TOP STORIES

• Shekel Begins Trading On Global Markets
• Saudi Arabian Homeland Security Market - $115 Billion Over the Next Decade
• Maryland Governor O'Malley Leads Biotech Mission to Israel
• Iraq Could Have Largest Oil Reserves in the World
• ILSI-Biomed Israel 2008 Opens in Tel Aviv
• MIDDLE EAST: Arab Capital of $4 Trillion Available for Investment
  

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Jerusalem Lures Biomed Firms With Grants

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Shekel-Dollar Exchange Rate Dips Below 3.3/$1
2.2 Shekel Begins Trading On Global Markets
2.3 Tower Semiconductor to Acquire Jazz Technologies

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 2-Track Global Announces Joint Venture Agreement with Triplanet for GCC
3.2 Consolidated Restaurant Operations Opens First Cantina Laredo and El Chico Restaurants in UAE
3.3 Saudi Arabian Homeland Security Market - $115 Billion Over the Next Decade
3.4 LaserCard Receives $2.9m Order for Saudi Arabia National ID Card Program
3.5 Denver Firm Wins Contract to Design Massive Egyptian Project
3.6 Orbit International's Power Group Receives $400,000 Order From Turkish Air Force
3.7 West Marine to Open First Franchised Store in Istanbul, Turkey
3.8 Zhone's Market Leading MSAP Selected by Greece's ON Telecoms for EFM Initiative

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 Israel Aspires To Be Financial Hub
4.2 Israeli Cities to Gain Environment Protection Authorities
4.3 Maryland Governor O'Malley Leads Biotech Mission to Israel
4.4 Lawyers Find It Wrong To Pay Below Minimum Wage

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Kuwait Threatens To Cut German Investment
5.2 Iraq Could Have Largest Oil Reserves in the World
5.3 Iraq to Increase Oil Production - Revenues Forecast at $62 - 100 Billion
5.4 Iraq Claims To Have More Oil Than Saudi Arabia
5.5 Iraq Inflation Up 16% On Food Prices
5.6 GCC Invests $18 Billion in New Steel Plants
5.7 Bahrain Eyes $2 Billion Refinery Expansion
5.8 UAE Opens First Plant for Recycling Construction Waste Opened
5.9 Non-Oil Foreign Trade in Dubai Up By 46%
5.10 Saudi Inflation Continues To Skyrocket
5.11 Yemen's Accession to WTO Discussed with World Bank
5.12 Foreign Investment in Egypt Sharply Up
5.13 Pakistan's Rupee Falls To Record Low

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:

6.1 IMF Says Turkey Needs Additional Measures To Reach 2009 Targets
6.2 Construction of Turkish Part of BTK Railway Set to Begin in July
6.3 Wireless Penetration in Turkey Will Increase from 95.0% in 2008 to 106.5% in 2010
6.4 Greece Drops In Competitiveness Rankings
6.5 Greek Economy Sails in Choppy Waters
6.6 Half of Greeks Are In Debt
6.7 Bulgaria GDP Growth to Slow Down

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Shavuot Holiday to be Marked on Eve of 8 June

*REGIONAL:

7.2 Lebanon Elects President After Months Of Turmoil
7.3 Kuwait Reappoints Prime Minister After Election
7.4 Turkey Readies to Go "Cold Turkey"

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8: ISRAEL LIFE SCIENCE NEWS

8.1 ILSI-Biomed Israel 2008 Opens in Tel Aviv
8.2 EarlySense Presents EverOn at the ILSI-Biomed 2008 Conference in Israel
8.3 PillCam COLON's Confirmed Potential as a Complement to Colonoscopy to Increase Colo-Rectal Screenings
8.4 Teva Announces Approval of Generic Sarafem Pulvules
8.5 Yissum Introduces Novel Device for Improved Saliva Based Medical Diagnostics
8.6 Given Imaging Receives Permanent Medicare Funding for PillCam SB in Australia

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Copenda's New Features Ease Communication Across Social Networking & Dating Sites
9.2 N-trig Sets New Industry Standard for Full Multi-Touch Capabilities on Large Format Displays
9.3 RADVISION Presented with Prestigious Industry Award for Product Innovation
9.4 LiveU's Transmission Technology Brings Live Video Broadcasts to the Internet
9.5 NSC Announces SnippTags – Spoken Words Tagging Service for Video Clips
9.6 PC Updater Software Will Now Be Free, Says RadarSync
9.7 China's Ministry of Railway Selects NICE for Third Project
9.8 Emoze Releases Upgraded Push-Email Enterprise Edition
9.9 Dune Networks Seizes #1 Position to Lead Switch Fabric Market
9.10 Silicom Server Adapters Selected for Virtualization Appliances of a Leading Storage Company
9.11 Alvarion Deploys First 3.3 GHz WiMAX Network in UK for Metranet
9.12 Elbit Systems Awarded $87 Million in Contracts for the Supply of Thermal Imaging Systems

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's CPI Rises More Than Expected in April
10.2 Israel's First Quarter Growth Faster Than Expected
10.3 Tourism in April Up 41% From Same Time Last Year
10.4 Foreign Investors Account for Quarter Of TASE's Activity & Own 17% Of Shares

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11: In Depth

11.1 MIDDLE EAST: Arab Capital of $4 Trillion Available for Investment
11.2 IRAQ: Gulf Countries Unwilling to Cancel Iraqi Debt
11.3 GCC: Fitch Says Oil Boom/Currency Pegs Bring Faster Inflation
11.4 BAHRAIN: Asset Hunt
11.5 BAHRAIN: Labored Reform
11.6 OMAN: Moody's Says Omani Banks Enjoy Strong Earnings & Growing Franchises
11.7 OMAN: Retail Therapy
11.8 TURKEY: Record IPO
11.9 GREECE: Fitch Affirms 'A'; Outlook Remains Positive

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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Jerusalem Lures Biomed Firms With Grants

In an effort to turn Jerusalem into the biomed capital and create new jobs, BioJerusalem, an initiative of the Jerusalem Development Authority, will allocate at least two grants of $706,000 each to life-sciences companies that are planning to establish or expand activity in Jerusalem this year. Initially, two life-sciences companies - including biotech, pharmaceuticals and medical devices - that base their business in Jerusalem this year will be eligible for the grant, subject to the condition that they employ at least 50 new employees in a constructed area of at least 2,500 square meters. If the program succeeds, it will be continued next year, with the option of more life-sciences companies receiving grants. The grant, aimed at accelerating the establishment of biomedical companies in Jerusalem, is part of the Jerusalem Economic Development Program approved by the government in 2005; it originally allocated a total of $82.35m over seven years for the economic development of the city. (JP27.05)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Shekel-Dollar Exchange Rate Dips Below 3.3/$1

The shekel-dollar exchange rate briefly dipped below 3.3/$ in inter-bank trading on 26 May, the first time since January 1997 that the rate has been below this level. The rate has since risen again slightly, and is currently just above the 3.3/$ mark, at 3.301/$, 0.98% below the 23 May representative rate. A further vote of confidence in the shekel by global markets can be found in the news that the shekel will become a convertible currency on capital and money markets worldwide, following Israel's official admission to the international currency clearing system operated by CLS Bank International. Another factor that will have an equal effect on local foreign currency trading, is the surprising figures on economic growth in the first quarter, published yesterday by the Central Bureau of Statistics. GDP grew by an annualized 5.4%, far higher than the Bank of Israel's 3.2% forecast for 2008 as a whole. Bank of Israel Governor Fischer is widely expected to raise the interest rate by 25 or 50 basis points. The interest rate is currently 3.25%, the lowest it has ever been in the country's history, following two 50 basis point cuts, and then a decision to leave the rate unchanged. The shekel-euro rate is currently up 0.16% at NIS 5.2493/€1. The shekel-dollar representative rate was set 0.15% lower on Friday at NIS 3.333/$1, and the shekel-euro representative rate was set 0.365% lower at NIS 5.2408/€1. (Globes 26.05)

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2.2 Shekel Begins Trading On Global Markets

From this week, the shekel will finally become fully convertible in international currency markets and will be traded by major commercial banks along with 16 other world currencies following approval by CLS Bank International in New York. "The inclusion of the Israeli shekel as a settlement currency in CLS [Continuous Linked Settlement] is a significant further step in Israel's increasing integration into the global economy," Bank of Israel Governor Stanley Fischer has said. "By reducing settlement risk in FX transactions, vital to Israel's open economy, it reinforces the stability and efficiency of Israel's banks and financial system, and benefits the entire economy. "We are pleased that the ongoing reform of the payments system undertaken by the Bank of Israel, including the introduction of an RTGS [Real-Time Gross Settlement] system and adoption of a modern-payments-system law, along with the bank's close cooperation with CLS Bank, the new Israeli members of the CLS service and others has made this possible." CLS Bank settles an average daily volume of more than 500,000 instructions with a gross value of $4 trillion. CLS Bank currently provides settlement service to over 2,500 participants. Of these, 61 are CLS Bank Members, including two new Israeli members, Bank Hapoalim and Bank Leumi. Several countries and companies already honor the shekel, but the announcement by CLS is a symbolic act that gives an international stamp of approval to the Israeli currency, and recognizes it as one of the strongest currencies in the world. (Various26.05)

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2.3 Tower Semiconductor to Acquire Jazz Technologies

Tower Semiconductor and Newport Beach, California's Jazz Technologies, a leader in Analog-Intensive Mixed Signal (AIMS) foundry solutions, announced the signing of a definitive agreement by which Tower will acquire all of the outstanding shares of Jazz in a stock-for-stock transaction valuing Jazz at a fully diluted equity value of approximately $40m, based on Tower's closing price on NASDAQ on May 19, 2008. Under the terms of the agreement, each outstanding share of Jazz common stock will be converted into the right to receive 1.8 Tower ordinary shares. The total value of the transaction, including net debt, is approximately $169m. Tower and Jazz are highly complementary and the transaction is expected to offer significant benefits to customers and shareholders. The combined company will be an industry leader, bringing together Tower's strength in CMOS Image Sensor, Non-Volatile Memory (NVM) and RF CMOS with Jazz's expertise in Mixed Signal, Power Management (CMOS and BCD) and RF (RF CMOS, SiGe and BiCMOS) to create one of the broadest portfolios of specialty process technologies. The agreement has been unanimously approved by the boards of directors of both Tower and Jazz and the transaction is subject to the approval of Jazz's shareholders and other customary closing conditions. The transaction is expected to close in the second half of 2008.

Migdal HaEmek, Israel's Tower Semiconductor (http://www.towersemi.com) is a pure-play independent specialty wafer foundry established in 1993. The company manufactures integrated circuits with geometries ranging from 1.0 to 0.13-micron; it also provides complementary technical services and design support. In addition to digital CMOS process technology, Tower offers advanced mixed-signal & RF-CMOS, Power Management, CMOS image-sensor and non-volatile memory technologies. (Tower20.05)

3: REGIONAL PRIVATE SECTOR NEWS

3.1 2-Track Global Announces Joint Venture Agreement with Triplanet for GCC

New York, New York's 2-Track Global signed an Exclusive Joint Venture Agreement with Triplanet to market its products in the Persian Gulf (GCC), India and Pakistan. Based in Dubai and Mumbai, Triplanet is a specialized vehicle tracking and security company servicing customers throughout the Gulf region as well as India. The Agreement covers 2-Track's ‘I-Track' brand of vehicle tracking devices and ‘M-Track', it's highly successful brand of Personal Tracking devices. 2-Track Global is a technology development and marketing company which owns, operates and licenses proprietary telematics solutions combining hardware and software applications run over wireless or satellite networks to deliver remote security management of marine and cargo fleets (including consumer solutions aimed at the leisure, marine and domestic security markets) and commercial vehicle plant and machinery management and security. The company has communications architecture technology which provides global logistics solutions for the remote monitoring of freight containers over multiple transport mores. (2TG19.05)

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3.2 Consolidated Restaurant Operations Opens First Cantina Laredo and El Chico Restaurants in UAE

Dallas, Texas' Consolidated Restaurant Operations (CRO) announced the openings of the first Cantina Laredo and El Chico restaurants in United Arab Emirates. El Chico opened at Jumeirah Beach Residence in Dubai, the world's largest single-phase mixed use development with 25,000 residents in 40 towers along the prestigious Dubai Marina. Cantina Laredo opened at Khalidiyah Mall in Abu Dhabi, the capital of UAE. The restaurants are the first of more than 100 CRO locations planned to open in the Middle East region. During 2006, Dallas-based CRO entered into a 105 restaurant development agreement with Saleh Bin Lahej Group, a well-regarded foodservice operator based in Dubai. Saleh bin Lahej is slated to open III Forks and Silver Fox fine-dining steakhouses in addition to Cantina Laredo and El Chico restaurants. El Chico is the iconic Tex-Mex, family-oriented restaurant with a heritage dating back to 1940. The authentic and colorful restaurant caters to families looking for freshly-prepared, original-recipe, savory Mexican food in a welcoming, casual atmosphere. (CRO22.05)

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3.3 Saudi Arabian Homeland Security Market - $115 Billion Over the Next Decade

Threatened at home by a massive Al Qaeda infiltration at all levels of society and intimidated by neighboring ascending Iran with its fundamentalist Shi'ia push, Saudi Arabia's rulers are embarking on a multi-tier homeland security project to protect themselves and their oil infrastructure, creating a market of more than $115 billion over the coming decade. This prediction is part of a new market research report published on May 27 by Homeland Security Research Corp. (HSRC), titled: "Saudi Arabia Homeland Security Market – 2009-2018." Oil and policy experts around the world are unanimous in their opinion that a significant damage to Saudi Arabia's oil exporting facilities or a major regime changing event in the kingdom might precipitate a debilitating economic crisis, possibly plunging the world's economy into a deep recession, caused by a sharp increase in energy prices. Saudi Arabia is the only country in the world where a vast majority of its homeland security components report directly to the royal court, and not to the ministries of Defense, Security or Interior. In the 1950s, the Kingdom dedicated about 30% of its GDP to protecting itself. Currently, the allocation for HLS is about 5%, a modest expenditure by comparison. Over the coming decade, Saudi Arabia's homeland security market is forecasted to be the largest after that of the U.S. The Kingdom boasts 24 separate agencies and organizations, arranged in a three-tier structure, employing more than 250,000 personnel (a number that is expected to grow by an additional 35,000 over the forecast period). In several sectors, the Saudi homeland security market is forecasted to be even larger than that of America's. For example, HSRC forecasts that the Kingdom will spend more than the U.S. on fortifying its borders with Iraq and Yemen (as opposed to the U.S's expenditure on similar efforts along the Mexican and Canadian borders). Homeland Security Research Corp. (http://www.homelandsecurityresearch.com) is a Washington, DC based, international market research and professional services firm serving the homeland security market. (HSRC27.05)

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3.4 LaserCard Receives $2.9m Order for Saudi Arabia National ID Card Program

Mountain View, California's LaserCard Corporation, a leading provider of secure ID solutions, announced a follow-on purchase order valued at $2.9m to supply secure identity cards for the Kingdom of Saudi Arabia's national ID program. This brings the total orders received for this program to $4.7m since April 1. The $2.9m order calls for the continued supply of optical smart cards to be issued via approximately 40 issuance offices in cities throughout Saudi Arabia. Deliveries are expected to be completed in the September quarter. Since the inception of the Saudi National ID Card project in 2003 through March 2008, LaserCard has supplied approximately $16m of cards, software, hardware and services for the program. LaserCard has defined the Middle Eastern region as an area of strategic focus for the growth of its secure ID solutions business. The company recently expanded its business activities in Saudi Arabia through its German subsidiary, Challenge Card Design GmbH, which signed a previously announced $8.4m contract with the Golden Chip Company late last year to deliver a turnkey card manufacturing facility. (LaserCard 19.05)

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3.5 Denver Firm Wins Contract to Design Massive Egyptian Project

Under terms of the biggest contract in company history, Denver-based Ohlson Lavoie Collaborative will serve as the architect of record on the design of the Cairo Financial Center (CFC) with its 8.1m square feet of office, conference, hotel, retail and parking space. The project will equal the size of three Empire State Buildings, but spread out across 667,000 square feet (about 15 acres). The first stage of the $730m CFC is scheduled to open the end of 2010 and will include a 3,000-car underground parking structure, a 16-screen theater complex, 600,000 square feet of office space, and 950,000 square feet of retail shops. The second stage is due to open by 2013 and will include 3,000 additional underground parking spaces, 1.1m square feet of office space, 800,000 additional square feet of retail space, a 100,000 square-foot exhibition and conference center, a health club and a five-star, 450-room hotel. The project will surround 160,000 square feet of open plaza highlighted by water features, a Roman amphitheater for outdoor performances and shopping arcades. With U.S. offices in Denver and Orlando, Fla.; Tokyo, Japan; Cairo, Egypt; and Dubai, United Arab Emirates, Ohlson Lavoie Collaborative is a full-service architectural firm that emphasizes client relationships and building functionality. (OLC20.05)

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3.6 Orbit International's Power Group Receives $400,000 Order From Turkish Air Force

Hauppauge, NY's Orbit International Corp., an electronics manufacturer, systems integrator and software solution provider, announced that its Power Group, Behlman Electronics, has received a new order for its custom division, valued at approximately $400,000, for two types of our Custom Commercial Off-The Shelf (COTS) DC power supplies for use in a Turkish Air Force thermal imaging system. Expected deliveries under this order consist of qualification units scheduled for Q4/08 and production units to be delivered approximately 150 days after qualification unit approval. The units to be delivered are based on Behlman's DCS series of Custom COTS power supplies that are used in a number of U.S. military ground based, mobile, shipboard and airborne applications. The customer has indicated there is a minimum potential for follow-on production orders that are estimated to exceed $600,000. Orbit International Corp. is involved in the manufacture of customized electronic components and subsystems for military and nonmilitary government applications through its production facilities in Hauppauge, New York, Quakertown, Pennsylvania and Louisville, Kentucky. Its Behlman Electronics subsidiary manufactures and sells high quality commercial power units, AC power sources, frequency converters, uninterruptible power supplies and associated analytical equipment. The Behlman military division designs, manufactures and sells power units and electronic products for measurement and display. (Orbit15.05)

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3.7 West Marine to Open First Franchised Store in Istanbul, Turkey

Watsonville, California's West Marine, the world's largest retailer of boating supplies and accessories, announced a relationship with East Marine Denizcilik & Turizm A.S. to open its first franchise store in Istanbul, Turkey. The new West Marine store in Turkey is part of a multi-store development agreement for Turkey. Istanbul, located on the Bosphorus Straight, straddling Europe and Asia, is surrounded by the Black Sea and the Sea of Marmara, making it an ideal location for a West Marine store. Other locations are being identified along Turkey's Aegean and Mediterranean coasts. West Marine, the world's largest retailer of boating supplies and accessories, has 370 West Marine stores in 38 states, Puerto Rico and Canada. (West Marine21.05)

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3.8 Zhone's Market Leading MSAP Selected by Greece's ON Telecoms for EFM Initiative

Oakland, California's Zhone Technologies, a leader in multi-service access equipment for VoIP, IPTV and Ethernet over copper and fiber access lines, announced that ON Telecom's has selected Zhone's MALC multi-service access platform (MSAP) to deliver premium EFM (Ethernet in the first mile) business services throughout the Attica region in Greece. ON Telecoms will deploy Zhone's MALC paired with EtherXtend subscriber site equipment in tandem with the Zhone Management System (ZMS) for guaranteed end-to-end performance with enforced IP service level agreements (SLAs). ON Telecoms selected Zhone's EFM solution to support a company-wide initiative to win high-end business customers away from expensive leased line service, historically the only option in the region for corporate customers requiring premium service guarantees. After trialing platforms from other leading EFM vendors, ON Telecoms selected Zhone to support the expansion of its business service portfolio to discerning corporate customers who typically require symmetric point-to-point or point-to-multipoint connections, high symmetric internet feeds and multi-primary rate interface (PRI) telephony service. ON Telecoms cited superior scalability and carrier grade platform redundancy as key decision factors. ON Telecoms is a leading alternative operator in Greece. After only 18 months of operation, ON Telecoms has gained a reputation for exemplary service and innovation. (Zhone19.05)

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 Israel Aspires To Be Financial Hub

The Finance Ministry is calling for changes in the country's tax system to boost financial growth and turn Israel into an international financial hub that will be attractive to investors within a decade. Statements to that end were made by Finance Ministry director-general Ariav said on 19 May in London at the start of meetings with senior representatives of the financial community. With the country's capital market already largely liberalized thanks the Bachar reforms, the government has now set its sights on a far more ambitious goal. The idea is to repeat the country's success in establishing an innovative hi-tech sector and establish Israel as an international financial center. Ariav heads a special committee, the Ariav Committee on Capital Market Reform, which includes members from government, academia and industry. The committee is due to present its policy recommendations in August. In London, an advisory committee, which was set up to assist the Ariav Committee, met on 19 May with Ariav. Among the members on the committee are senior representatives from leading investment banks and financial institutions including, Credit Suisse, Merrill Lynch, Lehman Brothers, Morgan Stanley, KPMG, HSBC and representatives from the London Stock Exchange and the London Business School. In March, Ariav met in New York with senior US financial executives to discuss recommendations on how to turn Israel into an international financial center. They discussed ways to facilitate access by small- and mid-sized businesses to the capital market and reduce the concentration in Israel's capital market. The executive representatives, mostly from Citigroup and Lehman Brothers, are members of the advisory committee that the Finance Ministry set up to assist the Ariav Committee. (JP20.05)

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4.2 Israeli Cities to Gain Environment Protection Authorities

As of next year, if the Knesset Interior and Environmental Committee has its way, cities in Israel will be obligated to enforce environmental laws and levy fines upon violators. The committee passed a bill to this effect, thus preparing it for its final Knesset reading some time in the coming weeks. The name of the bill: "Environmental Enforcement and Inspectors' Authority." Cities with a population of 20,000 or more - of which there are about 70 in Israel - will be obligated to operate a system of environmental inspectors and fines. Smaller cities will be permitted, but not obligated, to have such networks. The fines will be paid to the cities themselves, thus providing the incentive to operate the new system. The new bill specifies that within a year after its passage in the Knesset, every city must train inspectors for the enforcement of environmental laws. The inspectors will be granted broad authorities to locate and investigate violations. They will actually form local chapters of the Environment Ministry's Green Police, which is charged on a national level with enforcing environmental laws. (INN26.05)

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4.3 Maryland Governor O'Malley Leads Biotech Mission to Israel

Maryland Governor Martin O'Malley is leading a high level delegation of Maryland business people, state government officials and Jewish community leaders on an economic development mission to Israel this week. Most of the businesspeople are involved in the biotech industry. The delegation, which arrived on 27 May, will focus on expanding the already substantial business ties between Maryland and Israel. Maryland exported over $44m of goods and services to Israel in 2006. O'Malley visited Israel in the past when he was Baltimore's mayor. Several Maryland venture capital firms have invested in Israeli companies including high tech and biotech focused players such as EMZA, Defensoft, Icaros, FiberZone Networks, ClassifEye, Innovea, eBIZmobility, LifeBond and Flexicath. Many Israeli biotech companies have established significant presences in Maryland, which houses many US healthcare related agencies. Nearly 30 Israeli companies maintain offices in Maryland, including the US business development offices of Israel's largest defense contractors, Rafael Armament Development Authority and Israel Military Industries (IMI). Teva Pharmaceutical Industries also has a Maryland presence, following its January 2008 acquisition of Rockville-based CoGenesys. During the week-long mission, Governor O'Malley will meet with local businesses, and he is planning several economic development announcements. In addition, the Governor will deliver a speech at the prestigious Israel Life Sciences Industry (ILSI) Biomed 2008 conference in Tel Aviv. (Globes 26.05)

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4.4 Lawyers Find It Wrong To Pay Below Minimum Wage

The ethics committee of the Israel Bar Association Tel Aviv regional committee has ruled that paying a salaried lawyer or an intern less than the minimum wage is a violation of the ethical code. The committee stressed that the ruling did not amount to new legislation but the implementation of existing rules. As this represents a radical change in enforcement policy, it was decided that the ruling will come into force in three months time, to give employers time to make the necessary administrative changes. The Tel Aviv and Central region recommended that other regional committees also adopt the rule, to ensure a uniform introduction by the bar as a whole of changes to the ethical code. The decision is likely to meet with strong opposition from lawyers and the Israel Bar Association's national ethics committee has already declared that it has no legal standing. The ruling states that work hours should also include hours spent working at home, as is the case with working mothers who leave their offices early and continue working from home, or lawyers involved in litigation, who often have to spend extra time working on important hearings and cases. The ruling also provides that lawyers should be paid according to the actual number of hours they work and that employing someone for more than 12 hours a day, or 58 hours over a five-day week, without special authorization from the minister of industry, trade and labor, will also constitute a violation of the ethical code. (Globes 27.05)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Kuwait Threatens To Cut German Investment

The Kuwait Investment Authority (KIA) has warned Germany it may cut back its commitment to ploughing funds into Europe's largest economy if the Berlin government regulates sovereign wealth funds. Many German politicians are nervous about the influence sovereign wealth funds can wield and their capacity to buy leading national companies or key national infrastructure. KIA Managing Director Bader Al-Saad told weekly magazine Der Spiegel that Germany's reservations about wealth funds had not yet influenced the investment activities of the KIA, which manages the Gulf Arab state's oil-generated assets. German Finance Minister Steinbrueck is due to travel this week to the Gulf region, where he is expected to meet managers at sovereign wealth funds to improve their relations. The German government plans to extend existing legislation that gives Berlin a veto on takeovers of defense firms to include other industries, though Steinbrueck has said Germany does not want to scare off sovereign wealth funds. Steinbrueck has previously described the German plans to defend domestic firms as modest compared to those of other countries, including Britain, France and the US. The planned new legislation will not name "strategic" sectors that are off-limits to foreign investors. Government-owned investment vehicles control over $2 trillion, roughly the size of France's economy and are forecast to grow rapidly to $12 trillion by 2015. In recent months, funds from Asia and the Middle East have injected money into major banks like Citigroup, Merrill Lynch & Company and UBS AG after they were hit by exposure to the US subprime crisis. (AB19.05)

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5.2 Iraq Could Have Largest Oil Reserves in the World

Iraq dramatically increased the official size of its oil reserves after new data suggested that they could exceed Saudi Arabia's and be the largest in the world. The Iraqi Deputy Prime Minister, Barham Salih, told The Times that new exploration showed that his country has the world's largest proven oil reserves, with as much as 350 billion barrels. The figure is triple the country's present proven reserves and exceeds that of Saudi Arabia's estimated 264 billion barrels of oil. Salih said that the new estimate had been based on recent geological surveys and seismic data compiled by "reputable, international oil companies… This is a serious figure from credible sources." The Iraqi Government has yet to approve a national oil law that would allow foreign companies to invest. Salih said that the delay was damaging Iraq's ability to profit from oil output, robbing the country of potentially huge revenues. With oil selling for more than $125 dollars a barrel and demand rising, The Deputy PM is frustrated that Iraq still struggles over the establishment of a regulatory framework. "There is a real debate in the Government and among political leaders about the type of oil management structures we should have. I am for liberalizing this sector and allowing the private sector to come in to develop these vast resources," Salih added. He was optimistic that a draft law could be approved in the near future. BP, Exxon Mobil, Chevron, Royal Dutch Shell and Total have been queuing for rights to exploit Iraqi reserves. (The Times 20.05)

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5.3 Iraq to Increase Oil Production - Revenues Forecast at $62 - 100 Billion

Dr. Hussein al-Shahristani, Iraq's minister of oil, provided some figures on oil production and prospects in the country, which look encouraging. According to al-Shahristani, the average production in the last year has been 2.3 million bpd, compared with 1.3 million bpd in 2003. However, when the production in the north and the south is disaggregated, the figures for the north declined because of the terrorist sabotage of the oil pipelines connecting Kirkuk in the north with the port of Ceyhan in Turkey. The production in the south has gradually increased, reaching 2.3 million bpd in Q1/08, but is expected to reach 2.5 million bpd in Q2 and about 2.9 million bpd by the end of the year. Exports have also increased to 1.9 million bpd in Q1/08, which is higher than the 1.7 million bpd planned in the budget. The exports could rise to 2.3 - 2.4 million bpd by the end of the year. Revenues for the year are projected to increase from the budgeted amount of $62b to $100b. The Ministry of Oil has a five-year medium-term plan to bring oil production to 4.5 million bpd by the end of that period and to raise it further to 10 million bpd at the end of a decade. As a result, Iraq would not need any foreign aid or loans to implement its ambitious development plan, nor is there much need for foreign direct investment. (al-Mada 14.05)

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5.4 Iraq Claims To Have More Oil Than Saudi Arabia

Iraq's deputy prime minister said on 19 May that his country was the world's largest-ever emerging market, with foreign companies lining up to invest in the war-ravaged economy. He said that Iraq was predicting $70b oil revenue in 2008, with reserves that "could well exceed" 350 billion barrels, and the International Monetary Fund (IMF) slating 8% growth this year. That would give Iraq more oil reserves than Saudi Arabia. Vaunting Iraq's investment opportunities, Saleh said that a tender to turn a large former army garrison in Baghdad into housing had seen applications from 30 major international companies, mostly from the Gulf and Egypt. But Saleh, a former prime minister of the Patriotic Union of Kurdistan-run region of Iraqi Kurdistan, stressed that the private sector would have to do what the state was unable to do. He admitted that confusion remained for foreign companies wanting to invest in oil exploration and exploitation in the north of the country over which authority to sign the contracts with, Baghdad, or the Kurdistan regional government. The government in Baghdad and authorities in the autonomous Kurdish region of northern Iraq have been at loggerheads over contracts signed between the Kurds and foreign oil companies for months. Saleh said a national oil law to resolve the problem would not be finalized any time soon. (AB20.05)

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5.5 Iraq Inflation Up 16% On Food Prices

Rising prices of food, energy and other commodities worldwide pushed up Iraq's inflation rate to 16% last month, compared to 11% at the beginning of this year, the country's central bank said. Central Bank of Iraq Governor Sinan Al Shibibi said the bank would continue its monetary policy focused on absorbing the inflation by strengthening the Iraqi dinar against the US dollar and keeping interest rates at 17%. In its monthly report, the Iraqi Planning Ministry said last month saw increases in prices for the most important goods and services, which make up more than two-thirds of a family's expenditures. Food prices rose the most, with a 13.6% increase, and medical services and drugs went up 1.3%. The price of furniture in Iraq rose 0.8% and other essential goods and services inched up 0.6%. The cost of fuel fell by 4.9%, and transport and communications prices sunk by 2.5%, the report said. Inflation, which increased at 69.6% at end of 2006, was sharply reduced to 32% at the start of last year and then to 11% at the beginning of this year, thanks to a policy package that included exchange rate appreciation and higher interest rates. But the security situation in some areas and corruption are still the main obstacles for a public investment program, despite billions of dollars that soaring world oil prices bring to Iraqi government coffers. (AB26.05)

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5.6 GCC Invests $18 Billion in New Steel Plants

More than $18b is being invested in 46 steel manufacturing plants throughout the Arabian Gulf, in an attempt to close the widening gap between supply and demand for steel. Steel is a major component for the construction industry as well as materials handling machinery for manufacturing. According to the database of research company Proleads, which monitors major construction projects across the region from initial study to completion, Saudi Arabia with 17 and the UAE with 16 are leading the way in steel plant projects individually varying in value from $15m to $2b. Oman has six steel plants on the books, Bahrain four and Qatar three. Topping the list of projects is an integrated complex of steel factories in Saudi Arabia which will turn out 500,000 tons a year of railway track, three million tons a year of iron and steel processing and production plant and 800,000 tons a year of pipeline manufacturing plant. Of the top 10 projects, four are in Saudi Arabia, three in the UAE, two in Qatar and one in Oman. (TradeArabia 19.05)

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5.7 Bahrain Eyes $2 Billion Refinery Expansion

Bahrain's plans to add 100,000 barrels per day (bpd) of new refinery capacity to its Bapco plant at a cost of over $2b, the country's minister of oil and gas affairs Abdul-Hussain bin Ali Mirza said. The island kingdom's only refinery, Bapco has capacity of around 260,000 bpd. The expansion would increase capacity beyond 2016, Mirza told reporters. 'The next phase of investment will cost more than $2b,' Mirza said. 'Some units at the plant are old and need upgrading.' The plan was contingent on obtaining increased crude supplies from Saudi Arabia, he added. A pipeline pumping 220,000 bpd of Saudi oil to Bahrain would need to be expanded. The refinery has five crude distillation units, and would like to revamp them to have just one or two large units. Bapco would also like to build a unit to convert heavy fuel oil into lighter transport fuels, he added. Bahrain was still in talks with Iran and Qatar to import gas, he added. A committee from Bahrain would leave to Iran for a fifth round of talks on 26 May, he said. No imports would come to Bahrain from Qatar until Doha completed a study into how its gas reservoir was performing after rapid development, he added. Qatar has declared a moratorium on new projects until the study was completed. In the meantime, Bahrain aims to boost domestic gas production to 2 billion cubic feet per day (cfd) over the next ten years from around 1.2 billion cfd now, he said. (TA26.05)

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5.8 UAE Opens First Plant for Recycling Construction Waste Opened

The emirate of Sharjah inaugurated the first plant in the UAE for recycling construction waste. The $11m Saja'a waste management factory is developed and run by Emirates Environmental Technology Company under supervision of Bee'ah, a limited liability joint stock company, partly owned by Sharjah Municipality. The Director General of Sharjah Municipality hopes the debut joint venture between the civic body and Emirates Environmental Technology Company at Saja'a will open up new business opportunities in trading on by-products of construction waste management. Apart from high financial returns, the facility uses international safety, environmental protection and operating standards. New techniques were introduced to ensure that waste is disposed of as effectively and as safely as possible. (Mena Report 21.05)

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5.9 Non-Oil Foreign Trade in Dubai Up By 46%

Dubai's non-oil foreign trade (including free zones and customs warehouses), jumped 46% in Q1/08 to about $58.3b, against $39.9b in the same period of 2007. During the period under review, Dubai's exports recorded phenomenal growth, soaring 79%, while re-exports went up 73.5% and imports grew 49.7%. The latest statistics, compiled by Dubai World's Statistics Department, show that Dubai's direct non-oil foreign trade, excluding free zones and customs warehouses, amounted to about $39.2b during Q1/08, against about $24.9b for the same period in 2007, an increase of some $14.2b. The growth of Dubai's non-oil economy also comes as a result of the noticeable rise in the international oil prices, which led to a corresponding increase in government revenues and the consequent public spending on development projects. The unprecedented construction boom and the tourist and commercial development are also factors which largely contributed to this growth. Concurrently, Dubai's exports to various countries showed remarkable progress, rising 79% in the first three months of 2008 to Dh10.43 billion, compared to Dh5.83 billion in the same period of 2007. India topped the list of Dubai's direct import sources in the first quarter of 2008 with a share of 13.14% worth Dh12.6 billion. China came second with Dh10.7 billion, followed by Switzerland with Dh7.2 billion. India, China and Switzerland together accounted for 31.8% (Dh30.5 billion) of Dubai's imports, while imports from other countries accounted for 68.2% (Dh65.6 billion). As for Dubai's exports, India again topped the list with 45.7% worth Dh4.7 billion during the first quarter. India maintained its position as the largest re-export destination with 31.8% (Dh11.9 billion). Iran came second with re-exports hitting 14% (Dh5.2 billion), followed by Switzerland with 9%. (AB26.05)

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5.10 Saudi Inflation Continues To Skyrocket

Annual inflation in Saudi Arabia accelerated to at least a 27-year high of 10.5% in April from 9.6% the previous month, fuelled by rents and food prices in the world's largest oil exporter. The cost of living index for the largest Arab economy was 115.2 points on April 30 compared with 104.3 points a year earlier, government data showed. The rental index - which includes rents, fuel and water - surged 16.9%, with rents soaring 20.4%, while food and beverages cost surged 16%, according to the data. Like most of its neighbors in the world's biggest oil-exporting region, Saudi Arabia pegs its riyal currency to the dollar, which has fallen to record lows against the euro and a basket of major currencies this year. Domestic factors, such as rents, play a role in stoking inflation, but the main driver is the currency situation. Last year, Saudi Arabia imported 960,000 tonnes of rice, making it the world's sixth-biggest rice importer, according to US Department of Agriculture data. Price rises are plaguing the Gulf Arab region, where economies are surging on a near sixfold increase in oil prices during the last six years. Dollar pegs force the Gulf states, except Kuwait, to track the US in cutting interest rates. With the dollar tumbling this year to record lows, some imports have become more expensive. Annual money supply in the kingdom has been accelerating until it reached at least a 14-year high in February, a trend that has prompted the central bank to raise bank reserve requirements three times since November to 12% from 7%. Money-supply growth, however, eased to 23.04% in March. (AB24.05)

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5.11 Yemen's Accession to WTO Discussed with World Bank

Yemeni Minister of Industry & Trade al Mutawakel recently held talks with a World Bank delegation in Yemen. The talks dealt with Yemen's desire to join the World Trade Organization (WTO), in addition to possibilities of the Bank to make a strategic study to merge Yemen's economy with the region economies, especially with the Gulf Cooperation Council (GCC), the Great Arab Free Trade Zone, Sana'a Forum countries. The Minister briefed the delegation concerning steps taken by Yemen to join WTO and its efforts to meet laws and regulations in all fields according to accession requirements. Al-Mutawakel said that Yemen's accession to a multi-parties trade system would contribute to facilitate merging the Yemeni economy into the world economy and come out positive outputs to realize efforts in economic and social development. (WB14.05)

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5.12 Foreign Investment in Egypt Sharply Up

Egypt received $7.8b in foreign direct investment (FDI) in H2/07, compared to $6b in H2/06, Investment Minister Mohieldin announced. He told reporters that FDI for the financial year which ends on June 30 would probably be higher as a proportion of GDP than in the previous year, when it was 8.6%. FDI in that year was worth $11.1b. Mohieldin said that unlike in some previous periods, the July-December figure did not include any big sales of government assets and that FDI was shifting towards greenfield projects and the expansion of existing projects. The government is unlikely to complete the sale of state-owned Banque du Caire by the end of June, he added. The sale, expected to bring in at least $1.5 billion, is the next big project in Egypt's privatization program. On the eve of a major World Economic Forum meeting in the Egyptian resort of Sharm el-Sheikh, Mohieldin dismissed speculation that the government might introduce a tax on capital gains from equities to raise more revenue. The speculation arose this month when the government imposed a tax on treasury bills and said that bonds would also be taxable from the start of the new financial year. He said Egypt had to compete for investment against countries such as Turkey, South Africa and the Gulf countries, which he said had no capital gains tax. (Reuters 17.05)

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5.13 Pakistan's Rupee Falls To Record Low

The Pakistani rupee slumped to a record closing low against the dollar on 20 May, as oil importers bought the US currency to meet record high crude prices. The rupee was quoted at 69.60/90 to the dollar at the close, compared with 69.25/50 on 20 May. It surpassed the previous record closing low of 69.40/60 on 9 May. The currency has dropped 12.9% since the beginning of the year. Annual inflation has jumped to a 30-year high and both the fiscal and trade deficits are widening under the relentless rise in world crude and agricultural prices.

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:

6.1 IMF Says Turkey Needs Additional Measures To Reach 2009 Targets

The IMF's Turkey Representative Hossein Samiei said that Ankara must take additional measures in order to reach 2009 targets. The representative said Turkey must continue its public finance policy and tight monetary policy and must apply that labor package and infrastructure expenditures before the revenue transfer to municipalities. He named low growth rate, high inflation and growing C/A deficit as the potential problems for Turkey and decrease in foreign funds are likely to create problems. Therefore, Turkey needs a strong policy framework in order to restore the investor confidence and fight with the external risks. The representative also said creation of a non-budget fund should hamper financial transparency. He said IMF calculated the additional cost of new initiatives such as revenue transfer to municipalities, labor package, GAP projects as 1.25% of GDP, and mentioned in order to catch the primary surplus of 3% for 2009, Turkey must introduce additional financial measures. (BGC26.05)

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6.2 Construction of Turkish Part of BTK Railway Set to Begin in July

The construction of the 76 km long section of the Baku-Tbilisi-Kars (BTK) railway project in Turkey will start in July. Ministry of Transportation officials said that presidents of Turkey, Azerbaijan and Georgia will lay the foundation of Turkish part of the railway, in June. Turkey has allocated $253m for to the project that will revive historical Silk Road as "Iron Silk Road." The railway, which consists of 3 phases, will connect Turkey with Azerbaijan and other Turkic republics in Central Asia. Georgia on its soil will construct 29-km railway line from Turkish border to Ahilkelek and rehabilitate the current railway track reaching near Tbilisi. Preparations for the bidding process in Georgia's section continues. Azerbaijan will meet the cost of the construction works in Georgia. The railway project is targeted to be concluded in 2010. On the other hand, shipping through railway will be possible from Europe to China following completion of Baku-Tbilisi-Kars Railway Project in parallel to completion of ongoing Marmaray Project in Istanbul. Some 30 million tonnes of freight are planned to be shipped annually in the medium term when Baku-Tbilisi-Kars Railway starts to be operated. Last February, the agreement for the landmark Baku-Tbilisi-Kars railway project was signed in Tbilisi by Turkish Prime Minister Erdogan, Georgian President Saakashvili and Azerbaijani President Aliyev. On November 21st, presidents of Turkey, Azerbaijan and Georgia laid the foundation of Georgian part of the railway. (TNA21.05)

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6.3 Wireless Penetration in Turkey Will Increase from 95.0% in 2008 to 106.5% in 2010

Research and Markets (http://www.researchandmarkets.com) announced a new IE Research report "2Q08 Turkey Mobile Forecast, 2008 - 2010: Turkcell Dominates In Turkey's High Growth Mobile Market" to their offering. They forecast that the wireless market in Turkey is quickly expanding with total subscribers increasing from their projected 70.8 million in 2008 to a forecasted 81.7 million subscribers in 2010 for a subscriber growth rate of 15.3% over the forecast period. Given these growth rates, Turkey will see the highest level of subscriber growth in our Europe coverage list during the forecast period. The level of wireless penetration in Turkey will increase from 95.0% in 2008 to 106.5% in 2010 (this is an increase of almost 10% points from our previous quarterly forecast). The largest operator, Turkcell, will continue to provide wireless services to a majority of subscribers in Turkey. In 2010, their models predict market shares (by subscribers) of the three operators - Turkcell, Vodafone, and Avea (Turk Telekom) - will be 51.7%, 28.4% and 19.9% respectively. Turkcell will continue to enjoy approximately 42.2% EBITDA margin in 2010. They are now forecasting that Turkcell will have the highest ARPU among operators in the country at $15.73 per month in 2010. (R&M20.05)

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6.4 Greece Drops In Competitiveness Rankings

Greece ranked 42nd among 55 countries in the world competitiveness list for 2008, published by the Institute for Management Development (IMD), sliding six places compared with the previous year's ranking, the Federation of Northern Greece Industries said in a statement. The ranking reflects economic performance, government and corporate efficiency and infrastructure. According to IMD's report, Greek fell two places to rank 48th in the economic performance category, while in the government efficiency category it lost 16 places to rank 46th. In the corporate efficiency category, Greece lost seven places (42nd), while in the infrastructure category fell one place to rank 35th. The United States, Singapore and Hong-Kong were the top three countries in the world competitiveness list for 2008. (Athens News 16.05)

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6.5 Greek Economy Sails in Choppy Waters

Greek government ministers may have been heartened by the 3.6% rise in gross national product (GNP) in the first quarter, as it was better than expected, but prospects look rather shaky. The reason is that five major economic fronts remain open, with particular uncertainty regarding oil prices and tourism. The Economy Ministry's trimmed growth rate forecast for 2008 to 3.6% from the previous 4% is based on the European Commission's assumption that oil prices will average $100 a barrel. They are now in the fifth month of the year and prices remain steadily at a much higher level and no analyst's forecasts seem to concur with the Commission's. On the contrary, they see oil prices continuing to rise in coming years. Greece's tourism industry is also seen on a downturn, mainly due to the slowdown in the European economy, the Olympic Games in Beijing and the Euro soccer tournament in Austria and Switzerland next month. Hoteliers in the Attica region have predicted a 6% fall. Data for private consumption are also downbeat. Supermarket sales were down 1.8% in February year-on-year, with a sharper drop in small shops. Clothing and footwear outlets and small grocery stores saw turnover fall by 11.7% and 8.3%, respectively. Department store sales were 3.9% lower, while furniture, electrical and household equipment turnover fell 4.4%.

Building activity and the property market are also causing concern. Private construction was down 2.6% in the first two months, year-on-year, while the National Statistics Service estimates that realty assets have fallen 20% in value. Alpha Bank estimates private housing investment will decline by 2% this year, after a 6.8% drop last year, before recovering next year. Officials believe prospects are more favorable than indicated by the above figures. They cite the fact that the purchasing managers index rose to 54.4 points in April, from 52.6 in March and 51.5 in January. The business confidence index rose above 100, to 101.4 in April from 99.4 the previous month, while the number of months of assured production rose to 4.9 to 5.1. (Various20.05)

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6.6 Half of Greeks Are In Debt

One in two households have currently contracted some form of debt, usually a credit card or a home-owner's loan, but the country's borrowers are not considered to be in over their heads, according to survey results published on 19 May. The Bank of Greece said that a survey it prepared recently showed that 51.4% of households have taken out some form of loan, versus 47% in 2005, when the survey was last held. The figure also showed that the total amount borrowed reaches 45.3% of the country's annual economic output, as opposed to 54.3% in the 15-member eurozone. The report will help allay fears about the negative impact higher interest rates and an expected economic slowdown in Greece will have on the growing pool of borrowers. Consumers have been snapping up loans at one of the fastest rates in the eurozone for a number of years, taking advantage of lower interest rates after Greece's entry into the eurozone. However, the Bank of Greece, which regulates and supervises the country's banking system, warned banks to be careful about their lending practices. Some 16% of households spend more than 40% of their income on meeting their monthly loan payments. (Kathimerini20.05)

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6.7 Bulgaria GDP Growth to Slow Down

A report of the research and advisory group Economist Intelligence Unit predicts that the growth of Bulgaria's GDP would slow down in the coming years. According to EIU, the country's GDP will grow by 5.7% in 2008, and by 5.5% in 2009. The share of exports and industrial production in the GDP growth will increase at the expense of consumption. The low corporate expenses in Bulgaria, however, are going to continue to attract investments and to maintain a GDP growth above 5%. The analysis points out that the current account deficit and the negative trade balance would remain the main risk factors for Bulgaria's economic growth. EIU also reports that the country's high inflation in 2007 was mainly the result of isolated factors such as the weak agricultural production and the increase in the prices of raw products. EIU predicts, however, that Bulgaria's inflation would remain above the average EU level, which would not allow the country to join the Eurozone before 2012. According to the report, the Bulgarian cabinet will manage to achieve its planned budget surplus of 3% at the end of 2008. (Novinite27.05)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Shavuot Holiday to be Marked on Eve of 8 June

On 8/9 June, the Jewish world will observe the holiday of Shavuot. Shavuot is the second of the three major pilgrim festivals (Passover being the first and Sukkot the third) and occurs exactly fifty days after the second day of Passover. This holiday marks the anniversary of the day when the Jewish People received the Torah at Mount Sinai. This is a biblical holiday complete with special prayers, holiday candle lighting and kiddush, and many forms of work and labor are prohibited. The word "Shavuot" means "weeks": It marks the completion of the seven-week counting period between Passover and Shavuot. During these seven weeks the Jewish people cleansed themselves of the scars of Egyptian slavery and became a holy nation ready to enter into an eternal covenant with G d with the giving of the Torah. Before the giving of the Torah the Jews were a family and a community. The experience of Sinai bonded the Jews into a new entity: the Jewish people; the Chosen Nation. This holiday is likened to their wedding day -- beneath the wedding canopy of Mount Sinai, G d betrothed the Jews.

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*REGIONAL:

7.2 Lebanon Elects President After Months Of Turmoil

Lebanon's new president Michel Sleiman appealed for unity as he was sworn in on 25 May in a first step towards defusing a political feud that threatened to plunge the nation into a new civil war. Celebratory shots were fired into the air and cars horns hooted as crowds of people, cheering and waving Lebanese flags, poured into the streets of Beirut and Sleiman's hometown of Amsheet. The election was hailed by President Bush who has given his staunch backing to the Sunni-led government in its 18-month standoff with the mainly Shiite Muslim Hezbollah-led opposition. Sleiman was elected by 118 votes in a much-delayed parliament session attended by Arab and Western dignitaries that followed a deal hammered out on 21 May in Qatar between the rival Lebanese politicians. The main challenge for Sleiman, 59, will be to impose himself as a neutral figure and reconcile the Western-backed ruling coalition and the opposition, which is supported by Iran and Syria. After Sleiman was sworn in, the government of Prime Minister Siniora resigned in line with the constitution but will stay on in a caretaker role. Bickering between the two camps had left the presidency vacant since pro-Syrian Emile Lahoud's term ended in November. Nineteen previous attempts to get lawmakers together to elect a successor failed. The rivals finally agreed to elect Sleiman, form a national unity government in which the opposition has veto power and draft a new electoral law for a parliamentary election due next year. In nearly 10 years at the helm of the army, Sleiman managed to stay out of the political storm. But as president - a position reserved for a Maronite Christian under Lebanon's multi-confessional system - he will have to tread a fine line to keep the peace with the same neutrality. Lebanon has been mired in political turmoil since November 2006 when six pro-Syrian opposition ministers quit the cabinet in a bid to gain a greater voice.

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7.3 Kuwait Reappoints Prime Minister After Election

Kuwait's ruler reappointed Prime Minister Shaikh Nasser Al Mohammad Al Sabah on 20 May to select ministers for the Gulf Arab state's new cabinet. Analysts said it was a sign that little would change in the country following the parliamentary elections on 17 May. Kuwait's ruler, Shaikh Sabah Al Ahmad Al Sabah, dissolved the assembly in March to end the standoff with the government. However, many of the same faces are back in parliament and political sources said they expected Sheikh Nasser to reappoint many of the same ministers. The cabinet had formally resigned on 19 May, as required by the constitution after the election.

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7.4 Turkey Readies to Go "Cold Turkey"

Beginning on 19 May, smoking in all enclosed areas, except residences and designated areas, will be prohibited in Turkey. However, smokers and business owner still do not exactly know the extent of the ban and they choose to follow the wait and see principle at the moment. They criticize the law as being too strict and believe the ban will not be implemented fully. Smoking will be banned in almost all enclosed areas such as public buildings including education, health, entertainment, sports, production, business, cultural and social facilities. The ban also covers all public transportation, including taxis, trains and boats. Although officials from the Tobacco, Tobacco Products and Alcoholic Beverages Market Regulatory Authority (TAPDK) said the law is clear, statement from the Prime Ministry defining the enclosed spaces will be published as soon as it is approved by the prime minister. Around 15 million packs of cigarettes are consumed in Turkey every day according to TAPDK. Around 108 billion cigarettes were consumed last year, and cigarette consumption increases in times of economic crisis. The most debated article of the new regulation is the one that bans smoking in all cafes, restaurants and bars. This article will be implemented on July 19, 2009. Nevertheless, the ban on smoking in restaurants, bars and cafes located inside shopping malls will also be implemented on 19 May. Restaurant owners believe that entertainment sector will be affected negatively when the bans comes in effect. (TDN 17.05)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 ILSI-Biomed Israel 2008 Opens in Tel Aviv

ILSI-Biomed 2008 officially opened on the morning of 27 May in Tel Aviv, Israel. The 3 days event (Dates: 27-29 May 2008) is an international convention hosting world renowned experts, academic luminaries, Israeli companies and an exhibition encompassing the hottest, most recent Israel's Bio-medical innovations. This year Israel is celebrating its 60th anniversary providing ILSI-Biomed an opportunity to illuminate 70 of the most advanced Israeli startup companies. Biomed week is projected to attract over 6,000 CEOs and senior professionals from Medical Device and Bio-Pharma companies, scientists and researchers, venture capitalists, and angel investors from Israel and abroad. The conference agenda highlights the opportunities and challenges faced by the world's healthcare industry, regulatory aspects and reimbursement issues worldwide, emerging trends and new therapies. The conference will provide a great platform for networking and one-on-one meetings. Two parallel events will be held during the week: The second International Stem Cell Meeting, and ISRACAS 2008, the 11th Israel symposium on computer-aided surgery, medical robotics and medical imaging. Also attending and exhibiting are delegations from the states of Oklahoma and Pennsylvania, who are represented in Israel by Jerusalem based Atid, EDI (http://www.atid-edi.com). (ILSI27.05)

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8.2 EarlySense Presents EverOn at the ILSI-Biomed 2008 Conference in Israel

EarlySense has been chosen to present at the ILSI - Biomed 2008 Conference, 7th National Life Science & Technology Week, at the David Intercontinental Hotel in Tel Aviv on 28 May 2008. EarlySense's EverOn is a continuous, contact-free, patient supervision system that measures patient parameters from under the mattress on which the patient is lying. There are no leads or cuffs to connect to the patient, who has complete freedom of movement and is not burdened by any irritating attachments. EverOn detects heart and respiration rates as well as bed entries and exits, and patient movement. The device sounds an alert when a pre-set parameter threshold is crossed. EverOn also displays and records real time data on a continuous time-line. The time line is designed to help predict the deterioration of a patient's health and consequently avert a critical event. EarlySense (http://www.earlysense.com) is developing a pioneering technology designed to advance proactive and preventive patient supervision to enable better patient outcomes. The flagship product, EverOn, is an automatic, continuous, contact-free patient supervision device. The base technology of the EverOn system was cleared by the FDA in November 2007. EarlySense was founded in 2004 by experienced entrepreneurs and is headquartered in Ramat-Gan, Israel. (EarlySense20.05)

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8.3 PillCam COLON's Confirmed Potential as a Complement to Colonoscopy to Increase Colo-Rectal Screenings

Given Imaging announced the results of an eight-center European study confirmed that PillCam COLON demonstrates encouraging results for detecting colo-rectal polyps compared to colonoscopy. The primary objective of the study was to assess the accuracy of PillCam COLON in detecting polyps as compared to traditional colonoscopy. The eight-center trial enrolled 320 patients, with a mean age of 59 years. Prior to capsule ingestion, patients underwent a traditional colon prep after a one-day liquid diet. The procedure included prokinetic tablets and additional small doses of laxatives. No sedation, intubation or insufflation was required. After capsule endoscopy with PillCam COLON, an independent physician performed traditional colonoscopy. Capsule endoscopy with PillCam COLON showed sensitivity (the ability to positively identify disease) of 66%, with specificity (the ability to avoid a false positive) of 82% in identifying significant findings, with a positive predictive value (the percent who test positive when confirmed to have the condition) of 72% and a negative predictive value (the percent who test negative who are confirmed not to have the condition) of 77%. Significant findings were defined as at least one polyp larger or equal to 6 mm or 3 polyps of any size. For polyps larger or equal to 6 mm and 10 mm, capsule endoscopy showed sensitivity of 64% and 60% and specificity of 84% and 98% respectively.

Capsule endoscopy with PillCam COLON enables the physician to directly see the colon mucosa in its natural state while not requiring sedation, intubation, insufflation or radiation. The PillCam COLON video capsule is a smooth plastic capsule that measures 11mm by 31mm and can be naturally ingested with a sip of water. It has tiny video cameras at each end which together capture 4 images per second for up to 10 hours. The PillCam COLON video capsule utilizes advanced optics technology, which have been specially adapted with a wide lumen and high degree of compartmentalization that characterizes colon physiology.

Yokneam, Israel's Given Imaging (http://www.givenimaging.com) is redefining gastrointestinal diagnosis by developing, producing and marketing innovative, patient-friendly products for detecting gastrointestinal disorders. The company's technology platform is the PillCam Platform, featuring the PillCam video capsule, a disposable, miniature video camera contained in a capsule, which is ingested by the patient, a sensor array, data recorder and RAPID software. (Given Imaging19.05)

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8.4 Teva Announces Approval of Generic Sarafem Pulvules

Teva Pharmaceutical Industries announced that the U.S. FDA has granted final approval for the Company's Abbreviated New Drug Application (ANDA) for Fluoxetine Capsules USP, 10 mg and 20 mg. Shipment of the product will begin immediately. As the first company to file an ANDA containing a paragraph IV certification for this product, Teva has been awarded a 180-day period of marketing exclusivity. Teva's Fluoxetine Capsules are the AB-rated generic equivalent of Eli Lilly's Sarafem Pulvules and are indicated for the treatment of premenstrual dysphoric disorder (PMDD). Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the world's leading generic pharmaceutical company. The Company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients, as well as animal health pharmaceutical products. Over 80% of Teva's sales are in North America and Europe. (Teva21.05)

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8.5 Yissum Introduces Novel Device for Improved Saliva Based Medical Diagnostics

Yissum introduced a novel device that enhances the diagnostic value of saliva. Professor Palmon, from the Faculty of Dental Medicine at the Hebrew University of Jerusalem, presented a disposable device that clears whole saliva from its major protein constituent – alpha-amylase. The device enables the detection of various low-abundance biomarkers in human saliva. Saliva is an easily obtainable body fluid that is becoming an important diagnostic tool, since most molecule that can be found in the blood or urine, can also be detected in the oral cavity, although usually at lower concentrations. Studies indicate saliva may be useful for detecting various cancers, heart disease, diabetes, periodontal diseases, and other conditions as well a host of infectious agents such as HIV. Compared to collecting blood samples, obtaining saliva samples is a non-invasive, inexpensive and convenient procedure, which can even be performed at the home setting. However, a major hurdle is that saliva contains a high content of proteins whose function is to digest food. One protein in particular, Amylase, is extremely abundant and constitutes up to 60% of saliva proteins. The massive presence of this protein may mask the presence of other protein components and hamper certain diagnostic tests. Prof. Palmon invented a device that removes amylase from whole saliva (and other body fluids) in a simple and efficient procedure. The invention is a disposable device that removes amylase in a single pass of the whole saliva. The device takes advantage of modified potato starch, which is able to absorb large quantities of amylase. This will increase the diagnostic value of saliva and enable efficient detection of markers found at low concentrations. Tel Aviv, Israel's Yissum (http://www.yissum.co.il) was founded in 1964 to protect the Hebrew University's intellectual property and commercialize it. $1 Billion in annual sales are generated by products based on Hebrew University technologies licensed out by Yissum. Ranked among the top technology transfer companies in the world, Yissum has registered 5500 patents covering 1600 inventions; licensed out 480 technologies and spun out 65 companies. (Yissum27.05)

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8.6 Given Imaging Receives Permanent Medicare Funding for PillCam SB in Australia

Given Imaging announced that the Australian Government Department of Health & Ageing has approved permanent Medicare funding for capsule endoscopy of the small bowel. Capsule endoscopy has been interim Medicare funded in Australia subject to data collection since May 2004. Medicare is the scheme that gives all Australian residents access to subsidized health care. The Australian PillCam database was developed and supported by members of the Gastroenterological Society of Australia (GESA) in collaboration with Given Imaging and resulted in a database of 2,949 patients. This data set is the largest body of data ever accumulated on PillCam SB and the largest data set ever submitted to the Medical Services Advisory Committee (MSAC). MSAC is the committee that advises the Australian Federal Minister for Health and Ageing on the safety, efficacy and cost-effectiveness of new medical procedures and technologies. Yokneam, Israel's Given Imaging (http://www.givenimaging.com) is redefining gastrointestinal diagnosis by developing, producing and marketing innovative, patient-friendly products for detecting gastrointestinal disorders. The company's technology platform is the PillCam Platform, featuring the PillCam video capsule, a disposable, miniature video camera contained in a capsule, which is ingested by the patient, a sensor array, data recorder and RAPID software. More than 700,000 patients worldwide have benefited from the PillCam capsule endoscopy procedure. (Given Imaging15. 05)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Copenda's New Features Ease Communication Across Social Networking & Dating Sites

Copenda announced major upgrades to the site that will make it easier to find and connect with people on the internet. Copenda is the first search engine that allows people to view profiles from multiple social networking and dating sites in one place. Members can filter through general preferences, such as gender, interests, age, as well as location, and the profiles are aggregated into one location. New features to the site include Contact me – Enables one to contact social networking users directly from Copenda. All messages are flawlessly sent by Copenda through his or her social network account. In Claim my profile – Members can manually add their profiles to Copenda's search engine and associate existing profiles with their Copenda profile. After "claiming" their social networks and dating sites' profiles, users will be able to oversee all relevant accounts in one, centralized location called "My Copenda." Each claimed profile has a link to Copenda's profile page which contains general information about the Copenda user. Tel Aviv, Israel's Copenda.com (http://www.copenda.com), a unique social people search engine, allows you to cross-search leading social networks to find your friends, singles for dating, people with similar interests and more. Their complex algorithms crawl semi-structured data from multiple social networks and online dating sites. Copenda uniquely integrates an innovative user interface with dating site features such as personality search and social network features such as ranking, comments and tagging. (Copenda16.05)

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9.2 N-trig Sets New Industry Standard for Full Multi-Touch Capabilities on Large Format Displays

N-trig announced that its DuoSense technology now has full multi-touch capabilities designed for large format displays. Currently, N-trig's full multi-touch works on displays measuring up to 22 inches and recognizes an unlimited number of simultaneous touch points, allowing people to efficiently work and collaborate using a single platform. Full multi-touch makes using a computer even more intuitive and natural, enabling you to: Handle documents on the computer desktop like you would on a real desk, moving or pushing them aside with your hands; Make sketches and scribble notes using a pen; Shuffle photos with both hands and Play games with multiple players touching the surface simultaneously. N-trig's DuoSense technology changes the paradigm of human interactivity, taking the user to the next level of computing, gaming, multimedia, and new types of user applications never before available. Full multi-touch enables OEMs to create new platforms and products that offer their customers a more personalized, hands-on, interactive experience. It can be used in a wide variety of applications, including all-in-one devices, gaming, multimedia portable consoles, information kiosks, collaborative design, entertainment, broadcasting, education, and more. Be they in horizontal or vertical form factors, the possibilities are endless.

Headquartered in Kfar Saba, Israel (http://www.n-trig.com), N-trig is revolutionizing the way people interact with computers by providing the industry's first dual-mode pen and touch input device. N-trig's DuoSense technology is the only combined pen, touch, and multi-touch interface for today's advanced computing world. N-trig's DuoSense dual mode digitizer uses both pen and zero-pressure capacitive touch to provide a true Hands-on computing experience for mobile computers and other digital input products over a single device. DuoSense enables greater mobility and usability in the next generation of computing devices and notebook PCs, enabling new market opportunities for OEMs and ODMs to introduce computer products which offer a more intuitive and interactive experience. (N-trig 19.05)

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9.3 RADVISION Presented with Prestigious Industry Award for Product Innovation

RADVISION has been presented with the prestigious 2008 North American Frost & Sullivan Award for Product Differentiation Innovation. This Award is presented each year by Frost and Sullivan to the company that has best demonstrated the ability to develop products that allow it to differentiate from competing vendors and products. RADVISION received this award in recognition of the company successfully leveraging its existing technology assets to introduce SCOPIA Desktop that in combination with SCOPIA multi-point control unit (MCU) and the rest of the SCOPIA infrastructure suite, is allowing RADVISION to set itself apart in the industry. Unified Communications is driving the deployment of video conferencing throughout organizations from the conference room, to the desktop and to mobile workers. The SCOPIA Conferencing Platform supports all of those environments including next generation high definition (HD) endpoints, standard definition (SD) endpoints and through SCOPIA Desktop to the remote and mobile worker. SCOPIA Desktop capabilities have also been integrated into Microsoft's Office Communications Server 2007 and IBM Lotus Sametime collaboration solutions extending the capabilities of those solutions. TEL AVIV, Israel's RADVISION (http://www.radvision.com ) is the industry's leading provider of market-proven products and technologies for unified visual communications over IP, 3G and IMS networks. With its complete set of standards-based video networking infrastructure and developer toolkits for voice, video, data and wireless communications, RADVISION is driving the unified communications evolution by combining the power of video, voice, data and wireless – for high definition video conferencing systems, innovative converged mobile services, and highly scalable video-enabled desktop platforms on IP, 3G and emerging next-generation IMS networks. (RADVISION)

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9.4 LiveU's Transmission Technology Brings Live Video Broadcasts to the Internet

LiveU Inc. (http://www.liveu.tv) will be demonstrating cutting edge technology and services that enable high-quality live video broadcasts from anywhere to the internet at highly affordable prices. Use of LiveU's technology is particularly relevant to Internet portals that may currently be unable to provide live coverage to their audiences due to the relatively high pricing of existing solutions. LiveU's service provides a mobile live-video uplink solution that works with any type of video camera, providing reliable video at high quality, immediacy of service, availability and portability, and all at a low price. "ONE" (http://one.co.il), a leading sports portal in Israel, have been using the LU service extensively. The LU product line uses any existing cellular/wireless infrastructure to provide a mobile video uplink (up to 2Mbps) as well as hi-capacity file transfer solutions for applications including breaking-news, hyper-local sporting event coverage and others. Based in Fair Lawn, NJ, LiveU has its R&D center in Kfar Saba, Israel. LiveU is a privately held company, backed by top tier US based and international investors. LiveU's services have been deployed successfully by leading internet portals to transmit live sports events, concerts, reality shows and news. (LiveU19.05)

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9.5 NSC Announces SnippTags – Spoken Words Tagging Service for Video Clips

NSC (Natural Speech Communication) released SnippTags - a new indexing service for video clips and multimedia content, offered to web-based content providers and aggregators as well as data mining companies. SnippTags is an indexing service that offers content providers with key words that were extracted from their content audio track together with the exact time each word was uttered ("Spoken Tags"). The service is based on advanced audio track analysis, which includes high accuracy recognition of spoken key-words in the audio stream of the multimedia content. Classical search engines perform indexing and search of textual content in a very efficient way. However multimedia content, which accounts for a substantial portion of content over the Internet, is currently indexed based on manually entered text and metadata. This method often results with inability to identify relevant multimedia content and poor search result. SnippTags performs the task of analyzing content, previously hidden to traditional search engines, and makes it visible to them. In addition, SnippTags enables content partners to create innovative advertising models by attaching content-based ads to specific points in time in the video clip or the multimedia file being played.

Rishon LeZion, Israel's NSC (Natural Speech Communication - http://www.nscspeech.com) is a leader in the use of speech recognition technologies for audio mining and speech-driven services. The company has successfully deployed its advanced solutions for clients in the telecom, security, call center and enterprise markets around the globe. NSC's cutting-edge solutions are based on a unique approach which combines a blade platform with advanced speech technology. (NSC19.05)

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9.6 PC Updater Software Will Now Be Free, Says RadarSync

RadarSync announced a major upgrade to its PC updater software. In a move to dominate the market, it is offering the software, RadarSync - Free Edition, free of charge. The company is also making its technology available through its webservices platform, offering free device driver syndication services to download and tech websites. RadarSync's PC updater has been recognized by journalists and bloggers, including Yahoo! Tech, PC World, Lockergnome and Lifehacker. The company's collection of free links to drivers for Windows Vista ranks above Microsoft's own driver pages on a Google search. RadarSync - Free Edition helps PC users keep their systems updated by finding, downloading, and installing the correct driver and software application updates. RadarSync (http://www.radarsync.com) is a privately owned company. Its management team has over ten years of experience in computer hardware-software integration and updates. In 2006, the company was named one of the fifteen most promising Israeli internet startups. (RadarSync20.05)

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9.7 China's Ministry of Railway Selects NICE for Third Project

NICE Systems received another follow-on order from the Ministry of Railway (MOR) in China, for NiceVision Net, the Company's end-to-end solution for video security with content analytics. The IP-based NICE solution was selected following successful implementation on the Qing Zang rail - the railroad connecting Lhasa in Tibet to Germu in Qinghai, and the Beijing-Tianjin inter-city passenger line- the country's first high-speed passenger rail service. NICE's business partner for the project is Smartron Technology (China) Inc. The Hefei-Wuhan high-speed rail line, which is expected to launch in 2009, is part of a massive upgrade and expansion of China's railway system and is part of China's first high-speed train service. The scalable IP-based video content analytics solution will be deployed to help protect the railway including its tracks and stations, to verify that there is no destruction and to prevent accidents. By providing real-time alerts to security personnel, the result will be enhanced passenger safety and better asset protection. NiceVision Net will provide MOR unprecedented reliability, with a high availability architecture that is supported by unique features, such as patent pending Zero Points of Failure encoder redundancy, ensuring non-stop surveillance under any condition for mission critical applications. Ra'anana, Israel'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 19.05)

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9.8 Emoze Releases Upgraded Push-Email Enterprise Edition

emoze announced the release of the upgraded Enterprise Edition. It is no longer necessary to debate in the boardroom the high costs against the benefits of services such as RIM's BlackBerry. With emoze, all those benefits - and more - can be quickly and easily deployed and enjoyed without busting the business budget. This emoze enhanced Enterprise Edition is available for free download and trial by companies worldwide in its beta version. There is no need to buy employees special mobile devices to provide real time synchronization of office emails, appointments and contacts when they are on the move. You are not tied to a device manufacturer or to a mobile service provider. All you need is a simple data package plus the emoze software and it will deliver anytime, anywhere, to your team members, making it an ideal choice for medium sized enterprises and smaller businesses. Emoze provides two-way synchronization on the move, which means that office email, calendar and contact information stays up-to-date on your own exchange server as well on employee's mobile devices. Email attachments in multiple formats can be selected for review and bookings made for new appointments by individuals on the road or by other team members on their PC at work or on their mobiles, keeping everyone in touch. Ra'anana, Israel's emoze (http://www.emoze.com) turns mobile phones and mobile devices in to fully functional personal communication devices with a single, simple and free download for the individual user. It delivers real-time, secure synchronization of emails, calendars, contacts and tasks - pushing data and updates to you anytime, anywhere using any mobile service provider network or WiFi and all leading brands of mobile device. Download, registration and use of emoze are all free for the individual user. (emoze 19.05)

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9.9 Dune Networks Seizes #1 Position to Lead Switch Fabric Market

Dune Networks announced that according to The Linley Group's Communications Silicon Market Share 2007 report, Dune is ranked No. 1 worldwide in the sale of merchant switch fabrics for 2007. Dune's SAND chipset is the industry's most widely used Traffic Manager and Switch Fabric solution. Dune is enjoying a long list of Tier-1 customers with over 100 different systems designs in Data Center, Enterprise and Carrier markets. According to the report, Dune seized the No. 1 position with 36.2% market share driven by the first and second generation of SAND chipset rolling out to production. Dune Networks (http://www.dunenetworks.com) is a semiconductor supplier of networking devices facilitating the build of Data Center, Enterprise and Carrier Ethernet Solutions. Dune provides a switching solution that truly scales in capacity, port rate and service scheme. This extends the life cycle of packet platforms from the legacy 3 years to 10 years and more, revolutionizing the economics of packet networks. Founded in 2000, Dune's offices are located in Sunnyvale, California and in Yakum, Israel. (Dune22.05)

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9.10 Silicom Server Adapters Selected for Virtualization Appliances of a Leading Storage Company

Silicom announced that its quad-port Gigabit Ethernet Server Adapters have been selected by a leading storage company as a standard component in its state-of-the-art new virtualization appliances. Silicom's robust adapters will be used to enhance the throughput of the appliance as required in high-traffic and mission critical environments, and to prevent I/O bottlenecks at the appliance level. Virtualization appliances are an innovative solution for the IT department's need to be able to change the configuration of complex Storage Area Networks (SAN) or Network Attached Storage (NAS) without disrupting system availability. The virtualization appliance separates the logical and physical representation of storage resources, independently managing the relationships in order to free the main system from the task. The concept of virtualization is being increasingly embraced throughout the IT community as a potent trend with the potential to improve performance, enhance flexibility and reduce costs. Kfar Sava, Israel'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. (Silicom21.05)

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9.11 Alvarion Deploys First 3.3 GHz WiMAX Network in UK for Metranet

Alvarion announced that its BreezeMAX platform is being used by Metranet, a wireless specialist, to deploy the first WiMAX network using the 3.3 GHz spectrum in the UK. Metranet is using this frequency through gaining a Non-Operational Temporary license from Ofcom, the independent regulator and competition authority for the UK communications industries, specifically for this network. This is part of a SEEDA (South East England Development Agency) match-funded innovation project. Alvarion's BreezeMAX base stations and CPEs enable Metranet to provide backhaul for CCTV cameras (closed circuit TV), and traffic junction control throughout Reading. The WiMAX network went live in March 2008 and replaced the existing wired network. Live video from main roads and junctions is streamed back to a central control room, and traffic lights can then be manually controlled via the WiMAX network to improve traffic flow. Automatic License Plate recognition is also being built into the system. Tel Aviv, Israel's Alvarion (http://www.alvarion.com) is the largest WiMAX pure player ensuring customers' long term success with fixed and mobile solutions for the full range of frequency bands. Based on its OPEN WiMAX strategy, the company offers superior wireless broadband infrastructure and an all-IP best-of-breed ecosystem in cooperation with its strategic partners. (Alvarion21.05).

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9.12 Elbit Systems Awarded $87 Million in Contracts for the Supply of Thermal Imaging Systems

Elbit Systems Electro-Optics Elop Ltd. (Elop) has been recently awarded three contracts valued in a total amount of approximately $87m from a customer in Asia for the supply of cooled Thermal Imaging systems for reconnaissance and target acquisition applications. One of the contracts will be performed through Elbit Security Systems. The projects will be performed over two years and Elop foresees potential for follow-on orders. These contract awards reflect Elop's industry leadership in the area of advanced cooled detector technologies, which serve as the foundation for a wide range of thermal imaging products for military applications. The advanced features of Elop's systems enable them to produce thermal images of very high quality. Haifa, Israel ‘s Elbit Systems is an international defense electronics company engaged in a wide range of defense-related programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance ("C4ISR"), unmanned air vehicle (UAV) systems, advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. The Company also focuses on the upgrading of existing military platforms and developing new technologies for defense, homeland security and commercial aviation applications. (Elbit Systems 21.05)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's CPI Rises More Than Expected in April

The Central Bureau of Statistics announced on 15 May that the April Consumer Price Index (CPI) rose by 1.5%, well above even the highest forecasts by analysts. This was the highest monthly CPI rise for April since 2002. Inflation for the past 12 months was 4.7%, well beyond the 3% ceiling of the price stability target. Excluding housing, inflation over the past 12 months was 5.6%. The sharp rise in April CPI and expectations of more to come in the coming months leaves little maneuvering room for Governor of the Bank of Israel Prof. Fischer. He may be forced to raise the interest rate at the end of the month. The clothing and footwear item in the April CPI rose by 6.7%; food, including fruits and vegetables, rose by 2.3%, transportation and communications rose by 2%; education, culture and sports rose by 1.5%, and housing by 1.1%. Price changes listed for specific items included: tomatoes - an increase of 94.3%; domestic and foreign recreation a rise of 10.6%; fresh fruit rose by 11.1%; prices of bread and cereals rose 2.6%; the price of meat, poultry, and fish rose by 1.9%; milk and dairy products rose 1.6%; and fuel and oil rose 1.6%. The price of cucumbers fell by 35%. (CBS15.05)

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10.2 Israel's First Quarter Growth Faster Than Expected

The economy grew at an annualized rate of 5.4% in the first three months of the year, racing ahead of the gloomy growth outlooks issued by the Bank of Israel and the Finance Ministry. Gross domestic product rose by an annualized 5.4% in Q1/08, compared with 5.8% growth in Q4/07 and 5.9% in Q3, the Central Bureau of Statistics reported on 25 May. Growth projections for the economy in 2008 of 4.3% by the Finance Ministry and 3.2% by the Bank of Israel painted a more pessimistic scenario. In the first three months of the year, business production rose by 6.1%, down from 7.6% in the fourth quarter and 7.3% in the third quarter of last year. In spite of the manufacturers' claims of a crisis in the export industry, the first quarter saw exports of goods and services rise by an annualized 12.6%, after rising by 14.7% in the preceding quarter. Industrial exports, not including diamonds, grew at an annualized rate of 6.2% in the first quarter; imports of goods and services rose by an annualized 18.7%, up from 6.8% in the preceding quarter. Investment in fixed assets rose by an annualized 9.6%, after falling by 11.8% in the preceding quarter. Private consumption, excluding durable goods, rose by 6.1%, driven by growth in the purchase of cars, refrigerators, washing machines and air conditioners. Private consumption of durable goods rose by 18.8% in the first quarter. (Various26.05)

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10.3 Tourism in April Up 41% From Same Time Last Year

On 19 May, the Ministry of Tourism announced that almost 300,000 tourists visited Israel in April, up 41% from April 2007. During the first four months of 2008, 936,000 tourists arrived in Israel, an increase of 43% from the first trimester of 2007 and a growth of 34% from the same period in 2006. The growth rate matches the ministry's goal of attracting 2.8 million tourists to the country this year. The Ministry did express concern about the shortage of available guest rooms in Israel and the impact this might have on the ministry's plans to draw 5 million tourists in 2012. The Tourism Ministry has already approved the construction or renovation of 700 guest rooms in the North, the Negev and Jerusalem in a bid to encourage capital investment in the industry. The scheme is expected to bring in $144m in investment. The second stage of this investment initiative began on 21 May, when representatives of the Tourism Ministry, the Finance Ministry and the Industry, Trade & Labor Ministry examined 12 proposals for the construction or renovation of hotels and guest rooms in Jerusalem, Tiberias, Acre, Ashdod, Kiryat Shemona and the Upper Galilee. The proposals, which outline the building of 1,660 new guest rooms, are projected to bring in $294m in investment. Plans that meet the ministries' preconditions will be eligible for financial assistance from the government of up to 20%. (MoT19.05)

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10.4 Foreign Investors Account for Quarter Of TASE's Activity & Own 17% Of Shares

Foreign investors have become more active in the local market in recent years, and at the end of 2007, they owned 17% of the shares traded on the Tel Aviv Stock Exchange (TASE), up from 10% in 2001. TASE's research unit found that foreign investors are responsible for at least 25% of total stock market turnover. The research unit attempted to estimate the weight of foreign activity on the local market, by comparing trade turnover on Sundays, versus the other days of trade - the well-known "Sunday phenomenon." This phenomenon has increased in recent years, indicating the growth in foreign activity on the market. The researchers found that between 1997 and 2007 the gap between Sunday and other trade days has gradually increased. For the past two years, turnover has been about 24% lower on Sunday than during the rest of the week, compared to 13% in 2004 and only 5% in 1997. The explanation for the gap lies in foreign investors' increased involvement in the Israeli capital market - which is reflected, among other things, in the acquisition of about $4b in shares in the past three years.

The proof of a connection between low relative Sunday trade turnover and the activity of foreign investors can be found in reports from the many trading rooms in Israel, who say that foreign investors are almost completely inactive on Sundays, taking action only in urgent cases and to carry out instructions placed late the preceding week. The research unit notes that the trend is also apparent from Bank of Israel data, which indicate that the proportion of foreign investors in stocks and bonds increased from about 19% in 2006 to at least 25% in 2007. As noted, the figure refers to both stocks and bonds, and accurate figures for the separate markets are unavailable. Nevertheless, the TASE believes that international investors are more focused on stocks than bonds, which would mean that foreign investors were behind at least 25% of all stock trade. (Various20.05)

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11: In Depth

11.1 MIDDLE EAST: Arab Capital of $4 Trillion Available for Investment

A whopping $4 trillion in Middle Eastern capital is available for investment, in both private and public sectors, according to a new report from AT Kearney, a global strategic management consulting firm. This high investment power is largely linked to Sovereign Wealth Funds. The assets under management of these funds have, at a global level, risen by 18% between 2006 and 2007 to reach $3.3 trillion with Middle East SWF accounting for 50% of it. The SWFs are expected to reach $5 trillion in 2010 and $10 to $15 trillion in 2015, the study said.

With the rapid growth of the assets, SWFs are under growing pressure to invest. They have accomplished a strategic shift in the way the money is being invested. Traditionally, countries turned their surpluses into risk-averse financial assets. China, for example, supported the US consumption economy by buying government bonds, it said. SWFs are now favoring equity-type investments to benefit from higher revenues and to gain exposure to strategic companies with more capabilities and expertise in industries that are crucial to their own economies, it said. With the world's biggest Sovereign Wealth Fund - the Abu Dhabi Investment Authority - as one example, the UAE is moving towards these private equity-style deals. The SWF could also be an opportunity for the developed countries, when most of their economies are slowing down, the report said.

Early this year, SWF from Asia and Middle East injected billions of dollars of new capital into troubled financial institutions and contributed this way to the stability of the whole system. The AT Kearney report points out the fact that investors from developing countries typically promise to make significant capital investment to grow the business. This approach usually offers a more attractive value proposition for the management team of the targeted firm. The rising power of the regional SWF and their private equity oriented investments are also an opportunity for the Middle East economy itself, it said.

The study revealed that private equity and SWF investments accelerate the growth of job creations. "More than one million jobs have been created through private equity investments in Europe in the last four years" said Dr Dirk Buchta, managing director, AT Kearney Middle East. The report shows that companies financed by private equity and SWF grow faster than those traditionally financed. Private equity firms often invest in mid-size companies, mostly former family owned businesses - of which the Middle East has many. With the help of private equity investors, these companies usually invest more heavily in R&D and become more international. (TradeArabia 26.05)

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11.2 IRAQ: Gulf Countries Unwilling to Cancel Iraqi Debt

Dr. Nimrod Raphaeli is the Editor of the MEMRI Economic Blog observed that during the long years of Saddam Hussein's rule in Iraq, economic data were treated as top national secrets and the revelation of such data to unauthorized persons could bring the death penalty. Therefore, it was only after the fall of the regime that the extent of Iraq's enormous sovereign debt, estimated at the time in excess of $120 billion, was to become a public record.

After the invasion of Iraq in April 2003, it became evident that the country's economic and social development could not be initiated with so much external debt overhang, and the issue was taken up by the Paris Club. At the September 2003 meeting in Dubai of the G-7, the finance ministers called on the Paris Club "to make its best effort to complete the restructuring of Iraq's debt before the end of 2004." According to U.S. figures, Iraq owed Paris Club members approximately $40 billion. Of this amount, $21 billion was principal and $19 billion was interest. The IMF estimated Iraqi debt held by non-Paris club governments - primarily the oil-rich Arab countries in the Persian Gulf - at $60 billion to $65 billion, and debt to commercial creditors at roughly $15 billion.

The Paris Club Tackles the Iraqi Debt

The Paris Club is an informal group of financial officials from 19 of the world's richest countries, which provides indebted countries and their creditors such financial services as debt restructuring, debt relief, and debt cancellation. Debtors are often recommended by the International Monetary Fund after alternative solutions have failed.

At its meeting on November 21, 2004, the Paris Club recommended a three-stage plan to reduce debt owned by Iraq by 80%. The first stage was to immediately cancel 30% of debt owned by Iraq to each Paris Club country. The second stage was to start the implementation of an IMF program following which another 30% would be cancelled. The remaining 20% of the initial stock would be abdicated upon completion of the last IMF program. Most creditor countries, including the U.S., the U.K., France, China and Russia, have adopted the recommendation, in full or in part. The oil-rich Arab Gulf countries have been the exception, despite many promises to the contrary.

Most recent data from the U.S. Department of State indicate that over the past three years, Iraq's debt has been reduced by $66.5 billion. With the participation of all members, the Paris Club cancelled a total of $42.3 billion. The U.S. cancelled 100% of Iraq's debt of $4.1 billion. Other Paris Club members agreed to cancel 80% of Iraq's debt. A number of non-Paris Club members have cancelled a total of $8.2 billion, on Paris Club terms.

Iraq's Failed Attempts to Resolve Debt Issue with Gulf Countries

The Iraqi Finance Ministry has sent several messages to the Arab countries, notably Kuwait and Saudi Arabia, confirming Baghdad's readiness to hold talks to settle the Iraqi debt. However, Finance Ministry director-general finance Muhammad Al-Hariri has noted bitterly, "We were expecting, for some time, that these states would resolve the issue and follow the path of several other countries around the world that have cancelled the debt due them from Iraq, but the Arab countries have remained bystanders." He added that the attitude of the Gulf states is "politically motivated, because some of these countries do not recognize the new changes in Iraq."

The Iraqi daily Al-Da'wa, issued by Prime Minister Nuri Al-Maliki's political party of the same name, has been far more explicit in its criticism of the Gulf countries for their refusal to cancel Iraqi debts. In an article entitled "Iraq Is Not Obliged to Pay Odious Debts," Rassim Qassim writes that most of the debts accrued by Iraq were "the result of actions by the previous dictatorial and unconstitutional regime…They are primarily in the form of damages sustained by countries during the invasion and occupation of Kuwait or the result of wars and crises that led to the isolation that regime…" When that regime fell, writes Qassim, "it was assumed that countries which had opposed the previous regime and its programs would drop the odious [illegitimate] debt, and they are now asking the suffering Iraqi people to bear the responsibility of the actions of the despot [Saddam Hussein.]"

Qassim goes on to say that "the new Iraq - with its elected constitutional government and its democratic institutions - is not obliged to pay these debts and it is not obliged to acknowledge them… The civilized world and, specifically, Europe, has responded to the Paris Club, which cancelled 80% of the odious debts, and the European Union is trying to cancel the rest and open a new page with emerging Iraq. The international community has begun to view Iraq in a different perspective - as the sole country in the region that enjoys democratic, multi-party and constitutional parliament."

After underscoring Iraq's great economic potential, the author warns of "the impediments being placed on it by countries which have regimes that are incompatible with democratic orientation and which insist on retaining the false debts that were imposed on Iraq." He concludes by calling on the Gulf countries to reexamine their calculations and to keep in mind that "causing harm to Iraq would not endure, and what goes around comes around."

Reflecting the same views, Hilal al-Ta'aan writes in the Iraqi government daily Al-Sabah that most of the loans given to Iraq by foreign and Gulf countries were made with the certitude that they had a military objective - to arm Iraq and support its war against Iran.

The Doctrine of Odious Debts

The two articles echo the doctrine of "odious debts." Proponents of the doctrine asset that some of Iraq's debt could potentially be classified as non-legitimate under international law, since they were undertaken during the Hussein regime and that international law should be able to expunge these debts. Patricia Adams, who is associated with Probe International, a Toronto-based organization devoted to the issue of "odious debts," quotes Russian legal scholar Alexander Sack, who, in 1927, defined the Doctrine of Odious Debts, as follows:

If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime… this debt is odious…. This debt is not an obligation for the nation; it is a regime's debt, a personal debt of the power that has incurred it, consequently it falls with the fall of this power.

Reparations as Debt

Apart from the external debt, there is the issue of reparations to Kuwait and, to a lesser extent, to Saudi Arabia, stemming from the occupation of Kuwait by Iraq, the looting of the country and setting fire to its oil fields.

Following the occupation of Kuwait, the United Nations imposed sanctions against the Iraqi regime. Security Council Resolution 661, of 1990, prohibited all nations from buying Iraqi oil and from selling Iraq any commodities except food or medicines. Under the same resolution, the United Nations Compensation Commission (UNCC) was established as a subsidiary organ of the Security Council to process claims and pay compensation for losses and damage suffered as a direct result of Iraq's 1990-1991 invasion and occupation of Kuwait. Initially, 30% of revenues from the sale of Iraqi oil was to be channeled through the UNCC; that proportion was later reduced to 5%, and it has remained at that level, but with a larger revenue base. The Commission receives about $220 million a month.

There were approximately 2.7 million claims submitted, for a total of over $350 billion. Of these claims, 1.54 million (57%) resulted in some sort of award. The total approved by the UNCC was $52 billion. In March of this year, the UNCC paid out $972.4 million, bringing the total to $24.4 billion. Kuwaiti companies and state entities received the lion's share of the latest round of compensation, amounting to $725.1 million, followed by Saudi Arabia with $148 million, the U.S. ($76 million) and Turkey ($23.3 million). Another $28 billion remains to be paid to settle all outstanding claims.

The Commission has adopted a policy of paying individuals first, with the result that the remaining sum is owed to government entities (including state oil companies) of Kuwait and Saudi Arabia.

Kuwait, which has received nearly $14 billion from the UNCC, is still owed about $27 billion, or almost all of the remaining outstanding compensation of $28 billion, to be paid by Iraq through the UNCC.

Conclusion

There is no doubt that Kuwait suffered enormously as a result of its occupation by Iraq and the brutal administration, established by Saddam Hussein, that followed. The country was systematically looted, many of its citizens were murdered or taken as prisoners to Iraq without leaving a trace. Reparations were justified. But how much reparations should be assessed, and collected, should be negotiated in a spirit of generosity as befit two neighborly Arab countries that must live side by side for a long time.

The issue of debt is of an entirely different genre, because loans extended to the Iraqi regime during the Iraq-Iran war were equally beneficial to lender and borrower alike, and this factor should be kept in perspective as the parties seek to bring the issue to a close. A strong and prosperous Arab Iraq may serve again as a dam against a raging Persian tide that threatens to sweep the Middle East in its wake. This factor, above everything else, could only be ignored by the debtor nations at their own peril.

Dr. Nimrod Raphaeli is the Editor of The MEMRI Economic Blog, (http://www.memrieconomicblog.org). This article was originally published as a MEMRI Inquiry and Analyses piece. (MEMRI19.05)

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11.3 GCC: Fitch Says Oil Boom/Currency Pegs Bring Faster Inflation

On 21 May, Fitch Ratings (http://www.fitchratings.com) said inflation in the member countries of the Gulf Cooperation Council (GCC) is set to rise further in the absence of effective policy tools to prevent it. However, potential sovereign credit ramifications - mainly fiscal and socio-political - are modest, being outweighed by the impact of continued high oil prices on public finances and sovereign balance sheets. In a special report, Fitch notes inflation is already in double digits in Oman, Qatar and the UAE and close to 10% in Kuwait and Saudi Arabia, leaving only Bahrain with a more modest inflation rate of around 5%.

"GCC inflation is its highest in over 30 years. As in the seventies, some of the region's increased oil wealth is feeding through into higher prices, and with policy tools limited, inflation will rise further before it starts to fall," says Richard Fox, Head of Middle East and Africa Sovereign Ratings at Fitch.

The region's increased oil wealth warrants an increase in real exchange rates, which can come either though a revaluation of the nominal exchange rate or higher prices, or a combination of the two. Given the decision to stick with dollar pegs, Kuwait excepted, higher inflation is inevitable. "Real interest rates are increasingly negative; fiscal policy is expansionary and administrative measures have had little impact on the main inflation drivers - rent and food," says Charles Seville, Associate Director and the report's main author. "The main hope is that improved real estate supply, moderation in food prices and more restrained government spending will start to reduce inflation later this year."

Higher inflation has many causes. Spending oil revenues, even at a measured pace, boosts demand and liquidity growth. Although imports have satisfied much demand, shortages are mounting and costs rising. Property markets are especially tight as expatriate labor brings massive population growth. Rents are the main cause of high inflation in the two highest inflation countries - Qatar and the UAE.

Dollar pegs and falling US rates have dictated increasingly negative GCC real interest rates, which encourage bank borrowing and purchase of real assets, especially property. Credit growth accelerated throughout the region last year, exceeding 30% everywhere but Saudi Arabia and 50% in Qatar. Fitch believes this channel to higher inflation is more important than the direct impact on import costs of weaker dollar-linked currencies. Nevertheless, Fitch notes that Bahrain, with the lowest inflation rate, sources a larger share of its imports from within the region, compared to its GCC neighbors.

Inflation in Saudi Arabia and Oman has been more affected by rising food prices. With at least some commodity prices now moderating and housing costs less of a factor, inflation may abate later this year. By contrast, in Qatar and UAE, lower inflation must await improved property supply.

Higher inflation brings some credit concerns, though these are largely offset by the impact on public finances and sovereign balance sheets of higher oil prices. Governments have moved to defuse potential socio-political pressures by raising wages and subsidies to preserve purchasing power of their citizens. Countries with the highest inflation are also best able to shoulder such costs, with budget surpluses of at least 20% of GDP expected in all except Bahrain and Oman this year. Budgeted oil prices are creeping up, but actual oil prices remain well above levels that would raise serious credit concern.

A bigger worry is the contingent liabilities inherent in rapid bank lending growth and booming property markets which have often preceded banking system stress elsewhere. However, the trigger would most likely be lower oil prices or a geopolitical shock, rather than the more usual sharp policy tightening which is unlikely. Moreover, as GCC banking systems are generally strong and sovereigns willing and able to support them if required, sovereign credit concerns from this source are also limited.

Higher costs could mar the attractiveness of the region as a place to work and do business and will reduce the viability of some projects, all of which will hamper the region's diversification strategies. Rising and increasingly divergent inflation also poses another challenge to the GCC's goal of monetary union by 2010. With a host of technical and political issues still to be addressed, that target looks increasingly likely to be postponed. (Fitch21.05)

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11.4 BAHRAIN: Asset Hunt

According to the Oxford Business Group, a push by Bahrain's parliament for greater transparency in recording government assets could mean delays for the Kingdom's main investment authority, which has announced plans to diversify its holdings. Last November, a parliamentary committee was established to determine the extent of the government's assets and investments, and to investigate whether there had been any abuse or mismanagement of them. On May 18, Sheikh Abdulrahman bin Ali Al Khalifa, the director-general of the Survey and Land Registration Bureau, told the committee a registry had not been completed, meaning there was still no clear record of the state's holdings and property.

"There are a lot of unregistered government properties and assets, but we have managed recently to recover seven government plots and had them registered. We are in need of reorganization to ensure that we have clear statistics," Sheikh Abdulrahman said.

Much of the focus of the inquiry has fallen on the Bahrain Mumtalakat Holding Company, the government's main investment arm, established in 2006. Mumtalakat has holdings of around $10bn, with 98% of its portfolio located within the Kingdom. The company has a wide range of investments, including aluminum production, property, agriculture, telecommunications and tourism. It has recently revealed its intention to divest some of its local holdings and spread its asset base equally between domestic and overseas locations over the next five years. "We're looking at several opportunistic deals in the US," Talal Al Zain, Mumtalakat's chief executive officer, told the press on May 20. "We're looking at the insurance space."

While not going into details about which US firms were being targeted as potential investments, Al Zain said the company had no intention of investing in the US banking sector, at least for now. Earlier in May, Al Zain said the US subprime crisis presented opportunities for cashed up funds such as Bahrain's. "I am looking at distressed investments," Al Zain told the local media on May 15. "Given the conditions of these markets, they will have to access the liquidity we have."

The company was also considering expanding into telecommunications, renewable energy and financial services, he said. However, these plans are one of the issues that have concerned the parliamentary committee, which has claimed Mumtalakat has stalled in providing detailed information on its current holdings. Committee secretary Sayed Abdulla Al A'ali said the fund was being less than forthcoming regarding the properties it managed.

"Mumtalakat's chief executive officer Talal Al Zain told us the company only deals with properties transferred to it by the finance ministry and said listing all the government property and assets would take a lot of time, promising to give us information as soon as possible," Al A'ali said on April 21. "We have not received this information [yet] and instead general information about Mumtalakat has been presented to us. Mumtalakat runs 34 companies, which the government has 100% control over." Mumtalakat has said the 34 companies it operates are independent entities and as such are not registered under its name.

The committee has questioned whether the holding company was legally authorized to sell any of the assets transferred to it. If, as some members have contended, the company can only dispose of assets with the assent of the King, this could put a spanner in the works of Mumtalakat's overseas expansion plans. (OBG23.05)

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11.5 BAHRAIN: Labored Reform

The Oxford Business Group reported that Bahrain is planning a major overhaul of the laws and conditions governing foreign labor, with proposed reforms giving greater protection to the rights of expatriate workers. One of the central changes involves restructuring the visa system. Previously, foreign staff have had their permits to stay issued through their employers. The existing scheme has come under fire for giving employers excessive power over their workforce, allowing them to hold the threat of cancelling visas if workers complained of poor conditions.

Over the past few months, there have been a series of strikes at workplaces across the kingdom, mainly involving the construction industry, during which foreign laborers have downed tools to highlight low wages, cramped housing and the poor health services available to them.

Bahrain's Labor Minister Majeed Al Alawi said the reforms would put an end to illegal or questionable practices and would promote the free movement of labor, irrespective of a worker's nationality. "The abolition of the sponsorship system will fulfill the government objective of preventing the violation of human rights and all types of human trafficking," he said during a visit to India on April 28.

Though acknowledging that many in the business community were not in favor of the change, Al Alawi said the system would be abolished by the end of the year. "We will take into account their suggestions and try to address their concerns, however, we shall not go back from the decision to allow the free movement of labor in Bahrain," he said. "Bahrain wants to take the lead in the Gulf in the area of labor market liberalization."

The government has proposed issuing separate work and residence permits, whereby the state would have control over residency issues, whilst the employer's responsibility, and power, would be limited to work documents. This would mean a foreign worker could leave a job and take up another position without the risk of having his visa cancelled and being deported.

Under the proposed changes, Bahrain's Labor Fund, which is charged with promoting and developing local employment and training, will be responsible for collecting a $530 fee for a two-year work permit, as well as an additional $26.50 per month for each foreign worker. Nezar Al Baharna, the chairman of the Labor Fund and the minister of state for foreign affairs, said the fees were not intended to make employing non-nationals more expensive or to discourage employers from taking on expatriate staff. "The details of the labor market reforms have been debated threadbare in the national press and our goal is to empower the local workforce, Bahrainis and expatriates alike, by creating a level playing field for everybody to work, thrive and prosper," he said at a meeting on May 7.

On May 11, Al Alawi announced plans for further strengthening foreign workers' rights, saying the government was looking to put in place legislation offering greater protection to women working as housemaids in Bahrain. While not covered by the general labor laws in Bahrain, the minister said foreign domestic servants still had the right to lodge complaints with the Labor Ministry. The proposed new law would help ensure the household staff were not mistreated by anyone and that their human rights were respected, he said.

To further codify labor conditions, Bahrain has signed a series of memorandums of understanding (MoU) with Asian countries, whose citizens represent the majority of the kingdom's foreign workforce. These MoUs, signed with the governments of India and Nepal among others, set out guidelines for recruitment of foreign workers and guarantee them protection under Bahraini law. Employers will be required to agree with workers on the duration of a contract, the conditions of employment, including wages and end of service benefits, medical facilities, leave entitlements and other facilities such as transportation and accommodation. All contracts will have to be authenticated by the Labor Ministry before coming into force.

While employers may not be happy with the new plans, fearing an erosion of their own rights and higher costs due to set minimum wages and the requirement to provide better housing, services and facilities, the government sees this as a price that must be paid in order to promote free movement of labor into the kingdom. (OBG19.05)

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11.6 OMAN: Moody's Says Omani Banks Enjoy Strong Earnings & Growing Franchises

Moody's Investors Service (http://www.moodys.com) said that rated Omani banks continue to enjoy well-established domestic franchises, strong earning-generating capability despite pressure on interest rate margins and good capital levels, says Moody's Investors Service in its latest 'Banking System Outlook' report for Oman. The stable outlook on the bank financial strength ratings (BFSRs) of these institutions captures their good franchise development in recent years but also the challenging and increasingly competitive operating environment in Oman. It also recognizes that the improved financial performance of recent years has been partly driven by the positive economic cycle.

In addition to the Banking System Outlook, which focuses on performance measures and forward-looking rating drivers for the Omani banking system, Moody's has also published a 'Banking System Profile' report for Oman. The Profile forms part of a new series of reports on banking systems throughout the world, which are designed to complement Moody's Banking System Outlook reports by serving as descriptive reference guides to key structural factors that are reflected in Moody's bank credit ratings.

Despite improvements in domestic conditions, Omani banks continue to operate in a challenging and highly concentrated economy that constrains the upside potential to their ratings. Oman still relies heavily on hydrocarbon exports, which results in considerable cyclicality in the operating environment, which in turn affects the performance of the banks. However, given the current strength in oil prices, hydrocarbon exports are contributing positively to Oman's economic up-cycle.

"We expect that the government's ongoing strategy to diversify and expand the non-oil segment of the economy to continue to boost economic activity in the country and create further growth opportunities for the Omani banking sector. In addition, the major Omani commercial banks have achieved a balanced franchise development across segments, which has entailed both strong growth in personal lending and continued growth in corporate and commercial banking," says Elena Panayiotou, a Moody's Analyst and author of the report.

Moody's recognizes that the banks continue to generate strong earnings, mostly due to their low cost structures and the healthy albeit declining interest margins earned on their growing business volumes. However, it cautions that, given the increasingly competitive nature of the Omani banking market, the banks need to strengthen their non-interest-related income in order to offset the pressure on margins and sustain their profitability at the current levels.

Another constraint to the Omani banks' ratings is the high credit risk they continue to face. "Although the system's asset quality has improved in recent years, mainly due to improved credit risk management policies, much of the improvement reflects Oman's favorable economic environment, which may not be sustainable through a cycle. Moreover, the rapid credit expansion in the past two years raises concerns over the performance of these loans once they start to season," Ms Panayiotou explains.

Moody's regards bank governance standards in Oman as moderate but gradually improving as the level of foreign direct investment in the country rises and as foreign investors raise their participation in the banking system. In addition, the regulatory and supervisory framework is still evolving but is currently of adequate quality with a good level of transparency and formalization of procedures and rules. The rating agency also views favorably the steps being taken by the Central Bank of Oman to enhance its supervisory techniques and oversight and welcomes its plan to adopt risk-based consolidated supervision. Moody's generally views Omani banks as operating in a high-support system based both on the importance of the banking sector to the payment system but also the past behavior of government intervention in cases where institutions were faced with financial distress. (Moody's15.05)

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11.7 OMAN: Retail Therapy

Oman's retail sector is on the rise, with new projects due for completion before the end of the year and major upgrades at some of the sultanate's existing centers under way. Dubai-based developer Majid Al Futtaim Group (MAF) is due to launch its new 20,600-square meter Qurum City Centre in Muscat in October. When open, the $67.5m project is expected to provide employment for around 800 people, half of whom will be Omani nationals. While the increase in jobs on offer for locals will please a government keen on promoting the "Omanisation" of the workforce, the Qurum City Centre is likely to prove an even bigger hit with shoppers.

Last year, more than 8m people visited the Muscat City Centre, one of the country's first large-scale shopping complexes. Given that the population of the sultanate is just 2.6m, it is clear that Omanis have taken to the mall experience in a big way. According to Ibrahim Al Qasmi, the general manager of Muscat City Centre, another MAF project, visitor numbers are expected to increase by 25% on last year's results. "With Muscat City Centre positioning itself as Oman's first regional mall, we are looking at increasing our footfalls to 10m this year," he said on April 3. "We are also expecting a further increase in our tourist shoppers and hence we have already implemented a few [new] services such as shuttles from select top notch hotels in Muscat."

Other major shopping complexes are also reporting increased patronage, sparking more construction plans. In mid-March, the Abu Dhabi-based Emke Group announced plans to spend $182m on building more outlets of its LuLu supermarket chain across the country.

Developers are increasingly looking to the opportunities offered by Oman's retail sector. Compared to the US or neighboring Dubai, the sultanate has a very low ratio of per capita retail space. While the ratio is almost 1.8 square meters per head in the US and around .46 square meters per capita in Dubai, in Oman the figure is just .11 square meters, according to Wayne Scherger, vice-president of divisional services at MAF.

However, Oman's fondness for air-conditioned shopping malls does threaten to leave some out in the cold. Steeply rising rents, falling patronage and the struggle to compete with the economies of scale enjoyed by large chains have meant that Oman's small retailers are finding it increasingly harder to compete.

The government has moved to help businesses deal with skyrocketing rents, which are rising at more than 11% annually, by announcing a rental increase cap of 15% in September. With inflation steadily on the rise, it is currently considering lowering the cap to 7%. Oman's minister for commerce and industry, Maqbool bin Ali bin Sultan, has recommended that the country's small businesses adopt the techniques used by larger retailers, such as centralized purchasing, warehousing and bulk-breaking if they wanted to compete with their bigger rivals. "Small retailers should now take steps to improve their quality of services and product range availability to satisfy customer needs and withstand competition," he told the local media last October.

However, it is hard for smaller stores to compete with malls that have large advertising budgets, shuttle bus services, off-street parking, entertainment and eating facilities under the same roof. One-stop shopping has certainly caught on in Oman, with developers such as MAF and Emke riding the wave of this popularity and building on it with high levels of investment. Small-scale retailers will be looking for creative ways to compete with their bigger rivals, or risk following the trend seen in so many other countries and going under. (OBG19.05)

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11.8 TURKEY: Record IPO

While a number of IPOs have been postponed in the wake of the Istanbul Stock Exchange's steady slide this year, the Oxford business group observed that the record-breaking sale of a 15% stake in Turk Telekom will act as a boon for the bourse despite reservations surrounding the low pricing of the shares.

On May 13 shares in the IPO, which were allocated on a 60:40 ratio to local and foreign investors respectively, were priced at YTL4.6 each, close to the top of the 3.9 - 4.7 price range set by the Turkish privatization agency. Demand for shares among Turkish investors was 4.7 times higher than the amount on offer, and 4.3 times higher from international investors. The IPO fetched a total of YTL2.42bn ($1.9bn), a record figure for the ISE, giving Turk Telekom a market value of $12.95bn.

Some analysts welcomed the deal as Turkey needs foreign investment to finance a current deficit estimated at $45bn this year. However, the fact that the company will trade at 6.4 times its 2007 profits - well below the average of 9.9 times earnings for shares in the 50 top ISE listed companies - has led some economists to argue that the offering was underpriced. The government had budgeted a YTL3.9bn ($3.1bn) income from the sale but considering the current financial situation, many have deemed the IPO a relative success. "Compared to previous ones, it could have been better, but under current market conditions it was a success for the Privatization Administration," Yurdal Yalman, head of research at Oyak Securities, told international media.

The IPO represents the second stage of the privatization process of Turk Telekom. In 2005 the government sold 55% of its stake in the company for $6.65bn to Oger Telecom. Dubai-based Oger Telecom is 35% owned by Saudi Oger, a Saudi Arabian conglomerate that is controlled by relatives of Rafiq Hariri, the late Lebanese prime minister.

Despite the liberalization of the long-distance fixed line market, which began in May 2004 with the allocation of over 40 licenses to potential competitors, Turk Telekom remains the unchallenged market leader in the fixed line segment.

Turk Telekom also maintains a 81% stake in Avea, Turkey's third largest mobile phone operator. With around 10m customers at the end of 2007, Avea is the smallest operator behind Vodafone (16.2m) and Turkcell (35.4m). However, Turkcell's market share has fallen from 65% at the end of 2004 to 57.5% today as its rivals have proved successful in attracting an increasing proportion of subscribers. Moreover, the solid financial backing Avea receives from Turk Telekom is a major advantage in its endeavor to increase its current 17% market share.

Turkcell stock slid 6% in the lead up to the Turk Telekom IPO, as investors sold the stock to buy into the IPO, before rallying 3.4% on 13 May. Turkcell's share price also dropped at the beginning of May after the company reported a lower than expected rise in profits. However, the company continues to trade at 13.2 times last year's earnings.

Competition within the mobile sector is set to become increasingly intense following the recent confirmation by the Turkish Telecommunications Board that mobile number portability will be introduced on November 13. The effect of increased competition bodes well for consumers as mobile operators are increasing the services and technology available to their subscribers. On May 13 Turkcell announced a partnership with US-based Bubble Motion to introduce voice SMS services in Turkey. On May 5 Vodafone unveiled that it will bring Apple's iPhone to no less than 10 markets around the world, including Turkey. No details were given about when exactly the iPhone will be released in Turkey but it is expected to reach Europe by the end of the year.

In the long-term competition in the Turkish GSM market could be further complicated by the arrival of Mobile Network Virtual Operators (MNVOs), the first of which are expected to be launched in June. Virtual operators will be able to use the infrastructure of the existing mobile operators to introduce their own brands and build a customer base. (OBG16.05)

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11.9 GREECE: Fitch Affirms 'A'; Outlook Remains Positive

Fitch Ratings has on 13 May affirmed Hellenic Republic's (Greece's) foreign and local currency Issuer Default ratings (IDR) at 'A' with Positive Outlook and the Short-term foreign currency IDR at 'F1'. The Country Ceiling is affirmed at 'AAA', reflecting Greek membership of the European Monetary union.

"The factors underpinning the Positive Outlook remain in place but more progress is needed on the public finances to translate this into an upgrade," said Chris Pryce, Director in Fitch's Sovereign Group. The Positive Outlook reflects sustained and strong GDP growth, which is approximately double the euro area average in the last 10 years and is moving income per head towards EU15 levels. The economy is focused on services, especially shipping and tourism, and Greek business has successfully taken advantage of the rapid growth in southern Europe and the Balkans as well as the expansion of world trade. The banking system remains relatively strong with a Fitch BSI (Banking System Indicator) of 'B' (high quality). This is significantly better than the majority of its rated peers and in line with most developed countries and despite continuing rapid credit expansion.

In addition, the public debt ratio, one of the highest in Europe, has now established a downward path both because of the high nominal GDP growth and, more recently, fiscal consolidation. The government deficit declined to a Maastricht-compliant 2.6% of GDP (on revised data) in 2006 from 7.4% in 2004 and remained below the Maastricht threshold at 2.8% in 2007. Following recent upward revisions to GDP data the latest government debt-to-GDP ratio at end-2007 was 94.5%, compared with the then estimate of 104.1% at end-2006.

However, Fitch notes that further progress needs to be demonstrated if Greece is to achieve a rating upgrade. Firstly, while the fiscal deficit remained below 3% of GDP last year, it was 0.4% of GDP larger than expected despite GDP growth being broadly in line with expectations. This was due to a number of special factors, including emergency assistance following a natural disaster, the unexpected additional debt repayment to Olympic Airways ordered by the courts and unbudgeted payments to the EU related to the GDP revision. However, it is important that the government demonstrates its ability to achieve its own target of a 1.6% deficit this year to maintain credibility in the continuity of the fiscal consolidation program. Almost all of this year's improvement is scheduled to come from an increase in tax revenue, adding 1.3% worth of GDP to total revenue, mostly via indirect taxation, a broadening of the property tax base and further efforts to reduce tax evasion. This will be a difficult task but, if achieved, will return Greece to a plausible path to achieving balance in the public finances by 2010 and knock 10 or more points off the debt ratio over the same period.

Secondly, the external environment has become more challenging. The expansion of Greek companies into new markets in the Balkans has been positive for growth but brings with it macroeconomic risks when these markets are, as at present, under pressure from tighter credit conditions and large external financing requirements. While the continued widening in the Greek current account deficit is not a direct credit concern for a euro area member it could be signaling unsustainable trends in the economy in the context of robust domestic credit growth. Competitiveness has deteriorated as wages have risen relative to productivity growth and labor market inflexibility could hamper the economy's ability to cope with negative global shocks. Nevertheless, it is noteworthy that Greek exporters have been successful in the services sector and have more or less held their market share in goods and services over the past five years, in contrast to some other southern European economies. It will be important to see the resilience of Greece's growth dynamics through 2008 in the face of elevated external risks.

Thirdly, the improvement in fiscal ratios that Fitch had expected as a result of GDP revisions was in the event smaller than anticipated as Eurostat did not accept the proposal of National Greek Statistical Service to increase GDP by about 25%, instead approving an increase of 9.6% in the base year. Fitch had anticipated last year that the switch to new national accounts measures would cut government debt to around 80% of GDP for end 2006 from the then estimate of 104%.

Finally, Fitch would like to see more action taken on pension reform. Population aging poses a high risk to government finances and there is only limited time left to start initiating parametric reforms designed explicitly to reduce the untenable generosity of state provision. The changes that the government has announced are primarily administrative in nature and will not materially reduce the fiscal costs of ageing. Nevertheless, it important that these changes are implemented thoroughly so that more fundamental changes may be introduced when the need to move the country's long term finances to a sustainable position is finally recognized.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, http://www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. (Fitch13.05)

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- Israeli Shekel conversions done at a rate of NIS 3.40 = $1.00
- Turkish Lira conversions done at a rate of NTL 1.2 = $1.00
- Euro conversions done at a rate of € 1.00 = $1.50
- Jordanian Dinar conversions done at a rate of JD 1.00 = $1.41
- UAE Dirham conversions done at a rate of Dh 3.66 = $1.00
- Omani Rial conversions done at a rate of OR 0.385 = $1.00
- Pakistani Rupee conversions done at a rate of Rs 60 = $1.00

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