EDI logo2013

Fortnightly - April 23, 2014

EDI Fortnightly Report




1.1  Government Set To Approve Food Imports Reform


2.1  BIRD Foundation Helps Fund Cooperation between Whirlpool & Hanita Coatings  
2.2  Kenshoo Secures $20 Million in Growth Financing Round  
2.3  First C-130J Super Hercules 'Shimshon' Arrives In Israel   
2.4  Lockheed Martin Opens New Office in Israel  
2.5  Idomoo Wins France-Israel Prize  
2.6  Flayvr Raises $2 Million to Tackle 880 Billion Digital Photos  


3.1  Lebanon’s Pharmaceutical Expenditures
3.2  Targeted Medical Pharma Completes Middle East Distribution Agreement
3.3  Six Flags & Meraas Reveal Plans for Dubai Theme Park
3.4  Saudi to Produce First Locally Made Car By 2017


4.1  Biodegradable Packaging Company Tipa Raises $10 Million 


5.1  Lebanon’s Trade Deficit Continues to Grow
5.2  Jordanian Tourism Revenues Rise in First Quarter Of 2014 
5.3  US Firms Form Consortium for Burgeoning Iraq Oil & Gas Market 

♦♦Arabian Gulf

5.4  UAE Says No Guarantees for Western Firms on Oilfield Deals
5.5  Oman Extends Ban on Recruiting Foreign Workers
5.6  Saudi Arabia Passes UK and France in Military Spending List
5.7  Riyadh Hospital Project Costing $186.7 Million Completed

♦♦North Africa

5.8  IMF Says Egypt Needs More Financial Support
5.9  Egypt's Urban Inflation Rises To 9.8% Year-On-Year in March
5.10  EU Contributes €57 Million to Improve Egypt’s Water Systems
5.11  Tunisian President Slashes Own Salary by Two-Thirds
5.12  Morocco Exports Rise at Start of 2014


6.1  Turkish Exporters Fear US Anti-Dumping Duties on Rebar Permanent 
6.2  IMF Says Cyprus to Return to Growth in 2015 
6.3  Greek Bond Sale Tops $4 Billion in Return to Markets 



7.1  Yom HaShoah - Holocaust Martyrs' & Heroes' Remembrance Day 2014
7.2  Israel Commemorates Soldiers Who Fell in the Line of Duty 
7.3  Israel’s Independence Day – 66 Years After Sovereignty was Regained 


7.4  Egypt Steps Up Campaign to Control Mosques 
7.5  Algeria’s Bouteflika Wins Fourth Term 
7.6  Three Out Of 10 People in Turkey Are Children 


8.1  Laboratory-Produced Human Bone to be Transplanted in Humans
8.2  Teva Announces Launch of Generic Lunesta Tablets in the United States 
8.3  Eventus Diagnostics $2.72 Million Financing for Commercialization Octava 
8.4  Teva Suffers Setback Over Copaxone 
8.5  Cardiosonic Received CE Mark for Its TIVUS Ablative Catheter Device 


9.1  Intel Adds New magicApp for its Android Showcase
9.2  Israel Space Project Gets $16 Million Boost from Sheldon Adelson 
9.3  Israeli Tech Tracks a Skeleton for Biometric Authentication 
9.4  Checkmarx Selected as Winner of 2014 Red Herring Top 100 Europe Award 


10.1  Israel’s CPI Rises 0.3% in March
10.2  OECD Projects 3.5% Growth for Israeli Economy in 2015
10.3  Israel's GDP Per Capita Hits New High in 2013
10.4  IMF Says Israel's Economy Will Grow by 3.5% in 2015
10.5  Immigration to Israel Grows 14% in First 3 Months of 2014
10.6  March Sets New Record in Tourist Entries to Israel
10.7  Israel’s Matza Exports Down 14%

 11:  IN DEPTH

11.1  LEBANON: S&P Outlook Revised To Stable on Strength of Financial System
11.2  KUWAIT: High-End Retailers Look to Kuwait for Expansion
11.3  OMAN: Oman Gas Production on Track to Meet Rising Demand
11.4  SAUDI ARABIA: The Saudi Succession Question
11.5  EGYPT: Coming Clean About the Energy Crisis
11.6  EGYPT: Corruption in Construction - Egypt’s Failing Infrastructure
11.7  TUNISIA: Tunisia's Trade Deficit Widens
11.8  MOROCCO: Eying Africa for Investment & Political Support
11.9  MOROCCO: Looking to be Financial Services Gateway to Africa
11.10  TURKEY: Moody's Changes Outlook to Negative From Stable


 1.1  Government Set To Approve Food Imports Reform

The new parallel imports reform will soon be submitted to the government for approval.  In a few weeks, Prime Minister Netanyahu will submit to the cabinet the food imports reform drawn up by the Locker Committee on parallel imports.  Although the announcement by the Prime Minister's Office came just before the Passover holiday, the final recommendations will only be submitted in a few weeks.  After the recommendations are submitted, a bill will be drafted, which will take three more weeks.  This bill will then be sent to the Knesset for approval in a process that will take several more months.  Final approval of the initiative will occur only by early August.

Under the reform, Israel will adopt the EU procedure for food imports, which will open the market to massive imports of food products, expanding the range of products, with the objective of increasing competition and lowering consumer prices.  As in the EU, Israeli importers must meet standards by means of an importer's declaration. This will facilitate importers of ordinary food, but it will be accompanied by higher penalties on importers that do not meet the standards and by tighter enforcement and supervision.

The reform will apply to non-sensitive foods, such as breakfast cereals, cookies, crackers, snacks, pasta, rice, and legumes. It will not apply to sensitive foods, such as meat, infant foods and foods about which there are concerns - for these products, the requirement for individual permits for each item will remain in force. The list of sensitive foods will be periodically updated as needed.  According to the Central Bureau of Statistics, imports of non-sensitive foods account for half of Israel's food imports, and import duties on food total $3-4 billion a year.  (Globes 13.04)

Back to Table of Contents


 2.1  BIRD Foundation Helps Fund Cooperation between Whirlpool & Hanita Coatings

Hanita Coatings, a leading converter of PET films and provider of energy efficiency solutions, recently won funding from the BIRD Foundation to launch a joint venture with U.S.-based appliance manufacturing giant Whirlpool Corporation.  The companies will be developing a new generation of highly energy-efficient refrigerator insulation, based on vacuum insulation panel (VIP) technology.  The BIRD (Binational Industrial Research and Development - http://www.birdf.com) Foundation focuses its activity on searching out promising Israeli technology and bringing it to the attention of American companies, helping to fund joint research projects between the parties.  Hanita Coatings, as the foremost supplier of ultra-high barrier filmic laminates to the vacuum insulation panel industry, was a natural partner for appliance manufacturer Whirlpool in its quest to develop highly efficient, space saving insulation for refrigerators.  (BIRDF 22.04)

Back to Table of Contents

 2.2  Kenshoo Secures $20 Million in Growth Financing Round

Kenshoo announced a $20 million growth financing round led by Bain Capital Ventures.  Kenshoo’s existing investors, Sequoia Capital, Arts Alliance, and Tenaya Capital also participated in the round.  The company plans to use the funding to further disrupt the digital marketing technology space with its proprietary approach to predictive media optimization.  Kenshoo currently delivers more than 1 trillion digital advertisements on an annualized basis and tracks over $200 billion in annualized online client sales revenue.  Earlier, Kenshoo announced that its Halogen solution had emerged from beta after enabling marketers to increase revenue by 53% and investment by 36% across 90+ budget plans.  Kenshoo Halogen is the world’s most advanced and accurate predictive modeling engine and powers various components of the Kenshoo platform to automatically optimize campaigns.

Tel Aviv’s Kenshoo (http://www.Kenshoo.com) is a global software company that engineers cloud-based digital marketing solutions and predictive media optimization technology.  Brands, agencies and developers use Kenshoo Search, Kenshoo Social, Kenshoo Local and Kenshoo SmartPath to direct more than $200 billion in annualized online client sales revenue through the platform.  Kenshoo is the only Facebook strategic Preferred Marketing Developer with native API solutions for ads across Facebook, FBX, Twitter, Google, Yahoo, Yahoo Japan, Bing, Baidu and CityGrid.  (Kenshoo 09.04)

Back to Table of Contents

 2.3  First C-130J Super Hercules 'Shimshon' Arrives In Israel

Israel's first Lockheed Martin C-130J Super Hercules airlifter arrived at Nevatim Air Base on 9 April.  Israel ordered its C-130Js through a Foreign Military Sale (FMS) contract with the U.S. Government.  This is the first ferry of the C-130Js currently on order for the IAF, which has operated legacy C-130s since 1971.  In non-combat - but equally harsh environments - C-130Js are often the first to support humanitarian missions such as search and rescue, aerial firefighting in the U.S., and delivering relief supplies after earthquakes, hurricanes, typhoons and tsunamis around the world.  This C-130J Super Hercules was first delivered to the Israeli Air Force (IAF) in June 2013 in Marietta, Ga., at the Lockheed Martin facility where it was manufactured.  The aircraft remained in the U.S. to receive Israeli-specific, post-production modifications.  Headquartered in Bethesda, Md., Lockheed Martin is a global security and aerospace company that employs approximately 115,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.  (Lockheed Martin 09.04)

Back to Table of Contents 

 2.4  Lockheed Martin Opens New Office In Israel

On 9 April Lockheed Martin’s Chairman, President and CEO Hewson officially opened its newest office in Israel to support the Corporation's growing presence in that important country.  The new office further demonstrates the Corporation's commitment to supporting the Israeli Defense Force and their "Move to the South" campaign.  The consolidation of IDF Technical Units to new bases in the Negev Desert region is an important transformation of Israel's information technology capability.

Former Israeli Air Force Brig. Gen. Shelly Gotman was recently appointed as managing director of Israel for the company's Information Systems & Global Solutions (IS&GS) business and will lead the office.  Lockheed Martin's IS&GS business has been the number one provider of information technology solutions and services to the U.S. government for the past 19 years.  It has been growing its international presence with major operations in the United Kingdom, Europe, and Australia.  Current IS&GS customers include NATO, British air traffic management organization NATS, the Australian Tax office and the UK Ministry of Justice.  (Lockheed Martin 09.04)

Back to Table of Contents

 2.5  Idomoo Wins France-Israel Prize

Idomoo (http://idomoo.com), the innovative personalized video platform, has received an award for contributions to significant trade between France and Israel from the Israel-France Chamber of Commerce and Industry (CCFI).  The ceremony, which took place at CCIF's Annual dinner at the Pavillon Dauphine in Paris, was attended by France’s Foreign Minister and former PM Mr. Laurent Fabius, who expressed his deep desire to strengthen economic ties between France and Israel.  Also in attendance were France’s Ambassador to Israel Patrick Maisonnave, and Ministry plenipotentiary at the Embassy of Israel in France Zvi Tal.  For nearly 15 years, CCFI has given the award to companies or people who have contributed to economic ties between France and Israel.  Idomoo was one of five Israeli organizations/companies to be given the Innovation Award for close ties and successful business in France.  (Idomoo 14.04)

Back to Table of Contents

 2.6  Flayvr Raises $2 Million to Tackle 880 Billion Digital Photos

Flayvr, creators of technology that brings deep context to digital photos and videos to improve organization and create new sharing experiences around life events, has secured $2m in new funding.  The round is made up of investments from top investors and technology entrepreneurs, led by Kaedan Capital, former Microsoft Corporate Vice President Moshe Lichtman, Aviv Venture Capital, iAngels, former Microsoft Vice President of Strategy and Partnership Hank Vigil, Fritz Lanman, Adler Chomski and all of Flayvr’s angel round investors including Rafi Gidron, Zohar Gilon, Yariv Gilat, and Partam Hightech.  The funding will be used to double the Flayvr team size, expand company operations in the US and to improve and extend the Flayvr platform, which currently includes mobile gallery replacement apps for iOS and Android.  Flayvr was also selected by Google as a Top Developer in 2014 and the Android version of Flayvr was featured as one of their Best Apps of 2013.

Tel Aviv’s Flayvr (http://www.flayvr.com) is a next-generation photo and video gallery experience that automatically organizes photos and videos, turning them into elegant, interactive collections that are easily shared with others as an HTML5 experience.  Flayvr was created with the vision of changing the way we consume user-generated photos and videos, by creating a new visual medium accessible on any platform.  Founded by technology veterans and entrepreneurs, Flayvr delivers context to digital photos and videos using computer learning technology to bring order to online storage chaos.  (Flayvr 09.04)

Back to Table of Contents


 3.1  Lebanon’s Pharmaceutical Expenditures

According to Business Monitor International (BMI)’s Pharmaceuticals and Healthcare Q2/14 report, Lebanon’s pharmaceutical expenditures are projected to rise by an annual 6.8% yielding a total market value of $1.46b in 2014, compared to $1.36b in 2013.  The growth in pharmaceuticals has been deemed as slow by BMI on account of ongoing political and economic instability.  As for healthcare expenditures, they are estimated to rise by a yearly 9% from $3.07b in 2013 to $3.34b in 2014.  For Q2/14, Lebanon's Pharmaceutical Risk/Reward Rating (RRR) score is calculated at 52.7 out of 100, placing the country in eighth position in the Middle East and Africa region, ahead of Algeria and Jordan but surpassed by Qatar and Bahrain.  In other terms, Lebanon is seen as the eighth most attractive MENA market for innovative product launches.  The RRR score is lower than the Q1/14’s score of 54 and previous ranking of sixth amongst MENA countries.  The downturn is associated to a lower Industry Rewards score, mainly due to a downward revision in pharmaceutical spending per capita.  (Various 12.04)

Back to Table of Contents

 3.2  Targeted Medical Pharma Completes Middle East Distribution Agreement

Los Angeles’ Targeted Medical Pharma announced the completion of an agreement between Analytical Testing Laboratories (ATL), a Lebanon based company that specializes in drug testing services and inborn errors of metabolism, for the exclusive distribution of the company’s amino acid based products to physicians and pharmacies throughout the Middle East.  The Agreement provides ATL with a limited exclusive license for the marketing and sales of certain products in twenty countries in the region.  The Agreement includes a licensing fee, an annual minimum product purchase order and certain performance benchmarks which include meeting product registration and regulatory approvals as well as sales volume in a given country.  ATL is a specialized laboratory focusing on multidisciplinary analysis in the fields of Medical Diagnostics, Genetic Metabolic Diseases, Toxicology, Pharmaceutical Drug Testing Services, Food Chemistry & recently in Molecular Biology DNA & GMO Testing.  Targeted Medical Pharma develops medical foods for the treatment of chronic disease, including pain syndromes, peripheral neuropathy, hypertension, obesity, sleep and cognitive disorders.  (TMP 17.04)

Back to Table of Contents

 3.3  Six Flags & Meraas Reveal Plans for Dubai Theme Park

Six Flags Entertainment Corporation, the world’s largest regional theme park company, and Meraas Leisure and Entertainment, have announced plans to bring a theme park to Dubai.  In a joint statement, the companies said a new strategic partnership will bring a Six Flags-branded theme park to the emirate.  The project is planned to open in late 2017 and will be located within the multi-themed park project in Jebel Ali launched by Meraas.  Terms of the arrangement were not disclosed.

Six Flags Entertainment Corporation posted $1.1 billion in revenue last year and operates 18 parks across the United States, Mexico and Canada.  Meraas L&E is the leisure and entertainment arm of Meraas Holding, a Dubai-based real estate development company, which creates integrated master-planned communities.  (AB 12.04)

Back to Table of Contents

 3.4  Saudi to Produce First Locally Made Car By 2017

Saudi’s first locally produced car could be built by 2017 following a deal between Saudi and Malaysian businesses to establish a factory in Damman.  The chairman of the Saudi Malaysian Industrial Development Holding Company, said 300,000 units a year of the Saudi-made Meeya car will be produced when the plant reaches maximum output.  He said the factory would create 2,000 jobs, with major vehicle manufacturing firms from Malaysia, China, Germany, Japan and Korea also involved in the project.  The factory would start producing 50,000 cars in the first 36 months.  The vehicles would come in three models ranging in price between SR45,000 ($11,999) and SR120,000 ($32,000).  A price reduction of up to 50% could also be possible if the government supported the project with land and other facilities.  The Saudi Ministry of Commerce and Industry said it wanted to develop the automotive industry but it had to be done after careful co-ordination between government and the private sector.  (AB 17.04)

Back to Table of Contents


 4.1  Biodegradable Packaging Company Tipa Raises $10 Million

Biodegradable packaging company Tipa Corporation (http://www.tipa-corp.com) of Ramat HaShavim has raised $10 million in a financing round led by Li Ka-shing's Horizon Ventures.  Other investors in the round include previous Israeli investors Aviv Venture Capital and GreenSoil Investments.  According to IVC, Tipa has raised $12.5 million to date.  Tipa develops biodegradable and recyclable packaging for food and beverages, including snacks and frozen food.  The company says that its packaging, which is partly based on orange peel, degrades after 180 days.  The packaging costs little to manufacture.  It will use the financing to develop new products and sign collaborations and conduct pilots with food manufacturers and packaging companies.  (Globes 22.04)

Back to Table of Contents


 5.1  Lebanon’s Trade Deficit Continues to Grow

The Lebanese trade deficit broadened by 17.2% to $3.11b by February 2014, compared to a deficit of $2.65b by February 2013 on account of higher imports and lower exports.  While exports covered 22.84% of imports in the first two months of 2013, this share has dropped to 13.79% in the first two months of 2014.  Total imports increased by 4.92% y-o-y to reach $3.61b.  Mineral products ranked first among total imports accounting for 30% of the total ($1.09b).  Products of the chemical or allied industries, machinery and electrical instruments, base metals and articles of base metals followed each with a 9% share.  The three main import sources were the United States, China and Italy as they account for 13%, 10% and 8% of total imports.  Total exports reached $497.20m by February dropping by 36.67% y-o-y.  Pearls/precious stones topped the list with 18% of total exports, dropping by 60.70% or $91.08m, followed by prepared foodstuff, beverages and tobacco with a 17% stake, and Machinery and Electrical Instruments with a 13% stake.  Lebanon’s top three export destinations were South Africa with an 11% share of total exports, followed by Saudi Arabia and the UAE with a share of 10% each.  In monthly terms, Lebanon’s trade deficit narrowed from $1.63B in January to $1.48B in February as exports rose by 3.72% while imports slid by 7.52%.  (BLOM 10.04)

Back to Table of Contents

 5.2  Jordanian Tourism Revenues Rise in First Quarter Of 2014

The Hashemite Kingdom’s tourism sector experienced a rise in revenues and number of visitors in the first three months of 2014, compared to the same period a year earlier.  A Ministry of Tourism report showed that revenues rose nearly JD728 million in the first quarter, an 11.1% rise compared with Q1/13.  The number of both individual and group visitors also increased in that same period.  The report showed there has been a 4.7% increase in the number of group visitors in the January-March period of the current year compared to the same period in 2013.  A total of 932,000 individual visitors came to the country in the period in question, with a 3.1% increase compared with the same period in 2013, according to the Tourism Ministry.

There has been a rise in the number of visitors coming from Malaysia, Indonesia, Pakistan, Bangladesh and India.  The number of Malaysian tourists increased by 42.2% in the concerned period, and there was also a rise in the number of visitors from Pakistan (64.2%), Bangladesh (48.8%) and India (13.5%), according to the report.  The minister said the improvement of tourism revenues has also had an impact on employment in the sector, which rose by 10%.  (JT 19.04)

Back to Table of Contents

 5.3  US Firms Form Consortium for Burgeoning Iraq Oil & Gas Market

North America Western Asia Holdings (NAWAH), U.S. Steel Tubular Products, a subsidiary of United States Steel Corporation, and MRC Global have announced an alliance to bring critical oil well equipment into the natural resources-rich region of southern Iraq.  The consortium will serve an international lineup of leading oil and gas companies charged with developing Iraq’s giant oil and gas fields.  This consortium has committed to providing an initial inventory of oil well equipment to launch the effort and plans to expand Iraq’s in-country supply of material when the oil well demand increases.  The first shipment of oil well material is expected to arrive in Iraq in early May.

NAWAH, with regional headquarters in Dubai, United Arab Emirates and operational headquarters in Basra, Iraq, is focused on world-class port operations and supply and distribution centers in southern Iraq.  U.S. Steel Tubular Products is the largest integrated tubular products producer headquartered in the United States with more than 100 years of experience serving the energy markets.  Houston-based MRC Global is the largest global distributor of pipe, valve and fitting products and services to the energy and industrial markets.  (NAWAH 09.4)

 Back to Table of Contents

♦♦Arabian Gulf

 5.4  UAE Says No Guarantees for Western Firms on Oilfield Deals

Suhail bin Mohamed Al Mazrouei, the UAE energy minister, said he hopes Western oil companies historically in charge of Abu Dhabi's biggest oilfields would keep a role, but that no one was assured of keeping their seat when concessions are renewed.  The OPEC member country has held a 60% stake in Abu Dhabi Company for Onshore Oil Operations (ADCO) since acquiring an interest in fields that produce over half the United Arab Emirates' oil.  Four of the world's largest stock market-listed energy companies - ExxonMobil, Royal Dutch Shell, Total and BP - have each held 9.5% equity stakes in the ADCO concession since the 1970s and would be keen to prolong their involvement.  After their deal expired on 11 January, Abu Dhabi National Oil Company (ADNOC) took 100% of the ADCO concession in what was seen as a temporary measure while political leaders in the UAE decide whether to let Asian oil buyers in for the long haul.  (AB 12.04)

Back to Table of Contents

 5.5  Oman Extends Ban on Recruiting Foreign Workers

Oman extended by six months a ban on companies recruiting expats in the construction and housekeeping sectors.  Sheikh Abdullah bin Nasser Al Bakri, Minister of Manpower, issued a decision temporarily banning the recruitment of expatriates for a further six months from 4 May.  Exceptions to the decision include companies working for government projects, companies that are managed full time by their owners, who are registered with the Public Authority for the Development of Small and Medium Enterprises (PADSME) and insured with the Public Authority for Social Insurance (PASI), it added.

In October, Oman initially announced plans to suspend the recruitment of foreign workers in the sectors for six months, stemming from the labor market regulation and review of the actual needs of the labor force in different activities.  The ministry has been relentlessly working to root out illegal workers so that more job opportunities can be created for the national workforce.  Earlier this year, Oman's government said it would limit the number of foreign workers and sharply raise the minimum wage for locals in a drive to increase employment of Omani citizens.

Around 1.3 million or 39% of the population of about 3.3 million are foreigners, most of them workers brought in to do skilled or strenuous jobs in the oil, construction and services industries.  The plan is said to be aimed at redressing an imbalance in the Sultanate’s employment market and part of the broader Omanization initiative.  (AB 14.04)

Back to Table of Contents

 5.6  Saudi Arabia Passes UK and France in Military Spending List

Saudi Arabia passed the UK, Japan and France to become the world’s fourth largest military spender in 2013, according to a new report released by Stockholm International Peace Research Institute (SIPRI).  The report said military spending in the Middle East increased by 4% in 2013, reaching an estimated $150 billion.  Saudi Arabia’s spending increased by 14%, to reach $67 billion, possibly due to tensions with Iran but also the desire to maintain strong and loyal security forces to insure against potential ‘Arab Spring’ type protests.  Maintaining regime survival in the face of internal opposition is also the likely motive for Bahrain’s 26% increase, the study noted.  However, the largest regional increase was by Iraq (27%), as it continued the rebuilding of its armed forces.  (SIPRI 18.04)

 Back to Table of Contents

 5.7  Riyadh Hospital Project Costing $186.7 Million Completed

Al-Hammadi Development and Investment Company announced the completion of the Al-Hammadi Hospital project in Riyadh.  The 428-bed, $186.7m facility is set to open in Q3/14 in Al-Suwaidi, a district in the south west of the capital’s metropolitan area.  Al Hammadi Al-Suwaidi Hospital is built on a 44,000m² tract within a total land area of 100,000m².  Consisting of eight floors in total — six floors above ground and two basement floors — the hospital complex also houses accommodation for the facility’s medical staff.  The hospital itself will house over 300 patient suites as well as 100 beds designed specifically for children and young adults.  The outpatient department will include 64 clinics for walk-in patients, while the surgery units will utilize 13 fully-equipped theatres.  In addition, the hospital will feature a number of specialized units, including a theatre for cardiac catheterization, two rooms for performing upper and lower laparoscopic procedures and a theater for endoscopic treatment of renal lithiasis (kidney stones).  The hospital is the second such facility developed by the Al-Hammadi Development and Investment Company after the opening of the Al-Hammadi Hospital in April 1985 and will bring its total bed count to 728 beds.  (Various 19.04)

Back to Table of Contents

♦♦North Africa  

 5.8  IMF Says Egypt Needs More Financial Support

Egypt will need further international assistance to put its economy back on track despite receiving huge loans from Arabian Gulf states, the IMF said.  The IMF had been in talks on a $4.8 billion bailout package for Egypt, which has been coping with violence and economic woes since the 2011 overthrow of president Hosni Mubarak.  But the discussions broke off last year due to political instability after the military overthrew elected president Mohammed Morsi of the Muslim Brotherhood.

Saudi Arabia recently announced a $5 billion support package for Egypt before the country holds 26 - 27 May elections in which retired army chief Abdel Fattah al-Sisi is seeking to be president.  Two fellow oil-exporting Gulf monarchies, Kuwait and the United Arab Emirates, have together promised $7 billion.  Despite the influx of cash, Egypt still faces challenges, including low growth, high unemployment and an aggravated budget deficit.  (AFP 12.04)

 Back to Table of Contents

 5.9  Egypt's Urban Inflation Rises To 9.8% Year-On-Year in March

Egypt’s annual urban inflation rose to 9.8% in the twelve months to March 2014 to reach 144.8 points, up from 7.6% in the same month last year, according to a statement by state statistics body CAPMAS on 10 April.  According to CAPMAS, the urban consumer price index (CPI) eased to 0.7% compared to February 2014.  The headline CPI has similarly swollen to 10.2% year-on-year at 147.4 points, compared to 7.5% in the year leading up to March 2013.  On a monthly basis, overall inflation dropped to 0.7%, from one% the previous month.  CAPMAS attributed the inflation increase to the 1.8% price hike of vegetables and 2.1% hike in fruits cost.  Also (poultry, meat) and (eggs, dairies products) have witnessed price soar of 2.8% and 24.3% respectively.  (CAPMAS 10.04)

 Back to Table of Contents

 5.10  EU Contributes €57 Million to Improve Egypt’s Water Systems

The European Union announced that it will implement a number of water sector projects in Egypt that will benefit the Ministry of Housing and the Holding Company for Water and Waste Water.  The first project, titled the Improved Water and Waste Water Services Program, is comprised of two phases that aim to improve and expand existing water and wastewater treatment plants.  The EU contributed €57m to the project, which is projected to cost €598m.

The first phase is expected to provide water to 533,000 people and improve water services to three million people living in Gharbeya, Sharqeya, Damietta and Beheira Governorates.  The second phase, finalized in December, will cover four more governorates in Upper Egypt to include: Qena, Sohag, Assiut and Minya.  It aims to provide water to one million people and improve water services for four million people.

The EU plans to implement other projects to “improve the capacity” of the Holding Company for Water and Waste Water, which aims to develop sustainable high water and waste water services to support the country’s economic and environmental development, according to the EU presentation.  The EU also plans to implement a project that supports the “institutional capacity building” of the Egyptian Water and Waste Water Regulatory Agency by establishing an improved regulatory system and management resource processes. The regulatory functions that will be implemented include: drinking water quality reporting and auditing, customer services, water company performance measures, and licensing.  (DNE 12.04)

Back to Table of Contents

 5.11  Tunisian President Slashes Own Salary by Two-Thirds

Tunisia’s President Moncef Marzouki announced on 18 April his decision to voluntarily take a two-thirds pay cut as the government grapples with a financial situation it has described as “critical.”  The Tunisian economy has suffered from the instability that followed the 2011 revolution, which toppled long-time autocrat Zine el-Abidine Ben Ali and ignited the Arab Spring.  A spokesman previously said the president received a gross monthly wage of 30,000 Tunisian dinars (around $18, 870), which gave him a net income of 20,000 dinars ($12,580).  Marzouki, who has been president since late 2011, also said he had ordered further reductions in the expenses of the presidency. 

Some Tunisian media have criticized the perceived excesses of the presidency, with much of the country still threatened by social conflict fuelled by poverty and high unemployment.  In January, the IMF released more than $500 million, part of a $1.76 billion loan to support Tunisia, shortly after a new technocratic government was sworn in under a deal to end months of political instability.  (AFP 18.04)

 Back to Table of Contents

 5.12  Morocco Exports Rise at Start of 2014

Relatively new export sectors made a strong contribution to Morocco’s rising exports.  This increase included the auto industry, which saw shipments rise to MAD2.97 billion during the first three months of the year, an increase of about 43% over the same period in 2013.   Statistics also showed that breakthroughs occurred in foreign sales of consumer electronics (21.2%), aviation products (5.9%) and pharmaceuticals (3.7%).  However, exports of agricultural products dropped 3.4% in the first three months of 2014 and are likely to fall even lower in the second half of the year.  The agricultural sector accounts for 18% of Morocco’s GDP.  The Minister of Investments, Moulay Hafid El Alamy, recently announced more promotional support for Moroccan exports.  One of the key factors for increasing support for Moroccan exports has been identified as the rise in competition in the global marketplace.  (MAP 21.04)

 Back to Table of Contents


 6.1  Turkish Exporters Fear US Anti-Dumping Duties on Rebar Permanent 

Turkish steel rebar exporters are hoping that the US won't make a preliminary decision to set duties on imports of steel rebar from Turkey permanent.  The US Commerce Department set preliminary duties on millions of dollars’ worth of imports of steel rebar from Mexico and Turkey after a complaint by US producers about price undercutting by foreign competitors.  The department set dumping duties of up to 2.6% on Turkish imports after American producers alleged companies from the two countries were selling steel rebar, which is used to reinforce concrete, at unfairly low prices.  A final decision is due on 2 July.  

US manufacturers claimed rebar imports from Turkey were subsidized by the Turkish government, but the Commerce Department ruled in February that this was not the case.  The US has launched separate, ongoing investigation into steel products that has so far yielded no concrete result.  Earlier in 2013, the US Commerce Department launched an investigation that could lead to steep duties on steel pipe used in oil and natural gas production from Turkey and eight other countries.  Domestic manufacturers say the pipe is being sold in the United States at unfairly low prices.  The department is expected to make a final decision this year.  (HDS 22.04) 

Back to Table of Contents 

 6.2  IMF Says Cyprus to Return to Growth in 2015 

Crisis-hit Cyprus will return to economic growth in 2015, the IMF`s World Economic Outlook (April 2014) says.  The WEO adopts Cyprus lenders` projections as revised following the third economic program review.  According to the WEO, unemployment in 2014 will peak at 19.2% compared with the previous projection of 19.8% and will decline to 18.4% in 2015 amid modest economic growth. IMF staff estimates that the rate of unemployment has started showing signs of deceleration during the last months of 2013. 

The Cypriot economy will shrink by 4.8% in 2014 and will return to a modest growth of 0.9% of GDP in 2015.  Inflation is projected to remain in the 2013 levels, that is 0.4% will increase to 1.4% in 2015.  Although Cyprus registered deceleration trends following the €10 billion bailout agreed in March 2013, the IMF staff report estimates that average inflation in 2014 to remain around last year’s level, with recent downward pressures to be offset by a stabilization of utility prices and by the pass through to prices of VAT increases taking effect this year. 

Cyprus` current account balance from -1.5% of GDP will reach a surplus of 0.1% in 2014 and will increase to 0.3% of GDP in 2015.  According to the WEO, “acute risks have decreased, but risks have not disappeared.”  (FM 13.04) 

Back to Table of Contents

 6.3  Greek Bond Sale Tops $4 Billion in Return to Markets 

Greece ended a four-year exile from international markets with a bond sale of €3 billion ($4.2 billion), more than the government estimated.  The coupon on the five-year bond is 4.75%, with almost 90% of the issue going to long-term investors outside of Greece, the Athens-based Finance Ministry said in a statement announcing the sale.  The country sought to raise €2.5 billion and orders exceeded €20 billion, Greek Prime Minister Antonis Samaras said in a televised address to the nation afterward.  

Greece, which has been bailed out twice, carried out the world’s biggest sovereign-debt restructuring and teetered on the brink of exiting the euro, had been shut out of bond markets since March 2010 and kept afloat with aid totaling €240 billion from the euro area and the IMF.  Those funds necessitated the regular presence in Athens of officials from the so-called troika of the European Commission, the European Central Bank and the IMF, which became associated with austerity measures that triggered a political and social backlash.  (Bloomberg 10.04) 

Back to Table of Contents



 7.1  Yom HaShoah - Holocaust Martyrs' & Heroes' Remembrance Day 2014 

Israel will mark Holocaust Martyrs' & Heroes' Remembrance Day (Yom HaZikaron HaShoah ve-laGvura in Hebrew) beginning on Sunday evening, 27 April and Monday, 28 April.  Holocaust Remembrance Day (Yom HaShoah) is a national day of commemorating the six million Jews murdered in the Holocaust.  It is a solemn day, usually beginning at sunset on Hebrew date of 26 Nisan and ending the following evening.  The internationally recognized date comes from the Hebrew calendar and corresponds to the 27th day of Nisan on that calendar.  It marks the anniversary of the 1943 Warsaw ghetto uprising.  This year, the observance begins one day later to prevent the desecration of the Sabbath in preparation for the memorial services. 

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 nationally on television.  Marking the start of the day, in the presence of the President 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.  

 Back to Table of Contents

 7.2  Israel Commemorates Soldiers Who Fell in the Line of Duty 

Israel’s Memorial Day for Fallen Soldiers and Victims of Terrorism which will begin at sundown on 27 April, honors the soldiers who have fallen in the line of duty since 1860 (when modern-day Jews first lived outside of Jerusalem's Old City walls).  The Memorial Day begins with a minute-long siren sounded at 20:00h, followed immediately by official events.  On the following day, a two-minute siren was sounded at 11:00 as part of Memorial Day ceremonies across the country.  For the duration of the sounding of both sirens, 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 fallen soldiers and victims of terrorism.  

A small flag a black ribbon will be laid on the grave of every soldier who died in the line of duty as an expression of respect and sympathy.  More than a million people are expected to visit military cemeteries across the country.  Though a regular work day, activity is usually curtailed and many leave their offices early pending the Independence Day celebrations that follow.  Both Memorial Day and Independence Day are observed one day later this year to prevent the desecration of the Sabbath in preparation for the events. 

Back to Table of Contents

 7.3  Israel’s Independence Day – 66 Years After Sovereignty was Regained

Celebrations for the 66th anniversary of Israel's regaining its independence will begin on Monday evening, 5 May throughout the country, continuing throughout Tuesday, 6 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.  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 the Jews 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 1,879 years earlier, was restored. 

Back to Table of Contents


 7.4  Egypt Steps Up Campaign to Control Mosques 

The Egyptian government has stepped up a campaign to curb Muslim Brotherhood influence over mosques, saying it has licensed more than 17,000 state-approved clerics to give Friday sermons to stop places of worship falling "into the hands of extremists".  The military-backed authorities have been trying to bring mosques under tighter control since the army toppled Mohamed Morsi of the Islamist Muslim Brotherhood last July after mass protests against his rule.  All of the newly-approved clerics had been trained at Al-Azhar University, which is a respected center of Sunni Islamic learning, and institutions run by the ministry of religious endowments, according to a statement issued by the prime minister's office.  

Last September, the religious endowments minister said unlicensed clerics would be barred from delivering sermons at mosques - long a recruiting ground for Islamist parties.  The government statement said the ministry of religious endowments had taken "a big step" towards addressing a shortfall in "qualified preachers".  Around 12,000 preachers not approved by the state had been removed from service, the statement added, without giving a time frame.  Last September, the minister of religious endowments said he aimed to bar 55,000 unlicensed clerics.  The government has cracked down hard on the Muslim Brotherhood, the political movement that propelled Morsi to power in a 2012 presidential election.  (Reuters 10.04) 

Back to Table of Contents

 7.5  Algeria’s Bouteflika Wins Fourth Term 

In a result that surprised no one, 77-year-old Algerian President Abdelaziz Bouteflika was re-elected with 81.53% of the vote.  Ali Benflis, the sitting president's main rival, took home just 12.18% of the ballots in the results unveiled on 18 April.  Although many people are making humorous comments about the results attributed to President Bouteflika, they also believe that the outcome is the lesser of two evils.  "I don't know where this figure of 81% for Bouteflika came from, or where they got this turnout figure of 51% from!  But when all is said and done, we knew that Bouteflika would win.  What people were afraid of was that things would take a turn for the worse in this country and very happily, that wasn't the case.  That's the main thing," said Hicham Salhi, a trade unionist who works for a public-sector company.  (Magharebia 21.04) 

Back to Table of Contents

 7.6  Three Out Of 10 People in Turkey Are Children 

The proportion of Turkey’s child population was almost 30% in 2013, with more than 1 million new babies born in one year, according to data released by the Turkish Statistical Institute (TUIK) on 22 April.  In 2013, there were more than 22.7 million children in Turkey, out of a total population of over 76.6 million.  The rate of those younger than 18 was 45% in 1935, while it stood at 29.7% as of 2013.  Some 27.3% of children are in the “0-4” age group, 27.6% are in the “5-9” age group, 28% are in the “10-14” age group, and 17.2% are in the “15-17” age group.  There has been no significant change over time and between genders in these ratios. 

TUIK stated that urbanization, the rising educational attainment of women, and the increased participation of women in working life, had led to a steady reduction in fertility, postponement of births, and decrease in overall fertility rates in Turkey.  If these tendencies continue, the proportion of children is estimated to fall further to 25.7% by 2023, to 19.1% by 2050, and to 17.6% by 2075. 

When the proportion of children in the total population is compared with the proportions of European Union member countries, Turkey’s child population rate - at 29.7% in 2013 - is the highest of all.  Children make up just 16% of the aging German population, 22.2% of the French population, 21.2% of the British population and 20.2% of the Swedish.  Some 53.2% of all households in Turkey had at least one child in 2013.  The proportion of households with one child was 39.7%, with two children was 35.5%, with three children was 14.5%, with four children was 5.3%, and with five or more children was 5%. 

More than 1.2 million newly born babies were registered in 2013, 51.4% of whom were boys.  The top three most popular boy’s names were Yusuf, Berat and Mustafa.  Meanwhile, in the 2013/2014 academic year, the average number of students per teacher was 19 in primary schools, 18 in secondary schools and 16 in secondary schools. The average number of students per classroom across all levels of education was 29. (AA 22.04) 

Back to Table of Contents


 8.1  Laboratory-Produced Human Bone to be Transplanted in Humans 

Bonus BioGroup commenced a clinical trial for the repair of human facial bone deficiency, including upper or lower jawbone cavitation by transplantation of live human bone grafts produced in the company's manufacturing facility at Matam High-Tech & Business Park, Haifa, Israel.  Bonus BioGroup produces live human bone grafts comprising of cells harvested from patients' own fat tissue, in a personalized medicine approach.  Its novel proprietary technology for the manufacturing of these cells combines multiple disciplines, such as material and tissue engineering, biology and regenerative medicine.  Enrollment of the first patient and execution of the first stages of this bone void-filling clinical trial have been successfully performed; a fat tissue sample was obtained by clinical biopsy and transported within several hours to Bonus BioGroup's manufacturing facility.  There, cells were extracted from the sample tissue and the process of generating live human bone graft commenced. 

The manufacturing of the live bone graft is expected to be completed within approximately one month, following which a ready-to-use injectable bone graft will be in place and maintained in stand-by at the manufacturing facility.  On the scheduled day of transplantation, it shall be transported to the medical site to be transplanted back into the patient's jawbone.  As the manufactured bone grafts originate from the same patients receiving the grafts, Bonus BioGroup's live human bone grafts are anticipated to induce full immunological tolerance.  The biological similarity between the patients' body and their autologous grafts is expected to be identified by the immune system and thereby prevent graft rejection - a common phenomenon in allograft (foreign donor tissue) transplantation. 

Haifa’s Bonus BioGroup's (http://www.bonusbiogroup.com) manufacturing facility was designed and established in compliance with the European Good Manufacturing Practice (GMP) and meets all advanced therapy regulations in regard to the production of clinical-grade cellular products suitable for human therapy.  (Bonus BioGroup 10.04) 

Back to Table of Contents

 8.2  Teva Announces Launch of Generic Lunesta Tablets in the United States 

Teva Pharmaceutical Industries announced the launch of the generic equivalent to Lunesta (Eszopiclone Tablets, CIV), 1, 2 and 3 mg, in the United States.  Lunesta Tablets, marketed by Sunovion Pharmaceuticals, had annual sales of approximately $852 million in the United States, according to IMS data as of December 2013.  

Teva Pharmaceutical Industries (http://www.tevapharm.com) is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients.  Headquartered in Israel, Teva is the world's leading generic drug maker, with a global product portfolio of more than 1,000 molecules and a direct presence in approximately 60 countries.  (Teva 15.04) 

Back to Table of Contents

 8.3  Eventus Diagnostics $2.72 Million Financing for Commercialization Octava 

Eventus Diagnostics (EventusDx) announced completion of a $2.72 million financing.  The financing was led by a new family office private investor; existing investors also participated.  Proceeds of the financing will mostly be used to support the continued development and commercialization of the company's Octava breast cancer tests.  The Octava tests are the first in a new class of rapid, accurate and cost-effective immune system-based blood tests that detect the presence or absence of cancer by measuring ratios of autoantibodies produced in response to the presence of tumor-specific antigens.  The Octava Pink and Octava Blue tests are designed to be used in conjunction with annual screening mammograms.  They provide additional information that enables women and their physicians to better assess the validity of their mammography results. 

Eventus Diagnostics (http://www.eventusdx.com), a U.S. company headquartered in Miami, FL with a wholly owned R&D subsidiary in Israel, is developing a new class of immune-based blood tests for the detection of cancer.  The company's Octava Pink and Octava Blue tests are CE marked in the E.U. to provide additional information to help physicians better interpret breast cancer screening results and are also approved in Israel for adjunctive use with mammography.  (EventusDx 15.04)

Back to Table of Contents

 8.4  Teva Suffers Setback Over Copaxone 

Teva Pharmaceutical Industries has suffered a setback in its attempt to preserve patent protection on its multiple sclerosis treatment Copaxone, which accounts for half of its profits.  The US Supreme Court found that Teva had demonstrated “a fair prospect of success on the merits” in its appeal of a decision from the United States Court of Appeals for the Federal Circuit that invalidated the claim of US. Patent 5,800,808 (the “’808 patent”), but denied the company’s application to stay the Federal Circuit's decision, saying that Teva could recover patent infringement damages.  The 808 patent expires on 1 September 2015.  It claims a process for manufacturing the active ingredient of Teva’s Copaxone.  Teva says that it will continue pursuing its appeal in the Supreme Court and defending its intellectual property for Copaxone.  The ruling represents a victory for three of Teva's competitors, Mylan, Sandoz and Momenta, which have generic versions of Copaxone in preparation.  Teva has been fighting to prevent generic versions of Copaxone from reaching the market, in order to gain time to switch patients to a new version of the drug which it has developed.  Sales of Copaxone were $3.2 billion in the US in 2013, and $4 billion worldwide. (Globes 20.04)

Back to Table of Contents

 8.5  Cardiosonic Received CE Mark for Its TIVUS Ablative Catheter Device 

Cardiosonic announced CE marking of its TIVUS (therapeutic intravascular ultrasound) ablative catheter device.  The core of the company's technology is a miniaturized ultrasonic transducer, located at the tip of a flexible catheter, and capable of emitting ultrasonic waves which creates controllable levels of heat for selective tissue ablation.  The first application of the TIVUS catheter is Renal Denervation (RDN) for the treatment of resistant hypertension.  Animal testing has shown that the TIVUS non-focused ultrasonic energy penetrates the artery wall and causes nerve ablation at a depth range of 0.5mm to 10mm, enabling a more complete nerve ablation than Radio Frequency energy, which damages the vessel wall and penetrates half as deep as TIVUS.  Other applications of the company's technology include the treatment of Pulmonary Hypertension, COPD, Asthma and Atrial Fibrillation (AF). The company has completed very encouraging preliminary animal work in all of these areas.  Ra’anana’s Cardiosonic (http://www.cardiosonic.co.il) was founded in 2009 to develop and commercialize breakthrough ultrasound technology.  (Cardiosonic 22.04) 

Back to Table of Contents


 9.1  Intel Adds New magicApp for its Android Showcase 

magicJack VocalTec announced that its new mobile calling app – magicApp – has been optimized for Intel’s latest x86 mobile platform.  The Intel Software Partner Program has included the magicApp for free calling in Intel’s Android Showcase, an online collection of Android applications designed to run on smartphones and tablets.  The program gives magicJack developers access to Intel tools, code and support to help maximize magicApp’s performance on Android devices.  magicJack’s free calling mobile app currently offers free calls to US and Canadian landlines and mobile devices as well as to any magicJack number worldwide without using minutes or requiring a voice plan.  magicApp also provides for low cost international calling from the US and can securely access stored contacts in Android devices for fast and easy calling.  Users without a current magicJack account can still use the service, while existing magicJack customers are able to use their current number on magicApp and devices as well.  The free magicApp is available for Android and iOS devices and can be downloaded in their respective app stores.

Jerusalem’s magicJack VocalTec (http://www.vocaltec.com), the inventor of magicJack and a pioneer in Voice over IP (VoIP) technology and services, is a leading cloud communications company.  With its easy-to-use, low cost solution for telecommunications, the Company has sold more than 10 million award-winning magicJack devices, now in its third generation, has millions of downloads of its free calling app, and holds more than 30 technology patents, magicJack is the largest-reaching CLEC (Competitive Local Exchange Carrier) in the United States in terms of area codes available and number of states in which it is certified.  (Intel 10.04) 

Back to Table of Contents

 9.2  Israel Space Project Gets $16 Million Boost from Sheldon Adelson 

SpaceIL (http://www.spaceil.com), a nonprofit organization aiming to land the first Israeli spacecraft on the moon, said it has received a $16.4 million grant from the foundation of U.S. casino magnate Sheldon Adelson.  With a budget estimated at $36 million, the Israeli scientists and engineers building the shuttle - temporarily named "Sparrow" - believe it will land on the moon by the end of 2015, a feat only the United States, Russia and China have managed so far.  

SpaceIL, which is backed mainly by philanthropists, was founded to compete for Google's LunarX Prize, unveiled in 2007.  The $20 million prize will go to the first team to land a spacecraft on the moon, make it jump 500 meters and transmit images and video back to earth.  Thirty-three teams started out in the running and they are now down to 18, including competitors from the United States, Italy, Japan, Germany, Brazil, Canada, India and Chile.  SpaceIL said it aims to show that space exploration is no longer limited to global superpowers with vast space programs.  It also hopes its technological breakthroughs spur a new wave of commercial space-related industries in Israel.  (Reuters 09.04)

Back to Table of Contents

 9.3  Israeli Tech Tracks A Skeleton For Biometric Authentication 

Extreme Reality (http://www.xtr3d.com), a Herzliya Pituah based video technology firm, may have found the solution to racial or ethnic profiling in a biometric profiling system that can automatically analyze how an individual moves, based on a “skeletal map” that indicates if an individual is up to no good.  This system works well on a voluntary basis, but, unless a government legislates that all citizens submit their biometric information (as Israel is planning to do), biometrics can’t be used to identify individuals in this way.  This issue does not even consider foreigners who enter a country and whose profiles are most likely not on record. 

Extreme Reality has been working in the video technology market for nearly a decade, specializing in creating a 3D effect using 2D cameras.  Their software-based solution uses motion analysis based on the skeletal position of an individual and creates a 3D image of them on screen, using standard two-dimensional cameras.  The software is very popular in the gaming industry, where Extreme Reality partnered with Sega, the Japanese game maker. Sega and other companies use it in a variety of video games.  The system uses pre-installed 2D cameras to analyze an individual’s motions to determine their biometric profile.  The profile is the basis for a “skeletal map” of the individual that analyzes the distances between joints in the body and how those joints move in three dimensions.  (ToI 21.04) 

Back to Table of Contents

 9.4  Checkmarx Selected as Winner of 2014 Red Herring Top 100 Europe Award 

Checkmarx was awarded a 2014 Red Herring Top 100 Europe Award, which celebrates the innovative technologies of private companies across the European region.  Checkmarx is a creator of software solutions that secure mobile and web applications in order to protect consumer data as they are programmed.  Checkmarx scans software source-code, quickly identifying security vulnerabilities and regulatory compliance issues, and immediately shows developers and security auditors where and how to fix them.  Red Herring's editorial staff evaluated the companies on both quantitative and qualitative criteria, such as financial performance, technological innovation, management quality, overall business strategy and market penetration. 

Tel Aviv’s Checkmarx (http://www.checkmarx.com) is a leading developer of software solutions used to identify security vulnerabilities in web and mobile applications.  It provides an easy and effective way for organizations to introduce security into their Software Development Lifecycle (SDLC) which systematically eliminates software risk.  The company's customers include 4 of the world's top 10 software vendors and many Fortune 500 and government organizations, including Samsung, Salesforce and the US Army.  (Checkmarx 16.04)

Back to Table of Contents


 10.1 Israel’s CPI Rises 0.3% in March 

Israel's Consumer Price Index (CPI) rose by 0.3% in March, the Central Bureau of Statistics reported.  Analysts had estimated March inflation at 0.1%.  Inflation year-to-date is minus 0.5%.  In the twelve months to March, the index rose 1.3%.  There were notable rises in March in the housing maintenance item (0.9%); culture and entertainment (0.4%); and transport (0.4%).  The housing services item, which covers rents, rose by 1.2%. Fuel price rose 2.2%.  The clothing and footwear item fell 1.5%; fresh vegetables and fruit fell 0.4%; and the health item fell 0.3%.  (CBS 14.04) 

Back to Table of Contents

 10.2 OECD Projects 3.5% Growth for Israeli Economy in 2015 

The Organization for Economic Cooperation and Development has recently projected that Israel's economy will grow by 3.5% in 2015, a rate higher than the one attributed to the OECD's other 33 member-states.  A report by the organization's economists pegged the Israeli economy's growth rate at 3.4% for 2014, compared with projections averaging a 2.3% growth rate for its other members in the coming year.  OECD economists believe the growth rate for most of its members in 2015 will average at 2.7%.  The report further lauded Israel's efforts to reduce unemployment rates, saying that while the unemployment rate is expected to reach 6.9% in 2014, compared to 6.2% in 2013, it will still be lower than the 7.8% unemployment average in other OECD member-states.  The Paris-based organization said that Israel's unemployment rate is expected to drop to 6.6% by 2015, remaining lower than the projected 7.5% jobless rates for other OECD countries.  (OECD 19.04) 

Back to Table of Contents

 10.3 Israel's GDP Per Capita Hits New High in 2013 

Israel's economy has grown by 3.3% in 2013, the Central Bureau of Statistics announced.  According to the data, Israel's gross domestic product for Q4/13 crossed the 1 trillion shekel mark for the first time ever, coming to NIS 1.05 trillion ($302 billion, compared to $226 billion in Q4/10).  As a result, the GDP per capita also hit a record high 2013 -- NIS 130,700 ($37,500).  The Central Bureau of Statistics projected that Israel's GDP per capita will be NIS 134,600 ($38,700) in 2014.  The CBS further noted that the standard of living in Israel had risen by 1.8% in 2013, with private consumption growing by 3.7%.  Total average spending per capita last year also set a new record, reaching NIS 73,524 ($21,118).  (CBS 22.04) 

Back to Table of Contents

 10.4 IMF Says Israel's Economy Will Grow by 3.5% in 2015 

The Israeli economy will grow by 3.5% in 2015, up from 3.2% in 2014 and 3.4% in 2013, the International Monetary Fund said in its World Economic Outlook mid-year report.  The IMF outlook is more optimistic than that of the Bank of Israel, which is predicting growth of 3% in 2015, or 2.8% without production from the Tamar natural gas reserve.

However, the IMF is pessimistic about the rate of unemployment in Israel and predicts that the unemployment rate will rise from 6.2% in 2013 to 6.7% this year, and then fall to 6.5% in 2015.  The Bank of Israel, on the other hand, predicts that the unemployment rate will rise more moderately, to 6.2% in 2015.  The IMF forecasts that inflation for 2014 will stand at 1.6% and will not exceed 2% in 2015, remaining within the target rate of 1% to 3%.   

The IMF report indicates a certain decrease in world economic growth, expected to total 3.6% in 2014 and 3.9% in 2015.  According to the outlook, the euro bloc will continue to see slow growth of 1.2% in 2014 and 1.5% in 2015, considerably less than the economic growth predicted for Israel.  The U.S. economy is also expected to grow at a slower rate than Israel's: 2.8% in 2014 and 3% in 2015.  (IH 09.04) 

Back to Table of Contents

 10.5 Immigration to Israel Grows 14% in First 3 Months of 2014 

The first three months of 2014 saw a 14% increase in the number of new immigrants to Israel compared to the same period of 2013, the Central Bureau of Statistics reported. According to CBS data, 3,623 new immigrants arrived in Israel from January to March 2014, compared to 3,177 in the same period the previous year.  January 2014 alone saw 1,220 new immigrants land in Israel, while 1,340 arrived in February.  These numbers can be extrapolated to a total of 19,000 new immigrants for 2014, compared to 16,882 in 2013 -- an increase of 19%.  The CBS numbers showed that approximately one-third of the newcomers entered Israel on tourist visas and after staying a few weeks or months changed their status to that of a new immigrant.  Other new arrivals come to Israel under the Law of Return, despite not being registered as Jews by the Interior Ministry.  However, according to the CBS, immigration under the Law of Return has dropped significantly in recent years. 

The biggest number of new immigrants in January-February 2014 came from Russia (899), followed by France (802) and the United States (203).  The CBS also noted that the first quarter saw smaller groups of immigrants from other countries, including Ethiopia (79); Britain (55); Brazil (55); Hungary (35); Belgium (34); Canada (23); South Africa (22) and Switzerland (13).  (CBS 13.04) 

Back to Table of Contents

 10.6 March Sets New Record in Tourist Entries to Israel 

Israel recorded some 302,000 visitor entries in March 2014, according to the Central Bureau of Statistics.  This figure is similar to March 2013, when visitors were arriving in advance of the Passover period, which began last year in late March.  The March 2014 figure is 4% more than February 2012 and 10% higher than March 2011, which are more suited as related to the time of year when Passover and Easter fell.  Of these visitor entries, 284,000 were tourists (staying more than one night), 13% more than March 2013, and 14% and 13% more than March 2012 and 2011 respectively. This is an all-time record for the first three months of the year. 

Some 776,000 visitors arrived in Israel in the first three months of 2014, 3% more than the same period in 2013, 5% more than 2012 and 3% more than 2011.  Of these, 705,000 were tourists, 17% more than 2013 and 11% and 10% more than 2012 and 2011 respectively.  (CBS 10.04) 

Back to Table of Contents

 10.7 Israel’s Matza Exports Down 14% 

Israel exported matza to 45 countries in 2013, including Azerbaijan, Kenya, Nigeria, and Sri Lanka.  Matza exports fell 14% in 2013 to $16.7 million, the Israel Export and International Cooperation Institute reported.  It attributes the drop to the strong shekel and increased local matza production in the US, which reduced the need for imports from Israel.  Matza exports to the US fell 21% in 2013, although it was still the largest destination of Israeli matza.  Israel exported matza to 45 countries in 2013, including Azerbaijan, Kenya, Nigeria, Sri Lanka, Benin and Uganda. 

An interesting trend, according to the institute, was the demand for different types of matza, particularly for health reasons.  Exporters have noted increasing demand for whole wheat and organic matza, as well as matza made from rye and bran.  There was also rising demand for "boutique' matza, such as products made from potato flour, matza with honey or chocolate, hand-made matza, round matza, egg matza and matza in holiday packaging.  (Various 09.04)

Back to Table of Contents


 11.1 LEBANON:  S&P Outlook Revised To Stable on Strength of Financial System 


  • In our view, Lebanon's government debt servicing capacity is supported by deposit flows to the financial system, which remain stable despite a challenging political and security environment.
  • The formation of a new government, which now brings together rival political groups, reduces the risk of a widespread escalation of domestic conflict.
  • On the other hand, we see little prospect for significant improvement in macroeconomic fundamentals or public finances, and we believe security risks will continue to weigh heavily on stability and growth.
  • We are revising our outlook on Lebanon to stable from negative.
  • We are affirming our 'B-/B' long- and short-term foreign and local currency sovereign ratings.
  • The stable outlook reflects our view that deposit inflows to the financial system will enable the government to meet its financing needs over the coming year despite the difficult internal and external political environments. 

Rating Action

On April 11, 2014, Standard & Poor's Ratings Services (http://www.standardandpoors.com) revised its outlook on the Republic of Lebanon to stable from negative.  At the same time, we affirmed our 'B-/B' long- and short-term foreign and local currency sovereign credit ratings. 


The outlook revision reflects our view that the government's debt servicing capacity is materially determined by the strength of deposit flows to the financial system.  In our view, this funding source has helped stabilize the government's financing needs during increasingly challenging times for the internal and external political environments.  We note that deposit inflows have been stable, even during the domestic political vacuum in 2013 and also in the face of the increasing spillover from the deteriorating situation in Syria. 

However, this concentration of government financing from a single source is also a structural weakness, which in our view leaves Lebanon more vulnerable to adverse business, financial, and economic conditions. In our opinion, the government currently has the capacity to meet its financial commitments.

Further, the formation of a government in February 2014, after nearly one year of negotiations, and which includes rival political groups, decreases the risk of renewed civil war in Lebanon. 

Confidence in the Lebanese banking system underpins Lebanon's sovereign creditworthiness.  Despite regional turbulence, this confidence remains intact and supported by remittances from the Lebanese diaspora and the interest rates banks pay on both local- and foreign-currency deposits.  The banking system's funding profile features a high proportion of retail deposits, and banking sector deposits--including resident and nonresident deposits--were 2.1x government debt levels as of the end of February. 

The banks support the government debt market in two ways. First, they buy Lebanese government debt directly.  On 31 January 2014, general government debt was 23% of total banking system assets.  This means bank creditors held 53% of gross central government debt.  Second, Lebanese banks buy certificates of deposit issued by the Banque du Liban (the central bank or BdL), which in turn buys government debt.  The BdL itself held 30% of local-currency government debt on Jan. 31.  The BdL keeps substantial foreign assets, with gold and foreign currencies of $45.6 billion covering 33% of resident and nonresident private-sector deposits at the end of February, to maintain confidence in the system. 

The Syrian crisis has entered into its fourth year without a clear resolution in sight, and Lebanon's political, security, and economic trajectories will remain deeply entwined with developments in its larger neighbor.  While we see little short-term prospects for a resolution to the Syrian crisis, we do not expect the political environment to deteriorate so badly that it would put Lebanon's deposit levels at significant risk. 

Indeed, we see potential, albeit limited, for an improvement in the domestic environment following the formation of a unity government earlier this year.  Prime Minister Tammam Salam formed a government in February 2014, after nearly one year of negotiations following his appointment.  The government comprises centrists, as well as both the March 14 and March 8 political alliances, the former led by former Prime Minister Hariri, who opposes the Assad regime in Syria, and the latter by Hezbollah, whose military arm is actively fighting in support of the Assad regime and whose involvement has led to reprisal attacks from Sunni militias increasingly operating on Lebanese territory. 

We anticipate little in the way of reform or policymaking from the new Lebanese government.  Even in stable times, policymaking in Lebanon is constrained by its divisive political environment and institutional and governance effectiveness remains a main ratings weakness.  Moreover, this government will be short-lived; by law, it must resign when a new president is elected by the parliament.  Constitutionally, this is due by 25 May.  Even if a government is formed quickly thereafter, parliamentary elections are due in November.  On balance, however, we view the formation of the government as a sign that the main political parties and key actors remain committed to reducing the risks of a renewed escalation of domestic conflict in Lebanon. 

We do not expect a meaningful economic recovery or a significant improvement in macroeconomic fundamentals, which have deteriorated over the last three years.  The Syrian crisis will continue to weigh heavily on Lebanon's growth prospects, depressing its services-driven economy that is highly sensitive to swings in consumer and investment confidence.  We do not anticipate a significant rebound in tourism, financial and trade services, or foreign direct investment in 2014, and therefore do not foresee a material improvement in Lebanon's macroeconomic fundamentals or creditworthiness, despite the stability of deposits and high central bank reserves.  We estimate that real GDP per capita growth will average 0.8%, although we note that our population figures do not account for the large refugee population living in Lebanon. 

The slowdown in economic growth is straining Lebanon's already-weak public finances, in a political environment that was not conducive to reforms even during periods of strong growth.  The deficit widened in 2013 to 9.5% of GDP, and we expect it will remain at similar levels given pressure on revenues and little expenditure flexibility.  Interest payments on debt are nearly 8.5% of GDP, or 40% of revenues, while transfers to the loss-making electricity company Electricite du Liban (EdL) are 4% of GDP.  The primary balance has turned increasingly negative, highlighting the lack of fiscal space, which in turn is contributing to the rise in general government debt.  We expect general government debt to rise to 147% of GDP in 2014.  Under our base case, a parliamentary bill to increase public-sector wages will not be approved without offsetting revenue measures. 

The political environment precludes Lebanon from receiving significant financial support from the international donor community, as does government policy against setting up refugee camps that would allow the donor community more direct access to aid the refugees.  The Syrian crisis has displaced millions of people, both internally and outside of the country. The UN High Commissioner for Refugees estimates that the Syrian refugee population in Lebanon could reach 1.5 million by the end of 2014, increasing the population of Lebanon by about one-third.  In the medium term, the impact of the increasing number of Syrian refugees on Lebanese politics and society, as well as the economy, as pressure increases on public spending, services, infrastructure, and the labor market, will become a greater concern for the Lebanese government. 


The stable outlook reflects our view that deposit inflows to the financial system will enable the government to meet its financing needs over the coming year despite the difficult internal and external political environments. 

If the political and economic situation deteriorates to the point where it staunches deposit growth, we could consider lowering the ratings.

We could consider raising the ratings if public finances became more sustainable, which would be supported either by a political breakthrough in Syria -- potentially improving economic growth prospects in Lebanon--or an improvement in domestic policymaking that could translate into fiscal reforms.  (S&P 11.04) 

Back to Table of Contents

 11.2  KUWAIT:  High-End Retailers Look to Kuwait for Expansion 

The growth witnessed across Kuwait’s retail sector in recent years looks set to continue, as additional outlets open their doors in newly available retail spaces.  High-end malls carrying luxury brands, in particular, are proving popular with Kuwaitis, who rank among the GCC’s most affluent consumers. 

Analysts expect 2014 to be another strong year for Kuwait’s retail sector, with key international brands looking to boost their presence.  New shopping centers, including The Gate Mall, are preparing to open for business, while other ventures, such as The Avenues, plan to expand.

Kuwait came in ninth overall on AT Kearney’s Global Retail Development Index 2013 survey, edging up three places from 2012, and maintaining the number two spot within the MENA region, behind the UAE.  The survey attributed the improved ranking to steady economic growth, higher consumer spending and a stronger representation of international retailers.  

New openings 

In March, Marks & Spencer moved to strengthen its foothold in the country by opening a new 6700-sq-metre store in Kuwait City.  The store, which brings the retailer’s total number of outlets in the region to 26, is operated by Marks & Spencer’s long-term franchise partner, Al Futtaim Group.  “The Middle East is a priority market for Marks & Spencer and [...] we are continuing to build our presence here,” the retailer’s CEO, Mark Bolland, told local media at the store’s opening.  The outlet marks the retailer’s largest store outside the UK. 

Just weeks earlier, Kuwait’s biggest hypermarket opened its doors in Dajeej. Set over 21,400 sq. meters, LuLu Hypermarket will serve the expanding suburbs of Messilah, Mishref, Salwa and Jleeb Al Shuyoukh.  The hypermarket is expected to host a number of established names, including Costa Coffee, Malabar Gold, Dunkin Donuts and Damas.  The company said it planned to open four additional outlets in Kuwait before 2016 as part of its GCC expansion strategy.  

Focus on luxury 

Kuwait has one of the highest concentrations of international retailers in the GCC, according to AT Kearney, with the luxury segment proving a major draw.  Several high-end brands, including Chanel, Burberry, Louis Vuitton, Prada and Christian Dior took up residence in the Prestige district of The Avenues when the third phase of the mall’s expansion was completed just over a year ago.  The extension made available an additional 100,000 sq. meters of space, sufficient to house around 400 shops. 

Kuwait’s high GDP per capita, estimated at $48,260 in 2012 by the IMF, means the country is well-placed to drive growth across the luxury retail segment.  A recent report by Business Monitor International suggested that the comparatively relaxed dress codes and sizeable young population could also be boosting spending on high-end fashion.  “In a country in which 45% of the population is in the 20-39 years age range, important for household spending on the retail sector, malls such as The Avenues are attracting young consumers keen to buy international brands.  Kuwaiti women do not generally wear abayas, so there is a much more open attitude towards fashion,” the report read. 

The fourth phase of The Avenues’ expansion, which is in the design stage, is expected to include two five-star hotels, additional shopping space and a multi-purpose ballroom when finished. 

The Gate Mall, a six-floor, 37,000-sq-metre shopping center under construction near the American University of Kuwait, is another venture set to open in the coming months.  Once completed, the mall, which is being built by Al Kuthban Construction, is expected to include more than 275 shops, making it Kuwait’s second-largest shopping center.  The developers of Al Salam Mall, a $142m project offering 26,680 sq. meters of gross leasable area, announced last September that more than 70% of retail space had been leased. 

Analysts have cited refined consumer tastes and heavy spending on quality brands as key drivers for high-end retail.  Kuwait’s young, wealthy customer base and penchant for luxury labels should ensure that demand remains strong, paving the way for further expansion.  (OBG 22.04) 

Back to Table of Contents

 11.3  OMAN:  Oman Gas Production On Track To Meet Rising Demand

Domestic gas requirements are set to expand rapidly over the next few years as Oman’s industrial base expands and as the utilities sector grows to keep pace with rising demand for water and electricity.  However, officials have said projected increases in gas production will be managed to ensure supplies can be guaranteed over the long term. 

The Oman Power and Water Procurement Company (OPWP) estimates gas consumption in the electricity and water desalination sector will rise from the current annual volume of 6.7b cu meters to 10b cu meters by 2020, an almost 50% increase.  While the national demand for gas will rise sharply over the coming six years, the rate of increase is by no means evenly distributed, with requirements set to spike in some regions. 

This is particularly the case in areas of the country where the government has promoted industrialization as a means to broaden the economic base and provide new opportunities.  Demand for gas in the Salalah region, the center of extensive industrial development, is forecast by the OPWP to rise from the current 0.72b cu meters annually to 1.2b by 2020 as new industrial facilities, as well as the power plants and utilities needed to support them and the swelling population, come on-line.  

Pumping up the volume 

To help meet this demand from the utilities sector, along with that of industry and private consumers, Oman is pushing to raise production, with output to be increased steadily over the next few years.  Production from domestic fields, which topped 100m cu meters a day in 2013, should reach 120m cu meters a day by 2018, according to the Ministry of Oil and Gas. 

The biggest boost to output, one that could push production past the daily figure of 120m cu meters, will be the new Khazzan-Makarem tight gas development.  A project of energy major BP and the Oman Oil Company Exploration and Production, the Khazzan project is based in an area known as Block 61 in central Oman.  By sinking some 300 wells to depths of up to 4500 meters and utilizing hydraulic fracturing technology and other techniques, BP plans to produce 28.3m cu meters of gas a day.

According to Dave Campbell, BP Oman’s general manager and vice-president of operations, Khazzan will be a significant factor for the economy of Oman. “BP and its partner are making a $16b investment in developing the Khazzan tight gas resource,” he told OBG.  “This project is not only important for BP, but is essential for the Sultanate of Oman.  The economic benefit of gas extends past the energy sector because the growth in the supply of energy for Oman is also an enabler for economic development in all other sectors.”  

Prioritizing demands 

While Oman will have far greater access to gas supplies in the coming years, the government intends to manage upstream flow to downstream industries, balancing long-term supplies with measured industrial expansion.  According to Salim bin Nasser Al Aufi, the undersecretary of the Ministry of Oil and Gas, the first priority for the increased flow of gas will be utilities, ensuring the supply of electricity and water (through desalination), with commitments to existing industries being met after that.  “Yes, we will have more gas, but if we produce all of it today, then very soon in the future we will have a big hole,” Al Aufi told local media in late March. “When Khazzan-Makarem kicks in, there will be other producers and we will need to turn them down a little bit, so that we save that gas for the future.” 

One of the industry players already set to benefit from rising gas production is Sohar-based Jindal Shadeed Iron and Steel with its recently expanded production facility set to take annual output of steel products to around 2m tonnes, most of which will be destined for the growing domestic market. 

Naushad Ansari, Jindal Shadeed’s director and head of plant, recently told OBG, “Heavy industry forecasts expansion and operations based on the availability of gas, therefore it is crucial that the country’s strategy going forward revolves around ensuring reliable gas feedstock to industrial estates.” 

While Oman is set to increase domestic gas production, and is holding talks with Iran over the possibility of imports via a direct pipeline, industry will have to compete with other calls on gas supplies.  Those industries that can offer the best value-added components, including employment, revenue, export potential and meeting domestic needs, will likely have the inside running when pitching future proposals to the government and state agencies.  (OBG 17.04) 

Back to Table of Contents

 11.4  SAUDI ARABIA:  The Saudi Succession Question 

Al Monitor observed that the recent royal decree appointing Prince Muqrin bin Abdelaziz as deputy crown prince, thus guaranteeing his eventual rise to the throne, has reassured many Saudis about their leadership for the near future, but it has not dispelled their concerns about the monarchy’s long-term stability. 

Saudis gave the announcement a “welcome reaction,” said Asaad al-Shamlan of the Institute of Diplomatic Studies in Riyadh.  “It’s provided some kind of certainty regarding the succession and medium-term stability.”  Nevertheless, the decree’s unusual disclosure that the king’s decision was approved by three-quarters of the princes consulted, along with its strong insistence that the decision “may not be modified or changed in any way or form by any person whoever it may be,” left lingering concerns about how firmly the king’s decision was accepted within the royal family.  Who, Saudis wonder, are the rejecting 25%? 

“The interesting thing is that they announced the percentage of votes for Muqrin,” said a Saudi university English lecturer.  “Usually, they would not announce that there are objections.”  While the House of Saud has a history of being pragmatic and of closing ranks behind a consensus, many Saudis fear potentially rancorous infighting as members of the younger, second generation of princes vie to assume the reins of power.  Muqrin’s projected ascension to someday become king now means that that day of reckoning is further postponed. 

Shamlan suggested that fears of infighting had been overblown.  He noted that the king’s decision did not leak prior to its 27 March announcement despite a pocket of rejectionists.  That, he added, is “indicative of some cohesion in the royal family.”  An academic who closely follows royal politics and asked to remain anonymous wrote in an email that Saudis “are reassured for the time being, but there is a sense of concern about the future.” 

Meanwhile, King Abdullah bin Abdulaziz, in elevating his youngest half-brother, violated his own earlier edict that established new procedures for selecting future crown princes.  In 2006, Abdullah established the 34-member Allegiance Council, comprised of sons and grandsons of the country’s founder, King Abdulaziz bin Saud.  According to its regulations, this body was supposed to play an active role in choosing the crown prince when that post next became vacant.  Abdullah, however, pre-empted the prerogative of the council and instead designated Muqrin to be the next crown prince when the incumbent, Prince Salman bin Abdulaziz, either becomes king, steps down for health reasons or dies.  Muqrin would also become king if the posts of crown prince and king become vacant simultaneously. 

The royal decree stated that King Abdullah had made his decision in cooperation with Salman, but it appears that the council was not called into session to participate in Muqrin’s selection.  Instead, its members were polled individually, according to a 1 April tweet by Khalid bin Talal, son of Prince Talal bin Abdulaziz who is regarded as an independent-minded maverick within the royal family.  Asked about this tweeted information, the Saudi academic wrote in an email, “It seems that what Khaled bin Talal tweeted is more realistic and is accurate in stating that members were consulted individually.” 

The announcement of Muqrin’s appointment came on the eve of President Barack Obama’s long-awaited visit to Riyadh and overshadowed his arrival as the Saudi rumor mill went into overdrive, even suggesting, falsely, that King Abdullah would be abdicating.  That speculation was further fueled by pictures of the king, who is around 90, wearing an oxygen tube as he met with Obama.  Abdullah has always been more candid than other princes about sharing his health status with the public.  He did not keep secret, for example, that when he traveled to the United States a few years ago, he was having back surgery. 

On the face of it, Muqrin’s new role means that the first generation of princes, the sons of the country’s founder, will remain the principal power brokers for potentially at least a decade or more because Muqrin is only 68 years old.  This situation raises the question of whether it is good for Saudi Arabia at a time when it needs forceful leadership at the top because of the huge economic and development challenges of the near future.  Many Saudis feel that younger people with more energy are needed to drive a recalcitrant bureaucracy that often fails to implement major decisions in a timely way.  Some Saudis also would like to see a leadership that is more open to greater participation by ordinary people in government decision-making. 

On Saudi Arabia today, James Smith, former US ambassador to Riyadh, asserted, “You have a population that no longer sees themselves as subjects.  They see themselves as citizens, and they’re demanding that their government be responsive.” Speaking during a 31 March teleconference sponsored by the Woodrow Wilson International Center for Scholars, Smith added that one of the government’s biggest challenges “is balancing the expectations of a citizenry that is increasingly involved and want to be a part of the dialogue.” 

In a sense, the line between the first and second generation has been blurred by Muqrin’s ascension because he is closer in age to his nephews.  For example, the king’s son Miteb, who heads the National Guard, is 60 and Khalid bin Faisal, the education minister, is 73. 

By most accounts, Muqrin is a likable prince, known for his friendliness and for taking popular stands.  For example, he recently castigated Saudi banks for not helping ordinary Saudis.  “People like Muqrin, and they are optimistic and happy for this appointment,” said the English-language lecturer.  “He takes decisions immediately when people complain so they feel comfortable that he cares about them.” 

Meanwhile, one well-placed Saudi who works in the office of a senior prince said that King Abdullah might soon press ahead with a move that has long been bandied about in the royal family — naming a prime minister to take on many of the executive functions now performed by the king.  This change, the source said, would be meant “to give assurances for the future.”  (AL Monitor 14.04) 

Back to Table of Contents

 11.5  EGYPT: Coming Clean About the Energy Crisis 

On 15 April, the Economist Intelligence Unit wrote that Mohammed Shaker, an energy executive who was appointed electricity minister at end of February, has told Egyptians that they are going to have to put up with power cuts for some time.  The fact that Egypt is facing such a crisis has been brought home by the frequent cuts in electricity supplies over the winter, a season of relatively low power demand.  Mr. Shaker has said that this summer's power cuts could last as long as six hours at a time, depending on the availability of fuel, and that there is unlikely to be any major improvement until 2018. 

The strains on the power sector have been building for several years, and there have been regular power cuts during the summer months since 2010.  There are several interlinked reasons for the crisis.  These include: 

  1. electricity consumption rising by about 8% a year on average over the past five years, while capacity additions have lagged behind;
  2. natural gas production declining by more than 10% over the past two years;
  3. delays in the completion of power station projects and lack of progress in tenders for new plants; and
  4. accumulation of deficits in state power utilities as a result of heavy subsidies provided to residential consumers, who account for almost half of total demand. 

The winter power cuts have come at a time when the peak daily load has rarely exceeded 22,000 MW (it was 22,650 MW on 14 April, according to the Egyptian Electricity Holding Company, or EEHC).  During the height of the summer, the peak load is likely to be more than 30,000 MW.  Mr. Shaker has said that the grid's maximum capacity is now only about 28,000 MW and that its efficiency is impaired during periods of high temperature. 

Kuwait Lends a Hand 

The shortage of capacity is only part of the problem.  Egypt's thermal power stations need at least 100m cu meters/day of natural gas and more than 20,000 tonnes/day of diesel or fuel oil in order to function at a reasonable level of capacity.  Owing to the shortfall in natural gas production, the EEHC's daily allocation of gas is now only 70m cu meters, an electricity sector consultant told The Economist Intelligence Unit.  The government is seeking to compensate for the gas shortfall through increasing the use of diesel in dual fired plants.  The Kuwait Petroleum Corporation (KPC) announced in early April that it had agreed to increase its supplies of crude oil to 85,000 barrels/day (b/d), from 65,000 b/d, and of diesel to 1.5m tonnes/year (t/y), from 860,000 t/y.  The Kuwaiti supplies will continue until end of 2016, Ibrahim al-Mudhaf, KPC's marketing director, was quoted as saying by the official Kuwait News Agency.  Although Egypt will ostensibly be charged market rates, the supplies are likely to be financed by Kuwaiti government loans. 

The EEHC's most recent comprehensive data cover the period up to end of June 2012.  These show that thermal power stations accounted for 88% of total installed capacity of 29,074 MW and that natural gas accounted for 84% of total thermal power generation of 129.4bn kwh.  Meanwhile, annual consumption of natural gas for power generation was about 28bn cu meters in fiscal year 2011/12 (July-June), equivalent to 76m cu meters/d and accounting for about half of Egypt's total natural gas production during that period. 

The additional Kuwaiti fuel supplies will provide some respite over the next few months, but this is unlikely to be enough to avoid power cuts.  Mr. Shaker has said that a 10% fuel shortfall would result in daily outages of about three hours during the summer, and that this could extend to six hours if the fuel shortfall reaches 20%.  The government has argued that the grid's capacity will be increased by end of June with the start-up of steam generator units at the Giza North and Benha power stations, whose construction has recently been completed.  Giza North has four 250 MW gas turbines and two 250 MW steam turbines that will run on heat recovered from the gas turbine cycle; Benha has two gas turbines and one steam turbine, and has total capacity of 750 MW. 

Too Little Downstream Activity 

However, since the main contracts for Giza North and Benha were awarded in September 2011 (to a partnership of GE of the US and SEPCO III of China), there has been a marked slowdown in power station project activity.  The two largest schemes under way are a 1,950 MW plant at Helwan, south of Cairo, and a 500 MW combined cycle conversion at the Al Shebab power station, in the eastern Delta, financed, respectively, by the World Bank and the European Investment Bank.  Both are still in the tendering phases.  The EEHC has also revived two major projects to be carried out by private investors: the 2,250 MW Dairout combined cycle plant in the Delta; and a 250 MW wind farm in the Gulf of Suez.  These two schemes were originally put out to tender in 2010, and bidders have been invited to present fresh offers at the end of May. 

By the time the first of these new plants come on stream in 2017 and 2018, Egypt's natural gas production should be starting to recover.  The offshore West Nile Delta project being undertaken by BP of the UK is planned to produce about 10bn cu meters/year of gas, which would boost Egypt's total capacity by 20?25%.  The Ministry of Petroleum announced in mid-April that the first gas from West Nile Delta will come onshore at the Idku facility, operated by BG Group, also of the UK, in 2017 at a rate of 4.5bn cu meters annually, pending the completion of BP's permanent onshore facility at nearby Motabas.  Neither company has yet confirmed this arrangement.  The ministry has also indicated that it is in advanced negotiations about the import of liquefied natural gas (LNG) via a floating storage and gasification unit to be installed at Ain Sokhna, near the southern entrance of the Suez Canal.

Rush for coal? 

Another element in the government's strategy for tackling its energy crisis is a proposal to import coal. Initially this would be as a replacement for natural gas in cement production, but there has also been discussion of using coal for power generation.  The environment minister, Leila Iskander, has indicated that she is not yet satisfied that adequate safeguards are being put in place to prevent pollution arising from the transport and use of coal.  The cabinet agreed in principle at the start of April to allow the use of coal in cement plants, but this was supposed to be subject to further environmental impact assessments.  The cabinet also agreed to encourage use of biomass in cement plants, and to stiffen penalties for violating environmental regulations. 

However, although such measures may ameliorate to an extent the shortages in specific industries, they will clearly be insufficient to fully fill the energy gap.  With this in mind, Mr. Shaker has made regular appearances on television in recent weeks in an effort to explain the nature of Egypt's energy crisis and the measures being taken to address it.  Yet, with shortages only set to worsen during the hot summer months, the government and the likely next president, Abdel Fattah el-Sisi, will be fearful of a popular backlash as temperatures begin to rise.  (EIU 15.04) 

Back to Table of Contents

 11.6  EGYPT:  Corruption in Construction - Egypt’s Failing Infrastructure 

As Egypt’s political failure continues to permeate various sectors - the economy, health system and security - decades of poor management and little accountability have led to the failing of a key sector: Egypt’s real estate market.  The recent spate of collapsing buildings reveals an infrastructure that is literally shaking at its core. 

Although not a new phenomenon, a recent string of building collapses has once again brought Egypt’s housing and corruption into the spotlight.  On 13 March in Alexandria, a wall still under construction collapsed onto a coffee shop killing six people and injuring seven.  On 19 March, a six-story building collapsed in Nasr City, Cairo, depriving thirteen families of their homes but miraculously sparing all of their lives.  On 21 March, a three-story building collapsed in Giza, killing two and injuring five.  In Suez, a portion of a building also fell, injuring a child.  On 30 March, another four-story building collapsed in Cairo, killing two and injuring others.  These five incidents happened in the space of less than a month and as a BBC article reports, “barely a week goes by in Egypt without news of a collapsed building.” 

The collapse of buildings across Egypt is a problematic phenomenon on several fronts.  Most obviously, it endangers the lives, properties and homes, and well-being of the Egyptian public.  The devastation of losing one’s home, not to mention the loss of human life alone, should translate into the implementation of building regulations and a more strict and urgent move towards construction reform.  As laid out in Article 46 of the country’s new constitution, all Egyptians have a right to “live in a healthy, sound and balanced environment,” with protection of this right being a “national duty.”  The overarching failure to enforce building laws and regulations, and to enforce maintenance ordinances directly endangers civilians lives and property, two fundamental rights set forth in Articles 2 and 3 of the Universal Declaration of Human Rights that state: “everyone has the right to life, liberty and security of person.” 

While regulations and laws may exist, the collapse of these buildings is clear indication that regulations are not being enforced.  When asked by television host, Youssef al-Husseiny on private satellite channel ONTV, about the collapse of the building in Nasr City, the municipality’s head Ali Salem explained that a restoration order was sent to the owner of the building, calling for immediate action.  When asked why the municipality did nothing over a period of four and a half months to follow up on the order, Salem stumbled over his words, initially stating that he was unaware of whose responsibility it was to monitor the status of buildings, consequently attempting to place the blame on the police for not enforcing the order, and later becoming defensive and suggesting that he would stop working in the face of criticism.  He ended the conversation abruptly, refusing to engage on his office’s responsibility for the collapse. 

This phenomenon also represents an economic and financial loss for individuals, the municipality, city, and country.  Litigation, rebuilding, compensation and wealth distribution all significantly add up, creating burdens that at least one party, whether the federal government, municipality, contractor, or displaced family, will have to endure; in most cases, it is the poorer families that walk away, homeless and unprotected. 

On 30 March, Mada Masr quoted state media as saying that the collapse of a Cairo building occurred because "it was old and not constructed on concrete columns."  Before the revolution and even more so in its wake, buildings across Egypt have sprouted without proper licenses in order to avoid state bureaucracy, cut costs affiliated with implementing regulations, and gain as much profit as possible from each construction project.  In January 2013, engineers reported that approximately twenty buildings were collapsing on a yearly basis in Alexandria alone. 

Correcting the housing problem would be costly and time consuming, explaining why few have attempted to tackle this endeavor, particularly at a time when successive governments have been able to do little on key fronts involving Egypt’s failing economy.  On 3 February 2011, the Wall Street Journal wrote that “more than 90 percent of Egyptians hold their property without legal title,” while a blog for the Property and Environment Research Center estimates that the value of “extralegal businesses and property, rural and urban” adds up to $248 billion.  Necessary reform would entail the standardization of building regulations and their unified codification, as well as regular inspections of currently existing buildings and those yet to be built.  Police and regulating officials, instead of taking bribes, would have to be willing to report illegal construction to the appropriate authorities; court dockets would be full of injunction and compensation requests which judges would need to be open to hearing; and families that live in faulty or old buildings would need to be evacuated and given temporary residences until construction is completed.  The task is gargantuan and requires the collaboration and cooperation of actors across a number of sectors, as well as a willingness by the country’s leadership to challenge what has become institutionalized bureaucracy and corruption.  Until this cadre of leadership appears however, we will continue to witness building collapses on a regular basis across Egypt. 

Amira Mikhail is a JD Candidate at Washington College of Law, American University and a former intern at the Atlantic Council's Rafik Hariri Center for the Middle East.  (Atlantic Council 09.04)

Back to Table of Contents

 11.7 TUNISIA:  Tunisia's Trade Deficit Widens 

Tunisia’s official foreign trade figures for the end of the first quarter of this year published and relayed by the media reflect a monumental deficit.  The situation was expected, given the malfunctioning of the production apparatus and the drop in volume of foreign direct investments.  Two fundamental questions arise: Is the situation sustainable indefinitely?  What will be the impact on foreign exchange risk? 

Overall, the data reported by the National Institute of Statistics indicate deterioration in the trade deficit, widening from TND2.419 billion ($1.532 billion) at the end of March 2013 to TND3.29 billion ($2.083 billion) by the end of Q1/14.  The gap, observed at the global level, has mainly increased in the most important sectorial groupings, namely, the agriculture and agro-food industries, engineering industries and other manufacturing industries. 

Thus, the stability of the food balance is at stake.  The drop registered by the industrial sector illustrates a major dysfunction in the goods and services market, given the respective differential increases in importation of capital goods and raw and semi-manufactured materials by 5.4% and 3% during the analysis period.  In short, interpreting the above figures must be accompanied by an impact assessment of the deterioration of foreign trade terms on the current accounts and capital accounts balances of the country.  These are key elements for estimating the severity of liquidity and foreign currency risks if the rhythm of aggravation of the trade deficit keeps growing. 

Overview of the International Investment Position of Tunisia

The analysis of the creditworthiness of a country is based on studying its possibilities to fulfill its obligations of repayment of its debt.  Tunisia will meet its obligations by financing its needs for this purpose, measured by the variations of the value of its current account and capital account balances. 

The balance and the account in question are statistical records that compile economic and financial transactions to track changes in national assets and liabilities. 

In Tunisia, according to the parameters published by the Central Bank of Tunisia, the statement of current transactions revealed a deficit of TND6.437 billion ($4.076 billion) at the end of 2013 compared to a gap of TND 5.812 billion ($3.68 billion) on 31 December 2012.  Regarding the capital account and financial transactions, the balance dropped from TND 7.83 billion ($4.958 billion) to TND 5.343 billion ($3.383 billion) during the same period.

The overall balance has largely deteriorated, registering a - TND 1.095 billion ($6.934 billion) compared to TND 2.138 billion ($1.354 billion) during the period 2012–2013. This is an unprecedented situation given that the country has benefited, in this very short time, from a massive liquidity injection by incurring billions of dinars worth of debt.  This clearly demonstrates that the trade deficit of Tunisia will indeed be problematic for the nation and could simply lead it to fail to make payments in a few months. 

It should be noted that the international investment position faced a deficit of TND 76.374 billion ($48.365 billion) at the end of last year and a deficit of TND 68.606 billion ($43.446 billion) in 2012.  This infers a liquidity difference of TND 7.768 billion ($4.919 billion). 

The risks 

This current situation, in which Tunisia’s trade and capital deficits have accumulated and reached an unsustainable limit, points to the national economy being in the classic position of a liquidity trap.  This happens when monetary authorities are unable to properly manage through a global recession and they fail to inject additional money and affect key interest rates. 

Under such circumstances, in which both private investment and consumption are largely paralyzed, such declines should be offset by increasing public spending.  This, however, can be difficult when the development budget does not exceed TND 4.5 billion ($2.8 billion).  Thus, there is a dilemma that indefinitely poses the problem of finding liquidity in the unofficial circles of the Tunisian economy, namely, by addressing the tax-evasion abyss and going through the underground economy. 

Other problems arise in regard to the continuation of the dizzying pace of the widening trade deficit, especially with regard to foreign exchange risk management and the preservation of the Tunisian dinar's value, which is managed by the Central Bank of Tunisia and fluctuates depending on a basket of foreign currencies. 

These difficulties mainly result from the increasing volatility of capital inflows into Tunisia, the low growth of total productivity as well as the additional foreign currency withdrawals made by importers to meet their banking needs in this area. 

The risk of national currency speculation could thus increase and lead to inaccurate price signals and a fluctuating real exchange rate.  This generally leads to a sustainable integration of inflationary pressures, which are exacerbated by a state of uncertainty that undoubtedly increases capital costs and discourages investment. 

Under such circumstances, there is an urgent need to think deeply about how to manage the trade deficit in correlation with macroeconomic choices whose effects are difficult to identify. 

The reality is quite complex.  Several economists have proven that the deficit in itself means nothing. However, a deficit is often a sign of a lack of competitiveness in a country living beyond its means and whose economic fabric is destroyed by taxation and regulation. It is not the deficit that matters, but rather what lies behind.  (Al Monitor 15.04) 

Back to Table of Contents

 11.8  MOROCCO:  Eying Africa for Investment & Political Support 

The visit of King Mohammed VI in late February-early March 2014 to four countries in West Africa (Mali, Ivory Coast, Guinea and Gabon), at the head of a large delegation of business owners, proves that the Kingdom of Morocco is looking at this region as a promising horizon for its major corporations, which are unable to expand in their natural surroundings — i.e., North Africa — as a result of the crisis of the Arab Maghreb Union.  Meanwhile, Morocco still believes that Algeria is one of the most important markets that it dreams of tapping — entering into it and, through it, entering the Tunisian market — but this requires the normalization of relations between the two countries, or at least the opening of their land border, closed since 1994. 

Awaiting normalization, which may be delayed pending the UN solution to the Western Sahara issue, Moroccan business owners are looking south for alternative markets.  It could be argued that the narrow Moroccan market (34 million people), the decline in European demand for Moroccan products and the stagnation of domestic demand (increasing by only 2.4% in 2012 compared to 5.7% in 2011, although it was expected to improve in 2013 to reach 5%, according to the Moroccan High Commission for Planning) are all factors that make it imperative for Moroccan companies to strengthen their presence in Africa.  “The roots of the Morocco tree whose leaves breathe in European air,” as King Hassan II described it.  Moroccan attention is focused on the Economic Community of West African States (ECOWAS), registering a significant 7% economic growth in 2013 and with the purchasing power of the total population (300 million people) estimated at $590 billion. 

Morocco’s Foreign Investments: Africa 

As reported by the Moroccan Ministry of Economy’s Department of Studies and Financial Forecasts, 7% of Morocco’s exports in 2012 were to the markets of the Sahel-Saharan states.  The companies exporting to Africa (reaching today 930 companies) aim to register triple this figure, raising the ratio up to 20% in 2018.  The total of direct current Moroccan investments in Africa is $800 million, making the kingdom the second investor in the African continent after South Africa.  According to figures published by the Moroccan daily L'Economiste on 20 February 2014, Africa — especially West Africa — attracted in 2013 half of Moroccan foreign investments, i.e., MAD1.04 billion out of MAD2.186 billion ($127 million out of $267 million).  During 2009-2013, investments amounted to MAD11.35 billion out of MAD 16.28 billion ($1.38 billion out of $2 billion).  Since 2009, Moroccan investors have transferred to their country MAD 1.05 billion ($127 million) from the proceeds of their investments. 

These investments fall within the scope of a global expansion toward Africa, as foreign direct investment in 2012 in the continent increased by 5% (United Nations Conference on Trade and Development Report), which is a significant ratio at a time when foreign direct investments are witnessing a real global collapse (dropping by 18% in 2012 and expected to stagnate in 2013). 

The activity of some major Moroccan companies in the African continent symbolizes the importance of this inclination of Moroccan business owners toward Africa.  These companies include Royal Air Maroc, covering 27 African capitals and ranking second after Air France as the most important airline operating between Europe and Africa, with an average of 217,000 seats per week (compared to 135,000 registered by its Algerian counterpart [Air Algerie] and 141,000 by [Tunisair,] its Tunisian counterpart). 

Another company that symbolizes the importance of Morocco’s investments in Africa is Maroc Telecom (in which the state owns 30% of the shares).  This company has had subsidiaries in Mauritania since 2001 (Mauritel), Burkina Faso since 2006 (Onatel), Gabon since 2007 (Gabon Telecom) and Mali since 2009 (Sotelma). In 2013, these subsidiaries — whose total customers reached 30 million — achieved earnings, before interest, taxes, depreciation and amortization, of MAD 2.383 billion ($347 million), more than a 30% increase compared to 2012.  Furthermore, the scope of activity in Africa of the most important Moroccan banks was remarkably expanded in recent years, as there are currently 20 branches in the African continent.  Ivory Coast entrusted one of these banks, Attijariwafa Bank, to look for funds for its budget in the world capital market, which is a sign of confidence in this bank’s professionalism. 

The Relation to the Western Sahara issue 

Of course, this spread into Africa is not purely economic, since one of its objectives is breaking the African diplomatic isolation imposed on the kingdom after its withdrawal in 1984 from the Organization of African Unity to protest the admission of the Sahrawi Arab Democratic Republic. 

Recent visits by the Moroccan monarch to Mali, Ivory Coast, Guinea and Gabon led to the signing of several economic agreements and the establishment of joint business councils between the Moroccan economic business owners and their counterparts in these countries.  These visits culminated also in diplomatic gains, since King Mohammed VI succeeded in obtaining Gabon and Senegal’s support regarding the proposal for resolving the Western Sahara issue within the scope of a “broad autonomy” rather than a referendum that has yet to be held since the cease-fire in the former Spanish colony (1991). 

Morocco hopes African support will help it convince the concerned states in the international community of the reasonableness of the autonomy proposal — mainly the United States, which does not seem to favor this proposal so far.  Moreover, the French daily Le Monde recalled this fact on Feb. 17, 2014, since the kingdom miraculously dodged in April 2013 a UN regulation proposed by Washington to expand the powers of the United Nations Mission in Western Sahara to include human rights. This would have strengthened the diplomatic position of the Polisario Front and its Algerian ally.  (Al Monitor 14.04) 

Back to Table of Contents

 11.9  MOROCCO:  Looking to be Financial Services Gateway to Africa

As part of a broader push to boost Morocco’s links with fast-growing frontier markets in West and Central Africa, in mid-February the Moroccan parliament adopted a law which formalizes the status of Casablanca’s international financial center and adds new measures to attract investors. 

Morocco aims to establish Casablanca Finance City (CFC) as a gateway for capital inflows to the African market.  Sector authorities contend that with the adoption of Law 68-12, which was unanimously approved by the Chamber of Counsellors’ financial commission in early March, the project moves out of its initial development phase. 

Under Law 68-12, the Moroccan Financial Board, the project’s developer, was renamed the Casablanca Finance City Authority (CFCA) and will serve as the CFC’s permanent oversight body, although financial sector regulation will remain in the hands of existing authorities. 

The law expands the list of financial service organizations eligible to obtain CFC status.  The zone originally welcomed corporate and investment banking institutions; law, audit and consulting firms; and major companies, including those outside of the financial services sector, that want to establish their regional headquarters in the CFC as a base for expansion into Africa. 

Law 68-12 broadened this to include reinsurance companies and firms that perform a wider array of investment services, including capital market intermediation, investment banking services and specialized services, such as financial research and ratings agencies.  Finally, the legislation permits firms to establish representative offices in the zone, which will allow large businesses to gradually shift their activity to the CFC, instead of requiring regional headquarters to be established immediately.  Credit institutions with CFC status will also be permitted to receive deposits from corporations, including those based outside of Morocco. 

Fuelling African Expansion 

Authorities in Casablanca are hoping to capitalize on a growing trend of African expansion by financial services firms. Morocco’s three largest banks, Attijariwafa Bank, Banque Centrale Populaire and BMCE Bank, are all working to increase their presence in the banking market in West and Central Africa.  The parent company of Moroccan insurance provider CNIA Saada, Saham Finances, acquired the third-largest insurance group in West and Central Africa in terms of premiums, Colina, in 2010. The purchase provided CNIA Saada an existing network of 15 insurance companies in 11 African countries. 

Although Moroccan authorities have set ambitious goals for Casablanca, interest in the CFC is growing.  The number of companies registered in the zone swelled from 10 in mid-2013 to 33 by January 2014 and includes the US-based insurance firm AIG, France’s Societe Generale and international law firms such as Baker & McKenzie and Duhamel Blimbaum.  On 10 February, the CFCA announced that BNP Paribas Regional Investment Company, a subsidiary of the French lender dedicated to corporate and investment banking, would establish its regional office in the zone. Jean-Christophe Durand, head of corporate and investment banking at BNP, confirmed the company’s intention to expand its services in Africa from Casablanca in a press release. 

Long road ahead 

Authorities also hope that efforts to reinvigorate the Casablanca Stock Exchange (CSE) will attract new actors in the financial services sector.  Exchange volumes on the CSE have dropped since the beginning of the global economic downturn in 2007, and market capitalization has fallen in four of the past five years.  A series of reforms are in the works to create a separate platform for small and medium-sized enterprises, and to introduce new financial instruments, including stock lending and futures exchanges.

Speaking with OBG, Said Ibrahimi, CEO of CFC, said, “The Casablanca Stock Exchange is currently suffering a temporary shortage of liquidity, although the upcoming development of derivative products will provide the necessary tools for improving the situation.” 

Despite the challenges, Morocco has significant potential as a financial hub, owing to its geographic position, stable political history and economic growth record.  Companies in the zone will be able to fast-track processes to create new businesses, recruit foreign employees, and obtain work authorizations and short- and long-term business visas.  In addition, lower corporate and income taxes and milder currency exchange controls will continue to draw companies to the CFC. Ibrahimi estimates that the zone could ultimately contribute 1-2% of GDP per year and create 80,000 direct and indirect jobs.  (OBG 15.04) 

Back to Table of Contents

 11.10  TURKEY:  Moody's Changes Outlook to Negative From Stable 

On 11 April, Moody's Investors Service (http://www.moodys.com) changed the outlook on Turkey's Baa3 government bond rating to negative from stable.  Concurrently, Moody's has affirmed Turkey's Baa3 rating at its current level.  Moody's decision to change the outlook to negative was prompted by the following two drivers: 

1. Increased pressure on the country's external financing position driven by heightened political uncertainty and lower global liquidity, adversely affecting foreign and domestic investor confidence. 

2. In a context of a slowing near-term outlook for GDP growth, growing uncertainty about medium-term growth trend because the prospects for growth-enhancing structural reforms may be diminished in the more uncertain policy environment that is accompanying the domestic political turbulence. 

The key drivers for Moody's affirmation of Turkey's Baa3 government bond rating are: 

1. The government's strong fiscal metrics, which have seen a substantial decline in debt-to-GDP in recent years, a declining share of debt denominated in foreign currency, and a lengthening of the debt's maturity structure. 

2. Turkey's economic strengths, specifically its size, wealth and economic diversification, which remain strong relative to other countries in the same rating category. 

Turkey's local-currency bond and deposit ceilings remain unchanged at A3, its long-term foreign-currency bond ceiling remains at Baa1, and its short-term foreign-currency debt ceiling is Prime-2.  The long-term foreign-currency bank deposit ceiling remains Baa3, and the short-term foreign-currency bank deposit ceiling is Prime-3. 

Rationale For Outlook Change 

First Driver: Weakening External Financing Position As A Result Of Heightened Political Uncertainty- The first driver of Moody's decision to change the outlook on Turkey's sovereign rating to negative is the adverse impact of the turbulent political dynamics and lower global liquidity on both international and domestic investor confidence as illustrated by exchange rate volatility.  This in turn is exacerbating the country's existing external financing challenges.  While domestic political risk has been material in Turkey, Moody's notes that - notwithstanding the conclusion of recent municipal elections - developments since December 2013 highlight intensifying internal political divisions.  Moody's expects these tensions in the political arena to persist until at least the second quarter of 2015, when parliamentary elections are due. 

These tensions have dampened foreign and domestic investor confidence, which Moody's expects to intensify existing pressures on the country's balance of payments, particularly (1) the financing of the relatively large current account deficit; and (2) the repayment of approximately $163 billion in external liabilities of the Turkish corporate, banking and government sectors.  Moody's notes that Turkey's economy is characterized by a relatively high reliance on external capital inflows to finance domestic consumption.  Sustaining high growth rates entails large financing needs which, at close to 25% of GDP in 2014, exceed those of other emerging markets, and expose the country to higher financing risk in periods of increased political turbulence.   

Looking across the economy in aggregate, the coverage of maturing external financing (which includes non-resident deposits and short-term external liabilities) with foreign-exchange reserves position Turkey unfavorably vis-à-vis the country's peers, as reflected in the country's high External Vulnerability Indicator, which Moody's estimates at 173% in 2014. 

Equally, Moody's notes that the capacity of Turkey's banks, corporates and public institutions to roll over maturing debt has historically been high, even at times of elevated financial distress.  Moreover, parts of the Turkish private sector have buffers which offset some of the current financing challenges: the banking sector has significant reserves (held at the central bank) which it could use to meet its maturing external debt; and most of the corporate sector's short-term debt is trade finance, which traditionally also benefits from a high roll-over rate. 

Second Driver: Weaker Growth Prospects In The Medium Term As A Result Of An Uncertain Policy Environment - The second driver supporting the outlook change is Turkey's weakened medium-term growth outlook.  Moody's believes that the uncertain policy environment stemming from the heightened political risk will constrain the momentum of structural reforms needed to reduce the Turkish economy's external vulnerabilities.  As a result, this will also delay the evolution of a growth model which can deliver higher, more stable, broad-based and financeable growth.  In this context, Moody's expects a cyclical slowdown due to lower global capital flows, which will dampen consumption and investment.  The rating agency expects that this will in turn slow down growth to 2.5% in 2014 and 3% in 2015 (down from the 4% growth rate registered in 2013 and below the 4% medium-term trend growth), both of which face downside risks.  While these near-term projections partly reflect the dampening impact of a higher interest rate environment on domestic demand, they are a reflection of the longstanding volatility that has characterized Turkey's growth model. 

The combination of challenges facing the country today - heightened political turbulence, pressures on its external financing and the prospect of weaker growth in the medium term - shift the balance of credit risks to the downside and support the negative outlook on the rating. 

Rationale for Affirming the Baa3 Rating 

Moody's decision to affirm Turkey's current Baa3 sovereign rating primarily reflects the strength of Turkey's fiscal metrics and the government's balance sheet.  Since the beginning of 2009, Turkey's debt burden has fallen by 10%age points to 36.3% of GDP in 2013.  Turkey's ability to finance its outstanding stock of debt is supported by the relatively low and decreasing share of foreign-currency-denominated debt (27.1% in 2013, from 46.3% in 2003).  Finally, the maturity profile of the central government's debt stock has lengthened significantly to 5.9 years (and the maturity of its foreign debt stock is now almost 10 years), which reduces its vulnerability to interest-rate increases. 

The second driver underpinning the rating affirmation relates to Turkey's economic strengths - its wealth, size, and diversification.  Turkey's average income level on a PPP basis of $15,352 is higher than the median for Baa-rated countries and nominal GDP has more than tripled over the 2000-2013 to stand at $820 billion in 2013, making it the 17th largest economy in the world.  The Turkish economy is fairly diversified, and the country has become increasingly open to the global economy.  Specifically, the Turkish industrial sector demonstrated flexibility and resilience in the face of the global financial crisis by expanding beyond its traditional market of the EU into new export markets, particularly Africa and the Middle East. 

What Could Move the Rating Up/Down 

Any upward movement in Turkey's sovereign rating is unlikely in the near term as long as external imbalances remain large and Turkey remains exposed to external financing and balance-of-payments pressures.  Moody's would consider moving the rating outlook back to stable if there were improvements in Turkey's institutional environment and/or competitiveness, political tensions abated, investor confidence in the economy improved, and pressure on the country's external finances eased. 

Downward pressure on the rating could arise from a material reversal of the recent improvements in public finances or from increased political instability and intensified pressures on the country's external finances, thereby heightening the risk of a sudden and sustained halt in foreign capital flows.  Material institutional changes that could further weaken Turkey's export competitiveness could also place downward pressure on the rating.  (Moody’s 11.04) 

Back to Table of Contents


The Fortnightly newsletter is a free service of Atid, EDI. We are a team of economic and trade development consultants, headquartered in Jerusalem, but active throughout the region and beyond. EDI works with an international clientele interested in identifying and researching business opportunities in the region. We also serve as the regional representative offices for a number of U.S. states and bilateral Chambers of Commerce, as well as European clients.

EDI's other services include development of feasibility studies and tailored research reports, as well as identification of potential joint ventures for commercial clients. For more information on how we may better assist you, please visit our Web site at: http://www.atid-edi.com.

  EDI Logo


Page 1 of 186