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TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Fischer Believes Israel in Good Shape
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 GlobalLogic Acquires Israel's InterObject
2.2 Oracle's New Acquisition Includes Israel Based R&D Center
2.3 UTOPY Opens Second Research and Development Center in Israel
2.4 Kidde Aerospace to Supply Gulfstream G250 Integrated Fire & Overheat Protection System
2.5 IncrediMail Announces Sale of $5 Million of Auction Rate Securities at Par Value
2.6 Aladdin Launches Attack Intelligence Research Center
2.7 Tigo Energy Chooses Israel for First International Office
2.8 BluePhoenix Signs Partnership Renewal Agreement With Leading Banking Solution Vendor
2.9 US Airways to Fly Between Philadelphia & Israel
2.10 Solarflare Signs Distribution Deal with El-Gev Electronics
2.11 Verigy Establishes Office in Israel
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 GraphOn Partnership for GO-Global Solution in Lebanon and Middle East
3.2 Astrata Awarded Iraqi Government Contract
3.3 United Airlines' Inaugural Flight Between Washington Dulles and Dubai
3.4 Palladium Group Opens Middle East Regional Office
3.5 UAE Ministry of Health Selects Cerner to Automate Healthcare Processes
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4: ISRAEL MACRO-DEVELOPMENTS
4.1 Cost of Elections Could Reach $900 Million
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Arab Countries Threatened by Shortage of Food & Scarce Water
5.2 Jordan's Water Needs To Jump To 1.67 Billion Cubic Meters In 12 Years
5.3 Gulf Economic Growth Set To Slow
5.4 Russia, Iran & Qatar Agree To Form 'Big Gas Troika'
5.5 UAE Approves 2009 Budget of $11.5 Billion
5.6 Oman's Inflation Stays Above 13%
5.7 Saudi Arabian Pharmaceuticals & Healthcare Industry Analysis for Q4/08
5.8 China Vows to Help Pakistan Tackle Economic Woes
5.9 Libya Suspends Oil Export to Switzerland
5.10 Advanced Status Reflects EU Confidence in Moroccan Model
5.11 Morocco Achieves 'Significant Progress' In Public Finances
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Cyprus Reduces GDP Growth Rate Estimate to 3%
6.2 Fitch Changes Greece's Outlook to Stable on Higher Deficit Forecast
6.3 Greek Fiscal Deficit at 3.5% of GDP in 2007
6.4 Athens Unveils €28 Billion Package
6.5 Greek Food Retailers Set To Show A Decline
6.6 Standard & Poor's Places Bulgaria on Negative Watchlist
6.7 Bulgaria to Have 170 MW of Wind Power Generators by End of 2008
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Elections to be Held n Israel
*REGIONAL:
7.2 Jordan To Switch To Wintertime On 31 October
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Teva Announces Sale of Its Israeli Veterinary Business to Phibro Animal Health
8.2 Cheetah's European Launch of New Reliant 2.0 System for Noninvasive Hemodynamic Monitoring
8.3 Teva Announces FDA Approval & Commercial Launch of Fentanyl Transdermal System
8.4 Compugen Finds Platform to Identify Viral Peptides for Use as Human Anti Inflammatory Drugs
8.5 Oramed Pharmaceuticals Launches Phase 1A Trials of its Insulin Suppository
8.6 NanoVibronix Receives FDA Clearance for its PainShield MD Device
8.7 Dune Medical Launches FDA Cleared Trial for Use of MarginProbe in Breast Cancer Surgery
8.8 Kamada Phase III Data Confirms Efficacy and Safety of Intravenous Alpha-1 Antitrypsin
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 IXI Mobile to Provide Next Generation Product
9.2 Elbit Vision Systems Wins an Important Order Incorporating Phased Array Technology
9.3 Morrisons Supermarkets Selects Retalix Software to Enhance Customer Experience & Support Growth
9.4 Corrigent Introduces a New Member in its Carrier Ethernet Transport – CE+T – Product Family
9.5 Brown-Forman Deploys BackFlip Software
9.6 Musicoola Powers New Interactive Music Service Platform at UPC Hungary
9.7 ECI Telecom's Carrier Ethernet Switch Routers Receive ‘Best New Product' Award from Light Reading
9.8 Vringo & Avea Partner to Launch World's First Paid-Subscription Video Ringtone Service
9.9 Voltaire Announces Availability of 40 Gb/s InfiniBand Switches with New "Smart" Design
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's Inflation Rate Remains Static in September
10.2 State of The Economy Index Points To Contraction
10.3 Israel's Trade Deficit Widens With Global Crisis
10.4 Israeli Officials Expect Record Tourist Visitors
10.5 Car Thefts in Israel Decline
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11: In Depth
11.1 ISRAEL: Recent Economic Developments
11.2 LEBANON: Safe for Now
11.3 JORDAN: Inflationary Factors Remain a Risk
11.4 BAHRAIN: Competitive Environment
11.5 QATAR: Gas or Hot Air?
11.6 UAE: Abu Dhabi - Tables are Turning
11.7 PAKISTAN: Moody's Lowers Ratings to B3 and Keeps It On Review For Downgrade
11.8 EGYPT: Softening Expectations
11.9 EGYPT: Oil Comeback
11.10 TUNISIA: IMF Executive Board Concludes 2008 Article IV Consultation
11.11 TURKEY: Growth and Turbulence
11.12 Greece's Food Exports Will Increase By 56% to Reach $7.695 Billion
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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Fischer Believes Israel in Good Shape
Israel is a relatively stable rock in the financial storm thrashing world markets, and the country is in good economic shape, Bank of Israel Governor Stanley Fischer said. "Certainly, Israel will be hit," he told Globes business news service. "We live in the world, and we're not an island, but our situation is relatively good, and better than I expected." Fischer led the world last recently in slashing the local prime interest rate by half a percent, a move that European banks imitated in an effort to pump more money into their economies and stave off a threatening deep and long recession. Like other central bank directors, Fischer fought against cutting rates while inflation surged, mainly as a result of soaring prices in crude oil. A lower interest rate usually fuels inflation even further because it encourages spending, which in turn increases demand and places an upward pressure on prices. However, the crash in the crude oil market that has accompanied the crash in stock markets enabled Fischer more flexibility to act.
He emphasized that the Israeli banking system does not face the challenges that have swept the US, partly because of tighter regulations stemming from the shares fiasco three decades ago. Fischer pointed out that the danger of a financial collapse in Israel ostensibly seems greater because of the ongoing political crisis but added, "The government's fiscal policy has remained fairly stable, and in the past six years, the results have been good." (IsraelNN13.10)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 GlobalLogic Acquires Israel's InterObject
Vienna, Virginia's GlobalLogic, a leader in global product development services, entered the Israeli market and expanded its footprint in Eastern Europe with the acquisition of Ramat Gan's InterObject, a software product engineering company headquartered in Israel with development centers in Ukraine. InterObject brings deep expertise in embedded software, mobile and multimedia streaming products. By acquiring InterObject, GlobalLogic enters the Israeli market and positions itself to become one of the most influential players in the embedded product engineering market. InterObject is an ISO 9001-2000 certified company specializing in offshore software development services for leading technology corporations in myriad vertical markets. They offer a variety of outsourced development services, as well as customized software solutions and ready-made building blocks for communications and multimedia applications. Their flexible outsourcing models, including leasing of development and testing resources as well as turnkey projects, are designed to provide maximum value in accordance with each customer's specific needs. (GlobalLogic 20.10)
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2.2 Oracle's New Acquisition Includes Israel Based R&D Center
Oracle Corporation's recent acquisition of Primavera Software also gave it an R&D center located in Jerusalem. Primavera, a leading provider of Project Portfolio Management (PPM) solutions, has 5 regional offices internationally. Their Jerusalem facility was obtained with its own acquisition of ProSight in 2006 for $45m. With the Primavera acquisition, Oracle now has two Israeli development centers. Primavera's PPM products and Oracles solutions will be combined to create a comprehensive enterprise project portfolio management solution. This solution is expected to help companies optimize resources and the supply chain, reduce costs, manage changes, meet delivery dates and ultimately make better decisions, all by using real-time data. Oracle is the world's largest enterprise software company, with $22.43 billion in revenues for fiscal 2008. Primavera is one of the largest independent providers of collaborative project, resource and portfolio management solutions. (Various19.10)
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2.3 UTOPY Opens Second Research and Development Center in Israel
San Francisco's UTOPY, a leading provider of Customer Intelligence and Performance Optimization solutions powered by Speech Analytics, announced that it has opened a new R&D Center in Tel Aviv, Israel, which will complement the North American Research and Development Center in Silicon Valley. UTOPY's new R&D Center is located in Kiryat Atidim High-Technology Park, Tel Aviv, capitalizing on the availability of top scientific talents in speech analytics and applied research. The new Israeli R&D Center will focus on the commercialization of state-of-the-art speech and search technology. UTOPY provides award-winning Customer Intelligence and Performance Optimization solutions powered by Speech Analytics, delivering the Voice of the Customer to enterprise decision-makers. With UTOPY solutions, free-flowing human conversations are transformed into actionable insight to strategically enrich the customer experience, optimize contact center performance, improve sales effectiveness and uncover competitive threats. UTOPY customers include innovative market leaders in financial services, insurance, healthcare, telecommunications, outsourcing and retail. (UTOPY 22.10)
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2.4 Kidde Aerospace to Supply Gulfstream G250 Integrated Fire & Overheat Protection System
Gulfstream and Israel Aerospace Industries (IAI) have selected Hamilton Sundstrand's Kidde Aerospace & Defense unit to supply the integrated fire and overheat protection system for the new Gulfstream G250 business jet. The integrated fire and overheat protection system comprises engine/Auxiliary Power Unit fire detection and extinguishing, cargo bay smoke detection, overheat detection system, and integrated control unit. The G250 system will be the first completely integrated fire and overheat protection system ever used on a business aircraft. The integrated controller will monitor and control the fire protection and overheat (bleed air leak detection) subsystems, as well as provide auxiliary aircraft functions. With 2007 revenues of $5.6b, Hamilton Sundstrand employs approximately 18,600 people worldwide and is headquartered in Windsor Locks, Conn. Among the world's largest suppliers of technologically advanced aerospace and industrial products, the company designs, manufactures and services aerospace systems and provides integrated system solutions for commercial, regional, corporate and military aircraft. (Hamilton Sundstrand 16.10)
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2.5 IncrediMail Announces Sale of $5 Million of Auction Rate Securities at Par Value
IncrediMail announced that it has sold $5m of Auction Rate Securities (ARS) to Credit Suisse, which sold the securities to IncrediMail in July of 2007. IncrediMail will receive $5m, (100% of par value) for the securities. In Q4/07, as a result of the well-publicized illiquidity in the ARS market, IncrediMail was required to take a $4.9m non-cash impairment charge. The repurchase of the ARS by Credit Suisse will result in a one-time gain, net of legal costs, totaling $4.8m or approximately $0.50 per share, which will be included in the Company's results for the fourth quarter of 2008. Tel Aviv's IncrediMail (http://www.incredimail-corp.com) is an internet company that designs, markets and delivers high end personal desktop software. The company's award winning e-mail client product, IncrediMail Premium, is sold in over 100 countries in 10 different languages. Other products include Magentic, a wallpaper and screensaver software for presenting digital personal photos, and HiYo, a graphic add-on to instant messaging software. (IncrediMail23.10)
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2.6 Aladdin Launches Attack Intelligence Research Center
Aladdin Knowledge Systems (http://www.Aladdin.com) announced the launch of the Aladdin Attack Intelligence Research Center, a premier facility for Internet security cybercrime investigation. Based at Aladdin's headquarters in Petah Tikva, Israel, the Attack Intelligence Research Center is comprised of global security researchers and law enforcement and cybercrime specialists dedicated to delivering security data and intelligence that educates, supports and strengthens the security community, and drives innovation in Aladdin's content security solutions. The Center steps beyond traditional threat detection to provide business intelligence surrounding evolving threats, predict future trends in internet security and uncover the inner workings and affects of the business of eCrime. The findings enable organizations to implement best practices and build corporate policy to protect against zero-hour and future Internet threats that compromise legitimate business safety. The Center will publish a semi-annual security trend report that not only recapitulates the Web threats of the previous six months, but also uses these findings to summarize trends in cybercrime and predict threats that will affect businesses in the next six months. (AKS15.10)
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2.7 Tigo Energy Chooses Israel for First International Office
Los Gatos, California's Tigo Energy, the solar company whose unique technology significantly increases efficiency in photovoltaic solar installations, announced the opening of its first international office. The facility, which is in Kfar Saba, just outside of Tel Aviv, will focus on engineering activities. Tigo Energy builds hardware and software intelligence into solar energy installations, making them more efficient, more manageable and safer. By maximizing the energy output of each individual module, Tigo's advanced balance-of-system products deliver lower costs of ownership and a faster return on investment for existing and new solar installations. Started in 2007, Tigo raised $6m in a round led by Matrix and OVP Venture Partners, and successfully deployed alpha installations in Northern California in cooperation with two of the most prominent regional installers. (Tigo Energy22.10)
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2.8 BluePhoenix Signs Partnership Renewal Agreement With Leading Banking Solution Vendor
BluePhoenix Solutions announced the renewal of a partnership agreement with a global supplier of banking solutions. The initial value of this agreement is estimated at $6m over two years. As part of this agreement, BluePhoenix will participate in the further development of a banking platform and vendor neutral solution that is scalable and portable across architectures, hardware and software. In the initial stages of implementation, BluePhoenix will be working on the globalization and service enablement of a core banking solution. Herzliya's BluePhoenix Solutions (http://www.bphx.com) is a leading provider of value-driven modernization solutions for legacy information systems. BluePhoenix offerings include a comprehensive suite of tools and services from global IT asset assessment and impact analysis to automated database and application migration, re-hosting, and renewal. BluePhoenix provides modernization solutions to companies from diverse industries and vertical markets such as automotive, banking and financial services, insurance, manufacturing, and retail. (BluePhoenix 22.10)
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2.9 US Airways to Fly Between Philadelphia & Israel
US Airways Group announced it will inaugurate a Philadelphia-Tel Aviv route in July 2009, using Airbus 330s. Planes will depart Philadelphia in the evening and land in Tel Aviv the following afternoon. The return flight will leave Tel Aviv before midnight and land in Philadelphia the following morning. The airline is waiting for approval from the Israel Civil Aviation Authority and the US Federal Aviation Authority. US Airways is the fifth largest carrier in the US. The Tel Aviv route will be the airline's longest flight and its first to the Middle East. US Airways will be the fifth airline flying between Israel and the US, joining El Al Israel Airlines, Delta Air Lines and Continental Airlines. (Globes 26.10)
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2.10 Solarflare Signs Distribution Deal with El-Gev Electronics
Irvine, California's Solarflare Communications, a leading provider of standards-compliant 10 Gigabit Ethernet (10GbE) silicon, signed a value-added distribution agreement with El-Gev Electronics in Israel. Under the terms of the deal, El-Gev Electronics will be in charge of pre- and post-sales activity, as well as technical support of Solarflare's 10GBASE-T PHY and 10GbE controller products for OEMs building 10GbE data center and enterprise solutions. Solarflare designs and develops the highest-performing, lowest-power, standards-compliant 10GbE controllers and 10GBASE-T transceivers. El-Gev Electronics is a leading distributor for manufacturers of Ethernet, Electronics, Fiber-Optics and RF/Microwave components. Dedicated and committed to the sales of modules, sub-assemblies and systems to the industrial, data communication, telecommunication, networking, wireless, military and aerospace markets, El-Gev Electronics was founded in 1987 and has established itself as a representative of high performance technologies. (Solarflare27.10)
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2.11 Verigy Establishes Office in Israel
Cupertino, California's Verigy, a premier semiconductor test company, has established an office in Petah Tikva, Israel. Verigy established a wholly owned subsidiary in Israel effective Sept. 1, 2008. Verigy's Israeli office will focus on sales, service and support for the region. Israel continues to be an important force in the semiconductor industry, with contributions in microprocessors, data and voice communications, wireless, IP and networking communications, medical, consumer, automotive, defense and more. Israel is home to five semiconductor fabs, over 150 fabless semiconductor companies, and extensive research and development facilities and design centers. Verigy's presence in Israel dates back to the company's beginnings within Agilent Technologies. Since Verigy became an independent company in June 2006, the company has had a presence in Israel through its third-party partner, Adecco. (Verigy27.10)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 GraphOn Partnership for GO-Global Solution in Lebanon and Middle East
Santa Cruz, California's GraphOn Corporation, a leading worldwide developer of thin-client application publishing and Web-enabling solutions, signed a reseller agreement with Open Link to market GraphOn's GO-Global for Windows software in Lebanon and throughout the Middle East. GO-Global is a fast and affordable remote application delivery solution that provides secure, Web-enabled access to centrally-running Windows applications from any platform and operating system, including UNIX, Linux, Mac OS X, Windows, Windows Mobile and Pocket PC. Founded in 1998, Open Link is a software integrator and solution provider headquartered in Beirut, Lebanon. The company focuses on the customer relationship management (CRM), computerized maintenance management systems (CMMS) and computer-aided facility management (CAFM) markets and is a partner with leading CRM and CMMS/CAFM companies. (GraphOn20.10)
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3.2 Astrata Awarded Iraqi Government Contract
Costa Mesa, California's Astrata Group has been awarded a contract by the Iraqi Government for the supply of Astrata's next generation GPS Vehicle Tracking and Fleet Management System, (Geo-Location Platform - GLP100i). The contract, awarded via Astrata's Iraqi partner/distributor El'Ryan For General Trading Co. Ltd, is for an initial 600 long-haul trucks of a total fleet of 20,000 vehicles. The end customer is the Ministry of Transport (MoT) of Iraq, who will own and operate the system. The GLP100i is a compact, technologically advanced GPS tracking device specifically developed to meet the rigorous demands of Fleet Management and Homeland Security applications. A primary feature of the new device is its unique, small, flat and lightweight form factor, making it easy to conceal within a vehicle. The MoT plan to use the Astrata system in the monitoring of unauthorized stops, route deviation, safety (distress button), voice communication, cargo tampering and general travel information such as ETA (Estimated Time of Arrival). Full system delivery will take place within Astrata's current financial year (ending 28 February 2009). The Astrata Group is focused on advanced location-based IT services and solutions (telematics) that combine GPS positioning, wireless communications (satellite or terrestrial) and geographical information technology, which together enable businesses and institutions to monitor, trace as well as control the movement and status of machinery, vehicles, personnel or other assets. (Astrata Group22.10)
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3.3 United Airlines' Inaugural Flight Between Washington Dulles and Dubai
United Airlines launched the first-ever nonstop service on Sunday, October 26 between Washington, D.C., and Dubai. With the inaugural flight, United becomes the only carrier to offer daily nonstop service between these important centers of government and commerce. The new Washington - Dubai route expands United's breadth of service to the Middle East and strengthens the company's Washington Dulles hub as an international gateway. United also serves Kuwait City daily from Washington Dulles in addition to 21 other international destinations. Washington Dulles also offers valuable connections to more than 58 destinations in the United States. Customers flying to Dubai on United will enjoy specially designed cuisine and excellent service. United Airlines operates more than 3,000* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. (United 23.10)
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3.4 Palladium Group Opens Middle East Regional Office
Lincoln, Massachusetts' Palladium Group, a global market leader in helping organizations execute their strategies, announced the opening of its Middle East regional base, located in the Dubai Knowledge Village, an international destination for strategic and human capital management. The opening of Palladium's Dubai office -- Palladium's first in the Middle East -- represents a commitment to the Gulf region. Palladium has a number of clients throughout the region in Bahrain, Qatar, Saudi Arabia and the United Arab Emirates, and about a dozen Palladium professional staff are currently working there. Serving as the Middle East headquarters, the office will include sales, delivery and management personnel. The Palladium team has already been engaged in the region, recently delivering a training course for the General Secretariat of the Executive Council of Abu Dhabi (GSEC). The training session, with the participation of 45 representatives from government entities, discussed balanced performance cards, a key element to improve the process of developing government performance in the Emirate. (Palladium21.10)
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3.5 UAE Ministry of Health Selects Cerner to Automate Healthcare Processes
Patients and clinicians at Ministry of Health (MoH) hospitals and clinics in United Arab Emirates (UAE) Northern Emirates soon will benefit from a fundamental change in the way they receive healthcare. MoH facilities will be implementing healthcare information technology (HIT) systems from Kansas City, Missouri's Cerner Corporation that are designed to improve patient care and the way doctors and nurses do their jobs. Twelve hospitals and 60 clinics will implement a suite of Cerner Millennium solutions to optimize and automate paper-based processes. iCapital, a UAE-based company and consortium lead, will serve as the prime contractor for the implementations. The Cerner Millennium solutions implemented throughout the MoH healthcare delivery facilities will automate processes in the scheduling, admissions, emergency, laboratory, pharmacy, radiology, surgery, medical records and clinical supplies departments. Nurses and physicians also will use Cerner Millennium solutions to manage and document patient care through online order entry and results notification and viewing. (Cerner20.10)
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4: ISRAEL MACRO-DEVELOPMENTS
4.1 Cost of Elections Could Reach $900 Million
Globes reported that the direct and indirect cost of the upcoming elections could potentially amount to an estimated $900 million. Ministry of Finance officials estimate that the direct cost of elections will be about $110 million, including the budget of about $51 million for MKs' election propaganda and about $55 million for operating polling stations. In addition, there are indirect costs amounting to about $700 million, resulting from the loss of a day's work because election-day is a national holiday. This amount is calculated according to the Central Bureau of Statistics' data for GDP in 2007, plus 4.5% growth in 2008 according to 220 days work in a year. A senior official in the Ministry of Finance Budgetary Division said, "the elections will have destructive results for the economy." This will be because there will be no approved budget until next May. The forecast is that the elections will be held in February and until a new government will be formed and discussions on the budget renewed, the budget will not be expected to be approved until mid-2009. (Globes 26.10)
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Arab Countries Threatened by Shortage of Food & Scarce Water
A report jointly prepared by the World Bank and the UN Food and Agriculture Organization (FAO) warned that scarcity of water threatens agriculture from Kazakhstan to the Maghreb (North Africa), an area characterized by a unique agricultural diversity but this diversity is disappearing because of scarcity of water extending to Egypt and the Arab countries. The scarcity of water has meant lower productivity, forcing many countries in the region to be a net importer of food. The challenges facing this area weaken the small farmers from competing at a time when the governments should provide protection to agriculture in an area that falls under the burden of poverty, illiteracy and hunger. (Al-Sharq01.10)
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5.2 Jordan's Water Needs To Jump To 1.67 Billion Cubic Meters In 12 Years
Water per capita in Jordan has dropped to less than 150 cubic meters a day this year, compared to 3,600 cubic meters in 1946, the Ministry of Water and Irrigation said on 15 October. The international water poverty line stands at 1,000 cubic meters per person annually. The ministry announced that the demand on potable water in the Kingdom is expected to amount to 1,671m cubic meters (mcm) in 2020, from around 300mcm in 2007, due to natural population growth, which currently stands at 2.8% annually. Jordan ranks as fourth water-poorest country in the world with a consumption level that exceeds the water resource capacity by 20%. The Kingdom's drinking water deficit for the summer stood at 12.7mcm. Other major factors that contributed to the water shortage include the successive waves of forced migration into the Kingdom and the fast-growing real estate sector. The population is forecast to grow by more than one million over the coming decade, up from the current figure of around 5.6m. Moreover, the ministry's statement showed that the agriculture sector still consumes 62% of the country's water resources while the industrial sector's needs are estimated at 4.5%. According to ministry figures, the Kingdom receives around 8,300mcm of water from rainfall during the winter, 92% evaporates, while around 554mcm feeds surface water resources and 276mcm goes to aquifers. The country's national water plan indicates that the Kingdom has between 800-850mcm of sustainable water sources every year. (Petra17.10)
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5.3 Gulf Economic Growth Set To Slow
Merrill Lynch said on 14 October that economic growth in the Persian Gulf is expected to slow this year and next due to the impact of the global economic downturn. The US bank said in report on the Gulf Cooperation Council (GCC) it has lowed growth forecasts for the UAE, Saudi Arabia, Qatar and Kuwait and that GDP growth for the region as a whole is expected to slow to 4.5% in 2009 from 6.2% this year. Merrill Lynch said GCC countries are in a good positioned to deal with the global downturn, "but the net impact will still be lower growth and smaller surpluses". Merrill Lynch said the global downturn will hit the UAE the hardest due to its exposure to tourism and trade, cutting its GDP growth forecast for this year to 6.8% from 7.2% and 2009 forecast to 4.5% from 6.8%.
The bank cut its growth forecast for Saudi Arabia, the region's largest economy, to 4% for 2009 from 4.8% due to lower oil production. It said the kingdom's large and closed domestic market provides some protection against the global downturn and is a source of stable growth. Qatar had its 2008 growth forecast cut to 14.5% from 14.8% by Merrill Lynch and its 2009 growth forecast slashed to 9.5% from 12.8%. The bank said the lack of a large domestic market in Qatar makes it more exposed to the global downturn. The bank kept its 2008 growth forecast for Kuwait unchanged, but cut its forecast for next year to 4.2% from 6.2%. It said the government is likely to use its massive budget and current account surpluses to support the domestic economy and equity markets. (ML14.10)
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5.4 Russia, Iran & Qatar Agree To Form 'Big Gas Troika'
On 21 October, Qatar, Russia and Iran moved to strengthen cooperation and a consensus to set up an OPEC-style gas group which is likely to worry Western consumer nations. Russia's gas export monopoly Gazprom said it had agreed with Iran and Qatar to form a "big gas troika" and that it should become a permanent body holding regular meetings. Europe and the United States have warned against such a gas export body, saying it could pose a danger to global energy security and create room for price manipulation. Russia, Iran and Qatar are ranked the first, second and third biggest holders of natural gas reserves in the world and together boast more than half of the global total. Major gas exporters have met informally for several years at the annual Gas Exporting Countries Forum, a grouping including also Venezuela, Nigeria, Algeria, Egypt, Indonesia and Libya. Iran wants to turn it into a more formal body akin to the Organization of the Petroleum Exporting Countries, the 13-member cartel which makes output decisions that can sway the oil price. Some analysts say any gas OPEC could be expected to share insights on upstream contract terms with investors rather than act on restricting gas supply as the oil OPEC does. Iran is still a relatively small exporter, with US sanctions over Tehran's nuclear activities slowing development of its gas sector. Major European companies have shelved or scrapped multi-billion-dollar projects in the Islamic Republic. Between them, Russia, Iran and Qatar hold 57.1% of the world's gas reserves, according to information published recently on the US government's Department of Energy website. (AB21.10)
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5.5 UAE Approves 2009 Budget of $11.5 Billion
The UAE raised its 2009 state expenditure by 21% to $11.49b in a balanced budget. The budget forecast that there will be no shortfall, but did not say at which price it calculated oil revenue. The price of oil, a key revenue earner in the world's fifth-largest exporter of oil, has dropped by about half since July. Thirty-seven percent of spending was allocated to services and 21% to education; the cabinet approved the bill in a meeting earlier on 21 October. The UAE was reviewing its economic policies to devise a three to five-year plan that takes into consideration a global recession, Economy Minister Sultan bin Saeed al-Mansouri said in remarks on the 21st. Like its neighbors in the world's biggest oil-exporting region, the UAE economy has been booming on six years of high oil prices. Oil has plunged by about half since hitting record levels above $147 a barrel in July on expectations of a downturn in energy demand during a global recession. (AB21.10)
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5.6 Oman's Inflation Stays Above 13%
Annual inflation in Oman held above 13% for a fourth consecutive month in August as food costs and rents rose more rapidly, official data showed on 18 October. Food, beverage and tobacco costs, which account for almost a third of the index, jumped 23.5% compared with a year earlier, the Ministry of National Economy said in a monthly report. Omani food costs rose 22.9% in July, when inflation eased for the first time in 14 months to 13.35%. Inflation picked up again in August, to 13.67%. Oman, like most of its neighbors in the world's biggest oil exporting region, pegs its rial to the dollar. This stoked inflation over the past two years as the US currency had fallen to record lows against the euro, driving up import costs. Global food and building material costs also soared in the first half of the year because oil prices were ratcheting higher, eventually reaching record highs above $147 a barrel in July. That drove up construction costs and house prices across the region. Rents, which account for 15% of Oman's consumer price basket, climbed 19.5% in August from a year earlier, compared with a rise of 17% in July, the data showed. The consumer price index climbed to 127.2 points on Aug 31 compared with 111.9 points a year earlier, the ministry said. Oman's central bank has tightened lending curbs three times in less than a year to rein in money supply growth. The business community feels inflation in Oman is likely to average 9.3% this year. (AB19.10)
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5.7 Saudi Arabian Pharmaceuticals & Healthcare Industry Analysis for Q4/08
Research & Markets (http://www.researchandmarkets.com) announced the addition of the "Saudi Arabia Pharmaceuticals and Healthcare Report Q4 2008" report to their offering.
Saudi Arabia's drug market is the largest in the Gulf Cooperation Council (GCC). Estimates that drug expenditure was $2.27bn in 2007. Over the forecast period (2008-2012) R&M expects the market to grow at an average rate of 6.8% annually to reach a value of $5bn by the end of 2012. Although a strict pricing environment should hold down pharmaceutical price inflation, R&M expects higher consumption volumes to drive growth over the forecast period. Epidemiological trends should also increase demand for pharmaceuticals. The recently launched Burden of Disease Database (BoDD) forecasts that the overall disease and injury burden should continue to grow between 2008 and 2030. The total number of disability-adjusted life years (DALYs) lost to disease and injury annually should rise at an average rate of 0.79% a year from 3.2mn DALYs lost in 2007 to 3.8mn DALYs lost in 2030.
In the updated Business Environment Ratings for Q4/08, Saudi Arabia receives an improved score of 50 out of 100, placing it equal fifth out of 15 Middle East and Africa markets surveyed. Although the pharmaceutical-specific risks remain relatively high, the country's political risks have reduced on account of an improved economic structure. In part, this is due to the high price of oil stimulating an improved trade balance. The country's $448mn medical device market continues to suffer from a lack of regulation. However, this should be remedied in the near future as the Saudi Food and Drug Authority (SFDA) has been tasked with drafting guidelines. Despite heavy investment in public health infrastructure, a shortage of beds in government hospitals has seemingly worsened in 2008. In response to a shortage of intensive care beds at government hospitals, the government pledged to pay the private hospital fees for these services if they are unavailable at public hospitals. The decision was extended to emergency patients in May. (R&M20.10)
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5.8 China Vows to Help Pakistan Tackle Economic Woes
China pledged to help Pakistan overcome its economic troubles, Chinese state media reported on 16 October, though details of the assistance were not disclosed. Pakistani President Zardari was expected to seek $500m or more in soft loans from its neighbor as it struggles to come to grips with a financial crisis. China said the two countries were ready to advance their strategic relationship a day after Zardari and China President Hu Jintao signed 11 agreements on trade and economic cooperation. Zardari, on his first foreign trip as president, had made clear that commercial ties with China were foremost on the Pakistani delegation's agenda. Pakistan is facing a critical shortfall in its balance of payments, along with inflation at close to 25% and heavy government borrowing from the central bank to cover a budget deficit. Analysts believe the central bank's reserves are barely enough to cover two months of imports and that the country urgently needs $3b to $4b. China agreed to provide $500m in a concessional loan to help Pakistan meet its balance of payment needs in April. Zardari hopes to secure another concessional loan of $500m to $1.5b. Zardari is wooing Beijing at a time when his country's relations with the United States are strained after U.S. forces in Afghanistan carried out cross-border air raids and at least one ground assault on al Qaeda and Taliban targets in Pakistan. Washington also recently sealed a civilian nuclear deal with India that riled Pakistan. Both New Delhi and Islamabad have developed nuclear weapons to counter each other, but Washington has ruled out a similar deal for Islamabad. (Various16.10)
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5.9 Libya Suspends Oil Export to Switzerland
Libya has announced that it has suspended the export of oil to Switzerland, 3 months after the arrest of Hanibal, Libyan leader Qadhaffi's son by the Swiss police for assaulting two hotel workers. Libyan Oil investment company, Tam Oil, owns an oil refinery in Switzerland and produces 20% of the gasoline consumed in the country. Libya has also decided to withdraw $7b of assets in Swish banks for the same reason. Analysts maintain that the Libyan decision is meant to pressure the Swiss authorities to drop the case against the Libyan leader's son, who has a case pending against him in France for excessive speeding and public misconduct. (Al-Nahar10.10)
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5.10 Advanced Status Reflects EU Confidence in Moroccan Model
The advanced status recently granted by the European Union (EU) to Morocco is a "sign of the confidence placed by the Union in the Moroccan model and the reforms undertaken in the kingdom," Foreign minister, Taieb Fassi-Fihri said. Fassi-Fihri stressed that the advanced status is also "a commitment of the European Union vis-à-vis a neighboring country, which has for a long time expressed its desire to further cooperate with the Union." This status, the minister added, is also a commitment of the EU to support Morocco in the large scale reforms that were initiated at the political level with the consolidation of the rule of law, the improvement of the judicial system, as well as the modernization of infrastructure and the fight against poverty. Fassi-Fihri also voiced hope that this open perspective with Morocco extends in the best conditions to a united Arab Maghreb (Algeria, Libya, Mauritania, Morocco and Tunisia) and beyond this regional entity to all the Arab partners in the Mediterranean space. On 13 October, the European Union decided to grant Morocco an Advanced Status, marking Morocco's special standing in the Euro-Mediterranean partnership. In this connection, the two parties agreed on a number of measures to implement the new status in the short and medium terms. The joint report adopted by the parties is meant to define the partnership between them in the years to come and prepare a new contractual framework in line with Morocco's achievements and assets and in light of regional and international challenges. The new status is the outcome of a strong and sustained dynamic of rapprochement between the two partners and heralds a new phase in which a special Moroccan-EU partnership will be broadened to include new areas of cooperation. At the economic level, the two parties aim to promote Morocco's steady integration in the EU market. (MAP14.10)
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5.11 Morocco Achieves 'Significant Progress' In Public Finances
Morocco achieved "significant progress" in public finance consolidation thanks to the good performance of public receipts and to the efforts made to tackle budget rigidity, International Monetary fund (IMF) said. In a report named "medium-term budget policy scenario analysis", the IMF underlined that Morocco's budget deficit has been reduced by 4 GDP points during the last four years, which resulted in a near-balanced budget in 2007. Morocco has achieved notable progress in improving the economic growth and its resilience to shocks, the document stressed, noting that these achievements reflect the quality of macro-economic policies and the sustained implementation of structural reforms as shown by the gradual improvement of living standards and per-capita income in the country. The reversal of the budget performance is "particularly remarkable", said the document, recalling that in the 1990s, Morocco's overall fiscal deficit amounted to 5.3% of GDP, while the total gross public debt equaled three-quarters of the GDP. The outstanding debt was reduced by 20 GDP points and currently stands at almost half of the GDP, thanks to a "cautious fiscal policy and to significant privatization receipts," the IMF explained. The situation has allowed for a sensible improvement in the perception of the quality of Morocco's performance and brought two major rating agencies to give Morocco the "investment grade." (MAP09.10)
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Cyprus Reduces GDP Growth Rate Estimate to 3%
Cypriot Minister of Finance Stavrakis has reduced its GDP growth estimate for 2009 from 3.7% to 3.0% as a result of the global economic crisis and the financial meltdown. The previous 3.7% forecast had been made a month ago when the Cyprus Finance Ministry was still insisting that the global credit crunch would not have an impact on Cyprus. Following the about-turn, the government was forced to revise its fiscal surplus forecast from 0.7% of GDP to 0.3% for 2009. Speaking before the Finance Committee in the House of Representatives, the Minister of Finance explained that for each 1% change of GDP, there is a respective 0.39% (of GDP) change in government revenues. Nevertheless, the MoF argued that due to the structure of public finances, this indicator will be slightly higher at 0.45- 0.5% for 2009 and would thus account for an €85m decline in revenue (considering GDP would reach €17.5b). (FM20.10)
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6.2 Fitch Changes Greece's Outlook to Stable on Higher Deficit Forecast
On 20 October, Fitch Ratings (http://www.fitchratings.com) changed the Outlooks on the Hellenic Republic's (Greece's) foreign and local currency Issuer Default ratings (IDRs) to Stable from Positive. The ratings are affirmed at foreign and local currency IDRs 'A' and Short-term foreign currency IDR 'F1'. The Country Ceiling is affirmed at 'AAA', reflecting Greek membership of the European Monetary union. "The Outlook change mainly reflects the Greek government's announcement in its draft budget for 2009 that it expects a higher government deficit for both 2008 and 2009 and that it has revised upwards its estimate for 2007 to 3.4%, which is significantly higher than its last estimate and above the Maastricht criterion of 3%" said Chris Pryce, Director in Fitch's Sovereign group. "We are also concerned that deficit expectations are based on forecasts of economic growth, which look optimistic while primary current expenditure is budgeted to grow rapidly."
Efforts to consolidate the country's fiscal position have stalled in the past two years. It is now clear that the deficit rose relatively sharply in 2007, albeit partly explained by special factors, while the outlook for 2008 and 2009 is clouded by the coming economic slowdown. Although Greece has been growing comfortably for a number of years, growth has been driven by tourism, shipping and financial services, which are now already faltering or, in the case of tourism, is likely to be hard hit next year. Government debt remains high at about 92% of GDP, which reduces scope for counter-cyclical fiscal policies. Fitch is now less confident that the sharp declines in the government debt ratio forecast by the government will be achieved. Moreover, fiscal risks associated with official support for the banking sector have risen, in line with developments elsewhere in Europe. (Fitch20.10)
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6.3 Greek Fiscal Deficit at 3.5% of GDP in 2007
Greece's fiscal deficit was revised upwards to 3.5% of GDP in 2007, while the country's public debt was 94.8% of GDP during the same year, Eurostat announced on 22 October. The EU executive's statistics agency, in its report on the fiscal condition of the EU-27, said Hungary (5.0%), Greece (3.5%), UK (2.8%), France (2.7%), Portugal (2.6%) and Romania (2.6%) recorded the highest fiscal deficits. Eurostat also announced it has withdrawn the reservation on the data reported by Greece in the April 2008 notification on the provision of data for the excessive deficit procedure. Issues clarified since April 2008 concerned the recording of EU grants (in 2006 and 2007), statistical discrepancies (for 2007 data) and the coverage of source data for extra-budgetary funds, local government and social security funds. The Greek authorities have agreed with Eurostat a list of medium-term actions to be implemented. Eurostat also said that the increase in the deficit for 2006 and 2007 is due to updated data for taxes, hospitals, social security, changes in the balance of Treasury Accounts at the Central Bank, changes in the recording of the transactions with the EU budget and improved coverage of extra-budgetary bodies. The EU's statistics agency said 12 member states recorded fiscal surplus in 2007, Finland (5.3%), Denmark (4.9%), Sweden (3.6%), Cyprus (3.5%), Luxembourg (3.2%), Estonia (2.7%), Spain (2.2%), Slovenia (0.5%), Holland (0.3%), Ireland (0.2%), Bulgaria (0.1%) and Latvia (0.1%). Estonia (3.5%), Luxembourg (7.0%), Latvia (9.5%) and Romania (12.9%) recorded the lowest public debts in 2007, while Italy (104.1%), Greece (94.8%), Belgium (83.9%), Hungary (65.8%), Germany (65.1%), France (63.9%), Portugal (63.6%) and Malta (62.2%) the highest public debt rates. (HRI23.10)
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6.4 Athens Unveils €28 Billion Package
Athens plans to make available as much as €28b, or 11.4% of Greece's GDP, to shield the banking system and the economy from the effects of international financial turmoil, Economy & Finance Minister Alogoskoufis said. Under the plan, the government is prepared to boost the capital of Greek banks by up to €5b by buying preferred shares with voting rights. The government also vowed to guarantee up to €15b in capital market loans and stands ready to issue €8b of special bonds to be able to inject liquidity into banks. Under the Greek plan, the salaries of top executives at banks that opt to participate in the state support program may not exceed that of the central bank governor - around €25,000 euros per month - Alogoskoufis said. Legislation will be submitted to Parliament as soon as possible, the minister said, reiterating that the country's banking system was safe and sound. The minister has already provided a verbal pledge that all deposits are guaranteed and last week brought new legislation to Parliament to increase the guarantee for private deposits to €100,000 euros for three years. (Kathimerini16.10)
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6.5 Greek Food Retailers Set To Show A Decline
Greece's retail food sector is already feeling the impact of the global economic crisis, with sales volume for the September-October period expected to show a marginal decline. In the year's first eight months, the volume of sales at supermarkets posted a small rise of 1.4% year-on-year, while turnover grew by 6.8% thanks to price rises. Nevertheless, about 60 product categories are showing a drop in sales volume, which in some cases exceeds 15%, while 74 categories are displaying a rise, but this exceeds 10% in just two or three cases. Senior supermarket staff attributes this slowdown to the general economic environment and the peculiarities of each product niche. Insecurity has been forcing consumers not to stop buying but to rationalize their purchases as much as possible. However there is also another trend appearing. Products aimed at the middle class are losing some of their market share. This concerns companies and products that are not particularly innovative or well promoted. Similarly, the large supermarket chains are under less pressure than their medium-sized and smaller rivals. (grhomeboy 20.10)
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6.6 Standard & Poor's Places Bulgaria on Negative Watchlist
Standard & Poor's has placed Bulgaria on CreditWatch negative because of the country's increased vulnerability during the ongoing global financial crisis. Thus, Standard & Poor's is going to decide whether to lower Bulgaria's credit rating of BBB+/A-2 on foreign and local currency sovereign debt by the end of October. The company's statement points out that the Bulgarian economy had been overheating at the time the present credit market crunch hit. The country's current account deficit has reached 14% of its GDP in eight months as the foreign direct investment declined especially in real estate and construction. In August Bulgaria's inflation had reached 11% year-on-year. Standard & Poor's expects that the country's budget surplus would be more than 3,5% of the GDP in 2008, and that the government debt would reach 15% of the GDP, whereas liquid fiscal assets would reach 17% of the GDP. The fact that Bulgaria's banking sector is dominated by foreign banks is expected to decrease the credit growth. (TSW25.10)
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6.7 Bulgaria to Have 170 MW of Wind Power Generators by End of 2008
By the end of 2008 the capacity of the installed wind power generators in Bulgaria is going to reach 170 MW. This was announced by the Chair of the Association of Producers of Ecological Energy Kiryakov during the first national meeting of the producers of wind generators and the investors in wind energy production. The current wind power generating capacity in Bulgaria stands at 110 MW but Kiryakov predicted that by the end of 2010 it would reach between 400 MW and 500 MW. The photovoltaic energy generators are expected to have a power-generating capacity of 5-6 MW by that time. Meanwhile, the National Electric Company NEK announced that new investments of about BGN 300 M would needed to include the wind and solar power producers into the country's electricity distribution network. (TSW18.10)
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Elections to be Held n Israel
On 27 October, President Peres dissolved the Knesset, a necessary step before holding new national elections. The announcement came at the beginning of the Knesset's winter session. The possibility of early elections arose when acting Prime Minister Ehud Olmert stepped down as head of the Kadima party and was replaced by Foreign Minister Tzipi Livni. Livni then became Prime Minister-designate, and was charged with creating a coalition. Livni failed to create a coalition and on 25 October announced that she would recommend to President Peres to call for new national elections instead of attempting to create a government. Peres then met with the heads of the Knesset factions to hear their recommendations. Each faction head could recommend that someone other than Livni be chosen to assemble a coalition, or that the public be allowed to go to the polls. At the end of the day, Peres announced that the overwhelming consensus favored elections. Either 10 or 17 February are the probable dates to be set for the general elections, some 100 days after the dissolution of the Knesset.
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*REGIONAL:
7.2 Jordan To Switch To Wintertime On 31 October
Jordan will switch to wintertime on Friday, October 31. Clocks are to be set back by 60 minutes as of midnight on Thursday, making the Kingdom two hours ahead of Greenwich Mean Time (GMT). The Prime Ministry decided earlier to adopt switching to wintertime by delaying clocks (60) minutes as of last Friday of October each year, while switching to summertime by moving forward the clock (60) minutes as of midnight of the last Thursday of March each year. Switching to summer time is adopted to conserve energy by making use of an hour of sunlight, while switching back the clocks comes in October, where technically winter season starts on the Kingdom. (Petra27.10)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Teva Announces Sale of Its Israeli Veterinary Business to Phibro Animal Health
Teva Pharmaceutical Industries entered into a definitive agreement to sell its Israeli based veterinary business unit to New Jersey's Phibro Animal Health Corporation, for total consideration of approximately $47m. The transaction is subject to certain conditions, including Israeli antitrust approvals and other closing conditions, and is expected to close in the first quarter of 2009. Teva's veterinary business unit in Israel develops, manufactures and markets veterinary products for poultry and other large farm animals, both in Israel and internationally, particularly in Southeast Asia, Africa, Latin America and Eastern Europe. The business operates one manufacturing facility in Israel with approximately 90 employees. Phibro Animal Health Corporation operates in Israel through its subsidiary, Koffolk. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the world's leading generic pharmaceutical company. (Teva16.10)
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8.2 Cheetah's European Launch of New Reliant 2.0 System for Noninvasive Hemodynamic Monitoring
Cheetah Medical announced the European launch of its new Reliant 2.0 System. In addition to core hemodynamic parameters including Cardiac Output (CO), Cardiac Index (CI) and Stroke Volume (SV), the Reliant 2.0 adds new parameters to provide a comprehensive suite of information for hemodynamic monitoring - all without the need for invasive modalities with the associated potential costs and risks. The new parameters include Noninvasive Blood Pressure (NIBP)1, Total Peripheral Resistance (TPR),1 Stroke Volume Variation (SVV), Cardiac Power (CP), and Change in Thoracic Fluid Content (TFCd). The Reliant hemodynamic monitoring platform is powered by Cheetah's unique, patented BIOREACTANCE Technology, which has been used effectively in over 2,000 patients in various clinical settings including medical and surgical intensive care, perioperative care, emergency medicine, heart failure, hemodialysis and exercise testing.
Cheetah Medical (http://www.cheetah-medical.com) delivers accurate noninvasive cardiac output (CO), thoracic fluid content (TFC) and other vital hemodynamic monitoring parameters to provide continuous, clinically actionable data for fluid and drug optimization in acute care settings, including intensive care, emergency and perioperative patient management. The Reliant System uses Cheetah Medical's proprietary BIOREACTANCE® technology which has validated performance accuracy and faster directional changes compared to invasive CO measurement methods and less potential risks. Cheetah Medical has offices in Tel Aviv, Israel and has recently relocated its United States headquarters to Portland, Oregon. (Cheetah Medical16.10)
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8.3 Teva Announces FDA Approval & Commercial Launch of Fentanyl Transdermal System
Teva Pharmaceutical Industries announced that the U.S. FDA has granted approval for the Company's Abbreviated New Drug Application (ANDA) for Fentanyl Transdermal System, 25 mcg/hour, 50 mcg/hour, 75 mcg/hour and 100 mcg/hour, the AB-rated generic equivalent of Ortho McNeil's chronic pain treatment Duragesic. Shipment of this product has commenced. Teva's Fentanyl Transdermal System was developed and manufactured by Aveva Drug Delivery Systems, a Nitto Denko company, which is one of the world's largest manufacturers of, and a pioneer in, "drug in adhesive" transdermal patch technology. The product utilizes a proprietary matrix design which incorporates the drug into the adhesive. It is indicated for the management of persistent moderate to severe chronic pain that requires continuous, around-the-clock opioid administration for an extended period of time and that cannot be managed by other means such as non-steroidal analgesics, opioid combination products or immediate-release opioids. FDA's diligence in approving this ANDA ensures that patients continue to have access to this medicine. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the world's leading generic pharmaceutical company. The Company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients, as well as animal health pharmaceutical products. (Teva20.10)
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8.4 Compugen Finds Platform to Identify Viral Peptides for Use as Human Anti Inflammatory Drugs
Compugen announced the development and validation of its new Viral Peptides Discovery Platform designed to identify peptides from viral genomes for potential human therapeutic use against inflammatory and immune related diseases. Compugen also announced that the Viral Peptides Discovery Platform has led to the discovery of two novel viral peptides demonstrating in in-vitro studies the ability to suppress inflammatory responses. The engine of the Viral Peptides Discovery Platform is based on the concept of utilizing the virus gained knowledge on how to subvert the human immune system. This is accomplished through the use of sophisticated algorithms and in silico tools that predict a large number of potential natural peptides produced by viruses and then select those that appear to have features suggesting anti-inflammatory activities. Validation activities for this platform included experimentally screening a number of these predicted peptides in a functional assay utilizing activated immune cells. In this validation experiment, two of the tested peptides exhibited suppression of secretion of various cytokines and chemokines suggesting anti-inflammatory properties. Compugen (http://www.cgen.com) is a leading drug and diagnostic product candidate discovery company. Unlike traditional high throughput trial and error experimental based discovery, Compugen's discovery efforts are based on in-silico (by computer) prediction and selection utilizing a growing number of field focused proprietary discovery platforms accurately modeling biological processes at the molecular level. The resulting product candidates are then validated through in vitro and in vivo experimental studies and out-licensed for further development and commercialization under various forms of revenue sharing agreements. (Compugen 23.10)
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8.5 Oramed Pharmaceuticals Launches Phase 1A Trials of its Insulin Suppository
Jerusalem's Oramed Pharmaceuticals (http://www.oramed.com), a developer of alternative drug delivery systems, has received approval from the South Africa Medicines Control Council (MCC) to begin conducting Phase 1A trials on eight healthy human volunteers for ORMD 0802, the company's newly developed insulin suppository. Oramed's Phase 1A trials on its insulin suppository mark an important step in the history of insulin delivery as it will provide a painless option for diabetics who seek an alternative to current delivery methods. An insulin suppository is especially important for small children and seniors, who often struggle with injections. This Phase 1A trial follows Oramed's announcement of its successful Phase 2A clinical trials on its oral insulin capsule, ORMD 0801, which demonstrated that the product has a strong safety profile and was well tolerated, as well as being effective in lowering blood glucose levels, in patients with type 2 diabetes. Oramed Pharmaceuticals is a technology pioneer in the field of oral delivery solutions for drugs and vaccines presently delivered via injection. Oramed is seeking to revolutionize the treatment of diabetes through its patented flagship product, an orally ingestible insulin capsule currently in phase 2 clinical trials. Established in 2006, Oramed's technology is based on over 25 years of research by top research scientists at Jerusalem's Hadassah Medical Center. The Company's corporate and R&D headquarters are based in Jerusalem. (Oramed 23.10)
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8.6 NanoVibronix Receives FDA Clearance for its PainShield MD Device
NanoVibronix announced that the US FDA has granted 510K clearance to market PainShield MD, a diathermy device used to treat pain. PainShield is the first hands-free, patch-based diathermy device, thus allowing for an entirely new dimension in ultrasound treatment of pain and soft tissue healing. The PainShield consists of a disposable patch connected to a portable reusable driver and generates ultrasound waves to the desired area of the body. NanoVibronix (http://www.nanovibronix.com), located in Nesher Israel, develops products that implement its proprietary surface ultrasound technology. The company has also developed a unique line of catheter based disposable ultrasound devices designed to treat catheter-associated injury including pain, discomfort and biofilm formation. The first two products in this category are the UroShield for in-dwelling urinary catheters and NG-Shield for in-dwelling Nasogastric tubes. (NanoVibronix23.10)
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8.7 Dune Medical Launches FDA Cleared Trial for Use of MarginProbe in Breast Cancer Surgery
Dune Medical Devices announced the launch of a pivotal clinical trial of the MarginProbe intraoperative, real-time, positive margin detection system, following U.S. FDA investigational device exemption (IDE) approval of its protocol during breast cancer surgery. With the FDA IDE approval in place, Dune is launching a nationwide U.S. clinical trial of MarginProbe, which uses Radio Frequency Spectroscopy to characterize breast tissue during surgery to determine the malignancy status of tumor margins. The study will involve more than 600 women in more than a dozen leading medical centers in New York City, Baltimore, Washington DC, Allentown PA and Los Angeles.
Underscoring the benefits of MarginProbe technology, the American Journal of Surgery published in its October issue results of an earlier 300-patient, prospective, randomized, controlled clinical trial that found a 56 percent reduction in repeat lumpectomies with use of MarginProbe. The double-arm study compared surgeons' ability to detect and remove positive margins during an initial lumpectomy and the resulting reduced rate of repeat procedures. In the MarginProbe group, surgeons applied the probe to the excised lumpectomy specimen and shaved additional tissue according to the device's readings, which resulted in a 56% reduction in the need for repeat surgeries. Dune recently closed a $15m Series C investment led by Apax Partners. Apax also led Dune's two previous financing rounds in 2004 and 2006.
Founded in 2002 and headquartered in Caesarea, Israel, Dune Medical Devices (http://www.dunemedical.com) is a privately owned, venture-funded medical device company, backed by Apax Partners. Dune is engaged in the development and commercialization of devices for real-time tissue characterization. Dune Medical's devices facilitate complete, therapeutic excisions in surgical oncology procedures. The MarginProbe described above is undergoing clinical trials in Israel and the U.S. (Dune27.10)
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8.8 Kamada Phase III Data Confirms Efficacy and Safety of Intravenous Alpha-1 Antitrypsin
Kamada has completed the final analysis of its US Phase III trial with intravenous Alpha-1 Antitrypsin (AAT), for hereditary AAT deficiency. In keeping with headline results announced in April, the study met its primary endpoint. The company has now officially completed the clinical stage of this product's development, high safety profile sided to meeting the primary endpoint were determined. The company is pleased with the final outcome of this study and plans file a BLA with the FDA in 2009. The trial, conducted in accordance with FDA requirements, was a controlled, randomized, double-blind, partial cross-over study that compared Kamada's intravenous AAT with a comparator product. Forty-Eight AAT-deficient patients were randomized 2:1 for the first 12-weeks to weekly infusion of Kamada's AAT or weekly infusion of comparator drug; all patients then received Kamada's AAT for a further 12 weeks. The efficacy endpoints of the study were determined by serum concentration of AAT and levels of AAT and other biomarkers in epithelial lung fluid.
The results indicate the high quality of the Kamada product and its ability to reach the required trough levels in AAT patients. With regards to safety, no safety concerns were demonstrated. The safety profile was comparable to that of the comparator product. Ness Ziona's Kamada (http://www.kamada.com) is a public biopharmaceutical company developing, producing and marketing a line of specialty life-saving biopharmaceuticals using its proprietary chromatographic purification technologies. Licensed and marketed worldwide, several of these specialty therapeutics are currently undergoing advanced clinical trials. (Kamada26.10)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 IXI Mobile to Provide Next Generation Product
IXI Mobile announced that it will provide, together with a Chinese ODM partner, IXI's next generation product - the Ogo CC10, the new member of the Ogo family of devices and end-to-end solutions. Ogo CC10 is a feature-rich, "candy bar" shaped, cost effective cellular device featuring a high resolution color screen, full keyboard, always-on connectivity and a PC like user experience including instant messaging, e-mail, text messaging and voice. Ogo CC10 leverages the capabilities and functionality developed for the CT-25 and features the end-to-end solution for data services based on IXI's Network Operations Center. The target audience for this device will be young adults and professional users - who seek to continue using data like IM, e-mail, browsing and other added value services - when away from their desk, for an affordable price.
Ra'anana's IXI Mobile (http://www.ixi.com) offers end to end solutions that bring innovative, data-centric mobile devices and services to the mass market. IXI's solutions are designed to improve the mobile user experience and increase mobile data usage. The company provides a turn-key solution to mobile operators and service providers worldwide to launch and support Mobile IM and email services. (IXI16.10)
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9.2 Elbit Vision Systems Wins an Important Order Incorporating Phased Array Technology
Elbit Vision Systems won a strategically important order for a weld inspection system based on phased array technology, in partnership with a well-known supplier of phased arrays instrumentation. Phased array technology is an advanced type of ultrasound technology, used primarily in medical and non-destructive testing applications. The ultrasonic beam can be swept like a search-light through the object being examined. This is in contrast to conventional, single element ultrasonic probes, which only allow a pulse from the element in a line perpendicular to the surface of the material under test. While more expensive, phased array is a faster and more accurate technology to for inspection applications. Kadima's EVS (http://www.evs-sm.com) offers a broad portfolio of automatic State-of-the-Art Visual and Ultrasonic Inspection Systems for both in-line and off-line applications, and quality monitoring systems used to improve product quality, safety, and increase production efficiency. (EVS15.10)
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9.3 Morrisons Supermarkets Selects Retalix Software to Enhance Customer Experience & Support Growth
Retalix announced that Morrisons, the UK's fourth largest supermarket group, will deploy Retalix software to increase operational efficiency and enhance the shopping experience across its 378 stores and 285 filling stations. In 2007, Morrisons announced a three-year IT investment program to replace legacy systems with best of breed software solutions. Currently Morrisons uses four different systems for the different POS functional areas in its stores - the checkout lanes, in-store quick service restaurants, dry cleaning service counters and fueling sites. After a thorough evaluation process of store systems, Morrisons selected an integrated system of Retalix software applications that includes Retalix StoreLine point-of-sale (POS), quick-service-restaurant (QSR) and self-checkout applications for the stores, as well as Retalix Fuel for its fueling sites. In addition, Morrisons will use Retalix software to automate its back-office cash management process.
Ra'anana's Retalix (http://www.retalix.com) is an independent provider of software solutions to retailers and distributors worldwide. Retalix solutions serve the needs of grocery chains, convenience and fuel retailers, food and consumer goods distributors and independent grocers. The Company offers a portfolio of software applications that automate and synchronize essential retail and supply chain operations, encompassing stores, headquarters and warehouses. (Retalix15.10)
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9.4 Corrigent Introduces a New Member in its Carrier Ethernet Transport – CE+T – Product Family
Corrigent Systems introduced the CM-4140, the newest member in its CM-4000 product line. The CM-4140 is a cost-optimized, low-power and small-footprint MPLS-based Carrier Ethernet Transport switch. It offers a full suite of carrier-class Ethernet and TDM services for aggregating residential multi-play services, business connectivity and mobile backhaul applications. The CM-4140 joins the CM-4314 and CM-4206, the first Carrier Ethernet Transport platforms introduced last year, offering a flexible mix of Ethernet and TDM services. Collectively, the CM-4000 product family facilitates the migration toward an all-IP network. Corrigent's CM-4140 offers high density GE, 10GE and OC-n/STM-n interfaces supported by 168Gbps non-blocking, fully redundant switching core in a modular architecture. The CM-4140 provides transport-grade capabilities, high service availability, hierarchical OAM for continuous monitoring and SLA metering, and end-to-end service management via the CM-View Network Management System (NMS).
Tel Aviv's Corrigent Systems (http://www.corrigent.com) is a leader in next generation Carrier Ethernet Transport systems. Corrigent's products represent the evolution of conventional carrier Ethernet switches. They merge the well defined and proven resiliency, quality, OA&M and cost characteristics of the transport network with state-of-the-art carrier Ethernet packet processing and traffic management capabilities, to allow scalable and reliable delivery of video, voice and data services. Orckit Communications is the parent company of Corrigent Systems. (Corrigent20.10)
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9.5 Brown-Forman Deploys BackFlip Software
BackFlip Software announced that Brown-Forman, a producer and marketer of fine quality beverage alcohol brands, has successfully deployed BackFlip Process Communications On Demand. Brown-Forman, with operations throughout more than 135 countries, chose the BackFlip multi-channel platform to provide their increasingly mobile workforce access to the company's business intelligence information using any communication channel. By using BackFlip's Process Communications On Demand Brown-Forman's mobile workforce will have faster and easier access to point-of-purchase information via communication-enabled business intelligence queries. Kfar Saba's BackFlip Software (http://www.backflipsoftware.com) is a driving force of business process communications. BackFlip's Process Communications On Demand empowers organizations with the ability to receive, access and communicate information at any time through any communication channel. (BackFlip 20.10)
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9.6 Musicoola Powers New Interactive Music Service Platform at UPC Hungary
Musicoola announced that their solution is powering a new interactive music service offered by UPC Hungary, a leading television, broadband internet and telephone service provider. The new service is available to all UPC digital TV subscribers. The "UPC Music package" contains 30 local and international audio music channels offering a variety of genres including rock, pop, world music, classical, jazz, electronic and urban. Three of the channels are local (rock & pop, folk and nostalgia) and include Hungarian music, customized for Hungarian listeners. Subscribers can listen to high quality sound, 24/7, uninterrupted by advertising or DJ's chatter. For its subscribers, UPC and Musicoola have created a customized interactive application, carrying the UPC brand, which enables subscribers to view and select from various genres, and provides an accurate and real-time display of song's data including song title, artist and album. Musicoola's end-to-end solution includes content, technology and a managed service. Musicoola provides an infinite number of fully customized music channels and genres and enables full assimilation of channels on any digital TV platform. Givatayim's Musicoola (http://www.musicoola.com) provides a full turnkey solution for music channels on all digital broadcasting platforms, such as "Boom TV" Romania, "HOT" Israel and "Yes" Israel. (Musicoola24.10)
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9.7 ECI Telecom's Carrier Ethernet Switch Routers Receive ‘Best New Product' Award from Light Reading
ECI Telecom announced that its 9700 series of Carrier Ethernet Switch Routers (CESR) was chosen as the winner in Light Reading's Leading Lights Award for the 2008 ‘Best New Product' category. ECI's 9700 series was selected for this prestigious award for its highly innovative proposition and considerable value it offers service providers as they migrate to next-generation networks. The state-of-the-art 9000 family of Carrier Ethernet Switch Routers, part of the company's recently announced 1Net business framework, provides operators with an optimal solution for Carrier Ethernet metro network deployment. The platform's advanced feature set enables service providers to deploy a cost-effective Carrier Ethernet metro network infrastructure for efficient transport of Ethernet and IP-based services. The 9700 series was designed for delivery of business and residential services in metropolitan core networks. The 9700 combines transport-like ease-of-use with carrier grade reliability, providing industry-leading wire-speed Gigabit Ethernet density while meeting performance and quality of service requirements for metro networks. The 9000 family is managed with ECI's LightSoft unified, multi-layer network management system, providing operators with a simplified solution for the management of Ethernet-based networks. Light Reading's annual Leading Lights awards recognized the top private and public companies and their executives for their outstanding achievements in the communications industry. Petah Tikva'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. (ECI22.10)
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9.8 Vringo & Avea Partner to Launch World's First Paid-Subscription Video Ringtone Service
Vringo has announced an agreement with Avea, a progressive mobile operator in Turkey, to provide Turkey's first video ringtone service. In addition to bringing Vringo to a potential universe ofms, this deal also represents a first for the video ringtone market: the first carrier-led video ringtone subscription model. Vringo and Avea are launching the service via the carrier's popular youth platform Patlican, bringing Vringo's video ringtone application and 4,000+-clips-and-counting video ringtone library exclusively to Patlican members. Members will receive a 60-day free trial, followed by a monthly subscription fee of 4 SMS/8 counters, which includes the application, access to a number of video ringtones and free data for downloading Vringo. Members will be able to reach these services and contents from patlican.vringo.com. Founded in 2006, Beit Shemesh's Vringo (http://www.vringo.com) is bringing about the evolution of ringtones. With its award-winning video ringtone application, Vringo takes a sledgehammer to the traditional call signature, transforming the basic act of making and receiving mobile phone calls into a highly visual, social experience. Vringo is backed by Warburg Pincus and by private investors. (Vringo27.10)
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9.9 Voltaire Announces Availability of 40 Gb/s InfiniBand Switches with New "Smart" Design
Voltaire announced a new family of quad data rate (QDR), 40 Gb/s switches that bring heightened levels of bandwidth and performance to high-performance clustered systems. In addition, Voltaire's new Grid Director 4000 line of switches features unique "smart" design elements to meet the needs of next-generation data centers delivering key benefits such as increased scalability, improved energy efficiency and expanded management capabilities. The first of Voltaire's switches in the Grid Director 4000 family is the Grid Director 4036, specifically designed to meet the scale-out, energy-efficiency and ease-of-use requirements of modern data centers. The Grid Director 4036 features 36 ports of 40 Gb/s InfiniBand connectivity and ultra-low latency to accelerate performance of applications running on clusters of servers and storage. With its smaller footprint -- measuring only 15 inches deep and weighing only 16.9 lbs -- the Grid Director 4036's 1U chassis is only half the depth of previous generations. Its configurable air-flow direction, low 10-watts-per-port power consumption, and redundant AC or DC power options allow the switch to easily integrate into highly dense and energy-efficient data center deployments while also plugging into standard and optimized racks.
Herzliya's 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. (Voltaire27.10)
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's Inflation Rate Remains Static in September
Israel's Consumer Prices Index (CPI) was unchanged in September, at 107 points, the Central Bureau of Statistics announced on 15 October. The figure is a surprise, since a rise of about 0.4% had been forecast by the pundits. It should be noted however that negative inflation was reported in September in each of the previous five years. Items that rose substantially in September were fresh fruits (10.5%), housing (1.9%), health (0.9%) and foodstuffs (0.3%). On the other hand, there were substantial falls in the prices of fresh vegetables (12.1%), apparel (5.2%), culture & entertainment (2.4%) and transport & communications (0.6%). The rise in housing prices stems partly from rental contracts being changed from being dollar-denominated to shekel-denominated, with rents being raised in the process. Prices of tomatoes rose 40% in September. The general CPI has risen 4.4% since the beginning of the year. (CBS15.10)
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10.2 State of The Economy Index Points To Contraction
The Bank of Israel's latest composite state-of-the-economy index declined by 0.3% in September 2008. The fall in the index in the last few months indicates the continued slowdown in the economy's rate of growth compared with that at the beginning of the year. The index this month was the outcome of a drop in the indices of goods exports and trade and services revenue on the one hand, and rises in the indices of manufacturing production, services exports and goods imports on the other. The index for August was amended downwards, partly due to a downward revision of the data on goods exports for that month. With regard to the components of the index: the index of manufacturing production rose in August by 3.3%, after declining by 1.4% in July. The trade and services revenue index fell by 3.7% in August, after rising by 0.8% in July. The services exports index went up in September by 6.2%, following its 2.2% drop in August. The goods exports index registered a 7.5% drop in September, further to its 4.2% decline in August. The imports index rose in September by 2.3%, following its drop of 5.2% in August. (BoI27.10)
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10.3 Israel's Trade Deficit Widens With Global Crisis
On 27 October, the Central Bureau of Statistics announced Israel's trade figures for September 2008. The economic crisis is beginning to affect Israel's foreign trade and the findings draw a less than sanguine picture. Israel's trade deficit averaged $1.2b a month in January-September 2008, amounting to nearly $14b on a seasonally adjusted basis. Israel's trade deficit totaled $10.7b in 2007. Based on September alone, assuming current trends persist, Israel's trade deficit will exceed $18b on an annual basis, putting the 2008 trade deficit 80% higher than in 2007. The recession in the US and Europe, which account for two-thirds of Israel's exports, has reduced the growth in Israel's exports. At the same time, as the global recession spreads to Israel, imports are falling in line with the contraction in output and private consumption.
The Central Bureau of Statistics reports that the import of goods totaled $5.35b in September, the export of goods totaled $4.24b, and the trade deficit totaled $1.1b. The export of goods, excluding diamonds, grew by an annualized 2.4% in July-September in trend figures, after rising 14.9% in April-June. Industrial exports, 80% of total exports, rose by an annualized 2.8% in July-September in trend figures, after rising 15.8% in April-June. The drop in the growth rate of exports reflects the severe recession in Israel's target markets. The most worrying figure is high-tech exports, which account for half of Israel's exports excluding diamonds. They were unchanged in July-September, after increasing by an annualized 8.3% in April-June. This is the first time in four years that Israeli high-tech exports failed to increase. The stagnation is bad news for economic growth in general, since high tech is a key economic driver. The Central Bureau of Statistics states that exports of communications, control, medical and scientific equipment fell by an annualized 8.5% in July-September and that exports for electronic components fell by an annualized 3.2%. (CBS27.10)
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10.4 Israeli Officials Expect Record Tourist Visitors
Based on analysis of statistics from the first nine months of 2008, Tourism Ministry officials say Israel can expect to reach an eight-year record for tourism to the country. The number of visitors to Israel between January and September exceeded the number of tourists who visited Israel during the entire year of 2007, and the high-traffic Jewish holiday period this October has not yet been tabulated. There were 2.3m visitors to Israel by September and government officials said they hope to reach a total of 2.8m tourist entries by the end of the year. If the goal is reached, tourism statistics for 2008 will be the highest since 2000, when 2.672 million tourists visited Israel. Some in the Tourism Ministry expressed optimism that the 2008 forecast was even somewhat of an underestimation. An intensive period of Jewish holidays, from Rosh Hashanah through Sukkot, was mostly excluded from the Ministry's statistics because it fell primarily in October, which has not yet concluded. Israel is generally inundated with Jewish and Christian tourists during the holiday period, which officials expect to be reflected in the October statistics.
Another indicator of the healthy tourist trade in 2008 is the figures released on 27 October by the Israel Hotel Association (IHA). According to the IHA, last month saw 763,000 tourist overnight stays, which is 49% more than were recorded in September 2007. Overall, there were 7.6m tourist overnight stays in Israeli hotels between January and September, 25% more than during the same period last year. Israelis also spent more time in hotels in September, with 1.1m citizens registering for overnight stays throughout the country, representing 6% more than in September of last year. Interestingly, the holiday season in 2007 primarily encompassed the month of September. (IsraelNN28.10)
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10.5 Car Thefts in Israel Decline
The decline in car theft in Israel is continuing. The Israel Police reported that 18,500 vehicles were stolen between January-September 2008, 20.2% fewer than the 23,200 vehicles stolen during the corresponding period in 2007. A breakdown by police districts showed drops in vehicle theft ranging from 2.8% in the Judea & Samaria District to 24.2% in the Northern District, compared with the corresponding period. Vehicle theft in the Central District, which has the highest number of thefts, fell by 23.9% in January-September compared with the corresponding period. Vehicle theft in the Tel Aviv District, which has the second highest number of thefts, was down 19.4%, and fell 19.6% in the Jerusalem District and by 9.4% in the Southern District. Even as the number of vehicle theft is declining, a trend which began in 2006, the number of vehicles continues to grow. The data show 2.75m vehicles in Israel in 2008, up from 2.52m in 2007 and 2.34m in 2006. Private cars accounted for 58.4% of all vehicles stolen in January-September. Commercial vehicles and trucks accounted for 22.6% of all vehicle thefts, and motorcycles and scooters accounted for 14.5%. Subaru is most common car brand stolen, followed by Ssanyang scooters and Mitsubishi's Lancer model cars. (Globes 23.10)
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11: In Depth
11.1 ISRAEL: Recent Economic Developments
The Bank of Israel released its "Recent Economic Developments" on 28 October. The economic indicators relating to the period reviewed, May to August 2008, point to continued growth in Israel's economy, albeit at a slower pace than in the last few years. The slowdown was expected, in light of the high rate of growth in the last few years and the lower rate of unemployment than in the past.
• The financial crisis in the US and world wide has not yet affected Israel's economy directly, and there are no indications of the stability of financial institutions being undermined.
• The global crisis is having an indirect effect on Israel's economy: exports have slowed as a result of the slowdown in world growth, and domestic concern––reflected in falling consumer confidence indices––led to a slowdown in the increase of private consumption and to a sharp fall in share price indices.
• The rise in the CPI in the last twelve months was above the upper limit of the inflation target, mainly because of the increase in world input and commodity prices, but also due to domestic inflationary pressures related to the full employment environment. These trends moderated significantly after the end of the period reviewed.
The economic data relating to the period under review, May to August 2008, show that Israel's economic growth continued, albeit at a slower pace than in the last few years. The slowdown was expected, in light of the high rate of growth in the last few years and the full employment environment. Inflationary pressure and continued real appreciation, which halted in the period reviewed, are consistent with the assessment that the growth slowdown to a great extent expresses the convergence to full utilization of production capacity.
In the four months covered by this review, the financial crisis in the US became more severe, but there were no signs of any direct effect on Israel's economy, i.e., of any undermining of the stability of financial institutions. In light of the further slowdown in global growth, the pace of expansion of Israel's exports moderated, although electronics exports continued growing at a good rate, due to the sound situation of the US electronics industry. As a result of the continued rise in world input and commodity prices, albeit with many fluctuations, the terms of trade worsened, with an adverse effect on the economy.
Although in the period reviewed, as stated, no significant direct effect of the global crisis was felt in Israel, there were signs of concern that it could spread, including a decline in private consumption following persistent drops in consumer confidence indices. The sharp fall in Israel's share-price indices, including those of banks and high-tech and real estate companies, reflected these expectations.
The GDP increased by 4.2% in the second quarter of 2008, following its 5.6% increase in the first quarter, and the slowdown in expansion was evident in most industries. The Bank of Israel's composite state-of-the-economy index rose at a moderate annual rate of 2.9% in the period reviewed, compared with a rate of 8.4% in the previous four months. The slowdown was also reflected in a decline in the government's tax revenues towards the end of the period reviewed, but the deficit is not expected to exceed the ceiling. Despite all the above, the slowdown was not reflected in the labor market: the unemployment rate was very low compared with its past levels, and the nominal wage rose.
The slowdown world wide and in Israel is likely to ease inflationary pressures, but over the last twelve months (September 2007 to August 2008) the CPI has risen by 5%, far above the upper limit of the inflation target. Inflation in May–August was caused mainly by the increase in world input and commodity prices, which was reflected in increases in energy and food prices. At the same time there were indications of domestic inflationary pressures, which is consistent with the economy being in the environment of potential GDP.
In light of all the above developments, the Bank of Israel increased the interest rate four times in the period reviewed, by a total of 1%, in order to return inflation and inflation expectations to around the middle of the target range within about a year. The moderation of inflation expectations, the fall in commodity and energy prices, and the continued global economic crisis led the Bank of Israel to reduce the interest rate during October (outside the period covered by this review) by half a percentage point. (BoI28.10)
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11.2 LEBANON: Safe for Now
Lebanon appears to have so far avoided the worst of the global financial crisis, though the country's economy may yet be tested by the threat of foreign capital drying up in the turmoil engulfing international markets. In a speech in Beirut on October 7, Edward Gardner, the International Monetary Fund's (IMF) chief representative in Lebanon, said the country's economy could prove relatively resilient.
According to Gardner and noted by the Oxford Business Group, Lebanon faces a lower threat level than other emerging economies, as the banking sector has few direct links to the current crisis. This is partly due to the central bank not exposing itself to high-risk financial products and limiting private banks from buying into the US subprime market. In 2004, the central bank issued a circular restricting domestic financial institutions from freely trading in the subprime market, while earlier this year it limited bank lending to 60% of the cost of real-estate projects in order to shield the local financial sector from excessive speculation.
Though Lebanon has labored under a massive national debt, confidence in Lebanese markets remains high due to internal financing from the central bank; large remittances; no history of bank defaults; and banks' maintenance of large liquidity as a buffer to defaults, Gardner said. While Lebanon had so far remained relatively immune from the worst of the economic crisis, Gardner did warn that there was no room for complacency. "Fundamentally sound institutions are not immune from panic attacks," he said.
In particular, he said Lebanon could be indirectly affected if the powerful economies in the Gulf region were hard hit by the crisis, which could result in job losses for Lebanese expatiate workers, a fall in remittances and a decline in foreign direct investment.
Gardner's comments echoed those of another IMF official, the fund's division chief for its Middle East and Central Asia Department, Domenico Fanizza. On October 3, Fanizza told local media that the global crisis had had no direct impact on Lebanon, "thanks to the supervision of the central bank, which helped the Lebanese banks not to be exposed to the financial crisis abroad". However, Fanizza too sounded a note of warning, citing some concern that the financial turmoil could translate into decreased economic activity in the Middle East in general, and in the Gulf region in particular.
One possible victim of the economic crisis will be the planned privatization of Lebanon's two mobile phone networks. The government had hoped to sell off the licenses for the state-owned operators before the general election tentatively scheduled for May next year. The sale could generate up to $6bn, which the government had planned to use to pay off some of the state debt.
Economist Kamal Hamdan believes the global downturn could mean that the time is not right to call for foreign or Arab bids for the two networks. "The financial crisis may turn into a recession in 2009 and of course this will have an impact on the region in general," Hamdan told local media on October 9. "A credit crunch means that investors will be less inclined to put their money on projects."
Gardner also suggested that the telco sell-off might have to be postponed until market conditions were more favorable. "Obviously, you don't want to privatize in a market where there is no credit," he said.
Falling economic confidence and a tightening of global belts could also see a drop in tourism arrivals in Lebanon, impacting one of the country's biggest revenue earners. With the Gulf states providing the bulk of Lebanon's foreign visitors, a roll back of the regional economy could upset the tourism industry, which is still struggling to recover from the setbacks caused by Hezbollah's war on Israel in 2006 and the long-running domestic political instability that followed.
According to former Finance Minister Jihad Azour, while Lebanon has so far managed to maintain economic stability, the need remains for a tight hand on the financial markets so as to avoid becoming embroiled in the crisis. His foremost concern was the continued monitoring of Lebanese banks, "especially their transactions outside of Lebanon and in the markets which have been affected by the crisis," Azour said at a conference on October 8.
Riad Salameh, governor of the central bank, has vowed that the bank will continue its interventionist policy, which he says has been vindicated by the economy's limited exposure to the subprime crisis. "The central bank will not let any bank fail," Salameh said during a conference in mid-September. "Today, this statement will attract much less criticism as we have seen the US, the UK and other European countries prevent their banks from defaulting even when it necessitated the use of contributors or central-bank money, which we, in Lebanon, have never done." While promising to keep monetary policy on a short leash, Salameh and the central bank may have their work cut out for them if the global economic crisis takes hold in the Middle East. (OBG21.10)
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11.3 JORDAN: Inflationary Factors Remain a Risk
Jordan's inflation rate continued to rise in the third quarter, even as international price pressures eased. While authorities expect it to fall over the coming months, inflationary factors remain a risk. Inflation hit 19.9% in September year-on-year, with the rate for the first nine months of the year coming to 15.5%. The statistics show a considerable rise since June, when the rate was 13.3% year-on-year, despite a cooling of global inflationary pressures in the third quarter.
Rising prices have been considered a major economic challenge for the Kingdom for more than a year, and the seriousness of the problem has been reaffirmed in recent weeks by two ratings agencies and the central bank.
On October 13, Moody's Investors Service published its annual report on Jordan, praising the country's overall macroeconomic soundness, but warning that inflation, with the current account deficit, remained "the main economic risk". Then, on October 21, Capital Intelligence, an emerging markets credit rating agency issued a notice citing inflation as a "major risk to the short-term outlook".
The reports supported the assertion of Central Bank of Jordan (CBJ) Governor Umayya Touqan's statement earlier in the month that "containing inflation pressures is currently Jordan's most pressing priority".
Galloping prices have been a serious concern across the world over the past year or more, particularly in emerging markets such as Jordan, stoked by a range of factors. On the international level, these have included rocketing oil prices (topping $140 a barrel in July) and the sharply rising cost of food and commodities.
In Jordan, food prices jumped 26% in September year-on-year, housing by 17%, clothing rose 9% and other goods and services increased by 14%, according to data issued by Bloomberg. Another supply shock came from the falling US dollar, to which the Jordanian dinar is pegged, which has made imports denominated in other currencies - most notably euros - more expensive.
On the demand-pull side, Jordan, like several countries in the Middle East and North Africa region, has seen a flood of investments from the oil-rich Gulf. Additionally, relatively high natural population growth and an influx of refugees from Iraq have been key domestic factors.
However, most of these pressures have eased somewhat over the third quarter. Oil prices have dropped sharply to around $80 per barrel by mid-September, with commodities also falling, and food costs moderating due to improved harvests and more intensive cultivation.
Meanwhile, the dollar has chalked up large gains, with the euro falling 10.8% against the greenback in the period between the beginning of July and the end of September.
Furthermore, reports from within and outside the country suggest that many Iraqis have returned to their homeland as the situation there has stabilized – a trend that started well before the summer. Finally, the slowing of key Western economies - including the United States, the primary importer of Jordanian goods, and the European Union - should have a cooling effect.
Perhaps the key reason why Jordan's inflation has continued to climb despite the interplay of these factors is the government's brave decision to slash fuel subsidies in February, which saw the price of petrol rise 35%, and that of diesel and kerosene 76%. The moves were made as part of the broad policy of reducing subsidies in order to lower market distortions, and, perhaps more importantly, improve the country's budgetary position.
Indeed, the decision to increase prices sharply was made largely due to the effect that higher costs were having on the fiscal balance sheet. It appears that the effect of the move (which is likely to be beneficial in the medium to long term) was still feeding through in the third quarter.
Capital Intelligence's report forecast that this dynamic process will level off over the coming months, stating that "the headline rate should fall significantly in 2009 as the impact of fuel and food price hikes passes through the system." Combined with other disinflationary factors, the drop could start even earlier.
However, Capital went on to warn that "there is a risk that the disinflationary process will be weakened by second round effects, including wage increases". Indeed, on October 15, the government announced a 36% hike in the minimum wage to $212 per month, a move designed to give some breathing space from inflation to poorer consumers, but which runs the risk of triggering an upwards salary spiral and eroding the fiscal situation.
Furthermore, Jordanian economist Yusuf Mansour has argued in the local press, prices in the Kingdom can tend to be "sticky downwards" - i.e. they do not ease as quickly as they could when inflation falls. Mansour argues that, in some sectors, lack of competition means that producers and retailers are slow to pass cost reductions on to consumers. Given the unpopularity of subsidy cuts earlier this year, it may not prove politically expedient to call a public wage freeze and drive forward reforms in the immediate future. But in the medium to long term, a reinforcement and continuation of liberalization policies could prove the best way to prevent a future inflationary spike. (OBG28.10)
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11.4 BAHRAIN: Competitive Environment
Bahrain has jumped up the rankings in the latest World Economic Forum's (WEF) comparative study on the competitiveness of national economies, as reported by the Oxford Business Group, though the report also identified some areas where the Kingdom needs to improve its performance.
The WEF's Global Competitiveness Report 2008-2009, released in the first half of October, assessed 134 countries on the basis of a wide range of factors grouped together in 12 categories or "columns", and saw Bahrain climb six rungs up the ladder to 37th overall. According to the WEF, the report, based on a survey of business leaders in each country, aims to capture a broad range of factors affecting an economy's business climate. It also includes comprehensive listings of the main strengths and weaknesses of countries, making it possible to identify key priorities for policy reform.
Xavier Sala-i-Martin, professor of economics at Columbia University and co-author of the report, said the policy makers were faced with new economic management challenges due to the major international financial crisis, the related slowdown in the world's leading economies and rising energy and food prices. "Today's volatility underscores the importance of a competitiveness-supporting economic environment that can help national economies to weather these types of shocks in order to ensure solid economic performance going into the future," he said in a statement accompanying the release of the report.
Significantly for a country striving to promote itself as the region's financial centre, Bahrain appears to be meeting this challenge, rating highly in the WEF's financial market sophistication category, coming in first in the Gulf region and 14th overall. Of the nine sub categories in this column, Bahrain scored strongly across the board, being ranked in the top 10 globally for ease of capital flow, 23rd for ease of access to loans and 20th for the level of development of its financial markets.
Sheikh Mohammed bin Essa Al Khalifa, the chief executive of the Bahrain Economic Development Board (EDB), said the findings of the report not only reinforced Bahrain's position as the leading financial market in the Gulf, but also as a world leading international finance centre. "The Kingdom offers a full range of financial services, with particular strength in banking and asset management and is home to the most advanced, transparent and respected regulatory regime in the region," he was quoted as saying on October 12 by local media.
In the WEF's institutions column, which includes property rights, protection of intellectual property and standards of government regulation of the economy, Bahrain was ranked 31st globally. Infrastructure and macroeconomic stability were also deemed as key strengths ranking 28th and 20th overall respectively. The only area it scored below global average was for health and primary education, for which it was assessed at 45th spot internationally.
One category in which Bahrain underperformed is innovation, where it was ranked 75th globally. In the subcategory of utilizing innovation, the WEF assessed Bahrain118th out of the 134 countries covered in the report, its lowest ranking in any category, while rating the quality of its scientific research institutions at 100 overall. Bahrain also got a low score for university-industry research collaboration (101st) and company spending on research and development (82nd). However, Bahrain's ranking for this column was bolstered through a rating of 27th for the government's readiness to procure advanced technical products, indicating the state's enthusiasm to utilize technology and modernize its activities. Indeed, in the years directly before and after 2000, Bahrain's reputation as a technology pioneer in the region was dented, when the government cut funding to concentrate on infrastructure programs, but since early 2007 the IT sector has experienced resurgence with new funding from government and private investors and the implementation of a number of initiatives.
Other areas where Bahrain has room for improvement include labor market efficiency, with the Bahraini economy being ranked 64th overall but 130th for female participation in the labor force, and higher education and training, where it got a grade of 54th, with the local availability of research and training services and the quality of management schools both assessed as being in the second half of the global averages. However, it should be noted that education and training play a central role in the far-reaching reform and development programs that Bahrain's government is currently is the process of putting in place. The state recently unveiled a number of national education reform initiatives, which together form the backbone of a detailed plan that is meant to raise standards in the country's education system and make Bahraini students internationally competitive. The desired outcome is to achieve a level of education and training that is commensurate with the Organization for Economic Cooperation and Development (OECD) average. It is expected that investment in education will significantly contribute to stronger economic growth by raising the productivity and competitiveness of the local labor force.
Though Bahrain's WEF scorecard indicates room for improvement, the study showed the Kingdom has solid foundations on which to build, while the intended cornerstone of the economy - the financial markets - is one of the most sophisticated and advanced in the world. This endorsement should be reassuring to the authorities and investors alike, as it suggests Bahrain is well placed to weather the global crisis. (OBG24.10)
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11.5 QATAR: Gas or Hot Air?
Qatar, along with Russia and Iran, has moved towards forming a permanent organization of leading gas-producing nations, a step that could lead to the establishment of a grouping similar to the Organization of Petroleum Exporting Countries (OPEC), intended to give gas exporters greater control over the international market. On October 21, Qatar's Deputy Prime Minister and Minister of Energy and Industry Abdullah bin Hamad Al Attiyah - along with Gholamhossein Nozari, Iran's oil minister, and Alexei Miller, chief executive of Russian gas giant Gazprom - jointly announced in Tehran that the three countries had agreed to establish an organization to boost cooperation.
According to Al Attiyah, representatives of the three countries will meet in Doha before the end of the month and then again in Moscow to formalize the new body before presenting it to a gathering of other major gas-producing nations. "God willing, in the next meeting of the gas exporting countries, they will affirm the establishment of the organization," he said. The agreement between the three countries, which between them control around 56% of the world's natural gas reserves, set alarm bells ringing among leading importers, especially those in Europe.
The European Commission was quick to condemn any plan to form a gas cartel, issuing a statement saying any such move would prompt the EU to revise its energy policies. "In principle, the commission is against cartels for the sale and marketing of products, and hydrocarbons are no exception to that," Commission Energy Spokesman Ferran Tarradellas Espuny told reporters in Brussels. "We believe the best conditions for the sale of a product such as gas are a free and transparent market."
An international gas cartel could negate efforts by the EU to diversify its sources of natural gas, which were undertaken in order to reduce its reliance on Russia. Concerns in Brussels will be heightened by the news that Qatar is one of the driving forces behind the proposed new exporters grouping, as the Gulf state has increasingly been seen as an alternative supplier to Russia. Both the UK and Italy have turned to Qatar as a source of gas, with the former planning to meet 20% of its gas needs through imports from the Gulf state and Italy around 10%.
The proposal to form a gas cartel is not a new one. Russia suggested such an organization in 2002, with Iran again raising the issue early last year, while Algerian Energy and Mines Minister Chakib Khelil said last year that a gas equivalent to OPEC would eventually become a reality. Qatar is already a member of the Gas Exporting Countries Forum, a loose-knit grouping of gas-producing states founded in 2001 that meets periodically but has no stated agenda for forming a gas cartel.
Though the announcement of close cooperation between the world's big three gas powers may have sent tremors through the industry, it is still unclear what will come out of the agreement. Even at their joint press conference, Al Attiyah, Miller and Nozari were sending out somewhat mixed messages. According to Miller, the new body would review existing projects while implementing new ones, and Nozari spoke directly of forming an OPEC-like group. Meanwhile, the Qatari minister said the agreement would strengthen cooperation between the three producers.
Many analysts doubt that a gas cartel is viable, at least in the present economic climate, and also query why Qatar would feel obliged to join such a grouping if formed. Samuel Ciszuk, Middle East analyst for financial advisory firm Global Insight, said it was difficult to see Qatar, Iran and Russia finding common ground to work on projects together. "It's very hard to see anything concrete come out of this. The actors have too divergent interests to get anywhere right now," Ciszuk told Reuters on October 22. "Qatar is not really in need of funds. They are earning a lot of money and are fully capable of pursuing projects on their own."
One reason Qatar may have raised the specter of an international gas cartel is to shore up prices, which have fallen in line with the drop in oil. Having committed to increasing LNG production to 77m tonnes by 2012, Qatar does not want to see its major asset being sold off at a cut price. With predictions that demand will fall next year in Asia, one of its leading markets, Qatar may be looking for an avenue to promote a touch of uncertainty among buyers, much as OPEC is able to do with its talk of cutting production. The meeting in Doha at the end of the month may give a further clue as to the direction of any new grouping of gas exporters, as well as more clearly illuminate how Qatar views the future of the industry. (OBG24.10)
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11.6 UAE: Abu Dhabi - Tables are Turning
Despite the global economic slowdown, Abu Dhabi has made a move to increase its stake in US-based Advanced Micro Devices (AMD), the world's second largest maker of computer processors. The Oxford Business Group observed that this transaction testifies to the ongoing vitality of United Arab Emirates (UAE) investment and the change in Western sentiment toward Gulf investment vehicles.
Advanced Technology Investment Company (ATIC), which was set up earlier on this year by the Mubadala Development Company, a government-owned investor, took a majority share ownership in AMD's manufacturing arm last week.
This is not Abu Dhabi's first foray into the world of IT. Mubadala already invested $622m in November 2007 for an 8% equity stake in AMD. This latest deal means Mubadala has boosted its stake in AMD to 19.4%, at a cost of $314m for 58m shares, in addition to warrants for an additional 30m shares.
The move comes as part of AMD's strategy to restructure its organization and spin off its manufacturing operations in an attempt to cut costs. ATIC and AMD have agreed to set up a new company, to be temporarily called "the Foundry Company". ATIC will invest $2.1bn to purchase its majority 55.6% stake in the Foundry Company, of which $1.4bn will go directly to the operating capital of the new entity and $700m will be paid to AMD to purchase additional shares. The Foundry Company will also take on about $1.2bn, or approximately 24%, of AMD's existing debt. ATIC has also committed additional equity funding to the new company, which has been estimated at between $3.6bn and $6bn over the next five years.
The California-based chipmaker will benefit two-fold from the deal. Its 44.4% equity stake will ensure ongoing provision of custom-made chips, while being spared the manufacturing burden. By the same token, Mubadala will gain from a further diversified revenue stream. It has been agreed that the board of directors will be represented equally from both companies and that AMD's senior vice-president in charge of manufacturing, Doug Grose, will become Foundry's CEO.
Meanwhile, the additional funds will be used to expand the Foundry Company's chip-making capacity at its factories in Dresden, Germany and begin construction on a new state-of-the art facility in Saratoga County, New York, subject to the transfer of previously-approved New York State incentives. The new facility is expected to generate more than 1400 direct jobs and an additional 5000 jobs in the region through its operation. The hatchling firm will have to compete against established companies such as China's Semiconductor Manufacturing International Corporation, Taiwan-based Chartered Semiconductor and IBM Microelectronics, a unit of computing stalwart IBM.
It is thanks to record oil receipts in recent years that Abu Dhabi, which sits atop 95% of the UAE's oil, is capable of making such lofty deals. Pumping 2.6m barrels per day, the UAE capital, which is the world's sixth largest exporter of oil, has enjoyed a healthy current account surplus in recent years. Having such financial buoyancy has allowed the emirate to pursue its bold strategy of international investment, while the global credit squeeze has meant that many foreign economies are now welcoming international sovereign investment.
At the beginning of the year, political oratory against government investment vehicles was frequent. It came from critics, mostly European officials and US-based politicians, who felt investment could potentially be used to flex political muscle over strategic industries such as technology, instead of purely maximizing government wealth.
It seems, however, that the financial winds have changed, and along with them sentiment toward investment from cash-rich, resource-based economies. Given the collapse of some of Wall Street's biggest names last month, the need for capital to lubricate lending is now seen as essential in the West. The big question is where the money is going to come from to help capitalize troubled banks. Sovereign Wealth Funds (SWFs), once viewed with suspicion, are now being profiled as saviors to buttress global markets.
Mathew James, chief operating officer of Abu Dhabi Investment House told OBG, "The West now wants this money from funds and Abu Dhabi has done a fantastic job. They are a model of how these tools should be used."
Salah Al Shamsi, president of the Abu Dhabi Chamber of Commerce & Industry, believes that funding from the Gulf could help out in these difficult times. "Our investments are helping the world economy...People should look at our track record of investment and then judge. They can see clearly that the investment has been positive and rewarding for everyone," he said.
As the search for global capital has intensified, a group, co-chaired by Hamad Al Suwaidi, a director of the Abu Dhabi Investment Authority (Adia), representing an estimated $2.3tn in SWFs, presented a set of self-imposed voluntary principles to the International Monetary Fund (IMF) on October 11. Aimed at reducing concern that the funds might be acting for political motives, the move reflects the increasing importance of SWFs in the international monetary and financial system. "[...] We seek to ensure that the international investment environment will remain open and our capital can continue to be put to use when it is most needed," said Suwaidi in a statement.
In the past, skeptics in the West warned that sovereign funds, from places such as Abu Dhabi, may be putting too much money into their economies. Nowadays, however, it seems the same people are worried that cash-rich nations might not be plowing enough in. (OBG16.10)
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11.7 PAKISTAN: Moody's Lowers Ratings to B3 and Keeps It On Review For Downgrade
Moody's Investors Service (http://www.moodys.com) has lowered the Pakistani government's bond ratings from B2 to B3 and kept the ratings on review for downgrade. In September 2008, Moody's had moved the outlook from stable to negative.
"The rating action was prompted by the continuing erosion of the country's external liquidity position, which has remained inadequately addressed by policy adjustments and has suffered from delays in assistance from key bilateral and multilateral creditors," says Aninda Mitra, Moody's sovereign analyst for Pakistan.
"The failure to obtain timely assistance from Saudi Arabia, China, the US and other friends, and delays in disbursements from the World Bank have eroded investor confidence and resulted in a substantial drawdown of Pakistan's foreign currency reserves," says Mitra, cautioning that "Ongoing negotiations for an IMF assistance program represent a last resort, but even this may not fully assure Pakistan of the ability to remain current over time on its external obligations, including payment on its global bond due in February 2009."
"Uncertainty about the size, timeliness and durability of an IMF program were the main drivers for keeping the ratings on review for downgrade," explained the analyst.
"Meanwhile, domestic demand management policies have proven inadequate, and structural reforms to improve tax administration or generate higher domestic savings would take more time and face a challenging domestic political environment," notes Mr. Mitra, adding, "Delays evident in the de-monetization of fiscal deficits, in particular, reflect insufficient policy adjustments and had blunted macro-economic stabilization."
"While the continuing strength of remittance inflows, the reduction in international oil prices, and the recent pick-up in tax collections would help at the margin, they would not anytime soon offset the large financing risks posed by Pakistan's twin deficits," says the analyst. Medium-term considerations also played a role in Moody's decision to place Pakistan's sovereign credit ratings on review for downgrade.
"Even if an IMF assistance package were to avert a near-term default, Pakistan's intrinsic ability to generate greater access to foreign exchange has dimmed," says Mitra. He adds that "Insufficient macro-economic adjustments, weak prospects for structural reforms, and a chronic shortage of foreign exchange were likely to heighten Pakistan's need for medium-term balance-of-payments support, or raise the risk of a hard economic landing." "As a result, Pakistan's external credit metrics and access to liquidity are now expected to remain more precariously positioned than at similarly rated countries," says the analyst.
"Additionally, the global credit crisis and a rapidly weakening world economy may also further limit any export-led or foreign-investment-driven recovery prospects for the Pakistani economy, or a replenishment of the country's foreign currency reserves," says the Singapore-based analyst. "Although Pakistan's tumultuous political transition had ended, the apparent lack of a domestic political consensus in effectively tackling the growing threat of Islamic militancy may worsen the level of violence," says the analyst, adding, "This situation could complicate prospects for confidence-sensitive inflows from official creditors and private investors."
"After placing the government's B3 bond ratings on review for downgrade, Moody's will closely monitor the timeliness, adequacy and prospects for sustainability of the IMF program over the review period, to make a final ratings assessment," concludes the analyst. Concurrent to the rating decision on the Pakistani government's bond ratings, the foreign currency bond ceiling was lowered from Ba3 to B1; and the foreign currency deposit ceiling was maintained at B3. Both ceilings were also put on review for downgrade. Lastly, the local currency deposit ceiling was lowered from Baa2 to Ba2 to reflect the risk that, in the current circumstances, the government's ability to support the banks in case of emergency has diminished. (Moody's28.10)
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11.8 EGYPT: Softening Expectations
Egypt's growth is set to slow following the international financial crisis and signs of a global slowdown. As banks and companies around the world are facing a shortage of financing, and various governments have injected billions of dollars into their banking systems, the most populous Arab country is waiting to see if it can contain the fallout from the crisis.
Finance Minister Youssef Boutros-Ghali has announced predictions that the country's growth will slow to 6% in the current fiscal year, after three years of more than 7% growth. At a conference in Cairo on October 21, Prime Minister Ahmed Nazif stated that the Egyptian banking system was in better shape than many other countries, due to the reforms of the previous years and a regulatory framework that has limited the amount of borrowing for Egyptian banks.
Many analysts agree with the view that the Egyptian banking sector might largely avoid the international turbulence. "The overall impact on the Egyptian banking sector will be limited, when compared to what is happening in other countries," Reham El Desoki, senior economist at Beltone Financial, told OBG. "There seems to be enough liquidity, and the inter-bank sector appears to be working."
Nonetheless, the Egyptian economy is threatened less by a potential crisis in its financial sector as it is by the more far-reaching effects of the global slowdown. One major concern is a reduction in available income in important tourism markets such as the US and Europe, which could lower the number of visitors coming to Egypt in coming months. Furthermore, lower consumption in the US and European markets may reduce demand for Egyptian exports.
The government is already taking steps to try to soften potential blows from a worldwide economic slowdown. On October 18th, Trade and Industry Minister Rachid Mohammed Rachid cancelled export duties on cement and iron and steel products. The Ministry released a statement saying the move was a means to make Egyptian exports more competitive at a time when international demand could shrink. The taxes had been imposed in March, when local and foreign demand for Egyptian cement and steel was putting pressure on prices, leading to shortages in the local market, and exports of cement were actually banned between April and October.
But the biggest threat to the country could come from a reduction in world trade. Egypt's strategic location between Europe and Asia has made it a central corridor for transport of goods, especially through the Suez Canal, which contributed 3.3% to Gross Domestic Product (GDP) in the 2007/2008 fiscal year.
According to Cairo-based investment bank EFG-Hermes, the canal's earnings may reach a record $6.1bn this fiscal year, up about 18% from last year. But reports in the local press have predicted that the revenue growth rate will decrease to 10% in the 2009/2010 fiscal year. Meanwhile, international media reported on October 21 that the expectations for the canal's growth in volume of trade in 2008 had been cut from 16% to 2%.
There are other challenges as well. The current budget deficit - which stands at $10.4bn - could limit the country's ability to promote growth through public spending, as Investment Minister Mahmoud Mohieldin has stated that Egypt is committed to lowering the budget deficit to 6.9% of GDP for 2008. Since 2004, the country has continuously reduced its deficit from a high of 11% of GDP, and there are plans to further lower the deficit to 3-4% by 2010-2011. The government will now have to strike a tough balance: continue to promote growth through public spending, whilst at the same time sticking to its plan to reduce the deficit.
At the conference, Egyptian Prime Minister Ahmed Nazif emphasized that the government had been able to increase tax revenues by 20% a year for the past four years, and stressed that it would allow investment in infrastructure to continue. Nevertheless, some skeptics wonder if Egypt isn't spreading itself too thin. "The budget reduction target is possible, but probably not in the timeframe the government had predicted (3-4% of GDP by FY2010/2011)," said El Desoki.
One piece of good news is that inflation - which reached a 16-month high of 23.6% in August - receded to 21.5% in September, and is expected to continue falling in line with declining commodity prices. Indeed, Mohieldin told international press that he expected inflation to drop to 12-13% by the end of the 2008/2009 fiscal year.
Though Egypt will no doubt experience the effects of the international financial crisis, economic resilience could be proven through the country's ability to maintain exports and continue to attract foreign investment. The government expects to attract around $10bn in foreign capital in the year 2008/09, though this is admittedly less than the $13bn from last year. But at a time when the International Monetary Fund expects world GDP to slow to 3%, achieving the 6% GDP growth target may prove to be a tall order. (OBG27.10)
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11.9 EGYPT: Oil Comeback
Egypt's daily oil output has reached its highest point in 14 years, as the country strives to revive the sector. The Oxford Business Group cited a report by the Egyptian General Petroleum Corporation (EGPC), which holds the government stake in about 30 oil subsidiaries in Egypt. It announced an increase in production of 55,000 barrels per day (bpd), bringing the nation's oil output to 700,000 bpd. This is a much needed boost for the industry, as oil production in Egypt has been declining steadily since 1990, when it peaked at 941,000 bpd.
The 2007/8 fiscal year saw a rise in production as a result of new discoveries in the Gulf of Suez, the Nile Delta, the Western Desert and the Mediterranean Sea, reflecting the success of the government's efforts to encourage increased investment in the oil sector. Additionally, last year the Shura Council's Industrial Production and Energy Committee approved nine agreements for oil and natural gas prospecting in the areas of the Gulf of Suez and the Western and Eastern Deserts. These new areas of exploration will receive investments of over $222bn, according to local media.
Last month, Egypt signed three more oil exploration agreements with four companies from the UK, Italy, Malaysia and Kuwait. The deals will allow the foreign corporations to look for oil in Rosetta, on the Mediterranean coast, off the Mediterranean shores in the west Delta and in northern Al Bardawil, according to reports. Several foreign oil operators have already struck oil this year. UK-based companies Circle Oil and Premier Oil recently announced an oil and gas find in the Al Amir SE-1 well at the North West Gemsa Concession, located southeast of Cairo in the Gulf of Suez Basin. Initial, sustained production was over 3,000 bpd.
The increase in exploration has already had an impact on Egypt's official reserves. The figure increased from 3.7bn in 2006 to a current estimated 4.2bn barrels due to the various new findings, according to the Ministry of Petroleum. Additionally, opportunities for further development of the sector are increasingly being found outside the country. On October 5, Egypt's Minister of Petroleum, Sameh Fahmi, accompanied Foreign Minister Ahmed Abul Gheit on a surprise visit to Baghdad to meet with members of the Iraqi administration. The Iraqi government has called on Egypt to help rebuild its oil infrastructure.
Iraq remains the second largest Arab oil power and the world's third, with proven reserves of 115bn barrels. During Fahmi's visit, the two governments signed various cooperation agreements, including stipulations that Egyptian companies would build 20 filling stations in the country and hold training courses for Iraqi oil personnel. The Egyptian government expects other cooperation opportunities to arise in the areas of digging, extension of pipelines and construction of oil installations.
The revamping of the country's oil sector is important for future sustainability, as some analysts fear that Egypt might become a net oil importer in the years to come. According to a report by the Organization of Arab Petroleum Exporting Countries (OAPEC), Egypt's energy consumption rose from 1.21m barrels of oil equivalent (boe) to 1.24m boe during the past year. Egypt is already the most populous Arab country as well as the region's biggest energy consumer, excluding Saudi Arabia. The country's growing population is only set to add further pressure.
Overall, the evolution of the Egyptian oil industry will depend highly on the level of investment in exploration and the new oil finds it can produce. Enhanced oil recovery techniques, which allow higher production on already explored wells, are also impacting the level of reserves positively and allowing the country to better use its resources in a time of worldwide energy constraints. (OBG21.10)
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11.10 TUNISIA: IMF Executive Board Concludes 2008 Article IV Consultation
On August 6, 2008, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Tunisia.
Background
Tunisia's sound economic policies and pragmatic approach to structural reforms continue to bear fruit, as evidenced by strong growth and improved social indicators. Real GDP growth averaged 5% a year while the macroeconomic and financial position strengthened substantially during the past decade.
Tunisia has so far weathered relatively well the difficult international environment. Real GDP growth increased from 5.5% in 2006 to 6.3% in 2007 - a record over the last decade - underpinned by strong performance of agriculture, energy, manufacturing and the services sectors. On the demand side, vigorous exports and investment powered the growth acceleration. Inflation has picked up, due mainly to rising international fuel and food prices and, to a lesser extent, growing liquidity in the banking system reflecting increasing foreign direct investment (FDI). Year-on-year inflation reached 6% in April 2008 before pulling back to 4.9% in June 2008. The Central Bank of Tunisia (BCT) responded by tightening monetary policy starting in the second half of 2007.
The fiscal deficit was kept within the 2007 budget target of 3% of GDP. Revenue exceeded expectations owing mainly to stronger oil revenue - notably from oil companies' higher profits due to surging oil prices and increased domestic production. The additional revenue offset expenditure overruns mainly caused by rising direct food and fuel subsidies. Continued fiscal consolidation and privatization receipts further reduced public debt-to-GDP ratio to about 51% at end-2007.
The current account deficit widened due to declining terms of trade, but the significant increase in FDI inflows increased reserves to over $8b, largely sufficient to cover short-term liabilities.
Bank performance improved significantly in 2007, including banking activity, profitability, and prudential indicators. The ratio of nonperforming loans (NPLs) to total loans declined from 24% in 2003 to 17.3% in 2007, largely accounted for by the proactive management of such claims, while the provisions-to-NPLs ratio increased from 43.1% to 53.8%.
The short-term outlook is encouraging despite the challenging international environment. In 2008, real GDP growth is projected to decelerate moderately to 5.5%. Inflation would remain around 5% if international prices taper off and monetary policy continues to be restrictive. High fuel and food prices are expected to widen the current account deficit to 3.5% of GDP. The fiscal deficit is projected to remain at 3% of GDP, owing to buoyant revenue, notably from the hydrocarbon sector. The medium-term outlook remains favorable with growth projected at above 6% sustained by strong FDI. Risks to the outlook are essentially related to the international environment.
Executive Board Assessment
Executive Directors commended the authorities for the notable resilience and continued strong performance of the Tunisian economy, which has been founded on prudent and forward-looking economic policies and market-oriented structural reforms. The outlook remains favorable, with buoyant FDI supporting growth, although there are downside risks related mostly to the global economic turbulence. Directors considered that the key immediate challenge confronting the authorities will be to address the pressures arising from the global food and fuel price increases while maintaining macroeconomic sustainability. Over the medium term, employment creation and income growth will be key to improving economic welfare in Tunisia.
Directors commended the authorities' commitment to fiscal prudence, which will remain essential for lowering the public debt. They endorsed the authorities' decision to contain the fiscal deficit within the 2008 budget target, which will require tight control over current spending and likely additional adjustments to domestic petroleum prices. They noted that buoyant fiscal revenues, particularly from the hydrocarbon sector, have accommodated the gradual pass-through of international oil and food price increases to domestic prices under the current subsidy system. Directors noted, however, that the current subsidy system is not sustainable, and suggested its replacement with a targeted safety net for the most vulnerable groups that would better support medium-term fiscal sustainability, reduce the country's vulnerability to shocks, and create the fiscal space for additional social and infrastructure expenditures. In this context, they welcomed the authorities' intention in the XIth Plan to phase out subsidies for petroleum products by 2011 and to ensure better control of expenditures for food subsidies.
Directors supported the restrictive monetary stance of the BCT. They recommended that the authorities stand ready to increase the BCT's key policy interest rate if inflationary pressures intensify, given that growth still has significant momentum. They supported the BCT's efforts to manage persistent excess liquidity in the financial system, and to continue to build an inflation-targeting framework for monetary policy.
Directors considered that the exchange rate of the Tunisian dinar is broadly aligned with fundamentals and that the authorities' policies are consistent with external stability. Some Directors saw merit in an accelerated transition toward the authorities' commendable objectives of a floating exchange rate and an inflation-targeting framework.
Directors welcomed the continued strengthening of the banking sector's performance, with greater profitability, a decline in nonperforming loans, and improved loan-loss provisioning. Further strengthening of the banking sector should remain a high priority as the authorities continue to gradually open up the capital account. They welcomed the potential growth and employment benefits of the large FDI-financed projects, but counseled prudence with respect to real estate projects in particular, which may create a credit risk for the banking sector and contingent liabilities for the government. Directors supported the authorities' objective of implementing the Basel II system by end-2009 and achieving full compliance with international Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) standards over the medium term.
Directors welcomed the steps being taken by the authorities to deepen the global and regional integration of the Tunisian economy. They praised the authorities for their pragmatic approach to trade and financial integration, and noted the recent important milestone of achieving bilateral free trade in industrial goods with the European Union. They looked forward to further simplification and reduction of tariffs on a most-favored-nation basis.
Directors welcomed the steps aimed at further improving the business climate. They looked forward to further progress in liberalizing the services sector and reforming the tax and customs administration, in order to promote domestic and foreign investment. (IMF15.10)
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11.11 TURKEY: Growth and Turbulence
The outlook is mixed for Turkey's aviation industry, with the country's national flag carrier planning a massive expansion program while some smaller lines are looking to cut routes and costs as the Turkish economy slows. On October 14, national carrier Turkish Airlines (THY) announced it had asked leading manufacturers Airbus and Boeing to submit proposals for 25 double-aisle and 50 single-aisle planes, with options for 10 more twin-aisle and another 20 narrow body aircraft.
This new order could see as many as 105 aircraft added to THY's existing fleet of 115, though it is expected some older models presently being flown would be pensioned off.
In its statement announcing the expansion, THY said its passenger numbers had increased by 150% in the past four years. This growth, along with the objective of being "ready to provide service when the global economy recovers with a more stable foundation while Turkey stands in the forefront by taking its market share to new heights", were the reasons for the largest acquisition program in the airline's history, it said. Temel Kotil, THY's chief executive officer and member of the board of governors at the International Air Transport Association, said the deal would be worth around $6bn, with the first deliveries due in the second half of 2010.
Though other airlines were facing financial difficulties, THY was sticking to its prediction of passenger growth of 20% and sales of $4.5bn for 2008, Kotil told an international news agency on October 14. THY has also been seeking other avenues of expansion, having recently considered buying a stake in Austrian Airlines, though not submitting a final bid, and also bidding for a 49% share of BH Airlines, the Bosnian Muslim-Croat federation flag carrier.
Though the results of the bid, which pitted THY against the Comintel Corporation of Malaysia and a Jordanian consortium including Royal Jordanian Airline, have yet to be announced, news agency Reuters quoted an unnamed Bosnian official as saying on October 8 that the Turkish airline's offer was by far the best on the table.
Another major boost for the Turkish airline industry will be the Turkish Engine Centre, a joint venture between Pratt & Whitney of the US and Turkish Airlines Technic, the technical services arm of the national carrier. The new facility, being built at Istanbul's Sabiha Gokcen International Airport on the Asian side of the city, is due to commence providing engine maintenance, repair and overhaul services in mid-2009. According to Daniel Tenant, the Turkish Engine Center's general manager, the facility will be able to overhaul up to 200 engines annually and will quickly establish itself as a regional maintenance centre.
While THY is apparently flying high, other operators in the industry are concerned over potential turbulence as the global economic slowdown, falling demand in the cooler months and high fuel prices (while oil prices are going down, forward contracting means that companies have had to buy at an agreed price in advance) combine to reduce ticket sales.
Orhan Coskun, the chief executive officer of private carrier Atlasjet Airlines, has warned the true situation in the sector will only become clear after the end of October, when the full effects of the end of the peak season will be felt. "At least two or three airline carriers in Turkey will be in a very difficult situation," Coskun told the local media in late September. To reduce costs, Atlasjet has leased two of its aircraft to a Saudi Arabian carrier and was planning to send another three to the kingdom, he said.
Even more pessimistic was Omer Torosluoglu, Inter Airways' chief executive officer, who predicted that up to half of Turkey's 16 private airlines may fail. "Only those companies that can find additional financing will survive. The fast loss of value in the Turkish lira against the dollar might also cause big losses on domestic lines," he was quoted as saying in local media on September 20. Even THY has felt the pinch on some routes, announcing on October 8 that it was dropping its Denizli-Ankara service, operated by low-cost subsidiary Anadolujet, due to poor sales. The average occupancy rate on the route from the capital to the Aegean city was just 23%, THY officials said, well below the 50% minimum requirement the airline had set. Though Turkey's biggest may be getting bigger, many other players in the Turkish aviation industry could be in for a rough landing if the local and international economies continue on their nose dive. (OG21.10)
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11.12 Greece's Food Exports Will Increase By 56% to Reach $7.695 Billion
Research & Markets (http://www.researchandmarkets.com) announced the addition of the "Greece Food and Drink Report Q4 2008" report to their offering.
Despite Greece's reasonably large agricultural sector, the country's food and drink trade balance has been consistently negative for the last ten years. The relatively underdeveloped food processing sector is partly responsible for this and hints at the opportunities available to firms willing to invest in the production of goods that currently have to be imported.
Data from the United Nations Conference On Trade and Development reveals that in 2006 Greece exported food and drink products worth a total of $4.248b and imported products worth a total of $6.814b. Between 2001 and 2006 the amount of food and drink that Greece has imported has increased by 103%, while the amount exported has increased by 67%.
Meat and dairy account for around 30% and 17% of Greece's total food and drink imports respectively. Greece is reliant on imported meat because of the limited cattle herds in the country. However, the country's dairy sector is well developed and the high level of imports is largely due to the success of international dairy firms at marketing their products to Greek consumers.
Fruit and vegetables accounts for around a third of Greece's food and drink exports while olive oil accounts for around a tenth. Primary agricultural products therefore make up the bulk of Greece's exports, with the country's Mediterranean climate allowing for the cultivation of highly valued crops that are in demand in Western Europe and elsewhere. This continued reliance on raw agricultural products suggests that the Greek food and drink industry has not made the most of many opportunities in the processed goods sector. The country's comparative advantages, particularly in the areas of aquaculture and agriculture, should be capable of supporting a food and drink sector that is much larger than is evident today.
However, the rapid recent growth in exports is suggests that Greek producers have already become aware of this fact and are now investing to increase production. The author believes that this investment will be stepped up as more producers become aware of the opportunities that Greece offers. Therefore, by 2012 the author is forecasting that Greece's food exports will increase by 56% to reach $7.695b. At the same time this investment will reduce demand for imports. Therefore the author is currently forecasting that the growth in food and drink imports will slow, increasing by only 13.5% over the same time period. This means that the author is forecasting Greece's food and drink trade balance will be approaching equilibrium by 2012. (R&M15.10)
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- Turkish Lira conversions done at a rate of NTL 1.50 = $1.00
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