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TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Knesset Approves Budget Bill
1.2 Israel & China to Collaborate on R&D
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 IMD Survey Finds Israel Dealt Best With Global Crisis
2.2 Novalar Reaches Agreement With H.A. Systems to Distribute OraVerse in Israel
2.3 Veraz Networks & Dialogic Announce Definitive Agreement to Merge
2.4 Agilent Technologies and Tabor Electronics Announce OEM Agreement
2.5 NICE Acquires Lamda Communication Networks
2.6 Bitstream To Acquire Assets of Press-sense
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Jordan Key Market for U.S. Hardwood
3.2 Hilton Signs First Jordan Dead Sea Resort Deal
3.3 Kuwait Ministry of Electricity & Water Migrates to Red Hat Enterprise Linux
3.4 Intercoil Appointed Exclusive Licensee for Simmons in the Middle East
3.5 NexCen Brands Announces Great American Cookies® Expansion in the Middle East
3.6 VAI Helps Large Saudi Arabian-Based Distributor Streamline & Integrate Warehouse Operations
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Tel Aviv To Switch To Electric Transport
4.2 French Residential Installations of Over 3,000 SolarEdge Solar Power Systems Planned
4.3 Israel's New Desalination Plants Water the Desert
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Lebanon Expected To See Growth Up To 8%
5.2 Jordan's Consumer Price Index Rises By 4.9% At The End Of April
5.3 GCC Economies To Grow 4.4% This Year
5.4 Bahrain Inflation Rises in April to 2.7%
5.5 Qatar's Annual Inflation Declines To -3% In April 2010
5.6 Oman Sees $1.09 Billion Budget Surplus In First Quarter
5.7 Saudi Inflation Hits 10 Month High In April
5.8 Egypt Jumps 11 Places In Competitiveness Index
5.9 Morocco's Mining Sector to Average Annual of 4.13% To 2014
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Recession in Cyprus
6.2 Cyprus' Trade Deficit Expands In January - February
6.3 Greece's GDP Drop Not So Bad, But Worse is Ahead
6.4 Greek 2010 Tourism Revenues Seen Down 7 – 9%
6.5 Bulgarian Decline in First Quarter
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7: GENERAL NEWS AND INTEREST
7.1 Egypt Extends Emergency Law Despite Protests
7.2 Most Egyptian Women are Overweight
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Protalix BioTherapeutics Receives $4 Million Research Grant From the Israeli Government
8.2 Teva Announces Launch and Shipment of Generic Lipitor Tablets in Canada
8.3 Rosetta Genomics Identifies 49 Novel microRNAs
8.4 Can-Fite BioPharma Approved for Phase II Clinical Trial of CF101 in Patients with Glaucoma
8.5 Teva Announces Launch of Generic Valtrex
8.6 Yissum Introduces a Breakthrough Computational Method for Superfast Drug Discovery
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 India to Implement NICE's Comprehensive Integrated Security Solutions for its Parliament
9.2 Wavion Expands its Presence in Russia – Partners with Dateline on New Wi-Fi Projects
9.3 MobileMax Helps Power Verizon's Global FMC Offering
9.4 RiT Technologies To Launch New Product Lines Based on Optical Laser Technologies
9.5 BroadLight Announces the Industry's Smallest and Lowest Power GPON Processor
9.6 Siverge Networks' Griffin Delivers High-Performance & Top Functionality for Raisecom Products
9.7 Silicom Server Adapter Achieves VMware-Ready Status
9.8 Mellanox InfiniBand Solutions and Ethernet Adapters Selected by IBM
9.9 OptimalTest Provides STMicroelectronics with Advanced Adaptive Test Solutions
9.10 Tvinci Launches First Complete Pay-OTT Video Platform and Powers Projector.tv
9.11 N-trig Introduces N-act Hands-on Gesture Vocabulary for True Multi-Touch User Experience
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's April CPI Increases by 0.9%
10.2 State of The Economy Index Shows Slower Expansion
10.3 Israel's Economic Growth Slows to 3.3% in First Quarter
10.4 Dual-Earners Make Up 61% of Israeli Jewish Couples
10.5 How Much Do Israelis Spend On Milk?
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11: In Depth
11.1 MIDDLE EAST ECONOMY: Oil Price Creeps Upwards
11.2 ISRAEL: Euro Crisis & Ramifications for Israel
11.3 ISRAEL: Israel economy - Greek waves
11.4 ISRAEL: the Israeli IT Market Will Be Worth $4.9 Billion in 2010
11.5 KUWAIT: Pharmaceuticals & Healthcare Report - Q2 2010 Analysis
11.6 OMAN: Pharmaceuticals and Healthcare Report - Q2 2010 Insights
11.7 EGYPT: Political Catch-all
11.8 EGYPT: Egypt Pharmaceuticals and Healthcare Report Q3 2010
11.9 EGYPT: Internet Investment
11.10 TUNISIA: A Place in the Sun
11.11 ALGERIA: Algeria Petrochemicals Report Q3 2010
11.12 TURKEY: Economy Shakes Off Shackles Of Crisis, But Still Hindered By Europe's Troubles
11.13 TURKEY: Azerbaijan politics - Breaking with America?
11.14 GREECE: Greece Economy Kicking The Can A Little Bit Further
11.15 GREECE: Fitch Comments on Greek Public Finance Outlook
11.16 GREECE: Pharmaceuticals and Healthcare Report for Q2 2010
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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Knesset Approves Budget Bill
On 25 May, the Knesset ended a long night of speeches culminating in the approval of the budget bill. The bill passed its third reading with a majority of 51 in favor and 31 abstaining. It will be imposed on next year's budget.
Finance Minister Steinitz said the bill was meant to expand public services, and that it was based on growth results dating back a decade as well as the effects of deficits in the future. He added that the bill had won the support of the governor of the Bank of Israel and the IMF, which is considering recommending it to other states. The opposition Kadima party had planned a 45 hour filibuster, but stopped after just 12 hours, protesting the increase in the budget.
Included in the bill by Minister of Finance Steinitz was the application of a new fiscal rule for setting the increase in government spending. The Ministry of Finance says that the guidelines for the rule used actual economic developments, rather than projections, simplicity and transparency of the proposed rule, and preserving fiscal credibility while meeting budget needs. The policy rule states that the government will continue to maintain fixed fiscal rules. The increase in spending will be on the basis of a formula: the difference between the 60% debt-to-GDP target ratio and the actual ratio multiplied by the average GDP growth rate over the preceding ten years, based on Central Bureau of Statistics figures. This formula results in permissible growth in government spending of 2.6% in 2011.
On the basis of the cabinet decision of May 2009, the government will continue to reduce the deficit so that beginning in 2014 the budget deficit will be less than 1% of GDP. The deficit ceiling will be 3% in 2001, 2% in 2012, 1.5% in 2013 and 1% in 2014. (Various 25.05)
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1.2 Israel & China to Collaborate on R&D
On 20 May, Globes reported that Minister of Industry, Trade & Labor Ben-Eliezer and China's Minister of Science & Technology Wan signed an R&D cooperation agreement in Jerusalem. The agreement is important for Israeli entrepreneurs who want to do business in China, which is an increasingly important market for foreign companies, including from Israel. China's rapid urbanization, its huge need to build infrastructures of every kind, and the big money that this rapidly growing economy has at its disposal creates a magnet for entrepreneurs. At the same time, the euro crisis is dragging down the world's stock markets, further strengthening China's attractiveness. The agreement came after two years of negotiations between the Ministry of Industry, Trade & Labor and China's Ministry of Science & Technology, which oversees industrial R&D in the country. The R&D cooperation agreement sets out collaboration between Israeli and Chinese manufacturers. Israeli companies will be eligible to receive up to 50% of R&D costs through the Office of the Chief Scientist. Chinese companies will receive support from the Ministry of Science and Technology. In this way, companies from both sides will be exposed to different market demands, and the governments will share in the risk through financial support. (Globes 20.05)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 IMD Survey Finds Israel Dealt Best with Global Crisis
Israel is ranked 17th in the IMD World Competitiveness Yearbook 2010 rankings of 58 countries, up from 24th place in 2009. Israel is ahead of China, Finland and New Zealand. Singapore topped the rankings, followed by Hong Kong, and the US. The International Institute Management Development (IMD) at Lausanne, Switzerland, ranked Israel in first place in several categories, including its economy's soundness in the face of economic crises and in the functioning of its central bank. The World Competitiveness Report is further testimony of the functioning of the Bank of Israel in recent years, during the great economic crisis for which the bank and Governor of the Bank of Israel Prof. Fischer have already been praised. The World Competitiveness Report also ranks Israel in first place in R&D spending as a percentage of GDP. However, Israel still lags in variables such as participation in the labor force, reducing bureaucracy, and it is ranked last in the proportion of dependant population to the supporting population. The World Competitiveness Report ranks the 58 countries on 327 variables grouped into four competitiveness factors: economic performance, government efficiency, business efficiency and infrastructure. (Globes 20.05)
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2.2 Novalar Reaches Agreement With H.A. Systems to Distribute OraVerse in Israel
San Diego's Novalar Pharmaceuticals has entered into an agreement with H.A. Systems Dental Imports, based in Ramat Gan, Israel, to distribute OraVerse in Israel and the Palestinian controlled territories. Under the terms of the agreement, H.A. Systems will file the necessary documentation for regulatory approval of OraVerse with the Israel Ministry of Health. Upon approval, H.A. Systems will have exclusive rights to promote and distribute OraVerse to dentists in the territory through the company's established dental franchise and sales force. OraVerse is the first and only local anesthesia reversal agent that accelerates the return of normal sensation and function following routine dental procedures. OraVerse is approved for use in the U.S. by the FDA and sold by Novalar direct to dentists in the U.S. (Novalar 17.05)
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2.3 Veraz Networks & Dialogic Announce Definitive Agreement to Merge
Veraz Networks and Montreal's Dialogic Corporation, a pioneer in enabling interactive mobile video services and applications, announced that they have entered into a definitive agreement to merge. After closing, the name of the merged company will be Dialogic, and it will be a global leader in communications products and services to the telecommunications service provider and enterprise markets. Over 80% of the Fortune 2000 companies and service providers worldwide rely on Dialogic's application-enabling technologies, putting Dialogic at the forefront of enabling high quality video on wireless and wireline networks. Today, over 130 service providers in over 80 countries rely on Veraz's next generation switching and bandwidth optimization products and services to leverage the power of IP to deliver high quality voice and data services while lowering their operational and capital costs. Veraz is currently traded on NASDAQ and it is expected that the merged company will continue to be traded on NASDAQ. The merged company is expected to benefit from operational cost synergies and is expected to realize revenue synergies by combining complementary product portfolios, as well as by optimizing the established global sales and distribution channels.
Petah Tikva's Veraz Networks (http://www.veraznetworks.com) is the leading provider of application, control and bandwidth optimization products that enable the evolution to the Multimedia Generation Network (MGN). Service providers worldwide use the Veraz MGN portfolio to extend their current application suite and rapidly add customized multimedia services that drive revenue and ensure customer retention. The Veraz MGN separates the control, media and application layers while unifying management of the network, thereby increasing service provider operating efficiency. (Veraz12.05)
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2.4 Agilent Technologies and Tabor Electronics Announce OEM Agreement
Agilent Technologies and Tabor Electronics announced an OEM agreement establishing Tabor as a provider of Agilent test solutions for the high-speed arbitrary waveform generator (AWG) market. An integral aspect of this OEM agreement is the all-new Agilent 81180A, a 4.2GSa/s Arbitrary Waveform Generator that delivers exceptionally high dynamic range.
Established in 1971, Tel Hanan's Tabor Electronics (http://www.taborelec.com) has become a world-leading source of high-end test and measurement equipment. Tabor has earned global recognition for its highly skilled workforce and innovative engineering capabilities. In addition to offering a full range of self-branded instruments, Tabor is also a world-class OEM that private-labels a variety of products for industry leaders. The Company's extensive product portfolio includes pulse, function and arbitrary waveform generators, high-voltage amplifiers, waveform and modulation creation software and more in various platforms, interfaces and frequency ranges. Technologically advanced, featuring the highest levels of performance, reliability, and most importantly, price-competitive, Tabor's products are sought-after in a diverse array of applications. Agilent Technologies (NYSE:A) is the world's premier measurement company and a technology leader in communications, electronics, life sciences and chemical analysis. The company's 16,000 employees serve customers in more than 110 countries. Agilent had net revenues of $4.5 billion in fiscal 2009. (Agilent 24.05)
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2.5 NICE Acquires Lamda Communication Networks
NICE Systems announced that it has acquired Lamda Communication Networks, a provider of satellite communications interception technology based in Israel. Lamda's unique technology addresses the growing demand for satellite communication interception capabilities and enables law enforcement, internal security and intelligence agencies to fight crime and terror more effectively. The company does not anticipate material impact on its financial results, as a result of the acquisition, in 2010. The addition of Lamda's satellite communication interception technology will enhance NICE's existing capabilities and complement the current offering of advanced applications such as monitoring, traffic analysis and voice analytics. It constitutes a flexible, software-based platform for satellite communications interception, with automatic analysis capabilities and advanced system management at a relatively cost-efficient infrastructure deployment. The technology is the culmination of twenty years of domain expertise and the team's experience in building satellite systems for customers worldwide. This transaction will further enhance the comprehensive NiceTrack solutions portfolio.
Ra'anana's NICE Systems (http://www.nice.com) is the leading provider of Insight from Interactions solutions and value-added services, powered by advanced analytics of unstructured multimedia content - from telephony, web, radio and video communications. NICE's solutions address the needs of the enterprise and security markets, enabling organizations to operate in an insightful and proactive manner, and take immediate action to improve business and operational performance and ensure safety and security. (NICE 25.05)
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2.6 Bitstream To Acquire Assets of Press-sense
Responding to customer desires for more automated business processes, Marlborough, Massachusetts' Bitstream, a leading software development company, announced that it has agreed to acquire substantially all of the assets of Israel's Press-sense for $6.5m in cash and the assumption of liabilities related to deferred revenue. Press-sense is a leading developer of business flow automation systems. The Press-sense business will complement and expand Bitstream's Pageflex product line of enterprise brand management and web-to-print solutions to create one of the most robust end-to-end offerings of business management tools available in the marketing and print industries. By fully automating the creation, production and back-office processes for document orders, Bitstream will provide the tools to enable its customers to maximize production efficiency, monitor and reduce costs, and increase profits. By establishing an office in Israel, Bitstream not only will be able to support Press-sense and Pageflex customers, but also will have an EMEA base from which to staff and support their other business lines, including the Bolt browser. A privately-held company founded in 2001 and funded over the years by several venture capital firms, Press-sense (http://www.press-sense.com) has become a dominant solution provider at the intersection of Web-to-print and MIS. The company's flagship Press-sense iWay print-on-demand workflow and management solution has been adopted as the sole OEM web-to-print solution by major digital print manufacturers, including Xerox Corporation and Hewlett-Packard, resulting in an installed base of more than 1,500 customers in North America, Europe and Asia Pacific. There is very little overlap between the customer base of Bitstream and Press-sense, so there is great opportunity for up-selling and cross-selling products throughout the combined customer bases. Press-sense is based in a high-tech development center in Or Akiva, Israel. Bitstream will maintain an office in Israel, which will include product development, sales and customer support capabilities. (Bitstream 17.05)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Jordan Key Market for U.S. Hardwood
The American Hardwood Export Council (AHEC) has selected Jordan as one of the important and growing markets for its products in the Middle East. AHEC pointed that Jordan contributed with a value of $69.3m of the U.S. hardwood exports to the Middle East and North Africa during 2009. The council pointed that the construction sector in Jordan is rapidly developing because of the growing economic stability, adding that a workshop on wood classification will be organized by the council in cooperation with the local agent. AHEC said the council is seriously taking important steps to boost the level of awareness of the new American hardwood markets, pointing that many kinds of American hardwood have been used in recent projects in Jordan. (Petra17.05)
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3.2 Hilton Signs First Jordan Dead Sea Resort Deal
Hilton Worldwide has signed an agreement with Dead Sea Resorts Company (DSR) to manage Hilton Dead Sea Resort & Spa, its first property on the Dead Sea in Jordan, as well as the existing King Hussein Bin Talal Convention Centre. The 285 room new-build waterfront resort located on the east coast of Jordan overlooking the Dead Sea (the lowest point on Earth), is scheduled to open in the fourth quarter of 2013, said a statement from Hilton. The resort is adjacent and linked to the King Hussein Bin Talal Convention Centre, a state-of-the-art meetings facility famed for hosting the 2009 World Economic Forum on the Middle East. Hilton will start operating the convention centre soon. The spa is part of Emaar International Jordan's Samarah Dead Sea Resort, an integrated community which, besides the hotel, will house 1,000 residences, retail and leisure facilities. The hotel's location within this development is the North Rift, adjacent to a Wadi (a valley) on the Dead Sea waterfront. The company has two properties in Jordan under development – the 531-room Hilton Amman Jordan Gate which opens this year and the 346-room Hilton Tala Bay Aqaba set to open in Q4/11. (TradeArabia 25.05)
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3.3 Kuwait Ministry of Electricity & Water Migrates to Red Hat Enterprise Linux
Raleigh, NC's Red Hat, a leading provider of open source solutions, announced that the Ministry of Electricity & Water (MEW) in Kuwait plans to migrate its datacenter infrastructure from Novell SUSE Linux Enterprise Server 10 to Red Hat Enterprise Linux. MEW has selected Red Hat Enterprise Linux as the basis for its long-term IT strategy based on the platform's ease of use, performance, scalability and security, and plans to run its mission-critical systems on the platform. MEW serves more than 800,000 consumers with a 12 gigawatt power generation grid. Its decision to migrate to Red Hat Enterprise Linux comes as MEW aligns its strategic IT infrastructure to meet Kuwait's need for increased power capacity. Red Hat provides high-quality, affordable technology with its operating system platform, Red Hat Enterprise Linux, together with virtualization, applications, management and Services Oriented Architecture (SOA) solutions, including Red Hat Enterprise Virtualization and JBoss Enterprise Middleware. (Red Hat 12.05)
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3.4 Intercoil Appointed Exclusive Licensee for Simmons in the Middle East
Intercoil International announced a licensing and distribution agreement with Simmons - a global bedding company based in Atlanta, Georgia. As part of the agreement, Intercoil will be the exclusive licensee of Simmons products across the Middle East. Intercoil plans to open eight dedicated Simmons retail locations by the end of 2011, with four planned in Dubai and others across the region. The first Simmons exclusive showroom in the region will commence operations soon. As part of the deal, Intercoil is importing high-end machinery & technological know-how from Simmons and will manufacture the Simmons sleep products out of Intercoil's main factory in the UAE. The manufacturing is scheduled to begin within a month's time. In addition, Intercoil will distribute Simmons products through its established retail network in the UAE, Oman, Saudi Arabia, Bahrain, Kuwait, Qatar, Iraq, Egypt, Jordan and Lebanon. (Intercoil19.05)
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3.5 NexCen Brands Announces Great American Cookies® Expansion in the Middle East
NexCen Brands announced the opening of the first Great American Cookies store in Dubai, the third of this franchise brand in the Middle East. The Great American Cookies store opened at the Dubai Mall, the largest shopping mall in the world with over 1,000 retail stores. The store opened under an existing master franchise with DRH Group, Inc. BVI, which calls for the development of 20 Great American Cookies stores in the Middle East over a 10-year term. The first co-branded Great American Cookies and Marble Slab Creamery store in the Middle East also opened recently through this master franchise agreement. The co-branded store is located at Mirdiff City Centre, a new shopping mall in Dubai with over 400 retail stores. NexCen Brands is a strategic brand management company with a focus on franchising. It owns a portfolio of franchise brands that includes two retail franchise concepts: TAF and Shoebox New York, as well as five quick service restaurant (QSR) franchise concepts: Great American Cookies, MaggieMoo's, Marble Slab Creamery, Pretzelmaker and Pretzel Time. The brands are managed by NexCen Franchise Management, Inc., a subsidiary of NexCen Brands. (NexCen 24.05)
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3.6 VAI Helps Large Saudi Arabian-Based Distributor Streamline & Integrate Warehouse Operations
Ronkonkoma, NY's VAI (Vormittag Associates, Inc.) announced that Saudi Arabian-based United Yousef Naghi Company (www.unitednaghi.com.sa/), one of the largest distributors of LG Electronics' home appliances and consumer electronics products in Saudi Arabia, has successfully upgraded to a newer version of VAI's S2K Software Suite to streamline its warehouse operations and improve logistics management capabilities. Additionally, the distributor sought to assist its sales and customer service teams with access to the most accurate and timely data possible to grow United Yousef Naghi Company's operations. VAI is a leader in enterprise resource planning (ERP) solutions for the distribution, manufacturing, retail and service industries, and an IBM Premier Business Partner. United Yousef Naghi Company is headquartered in Jeddah, Saudi Arabia and it employs more than 1,200 people through several companies. The subsidiaries include Arabian Trading Services, which sells food and consumer products; MY Naghi Motors, a large automobile distributor; Hafil, a transportation service company; and United Naghi Electronics, which sells consumer electronics. (VAI 18.05)
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Tel Aviv To Switch To Electric Transport
Public transport in Tel Aviv will gradually switch to non-polluting vehicles over the next few years. As part of measures being introduced by Minister of the Environment Erdan to reduce the use of polluting vehicles in city centers, taxis in Tel Aviv will be hybrid or electric cars. During his recent stay in China, Erdan visited BYD (Build Your Dreams), the world's second largest battery manufacturer, to examine the company's latest development in electric vehicles. The company has managed to upgrade the batteries to be used by electric vehicle venture Better Place in Israel, and has developed a vehicle whose batteries, instead of being recharged or replaced every 160 kilometers, will have a range of 330 kilometers. BYD is focusing on taxis of this type. Erdan has been in talks with Tel Aviv mayor Huldai on implementing the company's model in the city. The switch to non-polluting public transport in Tel Aviv is part of a plan that will include all the main cities, as the Ministry of the Environment gears up for expansion of its authority in the area of transport next year under the Clean Air Law. The ministry recently published a tender to find a company to advise it on implementing technology for reducing air pollution in transport. By next year, the ministry intends to impose strict standards on polluting buses and taxis. (Globes 12.05)
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4.2 French Residential Installations of Over 3,000 SolarEdge Solar Power Systems Planned
SolarEdge Technologies is expanding its activity in France with Solelux Toiture, one of the top 3 residential integrators in France. Since the beginning of the year Solelux installed hundreds of SolarEdge systems monthly, up to 3kWp each. The company expects to accelerate the rate of installations, reaching 10MWp installations by the end of 2010. The SolarEdge power harvesting solution includes PowerBoxes, which are module-integrated power optimizers, multi-string solar inverters and solar monitoring software. This unique end-to-end solution is especially beneficial for residential installations, which account for over 90% of the French PV market, as it enables faster return on investment through production of up to 25% more energy from PV installation and reduction of maintenance costs and complexities. The SolarEdge solution also provides the industry's first fully automatic solution for electrocution prevention and fire safety. This exceptional solution is built-in to the PowerBoxes and requires no added hardware, cost or manual operation. As the demand for PV installations in France increases, so is the public awareness of PV safety. With the new safety regulations enforced by the National Committee for the Safety of Electricity Users (CONSUEL), the SolarEdge solution is even more attractive to the French system owner and highly compatible with the French market.
Hod HaSharon's SolarEdge (http://www.solaredge.com) provides the world's first end-to-end Distributed Solar Power Harvesting and PV Monitoring solution, allowing maximum energy production at a lower cost. The SolarEdge PowerBoxes are DC-DC power optimizers that perform MPPT per individual panel while monitoring performance of each panel and communicating across existing power lines. Moreover, PowerBoxes always maintain a fixed DC string voltage, allowing optimal efficiency of the SolarEdge multi-string PV inverter, which is tailor made to work with power optimizers. (SolarEdge 12.05)
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4.3 Israel's New Desalination Plants Water the Desert
A huge new desalination plant just dedicated is planned to help end Israel's constant worry for enough water for farms, factories and homes, as the new plant begins to pump 10% of Israel's water needs. The facility on the Mediterranean Coast at Hadera, located between Haifa and Tel Aviv, is the largest of its kind in the world and the third largest in Israel. Two more plants are on the drawing boards, with all five of them projected to provide two-thirds of the nation's water. The desalinated water will be cheaper than the cost of pumping from the Kinneret (Sea of Galilee) to the national water carrier. President Peres was on hand and raised a cup of water to toast the new project. If all goes according to plan, the Kinneret will return to flood levels in several years after all of the desalination plants come on line. The desalinated water from the Mediterranean also will allow the dams to the Kinneret to be opened and help replenish the drying Jordan River and the rapidly depleting Dead Sea. The Hadera plant uses reverse osmosis technology, which means the sea water does not have to be heated, as is done in larger plants in the world that are less environmentally friendly. The entire process of desalinating the water takes 35 minutes from the time it enters pipelines in the sea. The mammoth plant covers more than 18 acres and actually is two facilities that can operate independently from each other. Together, they can provide 127 cubic million liters, or 33 million gallons a year. (IsraelNN18.05)
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Lebanon Expected To See Growth Up To 8%
Central Bank of Lebanon governor Riad Salameh said that Lebanon's real GDP is forecast to grow between 7% and 8% in 2010, spurred by higher capital inflows. He said liquidity witnessed by Lebanese banks has boosted confidence and had a positive impact on growth. Salameh further explained that Lebanese banks, around sixty, were able to evade the negative effect of the global financial crisis because of the conservative policy measures followed, besides the large asset base they posses altogether, equivalent to three times GDP. He said that banks' deposits which grew by 22% in 2009 are expected to rise by 10% in 2010, up from the current $105 billion. Inflation levels are expected to stabilize between 4% and 5% in 2010. (CBL 20.05)
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5.2 Jordan's Consumer Price Index Rises By 4.9% At The End Of April
According to the Department of Statistics (DoS), Jordan's consumer price index rose by 4.9% to 122.9 points at the end of April 2010 compared to 117.2 points at the end of the same month last year. The rise resulted from an increase in the prices of transport by 15.6%, meat & poultry by 8.7%, fuel & electrical items' prices by 8.9%, sugar by 20.2% and education by 6.5%. The rise was also accompanied by a decrease in the prices of fruit by 4%, dairy products by 2.1%, telecommunication services by 1.7% and oil and fat by 3.7%. (Petra 14.05)
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5.3 GCC Economies To Grow 4.4% This Year
GCC economies are now recovering and growth this year is likely to average 4.4% and then rise to 4.7% in 2011, following just 0.3% growth in 2009, the Institute of International Finance (IIF) has forecast. IIF, the leading global association of financial institutions, noted that prospects vary considerably across the region, in its semi-annual GCC Regional Economic Overview. On oil, IIF forecast a rebound in production of around 3% in Kuwait, Saudi Arabia and the UAE. They expect the GCC's revenue from oil and gas to rise from $323b in 2009 to $419b in 2010 and to $457b in 2011. Accordingly, the IIF anticipates that the net foreign assets of GCC countries will rise from $1,049b at the end-2009 to $1,340b by end-2011, equivalent to 125% of the regional GDP.” The IIF report noted that the GCC region was not spared the fallout from the global financial crisis even if it fared better than other emerging regions. Nominal GDP of the GCC economies declined from $1,054b in 2008 to $849b in 2009. But the overall impact on real levels of economic activity was contained by larger government spending supported by strong fundamentals and strengthened financial buffers. The non-hydrocarbon sector, where more than 95% of the labor force is employed, grew 2.7% in 2009 as compared with 7.0% in 2008.
Nonoil real GDP is expected to grow by 3.7% in Saudi Arabia and 1.8% in the UAE. With a successful resolution of Dubai's debt issues, especially if this sparks an acceleration of reforms, nonoil growth in the UAE could reach 2.7% in 2010 and 4.3% in 2011. In this case, Dubai would avoid another contraction in its economy. Inflation pressures in the region should generally remain contained: less than 1% in Qatar and the UAE, 4% in Kuwait and 5% in Saudi Arabia. The IIF's baseline GCC projections assume modest global economic recovery (growth of 3.3%) and average oil prices of $75 per barrel in 2010 and $80 per barrel in 2011. It is also assumed that the fallout from Dubai's debt problems will likely have a measurable but limited impact on growth prospects in the UAE, less so for the GCC region. However, investment flows to the region may slow, the cost of funding will be higher, and banks are likely to adopt a more cautious and discriminating approach to lending going forward, the report said. (TradeArabia 18.05)
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5.4 Bahrain Inflation Rises in April to 2.7%
The Bahraini Central Informatics Organization announced that Bahrain's inflation rose y-o-y for the third month in a row to 2.7% in April 2010, compared to 1.8% in March 2010 and 3.1% in April 2009. The general index increased month-on-month by 0.6%, based on the food and clothing sub-indexes which accelerated m-o-m by 3.3% and 0.6%, respectively. On the other hand, furnishing and household equipment and maintenance, and alcoholic beverages and tobacco sub-indexes declined m-o-m by 0.4% and 0.2%, respectively. The remaining sub-indices, including: housing, water, and energy, healthcare services, transportation, communication, recreation and culture, education, and restaurants, saw no monthly changes in their prices. From a y-o-y perspective, all sectors saw year-on-year positive growths except for the housing, water and energy sub-index and the communications sub-index which stepped down by 1.5% and 5.1%, respectively. Alcoholic beverages and tobacco sub-index saw the largest y-o-y increase in prices, going up by 10.5%, followed by the food sub-index, which grew y-o-y by 8.6% in April 2010 compared to a y-o-y growth of 3.6% in March 2010. Education, restaurants, transportation, healthcare services, clothing and footwear, furnishing, and recreation sub-indices came after, increasing by 7.8%, 6.5%, 3.9%, 3.9%, 1.9%, 1.8%, and 0.2%, respectively. The GCC countries are expected to witness an increase in prices accompanied by the recovery in their economies, especially that they are net importers of food and their currencies are pegged to the US dollar, except for Kuwait which de-pegged from the US dollar in May 2007. (CIO 24.05)
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5.5 Qatar's Annual Inflation Declines To -3% In April 2010
Qatar's annual headline inflation dropped to -3% in April 2010, from 4.4% in March 2010, according to the Qatar Statistics Authority. The deflation was mainly due to the decline in costs of rents, fuel and energy by 13.7% annually in April 2010. This item has a weight of 32% in the overall consumer price index in Qatar. Food and transportation registered lower price rises in April, of 2% and 3.9%, respectively, compared to 2.8% and 6.1% in March 2010. They constitute 13% and 20% of the index. Inflation averaged 1.4% between January and April. On a monthly basis, inflation rose by 0.3% in April 2010, from 0.1% in March 2010, as prices of food, rent, fuel and energy, furniture and miscellaneous goods rose by 0.7%, 0%, 0.4% and 1.1% respectively in April, compared to a monthly change of 0%, -1.1%, 0.1% and 0.2% in March 2010. Overall, inflation is expected to rise gradually in 2010, averaging 3%, compared to an annual average of -4.9% in 2009 and 15.2% in 2008, as economic growth rises and prices rebound from their 2009 lows. (Various 19.05)
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5.6 Oman Sees $1.09 Billion Budget Surplus In First Quarter
Oman's budget swung to a surplus of 421.2 million rials ($1.09 billion) in Q1/10, helped by higher oil prices. Most states in the world's top oil exporting region are expected to run comfortable budget surpluses and continue to increase spending this year as higher oil prices help cement economic recovery. Oman booked a deficit of 16.6 million rials in the same period a year ago and a gap of 22.9 million in the two months to the end of February. The Gulf sultanate's revenue jumped 47.9% to 1.996 billion rials in the three months to the end of March from a year ago, while expenditures were up 15.3% at 1.575 billion, the data showed. Over the same period, Oman's net oil income doubled to 1.425 billion rials from 709.2 million a year ago. It sold its oil at an average price of $76.68 per barrel in January-March, up 70.6% from the same period of 2009. Oman based its 2010 budget on a projected oil price of $50 a barrel and expected a deficit of 800 million rials given plans to finance a range of infrastructure projects. (AB 16.05)
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5.7 Saudi Inflation Hits 10 Month High In April
Saudi inflation climbed to a 10 month peak of 4.9% in April, as global harvest concerns kept food prices up in the import reliant kingdom. Price pressures are seen rising again this year as oil exporters recover but inflation is expected to stay in low single digits across the Gulf. Inflation in the kingdom stood at 4.7% year on year in March, down from a record high of 11.1% in July 2008. Monthly, the cost of living in the world's largest oil exporter edged up 0.3%, after a 0.5% rise in March. Food prices, which account for 26% of the overall basket, edged down 0.1% month on month in April after a 0.9% jump in the previous month. They were up 5.1% on an annual basis in April. Household costs rose 1% month on month in April at a similar pace to the previous month, while showing a 9.6% rise on an annual basis. Bad weather in countries that export crops to Saudi Arabia has raised concerns over availability of supplies for some commodities such as rice. The desert kingdom is among the world's top five rice importers and became a major wheat importer in 2008 after abandoning a 30 year self sufficiency plan. (AB 16.05)
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5.8 Egypt Jumps 11 Places In Competitiveness Index
Egypt jumped 11 places to rank 70th in the Global Competitiveness Index (GCI), up from 81 in 2009. However, the overall improvement was largely based on deteriorating conditions in other countries, according to the seventh annual Egyptian Competitiveness Report (ECR) titled “Green Egypt: A Vision for Tomorrow.” Trade Minister Rachid disagreed with the report's conclusion, which attributed Egypt's improved ranking to the poor performance of other countries. While the financial sectors of other countries suffered, Egypt was able to remain healthy during the crisis, the report said, due to regulatory reforms and improved supervision. Egypt jumped 22 places in the financial market sophistication indicator. The composite competitiveness raw score however has not improved since 2007, remained at 4. The score is ranged from 1-7 with 1 being the lowest competitiveness performance and 7 the highest. According to the report, scores were lowest in the areas related to human development, labor markets and macroeconomic stability. In labor market efficiency, Egypt ranks 126 out of 133 countries; and in quality of education Egypt came in at 123. The report recommends that Egypt tackle issues including “high inflation, high unemployment rates, weak shared growth, persistent poverty, high budget deficits and high level of public debt.” The most controversial argument was about the quality of fiscal spending. The report points out that too much government budget is allocated to operational salaries and poorly targeted subsidies and not enough is used for investment in human resources and infrastructure that can improve Egypt's long term competitiveness and lower poverty. (DNE 24.05)
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5.9 Morocco's Mining Sector to Average Annual of 4.13% To 2014
Research and Markets' (http://www.researchandmarkets.com) "Morocco Mining Report Q2 2010" report says the state-owned Office Cherifien de Phosphate (OCP) is taking advantage of the recovery in phosphate prices seen over recent months by looking to expand its operations in 2010. In February 2010, it was reported by the Maghreb Arabe Presse (MAP) that OCP is to receive a $500mn loan from French bank Credit Agricole, which will be used to buy goods and equipment. At the same time, MAP also reported that OCP is to spend some $200mn on building two new sulfuric acid production plants in the country, with a capacity of 3,410 tonnes per day. Additionally, the Al Hayat newspaper has reported that OCP is receiving tenders from parties interested in building a new $500mn 200km underground pipeline to transport phosphate ore across the country. This pipeline, which is expected to be completed by end-2012, will play a key role in OCPs previously-stated aim to boost annual production to some 50mn tonnes per annum (tpa). OCP has received some EUR240mn in loan guarantees for the project from the Agence Francaise de Developpement and Coface, according to the Al Hayat report. OCP has been performing strongly despite the impact of the global economic crisis. In September 2009, MAP reported that OCP had managed to achieve turnover of MAD1.5bn over the January-August 2009 period, making up some 75% of its projected turnover for the year.
The Kingdom of Morocco's economically vital mining sector is dominated by phosphates, which account for some 95% of mineral production. This industry is also dominated by state-run OCP. Beyond phosphates, the country also produces manganese, lead, zinc, copper and cobalt. The Office National des Hydrocarbures et des Mines (ONHYM) is the primary agency responsible for the exploration and promotion of national mineral resources. The other major state-owned organization governing the mining industry is the Bureau de Recherches et de Participations Minires (BRPM), which is responsible for the development of most minerals found in Morocco. All mineral resources are the property of the state, which issues permits and licenses for the exploration and exploitation of the resources. The current mining legislation in Morocco is based on the Mining Law (1951) and is enforced through executive orders and the Directorate of Mines. Under the law, a mining company may set up a tax-exempt reserve fund of up to 50% of the fiscal profits for exploration and development investment. (R&M 17.05)
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Recession in Cyprus
Cyprus remained in recession in Q1/10, Cyprus' statistics department figures showed on 12 May, but there were signs of a rebound in services and tourism. Cyprus' economy contracted 0.2% in the first three months of 2010, compared to a negative 0.4% in Q4/09. A quick estimate showed that for the year, real GDP fell by 2.4% in Q1/10, compared to a fall of 3.1% in Q4/09. The contraction of the economy during the first quarter of 2010 is mainly attributed to the negative growth rates observed in construction, trade and manufacturing activities. Positive growth rates observed in the broad services sector and a better performance by the island's tourism sector buffered the extent of this contraction. Tourism accounts for almost 11% of Cyprus's GDP. (CSD 12.05)
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6.2 Cyprus' Trade Deficit Expands In January - February
Cyprus' trade deficit expanded in January-February according to the Statistical Service. Total imports/arrivals (covering total imports from third countries and arrivals from other Member States) in January-February 2010 amounted to €917.0m compared with €866.7m in January-February 2009. Total exports/dispatches (covering total exports to third countries and dispatches to other Member States) in January-February 2010 were €155.7m compared with €145.8m in January-February 2009. The trade deficit was €761.2m in January-February 2010 compared with €720.9m in the corresponding period of 2009. During February 2010 total imports/arrivals (covering total imports from third countries and arrivals from other Member States) were valued at €466.0m. Total exports/dispatches (covering total exports to third countries and dispatches to other Member States), including stores and provisions, in February 2010 amounted to €83.0m. Exports/dispatches of domestically produced goods, including stores and provisions, were €48.3m whilst exports/dispatches of foreign goods, including stores and provisions, were €34.6m. (FM 14.05)
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6.3 Greece's GDP Drop Not So Bad, But Worse is Ahead
Greece's economy shrank less than was expected in the first three months of the year, though the economy is likely to move deeper into recession this year with the government's recent austerity measures. Data released on 12 May by the Hellenic Statistical Authority showed that the country's GDP contracted 0.8% in Q1/10 compared to Q4/09, better than the 1.4% drop expected by most economists. The overall eurozone grew for the third quarter in a row by 0.2% over the last three months. Economists said they expect the pace of contraction in Greece to accelerate for the next two quarters as the austerity moves, coupled with higher inflation and job losses, lead to a sharp decline in households' disposable income. In return for emergency aid from eurozone nations and the IMF, Athens has committed to deep budget cuts, including cuts to civil servants' wages and pensions.
The Greek economy shrank by 2.3% year-on-year in the first three months of 2010, the data showed, also less than the 2.7% drop forecast by economists. Economic activity in Greece has been slowing since the beginning of 2008. For 2009 as a whole, the Greek economy shrank 2%, worse than the government's forecast of a 1.5% contraction. Experts pointed to government reforms aimed at tapping the black economy as starting to pay off. The government has pledged to step up its fight against widespread tax evasion as part of a multibillion-euro plan to cut its ballooning budget deficit. (eKathimerini 13.05)
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6.4 Greek 2010 Tourism Revenues Seen Down 7 – 9%
Greece's tourism revenues are likely to fall 7-9% this year, making it even harder for the debt-choked country to pull itself out of a crisis that has rocked markets worldwide, head of the Hellenic Hotel Federation said. Tourism accounts for nearly a fifth of Greece's output and is a main driver of its €240b economy. How it fares is crucial for the recession-hit economy and its capacity to exit its debt crisis. Last year was already bad for the sector, with revenues down about 10%. Tourism receipts fell to €10.4b ($13.21 billion), pushed lower by the global financial crisis, a strong euro and competition from cheaper nearby destinations. The industry had hoped things would slightly improve thanks to a weaker euro and signs of economic recovery in key markets such as Germany and Britain. But bookings have been hurt by worries over repeated strikes against austerity measures and violent demonstrations. How tourism eventually fares this year will depend a lot on whether upcoming protests are peaceful and whether there are any more 24-hour flight strikes. (FM 14.05)
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6.5 Bulgarian Decline in First Quarter
Bulgaria's economic decline slowed to 4.0% on an annual basis in Q1/10 from 5.9% in the previous quarter. An estimate from the Bulgarian statistics office showed the Bulgaria's consumption-based economy remained in recession in the first quarter, as did neighboring Romania, while export-reliant Central European peers showed signs of recovery. Despite the economic contraction, consumer prices rose 1.8% in April year-on-year, mainly due to a hike in the prices of cigarettes and fuels. On a monthly basis, consumer prices were up 1.1%. (Various 12.05)
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7: GENERAL NEWS AND INTEREST
7.1 Egypt Extends Emergency Law Despite Protests
On 11 May, Egypt's government extended the country's controversial emergency law for another two years, saying it would limit its use, a promise dismissed by human rights activists who warned the law would continue to be used to suppress dissent. The emergency law, in place since the 1981 assassination of then-President Anwar Sadat by Islamic militants, gives police broad powers of arrest and allows indefinite detention without charge. Democracy advocates and human rights groups have long said the law is used to silence critics and ensure the ruling party's lock on power, pointing to the arrest of bloggers, political activists and others. Despite protests, the ruling party dominated parliament approved the government's request that the law be kept in place until May 31, 2012. A number of bloggers have been detained under the emergency law, including Hany Nazeer, a Christian arrested in 2008 after posting an item seen as insulting to Islam, and Mosaad Suleiman Hassan, an activist who wrote about discrimination against Bedouin in the Sinai Peninsula, jailed since 2007. The emergency law has been renewed repeatedly by parliament since 1981. The government said its extension was necessary because of continued terrorism threats against Egypt, pointing to bombings against tourist resorts in the Sinai in the 2000s, weapons smuggling across the Egypt-Gaza border and, in particular, a recent case in which 26 men were convicted of spying for the Lebanese militant group Hezbollah and plotting attacks in Egypt. In 2007, a constitutional amendment called for the emergency law to be replaced by a specific counterterrorism law. (AP 12.05)
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7.2 Most Egyptian Women are Overweight
Nearly 80% of women in Egypt are overweight and 46.6% obese, said a recent study by the International Obesity Task Force in Egypt. It also found that more than 25% of children aged 4 years are overweight. Another study recently conducted by the National Nutrition Centre of Egypt stated that 48.5% of Egyptian women and 16.7% of Egyptians over 20 are obese, while 35% of the population has a BMI (body mass index) over 30. In another study, the Diabetes Atlas survey, the incidence of diabetes in Egypt last year was 10.4%. (TradeArabia 14.05)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Protalix BioTherapeutics Receives $4 Million Research Grant From the Israeli Government
Protalix BioTherapeutics announced that the Office of the Chief Scientist (OCS) of Israel's Ministry of Industry, Trade and Labor has awarded the Company a grant of up to $4.1m for calendar year 2010. The OCS awarded the grant to the Company to promote the advancement of the Company's drug development programs. The terms of the grant provide that up to $2.9m of the funds awarded are to be used for the advancement of the Company's early-stage pipeline product candidates, including acetylcholinesterase (AChE), PRX-102, pr-antiTNF and three undisclosed compounds in development. AChE, an anti-organophosphate nerve agent in development for biodefense applications, which had shown promising efficacy data in a number of animal studies, is currently the subject of a phase I clinical trial in healthy volunteers. PRX-102, in development as an enzyme replacement therapy for Fabry disease, has shown promising results in the knock-out animal model. Pr-antiTNF, a biosimilar version of etanercept (Enbrel) in development for rheumatoid arthritis, also demonstrated promising results in a well-established collagen induced arthritist animal model. The Company anticipates meeting with the U.S. FDA for pre-IND meetings in the near-term to discuss next steps for these product candidates.
In addition to the capital being allocated to the Company's early stage programs, the terms of the grant also provide that up to $1.2m is to be used in connection with the further development of taliglucerase alfa, the Company's proprietary plant cell expressed recombinant Glucocerebrosidase enzyme for the treatment of Gaucher disease. The Company's new drug application (NDA) for taliglucerase alfa is currently being reviewed by the FDA, and similar applications with other comparable regulatory agencies in other countries are expected to be submitted during 2010. The Company is making taliglucerase alfa available to Gaucher patients in the United States under an Expanded Access protocol, and to patients in the European Union, Israel and other countries under Named Patient provisions.
Carmiel's Protalix (http://www.protalix.com) is a biopharmaceutical company focused on the development and commercialization of proprietary recombinant therapeutic proteins expressed through its proprietary plant cell based expression system. Protalix's ProCellEx presents a proprietary method for the expression of recombinant proteins that Protalix believes will allow for the cost-effective, industrial-scale production of recombinant therapeutic proteins in an environment free of mammalian components and viruses. Protalix is also advancing additional recombinant biopharmaceutical drug development programs. (Protalix 17.05)
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8.2 Teva Announces Launch and Shipment of Generic Lipitor Tablets in Canada
Teva Pharmaceutical Industries announced that its subsidiary, Teva Canada received a Notice of Compliance from Health Canada to market its generic version of Pfizer's Lipitor (atorvastatin) Tablets, a product indicated for lowering cholesterol. Shipment of this product will commence immediately. Lipitor (atorvastatin) Tablets had annual brand sales of approximately C$1.3 billion in Canada. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 15 pharmaceutical companies in the world and is the leading generic pharmaceutical company. The company develops, manufactures and markets generic and innovative pharmaceuticals and active pharmaceutical ingredients. (Teva 19.05)
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8.3 Rosetta Genomics Identifies 49 Novel microRNAs
Rosetta Genomics announced the publication of a study entitled, “Discovery of microRNAs and other small RNAs in solid tumors,” in the online edition of Nucleic Acid Research. The article was authored by Rosetta Genomics scientists. The discovery of these new microRNAs gives Rosetta direct and exclusive access to 49 novel microRNAs, each one of which has the potential to be, alone or in combination with other microRNAs, a diagnostic biomarker, response biomarker or drug target. In addition, Rosetta has filed patent applications on each of these newly discovered microRNAs to enhance their expanding IP portfolio. MicroRNAs (miRNAs) are recently discovered, small RNAs that act as master regulators of protein synthesis, and have been shown to be highly effective biomarkers. The unique advantage of microRNAs as biomarkers lies in their high tissue specificity, and their exceptional stability in the most routine preservation methods for biopsies, including Formalin Fixed Paraffin Embedded (FFPE) block tissue and fine needle aspirate (FNA) cell blocks. It has been suggested that their small size (19 to 21 nucleotides) enables them to remain intact in FFPE blocks, as opposed to messenger RNA (mRNA), which tends to degrade rapidly. In addition, early preclinical data has shown that by controlling the levels of specific microRNAs, cancer cell growth may be reduced.
Rehovot's Rosetta Genomics (http://www.rosettagenomics.com) is a leading developer of microRNA-based molecular diagnostics. Founded in 2000, the company's integrative research platform combining bioinformatics and state-of-the-art laboratory processes has led to the discovery of hundreds of biologically validated novel human microRNAs. Building on its strong patent position and proprietary platform technologies, Rosetta Genomics is working on the application of these technologies in the development of a full range of microRNA-based diagnostic tools. (Rosetta 19.05)
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8.4 Can-Fite BioPharma Approved for Phase II Clinical Trial of CF101 in Patients with Glaucoma
Can-Fite BioPharma received approval from the Israeli Ministry of Health (MoH) to conduct phase II clinical trial with orally-administered CF101 in the treatment of Glaucoma. Leading Medical Centers in Israel will enroll 40 patients with Glaucoma for the first cohort and will be treated for 16 weeks with CF101 or placebo. The study will be expanded to 2 additional cohorts upon successful conclusion of an interim analysis of the first cohort. The study will investigate the safety and efficacy of CF101 manifested by a decrease in the intraocular pressure. The trial protocol and the results will also be reported to the US FDA. The rationale for the conductance of this study is based on interesting findings from the recently concluded Phase II study in Dry Eye, demonstrating a decrease in the intra ocular pressure in patients who were treated with CF101.
Can-Fite's CF101 is a targeted drug that specifically attacks diseased or pathologic cells without compromising normal body systems, and therefore has shown a favorable safety profile to date. CF101 is based on a scientific concept suggesting that the target of the drug (A3 adenosine receptor) is highly expressed on the surface of pathologic cells. Can-Fite, whose shares were first issued in September 2005, has evolved within a short period of time to a company which develops couple of indications in the ophthalmic arena including Glaucoma, Dry Eye Syndrome and Uveitis, with an overall market of $8B.
Petah Tikva's Can-Fite BioPharma (http://www.canfite.co.il) focuses on the development of molecule-based drugs that inhibit the development of cancer and inflammatory cells. The Company's lead drug, CF101, is being developed for the treatment of autoimmune inflammatory and ophthalmic diseases and the second drug candidate CF102 is developed for liver diseases, i.e., liver cancer and HCV. (Can-Fite 24.05)
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8.5 Teva Announces Launch of Generic Valtrex
Teva Pharmaceutical Industries announced U.S. FDA approval and commercial launch of its generic version of GlaxoSmithKline's antiviral product, Valtrex (valacyclovir hydrochloride) Tablets 500 mg and 1 g. Total annual sales of the product, including brand and generic sales, were approximately $2.1 billion in the United States, based on IMS sales data. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 15 pharmaceutical companies in the world and is the leading generic pharmaceutical company. The company develops, manufactures and markets generic and innovative pharmaceuticals and active pharmaceutical ingredients. (Teva 25.05)
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8.6 Yissum Introduces a Breakthrough Computational Method for Superfast Drug Discovery
Yissum, the technology transfer arm of the Hebrew University of Jerusalem, introduced Dralgo, a novel computational platform for accelerated discovery of promising drug candidates. The new technology will be presented by its inventor, Professor Amiram Goldblum from the Institute of Drug Research at the Hebrew University of Jerusalem, on June 15 at the Technology Transfer Session II of the ILSI Biomed Israel 2010 conference, to be held at the David Intercontinental Hotel, Tel Aviv, Israel.
The novel method is based on a proprietary algorithm for superfast identification and design of molecules with the highest probabilities for displaying specific biological activities. Dralgo has a unique generic ability to find both the optimal solution and a large set of best solutions or alternatives, which is applied to the production of focused libraries of drug candidates with optimized drug-like properties based on a specific activity of a set of compounds. It can also provide bioactivity indexes of molecules for their interaction with specific targets or their effect on specific disease conditions. Such indices are especially useful for decision making on priorities for purchasing or synthesizing molecules. Most recently, this novel technology has been directed to discover small molecules that are active at multiple targets, for treating disease conditions that are multi-factorial. The novel platform achieves an enrichment factor of up to 5,000 for biologically active molecules, and was validated both in silico and in vitro. In one validation trial, it was tested on a database of 2.5 million small molecules in search for inhibitors of the enzyme acetylcholinesterase as potential anti-Alzheimer drugs. Dralgo was able to pinpoint 10 molecules which were predicted to have the desired biological activity. Of these, 5 candidates were tested for biological activity, and 3 indeed exhibited the desired activity. None of the three has ever been patented or mentioned in the literature. In another trial, Dralgo helped in designing a protein drug for treating Chronic Myeloid Leukemia (CML). Out of a database of 1080 protein sequences, a mere 10 were selected for in vitro studies, and 6 of those inhibited CML cell proliferation.
Jerusalem's Yissum Research Development Company (http://www.yissum.co.il) was founded in 1964 to protect and commercialize the Hebrew University's intellectual property. Ranked among the top technology transfer companies in the world, Yissum has registered over 6,100 patents covering 1,750 inventions; has licensed out 480 technologies and has spun-off 65 companies. (Yissum25.05)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 India to Implement NICE's Comprehensive Integrated Security Solutions for its Parliament
NICE Systems announced that India's Bharat Electronics Limited, NICE's strategic partner and the project's prime contractor, will be implementing its comprehensive, integrated security solution offering to enhance the safety and security of India's Parliament House and the entire surrounding complex in New Delhi. In this $5 million plus deal, NICE will be providing a comprehensive security solution, based on its NICE Situator situation management solution that integrates multiple, disparate security and safety systems into a single, holistic operational view and enhances real-time response by automating procedures and information sharing. The selected solution also includes IP video surveillance with advanced video analytics and NICE Inform for multimedia incident information management. Following a rigorous evaluation process, the selection of NICE from among competing vendors was based on its ability to provide a pre-integrated portfolio of security solutions, which integrate multiple sensors and inputs including high-end video surveillance cameras, acoustic and intrusion sensors, fire detection, 3-D maps and more, into a holistic situational awareness management platform that enables real-time action and event management, as well as post-event investigation and debriefing.
Ra'anana's NICE Systems (http://www.nice.com) is the leading provider of Insight from Interactions solutions and value-added services, powered by advanced analytics of unstructured multimedia content - from telephony, web, radio and video communications. NICE's solutions address the needs of the enterprise and security markets, enabling organizations to operate in an insightful and proactive manner, and take immediate action to improve business and operational performance and ensure safety and security. (NICE 24.05)
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9.2 Wavion Expands its Presence in Russia – Partners with Dateline on New Wi-Fi Projects
Wavion and Dateline, a leading system integrator in Russia, announced the deployment of Wavion's Wi-Fi solution for two new projects in Russia. The projects are based on Wavion's WBS-2400 base stations, operating in 2.4 GHz band. The first project is a Wi-Fi network deployment at the Moscow State University premises. This project will provide Wi-Fi access for the university students - the first stage of a larger information project for the University, lead by JSC CenterTelegraph, a Russian telecom carrier. The Moscow State University is the largest and oldest university in Russia, with more than 36,000 students. The second project is a metro Wi-Fi deployment in the city of Rybinsk, done for Telefonika, a rapidly growing ISP in Rybsink. This project will provide internet access to the city residents, thus significantly increasing the subscriber base for Telefonika. Yokneam's Wavion (http://www.wavionnetworks.com) is a technology leader in Metro and Rural Wi-Fi and Wireless broadband access, with deployments in more than 57 countries. The company's digital beamforming and SDMA technologies are the first and only to resolve the significant performance, penetration and profitability challenges facing large scale Metro and Rural deployments. (Wavion 12.05)
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9.3 MobileMax Helps Power Verizon's Global FMC Offering
MobileMax announced that Verizon Business is leveraging the MobileMax Enterprise edition platform to help deliver their new Verizon Global Fixed Mobile Convergence (FMC) solution to their enterprise customers. Verizon FMC employs advanced handset software from MobileMax to determine cost-effective routing for mobile calls. The service dynamically directs mobile calls to either Verizon's cloud-based global voice-over-IP (VoIP) communications platform, powered by Broadsoft, or to the user's mobile network service. Verizon's Global FMC offers a universal phone number that lets workers securely and seamlessly use the features of their PBX on their mobile handsets. As a result, workers can cost-effectively take advantage of the same “office-based” capabilities wherever they may roam.
Herzliya's MobileMax (http://www.mobile-mx.com) is the worldwide leader of Mobile VoIP and FMC applications to the telecommunications industry and is a key player in the Unified Communication (UC) arena. MobileMax develops and licenses patent-pending Mobile VoIP & PBX solutions to carriers and service providers. The MobileMax client resides in the user's mobile device and extends real-time communication functionality to mobile handsets. Users have one device with one number, one address book and one voice mailbox, always using the lowest cost network for connectivity. (MobileMax 11.05)
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9.4 RiT Technologies To Launch New Product Lines Based on Optical Laser Technologies
RiT Technologies is broadening its business to take advantage of new lasers technologies developed in co-operation with STINS COMAN. RiT intends to leverage these new technologies to launch new product lines, thereby expanding its addressable market significantly. RiT's first new offering will be a highly accurate laser-based speed camera designed for use by traffic police. The product will by used by officials to instantaneously measure and document the speed of cars in all types of traffic environments in ways that are highly defensible in court. The product's use of advanced innovative optical laser technology will make its measurements much more accurate than those taken by other speed cameras on the market, and will give it greater range. This solution is also useful for other types of enforcement agencies, such as the cost guard and others. The laser-based speed camera is currently in the final development and certification stage, and is expected to be ready for launch by the beginning of the fourth quarter. To prepare for product rollout, negotiations are already underway with initial customers and potential distributors.
Tel Aviv's RiT (http://www.rittech.com) is a leading provider of intelligent solutions for infrastructure management, asset management, environment and security, and network utilization. RiT Enterprise solutions address datacenters, communication rooms and workspace environments, ensuring maximum utilization, reliability, decreased downtime, physical security, automated deployment, asset tracking, and troubleshooting. RiT Environment and Security solutions enable companies to effectively control their datacenters, communications rooms and remote physical sites and facilities in real-time, comprehensively and accurately. (RiT 13.05)
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9.5 BroadLight Announces the Industry's Smallest and Lowest Power GPON Processor
BroadLight announced the introduction of the BL2341 GPON SFU/SFP Processor, a new member of its widely deployed GPON processor family. BL2341 is the industry's smallest and lowest power GPON processor. With a 13x13 LFBGA package and consuming less than 1 Watt, the BL2341 uses the field proven GPON software suite enabling small form factor designs. The BL2341 samples will be available soon. Ramat Gan's BroadLight (http://www.broadlight.com) is a fabless semiconductor company supplying semiconductor devices to equipment vendors for FTTH applications around the globe. Its technology spans from optical access to home networking which enables the delivery of highly integrated, low-cost, solutions from the central office to the customer premise. BroadLight is the leader in GPON semiconductor devices and software, BroadLight technology is powering the largest PON deployments worldwide. (BroadLight 17.05)
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9.6 Siverge Networks' Griffin Delivers High-Performance & Top Functionality for Raisecom Products
Siverge Networks has been selected by China's Raisecom, a leading provider of telecommunications equipment and network solutions, for the next generation of its Access products. The Griffin family of chip solutions is based on unique HW technology, providing significantly higher performance, lower cost and best scalability in the market for networking infrastructure. Additionally, Griffin products enable Siverge customers to reduce cost and complexity by collapsing multi-line-cards into a single multi-service card, performing all the necessary transport and aggregation functions needed to bridge legacy infrastructure and new services and networks. Herzliya's Siverge Networks (http://www.siverge.com) is a leading provider of networking chip solutions. Siverge products exhibit powerful hardware technology that enables low-cost, high-speed and high performance communication systems for carrier networks and wireless backhaul. The company's technology redefines the limits of networking devices, integrating 10x more functionality, capacity and channel/port density. (Siverge 17.05)
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9.7 Silicom Server Adapter Achieves VMware-Ready Status
Silicom announced that its dual-port gigabit fiber server adapter has achieved VMware Ready status. This designation indicates that the Silicom server adapter has passed a detailed evaluation and testing process managed by VMware and is now listed on the VMware Hardware Compatibility List. Passing the extensive VMware-specified testing helps ensure that the Silicom server adapter makes best use of VMware technology and is ready for deployment in customer environments. The VMware Ready program is a VMware co-branding program for qualified partner products and is a benefit of the VMware Technology Alliance Partner (TAP) program. With more than 1,300 members worldwide, the VMware TAP program works with best-of-breed technology partners to provide them a comprehensive set of VMware technical and marketing services, support, tools and expertise to deliver enhanced value to joint customers. Kfar Saba's Silicom (http://www.silicom.co.il) is an industry-leading provider of high-performance server/appliances networking solutions. The Company's flagship products include a variety of multi-port Gigabit Ethernet, copper and fiber-optic, server adapters and innovative BYPASS adapters designed to increase throughput and availability of server-based systems, WAN Optimization and security appliances and other mission-critical gateway applications. (Silicom 17.05)
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9.8 Mellanox InfiniBand Solutions and Ethernet Adapters Selected by IBM
Mellanox Technologies announced that its ConnectX-2 InfiniBand and Ethernet adapters, as well as its IS5000 line of 36, 216, and 648-port fixed and modular 40Gb/s InfiniBand switches, are now available through IBM's iDataPlex and Intelligent Cluster product lines. Mellanox's adapters and switch systems offer IBM customers I/O infrastructure performance and scalability for data centers, Cloud, Web 2.0 and high-performance computing (HPC) environments. ConnectX-2 adapters support an extensive array of networking, clustering, storage and management protocols. ConnectX-2 InfiniBand adapters are also designed to provide hardware processing of application communications frequently used by scientific simulation for data broadcast, global synchronization and data collection, and new features, such as GPU-Direct, improve application performance on GPU-based clusters by reducing the dependency on the CPU for data movement. ConnectX-2 EN 10 Gigabit Ethernet adapter cards are VMware vSphere 4 certified, enabling broad interoperability with other operating systems and the ecosystem of OEM supplied servers, switches, gateways and storage systems. In addition, ConnectX-2 EN with RDMA over Ethernet (RoE) delivers up to 1/10th the latency, saves power consumption and delivers improved economics compared to other standards-based 10 Gigabit Ethernet adapter solutions in the market today.
Yokneam's Mellanox Technologies (http://www.mellanox.com) is a leading supplier of end-to-end connectivity solutions for servers and storage that optimize data center performance. Mellanox products deliver market-leading bandwidth, performance, scalability, power conservation and cost-effectiveness while converging multiple legacy network technologies into one future-proof solution. (Mellanox 18.05)
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9.9 OptimalTest Provides STMicroelectronics with Advanced Adaptive Test Solutions
OptimalTest has entered into a licensing agreement with STMicroelectronics to provide solutions for test floor monitoring and control, including early detection of issues, for the semiconductor company's distributed test operations. An innovative leader in the semiconductor industry, STMicroelectronics is the world's fifth largest semiconductor company and a market leader in several segments of its diverse product portfolio. Under the terms of the deal, OptimalTest is now deploying its integrated test floor monitoring and control solution on more than 60 testers at two STMicroelectronics sites. Devices being tested at these sites include complex SoCs and mission-critical devices for high-reliability applications. The solution addresses improved quality, data integrity, yield and test efficiency while minimizing cost of test for devices aimed at price-sensitive markets. OptimalTest's solution, including OT-Proxy and OT-Portal, will be implemented at both sites in real-time for wafer sort and final test. Providing a comprehensive but streamlined and integrated view of globally distributed test operations, OptimalTest's software pinpoints issues among products, processes, operations and equipment to accelerate notification and decision-making.
Established in 2005, Ness Ziona's OptimalTest (http://www.optimaltest.com) provides comprehensive, scalable test management and optimization software based on advanced adaptive test. The company's solution is unique for its breadth, incremental modularity, seamless connectivity and real-time and near-time capabilities. It allows adaptation and enhancement of test processes and operations through continuous automated learning, advanced adaptive test techniques and expertly culled data that is decision-ready, resulting in significant, measurable improvements in yield, test time reduction, reliability and quality as well as reduced cost of test. (OptimalTest 24.05)
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9.10 Tvinci Launches First Complete Pay-OTT Video Platform and Powers Projector.tv
Tel Aviv's Tvinci (http://www.tvinci.com) launched a complete end-to-end Pay-OTT (Over-the-Top) video platform. The company's Tvinci MediaHub and Tvinci MediaStore have been developed to meet the industry need for a new monetization layer to OTT video content through direct payments (Pay Per View, subscriptions, coupons etc). Tvinci's platform enables content owners and network operators to offer a consistent content consumption experience across any internet enabled device: PC / Mac, Connected TV, STB, games console, smartphone and iPad. Tvinci's platform is based on its Tvinci MediaHub (back-end) and Tvinci MediaStore (front-end) systems which are designed to fit any cross-device OTT requirements. The Tvinci MediaHub is the core of Tvinci's platform, used for the management of video content, business rules and users on any internet device. It is a one-stop-shop for controlling the entire life cycle of a digital asset: from ingest through management and business rules setting, pricing and billing, to analysis of its consumption and the viewing experience of the end user. In addition to the launch of Tvinci's complete Pay-OTT video platform, the company also announced that it has been selected by Projector TV, a UK based initiative for cultural online entertainment owned by Hollywood studio Future Films Group, for the launch of its video portal. (Tvinci 24.05)
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9.11 N-trig Introduces N-act Hands-on Gesture Vocabulary for True Multi-Touch User Experience
N-trig announced the availability of the N-trig N-act Hands-on gesture vocabulary for two plus one, three and four finger multi-touch. The N-act gesture vocabulary enhances the overall user experience and together with the pen functionality enables the user to utilize new multi-touch gestures to perform actions directly on the screen whether using their finger or the pen. In order to further drive the mass adoption of a touch interface, N-trig is now taking standard 2-finger multi-touch gestures to the next level, expanding the multi-touch capabilities to include the use of four or more fingers in combination with a pen. This development is opening up a world of new possibilities for the development of different types of computing devices and the creation of new software applications, including advanced graphics packages, video games, CAD programs, and much more. The N-act gesture set demonstrates the continued evolution of the multi-touch marketplace to provide end-users with a more natural, flexible and Hands-on computing experience.
Kfar Saba's N-trig (http://www.n-trig.com) is revolutionizing the way people interact with computers by providing the industry's first dual-mode pen and touch input device. N-trig's DuoSense technology is the only combined pen, touch, and multi-touch interface for today's advanced computing world. N-trig's DuoSense dual-mode digitizer uses both pen and zero-pressure capacitive touch to provide a true Hands-on computing experience for mobile computers and other digital input products over a single device. (N-trig 12.05)
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's April CPI Increases by 0.9%
On 14 May, the Central Bureau of Statistics announced that Israel's consumer price index rose 0.9% in April from March, boosted by broad-based gains to exceed expectations. It stood 3% higher year-on-year, decelerating from 3.2% inflation in March. According to the data, the prices of clothing and footwear rose by 11.4% in April, the prices of fruit and vegetables were up 1.9%, the prices of apartments rose by 1%, the prices of transportation were up 0.6% and the prices of food saw a 0.4% increase. The prices of milk and dairy products dropped by 0.5%, car insurance prices were down 1%, the prices of bread dropped by 1% and the prices of cucumbers saw a dramatic decline of 19.8%. Monthly CPI has risen in 10 of the past 14 months but the annual rate has eased in each of the past four months, alleviating some pressure on the Bank of Israel to raise interest rates further, analysts say. However, such a high monthly rise in April could prompt another rate hike later in May. The annual rate fell back to within a 1-3% target for the first time since last October. It peaked at a 3.9% rate in December. The central bank had said it expected a rate of 3% or lower this month. Analysts expect inflation to ease to below 2% in 2010 as the Bank of Israel further raises short-term interest rates and as housing prices stabilize. (CBS 14.05)
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10.2 State of The Economy Index Shows Slower Expansion
The composite state of the economy index compiled by the Bank of Israel rose 0.1% in April. The rise, coming after the rises in previous months as well, shows a continued recovery in the economy, even if at a slower pace. The rise was due to a rise in the industrial production index, and the index of revenue of trade and services activities. Those rises were offset by a drop in goods exports, and a slight drop in exports of services, and in import indexes. The March index was revised lower to 0.5% from 0.6%. (BoI 20.05)
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10.3 Israel's Economic Growth Slows to 3.3% in First Quarter
The Central Bureau of Statistics announced on 16 May that Israel's economy grew at an annualized rate of 3.3% in Q1/10, continuing to rebound from a brief recession although at a slower pace than rapid growth of the prior two quarters. The economy grew 4.8% in Q4/09, unchanged from a previous estimate, and 3.6% in the third. Following the global recession, Israel's economy also grew at a slower rate in the last quarter of 2008, though growth returned in the April-May period of last year as consumer spending remained fairly robust. For all of 2009, the economy grew 0.7% and the Bank of Israel forecasts growth of 3.7% this year. Growth in Q1/10 was fuelled by a 1.6% increase in consumer spending – slower than growth rates of above 5% in the previous three quarters – an 8.2% jump in state spending and a 44% surge in imports, the bureau said in its first estimate of first-quarter gross domestic product growth. Exports, which account for some 40% of Israeli economic activity, fell by 7.3% after a 47% jump in Q4/10. Excluding the public sector, the economy grew an annualized 4.8% in the first quarter. (CBS 17.05)
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10.4 Dual-Earners Make Up 61% of Israeli Jewish Couples
Some 61% of Israeli Jewish couples have two wage earners, 28% have one wage earner and 6% have no wage earner. Men are the wage earner in 66% of the couples with one wage earner, the Central Bureau of Statistics reported in its Social Survey for 2009. Some 71% of secular Jewish couples have two wage earners, compared with 19% of Haredi (ultra-orthodox) couples, while 25% of Haredi have no wage earners. 42% of Israel's Jews define themselves as secular, 25% as tradition, 13% as traditional-religious, 12% as religious and 8% as Haredi. 8% of Israeli Arabs define themselves as very religious, 47% as religious, 27% as not very religious and 18% as not religious. Among Israeli Jews of working age (25-54), 93% of secular men work, 94% of religious men work, 91% of traditional men work, but only 52% of Haredi men work. 78% of Haredi live in households with an average per capita income of NIS 2,0000, compared with 48% of religious Jews, 37% of traditional Jews and 24% of secular Jews. (Globes 17.05)
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10.5 How Much Do Israelis Spend On Milk?
On 17 May, the Central Bureau of Statistics announced that Israel's overall production of milk in 2009 totaled 1.3 billion liters – a 4.4% drop compared to 2008. The production of milk was 10.1% of the agricultural production, compared to 11% in 2008. This amount includes self-consumed milk, particularly in the Arab sector where the consumption of goats' milk is high. The price of pasteurized milk dropped by 1.7% during 2009. The annual yield of an Israeli cow totaled 11,292 liters in 2008 – almost double the amount produced by a cow in the European Union (5,918). In the United States, an average cow yields 9,053 liters, in China – 2.754 liters, and in India – 1,109 liters. The number of cattle sheds dropped between the years 2001-2008 from 1,250 to 991 following the reform in the dairy industry. The same period saw a rise in the production of milk per cattle shed.
The production in the honey industry totaled some 3,000 tons in 2009, compared to 2,500 tons in 2008. The honey was produced in some 93,000 beehives which provided most of the local demand for honey in Israel. The prices of honey dropped by 1.7% in 2009.
An average Israeli household spent NIS 309 (about $82) per month on dairy products in 2008 – 2.5% of the monthly expenditure. Some NIS 55 ($15) were spent on pasteurized milk, NIS 36 ($9.5) on yogurts, NIS 36 on hard cheese, NIS 51 ($13.5) on soft white cheese, and NIS 5 ($1.5) on honey. In 2009, the price of a carton of pasteurized milk was NIS 6.06 ($1.61), the price of 100 grams of hard cheese was NIS 4.6 ($1.22), and the price of 250 grams of soft white cheese was NIS 6.56 ($1.74). (CBS 18.05)
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11: In Depth
11.1 MIDDLE EAST ECONOMY: Oil Price Creeps Upwards
On 30 April, the EIU (http://www.eiu.com) observed that the oil price has settled into a range of around $85/b, and could be heading higher. This provides a potential fillip for the economic prospects of the Middle East and North Africa (MENA) region, which now looks likely to register average annual growth of close to 5% in 2010-11. However, the risk of a price overshoot, followed by a heavy fall, cannot be ruled out.
The region's oil exporters have cause for satisfaction with the current state of the market, even if the more scrupulous among OPEC member states could be excused for being irritated at the lax quota observance of some of their peers. The oil price has risen to a level about $10/b above the previous implied OPEC target of $75/b in response to increased demand, a marginally more positive outlook for the global economy and a general surge in commodities prices. OPEC ministers gathered in March, and agreed to leave matters as they were for the entire summer period, with their next meeting not scheduled to take place before October, indicating a high degree of confidence in the state of the market.
Compliance slippage
According to the International Energy Agency (IEA), OPEC's compliance with the target set at the start of last year (a 4.2m-b/d cut from September 2008 levels) has slipped to 55%, with Nigeria, Angola, Iran and Venezuela the worst offenders, and the UAE, Saudi Arabia and Kuwait the most dutiful. For these latter three Gulf Arab producers, the higher price seems to be adequate compensation for their continued production restraint.
The IEA reckons that demand is likely to increase by 2% in 2010, compared with last year, when it contracted by 1.5%. So far, this forecast looks fairly robust, thanks to a surge in demand in the first quarter in China and continued strong demand growth in the Middle East. Demand is also likely to be propped up by the economic recovery in the US, which is looking to be stronger than we earlier expected. The main drag is the weak recovery in Europe.
Saudi oil splurge
The IEA expects Chinese oil demand to rise to 9.1m b/d (out of a global total of 86.6m b/d) in 2010, from 8.5m b/d last year, a rise of just over 7%. Middle East demand is forecast to increase by 5.6% to 7.6m b/d. Much of this is accounted for by Saudi Arabia, where the IEA expects consumption to rise by 7.4% in 2010 to 2.8m b/d, following a year-on-year increase of 8.8% in 2009. The main reason for these big leaps in demand in Saudi Arabia is the burning of crude oil in power and desalination plants, in particular during the summer months - use of gasoline is also rising at a rapid rate, as is demand for LPG, ethane and naphtha, which is associated with the expansion of petrochemical production.
Gas boost
The Saudi government has recognized the risks of letting oil consumption continue to rise at these rates, and Saudi Aramco has embarked on a crash program of investment in natural gas production. Two major projects now underway - Karan and Wasit - will contribute to an overall increase of 50% in raw gas output over the next five years, which offers the prospect of a moderation in Saudi oil demand as it should no longer be necessary to resort to crude oil for power generation to such a large extent. Karan is scheduled to come on stream in mid-2011, and will eventually produce at a rate of 1.8bn cu ft/day. Contractors are to be invited in the next two-three months to bid for the Wasit project, which aims to produce some 2.5bn cu ft/d from the Hasbah and Arabiya fields.
According to Khalid al-Falih, the head of Saudi Aramco, raw gas production will rise from 10.2bn cf/d now to 15.5bn cu ft/d in 2015. Over the sale period, output of sales gas (methane) will rise from 7bn cu ft/d to 9.3bn cu ft day, while ethane production will rise from 800m cu ft/d to 1.2bn cu ft/d and natural gas liquids output will rise from 937,000 b/d to 1.2m b/d.
Supply sufficiency?
This has implications for the medium term. Saudi Arabia currently has 4m b/d of spare oil production capacity, and is planning to bring on stream the Manifa field at a rate of 900,000 b/d in 2013. Manifa will be supplying oil to two new refineries at Jubail and Yanbu, and will not have a net effect on overall capacity, as there is likely to be some depletion in mature fields in the meantime. However, even taking into account relatively strong levels of demand growth (globally, as well as in Saudi Arabia), the market is unlikely to face any serious supply constraints over the next five years, during which time some of the world's biggest oil companies will be applying themselves to meeting some ambitious targets to increase production in Iraq. With oil prices in the $80-90/b range there is also likely to be considerable investment going ahead in tar sands in Canada and in deep-water pre-salt fields off Brazil.
All this suggests that even if oil prices seem to be set in a comfortable range for producers for the time being - and the market has to take into account the perennial threat of military conflict over Iran's nuclear program - the downside risks should by no means be discounted. (ViewsWire30.04)
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11.2 ISRAEL: Euro Crisis & Ramifications for Israel
Nadav Kedem writes in the INSS - The Institute for National Security Studies (http://www.inss.org.il) Insights No. 181 that the financial crisis in Europe raises several economic and political questions, including the effect on the European Union in general and relations between EU states in particular, as well as the possible impact on Israel.
The European Economic and Monetary Union (EMU) is not only an economic project designed to achieve economic growth. Rather, it is first and foremost a political project to advance and deepen European integration and the international status of the EU. In fact, an economically powerful nation that generally conducts itself with fiscal responsibility is liable to pay a steep economic price when it joins a monetary union with states that are economically weaker and do not maintain the same measure of fiscal responsibility. Germany, for example, the leading economic power in Europe, initially joined this project out of political considerations: advancing and enhancing the EU and its own status within it (e.g., many claim that agreeing to the EMU was the price Germany paid to the EU in general and France in particular for the unification of Germany), despite the potential economic costs like the ones that are required of Germany at present. By joining the project, Germany loses its autonomy in terms of its monetary policy, is vulnerable to inflation and much economic uncertainty, and as is now evident, is liable to have to extend economic aid to economically weaker nations in the EMU.
In contrast, states such as Greece, Spain and Portugal gain economic stability (the danger of inflation drops and economic certainty rises) and, as demonstrated by the current crisis, enjoy the economic guarantee of stronger states. The EMU thus helps encourage many states to want to join and undergo the required economic and political reforms. At the same time, a monetary union also generates political gains for the strong nations. The EMU as well as the EU are a force multiplier for the dominant member nations on the international arena. For the stronger states, enhanced European integration is a road to political and economic influence and usually, also a key to political, economic, and even security stability both within the EU and beyond.
Accordingly, any changes in the EMU occur against the background of the many political implications far beyond the euro and the eurozone. Furthermore, there is no legal way to oust any member from the EMU (the same is true for the EU) and certainly there is no fixed mechanism in place for such a move. Despite the many stringent official demands of EMU members (the scope of debt relative to GDP, the size of government deficit, and the rate of inflation), there is no effective tool to enforce their implementation. In fact, even Germany has failed to meet them all. In any case, any attempt to expel Greece from the EMU would be opposed by many states, lest they too be candidates for ouster. Moreover, one may assume that such a move would affect a host of European integration processes and set them back. Nonetheless, it is likely that after the crisis abates, European states, especially Germany, will try to introduce changes to the EMU in order to prevent a future crisis. They will also likely be much more stringent with new candidates seeking to join the EMU.
Despite the difficulties in states beyond Greece – Portugal, Spain, Ireland and even Italy and Great Britain – these states still appear at a stage where brisk economic steps could prevent a crisis and put them on a path that would allow them to meet their obligations. Moreover, the recent general mobilization of EU leaders and the IMF to support the euro sharply lessened the possibility that the Greek crisis might spread to other states.
However, there is real doubt about Greece's ability to undertake fundamental economic reforms and pay its debts. The aid to Greece expected to be given by the EU and the IMF actually consists of loans or loan guarantees allowing Greece to enjoy cheap credit; this will enable it to recycle its debt and postpone the payout dates until the economic steps it is supposed to take (such as significant budget, salary, and pension cuts, raising the retirement age, and more) make themselves felt. However, there still is grave concern whether Greece will in the end be able to repay all its debt, which means that the aid package does not necessarily spell the end of the crisis. The Greek crisis is liable to continue casting its shadow over the euro and encourage speculators to bet against it. A possible solution may be in Greece voluntarily withdrawing from the EMU in return for an economic aid package. The cost (in the broadest sense of the term) for Germany and other nations – of continuing to support the euro while Greece remains in the EMU – might be much higher than giving it a one-time real aid package (not just cheap loans).
Thus far the crisis has not affected the Israeli economy in any fundamental way. However, the relative portion of foreign trade in Israel's GDP is particularly high. A large part of Israel's exports go to Europe (in 2009, Israeli exports totaled some $48 billion, with some $12.4 billion associated with exports to EU member states). Greece's economy is small relative to the bloc's total, and therefore the direct effect of the Greek crisis on Israel is negligible (Israeli exports to Greece totaled some $300 million in 2009). Nonetheless, and especially if the crisis lingers over time, a string of other elements might have a negative impact: market uncertainty (which harms economic growth and the scope of investments); the euro's loss in value, reducing export profitability to the euro bloc and increasing import profitability (which damages Israel's GDP as well as its trade balance); instability in currency exchange rates; low growth rates and deferred recovery from the crisis in Europe (which would affect the scope of Israeli exports); and various austerity measures throughout Europe to prevent a similar crisis in other nations would damage economic growth.
Therefore, should the crisis in Greece and elsewhere in Europe continue over a long period, it is liable to damage Israel's exports and its GDP. The Israeli economy's ability to handle the challenge in the short term is limited. Israel has no influence on what is done in Europe with regard to the crisis. The trade agreements to which Israel is also a signatory will make it difficult for the government to exert any fundamental, immediate, and concerted influence on the structure of Israeli exports, i.e., to attempt to steer exporters who are finding it difficult to export to Europe toward other markets such as East Asia, and thereby decrease the impact of the crisis on Israel. Nevertheless, in the short term, the Bank of Israel could intervene to boost the euro by buying euros for Israeli shekels. This is a partial solution, but one that was adopted by the Bank of Israel in its attempt to handle the drop in the value of the dollar. In the longer term, the State of Israel could continue to promote free trade agreements more vigorously, as well as improve current agreements with as many states as possible.
The Israeli market is relatively healthy and is coping with the crisis better than larger, stronger economies. The continuation of the crisis will spur Israeli exporters to penetrate new markets and to diffuse risks. On a grander scale, the scope of the problem will continue to force the economic powerhouses in Europe and the world to tackle it with maximum efforts, despite the inherent political difficulties. The EMU in particular and the EU in general are projects too large and important to allow significant damage by a crisis in a country such as Greece. (INSS 13.05)
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11.3 ISRAEL: Israel economy - Greek waves
On 5 May the EIU (http://www.eiu.com) said the worsening financial crisis in Greece and the deterioration in government bond markets in Europe generally have had no direct impact on Israel, at least to date. However, these problems do raise question about the sustainability of Israel's current growth spurt.
Government spokesmen, as well as the large Israeli banks, have stressed that neither the economy nor the banks have any significant exposure to the Greek economy, banking system or government debt. While this is no doubt correct in the immediate context, the fact remains that the Greek crisis has already had an impact on the Israeli economy - via the decline of the euro and other European currencies. The Bank of Israel's policy of intervention in the forex market, begun in March 2008, was aimed at preventing, or slowing, the shekel's appreciation versus the US dollar. However, since the onset of the Greece crisis in late November 2009, the dollar has strengthened globally, especially against the euro, whilst the shekel has risen in value against the US currency.
Shekel surge
The result has been a major increase, in the order of 12%, in the shekel's value versus the euro between December 2009 and April this year - enough to damage severely the profitability of Israeli exports to Europe. These are much less skewed toward high-technology sectors than are exports to the US, and hence tend to have lower profit margins. The timing and scale of the Bank of Israel's interventions in March and April seem to indicate that the Bank's main focus is now the shekel/euro rate, as the euro's decline globally pushed its price beneath the rate of NIS5 for most of April, hitting a low of 4.867 on May 5th.
Looking beyond the immediate currency-driven damage to Israeli exporters, the longer-term impact of the Greek and wider European crisis is likely to derive from the slow growth imposed upon the European economies generally, as many countries are forced to adopt policies of tight fiscal restraint. The poor prospects for export growth in the European markets are increasing the incentive for Israeli exporters generally to re-orient their efforts away from their traditional European markets toward the faster-growing economies of East Asia and Latin America. The government has yet to become directly involved in this effort to a significant degree, but it is likely to come under increasing pressure to do so.
Bullish Bank
Israel's recovery from the global economic downturn has been comparatively rapid. Growth in the fourth quarter of last year accelerated to 4.8%, in annualized quarter-on-quarter terms. The latest Bank of Israel Companies Survey indicates that business activity continued to expand during Q1/10. Moreover, the leading index of the Survey suggests that the positive momentum has been maintained during the second quarter. The composite State of the Economy Index also points to continued growth in the economy. Nonetheless, the level of foreign demand will clearly remain a critical determinant of overall growth, given that exports account for around 40% of GDP. Given continuing concerns about the pace of global recovery - particularly in the light of the debt crisis in Greece and its impact on European growth - we have left our GDP forecasts for 2010 and 2011 unchanged at, respectively, 3.2% and 3.6%. Our forecasts are slightly more conservative than those of the Bank of Israel, which recently raised its own projections for GDP growth to 3.7% in 2010 and 4.0% in 2011. (ViewsWire 05.05)
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11.4 ISRAEL: the Israeli IT Market Will Be Worth $4.9 Billion in 2010
Research and Markets(http://www.researchandmarkets.com) "Israel Information Technology Report Q2 2010" projects that the Israeli IT market will have a value of $4.9bn in 2010, with a return to single digit growth following a sharp slowdown last year. The market is forecast to reach $6.1bn in 2014. The Israeli IT market should have enough momentum from key sectors to expand at a compound annual growth rate (CAGR) of 6% over BMIs 2010-2014 forecast period, thanks to stable demand from defense and government sectors as well as opportunities in verticals like financial services and small and medium-sized enterprises (SMEs).
Spending is expected to resume single-digit growth in 2010 after a contraction in 2009. In late 2009 and early 2010, there were reports of a pick-up in the flow of projects. Vendors reported that demand had revived in the key financial services vertical, where new projects included an $11mn IT outsourcing tender by the First International Bank of Israel. Healthcare, the public sector and utilities were also generating projects.
The Israeli IT market has a number of positive fundamentals, which should keep it in positive territory during BMIs five-year forecast period. Low computer penetration of around 30% offers potential for continued growth. High internet penetration and growing broadband penetration are drivers for the retail segment, while the financial services sector accounts for about 15% of Israeli IT spending.
Industry Developments
In 2009, Israel's high-tech sector suffered as demand for high-tech exports dropped by at least 10-15%, with as many as 10,000 sector jobs feared to be at risk. This represented a major concern for the Israeli government given that high-tech accounted for around 10% of Israel's economy, with annual sales estimated at around $25bn. Major IT firms were retrenching in Israel, including SAP, Cisco and HP. IT is viewed as an important policy tool for the Israeli governments 2008-2010 socio-economic policy framework. In 2009, the National Economic Council recently submitted a policy agenda to the government, which specified two main policy tracks of reducing poverty and achieving balanced growth. The first track was expected to emerge as the main priority.
As part of its modernization agenda, the government is pressing ahead with various other strands of its e-government project. Among other initiatives, there has also been spending on computers in healthcare and the nationwide paperless court initiative. The e-government program is leading to increased demand for computers, with the Israeli government reaching supply agreements with vendors like Dell and HP.
Competitive Landscape
The Israeli IT services market is competitive, with leading multinational competitors IBM and HP following its merger with EDS both estimated to have Israeli IT services market shares of around 10%. HP Israel's software division hosts HP's biggest research and development (R&D) centre worldwide and the company also has significant production facilities in Israel.
Leading IT services vendors, including Israeli companies Ness Technologies and Matrix as well as US giant IBM, experienced mixed fortunes in the Israeli market in 2009. Ness Israel reported a 17% decline in full-year 2009 revenues compared with 2008, although around one-third of this was due to foreign currency effects. Meanwhile, market leader Matrix reported wins in a number of key sectors including healthcare, financial services, defense and government.
In 2010, Microsoft Israel, which as an annual turnover of around $1bn, hopes that sales of its Windows 7 operating system, launched in October 2009, will boost its sales. Microsoft anticipated that support from leading PC makers would underpin success for the new system, despite some caution from businesses. Israel is also an important R&D centre for Microsoft and in 2010 the company's Israel R&D centre launched a new unified access gateway (UAG) product.
Computer Sales
The Israeli computer hardware market, including desktops, notebooks, servers and accessories, is projected at $2.2bn in 2010, up from $2.1bn in 2009. The market is expected to grow at a CAGR of 5% over the forecast period to reach $2.6bn in 2014. Spending is expected to resume single-digit growth in 2010, after a contraction in 2009 due to the economic slowdown and unemployment hitting consumer demand for electronics goods. Household consumption moved into negative territory in 2009, with spending on household equipment down by 6.7% in Q109, and although there was a slight recovery in H209, trading conditions remained tough.
Software
Israeli software spending is projected at $1.0bn in 2010, up from $973mn in 2009. The packaged software segment is expected to grow at a CAGR of around 7% over the forecast period. Businesses were expected to remain cautious, deferring investments or looking for good enough solutions to immediate problems. However, there should still be several growth areas going forward. Spending on software is shifting towards the SME segment, which forms the mainstay of the Israeli business sector. Spending on enterprise solutions has grown since 2007, with reviving or emerging areas of opportunity including security, customer relationship management (CRM) solutions and business intelligence. In terms of verticals, the financial sector has been a mainstay of demand, with other key opportunities including defense and healthcare.
IT Services
The IT services segment is estimated at $1.6bn in 2010 and this is expected to grow at a CAGR of 7% over the forecast period to reach $2.1bn in 2014. In 2009, there were reports of IT managers scaling back projects, and vendors will have to adapt to an environment where some projects are commissioned more in response to immediate needs.
Government and defense are two key sectors likely to be a continued source of opportunities, because the factors driving spending in each case are not particularly sensitive to economic vicissitudes. Another key area of opportunity is healthcare IT. Despite failing to capitalize in the past, Israel is starting to emerge as a desirable location for packaged applications and localization services.
E-Readiness
Israel's high PC penetration and the growing availability of broadband access mean that internet penetration is likely to continue its upward trajectory. The government has announced that it intends to make a big effort to narrow the digital gaps that manifest themselves across various demographic lines. Israel's strong broadband growth has long relied on a handful of developments across the market. These include the competition between Bezeq and the cable companies, with five major internet service providers (ISPs) vying for market share from both the corporate and residential markets, which enjoy high PC penetration rates, advanced telecoms infrastructure and minimal regulatory intervention. Another development likely to stimulate growth is the introduction of local loop unbundling (LLU), which will give alternative operators access to Bezeq's network and will stimulate much greater competition. LLU was due to be implemented by end-2009. (R&M 19.05)
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11.5 KUWAIT: Pharmaceuticals & Healthcare Report - Q2 2010 Analysis
Research and Markets' (http://www.researchandmarkets.com) "Kuwait Pharmaceuticals and Healthcare Report Q2 2010" says the pharmaceutical market was estimated to be worth $365m in 2009. Oil-driven GDP growth is expected to continue to fuel both public and private pharmaceutical expenditure over the forecast period. The market should grow at a CAGR of 5.0% over the next five years to reach $466m in 2014 according to the reports forecast. Over a 10-year time horizon, we expect the market to grow at 5.1%, reaching a value of $601m in 2019.
While Kuwait's drug expenditure is relatively small in absolute terms, regional harmonization of pharmaceutical regulation and trade means that drug makers are increasingly evaluating the Gulf Cooperation Council (GCC) as a whole. The analyst forecasts that the GCC regional pharmaceutical market (consisting of Saudi Arabia, Kuwait, Bahrain, Qatar, the UAE and Oman) will be worth $7.6bn by 2014 and $9.6bn by 2019.
Patented drugs dominate private consumption. Kuwait's small size makes it difficult to obtain bulk purchase discounts or generate real competition, posing a challenge for smaller private sector purchasers in particular, Consequently, generic drug prices in private pharmacies are only 10-15% lower than their branded equivalents.
The country's strong pharmaceutical regulatory structure and stable political and economic landscape ensure that it scores highly in the Pharmaceutical and Healthcare Business Environment Ratings. Kuwait is ranked fourth out of 17 markets surveyed in the Middle East and Africa, but its relatively small size means that it offers potentially lower returns than larger markets in the region such as Saudi Arabia or the UAE.
A shortage of workers remains a challenge for Kuwait's public healthcare system. In March 2010, Kuwait's Ministry of Health announced plans to penalize doctors employed by the public sector who carried out private work during working hours without prior permission, after it found a number of specialists were also working for the private sector part-time.
Despite efforts to strengthen the domestic industry, only 20% of pharmaceutical products in terms of volume are manufactured domestically. The country's only major producer is generics-based Kuwait- Saudi Pharmaceutical Industries (KSP). No multinationals have a direct manufacturing presence in the country, with most companies conducting operations through representative offices in neighboring Saudi Arabia or the UAE. (R&M 12.05)
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11.6 OMAN: Pharmaceuticals and Healthcare Report - Q2 2010 Insights
Research and Markets' (http://www.researchandmarkets.com) "Oman Pharmaceuticals and Healthcare Report Q2 2010" estimates that Oman's pharmaceutical market was worth $124mn in 2009 and that it should rise to $171mn by 2014, representing a CAGR of 6.69%. This rate will slow to around 3.6% between 2014 and 2019 to give a final market value of $204mn. Oman has one of the smallest drug markets in the Middle East, which discourages foreign investment, but the country benefits from a well-funded and advanced health system. Indeed, health expenditure is forecast to increase from $0.8bn in 2009 to $1.38bn by 2014 at a CAGR of 11.53% from 2009-2014. Oman's economy was relatively untouched by the economic downturn, growing at an estimated 2.6% in 2009. For 2010, the analyst expects growth to stand at a healthy 5.2%, based on an expected uptick in oil production, which will boost consumer spending power and will also have a positive effect on public finances.
In February 2010, Oman's health minister, Ali Bin Mohammad Bin Mousa, announced that the government will open more hospitals to meet higher demand for health services, reports Gulf News. During a meeting of the Majlis Ashura, the minister acknowledged long waiting times for patients, as health centers and clinics have to provide services to more than 3,000 cases a day. He added that a new royal hospital would be established in two years time. According to MoH figures in 2008, 93% of health spending was recurrent, with developmental expenditure standing at $49.3m. This represents an increase of 37.7% on 2007, when developmental spending stood at $37.1m. In 2006, the figure was just $20.7m. However, there were concerns that the rate of increase may have slowed somewhat in 2009 as a result of the economic downturn. The news from the government concerning hospital openings, however, seems to suggest that high-levels of investment will continue in the immediate future.
Meanwhile, Oman's Business Environment should benefit from the governments January 2010 announcement that it is implementing a new tax law, which aims to improve the country's economic situation and attract investment. The new law will encourage foreign companies to invest in Oman, promote competition and create tax equity, efficiency and transparency. The government set a tax rate of 12% to all companies incorporated in Oman, irrespective of their shareholders nationality. In the Business Environment Rating matrix for Q2/10, Oman was ranked at ninth of the 17 regional markets surveyed in the Middle East and Africa (MEA) region. (R&M 14.05)
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11.7 EGYPT: Political Catch-all
On 12 May the Economist Intelligence Unit (http://www.eiu.com) reported that the Egyptian government has renewed its emergency laws for two more years, while promising to be more discriminating in their application and to continue to work on new counter-terrorism legislation that would replace them. This defensive posture reflects the government's concern about the growing effectiveness of the opposition to the rule of President Hosni Mubarak and his National Democratic Party (NDP) in the run-up to parliamentary and presidential elections.
The emergency laws in their current form have been in force since Mubarak came to power in October 1981 after the assassination of Anwar Sadat (who had lifted an earlier version the previous year). The laws give sweeping powers to the security services, including indefinite detention without charge, and the referral of civilian detainees for trial by military courts. The laws have been renewed at three- and two-year intervals throughout the Mubarak era.
In 2005, Mubarak undertook some limited political reforms. These included changing the constitution to allow for direct election of the president, subject to tight restrictions on who would be eligible to stand. He pledged on his re-election that year for a fifth term that he would seek to replace the emergency laws with a counter-terrorism law. The government has not yet come up with a draft for such a law, but the NDP has said that the renewal of the emergency laws should not be taken as a sign that the counter-terrorism law has been dropped. The government has also inserted a clause specifying that the emergency laws will only be used against people suspected of being involved in terrorism or narcotics, and has insisted that all cases will be subject to judicial review. The law was passed on May 11th by 308 votes (mainly NDP) to 101 (Muslim Brotherhood - classified as independents - and the small legal opposition parties), with 45 absentees.
Window dressing?
The domestic opposition and international critics of Egypt's security regime (such as Human Rights Watch and Amnesty International) do not accord much credence to the government's assurances that the emergency laws will be used sparingly and under judicial supervision. The government has stated before that the laws will only apply to terrorists and drug traffickers - the only difference this time is that this assurance is written into the legislation - whereas in practice many of those detained would be more properly defined as political prisoners. The laws are routinely used to sweep up members of the Muslim Brotherhood. The Ministry of the Interior claims that the number of administrative detainees held under the emergency laws does not exceed 1,500; Amnesty International says that it is more like 10,000. There have been few (if any) instances of judicial intervention to overturn measures taken under the emergency laws. The government has also said that the laws do not allow monitoring of communications. However, Human Rights Watch points out that such monitoring has been authorized in an amendment to the constitution that was passed in 2007.
Plaintive
The government has defended the maintenance of the emergency laws on several grounds. It says that Egypt remains vulnerable to terrorist attack, as demonstrated most recently in the trial and conviction of members of a cell set up by Hezbollah, an Iranian-backed Lebanese group, to attack targets in Egypt, including ships passing through the Suez Canal. (The trial was conducted by a military tribunal.) Another line of defense is that Egypt is not alone in having such emergency laws, citing Israel (which kept in place laws inherited from the British Mandate when the Jewish state was founded in 1948) and Syria, which has kept its emergency laws since 1963. In an apparent response to criticism from the Obama administration, which expressed disappointment in the two-year renewal, Egyptian officials say that it has not been easy to find a way to deal with hundreds of detainees classified as dangerous terrorists in the transition from emergency laws to a counter-terrorism law - pointing out that President Obama faces a similar difficulty as he seeks to live up to his pledge to close the Guantanamo detention centre.
ElBaradei factor
The government was able to shrug off periodic criticism of its human right policies in the past by presenting the political choice in Egypt as being between a stable, pro-Western, regime and a Muslim Brotherhood opposition with links to Islamist terrorists. This has become more difficult with the emergence of Mohammed ElBaradei, the former head of the International Atomic Energy Agency, as a standard-bearer for political reform. ElBaradei is pressing for constitutional changes to ease the restrictions on candidacy for the presidential election and to restore judicial supervision of parliamentary elections. His international prestige means that it is hard for the authorities to suppress him as they have other campaigners for political reform, and he has attracted a significant and enthusiastic following among liberal opponents of the NDP/Mubarak regime (he has a more uncomfortable relationship with the Muslim Brotherhood).
The ElBaradei factor has added to the tensions surrounding the parliamentary elections (partial for the Upper House in June; general for the lower house at the end of this year), in which the NDP is looking to maintain its overwhelmingly dominant position. The stakes are high owing to the proximity of the presidential election: the current rules specify that candidates must be from the leadership of a party holding at least 3% of the seats in parliament or else must obtain 250 signatures of support from MPs or elected municipal council members. It is commonly assumed that the regime wishes to ensure that either Mubarak gets a sixth term or that his son, Gamal, who is chief of policy in the NDP, succeeds him, with minimal opposition. The government has rejected opposition claims that one of the purposes of renewing the emergency laws until June 2012 is to guarantee that these elections all go to the regime's plan. (EIU 12.05)
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11.8 EGYPT: Egypt Pharmaceuticals and Healthcare Report Q3 2010
Research and Markets' (http://www.researchandmarkets.com) "Egypt Pharmaceuticals and Healthcare Report Q3 2010" says Egypt's total pharmaceutical spending has been on a steady rise, reaching a calculated $2.48bn by the end of 2009 and forecast to rise to $4.24bn by 2014 at an 11.4% compound annual growth rate (CAGR). Growth in the next five years will be driven by the drug pricing reform, which should make all drugs more affordable, but in general will make generics a more attractive option for substitution. Our long-term outlook to 2019 is for drug spending to reach $5.99bn, with a slower CAGR of 9.2% from 2014 onwards.
We assert that Egypt's pharmaceutical sector has more potential in terms of growth and expansion prospects over the next five years than its regional peers Algeria and Morocco. Our view is based largely on the high market value of drug sales in Egypt, as well as the strengthening domestic drug manufacturing sector, which should help alleviate the pharmaceutical trade deficit.
In particular, the government is keen to encourage foreign direct investment (FDI), although its target of $10bn by June 2010 is looking overly optimistic given that only $2.6bn had been invested by April. In our view, the pharmaceutical sector has much potential: numerous drug makers already have manufacturing sites in the country, and although the regulatory environment is challenging, the prospect of selling in such a populous market will continue to be attractive. Other sectors are receiving increased international interest, giving more impetus in general for foreign-led projects.
In terms of US dollar year-on-year (y-o-y) growth in the pharmaceutical market, we believe Egypt will outperform its neighbors, with growth of 16% between 2010 and 2011. Egypt has several strengths: domestic manufacturing is developed and expanding; drug exports are exceeding market expectations; per capita spending will remain low, and therefore the need for affordable generics should drive domestic manufacturing and generic imports; the healthcare system is still undergoing a review and will likely be reformed within the next five years; the epidemiological profile is in line with regional trends; the demand for niche therapeutic areas is rising as more diverse drugs reach the market; and we expect massive consolidation within the local drug manufacturing industry as smaller players in specific treatment areas will need investment for expanding capacities.
The Egyptian pharmaceutical sector will also benefit from the presence of locally based active pharmaceutical ingredient (API) manufacturers, which will cut imports and reduce costs for existing drug makers. FDI in this area is also likely to be warmly received by the government and will help to create a strong base in North Africa for drug manufacture. (R&M 24.05)
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11.9 EGYPT: Internet Investment
For the past decade, the Oxford Business Group observes, the Egyptian government has pursued the development of a knowledge economy via the expansion of its information and communications technology (ICT) sector, now a major economic breadwinner. Now Egypt has cemented its position at the forefront of Arabic content expansion by becoming one of the first three countries in the world to receive a domain name in non-Latin script.
In May 2010, the Internet Corporation for Assigned Names and Numbers activated the top-level Arabic domain name ".masr" for three Egyptian companies (TE Data, InTouch and Vodafone Data). The Arabic domain name may be used in addition to the standard ".eg" and other Latin character names. "Introducing Arabic domain names is a milestone in Internet history," the Egyptian communications and IT minister, Tarek Kamel, wrote in a statement. "It will boost the number of online users in the country and enable internet services to penetrate new market segments by eliminating language barriers."
Saudi Arabia and the UAE received Arabic domain names at the same time as Egypt, while Russia was assigned the Cyrillic ".rf" the following week. ICANN reported that 21 requests have been filed for domains in 11 different languages since November, when the organization began accepting applications.
It was high time for the inclusion of Arabic domains, as the world's 320m Arabic speakers are currently underserved by the internet. According to the Arab Media Outlook report by the Dubai Press Club and PricewaterhouseCoopers, broadband usage in the Middle East and North Africa region is expected to grow 25% annually until 2013. "Arabic content creation is set to increase drastically, with 5% of the world's population speaking Arabic and yet only 1% of internet content available in that language," Wael El Fakarany, the regional manager for Google Egypt, Saudi Arabia and North Africa, told OBG.
When it comes to putting Arabic content on the web, Egypt has assumed a leading role regionally. The Egyptian Ministry of Communications and IT's ICT Strategy 2007-10 includes an e-content program aimed at producing Arabic internet content, with an emphasis on the cultural and intellectual. For example, in conjunction with IBM, the ministry began digital processing of Egypt's National Archives in December 2009.
The ICT sector has played a major role in the growth of the Egyptian economy during the global crisis, expanding 14.6% in the 2008-09 financial year. In contrast, the overall growth rate for the economy was just under 5% in the same period. Foreign investment into the sector has reached over $1bn annually, due in part to developed infrastructure, including the 3m-sq-metre technology park Smart Village in Cairo.
In addition to courting international IT players, the government has focused on building up a more computer-literate populace as the foundation of an information society. In February 2010, internet penetration reached 22.2%, representing more than 17m internet users, while the state has made efforts to increase this rate by lowering internet costs.
The Egyptian Education Initiative (EEI) aims to integrate ICT into schools, training the next generation of Egyptians for high-tech careers. One of the scheme's longer-term objectives is the connection of all preparatory schools to broadband by 2012. The number of Egyptian tech graduates has reached 80,000 per year, creating a large workforce for the high-value international ICT market.
With nearly 60% of its population under the age of 25 and ICT a burgeoning economic powerhouse, Egypt has good reason to continue pursuing development of the sector. "From 2010 to 2014, we will endeavor to use innovation as a primary driver for future growth," Kamel told OBG in an interview in 2009. In being among the first to receive an Arabic domain, Egypt has shown itself to be at the forefront of the Arabic internet revolution. (OBG 25.05)
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11.10 TUNISIA: A Place in the Sun
Tunisia is ramping up investments in renewable energy projects in an effort to both trim its own electricity bill and pave the way for many exports, following the announcement that it would participate in a multibillion-euro scheme that could grow into the largest international energy program ever deployed. The Oxford Business Group said that while long having backed the development of a mix of renewable energy sources, it seems the Tunisian government is now shifting its focus towards the solar option (though still supporting other alternative energy forms such as wind power and biomass).
Late last year, the government launched a €2.05bn program to reduce the country's dependence on energy sourced from hydrocarbons, with the scheme aiming to fund more than 40 separate renewable energy projects while also introducing subsidies for solar panels, lowering the cost of technology so as to encourage citizens and businesses to install panels.
The Tunisia Solar Plan foresees a mix of public and private funding to pay for the program, with the state taking the lead in some of the major projects, including three large-scale solar developments, and the private sector contributing to 29 separate schemes. Among its objectives, the government hopes the initiative will bring about a 22% reduction in demand for conventional energy sources and cut carbon emissions by 1.5m tonnes a year, while increasing renewable energy production to 550 MW by 2016.
To help meet this goal and to encourage private use of solar energy, the government has reduced the price of solar panels by around 30%, with the Tunisian Electricity and Gas Company (STEG) cooperating with the banking sector to put in place an easy billing system that allows buyers to pay off their purchases in installments over a five-year term.
Profit provides another incentive for the private sector to install alternative energy generation capacity. The government has enacted legislation allowing for unused surplus, up to 30% of total production, to be sold on to STEG. While this will probably have little real benefit to householders, private sector businesses that invest in renewable energy plants could well offset the cost of acquiring the technology within a few years, quite apart from the savings to be accrued from meeting their own electricity needs.
Though substantial, the investment for the Tunisia Solar Plan is but a fraction of that proposed under an ambitious scheme that could see the country become a major energy exporter in the coming decades. Under the Desertec Industrial Initiative (DII), €303bn would be spent on establishing power generation capacity in North African states such as Tunisia and a high-voltage direct current transmission grid to allow electricity exports to Europe.
According to Bernd Utz, chief technology officer of the renewable energy division of the German firm Siemens – one of the key partners in the DII project – thanks to its existing experience with solar energy, Tunisia is well placed to be a leading player in the scheme and thus stands to gain from it. "I think the main benefit for some North African countries like Tunisia is that, for the first time, there is more available renewable energy," he said in an interview with international media in late April. "So, it's just having more power in the grid, which could help meet the increasing demand. Secondly, it's creating qualified jobs and economic development skills. Thirdly, the project can open a channel for exports and revenue."
Though still very much on the drawing board, DII is being pushed forward by its supporters, with plans being drawn up that would see initial production begin by 2020, with up to 15% of Europe's electricity needs to be met by the African sun by 2050.
Tunisia is also involved in the early stages of the Mediterranean Solar Plan, a separate EU-backed scheme that envisions investing more than €38bn to construct solar energy plants in Mediterranean and North African countries. The output of these plants would then be exported to Europe, as part of the EU's commitment to meeting 20% of its electricity consumption via renewable sources.
In the meantime, Tunisia is also investing in wind energy as a viable alternative to conventional sources of electricity. Currently, some 6% of the country's electricity needs are met by wind farms, with output expected to rise to 300 MW by next year and up to 1000 MW in the years to come. Although working to bolster other renewable energy sources, the Tunisian government is pouring resources towards the solar sector in a bid to keep the lights on at home, while cashing in on Europe's burning need for more power. (OBG 25.05)
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11.11 ALGERIA: Algeria Petrochemicals Report Q3 2010
Research and Markets' (http://www.researchandmarkets.com) "Algeria Petrochemicals Report Q3 2010" says Algeria's short-term goals will be more focused on the development of upstream resources, with petrochemicals development ongoing and not expected to be onstream until 2014.
The June 2009 BP Statistical Review of World Energy estimate for proven oil reserves is 12.2bn bbl. There is scope for expansion, with the authors assuming at least 12.5bn bbl by 2014. Estimates of recoverable oil resources range as high as 43bn bbl. Exploration success rates in the Berkine Basin have been high and several billion barrels of oil may lie in the area. With gas, we forecast 2008's 4,500bcm of reserves to rise to 4,650bcm by 2014. State-owned company Sonatrach announced five new oil and gas discoveries, bringing the total number of finds for 2009 to nine. In the announcement, reported by state news provider Algrie Presse Service in late December, Sonatrach said it had made five discoveries in the Berkine, Illizi and Amguid/Hassi Messaoud basins, all in the east of the country. No reserves estimates have been released and Sonatrach has not commented on the potential impact of the new discoveries. We forecast that estimated gas production of 100bcm in 2009 will reach 140bcm by 2014.
As a result of this expansion in gas and oil production capacities and the country's geographical position and economic relations giving it easy access to the markets, Algeria is well placed to take advantage of the decline in the falling competitiveness of the West European petrochemicals industry. However, an uncertain business environment and delays to the Arzew ethylene cracker are undermining the industry's progress.
In 2009, Algeria had petrochemicals production capacities of 130,000 tonnes per annum (tpa) of ethylene, 178,000tpa of PE, 40,000tpa of VCM, 35,000tpa of PVC, 120,000tpa of methanol and 990,000tpa of ammonia. The Algerian petrochemicals industry is set to experience massive growth in olefins, polyolefin, aromatics, methanol and fertilizer production from 2014 after the completion of the Arzew petrochemical complex and a number of urea and ammonia units. The round of contracts signed in July 2007 will see the construction of a 1.1mn tpa ethane cracker at Arzew, which will be used to manufacture 410,000tpa of MEG, 350,000tpa of HDPE and 450,000tpa of LLDPE, mainly for export. This will be overseen by a 51:49 joint venture (JV) between French major Total Petrochemicals and Sonatrach.
The Total-Sonatrach joint venture is in the process of awarding technology and design contracts for the complex at Arzew. However, in November 2009 the cracker faced delays as the contract looked set to be renegotiated over cost issues. The JV was formally agreed in December 2007 and was due to come onstream in 2012, but this has now been pushed back to 2014. The European Commission cleared Total to create a petrochemical JV with Sonatrach. The investment, shared equally by the partners, will cost $3bn and process 1.4mn tpa of gas, fed from natural gas fields in southern Algeria. The contract was awarded in July 2007 and includes the construction of the ethane cracker. In March 2009, the American Scientific Design Company was selected to provide its EG technology to the complex, which will have capacity for 550,000tpa of EG. The award includes the license, provision of a process design package, technical assistance and start-up services, and the initial charge of Scientific Designs ethylene oxide catalyst.
In the Middle East and Africa Petrochemicals Business Environment Ratings table, Algeria is in 10th place with an overall score of 38.0 points, 0.2 points less than in the previous quarter, due to a decline in its country risk score. In nearly every indicator, Algeria comes last by a long margin except when Nigeria scores worse and the situation is likely to remain that way until the Arzew complex is onstream. (R&M25.05)
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11.12 TURKEY: Economy Shakes Off Shackles Of Crisis, But Still Hindered By Europe's Troubles
Zaman writes that while Turkey has almost completely closed the door on the recession, the troublesome situation in several European economies is preventing the country from transitioning directly to an economic boom. Observers are optimistic that the rapid economic recovery will continue, although they caution that the adverse impact of global developments may keep the country from leaving the crisis completely behind for some time.
For the past several months, the Turkish economy has been enjoying an influx of positive economic data, suggesting that Turkey is doing well in its recovery from the worst financial crisis since the Great Depression. After managing to remain afloat amidst a devastating global credit crunch, the economy registered 6% growth in Q4/09 over the same period of 2008, a promise that happier days are here again.
Recent figures revealed that Turkey increased its sales abroad by 23% in the first four months of 2010 to reach $35 billion in revenue, registering double-digit year-on-year growth rates for the past five months. Observers predict that Turkey will not experience any difficulty in reaching or even surpassing its $107.5 billion export target by the year's end, as set out in the medium-term economic program.
Industrial production enjoyed an impressive 21.1% jump in March over the same month of the previous year, heralding a strong recuperation in Turkey's manufacturing performance, while the capacity utilization rate also climbed to its highest level in 18 months last month. Confidence in the Turkish real sector and the consumer confidence index also reached post-crisis peaks in the fourth month of the year. Even the only discouraging indicator, unemployment, showed a slight recovery in February, dropping by 0.1%age points over the preceding month.
'EU crisis prevents Turkey from enjoying full recovery'
Amid these positive developments, Sunday's Zaman spoke with sector representatives and economy experts this week about whether Turkey has been saved from the gloomy shadow of the economic turbulence that shook the world to the core last year or whether there is still a long way to go. According to Omer Cihad Vardan, the president of the Independent Industrialists and Businessmen's Association (MUSIAD), Turkey has almost overcome the crisis, though some fields still remain in need of further development. “However, we cannot say that Turkey is 100% out of the crisis until Europe leaves its current turmoil behind,” he said in a phone interview with Sunday's Zaman.
“The Turkish economy is, in fact, ahead of the pack in the way out of the economic meltdown. We can even say that it has surmounted the crisis well compared to other major economies in the world. This is an important thing, but not sufficient by itself, because Turkey is a country integrated into the global economy. It exports and imports. If its export markets still suffer from the recession, it is not a sign of relief for the economy. Europe, for instance, receives some 40% of Turkey's exports, and its failure to recover from the recession as quickly deters Turkey from leaving the crisis behind.”
Yet Vardan hopes that the EU will find a solution to the debt crisis before it grows further, since otherwise it will not be a surprise to see the crisis spread from Greece, Spain and Portugal to the whole continent and even outside its borders, derailing the global economic recovery. In fact, the world markets are becoming increasingly sensitive to signs that the European debt crisis continues to grow, fearing that the turbulence could shake the global economy, which is still extremely vulnerable to any shock. Although the EU, afraid of a collapse of the eurozone as the euro plunged significantly, put up a staggering €750 billion rescue package two weeks ago, European stock markets continued their slide last week.
'GDP figures show crisis over'
Seyfettin Gursel from Bahcesehir University notes that Turkey has left the crisis behind, according to certain economic indicators that have returned to their pre-crisis levels. “Considering gross domestic product [GDP], I predict Turkey will attain a growth rate of 12 to 13% in the first quarter of this year over the same period of last year, which will be followed by a year-on-year growth of 7 to 8% in the second quarter. So we will regain pre-crisis levels in terms of GDP growth rates by the second three months of 2010,” said Gorsel. According to him, employment is also likely to show a similar trend, returning to 2008 levels during the spring in nonagricultural employment. “So, we can say that Turkey has exited the crisis in a sense,” he affirmed.
However, Gorsel added, there is also a half-empty part of the glass, which is unemployment, a global issue. The number of unemployed surged from about 2.3 million at the onset of the crisis to its current level of 3.56 million, a staggering increase of 1.27 million in the span of one-and-a-half years. “It will take many years to reduce the number of unemployed to pre-crisis levels,” he predicted. (Zaman 23.05)
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11.13 TURKEY: Azerbaijan politics - Breaking with America?
On 12 May the Economist Intelligence Unit (http://www.eiu.com) said that Azerbaijan's relations with the US are at a historic low, because of US efforts to foster Turkish-Armenian reconciliation as a separate matter from the Azerbaijani-Armenian dispute over Nagorny Karabakh. The acrimony also touches on Azerbaijan's domestic affairs, as some in Baku suspect the US sees the November parliamentary election as an opportunity for regime change. As a result of this falling out, there is a chance that Azerbaijan could change its strategic orientation in favor of Russia. This threatens European plans for energy-supply diversification also look vulnerable--although for the moment Azerbaijan remains rhetorically committed to the Nabucco pipeline project. The regional balance in the South Caucasus is also potentially at risk.
For over 15 years Azerbaijan has pursued a pro-Western policy; it has given Western oil companies privileged access to its oil sector and has built pipelines to deliver its hydrocarbons to Western markets. Baku has stopped short of seeking to join NATO but has cooperated with the US-led alliance. It has maintained this course despite of repeated overtures and occasional bullying from Russia.
In the past six months, however, ties between the US and Azerbaijan have been severely strained. The main cause has been active US support for rapprochement between Armenia and Turkey, involving the establishment of diplomatic relations and the opening of the land border. This touches directly on Azerbaijani interests: the Turkish-Azerbaijani blockade of Armenia exacts a continuing price on Armenia for the occupation of Nagorny Karabakh and surrounding territories.
Turkish-Armenian reconciliation has now stalled, partly because of pressure applied by Azerbaijan on Turkey's government and parliament. US motives for pursuing this course are open to debate, but domestic considerations loom large. During his campaign to be president, Barack Obama, voiced his support for recognition of the massacre of Armenians in the Ottoman Empire during the First World War as genocide. Since taking office he has been under pressure to make good on this promise, and so has backed the normalization protocols - which provide for the establishment of a bilateral Turkish-Armenian commission on historical questions - as a way of dealing with the issue. Some in Azerbaijan suspect that it is being frozen out so the US can build military bases in Armenia or use it as a launching pad for an attack on Iran's suspect nuclear facilities.
Strained Alliances
At the end of 2009 the US Congress allocated $8m in financial aid to Nagorny Karabakh in the 2010 fiscal year. The response in Azerbaijan was furious. The head of the presidential administration's international affairs department, Novruz Mammadov, said this showed the US was not acting neutrally in the Karabakh dispute. On 15 December a large number of Azerbaijan's opposition parties joined with the ruling bloc to sign a statement claiming that the US aid package threatened Azerbaijan's territorial integrity.
Tension increased further in March, when the foreign affairs committee of the US House of Representatives voted to recognize the Armenian genocide. The non-binding resolution called on Obama to recognize it too in the US's annual statement on the massacres, which is held on April 24th. In the event, Obama stopped short of doing so. However, according to local media reports in Baku, on the day that the resolution was passed Aliyev telephoned his Turkish counterpart, Abdullah Gul, to express his outrage, claiming that it fuelled tensions in the region. Aliyev reiterated his support for Turkey and the Azerbaijani parliament drew up a statement in protest.
Azerbaijan and Turkey have long been staunch allies. Following Azerbaijan's war with Armenia in the early 1990s, Turkey closed its border with Armenia in a show of solidarity. Turkey also forms part of an important export route for Azerbaijan, which takes Azerbaijani oil and gas from the Caspian Sea through Georgia, Turkey and onto Europe. Relations were strained by the Turkish-Armenian protocols in October 2009 but the Turkish insistence on a linkage to the Karabakh talks has healed the rift. The two sides have reportedly settled a long-running dispute over gas-pricing and are due to sign a new agreement on this within the next week.
The end of the American dream?
The crisis in Azerbaijani-Turkish relations has passed, but US-Azerbaijani ties remain tense. On April 15th, the head of the public policy department of the presidential administration, Ali Hasanov, strongly criticized the US for supporting Armenia over Nagorny Karabakh. He also complained that the Armenian diaspora exercised too much influence over Azerbaijan's relationship with the US. Five days later, Azerbaijan's defense ministry announced the postponement of military exercises with the US scheduled for May.
This follows the withdrawal of Voice of America's radio broadcast license; the scrapping of the defense ministry's EuroAtlantic cooperation initiative, and threats in parliament to cancel Western oil contracts. In late April Eldar Ibrahimov, a senior member of Azerbaijan's ruling party, claimed that 18 months earlier the US had pressed Azerbaijan to open its airspace for an attack on Iran and to permit the opening of US military bases. In another move that is likely to upset the US, Azerbaijan has accepted a proposal from the Iranian foreign minister, Manouchehr Mottaki, to host a meeting between the foreign ministers of Azerbaijan and Armenia in a bid to try to find a solution to the Nagorny Karabakh conflict.
According to the opposition newspaper Yeni Musavat, Azerbaijan's government also perceives that western governments aspire to facilitate regime-change in Azerbaijan at the parliamentary election scheduled for November. The paper added that the authorities were considering postponing the ballot. Three regional organizations - the EU, the OSCE and the Council of Europe - have set out what they see as the main priorities ahead of the election: stronger independent electoral administration, freer media coverage and greater public participation in the electoral process. The organizations said that they will work with the authorities and civil society groups to improve Azerbaijan's ability to hold free and fair elections.
Despite the international organizations' efforts to improve electoral procedures in Azerbaijan, international observers have criticized every election since independence. Weakness and division among the opposition prevents it from providing a genuine alternative to Aliyev's New Azerbaijan Party (NAP). The authorities are also intolerant of any attempts by the opposition to increase their presence in society. For example, the authorities reacted swiftly to quash a small political demonstration held by one of the main opposition parties, Musavat (Equality), in Baku, on April 14th: the protest was forcibly dispersed and around 30 people were detained.
Reconsidering Russia?
Azerbaijan's government is unlikely soon to forget or forgive US efforts to pursue its narrow interests in the Caucasus at Baku's expense. Aliyev and his father have withstood intermittent Russian pressure over the last 15 years but have maintained a broadly pro-US course. This has now been repaid by the US seeking to weaken Azerbaijan's negotiating position vis-à-vis Armenia. The Azeri authorities will also be watching the US stance towards the November election closely, and to compare this with Washington's approach to recent elections in Armenia.
The suspension of military cooperation is noteworthy because it works against Azerbaijan's objective to strengthen its armed forces. As such, it underlines the depth of Azerbaijan's unhappiness with the US. Russia has on several occasions offered to buy Azerbaijan's coming gas glut and may do so again now. Recently, however, the Azerbaijani authorities have reiterated their commitment to the Nabucco gas pipeline project. A gas deal with Russia on its own would not be sufficient to prompt a strategic reorientation. If Russia could credibly offer to help Azerbaijan recover Nagorny Karabakh that might prompt a rethink. Lifting the Armenian occupation of nearly 20% of the country's territory is the number one priority; and at present it seems Azerbaijan's relationship with the US holds little hope of achieving it.
If Azerbaijan were to undergo a strategic reorientation, it would have ripple effects across the region. Two years ago, Georgia was avowedly pro-western and bent on NATO accession; Azerbaijan pursued a pro-Western oil and gas policy and supported other western-leaning governments in the CIS; and Armenia had achieved the considerable feat of enjoying good relations with the US and Russia (and Iran) simultaneously. Today, the West's standing in the region has fallen: Georgia is no longer actively pursuing NATO entry and its hopes of territorial reintegration dashed. Armenia's position is little changed. A shift in Azerbaijan's orientation would thus ensure that Russian political and commercial interests once again held sway. This would leave Georgia vulnerable. Already it has lost an influential supporter because of the change of government in Ukraine; a pro-Western Azerbaijan is the only reliable friend it has left. (ViewsWire 12.05)
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11.14 GREECE: Greece Economy Kicking The Can A Little Bit Further
On 11 May the Economist Intelligence Unit (http://www.eiu.com) said the €110bn IMF/euro area rescue package announced in early May, bolstered further by the region's huge €750bn stabilization mechanism agreed on May 10th, will allow Greece to meet its debt-servicing requirements over the next few years. While there is no longer any near-term pressure for Greece to raise debt in the capital markets, the Economist Intelligence Unit believes that the various bailout plans will only delay a necessary restructuring of Greek public debt, which could lead to some very negative consequences.
According to Petros Christodoulou, the head of the Public Debt Management Agency (ODDICh), Greece must roll over around €20bn in bonds in the second half of 2010 and €26bn in 2011. By the end of 2013 when the IMF/euro area package runs out, however, Greece must roll over around €104bn in bonds, which does not include funding its deficit or T-bills. The lending facility therefore just barely covers Greece's bond rollover requirements.
The Greek government recorded a primary deficit of 8% of GDP in 2009. According to our calculations, it must run a primary surplus of around 9% of GDP in 2010 just to stabilize its debt stock. Even if the Greek government were to default on all of its debt immediately, the 17%age point swing it would have to manage to stabilize its debt levels is formidable. The majority of the IMF/euro area lending facility is comprised of bilateral loans that will be offered at an interest rate of around 5%. While this is significantly lower than the rate the markets are demanding, it remains higher than the cost of borrowing for most other euro area countries.
If the Greek government succeeds in achieving all of the targets it has set for fiscal austerity and structural reform, and if the contraction in GDP is not greater than government forecasts, then it is possible that Greece could return to the markets in 2013 when the IMF/euro area package runs out. However, we expect the government to miss its deficit reduction targets and GDP to contract more sharply than official estimates, and therefore believe that a voluntary restructuring of Greek debt is seemingly inevitable.
A voluntary restructuring of Greek debt must take place before Greece has to return to the markets to finance its debt servicing needs in 2013. We expect that the Greek government and its creditors will negotiate at least a 30% haircut on Greek debt in 2012 to reduce Greece's debt stock to around 96% of GDP that year. If the Greek government succeeds in generating a primary surplus and has implemented some structural reforms by then, we expect this will be a sufficient reduction to allow Greece to get ahead of its debt servicing schedule.
Such a restructuring will require significant write-downs on the balance sheets of banks exposed to Greek sovereign debt, particularly Greek, French and German banks. We expect that these banks will strengthen their capital base over the next two years so that they can survive a haircut on Greek debt. In France and Germany it is also possible that Greek debt will be removed from private sector bank balance sheets and will instead be held by state-owned banks such as the Caisses des Depots (CDC in France) or the Kreditanstalt fuer Wiederaufbau (KfW in Germany).
Risks of delaying
Although Greece is no longer under the immediate strain of struggling to meet its debt servicing requirements, there are some potentially negative consequences to delaying a restructuring of Greek debt. Firstly, there is the issue of contagion. As Greek borrowing costs hit record highs almost every day in the last week of April and beginning of May, the spreads between Portuguese, Spanish, Irish and Italian government bonds and the comparable German bunds increased significantly.
Both Portuguese and Spanish sovereign debt were downgraded by Standard and Poor's in late April, and on May 5th Moody's rating agency threatened to downgrade Portugal in the next three months. With Greece now guaranteed to cover its debt servicing needs over the next few years, investors turned their attention to other euro area countries with worrying fiscal dynamics and low growth. If investors continue to worry that the peripheral euro area countries cannot meet their debt servicing requirements, they could drive borrowing costs up to a level that would cause a significant liquidity crunch. In the case of Portugal and Ireland, sufficient aid could be extended to avoid debt defaults. Given the formidable size of Spain and Italy's debt stocks, however, a bail-out of these countries by the IMF and euro area could be unfeasible on may counts.
In an attempt to stem the contagion of the Greek fiscal crisis, the euro area and IMF announced on May 10th that they would provide a euro area rescue package worth €750bn over the next three years. Euro area countries will provide up to €440bn in government-backed loan guarantees for any euro area member states facing a fiscal crisis. Furthermore, all 27 EU member states agreed to increase and extend the balance of payments facility used in 2008 to help Latvia, Hungary and Romania so that it is available to euro area countries. This fund will be increased by €60bn to €110bn, with the European Commission using the EU budget as collateral to raise money on the markets. In addition to the EU contributions, the IMF will contribute €250bn.
The markets initially responded positively to news of this colossal bailout, but the rally quickly faded once attention focused on the fact that the package does nothing to address the underlying imbalances that have caused the peripheral countries' particular fiscal dynamics. If Portugal, Ireland, Italy and Spain do not take further measures to address their structural imbalances, contagion from the Greek fiscal crisis could resume as the rescue package winds down. The risk of contagion in the short term will be stemmed in part by the actions of the European Central Bank, which announced on May 10th it will step in as a lender of last resort and buy sovereign debt in the secondary markets. The ECB will also reactivate unlimited fixed-rate offerings of three month loans to help boost liquidity.
Leaving the party
A second risk to delaying a restructuring of Greek debt is that, after undergoing an extremely painful adjustment, Greece could decide that the benefits of euro area membership do not outweigh the drawbacks. By abandoning the common currency, Greece could rebalance its economy through an external devaluation. However, the negative effects of leaving the euro area are likely to far outweigh any potential benefits of a floating currency. The new currency adopted would fall steeply in value, causing inflation to rise dramatically and competitive gains could only be maintained by preventing wages from also rising. Public debt would remain in euros while the government's tax income would be in a depreciated currency, and public debt default would be inevitable. The banks would be in danger of insolvency because their assets would be in the depreciated currency while they would have substantial borrowings in euros. Individuals would immediately withdraw their savings and deposit them abroad, causing a run on banks.
In a speech in late April, Greek prime minister George Papandreou said that despite the tough austerity measures and prolonged recession the country is facing, the most difficult challenge the country faces is how to buy some time. This is no longer an immediate issue given the large IMF/euro area emergency packages. While the prime minister may now breathe a sigh of relief, however, there are significant risks involved in having bought Greece more time. Contagion of the Greek fiscal crisis or Greece deciding the benefits of leaving the euro area outweigh the costs could both threaten the future of the euro area. (EIU 11.05)
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11.15 GREECE: Fitch Comments on Greek Public Finance Outlook
On 18 May, Fitch Ratings (http://www.fitchratings.com) published a new report assessing the outlook for Greek public finances following the approval of an €110bn IMF-EU financial support program earlier this month, designed to restore public debt sustainability by 2014.
'In Fitch's opinion, the package minimizes near term liquidity risk for Greece, obviates the need for the sovereign to tap international capital markets until 2012 and offers the government a path to fiscal solvency, provided that the program is implemented fully and effectively,' says Paul Rawkins, a Senior Director in Fitch's Sovereign ratings team. "However, whilst the support package maps out a viable route to medium-term debt sustainability, general government debt is set to rise to almost 150% of GDP before stabilizing in 2013, making this route a highly challenging one," added Rawkins.
Fitch has consistently highlighted the need for Greece to import external credibility from external institutions such as the IMF and EU, in the light of its poor fiscal track record and the damaging revelations of fiscal misreporting in October 2009. Strong conditionality is the key feature of the financial support package, which has at its core a highly aggressive fiscal consolidation and structural reform program, reinforced by a financial sector stability fund. Fiscal adjustment will be heavily 'front loaded' in a bid to secure the program's success and restore financial market credibility, with simultaneous IMF-EU disbursements dependent on quarterly reviews of Greek performance under the program.
Fitch currently rates Greece at 'BBB-' with a Negative Outlook, following successive sovereign downgrades from 'A' since October 2009. The agency notes that the engagement of the IMF has enhanced the credibility of the Greek fiscal adjustment program, while the accompanying financial support package greatly reduces near term financing risks. Henceforward, with the policy agenda being set by the IMF-EU, Fitch's focus will shift to the underlying performance of the economy and the Greek authorities' ability to sustain multi-year retrenchment in the face of deep seated domestic opposition. The downside risks are high and Fitch has accordingly judged that Negative Outlooks on Greece's sovereign ratings remain appropriate.
The success of the program hangs not only on the authorities' ability to meet the fiscal targets, but also the capacity of the economy to adjust and recover, which remains highly uncertain. The macroeconomic assumptions underlying the IMF program appear broadly realistic, while the private sector may yet prove to be more flexible than many expect, particularly in the context of broader European economic recovery. Nonetheless, Fitch says that the magnitude of the paradigm shift away from the public sector should not be underestimated.
Looking beyond the program, Fitch notes that the IMF-EU package will have a significant impact on the maturity, obligor and interest rate structure of general government debt. A key objective of the program is to restore affordable capital market access. However, the terms of official support imply a shortening of debt maturities, potentially exacerbating sovereign exposure to markets risks once the program is complete. (Fitch 18.05)
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11.16 GREECE: Pharmaceuticals and Healthcare Report for Q2 2010
Research and Markets' (http://www.researchandmarkets.com) "Greece Pharmaceuticals and Healthcare Report Q2 2010" calculates that total pharmaceutical spending in Greece reached a value of €6.24bn ($8.79bn) in 2009. Expenditure recorded 64% growth in local currency terms from 2005-2009, making it one of the most dynamic markets in the Central & Eastern European (CEE) region. However, BMI forecasts that growth in 2010 will drop to just 1.5% as harsh policies on pharmaceutical prices and restrictions on reimbursement eligibility are implemented. Over the next five years BMI projects growth of 3.71% in euro terms, or 1.26% in US dollars, with the market reaching a value of €7.49bn ($9.36bn) by 2014.
Greece's debt crisis remains the most important issue affecting the country's healthcare sector. Indeed, under Prime Minister George Papendreous plans to reduce the deficit from 12% in 2009 to under 3% in 2013, the country is planning a 10% cut in social security spending and is freezing hiring in the public sector. Naturally there are fears in the healthcare sector that large-scale cuts will be made. Large pharmaceutical companies are also often an easy target in times of crisis. The Greek authorities have already moved to reduce drug prices in line with countries such as Romania and Bulgaria. This could represent a sizeable reduction considering the disparities between these markets in terms of health expenditure. Romania currently spends $528.3 per capita on health, while Bulgaria spends $489.8. In comparison, Greece spends $3,092.
On a positive note, there is also likely to be an extra focus on corruption in the health sector. The debt crisis has unveiled the deep culture of graft in the industry, with hospitals massively over-ordering on some pharmaceuticals. A report from Transparency International claims that Greeks pay over $1bn in bribes each year, and the country has the worst ranking out of all the 16 eurozone countries. The average size of bribes are €1,355 in the public sector and €1,671 in the private sector.
Meanwhile, the row between drug makers and the Greek government over the payment of outstanding debts moved up to European level in December 2009, with the European Federation of Pharmaceutical Industries and Associations (EFPIA) lodging a formal complaint with the European Commission (EC) over Greece's non-payment of debts. According to the Hellenic Association of Pharmaceutical Companies (SFEE), cited by the Financial Times, cumulative debts to drug and medical device companies reached €6.5bn during mid-2009, well above official government statistics, which estimated outstanding hospital debts of between €2.5bn and €3bn in October. Despite the new PASOK-led socialist government stating that settling arrears would be a priority, BMI believes that eliminating delayed payments would be extremely challenging in 2010 and that debts could prevail for a number of years. (R&M 12.05)
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