• Israeli Establishments to Become Smoke-Free Zones
• Construction Boom Tops $2.4 Trillion in Persian Gulf Projects
• Karamanlis & Erdogan Inaugurate Greek-Turkish Natural Gas Pipeline
• Chanukah Lights Up the World Starting 4 December
• Islamists Dealt Heavy Blow in Jordanian Elections
• EGYPT: Macro Economics

TABLE OF CONTENTS:

1.1 Bank of Israel Official Slams Olmert Budget Expansion Proposal
1.2 Compromise Reached On Socioeconomic Reform
1.3 Israeli Establishments to Become Smoke-Free Zones
1.4 National Library to Be Established In Jerusalem

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2.1 Voltaire Powers Two of the World’s Top Five Fastest Supercomputers on the New Top 500 List
2.2 RushNet Expands Apple Rush Export Business to Israel
2.3 N-trig Translates its Website Into Chinese & Japanese
2.4 MobiMate Announces Completion of Financing Round Led by Motorola Ventures
2.5 MTS Announces Receipt of NASDAQ Notice of Failure to Comply With Continued Listing Requirement
2.6 Most Israelis Prefer Buying Locally Produced Foods
2.7 Hooters Plants Flag in Israel

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3.1 Construction Boom Tops $2.4 Trillion in Persian Gulf Projects
3.2 Work To Begin On $1.6 Billion Bahrain Health Island
3.3 Citigroup Sells Abu Dhabi Fund $7.5 Billion Stake
3.4 AMD Announces $622 Million Investment by Mubadala Development Company
3.5 DP World Prices Biggest Middle Eastern IPO
3.6 Michigan State University Launches Dubai Campus
3.7 Dubai Woodshow to Double in Size
3.8 US Court Rules In Favor Of Turkish Steel

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4.1 Ben-Eliezer Commits To 10% Clean Energy by 2020
4.2 2-Shekel Coin To Enter Circulation

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5.1 Jordan & Canada May Forge Free Trade Agreement During Second Half Of 2008 5.2 UAE Posts 170% Mobile Penetration

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6.1 Karamanlis & Erdogan Inaugurate Greek-Turkish Natural Gas Pipeline
6.2 Turkey's Economic Targets for Next 5 Years
6.3 Turkey Is Set To Start The Button For Building Nuclear Power Plants
6.4 Greek Budget Revenues Above Target
6.5 Greece’s Private Healthcare Way Forward

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*ISRAEL:

7.1 Chanukah Lights Up the World Starting 4 December
7.2 Israel Becoming Less Secular
7.3 Israeli Flag to Take the Guinness Record As World's Largest

*REGIONAL:

7.4 Islamists Dealt Heavy Blow in Jordanian Elections
7.5 New Jordanian Government Sworn In 7.6 UAE Celebrates 36th National Day on 2 December
7.7 Turkey’s Draft Constitution to Be Announced in Weeks

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8.1 BioLineRx In-Licenses Anti-Cancer Compound BL-4060
8.2 Quark Pharmaceuticals, Inc. Announces First Systemic siRNA Dosing in Humans

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9.1 Tower Semiconductor Opens Taiwan Representative Office to Expand Presence in Asia Pacific Region
9.2 ForeScout Technologies Extends Network Access Control (NAC) Support for Remote End-Users
9.3 TraceSpan Announces TR-069 Support and Analysis
9.4 Continuity Software Launches RecoverGuard Version 2.0
9.5 Horizon Next Generation Location-Free Universal HD-DVD/Blu-Ray Decoder/Transcoder SoC
9.6 Connexion Technologies Selects BitBand to Deploy Advanced Entertainment Packages for US Market
9.7 MTI Wireless Edge Offers Wide Selection of 3.65 GHz WiMAX Antennas
9.8 Neotel South Africa Selects ECI Telecom for Next-Generation Transport Backbone Network
9.9 Gizmoz Launches Be a Star

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10.1 Israel’s CPI Rises 0.1% in October
10.2 Israeli Hotels Report Highest Occupancy Since 2000
10.3 Unemployment Continues To Fall

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11.1 LEBANON: Fiscal Future in the Balance
11.2 LEBANON: IMF Executive Board Concludes 2007 Article IV Consultation
11.3 GCC: Creditworthiness Unaffected By Inflation, Exchange Regime Changes
11.4 KUWAIT: Under Construction
11.5 BAHRAIN: Refinery Upgrade
11.6 UAE: Moody’s Rating of Aa2 Based on Strong Economic Fundamentals
11.7 UAE: Tools Limited in Inflation Fight
11.8 ABU DHABI: Future in Petrochemicals
11.9 SHARJAH: Jet Fuel Pipeline
11.10 OMAN: Inflationary Fires
11.11 SAUDI ARABIA: Riyal Pressures Mount
11.12 EGYPT: Macro Economics
11.13 ALGERIA: Export Woes
11.14 PAKISTAN: Politics May Jeopardize Positive Credit Fundamentals
11.15 CYPRUS: EC Says Cyprus on Track for Euro Changeover
11.16 TURKEY: Nuclear Ambitions

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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Bank of Israel Official Slams Olmert Budget Expansion Proposal

Bank of Israel Deputy Governor Prof. Eckstein has lambasted recent proposals by the Olmert government to increase spending in 2008 by 3%, double the increase ceiling set in the budget bill. Eckstein told Globes that he warned Olmert to refrain from measures that would undermine its fiscal credibility. Eckstein stressed the need to comply with the budget growth cap of 1.7% in view of the crises affecting international markets. Eckstein added that preserving the budget framework was an international commitment that the government has undertaken towards the Israeli public, international investors, and the US government in particular, in an official letter sent to the White House in 2004. Eckstein believes that the government must use the budget surplus from taxes to reduce the public debt, with the goal of achieving a debt-to-GDP ratio of 60%. (Globes 19.11)

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1.2 Compromise Reached On Socioeconomic Reform

A compromise has been reached between the Ministry of Finance and Finance Committee chairman MK Misezhnikov (Yisrael Beitenu) on the program to narrow social gaps. The reform includes raising the value use on company cars, instituting a negative income tax, absorbing a private member's bill of MK Shalom (Likud), and widening the tax brackets. The Knesset is expected to pass the plan. Coalition whip MK Aflalo (Kadima) negotiated the compromise on 27 November. The socioeconomic reform was split into four separate bills, three of which - raising the value use on company cars, institution of a negative income tax, and the widening of the tax brackets - will be sent to the Finance Committee for approval. The Ministry of Finance also retreated from its threat to pull the reform altogether provided that Misezhnikov first vote on raising the value use of company cars, so that the ministry can guarantee a source of revenue for the other components of the reform. Aflalo was also able to persuade the Ministry of Finance that the Finance Committee would soon discuss the mandatory pension bill, which is part of the reform, and vote on it before December 31, the deadline for passing the 2008 budget and economic arrangements bills. (Globes27.11)

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1.3 Israeli Establishments to Become Smoke-Free Zones

On 26 November, the Knesset Law Committee gave its final stamp of approval to enforce fines that are meant to stamp out smoking in public places, including restaurants, coffee houses, bars and shopping centers. Smokers who choose to ignore the law face a fine of up to NIS 1,000 ($260) for lighting up in public places. Business owners will be penalized as well: fines of up to NIS 5,000 ($1,300) will be levied on businesses which allow smokers to puff away in violation of the law. Restaurant and coffee house owners will also be fined NIS 1,290 for each ashtray present on a table outside of special smoking zones. Until July, business owners were only required to hang "No Smoking" signs in their establishments and essentially the no-smoking law already in existence was not enforced. The new law, proposed in July by Likud Knesset Member and chairman of the Knesset Economic Affairs Committee Erdan, passed unanimously. As of 7 November, the strict fines went into effect, requiring business owners to ask their customers not to smoke, and to report them to the local inspection authority if they persist in doing so. Moreover, they are also required to post a hotline phone number in their establishments where customers can reach an inspector if they want to report a violation. There is one accommodation, however: the establishments may set up separate ventilated areas for smokers. Owners of public recreation places are required to instruct smokers to put out their cigarettes and are also mandated to file a complaint against violators with the municipality.

Only 23.2% of adult Israelis smoke, according to the survey, although 44% of non-smokers say they're uncomfortable telling those who puff that they would like them to cease releasing their second-hand smoke. The study found that 80.3% of Israeli citizens agree that smoking should be prohibited in clubs, pubs and discotheques. In addition, 78.2% of the 3,154 respondents also felt smoking should be prohibited in cafes and restaurants. The highest percentage of anti-smokers came from those who said puffing should be prohibited in shopping malls – 84.8%. All of the respondents were over age 18. Actually, the first law against smoking in public was passed by the Knesset in 1983, according to a report by the Israel Council for the Prevention of Smoking. By 1994, all private and public workplaces were included in the prohibition, and in 2001 restaurants, cafes and other public places joined the list. Local authorities, however, were often unwilling to risk their customer base by enforcing the law. (INN26.11)

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1.4 National Library to Be Established In Jerusalem

On 26 November, the Knesset unanimously passed an historic law creating Israel's first national library. The new law paves the way for a new building and a new attitude. The Jewish National & University Library on the Hebrew University of Jerusalem's Givat Ram campus has been a de facto national library since the university's inception in 1925. The library's new building has been awaiting passage of this law for years. The money was pledged over a decade ago by Yad Hanadiv, the Rothschild Foundation in Israel, which provided the money to build the Knesset and the Supreme Court. However, they would only release the money once the law was passed. The foundation also demanded a master plan for the content and facilities of the new library before releasing the money. It is hoped the new building would be done within five years. According to the law just passed, the national library must be housed in Jerusalem. The law, which goes into effect on January 1, 2008, creates an "unprecedented institution." For the first three years, the library will be a wholly owned subsidiary of the Hebrew University. Afterwards, it will be split three ways. The state will own 50%; the university 25% and 25% will be reserved for other public entities. While the state will be the majority shareholder, the library will be independent. According to the law, one of the members of the national library council will have to be a literary personality from an immigrant community who is familiar with that group's culture. Another member must be from the Arab, Druze or Circassian communities. (JP27.11)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Voltaire Powers Two of the World’s Top Five Fastest Supercomputers on the New Top500 List

Voltaire announced that its InfiniBand-based solutions are used in two of the world’s top five supercomputers according to the 30th edition of the Top500 list of the world’s most powerful computers. 125 supercomputers (25% of the list) are connected with InfiniBand, 52% more than the 82 supercomputers reported on the November 2006 list. Voltaire continues to maintain a leadership position on the list with more deployments than any other InfiniBand systems vendor. The Top500 list is published two times a year on www.Top500.org and ranks the most powerful supercomputers worldwide according to their performance on the LINPACK benchmark. Headquartered in Herzliya, Israel, Voltaire (http://www.voltaire.com) designs and develops server and storage switching and software solutions that enable high-performance grid computing within the data center. Voltaire refers to its server and storage switching and software solutions as the Voltaire Grid Backbone. Voltaire’s products leverage InfiniBand technology and include director-class switches, multi-service switches, fixed-port configuration switches, Ethernet and Fiber Channel routers and standards-based driver and management software. (Voltaire19.11)

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2.2 RushNet Expands Apple Rush Export Business to Israel

Blue Island, Illinois’ RushNet has expanded Apple Rush’s export business with the first shipment of a container full of Organic Apple Rush beverages to Israel. RushNet shipped the container of Apple Rush on 14 November to Foods & Stuff, a fast growing company based in Israel. Foods & Stuff is a distributor of high quality Natural and Organic food and beverages with a network throughout Israel. This marks RushNet’s first venture into the Near East market and represents significant progress in the growth of its export business which already includes Canada, Guam, Mexico and Puerto Rico. RushNet is a beverage marketing company with a dynamic array of natural and organic beverages that it sells to distributors throughout the U.S. and into export markets. The line of quality beverages includes; e-water (RushNet is the brand owner), Ginseng Rush , Ginseng Rush XXX and Rush Cola. (RushNet19.11)

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2.3 N-trig Translates its Website Into Chinese & Japanese

Kfar Saba, Israel’s N-trig (http://www.n-trig.com), the provider of DuoSense technology combining pen and zero-pressure touch for mobile computers into a single device, announced today that it has translated its website into traditional Chinese and Japanese. Rather than using today’s industry standard resistive touch and a digitizer mounted behind the LCD, N-trig’s zero-pressure touch is based on capacitive touch and transparent sensor technology, enabling the best touch experience in any product anywhere in the world. N-trig’s dual mode technology integrates pen and touch in one simple front mounting digitizer, making it thinner and smaller and allowing for simple, low cost integration on top of the LCD. (N-trig 15.11)

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2.4 MobiMate Announces Completion of Financing Round Led by Motorola Ventures

MobiMate announced the completion of a round of financing led by Motorola Ventures, the strategic venture capital arm of Motorola. Motorola joins MobiMate's current investor group which includes John Sculley, former CEO of Apple Computer; serial entrepreneur Richard Rosenblatt, investment banker Michael Price of Evercore Partners, Michael Targoff, CEO of Loral Space & Communications and several other prominent industry veterans. MobiMate’s WorldMate Live is a mobile travel service that supports travelers by providing information and transaction capabilities on their mobile devices and PCs. The service includes a web 2.0 travel planning site and a mobile application to provide real-time, on-the-road travel support. With the ability to import travel booking information from third party travel providers, WorldMate allows for a simplified and seamless travel experience for users on-the-go. Lod, Israel’s MobiMate (http://www.wmlive.com) is the leading provider of mobile travel-related services. Its best-selling WorldMate service offers an easy-to-use application that automatically delivers valuable content and services to users’ cell phones, turning their mobile devices into a personal travel assistant. (MobiMate19.11)

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2.5 MTS Announces Receipt of NASDAQ Notice of Failure to Comply With Continued Listing Requirement

MTS - Mer Telemanagement Solutions announced that on November 14, 2007 it received a NASDAQ Staff Determination letter indicating that MTS has failed to comply with the continued listing requirement that the Company maintain either a minimum $2,500,000 stockholders' equity or $35,000,000 market value of listed securities or $500,000 of net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years, as set forth in NASDAQ Marketplace Rule 4320(e)(2)(B), and that the Staff is therefore reviewing the Company's eligibility for continued listing on The NASDAQ Capital Market. In accordance with NASDAQ Marketplace Rule 4320(e)(2)(D), MTS has 30 calendar days, or until December 14, 2007, to regain compliance with such continued listing requirement. The Company is considering its options to regain compliance with the continued listing requirement. Ra'anana, Israel’s Mer Telemanagement Solutions (http://www.mtsint.com) is a worldwide provider of innovative solutions for comprehensive telecommunications expense management (TEM) used by enterprises and for business support systems (BSS) used by information and telecommunication service providers. Since 1984, MTS Telecommunications' expense management solutions have been used by thousands of enterprises and organizations to ensure that their telecommunication services are acquired, provisioned, and invoiced correctly. In addition, the MTS' Application Suite has provided customers with a unified view of telecommunication usage, proactive budget control, personal call management, employee cost awareness and more. (MTS 19.11)

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2.6 Most Israelis Prefer Buying Locally Produced Foods

The Israeli Manufacturers Association and Geocartagraphia Marketing Institute have found a 9% increase in the number of Israelis who prefer their food 'blue and white'. The poll showed that in 2006, 90% of the households in Israel purchased locally produced groceries as compared to 8l% in the previous year. 96% of those polled expressed a preference for locally produced dairy products, processed foods, frozen vegetables, cooking oil, processed meat foods and snacks. Less popular were 'blue and white' soft drinks (89%), ice creams (87%), wines, sweets and tea and cafe. There was a slight increase in the number of households buying more Israeli wines than imported wines. The Manufacturers Association noted that just because something is 'made in Israel' doesn't necessarily mean it's a local product. For example Carlsberg and Tuborg are both manufactured in Israel under license by a local soft drink manufacturer. Applying the same logic, Coca-Cola would also have to be considered 'blue and white'. (KT19.11)

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2.7 Hooters Plants Flag in Israel

Atlanta, Georgia’s Hooters opened its first location in Israel. The Hooters of Poleg, Israel hosted its VIP Grand Opening Celebration on 27 November. The Hooters of Poleg, located in Netanya, is the first of at least 3 Hooters restaurants planned to open in Israel. The restaurant opened to the public on 28 November. International expansion has been a focus for Hooters over the past couple years. This 2 new location brings the total number of countries that Hooters currently serves their world famous wings in to 25, with many planned for the future. In 2008, the concept is slated to open over 32 locations, 19 of which are international, including the newest markets of Dubai, Thailand, New Zealand and Columbia. Hooters is well known for its brand of food and fun, featuring a casual beach-theme atmosphere, a menu that features seafood, sandwiches and Hooters' signature spicy chicken wings, and service provided by the All- American cheerleaders, the Hooters Girls. (Hooters of America26.11)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Construction Boom Tops $2.4 Trillion in Persian Gulf Projects

The construction boom in the Persian Gulf has reached new heights, with 2,837 projects estimated to be worth in excess of $2.4 trillion now underway, the majority of development being carried out in Saudi Arabia and the UAE. According to research by database company Proleads, which monitors regional construction projects across all industry sectors, the biggest construction project currently underway in the region is the King Abdullah Economic City in Saudi Arabia valued at $120b. This is followed by the $86b Silk City Project in Kuwait and Dubailand in the UAE, valued at $60b. The research also shows that, when additional developments currently at the early planning or concept stage are also taken into account, the Gulf countries account for a total of 3,519 projects worth $ 2.527 trillion. Massive development like this has turned the Middle East into the world's biggest market for plant, construction vehicles, machinery and equipment. (GN27.11)

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3.2 Work To Begin On $1.6 Billion Bahrain Health Island

Work will start soon on a $1.6b project to create a Health Island off the northeast coast of Bahrain. Officials say the development will revolutionize the country's healthcare system and turn it into a regional hub for health tourism. The Ithmaar Development Company (IDC), a subsidiary of Bahrain-based Ithmaar Bank, is spearheading the project. Health Island will feature the latest facilities and services within a landscaped resort built on reclaimed land off Muharraq. It will cover a total of 1.25 million sq m and include a diagnostic centre, alternative medicine centers, a nutrition and diabetes centre, an aesthetic surgery centre, a sports medicine centre and a women and children's centre as well as deluxe spas, boutique hotels and luxury residences. Around 50% of the development, including the island's beaches and businesses, will be open to the public, while the rest will be within gates and private areas. Reclamation of the seabed and construction on the project is expected to take three to five years. The island will be divided into clusters, each focusing on different aspects of healthcare. Among the main features will be a 358-bed "wellness hospital" catering to medical aesthetics, nutrition, diagnostics, alternative medicines and sports medicines. In addition, a 216-bed children's and women's hospital will cater to a range of maternal and pediatric care. (TradeArabia 27.11)

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3.3 Citigroup Sells Abu Dhabi Fund $7.5 Billion Stake

On 26 November, Citigroup announced that it was selling a $7.5b stake to the Abu Dhabi Investment Authority sovereign fund in the latest bid to shore up its balance sheet. The Abu Dhabi Investment Authority agreed to buy a 4.9% equity stake in a complex transaction that has been approved by federal regulators. It claims it will have no role in the management or governance of Citigroup, or any presence on Citigroup’s board. Abu Dhabi’s 4.9% stake will make it Citigroup’s single largest shareholder, overtaking Prince Walid bin Talal of Saudi Arabia. He has owned close to a 5% stake since the early 1990s, when he made a similar investment to bail out the company. Together, their holdings will mean that nearly 10% of the Citigroup will be owned by Middle Eastern investors. The investment from Abu Dhabi underscores Citigroup’s precarious capital position, and also highlights the growing petrodollar wealth of Mideast countries, which are buying up assets and taking stakes in numerous American companies. Citigroup officials said they had briefed the credit rating agencies and won approval from its main regulator, the Federal Reserve Bank in New York. It is unclear if other federal regulators were briefed on the agreement, but executives said they did not expect the deal to be derailed on regulatory or political grounds. Last year, the proposed sale of some American ports to a Dubai firm set off a firestorm of questions in Congress about national security; an alternative buyer was ultimately found. (Various27.11)

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3.4 AMD Announces $622 Million Investment by Mubadala Development Company

Sunnyvale, California’s AMD has received an investment from a wholly-owned subsidiary of Mubadala Development Company, a strategic investment and development company headquartered in Abu Dhabi, United Arab Emirates (UAE). Mubadala invested approximately $622m, receiving 49 million newly-issued shares at a price per share of $12.70, the closing price of AMD common stock on November 15, 2007. AMD received approximately $608m, after reimbursing Mubadala for approximately $14.6m in expenses. AMD will use the net proceeds from the sale of the shares of common stock for general corporate purposes including accelerating its long-term, customer-focused growth strategy by investing in R&D, product innovations and manufacturing excellence. This is a non-controlling, minority investment. Mubadala will not receive any board representation as part of the deal. This transaction does not present a controlling investment or acquisition subject to review by the Committee on Foreign Investment in the U.S. (CFIUS). AMD - Advanced Micro Devices is a leading global provider of innovative processing solutions in the computing, graphics and consumer electronics markets. Mubadala is an investment and development company, wholly-owned by the Abu Dhabi Government. Mubadala’s mission is to create and maximize long-term returns as an engaged investor in high-performing businesses and promising new ventures. (AMD16.11)

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3.5 DP World Prices Biggest Middle Eastern IPO

On 21 November DP World, the Dubai marine-terminal operator, priced what its parent is calling the largest-ever initial public offering from the Middle East. The $1.30 a-share offering is designed to raise $4.96b and indicates a market capitalization for the company of $21.6b. Dubai World said the offering amounts to a 23% stake in DP World. Dubai World is controlled by the emirate's government. Dubai World controls Port & Free Zone World, which in turn is parent to DP World. On offer are 3.25 billion shares plus an option on almost 573 million more shares if demand for the offering is sufficient. The offer, Dubai World said, was more than 15 times oversubscribed. The deal was priced at the top of its expected range of $1 to $1.30 a share. DP World is the No. 4 global marine-terminal operator by capacity and by container units handled. It employs 30,000 people and operates 42 terminals in 22 countries.

Early in 2006, DP World acquired Peninsular & Oriental Steam Navigation Co. of the U.K. for £3.3b after winning a takeover battle against a Singapore company, PSA. Within its operations, P&O had contracts to manage a number of U.S. ports. The deal was backed by President Bush, but a number of prominent U.S. lawmakers objected to the prospect of an Arab government helping manage access to U.S. port facilities. DP World eventually said it would sell the U.S. operations of P&O to a U.S. entity. (MarketWatch27.11)

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3.6 Michigan State University Launches Dubai Campus

Michigan State University (MSU), a top ranked US public Tier I research university, launched its regional campus in Dubai on 19 November. The Michigan State University Dubai campus, at Dubai International Academic City (DIAC), is a not-for-profit academic institution. It will offer bachelor and master’s degree programs with sessions beginning in August 2008. The campus will include laboratories and state-of-the-art student community centers. In September, the renowned US institution announced its partnership with DIAC to set up the campus. The joint initiative between Tecom Investments and MSU supports the objectives set out in the Dubai Strategic Plan 2015 and will cater to the emerging higher education needs of the region. Degree options being considered at the MSU campus in Dubai include areas as diverse as media, communications, public relations, computer engineering, construction management, family studies and business related programs. The MSU faculty and administrators have consulted extensively with Dubai’s corporate and government leaders to identify relevant academic offerings. Until its new DIAC campus becomes functional, the MSU will maintain a contact office in Knowledge Village. MSU in Dubai will be the first not-for-profit international higher education initiative in the UAE. The campus will bridge regional higher education needs while collaborating with premier institutions of higher learning in the emirate. MSU will have full academic authority and quality control over the courses and programs. Currently, DKV and DIAC host 20 reputed international universities from 10 countries including the US, the UK, Belgium, Iran, Pakistan, Russia, Australia, France and the Indian Subcontinent. (TradeArabia 19.11)

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3.7 Dubai Woodshow to Double in Size

Dubai Woodshow 2008, the largest wood and wood machinery exhibition in the Middle East, is set to achieve a 100 % growth in exhibitor participation, according to organizers. Scheduled to take place from February 5 - 7, 2008, the event will move to a larger exhibition space at the Dubai Airport Expo. The expo will cover an area of 16,000 sq ft. Visitor turnout is also expected to soar 150 % in comparison with the previous edition, the organizers said. Delegations from more than 25 countries will be present at the show, which will include companies looking to showcase their products and services varying from plywood, medium-density fiberboard (MDF), veneer, laminates, parquet, and paper and treatment products to wood and woodworking machinery. Maintaining its popularity among a distinct group of established construction professionals, Dubai Woodshow 2008 is set to draw in a large number of interior designers, architects, engineers, timber merchants, furniture and building material manufacturers, carpenters, wholesale dealers and retailers. The Commonwealth of Pennsylvania’s Eastern Mediterranean Regional Office, represented by Atid, EDI, will also be present. (TradeArabia 19.11)

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3.8 US Court Rules In Favor Of Turkish Steel

An antidumping case over Turkish iron and steel filed by the US International Trade Commission has been decided in favor of Turkey, with the decision lifting the barriers to US imports of iron and steel from Turkey. The USITC had filed an antidumping case early this year against Turkish steel pipe producers Colakoglu Metalurji, Ege Celik Endüstrisi, Haba Sinai ve Tibbi Gazlar and ICDAS Celik. A preliminary investigation by the commission had found in favor of Turkey and did not impose any dumping penalties on the companies. Turkish Foreign Trade Minister Tuzmen commented immediately after hearing the long-awaited decision, saying exports of iron and steel products to the US will increase shortly. Tuzmen was pleased with the final decision following the protracted investigation conducted by US officials. Tuzmen said Turkey had been exporting $500m worth of iron and steel to the US annually but that this trade had been adversely affected when the US initiated the antidumping probe. He said iron and steel exporters had been facing difficulties in exporting to the US due to both low exchange rates and the ambiguity in this case. (Zaman27.11)

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 Ben-Eliezer Commits To 10% Clean Energy by 2020

Minister of National Infrastructures Ben-Eliezer told the Knesset Interior Affairs and Environment Committee on 26 November that, "by 2016 we will achieve a target of 5% electricity production from cleantech energies, and this will reach 10% by 2020." In 1998, the government ruled that, from 2007, at least 2% of Israel's electricity would be produced using cleantech energies. The Knesset Interior Committee heard on 26 November that just 0.2% of Israel's electricity was produced from cleantech energies, a tenth of the original target. Ben-Eliezer told the committee that his ministry's research budget had been cut six times over the last two years. The Infrastructures Ministry was called upon to provide a proper plan for meeting the targets it was set. Ben-Eliezer undertook to report back to the committee with a plan for delivering alternative energy targets within three months. (Globes27.11)

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4.2 2-Shekel Coin To Enter Circulation

The Bank of Israel will soon issue the new NIS 2 coin, which will go into circulation at the beginning of the Hanukah holiday. The bank has spent the last five months preparing for the orderly introduction of the new coin and claims there is no risk of it being wrongly identified by parking meters and vending machines, since it differs in size and thickness from the 10 agorot coin. Some economists fear that the introduction of the new NIS 2 coin will trigger a wave of price hikes, as businesses round prices upwards. (Globes 26.11)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Jordan & Canada May Forge Free Trade Agreement During Second Half Of 2008

If negotiations run smoothly over the coming few months, Ottawa and Amman will be able to forge a free trade agreement by H2/08. Canadian Trade & Industry Minister Emerson left Jordan early on 19 November after holding talks with Jordanian officials on political and commercial relations as well as means of increasing bilateral investment. He expected to be mandated by the Canadian government to start free trade deliberations before Christmas. The minister said the free trade agreement will have more of a political and strategic significance than commercial weight, due to the small trade exchange when compared to large volumes of Canadian business with the rest of the world. King Abdullah’s visit to Canada last July gave impetus to Jordanian-Canadian relations, which will be strengthened through a free trade accord. Under a global commercial strategy, Canada is working on several free trade agreements but Jordan will be the second country in the Middle East, after Israel, to enjoy this opportunity. Emerson stressed the need for good basis and a transparent environment to achieve the free trade agreement target. In this regard he mentioned accords to avoid double taxation, to secure foreign investment and promotion, air service, tariffs on goods and rules of origin, among others. The minister added that Canada will examine Jordan’s development priorities and work towards providing the Kingdom with expertise in the areas of energy (nuclear and shale oil) and engineering, besides the transfer of technology. (JT20.11)

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5.2 UAE Posts 170% Mobile Penetration

The number of mobile subscribers in the UAE crossed 7.3 million this November, raising the mobile penetration level to nearly 170 % in an estimated population of 4.3 million. etisalat, the UAE's leading telecom operator, has registered 6.3 million mobile subscribers to date, while its new domestic rival du announced recently that its subscriptions have crossed one million. Officially, the UAE's population is 4.1 million including 2.7 million laborers according to the 2006 census, which raises the penetration rate to 178 %. However, it is well known that the expatriate population far outnumbers native Emiratis. This means there are 178 mobile numbers in circulation per 100 people, just short of two sim cards per person. In terms of mobile teledensity, this makes the UAE the top country in the Middle East and North Africa and places it among the world's top few countries. Arab Advisors ranks the UAE No. 1 in Total Connectivity Index this year, while the World Economic Forum ranked the UAE the most competitive economy in the Middle East and North Africa based on IT resources earlier this year. (TradeArabia20.11)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:

6.1 Karamanlis & Erdogan Inaugurate Greek-Turkish Natural Gas Pipeline

Greek Prime Minister Karamanlis and Turkish Prime Minister Erdogan met on the bridge over the Evros River at Kipous on 18 November, at the border between Greece and Turkey, for the inauguration of the Greek-Turkish natural gas pipeline. The two prime ministers shook hands and posed for a photograph, after which Karamanlis got into the Turkish premier's car and they went to Ipsala on the Turkish side of the border for an inauguration ceremony. This was the second time that the two prime ministers met on the bridge over the Evros River, the first time being in July 2005 when work on the project first began. The pipeline is eventually expected to bring natural gas from the Caspian Sea via Turkey and Greece to Italy and from there to the rest of Europe. Prime Minister Karamanlis is expected to visit Turkey around the start of 2008. Meanwhile, Turkish Foreign Minister Babacan is due to visit Athens on December 3. (AN18.11)

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6.2 Turkey's Economic Targets for Next 5 Years

Turkey's exports are expected to exceed $200b by 2013, while the country's tourism incomes will reach $40b by the same year, the nominal interest rates are envisaged to drop to one-digit figures by 2012. Following the 3-month action plan made public by Turkish State Minister & Deputy Premier Ekren recently, the main features of an action plan covering the 2008-2012 period have become clear. According to such plan, national income will reach $800b and income per capita will increase to $10,000 by 2013. Moreover, the plan envisages the sharing of information and documents, which are used in foreign trade processes, between institutions in electronic form. The plan also envisages the establishment of wide-scale and logistic ports at Aegean, Mediterranean and Marmara coasts, as well as construction of new highways throughout Turkey. (TNA19.11)

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6.3 Turkey Is Set To Start The Button For Building Nuclear Power Plants

Turkish President Gul approved the law (vetoed by his predecessor Sezer) for the establishment and management of nuclear power plants and sale of energy. Turkey aims to build three nuclear plants with a total capacity of 5,000 megawatts and first plant to come on line by 2012. According to the new law, qualifications for companies bidding to build and run the power plants will be published within a month. Meanwhile underlining Turkey's burgeoning demand for energy, Turkey-Iran signed cooperation agreement to build three thermal power plants, two in Iran and one in Turkey. Additionally, hydroelectric power plants will be built in Iran that would generate a total of 10,000 MW of electricity. Meanwhile, thermal power plants will be operated by private companies of the two countries. Accordingly, Turkish company will have 49% of stake in Iranian power plants and Iranian company will have the same percentage in Turkish power plant. (BGC21.11)

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6.4 Greek Budget Revenues Above Target

Greek budget revenues rose 7.8% in October, exceeding a 5.5% annual growth rates envisaged by the budget, the finance ministry announced on 7 November. Budget revenues were up 6.2% in the 10-month period from January to October, also exceeding this year's budget target for a growth rate of 5.5%. Tax and custom agencies reported an 11.5% increase in revenues in October, while VAT revenues rose by 8.6%. (ANA09.11)

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6.5 Greece’s Private Healthcare Way Forward

With Greek healthcare acknowledged as one of Europe's worst from a patient's perspective and its state insurance system crumbling, the opportunity gap is immense for private hospital and insurance provision. Healthcare giants are already battling it out for supremacy in southeast Europe, with Greece as the springboard, experts say. Greece was among the poorest for patient-centered care, according to a recent Euro Health Consumer Index survey conducted by Sweden's Health Consumer Powerhouse. The survey found that it is doctors, not patients, who are seen as all-important in the Greek system. While the caliber of doctors themselves is high, state hospitals are often dirty with inadequate nursing care. By contrast, private healthcare hospitals are often seen as centers of excellence in which the patient's comfort is paramount.

Public Dutch player Eureko sees its Greek insurance subsidiary, InterAmerican, as the cornerstone of its regional strategic battle in offering high-caliber healthcare and private insurance. Hygeia, which is controlled by Marfin Investment Group (MIG), the listed Greek financial group, is hoping to push Eureko out of its leading position. Hygeia is also looking at several more hospital acquisition possibilities in Cyprus.

Greece dropped five places in the Euro Health survey of national health systems, which was released in October. Patient rights, patient perspective, legislation and waiting times were among the survey's key indicators. 27 European Union countries were studied, as well as Norway and Switzerland, which are the two biggest consumers of healthcare. Greece was ranked among the last few, falling to 22nd place on the survey and scoring 561 points out of 1,000. In two earlier surveys, Greece placed 17th. The survey's writers noted that Greece's system centers on the doctors' power, rather than the patients'. Slovenia and Hungary also shared the lower echelons with Greece. Austria was first, followed by the Netherlands and France. Spain and Italy also fared well. While Greece scored well for the number of specialists available, as well as direct access to those specialists, it earned low points for same-day access to a general practitioner. The survey pointed out that Greece does not have adequate kidney donor legislation to support an adequate transplantation policy. Sadly, the survey found that the best healthcare is mostly available to wealthier citizens. (Athens News 09.11)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Chanukah Lights Up the World Starting 4 December

Starting on the evening of 4 December and lasting for 8 days, Israel and the Jewish world will mark the Hanukkah - Festival of Lights - holiday. Hanukkah recalls the victory against all odds of the small Maccabean army against the Syrian king Antiochus in 165 B.C.E. It also remembers the miracle of the burning of holy olive oil for eight days. After the military victory, the Cohenim (priests) searched the desecrated Temple and found one container of olive oil that was fit to light the holy Menorah. The oil was enough for only 24 hours but lasted eight days, during which time the Cohenim were able to prepare new oil. The menorah used today to commemorate the holiday has eight branches, one more than that which was used in the holy Temple. Theologically, Hanukkah is a minor festival on the Jewish calendar, but it has grown to prominence because of its proximity to Christmas. The practice of gift giving carried over into Hanukkah because of the Christmas precedent, though the Jewish holiday precedes the Christian one.

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7.2 Israel Becoming Less Secular

An Israel Democratic Institute (IDI) demographic survey finds religious growth and secular decline - but most significant is that the proportion of religious in the public is highest among the youth. The percentage of Jews describing themselves as secular has dropped sharply over the past 30 years, while the religious and traditional proportions have risen. The annual survey finds that the secular public comprises only 20% of the Israeli population - compared to 41%, more than twice as much, in 1974. Nearly half the population, 47%, describes itself as traditional, while the hareidi-religious and religious-Zionist together comprise 33% of the public. The numbers were compiled based on a survey of representative sampling of 1,016 Israelis Jews.

Over the past seven years, according to IDI statistics, the proportion of secular Jews has dropped sharply from 32% to 20% today. The "traditionalists" have traditionally had the lead in polls of this nature - except for one year in 1974, when they trailed the seculars, 41% to 38%.

Other findings show that the Sephardic population is much more traditional and religious than the Ashkenazi sector. Ashkenazi Jews are those originating from European (Christian) countries, whereas Sephardic Jews lived in the Iberian Peninsula (now Spain and Portugal), African and Middle Eastern (Moslem) countries. Only 7% of the Sephardim describe themselves as secular, compared to 36% of the Ashkenazim. At the same time, 56% of the Sephardim are religious or hareidi, compared to only 17% of the Ashkenazim. Some 39% of those under age 40 are religious - more than those in their 40's and 50's (32%), and much more than those aged 60 and over (20%). It can be inferred from the numbers that Israel is a traditional society, and that it will become even more so as the years go by. (INN23.11)

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7.3 Israeli Flag to Take the Guinness Record As World's Largest

The largest flag in the world - an Israeli flag the size of two football stadiums - has arrived in Israel and will be presented at a ceremony in honor of 50 years of friendly relations between Israel and the Philippines. Two flags of identical size, one Israeli and one Philippine, will be measured by representatives of the Guinness Book of Records, who are anticipated to declare them the "largest flag in the world." The flags were rolled out at a festive ceremony on 25 November at the Masada airfield near the Dead Sea in the presence of the Director General of the Ministry of Tourism, the donor of the flag - Philippine businesswoman Grace Galindez-Gupana, and the Consul General of the Philippines. Sister Grace Galindez-Gupana, who initiated and financed the flags, has been promoting tourism between the two countries for years, and hopes that the flags will interest Israeli and Philippine citizens to visit each others' country. Each flag was sown in the course of 3 weeks by six professional sewers under the direction of two designers and 40 volunteers, and weighs 5,200 kilos (11,000 lbs). Each flag is twice the size of the American "super flag" which holds the title at the moment as the largest flag in the world. Next year, Israel celebrates its 60th year of regaining independence and the flag will be integrated into events. (IN23.11)

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*REGIONAL:

7.4 Islamists Dealt Heavy Blow in Jordanian Elections

The Islamic Action Front (IAF) was dealt a heavy blow by legislative elections held on 21 November as the number of its deputies dropped to six, having fielded 22 candidates for the vote. Supporters of the king, mainly tribal Bedouin and centrist politicians, secured a majority of the seats in the 110-member Chamber of Deputies. The results also showed that women’s representation rose to a record of seven, six of them winning under a quota system. Meanwhile, there were news reports that a new government was being formed to succeed that of Prime Minister Bakhit.

The number of Islamist deputies in the 15th Parliament will be the lowest representation for the Islamist movement since parliamentary life was revived nearly two decades ago. The IAF was unable to win seats in Zarqa and Irbid, its traditional strongholds, and only two of its eight nominees for Amman seats made it to the House. The IAF, the political wing of the Muslim Brotherhood, said the government was leading a smear campaign to minimize chances of its candidates by “facilitating” vote-buying by influential businessmen. Meanwhile, activists from the Jordanian Civil Alliance, an umbrella of NGOs, said despite some perceived setbacks in the voting process, the elections were held in a fair and free manner.

Final figures revealed that voter turnout reached 54 % at the national level, with the highest rate recorded in the rural town of Tafileh (82 %) and the lowest in the capital (35 %). The government mobilized 40,000 police officers and soldiers to maintain security in 45 districts across the Kingdom.

In the 1989 elections, the first in Jordan after a 22-year hiatus prompted by the country's loss to Israel in the 1967 Six-Day War, IAF nearly won a majority of parliamentary seats on promises to tackle poverty that affects nearly 25% of the population. But four years later, the group lost much of its clout because it has failed to deliver on its promise to help provide jobs and ease the burdens of poverty. In recent years, the group has also been criticized for its loud rebuke of state policies without being able to provide alternatives. (JT22.11)

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7.5 New Jordanian Government Sworn In

On 25 November, the new 27-member Jordanian government headed by Nader Dahabi was sworn in before King Abdullah and held its first Cabinet meeting later in the day. The prime minister made some changes to the initially suggested list of ministers following consultations over the lineup during a retreat in Aqaba over the weekend. The last name to be added was Thouqan Qudah, who was appointed state minister for prime ministry affairs. The final list includes four women, three of whom are newcomers. The team includes 13 first-time ministers, eight who were members of the previous Cabinet and six who served as ministers in earlier governments. Dahabi, whose last post was president of the Aqaba Special Economic Zone Authority, held the transport portfolio in the government of former premier Ali Abul Ragheb. The lineup also saw ministry secretaries general becoming ministers, including Minister of Education Tayseer Nueimi and Minister of Higher Education and Scientific Research Omar Shdeifat. Dahabi told his team during their meeting to draw up plans to implement the King’s directives entailed in the Letter of Designation, including a mechanism of evaluation of the progress in these blueprints. In the letter, the King said the coming stage should focus on socio-economic development. His Majesty tasked the new government with putting in place a social safety network that covers education, health, housing and seeks to improve incomes of civil servants, military and security personnel. (JT25.11)

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7.6 UAE Celebrates 36th National Day on 2 December

The National Day of the UAE is celebrated on 2nd December every year. The United Arab Emirates is a federation of 7 emirates, namely, Abu Dhabi, Dubai, Ras Al Khaimah, Umm Al Quwain, Sharjah, Fujairah and Ajman. The UAE was formed in the year 1971 under the leadership of Sheikh Zayed Bin Sultan Al Nahyan. In the beginning, the UAE was a federation of six emirates to which the emirate of Ras Al Khaimah was added a year later. The national assembly has representatives from each one of the emirates while the Ruler of each emirate has to vote in the Supreme Council of Rulers. According to an announcement by the Minister of Labor, the private sector has been granted a holiday on Sunday, December 2, to join in the celebrations commemorating the UAE's formation. The Emirates will celebrate its National Day over the long weekend, culminating in the grand finale of Live in Dubai 2007 on the day itself. The celebration will showcase the emirate’s top talent in a specially created opera, titled 'Glorious Wedding', and will feature fireworks and local and international cultural events.

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7.7 Turkey’s Draft Constitution to Be Announced in Weeks

In a concrete step to replace the 1982 Constitution, the ruling Justice and Development Party (AKP) is expected to reveal the new draft Constitution by 15 Dec. The party had discussed the content of the document during a recent retreat. Prime Minister Erdogan stressed that the 1982 Constitution is insufficient. “Who else but a government to whom the nation has given 65% of seats in Parliament can do it?” Erdogan said. He added that the AKP will be open to contributions from the rest of the society in finalizing the “civilian constitution.” The AKP plans to introduce the draft to Parliament after deliberations by nongovernmental organizations, universities and the media. Responding to earlier criticism from the opposition against Erdogan for allegedly trying to impose an AKP-crafted constitution on the country, the prime minister denied that the draft merely reflected AKP's vision. Following the 1980 military coup, the 1982 Constitution was prepared by an Advisory Assembly, the decisions of which were subject to veto of military leaders of the junta. An initial draft was prepared by a group of experts, the “Scientific Committee,” set-up by the AKP. The draft was immediately confronted with a barrage of criticisms, accusing the AKP with attempting to lift the headscarf ban from universities, or by altering the national identity by installing an alien constitution. It was also suggested that the AKP was keeping the public mind in the dark by preparing the draft covertly. (TDN27.11)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 BioLineRx In-Licenses Anti-Cancer Compound BL-4060

BioLineRx has signed a worldwide exclusive license agreement with Yissum, the technology transfer company of the Hebrew University of Jerusalem, and Hadasit, the technology transfer company of Hadassah medical organization, for the development and commercialization of BL-4060, a small molecule drug candidate for the treatment of cancer. Financial terms of the license were not disclosed. BL-4060 is an analog of the fatty molecule ceramide indicated for the treatment of cancer. Ceramide is a strong pro-apoptotic agent that induces apoptosis (programmed cell death) in a variety of cancer cells. Ceramide levels in cancer cells are generally too low to have the desired therapeutic effect. In preclinical studies to date, BL-4060 treatment resulted in an elevation of ceramide levels in cancer cells, thereby leading to the formation of cytotoxic agents that cause apoptosis. In addition, BL-4060 appears to be synergistic with commercial chemotherapies. Preclinical studies demonstrated that BL-4060 considerably reduced the sizes of pancreatic, prostate and breast tumors.

Jerusalem, Israel’s BioLineRx (http://www.biolinerx.com), a clinical stage drug development company traded on the Tel Aviv Stock Exchange, is dedicated to building a robust pipeline of promising therapeutics for unmet medical needs. BioLineRx advances projects from early stage discovery and lead generation to advanced clinical trials. BioLineRx partners with researchers, universities and biotech companies to further the development of promising compounds. Yissum (http://www.yissum.co.il) was founded in 1964 to protect the Hebrew University’s intellectual property and commercialize it. Ranked among the top technology transfer companies in the world, Yissum has registered 5,000 patents covering 1,400 inventions; licensed out 400 technologies and spun out 60 companies. (BioLineRx15.11)

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8.2 Quark Pharmaceuticals, Inc. Announces First Systemic siRNA Dosing in Humans

Quark Pharmaceuticals has commenced systemic dosing in humans of its proprietary product candidate, AKIi-5, a siRNA compound discovered and developed by Quark for the treatment of Acute Renal Failure (ARF), also called Acute Kidney Injury (AKI). Based on publicly available information, Quark believes that this is the first human clinical trial involving the systemic delivery of siRNA. Quark was granted an IND by the FDA for AKIi-5 for the prevention of Acute Renal Failure in high-risk patients undergoing major cardiovascular surgery. AKIi-5 is a synthetic, chemically modified siRNA molecule discovered and patented by Quark that has an AtuRNAi technology-based structure licensed from Silence Therapeutics. Quark has conducted pre-clinical studies of AKIi-5 for the prevention of acute renal failure in rats and monkeys. Rats treated with a single bolus injection of AKIi-5 were significantly protected from ischemia/reperfusion- induced acute kidney injury. In the rat studies, AKIi-5 effectively prevented the development of acute renal failure. Quark's pharmacokinetic, distribution, and toxicity studies in rats and monkeys indicate that AKIi-5 appears to have a favorable safety profile and has a relatively short residence time in the kidney.

Quark Pharmaceuticals is a development-stage pharmaceutical company focused on discovering and developing novel therapeutics based on its proprietary gene discovery science and technology, with an initial focus on drug candidates that work through the natural mechanism in the cell known as RNA interference, or RNAi, for the treatment of diseases associated with oxidative stress. Quark (http://www.quarkpharma.com) is headquartered in Fremont, California and operates research and development facilities in Boulder, Colorado and Nes Ziona, Israel. (Quark 19.11)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Tower Semiconductor Opens Taiwan Representative Office to Expand Presence in Asia Pacific Region

Tower Semiconductor announced the opening of a representative office in Taiwan to support its increasing presence throughout the Asia Pacific region. Tower’s new office will be located in Hsinchu and will serve existing and future regional customers. The Taiwan-based representative office will provide applications and logistical support to Tower’s existing customers, and will also perform marketing activities aimed at the local market to increase its customer base. The company’s specialty foundry focus is a perfect match to many Taiwanese fabless companies that seek professional manufacturers, such as Tower, who provide specialized expertise within designated manufacturing areas.

Migdal Ha’Emek, Israel’s Tower Semiconductor (http://www.towersemi.com) is an independent specialty foundry that delivers customized solutions in a variety of advanced CMOS technologies, including digital CMOS, mixed-signal and RF (radio frequency) CMOS, CMOS image sensors, power management devices, and embedded non-volatile memory solutions. Tower’s customer orientation is complemented by its uncompromising attention to quality and service. Its specialized processes and engineering expertise provides highly flexible, customized manufacturing solutions to fulfill the increasing variety of customer needs worldwide. (Tower 15.11)

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9.2 ForeScout Technologies Extends Network Access Control (NAC) Support for Remote End-Users

ForeScout Technologies has expanded the integration capabilities of its NAC appliance, CounterACT, to seamlessly work with Nortel and Juniper virtual private network (VPN) products. This integration further extends the network access control and endpoint security functionality to mobile and remote end-users connected over Juniper or Nortel VPN, to ensure that all devices outside of the enterprise LAN are in compliance with corporate network security policies. When deployed to monitor VPN connections, CounterACT ensures that all connecting devices are subject to the same network security policies and granular enforcement options as the devices connected to the local corporate network. CounterACT detects and inspects every endpoint, regardless of whether the user is connecting with a company-issued device or personal home computer, and ensures compliance with all security requirements before allowing access. Additionally, CounterACT interrogates every device for self-propagating malware infections, protecting the enterprise network from an outbreak.

ForeScout's clientless network access control (NAC) solutions enable customers to implement and enforce network access policies of both managed and unmanaged devices in both a pre and post connect mode to gain complete control over network security without disrupting end-user productivity. ForeScout's flagship product, CounterACT, combines network access control and signature-less intrusion prevention in a single network appliance that interrogates and enforces controlled access of every device while seamlessly integrating with any existing IT infrastructure. ForeScout Technologies' (http://www.forescout.com) headquarters are located in Cupertino, California and it has an R&D center in Tel Aviv, Israel. (ForeScout06.11)

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9.3 TraceSpan Announces TR-069 Support and Analysis

TraceSpan Communications announced its new TR-069 analysis module. Leveraging the Upper Layers analysis module available for the DSL Xpert and VDSL Xpert analyzers, TraceSpan adds a unique capability to test and analyze xDSL products for TR-069 compliance. The TR-069 is a DSL Forum technical specification that defines an application layer protocol for remote management of end-user devices, among them xDSL Customer Premise Equipment (CPE) modems. The DSL Xpert support of TR-069 allows modem makers and service providers to test and verify compliance of their equipment with the TR-069 protocol. It provides full transparency of the communication and details all the messages and commands sent between the CPE and Auto Configuration Servers (ACS). It also identifies any deviation from the protocol and indicates the correct protocol-compliant messages.

Ra'anana, Israel’s TraceSpan Communications (http://www.tracespan.com) develops and manufactures innovative broadband monitoring solutions. Empowered by patent-pending breakthrough technology, TraceSpan’s performance analysis and Lawful Interception and monitoring products enable non-intrusive monitoring of data in broadband networks. (TraceSpan19.11)

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9.4 Continuity Software Launches RecoverGuard Version 2.0

Continuity Software announced the release of the newest version of its RecoverGuard disaster recovery testing and monitoring software. RecoverGuard version 2.0 features significant enhancements to its configuration wizard, dashboard, reporting infrastructure and gap detection engine, which will enable customers to identify and correct disaster recovery (DR) threats, faster and more easily than ever before. A new feature in RecoverGuard v2.0 is its Configuration Wizard. This allows software installation to occur in just one hour. For both customers and channel partners, this means a fast and easy install after initial purchase, as well as in the future (i.e., adding a new datacenter). In addition, the configuration wizard now includes full heterogeneous support (storage, servers and applications), auto-discovery, auto-validation (credentials) and auto-detection (change management). Tel Aviv, Israel’s Continuity Software (http://www.continuitysoftware.com) is a leading provider of Disaster Recovery Management (DRM) solutions. Its RecoverGuard software mitigates data protection and disaster recovery (DR) risks by detecting replication infrastructure gaps and configuration vulnerabilities between a customer's primary production and disaster recovery sites. With RecoverGuard software, customers can now confidently validate their DR strategy, and ultimately, ensure their business continuity and data protection goals. (Continuity 19.11)

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9.5 Horizon Next Generation Location-Free Universal HD-DVD/Blu-Ray Decoder/Transcoder SoC

Horizon Semiconductors, a leading provider of highly integrated silicon solutions that enable secure video and audio compression & transmission for the consumer electronics and home entertainment markets, announces the immediate availability of the industry's first universal System-On-a-Chip (SoC) solution enabling dual channel native 1080/60p decoding, encoding and transcoding for next generation media players/recorders supporting the HD-DVD and Blu-Ray optical disc formats (as well as legacy red laser DVD format),iVDRs, place shifting boxes and location-free TV markets requirements on a single platform. Horizon's Hz7120 HD-DVD/Blu-Ray SoC supports wide range of features and capabilities including conformance to leading video compression standards such as native high-definition 1080/60i & 1080/60p profiles of AVC/H.264, VC-1, MPEG-2 and DV/HDV, leading audio compression standards such as DTS-HD, Dolby Digital Plus and Dolby TrueHD, as well as HD-DVD and Blu-Ray HDi and BD-J (BD-Java) interactive technologies. The Hz7120 is provided with a comprehensive software stack compliant with both Blu-ray & HD DVD specifications, and a reference hardware platform designed to significantly accelerate OEM/ODM development cycle.

Herzliya, Israel’s Horizon Semiconductors (http://www.horizonsemi.com) is a leading provider of highly integrated silicon solutions that enable secured video and audio compression & transmission for the consumer electronics and home entertainment markets. Using proprietary technologies and advanced design methodologies, Horizon designs, develops and supplies complete system-on-a-chip solutions and related hardware and software applications. Horizon's diverse product portfolio includes solutions for digital cable, satellite and IPTV Set-top boxes, DVD, HD-DVD and Blu-Ray players and recorders, HDTV, Digital Video Recorders and Home Media Centers. (Horizon 19.11)

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9.6 Connexion Technologies Selects BitBand to Deploy Advanced Entertainment Packages for US Market

BitBand has been selected to supply its IPTV video servers to Connexion Technologies, the premier fiber-optic amenity company. Through the agreement, BitBand Technologies will help Cary, North Carolina’s Connexion Technologies provide multi-dwelling residences and communities with advanced entertainment packages delivered over a single Fiber to the Home (FTTH) network. Connexion Technologies deploys fiber-optic infrastructures for properties in the US. Utilizing BitBand's solution allows Connexion Technologies to enable and immediately deploy on-demand IPTV applications and business models. The agreement with Connexion Technologies further expands BitBand's footprint in the US telecommunications market, as Connexion Technologies demonstrates an accelerated growth in deploying FTTH. Netanya, Israel’s BitBand’s (http://www.bitband.com) advanced video delivery solutions over IP broadband networks help Next Generation Service Providers and Telcos realize the Triple Play offering, enabling quick entry into new markets, faster ROI and a safe track to profitable large scale service. The company's solutions are targeted at large scale deployments of TV-centric residential subscribers and feature high-scale streaming and robust performance optimized for hybrid and distributed network architectures. (BitBand27.11)

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9.7 MTI Wireless Edge Offers Wide Selection of 3.65 GHz WiMAX Antennas

MTI Wireless Edge announced the availability of their large selection of 3.3-3.8GHz antennas for WiMAX applications. Their range includes a variety of: 1. CPE directional antennas with gain from 12dBi to 24dBi, 2. BTS sectorial antennas covering 60, 90 and 120 degrees with both Vertical and Horizontal polarization, 3. Omni directional antennas from 9dBi to 12dBi and 4. Various CPE and BTS dual polarity antennas. This range of high performance and cost competitive antennas comply with ETSI requirements and have been field proven for many years in Europe, Asia, Latin America and other markets where the 3.5GHz band is open. Some OEM customers have already received and announced FCC approval of their radios using MTI Wireless Edge antennas.

Tel Aviv, Israel’s MTI Wireless Edge (http://www.mtiwe.com), a leader in the development production and marketing of high quality, low cost, flat panel antennas for RFID & Fixed Wireless applications offers large portfolio with over 90 models of Linear and Circular, Single and Dual polarity antennas for active and passive RFID Systems. The frequencies that MTI offer antennas for are 450MHz, 865-870MHz, 902-928MHz, 950-956MHz, 2.4GHz as well as Integrated Enclosure Antenna solution (IAE). MTI Military products include a wide range of broadband, tactical and specialized communications antennas, antenna systems and DF arrays installed on numerous airborne, ground and naval, including submarine, platforms worldwide. (MTI26.11)

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9.8 Neotel South Africa Selects ECI Telecom for Next-Generation Transport Backbone Network

ECI Telecom announced that Neotel, the first national infrastructure-based competitor in the fixed-line telecommunications sector in South Africa, has selected ECI's XDM and BroadGate (BG) line of products to support its network rollout in the country. Under-served areas in Africa present a considerable potential for growth as carriers reach out to provide basic and advanced services to the region. South Africa has recently liberalized the telecom sector and Neotel is now building a next generation network to serve this growing market. Neotel's next-generation transport network, as supplied by ECI, will support both enterprise and residential customers with voice, data and internet services. ECI's vast experience in rolling out new networks in emerging markets worldwide was key to Neotel in meeting its aggressive deployment and service targets. ECI will provide a full access-to-core solution for all of Neotel's transmission requirements by deploying the XDM and the BG families of products. Petah Tikva, Israel’s ECI Telecom (http://www.ecitele.com) delivers innovative communications platforms to carriers and service providers worldwide. ECI provides efficient platforms and solutions that enable customers to rapidly deploy cost-effective, revenue-generating services. (ECI26.11)

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9.9 Gizmoz Launches Be a Star

Gizmoz (http://www.gizmoz.com) launched Be a Star, an online application that lets consumers enjoy the fun and fame of starring in their own movie, TV or online video clip. Whether playing the romantic lead, jamming in a music video or performing daredevil stunts in an extreme sports clip, securing the starring role in a Gizmoz production is as easy as uploading a digital photo. To share the spotlight with a friend, upload his or her image as well. In a matter of seconds, the Gizmoz Be a Star application converts a digital face shot into a lifelike talking 3D head. The image is then superimposed on a video character with facial expressions, audio and movements all automatically synched together. The entire 30 to 60 second production can be posted to any blog or social networking profile, shared with friends or family by email, or uploaded to a video site or web site for the entire world to see. Gizmoz is actively working with movie studios, music labels and production companies to continually build a rich library of video clips. Gizmoz is funded by Benchmark Capital, Columbia Capital and Jagen, with offices in Menlo Park, CA and Ramat Gan, Israel (Gizmoz 27.11)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s CPI Rises 0.1% in October

The Central Bureau of Statistics announced on 15 November that October’s Consumer Price Index (CPI) rose by 0.1%. The CPI is now 101.5 points (100 baseline = 2006 average). Inflation between January - October was 2.7%, close to the upper limit of the 1-3% price stability target. Inflation picked up in recent months to reach 4.6% in July-October. The shekel's appreciation against the dollar ameliorated the rise in the CPI, lowering the rise 0.3%age points. Price for many items rose, including fuel by 3%; electricity by 4.4%; clothing by 1%; and food (excluding fruits and vegetables) 0.7%. Rent fell 1.2% and foreign travel fell 3.3%. (CBS15.11)

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10.2 Israeli Hotels Report Highest Occupancy Since 2000

The Central Bureau of Statistics announced on 26 November that no less than 2.3 million people are expected to visit Israel during 2007, significantly more than the war marred 2006. Nationwide hotel occupancy rose to 74% in October, up nearly 30% compared with the same month last year. It is also the highest occupancy rate for any October since 1999. Tourism is expected to contribute a billion dollars to the GDP this year, or 0.7% of Israel's GDP. A national occupancy rate of 74% brings Israel near the averages in heavily tourism-oriented countries. Tourism Minister Aharonovich says that Israel has to start preparing for a major influx of tourists in 2008. He foresees some 2.8 million people coming, noting that Israel's total population is only around 7 million. Aharonovich remarked that the figures prove that the Tourism Ministry is managing to meet its goals in 2007, and that it had been the best year since 2000, when 2.7 million tourists visited. (Various27.11)

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10.3 Unemployment Continues To Fall

The Central Bureau of Statistics announced on 27 November that Israel’s unemployment fell by a further 0.2% to 7.3% in Q3/07m 7.5% in Q2/07. This is the lowest rate in 11 years. The monthly average number of unemployed was 213,000 during the third quarter, of whom 105,300 were men and 103,400 were women. Unemployment fell by o 7.5% September from 8.5% in January. Unemployment has fallen by 62,000 since the 10.7% reached in 2003. The number of employed persons rose in the third quarter to an all-time high of 2.77 million. Participation in the labor force has risen 56.7%: 61.8% for men and 51.8% for women. (CBS27.11)

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In Depth

11.1 LEBANON: Fiscal Future in the Balance

At the end of October, the Oxford Business Group reported, Lebanon's Ministry of Finance released its draft budget for 2008, still to be approved by the cabinet and parliament. In what has been labeled an ambitious document, the ministry laid out its plans to increase government revenues by 9% to $5.6bn and to tighten expenditures by 3% to $7.6bn in the coming year. The result would be a total budget deficit of 27.1% of expenditure, or $2.1bn, down from 35.2% in the 2007 budget.

The increased revenues would be stimulated by a rise in the rate of value added tax (VAT) from its current level of 10% to 12% as well as an increase in taxes on interest rate deposits from 5% to 7%. These are expected to come into effect at the beginning of the year and were outlined as part of the five-year reform program submitted to donor states at the Paris III conference this past January.

A further rise in VAT to 15% is planned for 2010 with the aim of generating at least 2% of GDP in additional revenue. Since its introduction in 2002, the tax has proved to be a major source of government revenue. In 2005, it generated 5.1% of GDP for the state.

The government estimates that the increased tax on interest income will generate about 0.5% of GDP in revenue, calculated on the basis of what it considers a realistic estimate of a deposit growth rate of 10% over the medium term. It also estimated this based on a 72% dollarization rate of deposits (the percentage of deposits in dollars compared to the Lebanese lira) and relatively stable interest rates over the medium term.

With the auction of the two state-owned mobile networks to private bidders planned to take place in early 2008, the draft budget anticipates revenues from the mobile sector to drop by 29%. Although the sale will deprive the budget of a major source of revenue, the anticipated billions of dollars that will be made from the auction will give the government a boost in meeting its aim of reducing the size of the public debt. A recent Credit Suisse report estimated the licenses could fetch above $3bn each.

Strong measures to trim expenditure and boost revenues are essential if the government is to able to achieve its aim of moving the primary fiscal balance (the budget total excluding debt servicing payments) from its 2006 deficit of nearly 1% of GDP to its planned surplus of 8% of GDP by 2010. Last year's deficit bucked a trend of primary balance surpluses since 2000. The 2008 budget law estimates returning to a primary surplus of approximately $1bn.

The cost of servicing the debt represents a huge drain on resources, constituting more than 45% of expenditures. Total public debt stood at $40.6bn, which was about 180% of GDP, at the end of September this year. In this year's budget, the cost of debt servicing is anticipated to be trimmed by 5% to $3.1bn, made possible through the help of international financing received from donors at the Paris III conference.

Another significant drain on resources is the state-owned power company Electricite du Liban (EDL). Last year, 20% of fiscal revenues, which were 3.5% of GDP, were paid out as government transfers to EDL, described by the government as "a real hemorrhage on public finances" and suffering "major governance problems". Total payments to the power sector, including the cost of servicing incurred debt, are equal to more than a quarter of the country's total public debt. In the 2008 budget, the government aims to bring down the cost of transfers to EDL to $666m to represent 13% of expenditures.

Based on its budget estimates, the ministry of finance predicts GDP growth of 4% in 2008, to be followed by 5.5% in 2009 and 5% in 2010. These figures are higher than those recently suggested by international observers. Earlier this year Citigroup forecast 2.9% GDP growth in 2008, while an Economic Intelligence Report (EIU) on Lebanon released last month predicted real GDP growth of 1.2% in 2008, rising to a possible 2.3% in 2009.

With Lebanon still feeling the heat from political wrangling over selecting a new president, due to take place later this month, a question mark remains over whether a future government will be conducive to the reforms and fiscal measures set out by the current government. "The political situation will remain volatile, owing to continued clashes between pro- and anti-Syrian forces within the country. These will be fuelled by long-standing grievances between the various sectarian groups over the distribution of access to political influence and economic resources," said the EIU report, stressing that the government's reform plan could suffer the consequences of ongoing political tensions. (OBG19.11)

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11.2 LEBANON: IMF Executive Board Concludes 2007 Article IV Consultation

On October 3, 2007, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Lebanon.

Background

Economic developments in 2006 were significantly affected by the July-August Hezbollah attacks on Israel. Real GDP is estimated to have been flat, with strong growth in the first half of the year offset by the disruptions during and after the conflict. Inflation increased, mainly reflecting supply shortages during the conflict and the ensuing blockade. Financial pressures associated with the conflict were managed effectively owing to the banking system's strong liquidity position. Immediately after the conflict, donors pledged $1.7 billion for relief and recovery (including at the Stockholm conference in August 2006), with disbursements in 2006 roughly offsetting the immediate fiscal costs of the conflict. Nonetheless, the overall fiscal deficit increased in 2006 because of rising interest expenditures and higher than expected transfers to the power company, Electricité du Liban. Government debt rose to over $40 billion (178% of GDP) at end-2006.

The economic situation continues to be overshadowed by the political stalemate and episodes of violence, including the assassination of a member of parliament in June 2007 and a fifteen-week long battle between the army and Fatah al-Islam militants in northern Lebanon. In this environment, economic activity, including tourism, remains subdued, and real GDP is expected to rebound only slowly in 2007. Inflation as measured by the Consumer Price Index declined through mid-2007 from its 2006 peak, notwithstanding the depreciation of the U.S. dollar to which the currency is pegged. Trade flows have recovered from the near- standstill during and after the conflict, with the trade deficit in the first half of 2007 deteriorating slightly relative to the same period in 2006.

The financial system has remained resilient to the political uncertainty. Owing to moderate capital inflows and slow deposit growth as well as limited donor disbursements, international reserves declined by $300 million to $11 billion in the first quarter. However, deposit growth accelerated subsequently, and by end-June broad money was already 4% higher than prior to the Hezbollah attacks, with international reserves more than recovering to $11.6 billion at end-June 2007. Still, the political deadlock has increased risks, as reflected by Eurobond spreads of 495 basis points as of end-August and deposit dollarization of around 76%, significantly higher than prior to the 2006 conflict. The recent turbulence in international financial markets has not had, up to now, a significant impact on Lebanon. While spreads have increased by around 80 basis points between mid-July and mid-August, there has been no pressure on the currency, and deposit inflows have remained robust, though at a more moderate pace than in the second quarter.

Executive Board Assessment

Directors commended a good policy performance under the program supported by the Fund's Emergency Post-Conflict Assistance. The economy is recovering despite the persistent high oil price and political uncertainty, inflationary pressures have eased, and gross international reserves have increased further.

At the same time, Directors underscored that major challenges remain, including the large debt overhang, financial and macroeconomic vulnerabilities, and high energy costs. They considered the authorities' 2007-12 reform program to be an ambitious and credible strategy for meeting these challenges. They acknowledged that implementation of the program will be a challenging task given the difficult political and security situation. While Directors were encouraged by the authorities' reiterated commitment to reform, they noted that the authorities will need to pay close attention to the timing of the reform process. Directors stressed that donor support is an important pillar of the reform strategy, and called for timely disbursement of such support.

Directors welcomed the authorities' success in containing the primary fiscal deficit in the first half of 2007. They emphasized the need for determined action to achieve the 2007 budget deficit target and the medium-term debt reduction objectives. In this regard, Directors commended the steps taken to initiate reforms in the social security and power sectors. They encouraged the authorities to give priority to raising gasoline excises as soon as the political situation allows.

Directors welcomed the fiscal adjustment and privatization plans for 2008. They noted the planned increases in the value-added tax and the tax on interest income in 2008, the preparations for the introduction of a global income tax in 2008, and the administrative reforms underway. Directors emphasized that further progress is needed on energy sector reforms to realize the expected medium-term expenditure savings. They supported the planned privatization of the telecom sector as crucial to the success of the reform strategy.

Directors stressed the importance of strengthening public financial management. They encouraged the authorities to follow up on their action plan to improve the cash and budget management functions. While they called for expenditure restraint, Directors advised against across-the-board expenditure cuts, and recommended that efforts focus instead on curtailing low-priority current spending rather than capital spending. Directors also emphasized the need to strengthen the social safety nets. They welcomed the establishment of a debt management office.

Directors noted that the monetary policy framework has served Lebanon well, especially in helping to maintain financial stability in the face of disruptions in international financial markets. They underscored that central bank financing of the government will need to be gradually reduced in order to safeguard the central bank's balance sheet, and supported the authorities' intentions to rely increasingly on market finance.

Going forward, Directors supported the planned introduction of transparent short-term monetary instruments, and underscored the importance of allowing greater interest rate flexibility in Treasury bill auctions. Directors advised that the central bank refrain from quasi-fiscal activities, and supported the establishment of a joint working group in the Ministry of Finance and the central bank to better coordinate interventions in the financial market.

Directors considered that the exchange rate peg to the U.S. dollar has helped maintain financial stability without impairing competitiveness. They noted that gross international reserves, combined with the banking system's liquidity cushion, appear to be sufficient to meet temporary pressures on the exchange rate. Directors agreed that the real effective exchange rate appears broadly in line with fundamentals. Going forward, Directors stressed that continued sound macroeconomic policies and structural reforms, particularly full implementation of fiscal adjustment plans, will be essential to support the exchange rate peg.

Directors noted that the banking sector, though profitable and well capitalized, faces vulnerabilities associated with high sovereign exposure, maturity mismatches, and the high degree of dollarization. They agreed that a reduction in the government debt will be crucial to reduce these vulnerabilities, but also emphasized the need to strengthen risk management, diversify loan portfolios, and enhance cross-border supervision. Directors welcomed commercial banks' readiness to adopt Basel II requirements in 2008. (IMF26.11)

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11.3 GCC: Creditworthiness Unaffected By Inflation, Exchange Regime Changes

Standard & Poor's (http://www.standardandpoors.com) commented on 22 November that the creditworthiness of Gulf Cooperation Council (GCC) states will remain unaffected either by rising inflation or by changes in the exchange rate regime, in a report titled "Balance Sheets Bolster GCC States As They Ponder A Change In Exchange Rate Regimes." "From a credit ratings perspective, the question is whether or not the ability of the GCC states to service their debt in a timely manner will be affected either by rising inflation or any shift in exchange rate regimes," said Standard and Poor's credit analyst Farouk Soussa. "In our view, the answer is an unequivocal 'no'."

There is much debate at present over whether the GCC states will revalue their currencies or follow Kuwait and change their exchange rate regimes altogether in order to combat the effects of rising inflation and the weak U.S. dollar. The issue is likely to figure prominently when GCC heads of state meet next month.

But as the report points out, the consequences of the inflationary spiral, which sparked speculation of possible changes in the GCC exchange rate regimes, are offset by revenues from oil and gas exports - the dominant source of the wealth in the region. In addition, GCC states benefit from the booming non-oil sector and the low level of dependence of public investment on tax revenues.

Changes in the region's exchange rate regimes would likely further delay the formation of the GCC monetary union. Nevertheless, given that the economic benefits of such a union would be more political in nature, the delay will not have a direct effect on sovereign creditworthiness because the ratings on GCC countries are primarily driven by balance sheet strength, which will be unaffected, and constrained mainly by regional geopolitical risks. (S&P22.11)

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11.4 KUWAIT: Under Construction

The Burj Dubai may have recently been crowned the world's tallest structure but Kuwait has already unveiled plans for a building that will tower over Dubai's newest superlative. The Burj Mubarak Al Kabir will stretch over a kilometer into the sky and is part of just one of a number of ambitious real estate developments in Kuwait.

Recently, following months of planning and negotiations, Kuwait's Municipal Council approved development designs for the new superstructure, which is named after a key political figure in Kuwait's recent history. The tower will be the center piece of a massive $86bn project, lying to the north of Kuwait City being led by Tamdeen Real Estate. Known as Madinat Al Hareer (the Silk City), the new development is designed to be an entirely new urban area accommodating some 700,000 people.

Along with the Mubarak Al Kabir tower, Madinat Al Hareer will also house a 50 square kilometer nature reserve, a free trade zone, a new airport and dedicated zones for industry, health, entertainment, media and education. The development will be linked to Kuwait City via the Subiya Causeway, a 35km bridge stretching the width of Kuwait bay. Located in the relatively undeveloped area of Subiya, the project is part of a broader plan by Kuwait to revitalize the northern part of the country.

Abutting the Madinat Al Hareer site is the Boubyan Island development, which is being overseen by the ministry of public works and is expected to cost an estimated $4.6bn. When completed, the project will have revamped the large island northeast of Kuwait City, installing a free trade zone, oil depot and a major port. The port portion of the project, the first phase of which was recently awarded to a Chinese consortium, will cost an estimated $1bn in total. Industry analysts, in conversations with OBG, said that while the government is covering the construction costs of the port, management of the port, once operational, would likely be assigned to a private sector company.

Big money is also being spent on the mainland. Kuwait University, the country's largest higher education institution, is shifting its facilities to a new university town outside the city. The campus, which will feature separate buildings for men and women, will cost around $2.5bn. Elsewhere, Mabanee Real Estate recently opened the first phase of The Avenues shopping, business and leisure development, which, when completed, will have cost an estimated $2bn.

However, while the announcement of so many new projects does provide a spot of excitement for the Gulf state, it will be several years before residents are able to reap the benefits of the new developments.

According to Tamdeen's current schedule, it will take approximately 25 years to construct the entire Madinat Al Hareer, with the first phase due for completion within the next seven years. However, the Subiya Causeway, which is a crucial component for the development of the northern area, has already been hit by numerous delays. The Environmental Public Authority has raised concerns about the impact of the causeway's piers on marine life in Kuwait Bay, and similar planning issues have forced a redesign of the project. "Because of these changes the tender is unlikely to be issued until year-end or early 2008, and construction will not be able to start until 2009 at least," said Robert Uthwatt of Danish engineering firm COWI, the consultant on the project.

Engineering experts have also questioned the feasibility of the Mubarak Al Kabir tower, which will require unique structural supports to ensure the upper floors can withstand high winds.

Similarly, the Boubyan Port project was due to open by 2009, but delays over the build-operate-transfer scheme have pushed back completion dates by at least a year. The first three-container berths, originally due to come online next year, have been postponed until late 2009, with the following five berths similarly delayed. The full development of the port will be executed in five phases over the next 16 years and, once finished, will have a planned capacity of 3.5m twenty-foot equivalent units.

Thanks to record oil prices, Kuwait is flush with high levels of liquidity and has plenty of capital to spend on extravagant projects such as these. However, political wrangling, which has led to two cabinet reshuffles in the past 11 months, combined with the increasing pressures from cost inflation, have dramatically slowed the approval processes for several of the bigger budget projects. (OBG16.11)

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11.5 BAHRAIN: Refinery Upgrade

Bahrain is planning to consolidate its place at the centre of the Gulf region's oil refining industry, unveiling a series of large investments to boost production capacity and the flow of crude into the country, according to the Oxford Business Group.

On November 19, Abdulhussain bin Ali Mirza, Bahrain's oil and gas minister and head of the National Authority for Oil and Petroleum (NOGA), announced that authorities were looking at a number of new investment projects to strengthen state-oil producer Bapco. These include the construction of a second pipeline from Saudi Arabia to increase supplies and the replacing of some of the older units of the company's refinery.

Currently, Bahrain's sole refinery has a capacity to process 250,000 barrels per day (bpd), though less than 20% of this comes from the kingdom's own fields, with the vast majority of crude coming from nearby Saudi Arabia through a single 54 km long pipeline. Though Bahrain has already invested in a number of projects to boost output from its existing wells and to develop new fields to increase domestic production to around 70,000 bpd by next year, any major upgrade of Bapco's refining capacity will need to be fed by imports, with Saudi Arabia the logical supplier.

The announcement of the new program is the last in a series of expansion projects that are nearing completion, and carrying a total estimated value of $1.2bn. These include an increase in storage capacity as well as infrastructure upgrades at the country's refinery to bring it into line with new environmental requirements.

It is not just Bapco's normal refining capacity that will be getting a major boost though. The company is branching out into low sulphur diesel production (LSDP). A new $725m LSDP refining plant is due to come on line on December 4, and is one of the keystones of Bapco's strategic investment program to maintain the company's position at the forefront of the region's refining industry.

The new plant, which is projected to generate revenue of $300m a year, is designed to meet the growing demand for low sulphur diesel. Till now, Bapco's diesel products had contained a high sulphur content, increasingly unpopular on international markets with the rising awareness of polluting emissions. Current sulphur content in Bapco's diesel fuel averages 0.65%, though this will be slashed to just 0.001% at the new facility, which will have a production capacity of 100,000 bpd. According to a statement issued by the company on November 19, the LSDP refinery will keep Bapco competitive and profitable as a major international export refiner.

In an interview with a local paper on November 8, Mirza said Bapco's new LSDP facility would meet the increasingly stringent quality requirements coming into force. "The company implemented the program in view of the rise in global environmental awareness that made the world's governments create different laws [...] calling for the use of cleaner fuel products," he said.

However, Bapco's modernization and expansion program is not only being driven by environmental concerns, though these have been important. According to Mustafa Al Sayed, the company's chief executive, new refining capacity is required if the Gulf is to meet the Asian market's increasing demands for energy. Both NOGA and Bapco were keen to ensure that they could compete in this lucrative market, Al Sayed told a conference of storage terminal operators in Manama on November 19.

Notwithstanding the current expansion drive, the kingdom is limited by its reserves and its reliance on Saudi crude. A number of exploratory licenses were issued recently in a bid to find new fields. However, Bapco could lose its monopoly position in Bahrain's refining industry if new reserves are located. On November 13, Mirza said that while Bapco did not need to build a new refinery nor could not afford to fund such a massive project at the moment, a second refinery could be constructed if new finds justified the expense. Any new plant, which Mirza said would cost of between $6bn and $8bn, would be operated by the private sector, rather than the state.

Although the kingdom's reserves are dwindling, with estimates putting existing stocks at around 125m barrels, and with daily output sufficient to meet domestic demand of 23,000 bpd with some left over for export, a number of new exploration leases have been granted this year, with plans to sink up to 700 new wells over the next 15 years. Bahrain's refinery was the first in the Middle East, starting operations in 1935. Since then, it has undergone many changes and upgrades as technology improved and demand grew. Now one of the largest refineries in the region, Bapco is still setting the pace and with its new environmentally friendly processing facilities and cleaner products, it has positioned itself to hold onto its market share and even build on it. (OBG23.11)

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11.6 UAE: Moody’s Rating of Aa2 Based on Strong Economic Fundamentals

The high investment-grade ratings of the United Arab Emirates (UAE) remain supported by the country's strong economic fundamentals and long history of domestic political stability, Moody's Investors Service says in its new credit report on the UAE. The foreign and local currency government bond issuer ratings for the federal government of the UAE are currently Aa2 (upgraded from Aa3 in July 2007). These are the highest sovereign ratings in the region along with those of Kuwait and Qatar.

"The UAE enjoys one of the highest levels of GDP per capita in the region, thanks largely to a high level of hydrocarbon exports per capita. The country has the fifth largest oil reserves in the world," says Tristan Cooper, a Moody's Vice-President / Senior Analyst and author of the report.

"In addition, the non-hydrocarbon economy is vibrant and growing rapidly, encouraged by the government's active promotion of the private sector and successful efforts to attract foreign investment. Meanwhile, sustained fiscal and current account surpluses have enabled the public and private sectors to accumulate large net foreign asset positions," Mr. Cooper adds. The domestic political situation remains stable and the UAE enjoys close relations with the US, other G8 countries and most regional neighbors, although relations with Iran are complicated by a long-running territorial disagreement.

A number of factors weigh on the UAE's ratings. These include the country's high dependence on hydrocarbon exports, which exposes the economy to swings in international oil prices. Mr. Cooper also explains that: "Inflationary pressures have risen markedly in recent years - stimulated by capacity constraints, strong growth in public expenditure, and the peg to a falling dollar. This threatens to undermine the competitiveness of non-hydrocarbon sectors. Furthermore, the contingent liabilities of some emirate governments are rising rapidly, particularly in Dubai, as publicly owned companies seek financing for their ambitious expansion plans."

Moody's notes that the UAE's political, administrative and legal institutions tend to be weaker than those of higher rated countries and the poor quality, scope and timeliness of official data act as an impediment to economic analysis. Despite the stability on the domestic political front and the fact that the UAE has historically been relatively unaffected by regional geopolitical instability, there remains a risk that a deterioration in the neighboring political environment could have an adverse impact. Nevertheless, this risk is slight, as reflected in the country's high Aa2 ratings.

The UAE's sovereign ratings have a stable outlook. "Although Moody's expects the government's finances to continue to improve over time given our projection of wide fiscal surpluses, the UAE's ratings are likely to be constrained by political, institutional and structural factors, which are given comparatively more weight in the Aa rating category," Mr. Cooper concludes. (Moody's 21.11)

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11.7 UAE: Tools Limited in Inflation Fight

The UAE’s Ministry of Economy acknowledged on 19 November the seriousness of rising inflation, relating it to the currency peg in the context of the declining dollar, surging oil revenues and the money supply, and soaring housing and fuel prices.

With the dirham artificially devalued against major currencies due to its peg to the dollar, the ministry said the UAE's ability to use monetary policy tools to curb the problem is limited. Despite the fact that the OPEC Summit refrained from including any reference to the dollar in its final communiqué, the mere fact that the greenback's weight can be under consideration drove it down yesterday to even lower levels.

"Since January 2001 and until September 2007, the dollar lost around 32 % of its value against the euro and 27 % of its value against the British pound. Imports from these countries constitute around a third of our total imports. Since the dirham is pegged at a fixed rate to the dollar, the prices of imports from these countries have risen in dirhams, leading to imported inflation," the ministry revealed in a recent report. Another aspect adding to the problem is the increasing money supply at an unmatched average annual rate of 15 %, resulting in abundant liquidity and further complicating the problem by supporting the demand side.

Abundant Liquidity

"The increase in money supply [for the strictest definition of money supply, or what is referred to as M1] was not less than 15 % every year since 2001. This is an extremely high growth rate, by all standards, and simply means that more and more money was chasing fewer goods and services, leading to inflation," it said in a statement. Increasing rents are also considered by the ministry to be among the leading factors pushing inflation rates even higher.

"According to the existing consumer price index [CPI] weights, rent constitutes around 36 % of the average household expenditure in the UAE. This is, once again, a critical issue that will not be resolved until the residential and non-residential units, currently under construction, are ready for occupancy," the ministry said.

Some experts suggest that an ideal solution for the escalating rent levels is to extend the mortgage duration from the existing average of 15 years to 25 or 30 years as is the case in many developed markets. "The increase of the duration will result in less monthly debt burdens and accordingly less rents, and on the other hand, the practice will also support the real estate market by providing for a wider buyer base," said Obaid Al Ka'abi, a general manager at Das Holding.

"The UAE government is serious about containing inflation. Inflationary pressures are likely to subside primarily when the residential and non-residential units are occupied, and if the dollar stops declining vis-à-vis other international currencies or if a change in the exchange rate regime is contemplated. Until then, everyone will simply have no option but to weather the storm," he said. (GN20.11)

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11.8 ABU DHABI: Future in Petrochemicals

With oil prices reaching an all-time high, the members of the Gulf Co-operation Council (GCC) are set to continue reaping the benefits of their oil-based economies. Abu Dhabi in particular, observes the Oxford Business Group, with its extensive natural resources, is keeping energy in the forefront of its economic policy.

Oil prices have reached a record high of almost $100 per barrel. Abu Dhabi is currently producing 2.6m barrels per day (bpd), but is investing an estimated $20bn in the coming years to increase production to 3.5m bpd by 2011. This investment will also be used to increase natural gas production levels from 6.5m cubic feet per day to 9.5m cubic feet during the same period.

During the recent Middle East Economic Digest (MEED) conference in Abu Dhabi, Khaldoun Al Mubarak, chairman of Abu Dhabi's Executive Affairs Authority, said, Energy will remain the backbone of our economy, and that does not only include oil, as we are seeking a major development program for our sour gas production, as well as the petrochemical sector.

Sour gas contains hydrogen sulfide, a potentially dangerous substance making production and transport more costly and challenging due its corrosive properties. Sour gas accounts for the majority of the 213bn cubic feet of identified natural gas reserves in the United Arab Emirates (UAE). The Abu Dhabi National Oil Company (ADNOC) is currently evaluating bids to tap the sour gas reserves contained in the emirate's Shah field. Royal Dutch Shell, US-based Occidental Petroleum, ExxonMobil and ConocoPhillips are all bidding for the multi-billion-dollar development contract with the winner expected to be announced by the end of the year.

The original tender announced in April included the Bab and Shah gas fields. It was later split because of the complexity of the project, allowing for the Bab field to be developed separately at a later date. The winner of the current tender will have a 40% stake in the project, while ADNOC will retain the rest. The development is expected to produce 3bn cubic feet of gas per day to be used for re-injection in oil fields and as a source of energy for downstream industrial activities.

The government is keen to facilitate the growth of downstream petrochemicals industries and attract foreign investors to the sector in coming years. Because transporting it is so costly, the fact that Abu Dhabi has supplies on hand makes it even more competitive, pegging the sector to become a cornerstone of the economy.

Investments in the GCC's petrochemicals sector are expected to grow to an estimated $120bn in the next five years with the goal of satisfying the growing demand from surging economies such as India and China. According to the Gulf Organization for Industrial Consulting (GOIC), Saudi Arabia accounts for 63% of total petrochemicals investments while the UAE, Qatar and Kuwait are well positioned to attract additional investment. Next January, Abu Dhabi will host the GCC 11th Industrialists' Conference on the Gulf petrochemicals industry organized by the GOIC to create a GCC petrochemicals vision for 2020.

At the MEED conference, Kito de Boer, managing director of international consulting firm McKinsey and Company Middle East, estimated that Abu Dhabi will have an investible surplus of $800bn by 2020, due to the inflow of revenues from oil production. He added, Abu Dhabi will have the highest concentration of wealth [...] on the planet due to its vast natural endowment. Abu Dhabi continues to capitalize on its vast natural resources through prudent investments and collaboration with the private sector. Oil, sour gas and petrochemicals will all play a vital role in the emirate's future, and will help provide the fuel for economic diversification. (OBG23.11)

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11.9 SHARJAH: Jet Fuel Pipeline

A new 45 km jet fuel pipeline recently opened running between Sharjah International Airport and the Hamriyah Free Zone (HFZ). The line and associated 50,000 ton storage facility at the HFZ are expected to further boost economic expansion in Sharjah and the other Northern Emirates.

The Oxford Business Group reported that the contract for the pipeline and storage unit was first signed in 2005. Designed by Mott MacDonald and built by Sharjah-based contractors, the pipeline and facility were constructed at a combined cost of $32m. The company Anabeeb, or "pipeline" in Arabic, was set up as a joint venture between the government and Air BP. Anabeeb will operate and maintain the pipeline, further cementing Air BP's presence in the emirate, which goes back to the 1930s. At present, BP Sharjah operates three gas fields, a processing plant, gas compression facilities and two liquid export terminals.

Air BP's jet fuel pipeline represents the emirate's next step in meeting the energy demands brought on by increased traffic at Sharjah International. The airport is one of the largest cargo and passenger hubs in the Middle East, third after the airports in Abu Dhabi and Dubai, and is projected to grow. In 2006 Sharjah International saw a 36% increase in passengers, largely due to the expansion of Air Arabia, the region's first low-cost airline, which was established in Sharjah in 2004. The airport embarked on a $62m two-year expansion plan in 2005, increasing passenger capacity from 2m per year to 8m per year, and upgrading aircraft handling capacity to ten at a time.

Air BP is currently the largest fuel supplier to Air Arabia and holds 49% of a joint venture with Fleix Trading for Sharjah Aviation Services Company (SASCO), which manages the airport's fuel system and boarding services.

Air travel in Sharjah is speeding up, with new planes coming into the airport in addition to the new fuel services. At the Dubai Air Show on November 11, Air Arabia announced it was looking for up to 50 planes to add to its current fleet of 11 - a deal estimated to be worth over $3.5bn. Two days later airline officials signed a contract for 34 Airbus A320s with an option to purchase 15 more. The company aims to have more than 50 planes by 2015, in an effort to enhance its profile.

At the air show, Boeing was marketing its new smaller, fuel-efficient, wide-body aircraft, the 787. Despite the 787's features and its expected 1000 orders before the end of the year 2007, Air Arabia may not fill the rest of its fleet with the new aircraft, given that Air BP and Airbus have established an exclusive fuelling agreement for the A380, marketed as the world's biggest passenger jet. The opening of the pipeline is likely to further strengthen the relationship between Air Arabia and Airbus. Air BP also showcased its new environmentally friendly refueling vehicle, which is 100% emission free and runs off a 96 DC volt engine.

While it may not opt for the heavily marketed 'green' 787, the opening of the pipeline will reduce the number of fuel transport vehicles visiting Sharjah International by 50 per day, improving road safety and congestion issues, as well as reducing carbon dioxide emissions.

At the official opening ceremony for the pipeline, Sheikh Sultan bin Ahmed bin Sultan Al Qasimi, speaking on behalf of the Sharjah Petroleum Company, said the pipeline was "in line with our urban planning policies aimed at reducing road congestion and carbon dioxide emissions". He added, "The new facility is a highly strategic asset and will provide a solid growth platform for Sharjah's aviation sector and its flagship airline Air Arabia, while introducing internationally accepted safety and environmental standards for the emirate's people." (OBG22.11)

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11.10 OMAN: Inflationary Fires

Oman's climbing inflation rate, which has hit a 16-year high according to figures released in mid November, has set off alarm bells in Muscat, with a number of steps being considered to bring down spiraling prices. The Oxford Business Group announced that on November 20, Oman's ministry of national economy released the inflation data for this past year ending in September. They made grim reading for a country used to relatively stable prices and a solid economy. The annual rate of inflation rose to 7.09%, well up on the 6.47% of the previous month. Even more significantly, the latest results were more than double the previous year's figure of 3.2% and more than three and a half times that of the 1.9% seen in 2005.

The spike in Oman's inflation has been brought on by a number of factors, particularly a 14% hike in the prices of food, beverages and tobacco, which collectively represent more than 30% of the country's consumer price index. Surging rent increases also fuelled the index's rise, climbing 7.9%.

Such is the government's concern at the rate of price rises that on November 25 the council of ministers established a special committee to look into the domestic and international causes of what it described in an official statement as "this phenomenon". The committee, to be chaired by National Economy Minister and the Deputy Chairman of the Financial Affairs and Energy Resources Council Ahmed bin Abdulnabi Macki, will include the ministers of the departments of fisheries, commerce and industry and agriculture and the head of the Oman Chamber of Commerce and Industry. It is expected to develop strategies to ease the impact of inflation of Omani society.

However, one factor that has been receiving a great deal of attention, and is sure to be looked at by the committee, is the dipping dollar, to which the Omani rial is pegged. As a result, the cost of imports from non-dollar areas has increased, contributing strongly to inflation growth. Though officials have repeatedly said Oman is not planning to decouple its currency from the dollar, these statements have not dampened speculation Oman might join Kuwait, which in May moved to sever its link with the greenback in favor of a weighted basket of mixed currencies.

On November 22, Hamud bin Sangur Al Zadjali, the central bank's governor, followed the lead set by Macki in October, saying the currency peg would remain in place. "We're not thinking about revaluation, we're not changing our policy," Al Zadjali said while attending the European Banking Congress in Frankfurt. "The currencies go up and down along with a cycle and the economy in a country."

Amid stories of climbing inflation and pondering over the currency peg came a piece of good news for the economy. The directorate general of export development for the Omani centre for investment promotion and export development announced on November 20 that non-hydrocarbon exports had jumped 82% for the first five months of the year, hitting $1.2bn, well on the way to eclipsing the $2.1bn earned in 2006.

However, a warning issued by Moody's Investors Service on the non-hydrocarbon sectors of the United Arab Emirates could also apply just as well to those of Oman and across the Gulf. The report, issued on November 21, said inflation and the pegging of currencies to the US dollar could harm the region's non-energy related industries. "If unchecked, the rising cost of living threatens to erode the competitiveness of the non-hydrocarbon sector," the report said.

While Oman has worked hard to boost its industries not related to hydrocarbons and diversify the sultanate's economy, many sectors rely on imported raw materials, the prices of which are being pushed up by the fall in the US currency. Other industries, more dependent on home-grown materials, have to contend with spiraling prices of local goods and services.

The falling dollar and rising costs also hit hard at Oman's large expatriate community, which still plays a significant role in the country's economy, despite the state's policy of Omanization, encouraging employers to hire local staff. With many being paid in dollars, foreign workers have seen the value of their income drop sharply as prices began climbing. This has forced employers to increase wages, adding to the inflationary spiral, or face losing experienced personnel. In the statement made after its November 25 meeting, the council of ministers said it was looking at "identifying practical solutions to ease its impact on citizens and expatriates", recognizing the pressures inflation was bringing to bear on both local and foreign workers. However, while recognizing these pressures, the government might be hard pressed to alleviate "this phenomenon", at least in the short term. (OBG27.11)

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11.11 SAUDI ARABIA: Riyal Pressures Mount

Brad Bourland, Chief Economist & Head of Research at Jadwa Investment (http://www.jadwa.com) writes that the Saudi Arabian Monetary Agency (SAMA) has moved to quell an unprecedented bout of pressure on the riyal's peg to the US dollar. A cut in interest rates paid on deposits at SAMA on November 24, making it less attractive to hold riyals versus dollars, has reaffirmed SAMA's commitment to the peg but has been unable to push the riyal back from a 21-year high against the dollar. By itself, the interest rate cut has clearly not been enough to end the speculation on the peg, but it is an important sign to the market that SAMA remains committed to the current exchange rate arrangement after a period of uncertainty. However, lower interest rates are likely to have adverse consequences for inflation.

Pressure had mounted on the riyal last week and on November 23 it was trading at SR3.705:$, the strongest level since the peg was introduced in 1986 and well above its official rate of SR3.75:$. While this difference appears small, it is a significant change from the tight range around the official rate within which the riyal usually trades. The one-year forward rate, which measures what the market expects the riyal:dollar exchange rate to be in one-year's time, hit SR3.585:$, meaning that some market participants were betting on a strengthening of 4.4%.

The bulk of the pressure on the riyal is coming from the offshore market, with banks in Dubai, Bahrain and London conducting relatively small deals at levels well above the official rate. Saudi banks, who are responsible for most riyal transactions, have modestly adjusted their rates, but not by as much as the offshore banks. As Saudi companies are freely able to access riyals offshore, a wide and persistent disconnect between the official rate and the market rate calls into question the credibility of the official rate.

Addressing the pressure on the riyal posed a dilemma for SAMA. Reducing interest rates is the simplest way to ease pressure on the currency over the short term, but such a move would add to inflationary pressures that are already becoming a problem (inflation hit 4.9% in September). SAMA's decision not to adjust rates when the US Fed Funds rate was cut in mid-September was the event that triggered the current round of riyal strength, as the market read this as a signal that Saudi Arabia was de-linking its monetary policy from that of the US and preparing to drop the peg.

After a period of deliberation that heightened uncertainty within the market about the future direction of the riyal, SAMA cut the reverse repo rate by 50 basis points (0.5%age points) on November 24, lowering it to 4.25%. Saudi banks quickly followed suit, lowering the rate of interest they pay on riyal deposits to 4.00%, some 60 basis points below the rates they are paying on dollar deposits. This effectively achieves SAMA's goal of making it relatively less attractive to hold riyals on deposit than dollars.

To help deal with inflationary concerns, SAMA raised the commercial bank reserve ratio for current accounts from 7% to 9% in early November. This means that commercial banks have to place with SAMA funds equivalent to 9% of the total value of the deposits in their current accounts. Increasing the amount of money that has to be set aside as reserves, reduces the amount available to lend and therefore cuts credit growth.

Bourland believes SAMA will now take a period of time to observe the foreign exchange market reaction to its latest interest rate move before taking further action. In the few days since the cut, there is little sign that the riyal has moved back toward the official rate; in fact, it touched a new low on November 26. The cut is, however, a clear sign that SAMA remains committed to the current exchange rate and the peg.

It is not clear how effective the new tighter reserve requirements will be in curbing lending and thus inflation. In our view, credit growth is not yet a major factor behind inflation. Furthermore, commercial banks have more funds than they are prepared to lend to the private sector (the commercial bank private sector loan-to-total deposit ratio has fallen from 89% at the end of 2005 to 81% in September), so we do not think that the increase in the reserve requirement will have much impact on bank lending. Growth in credit to the private sector has picked up over 2007, so if SAMA's move has any impact it will not be felt for many months.

While the interest rate cut signals SAMA's commitment to the exchange rate peg, it is not the end of the revaluation story. Confidence in the peg is weakening, with many analysts outside the Kingdom believing that the divergence in monetary policy needs between the US (where interest rates are falling) and Saudi Arabia (where, if it were not for the peg, rates would be rising to contain inflation) makes the peg unsustainable. In these circumstances markets can react disproportionately. For instance, the intensification of pressure on the peg last week was the result of comments from various sources that in normal circumstances would not have affected the riyal.

Two events next month could trigger more pressure on the riyal:

*The GCC heads of state will almost certainly postpone the planned introduction of a regional single currency at their summit on December 4 and the statements they make about exchange rate arrangements will be studied carefully.

*On December 11 the US Fed is expected to cut interest rates by another 25 basis points. Despite the recent cuts in the reverse repo rate, Saudi Arabia will be expected to respond to the Fed.

What lies ahead? If the dollar strengthens in international markets, then we expect pressure on the riyal to abate. However, should the dollar continue to decline and SAMA prove unable to address a substantial and persistent differential between the dollar:riyal market rate and the official rate, SAMA might begin a series of gradual adjustments to the exchange rate itself, as it did during the rise and fall of oil prices during the 1970s and early 1980s. In any case, Bourland anticipates no change in the policy of pegging to the dollar, versus another currency or basket of currencies. Such a major departure from longstanding policy would be considered in a more deliberate fashion and not done as a result of market pressures. For now, Bourland maintains that the costs of altering the peg greatly outweigh the benefits and expects the peg to remain in place. (Jadwa 27.11)

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11.12 EGYPT: Macro Economics

Prime Research commented that Egypt’s positioning as an important Middle East nation with regard to its political weight is a well established given. Since appointment of the Nazif government and its largely successful attempt to convert the Arab world’s most populous nation into a free market, Egypt’s economic significance within the region is what is increasingly grabbing headlines. The accompanying GDP growth trajectory which kicked off in 2003, continued unabated in latest FY07 numbers, (7.1% real growth) and what’s more appears set to continue, as officials have brought into play Egypt’s strongest assets, a 75 million and growing population.

Consumer spending is powering domestic demand driven economic growth, compensating for well versed state budgetary constraints on the government pursuing an expansionary fiscal policy. As importantly, safety in (population) numbers is the key attraction for the wealth of FDI pouring into the country, from banking to real estate, to petrochemicals.

Net exports which essentially catalyzed the GDP growth take off post float have now, as expected, reversed into a drain on numbers, as the local currency strengthens and a wealthier middle class, a function of tax breaks and custom cuts, both new and old, buoy sentiments and fuel imports. While a ballooning trade deficit warrants keeping an eye on, Egypt continues to run healthy current account (FY07 - $2.7 bn) and Balance of Payments (FY07 - $5.3 bn) surpluses, net service and capital inflow attributable. An associated accumulation of FX reserves has allowed Egypt a build up of a $29 billion cushion, equivalent to 10 months imports, (relative to a 5 to 6 month norm) and calls for a rating upgrade from some corners, as well as further flexibility of the currency from others.

Egypt really has reopened the “open door”…

The privatization process really has been a success this time round. To the surprise of many the government has managed to divest of close to 100 state owned entities since coming into power, securing steep price tags on a number of the high profile strategic sell offs, including 1 of the “Big 4” banking institutions, and the 3rd telecom license. Commitment to associated reform has also reduced concerns on budget financing and will aid further in reducing monetization pressure, as well as allowing for only limited reliance on the commercial banking sector to fund the deficit, in turn reducing crowding out repercussions for a government seemingly intent on bringing down interest rates and invigorating private sector consumption and investment.

Timing has proven equally inherent here, with a benign global environment and a petrodollar boom in the GCC fleshing out the pockets of large private investors and sovereign funds, which with oil at $94/barrel (at writing), have not only the cash but the confidence to aggressively implement a geographical expansion strategy. Moreover, we are further encouraged by the utilization of privatization receipts, with capital injections into state banks and restructuring of over ½ of private sector bank Non-Performing Loans, in conjunction with an aggressive $22 billion build up of non-financial agents in the commercial system, have all contributed toward solidifying the sector. Past experiences have made the viability of the financial sector in Egypt a priority with the state.

What we should be worried about…..

We do have a number of concerns however which do require attention, and have been covered in detail within this note. To sum up, inflation pressures top the list here. With monetary policy publicly defined as inflation targeting, and with associated numbers in, or close to double digits depending on base rates, we look at causes and consequences.

Continued bureaucratic red tape, we are also firm believers, continues to hold Egypt back from reaching true potential. Efforts have been concerted here as of late however, with the development of industrial investment zones awaiting cabinet approval and the most recent Doing Business 2008 Report, issued by the World Bank and IFC, labeling Egypt the worlds top reformer. The report also concluded that “equity returns are highest in countries that are reforming the most”.

Moving on, Egypt’s indebtedness also remains an issue for us; with government debt at ca. 64% of GDP, while we are skeptical on the states announced target pertaining to a 1% reduction in the deficit/GDP per annum in the medium term. FY07 numbers did show an aggressive improvement however (350 bps shrinking to 5.7%), although this is likely to be an exception rather than the rule, attributable to big ticket, and accordingly unsustainable, state divestitures, what we view as a peak in GDP growth rates over the associated 12 month period and most significantly various reclassifications of consolidated fiscal numbers which resulted large in extraordinarily elevating state expenditures, and accordingly the deficit in 2006, and similarly abnormally reducing outflows, and improving the cash deficit in 2007.

While government finance reform is talked about considerably, and subsidy reductions have occurred on fuel and utilities, the structural make up of Egypt’s economy, with very uneven income distribution and nominal GDP/capita at under $1,800, reigning in spending is an extremely challenging and sensitive issue. How Egypt finances its inevitable deficits also require careful consideration, and although difficult to quantify, one should note with caution that the “economic boom” which many talk about with reference to Egypt as of late, is very localized within a middleclass minority, albeit growing, with the vast majority of Egyptians reaping only little of the fruit. That said, overall Egypt’s macro positives are far outweighing the negatives for the time being, with the numbers speaking for themselves. (Prime Research05.11)

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11.13 ALGERIA: Export Woes

Algeria is falling short in its efforts to diversify its export earnings, with energy sales overseas increasing their dominance in the country's foreign trade while income from non-hydrocarbons is dropping. Figures released by the state in the second week of November show that Algeria earned only $969m from non-hydrocarbon exports in the first nine months of the year, with semi-finished industrial products accounting for just over 75% of the total. This was 2.65% down from the same period in 2006, though this could easily get lost in the overall energy fuelled export earnings figure of $40.7bn for the three quarters, which represented a rise of 17.9%. Algeria's much-touted industrial sector did little to add to export earnings, contributing just $31m, less than half the $65m recorded for the first nine months of last year.

The weak results from Algeria's non-hydrocarbon exports also added to the hurt being felt in the country's balance of trade figures. In the first nine months of the year, Algeria's trade surplus saw a 16% reduction, compared to the January to September total in 2006, coming in at $22.17bn. However this was mainly down to a 25% increase in imports, much of it foodstuffs, with Algeria spending $19.87bn for foreign goods, according to official figures announced at the end of October.

Algeria's heavy dependence on hydrocarbons exports could harm the broader economy, especially as Energy Minister Khelil said in early November that the country's oil production will not reach the target set for it of 2m barrels a day by 2010 due to a slower- than-predicted increase in capacity. Though ongoing high oil prices will continue to prop up Algeria's export earnings for the foreseeable future, a sudden drop in earnings could hit hard at its already weakening balance of trade figures.

According to Commerce & Industry Minister El-Hachemi Djaaboub, Algeria has failed to exploit the opportunities offered by its partnership agreement with the EU, which came into force in September 2005. This applies especially to the opportunity to take advantage of the bloc's hunger for agricultural products. On November 11, Djaaboub announced the government was going to establish a strategy to promote non-hydrocarbon exports, setting a target of overseas sales of $2bn by 2010.

Mohamed Benini, the head of Algeria's export promotion agency ALGEX, said he believes Algeria has not done enough to take advantage of its existing free trade agreements. He said that many countries had opened their doors for Algerian products, but the country has not taken advantage of the situation, as "its industry does not allow it to make the most of the offered tariff advantages".

Another stumbling block for Algeria's export trade was identified by the World Bank in a report released November 5. It rated Algeria low in terms of management of the transport of goods via sea and land in a study on international logistics. The bank's Logistics Performance Index and the accompanying report, Connecting to Compete: Trade Logistics in the Global Economy, ranked Algeria 140 out of the 150 countries covered in the report. It also placed the country third from last for efficiency and effectiveness of the clearance process by Customs and other border control agencies.

Algeria did not fare much better in other survey categories, with the quality of transport and information technology infrastructure for logistics, competence in the local logistics industry, and ease and affordability of arranging shipments all getting a rating of 139. Overall, the report said Algeria was performing below its logistics potential. Poor logistics not only directly harm the trade of a country such as Algeria but can also damage investment prospects, the report said.

"In this highly competitive world, the quality of logistics can have a major bearing on a firm's decisions about which country to locate in, which suppliers to buy from, and which consumer markets to enter," the report said. In order to overcome this problem, at least in part, the government has committed $12bn to upgrade existing infrastructure at ports and airports and to build new facilities. However, this will not overcome many of the other weaknesses identified by the World Bank.

Algeria has an urgent need to get better and smarter at tapping into the global export trade. The country must improve its trade services if it wants to reduce its reliance on energy exports to prop up the economy or else face hard times when the wells stop pumping. (OBG23.11)

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11.14 PAKISTAN: Politics May Jeopardize Positive Credit Fundamentals

Standard & Poor's (http://www.standardandpoors.com) announced on 27 November that there is no telling what the outcome on the Pakistan turmoil will be but one thing is certain: the country is at a turning point. Standard & Poor's Ratings Services report titled "Pakistan At A Turning Point--Is Sovereign Credit Quality At Risk?" said how the country's political transition unfolds over the next few months will give a strong indication on whether Pakistan's ratings will remain supported by reforms, foreign investment and a prudent policy mix, or whether they will be eroded by continued instability or a regression into a highly politicized and ineffectual administrative environment under an elected government.

"Fiscal slippages may arise, jeopardizing the currently favorable debt trajectory," said Standard & Poor's credit analyst Agost Benard. "Foreign currency inflows could also be affected, thus hurting Pakistan's external liquidity position. The other notable risk is that economic growth could also suffer," he said.

Standard & Poor's recently revised the outlook on the sovereign rating on Pakistan to negative after President Pervez Musharraf declared a state of emergency on Nov. 3, 2007. The sovereign credit ratings (foreign currency: B+/B; local currency BB/B) remain unchanged for now because the country's economic fundamentals are sufficiently strong to withstand a period of uncertainty without a material decline in credit quality.

"Greater clarity is only likely after the National Assembly elections, scheduled for Jan. 8, 2008, but it's clear that past achievements could be put at risk and credit supporting factors diminish, should political uncertainty persist or, if the new paradigm yields revolving-door governments, where political imperatives detract from reforms and fiscal consolidation," Mr. Benard said. (S&P27.11)

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11.15 CYPRUS: EC Says Cyprus on Track for Euro Changeover

In the last few months Cyprus has achieved considerable progress on the practical changeover preparations and seems generally well prepared for the introduction of the euro. With a view to enabling businesses, in particular retailers, to give change exclusively in euro as from €-day, the Central Bank and banks should continue their efforts to convince businesses of the need for being sub-frontloaded. The communication activities on the euro should be further strengthened with a view to increasing the support for the euro, notes the European Commission in its sixth report on the practical preparations for the enlargement of the euro area.

The introduction of the euro in Cyprus implies that a population of about 775,000 will take part in the changeover from the Cyprus pound to the euro. In order to replace the currency in circulation in Cyprus pound with euro cash, 60.7 million euro banknotes (worth €1.19b) and 395 million euro coins (worth €100.26m) are necessary, according to the estimates of the Central Bank of Cyprus (CBC).

In line with the European Central Bank's decision that new euro-area entrants can borrow the necessary volumes of euro banknotes from the Eurosystem and pay them back after the changeover with euro banknotes produced by their own supply arrangements, the CBC received the euro banknotes from the Bank of Greece in the course of October.

The Cypriot euro coins were produced by the Mint of Finland, following a public call for tenders. Mass production started once the Council had decided, on 10 July 2007, that Cyprus can adopt the euro on 1 January 2008. About 60% of the coins arrived by mid-October via container shipments, while the remaining 40% are expected to be delivered by the end of November.

Euro Kits

The CBC estimates that approximately 80% of the value of the euro banknotes which will be introduced into the Cypriot economy (i.e. 48.4 million banknotes, worth approximately €950m) will be supplied to the banking sector before €-day, as well as 64% of the value of euro coins (i.e. 251.2 million coins, worth approximately €64m).

In addition, since 1 November, some banks exchange Cyprus pounds into euro banknotes for their customers at the conversion rate and without exchange charges, so that the public can prepare for payments in euro as from €-day.

Most of the euro banknotes will be channeled into circulation through ATMs. Approximately 550 ATMs are operated by credit institutions in Cyprus, virtually all within the banks' premises which allows for their immediate refilling. Some large banks have announced that they implement the conversion of their ATMs in the evening of 31 December. At least 70 % of the ATMs will be converted to dispensing exclusively euro banknotes at the latest by 1.00 a.m. on €-day, while the remaining 30% will be converted by noon on the same day.

Return Of National Cash

As regards the return of national cash, the CBC intensified its campaign encouraging citizens to use hoarded national cash or to deposit it with banks in October 2007. The CBC estimates that by the end of this year 80.9 million national banknotes and 472.7 million national coins will be in circulation. It is expected that most of these banknotes and about half of the coins will sooner or later be returned to the CBC.

Checks; POS Terminals

About 25 million checks are being used per year in Cyprus. Since checks denominated in Cyprus pound and dated after 31 December 2007 will not be valid, banks have started supplying their customers with check books in euro, which are being used already now.

How well prepared?

According to a Eurobarometer survey held in September 2007, virtually all enterprises (97%) had started preparing for the changeover; most of them had done so as from April 2007 (88%). More than 9 out of 10 enterprises are aware that prices have to be displayed both in euro and in Cyprus pound since September 2007, and the large majority of enterprises do not experience any particular difficulties in fulfilling this obligation. Concerning enterprises' pricing policy, 17% of the businesses mentioned that they will adjust their prices mostly downwards (3% in January), while only 3% will mostly adjust upwards (16% in January).

According to the latest Eurobarometer, still 74% of respondents in Cyprus fear prices increases on the occasion of the changeover to the euro. This constitutes only a slight change compared to the situation in April 2007, when 78% shared this concern.

The dual display of prices in Cyprus pound and euro became mandatory for enterprises on 1 September 2007. Its implementation is carefully monitored by five Euro Observatories established throughout the country which send more than 100 inspectors to each retail outlet on a regular basis.

It appears fair to assume that the ongoing communication campaign in Cyprus is instrumental to increase the support for the euro. Other factors confirm this: 67% of the respondents felt quite or very well informed which is a huge leap forward from previously 47% (April 2007) and 39% (September 2006). Similarly, the familiarity with some key features of the euro and EMU has further improved. (FN27.11)

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11.16 TURKEY: Nuclear Ambitions

Early this month the Turkish parliament passed a bill authorizing the construction and operation of nuclear power plants in Turkey. This motion is being seen as an important initiative in addressing the country's energy concerns.

Though not yet approved by President Abdullah Gul, the bill, passed in parliament on November 8, allows the ministry of energy and natural resources to offer tenders for the construction of nuclear power plants, while also granting the ministry the authority to determine the plants' capacities and locations. The law would allow the government to grant purchase guarantees to companies looking to operate nuclear plants. According to the bill, public institutions will be permitted to build power plants should the private sector show no interest.

Turkey's power trading company, TETAS, will initiate the tender and assess any offers made. Turkey's council of ministers is expected to then give the final green light to the winning bidder(s) and TETAS. The agreement would grant the successful bidder the rights to generate power in its nuclear plant for a 15-year period. Construction of nuclear power plants may begin as early as the end of June 2008, according to the schedule set out by the ministry of energy and natural resources.

The new bill is as an important stepping stone in Turkey's civilian nuclear objectives. The country plans to have three nuclear power plants up and running by 2012, with a total capacity of an estimated 5,000 megawatts. This should reduce Turkey's dependency on imported energy supplies from neighboring states, with record-breaking oil prices continuing to burn a sizeable hole in the government's pocket.

Although many leaders look to the financial advantages promised by the bill, the legislation encountered some roadblocks before passing through parliament. Former President Sezer vetoed the original draft in May. The ruling Justice and Development Party (AKP) had to overcome strong resistance from political opposition and environmentalists, and made several technical amendments to the first draft.

The recent initiative comes after numerous attempts to launch a nuclear program, dating back to the 1960s. Previous efforts were derailed on environmental grounds - particularly the fact that a large portion of Turkey is prone to earthquakes.

In July 2000 Turkey's government was forced to abandon plans to build a nuclear plant at Akkuyu on the Mediterranean Coast. This was partly due to protests from environmentalists in Turkey, Greece and Cyprus, who pointed out that the proposed site was a mere 25 km from a seismic fault line.

Environmentalists and local residents remain up in arms over the bill and potential plans to locate one of the nuclear reactors in Sinop, a city located 435 km northeast of Ankara. Hilal Atici, a local representative for the environmental organization Greenpeace, said the government should think about renewable energy sources. Energy analysts point to government efforts to develop renewable energy. Developing 'green' infrastructure and making the necessary investments for renewable energy - whether in the form of wind turbines or otherwise - will take time. Green options do not offer a fast or complete solution to Turkey's thirst for energy.

Meanwhile, some political analysts interpret the passage of the civilian nuclear bill as an indirect response to Iran's alleged military nuclear explorations, which could conceivably spark a nuclear arms race in the region. Though enjoying the protection of fellow NATO member states and on amicable terms with Tehran, Ankara may want to be prepared for a regional nuclear escalation. Developing civilian nuclear facilities provides Turkey with something of a head start should the government decide in the future to consider developing military nuclear facilities of its own.

The president is expected to give the bill his blessings. The Turkish press reports that Turkey's Sabanci Holding is looking for foreign partners in preparation for a bid to construct a nuclear power plant in the country. With Turkey's energy demands so pressing, the nuclear option is proving too tempting an opportunity to ignore. (OBG19.11)

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- Israeli Shekel conversions done at a rate of NIS 4.00 = $1.00
- Turkish Lira conversions done at a rate of NTL 1.20 = $1.00
- Cypriot Pound conversions done at a rate of C£ 1.00 = $1.60
- Jordanian Dinar conversions done at a rate of JD 1.00 = $1.41
- UAE Dirham conversions done at a rate of Dh 3.70 = $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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