h for electricity generated by fossil fuels. A number of companies have already expressed interest in the tender. The winner of the tender will receive the 1,000 acre site for free, in addition to the right to produce electricity and sell it to the state. (Globes 16.01)
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Jordanian Expatriates' Remittances On The Rise
The total amount remittances of Jordanians working abroad rose by 17.9% at the first ten months of 2007 compared to the same period of 2006, according to figures released by the Central Bank of Jordan (CBJ). The revenues from expatriates' transferences amounted to about $2.85b. The number of Jordanians working abroad is estimated at 600,000 to 670,000, the majority of who work in Saudi Arabia according to the Jordan's Department of Statistics (DoS). The number of Jordanians working abroad has been increasing over the past few years due to a huge demand for skilled and highly qualified workers in the Arab Gulf region. According to (CBJ), the revenues from expatriates during 2006 amounted to about $2.82b. Jordan's GDP in 2006 stood at $13.96b. (Petra21.01)
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5.2 Iraq's Budget Mired in Parliamentary Debate
Debate over funding, including allocations to the autonomous Kurdistan region, have stalled passage of the 2008 Iraqi budget. Failure to pass the $48b budget would hold up vital spending at a time when Washington is urging the government to jumpstart the economy to take advantage of sharp falls in violence. The Speaker of Iraq's parliament has been trying to reconcile contending political groupings to pass the budget when it next comes up for debate on 24 January. U.S. officials have praised the 2008 budget, as well as this month's passage of a law allowing former members of Saddam Hussein's Baath party to rejoin the government, as evidence Iraq's divided leaders were starting to make political progress. One key budget dispute centers on the 17% of funds allocated to the semi-autonomous northern region of Kurdistan, based on population estimates. In the absence of an accurate census, non-Kurdish lawmakers said Kurdistan should get 12% of the budget. Others complained about inadequate allocations for teachers and the specter of food rationing. Though lawmakers fought over the budget, there was rare unity when parliament voted on 22 January to adopt a new, temporary national flag. This is a move long sought by ethnic Kurds who say the Saddam-era banner was a reminder of his brutal rule. Debate over a post-Saddam flag was brought forward by a planned pan-Arab meeting of lawmakers in Kurdistan on March 10. Kurdish officials had refused to fly the current flag, which is banned in Kurdistan. The new flag will last for one year, during which time talks will continue on what the final flag should look like. (Various22.01)
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5.3 GCC Making Long-term Investments in Canada
Heenan Blaikie noted that with oil prices reaching record highs, and gas prices remaining comparatively low, Canada's natural resources are grabbing the attention - and investment dollars - of the Gulf Cooperation Council (GCC) states (Saudi Arabia, United Arab Emirates, Bahrain, Kuwait, Oman and Qatar). Two recent acquisitions by UAE's Abu Dhabi National Energy Company (TAQA) in Alberta's oil and gas sector were among 2007's largest deals by GCC companies according to the Financial Times. In an article dated January 7, 2008, the FT noted that TAQA's $2b acquisition of Northrock Resources in May ranked eighth and its $4.6b acquisition of Calgary-based PrimeWest Energy Trust announced in September ranked fourth on the list of the top GCC deals worldwide in 2007. In addition to these transactions, TAQA also made a third acquisition of Pioneer Canada for $540 million in August 2007. The TAQA deals were part of the record $83b invested worldwide by GCC entities in 2007. This doubled the GCC investments made in 2006. Heenan Blaikie is one of Canada's top national law firms. It delivers strategic legal advice and innovative business solutions under six broad sectors: business law, tax, labor and employment, litigation, intellectual property, and entertainment. (Heenan Blaikie18.01)
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5.4 UAE-US Highlighted by Bush Visit
With one of the most open and innovative economies in the world, the UAE is a substantial economic partner with the US. The US Commerce Department named the UAE as the United States' single largest export market in the Arab Middle East, with nearly $12b in exports in 2006. Some 750 US firms have an on-the-ground and expanding presence in the UAE. UAE institutions have been investors in US capital markets for more than 30 years. The UAE has generated most oil revenues from sales to Asia, while reinvesting a significant percentage in US markets. In 2006, UAE investment firms directly invested $3.5b in US companies.
Transactions in 2007 include a $7.5b stake in Citigroup by the Abu Dhabi Investment Authority (ADIA); Borse Dubai agreed to take a 19.9% stake in the NASDAQ and to buy NASDAQ's 28% stake in the London Stock Exchange; Mubadala Development Company took a 7.5% stake in the Carlyle Group and an 8% stake in Advanced Micro Devices; and Istithmar, a Dubai fund, bought Barneys New York. Emirates Airlines is the biggest customer for the Boeing 777, with 98 aircraft in service or on order. In addition, Etihad Airlines has purchased 5 Boeing 777-300ER aircraft. More than 28,000 Americans reside in the UAE. There are four daily non-stop flights between the US and the UAE. (WAM13.01)
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5.5 Dubai Budget Surplus To Hit $3.103 Billion in 2008
Sheikh Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, issued Decree no. 8 for 2008, announcing the budget of the emirate, which is expected to touch a surplus of $3.103b, compared to $1.388b in 2007. Dubai's revenues for fiscal year 2008 are expected to touch $36.757b, while planned spending is estimated at $33.65b. Dubai's non-oil sector has scored success in regard to production rate through the emirate's attempts to expand and diversify revenue sources and base of income. According to the financial report, the contribution of oil sector to the projected gross domestic product (GDP) in 2008 will be 4%. The share of Dubai's public sector in the balance sheet was 21%, while the contribution of the economic sector was 79%. (WAM13.01)
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5.6 Saudi Arabia's Inflation Reaches 6.5% in December
A report issued by the Saudi Arabian Ministry of Economy and Planning showed that the Kingdom's inflation has accelerated to a record 6.5% in December, increasing pressure on the largest Arab economy to revalue its currency. According to the report, the inflation rate rose from 6% in November. Inflation averaged 4.1% in 2007, up from 2.2% in 2006, the ministry said. Gulf states, including Saudi Arabia and the United Arab Emirates, are under pressure to revalue their currencies against the falling dollar to arrest rising inflation, which has accelerated to records in all six Gulf Arab states in the last 12 months. Separately, Oman's inflation accelerated to a record 7.6% in November on food and rent, the Economy Ministry said. Inflation in Qatar rose to 13.7% in the third quarter, the highest in the Gulf. (MENAFN17.01)
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5.7 UK Railway Experts in Saudi Arabia to Tap Market
A British railway sector delegation was in Saudi Arabia recently to explore opportunities in building urban railways in the capital. The UK's Railway Industry Association (RIA) led a 15-member delegation to discuss setting up urban railways in Saudi cities. The delegation represented officials from 15 companies under RIA who have the expertise in technology, techniques, operations and maintenance of the railway sector. The purpose of the mission is to share British skills and expertise with Saudi partners, who are involved in the upcoming railway projects in the Kingdom. The delegation met with the key officials of the Saudi Railway Organization and expressed the group's support and cooperation in its programs. The team also visited Jeddah. The visit was sponsored by UK Trade and Investment in association with RIA. (MENAFN17.01)
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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:
6.1 Erdogan Unveils Government Five Year Action Plan
On 10 January, Turkish Prime Minister Erdogan stressed that economic development and democratic reforms will go hand in hand in Turkey while he unveiled a plan that sets targets in 145 areas, mostly dominated by education and health services and infrastructure. The prime minister said Turkey is not bargaining with the International Monetary Fund and is setting the conditions for future relations. He said when the government came to office Turkey owed the $23.5b. He claimed the AKP government brought this figure down to 7.5b. He said because of all this Turkey's economic credibility is at an all time high.
Erdogan says emphasis will be given to Africa. He said Turkey has already started work to enhance its ties with African countries and will soon open ten embassies in African capitals. He said work is in progress to staff the embassies and select locations. The prime minister said Turkey will push ahead with its quest to join the European Union by accelerating reforms. He said he will soon have a meeting in Germany with French President Sarkozy and German Chancellor Merkel, both skeptics of Turkish membership.
The prime minister said until now the government subsidized farmers directly, but that as of this year he will abandon this system and provide direct subsidies to the products of the farmers. ,” he announced in a major policy shift in agriculture. The prime minister admitted that the government had failed in its inflation target of 5% as inflation for the past year was 8.3%. But he said the government will make an extra effort to achieve the target of 5% this year. He also said the nominal interest rate will be reduced to a single digit figure. (TNA11.01)
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6.2 Turkey To Help US Transport Iraqi Oil
Turkey will help the United States to operate and transport neighboring Iraq's oil as part of its drive to become an energy hub, Turkish Energy Minister Guler announced on 11 January. Guler also said that Turkey and the United States will develop joint projects to extract oil from Iraqi fields. Guler visited the United States with President Abdullah Gul in mid-January for talks with US officials, predominantly about energy. Guler met with U.S. Secretary of Energy Bodman during his Washington trip and discussed energy supply security. Guler also said Iraq's natural gas could be transported to European markets via Turkey. Iraq pumps crude oil exports via a pipeline to Turkey's Mediterranean coast. Ankara's ties with Iraq have been strained in recent months by Turkey's aerial bombardment of separatist Kurdish PKK terrorists who have been using northern Iraq as a base from which to attack Turkey. (Various12.01)
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6.3 Turkish Credit Card Debt Soared By 523% Since 2002
According to a research carried by Lafferty Group, credit card debt in Turkey has increased by 523% since 2002 to $17.9b at the end of 2007. Lafferty research pointed out that Turkey has been propelled into the top ten global card markets in terms of profitability, with profits of $1.8b before tax in 2007. Despite rapid growth, the amount of debt on credit cards is 20% of the total spent, as compared to 57% in UK. Although roll-over rate was around 40% levels a couple of years ago, following the increase in installment facilities and increase in general purpose loans due to lower interest rates have pulled down the roll-over rate in credit cards to 20% levels. (BGC11.01)
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6.4 Greek PM to Visit Ankara on 23 January
Greek Prime Minister Karamanlis will visit Turkey on January 23-25 in response to an invitation by his Turkish counterpart Erdogan. This is the first such trip in almost 50 years. The two leaders will discuss bilateral and international issues. Erdogan visited Athens in May 2004, while Turkish Foreign Minister Babacan laid the groundwork for this trip in a visit to Athens last month. Karamanlis's uncle, Constantin, was the last Greek premier to visit Turkey in an official capacity in May 1959. Frequently tense relations between the two states have thawed over recent years with economic cooperation and last month's agreement to set up joint peacekeeping and emergency response units under NATO auspices. Once on the brink of war over an uninhabited Aegean Sea islet in 1996, Greece and Turkey improved relations after both countries were stricken by destructive earthquakes in 1999. They have since held regular talks at both political and military levels. Agreement to establish a hotline between their air forces and armies came after a Greek pilot died when his jet collided with a Turkish fighter in one of the mock dogfights that frequently occur in Aegean airspace. (Various17.01)
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6.5 Bank of Greece on Aging Population
Bank of Greece Nikos Garganas warned on 17 January that the consequences of an aging population in Greece will be more intense. One reason for this is that the public debt ratio related to the GDP is at a very high level, adding that a delay in the implementation of policies to tackle the consequences of an aging population, such as reforms to safeguard the viability of the social security system, the restructuring of public finances and the boosting of employment- transfers and worsens the problem that future generations will have to face. Garganas said that demographic developments (a greater life expectancy and a low birth rate) will lead to a considerable increase in the elderly people's dependence rate (meaning the percentage of people over 65 in relation to the employed section of the population) in all European Union countries. He pointed out that this development will considerably increase expenditures for pensions and health and will reduce the number of people paying contributions. According to Garganas, the degree to which these consequences will affect the standard of living in individual countries will depend on their initial fiscal performances, on efforts being made to strengthen the growth rate, on an increase in the percentage of the employed population and the rationalization of pensioning systems. (HRI17.01)
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6.6 Cyprus & Malta Upgraded Following Entry to Eurozone On 1 January
On 13 January, Moody's Investors Service upgraded the foreign and local currency government bond ratings of Cyprus to Aa3 from A1 and Malta to A1 from A2. The outlook on these ratings was changed to stable from positive. The countries joined the Eurozone on January 1. Accordingly, the country ceilings for debt and bank deposits of both Cyprus and Malta were also withdrawn and replaced with the Eurozone's regional Aaa ceilings, which have a stable outlook. These rating actions had been clearly signaled by Moody's since mid-2007, following the European Commission's approval of the countries' entry into the Eurozone. "Moody's views the adoption of the euro by Cyprus and Malta as a significant credit positive because it all but eliminates the risk of a currency crisis, thereby insulating their economies from external financial shocks," said Tristan Cooper, Vice President and Senior Analyst in Moody's Dubai office. These rating actions on the countries' government bonds are further supported by the strengthening economic fundamentals of Cyprus and Malta. "In recent years, both countries have successfully implemented fiscal consolidation programs that have narrowed their fiscal deficits and reversed the previous upward trend in their public debt. The gross general government debt burdens of Cyprus and Malta have now dropped just below the Eurozone average," added Mr. Cooper. (Moody's03.01)
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7: GENERAL NEWS AND INTEREST
*REGIONAL:
7.1 The World Islands in Dubai is Now Complete
I was announced that the last rock is placed on the breakwater of The World, completing the project after 5 years. Nakheel, one of the world's largest property developers, laid the final stone on 10 January on the breakwater for The World islands in Dubai. The last rock was one of 34m tons of rock that were used to construct the 27-kilometre breakwater which surrounds the 300 man-made islands that make up The World, Nakheel said. This marked the completion of the first phase of one of the world's most exclusive real estate development projects. The first sand for the project was poured in September 2003, with 320m cubic meters of sand now dredged from the sea as part of the land reclamation for the project. The next phase of the project involves handing over islands to developers for construction and the building of infrastructure. Offers to purchase on The World are by invitation only, with 60% of the islands already sold by January 2008. The cost of the islands varies from $15-$50m, though one island currently costs $250m to buy. (ArabianBusiness10.01)
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7.2 Burj Dubai Now Towers at 600 Meters
The Burj Dubai now measures 600 meters, Emaar announced. The Burj Dubai now towers almost 600 meters above the emirate as it continues to solidify its position as the tallest structure in the world. The iconic mega-structure has reached 598.5 meters and 158 floors, over 90 meters higher than the world's tallest building, Taiwan's Taipei 101, and over 40 meters higher than the world's tallest free-standing structure, Toronto's CN Tower. The only structure now left for the Burj to overtake is the KVLY/KTHI television mast in Blanchard, US, which measures 628.8 meters. The Burj Dubai will not be officially recognized as the world's tallest structure until it is completed, which is expected before the end of 2008. When completed, the tower will be the tallest building in the world in all four categories recognized by the Council on Tall Buildings and Urban Habitat (CTBUH), which ranks buildings on the basis of spire height, the highest occupied floor, roof height and pinnacle height. Construction of the building's concrete structure finished at around 585 meters and contractors are currently working on the steel structure on top and the spire. The spire will be built from the inside of the building and raised up using a hydraulic pump - meaning that the height will be adjustable. The final height of the Burj is rumored to be between 700 and 1,000 meters. (Various13.01)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Can-Fite & NIH Continue M-CRADA to Investigate CF101 for Uveitis Treatment
Can-Fite BioPharma announced the successful completion of a preclinical trial with CF101 in the treatment of uveitis. This preliminary trial was conducted in a leading laboratory at the National Eye Institute (NEI), which is part of the US National Institute of Health (NIH). The trial, which examined the effect of CF101 in a preclinical animal model, demonstrated that the drug was able to significantly reduce ocular disease symptoms via a definitive immunological mechanism of action. Can-Fite signed an M-CRADA with the NIH to expand the preclinical studies and further explore the efficacy of CF101 in the treatment of uveitis. Uveitis is an inflammatory disease that involves the internal parts of the eye. This disease can lead to severe pain and partial or complete vision loss. Uveitis is the second ophtalmology indication of Can-Fite. A phase II clinical trial in patients with dry eye syndrome is currently conducted in leading medical centers in Israel. Petah Tikva, Israel's Can-Fite Biopharma (http://www.canfite.com) is a public company traded on the Tel Aviv Stock Exchange. The Company focuses on the development of molecule-based drugs that bind to receptors of cancerous or inflammatory cells and inhibit their development. Can-Fite's development pipeline currently has two drugs, CF101 and CF102. The company is simultaneously conducting several preclinical and clinical trials with the two drugs for various indications. CF101 is being studied for the treatment of rheumatoid arthritis, dry eye syndrome and psoriasis. Can-Fite has also entered the development of CF102 for the treatment of liver cancer, including liver cancer, hepatitis virus infections and liver tissue regeneration. (Can-Fite 17.01)
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8.2 Israeli Companies Develop Fortified Dairy Products for Women 30-40 Years Old
Two leading Israeli manufacturers, LycoRed (http://www.lycored.com) and Tara Dairy, have developed the 'YOU' line of functional foods including milk with 2% fat, personally packaged soft cheese (3% fat) and yogurt drinks. The products are aimed at women 30-40 years old. The new dairy line contains a unique vitamin and mineral formulation that helps protect a woman's health by addressing concerns including bone, brain, skin, heart health and digestive health. Active ingredients including calcium, iron, vitamin D, E and B are combined to deliver the ultimate health benefits that women desire. The vitamins and minerals provide 25% of the RDI. Tara's multimedia promotional campaign, 'YOU, your daily fortification' includes TV advertising, point of sale displays and a promotion in cooperation with Studio C women's fitness centers. Tara's partner in the project is LycoRed, which specializes in fortification solutions for functional foods and beverages. Manufacturers today cannot afford to risk negatively impacting taste or odor when they fortify their products. These fortification capabilities allow companies to combine ingredients without cross interaction to create the more neutral flavor profile demanded by functional foods. Consumers are looking for easy, tasty and healthy products. LycoRed helped Tara to meet this challenge. (LycoRed22.01)
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8.3 Teva Specialty Pharmaceuticals & UCB Announce U.S. Respiratory Collaboration Agreement
Teva Specialty Pharmaceuticals, the U.S. respiratory therapy unit of Teva Pharmaceutical Industries, and UCB announced an agreement to co-commercialize Teva's U.S. respiratory medicines. The initial product to be jointly promoted in the U.S. is Teva's ProAir HFA (albuterol sulfate) Inhalation Aerosol. ProAir HFA is the number-one branded hydrofluroalkane (HFA) albuterol sulfate inhaler in the U.S. Additionally, the agreement will provide UCB future joint promotion opportunities with other products in development by Teva Specialty Pharmaceuticals. Financial terms of the agreement were not disclosed.
UCB is a global leader in the biopharmaceutical industry dedicated to the research, development and commercialization of innovative pharmaceutical and biotechnology products in the fields of central nervous system disorders, allergy/respiratory diseases, immune and inflammatory disorders and oncology. Worldwide headquarters are located in Brussels, Belgium, and U.S. headquarters are located in Atlanta, Georgia. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the leading generic pharmaceutical company. The company develops, manufactures and markets generic, branded and innovative human pharmaceuticals and active pharmaceutical ingredients. (Teva17.01)
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8.4 Kamada Completes Phase I Studies with Aerosolized AAT for the Treatment of Lung Diseases
Kamada successfully concluded Phase I clinical studies designed to test the safety and tolerability of the aerosolized version of its flagship product, Alpha-1 Antitrypsin (AAT) using an optimized eFlow Electronic Nebulizer to treat various lung diseases. Kamada has already obtained Orphan Drug Designation (ODD) from both the US FDA and the EMEA for aerosolized AAT for the treatment of Congenital Emphysema and Cystic Fibrosis. ODD designation, and subsequent ODD status, present significant commercial advantages during the development process, registration and distribution of the product throughout its lifecycle, notably exclusive distribution rights for periods of 7 years in the U.S. and 10 years in Europe, should Kamada be the first to successfully complete the clinical trials and obtain regulatory approvals for these indications. eFlow, an electronic, portable nebulizer, enables extremely efficient aerosolization of liquid medications via a vibrating, perforated membrane. Compared to other nebulizer systems, eFlow can produce aerosols with a very high density of active drug, a precisely defined droplet size, and a high proportion of respirable droplets delivered in the shortest possible amount of time. Combined with its silent mode of operation, small size (it fits in the palm of your hand), light weight, and battery use, eFlow helps reduce the burden of taking daily inhaled treatments. Weizmann Science Park, Rehovot, Israel's Kamada (http://www.kamada.com) is a public biopharmaceutical company developing, producing and marketing a line of specialty life-saving therapeutics using its proprietary chromatographic purification technologies. (Kamada17.01)
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8.5 Teva Announces Approval of Pravastatin Sodium Tablets, 80 Mg
Teva Pharmaceutical Industries announced that the U.S. FDA has granted final approval for the Company's Abbreviated New Drug Application (ANDA) for Pravastatin Sodium Tablets, 80 mg. Teva's Pravastatin Sodium Tablets, 80 mg are the AB-rated generic equivalent of Bristol-Myers Squibb's Pravachol 80 mg tablets, and are indicated for treatment of certain hyperlipidemias and the primary prevention of coronary events. Teva is already marketing the 10 mg, 20 mg and 40 mg strengths of this product. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the leading generic pharmaceutical company. The company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients. (Teva17.01)
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8.6 Oramed's Insulin News That's Easy To Swallow
There's good news on the horizon for the millions of Americans who suffer from diabetes. A new method for taking insulin orally has been developed that mimics the way the body naturally processes this crucial hormone. Jerusalem, Israel's Oramed Pharmaceuticals (http://www.oramed.com) has created and patented an oral insulin capsule primarily intended for the treatment of Type 2 diabetes. Oral insulin delivery is an idea with huge potential not only for patients who dislike needles but, with the insulin market generating $25 billion a year in worldwide revenues, it represents an enormous opportunity for drug developers as well. As opposed to insulin taken by injection, the Oramed capsule mimics the ways in which the body naturally produces, regulates, and distributes the hormone. The capsule causes insulin to penetrate from the gastrointestinal track onto the liver. The organ then regulates the intake of the hormone prior to passing it onto the circulatory system. This revolutionizes the way in which insulin is delivered to the body by enabling its passage in a more physiologically normal manner. Oramed's oral insulin capsule may make it possible for hundreds of millions of diabetics worldwide to receive earlier treatment of insulin, which would allow them to better control their diabetes. Oramed recently completed its Phase 1A clinical trials, which successfully assessed both the safety/tolerability and indicated absorption properties of its proprietary oral insulin capsule. (Oramed20.01)
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8.7 Teva to Acquire CoGenesys
Teva Pharmaceutical Industries has entered into a definitive agreement to acquire Rockville, Maryland's CoGenesys, a privately-held biopharmaceutical company with a broad based biotechnology platform and focused on the development of peptide- and protein-based medicines across broad therapeutic categories. CoGenesys was established in 2005 as a division within Human Genome Sciences Inc. (HGSI) to focus on early drug development and was spun off as an independent company in June 2006. In its recently completed strategic review, Teva identified biopharmaceuticals – and primarily biogenerics – as a key, long-term growth opportunity for the Company. With this acquisition, Teva is taking a significant step towards advancing its strategic goals, demonstrating its commitment to becoming a leading player in the biogenerics market, as that market evolves. Based on over 15 years of peptide- and protein-based drug development research, CoGenesys brings to Teva advanced technological platforms (including Albumin Fusion, a novel approach to long acting biopharmaceuticals), which are key to establishing Teva's leadership position in biogenerics. In addition, its innovative pipeline addresses a broad spectrum of therapeutic categories. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the leading generic pharmaceutical company. The company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients. (Teva22.01)
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8.8 FDA Approves Cheetah Reliant for Noninvasive Cardiac Output Monitoring (NICOM)
Cheetah Medical announced the U.S. FDA approved for marketing the Reliant, a highly accurate, portable cardiac output monitor which provides a noninvasive window to cardiac and hemodynamic function. The Reliant monitor is powered by Cheetah's unique, patented BIOREACTANCE Technology, which has been used effectively in over 1,000 patients in various clinical settings including hemodynamic monitoring, heart failure, perioperative care, hemodialysis and stress testing. Reliant harnesses the innovative NICOM system which combines traditional impedance technology with BIOREACTANCE Technology. Traditional bioimpedance analyzes changes in voltage of electrical currents traversing the patient's chest, while BIOREACTANCE also analyzes frequency related effects. NICOM's hybrid analysis helps deal with electrical noise interference, patient movement, respiration and electrode misplacement. As a result, NICOM enables a highly precise, accurate and responsive measurement of cardiac function and hemodynamic status not available with other modalities. This can be likened to improved quality of Frequency Modulation (FM) versus traditional Amplitude Modulation (AM). Ramat HaChayal, Israel's Cheetah Medical (http://www.cheetah-medical.com) is a privately held company with offices in Indianapolis, Indiana and the UK. Cheetah Medical is preparing to launch its sales and marketing activities for the US and European markets. (Cheetah Medical 22.01)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 N-trig Releases Multitouch Technology
N-trig has enhanced its DuoSense single capacitive touch technology to include multitouch capabilities, which will be available for OEM integration in May of 2008. Multitouch allows mobile computers to recognize multiple simultaneous touch points, so you can use more than one finger at once to manipulate images on a computer screen. This simplifies complicated tasks, such as zooming in and out, scrolling up and down, and rotating images allowing you to use the intuitive and natural gestures of your fingertips instead of the mouse and keyboard. With multitouch, you can use your fingers to move and shuffle around images, objects, and data as if you were arranging your desk instead of a desktop. N-trig's multitouch capabilities are fully compatible with Windows Vista and Microsoft Office 2007 and require no special applications to give end users the desired experience. N-trig's multitouch uses capacitive touch and not resistive touch, enabling the best touch experience in any input device for the personal computing industry. Kfar Saba, Israel's N-trig (http://www.n-trig.com) is the provider of DuoSense digitizer technology combining pen and zero-pressure touch for mobile computers into a single device. N-trig enables OEMs and ODMs to provide innovative new technology for the next generation of mobility by making notebook PCs more mobile, productive, user-friendly, natural, and intuitive to use. (N-trig 17.01)
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9.2 Bezeq Selects Personeta's TappS NSC as Its Next Generation Service Platform
Bezeq, Israel's largest telecommunications service provider, has selected Personeta's TappS NSC as its platform of choice for Next Generation services. Bezeq will use Personeta's platform to migrate and enhance existing IN services and roll out new ones. Bezeq has been using Personeta's TappS NSC for several years to support value-added services, such as Number Translation Services (NTS), Network IVR and Call Authorization services. It will now use TappS to migrate other existing IN services and enhance them with new features and capabilities. Services to be migrated include 1700, 1800, and 1900 numbers, and prepaid/postpaid calling card services. Bezeq also plans to use Personeta's service creation environment to roll out innovative services on both circuit-switched and IP networks.
TappS NSC is a service creation and execution environment for any type of network and protocol. It decouples the service logic from the network and uses standard Java APIs and Web Services for rapid service creation and system integration. This gives service providers, such as Bezeq, access to unprecedented programmability at a fraction of the cost and time normally associated with traditional IN services. The platform also enables end user self-care through Web, IVR, and other interfaces, giving service subscribers full control of their legacy and Next-Generation services. Hod HaSharon, Israel's, Personeta (http://www.personeta.com), the leading provider of converged communication solutions for service providers is redefining how converged services are developed and delivered for both businesses and consumers. (Personeta17.01)
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9.3 Integra5 Expands Converged Services Leadership with PC Caller ID Rollouts
Integra5 announced the commercial deployment of its PC Caller ID application, powered by the i5 Converged Services Platform (CSP). Comporium Communications, a quintuple play service provider based in South Carolina, is one of multiple new and existing Integra5 customers that are launching PC Caller ID to increase competitive differentiation and enhance the value of bundled services. PC Caller ID delivers notifications of an incoming caller's name and number to a subscriber's PC screen before the phone rings. The proven revenue- and loyalty-building benefits of early converged services - such as TV Caller ID - have led to service provider demand for additional applications that span all devices in the home including TVs, PCs, and landline and mobile phones. In a recent survey of Comporium TV Caller ID subscribers, more than 40% said they want to receive converged services across both TVs and PCs, and over 80% want more converged communications beyond caller ID. The i5 CSP lets operators launch new applications -- such as PC Caller ID, SMS Text Messaging and Voicemail to the TV, and i-Click -- in a matter of weeks, versus months or years, providing a foundation for the continuous rollout of converged communications and content services. Integra5 (http://www.integra5.com) is the global leader in blending triple and quad play bundles into converged services. Integra5 is headquartered in Burlington, Mass., and has a research and development office in Rehovot, Israel. (Integra516.01)
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9.4 RADA Receives a $1.4m RAFAEL Order for New Generation Litening Airborne Targeting Pod
RADA Electronic Industries has received a $1.4m purchase order from RAFAEL Advanced Defense Systems to develop a new generation Inertial Measurement Unit (IMU) for the Litening Airborne Targeting pod. RADA's IMU is the third product in its continuously-growing family of inertial navigation system (INS) solutions, and is the outcome of internal R&D investments made in 2007 and which are continuing in 2008. The current order calls for the development, production of prototypes, integration and qualification efforts. It is part of a framework agreement between both companies to develop, produce and deliver a substantial quantity of units. The total value of the agreement is $9m, including the $1.4m development order. Production orders are expected to be received in 2009, following the completion of the development phase. RADA Electronic Industries (http://www.rada.com) is a Netanya, Israel based company involved in the military and commercial aerospace industries. The Company specializes in Avionics systems (Digital Video Recorders, Ground Debriefing Stations, Stores Management Systems, Flight Data Recorders, Inertial Navigation Systems), Trainers Upgrades, Avionics systems for the UAV market, and Optronics (cameras for airplanes and armored vehicles). (RADA 14.01)
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9.5 Elbit Systems Awarded $40 Million in Several Contracts for the Supply of Thermal Imaging Systems
Elbit Systems announced that its subsidiary, Elbit Systems Electro-Optics Elop (Elop), recently has been awarded contracts valued at a total of approximately $40m from several customers for the supply of its CORAL and CORAL-CR hand-held lightweight Thermal Imaging cameras. The projects covered under the new contracts include applications for infantry, scouts and special units, night sight and target acquisition, security and perimeter defense and target acquisition for infantry commanders. Elop foresees substantial potential for follow-on orders. The systems are members of the industry-leading CORAL family, already in service around the globe. CORAL is a dual FOV Thermal Imaging camera, based on Elop's advanced, proven 3-5 micrometers FPA InSb detector technology, already utilized in many of Elop's other Thermal Imaging products. It produces a thermal image of outstanding quality based on Elop's unique image processing circuitry and software algorithms implemented in the system. CORAL-CR is a hand-held Thermal Imaging system that includes target acquisition capabilities in order to identify self positioning and detected target position. These capabilities are achieved by a laser range finder, a digital compass and a GPS which are mounted and boresighted together with the FLIR. The CORAL-CR has a 1:5 continuous optical zoom, high resolution, 3-5 micrometers FPA InSb detector and advanced algorithms.
Haifa, Israel's Elbit Systems (http://www.elbitsystems.com) is an international defense electronics company engaged in a wide range of defense-related programs throughout the world. The Elbit Systems Group, which includes the company and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned air vehicle (UAV) systems, advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. (Elbit)
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel Inflation Hit 5-Year High Of 3.4% In 2007
The Central Bureau of Statistics announced on 15 January that Israel's inflation rate exceeded 3% in 2007 for its highest level in five years, led by steep increases in food and energy prices. The inflation rate of 3.4% in 2007 exceeded an official annual target of 1 to 3% and contrasted with a rate of minus 0.1% in 2006. A rate above 3% was cemented after December consumer prices rose 0.6% from November, twice what was forecast. Despite four straight years of economic growth of at least 5%, Israeli inflation has been rather tame. After hitting a 6.5% rate in 2002, yearly inflation rates since have been negative or modestly positive. Robust demand stemming from rapid economic growth has resulted in gains in domestic prices, such as food, but those increases had largely been offset by a sharply stronger shekel against the dollar. About one-third of costs in Israel's economy are quoted in U.S. currency but paid in shekels. In 2007, the shekel appreciated 10% versus the dollar, holding back prices of housing and other items linked to the greenback. House prices, which registered negative inflation for most of 2007, rose 1.9% for the year a whole. On the heels of gains worldwide, food prices excluding fruit and vegetable prices jumped 6.3%, while transportation and communications -- which includes petrol for cars -- rose 4.2% in 2007. Health costs increased 1.9% and housing maintenance prices increased 6.1%. The only major price component that fell last year was clothing and footwear, which dipped 0.7%.
Annual inflation in Israel as late as May of 2007 was minus 1.3% and it had appeared as if inflation would stay benign. But in the second half of the year, oil and food prices soared globally, while fewer local housing contracts were being made in dollars -- leading to a spike in inflation pressures. The Bank of Israel responded with quarter-point rate increases in July, August and December to bring its key lending rate to 4.25%. (CBS15.01)
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10.2 Israel's State of Economy Index rose 1.2% in December
The Bank of Israel announced on 21 January that the State of the Economy Index rose 1.2% in December 2007. The index rose 3.4% in the fourth quarter. The Bank of Israel also revised upwards the State of the Economy Index by 0.8% for Q4/07. The index rose 8.3% in 2007, after rising by 7.5% in 2006. The index rose 33.8% in 2003-07, an average of 6.8% a year. The increase in 2005-07 was an even more rapid 7.4% a year. The index figures show that the economy's rapid growth is continuing, and that there are no signs of a slowdown at the moment. The manufacturing component of the index fell by 0.5% in November (the latest available figures), after rising 2.7% in October. Services exports, which include high-tech, rose by 13% in December, after falling 4% in November. Trade and services proceeds rose by 0.3% in November (the latest available figures) and by 0.7% in October-November. Export of goods rose by 2.4% in December and by 4.4% in November-December. Imports rose by 3%. Business employment also rose. (BoI21.01)
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10.3 Israel's Unemployment at 13-Year Low
Unemployment in Israel is continuing to fall and is now less than 200,000. The Central Bureau of Statistics reported on 20 January that the unemployment rate fell to 6.6% in trend figures in November, from 6.7% in October and 7.9% at in January 2007. The number of unemployed persons reached 193,400 in November, falling by 37,000 from more than 230,000 at the beginning of the year. The unemployment rate has now fallen 4.4% from the 11% high at the beginning of 2004. The unemployment rate has been falling faster than expected, by a monthly rate of 0.1-0.2% a month. If the current rate of decline persists, unemployment in Israel will fall below 6.5% by mid-2008, a rate also classed as the unemployment of an economy operating at maximum output. The average unemployment rate reached 6.7% in the Q4/07, compared with an average of 7% in the third quarter, 7.5% in the second quarter and 7.8% in the first quarter. The average unemployment rate for 2007 as a whole will be 7.3%. (CBS20.01)
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11: In Depth
11.1 ISRAEL: Summary of High-Tech Company Capital Raising in 2007
The following are the findings of the Quarterly Survey conducted by the IVC Research Center (http://www.ivc-online.com), which for more than eight years has been at the forefront of venture capital and private equity research in Israel. This Survey, conducted with the cooperation of the Israel Venture Association (IVA), reviews capital raised by private Israeli high-tech companies from Israeli venture capital funds and from other investors. The Survey is based on reports from 84 venture investors of which 50 are Israeli management companies and 34 are other – mostly foreign – investment entities.
In 2007, 462 Israeli high-tech companies raised $1.76b from local and foreign venture investors, 8.5% above the $1.62b raised in 2006 and 31.5% above 2005 levels.
In the fourth quarter, 115 Israeli high-tech companies raised $503m, a 21% increase from the $414m raised by 108 companies in the third quarter and a 5% increase from Q4 2006. Capital raising in the fourth quarter - the highest in five years - included an especially large financing round of over $100m for MobilEye. Even after adjustment, the figures indicate a stable level of capital raised relative to 2006.
“Both investments and exits in 2008 will be dependent, to a large extent, on economic activity in the US,” said Zeev Holtzman, Chairman of IVC Research Center and Giza Venture Capital. “A possible crisis on NASDAQ would mean fewer IPOs and lower acquisition values, which would impact the high-tech industry in Israel. Yet, we expect that the $1.6b average investment level of the last few years will be maintained in 2008.”
In Q4 2007, the average company financing round was $4.37m, compared with $3.8m in the previous quarter and $4.5m in the fourth quarter of 2006.
Israeli VC Investment Activity
In 2007, Israeli VCs invested $678m in Israeli high-tech companies. The Israeli VC share of the total amount invested in Israeli high-tech companies was 39%. This compared to $651m or 40% in 2006 and $655m or 49% in 2005.
In the fourth quarter, Israeli VCs invested $142m, which accounted for a low 28% share of the total invested in Israeli high-tech companies (35% excluding the $100m MobilEye round). The remainder came from other investment entities, mostly foreign. The Israeli VC investment share was also substantially below the 42% average of the previous nine years.
First investments made by Israeli VCs were 43% of the total amount invested by Israeli VCs in 2007, equal to 2006 levels. The average First and Follow-on investments were $2.48m and $0.89m, respectively.
In the fourth quarter First investments made by Israeli VCs accounted for 33% of their investments, compared to 51% in the third quarter and 55% in the fourth quarter of 2006.
Israeli VC Activity in Foreign Companies
Israeli VCs invested $50m in foreign companies during 2007 (in addition to their investments in Israeli high-tech companies), compared to $60m in 2006 and $95m in 2005. Three of the 39 investments were First investments and the remainders were Follow-ons.
Capital Raised by Sector
In 2007, the Communications sector led capital raising with $371m or 21% of total capital raised, followed by the Life Sciences with $351m or 20%. “Particularly noteworthy were the Semiconductor and the Internet sectors” said Efrat Zakai, Director of Research at IVC. “Semiconductors garnered 19% of total investments in 2007 and 31% in the fourth quarter. The figures reflected, in part, MobilEye's $100m round. The Internet sector, with $257m raised, has markedly increased its share of investment, which reached 15% in 2007. This compares with figures ranging from 2 to 5% in the last 5 years.”
Capital Raised by Stage
In 2007, 78 Seed companies attracted $151m, the highest amount raised since 2001. At 8%, the share attracted by Seed companies remained consistent with that of the previous four years.
In the fourth quarter, Seed companies attracted only 4%, compared with 7% in the previous quarter and 11% in the fourth quarter of 2006. Late Stage companies captured $180m or 36% of the total capital raised. This relatively high share was as a result of the $100m MobilEye round.
IVC Research Center is Israel's leading research center providing business leaders with an unmatched wealth of data on Israeli venture capital, private equity and high-tech industries. IVC products and services are used regularly by venture capital funds, private investors, high-tech companies, financial investors and institutions, as well as public entities such as the Office of the Prime Minister, the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist. (IVC14.01)
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11.2 LEBANON: 2007 Year in Review
In many ways, comments the Oxford Business Group, Lebanon ended 2007 much as it entered the year, mired in political uncertainty and turmoil, deeply in debt and with an economy seeking stability. The battles for political power did much to unsettle the Lebanese economy throughout the year and to delay much-needed legislative and regulatory reforms to boost productivity and get the country's stalled privatization program back on track.
Long before he left office on November 23, President Emile Lahoud had withdrawn his recognition of the government of Prime Minister Fouad Siniora, raising questions over the legitimacy of many of the decrees passed by the cabinet. Parliament failed to elect a successor to Lahoud, even thought there were 11 attempts to convene to hold a vote and despite a general consensus army chief of staff General Michel Suleiman should be appointed as the next head of state.
Rather remarkably, given the political turmoil, some elements of Lebanon's economy functioned quite well during the year. On January 8, 2008 the finance ministry announced the state deficit for the first 11 months of 2007 had been reduced from 37% to 31%. To the 11 months ending November 30, Lebanon recorded a primary budgetary surplus, excluding debt servicing costs, of $643m, a 372% improvement over the same period in 2006. Though a step in the right direction, Finance Minister Jihad Azour said 2007 would have been far better had the political situation been more stable.
One area that saw little improvement during the year was Lebanon's debt level, which remained fixed at $41bn, 185% of GDP. Servicing that debt ate up 48% of the state's revenues of $5.3bn to the end of November, with wages payments to public servants being the next largest singe expense, an expense the government wants to reduce through reforming the civil service in the coming year.
The government hopes it will be able to ease the country's debt through the privatization of Lebanon's two mobile phone networks some time this year, sales it expects to bring in well over $6bn. However, the telecoms' privatization still has to pass through the political hoops that have plagued similar projects in the past.
However, Hezbollah leader Nasrallah said his party and its allies would block any attempt by the government to privatize the telecom sector, saying such a move needed the approval of the parliament.
The state power utility, Electricite Du Liban (EDL), continued to be a major drain on the budget, with $930m transferred to prop up the loss-making enterprise. Much of this funding was required due to soaring international oil prices, a burden that affected many sectors of the Lebanese economy throughout the year. Plans to overhaul EDL and to privatize the utility, announced in 2002, are still on the backburner, partly due to political bickering and in part a result of opposition to the government's program of selling off essential services.
One of the success stories for the year was the banking sector, which saw consolidated assets rise by 7.9% over the first 11 months of the year to $80.1bn. There was also strong growth in deposits, with a year on year increase of 8.6%.
One of Lebanon's traditional foreign currency earners - tourism - again had a poor year. With Lebanon often making international headlines for all the wrong reasons, such as assassinations, the long running battle between the army and Islamic Palestinian militants in the Nahr Al Bared refugee camp in May and June and the potential for political instability to spill over into sectarian violence, tourism remained in the doldrums. Though final figures have yet to be released, the number of foreign visitors to Lebanon and the resulting revenue generated are expected to be well down on those of 2006, which had been deemed a disaster by tourism operators.
The Beirut Stock Exchange had an active year, with the BLOM Stock Index gaining 26.3% over 2007. However, the market also saw wide fluctuations, mainly driven by the political situation. With each announcement by parliamentary Nabih Berri that the presidential election had been postponed, the stock market would take a tumble, only to rebound as a new date for the ballot was set. Though the government is working to enact reforms to add stability to the economy, the political uncertainty and the concerns it raises with international donors, whose support is crucial to funding these reforms, means that Lebanon still has to face in the coming year the same problems it had in 2007. (OBG14.01)
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11.3 IRAQ: Economy's Oil Surge?
The Economist Intelligence Unit noted that among the factors driving the oil price over the $100/barrel threshold has been market concern at the lack of significant net new production capacity primed to come on stream in the next few years. Iraq, with the third-highest proven crude oil reserves in the world and the highest reserves/production ratio, has the potential to contribute to a resolution of this problem, but has not undertaken any major new oilfield developments for more than a quarter of a century. However, the Iraqi oil industry has in recent months shown signs of stirring from its conflict-induced coma, and although some of the near-term output forecasts of government officials appear somewhat optimistic, there is every prospect of Iraq playing a pivotal role in meeting extra demand over the course of the next decade.
Oil Register
The improvement in security conditions in last few months of 2007 has prompted the Ministry of Oil to dust off long-standing plans to boost output in existing oilfields and to award service contracts for the development of previously discovered fields. The ministry has invited interested companies to register with it by the end of January, with a view to issuing a series of tenders for oil extraction and service contracts over the next few months. These deals are unlikely to include production-sharing agreements (PSAs)—the issue of what fields should be eligible for PSAs has provoked huge controversy in the ongoing deliberations over the new oil law, which has yet to be passed. The decision of the Kurdish Regional Government (KRG) to award a series of PSAs within its area of control has ratcheted up the tensions, and the Baghdad government has indicated that companies working in the KRG zone would be wasting their time if they were to apply to be included on the register for the new projects planned elsewhere in Iraq.
Since the 2003 US-led invasion only a handful of such projects have got underway, the largest being the $197m development of the Subba and Luhais fields in the south being undertaken by Petrel Resources of Ireland on an engineering, procurement and construction (EPC) basis. The Irish firm says that it has made steady progress with this project since the contract was finally awarded at the end of 2005, and it expects the production facilities to come on stream during 2009. The minimum capacity specified in the contract is 200,000 barrels/day (b/d) of oil and 120m cu ft/day of gas. Petrel has also positioned itself for another more substantial project, having undertaken a technical appraisal of the undeveloped Merjan field, near Karbala. The ministry has indicated that the first batch of new contracts will focus on enhancing production in existing fields, but officials are also looking at prospects for developing fields, such as Merjan, where significant reserves have been identified but not developed.
According to Falah al-Khawaja, director-general of the State Company for Oil Projects, the ministry is aiming to lift production to 4.5m b/d in 2011. This compares with an average of 2.3m b/d in October and November 2007, according to the International Energy Agency.
Kirkuk Cloud
The recent output figures indicate that Iraq's production rose by more than 250,000 b/d in the final quarter of 2007 compared with the average for the first nine months of the year. This is attributable mainly to the improvements in security, which have allowed for much larger volumes of oil to be produced and exported from the Kirkuk fields in the north. Previously, Kirkuk operations had been hampered by the constant sabotage attacks on the pipeline connecting the area to the Ceyhan terminal in south-east Turkey, which has left the Basra Oil Terminal in the south as the only reliable export outlet for Iraqi crude. The improved security has even prompted the State Oil Marketing Organization (SOMO) to set an official selling price for Kirkuk crude for the first time in several years. January liftings for Europe have been priced at Dated Brent minus $3.75/b and those for the US at WTI minus $6/b. SOMO has also decided to boost Kirkuk crude sales from 300,000 b/d to between 350,000-400,000 b/d.
However, the prospects for pushing up production further in the Kirkuk area could be affected by the ongoing disputes between the KRG and the Baghdad government over the province's final status and over the PSAs awarded by the Kurdish authorities. The Kurds have been pressing for implementation of a commitment under Article 140 in the constitution for a referendum to be held on the incorporation of Kirkuk province into the KRG. The end-2007 deadline for this vote has been missed, and should no firm replacement date be set, the KRG may move unilaterally to seize control of the area (a substantial peshmerga force is already resident in the Kurdish side of Kirkuk, and the KRG has also reportedly begun to supplant the central government's role over some local oilfields). However, there is a high risk that such an approach would be resisted (possibly violently) by local Turkomans and Arabs. Nevertheless, with Kirkuk's oil under Kurdish control, and new oilfields in the present KRG-administered area coming on stream, the KRG might be tempted to appropriate the oil revenue, albeit probably under a "temporary arrangement" until the federal authorities are able to function once more. (This scenario would also probably necessitate a revenue-sharing arrangement with some of the governorates through which the Kirkuk pipeline passes.) Such an outcome would probably cause a complete breakdown in the KRG's already increasingly fraught relations with the federal government, and would hardly create the conditions necessary for sustained work on enhancing oil production in the Kirkuk area.
The development of Iraq's oil industry will also depend on how durable the recent gains by US and local forces against the insurgency in the central area of the country prove to be, particularly in light of the planned drawdown of American troop numbers over the coming period. Nevertheless, even with continuing political uncertainty, there is scope for a steady increase in Iraqi oil production over the next few years. This would not only play a part in alleviating global supply worries; it would also provide increased revenue to sustain much-needed development expenditure in the rest of the Iraqi economy. (EIU03.01)
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11.4 KUWAIT: 2007 Year in Review
With a muscular economy, largely stable political environment and stock market in good health, the Oxford Business Group deemed that 2007 was a generally successful year for Kuwait. This should continue in at least the medium term as GDP growth is expected to increase slightly from the estimated 5.7% for 2007. That is not to overlook short-term challenges, most notably inflation, which by the end of the year had hit a15-year high of 6.2%. While a concern, most analysts feel it is within the safe range and will be brought under control by prudent fiscal policy.
The overall national prosperity can be predominantly attributed to unprecedented and consistently high oil prices, which swelled treasury coffers. The government is utilizing this revenue to fund long-term economic reforms, strengthen investment infrastructure and turn Kuwait into a regional financial hub. The primary goal is to reduce the country's dependence on oil. This determination to diversify the economy was the single biggest factor underpinning major economic policy decisions in 2007.
However, the influx in revenue also helped create inflationary pressure and price hikes that affected everything from commodities to housing, education and health. The ailing US dollar exacerbated the issue, weakening profits from hydrocarbons in what should have been a bumper year, and risked damaging the labor market as expatriate workers saw living costs rise and the net value of their foreign remittances fall.
Similar effects are being endured throughout the region. While several Gulf countries facing similar challenges discussed abandoning the US dollar currency peg, last May Kuwait became the first to do so. The dinar is now linked to a basket of currencies, and Salem Abdel Aziz Al Sabah, governor of the central bank, has urged for calm regarding inflation. He said the full benefits of de-pegging would emerge over time.
Another cause for domestic disquiet last year was consumer debt, which at $17bn represents the highest per capita figure of any Gulf Cooperation Council country. There were repeated calls from some parliamentarians for oil revenues to be used to pay these off, but the government has thus far resisted these, intent on using the budget surplus to push through its economic diversification program. The state is trying to tackle the personal debt issue by making banks write-off about $4bn in bad debt. Meanwhile the central bank maintained its discount rate during 2007 - despite cuts in US rates - in an effort to discourage borrowing, as well as imposing tighter lending restrictions and introducing a realistic loan-to-deposit ceiling.
Finance Minister Faisal Hamad Al Ayyar, in an effort to pacify those concerned about price increases, has indicated that some of the budgetary surplus could be channeled into an across-the-board pay rise of $182 a month for public employees - that is, nearly all Kuwaitis.
Funding such moves will necessitate a continued bountiful oil supply, as will paying for the state's ambitious economic reform plans. To help ensure future revenue flows and also meet domestic energy needs, some of the current windfall is therefore being put back into oil extraction. In May 2007 the budget for construction of Kuwait's fourth refinery was doubled to $12bn. Due for completion in 2011, it is to have a capacity of 615,000 barrels per day.
The liberalization and privatization program was augmented last year with initiatives to woo foreign capital including recent legislation passed by parliament to slash the capital gains tax from 55% to just 15% for foreign companies. There are moves afoot to exempt foreign traders from stock market fees in the hope international investors will bring not just financing, but sophisticated technical and administrative experience.
Kuwait's list of international partners grew during 2007. The government set a target of attracting $100bn of foreign investment within a decade. Joint ventures such as December's headline-grabbing $9.5bn deal with US-based Dow Chemicals bode well for this. As well as traditionally strong ties with the US market, Chinese entrepreneurs are beginning to show interest, with several major infrastructure projects in Hong Kong being recently unveiled. Increasingly global in vision, Kuwaiti firms are reportedly poised to clinch a $10bn airport construction contract in the Philippines.
Other notable moves last year included National Bank of Kuwait's acquisition of National Bank of Egypt, and Investment Dar's of British car maker Aston Martin. The national price index returned 25% in 2007, comparing favorably with the long-term average of 20%.
Despite heated internal debate, leading international analysts such as Credit Suisse to state that the country is very much on the right track in using the current fiscal surplus to diversify, expand and stimulate the country's private sector, thereby spreading financial risk and laying the foundation for sustainable long-term growth.
All of this may require a change in attitude for many Kuwaitis, 90% of whom are employed, tax-free, in a sluggish and largely uncompetitive public sector. Parliamentary approval at the end of 2007 for proposals to privatize the enormous Kuwait Airways Corporation was therefore significant. Under the plan, the state would retain a 20% share, with 40% going to private investors and the balance sold by public subscription. This would allow Kuwaiti citizens to participate in and benefit directly from the new market-orientated culture.
This privatization plan encapsulates the overriding themes and aspirations of 2007. With no immediate signs of the country's hydrocarbons revenue abating, the government will be able to continue to fund its desired reforms and the upcoming year should see further progress in establishing an increasingly dynamic business environment. (OBG11.01)
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11.5 BAHRAIN: 2007 Year in Review
While not as spectacular as some of its neighbors, Bahrain's economy experienced another solid year in 2007, with rising inflation being the main cloud on the kingdom's horizon. Bahrain's economy expanded by 6.2% last year. Although this was well down on the 11% of the year before, the result was evenly spread across the economy, with all sectors reporting sound growth rates.
Another success for the government was the shortening of job queues, with the kingdom's unemployment rate falling to just 4% in late December, according to the ministry of labor. The government has been so successful in lowering unemployment that there is now a labor shortage in some industries, prompting the government to announce in December that it would reduce the quotas for employing Bahraini nationals in certain sectors.
As with most Gulf states, the vexing question of whether to retain or abandon its currency peg with the US dollar remained an issue of debate throughout the year, especially as the greenback slumped in the second half of 2007. Severing the dollar link and adopting a peg to a mixed basket of currencies was heavily argued as one way to reduce inflation in the kingdom. Though year-on-year increases to the consumer price index hit 8.4% at the end of November, fuelled by the rising cost of imports - due in part to the linking of the Bahraini dinar with the dollar - the government has for the present time ruled out pulling the peg.
While the dollar peg remains in place, the government has been looking at other measures to ease the effects of inflation. At the beginning of 2008, in response to calls from parliament, Prime Minister Sheikh Khalifa bin Salman Al Khalifa announced that $100m would be allocated to control rising prices, including continued subsidies on basic foodstuffs. The government also spent $360m on fuel subsidies during 2007.
Unlike most of the other Gulf states, Bahrain does not depend on the energy industry for the majority of its wealth. Though oil still plays a significant role in the economy, along with value added industries such as refining and derivatives production, the kingdom's financial sector is the driving force of the economy. Though official year-end figures have yet to be released, estimates put the contribution of the banking sector to Bahrain's GDP at more than 25% in 2007, with the industry seeing assets increase by 33% to $233.2bn. The kingdom's Islamic financial institutions showed an even higher rate of growth during the year, with assets topping $19bn, an increase of around 85%.
The stock market was another strong performer, with shares on the last day of trading for 2007 hitting a 52-week high, with the Bahrain All Share Index closing at 2,716 points.
During the year, the central bank enacted a number of interest rate reductions, ending with a cut of 25 basis points on December 12, putting its one-week deposit facility at 4.0% and its overnight deposit facility at 3.50%. For the most part, these cuts followed the lead of the US Federal Reserve, rather than representing an effort by the bank to prime an already active economy.
However, these positive outcomes were slightly overshadowed by the results of a survey conducted by HSBC. The bank's most recent Business Confidence Index, covering the last three months of 2007 and released in early January, showed a general downward turn in expectations. This trend was most pronounced in Bahrain, with the overall confidence rating falling to 92, by far the lowest in the region. The concerns reflected in the survey were mainly prompted by high inflation, rather than by fears of a downturn in the economy as a whole.
While no longer a major oil producer, Bahrain's economy is still strongly linked with the energy sector. Faced with dwindling reserves - local production has dropped to under 40,000 barrels per day (bpd) - Bahrain is looking to lift output with new technology to revitalize old fields and develop new blocks.
In mid-November, Abdul Hussain bin Ali Mirza, the minister of oil and gas affairs, announced bids had been received from a number of leading international firms to develop new on- and offshore fields, which when brought on line would boost output to 70,000 bpd. These new fields, combined with a major upgrade to the country's aging oil refinery and the development of new petrochemical side industries, will ensure Bahrain remains a player in the energy industry, even if not a major producer.
Though business confidence may be somewhat down and the kingdom facing increasing competition as the Gulf's financial hub, Bahrain's economy is predicted to grow by around 6.5% in the coming year, well above the global average of 3.3% estimated by the World Bank. (OBG18.01)
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11.6 BAHRAIN: Changing Climate
While Bahrain's business and investment climate is widely considered to be among the best in the Gulf region, praised for its openness and accountability, the kingdom's natural environment is becoming an increasing cause for long-term concern. As reported by the Oxford Business Group, according to Rehan Ahmed, an environment specialist with Bahrain's Public Commission for the Protection of Marine Resources, Environment and Wildlife, the kingdom's future is being threatened by climate change brought about by air pollution, in particular high levels of carbon emissions. "Let us understand that we are irresponsibly and recklessly mismanaging our ecological resources," Ahmed told a seminar on climate change and environmental protection in Manama on December 30. The present generation was causing damage to the environment that would be an unwanted legacy for future generations, he said.
A study conducted by the World Resources Institute backs up Ahmed's warnings, showing that carbon emissions in Bahrain were the equivalent of 21 tons per person, nearly five times the global average of 4.5 tons.
According to the World Wildlife Fund (WWF), Bahrain is one of the world's worst polluters on a per capita basis, ranking fourth on the organization's list behind Qatar, the United Arab Emirates and Kuwait, with the US occupying the fifth rung on the ladder.
The greatest single culprit was Bahrain's energy industries, which represented 50% of carbon emissions in the kingdom annually, while 24% originated from the manufacturing and construction industries and more than 10% was generated by the transport sector, Ahmed said.
Meanwhile, being an island state located in some of the busiest waters in the world, Bahrain is always at risk from a maritime environmental disaster, with oil spills being the most obvious threat. Bahrain's lucrative fishing and aquaculture industries and its tourism sector would be among the prime victims in the event of such an incident. However, even more significant, the low lying island kingdom would be put at peril by the threat of rising sea levels that many experts say will result from global warming and melting ice at the North and South Poles. Potential flood mitigation work involving the construction of dikes and barrages would involve massive expenses, draining away funds that would otherwise be directed to infrastructure and other projects.
A report released by the Pew Research Centre in late 2006 warned that Bahrain's burgeoning tourism sector would be hard hit by rising global temperatures, with visitors seeking more temperate climates as the mercury rises. Even an increase in average temperatures of five degrees Celsius, a figure in line with expert predictions for the end of the century, would result in a 58% drop in Bahrain's tourist arrivals, with only Mauritania and Mali suffering worse declines, the report said.
The government of Bahrain has already acted to rein in environmentally damaging developments in the economy, tightening up regulations governing planning permission, enforcing stronger environmental impact assessments for new projects and encouraging recycling. The Public Commission for the Protection of Marine Resources, Environment and Wildlife is developing a series of proposals for government consideration that would require developers to pay for any damage they cause to the environment, as well as help preserve the Kingdom's biodiversity.
A growing number of Bahraini companies are also working to boost their green credentials. Earlier this year, The Bahrain Petroleum Company launched a new $1.2bn facility to produce low sulfur diesel fuel, a response to both changing market conditions and to local environmental concerns. Many new residential, resort and business developments in Bahrain now promote themselves as being environmentally friendly, touting their use of energy efficient air conditioning and electronic systems, and in their use of extensive landscaping in keeping with the ecology.
However, the government does have to strike a balance between the economic needs of the country, especially those of energy production, and the environment. Having actively pursued a policy encouraging industrial development, it cannot stifle manufacturing, nor can it reverse the program of construction of new facilities needed to meet the country's energy needs. (OBG11.01)
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11.7 QATAR: 2007 Year in Review
The Oxford Business Group reported that concerning Qatar, 2007 was marked by major developments in the financial, telecommunications, energy and construction sectors.
The Doha Securities Market is moving forward with plans aimed at creating a single regulatory body called the Qatar Financial Market Authority. The government announced that the new organization, which was established in early 2007, is intended to be an impartial body that will contribute to the development of a unified market and sound financial system to improve Qatar's attractiveness to investors.
On the economic front, inflation rose by 12.8% year-on-year for the second quarter of 2007 and surged to 13.7% by the end of September. The real estate sector is cited as the main cause for much of the inflationary pressure, with the government working to ease housing shortage stemming from high demand from a growing population and an increasing number of expatriate workers. In turn, rising housing costs had a "trickle down" effect on food, beverages and tobacco prices.
Inflation led to a call for action from many in the business community, coupled with the desire of some members of the Organization of Petroleum Exporting Countries (OPEC) that oil should be priced in other currencies. As a result, there was mounting pressure on the Qatar Central Bank (QCB) to reconsider its long-standing peg to the dollar. The issue of de-pegging has been temporarily put to rest as leaders from Qatar and the region stated in December, at the Gulf Cooperation Council (GCC) Leaders' Summit in Doha, that there is no outstanding change and that if there was, it would be taken collectively. Still, speculation hovers as many continue to feel the impact of rising living expenses.
An eventful year in the telecoms sector was concluded by Vodafone's successful bid for Qatar's second mobile phone license, with service expected to launch in 2008. Vodafone and its local partner, the Qatar Foundation Consortium, beat off competition including the United Arab Emirates-based Etisalat, Kuwait's MTC, AT&T and Verizon Communications. Vodafone's confidence in the Qatari market remains high despite the current 120% mobile penetration rate held by Qatar Telecom (Qtel)'s former monopoly. The successful bidding process paves the way for the award of a license for a second fixed-line operator, a process due to begin as early as April 2008, though there will be no auctioning activities. Five organizations have already announced they will be bidding, including Verizon of the US, Bahrain's Batelco, the UAE's Etisalat and Italy's Eutalia. Companies have until February 7 to register potential bids. The winning licensee will have access to developments in Qatar such as the Pearl and Losail as well as to existing residential and business areas.
In terms of foreign investment, Qatar ranked highly in 2007, as the country sought to diversify from dollar assets. A consortium of GCC companies led by Qatar announced plans to invest $1.4bn in the oil and gas, Islamic banking and property sectors in Malaysia. Meanwhile, the country's sovereign fund, Delta Two, which handles most of the country's investment activity, remained in negotiations with its Dubai rival at the close of the year for a controlling stake in the London Stock Exchange (LSE) group. Currently, Borse Dubai owns 20% of the LSE, while the Qatar Investment Authority owns 15%, making them the number one and two shareholders in the London-based index. Dubai has agreed to trade about 5% of its stake in exchange of Qatar's 9.98% stake in OMX, the Nordic exchange group Dubai is looking to take over. If they come to a final agreement, they will swap positions, leaving the QIA with 20% and Dubai with 15%.
Meanwhile, Qatar's energy sector experienced tremendous growth in 2007 despite the 2005 moratorium on new gas projects. The moratorium was put in place to ensure optimal reservoir management and, as a result, the productive life of its North Field gas reservoir. Doha seems reluctant to add to the 25bn cf/d it is already committed to producing, at least until 2012. The biggest achievement in 2007 came with Qatar becoming the world's leading supplier of Liquefied Natural Gas (LNG). The world's former number one supplier, Indonesia, fell behind in production after the successful completion of RasGas train 5 in March 2007, ahead of schedule. RasGas train 5, one of the largest LNG plants in the world, is designed to produce 4.7m tons of LNG per year and will supply gas into the northern European market. In addition, RasGas, a joint venture between Qatar Petroleum and Exxon Mobil Ras Gas, is constructing the world's two largest trains ever built, with volumes of 7.8m tons per year, expected to be operational in 2008 and 2009.
On the infrastructure front, 2007 saw the signing of a Memorandum of Understanding (MoU) for a 40km-long causeway linking Qatar and Bahrain, a $2bn project expected to take approximately 48 months to complete. It is estimated that the causeway will be open to traffic in 2011 and will provide a much-needed alternative trade route between the two countries by road and rail.
Qatar's air and seaport infrastructure underwent further development with the ongoing construction of the New Doha International Airport and upgrades and expansion at Ras Laffan industrial city. Capacity expansions were also announced for Mesaieed Industrial City's port, which is home to Qatar's main oil export terminal, with the construction of a QR22bn world-class deep-water port that will have a capacity of 6m TEUs upon completion by 2030. This expansion will allow for further growth in light industrial manufacturing.
Qatar's economic growth should continue well into 2008 with oil production set to continue its upward trend following OPEC's decision to loosen restrictions put in place during 2007, and the launch of the Dolphin pipeline to the United Arab Emirates. Besides energy, government spending in health, education and transport should foster economic growth, with real GDP expected to rise by more than 9% in 2008. (OBG15.01)
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11.8 UAE: Abu Dhabi - 2007 Year in Review
Abu Dhabi, as noted by the Oxford Business Group, made major advances this year in terms of government policy, structure and economic initiatives. Changes in 2007 were focused on the government's continued effort to diversify and build a sustainable economy bolstered by foreign direct investment in multiple industries.
In the beginning of the year, Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE and Ruler of Abu Dhabi, revamped the board of directors of the Abu Dhabi Investment Authority (ADIA) and Abu Dhabi Investment Council and became the chairman of both organizations. ADIA, a sovereign wealth fund, made international headlines following a $7.5bn investment in Citigroup at the end of November. Other vehicles, such as the Mubadala Development Company, also made a number of notable investments in foreign businesses throughout the year.
The Abu Dhabi National Energy Company (Taqa) has expanded impressively since its founding in 2005, thanks to aggressive acquisitions during the past 12 months. Taqa's portfolio has grown to more than $16bn in assets through international acquisitions in countries such as Canada and Holland.
At home, the emirate saw new developments in energy. The Abu Dhabi National Oil Company explored options for sour gas production in the Shah gas fields to keep up with the growing need for natural gas. Four international energy companies are currently bidding for the project, which will produce an estimated 3bn cubic feet of gas per day.
Keeping up with the increased awareness of environmental concerns, Masdar, a government initiative dedicated to developing and promoting sustainable energy and clean technology, announced it would develop the world's first zero-waste, zero-carbon 'green' community within the emirate. Phase one of Masdar City is scheduled to be completed by 2010.
The tourism industry has been another active economic area. According to a study conducted by the Abu Dhabi Tourism Authority, 1.37m people visited the capital last year, a 16% increase from 2006. This growth has been met with some challenges, however, particularly a shortage in hotel capacity. Currently, there are 10,000 hotel rooms in the emirate, a number expected to increase to 13,500 in 2008.
Consolidating on the sizeable jump in this sector, the Executive Council established a new government body, the Office of the Brand of Abu Dhabi, to develop a brand for the emirate in an effort to generate tourism and foreign direct investment. The government continued to position Abu Dhabi as a destination for luxury tourists and announced that the emirate would host the 2009 Formula 1 Grand Prix on a track currently under construction on Yas Island.
Another major tourism event this past year was the Middle East International Film Festival, which provided a platform for people looking to invest in media related projects. The first annual Film Financing Circle was launched during the event to foster growth and provide capital to the region's developing industry.
As part of an effort to welcome the rising number of visitors, the Abu Dhabi Airports Company has continued to expand and redevelop the Abu Dhabi International airport, which is slated to handle 20m passengers by 2010. A healthy increase in passenger traffic was indicative of the growing international buzz surrounding the emirate as the airport served more than 6m passengers between January and November 2007, a 30% increase compared to the same period in 2006.
Looking to sustain these gains into the future, the Plan Abu Dhabi 2030 was released in September, outlining controlled growth for the capital city and setting targets for hotel rooms, schools and office and retail space. The program incorporated environmental regulations while considering the city's capacity for expansion. The Policy Agenda 2007-08, released in August, illustrated the government's policy statements on topics from planning and economy to legislative reform. This document was the first of its kind to be published in the region and the government anticipates releasing regular updated versions. (OBG09.01)
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11.9 UAE: Dubai - 2007 Year in Review
Dubai enters 2008 after a year of significant economic growth, continued expansion of its economy and the increasing transparency of its challenges. The Oxford Business Group reported that nominal GDP exceeded 16% for 2007, according to the ministry of economy, beating International Monetary Fund (IMF) projections. While the IMF had anticipated a GDP of ($185bn, the ministry said it expects it to have reached $190bn. Growth was driven equally through soaring oil prices and higher than expected expansion of the non-oil sector.
Dubai continues to be the envy of the Gulf in its ability to expand its non-oil sectors. The ministry of economy has reported that non-oil growth in the United Arab Emirates (UAE) has risen to $124bn, a 21% increase over the previous year. As such, non-oil sectors such as finance, real estate, tourism and hospitality, now make up some 65% of the GDP.
Further strengthening of the financial sector was achieved when Dubai Ports World floated 20% of its shares on the Dubai Financial Exchange between November 4 and 15, in what was believed to be the largest initial public offering (IPO) in the region to date. This gave the exchange a significant boost, as it was the first time a major domestic company had chosen to list on the exchange. Many financial professionals view the listing as a test for other state-owned companies considering IPOs.
On the banking front, Emirates Bank International and National Bank of Dubai (NBD) announced on July 2 that they had agreed to merge, signaling the possibility of further consolidation in Dubai's growing banking sector and creating the region's largest lender, in terms of assets, Emirates NBD. Financial services are one of the many sectors driving Dubai's growth in 2007. Total investment in the UAE, driven in large part by the private sector, is expected to have risen to $39.2m, at a growth rate of 19%.
An IMF country focus report for the UAE, published in December, said Dubai's "challenge now is to address the housing constraint that is pushing up inflation while sustaining growth and ensuring macroeconomic and financial stability". Increasing rental costs are a primary catalyst of the climbing inflation rate and in response, the government has announced plans to implement a series of measures to curb soaring rents in the residential and business sector, which include restricting rental increases and expediting completion dates of new housing projects. In the last week of 2007, the government lowered its rent cap from 7% to 5% although adherence to this is questionable at best as rental prices continue to skyrocket and demand for property outstrips supply.
On the commercial end, rental rates for office space in Dubai have tripled rising from $24.50 per square foot in 2005 to $76 today according to a report by local property consultant Asteco. Occupancy rates are currently around 98%, and new office space is being bought as soon as it comes to market. Construction delays are blamed for the current distortion between supply and demand.
Dubai has built a reputation for exclusivity and high-end appeal in the real estate sector. Profit margins on the emirate's high-end property projects have been significant in the past year. According to Barmak Besharaty, managing director of Dubai-based financial services company Almas Capital, "Luxury high-rise towers are being way over-built right now. There are only so many high net worth foreigners who can afford this type of real estate." With so many projects defined as the 'ultimate luxury,' industry professionals are beginning to see market saturation. However, Wazir Daredia, executive director and CEO of Dubai's Trident International Holdings, told OBG, "There will always be a market for luxury real estate."
Still, while there is no shortage of real estate development projects under construction, there remains a lack of middle-income housing. According to Mark Prior, regional managing director at the property-consulting firm EC Harris, "there is plenty of money to be made in affordable housing".
In other real estate news, the government announced plans on June 16 to establish the Dubai Real Estate Corporation (DREC) to provide a database of the state's land and property assets, which represents 30% of all commercial property in the emirate. The corporation is expected to be in a position to free up unused land for commercial development and thus encourage foreign investment in public sector real estate by the private sector.
A different aspect on the development front is the government's announced plan for Dubai to become an environmentally friendly city that would use up to 60% less energy than conventional cities. Energy efficiency is to be achieved through a federal government mandate that will require new buildings in the emirate to be constructed in compliance with strict environmental standards. In transportation news, the Road and Transport Authority announced it would build a third metro line to connect the Dubai International Airport with the Jebal Ali airport. Construction is expected to begin in March 2009 with service planned to start in December 2012.
The past year was one of positive economic indicators and increased activity across all sectors, although continuing shortages in commercial and residential space are starting to add serious constraints to the economy and increasing inflationary pressures. (OBG11.01)
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11.10 SAUDI ARABIA: 2007 Year in Review
The Oxford Business Group reported that 2007 was a bumper year for Saudi Arabia. Bourgeoning petrodollar prosperity and continued growth in the non-oil private sector have meant that the kingdom's economic fundamentals have rarely looked as good as they did at the close of 2007.
The government, actively led by King Abdullah bin Abdulaziz Al Saud, Custodian of the Two Holy Mosques, continued to adhere to its policy of creating a favorable business environment. In its fifth annual Doing Business report, the World Bank said Saudi Arabia had improved its ranking for ease of doing business from 33rd place in 2006 to 23rd. The kingdom topped the poll as the best place to do business in the Arab Middle East, ahead of Kuwait (40th) and the United Arab Emirates (68th). The report also ranked Saudi Arabia ahead of advanced economies such as France (31st) and Austria (25th).
Other accolades from international institutions followed later in the year, with the kingdom being ranked number one in the Arab world in terms of foreign direct investment (FDI) received in 2006, according to a report by the United Nations Conference on Trade and Development (UNCTAD). The UN report noted that the kingdom attracted $18bn, an increase of 51%, in FDI in 2006 alone. Saudi Arabia dwarfed other Gulf countries, with the United Arab Emirates, which came second, managing $8bn, while Jordan attracted $3.1bn, followed by Bahrain with $2.9bn.
Meanwhile, as money has continued to pour in, the kingdom has been able to spend on infrastructural development, a key strategy for government policy. As a result, actual spending in 2007 increased by 12.7%, however this represented a slight slowdown from 17.3% in 2006. Some analysts viewed this decrease as an attempt by the government to quell inflationary pressures. According to John Sfakianakis, chief economist at SABB, per capita GDP rose to $15,352; the highest figure since 1981, when the country's population was 9.8m, compared to today's nearly 25m.
Spending and high liquidity levels have inevitably led to the Saudi Arabian Monetary Agency, the kingdom's central bank, watching closely from the sidelines as the public continued to voice concerns over rising consumer price inflation. It reached 3.1%, up from 2.2% in 2006, representing a worrying 12-year high. "Supply bottlenecks, wage inflation, as well as simple speculative hikes by retailers are pushing prices up," said Sfakianakis. However, he said, when "compared to other gulf countries, such as the UAE or Qatar, inflation is very low".
Spending reached $118.1bn over revenues of $165.7bn, with a particular emphasis on improving living standards, creating job opportunities and the education sector. Some $26bn was allocated for education and manpower development, including building 2,000 new schools, in addition to universities for Tabuk, Najran and Al Baha, as well as one in Riyadh dedicated to women's higher education.
Health was another key area in 2007. Investment was made in some 400 primary health care centers and 13 new hospitals. These developments are expected to add 10,000 new beds to the kingdom's health services. The kingdom has 60 other hospitals in various stages of development.
Although the kingdom's fiscal affairs looked positive in 2007, there were some concerns, mainly in the area of employment. According to the central department of statistics and information, the latest official data placed the number of unemployed Saudis in 2006 at 469,018, registering an unemployment rate of 12.02% of the total Saudi labor force.
In an effort to tackle this problem, there was a major drive by the government to get its ambitious new economic cities underway in 2007, creating more jobs in a number of sectors. According to the government, the new cities, located in Rabigh, Hail, Medina, Jizan and Tabuk, are expected to contribute $150bn (42.9%) to the current GDP of $349bn and will combine industrial spaces with modern living environments. Including housing and entertainment for 4.5m people, officials hope the cities will help increase per capita GDP from $15,352 to $33,500 by the end of 2020.
Like many countries in the region, the percentage of non-nationals living in Saudi Arabia is high, at 27.1% of the population. The government's solution is 'Saudiization', a system designed to encourage the hiring of Saudi nationals above expatriates and move businesses away from reliance on foreign workers. Saudi law requires that for any enterprise, domestic or foreign-owned, Saudi workers should account for no less than 75% of the workforce and should receive 50% of the total payroll.
Notwithstanding the kingdom's heightened international profile, underscored by King Abdullah's European tour in the autumn, the main focus for 2008 will be on the economy and job creation. Consumer spending is picking up as optimism rises and oil production is expected to increase, which should lead, according to Sfakianakis, to real GDP growth in excess of the forecasted 3.5%. (OBG09.01)
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11.11 SAUDI ARABIA: Economy in a Free For All?
The Economist Intelligence Unit reported that with almost $6bn in initial share offerings currently in the works, the Saudi stock market presents an enticing investment prospect in a world of shrinking financial opportunities. The snag is that the market is largely off-limits to foreign investors. Speculation that this barrier is about to be removed has been firmly denied by Saudi officials, but a gradual liberalization involving more mutual funds, allowing indirect foreign investment, is on the cards.
As more international banks set up brokerage, advisory and asset management operations in Saudi Arabia, they are calling ever more insistently on the Capital Market Authority (CMA) to open up the Saudi stock market to direct foreign investment. The market has been very volatile in recent years, but high oil prices and Saudi Arabia's massive program of infrastructure investment mean there is considerable international investor appetite for the stock market of the region's largest economy. If they can get in.
Flutter
This explains the excitement over a report in December that Dr Abdulrahman Al-Tuwaijri, head of the Saudi Capital Markets Authority (CMA), had said the market would open to foreign investors "soon". In fact it was later clarified that Mr Tuwaijri had been misunderstood, as his remarks specifically referred to foreign investment in "domestic funds" that invest in the stock market - something that is already permitted.
Foreign investors are already allowed to invest in Saudi stocks through mutual funds that are based in the kingdom, while foreign residents of Saudi Arabia have been allowed to invest more generally since 2006. Moreover, the last remaining obstacles to Gulf Co-operation Council (GCC) investment in the Saudi stock market - though not in Initial Public Offerings (IPOs) - were removed at the end of 2007 in preparation for the planned GCC common market.
A gradual liberalization is therefore already happening. But it is likely to remain slow, reflecting the kingdom's typical caution in policymaking. Speaking in London on January 9th, Mr Tuwaijri noted that some foreign investment is already present and that "we will continue to see more involvement of this through time, but we are very careful," and that the process would need to be "very gradual and organized".
Mutual benefit
The most likely scenario is that the number of these mutual funds will be increased, allowing more foreign capital in but also keeping it at arm's length, before direct foreign investment will be countenanced. HSBC, whose joint venture HSBC Saudi Arabia was the first foreign investment bank to be licensed under the 2003 Capital Markets law, launched two Saudi index-tracker funds in December that are marketed as "one practical way for offshore investors to gain exposure to the Saudi equity market". One of these tracks an index of 37 stocks across a range of sectors while the second focuses solely on petrochemicals. Both are operated locally by HSBC Saudi Arabia.
HSBC's chairman of debt finance, Robert Gray, said that 80% of the money invested in the funds so far has come from outside the Gulf. It may be that non-Gulf investors are more ready to go for Saudi-based mutual funds operated by a familiar international brand than by local financial institutions that they don't know. Other international banks that are now setting up Saudi joint ventures are likely to follow suit, as long as they can obtain CMA approval.
Stock scarcity?
Both the HSBC funds are targeted at institutional investors. Mr Tuwaijri emphasized that the CMA does want more institutional investment in the stock market, for the sake of stability. By some estimates only 10% of GCC stocks are owned by institutional investors. The severe downturn in the Saudi market in 2006 was exacerbated by panic by a large number of first-time retail investors. The increasing number of financial institutions based in the kingdom will help diversify the investor base, but, with some reason, foreign banks argue that opening up is the quickest way to bring in more institutional investment.
However, the CMA will want the market to widen and deepen first, as the number of stocks traded is still small, and while the market may need more experienced investors and analysts, it does not exactly need more cash. Domestic liquidity is already growing very strongly and the stock market is still more attractive to many consumers than saving, leading to concerns about possible overvaluation. Also, many Saudi firms do not yet meet international standards on disclosure and corporate governance.
Hands off the IPOs
IPOs appear less likely to be opened up to foreign investors, given that even GCC nationals cannot access them. This is partly because the Saudi government is using IPOs as vehicles for privatization largely in order to distribute wealth more widely amongst the Saudi population, for political and social reasons. Investing in these flotations has been made very simple; it can be done from an ATM. Indeed, Mr Gray said that 30% of investors in one recent Saudi IPO subscribed via ATM.
There were 26 IPOs in Saudi Arabia last year and more major flotations are planned in 2008, including the $2.8bn IPO of Inmaa bank, the largest yet, which is scheduled for April. Currently an offering worth $1.2bn is in the market for 25% of PetroRabigh, a refinery/petrochemical project. This will be followed in February by a $1.9bn offering of shares in the kingdom's third mobile-phone company. It remains to be seen whether the GCC common market will require IPOs to be made available to GCC nationals, but progress is unlikely to be speedy. (EIU11.01)
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11.12 EGYPT: 2007 Year in Review
In 2007, Egypt continued its reformist course, winning the plaudit of "world's top reformer" and praise from the International Monetary Fund (IMF). It was also a year of growth; Egypt's Gross Domestic Product (GDP) increased 7.1% in 2007, up from 6.8% in the previous year, and unemployment continued to fall. The government won two votes; a referendum and the upper-house elections, but has yet to come to an agreement with opposition groups.
A November 2007 IMF report praised Egypt's "sustained and bold reforms [and] prudent macroeconomic management", which has delivered high growth and helped bring Egypt's unemployment rate to 9% from 10.5% at the end of 2004. According to the Fund, tight monetary policy, an improvement in the fiscal situation, and structural reforms promoting the private sector have all helped strengthen and broaden the Egyptian economy. While there were warnings that government debt remains painfully high and that a slow "trickle down" of wealth derived from increased growth might imperil public support for reform, the overall message can be seen as an encouraging "keep up the good work" to Egypt's government.
The IMF's praise and support for the reform process came months after Egypt was named the "world's top reformer" in Doing Business 2008, a report published in September by the World Bank and the International Finance Corporation (IFC). After a disappointing performance in 2004-2005, last year, the government "pulled out all the stops [and] its efforts cut deep", the report stated. Egypt won the accolade by enacting more reforms over the past two years than any other country in the world. Egypt made notable progress in five areas: improving the process of starting a business, licensing, property registration, getting credit, trading across borders and business closure.
Cuts in the minimum capital required to start a business, reduction of red tape in acquiring building licenses, the establishment of one-stop-shops for exporters and importers and moves to establish a private credit bureau were all cited as examples of pro-business reforms that have moved Egypt forward.
August saw another important move to liberalize the economy and improve the budgetary situation, with the announcement that subsidies currently granted to energy intensive industries would be phased out over three years, and to less power-hungry sectors over six years. This is intended to cut inefficiencies in the market and help reduce the budget deficit. The government hopes to save $2.64bn over the next three years as a result, and allow the market to determine prices. However, a ceiling of 15% price increase per annum will give investors predictability. While there were fears that this move would stoke inflationary pressure, the gradual nature of the subsidy cuts should lessen this effect. Most businesspeople and economists welcomed the decision.
Despite the successes, Egypt has reformed from a relatively low base - i.e. a highly over-regulated economy - and still ranks behind most countries in the region on measures such as ease of hiring and firing workers, and business start-up and closure. The government will need to sustain the reform momentum in 2008 if Egypt is to fulfill its huge potential.
Equally, as the IMF pointed out, public support for the government's reform program may waver if it is not seen as delivering better living standards to ordinary people. The opposition is becoming more vocal, though the ruling National Democratic Party (NDP) retains a tight grip on power.
Elections on June 11 to the Shura Council, Egypt's upper house of parliament, saw the NDP take 69 of the 71 seats. The Muslim Brotherhood, the main opposition movement, is banned but supports independent candidates, but none of its favored 19 "independents" managed to win a seat. The poll was criticized by some international organizations amid accusations of poll-rigging, but the NDP's landslide victory was due in no small part to the boycott by the secular opposition.
Similar problems dogged the March 26 referendum on changes to the constitution. The government announced that 75.9% of the votes had been cast in favor of the amendments and that 7m Egyptians had participated in the vote, representing 27.1% of the country's 35m registered voters. Many NGOs claimed that the turnout figures were inflated, with some estimates putting it as low as 5.
The constitutional changes removed references to socialism from the text, and embedded the concept of democracy, changes that supporters say will be more than merely symbolic. It also included the requirement that the government balance its budget, a vital element to combat Egypt's high levels of public debt. However, the institution of controversial clauses outlawing parties with a religious basis (i.e. the already-banned Islamic Brotherhood) and allowing Egyptians to be tried in military courts, caused ructions.
As Abdel Monem Said Aly, director of the Al-Ahram Centre for Political and Strategic Studies, told OBG, change will have to come from all sides: the NDP could broaden its support base, the Islamic Brotherhood drop religion from it politics, and the small, elite liberal opposition communicate better with the street. The success of continued reforms in 2008 may determine whether 2007 is remembered largely for economic success or political awkwardness. (OBG10.01)
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11.13 TURKEY: 2007 Year in Review
The Oxford Business Group observed that despite a nerve-wrangling year, Turkey emerged from 2007 in good form. The ruling Justice and Development Party (AKP) can look back with a strong sense of achievement, having successfully renewed its term with a landslide victory in July, and deflected resistance from members of the secularist establishment to its re-nomination of Abdullah Gul, the former foreign minister, as a candidate in the August presidential elections.
The AKP secured its second term in office by notching a 12% increase in votes over its November 2002 election victory. As a result, Turkey's pro-reformist conservative party was handed another five years in office with a majority in parliament. The foreign and local business community was relieved to see that a coalition government was not to be.
The snap general elections took place following inconclusive presidential elections in April-May, when Turkey's constitutional court ruled the vote - for which Abdullah Gul was put forward - as null and void due to an insufficient number of deputies present for the vote in the Grand National Assembly. Pressure from the secularist establishment, underlined by a veiled warning about creeping Islam from Turkey's top military brass, hastened the ruling. But Abdullah Gul's presidential ambitions would not be dashed, with the AKP securing enough votes and a sufficiently large quorum in the newly elected parliament in August for Gul to finally assume the top seat.
Local attention quickly reverted to the undeterred presence of the Kurdistan Workers' Party (PKK) in northern Iraq following the elections, with Turkish patience wearing thin over the lack of action from Washington, the Iraqi government and Kurdish Administration, in dealing with the PKK. Facing the threat of a large-scale Turkish incursion into Northern Iraq, Washington stepped up cooperation in late October and provided the Turkish military with 'actionable intelligence' against the PKK, upon which Turkey's air force acted. As in domestic politics, the combined application of patience and pressure appeared to be paying off for the AKP in security matters.
While the presence of the PKK in northern Iraq is certainly a sensitive issue for Turkey, the threat of conflict had very little impact on investor appetite. However, many local businesses put their investment plans on hold in 2007 due to the elections, with the Istanbul Stock Exchange remaining largely resilient in face of electoral uncertainties.
In the meantime, the government followed a cautious approach to privatization in 2007. The much-anticipated block-sale of Halkbank - one of the big three remaining public banks - was delayed and replaced by a 25% IPO in April. Like Halkbank, the sale of Turkey's electricity distribution network was put on ice and is expected to take place in 2008. This accompanies a much longer string of entities, including the national lottery, bridges, highways, sugar factories, TEKEL's tobacco division and the sale of a government share of Turk telecom.
While the privatization drive was delayed due to the elections, foreign direct investment (FDI) inflows remained fairly robust. After registering $20.2bn worth of FDI flows in 2006, analysts expect year-end FDI inflows to register between $16-17bn (net) in 2007. The largest M&A transaction in 2007 was Dutch ING Group's acquisition of Oyakbank for $2.7bn. Istanbul Analytics, the information platform on the Turkish economy and politics, believes that FDI levels could reach the $20bn mark in 2008.
The year was also characterized by fresh scrutiny of Turkey's ever-expanding current account (CA) deficit, registered at $32.8bn over the January-November period according to brokerage house and investment firm AK Securities. That Turkey must import 97% of its gas and 90% of its oil has had much to account for, with global oil prices briefly breaching the $100 barrel threshold to welcome in the New Year - placing an even greater burden on consumers and the government. Like today, Turkey's exporters were also up in arms over the strength of the Turkish lira.
Inflation sneaked up at the end of 2007, though the central bank maintained that Turkey was experiencing a deflationary process that would eventually become visible once inflationary pressures in the economy are neutralized. Turkey's summer drought pushed up agricultural commodity and processed food prices. The inflationary trend was also accounted for by record oil prices, higher taxes on gasoline and tobacco and higher water tariffs for Istanbul's 15m inhabitants. The central bank's monetary policy committee press release in November revealed that consumer prices increased by 1.8% from September to October, pushing annual inflation up to 7.7% in the latter month. A further 0.7% increase was added in November.
Meanwhile, expectations that social security reform would be passed through parliament before the end of 2007 were short-lived, with the government delaying the move until 2008. Reforming Turkey's cumbersome social security system comes as part of an effort to reduce the size of the unregistered economy.
The primary concern now is how much of an impact the global credit crunch will have on the Turkish economy and pace of reform. Despite the strengthening of the economy and positive transformation of the banking system over the last five years, structural fragilities, such as the size of the current account deficit, remain. The AKP may have its credibility tested as it embarks upon the difficult task of micro-economic reform. (OBG11.01)
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11.14 TURKEY: World's 74th Freest Economy
According to the "Index of Economic Freedom 2008," a product of the Heritage Foundation and The Wall Street Journal released on 17 January, Turkey's overall score rose by 2.5% over last year, reflecting improved scores in more than half of the 10 measurements of economic freedom. Turkey is ranked 32nd out of 41 countries in the European region and its overall score is lower than the regional average.
Turkey is near the world average in most areas but has very strong trade freedom, with a low average tariff rate and some non-tariff barriers, the study noted. The other merit about the Turkish economy was stipulated as a business-friendly environment for young companies. However, the study suggested that licensing and bankruptcy procedures are difficult. High income and corporate tax rates were listed as other cons of the business environment in Turkey. It also underlined that overall tax revenue is relatively moderate as a percentage of gross domestic product (GDP). On the other hand, property rights are well protected, it said.
In terms of labor freedom, however, Turkey displays a weak performance, the report claimed. It said that laying off workers is difficult and work regulations are highly inefficient. Turkey's scores in freedom from corruption, financial freedom and monetary freedom are slightly below the world average, according to the report.
The Heritage Foundation's report also pointed to high inflation rates and the government's direct subsidies policy, which it said distorted the prices of a variety of agricultural goods. Total government expenditures equal more than a third of GDP, the study noted, adding that the level of corruption is still not as serious as it is in some Middle Eastern countries.
According to the study, business freedom in Turkey is rated at 67.9%. Starting a business takes approximately six days, which is quite good compared to the world average of 43 days. "Obtaining a business license requires more than the global average of 19 procedures but less than the world average of 234 days, with costs being relatively low," the study highlighted. Bankruptcy proceedings can be burdensome and lengthy, it stated.
Turkey's score for trade freedom was 86.8%. As costs of trade, the study showed the service market access barriers, prohibitive tariffs for agriculture and food products, import taxes, restrictive import licensing requirements for food and agriculture products, non-transparent and arbitrary standards and regulations, export promotion programs, weak enforcement of intellectual property rights and corruption. Turkey's trade freedom score saw a 10%age point deduction only from non-tariff barriers. The other scores were as follow: fiscal freedom 77.7%, freedom from government 68.3%, monetary freedom 70.8%, investment freedom 50%, financial freedom 50%, property rights 50%, freedom from corruption 38% and labor freedom 48%.
The study indexed 157 countries in total. Greece was behind Turkey in 80th place. The first five freest economies were Hong Kong, Singapore, Ireland, Australia and the US. Macedonia (71), Namibia (72) and Lebanon (73) were just ahead of Turkey. (Zaman 18.01)
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