TABLE OF CONTENTS:
2.1 Microsoft Ventures Invests In Mobile Collaboration App Zula
2.2 Arrayit Sells Microarray Platform to Leading Laboratory in Israel
2.3 Stirling-Engine Developer Qnergy Acquires US-based Infinia
2.4 Apple Acquires Israeli 3D Chip Developer PrimeSense
2.5 Tel Aviv University's Ramot Raises $17 Million from Tata & Sandisk
2.6 Harlan Expands Israel Imaging Services and Disease-Validated Models
2.7 Magal $2.5 Million Order to Secure Power Sites in Eastern Europe
2.8 Signs of Gas at Tamar SW
2.9 INE Ventures Launches Israeli Fund for Technology Startups
2.10 Quixey Expands Globally with New Israel Office
3.1 Applebee's Considers Middle East Growth
3.2 GE Wins nearly $700 Million Contract from Saudi Electricity Company
3.3 Saudi Woman Invents First Arabic Coffee Machine
3.4 Saudi Arabia’s Binzagr Chooses HighJump Supply Chain Suite
3.5 Saudi Utility Signs $453 Million Deal for Riyadh Power Plants
3.6 Saudi Arabia to Produce Volvo and Renault Trucks
3.7 Nestlé Expands Plant in Turkey to Boost Exports
4.1 Eilat-Eilot Vows To Become Energy Independent Within 2 Years
4.2 Energy Ministry Approves Natural Gas to Fuel Cars
4.3 Ashdod Israel's Most Polluted City
4.4 RAK to Build World's Largest Solar-Powered Seawater Desalination Plant
4.5 Solar Plant Opens New Era in Oman Energy Industry
5.1 Lebanon's Annual Inflation Slows to 0.2% in October
5.2 Lebanon's Trade Deficit Falls by $2.8 Billion as Imports Drop
5.3 Lebanon to Survey Unlicensed Syrian Businesses
5.4 EBRD Grants Jordan Recipient Country Status
5.5 Qatar October 2013 Annual Inflation Rises to 2.8%
5.6 World Football Union Urges Qatar to Drop Kafala System
5.7 UAE Climbs 12 Places in ICT Development Index
5.8 Dubai Wins Vote to Host 2020 World Expo
5.9 Dubai Passes Mandatory Health Insurance Law
5.10 Austrian Firm Wins $120 Million Road Deal in Oman
6.1 Turkey's Foreign Trade Gap Widens in October
6.2 Turkish Central Bank Sees Inflation Above Target For Some Time
6.3 Turkey Seeks Local Engines for UAVs & Tanks
6.4 Turkish Internet Subscribers Up 460% Compared To 2008
6.5 Turkey’s Real Unemployment Rate 20% When All Jobless Considered
6.6 Cyprus Unemployment at 17% in October
6.7 Tourist Arrivals in Cyprus from Russia in 2014 Estimated at 800,000
8.1 New Device for Sleep Apnea is Easier On the Heart
8.2 Evogene Closes its Initial Public Offering in the United States
8.3 Can-Fite BioPharma Generates Partnership Interest
8.4 The Revolutionary Medic Shoes Presented at MEDICA 2013
8.5 Novocure Announces Launch of the inovitro Lab Research System
8.6 Eventus Diagnostics' Octava Blood Accurately Detects Breast Cancer
8.7 VBL Therapeutics FDA Fast Track Designation for VB-111
8.8 Teva Announces Additional Regulatory Exclusivity for TREANDA
9.1 CommuniTake Expands Remote Support to Blackberry 10.2 Devices
9.2 Everything.me Wins Both Meffy & Lovies Awards
9.3 Celeno Chosen as 2013 Red Herring Top 100 Global Winner
9.4 Insightera Provides Personalized Retargeting for Marketers
9.5 SmartCipher Wins the CRN Award for Security Product of 2013
9.6 Tonara Adds Interactive Score Synchronization to Help Musicians
9.7 Tadiran Telecom's Aeonix Solution Achieves Acme Security Approval
9.8 SWITCH Selects ECI Telecom to Upgrade Its Existing Network
11.1 ISRAEL: OECD Decries Shortage of Physicians in Israel
11.2 ISRAEL: Fitch Affirms Israel at 'A'; Revises Outlook on LT FC IDR to Positive
11.3 LEBANON: Tourism Trapped between Regional & Domestic Discord
11.4 GCC: IMF Cautions Arab Gulf States Over Unemployment Rate
11.5 OMAN: Infrastructure Boosted by $78 Billion 5-Year Plan
11.6 LIBYA: Slipping Into Chaos
11.7 TUNISIA: Moody's Downgrades Tunisia's Government Issuer Rating to Ba3
11.8 ALGERIA: IMF Mission Concludes Article IV Consultation Visit
11.9 MOROCCO: Boosting Phosphate Production
11.10 TURKEY: Turkey’s Pipeline Balancing Act
11.11 TURKEY: IMF Executive Board Concludes Article IV Consultation
11.12 TURKEY: Foreign Currency Ratings Affirmed At 'BB+/B'
11.13 GREECE: Moody's Upgrades Greece's Government Bond Rating to Caa3 from C
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
On 25 November, Finance Minister Lapid announced that he will not implement the planned income tax hike. Lapid was reportedly torn between either cancelling the planned rise in income tax or lowering VAT and chose the former. Senior Finance Ministry officials have reservations about the new measure but have been compelled to go along with it. Lapid added that he would cut the 2014 budget by NIS 3 billion to maintain stability. Income tax was planned to rise by 1 - 2% from January. At this stage it is not yet known if the Finance Ministry also plans lowering VAT, which was raised from 17% to 18% earlier this year. Lapid's decision comes after the government successfully collected NIS 3.7 billion from the trapped profits of the largest companies in Israel's economy. Lapid added that the plan not to cancel the tax hike will be brought to the Knesset for approval. (Globes 25.11)
The Knesset finance committee gave final approval to a plan aimed at halting pyramid structures at companies and breaking up large conglomerates blamed for high living costs. The bill won initial legislative approval more than a year ago but final approval has been delayed by a general election held in January and months of work to approve a state budget. The full plenum is slated to hold a final vote on the measure in the coming weeks, a finance committee statement said.
Key measures in the bill include limiting the number of layers permitted in a pyramid-type holding company in the next four to six years. Formation of new pyramids will be banned. The bill also proposes barring companies from holding a financial firm with assets exceeding NIS 40 billion ($11.2 billion) at the same time as non-financial assets with more than 6 billion shekels of revenue.
Israel has one of the highest concentrations of corporate power in the developed world with the government estimating that its largest business groups control 41% of the market value of public companies. The measure was introduced after the nation was shaken by hundreds of thousands of social protesters taking to the streets in 2011 in demand of lower prices for housing and other basic goods. (Reuters 26.11)
The construction of a "fourth arm" to Ben Gurion International Airport's Terminal 3 was approved. The new arm will meet the needs of the larger number of passengers passing through the airport following the signing of the Open Skies agreement with the EU to open airline competition for flights to and from Israel, and in particular the higher number of low-cost carriers flying to and from Israel. The new extension to Terminal 3 will cost NIS 660 million.
The Israel Airports Authority expects 14 million passengers to have used Ben Gurion Airport by the end of the year, and sees this number rising to 16 million by 2018, and is planning construction capable of handling 20 million passengers annually in the coming years. The existing arms at Ben Gurion Airport have eight connectors for incoming and outgoing flights. The planned 17,000 square meters expansion will include two exit gates to buses, five parking areas for large planes or seven for smaller planes, a lobby, cafes and stores. At the start of 2014, work will also begin on upgrading Ben Gurion Airport's runways to allow double the current aircraft traffic. That project will cost more than NIS 800 million. (Globes 01.12)
2: ISRAEL MARKET & BUSINESS NEWS
Microsoft Ventures announced a seed fund investment in Zula, a startup that streamlines mobile communication and productivity. Microsoft Ventures was impressed when it saw Zula’s presentation at TechCrunch Disrupt earlier this year, where they won the Audience Choice Award. It was a clear signal that this is a company on a major growth trajectory because they solve challenges that so many teams face when collaborating via mobile devices. Microsoft Ventures immediately saw the benefit of a mobile-first, cross-organization communication app helping an increasingly dispersed workforce stay connected on tasks while effectively collaborating with each other outside the inbox.
To date, Zula raised $750,000 from OurCrowd, Kima Ventures, Gigy Levy, and others. No details were disclosed about the size of Microsoft Ventures investment but media sources suggest it was several hundred thousand dollars at most.
Tel Aviv’s Zula (http://zulaapp.com) is a mobile-focused young startup that took a good look at the productivity landscape and decided it was time for a change. With a team comprised of pioneers in the communication space as well as established entrepreneurs, Zula has set a goal to streamline mobile collaboration and productivity. (Microsoft Ventures 18.11)
Sunnyvale, California’s Arrayit Corporation, a life sciences and molecular diagnostics leader, sold a $129,548 NanoPrint LM60 Enterprise Level Microarray Printer to a leading research laboratory in Tel Aviv, Israel. Arrayit NanoPrint instruments enable microarray manufacturing in a high-throughput and highly automated manner using advanced linear drive motion control and linear encoders that permit nanometer positional resolution. Microarrays are biomedical devices that contain genes, proteins, antibodies and other molecules from the human genome and proteome printed at high-density on glass substrates.
In 2010, Arrayit received Israeli Patent Number 153848 covering microarray methods for DNA testing, to improve the economies of scale in genotyping by allowing thousands of patient DNA samples to be simultaneously tested. The NanoPrint sale to Tel Aviv, the issued 848’ patent and other recent developments underscore Arrayit’s commitment to providing its patented and proprietary technology to Israel in furtherance of leading-edge life sciences research, diagnostics and an increasingly advanced health care system. The Company is currently seeking a joint-venture partner is Israel to further expand sales in this important economy. (Arrayit 22.11)
Qnergy and its US affiliate have acquired the assets of US-based Infinia Corporation, located in Ogden, Utah. Qnergy plans to integrate the core technologies and know-how of both companies in order to commence mass production of Stirling engines for various applications within the coming twelve months. Infinia Corporation is an energy technology company, developing and manufacturing high-efficiency, free piston Stirling generators that convert readily available and low cost heat sources such as solar, biogas and natural gas into reliable on and off grid electricity.
Ein Harod Ihud’s Qnergy (http://www.qnergy.com) was established in 2009 by Ricor Cryogenic and Vacuum Systems, a world leader in the field of miniature Stirling cryogenic coolers. Qnergy's technology enables residential and business customers to generate power and hot water on-site (Distributed Power Generation) with total efficiency of more than 90%. The company develops and manufactures highly efficient, reliable and cost-effective Stirling engines for various applications such as: micro-combined heat and power (mCHP), solar power generation and solar CHP, remote power generation and more. (Qnergy 21.11)
Apple has bought Israel-based PrimeSense (http://www.primesense.com), a developer of chips that enable three-dimensional machine vision, the companies said, a move that signals gesture-controlled technologies in new devices from the maker of iPhones and iPads. An Apple spokesman confirmed the purchase but declined to say how much it spent or what the technology will be used for. Israeli media said Apple paid about $350 million for PrimeSense, whose technology powers the gesture control in Microsoft Corp's Xbox Kinect gaming system. It was the second acquisition of an Israeli company by Apple in less than two years. Apple bought flash storage chip maker Anobit in January 2012. PrimeSense's sensing technology, which gives digital devices the ability to observe a scene in three dimensions, was used to help power Microsoft's Xbox Kinect device. The Israeli company has licensed the technology to Microsoft but it is unclear how that deal changes with Apple's acquisition of PrimeSense, which provides the technology behind Kinect's visual gesture system. Analysts are expecting PrimeSense's technology to show up in Apple devices in about 12-18 months from now, potentially in the often-speculated device for the living room such as a television, dubbed iTV by fans. (Reuters 25.11)
Ramot at Tel Aviv University (http://www.ramot.org), the University's technology transfer company, has raised $17 million for its Technology Innovation Momentum Fund, which will invest in breakthrough technologies in a wide range of fields, including pharmaceuticals, healthcare, high-tech and physical sciences. Having completed its first closing, the fund is expected to become operational shortly through its three expert scientific committees, which will review selected Tel Aviv University technologies for financing. The fund hopes to invest in 20-40 projects in Q1/14. The investment was led by Tata, which committed up to $5 million, with the balance of the investment provided by SanDisk and angel investors, primarily from South Africa, the US and India. (Globes 25.11)
Indianapolis, Indiana’s Harlan Laboratories, a leading contract research organization and research models and services company, announced that the company has expanded its disease-preconditioned animal model and imaging services (MRI and CT) at its specialty research center in Israel. These enhanced services support the growing requirements of researchers to quickly and efficaciously evaluate therapeutic compounds or medical devices in models exhibiting the characteristics of the targeted condition. Through this expansion, Harlan Laboratories offers chemically, genetically and surgically preconditioned models for numerous disease states including: autoimmune disease, diabetes, cancer, tissue repair, metabolism and obesity, and osteoporosis. In addition, Harlan Laboratories has expanded its imaging services with state-of-the-art MRI and CT scanning technology that provides an effective, efficient and humane approach to understanding disease biology, and evaluating therapeutic options in animal models. (Harlan Laboratories 25.11)
Magal Security Systems received a repeat order, to secure 13 power transmission substations for a large power company in Eastern Europe for $2.5 million. The order includes the supply and installation of intrusion detection systems. Yehud’s Magal S3 (http://www.magal-s3.com) is a leading international provider of solutions and products for physical and cyber security, safety and site management. Over the past 42 years, Magal S3 has delivered tailor-made solutions and turnkey projects to hundreds of satisfied customers in over 80 countries in some of the world's most demanding locations. (Magal S3 25.11)
The partners in the Tamar gas field reported that substantial signs of petroleum (natural gas) had been found in the drilling in Tamar South West. The partners did not give an estimate of the amount of gas in the reserve. The report states that the operator carried out logging tests during the drilling, from which it emerges that the target stratum contains natural gas. Drilling is now being carried out to reach the planned final depth, after which the borehole will be stabilized to enable electric well logs to be performed. The reserve, known as Tamar SW, is expected to contain 0.7 TCF (trillion cubic feet) of natural gas, which compares with 10 TCF at Tamar, with a 90% probability of a discovery. (Globes 26.11)
INE Ventures announced the official launch of INE Ventures Fund I, following the Mayor of Philadelphia’s Economic Trade Mission to Israel. INE Ventures will co-invest seed capital in Israeli technology startups with a selection of trusted venture capital partners to relocate portfolio company founders to Philadelphia and New York City to help them penetrate the U.S. market and turn into growing multinational companies. Israel’s government also recognizes the important role the U.S. market and investors play in growth for the Startup Nation’s early-stage companies and its U.S. representatives are excited by the role INE Ventures will play in bringing access to growth capital to these seed-stage companies. INE Ventures began to address a critical need: Israeli seed companies must take advantage of the US market to grow. East Coast investors are eager to meaningfully interface with Israeli startups that have a long term base of operations and that plan for expansion on the Eastern Seaboard and into the US market.
Based on the East Coast with offices in New York, NY and Philadelphia, PA, INE Ventures (http://www.ineventures.com) invests exclusively in Israeli technology startups through co-investment partnerships with select Israeli venture capital firms. (INE Ventures 27.11)
Mountain View, California’s Quixey, the Search Engine for Apps, announced its plans to open a new office in Tel Aviv, Israel, expanding its international presence and bringing in deeper talent to focus on refining its search capabilities. Following its recent $50m Series C funding round, the company aims to recruit aggressively and continue to provide the most intuitive app search and discovery solutions worldwide. The action plan is to assemble a team of key engineering talent that will work in constant coordination with Quixey's core team in Mountain View. By the end of 2014, the office will grow to 15-20 employees. In addition to its recent Series C round, this announcement comes on the heels of the company's first consumer-facing product availability: Quixey on Android. Quixey 03.12)
3: REGIONAL PRIVATE SECTOR NEWS
Applebee's, the world's largest casual dining restaurant chain, has announced plans to open at least five new restaurants a year in the Middle East. Recently opened restaurants include Jazan in Saudi Arabia, Sahara Centre in Sharjah (UAE), as well as the first Applebee's in Egypt. Presently, Applebee's operates 34 restaurants in the Middle East including outlets in Saudi Arabia, the UAE, Qatar, Kuwait, Lebanon and Egypt and employs over 2,000 people. The new proposed outlets will also result in creating over 500 job opportunities, the company said in a statement. In addition to the expansion, Applebee's also recently embarked on a re-branding exercise across all outlets in the region. Its interiors now represent a culturally rich canvas with the amalgamation of Middle East and American icons, it said (Applebee's 30.11)
GE signed a nearly $700 million contract with Saudi Electricity Company (SEC) to bring additional F-class combined-cycle gas turbines, and associated equipment and services, to Saudi Arabia. GE’s technology will support SEC’s large, combined-cycle power plants to generate more than 3.8 gigawatts (GW) of power and will provide significant fuel savings and lower emissions to meet growing energy needs of the Kingdom. GE’s technology previously has been chosen for SEC’s PP9, PP10, PP11 and PP12 power plants. PP13 and PP14 will feature 12 GE 7F-5 gas turbines, four GE steam turbines and 16 generators and are a further expansion of GE’s 7F-5 gas turbine technology used in the PP12 project in the country. PP13 will be located next to PP11 and PP12 at Dhurma, and PP14 will be located next to PP10, south of Riyadh. The contract also includes two contractual service agreements, one for each site, covering planned maintenance on the units for a fixed period of eight years.
Today, GE equipment assists in the generation of more than half of Saudi Arabia’s power supply, with more than 500 gas turbines installed in the Kingdom. The company operates in approximately 40 SEC power plants—an alliance that spans over four decades. Shipment of GE’s equipment is expected to begin at the beginning of 2015. The 7F-5 gas turbines will be manufactured at GE’s Greenville, S.C., facility, with the steam turbines and generators coming from GE’s Schenectady, N.Y., site. (GE 26.11)
A Saudi woman has invented the first electronic Arabic coffee maker for commercial purposes, which will make it easier and faster to prepare the traditional drink at home. Entrepreneur Lateefa Alwaalan invented the machine – called Yatooq - while working with the Badir Program For Technology Incubators, a government program to support the growth of emerging technology-based businesses in Saudi Arabia. Not only is the machine a milestone, but Alwaalan also is one of few entrepreneurs in the kingdom, particularly among women. Alwaalan, who studied at the University of Washington and is focusing her technical skills on coffee production, said it usually took 30 minutes to prepare the intricate Arabic coffee and it was difficult for many to make it correctly. The machines will carry a ‘Made in Saudi Arabia’ stamp and will be exclusively distributed in the kingdom by Danube. They are expected to be later exported to other Gulf countries. (AB 24.11)
Minneapolis’ HighJump Software, a global provider of supply chain management software, announced that Binzagr Company has selected the HighJump Supply Chain Advantage suite to strengthen the efficiency and accuracy of its supply chain. Binzagr is HighJump Software’s first customer in Saudi Arabia and one of the largest consumer goods distributors in the country. Binzagr worked with Norq Solutions, HighJump Software’s partner in the Middle East, to evaluate and select the HighJump Supply Chain Advantage suite’s solutions for yard, labor and warehouse management. (HighJump 25.11)
Saudi Electricity Co. (SEC) signed two contracts worth around $453 million with General Electric for maintenance of gas turbines at new power plants in Riyadh. The deal, which would run for 25 years split between 8 basic years and 17 optional years, would cover maintenance work on the 12 gas units for the combined-cycle power plants, SEC said. This follows a previous deal in which GE will supply SEC with 12 gas units and four steam turbines for the planned Riyadh Power Plant 13 (PP13) and PP14. Each plant would have a capacity of between 1,600 and 1,950 megawatts, an industry source has said. (AB 24.11)
King Abdullah Economic City (KAEC) recently signed a land plot to purchase of 225,000 sq. meters in KAEC’s Industrial Valley for the construction and operation of Volvo and Renault trucks. The plant, constructed by Zahid Tractor and Heavy Machinery Company, will be developed on an area of 60,000 sq. m. and is expected to produce 4,000 trucks a year and provide 400 new jobs. (Saudi Gazette.23.11)
Nestlé has expanded a plant in Turkey’s northwestern province of Karacabey in Bursa to produce Maggi bouillon products for the North African and the Middle Eastern markets, with a focus on Saudi Arabia. The company has invested around $11 million in a multiple plant in Karacabey to build two additional production facilities, creating 100 new jobs in addition to its existing 3,800-strong workforce. Nestlé’s Karacabey plant had become a regional production base in the meantime. While the annual consumption of bouillon per capita is just around 30 grams in Turkey, it is up to 225 grams in the target markets of the plant, including Saudi Arabia, Jordan and Qatar. Nestlé opened a breakfast cereal factory in Karacabey with General Mills in 2012. (HDN 26.11)
The Eilat-Eilot region has vowed to become entirely energy independent within two years’ time. The region launched its second major solar field, an 8 MW sized field at Kibbutz Neot Smadar on 25 November, at the Eilat-Eilot energy storage forum held on the kibbutz grounds. These 8 MW join the 4.95 MW field at Kibbutz Ketura, online since June 2011, as well as a mass of rooftop panels that bring the region’s total solar capacity up to 20 MW. In two months, these 20 MW will grow to 60 MW through the integration of four more fields, and within two years the number should jump to 160 following the integration of large sites at Kibbutz Ketura and Timna. Because the region’s consumption only amounts to between 120 and 140 MW, Eilat-Eilot can quite realistically become energy independent. For this reason, the Eilot Regional Council is calling upon the government to declare the region a national and global beta-site for energy storage research. (JP 25.11)
On 29 November, Minister National Infrastructures Shalom signed a directive allowing the use of compressed natural gas (CNG) by vehicles, as an alternative to gasoline, diesel and cooking gas. The Ministry of National Infrastructures estimates that switching to CNG could save NIS 1,700 a year in fuel costs for a car with an engine larger than 1.4 liter, assuming that CNG costs NIS 5.40 a liter. Switching to CNG could save NIS 55,000 a year in fuel costs of an average bus, and NIS 34,000 for an average truck, if CNG costs NIS 4.50 a liter. However, the ministry's estimates assume that taxes on natural gas will not change, even though the Israel Tax Authority has already announced that it plans large tax hikes on it. Revenues from the fuel excise exceed NIS 16 billion a year. The directive is part of the government's effort to encourage the construction of a CNG infrastructure for vehicles. (Globes 02.12)
Eight power stations of the Israel Electric Corporation (IEC), along with two manufacturers are the top ten emitters of greenhouse gases and pollutants, according to the Ministry of Environmental Protection's new Pollution Release and Transfer Register (PRTR), published for the first time on 1 December. The PRTR is based on data for 2012 from 424 businesses and manufacturers submitted to the ministry by law. Ashdod is Israel's most polluted city, followed by Haifa, Hadera, Ashkelon and Ramat Hovav Regional Council in the Negev. The PRTR lists emissions data of hundreds of enterprises by type of emissions, location and industry. The figures show that in 2012, Israeli industry emitted some 57,167,000 tons of greenhouse gases. It is important to note that most of these were in line with strict Israeli standards and with the approval of the ministry. (Globes 02.12)
The world’s largest solar-powered seawater desalination plant will soon be established in Ras Al Khaimah and will entail an output of more than 22 million gallons of potable water per day and 20 MW of solar power. This was announced by Utico Middle East, the GCC’s largest private full service utility and solutions provider. The project will set the new benchmark for the desalination business model and will be the world’s greenest desalination plant with the least CO2 emissions. Utico earlier this month released the pre-qualification tender inviting bids for the IWP project, which will be co-developed by Utico and the winning bidder. The new project will implement the most advanced reverse osmosis and filtration technologies and when operational, will push unit production rates down drastically. The reverse osmosis process forces seawater through a polymer membrane using pressure to filter out salt. (BI-ME 25.11)
US-based company Astonfield and Omani Rural Areas Electricity Company has signed the first agreement to generate electricity from renewable energy resources in the Sultanate in what has been branded a turning point in the Sultanate’s energy industry. Under the deal, Astonfield, in co-operation with local firm Multitech, will establish a pilot solar power plant in the state of Al Mazyunah in the Dhofar Governorate. It will begin commercial operation in mid-2014 with a 303KW capacity. The power purchase agreement has been described as a turning point in electricity generation in Oman. Experts say Oman has one of the highest potentials for turning solar radiation into energy, with the pilot project set up to determine the specific advantages and challenges of operating in the Sultanate. As part of the deal, Astonfield will install two different types of solar energy generation technologies to evaluate the best method for energy production. The final form of the solar power plant will then be tailored to Oman's specific environment. (AB 25.11)
5: ARAB STATE DEVELOPMENTS
According to the Central Administration of Statistics (CAS), Lebanon’s Consumer Price Index (CPI) rose at an annualized rate of 0.2% in October, down from 0.6% in September. The index reached 130.3 points in October, and remained driven higher food and education costs. Food & non-alcoholic beverages, and education costs which hold weights of 19.9% and 7.7% in the index’s basket added an annual 2.3% and 7.00%. All sub-indices witnessed a year-on-year rise, except for “Clothing and footwear”, “Water, electricity, gas and other fuels” and “Transportation” which fell by 7.6%, 1.6% and 6.3%, respectively. The annual decrease in clothing and footwear prices, which represent a weight of 6.2% in the basket of the index, could be the promoters’ strategy to spur a stagnating demand. In monthly terms, the CPI grew by 1%, with gains in all sub-indices offsetting the respective declines of 0.3% in “Water, electricity, gas and other fuels” and 2% in “Transportation”. (CAS 22.11)
A decrease in imports reduced Lebanon’s trade deficit in the first 10 months of 2013 by about $2.8 billion compared to the same period of 2012, figures from the Customs Department showed. According to the data, the trade deficit until October was $14.019 billion, down from $16.797 billion last year. Total imports in that same 10-month period fell to $17.661 billion from $21.280 billion last year, while exports stood still at $3.552 billion. The statistics also showed that both imports and exports had dwindled in August, September and October.
Economists say that the fall in imports this year has helped to some extent in lowering the trade deficit. The deficit in the balance of payments contracted to $675.2 million by the end of the third quarter of 2013, from a deficit of $1.932 billion through September of last year. Lebanon counts heavily on tourism and capital inflows to improve the balance of payments. But the sharp decline in the number of tourists coming to Lebanon, alongside the economic slowdown, have reduced revenues to the service sector, contributing to a balance of payments deficit.
The main items which Lebanon imported this year were minerals, transport equipment, chemical products, textiles and livestock. The main exported items were industrial products, textiles, agricultural produce and precious stones. Italy, France, Germany, China and the United States are the main exporters while Switzerland, Iraq, UAE, Saudi Arabia and Syria were importers of Lebanese-made goods. (TDS 29.11)
Lebanon will close any illegal Syrian businesses after a nationwide survey on these enterprises is completed, a senior official at the Economy Ministry said recently. Most of the shops being shut down were located in Tripoli and in the Bekaa Valley. Ever since the eruption of the civil war in Syria, hundreds of thousands of Syrian refugees have fled to Lebanon. Struggling to find jobs, many refugees have instead opened business in the already crowded market. Complaints of illegal competition from Syrians have grown as the refugee population in Lebanon has swelled, with many sectors claiming to be negatively impacted. Lebanese business associations have sounded warning bells over the alleged increase in illegal businesses. Lebanon hosts the largest number of Syrian refugees in the region, said to number over 800,000. (TDS 25.11)
The European Bank for Reconstruction and Development (EBRD) has granted Jordan the status of a recipient country, which will allow the Kingdom to benefit from the bank’s capital resources. Planning Minister Ibrahim Saif said that the London-based bank agreed to grant Jordan recipient country status on 4 November as the Kingdom met membership conditions and geographical requirements. Saif added that the EBRD’s Board of Governors approved granting Jordan the new status after a team from the bank concluded a comprehensive political and economic assessment on the Kingdom. In 2011, the bank expanded its operations to include four Southern and Eastern Mediterranean (SEMED) countries: Jordan, Egypt, Morocco and Tunisia. Late in October, EBRD opened a permanent office in Amman in a step described by executives as long-term commitment to supporting economic development in the Hashemite Kingdom. (JT 24.11)
Headline inflation in Qatar advanced to 2.8% y-o-y in October from 2.7% y-o-y in September, data released by the Qatar Statistics Authority showed. The consumer price index (CPI) increased 0.6% m-o-m in October after a 0.3% m-o-m rise the previous month. Rents and housing costs continue as the main driver behind inflation. Housing inflation increased to 6.2% y-o-y in October from 6.1% y-o-y in September after a 0.8% m-o-m rise. Against expectations, food prices increased sharply by 2.6% y-o-y and 1.0% m-o-m in October. There are also signs of strengthening demand on non-food items. Transport costs, which account for 20% of the CPI basket, also increased 1.7% y-o-y and 0.3% m-o-m over the same month. Core inflation (ex-rents) accelerated to 1.7% y-o-y in October from 1.4% y-o-y in September, data also showed. (QSA 21.11)
Qatar has been told by the world players' union FIFPro to abolish the kafala system for footballers and respect international standards for their contracts. The 2022 World Cup host nation also heard that it was essential to allow the establishment of a local players' union. The meeting came following French footballer Zahir Belounis arrived home, having allegedly been prevented from leaving the country after falling into a long-running dispute with a local club. Belounis said he had been unable to obtain an exit visa which has to be applied for by his employers under the kafala, or sponsorship, system. FIFPro also discussed conditions for the migrant workers employed in the country's construction industry following reports of ill-treatment and abuse. (AB 01.12)
The International Telecommunications Union (ITU) launches the 5th edition of its report – Measuring the Information Society (MIS), featuring key ICT data and benchmarking tools to measure the information society. The UAE has made significant progress in increasing its ranking in the IDI, recording the highest increase in rank, rising 12 places to 33rd in the IDI 2012. Mobile-cellular telephone penetration in particular rose by more than 14%, to 170% in 2012.
A household survey conducted by the UAE’s Telecommunication Regulatory Authority confirms that virtually all residents use a mobile phone and that 85% of the population uses the internet regularly and for the most part through a high-speed connection. In the use sub-index, UAE registered great progress in the number of wireless-broadband subscriptions. By end 2012, penetration had reached 51%, as against 22% the previous year. Furthermore, services are relatively cheap: the UAE ranks among the most affordable countries for prepaid mobile-broadband services, which cost less than 1% of GNI p.c. The MIS 2013 shows that the UAE is well above the global average in terms of mobile-cellular subscriptions, the proportion of individuals using the internet and the proportion of households with internet access. (BI-ME 25.11)
Dubai won the vote on 27 November to host the 2020 World Expo, beating competition from the Brazilian city of Sao Paulo, Yekaterinburg in Russia and Izmir in Turkey in a vote by members of the world fair body. The emirate won the support of 116 out of 164 voting members of the Paris-based Bureau International des Expositions in a final round runoff against Yekaterinburg, making it the first in the MENA region to host such an event. Dubai has been strongly promoting its bid to host the event in 2020 under the theme “Connecting Minds, Creating the Future.” World Expos, which participating countries use to showcase technological prowess, culture and architecture, are held every five years for a period six months.
The event is expected to attract 25 million visitors during the six months between October 2020 and April 2021, 71% of which would originate from abroad. The authorities had outlined investment plans of around $8.1 billion to expand capacity in Dubai’s core areas of tourism, transport, and infrastructure, including projects related to Dubai’s metro and airports. This will spur economic activity, boost business confidence, improve employment opportunities and increase investor focus on the country. The investment outlook for Dubai has improved this year with cheaper access to external financing, ongoing GRE debt restructuring and stronger non-oil earnings. Higher investment activity should also support private consumption on the back of higher employment and wage growth. (Various 28.11)
Dubai's ruler has approved a law requiring all employers in the emirate to purchase health insurance for their expatriate staff, a move expected to boost healthcare spending by its 2.2 million residents considerably. The law - the full text of which has not been published - will be rolled out within three years and will make employers responsible for providing at least an "essential benefits package" for every worker. It will be rolled out in several phases by 2016, the Dubai Health Authority said. The government will remain responsible for the coverage of local citizens, who are estimated to make up less than a fifth of the population. Insurance companies will need to secure a special permit from the Health Authority in order to issue policies. According to official estimates, only 40-50% of Dubai's residents are covered by government and private health insurance schemes today. Dubai's neighbor Abu Dhabi introduced mandatory health insurance in 2007, with patient claims quadrupling as a result. (AB 27.11)
Strabag Oman, a subsidiary of the publicly listed Austrian construction group Strabag, has been awarded a $120m contract in Oman by the Ministry of Transport and Communication. The company has been hired to build a 100km section of the 400km long road between the city of Sinaw and the industrial zone in Duqm in southern Oman. The new road is being built next to the existing old roadway. With 90% of the road passing through desert-like terrain, the project presents an enormous challenge in terms of the procurement of construction materials and logistics. The new carriageway will be asphalt-paved and will consist of one lane of traffic and one emergency lane per direction. The project further comprises the street lighting and the safety structures. Construction will start in January 2014 and is expected to last 24 months. (AB 01.12)
The Egyptian government has decided to sell assets belonging to state-owned spinning and weaving companies in an attempt to settle their debt with the National Investment Bank. Cabinet announced the decision, citing it as part of a plan to develop the textile sector. Restructuring the sector will cost the state EGP4 billion, which will be financed through selling unused land owned by the companies in addition to governmental aid. The development plan is under review by a consultancy firm. Currently there are 32 spinning and weaving public companies employing around 58,000 workers. Al-Ahram reported in April that factories in the textile sector are operating at 30% of their total production capacity. (Al-Ahram 21.11)
Italy has allocated a grant worth $66 million for Egypt to develop its supply sector. Italy allotted $45 million to build grain silos in the Giza governorate, Minister of Supply Abu Shady said. He also noted that $21 million has been assigned to develop bread bakeries in Sheikh Zayed. Abu Shady met with Italy’s ambassador to Cairo Maurizio Massari to discuss joint cooperation projects between the two countries in the field of sustainable development. The parties agreed to create a joint committee made up of the ministry’s experts and embassy’s technical office to develop a plan for the projects’ implementation. (Beltone 24.11)
6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
Turkey’s foreign trade deficit rose to $7.3 billion in October, from $5.5 billion in the same month in 2012, representing a 31.8% increase, according to figures revealed by TÜIK on 29 November. Economy Minister Zafer Çaglayan said the decrease in export was due to the Eid al-Adha Holiday, a drop in global demand and a loss in gold and iron-steel products due to an embargo imposed on Iran. Exports fell to $12.1 billion, an 8.2% drop, from October 2012 to October 2013, while imports rose to $19.4 billion with a 3.7% increase. The export coverage of imports fell to 62.1% from 70.2% during the same period. Exports to the European Union rose to $5.3 billion, a 0.2% increase, during the period in question.
Turkey’s main export trading partner, Germany, remained strong with $1.1 billion in bi-lateral trade, a figure representing a 4.8% rise. Iraq ranked second at $1 billion, followed by the UK at $805 million and Russia at $615 million. The top country for Turkey’s imports was China at $1.9 billion, followed by Germany at $1.82 billion, Russia at $1.81 billion and Italy at $1.1 billion. (HDN 29.11)
Inflation will stay above target for some time in Turkey due to a recent weakness of the lira, according to the country’s central bank. The recent weakness of Turkey’s lira means inflation will stay above target for some time and monetary policy will remain cautious as a result, the central bank said in a presentation to economists on 20 November. The bank said its cancellation of one-month repo auctions, announced on 19 November, would bring its cumulative tightening in money market rates to around 350 basis points (bps) since May, compared to a 60 bps rise in 1-year inflation expectations.
The bank held fire on interest rates but signaled more tightening of its day-to-day monetary policy, as it worries about a withdrawal of U.S. monetary stimulus that could weaken the lira and push inflation up further. Its decision to stop funding the market through weekly one-month repo auctions gives it tighter control over overnight lending rates and will enable it to increase banks’ cost of funding more sharply if needed.
The lira remains near historic lows against the dollar as Turkey’s huge current account deficit leaves it vulnerable to eventual reining in of policy by the Fed. (Reuters 20.11)
Scores of Turkish defense programs in recent years have either stalled or delayed due to one component: engine. Wary of engine troubles, Turkey’s defense procurement planners are pondering to give pace to local solutions. A local armored vehicles maker, Otokar, has developed a prototype for what will become Turkey’s first indigenous new generation battle tank, the Altay. It will be an “entirely Turkish tank.” So will be the Anka, an “entirely Turkish” unmanned aerial vehicle developed by TAI. So will be the TF-X, a future fighter aircraft Turkey intends to develop. The trouble is, Turks do not have an engine to power any of these Turkish platforms.
The head of the Turkish defense procurement agency, the Undersecretariat for Defense Industries (SSM), has said that Turkey has programs to locally develop engines. In February 2012, SSM signed a deal with Kale Havacilik and state scientific research institute TUBITAK for the development of a cruise engine for Turkey’s first indigenous cruise missile SOM. As part of its technology acquisition roadmap, SSM signed in December 2012 a contract with national engine maker TUSAS Motor Sanayi (TEI) for the production of five prototype engines for the Anka. The design, production and certification tests will take four years. (HDN 26.11)
The number of broadband internet subscribers in Turkey rose more than fourfold in the third quarter compared to 2008, according to figures revealed by Information and Communication Technologies Authority (BTK). The number of broadband internet subscribers in Turkey increased to 33.7 million as of this year’s third quarter from 6 million in 2008. The report also revealed that the number of third generation mobile telecommunications technology (3G) subscribers in Turkey rose 17% in Q3/13 compared to a year earlier. There were 68.9 million mobile subscribers in Turkey as of Q3/13, showing a 2.6% annual increase. In the fixed market, however, the number of subscribers in fixed telephone services decreased 2.8% in Q3/13 compared to a year earlier, from 14 million to 13.9 million. (AA 26.11)
There are over 6 million real unemployed people in Turkey, creating a jobless rate of 20%, almost doubling the official figures. Higher unemployment, officially or unofficially, appears set to be the biggest nightmare for Turkey in the coming years. The number of people who work fewer than 40 hours a week, but would work more if they could find work hiked to 595,000 in August by some 50% increase from the same month in 2012. The number of people who work fewer than 40 hours a week, but would work more if they could find work hiked to 595,000 in August by some 50% increase from the same month in 2012.
The Turkish Statistical Institute (TÜIK) reveals “official unemployment rates” in the middle of each month for the prior two months. The agency announced the rate for August 2013 as 9.8%, which is one point higher than the same period of the previous year.
The number of unemployed people increased to 2.8 million this August from 2.4 million last August. This means around 400,000 people became a part of “officially” jobless people. The official unemployment rate will be over 10% in the September figures, which will be announced soon. Economic conditions, however, do not promise more jobs. Although the Turkish government is trying to create more jobs just before elections at the cost of extra budget expenses, it can’t create more than 80,000-90,000 new positions in the public sector. This figure is so much lower compared to the 3 million officially unemployed people. (HDN 30.11)
Unemployment in Cyprus was marginally up at 17% in October, from 16.8% in September, according to data released by Eurostat. In absolute numbers 75,000 people were registered as unemployed, in Cyprus, in October. According to the data in the euro zone the average unemployment rate in October stood at 12.1%, recording a slight drop from September (12.2%) while the average percentage remained unchanged as regards the EU in its entirety at 10.9%. In Cyprus, unemployment in men was recorded at 17.3%, in women at 16.6% and in young people under the age of 25 at 43.3% or 18,000 people. Average unemployment in the euro zone in men stood at 12%, in women at 12.2% and in young people under 25 at 24.4%. (FM 01.12)
Cyprus Tourism Organization (CTO) estimates that tourist arrival from Russia will reach 800,000 in 2014 marking a steep increase of 25% year on year. CTO describes a decision taken by Russian`s two largest tour operators to increase their programmers for Cyprus as particularly encouraging, noting that the country`s rest operators will maintain their capacity for Cyprus at the same levels. It also notes that a large Russian tour operator that has not included Cyprus in its destinations will begin tours to the island. CTO believes that the recently signed open skies agreement between Russia and Cyprus will contribute to the above estimates. (FM 27.11)
7: GENERAL NEWS AND INTEREST
The Ministerial Committee on Legislation approved a bill on 1 December that would grant male homosexual couples with children tax breaks similar to those received by heterosexual couples. Should the Knesset approve Yesh Atid MK Adi Kol's bill, it would put an end to the discrimination inherent in the current law. Israel's tax code currently states that male and female parents are eligible for different tax breaks, with women receiving greater benefits than men. While mothers receive benefits until the child reaches that age of 18, a father's tax break expires once the child turns three. Because the tax break is essentially gender-based, male homosexual parents lose out on thousands of shekels in parental tax benefits. (IH 02.12)
The 50-member committee tasked with writing a new constitution for Egypt commenced its second voting session on 1 December, on schedule with plans to finish readying the draft charter for a national referendum. Voting continued on Chapter 5 of the draft charter, which will determine the country's system of governance.
Under Section 2 of Chapter 5 – The Executive – article 141 of the draft constitution stipulates that a president may serve for only four years and be reelected only once. The article was passed with 46 votes and one abstention.
Article 146 of the same section – which passed with 44 votes in favor, three against and two abstentions – states that the president will nominate the head of the cabinet who will submit his cabinet program for parliamentary approval. If parliament does not agree over the submitted program, the majority party or coalition will then nominate another cabinet leader for a parliamentary majority vote. Otherwise parliament will be dissolved and a new one elected within the stipulated period of 60 days.
Article 153, passed by a unanimous 48 votes, specifies that a state of emergency can only be instituted by a parliamentary majority for a maximum period of three months. An extension can only occur through a two-thirds vote by parliament.
During the session, 48 members of the committee passed 138 articles, as well as the constitution's preamble. Members of the committee completed voting on Chapters 1, 2, 3 and 4, which included articles on rights and freedoms, and the principle foundations of the state and society. (Ahram 01.12)
On 23 November, Egypt expelled the Turkish ambassador and downgraded diplomatic relations with Turkey, prompting Ankara to declare Cairo’s ambassador a “persona non grata” in a tit-for-tat reaction. Egypt’s Foreign Ministry spokesman said his country took the step due to Turkey’s continued “interference” in Egyptian internal affairs. The spokesman also accused Ankara of backing unnamed organizations bent on spreading instability, in an indirect reference to Egypt’s Muslim Brotherhood. Turkey was “attempting to influence public opinion against Egyptian interests, supported meetings of organizations that seek to create instability in the country,” said Abdelatty.
Turkey has emerged as one of the fiercest international critics of President Morsi’s ouster, calling it an “unacceptable coup.” Morsi’s Muslim Brotherhood, which has been staging protests calling for his reinstatement, has close ties with Turkish Prime Minster Erdogan’s AK Party. In response to Egypt’s decision, Turkey declared Egypt’s ambassador “persona non grata” and downgraded diplomatic relations to the level of charge d’affaires. Both Turkey and Egypt had recalled their respective envoys in August for consultations, but while the Turkish ambassador eventually returned to Cairo in September, Egyptian Salah el-Din stayed home.
The escalation came after Turkish Prime Minister Erdogan renewed his criticism of Egypt’s military-backed rulers, criticizing the trial of Morsi and describing the situation in Egypt as “humanitarian drama.” Erdogan previously criticized Morsi’s ouster, calling it a “coup,” prompting Egypt to announce the cancellation of a planned military drill with Turkey. Ankara said it was the one who cancelled the drill and that Egyptian officials claimed the announcement in public. Egypt accuses Erdogan’s Justice and Development Party (AKP) of being part a secret international alliance with the Muslim Brotherhood to revive the Islamic caliphate. (Various 23.11)
A Saudi Arabian man who took to the streets of Riyadh to offer ‘free hugs’ was arrested by the Gulf state’s religious police after being inspired by an online video clip of a similar altruistic campaign. Twenty-one–year old Abdulrahman al-Khayyal and a friend were detained by Saudi’s Commission for the Promotion of Virtue and Prevention of Vice for engaging in “exotic practices”, after taking to one of the capital’s main shopping streets wielding a placard offering free cuddles. They were both released after signing a pledge stating that they would not attempt the stunt again. Abdulrahman has previously announced his intentions via Twitter after watching a YouTube video of an earlier campaign that attracted more than 1.3m views. In the original three-minute clip, Bandr al-Swed was videoed hugging random male passers-by. (AB 22.11)
8: ISRAEL LIFE SCIENCE NEWS
Israeli company’s SomnuSeal mask is more comfortable for patients who can’t tolerate the existing option, and it protects cardiac health too. This most common form of sleep apnea is caused by tissues in the throat obstructing the airway during sleep. It leads to frequent awakenings and potentially also to severe cardiopulmonary complications as the heart and lungs are deprived of adequate oxygen.
Givatayim’s Discover Medical (http://www.discovermedical.com) is introducing a product to make the most effective treatment option more tolerable. Discover’s SomnuSeal, a unique mask for CPAP machines, is a small, self-adjusting device that fits between lips and teeth like a boxer’s mouth guard. It does not touch the nose, lips or tongue and requires no straps. The mask is manufactured in Israel of high-grade medical plastic. Two clinical trials at independent sleep labs in Israel showed that 22% of people who have refused to use other CPAP masks were fully compliant with SomnuSeal, which earned the European CE Mark in 2010. Discover is now seeking an investment of $3 million to $4 million to begin marketing the one-size-fits-all device. (Israel 21c 11.11)
Evogene closed its previously announced initial public offering in the United States of 5,750,000 ordinary shares at the price to the public of $14.75 per share, which includes the exercise in full by the underwriters of their option to purchase up to 750,000 additional ordinary shares. All of the shares in the offering were offered by Evogene. The shares began trading on the New York Stock Exchange on November 21, 2013 under the symbol “EVGN”. Evogene received gross proceeds from the offering of approximately $84.8 million, before underwriting discounts and commissions and other estimated offering expenses.
Rehovot’s Evogene (http://www.evogene.com) is a plant genomics company, utilizing a proprietary integrated technology infrastructure to enhance seed traits underlying crop productivity. Evogene offers a complete solution for crop productivity improvement through biotechnology and advanced breeding using a unique technology infrastructure that is based on a deep scientific understanding of plant genomics and proprietary computational capabilities. (Evogene 26.11)
Can-Fite BioPharma completed delivering a scientific presentation at Elsevier's 2013 Therapeutic Area Partnerships conference, where it is has generated considerable partnership and licensing interest in its CF101 product. The presentation focused on Can-Fite's CF101 for the treatment of autoimmune and anti-inflammatory diseases. The Company's successful conference participation comes on the heels of Can-Fite's ADRs up-listing on Tuesday, November 19 to the NYSE MKT, gaining greater financial markets exposure.
Can-Fite recently announced it has executed confidentiality agreements with 10 established pharmaceutical and biotechnology companies with respect to potential negotiations for the commercialization of CF101 for the treatment of autoimmune inflammatory indications. The Company already has licensing agreements in place for up to approximately $22 million in upfront and milestone payments, plus royalties upon commercialization for CF101 for anti-inflammatory indications with Seikagaku Corporation in Japan and with Kwang Dong Pharmaceutical Co. in South Korea. Can-Fite has already received approximately $8 million in upfront and milestone payments to date.
Petah Tikva’s Can-Fite BioPharma (http://www.canfite.com) is an Israeli public company, the ordinary shares of which are traded on the Tel Aviv Stock Exchange. Can-Fite, which commenced business activity in 2000, is focused on the development of small molecule orally bioavailable drugs, in particular, ligands that bind to the A3 adenosine receptor. Such drugs mediate anti-inflammatory and anti-cancer effects and are suggested as a biological predictive marker. Can-Fite's lead drug candidate, CF101, is in clinical development for the treatment of autoimmune inflammatory diseases. (Can-Fite 20.11)
Medic Shoes are a Life Enhancing invention for people who suffer from diabetes-induced leg pain and circulatory problems. These comfortable shoes are an innovative solution that enhances peripheral circulation and increases blood flow, leading to an improvement in the quality of life.
Yaffa Golan was searching for a solution to help alleviate the various side effects associated with her diabetes, a disease that affects most of her family members. When she was unable to find an answer, she invented the Medic Shoe, which are clinically-proven flexible shoes based on the principle of acupressure and reflexology, featuring vibrating motors that massage the sole of the foot. The device is a non-medical intervention that alleviates the symptoms of poor peripheral circulation and neuropathy, including foot pain, burning, cramping and tingling. The shoes provide instant relief to these side effects, leading to an increase in the quality of sleep and decreased blood pressure.
Tel Aviv’s Medic Shoes (http://www.medicshoes.com) are to be worn lying down for 15-30 minutes a day. After using the shoes as directed, statistically significant improvements were recorded both in objective medical indices and in subjective feelings, such as foot pain and sleeping difficulties. The patent underwent clinical medical trials and has submitted requests for approval from the European CE and the U.S. FDA. (Medic Shoes 21.11)
Novocure announced the launch of the inovitro, a propriety plug-and-play laboratory research system that allows scientists to apply Tumor Treating Fields (TTFields) to cancer cells in the lab. The inovitro, developed and manufactured by Novocure, consists of a TTField generator, proprietary control software, and 5 base plates each with 8 ultra-high dielectric constant ceramic petri dishes. The inovitro is a high throughput, plug-and-play and proprietary lab research tool. The inovitro allows researchers to set target TTFields intensity and frequency in each ceramic dish, and observe real time values of those parameters during an experiment. The inovitro is not intended for clinical use or in-vitro diagnostics.
Novocure Limited (http://www.novocure.com) is a private Jersey Isle oncology company pioneering a novel therapy for solid tumors called NovoTTF Therapy. Novocure U.S. operations are based in Portsmouth, NH and New York, NY. Additionally, the company has offices in Switzerland and Japan and a research center in Haifa, Israel. (Novocure 21.11)
Eventus Diagnostics announced publication of a peer-reviewed study that confirms the diagnostic accuracy of its Octava blood tests designed for use with screening mammography. The study showed that the Octava Blue test has excellent sensitivity and good specificity in helping to identify whether or not women who have had an abnormal mammography result actually have breast cancer. The study was conducted by researchers at Eventus Diagnostics and at major cancer centers in the U.S., Italy and Israel.
The Octava breast cancer 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 by the body in response to the presence of tumor-specific antigens. They have been validated in large multinational clinical studies and are CE marked in the EU. Pilot distribution programs are currently underway in Italy and are planned for other EU countries and Israel.
Eventus Diagnostics (http://www.event$x.com), headquartered in Miami, 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 OctavaPink and Octava Blue tests are CE marked in the E.U. to provide additional information to help physicians better interpret breast cancer screening results. (Eventus Diagnostics 25.11)
VBL Therapeutics announced that the U.S. FDA has granted Fast Track designation to its lead oncology drug VB-111, for prolongation of survival in patients with Recurrent Glioblastoma Multiforme (rGBM). GBM is an aggressive form of brain cancer which carries a very poor prognosis with current therapy. VB-111 was already granted Orphan Drug status for GBM in the U.S. and in Europe. VB-111, given as a simple IV infusion, is a novel gene-therapy drug that targets endothelial cells in the tumor vasculature, acting as a "biological knife".
Tel Aviv’s VBL Therapeutics (http://www.vblrx.com) is an innovative, clinical-stage biotechnology company committed to the development of novel treatments for immune-inflammatory diseases and cancer. VBL has a proprietary Vascular Targeting System (VTS) technology platform that has yielded VB-111, an anti-angiogenic agent for cancer, which is currently in multiple Phase 2 clinical trials. In addition, VBL has pioneered the Lecinoxoid class of oral anti-inflammatory agents. (VBL Therapeutics 27.11)
Teva Pharmaceutical Industries announced that the U.S. FDA has granted orphan drug exclusivity for TREANDA through October 2015 for indolent B-cell non-Hodgkin lymphoma (iNHL) that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen. Orphan status is granted to therapies intended to treat diseases or conditions that affect fewer than 200,000 patients in the United States. With the previously granted six months of pediatric exclusivity for TREANDA, regulatory exclusivity for this indication is now extended through April 2016. TREANDA is also indicated for the treatment of patients with chronic lymphocytic leukemia (CLL). TREANDA has orphan drug exclusivity for this indication through March 2015. With the previously granted six months of pediatric exclusivity for TREANDA, regulatory exclusivity for this indication lasts until 20 September 2015. TREANDA is indicated for the treatment of patients with chronic lymphocytic leukemia (CLL). Efficacy relative to first-line therapies other than chlorambucil has not been established.
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 about 60 countries. (Teva 27.11)
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
CommuniTake announced the availability of remote support for Blackberry 10.2 devices helping service providers further improve support metrics and simplify care complexity. The updated remote takeover functionality adds to the recent enhancements to CommuniTake’s Care suite for iOS and Android devices, including two phased remote mobile support solution, starting with remote diagnostics view and resolution scripts activation, followed by complete remote takeover; extended capabilities of the on-device diagnostics application; collaborative mobile support between community members via remote access technology; and enhanced mobile device behavior analytics.
Yokneam’s CommuniTake (http://www.communitake.com) is a front-runner in remote access technology over mobile devices. CommuniTake delivers a leading Mobility platform that unifies comprehensive Enterprise Mobility Management with robust multi-channel support and core Internet of Everything services. (CommuniTake 21.11)
Everything.me (http://everything.me) the pioneer of the contextual phone, has won prestigious Meffys and Lovies awards. Everything.me won the 2013 Meffy award for ’Discovery and Engagement’ in recognition of its contextual phone technology that provides Android users with an effortless mobile experience. Other mobile technology leaders such as Shazam and Mozilla were also recognized this year by the MEF organization for their work. Everything.me also won the Bronze Lovie in the ‘Lifestyle’ category for its ability to weave a contextual phone into everyday life. Focused on the European web and mobile industry, The Lovies also honored this year companies such as StumbleUpon and SoundCloud.
Founded in 2010 (as DoAt), Tel Aviv’s Everything.me is pioneering the contextual OS space for mobile devices. The company is backed by world caliber investors including: BRM Group, Horizons Ventures, Draper Fisher Jurvetson (DFJ), DFJTF, Telefónica Digital and Singtel Innov8. (Everything.me 25.11)
Celeno has been named a Red Herring Top 100 Global Winner for 2013. The annual award recognizes the leading private companies from North America, Europe, and Asia today, celebrating these startups’ innovations and technologies across their respective industries. Celeno provides high performance Wi-Fi chips and software for demanding home networking applications. The company's OptimizAIR technology maximizes in-home Wi-Fi capabilities, assuring reliable wireless video service delivery and quality of experience for multiple connected devices throughout the home and helps mitigate interferences in dense deployments. The technology also serves as the basis for major advances in cellular offloading that could drastically expand WiFi coverage for on-the-go users.
Ra’anana’s Celeno (http://www.celeno.com) provides high performance Wi-Fi chips and software for HD multimedia and entertainment home networking applications. Celeno’s extensive chip portfolio and OptimizAIR technology enable the wireless distribution of multiple and simultaneous HD video streams throughout the home with the highest levels of performance and reliability while ensuring a superlative quality of service and user experience. Celeno’s field-proven chips have been integrated into numerous OEM Wi-Fi devices and have been deployed with over 75 service providers worldwide. (Celeno 25.11)
Insightera, provider of the first learning B2B personalization platform, announced today that it has seamlessly integrated its platform with the Google Analytics reporting platform. With this integration, customers will be able to view, measure and build personalized retargeting campaigns based on organization names, industries and firmo-graphic details. Marketers can optimize advertising spend by using Insightera's machine learning and predictive analytics to learn which content works best per target segment and execute retargeting ad campaigns to those segments. The value-adding metrics help marketers compare their real-time personalization campaigns against website goals and offer a new B2B analytics dimension to understand website visits.
Insightera (http://www.insightera.com) is the first learning B2B personalization software. Insightera helps marketers monetize their big data and capitalize on their existing assets by personalizing onsite experience based on real-time discovery of prospects' industry, location and digital journey. By utilizing big data and predictive analytics, Insightera continuously improves ROI, auto-tuning campaigns and adjusts content accordingly to both known and anonymous prospects. Insightera was founded in 2009 and is headquartered in San Mateo, CA with an R&D Center in Tel Aviv, Israel. (Insightera 25.11)
Covertix announced that the company's SmartCipher Enterprise 3.0 has been named the Security Product of the Year award for 2013 by CRN magazine's Test Center. CRN Test Center Editors selected SmartCipher Enterprise for the Security Product of the Year after conducting in-depth reviews of a wide range of security products to determine the best of the best by awarding products that are not only incredibly innovative, but can change a solution provider's business in an instant. Whether you need protection from advanced persistent threats, document rights management, secure email attachments or cloud-based file and folder security, SmartCipher has a solution appropriate for your organization.
Kfar Sava’s Covertix (http://www.covertix.com) provides definitive monitoring and protection of data found in any type of file used anywhere inside or outside the organization. A simple yet sophisticated rule set embedded in the file determines where, when and by whom materials can be viewed, printed, changed and shared regardless of the PC, cloud storage, mobile device or tablet. (Covertix 25.11)
Tonara announced a new score synchronization feature for its iPad app. One of Tonara's biggest updates, score synchronization currently allows musicians to review their practice sessions and, in the future, will power stage management functions such as automatic lighting or supertitle changes at concert venues and opera houses. Tonara's technology combines audio signal analysis with proprietary algorithms to enable computers to understand notes in live or recorded music. This means that Tonara's app can now follow any number of notes played simultaneously on any number of different instruments, track the user's current position in the score even if he or she changes tempo or makes a mistake, and turn the page at the right moment. It can also match any note in a score with the corresponding note in a session recorded on the Tonara app, so musicians don't have to rewind or fast-forward through audio playback in order to find passages they need to listen to or practice.
Ramat Gan’s Tonara (http://tonara.com) is revolutionizing digital sheet music with an iPad app created for musicians, by musicians. At the core of the app lies a clever algorithm that allows the iPad to listen to you as you play live music, show you where you are on the screen, and even turn the pages for you automatically! Using this algorithm, Tonara also shows you the tempo at which you are playing. Tonara is setting a new standard for digital sheet music with beautiful scores created specifically for the size and resolution of the iPad screen. The app was designed to cater to your every musical need. Listen to your practice session using an intuitive music player that follows your recording on the score itself, turning the pages automatically. Send these recordings to others to get feedback or maybe just to show off a bit. (TC 23.11)
Tadiran Telecom announced its Aeonix solution has received Oracle - Acme Packet's Technical Certification, meeting the highest standards for session border control security and authentication. Aeonix R2 that was released to the market earlier this year is Tadiran's flagship UC&C solution designed for distributed environment supporting 25,000 users with enhanced high availability capabilities and built in Contact Center and Dispatch Console applications. The added compatibility with the Oracle - Acme Packet SBC provides Aeonix users with the market leader in VOIP security, protecting their calls, for both regular VOIP calls and video calls. The certification was granted to Aeonix following extensive mutual testing and configuration carried out earlier this year, but required no alterations in the Aeonix solution.
Petah Tikva’s Tadiran Telecom (http://www.tadirantele.com) is a privately held partnership, owned by Afcon Holdings, part of the Shlomo Group - a conglomerate engaged in a wide variety of industrial and service businesses. Tadiran Telecom (TTL) is an established global leader, innovator and supplier of IP business telephony and telecommunications solutions, serving businesses of all sizes, including tier-1 organizations in various market segments in 41 countries worldwide. (Tadiran Telecom 02.12)
ECI Telecom has been selected by SWITCH, the non-profit organization providing backbone services to Swiss universities’ networks, to deploy a next-generation optical network. The new DWDM network, based on the Apollo family of Optimized Multi-Layer Transport (OMLT) platforms, will offer both 10G and 100G connectivity to universities and educational institutes in the country. SWITCH was the first internet provider in Switzerland, though today, it develops Internet services for lecturers, researchers and students, connecting all universities in the country. ECI was selected after an extensive tender process, with specific technical and non-standard requirements. ECI will deploy a multi-degree colorless and directionless ROADM WDM network, with 88 channels supporting 10G/100G customized services. Since its founding in 1961, ECI has provided leading service providers and network operators with the most innovative and advanced networking solutions in the market.
Petah Tikva’s ECI Telecom (http://www.ecitele.com) delivers innovative communications platforms to carriers and service providers worldwide. ECI provides efficient platforms and solutions that enable customers to rapidly deploy cost-effective, revenue-generating services. Founded in 1961, Israel-based ECI has consistently delivered customer-focused networking solutions to the world’s largest carriers. (ECI Telecom 03.12)
10: ISRAEL ECONOMIC STATISTICS
Israel's unemployment rate dropped to a record low during October - 5.9 %. According to the Central Bureau of Statistics, the number of unemployed Israelis in the country's labor force (which includes those who are 15 and up) stood at 218,000 in October, some 4,200 fewer than in September. According to the Central Bureau of Statistics, the unemployment rate dropped by 0.1% since September, showing that some 23,000 full-time jobs were created in that time span. In June, unemployment stood at 6.7%. The figures are seasonally adjusted.
Compared to the same period last year, there were about 46,000 fewer jobless claims in October (that number reached 263,900 in 2012). The Central Bureau of Statistics further said that unemployment among men continued to go down in October, having dropped to 5.7% (compared to 5.9%). Female unemployment stayed at 6%. Among those aged 25 to 64, employment levels were unprecedented -- only 5.3% were out of work in October.
Meanwhile, in Europe, unemployment has reached its highest rate since World War II -- 12.2%. This means that one out of eight Europeans has no job, compared to one out of every 17 Israelis. The overall number of unemployed in Europe is also at a record high -- 20 million. Whereas in Israel one out of every 20 Israelis between the ages of 25 and 64 was unemployed in October (5.3%) in Europe one out of every five people in that demographic is out of a job. Half of the unemployed in Europe had no job for over a year.
Some 77% of Israelis who said they had a job in October were full-time employees. This includes 84% of men and 66% of women. Some 79% of Israelis between the ages of 25 and 64 were employed - about 89% of men and 73% of women. (CBS 29.11)
Some 200,996 cars were delivered in Israel during January-November 2013, 3.4% more than in the corresponding period of 2012, according to the Motor Vehicles Importers Association on the basis of licensing figures. It reported that 16,691 cars were delivered in November, 1%, more than in the corresponding month. Hyundai was the top-selling car, with 31,262 deliveries in January-November, 3.7% more than in the corresponding period. Toyota was in second place, with 20,328 deliveries, up 8.7%; followed by Kia Motors, with 19,665 deliveries, up 7.3%; Skoda, with 12,109 deliveries, up 13.5%; and Ford, with 11,989 deliveries, up 3.4%. Mazda was in sixth place, with 10,122 deliveries, down 6.9%. The top-selling car in January-November was the Kia Picanto, with 8,976 cars sold. (Globes 03.12)
11: IN DEPTH
On 21 November, the Organization for Economic Cooperation and Development (OECD) has released a comparative report on health care services, which indicates that the shortage of physicians in Israel is the worst among the OECD member states.
It further emerges from the report that the percentage of Israeli physicians older than 55 is the highest among the OECD member states — standing at 49% — while the average percentage of physicians in the same age range in the OECD member states is a mere 32%. In addition, the number of medical school graduates in Israel is the lowest among the OECD member states — just 4.9 per 100,000 residents, while the number of medical school graduates in relation to the number of actually practicing physicians is particularly low [in Israel] — 14.5 per 1,000 physicians. The average number of medical school graduates in the OECD member states is twice as high as the corresponding figure for Israel on this index — 33.7 per 1,000 professionally active physicians.
The above data taken together suggest that in the coming years, the number of professionally active physicians in Israel is bound to fall sharply. In comparison, the number of practicing physicians in Israel currently stands at 3.3 per 1,000 residents, a figure that is slightly higher than the OECD average, which stands at 3.2 [per 1,000 residents].
These findings are even more alarming considering the situation in the nursing sector. Already today, the number of nursing personnel in relation to the number of residents in Israel is extremely low — 4.8 per 1,000 residents. The average in the OECD member states on this index is almost twice as high — standing at 8.8 per 1,000 residents.
Israel also ranks low in terms of the number of nursing personnel relative to the number of physicians. In fact, only Greece, Turkey, Spain, Chile, and Mexico are ranked lower than Israel on the list. On the average, the number of nursing personnel in Israel is 1.5 per physician, as against the OECD average ratio of 2.8.
In this index, too, the number of nursing school students [in relation to the population] is rather low, and the shortage in nursing personnel is thus expected to become even more acute in the future. The number of nursing school graduates [in Israel] is 11.4 per 100,000 residents, nearly a quarter of the OECD average, which is 42.5. The number of nursing school graduates in relation to the number of actually practicing nursing personnel is likewise low — presently standing at 23.6 per 1,000 professionally active nursing personnel. (Calcalist 21.11)
On 29 November: Fitch Ratings (http://www.fitchratings.com) has affirmed Israel's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'A' and 'A+' respectively. The issue ratings on Israel's senior unsecured foreign and local currency bonds have also been affirmed at 'A' and 'A+' respectively. The Outlook on the Long-term foreign currency IDR has been revised to Positive from Stable. The Outlook on the Long-term local currency IDR is Stable. The Country Ceiling has been affirmed at 'AA-' and the Short-term foreign currency IDR at 'F1'.
Key Rating Drivers
The revision of the Outlook on Israel's Long-term foreign currency IDR reflects the following key rating drivers and their relative weights:
- The fiscal deficit is forecast to come in well below target this year. Based on data for the first 10 months Fitch predicts that the central government deficit will be 3.4% of GDP in 2013 versus a target of 4.3% of GDP and a 2012 outturn of 3.9% of GDP. Performance has been driven by a combination of consolidation measures, under-execution of budgeted spending and one-off factors.
- The new government has turned around the fiscal position and is committed to a credible medium-term program for further deficit reduction. Tax hikes and spending cuts are planned for 2014 and a proposal to tighten the ceiling on real expenditure growth (one of two fiscal rules) is being examined. The modest re-profiling of the consolidation program in late November does not alter Fitch's view on the official commitment to reduce the deficit.
- Public debt sustainability has improved. Improved fiscal performance combined with an upward revision to nominal GDP has lowered the debt/GDP ratio. Fitch expects the GDP ratio to fall to 65.4% of GDP in 2015, closer to the authorities' long-term target of 60% of GDP.
- Gas production has begun smoothly, new discoveries have been made and an export policy (although not the modality of exports) has been agreed. Gas output has allowed a reduction in energy imports, which has contributed to a fall in the trade deficit of 0.8% of GDP over the first 10 months of 2013 and is likely to boost GDP by a similar amount over the year. A greater certainty and stability of energy supply will bolster the manufacturing sector. Fiscal revenues from gas are currently low.
Israel's 'A' IDR also reflects the following key rating drivers:
- Near-term risks of a military conflict with Iran have eased following the P5+1 deal. Israel will be vigilant in ensuring Iran sticks to its commitments in the deal and any transgression could provoke a military response. There has been minimal direct spill-over from the conflict in Syria, although the course of the conflict and the impact on other neighboring states remains uncertain. There has been little progress on peace talks with the Palestinians since they restarted earlier this year.
Progress has been made in tackling structural weaknesses. In particular, a reduction in allowances should encourage greater participation in the labor force. Measures to reduce concentration in the private sector are under way.
The authorities have taken advantage of favorable market conditions to lengthen the average maturity of debt and tap the international market. Debt management and high domestic and external financing flexibility are a rating strength.
Israel's strong and well-developed institutions and education system have led to a diverse and advanced economy. Human development indicators and GDP per capita are high and the business environment promotes innovation, reflected in several major FDI transactions in the hi-tech sector this year.
Political risk is a constraint on Israel's ratings.
The Positive Outlook reflects the following risk factors that may, individually or collectively, result in an upgrade:
The current Outlook is Positive. Consequently, Fitch's sensitivity analysis does not currently anticipate developments with a material likelihood, individually or collectively, of leading to a downgrade. However, future developments that may, individually or collectively, lead to a revision of the Outlook to Stable include:
A high level of political risk is factored into Israel's rating. Current regional conflicts are assumed to continue, but their impact on Israel not to worsen materially. Fitch does not expect a military conflict between Israel and Iran. Fitch assumes civil war in Syria will continue without seriously destabilizing neighboring states or directly spilling over into Israel. Fitch does not assume any breakthrough in the peace process with the Palestinians or exclude the possibility of renewed conflict with Hamas in Gaza.
Fitch assumes that the ruling coalition will hold together and remain committed to lowering the deficit over the forecast period.
Gas supply and associated revenue streams are assumed to flow in line with the authorities' assumptions. Production at Tamar is expected to continue uninterrupted. Fiscal revenues will be low and there will be no exports during the forecast period.
Fitch assumes that the financial sector will remain stable in the face of rising house prices. Fitch assumes that the global economy will improve gradually over the forecast period. (Fitch 29.11)
BLOMinvest’s Lebanon Brief observed that Struggling to regain its glory days, tourism industry had to face not only the persistent war in Syria and its spillovers on the local scene, but also beat the ongoing political bickering that hinders its performance. The Lebanese government has long invested in advertising and marketing to make up for the sector’s lost receipts. In 2013, Lebanon promoted campaigns such as the “50% for 50 Days” in addition to slashing airfares and hotel rates. On a positive note, Beirut ranked 20th in the world’s best cities and 1st in the Middle East by the Condé Nast Traveler’s 2013 Readers’ Choice.
As a service-driven economy with tourism being a major contributor to Gross Domestic Product’s (GDP) growth, a decline in the sector will have substantial repercussions on economic growth and vice versa. The World Travel and Tourism Council (WTTC) posted that direct contribution of Travel and Tourism (T&T) stood at $4.12B (or 9.3% of GDP), while total contribution to the Gross Domestic Product (GDP) amounted for $11.14 in 2012, the equivalent of 25.1% of total GDP. Accordingly, the sector is a major contributor to the country’s GDP which means that any improvement in the former will boost the latter’s level, and vice versa.
The number of tourists maintained the downward trend that started in 2011 after a booming period when tourists’ number touched the 2 Million in 2010. Tourists’ number reached a 6-Year Low of 977,380 by September 2013, down by 10.0% from the same period in 2012 and by 23.4% from 2011, according to the Ministry of Tourism. Conversely, arrivals at Rafik Hariri International Airport (RHIA) increased 7.3% year-on-year (y-o-y) by September to 2.39 million. However, this figure isn’t indicative of an improving tourism as it comprises Lebanese and expats among others. Yet, a “tourists to arrivals” ratio can provide insight into the evolution of tourism seekers’ stake in total incomers over a defined period. In this context, the ratio showed a year-to-date decrease in the incomers’ number to Lebanon for tourism from respective 78.0% and 48.8% by September 2011 and 2012 to 40.9% during the first nine months of 2013. This was probably due to the increase in Syrian arrivals to Lebanon during the last few years since hostility of combats there pushed the majority of airlines to suspend their flights to Syria. Accordingly, Syrians abroad found themselves forced to use neighboring countries’ airports such as RHIA as a transitory route to reach their home land.
As for tourists’ nationality breakdown, Arab tourists stopped accounting for the bulk of vacationers in Lebanon this year due to the rising security incidents on the domestic and regional levels that pushed several GCC countries to renew their Lebanon travel-warnings. Visitors from Europe took the biggest share of tourists accounting for 34.7% by September 2013, while Arab tourists grasped 30.7% of the total.
Hospitality and Tourism performances go hand in hand, as the 10.0% slip in tourists’ number was coupled with a fall in Beirut’s occupancy rate1 from 58.0% to 51.1% by the end of September 2013. A correlation analysis was performed between tourists’ number over the first nine months of the period 2007-2013 and the occupancy rate over the same period. The analysis showed a high correlation coefficient at 0.91 between the two indicators to prove the fact that Tourism and Hospitality are almost perfectly correlated. Accordingly, any improvement in the number of tourists to Lebanon will be promptly tied with an increase in hotels’ occupancy rate. Yet, the occupancy rate provided by Ernst & Young monthly report does not cover areas outside the capital where occupancy rates show lower figures. Worth noting that most destinations located in distant regions are characterized by higher elasticity when it comes to their performance due to the seasonal effects. Hence, their viability is hugely threatened, as the whole sector’s performance has deteriorated due to the recent developments, especially the spillovers from the war in Syria.
Following the drop in occupancy rate, the Revenue per Available Room (RevPAR) and the Average Daily Rate3 (ADR) fell drastically in 2013. ADR slipped by 15.7% y-o-y to $166.89 revealing hotels desperate trials to boost reservations in vain, as occupancy rate in Beirut maintained the descending trend. Worth noting, a low ADR will show sluggish performance among hotels which are trying to attract more customers. In addition, reducing the ADR especially that of luxurious hotels, signals an aggressive marketing strategy to attract more tourists, increase occupancy rate and preserve RevPAR. Yet, to maintain their revenues, Lebanese hotels tried to reduce operational costs by discharging some of their personnel. Hotels couldn’t uphold their revenues this year which was clearly seen in the 26.6% yearly slid of the average RevPAR to $86.00 by the end of September. The decreasing RevPAR revealed a deteriorating activity as hotels were receiving lower tourists’ number. Regular celebrations and festivities couldn’t attenuate the cruel year’s repercussions on the market that enjoyed by September 2010 a $178.78 RevPAR, almost the double of 2013’s figure. In this context, the International Institute of Finance (IIF) forecasted that gross receipts from Tourism services will tumble by 20% y-o-y by the end of 2013 to $4.9 billion, after March projection of a 6% increase by the end of 2013.
Lebanese hospitality has been facing several difficulties with a large impact on the labor market. Some hotels and restaurants were forced to close their doors, while others dismissed some of their employees to reduce their operational costs. It is worth noting that the majority of employees in the Lebanese tourism sector are university students having part time jobs. In this context, the WTTC expected employment in T&T to collapse by 2.1% in 2013 or a loss of 2520 jobs, after directly supporting 120,000 jobs in 2012 (the equivalent of 9.0% of total employment). The decline in the tourism sector will also have an indirect impact on other related sectors with an additional loss of a yearly 3,000 jobs in 2013. Hence, total contribution of T&T to employment is expected to reach 317,000 jobs or 23.5% of total employment compared to 322,500 jobs (24.0% of total employment) in 2012.
As political factors seem to be a key player in the influx of tourists, we tried to correlate Tourism and Political stability to find out the relationship between the two factors especially in a country like Lebanon where political bickering is recurrent and persistent. Tourists’ number were taken over the period 2006-2012 with the “Political Stability and Absence of Violence” (PSAV) index introduced by the World Bank4 over the same period. The latter scores the variation of political stability in a country correspondingly to the occurring incidents and their weight as a Percentile Rank (PR) among all countries from 0 (lowest political stability) to 100 (highest political stability). (TLB 23.11)
Arab Gulf oil exporters may see unemployment among their citizens rise in coming years unless they change a decades-old habit of relying on cheap foreign labor, the International Monetary Fund said on 20 November.
Since the 1970s, millions of mainly low-skilled workers from south and southeast Asia have supported rapid economic growth in the Gulf states, whose citizens tend to favor cushy, high-paid public sector jobs. But this model is unlikely to be sustainable in the six Gulf Cooperation Council states - Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain - because of young, growing populations and high public wage bills, the IMF warned. "With a rapidly rising youth population...private-sector job creation for GCC nationals has become a challenge and unemployment could rise in the coming years unless more nationals find jobs in the private sector," the IMF said.
The GCC labor force could grow 3-4% each year, so an additional 1.2-1.6 million GCC citizens could enter the labor market by 2018, it estimated. If the current share of nationals in the private sector is merely to stay flat, about 600,000 private-sector jobs must be generated for nationals by 2018. However, this would only absorb about one-half to one-third of expected labor market entrants, the IMF warned in a paper, adding: "Even if public-sector hiring continues at its recent pace, unemployment could rise."
In Saudi Arabia, the most active country in labor reforms, the official jobless rate edged down to 11.8% in the second quarter of this year from a peak of 12.4% in 2011, official data show. The UAE had 14% unemployment among its nationals in 2009; it does not issue regular, timely jobless statistics. In all GCC countries, female unemployment rates are higher than for males, reaching nearly 35% in Saudi Arabia and over 28% in the UAE, the IMF said.
Social turmoil in the Middle East has spurred efforts in the Gulf monarchies, mainly Saudi Arabia, to boost employment of their citizens and crack down on illegal hiring of foreign workers.
But increased public sector hiring has made government budgets more vulnerable to any fall in oil prices. Efforts to boost private-sector employment of nationals, such as through quotas, have yielded mixed results so far, the IMF said. "The recent revamping of the Saudi Nitaqat program has had a modest impact so far in boosting private sector employment," it said.
Only Kuwait and Oman have seen an increase in the proportion of nationals employed in the private sector over the past decade. Excluding the UAE for which data are unavailable, about 7 million jobs were created in the GCC in 2000 - 2010. About 5.4 million of them were in the private sector, the IMF said.
Nearly 88% of those private sector jobs were filled by foreign workers. By contrast, in the public sector, where average wages can be several times higher, nearly 70% of new jobs were taken by local citizens.
The Arab Gulf states should improve restrictive labor rules such as sponsorship systems which make it hard for foreign workers to change jobs and negotiate wages, the IMF argued. "Allowing a more competitive labor market could help gradually raise the wages of foreign workers and make low-skilled nationals more attractive to employers," it said. Fees imposed for the employment of foreign workers could also help to narrow the wage differential with local citizens, the IMF said, citing such policies in migrant-dependent Singapore and Malaysia.
Low-skilled foreign workers occupy more than 80% of the private-sector jobs in the GCC, the IMF estimated, which resulted in outward remittances from the region of $80.8 billion in 2012. (AB 20.11)
KFH Research’s Oman report says the country’s economy continues to be highly dependent on hydrocarbons. However, oilfields are reaching maturity and despite investment in large gas projects, internal demand continues to grow, reducing gas export capacity. As a result, revenues from oil and gas seem to have reached their peak and have started to decline, meaning that government spending on infrastructure will slow over the coming years.
The weakening in hydrocarbons revenue is a structural problem that will soon expose significant weaknesses in the country's underlying budget dynamics. This deteriorating fiscal position may pose a threat to the government's ambitious capital expenditure plans in the near future.
The government's five-year spending plan (2011 - 2015) includes OMR30b ($78b) of expenditure, the majority of which will be allocated to social and transport infrastructure. With regards to transport infrastructure, a long-term boost may come from the country's plans to develop a national rail network. The project's cost is expected to run into billions of dollars, with the first phase planned to be completed by 2017. In the social infrastructure sector, significant investment has been targeted at water and energy projects around the country.
The government has earmarked tourism as one of the key sectors that will drive its economic diversification strategy. To this end, it has started to take a more active role, managing the development of the industry and attempting to attract foreign investment. The creation of OMRAN - a company established by the government to deliver major projects and manage assets and investment in the sector - is an illustration of the government's new, assertive approach. This tactic is complemented by Oman's favorable position as a relative political safe haven in the region.
Oman's transport sector is heavily reliant on its extensive road network, as there are no operating rail lines in the country. Oman has a road network stretching 45,985km, although a significant proportion of this is unpaved. However, this is set to change, as the government invests in transport projects to encourage tourism.
Road projects are the fastest-growing part of Oman's transport infrastructure sector, with spending allocations for new road ventures of around OMR1.7b. One of the biggest road projects is the second-phase construction of the 240km al-Batinah coastal road.
Inter-Gulf Cooperation Council (GCC) Rail Network
Plans to develop the country's railways have been a priority due to the proposed Gulf Cooperation Council (GCC) pan-Gulf rail network. This is a $25b railway network that will stretch over a 2,117km network, connecting the six countries of the GCC: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. The network is intended to encourage travel and increase trade in the region. Construction completion is scheduled for 2017.
Oman's section of the regional rail link will be the Batinah railway, which will run parallel to the Batinah highway. The link will cover 260km from Muscat to the border with the UAE and it will be a major boost to Oman's transport network.
Oman and the UAE have selected a 136km length of railway line connecting Sohar with the UAE border for priority implementation. A 27 km spur line to Buraimi will also be part of this priority package. The total volume of freight likely to be handled by the international rail network is estimated at 42m tonnes in 2020, rising to 62m tonnes in 2030 and topping 73m tonnes in 2040.
In December 2012, the government of Oman confirmed that Hill International had been awarded an OMR41.8m ($108.5m) contract to expand two airports in the sultanate. The company will be responsible for consultancy services and supervision works for Muscat International Airport and Salalah Airport projects, according to Minister of Transport and Communications Ahmed bin Mohammed al-Futaisi.
The development of Muscat International Airport is worth$1.8b, with the project at Salalah Airport project requiring an investment of $765m. The airports will have the capacity to cater for 12m and 2m passengers per annum respectively upon completion which is scheduled for end-2014.
Oman's ports are an important component of the country's transport sector. The country has two major ports: the Port of Sultan Qaboos in Muscat and the Port of Salalah. Another up-and-coming port is the Port of Sohar, located near the Straits of Hormuz, which is undergoing a $12b investment project, making it one of the world's largest port development projects.
Part of the expansion project will be the construction of a 70-hectare container terminal at the Sohar Port, which will have a capacity of 1.5m TEU's and cost approximately OMR50m ($130m) to complete. The construction commenced in April 2013 by Oman International Container Terminal (OICT) and is scheduled to be operational by January 2014.
Conclusion and Outlook
Oman’s construction and infrastructure sectors have defied the global recession thanks to financial backing from oil-fuelled state coffers. The industry grew by an impressive annual average of 25.2% between 2005 and 2010. However, the tide started to turn when real growth dropped to 1.6% in 2011. For 2012, Oman's Central Bank has reported construction industry value at OMR1.45b, which represents an estimated real growth of only 1.8%. In 2013, we expect a slightly higher growth rate with construction industry value reaching OMR1.53b.
Despite continuing political unrest in the wider Middle East region, Oman has remained highly insulated. This has allowed the tourism industry to expand and we expect the sector to continue to attract investors who are prepared to finance the building of the infrastructure required to cater for the growing number of visitors. Much like in the construction industry, Oman's economic growth has been highly volatile over the last decade. The country reported highly impressive double-digit growth in 2008 but we expect a more moderate growth in 2013 and 2014 at 3.2% and 3.5% respectively.
Overall, underpinned by government spending and a burgeoning tourism industry we expect a moderate but consistent construction growth moving forward - an outlook enhanced by Oman's position as a relative regional safe haven.
About KFH Research
KFH Research Limited is an award winning, independent Islamic research entity and is owned by Kuwait Finance House. Its research advisory includes economics, financial and feasibility analysis on new markets and potential investment ventures in various sectors worldwide. (KFH Research 29.11)
Tom Stevenson posted on 19 November in Al-Monitor that Western powers are in danger of underestimating the regional effects of Libya's political instability; this according to Hugh Robertson, the British Foreign Office minister responsible for the Middle East and North Africa.
Robertson told the Foreign Affairs Committee that there are around 400 arms dumps in Libya, 75% of which are not under government control. He also said the British, French and US governments have underestimated the capability of the region's militant groups to exploit the political chaos.
The level of state security in Libya has dramatically worsened lately, as rising militia violence and declining state power edge the country ever closer to all-out anarchy. Deputy Intelligence Chief Mustafa Noah was abducted from Tripoli International Airport on 17 November before being freed following the intervention of the Zintan Shura Council.
Noah's abduction was the highest-level attack on a government official since the kidnapping of Prime Minister Ali Zeidan by the Libyan Revolutionaries Joint Operations Room on 10 October. Zeidan was also released within 24 hours.
Violence centered in Tripoli's Ghargour district last weekend resulted in the deaths of at least 45 people and a further 460 wounded after Misrata militias opened fire on protesters demanding the withdrawal of their forces from the capital. The resulting clashes between rival militias were the worst since the 2011 overthrow of Moammar Gadhafi.
Evidence collected by Human Rights Watch from Tripoli's Abu Salim and Zawiya Street hospitals suggests the majority of casualties were caused by heavy weapons, including anti-aircraft guns and rocket-propelled grenades.
"Libyan citizens have paid with their lives for the reckless acts of unaccountable militias," said Sarah Leah Whitson, Middle East and North Africa director at Human Rights Watch. "Libya needs security forces that don't stand by as militias kill unarmed protesters."
Robertson said that huge quantities of arms were now unsecured in Libya and were potentially available to well-resourced regional militant organizations. "You add to that the ability of insurgents, through kidnap for ransom and other things, to raise sums of money like 40 million pounds ($64 million), and in a market that is oversupplied, where there is a lot of kit [military equipment] available, you can absolutely see the dangers," he told the committee.
The minister compared the danger posed by militant groups in the wider Sahel region to armed groups that fought in the Bosnian war. British government officials said poor border security in Libya and North Africa is making effective monitoring of militant groups difficult.
Simon Shercliff, head of the Foreign Office's Counter-Terrorism Department, said, "The size of the problem is immense. There are huge desertified borders, often not actually demarcated in any sensible way, and, as we mentioned earlier, ancient trade routes, used either for licit or illicit reasons, crisscross the whole region."
Foreign Office officials said that the British government is lobbying for cooperation between North African states on border-security issues, and has a permanent border-security adviser stationed in Libya.
A regional border-security conference was held in Rabat last week that resulted in the announcement of plans to establish a training facility in Morocco. Algerian representatives did not attend the conference due to diplomatic tensions between the two countries.
Algeria instead independently announced that it would built 80 new outposts, each manned with 40 guards, along its long Saharan border with Morocco, Mauritania, Mali, Niger, Tunisia and Libya.
Misratan militias based in Tripoli, including the al-Nusour brigade, which is widely held responsible for the recent spike in violence, have now withdrawn from bases in the capital in line with orders received from Misrata. Tripoli and Misrata regional leaders are believed to be engaged in regular meetings with the aim of defusing the tense political situation.
Instability is having significant effects on the operations of businesses and international oil companies in Libya, which has proven reserves of almost 48 billion barrels of oil — the largest in Africa.
National oil production has sunk to levels well below an average of 1.5 million barrels per day, and even below the levels expected by some international companies on their sites. The closing of oil fields, terminals and ports by militias (along with coordinated labor action in some areas) has led investors and oil companies to shrink their operations and in some cases, look to exit the country.
The majority of the country's oil terminals, which are located in the east around the Sirte basin, remain closed. However, the Mellitah export terminal and associated Greenstream pipeline, which runs from Western Libya to Italy, reopened 18 November after a labor dispute with Amazigh workers ended in a negotiated settlement.
Separatist militia leader Ibrahim al-Jathran, who is responsible for many of the closures, this month announced the establishment of his own oil company based in the country's east and outside the authority of the central Tripoli administration. Libya's oil exports primarily go to Europe, with roughly 10% shipped to China.
Oil companies said that both security concerns for their staff resulting from a lack of state control and the effect the closures are having on production are fueling their highly cautious positions toward Libya. The overwhelming majority of the Libyan government's revenue comes from oil production and exportation.
Tripoli is currently experiencing its first general strike in recent memory as the majority of the public sector and private businesses close and only pharmacies, hospitals and gas stations remain open. (Al-Monitor 19.11)
On 25 November, Moody's Investors Service (http://www.moodys.com) downgraded Tunisia's government issuer rating by one notch to Ba3 from Ba2. The outlook on the rating remains negative. The key drivers of the rating action are:
(1) Tunisia's ongoing political uncertainty and increased polarization, as highlighted by the lack of timely progress in the national dialogue. This is augmented by heightened security risks at the national level and in the wider region;
(2) Increased external funding challenges, exacerbated by delays in completing Tunisia's democratic transition and resuming economic reforms;
(3) Tunisia's persistently large external and fiscal imbalances;
(4) The fragile state of the country's banking sector, particularly the undercapitalized government-owned banks.
As part of today's rating action, Moody's has also downgraded the debt rating of the Central Bank of Tunisia to Ba3 from Ba2 and kept a negative outlook. The Government of Tunisia is legally responsible for the payments on all of the central bank's bonds given that they are issued on behalf of the government.
In addition, Moody's has lowered Tunisia's country ceiling for foreign-currency deposits to B1 from Ba3, and the country ceiling for foreign-currency bonds to Ba1 from Baa3. The local-currency bond and deposit ceilings were lowered to Baa3 from Baa2. The short-term foreign-currency bond ceiling has also been lowered to Not Prime from P-3, while all other short-term ceilings remain unchanged.
The first factor underlying the downgrade is the lack of timely progress toward the completion of the national dialogue and further setbacks in the finalization of the constitution by Tunisia's National Constituent Assembly (NCA), including a timetable for elections by the Independent Higher Authority of Elections. Whilst Moody's expects political consensus will ultimately be reached, delays have negative implications for private investment and economic activity. In addition, negotiations between government and opposition parties have become increasingly polarized more recently.
Moody's notes that this uncertainty at the political level is augmented by the resurgence of fundamentalist violence, including two attempted suicide attacks that specifically targeted tourist resorts. This increase in violence is being exacerbated by the power vacuum in neighboring Libya while Algeria has significantly increased its border security. These dynamics weigh on the investment climate and on the tourism industry, which represents a key export and source of employment for Tunisia.
The second driver of the downgrade is Tunisia's increased external funding pressures following its market access challenges and donor funding cutbacks in view of its slow progress on reform requirements. At the same time, Moody's notes that this is mitigated by the international community's stated interest in supporting Tunisia's transition to a consolidated democracy, as highlighted by the Deauville Partnership with Arab Countries in Transition.
The third driver of the downgrade is the persistence of sizeable twin deficits in the fiscal and in external accounts, both of which have increased significantly in recent years. Moody's expects Tunisia's fiscal consolidation to proceed only gradually in view of socially sensitive subsidies and transfer reform requirements under the IMF agreement and sees particular challenges with respect to reining in the wage bill. In the external sector, whilst greater currency flexibility helps to shield Tunisia's foreign-currency reserve holdings, it also contributes to higher inflation pass-through in the energy and food sectors at the detriment of households' purchasing power, a key GDP growth driver. This external vulnerability is mitigated by the country's external public debt structure which is long term and mostly due to multilateral and bilateral official creditors.
The fourth driver of the downgrade is the fragile state of the Tunisian banking sector, particularly the three large government-owned banks that account for around 30% of total banking assets, which exhibit severe asset-quality risks and are largely undercapitalized. Moody's estimates the overall sector's recapitalization needs to be equivalent to almost 6% of Tunisia's GDP. Tunisian authorities have recognized the need to recapitalize public banks and strengthen banking supervision, but until progress has been made on these issues, credit growth is likely to remain subdued and insufficient to support internal demand.
Rationale for Negative Outlook
The negative outlook on the rating reflects the challenging political situation in Tunisia and the sizeable pressures on government finances and the balance of payments. The persistence of political instability would likely have further negative consequences on the recovery of the economy, on fiscal metrics and also on the wider reform agenda in Tunisia.
What Could Change the Ratings Up/Down
Although an upgrade is unlikely over the near term, Moody's may change the rating outlook to stable from negative and eventually upgrade Tunisia's rating in the event of: (1) a political transition that alleviates uncertainties and instability, combined with a sustained recovery in economic growth towards pre-crisis trends; (2) a substantial and sustainable strengthening of the government's balance sheet; and (3) a sustained strengthening in the balance of payments and external payments position.
Moody's would consider downgrading Tunisia's rating further in the event of: (1) a persistent political stalemate which would compromise the country's democratic transition and economic reform agenda; (2) a sustained deterioration in the government's balance sheet through a rapid accumulation of debt, including through the materialization of significant contingent liabilities from government-owned banks and public enterprises; and (3) a further weakening of the country's external payments position, potentially combined with a hit to official international reserves. (Moody's 25.11)
An International Monetary Fund (IMF) mission visited Algeria 12 - 25 November 2013 for the annual Article IV discussions. The consultation will conclude with the preparation of a report to be discussed by the IMF Executive Board in January 2014. The team met with Finance Minister Karim Djoudi; Housing and Town-planning and Cities Minister Abdelmadjid Tebboune; Labor, Employment, and Social Security Minister Mohamed Benmeradi; the Delegate Minister for Budget, Mohamed Djellab; and the Governor of the Bank of Algeria, Mohammed Laksaci. The mission also held discussions with several other senior government and central bank officials as well as with representatives of the economic and financial sectors and civil society. At the end of the visit, the following statement was issued:
“Economic performance in 2013 has been satisfactory. Inflation, which reached 8.9% last year, has decelerated to 4.5% as of October thanks to fiscal consolidation and prudent monetary policy. Real Gross Domestic Product (GDP) growth is expected to slow to 2.7% in 2013 from 3.3% in 2012, reflecting continued decline in hydrocarbon sector as well as the impact of fiscal consolidation. Growth has been supported by private demand and by investments by public sector enterprises.
“Algeria’s external position, though still very strong, has started to weaken. The current account surplus is expected to narrow to 1.1% of GDP as a result of lower hydrocarbon exports and continued strong growth in imports. Hydrocarbon production continues to decline while domestic consumption of hydrocarbons remains strong, weighing on exports. Reversing the decline in exports will require more investment to increase hydrocarbon production, measures to reduce domestic hydrocarbon consumption, and efforts to diversify the export base. In addition, the authorities should continue to follow an exchange rate policy that avoids any misalignment of the dinar.
“The mission welcomes the fiscal consolidation undertaken this year which is expected to result in a balanced budget for the year, following a deficit in 2012. Long-term fiscal sustainability, however, remains a concern. Further fiscal consolidation should be pursued and should aim to strengthen non-hydrocarbon revenue, contain current expenditures and maintain public investment, which is critical for growth. A fiscal rule using a backward-looking average oil price and setting a floor on the structural balance could help Algeria manage revenue volatility stemming from fluctuating commodity prices, impose spending discipline and safeguard long-term sustainability.
“The financial sector is liquid and well capitalized, but underdeveloped. Although credit to the economy has grown rapidly, it remains insufficient for small- and medium-sized enterprises (SMEs). Increased competition and better credit risk assessment tools would encourage banks to orient their business toward SMEs. The mission advised the authorities to lift the ban on consumer credit and develop a mortgage market.
“Although Algeria has enjoyed macroeconomic stability, the economy continues to perform below its potential. Accelerating private sector led growth is critical for reducing the economy’s dependence on hydrocarbons and creating new jobs. In this context, reforms are needed to improve the business climate, remove constraints to foreign investment, promote international trade integration and equip the workforce with needed skills. (IMF 25.11)
The long-term outlook for Morocco’s phosphate production received a major boost in October when the state-run Office Chérifien des Phosphates (OCP) secured a key financing deal for its development strategy. The company launched a wide-ranging program in 2009 aimed at doubling phosphate rock and derivatives output by 2020.
Having signed a $271m loan agreement with the German state-owned development bank KfW in early October, OCP, which is the world’s largest exporter of phosphate rock, is now poised to embark on extensive capital upgrades, although the combination of increased competition and lower demand could spell delays in improved returns, at least in the near term.
Major overhaul planned
OPC’s development strategy, which includes overhauling mining and industrial infrastructure, alongside installing more efficient water usage systems, is expected to boost industrial output.
Phosphates represent around a quarter of Morocco’s export revenue, and while efforts to increase production should improve external receipts in the medium to long term, sales have declined by more than 20% this year as a result of lower global mineral prices.
The OCP is planning to roll out its development program with an eye on the market’s eventual recovery, which the company believes will occur in 2015, according to local media reports. The company will use the KfW loan, which will have an 11-year term with a three-year grace period, to finance the construction of two water desalination plants in the key ports of Jorf Lasfar and Safi. Waste water treatment stations at the Khouribga, Youssoufia and Benguérir mine sites will also be developed, alongside water adduction and distribution systems at both mining and industrial facilities.
Output increases targeted
The OCP aims to boost production of phosphate rock from its current level of 34m tonnes to 50m by 2020 through its ten-year Dh130b (€11.56b) investment program. Plans are also being made to increase annual fertilizer output from 3.5m tonnes to 10m. In addition, the company has said it aims to reduce production costs by up to 40% by overhauling infrastructure and expanding port operations.
With lower prices this year affecting the sector globally, foreign financing is playing an increasingly important role in supporting the company’s development program. Earlier in the year, the OCP signed a $150m agreement with the Saudi Arabia-based Islamic Development Bank (IDB), which is expected to finance infrastructure upgrades at the Jorf Lasfar port. Reports have suggested that the OCP could support future spending through a $600m foreign bond issue.
The development program is set to confirm the OCP as one of Morocco’s largest state-owned enterprise investors. Officials said the company invested Dh27b (€2.4b) through the program in the first nine months of 2013, with the figure expected to reach Dh30b (€2.67b) by the end of the year. The OCP plans to channel a further Dh29b (€2.58b) into the initiative in 2014.
However, the decline in phosphate rock prices from $185 per tonne at year-end 2012 to $127.50 by September 2013 is weighing on industry activity. OCP’s turnover eased in the first six months of 2013, leading to a slowdown in profits. Sales for the January-September period amounted to Dh29.44b (€2.62b).
Several factors have contributed to the global drop in prices, including an increase in phosphate production in recent years among newer players, particularly Saudi Arabia and Peru. Slower economic growth in emerging markets such as China and India has also dampened global demand for phosphates. While domestic consumption has eased, China is increasing its exports, further adding to the global supply.
The phosphate market, however, has shown itself to be cyclical in recent decades. OCP was reportedly braced for the recent price drop and expects the climate to improve over the next two years as population growth and rising agricultural demand help to balance out the supply of raw phosphates and fertilizers.
OCP’s investment program comes at a difficult time, but the expectation is that, once the market recovers, Morocco will be better-positioned to compete in an increasingly crowded field. This will be important as the country looks to boost export earnings and stabilize its trade deficit. (OBG 19.11)
As Turkey looks to diversify its sources of natural gas, one option that is coming closer to reality is a deal with the Kurdistan Regional Government (KRG) to build an oil and gas pipeline from northern Iraq. While this link would help consolidate Turkey’s position as a regional energy corridor, it risks upsetting relations with Iraq.
Turkey already has a number of pipelines linking it to foreign suppliers of oil and gas. Lines from Russia and Iran provide a large part of the natural gas consumed in Turkey, while a twin pipeline from Iraq offers an outlet to European markets for oil from fields in and around Kirkuk. The Baku-Tblisi-Ceyhan oil pipeline, running from Azerbaijan to the export terminal at Ceyhan on the Mediterranean is the main export route for Azeri crude.
Other plans to girdle Turkey with pipelines include the Trans-Anatolian Natural Gas Pipeline, which would carry Azeri gas to Europe. There is even a proposal for a link to Israel’s offshore fields, which would supply gas to Turkey and possibly Europe, though this project could be held up.
However, far more likely to spark debate is a proposal to build a pipeline between Turkey and Iraq’s Kurdish region. According to a late-October report from Reuters, the KRG would export up to 2m barrels per day (bpd) of oil via Ceyhan, while also selling a minimum of 10m cu meters of gas annually to Turkey for domestic consumption.
The deal could be of immediate benefit to Turkey, which is among the world’s largest importers of natural gas. The country spends around $12b each year on natural gas, much of which is used to fire power plants, and electricity demand continues to rise steadily. Total energy imports in 2013 are expected to amount to nearly $60b, a heavy drain on the economy and one that has jumped this year due to the depreciation in the value of the lira.
KRG officials have said the new oil pipeline could be completed within 18 months, a timeframe Turkey’s energy minister, Taner Yildiz, has said is not possible. Work on such a project could not start without a full feasibility study and other necessary preliminary steps, a spokesman for the minister said in late October.
Though the KRG is in the process of finishing a pipeline running to the Turkish border, it will not allow independent exporting capacity, with the new connection having to tap into the existing Kirkuk-Ceyhan conduit controlled by the Iraqi central government. To get around this, the KRG has proposed the construction of a parallel pipeline to Ceyhan, one dedicated to carrying the main flow from the northern Iraqi fields.
While the deal with the KRG would bring benefits to Turkey, both through a ready supply of oil and gas at competitive rates and revenue from transit fees for the portion of the Iraqi-Kurdish hydrocarbons shipped for export, Ankara could also have a price to pay.
The KRG is in an open dispute with the Iraqi central government regarding the issue of the semi-autonomous region’s plans to export oil and gas directly, without involving Baghdad. By formalizing any agreement with the KRG, Ankara could further alienate Iraq, just at a time when the Turkish government has embarked on a diplomatic offensive to mend broken fences.
Among the Iraqi central government’s complaints is that Ankara has undermined its authority by negotiating agreements directly with the KRG, particularly over energy. The Iraqi central government would prefer any exports from the Kurdish region be carried out through the existing pipeline to Ceyhan, though this does pose a technical problem as much of the take from the fields in the area under KRG control is heavier than the Kirkuk-sourced crude currently being pumped through the line.
While the KRG is entitled to 17% of Iraqi’s total energy revenue, Baghdad is concerned that the regional government wants a bigger slice, one that could be used to fund a move towards full independence. This is something Turkey in the past has said it would not accept as Ankara fears an independent Iraqi Kurdistan would further inflame its own Kurdish separatist problems. However, the increased rapprochement with the KRG, combined with Ankara’s efforts to end its own Kurdish conflict, may have lessened those concerns.
A potential outflanking move
On November 11, the Turkish foreign minister, Ahmet Davutoglu, said during a meeting in Baghdad that Iraqi Prime Minister Nouri Al Maliki had proposed building a new pipeline from his country through Turkey to Ceyhan, creating an energy corridor that could be used to carry oil from Iraqi’s southern oil fields. While potentially attractive, holding out the possibility of higher transit fees for Ankara, the offer could be dependent on Turkey’s not tying itself too closely to the KRG, though Turkish officials have said accepting one proposal does not rule out the other.
Turkey seems to be attempting a somewhat difficult balancing act, having apparently committed to purchasing Iraqi Kurdish hydrocarbons while trying not to undermine Baghdad’s sovereignty. With any independent pipeline at least two years down the track, Ankara may well be hoping that the Iraqi central government and the KRG will be able to come to a working arrangement, one that would see Turkey hosting an increase in transport of oil and gas from Iraq without being burdened with a host of political problems. (OBG 28.11)
On November 20, 2013, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Turkey.
The Turkish economy achieved a welcome reduction of imbalances in 2012. In 2013, growth has accelerated significantly on the back of a monetary and fiscal policy stimulus. The economy is projected to expand by 3.8% this year with private consumption and public investment as the main contributors. With this rotation back to domestic demand-led growth, the current account deficit is widening again, while inflation remains above target.
The authorities are on track to meet their 2013 budget targets, despite rapid spending growth. As one-off factors boosted revenues beyond projection, the government made use of these windfalls to increase capital expenditure significantly beyond the budget ceiling, while maintaining its overall deficit targets. The banking system remains well capitalized, with capital ratios well above regulatory minima and non-performing loans (NPLs) remaining subdued, despite some uptick over the last year.
Executive Board Assessment
Executive Directors noted the faster growth of the Turkish economy this year, due in part to policy stimulus. Nonetheless, they observed that the domestic demand-led growth is leading to a renewed deterioration in inflation and the current account deficit. In the period ahead, Directors encouraged the authorities to tighten their macroeconomic policies and step up structural reforms to strengthen external performance and bolster economic growth.
Directors considered a less accommodative monetary stance to be more appropriate in light of still-high inflation. Most Directors agreed that normalizing the monetary policy framework would help improve communications and strengthen monetary transmission. Some Directors noted the challenge faced by the monetary authorities in dealing with volatile capital flows and noted the improvements in inflation relative to the past. Directors suggested building up net foreign reserves through sterilized intervention when capital inflows resume.
Directors generally agreed that a tighter fiscal policy would help reduce external vulnerabilities and relieve pressure on monetary policy. They encouraged the authorities to contain current spending and save any revenue over-performance. They cautioned that discretionary stimulus should be reserved for a scenario of potential negative economic outturn. Over the medium term, fiscal consolidation would raise public saving and contribute to real exchange rate depreciation. Greater budgetary flexibility would be needed to allow greater spending on priority areas such as education and infrastructure.
Directors expressed satisfaction that the Turkish financial system is generally sound. They noted, however, that banks’ indirect exposure to foreign exchange risk requires careful monitoring. They considered that macro-prudential measures should be targeted at household credit and corporate foreign exchange lending. Directors encouraged further efforts to address the deficiencies in the regime for anti-money laundering and combating the financing of terrorism identified by the Financial Action Task Force.
Directors noted the Turkish economy’s low saving rate and reliance on external financing. They underscored the importance of raising both private and public saving and stepping up structural reforms to raise competitiveness, attract foreign direct investment and enhance growth while reducing external imbalances. The authorities’ efforts to decrease energy dependence, increase labor market flexibility, reduce the informal sector, and reform private pension are in the right direction. Further efforts to improve the business climate will also be important. (IMF 27.11)
On Nov. 22, 2013, Standard & Poor's Ratings Services (http://www.standardandpoors.com) affirmed its unsolicited long- and short-term foreign currency sovereign credit ratings on the Republic of Turkey at 'BB+/B'. We also affirmed our unsolicited 'BBB/A-2' local currency ratings and our 'trAAA/trA-1' Turkey national scale ratings. The outlook is stable.
The key ratings constraint continues to be Turkey's high external risks, which are associated with its large current account deficits and substantial net external liability position. Data from the Central Bank of the Republic of Turkey (CBRT) indicate that the corporate sector's net short foreign currency position is about 20% of GDP, implying that Turkish investment activity - and therefore growth - is considerably vulnerable to exchange rate developments.
Additional ratings constraints include the country's moderate income levels, reflecting relatively low productivity and labor force participation, as well as what we consider to be a large grey economy and a continued dependence on rapid credit growth as a driver of economic expansion. Turkey's relatively effective institutions and governance, flexible monetary policy, well-capitalized and generally well-regulated financial sector, and its moderate general government debt burden support its ratings.
Given its heavy dependence on external financing, Turkey is vulnerable to changes in global markets. We estimate that Turkey's net external liability position will increase to more than double its current account receipts (CARs) this year. We project external debt, net of official reserves and financial sector external assets, to rise to more than 120% of CARs, from less than 100% before 2009, reflecting increased dependence on debt financing in recent years.
With the growth of the local currency market and considerable nonresident interest in Turkish-lira-denominated assets, we now consider the lira an actively traded currency, as defined in our criteria. However, external liquidity risk remains significant as Turkey has high and persistent current account deficits above 20% of CARs and needs to roll over an estimated 78% of CARs of external short-term debt by remaining maturity every year on average between 2013 and 2015. Financing costs have edged upward since May 2013, probably related to an expected gradual tightening of global monetary conditions.
Given its large external funding needs, we believe that Turkey will be among the most vulnerable emerging sovereigns if global liquidity dwindles. Its vulnerability could be exacerbated if political dissatisfaction within Turkey increases, weakening our current view of the government's policy flexibility. A temporary confluence of these factors led to a sharp reversal in portfolio equity flows in mid-2013, although we note that offsetting net FDI inflows have remained robust.
We expect Turkey's increased external financing costs to reduce the rate of credit expansion among Turkish banks and lead to weaker economic growth in the second half of 2013. In September, the financial regulator, Banking Regulation and Supervision Agency (BRSA), proposed to raise risk weights on bank and credit card loans to consumers, which could potentially constrain domestic demand and, at the same time, reduce imports. We expect export growth to decelerate from its 2012 high as the contribution from gold exports diminishes. That said, we believe export growth will remain robust in the medium term as external demand recovers, particularly in its trading partners in Europe, the destination of more than 50% of Turkey's goods exports.
We project annual growth of about 3.0% for 2013, accelerating to 3.6% in 2014. These forecasts take into account several structural weaknesses in the Turkish economy including a heavy dependency on imported energy; the high import content of exports; a low savings rate and therefore a reliance on increasingly expensive and volatile external funding; and substantial regional disparities in education and development. Because Turkey has persistently high current account deficits, our growth projections will remain highly contingent on the external environment and any related pressure on the exchange rate. Over the longer term, we believe that Turkey's growth potential will remain strong due to its favorable demographics and relatively flexible labor and products markets. Structural reforms, particularly those aimed at reducing the cost and scale of Turkey's net energy import bill, could enhance growth.
Given our relatively modest near-term growth outlook for Turkey, and the municipal, presidential and parliamentary elections scheduled for 2014 and 2015, we believe fiscal policy will be modestly expansionary. Assuming the lira's real effective exchange rate holds fairly steady, we anticipate the general government debt burden will continue its downward trend - albeit at a slower pace than we previously expected. If economic performance weakens much more than we currently expect, we believe the government will increase deficits and borrowings to stimulate the Turkish economy and support employment growth.
The floating lira and a deepening local currency capital market support Turkey's monetary policy flexibility. However, dependency on external funding and exchange rate volatility complicate monetary policy. This is because domestic financial conditions are partly determined by events outside the direct control of the central bank. The central bank has accumulated significant net foreign exchange reserves through lending to Turk Eximbank and raised gross foreign currency reserves through increases in the reserve requirement ratios for the banking sector. This has created a sizable cushion for the central bank to counter portfolio flow volatility, as it did during the summer of 2013.
CBRT also responded to continued pressure on capital outflows by increasing interest rates slightly, although the real central bank reference rate remains negative. After the Federal Reserve Bank's September 2013 announcement that it was maintaining the pace of quantitative easing, external flows have somewhat stabilized for Turkey. However, the lira remains weaker than it was at the beginning of 2013. Depreciation passes through to the inflation rate via both higher inflation expectations and higher import prices. We expect inflation to reach 8% by the end of 2013, but to ease again when the lira stabilizes.
The stable outlook reflects our view that there is a less than one-in-three likelihood we will raise or lower our ratings on Turkey within the next year. This is because we believe the risks from persistent current account deficits and more expensive external financing are balanced against Turkey's strong economic growth prospects.
We could consider raising the ratings on Turkey if the authorities continue to implement fiscal and monetary policies that are independent of election-cycle considerations and support more-balanced economic growth that depends less heavily on external borrowing. We could also consider an upgrade if structural reforms boost employment and investment to the extent that we significantly revise upward our expectations for Turkey's growth potential.
We could lower the ratings if credit growth accelerates further, relative to GDP; if current account deficits widen substantially; or if external leverage of the Turkish economy increases materially. We could also consider a downgrade if external borrowing was to become significantly more costly. The ratings could also come under pressure if external imbalances are corrected by a more abrupt economic adjustment that sees imports and domestic demand contract. We believe this would weaken Turkey's fiscal and financial stability and could undermine social cohesion and reduce economic policy flexibility. That said, we do not view this scenario as very likely. (S&P 22.11)
On 29 November Moody's Investors Service (http://www.moodys.com) upgraded Greece's government bond rating to Caa3 from C. The outlook on the rating is now stable. The short term ratings remain Not Prime (NP). The upgrade reflects the combination of the following key drivers:
(1) The significant fiscal consolidation that has taken place under Greece's structural adjustment program despite low growth and political uncertainty. As a result, Moody's expects that the government will achieve (and possibly outperform) its target of a primary balance in 2013, and record a surplus in 2014 in accordance with the adjustment program.
(2) The improvement in Greece's medium-term economic outlook supported by a cyclical recovery in the economy and also the progress made in implementing structural reforms and rebalancing the economy.
(3) The significant reduction of the government's interest burden following previous restructurings and official sector repayment assistance.
The key drivers taken together reduce the likelihood of further Private Sector Involvement (PSI) being undertaken as a condition for further financing.
Concurrently, Moody's has today raised the local and foreign-currency ceiling of Greece to B3 from Caa2.
Rationale for Upgrade
The first driver behind Moody's upgrade of Greece's rating is the government's progress in fiscal consolidation under the Troika-supported program, which has led to a 74% (or 11.6% of GDP) decline in its headline deficit since 2009. Based on the government's budget execution record up until October, Moody's believes that the government's deficit target (4.1% under the Troika support program, 13.5% of GDP according to Eurostat's definition, which also includes bank recapitalization costs) is likely to be within reach. Moreover, the government's recently presented 2014 budget envisages a further reduction in the general government deficit, which remains in line with targets under the Troika support program.
Moody's recognizes that the 2014 budget balances the fragile social and political environment in the country with the country's commitment to its international creditors. As a result, the rating agency expects the focus of the budget will remain on savings generated from structural reform measures as opposed to further expenditure cuts. That being said, Moody's believes that the government remains committed to achieving a primary surplus of close to 1.5% of GDP in 2014, especially as this will be required to qualify for continuing debt reduction from official creditors.
The second driver behind the upgrade is the evidence that the Greek economy is bottoming out after nearly six years of recession and that the combination of cyclical factors and the implementation of structural reforms are leading to a gradual improvement in medium-term growth prospects. Over the near term, the rating agency expects only a modest contraction of 0.5% in 2014 before the Greek economy records growth of 1% in 2015. Net exports will remain the near-term growth driver of the economy (led by tourism receipts) supported by a deceleration in consumption and investment growth. Although private investments remain fragile and weak, public investments continue to be supported with the disbursements and greater absorption of EU structural funds.
Looking further ahead, the rebalancing of the economy continues, with Moody's expecting the current account to shrink to a deficit of 0.5% of GDP in 2013 from an average deficit of around 10% over the previous five years. In addition, sentiment indicators -- namely industrial confidence surveys as well as indicators for the service industry -- illustrate a significant upward improvement in business expectations for the next 12 months.
The third driver of today's rating action is Greece's significantly reduced interest burden, resulting from the compositional change in the country's debt profile following two defaults on private-sector debt and as a result of the official-sector repayment assistance. Moody's expects that, as at year-end 2013, approximately 83% of Greece's general government debt will be owed to the official sector (mainly the IMF, EU and the ECB and euro area governments), with the balance accounted for by domestic banks and other private sector creditors.
Key debt metrics have improved as a result of this new creditor structure. Greece's debt-affordability ratio (general government interest expenses as a percentage of revenues) has decreased to an estimated 9.2% in 2013 from 17.0% in 2011, and interest as a percentage of GDP at around 4% of GDP is now consistent with other countries in the euro area. Greece's debt-maturity profile has also been lengthened to around 17 years in 2013, from around 6.5 years in 2011. Moody's does caution, however, that Greece's substantial debt stock (estimated at 175% of GDP in 2013) continues to weigh on its solvency. Although the rating agency expects debt to peak next year and then to fall from 2015 onwards, the overall reduction will be gradual and will remain susceptible to nominal growth shocks and policy implementation risks.
The very significantly diminished share of privately held debt may also weaken the rationale for a new round of PSI in order to improve Greece's debt profile. This assessment balances the limited financial benefits to Greece's supporters with their incentive for the country to regain access to the private debt markets as quickly as possible.
However, Moody's notes that the above-mentioned credit positive drivers are balanced by Greece's still large debt burden and the expectation that the current political environment will prove challenging in terms of negotiations with official creditors (as reflected in the latest negotiations on the 2014 budget). As a result, the rating remains at a low level to reflect the associated risks to the few remaining private-sector creditors.
Rationale for Raising Local and Foreign-Currency Ceiling
Moody's has raised the local and foreign-currency ceiling of Greece to B3 from Caa2. Notwithstanding a fragile and unpredictable domestic political environment, the B3 country risk ceiling reflects a slightly lower redenomination risk and a lower likelihood of exit from the euro area as a result of a slowly improving economy, improved debt affordability and continued euro area support as the country achieves its targets under the Troika program.
What Could Move the Rating Up/Down
Moody's could consider upgrading the rating in the event of a combination of (1) an easing of political uncertainty; (2) a continuation of structural reforms which would support long-term economic growth; and (3) sustained primary surpluses, which would support a continued decline in debt levels.
Conversely, the rating could be downgraded if there is a deceleration in the implementation of the Troika economic program due to heightened political risk and reform fatigue, as this would further hinder Greece's growth prospects and its ability to generate large primary surpluses over the coming years.
On 25 November 2013, a rating committee was called to discuss the rating of the Greece, Government of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have materially increased. The issuer's fiscal or financial strength, including its debt profile, has materially increased. The issuer has become less susceptible to event risks, particularly contingent liabilities emanating from the banking sector. However, the political environment in Greece continues to be fragile. (Moody’s 29.11)
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