TOP STORIES

• Netanyahu Says Growth Could Be Boosted To 6-7% Right Now
• IBM Acquires Storage Company Diligent Technologies
• InSite Vision Signs AzaSite Distribution Agreement with Biem Pharmaceuticals for Turkey
• Jordan & Canada Negotiate a Free Trade Agreement
• Turkey to Have First Nuclear Power Station by 2015
• Israel's Independence Day - 60 Years Since Sovereignty Regained
• Bahrain Set To Name Jewish Woman Envoy

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Netanyahu Says Growth Could Be Boosted To 6-7% Right Now

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7.1 Yom HaShoah - Holocaust Martyrs' & Heroes' Remembrance Day 2008
7.2 Israel Honors Fallen Soldiers With Jerusalem Service & National Siren
7.3 Israel's Independence Day - 60 Years Since Sovereignty Regained

*REGIONAL:

7.4 Bahrain Set To Name Jewish Woman Envoy
7.5 Bahrain & NATO Sign Security Accord

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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Netanyahu Says Growth Could Be Boosted To 6-7% Right Now

"The global economic crisis is great opportunities for Israel to make the economic reforms that everyone knows are necessary. The crisis creates the foundation for a broad consensus for implementation," told head of the opposition MK Benjamin Netanyahu (Likud) told "Globes" on 17 April. Netanyahu said, "One would think that we're some huge proportion of the global economy. After all, if we, as a small country, undertake a dynamic policy we'd actually increase our market share by improving the competitiveness of Israeli companies. But the government is sitting on the sidelines and says that nothing can be done, what will happen in the world will happen to us, and declares that economic growth will fall from 5% to 2%. I say that precisely now, at this time, we can and we must boost growth to 6-7%, and the way to do so is clear and open." Netanyahu added that the goal should be to facilitate business activity. He cited four lines of action: streamlining the cabinet, including a commitment to have only the legally mandated 18 ministers and reducing the number of public sector employees through natural retirement of 3% a year; tax cuts; instituting reforms to boost competitiveness and the removal of barriers; and exploiting Israel's unique strategic advantages. Commenting on the economic policies of Prime Minister Olmert and Minister of Finance Bar-On, Netanyahu said, "We're suffering from both mistaken policies and from a lack of coordination between the Prime Minister's Office and the Ministry of Finance." As for Olmert, Netanyahu said, "If I had deposited my assets with such a manager, I'd have fired him long ago." (Globes 17.04)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 IBM Acquires Storage Company Diligent Technologies

IBM announced it has acquired Diligent Technologies, a privately held storage "de-duplication" technology company headquartered in Framingham, Massachusetts with R&D located in Tel Aviv, Israel. Diligent's technologies and employees will become part of the IBM System Storage business unit of the IBM Systems and Technology Group. Financial terms were not disclosed. Diligent develops in-line data de-duplication software that is integrated with server and storage infrastructures to help organizations significantly reduce the amount and cost of physical storage required in data centers. Enterprise and mid-sized organizations are faced with data centers that are reaching a breaking point of complexity and manageability, while at the same time experiencing explosive demands for storage for new data, transactions, email and back-up files. Data de-duplication is an emerging technology that organizations are investing in today and Diligent's innovative technology provides a single solution to support data protection, archive and data-retention applications - all while maintaining the integrity of the data. The Diligent acquisition will be an important part of IBM's New Enterprise Data Center model, which helps clients improve IT efficiency and facilitates the rapid deployment of new IT services for future business growth. The new model is based on best practices for virtualization, green IT, service management and cloud computing. (IBM18.04)

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2.2 Jordan Valley to Acquire Assets of Semiconductor Equipment Supplier Bede

Migdal Ha'Emek, Israel's Jordan Valley Semiconductors, a provider of semiconductor metrology solutions, has acquired the business of Bede, effective 14 April. Bede is the leading supplier of HRXRD (High Resolution XRD) metrology for the semiconductor and compound industries with revenues of $11.6m in 2007. Bede entered into the UK's Administration phase, their equivalent of Chapter 11, on March 31. Bede X-Ray Metrology was founded in 1978 as a spinout company from England's University of Durham. Jordan Valley Semiconductors (http://www.jvsemi.com) provides semiconductor metrology solutions for thin films based on novel, rapid, non-contacting, and non-destructive x-ray technologies and offer a comprehensive family of solutions based on advanced X-Ray Reflectivity (XRR), X-Ray Fluorescence (XRF), and Small Angle X-Ray Scattering (SAXS) technologies. These tools are fully automated, production ready, and ideal for both blanket and patterned wafers. Jordan Valley's x-ray technologies enables accurate and precise characterization of all film types including single layers and multilayer stacks, high k and low k materials, metals and dielectrics, amorphous, poly-crystal and single crystal films. (JVS16.04)

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2.3 Jerusalem to Get Waldorf Astoria

Globes reported that IPC Jerusalem., a joint venture Hilton Hotels Corp. and IPC US REIT, controlled by Canada's Reichman family, has signed a management agreement to manage Jerusalem's Palace Hotel under the Waldorf Astoria brand. IPC is investing $100m in renovating the historic building, which will have 220 rooms and suites and 30 residential apartments in an adjacent building. The Palace Hotel, at the corner of King David Street and Agron Street in downtown Jerusalem, was designed by a Turkish architect and built in the 1920s. The Ministry of Industry, Trade & Labor were in the building for decades. The adjacent Customs House will be demolished and a new residential building will be built in its place. Hilton Hotels has 2,645 hotels worldwide, including two in Israel. The Waldorf Astoria brand, named for the original legendary hotel in New York, is the Hilton's most prestigious brand. There are five Waldorf Astoria hotels in the world, four in the US and one in Saudi Arabia. The decision to establish the brand in Jerusalem is a vote of confidence in Jerusalem by Hilton. The Palace Hotel is across the street from the David Citadel Hotel, formerly the Jerusalem Hilton, and just down the road from the King David Hotel. (Globes 17.04)

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2.4 Muller Breaks Danone & Yoplait Market Control in Israel

Two and a half months after Tara's investing $1.43m in the launch of Muller flavored yogurts in Israel, the overall yogurt market has grown by 38% and Tara's segment has grown by 20%, at the expense of Danone and Yoplait. Flavored yogurts constitute 52% of the total yogurt market and based on bar code records, it generates revenues of $119.4m annually. In Q1/08 flavored yogurts saw sales of $34.28m, up 38% compared to the same period in 2007. In terms of revenue, Muller had captured 18% of the market in terms of revenues in February, which climbed to 21% by March. However, in terms of quantity, Muller commanded 14% in February, and 18% in March - reflecting the fact that the brand is a relatively expensive one. Muller's growth is unrelated to expenditures on advertisement. Tara spent just $185,000 in advertising the brand in February, and $200,000 in March, a negligible investment in billboard and newspaper advertising. The company has chosen not to launch a televised campaign. In terms of revenues, the market segment of its largest competitor, Yoplait, tumbled from 51% in January, to 44% in February and 43% in March. (The Marker23.04)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Qatar University Selects Cerner Academic Education Solution

Qatar University announced that it will use the Cerner Academic Education Solution (AES) to teach students in its pharmacy program how to work with an electronic medical record (EMR). This tool allows students to learn in an environment that mirrors the automated point-of-care setting in which they will one day work. Qatar University is Cerner's first client in Qatar. The Cerner AES is the only full clinical information system adapted to support healthcare curricula and classroom instruction. This solution can be used in academic programs that teach nursing, medicine, pharmacy, physical therapy, occupational therapy and health information management. The Cerner AES supports instructors in the development of data-driven teaching cases for online presentation and instruction, supported by evidence and clinical outcomes. Institutions can use the Cerner AES to simulate patient scenarios through case studies to support curricula objectives, teaching and learning. With more than 6,000 clients worldwide, Kansas City, Missouri's Cerner is the leading supplier of healthcare information technology. (Cerner28.04)

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3.2 Emirates to Quadruple Planes by 2020

Emirates airline said 22 April that it would continue to double in size every three or four years, with plans for a 450-strong fleet by 2020. Chairman Sheikh Ahmed Bin Saeed Al-Maktoum, also president of Dubai Civil Aviation Authority, said the airline would increase its current fleet from 115 to 200 by 2012, taking delivery of 22 planes this year. Emirates has been doubling its size every three or four years since it started. The airline currently has 243 planes worth $60 billion on order, including 58 A380 super jumbos. The airline is hedging to protect itself from price fluctuations and has budgeted for $100-plus oil prices. (GN22.04)

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3.3 Prometric Signs Strategic Agreement with CERT for Exclusive Test Delivery in UAE

Baltimore, Maryland's Prometric, the leading global provider of technology-enabled testing and assessment services, has been chosen by CERT, the official certifying authority in the United Arab Emirates (UAE) under the guidance of the Ministry of Higher Education, to exclusively provide testing and assessment development and delivery services in Abu Dhabi, Dubai and the other Emirates comprising the UAE. The collaboration agreement is a linchpin in Prometric's Middle Eastern expansion strategy, which includes the recent launch of a Prometric subsidiary there. Under the agreement, Prometric will have exclusive access to all CERT educational institutes, including the 17,000 students currently enrolled in the UAE's Higher Colleges of Technology. The benefits to the people of the Emirates include access to some of the most prestigious certification and assessment tests in the world that are offered only through Prometric, including Microsoft, Project Management Institute, the Green Building Certification Institute and many others. The establishment of Prometric Dubai is a significant step toward Prometric's growth in the region. It will provide on the ground support to existing global contracts and lead efforts to develop new relationships in the quickly growing Middle East region. (Prometric22.04)

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3.4 Istithmar Snaps Up Stake in US Asset Manager

Dubai-owned Istithmar World Capital has taken a majority stake in US institutional asset manager Gulf Stream Asset Management, the company announced on 28 April. North Carolina-based Gulf Stream currently manages about $3.8b of corporate credit portfolios for global institutional investors. Istithmar World Capital, the private equity arm of Istithmar World, did not disclose the size or value of the stake in the firm. Istithmar World said that current conditions in the credit market provided opportunities for growth. Under the deal, the remainder of the business will continue to be owned by Gulf Stream Asset Management. However, the deal also means Gulf Stream now had the capability to build a global asset management platform with the resources of Istithmar. Istithmar World part of state-owned conglomerate Dubai World with $6b worth of assets under management. The firm is currently invested in over 35 companies. (AB28.04)

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3.5 InSite Vision Signs AzaSite Distribution Agreement with Biem Pharmaceuticals for Turkey

Alameda, California's InSite Vision Incorporated signed a licensing and distribution agreement with Biem Pharmaceuticals, an ophthalmology-focused Turkish pharmaceutical company, for InSite's AzaSite (azithromycin ophthalmic solution) 1% for the treatment of bacterial conjunctivitis (pink eye). Under the terms of the agreement, InSite grants exclusive rights to Biem to commercialize AzaSite for ocular bacterial infection in Turkey. An option to distribute to Biem's export markets will be considered at a later date. Biem will be responsible for securing regulatory approval of AzaSite for the Turkish market. In exchange, Biem will pay for the cost of product registration in Turkey and provide a double-digit royalty to InSite on net sales of AzaSite upon approval by regulatory authorities. InSite Vision will be responsible for providing manufactured product.

Biem Pharmaceuticals, with headquarters in Ankara, is a privately held pharmaceutical marketing and distribution company focused on building a proprietary portfolio of high-value branded pharmaceutical products in Turkey and pursuing partnerships with other companies seeking to enter the Turkish pharmaceutical market. Biem Pharma aims to be the preferred partner for pharmaceutical and biotechnology companies seeking to maximize their opportunities in this territory and other selected markets. (InSite Vision 28.04)

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3.6 Turkish Alcoholic Beverage Consumption Declines

Turkey witnessed an approximate 10.4% decline in the sale of raki, wine, vodka and whiskey within a year, the country's regulatory body on the matter has revealed. Beer consumption, however, rose significantly over the same period, the Tobacco, Tobacco Products and Alcoholic Beverages Market Regulatory Authority (TAPDK) found. The consumption of raki, referred to as the traditional beverage of Turkey, declined 3.5 million liters last year, compared to 2006, according to TAPDK data. Raki consumption, which stood at 46.5 million liters in 2006, declined to 42.7 million liters in 2007. Most dealers of TEKEL, Turkey's alcoholic beverages and tobacco monopoly, believe the decrease in raki consumption was due to economic reasons.

Wine and vodka consumption fell from 23.4 million liters to 22.8 million liters and from 6.4 million liters to 6 million liters respectively last year. Over the same period, whiskey sales dropped from 1.6 million liters to 1.4 million liters. In 2007, gin consumption deteriorated 294,000 liters while cognac-brandy consumption dropped 82,000 liters, liquor 189,000 liters and vermouth 7,000 liters. The consumption of other distilled alcoholic beverages declined 34,000 liters during that period. Meanwhile, the compulsory label implementation that took effect in November 2007 decreased unregistered activity in the sector. Consumption figures rose in the last two months of the year, mainly due to this practice. (TDN 23.04)

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 Israel Venture Association's Annual Hi-Tech Conference 2008 Hits the Road

The IVA's 2008 Hi-Tech Conference will be held on May 19 and 20, 2008, in Tel Aviv. This year's discussions will focus on the topic "The Golden Age of Israeli Entrepreneurs." The conference will take a comprehensive approach to looking at the issues of Israel and the World - Increasing Global Competitiveness, Connecting Israel's cutting-edge industries with global trends: focus on future of Israeli tech industries, Reaching the Golden Age: Full Maturation of the Industry, Showcasing the Funds - Entrepreneur Relationship, From Innovation to Commercialization: Life starts at 60 (million) and more. This year's conference will be structured around an exhibit of case studies on specific examples representing these topics. The case studies will be chosen and designed to showcase the experience of companies and funds, bringing entrepreneurs, companies and the investors together to tell the story of investing in Israel. One of the most exciting new features this year includes the Start up Pavilion providing seed companies with a unique opportunity to present their projects to potential investors. In addition, the Annual IVA Startup Competition will be held in partnership this year with DEMO and Red Herring Magazine.

The Israel Venture Association (http://www.iva.co.il) was founded in 1996 in response to the extensive development of the hi-tech and venture capital activities in Israel. It is a broad based membership organization representing the diverse aspects of the VC industry in Israel, including the major VC funds and other venture investors, service providers, technological incubators, investment and commercial banks, private investors and private equity firms. (IVA 23.04)

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4.2 Check Point & Tel-Aviv University New Research Institute to Study Information Security

Check Point Software Technologies Tel Aviv University (TAU) have joined forces in the establishment of an information security research institute. The institute, under the auspices of the School of Computer Science at TAU, will be managed by a joint board, with representatives and financing from both Check Point and the university. The set-up investment is estimated at approximately $1m. According to the agreement, most of the financing will go towards research grants for students and doctoral candidates, as well as the establishment of research labs in the field of information security. The new research institute will facilitate the financing of dozens of academic research studies in various fields of information security. In addition, it will enable the establishment of a cutting edge research lab, and the institute will hold academic conferences hosting leading experts from all over the world. Tel Aviv, Israel's Check Point Software Technologies (http://www.checkpoint.com) is the leader in securing the internet. Check Point offers total security solutions featuring a unified gateway, single endpoint agent and single management architecture, customized to fit customers' dynamic business needs. Check Point's pure focus is on information security. (Check Point 24.04)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Jordan, Syria & Saudi Arabia Sign MoU for the Hijaz Railway

Jordan, Saudi Arabia and Syria signed an MoU of the Higher Commission of the Hijaz Railway under which a joint study will be carried out in the next few weeks to consider utilizing the Hijaz Railway, which crosses through the three countries. The memo was signed by Minister of Transport Batayneh and his Saudi counterpart Soraisri and Syrian counterpart Badr. Batayneh said in a statement to the press after the signing ceremony, that the agreement highlighted the importance of railway linkage between the three countries, as well as the unified agreement that was signed in 1966 on the railway. The issue of establishing the railway dates back to 1900 when Sultan Abdul Hamid urged Muslims from all around the world to donate for the establishing of a railway between Damascus and the holy place in Saudi Arabia to facilitate the transfer of pilgrims to the holy shrines Saudi Arabia. The construction of the 1,303 kilometers railway was completed in 1908. (Petra17.04)

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5.2 Jordan & Canada Negotiate a Free Trade Agreement

Jordan and Canada have started the first round of talks that are expected to result in the signing of a freed trade agreements between the two countries with a view to increasing trade exchange and setting up joint investment projects. Jordanian Secretary General of the Ministry of Industry & Trade Oqlah, who headed the Jordanian side to the negotiations, said the free trade agreement with Canada will enable Jordan to get access to international markets and promote investment competitiveness. Trade exchange between Jordan and Canada stood at JD48 million last year with Jordan's exports to Canada standing at JD8 million. During the first five-day negotiations, the two sides discussed the general frame of the agreement in terms of items, customs reduction on industrial and agricultural goods in addition to rules of origin that will be adopted by the agreements. Other topics for discussion in the first round will include measures related to imports and exports, customs and other items related to the environment and labor. Earlier, the Ministry of Industry & Trade held a preparatory meeting that was attended by representatives of the public and private sectors to discuss provisions that will be included in the free trade agreement and obstacles facing Jordanian exports to Canada. (Petra13.04)

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5.3 Iraq Oil Exports Hit 59m Barrels

Iraq boosted its crude oil exports by 3.3 million barrels last month over the previous month, bringing in nearly $15.5 billion. The country's total crude oil exports stood at 59.4m barrels for last month and grossed $5.64 billion, with an average price $95.02 for per barrel. February's exports hit 56.1 million barrels and yielded in $5.037 billion. January's amounted to 59.6 million and brought in $4.813 billion. There is still a wide difference in exports between the southern port of Basra and the northern city of Kirkuk, despite fighting in the south last month which included attacks on the southern export pipeline. Ministry figures showed a total of 49.5 million barrels were sent abroad through Basra while other 9.9 million barrels were exported from the Kirkuk oil fields to Turkey's Ceyhan terminal on the Mediterranean Sea. The special US auditor for Iraq released new data on Iraq oil revenues which show that the government could reap as much as $70 billion this year, thanks to the soaring oil prices in international markets. Iraq sits on the world's third-largest oil reserves, totaling more than 115bn barrels. But the industry is plagued by a lack of modern equipment and training after decades of UN sanctions, war and Saddam Hussein's ruinous rule. The war-torn country is planning to increase its oil output to 3m barrels a day by the end of this year by employing foreign companies' expertise and is also targeting production of 4.5m barrels a day by end of 2013.

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5.4 GCC Signs Euro Trade Pact

A free trade agreement between the GCC and the European Free Trade Association (EFTA) has been finalized after five rounds of talks in Geneva. Secretary general of the GCC, Abdulrahaman Al-Atiyya, said the deal would improve economic co-operation, increase goods trade and open up new investment opportunities between the two regions. The EFTA includes the European states of Iceland, Liechtenstein, Norway and Switzerland. Merchandise trade in 2007 between the EFTA and GCC amounted to more than $5.4b. Exports from EFTA states, worth $4.4b, consisted mainly of clocks and watches, precious stones, pharmaceuticals and machinery. The EFTA States' top import products from GCC States in 2006 included precious stones and aircrafts/spacecrafts. The GCC is holding ongoing talks with the European Union (EU) over a long-delayed wider FTA between the two blocs. Qatar's deputy prime minister said in January negotiations could drag on for months, blaming ‘endless conditions' by the EU which were impossible to meet. The GCC and EU signed a framework economic co-operation agreement in 1988, but have been unable to agree a FTA because of issues including market access, government procurement rules and intellectual property rights. The GCC is also in talks with Iran and Korea, and finalized an agreement with Singapore earlier this year. (Various27.04)

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5.5 Kuwait Inflation Reaches All-Time High Of 9.5%

Kuwaiti annual inflation surged to a fresh record of 9.5% in January, spurred by strong housing and food costs in the only Gulf oil producer to have scrapped its currency peg to the ailing dollar. Inflation is on the rise across the world's biggest oil-exporting region, almost doubling in five months in Saudi Arabia to a 27-year high of 8.7% in February, and holding at 13.7% in Qatar in December, just off a record. In Kuwait, prices more than doubled in the seven months to January even as the oil exporter allows its dinar currency to rise versus the dollar in a drive to curb imported inflation. A jump of 16.1% in housing costs - which comprise about 27% of the index - led the rise on Kuwait's All Items Consumer Price Index, government data showed. Food prices, which make up about 18% of the index, also jumped 7.7%. Even though it tracks a basket, Kuwait has barely kept up with the dollar's tumble on global markets because the US currency comprises the largest weighting in its basket. The dinar has risen about 9% against the dollar since Kuwait severed its peg on May 20, while the greenback has plunged more than 16% against the euro and almost 13% against a basket of major currencies. In addition to supply constraints in the property market, Kuwaiti money supply, an indicator of future inflation, has been expanding rapidly - growing at 27% in January, its fastest pace in at least 14 years. (Various25.04)

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5.6 Bahraini Families Feel Pinch As Food Prices Continue To Rise

Consumer prices in Bahrain advanced 0.4% during March, led by higher food costs, Bahrain's Central Informatics Organization (CIO) announced on 18 April. This compares with a 0.2% gain in February. The food, beverage and tobacco index touched 113.08 points, up 1.4% from the month earlier, the data showed. Housing costs were unchanged. Like most of its neighbors in the world's biggest oil-exporting region, Bahrain pegs its currency to the dollar, forcing it to track US interest-rate cuts and constraining its ability to fight inflation. Rising global food prices, a falling dollar and soaring rents have driven price rises across the region, where economies are booming on a near-six increase in oil prices since 2002. Inflation in Saudi Arabia hit a 27-year peak of 8.7% in February. The CIO said in January it had revised the consumer price index and was using 2006 as its base year. Calculations of annual inflation for each month would be done at a base of 100 points until it works out new weights to calculate prices for previous years, a CIO official said. That would indicate annual inflation in March of 5.24%, compared with 4.82% in February, according to Reuters calculations. (Various19.04)

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5.7 UAE's Retail Food Industry

The UAE retail sector continues to grow, supported by the upgrading of existing retail stores and the addition of state of the art new mega retail stores. The UAE market presents retailers with diverse relatively high-income consumers. Exporters who are willing to establish personal relationships, consolidate shipments, and meet the labeling requirements of the UAE market will find a rapidly growing sector in which to sell a wide range of products. Annual sales in the industry are estimated at $3.5b. The UAE food retail sector continues its aggressive growth. More large type stores are being built. The French retail chain Carrefour already operates in the market while a new one is being prepared to launch its services. Value of retailed products are currently estimated by trades at about $2.5b. Carrefour has moved aggressively into the retail of food and non-food products in the United Arab Emirates and is expected to open at more locations across the UAE. Other Arabian Peninsula markets are definitely in the cards for this retailer as consumers go more and more for low prices and everything under one roof. (R&M22.04)

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5.8 Saudi Takes Steps to Curb Price Rises

Saudi Arabia's cabinet has approved short- and long-term measures to protect the inflation-hit economy from food price rises. Inflation in the largest Arab economy almost doubled in the six months to March, when it hit 9.6%, its highest since at least the 1970s, official data showed. Earlier this month Saudi Arabia slashed import levies on food such as frozen poultry, dairy goods and vegetable oils to 5% from about 20%. Levies on building materials such as paints, gypsum, electrical cables and plastic pipes were reduced to 5%, while duties on wheat products were eliminated entirely from 25%. In March it introduced subsidies, cost of living allowances and welfare payments help its 25m people cope with price rises. Inflation is a key challenge across the Gulf Arab region, where governments which peg their currencies to the ailing dollar are raising wages and subsidies, bringing in price controls and tightening lending curbs to dampen the impact of price rises. (Various28.04)

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5.9 Saudi Inflation Hurtles Toward 10%

Inflation in Saudi Arabia, the world's largest oil exporter, accelerated to almost 10% in March, its highest since at least the oil boom of the 1970s, on soaring rents and food prices. The rental index of the largest Arab economy, which pegs its currency to the ailing US dollar, soared 15.8%, while food and beverage costs rose 14.2%. The rental index includes fuel and water costs. The overall cost of living index accelerated for a tenth straight month, rising 9.6% to 114.2 points in the year to March 31, compared with 104.2 points, Saudi data showed. Saudi inflation almost doubled in the six months to March. Saudi Arabia's Central Department of Statistics compiles inflation data. Price rises are plaguing the world's biggest oil-exporting region, where economies are surging on a near six-fold increase in oil prices during the last six years. Saudi inflation could surpass 10% this year before easing in the second half as anti-inflationary government measures take hold and lower global demand for commodities feeds into prices, the country's central bank governor said last week. (AB27.04)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:

6.1 EU Expects 4.7% Growth for Turkey In 2009

European Union expects Turkey's economic growth rate will be around 4.7% in 2009, up from 4.3% of growth expectations in 2008. European Commission's spring 2008 report on economic forecast said "due to its sizeable financing needs, Turkey may be more vulnerable to the current financial turbulence than most EU-Member States or other candidate countries." The report stressed Turkey should be able to increase export growth -in particular in tourism-while the tight monetary and fiscal policy mix will start supporting the disinflation process. Overall, economic activity is expected to rise only gradually from 4.3% in 2008 to 4.7% in 2009. The report also forecasts that unemployment rate would be around 10% in 2008 and fall to 9.8% in 2009, adding that as from mid-2008, inflationary pressures are expected to fall slowly. Annual consumer price inflation is expected to fall below 8% by the end of 2008 and to 6% at the end of 2009." (TNA29.04)

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6.2 Turkey's Food & Energy Costs Set to Rock Inflation

Consumer prices increased by 0.96% in March 2008 and the annual consumer price index (CPI) rose to 9.15%, according to the Turkish Central Bank, which blamed the rising energy and food prices on uncertainties in global markets that had delayed a decline in inflation. Prices of oil products in Turkey increased by 3.23% in March because the price of oil rose on the world markets and the Turkish lira devaluated. Processed food prices continued their increasing trend, which started in the second half of 2007, and rose 2.86% in March, compared to the preceding month. With crude oil prices touching new record highs and food prices remaining under pressure because of global shortages, analysts predicted consumers will feel more inflation pressure in the months ahead. These developments have increased the "primal fear" of stagflation - slow economic growth coupled with rising unemployment - and respected financial daily Wall Street Journal said in a report that inflation in Romania and Turkey was rising faster than elsewhere in Europe, underscoring how second-round effects from high food and oil prices spread more rapidly in emerging economies with high reliance on debt, while raising the risk of hard landings for the economy. (Zaman18.04)

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6.3 CBT Governor Points Out to Structural Reforms Once Again

The Turkish Central Bank's 76th general assembly was held on 24 April. During the assembly, the CBT Governor Yilmaz mentioned that despite the increase in Turkey's resilience to external shocks, he once again focused on more fiscal discipline and structural reforms to protect the economy's strength and also pointed out the EU harmonization process which plays a crucial part in this. The Governor noted that as a result of the global economic slowdown, the rate and duration of this slowdown was still unclear and therefore banks need to be more cautious about risks during loan issuance, which could result in a credit squeeze in the markets. Yilmaz said that at this point Turkey has been affected negatively by these developments and that the risk premium has increased parallel to other emerging economies. (BGC25.04)

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6.4 Turkish Change in Union Law

Ankara is working on a law that will lift the ban on strike and lock-out in various sectors including the banking and petrochemical sectors, sea, road and rail transportation services, educational institutions, child care establishments and retirement homes sectors. The Ministry of Labor & Social Security also prepared another bill to amend the law on unions. Accordingly, the bill on unions will require seven people to establish a union. Under the bill, three unions, in the same area of business, will be able to join to establish a federation. The bill will decrease the number of business lines from 28 to 18 in which a union can be established and it allows only three unions in one field of business. The age limit for becoming a member of a union under the new bill will be reduced to 15 from 16. The bill also gives permission to unions and confederations to develop international activities and cooperation, open overseas representative offices and establish union organizations abroad. The Minister will meet with the chairs of labor and employer unions to discuss and determine the details of the bills. The Ministry plans to reach a consensus with the unions soon and plans to submit the bills to the Council of Ministers as soon as possible. (BGC25.04)

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6.5 Turkey to Have First Nuclear Power Station by 2015

The first power station is expected to be constructed in the Mersin region in the south of Turkey. Turkey should have its first nuclear power station by 2015. According to the director general of the Turkish Electricity Trading Company (TETAS), all the legal groundwork has been laid to authorize the construction of nuclear power stations in Turkey. The tender process for the first nuclear power station, which began on March 24, would be completed on September 24. So far, there were four companies interested in the tender and this number could rise to as many as 15 before the end of September. A nuclear power plant costs between $10 - $15 billion. Energy production through nuclear means has become more attractive thanks to support by the state. (NTV 22.04)

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6.6 EU Presses Greece on Gases

Greece risks ending up before the European Court of Justice if it fails to come up with a reliable way of testing its pollution levels within the next three months and winning its way back into a United Nations carbon emissions trading program, European Union officials have announced. Athens insisted that it had the matter in hand following a UN decision to suspend Greece from a system allowing countries to trade greenhouse emissions with less industrialized nations in order to meet air pollution targets and curb global warming. But the country will not be allowed to re-enter the scheme unless it improves its pollution measuring system to meet EU standards. European Environment Commissioner Dimas had cast doubt on Greek efforts to measure and limit harmful emissions early this year, noting that Greece is the only country in the European Union not to have convinced the United Nations that it has a credible system to measure gases. (Kathimerini23.04)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Yom HaShoah - Holocaust Martyrs' & Heroes' Remembrance Day 2008

Israel is to mark Holocaust Martyrs' & Heroes' Remembrance Day, beginning on Wednesday evening, 30 April and Thursday, 1 May. Holocaust Martyrs' & Heroes' Remembrance Day (Yom HaShoah in Hebrew) is a national day of commemorating the six million Jews murdered in the Holocaust. It is a solemn day, beginning at sunset on Hebrew date of 27 Nisan and ending the following evening. This year it is marked early due to the actual date falling close to the Sabbath. Places of entertainment are closed and memorial ceremonies are held throughout the country. The central ceremonies, in the evening and the following morning, are held at Yad Vashem and are broadcast on the television. Marking the start of the day, in the presence of the President of the State of Israel and the Prime Minister, dignitaries, survivors, children of survivors and their families, gather together with the general public to take part in the memorial ceremony at Yad Vashem in which six torches, representing the six million murdered Jews, are lit. The following morning at 10:00, the ceremony at Yad Vashem begins with the sounding of a siren for two minutes throughout the entire country. For the duration of the sounding, work is halted, people walking in the streets stop, cars pull off to the side of the road and everybody stands at silent attention in reverence to the victims of the Holocaust. Afterward, there is a central ceremony at Yad Vashem, while other sites of remembrance in Israel, such as the Ghetto Fighters' Kibbutz and Kibbutz Yad Mordechai, also host memorial ceremonies, as do schools, military bases, municipalities and places of work. Throughout the day, both the television and radio broadcast programs about the Holocaust.

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7.2 Israel Honors Fallen Soldiers With Jerusalem Service & National Siren

On Tuesday night, 6 May and Wednesday, 7 April, Israel will observe Memorial Day. Events to mark Memorial Day for Israel's fallen soldiers will begin at 7:30 P.M. with a ceremony at the Western Wall in Jerusalem, attended by the Prime Minister, other dignitaries and bereaved families. At 8 P.M., a one-minute siren was heard across the country. The siren sounded again, for two minutes, at 11 A.M. Wednesday, marking the beginning of memorial services at each of Israel's 43 military cemeteries. Though a regular work day, activity is usually curtailed and many leave their offices early pending the Independence Day celebrations that follow.

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7.3 Israel's Independence Day - 60 Years Since Sovereignty Regained

Celebrations for the 60th anniversary of Israel's regaining its independence will begin on Wednesday evening of 7 May throughout the country, continuing throughout Thursday, 8 May. The official observance starts when the state flag is raised to full mast at a national ceremony on Mount Herzl in Jerusalem. Israel Independence Day is celebrated annually on 5 Iyar, which corresponded to 14 May 1948, the date the British mandate ended over the Land of Israel. This year it is marked early due to the actual date falling close to the Sabbath. A religious and national holiday, Yom Atzmaut - Independence Day is a celebration of the renewal of the Jewish state in the Land of Israel, the birthplace of the Jewish people. In this land, the Jewish people began to develop its distinctive religion and culture some. Here it has preserved an unbroken physical presence, for centuries as a sovereign state, at other times under foreign domination. Throughout their long history, the yearning to return to the Land has been the focus of Jewish life. With the rebirth of the State of Israel, in 1948, Jewish independence, lost two thousand years earlier, was restored.

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*REGIONAL:

7.4 Bahrain Set To Name Jewish Woman Envoy

A Jewish woman, Huda Ezra Ebrahim Nonoo, is set to become Bahrain's ambassador to Washington. Huda, a businesswoman, was the first Jewish woman to sit in the Shura Council, the 40-member upper house of the bicameral legislature, replacing her uncle. A Christian woman, Alice Samaan, also sits on the council which has 11 women, compared with only one woman MP, Lateefa Al Gaood, in the 40-member lower house. Huda also is the first Jewish woman to head a rights organization, the Bahrain Human Rights Watch. 0020She is its secretary-general. (GN25.04)

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7.5 Bahrain & NATO Sign Security Accord

On 24 April, Bahrain and NATO signed a security accord that both parties see as a necessity to move forward in the fight against global threats. The Agreement for the Protection of Classified Information was signed by Bahraini foreign minister Sheikh Khalid Bin Ahmad Al Khalifa and NATO secretary-general Scheffer at the opening ceremony of an international conference on NATO-Bahrain relations and the Istanbul Cooperation Initiative (ICI). The conference seeks to promote a better mutual understanding between NATO and Gulf countries and to introduce fresh ideas from the region into the implementation of the ICI. Bahrain is one of four GCC countries to have joined the ICI, a program launched by NATO in Istanbul in June 2004 to encourage military, security and civil cooperation with Gulf states. Kuwait, Qatar and the UAE also joined the initiative. (Various25.04)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Early Treatment with COPAXONE Delayed Progression to Multiple Sclerosis

Teva Pharmaceutical Industries announced new results from the PreCISe study, which demonstrated that early treatment with COPAXONE (glatiramer acetate injection) significantly reduced the risk of developing clinically definite multiple sclerosis (CDMS) by 45% compared to placebo (hazard ratio 0.55, p=0.0001). These data were presented as late-breaking science at the 60th Annual Meeting of the American Academy of Neurology (AAN) in Chicago. Based on the PreCISE results, an application for marketing authorization in Europe to the Medicines and Healthcare products Regulatory Agency (MHRA) for the extension of its indication to include the treatment of patients with a first clinical event suggestive of MS, was submitted and is currently under review. A similar application requesting an expanded label for COPAXONE will also be submitted shortly with the U.S. FDA. COPAXONE, currently indicated for RRMS, is a unique disease modifying treatment with a dual mode of action that has over 10 years of prospective clinical trial data demonstrating long-term clinical treatment benefits and good safety profile. The PreCISe results now extend COPAXONE effect to CIS patients, demonstrating a reduced risk of developing Clinically Definite MS (CDMS). Furthermore, the safety profile of COPAXONE in the PreCISe study was consistent with the well-established safety profile of the product based on many years of post-marketing surveillance and over 100,000 patients treated globally with COPAXONE.

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. Teva's innovative R&D focuses on developing novel drugs for diseases of the central nervous system. (Teva15.04)

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8.2 Teva Announces Tentative Approval of Generic Evista Tablets

Teva Pharmaceutical Industries announced that the U.S. FDA has granted tentative approval for the Company's Abbreviated New Drug Application (ANDA) to market its generic version of Lilly's osteoporosis treatment Evista (Raloxifene Hydrochloride) Tablets, 60 mg. Teva is currently involved in patent litigation concerning this product in the U.S. District Court for the Southern District of Indiana. A trial date has not been set. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the world's leading generic pharmaceutical company. The Company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients, as well as animal health pharmaceutical products. Over 80% of Teva's sales are in North America and Europe. (Teva17.04)

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8.3 Oramed Pharmaceuticals Partners with OnQ Consulting for Phase 2B Trials on Its Oral Insulin Capsules

Oramed Pharmaceuticals (http://www.oramed.com) announced the signing of an agreement with OnQ consulting, a clinical research organization (CRO) located in Johannesburg, South Africa, to conduct Phase 2B clinical trials on its oral insulin capsules. The study is intended to evaluate the safety, tolerability and efficacy on diabetic type 2 volunteers, using Oramed's oral insulin capsule. It is anticipated that this study will be conducted over several months, and the 30 subjects will each receive the treatment for a period of 6 weeks.

Jerusalem's Oramed Pharmaceuticals is an Israel-based company that focuses on the development of oral delivery solutions based on proprietary technology. Diabetes, one of the most rapidly growing diseases in the world, requires constant and an often unpleasant monitoring and drug therapy regimen. Oramed is seeking to develop an oral insulin capsule for the treatment of diabetes, and has recently commenced Phase 1B of its clinical trials. The company is also pursuing the development of oral delivery solutions for other drugs and vaccines. (Oramed17.04)

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8.4 Teva Announces Tentative Approval of Generic Maxalt Tablets

Teva Pharmaceutical Industries announced that the U.S. FDA has granted tentative approval for the Company's Abbreviated New Drug Application (ANDA) to market its generic version of Merck's migraine pain treatment Maxalt (Rizatriptan Benzoate) Tablets, equivalent to 5 mg and 10 mg base. Final approval of this product is anticipated upon expiration of patent protection for the brand product in June 2012. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the world's leading generic pharmaceutical company. The Company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients, as well as animal health pharmaceutical products. Over 80% of Teva's sales are in North America and Europe. (Teva17.04)

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8.5 Endogun Medical Systems Receives FDA Approval for Next-Generation Soft Tissue Attachment Device

Endogun Medical Systems has received FDA clearance to market in the USA its next-generation, single-incision, trans-vaginal EndoFast Reliant device for soft tissue reinforcement and attachment. Pelvic Organ Prolapse occurs in women, often following multiple births or excess weight, and develops as a result of weakening of the pelvic muscles which support internal organs (womb, bladder, rectum and vagina). Side effects of this condition include discomfort, a feeling of heaviness and pain and the disorder carries the risks of inflammation and infection. More than 600,000 procedures are performed annually in the USA and Europe (combined), with direct costs of associated surgical equipment reaching hundreds of millions of dollars. Estimates suggest that close to 7 million women are in need of such treatment; the gap between the potential market size and the actual number of procedures performed to date may stem from the fact that the current surgical offerings are significantly invasive, and require substantial surgical skills. Endogun's product is aimed at offering a single-incision, simpler and safer procedure, which is performed entirely trans-vaginally. HaOgen, Israel's Endogun Medical Systems (http://www.endogun.com) was founded in March 2004 to offer improved soft tissue attachment technology and products to the world of Minimally Invasive Surgery (MIS). It offers procedures that are easier for surgeons to use and safer for patients than today's options. Endogun aims to significantly improve the quality and outcome of many minimally invasive procedures in the world of urogynecology and urology. (Endogun:28.04)

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8.6 Teva Announces Approval of Generic Flolan for Injection

Teva Pharmaceutical Industries announced that the U.S. FDA has granted approval for the Company's Abbreviated New Drug Application (ANDA) to market its epoprostenol, the first generic version of GlaxoSmithKline's Flolan for Injection. Teva's approval is for the 0.5 mg base/vial and 1.5 mg base/vial strengths as well as the sterile diluent. This product is indicated for the long term intravenous treatment of primary pulmonary hypertension and pulmonary hypertension associated with the scleroderma spectrum of disease in NYHA Class III and Class IV patients who do not respond adequately to conventional therapy. 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. (Teva28.04)

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8.7 Compugen Announces Discovery of Blood Based Biomarker for Diagnosis of Lung Cancer

Compugen (http://www.cgen.com) announced the discovery and experimental verification of CGEN-438, a potential blood based biomarker for lung cancer. CGEN-438 is novel splice variant peptide of delta-like protein 3 precursor (DLL3). Importantly, the Compugen discovered biomarker is a peptide that is secreted from the cell into the bloodstream, whereas the previously known DLL3 is a protein located on the cell membrane. Initial clinical evidence indicates that the Compugen discovered molecule could potentially serve as both a serum biomarker for the diagnosis of small cell lung cancer and as a component in a biomarker combination for the diagnosis of non-small cell lung cancer patients. Using a test developed by Compugen to detect CGEN-438 in serum, the blood levels of the peptide were measured in about 40 lung cancer patients and healthy individuals. CGEN-438 concentrations detected in serum samples of small cell lung cancer patients were higher than those detected in controls, demonstrating its potential to become a diagnostic biomarker for small cell lung cancer. It was also evident that CGEN-438 is expressed to a large extent in certain non-small cell lung cancer serum samples and therefore may be used in a biomarker combination test for the diagnosis of non-small cell lung cancer as well. A patent application covering this biomarker has been filed by Compugen.

Tel Aviv, Israel's Compugen's mission is to be the world leader in the discovery and licensing of product candidates to the drug and diagnostic industries under milestone and revenue sharing agreements. The Company's increasing inventory of powerful and proprietary discovery platforms is enabling the predictive discovery of numerous therapeutic and diagnostic product candidates. (Compugen 28.04)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Amos-3 Satellite Successfully Launched

Five days after the originally scheduled launch date, on 28 April Israel's most advanced communications satellite was successfully launched into space. One hour and 20 minutes after its launch from a site in Kazakhstan, the Amos-3 satellite was released from the final stage of its launch cycle and entered its orbit route. The satellite joins its older brothers, Amos-1 and 2, both of which are in orbit. A few months from now it will be placed in a geostationary orbit, 36,000 km. from Earth, and replace the Amos 1, which has been operating for 12 years. It will provide high-quality broadcasting and communications services to Europe, Africa, the Middle East and parts of the United States. The Amos-3 is Israel's most advanced communication satellite and has four broadcast antennae, two of which are mobile and can be repositioned according to clients' changing needs. The Amos-2, which was launched in December 2003, is expected to remain operational for another 8 years. The satellite was built by Israel Aerospace Industries' (IAI) Space Division and carries a 250 kg. payload, compared to 160 kg. for the other Amos satellites. (INN29.04)

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9.2 MTI Wireless Edge Adds New Low Axial Ratio Antenna to Range of RFID Reader Antennas

MTI Wireless Edge announced the addition of their new Low Axial Ratio RFID reader antenna range to their large portfolio of high performance and cost competitive RFID antennas. After completing the 0.5 ft (7.5 dBic) 1dB axial ratio family of 3 antennas for FCC, ETSI & Japanese UHF frequency range, the MT-242043 is the first of the new 1ft (9 dBic) family. This new antenna MT-242043 is covering the 902-928 MHz bandwidths and is soon to be followed by similar antennas designed to meet the needs of the European (865-870 MHz) and Japanese (950-956) UHF frequencies. The new antenna has both Right hand and Left hand versions and is a 9 dBic (305 x 305 mm), light weight (1.5Kg) antenna. TEL AVIV, Israel's MTI Wireless Edge (http://www.mtiwe.com), a leader in the development, production and marketing of high quality, low cost, flat panel antennas for RFID & Fixed Wireless applications offers large portfolio with over 90 models of Linear and Circular, Single and Dual polarity antennas for active and passive RFID Systems. The frequencies that MTI offer antennas for are 450MHz, 865-870MHz, 902-928MHz, 950-956MHz, 2.4GHz as well as Integrated Enclosure Antenna solution (IAE). MTI Military products include a wide range of broadband, tactical and specialized communications antennas, antenna systems and DF arrays installed on numerous airborne, ground and naval, including submarine, platforms worldwide. (MTI16.04)

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9.3 Mellanox' ConnectX 10 Gigabit Ethernet LAN Wins Across Supermicro's Server Products

Mellanox Technologies announced its ConnectX 10 Gigabit Ethernet controllers have been selected for LAN on Motherboard (LOM) applications across Supermicro's leading family of server products, eliminating the need for separate add-in I/O cards. Supermicro is a leading provider of performance and power optimized server boards, chassis, and rack and blade systems that target data center, high-performance computing, workstation, storage networks and standalone server environments. Mellanox's ConnectX 10 Gigabit Ethernet controller is a single-chip solution that provides industry-leading I/O performance, small footprint, and low power consumption making it ideal for Supermicro's LOM requirements. In addition, ConnectX provides virtualization acceleration engines and integrated Fibre Channel over Ethernet (FCoE) support delivering valuable virtual machine scalability, I/O consolidation, and data center infrastructure future-proofing benefits. Yokneam, Israel's Mellanox Technologies (http://www.mellanox.com) is a leading supplier of semiconductor-based, interconnect products to world-class server, storage, and infrastructure OEMs servicing Fortune 500 data centers, the world's most powerful supercomputers, and mission critical embedded applications. The company's Virtual Protocol Interconnect (VPI) enables any standard communication protocol to operate over any converged network (InfiniBand, Ethernet, and Data Center Ethernet) with the same software solution. (Mellanox22.04)

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9.4 Mellanox Announces Virtual Protocol Interconnect With ConnectX Adapter Products

Mellanox Technologies announced the availability of Virtual Protocol Interconnect (VPI) in its industry-leading ConnectX server and storage adapter products. VPI enables I/O infrastructure flexibility and future-proofing for data centers and high-performance computing environments. VPI-enabled adapters facilitate any standard networking, clustering, storage, and management protocol to seamlessly operate over any converged network with the same software infrastructure. VPI also supports port auto-sensing of the fabric (InfiniBand, Ethernet or Data Center Ethernet) and configures the adapter in the appropriate mode easing deployments in both rack and blade environments. ConnectX adapter ICs and cards with VPI capabilities are already shipping in volume to first tier server and storage OEMs. These dual-port adapters can be configured to support VPI by a simple firmware upgrade that is expected to be available later in the second quarter with general availability in the third quarter. Yokneam, Israel's Mellanox Technologies (http://www.mellanox.com) is a leading supplier of semiconductor-based, interconnect products to world-class server, storage, and infrastructure OEMs servicing Fortune 500 data centers, the world's most powerful supercomputers, and mission critical embedded applications. The company's Virtual Protocol Interconnect (VPI) enables any standard communication protocol to operate over any converged network (InfiniBand, Ethernet, and Data Center Ethernet) with the same software solution. (Mellanox22.04)

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9.5 Teledata Networks Enhances Israeli Bezeq's Access Network with BroadAccess-1000 MSAG

Herzliya, Israel's Teledata Networks (http://www.teledata-networks.com), a leading global provider of innovative Multiservice Access solutions for NGN (Next Generation Networks), has been selected by Bezeq, Israel's incumbent service provider, to provide it with Next Generation Network access systems. Teledata Networks will enhance Bezeq's Access Networks using its innovative BroadAccess-1000 Multiservice Access Gateway (MSAG). BroadAccess-1000's diverse capabilities include both MSAG and IP DSLAM functionalities, and support of traditional (V5.2) and advanced protocols (VoIP). With its staunch environmental protection - a key feature in Bezeq's choice - BroadAccess-1000 will be installed in outdoor cabinets, as well as in communication rooms. Bezeq will use BroadAccess-1000 to supply an assorted set of services to its customers, such as Voice, ISDN, ADSL2+ and G.SHDSL. Currently, BroadAccess will be used for a project of relocating Central Office infrastructure, including the replacement of switch technology to V5.2. Teledata Networks is a long-established partner in Bezeq's ventures, and has been providing Bezeq with access network equipment for over eighteen years. Teledata Networks is a leading global provider of innovative Multiservice Access solutions for NGN (Next Generation Networks). The company tailors unique solutions for telecom operators and services providers in accordance with their needs, to enhance their competitive edge. (Teledata 22.04)

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9.6 Camtek Introduces Mustang - Automated System for Optical Inspection of PCB for Mobile Products

Camtek announced the introduction of Mustang - Camtek's new line of automated systems for optical inspection of finished high-density PCBs (printed circuit boards) used in the production of mobile consumer products. First systems of Mustang Model 600 have already been installed at customer sites. Built upon the technology of Camtek's Pegasus IC substrate inspection system, the Mustang combines excellent detection ability with automatic, cassette-to-cassette material handling and sorting capability for a broad range of panel sizes and types. Dual illumination systems optimize lighting for hard-to-detect defects in metal plating as well as in solder mask layer. Auto defect classification capabilities keeps track of defect occurrences by type while the system inspects both sides and sort panels of advanced cell phones, digital cameras and personal entertainment products. With headquarters in Migdal Ha'Emek Israel, Camtek (http://www.camtek.co.il) designs, develops, manufactures, and markets automatic optical inspection systems and related products. Camtek's automatic inspection systems are used to enhance both production processes and yield for manufacturers in the printed circuit board industry, the high density interconnect substrate industry and the semiconductor manufacturing and packaging industry. (Camtek22.04)

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9.7 Tower Semiconductor Ramps Production of Canesta's Breakthrough 3D Image Sensors

Tower Semiconductor and San Jose, California's Canesta, the inventor and pioneer of Electronic Perception Technology, announced that Canesta's revolutionary 3D image sensors are ramping to broad production at Tower. The availability of the breakthrough chips from a standard semiconductor manufacturing process will make it possible, for the first time, for mass market "everyday devices" to be able to "see". CanestaVision sensors, now in final qualification stages for the automotive industry, are being manufactured at Tower's advanced Fab2 facility, using its state-of-the-art, CMOS Image Sensor (CIS) 0.18-micron technology process. According to a recent study by Strategy Analytics, these kind of applications, such as 3D camera will boost the growth of the automotive semiconductor market from $18b in 2006 to $29b by 2013 through an 8.2% yearly growth rate. Similarly, new user-interaction mechanisms in which a user's actions or gestures drive the functions of a device have been proven by the success of recent videogame and mobile phone products.

Migdal Ha'Emek, Israel's Tower Semiconductor (http://www.towersemi.com) is an independent specialty foundry that delivers customized solutions in a variety of advanced CMOS technologies, including digital CMOS, mixed-signal and RF (radio frequency) CMOS, CMOS image sensors, power management devices, and embedded non-volatile memory solutions. Tower's customer orientation is complemented by its uncompromising attention to quality and service. Its specialized processes and engineering expertise provides highly flexible, customized manufacturing solutions to fulfill the increasing variety of customer needs worldwide. (Tower15.04)

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9.8 ECtel Strengthens Market Position With Launch of Fraudview 8.2

ECtel released a new version of Fraudview, ECtel's groundbreaking and market-leading fraud management platform. The new version, Fraudview 8.2, expands the product's fraud convergence to include new technologies and fraud schemes and improves the product's extendibility, scalability and operational effectiveness. Featuring a new application screening module that provides new schemes to detect subscription fraud and repeat fraudsters at the service provisioning and customer acquisition phase, as well as a new credit limit monitoring feature that continuously screens the ongoing subscriber usage and monitors the maintenance of their personal credit limits, Fraudview 8.2 is the market's most complete fraud management solution for telecom operators. Other features of Fraudview 8.2 include full support for RAC (Real Application Clusters) architecture, enabling unlimited Scale-Out options and High Availability capabilities for the system; System Extendibility - the new CIT version (Configuration & Integration Toolkit) allows the customer's IT department to fully configure the system and add new interfaces and services, independent of ECtel's professional services; and the option of Multi Language - Fraudview 8.2 is now fully multi-lingual across all application GUI (Graphical User Interface), allowing for non-English speaking analysts to utilize the system more effectively and efficiently.

Rosh Ha'Ayin, Israel's ECtel (http://www.ectel.com) is a leading global provider of Integrated Revenue Management(TM) (IRM(TM)) solutions for communications service providers. A pioneering market leader for nearly 20 years, ECtel offers carrier-grade solutions that enable wireline, wireless, converged and next generation operators to fully manage their revenue and cost processes. ECtel serves prominent Tier One operators, and has more than 100 implementations in over 50 countries worldwide. (ECtel23.04)

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9.9 South Africa's Transnet Freight Rail Standardizes on NICE IP Video Surveillance Application

NICE Systems announced that Transnet Freight Rail, the leading provider of logistics and the largest rail operator in South Africa, has decided to standardize on NICE, undertaking a multi million dollar project to implement NiceVision Net, NICE's end-to-end solution for IP video security. The NICE intelligent security solution will enable Transnet Freight Rail to monitor and record images from thousands of IP video surveillance cameras located throughout 670 sites across the country. Transnet Freight Rail maintains an extensive rail network that represents 80% of South Africa's entire rail infrastructure. The NICE advanced IP video surveillance solution will enable three control centers to centrally manage the surveillance and security of all sites, coordinating the appropriate responses to threats and events. This implementation will enable Transnet Freight Rail to enhance its security and protect its highly distributed assets and buildings across South Africa.

The NiceVision Net architecture includes the video security components required for high performance surveillance including encoders, network video recorders (NVRs), extensive event management and control room visualization. These components allow Transnet Freight Rail surveillance systems to be tailored precisely to the needs of each individual site, while meeting the security and operational needs of the Transnet Freight Rail organization as a whole. Ra'anana, Israel's NICE Systems (http://www.nice.com) is the leading provider of Insight from Interactions solutions and value-added services, powered by the convergence of advanced analytics of unstructured multimedia content and transactional data - from telephony, web, email, radio, video, and other data sources. NICE's solutions address the needs of the enterprise and security markets, enabling organizations to operate in an insightful and proactive manner, and take immediate action to improve business and operational performance and ensure safety and security. (NICE Systems28.04)

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9.10 PineApp Named ‘Product of the Year' Finalist for AeA High-Tech Innovation Awards

PineApp announced that its Mail-SeCure perimeter security appliance has been named a 2008 AeA High-Tech Innovation Awards' finalist for ‘Product of the Year' in the Systems Hardware category. PineApp's award winning Mail-SeCure platform is an advanced anti-spam and email security appliance that combats evolving email-based threats such as botnets, image and MP3-based spam and sophisticated virus attacks. Mail-SeCure provides unrivaled email security with the integration of five anti-virus engines - three signature based, one heuristic based and one zero-hour detection mechanism - along with 11 anti-spam engines. This approach protects against targeted threats such as Mail-bombing, DoES and Backscatter, as well as non-targeted threats including viruses, spam, worms and Trojan-horses. Nesher, Israel's PineApp (http://www.PineApp.com) is a leader in securing networks and email systems and offers comprehensive appliance solutions for small, medium and large organizations. In the past five years PineApp has specialized in email and content security systems and already has significant presence in more than 50 countries. (PineApp 22.04)

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9.11 Voltaire Announces Availability of High-Performance Storage Router for Unified Fabrics

Voltaire announced the immediate availability of a new high-performance storage router for unified fabrics. The Voltaire SR4G High Performance Storage Router improves the performance of applications accessing Fiber Channel storage by up to 200% and simplifies connectivity of InfiniBand fabrics to existing Storage Area Networks (SANs). By providing connectivity between 20 Gigabits/second InfiniBand and 4 Gigabits/second Fiber Channel, a single Voltaire SR4G High Performance Storage Router provides 1500 MB/second of storage throughput and enables a single server to gain up to a 200% improvement in throughput over a 4 Gigabits/second Fiber Channel connection. The Voltaire SR4G connects to a single InfiniBand adapter eliminating the need for multiple Fiber Channel HBAs in each server, creating significant cost savings. It also uses the iSER (iSCSI Extensions for RDMA) protocol to deliver block storage over InfiniBand. Herzliya, Israel'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. (Voltaire 28.04)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's State of Economy Index Rises

The Bank of Israel announced in 17 April that the State of the Economy Index increased by 0.5% in March. The index showed that economic expansion continued during Q1/08, but at a slower rate than in 2007. Key components of the index fell sharply in March, with possible implications for the future. The services exports sector and import and export of goods components pulled the index upwards in March. Developments in the index's components were as follows: the manufacturing output index fell by 4.5% in February (the latest available figures), after rising 4.6% in January and the trade and services proceeds index fell by 1.4% in February, after rising 0.2% in January. However, the exports of services index went the other way. It rose by 5% in March, after falling 4.9% in February. The export of goods index rose by 4.9% in March, after rising 0.1% in February. The imports index rose by 2.4% in March after rising 4.6% in February. The Bank of Israel also revised State of the Economy Index for January upwards to 0.4% from 0.2%. The February index was left unchanged. (BoI17.04)

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10.2 Israel's Unemployment Drops to 15-year Low in March

According to figures released by the Central Bureau of Statistics (CBS) on 17 April, Israel's unemployment rate was only 6.5% in February, the lowest since 1993. A total of 190,200 people were unemployed in February. In comparison, in February 2007 unemployment was 7.8%, in February 2006 it was 9.0% and in February 2005, 9.3%. The main cause behind the drop in unemployment is the economic growth in almost all sectors. In addition, lower unemployment and welfare benefits have led more people to return to the workforce. Today's unemployment rate is considered "frictional unemployment," a natural level where most of the unemployed are between jobs and are expected to find work relatively quickly, and hopefully easily. Most of the current unemployed are new workers just starting out, such as recent graduates or newly demobilized soldiers. Among those with higher education, considered at least 15 years of schooling, unemployment is only a few percentage points. In addition, the CBS also corrected the January unemployment rate downward, setting it also at 6.5%, less than the previously released figure of 6.8%. (CBS17.04)

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10.3 Survey Finds Over 40% Of Israelis Don't Have E-Mail

According to a Geocartogaphy Knowledge survey, 57.2% of Israelis have an e-mail account and 30% have more than one account. The survey, commissioned by start-up 1500.co.il, also found that 14.9% of Israelis have two e-mail accounts and 1% have at least six. On the other hand, 41.5% of Israelis have no e-mail account at all. The survey found that 18% of residents of Tel Aviv and the central region have more than three e-mail accounts, compared with 7% of Jerusalemites. The survey also highlighted differences between men and women: 30.2% of women have one e-mail account compared with 28% of men, but 17% of men have more than three e-mail accounts compared with 9.6% of women. (Globes 28.04)

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10.4 Israelis Drank 10-15 Million Bottles Of Wine on Passover

Israelis drank 10 - 15 million bottles of wine at the Passover Seder on the night of 19 April. Some 90% of the wine consumed were locally produced. The Manufacturers Association of Israel and Federation of Israeli Chambers of Commerce report that wine sales for Passover this year will total $85.7m, 10% more than last Passover. The Chambers of Commerce says that wine and alcoholic beverage sales totaled $371.4M in 2007, with Passover and Rosh Hashanah accounting for 40% of sales. Israel's wineries also focused their sales and marketing efforts on Passover. Local wineries spent $1.7m on advertising (at published tariffs) in April - more than ten times the monthly average for the rest of the year. Barkan Winery spent $639,000, Golan Heights Winery spent $587,000 and Tavor Winery spent $250,000. Israel's largest winery, Carmel Wines spent just over $140,000. Israel's matza industry is seeing 10% more sales this year than last Passover. The latest fad is health-food matza, including organic matza, light matza, whole wheat matza, and rye matza. Together, these matzahs account for a fifth of total sales. Matzo sales totaled $34m this year, including $21.4m in domestic sales and $12.85m in exports to over 40 countries. (Globes 17.04)

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11: In Depth

11.1 ISRAEL: Moody's Upgrades Key Ratings

Moody's Investors Service (http://www.moodys.com) has upgraded Israel's key ratings to reflect the country's proven resiliency in the face of repeated economic and political shocks, its firmly established fiscal discipline and its ongoing financial and political support from the United States and the Jewish Diaspora.

The government foreign and local currency bond ratings have been upgraded to A1 from A2, and the foreign currency ceiling for bank deposits has been upgraded to A1 from A2 as well. All other sovereign ratings have been affirmed, including the Aa1 country ceiling for long-term foreign currency debt. "Fiscal reforms are paying off in terms of increased economic vibrancy, diversification and competitiveness, and to the benefit of strengthening tax revenues, in spite of tax cuts," said Moody's Analyst Joan Feldbaum-Vidra. "These factors have led Israel to post consistent current account surpluses, helping to insulate the economy in the current adverse global conditions."

She said that while Israel, which has a globalized and very open economy, is not immune to the current developments. The economy will likely suffer a relatively modest slowdown in growth this year but should still outperform its 1.6% of GDP fiscal deficit target. "Israel has repeatedly exhibited a very strong willingness and ability to pay its debts," said Feldbaum-Vidra, who is Moody's lead sovereign analyst for Israel. "Fiscal discipline has been maintained in spite of the many security-related demands on public finances, evidence of its commitment to reducing its large government debt."

The analyst commented that Israel's hefty government debt load continues to be an important credit challenge. She said that substantial further reduction in government debt would be a key driver for any future upgrades, as would national security considerations.

Moody's said the difficult security environment continues to constrain Israel's credit ratings. "Undoubtedly, policymakers would focus more keenly on economic and financial issues if national security was less of a concern," said Feldbaum-Vidra. "In particular, investment would be closer to potential without these risks." She said Israel's competitive edge in high-tech products, relatively wealthy average living standards, deep capital market, and advanced institutional capacity mean that it has graduated from classification as an emerging market economy.

"This is critical to our analysis of Israel, since advanced economies can handle heftier debt loads without significantly increasing default risk," said the analyst. "However, the precarious security environment and high defense needs make less public funds available for necessary upgrades of physical and human capital, which would otherwise firmly situate Israel among the ranks of the advanced industrialized economies." Any rating actions affecting other entities in Israel will be announced separately. (Moody's17.04)

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11.2 ISRAEL: Israeli High-Tech Company Capital Raising - Q1 2008

The following are the findings of the Quarterly Survey conducted by the IVC Research Center, which for more than nine years has been at the forefront of venture capital and private equity research in Israel. This Survey, reviews capital raised by private Israeli high-tech companies from Israeli venture capital funds and from other investors. The Survey is based on reports from 86 venture investors of which 47 are Israeli management companies and 39 are other - mostly foreign - investment entities.

In the first quarter of 2008, 135 Israeli high-tech companies raised $617m from venture investors - both local and foreign. The amount raised was the highest in seven years, 52% above the amount raised by 121 companies in the first quarter of 2007, and 23% above the previous quarter's amount raised by 115 companies.

"2008 started exceptionally well, demonstrating the strength of the local high-tech industry," said Zeev Holtzman, Chairman of IVC Research Center and Giza Venture Capital. "A relatively high number of high-tech companies took advantage of the momentum built up in 2007 and raised significant capital based to the premise that ‘one should raise money when one can and not when it's needed.' Capital raising activity will probably moderate in upcoming quarters. Yet, we expect that the $1.6b average investment level of the last few years will be maintained in 2008."

Ninety-six companies attracted more than $1m each. Of these, 29 companies raised between $5m and $10m each, 14 companies raised between $10m and $20m each, two companies raised between $20m and $30m each, and two companies raised more than $30m.

Israeli VC Investment Activity

In the first quarter of 2008, Israeli VCs invested $262m in Israeli companies, 53% more than in the first quarter of 2007 and 84% above investments made in the previous quarter (Q4 2007). "We haven't seen such high figures since the first quarter of 2001." said Efrat Zakai, Director of Research at IVC. "The quarter was characterized by a high level of investment by Israeli VCs, as six funds each invested more than $15m."

The Israeli VC investment share of the total capital invested was 43%, very close to previous year's average of 42%. First investments accounted for 42% of total dollar investments by Israeli VCs in Q1, compared with 51% in the first quarter of 2007 and 33% in Q4 2007. The average First investment by Israeli VCs was $2.6m, while the average Follow-on investment was $1.2m.

IVC Research Center (http://www.ivc-online.com) is Israel's leading research center providing business leaders with an unmatched wealth of data on Israeli venture capital, private equity and high-tech industries. IVC products and services are used regularly by venture capital funds, private investors, high-tech companies, financial investors and institutions, as well as public entities such as the Office of the Prime Minister, the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist. IVC publishes the most comprehensive guide to Israeli venture capital and high technology companies - the IVC Yearbook. Among IVC products and publications are the Quarterly Survey, which examines capital raising trends by Israeli high-tech companies; the quarterly Israel Venture Capital Journal (IVCJ), which reviews developments in the venture capital, private equity and high-tech industries; and a comprehensive online database (www.ivc-online.com) containing over 6,000 Israeli high-tech companies, venture capital funds, investment companies and technology incubators, as well as news updates and lots more. (IVC29.04)

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11.3 LEBANON: Driving Force

Lebanon's car dealers are hoping the automotive sector can buck the slowdown seen across the country's economy, with strong sales in the first quarter building on a year of solid growth in 2007. Or, so says the Oxford Business Group. According to figures released by Lebanon's Association of Automobile Importers (AAI) in the beginning of April, 5,274 new cars were sold in the first three months of 2008, a 69% increase on the 3,179 sold during the same period in 2007. Though sales in the second two months were somewhat down on of the 2021 units sold in January, they still averaged more than 1,600 units, well above the corresponding months for 2007.

These strong figures continue a trend from 2007, which saw a 23.3% increase in sales over the preceding year, the AAI reported in February. While the total lack of imports in the middle of 2006 due to the conflict with Israel must be factored into last year's increase, the sales figure of 18,687 units was not far short of the record set in 2004, when 19,105 vehicles were driven out of the showrooms.

As was the case in the first quarter of this year, 2007 sales were dominated by smaller and lower-priced vehicles. Just under 50% of all sales were of Japanese-made cars, followed by European cars with 25% of sales and South Korean models taking third place with 17%. The shift to smaller models, which are more fuel-efficient and subject to lower sales and registration taxes than more powerful versions, reflects a certain caution on the part of buyers, wary of high prices and running costs.

Pierre Boustany, chief operating officer at BUMC, a dealer in Lebanon, said cost, rather than political or security concerns, remained the main determining factor with car buyers. "They are still confident to buy cars," Boustany told the local press in February.

One of the big winners in terms of sales last year was Rasamny Younis Motor Co (RYMCO), which saw sales improve by 76%, mainly due to the popularity of its Nissan range. The company also became Lebanon's leading importer of vehicles, accounting for 21.38% of all cars brought into the country last year, according to a report by Blom Bank released in April. However, despite the confidence of dealers in their clientele, there are some questions as to whether Lebanon's renewed love affair with the automobile will continue at the same pace.

A consumer confidence survey conducted in March reflected concerns over the economy, with the consumer confidence index falling to 69, down from the 81 of February. Any rating below 100 indicates a negative level of confidence among consumers. According to Ara'a, the firm leading the monthly study, the decline was mainly driven by a fall in current and expected personal income levels. This was followed by increasing commodity prices and the drop in the value of the US dollar, widely used as the country's second currency.

A number of other factors may also impact on new car sales in Lebanon. The continuing downturn in the tourism industry could further hit at rental fleet sales, for example. So too could a slowing down of the economy, with the International Monetary Fund forecasting GDP growth of 2% to 3% for this year, down from the 4% of 2007. Despite all this, Lebanon's public is still buying new cars in increasing numbers. Even with a slowing growth rate, ongoing political instability and a lack of faith in the immediate future of the economy, sales remain strong, with little sign they will ease down a gear. (OBG23.04)

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11.4 KUWAIT: Moody's Publishes First Banking System Profile on Kuwait

Kuwait's banking system is one of the most robust in the Gulf region, benefiting from the country's outstanding economic performance in recent years as well as a fairly effective supervisory framework, which - despite some drawbacks - has been very successful in restoring confidence in the system since liberation and nurturing its development, says Moody's Investors Service in its first Banking System Profile for Kuwait, published on 22 April.

"However, despite the recent economic growth, Kuwaiti banks face some challenges relating to the operating environment in light of the country's relatively undiversified economy, in which oil-related activities generate half of GDP. This results in the Kuwaiti banks having limited non-oil related exposures and sizeable balance-sheet concentrations, both to the oil sector and to individual entities." says Stathis Kyriakides, a Moody's Analyst and author of the report.

Moody's new Banking System Profile for Kuwait forms part of a new series of reports on banking systems throughout the world, which are designed to complement the rating agency's Banking System Outlook reports by serving as descriptive reference guides to key structural factors that are reflected in Moody's bank credit ratings.

Kuwait's domestic banking system is relatively saturated, with 16 banks - including Islamic financial institutions, specialized banks and branches of foreign banks - competing to serve a total population of 3.4 million, only a third of which comprises the banks' traditional retail target market. Conventional banks have historically dominated the financial system. To date, Kuwait Finance House has been their primary Islamic competitor but other Islamic financial service providers are set to pose increased competitive pressures. Moody's views the conventional banks' position as defensible, despite the central bank restriction on them tapping the Islamic segment.

'In recent years, a number of non-bank financial institutions have emerged as key market participants in Kuwait, in response to which banks have been expanding their investment banking, asset management and ancillary financial operations. Local banks have to date enjoyed the support of the regulator, i.e. the central bank, which has been unwilling to open up the market to foreign banks to an extent that would constitute a threat to the local banks' retail franchise. However, the central bank now believes that domestic banks are ready to withstand direct foreign competition and is currently in support of amending the banking law to lift the one-branch-only restriction applied to foreign banks,' explains Mr. Kyriakides.

The independence of the central bank's supervisory authority is well established, but Moody's is concerned that political pressure may have a bearing on central bank regulations. Although regulatory standards have been consistent with best common practices and the central bank has developed a prompt corrective action framework, the current regulatory burden is considerable. 'Overall, the framework for banking supervision and regulation in Kuwait has proven successful in addressing the country's needs following liberation. Nonetheless, given substantial changes over the past five years, it is still fairly new and developing and the regulator would need to ensure that it continues to adapt to changing industry demands, particularly as the sector evolves and the nature of Kuwaiti financial institutions' business becomes more complex,' cautions Mr Kyriakides.

Over the longer term, greater institutionalization of the reforms, transparency of enforcement practices and formalization of processes would be indicative of a more stable and mature bank regulatory and supervisory framework. Moody's considers systemic support expectations for Kuwaiti banks in general as high, based on the state's ability and willingness to support the banking sector, the importance of the banking system in the country's development, the absence of a deposit insurance scheme as well as the country's track record of support. (Moody's22.04)

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11.5 KUWAIT: Pharmaceutical Market to Reach a Value of $550.6 Million by 2012

Research and Markets (http://www.researchandmarkets.com) announced that the Kuwait Pharmaceuticals & Healthcare Report provides independent forecasts and competitive intelligence on Kuwait's pharmaceuticals and healthcare industry.

Kuwait's pharmaceutical market was estimated to be worth $332.8mn in 2007 and should grow at around 10% year-on-year (y-o-y) to reach a value of $550.6mn by 2012. Market growth, as in other Gulf Co-operation Council (GCC) states, should be underpinned by an expanding population and an epidemiological shift towards chronic non-communicable diseases. Kuwait's oil reserves should continue to underpin economic growth through the forecast period, ensuring per capita incomes continue to grow. As in other Gulf states, a trend for more cost-conscious government health policy is emerging that may serve to dampen pharmaceutical growth, particularly in the patented drug sector. However, the private sector, which has grown in strength over the past few years, should take a more prominent role in its place.

Government policy, combined with increased awareness of the bioequivalence of generics should allow the generics market to grow strongly over the forecast period, beating the overall drug market growth trend to account for 18% of the total market by 2012. This growth should provide an opportunity for the country's small domestic manufacturing sector, which consists of state-owned Kepisco. However, due to ever increasing GCC integration, BMI expects imports to account for most new sales. The GCC common market should allow gulf drug makers in particular to take advantage.

In BMI's updated Business Environment Ratings, Kuwait received a score of 52, down three points from Q1/08. The lower score resulted in a fall of two places in the Middle East and Africa (MEA) rankings table to fifth position out of 14 markets surveyed. Their assessment was downgraded after new data which suggested that Kuwait's pharmaceutical market had grown less quickly than expected in recent years. In terms of market risk, our assessment of Kuwait's business environment remains unchanged. Healthcare is provided largely free of charge to Kuwaiti citizens. However, an aging population with a significant chronic disease burden is expected to force the government to avail itself of some of the financial responsibilities. (R&M22.04)

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11.6 BAHRAIN: Development Strategy Unveiled

The Oxford Business Group reports that Bahrain has linked its aspirations to be a major economic power in the Gulf region with a fully mapped out development plan for the kingdom's infrastructure. The country's new National Plan is intended to serve as a blueprint for progressing the country's economy up until 2030, said Sheikh Hamed bin Mohamed Al Khalifa, the assistant under-secretary for urban planning at the Ministry of Municipalities and Agriculture. "The National Plan is the most comprehensive study ever undertaken to assess the planning requirements of 21st century Bahrain," Sheikh Hamed told local press on April 16. "It is a comprehensive national land use program that will transform Bahrain into one of the world's most highly regarded island nations."

Under the plan, self-contained regions are to be linked with their own health, education, commercial and leisure services through modern transport networks and highways, while a nationwide program of zoning will clearly identify specific areas for commercial, residential, industrial and tourism development. While the infrastructure plans and the development of social services needed to support the community are key, it is the zoning process that will be of greatest interest to private sector investors.

This process was taken a step closer to completion on April 16, when Municipalities and Agriculture Affairs Minister Mansoor bin Rajab announced that a project to classify all developed areas in Bahrain had been completed. "This is the first time in Bahrain's history that areas are classified, rather than depend on officials to decide what land can be used for residential or commercial purposes," the minister said. "This will allow more opportunities to investors, whether in Bahrain or abroad, as they would know in which areas they can invest." According to Sheikh Hamed, the full nationwide zoning process will be completed in May.

One of the key components of the national plan is the state working in partnership with the private sector, said Bahrain's Fahmi Bin Ali Al Jowder, Bahrain's minister of works. This will overcome one of the difficulties faced in the past, which was not the strategic planning process itself but the execution of those plans, he was reported as saying on April 17.

The question of execution has been a thorny issue in Bahrain, with the country's construction boom at times leading to unforeseen complications. Some coastal developments have been blamed for a rise in pollution off the waters surrounding the island while there have been accusations that dredging for new marinas and the construction of bridges spanning waterways have damaged the sensitive environment and harmed fish stocks vital for the aquaculture industry. There have also been claims that a failure by officials to enforce building regulations has resulted in unsafe structures being erected, potentially putting the public at risk.

Mazen Al Umran, the chairman of the Association of Consultant Engineers, said that the majority of construction projects in Bahrain are not being supervised by qualified consultants as mandated by law. While what he described as "cowboy" consultants were having design approval granted by municipalities overnight, legitimate consultants had to wait up to six months to have projects cleared by municipal authorities. "What we are seeing is that most of the worksites do not even have the name of the consultant mentioned, let alone the site being supervised," Al Umran told local press on April 17.

With the new National Plan calling for a massive increase in construction and infrastructure spending by the state, as well as laying the groundwork for further expansion of the private sector, concerns over quality control can only be heightened. Although no exact figures have been released about the funding to be allocated to the projects that comprise the national plan, it will be extensive. An indicator of this is the massive increase in spending by Bahrain's ministry of works, which will be one of the key players in implementing the new strategy. Last year, its expenditure on projects amounted to $660m, up from the $92.5m in 2002. With more projects on the drawing board, the budgets of the ministry and other state agencies are set to increase, with a direct flow onto the private sector. (OBG25.04)

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11.7 UAE: Dubai - Looking East

Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai, visited China earlier this month to cement business ties between the two rapidly emerging markets. The visit, reported by the Oxford Business Group, saw the United Arab Emirates (UAE) delegation discuss cooperation in a variety of sectors. It could give a push to ongoing negotiations for a free trade agreement between China and the Gulf Cooperation Council (GCC).

Trade between the UAE - and in particular Dubai - is growing at a rapid pace. Non-oil trade growth between Dubai and China has been consistently above 30% since 2004, and last year hit 47%, according to Dubai World. The total volume of trade between the two is now worth almost $20bn a year and all the signs point toward continued strong growth. China is Dubai's second largest trading partner, and its 12th largest market for exported goods.

However, much of the current trade is one-way. Of Dubai's estimated $45bn of non-oil exports, only around $180m find their way to China. By contrast, Dubai imports around $19bn of goods from China every year and the volume is growing. China is also not a significant consumer of the UAE's oil: OBG estimates that UAE oil exports to China in 2007 ran to no more than 60,000 barrels per day (bpd) - significantly lower than China's imports from Angola, Saudi Arabia, Iran, Russia and Oman.

Given that the UAE is the world's third-largest oil exporter, this represents a lower than expected share of the Chinese market. As oil reserves dwindle and domestic consumption increases, however, China is likely to significantly step up its oil imports from the Gulf, and imports from the UAE could reach as much as 600,000 bpd by 2025, according to the local press. China has recently made moves to increase the amount of Gulf involvement in its domestic petrochemicals sector: a $5bn joint-venture Kuwait Petroleum refinery in Guangdong, South China, was approved last December, and China is keen to involve Kuwait in a major oil storage terminal with National Aviation Fuel Holdings. The UAE will no doubt be interested in similar joint projects.

However, as might be expected from a city that is becoming renowned for its entrepreneurial spirit, it is in the field of business that Dubai is making the most immediate progress. Dubai International Capital (DIC) announced on April 14 that it would be partnering with China's First Eastern Investment Group in establishing a new fund, China Dubai Capital, to invest in Chinese companies. The new fund is expected to raise $1bn in capital and hopes to increase the listing of Chinese companies on the Dubai Securities market.

Leading Dubai-based real estate developers Emaar are also looking to increase their involvement in China. During the UAE delegation's visit, Emaar's chairman Mohamed Ali Alabbar signed a memorandum of understanding (MoU) with Shanghai China News Enterprise Development to explore mixed-use property and infrastructure developments. Emaar was the first Middle East-based developer to establish an office in China in 2006.

For the time being though, China's most important role in Dubai's economy may be to keep a lid on inflation, which estimates put in the region of 10% for 2007 - a figure that is on the rise. The dwindling global purchasing power of the dollar, to which all the currencies of the GCC except the Kuwaiti dinar are pegged, is playing a part in driving up consumer price inflation in Dubai. The artificially low Chinese yuan, by contrast, is helping in minimizing the effects of the dollar slide, while for China's part continuing strong demand in Dubai is helping to offset the effects of a drop in consumer confidence in other developed markets.

It seems likely that links between the two countries are likely to continue their rapid growth into the future; Dubai offering a dependable market and trading partner, and China offering a source of cheap consumer goods and a relatively untapped market for venture capital and real estate development. (OBG17.04)

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11.8 UAE: Northern Emirates - Clean break?

The last few weeks have seen a shake-up in the organization of healthcare in the United Arab Emirates (UAE), and in particular the Northern Emirates. The Oxford Business Group reported that the Ministry of Health (MoH) has handed over responsibility for day-to-day administration of public hospitals to a new body, the Emirates Health Authority (EHA). The EHA is currently awaiting formal approval by the Federal National Council (FNC). Until then, an executive committee is taking over the role of service provider.

The new structure will allow the MoH to concentrate on licensing, supervising, auditing and legislating, and bring the UAE in line with international practice. Perhaps more importantly, it will bring the Northern Emirates in line with their larger neighbors Dubai and Abu Dhabi, whose own health services are currently administered by independent bodies.

Under the new system, supervision of healthcare will be divided into three new offices: Support Services, including human resources and legal affairs department; Licensing, which will include the registration and accreditation of new drugs; and Public Health Policy, which will deal with the state response to disease control, health insurance and regulation. The chief executives of each office will fall under the authority of the director general of the MoH.

Despite the reform, rumors are beginning to circulate that Sharjah, the third largest emirate in the UAE, may imitate Dubai and Abu Dhabi by breaking away from the federal MoH, and form its own independent authority. According to unnamed sources within the ministry, friction is building over current funding measures for the emirate, which some Sharjah officials feel do not adequately compensate what they say is the highest hospital footfall in the Northern Emirates.

In particular, reports state that some hospitals are worried the EHA will "short-change" Sharjah's facilities. Under the new system, which sees an increased role for the private sector, Australian consultants VHA global have taken over the management of some of Sharjah's largest facilities. The introduction of private health care to the remaining emirates (Abu Dhabi has already implemented it) is likely to see the role of the private sector expanded further. Sharjah may feel that in such a climate, it will be better placed to regulate its own healthcare provision directly.

Two of Sharjah's main hospitals - Al Qassimi and the new teaching hospital due to open this year - already have independent boards of directors and maintain their own budgets, meaning that the need for further localization is perhaps overstated.

According to Dr Alan Sandford of Al Qassimi Hospital, there are no immediate plans for breaking from the MoH. "We are developing more autonomy, but as far as I am aware we will continue to remain part of the ministry," he told news agencies.

Regardless of the future of healthcare supervision in Sharjah, the MoH has some ambitious plans for the UAE's health provision. Over 35 initiatives are due for implementation over the next three years, including the establishment of an electronic network to link hospitals and health centers, and the development of a national health database to hold patients' records. Individual emirates such as Ras Al Khaimah have also earmarked as much as $2bn over the next five years to upgrade their healthcare facilities.

Perhaps the greatest healthcare challenge facing the UAE in coming years though will be addressing public awareness of non-communicable diseases such as cardio-vascular disease and diabetes. As much as a quarter of the UAE's population has some form of diabetes according to the World Health Organization. Addressing issues such as these will require the development of a unified policy by the federal government: creating the EHA should give the ministry of health sufficient space to do so. (OBG16.04)

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11.9 OMAN: Targeting Aluminum

Oman is poised to become one of the leading producers of aluminum in the Middle East, with a new plant at Sohar due to come on line in June. Attention is now turning to building up markets for the sultanate's aluminum output, as well as developing domestic downstream industries to make use of the bounty. Sohar Aluminum's $2.4bn greenfield smelter project is scheduled to begin production in June, with a projected output of 350,000 tons. When at full capacity, the plant is expected to contribute 2% to Oman's gross domestic product (GDP).

Speaking at a recent conference of aluminum foil producers in Muscat, Maqbool bin Ali bin Sultan, Oman's minister of commerce and industry, said the aluminum industry represented a plank in the sultanate's long-term plans for achieving economic diversification and reducing dependence on oil. Bin Sultan said the sultanate's industrial strategy "lays emphasis on mega industries that will provide long-term benefits for the economy".

In mid-April, one of the new smelter's potential clients, Oman's National Aluminum Products Company (NAPCO), announced it was going to invest $10.5m to increase its production capacity by 50%, from the present 16,500 tons per annum. In a statement issued on April 16, NAPCO said high demand over the past two years and the positive response by clients to its products had prompted the planned expansion.

The expansion program is the second in five years for the company, having spent $7m since 2003 to bring output up from the 8500 tons a year it produced at that time. Such has been the success of the company that NAPCO announced in its annual report for 2007 that its entire production capacity had been essentially sold out for 2008 well before the year had begun.

However, in a report issued late February, NAPCO warned that there were a number of concerns on the horizon, including increasing competition for skilled labor, which could push up wages costs, along with the ever-present threat of rising prices for raw materials. To some extent, the fears raised over labor shortages and a potential wages blowout can be attributed to the growth of the downstream aluminum sector in Oman and the region.

To support this growth, Oman's Public Establishment for Industrial Estates (PEIE), which manages the Sohar Industrial Estate (SIE), is looking to add to the 1,900 hectares it has in its hands at the moment. Of this, 742 hectares located next to the Sohar Aluminum smelter have been set aside for the development of a downstream aluminum industry cluster.

In March, Salzburger Aluminum Sohar, a joint venture between the Takamul Investment Company, a subsidiary of Oman Oil, and Salzburg Aluminum AG, began production of aluminum busbars at its new plant at Sohar. The plant has an initial production capacity of 30,000 tons a year, to be increased to 60,000 tons in its second stage. Located in the SIE's aluminum cluster, the company will buy materials from the neighboring smelter, exporting its finished busbars to Arab countries and to Indonesia, Malaysia and South Africa.

In December, Takamul and the Oman Cables Industry announced they would jointly develop a plant to aluminum rods and electrical conductors, with production due to commence in the first quarter of 2009.

However, while developing both upstream and downstream industries, Oman will face increasing competition in the region. Apart from the existing aluminum smelters in Dubai and Bahrain, Qatar, the United Arab Emirates and Saudi Arabia are all building new processing facilities. These are all intended to support domestic aluminum downstream industries as well as generate exports. While this regional rivalry to build smelters could result in oversupply of raw material, this should not affect downstream firms such as those in Oman, who could actually benefit from the competition between producers keen to make sales and lock in contracts. (OBG21.04)

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11.10 SAUDI ARABIA: Oil Lid On

Saudi Arabia's decision to call a halt to major new oilfield developments has added to concerns about long-term global oil supply, following indications that Russia's plans to boost its crude output had hit the buffers. The Saudi moratorium on net increases in capacity from 2009 onwards comes after a period of unprecedented investment in the kingdom's upstream oil industry, and the oil minister's argument that there is little sense in committing resources to developing capacity that may ultimately be unnecessary is not unreasonable. However, the decision will add grist to the mill of peak oil theorists, who will no doubt argue that it reflects Saudi Arabia's own anxieties about the sustainability of its oilfields.

The oil minister, Ali al-Naimi, said in an interview with Petroleum Argus, an industry newsletter, that once the current program of lifting capacity to 12.5m barrels/day is completed in 2009, there will be a pause before any major new projects are undertaken. Saudi Arabia's oil production strategy has for many years been based on maintaining about 2m b/d of spare capacity to be deployed in the event of sudden disruptions to global supplies. The kingdom is currently producing about 9m b/d. Mr Naimi said that most projections of world oil demand growth now pointed to a slowdown, and he suggested that Saudi capacity of 12.5m b/d was likely to be sufficient up to 2020.

It had previously been assumed that Saudi Arabia would consider a second phase of expansion projects to bring capacity up to 15m b/d by the end of the next decade. World oil demand is currently about 86m b/d, and is projected by the International Energy Agency (IEA) to increase by just over 1% per year on average up to 2030. In order to satisfy extra demand of this magnitude, production would need to rise by some 20m b/d across the world. Saudi Arabia, which accounts for one-fifth of global oil reserves, would be expected to make a major contribution to filling the gap.

However, the IEA's current projections for long-term demand are significantly lower than its earlier forecasts, and there is a growing consensus in the oil industry that demand could well peak at around 100m b/d owing to supply constraints, high prices and the development of viable alternatives. Mr. Naimi emphatically rejected the notion that the recent surge in oil prices over $110/barrel meant that OPEC should supply more crude to the market now. As far as OPEC is concerned there is plenty of oil available, and the price is being pushed up as a result of the headlong flight of global investors into commodity futures.

Pick & Mix

The Saudi expansion program started in 2004, after it had become apparent that previous estimates of global oil demand were about 3m b/d short of what was actually being consumed. Saudi Aramco, the national oil company, was able to make swift progress with its new upstream projects because most of them are based on reviving operations in fields that had been initially discovered in the 1950s and 1960s, but which had either been mothballed or left dormant because there was sufficient output from other fields. Earlier plans to move ahead with some of these projects were also affected by budgetary constraints during the 1990s when the oil market was volatile, with prices touching a low of $10/b in 1998. The sharp rise in oil prices since 2003 has meant that Saudi Aramco faced no such constraints in financing its current crop of development projects, even though costs of materials and services have gone through the roof.

The first major project to come on stream will be the 500,000-b/d Khursaniyah field. Its start-up has been delayed by several months, but the speed of its execution still compares very favorably with similar-sized projects elsewhere in the world. Early next year a 250,000-b/d expansion of the Shaybah field in the Empty Quarter is scheduled to come on stream (it is not clear whether plans to add a further 250,000 b/d will now go into effect), and Khurais, with capacity of 1.2m b/d is scheduled to follow by the end of 2009. Work is also going ahead on the 900,000-b/d Manifa project, but Mr. Naimi indicated that this is considered as a replacement for output declines elsewhere, rather than a net addition to capacity.

Peak Oilers

Saudi Arabia's ability to continue to play the role as the linchpin of the global industry has been challenged by a small band of dissenters. The most outspoken is Matthew Simmons, an investment banker, who has conducted exhaustive research of historical source material on the state of Saudi Arabia's reservoirs and reached the conclusion that the kingdom's five major fields - which account for some 90% of total production - are nearing exhaustion and that production will soon start to decline drastically. Mr. Simmons has put himself forward as the Cassandra of the global oil industry, but his analysis is hard to verify or conclusively to debunk given the reluctance of Saudi Aramco to open up its current data resources and the reticence of the company's pre-nationalization partners (Chevron, Texaco and ExxonMobil - whose shares were taken over in 1979) to make any comment based on their extensive knowledge of Saudi reservoirs. Mr. Simmons bases his analysis in his 2005 book, Twilight in the Desert, on the lack of major new oilfield discoveries in Saudi Arabia since the 1960s and on the increasing use of water injection to sustain production in the older fields, in particular Ghawar.

Inside Track

A more measured, and perhaps ultimately more credible, dissenting view has come from Sadad al-Husseini, who retired from his position as senior executive for exploration and production at Saudi Aramco in 2005. Mr. Husseini has rejected any suggestion that Saudi oil production has peaked, and he has described the current target of increasing capacity to 12.5m b/d as realistic. However, he has made clear in a number of media interviews and conference speeches that he foresees serious problems in sustaining production at significantly higher levels in the future. If the revised demand projections on which Mr. Naimi is basing his strategy are correct, there should be little cause for concern as regards the sustainability of Saudi output. (EIU21.04)

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11.11 SAUDI ARABIA: National Transport Strategy

The Oxford Business Group writes that while Saudi Arabia is a lucrative destination for car manufacturers, the ministry of transport is determined to reduce the kingdom's heavy dependency on automobiles, highlighting the development of rail and aviation links as pivotal for the country's long-term transport strategy.

Saudi Arabia's young and rapidly growing population is one reason for the high expectations for the car sector within the kingdom. In 2006, 40% of the population was in the 15 to 34 age bracket, while 38% were aged 14 years or younger. With this demography of young, large families it is understandable that the passenger car segment contributes to around 73.3% of the total revenue in the market, according to American research firm Frost & Sullivan.

A nation the size of Saudi Arabia, with a population of 22.7m people spread over an area of 2.15m sq km, is an obvious target for car manufacturers. Saudi Arabia is the largest market in the region and currently has no car assembly facilities, meaning international automotive companies are courting the kingdom through heavy marketing and the introduction of new models and technological advancements. With a nominal GDP rate that has nearly doubled in the last six years and a high ratio of cars per household, an ever-increasing number of vehicles are now on the road.

However, a quickly expanding population and increased car use have led to widespread traffic congestion and strain on the kingdom's road infrastructure. On April 1, the minister of transport, Jobarah Al Suraisry, announced that his ministry had drawn up an integrated strategy to reduce heavy reliance on motor vehicles, which would involve the promotion of the railway and aviation segments. "We consider this very important at the ministry and we believe once we have expanded our railway network that we will reduce the need for a large number of cars on the roads," Al Suraisy told OBG.

Railway expansion has been gaining momentum recently. At the end of March, Abdul Aziz Al Hoqail, president of the Saudi Railways Organization, announced that feasibility studies were being conducted for the construction of two new railway lines. One new line would connect the summer resort of Taif and southern city of Khamis Mushayt with the east-west land bridge, currently being developed, while the other would link Jeddah with the southern city of Jizan.

Meanwhile there have been new developments in the land bridge project, which will eventually connect Jeddah and Dammam. The plan involves the construction of a new 950-km rail line between Jeddah and Riyadh and Al Hoqail said officials were studying proposals for this segment by four qualified consortia, with the winner of the $5bn contract to be announced in May.

In addition, a high-speed rail project to connect the cities of Mecca, Jeddah and Medina is expected to play a pivotal role clearing the highways of the western region. King Abdullah bin Abdulaziz Al Saud, Custodian of the Two Holy Mosques, approved the idea in February, and Al Suraisy announced in late March that work on the project is set to start by the end of 2008. The project will cost around $5.2bn and involve around 500 km of track. It will be "executed next year and will open for service soon thereafter," Al Suraisy said.

Although there are a number of impressive railway investments underway, it will be some time before the necessary infrastructure is completed. With this in mind, the ministry has highlighted aviation as another area for promotion. With the kingdom having liberalized the aviation sector, licensing two new low cost domestic carriers, Sama Airlines and Nas Air, many industry experts believe air transport will play the most significant role in the country's transport strategy.

Ahmed Jazzar, president of Boeing Saudi Arabia, told OBG, "[Saudi Arabia] is a huge country, with no significant railway yet and no water channels. This means aviation is the only efficient means of transportation in the country." Domestic and international travel have surged in the kingdom in recent years. More than 33m passengers passed through Saudi Arabia's 27 airports in 2006 alone. According to the International Air Transport Association, regional carriers saw a 15.4% increase in overall demand during the first nine months of 2007.

Naturally, the exponential growth in passenger numbers in the region will mean airlines will have to continue to invest in increasing their capacity. "This means 1,160 new planes, at a conservative cost estimate of $190bn, will be needed in the Middle East by 2028," Jazzar told OBG. (OBG16.04)

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11.12 EGYPT: Food Challenges

Faced with rising food prices and increased social instability, the government has decided to act on several fronts. Following its ban on rice exports, the Oxford Business Group said Cairo announced it will reduce the area allocated to rice crops and increase corn production. The move to reduce rice crops was announced by Minister of Agriculture Amin Abaza, who justified the decision with the need to enhance water usage in agricultural production. "Rice consumes more water and we want to make sure we are using our water in the most efficient manner," Abaza was reported as saying during a state visit to India.

Egypt currently produces 4.6m tons of rice annually and consumes 3.2m tons only. It is Africa's largest rice exporter. However, the biggest challenge to local consumers is not the availability of rice but its rising price. Food prices, which represent more than 40% of the consumer basket, rose annually by 20.5% in March, up from 16.8% in February, with the price of a 1kg bag of rice doubling from £E2 to £E4 since the beginning of the year, according to the government's statistics agency CAPMAS.

To increase supply in the domestic market, the government has banned rice exports for six months starting April and removed last month import tariffs on 20 good items. The increase in international demand for rice in the last few years has pushed market prices up, luring Egyptian exporters to increase the amount of exported rice, from 700,000 tons in 2006 to 1m tons in 2007. Had the ban not been imposed, this figure would have reached 1.3m tons in 2008. Nader Noureddin, of the faculty of agriculture at Cairo University, believes that the export ban is already having an impact: "Without the ban, rice prices would have tripled in the local market, like they did internationally," he told OBG.

In another measure to keep a lid on food prices in the local market, Egypt plans to increase corn plantations by 400,000 acres to 2.1m acres. By 2018, the area allocated to corn production is expected to reach 3m acres. Egypt imports 4.5m tons of corn annually and aims to reduce its dependency on international markets by boosting local output.

Local corn prices have also been affected by the poultry industry, which uses the grain as feedstock. Grain prices in Egypt rose year-on-year by 48.1% in March, up from 27% in February, and food oil by 45.2%. Corn bread is one of the main food items subsidized by the government to feed millions of poor Egyptians. About 85 % of the country's bread is subsidized and the country is arguably the world's biggest consumer of bread, with each Egyptian eating 400gr. of bread a day.

However, some bakery owners are selling the subsidized flour on the black market at a higher profit instead of using it to produce bread. Seven people have died in clashes in bread lines so far, according to local media reports. As a result, up to 12,000 people have been arrested across the country and will face justice over selling flour illegally. Meanwhile, to increase bread output, President Hosni Mubarak has ordered the army to use its ovens to bake more bread.

The problems with bread distribution have been exacerbated by increases in the price of wheat internationally and an inflation rate that rose to 14.4% year-on-year in March, the highest in three years, from 12.1% in February and 10.5% in January. Egypt is one of the world's biggest importers of wheat, sourcing around 50% of the annual 16 m tones it consumes from international markets, but the government aims to reduce imports of wheat to 45% of total annual consumption.

Overall, the different measures taken by Egyptian officials regarding food production and distribution are part of a strategy to fight rising food prices within the local market while reducing dependency on external food markets. The elimination of import tariffs on several food products, combined with reduced food exports, aims to increase domestic supply and fight inflationary pressures. But ultimately, enhancing agricultural production is the only measure that can help the country become self-sufficient. "We currently import about 40% of our food from international markets," Noureddin told OBG. "In the short-term, Egypt has to increase its production of basic foods," he added. (OBG24.04)

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11.13 EGYPT: Bread On The Table

It is now more than 30 years since Egypt erupted in riots sparked off by an increase in bread prices, an event that weighed heavily in the calculations of the late president, Anwar Sadat, when he decided to sue for peace with Israel, thereby gaining access to generous amounts of American food aid. Egypt once again is in the throes of a bread crisis, and the government is rattled. The Egyptian economy is in much better shape now than it was in 1977, but the regime of the veteran president, Hosni Mubarak, who assumed power when Mr. Sadat was gunned down by Islamists four years after his historic visit to Jerusalem, faces a growing threat to its political legitimacy. This was starkly exposed in the local elections on April 8th, in which opposition forces were frozen out, and the ruling party took some 99% of the council seats with a pitiably low turnout.

Inflation Curse

The government team that Mr. Mubarak appointed in 2004 has won deserved credit for its effective management of economic policy, which has helped to achieve real GDP growth rates averaging some 7% and has pulled in record levels of foreign direct investment (FDI). However, its efforts to foster more equitable wealth distribution, for example through improving access to low-cost housing, have yet to make much of an impact on the grinding poverty experienced by large swathes of the Egyptian population. A relatively expansionary fiscal policy has stoked up inflation, a problem that was exacerbated last year by cuts in fuel subsidies and has grown worse recently owing to the surge in international food prices. Year-on-year urban inflation reached 14.4% in March, the highest level since 2004.

The recent rise in international wheat prices has inflated the cost of non-subsidized bread, forcing more citizens to buy the subsidized product, paying £E1 (US$0.18) for 20 small loaves. (Around one-fifth of Egyptians were living below the US$2/day poverty line in 2005, according to the World Bank.). At the same time, the rising differential between the subsidized and real value of flour has encouraged fraud and hoarding. The result has been lengthening bread queues at the country's 18,000 bakeries. Several people have been killed in fights in the queues, drawing negative attention from the international media.

Mr. Mubarak has sought to deal with the problem by instructing the army to maximize production from its own bakeries. The prime minister, Ahmed Nazif, and his economic policy advisers have come up with a range of other measures to deal with the situation. These have included separating the production of bread from its distribution, making it more difficult for bakeries to divert loaves onto the black market. Mr. Nazif said on April 10th that 11,226 bakeries had so far complied with this new regulation.

The trade and industry minister, Rashid Mohammed Rashid, has also waived import duties (currently around 5%-7%) on rice, dairy products and cooking oils, as well as imposing a ban on exports of rice and cement. Mr. Rashid's export ban came shortly after he announced a new strategy to regulate internal trade. This is expected to comprise 12 legislative amendments, some of which aim to bring down food prices and discourage anti-competitive activity. The minister is seeking the right to close down shops and businesses that contravene health and safety regulations, and to impose more severe penalties for commercial fraud. A new National Authority for Food Safety will be created, with responsibility for the supervision of food production and trading. Fines for monopolistic trading have been increased tenfold.

Paying Off the Workers

The discontent over food-price inflation and the shortages of subsidized bread have led to worker unrest in the large textiles factories in the Delta. The government initially cracked down hard, arresting a large number of workers at the Mehalla al-Kubra complex. However, this strategy backfired. Thousands of demonstrators flooded the streets of Mahalla al-Kubra, demanding the release of the detainees and clashing with police. Vehicles and buildings were destroyed, and the security forces used tear gas and rubber bullets, killing a fifteen-year-old boy. The government on April 8th sent a high-level delegation to the town to calm tensions, headed by Mr. Nazif. He promised the textile factory workers that he would address their demands, offering bonuses and higher wages. Such a prompt response, on the day of the local elections, showed how seriously the government is taking the crisis.

The government has managed to buy some time with its regulatory interventions and its cash handouts to some of the most disgruntled workers. Its exclusionary approach to elections has also scotched any chance of the Muslim Brotherhood coming to power by constitutional means. However, no one can say with any confidence that the threat of a major explosion of discontent, along the lines of the 1977 riots, has been averted. (EIU11.04)

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11.14 EGYPT: Unrest Underscores Backsliding On Political Reform

Summary

Riots over poor wages and rising prices, along with the disqualification of opposition candidates in local elections, have culminated in surging political and social tensions. However, the government's repressive response continues to impede the formation of a cohesive opposition movement that can seriously destabilize the Hosni Mubarak administration's authority. Fading hopes for political reform have been dealt a new blow by events surrounding the recent council elections. Not only were opposition party candidates prevented from taking part, but they highlighted the extent to which the regime has shaped measures touted under the banner of 'constitutional reform' for the benefit of its own longevity. Calls for political reform from the US have petered out, so there is little incentive for the regime to clean up its electoral practices, lighten its hand with protestors, or open its political system to opposition groups and a strong and independent civil society.

Reform Interruptus

In February 2005, the president, Hosni Mubarak, asked parliament to back constitutional reforms to allow multiple candidates in presidential polls. The move came as a result of US and domestic pressure for political reform in Egypt, a reliable US ally and the most populous country in the Arab world. The US was keen to demonstrate a shift in policy towards the Middle East that would respond to accusations of selective advocacy of democracy to suit its own interests and criticism of its close friendship with autocratic regimes such as those in Egypt and Saudi Arabia.

The US administration urged Mr. Mubarak to broaden the base of political participation in the country, which is the largest Arab recipient of US aid. It also launched the Middle East Partnership Initiative, aimed at supporting grass-roots reformers. However, the US State Department has declined to condemn the regime's actions - despite reports of local council opposition candidates being prevented from obtaining the necessary documents to participate in the recent local election and mass arrests of candidates affiliated with the Muslim Brotherhood, the main opposition group.

The Middle East Partnership Initiative is now seriously under funded, having had its budget slashed from $150mn in 2007 to less than $50m in 2008. The absence of any condemnation from the US means the absence of any real deterrent to prevent the authorities from continuing to use undemocratic means to crack down heavily on political protests sparked by anger over low wages, poor working conditions and rising food and oil prices.

There is no indication that the flow of US aid to the regime will be hindered by the current situation of unrest in the country. Ultimately, the force of the crackdown against demonstrators could intensify further and progress towards true political reform will be firmly off the agenda in the short to medium term.

Strike Wave

The current social and political unrest has erupted out of the biggest wave of public sector worker strikes to take place in Egypt for decades. But unlike the activism of 2004-2005, these demonstrations are not so much motivated by demands for political reform, but by demands for better pay and affordable food and fuel. They are a reaction to worsening economic conditions by disparate groups rather than by an organized and cohesive opposition movement with a decisive political agenda. Hence, it is unlikely that the current protests will put the government under any pressure to effect fundamental political reforms.

Although the government has accused the Muslim Brotherhood of organizing the strikes, this group is not currently in a position to mobilize a mass movement of workers behind a political reform agenda. Following the success of Muslim Brotherhood members standing as independents in the parliamentary elections of 2005, the authorities launched a large-scale crackdown on the organization, with mass arrests of its members and an attack on their financial assets.

Given the uncoordinated nature of the unrest, the regime may be bolstered by a belief that it has succeeded in weakening the effectiveness of the Muslim Brotherhood and other opposition groups, such as the liberal Al Wafd party and left-leaning Tagammu party.

Excuse For Backsliding

In March 2007, proposed constitutional amendments were approved by the Egyptian parliament, which ultimately eradicated protection against violations of privacy, individual freedom and individual security. The changes also removed constitutional requirements that the government should obtain judicial warrants before searching a citizen's home and communications, in cases where its suspects 'terrorist' related activity.

The amendments were touted as part of the regime's political reform drive and President Mubarak's desire to replace an Emergency Law in place since 1981 with antiterrorism legislation. But, not only had the Emergency law already been extended for two years by parliament in May 2006, these new constitutional changes effectively permanently enshrined the exceptional powers granted to the government by the Emergency Law into the constitution.

The new articles were approved by parliament, which remains dominated by the ruling National Democratic Party (NDP) and were then reportedly approved by a public referendum, although turnout was low, at just 27%. Rather than delivering greater freedom of political expression, the constitutional amendments have strengthened the government's mandate to undertake mass arrests and to aggressively suppress the wave of riots over local elections and over worsening economic conditions.

The debacle over municipal elections has exposed the insincerity of Mr. Mubarak's pledges to liberalize political life, thereby deepening a process of political backsliding. It has underscored the President's determination to secure a clear path to presidential succession for his son Gamal, an NDP politician who has taken an increasingly active role in domestic political and economic affairs in recent years.

It seems more obvious now than ever that although Mr. Mubarak's 2005 introduction of multi-candidate presidential elections was facilitated in response to domestic and international pressure for reform, the re-shaping of the system has been dictated by a desire to ensure Gamal's eventual succession.

This year's local polls were the first to take place since the scrapping of presidential referendums on a single candidate nominated by parliament and the introduction of a system to facilitate a multi-candidate race. But the new system has been designed so that presidential candidates have to secure the backing of local councilors in order to be able to run for election. In order to nominate a candidate for the 2011 presidential election, political parties must have the support of at least 10 local councilors in a minimum of 14 provinces.

This is the most likely reason for the reports of Muslim Brotherhood affiliated independent candidates and significant numbers from other non-NDP parties being prevented from registering for selection as local councilors. Obstacles put in their way ranged from administrative hurdles to physical assaults. Muslim Brotherhood candidates (who stand as independents as the party is officially outlawed) decided to boycott the polls the day before it took place.

Of the thousands that attempted to run, only 20 were permitted to do so. Whilst the organization was reticent to legitimize the process by taking part under such conditions, the boycott may well bolster the government's confidence in political persecution as a method for eradicating opponents from political processes and for preventing popular unrest from developing into organized political activism.

Preserving The Regime

The government's heavy handed response to the riots that have erupted this month and its conduct during the local elections are indicative of the its determination to secure the longevity of a Mubarak regime and to avoid any further electoral setbacks after pro-Islamist independents won 88 of the 444 directly elected seats in the lower house of parliament in December 2005. Consequently, their actions are likely to stoke political apathy in Egypt and slow the evolution of broad civil participation in political life. The recent confrontations over local elections have served as sharp reminder that the exclusion of political parties based on religion remains a key component of the government's authoritarian control.

If the regime continues to exclude religious reformers that have rejected violence from political participation, then Egypt's civil society, which is heavily influenced by religious teachings and communities, may become increasingly attracted to the doctrines of militant Islamic movements. It may also encourage religious sectarian strife as the population buckles under the strain of continued economic hardship.

The controversies surrounding the local elections serve as a dangerously timely reminder to Egypt's population of the absence of truly democratic channels for representation in the political sphere. This in turn could lead to heightened security risks in the country, which could impact negatively on the operations of foreign businesses.

It is likely that the government will seek to mollify protestors with promises of improved conditions. It has already extended its food subsidy program to an additional 15 million people and pledged to increase public sector wages. It can also be expected that economic reforms will take a back seat for the time being. Although economic reforms and a resultant increase in foreign investment have been responsible for increasing GDP growth to above 5% over the past three years, they have been deeply unpopular with millions of public sector workers.

Although the prime minister, Ahmed Nazif, has lowered personal and corporate taxes, he has also reduced energy subsidies and privatized several large-scale companies causing an increase in unemployment in certain pockets of the country. Despite impressive economic growth since Mr. Nazif's appointment in 2004, some 20% of the population lives below the poverty line. Critics of the regime have also accused recent economic reforms of widening disparities between the rich and poor. With food price inflation increasing from 16.8% in February to 20.5% in March, it hardly seems surprising that anger has erupted into fierce protests across the country.

The apparatus of the government's control over civil and political life - namely physical repression, state-controlled media, a loyal military that enjoys privileges, a constitution that allows political dissidents to be tried in military courts and allows the violation of civil liberties behind a mask of anti-terrorist legislation - will ensure its grip on power is maintained. This apparatus will also thwart any immediate domestic pressure for the advancement of political liberalization. However, the government is now under severe pressure to apply the brakes to economic reforms during a period of heated political tensions over the deteriorating living conditions of most Egyptians. (EIU22.04)

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11.15 MOROCCO: Shipping Link

The launch of the first direct transport ship line between Morocco and Tunisia is an important step in the growing economic ties between the two countries. However, intra-Maghreb trade remains small and the tension in Rabat's relationship with Algeria remains a stumbling block to freeing commerce in the region.

The opening of the shipping link means that goods transported between the two Maghreb countries no longer have to travel via Marseille in France or Malta. As described by the Oxford Business Group, journey times will therefore be cut to four days from two weeks, significantly reducing costs. The line, between Casablanca and the Tunisian port of Rades, will be managed by two private companies, one from each country, and will be run by a Moroccan-registered ship with a capacity of 70 containers, and 33 smaller motorboats.

The start of the direct line was one of the recommendations made by the Tunisian-Moroccan High Joint Committee, an organization responsible for promoting bilateral relations between the two countries, when it met in February. According to a statement issued by Mokhtar Rachdi, general manager of the Tunisian merchant navy, the growing trade between the two countries required the establishment of the connection.

Air transport is costly and indeed impractical for heavy goods transported in large volumes. Furthermore, a diplomatic spat between Morocco and Algeria has led to the suspension of rail transport between the two countries, and therefore between Morocco and Tunisia. Road links across the Maghreb are currently relatively poor, though the Trans-Maghreb Motorway project is gaining momentum again.

Intra-Maghreb trade accounts for only 4% of cumulative trade conducted by Morocco, Tunisia, Algeria and Mauritania. Disagreements and protectionist measures have limited economic co-operation between them. Algeria's support for the Polisario separatist movement in the Western Sahara in southern Morocco is one particular bone of contention. Additionally, Morocco and Tunisia have established strong trade relationships with the EU, and have concentrated on increasing exports to the Union rather than intraregional cooperation.

According to a recent report by the Tunisian ministry of foreign trade, Tunisian-Moroccan trade was worth an estimated $300m in 2007, while Tunisia's trade with the EU totaled $55bn.

At a recent "five-plus-five" conference of southern EU and North African countries, Spanish Foreign Affairs Minister Miguel Angel Moratinos urged the nations of the Maghreb to work more closely together, and the International Monetary Fund last year highlighted increasing regional trade as a key priority for further growth in North Africa.

There has been something of a thaw in recent years. While trade volumes remain relatively low, authorities hope that initiatives such as the Casablanca-Rades transport line will boost economic relations. The shipping route "will definitely lead to a reduction of costs, and, consequently, to the increase of goods movement," according to Nadia Iraki, head of Morocco's merchant fleet. Tunisian Trade and Handicrafts Minister Ridha Touiti said that "the size of commercial exchanges between Tunisia and Morocco will significantly increase in the coming years". Touiti added that this growth would be supported in part by the Agadir Agreement, which is a free-trade treaty between Morocco, Tunisia, Egypt and Jordan, seen by some as the first step to an EU-Mediterranean free trade agreement (FTA).

Nonetheless, this treaty has encountered problems since it was launched in March last year, as it clashes with Morocco's FTA with the United States, which stipulates strict "rules of origin". The latter limits what can be exported to the US duty-free.

Perhaps most importantly, the Agadir Agreement does not currently include Mauritania or Algeria, through which Moroccan goods transported by land must pass to get to Tunisia and vice versa. Notably, Algerian shipping officials were present at the launch and expressed an interest in developing sea transport links with Tunisia but apparently not Morocco. The first work on the Algerian section of the trans-Maghreb motorway commenced last year. If it is sustained, the infrastructure for greater commerce will exist within a few years. However, a relaxation in trade barriers would be the most important step to supporting greater economic activity between Morocco and Algeria, and therefore the countries beyond. (OBG16.04)

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11.16 TURKEY: The Fund Lives On

As the expiry date of Turkey's $10bn International Monetary Fund (IMF) loan deal approaches, the question of the future role of the IMF in the Turkish economy has been on the agenda for officials in Ankara and Washington. While a new stand-by loan arrangement has been ruled out, the IMF will remain active in Turkey, monitoring fiscal policy and possibly extending emergency loans when needed.

Speaking at a press conference in Washington on April 14, Mehmet Simsek, the minister of economy, said the government had reached an agreement with the IMF regarding a final review of the current stand-by agreement, which expires on May 10. A letter of intent would shortly be drafted and sent to the IMF executive board for approval, he said. Upon completion of the review Turkey will be eligible to draw a final loan of $3.7bn.

The country's outstanding $6.43bn debt to the fund is the largest of the 64 countries to which the IMF provides loans. Given the size of the existing debt, and taking into consideration the average GDP growth of 6.8% over the last five years, the government has decided not take up another stand-by agreement. Instead it will proceed with either a precautionary stand-by deal with access to IMF loans when needed or a post-program monitoring deal with no loan provision. "After [the current agreement expires], post-program monitoring will start automatically. Talks may take place for a cautionary stand-by deal if necessary and the dialogue will be deepened," Simsek said.

Even without a renewed stand-by loan, the IMF still holds an influential voice in the running of the country's economy. Delegations from the fund will continue to visit the country as part of the post-program monitoring phase, providing detailed reports and proposing reforms aimed at boosting growth.

The IMF's $10bn loan to Turkey has played a strong role in its recovery from economic collapse in 2001, and the tight fiscal policies the fund advocates - cutting spending and aiming for high primary surplus targets - have become increasingly desirable given the current economic situation. Turkey's letter of intent to be sent to the executive board, for example, is widely expected to call for social security reforms long championed by the IMF.

Although Turkey has thus far remained relatively sheltered from the effects of the US subprime crisis, a string of troubling economic indicators reveal that the global slowdown, combined with political uncertainty over the future of the ruling party, are taking their toll. Inflation is currently around 10%, far above the government's 4% target. In addition, figures from the Turkish Statistics Institute show that unemployment in the country has grown 0.3% over the last three months to reach 11.3%.

The current account deficit, which totaled $38bn for 2007, is also a concern. Data from the central bank measured the current account deficit for February at $3.7bn, slightly down from January's figure of $3.9bn, but nevertheless an increase of 20% on last year's figure.

The fundamentals of the Turkish economy remain strong, however, and the treasury has the currency reserves to ride out the storm. While the government has indicated the economy has the strength to go forward alone and feels the removal of the IMF crutch would be a positive sign to investors, there are still many in the business community who have said the option of a precautionary stand-by deal, with the option to take another loan, would be the safest option for the immediate future. Many financial markets insiders have said access to IMF funds in times of necessity would be a useful insurance to have, especially since the Istanbul Stock Exchange has been hit in recent weeks by the global sell off.

The continued support of the IMF and its role as an external guarantor is also important for attracting foreign investors, especially since ratings agency Standard & Poor's (S&P) downgraded Turkey's credit rating from stable to negative on April 3 in response to concerns over the political stability of the country. S&P analyst Farouk Soussa told the local media, "Despite its strong economic record, Turkey needs the IMF as an important foreign anchor to regain investors' confidence, which still remains fragile." (OBG18.04)

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11.17 TURKEY: Lira Goes From First to Worst

The New Anatolian observed on 29 April that, as inflation rises and the specter of political instability looms, the gains of the Turkish lira evaporate. The currency gained a record 21% last year, but this year, losses amount to nearly 9%. Analysts agree that 2008 will not be a good year for the New Turkish Lira (YTL). Turkey's ruling Justice and Development Party (AKP) touts the Turkish lira's (YTL) growing "prestige" on its Web site following the currency's record 21% rally in 2007. But those gains are evaporating as inflation and political instability grips the nation. The YTL has fallen 8.8% against the U.S. dollar this year, to 1.2941.

Once-bullish traders lured by a benchmark interest rate of 15.25% are dumping the currency as the Constitutional Court weighs an attempt to remove Prime Minister Recep Tayyip Erdogan and his government from office. The decline is undermining the central bank's efforts to curb inflation, which rose at a 9.2% rate in March, more than any member of the EU. Merrill Lynch and JPMorgan Chase recommend investors either avoid or reduce their holdings of Turkish assets. "It's not going to be a good year for the YTL because of deepening political uncertainty and global risk aversion, which primarily hurts countries with big current-account deficits," said Yarkln Cebeci, an economist in Istanbul at JPMorgan.

Second After the Krona

The YTL's decline since January is more than all emerging-market currencies except the Icelandic krona, which is down 12%, and the South African rand. Trading in options shows the YTL, a bellwether for emerging markets, will be the second-riskiest currency to own over the next 12 months after the rand.

Closing the ruling party and banning Erdogan and President Abdullah Gul from public life for at least five years may mean a return to fractious coalition governments that helped spark a financial crisis in 2001, Jean-Dominique Butikofer, who helps manage about $725m as head of emerging-market debt at Union Bancaire Privee in Zurich, said this month. The risk is that political conflict will distract the government from containing inflation and reducing the budget deficit, according to Citigroup in Istanbul at Citigroup.

The YTL fell 2.5% on March 17, the biggest decline in seven months, after the lawsuit was presented March 14. A day later, Merrill Lynch reduced the amount of 10-year Turkish bonds in a model emerging-markets debt portfolio to 7.4% from 9.9%.

Taking Risks

"Turkey has always been a risky place, but high returns are the pay-off for those who take the risk," said Michael Ganske, a strategist in London at Commerzbank, Germany's second-biggest lender. While investors are inclined to bet against the YTL, "we expect the AKP eventually to stay in place" and foreign direct investment "to underpin the currency," he said. The YTL may advance to 1.25 per dollar by year-end, he predicted. JPMorgan's Cebeci said it may weaken to 1.40 before rebounding to 1.32 by the end of the year.

JPMorgan on March 28 cut Turkish bonds to "underweight," meaning it recommends investors hold a smaller percentage of the securities than contained in benchmark indexes, from "market weight." Standard & Poor's changed its outlook on the nation's BB- credit rating to "negative" from "stable" on April 4, indicating a downgrade is the most likely next step.

"No one knows how the political situation will evolve, how much time it will take the court to decide or what the verdict will be," said Turker Hamzaoglu, an economist in London at Merrill Lynch. "The political tension coincides with a global crisis in financial markets, and this all weighs on the Turkish currency and assets." A weaker currency may make it more difficult to finance the current-account deficit, which the central bank said widened to a record $37.4b in 2007. The Turkish stock market's capitalization has fallen to $197b, from $282b in December. (TNA29.04)

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- Israeli Shekel conversions done at a rate of NIS 3.50 = $1.00
- Turkish Lira conversions done at a rate of NTL 1.2 = $1.00
- Euro conversions done at a rate of € 1.00 = $1.50
- Jordanian Dinar conversions done at a rate of JD 1.00 = $1.41
- UAE Dirham conversions done at a rate of Dh 3.66 = $1.00
- Omani Rial conversions done at a rate of OR 0.385 = $1.00
- Pakistani Rupee conversions done at a rate of Rs 60 = $1.00

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