TABLE OF CONTENTS:
2.1 BIRD Approves $8.9 Million in Funding for 11 New Projects
2.2 Orbotech to Acquire SPTS Technologies
2.3 ICL & AkzoNobel to Jointly Produce Vacuum Salt & White Potash
2.4 Top Image Systems Buys US’ eGistics for $18 Million
2.5 Rewalk Robotics Files for $58 Million Nasdaq IPO
2.6 Leviathan Gas Estimate Revised Upwards
2.7 Toonimo Raises $2.5 Million
2.8 OurCrowd Raises $60 Million in Equity Crowdfunding for 46 Companies
3.1 UAE Bourses Merger Shelved As Terms Not Agreed
3.2 Dubai’s Mall of the World to Cost AED 25 billion
3.3 Etihad Set to Launch San Francisco Flights in November
3.4 Emirates Finalizes $56 Billion Order for 150 Boeing 777X Planes
5.3 US Signs Agreement for $11 Billion Arms Sale to Qatar
5.4 Rising Rents Catapult UAE Cities Up Global Cost Of Living List
5.5 Electronic Labor Cards Introduced by UAE
5.6 Saudi Overtaken By US as Largest Oil Producer
5.7 Tourist Visits to Egypt Decreased 20.7% in May
5.8 Egypt Raises Taxes on Cigarettes & Alcohol
5.9 Egypt's Annual Urban Inflation Hits 8.2% in June
5.10 Morocco’s Economy to Grow 2.6 % in 3rd Quarter
8.1 CliniWorks Pfizer Alliance Develops Health Management Platform
8.2 Compugen Milestone in Cancer Immunotherapy Collaboration with Bayer
8.3 First Mazor Robotics Order for Renaissance System with Brain Module
8.4 MediSafe Expands into Wearables During Google Conference
8.5 Avraham Pharmaceuticals Successful Study for the Treatment of MCI
8.6 Teva Gets FDA Acceptance of NDA Filing for SABA Inhaler
8.7 Alcobra Files for $100 Million NASDAQ Offering
9.1 Israeli App Tracks & Warns Of Rocket Attacks From Gaza
9.2 Camtek Unveils Eagle - NextGen Semiconductor Product Line
9.3 Jordan Valley's Metrology Selected for Inline GaN/Si Process Control
9.4 Checkmarx Named a Challenger in Gartner 2014 Magic Quadrant
9.5 SuperCom Introduces Enhanced PureSecurity Electronic Monitoring Suite
9.6 Israeli Scanner Could Change How We Shop & Care For Ourselves
11.1 ISRAEL: Summary of Israeli High-Tech Company Capital Raising Q2/14
11.2 JORDAN: Jordan Looks to LNG to Ease Dependence on Egyptian Gas
11.3 UAE: IMF Says Dubai's Finances Stronger But Still Vulnerable
11.4 OMAN: Expanding IT in Oman
11.5 SAUDI ARABIA: Saudi Arabia's Family Feud
11.6 EGYPT: Fitch Says Egypt's Fuel Price Hikes Are Positive for Credit Profile
11.7 EGYPT: The Military Crowds Out Civilian Business
11.8 LIBYA: Libya Will Exhaust Monetary Reserves in 5 Years
11.9 MOROCCO: Morocco & Tunisia Try to Resuscitate Arab Maghreb Union
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
The deficit in the Israeli government's budget activity totaled NIS 4.9 billion in June, compared with a NIS 3.7 billion deficit in June 2013. The January-June 2014 deficit amounted to NIS 4 billion, compared with a NIS 10.2 billion deficit in the first half of 2013. The cumulative deficit over the past 12 months (July2013-June 2014) rose to 2.5% of GDP, following a continuous drop to 2.4% of GDP in the cumulative budget from the beginning of the year until May. Government spending (excluding repayments of principal) totaled NIS 24.7 billion in June (recreational pay for government employees is distributed in June of each year). Spending by government ministries totaled NIS 117.1 billion since the beginning of the year, a 3.9% rise, compared with the corresponding period in 2013.
Tax revenues totaled NIS 18.4 billion in June and NIS 127.3 billion in January-June, compared with NIS 117 billion in January-June 2013, an 8.8% nominal increase. Tax receipts from the capital market amounted to NIS 369 million in June, down 23%, compared with June 2013. Land tax revenues totaled NIS 677 million, 0.2% less in real terms than in June 2013. (Globes 08.07)
A bill to close down the Israel Broadcasting Authority and to establish another public broadcasting service in its place was put forward on 9 July, for second and third (final) readings in the full Knesset. The revised bill will be presented to the parliament in two weeks’ time and if approved, the dismantling of the IBA will begin immediately afterward. The management of the IBA will be placed in the hands of a liquidator for the duration of the changeover period. If agreement is reached, the new public broadcasting service will be launched on 31 March 2015, with three new television channels and a network of eight radio stations. At its closing session, the committee stipulated that no IBA employees would be dismissed during the interim period between the closure of one entity and the establishment of the new one. No agreement has been reached as to the conditions under which workers will be dismissed. The budget for the new public broadcasting service will rely on income from radio advertising, television sponsorship and car license fees, plus an injection of NIS 665m from the Treasury in the first year or two of operation. (JP 11.07)
Japanese Minister of the Economy, Trade and Industry Toshimitsu Motegi arrived in Israel on 6 July for an official visit. The visit came following an invitation made by Israeli Prime Minister Netanyahu when he met the minister on his recent visit to Japan. Motegi headed a delegation of senior officials of his ministry (which has responsibility for Japanese industry, industrial research and development and promoting cyber technology) and representatives of Japanese companies. Motegi signed an agreement with Minister of the Economy Bennett on parallel support for joint R&D projects carried out by Israeli and Japanese companies and research institutes. Implementation of the agreement on the Israeli side will be the responsibility of the Chief Scientist. The Japanese delegation participated in a seminar at which opportunities for economic and commercial cooperation between the two countries will be presented. The seminar is organized by the Foreign Trade Administration in the Ministry of the Economy and JETRO (Japan External Trade Organization).
The Foreign Trade Administration reports that Israeli exports to Japan totaled $762 million in 2013, down 20% from $953 million in 2012. One reason for the decline is the drastic devaluation of the Japanese yen, which lost 25% of its value in ten months. Imports to Israel of Japanese goods totaled $1.4 billion in 2013, compared with $2.08 billion in 2012. (Globes 06.07)
2: ISRAEL MARKET & BUSINESS NEWS
The Israel-US Binational Industrial Research and Development (BIRD) Foundation, has approved $8.9 million in funding for 11 new projects between Israeli and US companies. In addition to the grants from BIRD, the projects will access private sector funding, boosting the value of all projects to about $25 million.
The 11 projects approved are in addition to the 889 projects which the BIRD Foundation has approved for funding during its 37 year history. To date, BIRD’s total investment in these projects has been over $308 million, helping to generate direct and indirect sales of more than $10 billion. The latest 11 approved projects are:
The BIRD Foundation (http://www.birdf.com) promotes collaboration between Israeli and American companies in various technological fields for the purpose of joint product development. The Foundation provides grants of up to $1 million for approved projects, and assists by working with companies to identify potential strategic partners and facilitate introductions. Projects submitted to the BIRD Foundation are thoroughly reviewed by evaluators appointed by the National Institute of Standard and Technology (NIST) and by the Chief Scientist’s Office of the Israeli Ministry of Economy. (BIRD 07.07)
Orbotech announced the signing of a definitive share purchase agreement to acquire SPTS Technologies Group Limited (SPTS), a U.K.-based leading manufacturer of etch, deposition and thermal processing equipment for the microelectronics industry, from European private equity firm Bridgepoint and others. The combined companies’ comprehensive offering is expected to enable the leading designers of consumer electronics to turn their vision of next generation devices into reality. SPTS offers an extensive range of manufacturing solutions which set industry standards in the high growth Advanced Packaging and MEMS (micro-electro-mechanical systems) markets. Through this acquisition, Orbotech expects to accelerate the execution of its growth and diversification strategy, and is moving up the electronics value chain.
Yavne’s Orbotech (http://www.orbotech.com) has been at the cutting edge of the electronics industry supply chain, as an innovator of enabling technologies used in the manufacture of the world’s most sophisticated consumer and industrial products, for over 30 years. The Company is a leading provider of yield-enhancing and production solutions, primarily for manufacturers of printed circuit boards, flat panel displays and other electronic components. Today, virtually every electronic device is produced using Orbotech technology. (Orbotech 07.07)
ICL and AkzoNobel, a major producer of specialty chemicals and a leading global paints and coatings company, signed a non-binding Memorandum of Understanding to collaborate on the long-term production and marketing of vacuum salt and white potash. The MOU signed by AkzoNobel Chemicals International and ICL's Spanish subsidiary, ICL Iberia, calls for the production and marketing of 1.5 million tons of high quality vacuum salt, as well as 50,000 tons of white potash utilizing best-in-class available technology.
High purity vacuum salt, manufactured from a salt by-product of potash mining, is used in a variety of applications by the chemical industry and also applied for specialty grades in the food and feed industries. Under the MOU, the vacuum salt will be produced by a future joint venture between AkzoNobel Chemicals International and ICL Iberia and sold by AkzoNobel Chemicals International. The MOU also calls for AkzoNobel Chemicals International to enter into an off-take agreement with the joint venture for all of the vacuum salt produced by the joint venture. The white potash will be produced and marketed by ICL Iberia.
Tel Aviv’s ICL (http://www.icl-group.com) is a global manufacturer of products based on specialty minerals that fulfill humanity's essential needs primarily in three markets: agriculture, food and engineered materials. (ICL 09.07)
Top Image Systems signed a definitive agreement to acquire Dallas, Texas’ eGistics, a privately-owned provider of cloud-based solutions to the banking and payments market. Under the terms of the agreement, TIS will pay $18 million for the acquisition - 50% in cash and 50% in TIS shares. The acquisition is expected to close in third quarter. eGistics provides advanced image and data solutions that enable business process automation by optimizing the storage, management and delivery of business-critical information across a wide range of applications. Ramat Gan’s Top Image Systems (http://www.topimagesystems.com) is a leading global provider in the Enterprise Content Management (ECM) solutions market. TIS provides the technology to automatically transform any information entering an organization into useful and accessible electronic data, delivering it directly and efficiently to the relevant business system for action. (TiS 08.07)
Yokneam-based ReWalk Robotics (http://rewalk.com) has filed for an IPO on Nasdaq to raise $58 million at a company value of $250-300 million after money. The company recently changed its name from Argo Medical Technologies to its flagship product, which is a wearable robotic exoskeleton that provides powered hip and knee motion to enable individuals with Spinal Cord Injury (SCI) to stand upright and walk. ReWalk recently received US Food and Drug Administration (FDA) approval for its ReWalk device for home use, which generated major media attention, and has also stirred up interest among investors. To date the company has marketed the product in hospitals earning $1.6 million revenue in 2013 and a loss of $12.2 million. The device costs $60 - 70,000. (Various 13.07)
The estimate of the amount of gas in the Leviathan off the coast of Israel has again been revised upwards. The partners in the reserve report that the amount of gas is 16% higher than previously estimated. According to an updated resources report by NSAI, the best estimate of the quantity of gas in Leviathan is 21.93 TCF (trillion cubic feet), which compares with 18.9 TCF in the company's previous resources report. The estimated amount of condensate in the reserve has also been raised, from 34.1 million barrels to 39.4 million. The rise in the resources estimate stems from a broader and deeper database on the Leviathan gas field, including new processing and analysis of the 3-D seismic surveys, and analysis of various laboratory tests of the rocks and fluids in the reserve. The contingent resources report gives a low estimate of 16.58 TCF of gas for the reserve, 11% more than in the previous report, and a high estimate 26.52 TCF, 10% higher than in the previous report. The Leviathan update brings Israel's proven gas reserves to 1,000 BCM. (Globes 13.07)
Toonimo launches the first platform to enable websites to easily add custom, onsite animations to actively guide their website visitor using behavior-based triggers. Toonimo's multi-media platform enables marketers to create tailored, onsite animations to help websites engage, guide and convert their website visitors. The platform lets marketers create and position the animated character on their site, then add scripts that are professionally voiced-over and merged with their animation. Marketers can then set behavior-based triggers and personalization preferences so each site visitor is given the right, onsite animation to meet their navigation and conversion needs - like if they are hesitating, or about to abandon the page.
As web marketers continue to add video to their sites, Toonimo recognizes the need to simplify and measure the impact of those multimedia assets. With Toonimo's platform, businesses can create and launch tailored site animations in as little as 48 hours - saving heavy production costs and removing the overhead associated with outsourced movie production. Equally important, Toonimo clients can see the impact their animations are having on key metrics like conversion and engagement using built-in A/B tests.
Tel Aviv’s Toonimo (http://live.toonimo.com) empowers websites owners to create custom-animations that guide site visitors through tricky parts of their websites. With Toonimo's platform, marketers personalize their onsite multimedia using behavior based triggers and easily measure the impact on their site conversion using built in A/B testing. (Toonimo 14.07)
OurCrowd, the leading equity crowdfunding platform for accredited investors, has successfully raised $60 million in the aggregate to date over its platform for its 46 portfolio companies. Twenty of these companies have already raised more than $1 million each in investments, and four companies have raised over $3 million through the OurCrowd platform. The company has emerged as a leader in the increasingly competitive equity crowdfunding space. Earlier this year, OurCrowd announced the closing of a $25 million Series B funding round. OurCrowd continues to grow its investor base and team.
Jerusalem’s OurCrowd (http://www.ourcrowd.com) is a hybrid VC-equity crowdfunding platform for accredited investors who wish to invest in Israeli and global early stage companies. OurCrowd selects opportunities, invests its own capital and brings these startups to its accredited membership. Members choose those deals they invest in via OurCrowd-managed partnerships. OurCrowd investors must meet stringent accreditation criteria and invest a minimum of $10,000 per deal. (OurCrowd 15.07)
3: REGIONAL PRIVATE SECTOR NEWS
A planned merger of the Dubai Financial Market and the Abu Dhabi Securities Exchange (ADX) has been shelved for the foreseeable future as terms for the politically sensitive move could not be agreed. Having been mooted for a number of years, a merger of the DFM and the ADX seemed to take an important step closer last year as investment banks were hired to advise on a tie-up. The state-backed deal, seen as one of the biggest changes in the country's financial industry in recent years, was expected to energize financial markets in the UAE, making it easier for investors to operate across the markets, stimulating trade and attracting more foreign investment. However, despite a number of key impediments being overcome since then, talks have stalled and a deal is now unlikely to happen any time soon. (Reuters 10.07)
The construction of Mall of the World will cost AED25 billion, says CEO of Dubai Holding, Ahmed bin Byat. Mall of the World, the world’s first temperature-controlled city within a city, will feature the world’s largest indoor theme park and shopping mall, along with 20,000 hotels and serviced apartments, a wellness district catering to medical tourists and a cultural district, featuring theatres and galleries. The eight-million-square-feet retail and entertainment destination will be built in the course of ten years, for which funds will be gathered gradually. (AME 10.07)
Etihad Airways said it will expand its United States network to six destinations with the launch of a San Francisco service in November. Daily flights will be operated to San Francisco International Airport (SFO) from November 18 using a three-class Boeing 777-300ER aircraft leased from its strategic partner Jet Airways. San Francisco is the latest addition to Etihad’s US network. The airline currently offers double-daily flights to New York and daily flights to Los Angeles, Chicago and Washington DC. The forthcoming service to San Francisco will be followed by flights to Dallas/Fort Worth International Airport from December 3, Etihad added. (Etihad 15.07)
Dubai airline Emirates finalized a $56 billion order to buy 150 Boeing 777X jets on 9 July, firming up a commitment made last year, just weeks after scrapping an order with rival Airbus. The deal includes purchase rights for an additional 50 airplanes which, if exercised, could increase the value to about $75 billion at list prices. The agreement follows the surprise cancellation in June of a $16 billion order by Emirates to buy 70 of Airbus’ A350 aircraft, which delivered a blow to the European plane maker’s newest aircraft and hit its share price. Airbus ended the first half of the year behind its U.S. rival in orders and deliveries. The Emirates’ order was part of the 777X launch at the Dubai Air Show in November last year, one of the largest product launches in commercial jetliner history. Along with Emirates, Gulf carriers Etihad Airways and Qatar Airways also announced deals for the plane, totaling $100 billion at list prices. Emirates and Qatar Airways, which also ordered 50 777X jets, had jointly negotiated the deal at the Dubai Air Show. However, it was not clear whether the Doha airline had finalized its order yet. (Boeing 07.07)
Dubai’s Roads and Transport Authority (RTA) has started replacing traffic lights in Dubai with halogen bulbs using LED power-saving technology. It comes as part of the RTA’s safety and environmental push to enhance the traffic safety level and keep abreast of the green economy drive. The project will be carried out in phases and phase one is now under way. The bulbs will also save the RTA around Dh900,000 a year in expenditure. The LED (Light Emitting Diode) lighting system lasts longer — about ten years — while using the least power. The low-maintenance bulbs are also more reliable and efficient than conventional lighting. The technology has an auto-dimming feature according to the degree of external lighting. These lights can be clearly visible during daytime without being impacted by the sun’s reflections on the lenses. (GN 14.07)
5: ARAB STATE DEVELOPMENTS
Tourism revenues went up by 13.6% during the first half of this year to around $2.3 billion from $2 billion generated during the same period of 2013. According to the Central Bank of Jordan, the rise is attributed to higher income derived from religious and medical tourism. (Petra 15.07)
The Syrian crisis and the influx of refugees to Jordan have disrupted agriculture and food trade, leading to losses in exports to the neighboring country, according to a UNDP-ODI report, titled “Towards a resilience-based response to the Syrian refugee crisis.” The UN found that the crisis led to a 25% decrease in Jordan’s agricultural exports to Syria and a 30% decline in agricultural imports, thereby affecting farmers and traders. The study said the vast majority of Syrian refugees (97%) have gone to countries in the surrounding region. They are spread among Lebanon (38%), Turkey (25%), Jordan (23%), Iraq (9%) and Egypt (5%). Public finances in Jordan and Lebanon were structurally weak prior to the crisis, affecting their capacity to deal with the negative fiscal impacts of the combined shocks, the UNDP said. The influx of refugees, according to the report led to two shocks.
In Jordan, the first shock is demographic, due to the influx of the refugees, and has resulted in fiscal impacts such as increased government expenditures, increased subsidy costs and an increased budget deficit, according to the report. The second shock is economic.
The fiscal impact of the crisis on the Kingdom’s education, health, electricity and water sectors exceeded $850 million in just two years (2012-2013), it added. Moreover, Jordan has responded to the fiscal shortfall by making cuts in essential subsidies needed for the welfare of poor and vulnerable households. In Jordan there are more than 600,000 Syrian refugees, with 80% of them residing in host communities, adding more pressure to the country’s resources. (JT 09.07)
The United States signed an agreement with Qatar on 14 July to sell Apache attack helicopters and Patriot and Javelin air-defense systems valued at $11 billion. The agreement was signed at the Pentagon by U.S. Defense Secretary Chuck Hagel and Qatar's defense minister, Hamad bin Ali al-Attiyah. It was the biggest U.S. arms sale so far this year, according to media reports. Hagel visited Qatar in December when he and al-Attiyah signed a 10-year Defense Cooperation Agreement to govern interaction between U.S. and Qatari forces and enable the continued assignment of American troops to installations in the area, including the Combined Air Operations Center at Al Udeid Air Base. (Reuters 15.07)
Dubai and Abu Dhabi have been ranked as the 67th and 68th most expensive cities, according to Mercer’s 2014 Cost of Living Survey. Dubai was one of several cities in the region that experienced a jump in their rankings, with the emirate soaring 23 places from last year’s position at 90. Abu Dhabi rose 11 places from its 2013 placement at 79, while Beirut topped the regional index for the highest rates of living expenditure incurred by expatriates, coming in at number 63. Riyadh rose 11 places to rank 111th, while Jeddah continued to rank as the least expensive city in the region, being placed at 175. The reports said that the cities that have made significant advances up the table have in part been pushed up by a strong increase in expatriate rental accommodation costs, particularly the case with Abu Dhabi and Dubai. Mercer's survey uses New York as the base city and all cities are compared against it. Most other cities from across the Middle East region went up in the 2014 ranking, mainly due to global currency fluctuations. (AB 13.07)
The UAE's Ministry of Labor has announced it is replacing old plastic labor cards and employment contracts with electronic ones, according to the decision issued by Minister of Labor Ghobash. The move comes as a step towards e-transformation in MOL's provided services, which is part of commitment towards the directives of Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President, Prime Minister and Ruler of Dubai, to provide high-quality services to customers, meet their desires and achieve their satisfaction. The ministry issues an average of 3 million new/renewed labor cards annually. (AB 13.07)
The Kingdom of Saudi Arabia has been overtaken by the US as the world's largest oil producer, according to a report by the Bank of America which said that the extraction of oil from shale rocks by the US reached a high this year. This year, crude oil output and the production of liquids separated from natural gas in the US exceeded the production in both Saudi Arabia and Russia. The daily output in the US exceeded 11 million barrels in the first half of this year and is expected to rise to 13.1 million barrels a day in 2019. The report said production will remain at the same level for at least 10 years. Oil extraction is increasing at shale formations in Texas and North Dakota as companies continue to extract shale oil through fracking.
While shale production is bigger than Iraqi production, it hasn't made an expected impact on prices. Usually such a large energy supply growth would bring prices lower, but this is not happening as the geopolitical situation in Iraq and the Middle East is of concern. (AB 06.07)
The number of tourists visiting Egypt in May 2014 reached 768,000, a drop of 20.7% compared to 969,000 in the same month last year, Egypt's official statistics agency CAPMAS said. Western Europe supplied Egypt with the most tourists, followed by Eastern Europe and the Middle East in last May. The statement indicated that the number of nights visiting tourists spent in Egypt decreased by 17% in May 2014, falling from 8.8 million nights in May 2013 to 7.3 million. Arab countries saw the largest decline, falling 22.1% to record 1.5 million a night in May 2014 compared to 1.9 million in May 2013. On average, CAPMAS reported, tourists in May 2014 spent 9.4 nights in Egypt, compared to 9.3 in the same month last year and 9.7 in May 2010. (CAPMAS 14.07)
Egypt raised the sales tax on cigarettes by up to 120% on 6 July and doubled the tax on alcohol as part of a series of measures to curb the budget deficit and reform the economy. The decisions were taken by President Al Sisi a day after a subsidy cut that increased the price of fuel and natural gas by over 70%, angering drivers. Egypt is trying to reduce its deficit to 10% of the gross domestic product (GDP) in the next fiscal year, from an expected shortfall of 12% in 2013/14. Sisi, who took office last month, has already raised the price of electricity and imposed a 10% tax on stock market gains. Prime Minister Mehleb pointed out that the electricity move and the new cuts in fuel subsidies would save the government around EGP 51 billion ($7.13 billion) this year.
With the economy battered by three years of unrest, successive governments have said subsidies — that meant petrol in Egypt was among the world’s cheapest — must be lifted. The ex-army chief, who toppled Islamist president Mohammed Morsi in July 2013 before being elected president by a landslide in May, has repeatedly advocated austerity to narrow the budget deficit. The state spends more than 30% of its budget on fuel and food subsidies, in a country were nearly 40% of the population of 86 million hover around the poverty line. The government’s decision to slash energy subsidies is being applauded by economists who say it is an unavoidable step towards curbing state spending in the country where the deficit is running at 12% of GDP. (Various 06.07)
Egypt's annual urban inflation rate registered 8.2% in June, state statistical body CAPMAS announced. Urban inflation had reached 8.9% in the 12 months to June 2013. However, monthly urban inflation increased by one% in June compared to a decline of 0.7% last month. According to statistics, inflation in June was mainly pushed by a tangible hike in poultry and vegetables prices. In fact, annual food inflation recorded 11.2% in June, while yearly headline inflation rate was only 8.2%. Inflation usually increases ahead of and during the fasting month of Ramadan, which started 29 June, as demand on food and beverages increases. President Abdel-Fattah El-Sisi issued decisions on Friday, 4 June, to increase fuel and electricity prices in order to cut the state deficit. He also increased sales taxes on cigarettes and alcohol. (CAPMAS 10.07)
The growth rate of the Moroccan economy is expected to reach about 2.6 % in the 3rd quarter of 2014 year-on-year, against 2.3 % during the second quarter, said the High Commission for Planning (HCP). The national economy should grow to reach about 2.6% in the 3rd quarter of 2014 due to a probable 2.7% decrease of the agricultural value added and a 3.4% increase of non-agricultural activities, said figures by the HCP on the economic situation for July 2014. Growth prospects for the 3rd quarter of 2014 are expected to be, on the whole, more positive compared to the 2nd quarter, said HCP. Non-agricultural activities, mainly export sectors as clothing, aeronautics and car industry, will increase by more than 3% of the overall demand for Moroccan products. (MAP 14.07)
6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
Unemployment in Turkey fell to 9% in April, marking its lowest point in 10 months. The monthly unemployment rate was recorded at 9% in April, as there were 2.6 million people seeking employment during this period, which comprises of March to May, the Turkish Statistical Institute (TÜİK) announced. Unemployment had fallen to single digits at 9.7% in March after being at 10.2% in February. Meanwhile, non-agricultural unemployment during the same period was recorded at 10.8%. The number of people employed in Turkey aged between 15 years and over approached 26.2 million in April, a rate of 46.1%. The TÜİK data also showed the distinction between male and female employment rates with 65.1% for males and 27.6% for females. (TUIK 15.07)
Alternate Finance Minister Staikouras confirmed on 7 July that the primary surplus of the general government’s budget for the first five months of the year reached €1.22 billion, against a primary deficit of €1.61 billion in the same period a year earlier and a €1.68-billion primary surplus in the first four months of 2014. The data also showed a decline in the expired debts of the state to the private sector, most of which originate at social security funds: They owed €2.94 billion against €2.96 billion at the end of April. In the year to end-May the expired debts (which also include pending tax rebates) amounted to €5.13 billion, down from €5.23 billion in the year to end-April. This is the first time since the start of this year that expired debts have shown a monthly decline, while in comparison with December 2013 the debts have grown by €489 million.
The government views the debts data as a particularly positive sign given that May was an election month but the state authorities functioned well enough to reduce the amount accumulated despite that. (Ekathimerini 07.07)
7: GENERAL NEWS AND INTEREST
The Jewish fast day of the 17th of Tammuz was observed this year from sunup to evening on Tuesday, 15 July. The fast day itself commemorates five tragedies: 1. Moses descended from meeting G-d and receiving the Torah on Mount Sinai, saw the Jews celebrating with the Golden Calf and broke the two tablets G-d had given him. 2. The daily offering, which had been brought regularly in Temple in Jerusalem, was halted during the Babylonian siege before the Temple was destroyed. 3. The Romans breached the walls of Jerusalem, prior to destroying the second Temple, in 70 CE. 4. A Greek or Roman official named Apostimos held a public burning of the Torah. 5. Idols were set up in the Temple itself; it is not clear what year this happened. The 17th of Tammuz is the second of the four fasts commemorating the destruction of the Temple and the Jewish exile.
In later years this day continued to be a dark one for Jews. In 1391, more than 4,000 Jews were killed in Toledo and Jaen, Spain and in 1559 the Jewish Quarter of Prague was burned and looted. The Kovno ghetto was liquidated on this day in 1944 and in 1970 Libya ordered the confiscation of Jewish property.
The 17th of Tammuz also marks the beginning of the “Three Weeks,” which ends with the fast of the 9th of Av. Some customs of mourning, which commemorate the destruction of Jerusalem, are observed from the start of the Three Weeks. Jewish mourning customs restricts the extent to which one may take a haircut, shave or listen to music, though communities and individuals vary their levels of observance of these customs. No Jewish marriages or other major celebrations are allowed during the Three Weeks, since the joy of such an event would conflict with the expected mood of mourning during this time. The Three Weeks can be thought of as having a variety of increasing levels of mourning. Some restrictions begin on the 17th of Tammuz, some from the beginning of the month of Av, and some only come into effect the week in which Tisha B'Av occurs.
8: ISRAEL LIFE SCIENCE NEWS
CliniWorks announced a strategic alliance between its Ramat HaSharon, Israel subsidiary CliniWorks (http://www.cliniworks.com and Pfizer to jointly advance the parties’ respective capabilities in working with healthcare provider organizations to identify and close clinical or quality gaps to improve population health. The two companies are partnering to develop a population health management platform solution that leverages CliniWorks’ technologies in disparate data aggregation and Natural Language Processing (which interprets free text information) of de-identified healthcare data and Pfizer’s scientific, clinical and disease expertise. This platform will aim to enable large medical groups and integrated delivery system institutions to deliver near real-time and more efficient and effective quality healthcare, as well as improve patient engagement or activation, reaching the Centers for Medicare and Medicaid (CMS) Triple Aim. The development work will be partially supported by a grant received by CliniWorks and Pfizer from the BIRD Foundation.
CliniWorks (Israel) is a wholly-owned subsidiary of CliniWorks, Inc. which is a global healthcare technology leader dedicated to the transformation of Big-data into actionable evidence-based decisions. CliniWorks’ core technology has been vetted in the healthcare industry for 17 years and its leadership team has deep expertise in clinical data management. The company is dedicated to the simple, fast, and effective use of real-world evidence to accelerate clinical research, outcomes research, and improve healthcare performance, quality of care, patient-safety, compliance and adherence to meaningful use. (CliniWorks 07.07)
Compugen disclosed that it has achieved the initial milestone in the cancer immunotherapy collaboration it entered last year with Bayer HealthCare (Bayer). The collaboration provides for the development and commercialization of therapeutic antibodies against two checkpoint protein candidates discovered by Compugen. The milestone relates to the first preclinical milestone for one of two checkpoint protein candidates for which Compugen will receive a $1.2 million payment out of the $30 million potential milestone payments associated with joint preclinical research for the two programs.
The Bayer HealthCare/Compugen collaboration and license agreement provides the framework for the research, development, and commercialization of antibody-based therapeutics for cancer immunotherapy against two novel Compugen-discovered immune checkpoint regulators. Under the terms of the agreement, Bayer and Compugen are jointly pursuing a preclinical research program for each of the two candidates. Subsequently, Bayer will have full control over further development and have worldwide commercialization rights for potential cancer therapeutics.
Tel Aviv’s Compugen (http://www.cgen.com) is a leading drug discovery company focused on therapeutic proteins and monoclonal antibodies to address important unmet needs in the fields of immunology and oncology. The Company utilizes a broad and continuously growing integrated infrastructure of proprietary scientific understandings and predictive platforms, algorithms, machine learning systems and other computational biology capabilities for the in silico (by computer) prediction and selection of product candidates, which are then advanced in its Pipeline Program. (Compugen 07.07)
Mazor Robotics received the first order for its Renaissance system since the commercial launch of the brain surgery module. The system was sold to Bryan Medical Center in Lincoln, NE and will be utilized for spine and brain procedures. Bryan Medical Center is a 640-bed, not-for-profit, locally owned and governed health care organization serving patients from throughout Nebraska, as well as parts of Kansas, Iowa, South Dakota and other states in the region.
The Company commercially launched the brain application at the American Association of Neurological Surgeons (AANS) annual meeting in April 2014. Renaissance’s brain module is primarily used to assist with Deep Brain Stimulation (DBS) procedures to treat movement disorders, such as Parkinson’s disease. Three other hospitals, including Littleton Adventist (Littleton, CO), were utilizing the brain application during a pre-launch testing period and continue to use the system for brain surgeries.
Caesarea’s Mazor Robotics (http://www.mazorrobotics.com) is dedicated to the development and marketing of innovative surgical guidance systems and complementary products that provide a safer surgical environment for patients, surgeons, and operating room staff. Mazor Robotics’ flagship product, Renaissance®, is a state-of-the-art surgical guidance system that enables surgeons to conduct spine surgeries in an accurate and secure manner. (Mazor Robotics 02.07)
At Google’s I/O Developer Conference last month, MediSafe expanded its leading medication management platform to include wearables, becoming the first mobile health app on Google’s just-announced suite of Android Wear smartwatches. Users wearing either the LG Android Wear, Samsung Gear Live or Moto 360 smartwatches, who also have the MediSafe medication management solution installed on their Android smartphone or tablet, will automatically have a MediSafe “wearable app” loaded on their Android Wear and begin receiving medication reminders on their smartwatch when it’s time to take scheduled doses. The data is seamlessly transferred to the MediSafe app on their smartphones and tablets via Bluetooth, where it becomes part of their full medication adherence file they can export and email securely to their personal healthcare providers in between office visits.
Haifa’s MediSafe (http://www.MediSafeProject.com) is the leading medication management platform – connecting patients and health providers to improve health outcomes and better understand how people take medication. Inspired by the accidental insulin overdose of its co-founders’ father, MediSafe’s intuitive, singularly designed mobile app – now the most downloaded and highest rated in its category – was first to sync medication reminders between devices of families and caregivers. The MediSafe platform now includes web and SMS sync via branded solutions with pharmaceutical companies, HMOs, pharmacies, electronic medical/health records companies (EMR, EHR) and more. MediSafe also aggregates anonymous patient behavior data for pharmaceutical and healthcare companies, serving as a bridge between patients and health providers, improving health outcomes while benefiting all stakeholders across the healthcare ecosystem. MediSafe’s App can be downloaded from both Google Play and iTunes. (MediSafe 08.07)
Avraham Pharmaceuticals announced successful interim results in a Phase 2b clinical trial for the evaluation of the safety and efficacy of ladostigil in patients diagnosed with mild cognitive impairment (MCI). The on-going Phase 2b trial is a 3 years, multi-center, randomized, double-blind, placebo-controlled trial and includes approximately 200 patients in 16 centers in Europe and Israel. An independent expert committee evaluated the safety data on all patients participating in the trial and that have completed at least 1 year of treatment. The expert committee concluded that there are no safety issues preventing continuation of the trial. There were no serious or unexpected adverse events related to the drug. In addition, the interim results point to a positive trend as to the efficacy of the drug, as evident by various clinical parameters and relevant biomarkers. This includes reduced loss of brain volume as determined by MRI, improved immune system parameters and trends in improvement of cognitive parameters.
Founded in 2010, Yavne’s Avraham Pharmaceuticals (http://www.avphar.com) develops ladostigil, a unique, multi-functional drug substance for the treatment of mild cognitive impairment, currently undergoing a Phase IIb clinical trial. (Avraham Pharmaceuticals 08.07)
Teva Pharmaceuticals Industries announced that the U.S. FDA has accepted for review the company’s new drug application (NDA) for albuterol multi-dose dry-powder inhaler (MDPI), an investigational breath-actuated dry-powder inhaler for the treatment or prevention of bronchospasm in patients 12 years of age and older with reversible obstructive airway disease; and for the prevention of exercise-induced bronchospasm (EIB) in patients 12 years of age and older. The NDA filing includes data from eight clinical studies that evaluated the safety and efficacy of albuterol MDPI in adults and adolescents (12 years of age and older) with asthma and exercise-induced bronchospasm (EIB). The NDA for albuterol MDPI has been accepted by the FDA for standard review, with a FDA Regulatory Action expected in March 2015.
Teva Pharmaceutical Industries (http://www.tevapharm.com) is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. Headquartered in Israel, Teva is the world's leading generic drug maker, with a global product portfolio of more than 1,000 molecules and a direct presence in approximately 60 countries. (Teva 14.07)
Alcobra Pharmaceuticals has filed a prospectus to raise up to $100 million. The price of the shares in the offering was not indicated. A shelf prospectus is not binding but it indicates that Alcobra has a huge appetite for raising money after already holding two offering in the past 14 months. Alcobra's IPO on NASDAQ in May 2013 raised $25 million at a company value of $89 million. After the share price rose 200% in just six months, the company held a secondary offering to raise $33 million, lowering its company value by one third to $170 million. Today Alcobra is worth $260 million and had $44 million in cash at the end of the first quarter. Alcobra came to NASDAQ 14 months ago without cash and almost no expenses and was a company relying on outsourcing. Since then the expenses have accumulated mainly due to clinical trials.
Tel Aviv’s Alcobra Pharmaceuticals (http://www.alcobra-pharma.com) is an emerging biopharmaceutical company primarily focused on the development and commercialization of their proprietary drug, Metadoxine Extended Release (MDX), to treat Attention Deficit Hyperactivity Disorder (ADHD) and other cognitive disorders. (Alcobra 15.07)
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
Israelis have found a new way to learn of imminent rocket attacks from the Gaza Strip in the form of a mobile phone app. Hamas terrorists have fired more than 1,000 rockets from Gaza at Israeli cities in the past week. Typically, air raid sirens blare and residents have between 15 and 90 seconds to head to bomb shelters and safe rooms in their homes. Many have also downloaded an application called Red Alert to their phones that also warns of incoming rockets. Most of the rockets launched from Gaza since 2005 have been aimed at southern towns but Hamas and other Palestinian militant groups now have missiles that can reach deeper into Israel. The app has been downloaded by some 500,000 Israelis on their Android and iPhones, with another 50,000 in the United States having downloaded an English version. Once a rocket is fired, Israel's military sounds sirens and also notifies Red Alert's servers. Its servers crashed at the outset when rocket fire turned to Jerusalem and Tel Aviv but they were quickly back up with stronger servers. (Reuters 15.07)
Camtek announced the launch of its next generation Semiconductor Inspection and Metrology platform. The Eagle product line is designed to support the fast growing Advanced Packaging market using cutting edge technologies, both software and hardware, that deliver unparalleled 2D and 3D inspection and metrology capabilities on the same platform. This new product line will strengthen Camtek’s leading position in the semiconductor backend market, taking advantage of our expertise in bump inspection and metrology. The Advanced Packaging market in particular uses a wide spectrum of bump types and sizes. Their capabilities in the inspection and metrology of current and next-generation bumps, down to 2µm, will give customers a competitive edge in this emerging market.
Migdal HaEmek’s Camtek (http://www.camtek.co.il) provides automated and technologically advanced solutions dedicated to enhancing production processes, increasing products yield and reliability, enabling and supporting customer's latest technologies in the Semiconductors, Printed Circuit Boards (PCB) and IC Substrates industries. (Camtek 07.07)
Jordan Valley Semiconductors has recently delivered and successfully commissioned its JVX7300L in-line X-ray metrology tool at multiple customers. The systems have been purchased for in-fab process development and automated production monitoring of GaN on Si wafers. The JVX7300L is a production worthy X-ray metrology system for GaN on Si and other More-than-Moore applications and can be used for both in-fab process development and production monitoring. The tool supports a wide range of X-ray metrology modes, scanning HRXRD, XRR and (GI)XRD, to provide solutions for a wide range of materials and structures. HRXRD is capable of measuring the composition, thickness strain/relaxation of single and multiple epilayer stacks. Additionally, with XRR and (GI)XRD channels, the tool can also provide information on the thickness and density of a wide range of thin-films as well as providing unique microstructure information (crystallinity, grain-size and phase) of polycrystalline thin-films. Unlike optical or spectroscopic tools, HRXRD and XRR are first principle techniques that deliver accurate and precise results without calibration.
Migdal HaEmek’s Jordan Valley Semiconductors (JVS - http://www.jvsemi.com), is the leader in X-ray metrology and defect detection tools for the semiconductor industry. Jordan Valley's tools are fully automated non-contacting and non-destructive tools designed for production control on patterned or blanket wafers. he company offers the semiconductor industry the most comprehensive portfolio of advanced metrology and defect inspection tools, based on X-ray technologies such as XRR (X-ray reflectomerty), XRF (X-ray fluorescence), XRD (X-ray diffraction) and others. (JVS 07.07)
Checkmarx has been positioned the furthest for completeness of vision in the Challenger’s quadrant of Gartner’s 2014 Magic Quadrant for Application Security Testing report. Challengers are recognized as “vendors that have executed consistently, typically by focusing on a single technology and have demonstrated substantial competitive capabilities against the Leaders in this particular focus area, and also have demonstrated momentum in their customer base in terms of overall size and growth.” According to Gartner’s report, “through 2015, more than 75% of mobile applications will fail basic security tests.” Checkmarx addresses this issue by creating SAST software solutions that secure mobile and web applications from the very beginning of the programming process in order to protect consumer data. Checkmarx scans software source-code, quickly identifying security vulnerabilities and regulatory compliance issues, and immediately shows developers and security auditors where and how to fix them.
Tel Aviv’s Checkmarx (http://www.checkmarx.com) is a leading developer of software solutions used to identify security vulnerabilities in web and mobile applications. It provides an easy and effective way for organizations to introduce security into their Software Development Lifecycle (SDLC) which systematically eliminates software risk. The company's customers include 4 of the world's top 10 software vendors and many Fortune 500 and government organizations, including Samsung, Salesforce and the US Army. (Checkmarx 09.07)
SuperCom announced that its M2M division will be launching and presenting its enhanced PureSecurity - Electronic Monitoring Suite, which consists of the PureTag, PureTrack, PureCom and PureMonitor products, to the North American marketplace. The PureSecurity Suite is a best-of-breed electronic monitoring and tracking platform which introduces a long list of innovative features including: secure communication, advanced security and anti-tamper mechanisms, voice communication, unique touch screens, fingerprint biometrics and extremely long battery life. The PureSecurity Suite provides public safety monitoring programs with a complete end-to-end electronic monitoring solution which is reliable, flexible, and secure.
Since 1988, Herzliya’s SuperCom (http://www.supercom.com) has been a leading global provider of traditional and digital identity solutions, providing advanced safety, identification and security solutions to governments and organizations, both private and public, throughout the world. Through its proprietary e-Government platforms and innovative solutions for traditional and biometrics enrollment, personalization, issuance and border control services, SuperCom has inspired governments and national agencies to design and issue secured Multi-ID documents and robust digital identity solutions to its citizens and visitors. (SuperCom 09.07)
Herzliya’s Consumer Physics (www.consumerphysics.com) offers a scanner that could change the way one shops and takes care of themselves -- by reading the chemical makeup of foods, drugs and other items. The tiny device is still limited to a few key applications, but its creator envisions a machine that will compile a massive collection of data that will allow users to analyze the physical matter that exists around them. The application, called the SCiO, is an infrared spectrometer the size of a thumb drive. It is being marketed for three applications -- food, pharmaceuticals and horticulture, or the health of plants. Simply by pointing and clicking a miniature digital wand, users can see how many calories are in a piece of cheese or determine when a tomato will reach peak ripeness. These features may seem more fun than life-changing at this point. But ultimately, advocates say, the SCiO could have lifesaving uses, such as identifying contaminated foods or determining whether a drug is counterfeit. The company has raised over $2 million from over 11,000 supporters on the fundraising website Kickstarter. The device may become commercial sometime in the next year at the price of $299. (NoCamels 04.07)
10: ISRAEL ECONOMIC STATISTICS
Israel's Consumer Price Index (CPI) rose 0.3% in June the Central Bureau of Statistics announced. The index was slightly higher than analysts' estimates of 0.2%. The CPI rose 0.1% in May and has risen 0.5% over the past 12 months below the government's 1-3% inflation target range. There were notable rises in prices of and clothing and footwear (10%) and housing costs (0.3%). The notable falls were in prices of fresh fruit (8.5%), fresh vegetables (1.4%) and food (0.3%). (CBS 15.07)
A survey of internet trends in Israel carried out by the Smith Institute found 24% of Israelis never surf the internet and 31% find no interest or usefulness in it. The survey also sheds light on digital gaps in Israeli society, finding that 15% of those who do not surf the internet are in fact incapable of doing so. A further 15% say they are simply too busy and 14% do not use the internet because they have no computer or other suitable device. Only 8% of the non-surfers said they did not use the internet for religious reasons.
Altogether, 76% of the adult population in Israel has an internet connection, 5% more than in 2011. Among young people aged up to 29, the proportion of those who surf the Internet is 85%, compared with 62% among those aged 50 and above. Only 33% of the haredi (ultra-Orthodox Jewish) community use the internet, compared with 85% of secular and traditional Jews. Among ethnic minorities in Israel, the proportion of internet users is 63%.
Since a similar survey in 2011, a substantial rise has taken place in the proportion of Internet users who surf via smartphone, from 23% to 74%. Nevertheless, most Israelis (91%) still surf via computer. Tablets account for just 29% of internet surfing.
Israelis still do not rely on the internet as a job search tool; only 32% look for work that way. This is still three times as many as in 2011. On the other hand, about 40% of Israelis now use the Internet to pay bills and carry out banking transactions. Most users still do not consider information found on the internet to be reliable, with only 29% saying that all or most information on the network is reliable. (Globes 08.07)
Tel Aviv is the world's 18th most expensive city for foreign visitors, according to Mercer’s annual cost-of-living survey for expatriate employees. Tel Aviv is up dramatically from last year, when it placed 32 in the rankings. Tel Aviv is has the highest cost of living for expats among Middle East cities, followed by Beirut (63 in the general rankings), Dubai (67), and Abu Dhabi (68). The Middle Eastern city with the lowest cost of living is Jeddah, in Saudi Arabia (175). US research company Mercer said that the rankings examined housing prices, transport, food, home maintenance, and entertainment. All the cities were compared to New York and the US dollar. (Globes 10.07)
11: IN DEPTH
$930 million - the highest quarterly amount since 2000 - was raised by 175 Israeli high-tech companies in Q2/14. This was a 38% jump from the $673 million raised in Q1/14, and 109% above the $446 million attracted in Q2/13.
The average company financing round reached $5.3 million in Q2/14, compared to $4.2 million in Q1/14 and $3.2 million in Q2/13.
The quarterly figures included a $135 million investment in Landa Digital Printing by Germany’s ALTANA Group. However, even excluding this deal, the quarter’s investments reached an exceptionally high $795 million, 18% more than that of the previous quarter, and 78% above the amount in the year-earlier period. The average company financing, excluding the Landa deal, reached $4.57 million.
One hundred and eight VC-backed deals accounted for $572 million or 62% of total capital raised. While this was well below the five year average of 77%, the amount was 29% above the $444 million quarterly average since the start of 2013.
The average VC-backed financing round was $5.3 million, compared to $6.1 million in Q1/14 and $4.2 million in Q2/13.
In the first half of 2014, 335 Israeli high-tech companies raised $1.6 billion, an increase of 81% from $885 million in H1/13 and 67% from $962 million in H1/2012. This was the strongest capital raising period on record for Israel’s high-tech industry.
In H1/14, the average VC-backed company financing round reached $5.64 million, compared with $3.72 million in H1/13.
Ofer Sela, partner in KPMG Somekh Chaikin's Technology group commented, "Mature, revenue growth companies are continuing to raise significant capital. While in the past, venture capital funds saw the M&A route as providing the best opportunity for revenue growth company exits, potential NASDAQ IPOs are now a major driver of VC investment.
SaaS and other companies operating in a recurring revenue model are dominating VC-backed investment. We are seeing a significant number of seed stage firms positioning themselves as recurring revenue model companies as the transition from a product company to a service company is very challenging at a later stage."
Israeli VC Fund Investment Activity
In Q2/14, Israeli VC funds invested $153 million in Israeli high-tech companies, up 44% and 40% from investments in Q1/14 and Q2/2103, respectively. The amount, though, accounted for only 17% of capital raised in the quarter, consistent with the record low 16% of the previous quarter.
First investments accounted for $52 million or 34% of total Israeli VC investments – slightly above the 33% 2013 quarterly average. This compared with 37% and 25% of Q1/14 and Q2/13, respectively.
Capital Raised by Sector and Stage
In Q2/14, the life sciences stood out as the sector attracting the most investment. Forty-four companies raised $251 million or 27% of total capital raised. The amount is 83% above the $137 million invested in the sector in Q1/14 and 156% more than the $98 million raised in Q2/13.
Late stage companies continued to lead investments by stage, capturing a record $450 million or 48% of all investments made in Q2/14. Mid-stage companies raised $182 million, while their share decreased to an all-time low of 20%.
Koby Simana, IVC Research Center’s CEO points to an analysis of capital raised by round (Chart 2): "In Q2/14 we saw consistent increases in capital raised at all stages, from early rounds – such as seed and A-round – to later rounds. The increase in early rounds is explained by the Landa deal, which was an A-round for the company. The rise in mid-stage rounds is relatively minor, which means most of the increase in capital raised in the second quarter is a result of more late stage deals from D-round and up.” Simana offers an explanation of the survey findings: “We found a direct correlation between deal size and round type. It seems a sizable portion of the late-round hike is a direct result of the increase in the number of deals above $20 million. In the first six months of 2014, we counted 15 deals above $20 million, nearly equal to the number of such deals for the entire 2013. "
In H1/14, mid and late stage companies accounted for $1.1 billion of total capital raised, a 77% increase from $611 million invested in these stages in H1/13. Seed companies garnered only five% of capital raised, down from seven% in H1/13.
IVC Research Center is the leading online provider of data and analyses on Israel’s high-tech, venture capital and private equity industries. Its information is used by all key decision-makers, strategic and financial investors, government agencies and academic and research institutions in Israel.
IVC-Online Database (http://www.ivc-online.com) showcases over 11,000 Israeli technology startups, and includes information on private companies, investors, venture capital and private equity funds, angel groups, incubators, accelerators, investment firms, professional service providers, investments, financings, exits, acquisitions, founders, key executives and R&D centers. (IVC 15.07)
Jordan’s high energy import bills and the frequent power cuts resulting from shortfalls in supplies from Egypt may soon become less of a problem as a new liquefied natural gas (LNG) import facility at the port of Aqaba is set to come on-line by the end of the year.
Work on the $65m terminal to the south of Aqaba is on schedule, according to Energy Ministry officials, with a floating regasification plant to process the LNG already rented. Construction finance is being provided by the Kuwait Fund for Arab Economic Development.
While work is proceeding on the terminal itself, Jordan has moved to lock in supplies for the new facility. In early May, Energy Minister Mohammad Hamed confirmed that an agreement had been reached with Royal Dutch Shell to supply LNG, with contracts to be signed before the end of the second quarter. Under the agreement, Shell will supply 16.7m cu meters of LNG per day for processing and distribution through the terminal. First shipments of gas are expected by the end of the year.
The LNG terminal is one of the most immediate responses to a disruption of gas supplies from neighboring Egypt, with the pipeline linking the two being subject to a series of bombings that cut gas flow in recent years. Egypt is struggling to meet its export commitments in the face of high domestic demand and falls in production, having to redirect gas from overseas sales to the local market. One of the hardest hit from this move has been Jordan, which has relied on Egyptian gas for up to 80% of its gas requirements, with most of the gas used to fire power stations.
The need to develop alternative energy supplies will become more pressing in the years to come, as the current losses by the National Electric Power Company (NEPCO) continue to press on the budget, mainly a result of having to buy and import fuel from the open market at a time when prices were high. According to Finance Minister Umayya Toukan, the company lost around $4.9b last year, and a total debt of $7b was accumulated over the past three years. Jordan imports up to 97% of its energy needs, with outlays estimated to be the equivalent of more than 20% of GDP.
According to Shell officials, importing LNG through the Aqaba facility will cut Jordan’s energy bill by around $500m a year. Though LNG is more expensive than natural gas, the cost is far below that of diesel, with the Aqaba terminal providing the added advantage of reliability, something that Egypt can no longer offer as a supplier.
Secure Energy Link to Boost Economy
Ratings agency Standard and Poor’s (S&P’s) issued its latest investor note on Jordan in May and maintained its ‘BB-/B’ long- and short-term foreign and local currency sovereign credit ratings while keeping in place its negative outlook for the medium term. Jordan had taken a large hit from the losses incurred by NEPCO stemming from the disruptions to the gas supply from Egypt and the resulting need to ramp up diesel imports to offset gas shortages, the note added.
Several developments in the energy sector would begin to reduce the fiscal and external costs of energy supplies, S&P added, with one of the key measures being the diversification of energy sources and the construction of the LNG terminal at the port of Aqaba.
With the government planning to eliminate electricity subsidies by 2017, it will want to try to keep the price shock to a minimum by having a cost-effective source of power in place by that time. This will help minimize the flow of pricing increases to the public and lessen their impact on the economy.
However, even with the new Aqaba facility and other programs to diversify Jordan’s energy sourcing, the country may struggle to keep up with the demand for power, driven by a demographic boom and the influx of hundreds of thousands of Syrian refugees. According to Energy Ministry estimates, electricity requirements are set to double from the present level of 2000 MW to 4000 MW by 2020.
The country needs the private sector to invest in its oil shale, natural gas and renewable energy sectors to meet a forecast 7% annual increase in electricity demand, Energy Minister Hamed added. (OBG 03.07)
Dubai's ability to finance its debts has improved because of stronger economic growth and more conservative spending, but the emirate would still be vulnerable in a major downturn of the global economy, the International Monetary Fund said.
Dubai's government debt is expected under a baseline scenario to fall gradually to 41.6% of GDP in 2019 from 60.2% last year, the IMF said after annual consultations with the UAE. That would be well below a peak of 66% in 2009, when a property market crash pushed Dubai to the brink of default and jolted financial markets around the world - though it would still be far above 15.4% in 2007, before conditions started deteriorating.
"Although Dubai's debt could still become unsustainable under severe shocks, the outlook has improved," the IMF said in a report. "Continued fiscal consolidation and improving growth prospects have been strengthening Dubai's resilience to external shocks." Under the scenario of a severe global downturn, however, Dubai's debt would jump to 71% of GDP in 2019. This scenario assumes a shock to economic growth, lower inflation-adjusted interest rates, and deterioration in Dubai's budget balance excluding interest payments.
A third scenario - a global downturn plus a real estate shock during which the government would take over 20% of the debt of government-related enterprises - would boost the ratio as high as 86%.
The IMF predicted Dubai's economic growth would average a healthy 5.6% in the next six years, boosted by big real estate projects and preparations to host the Expo 2020 world's fair - but growth would only be 3.5% if the global economy came under stress again.
Together with its GREs (government related enterprises), both majority- and minority-owned, Dubai will have to repay some $141.7b in coming years, or 141% of its 2013 GDP, the IMF estimated. Of that sum, $92.2b would mature before the end of 2019. The heaviest repayments of bonds and loans would hit Dubai in 2018, when some $40.3b is due. However, firms such as property developer Nakheel, which were forced by the crash to restructure their debts, have been aiming to repay ahead of schedule in recent months.
The IMF also repeated its frequent warning about rapid property price rises in Dubai, saying authorities had agreed in conversations with the IMF that further measures, including higher, targeted fees, might be needed to tackle speculative demand for real estate.
The Dubai government also indicated that it would execute big real estate and infrastructure projects gradually, keeping its plans flexible and in line with demographic forecasts, the IMF added. Dubai's government finances are forecast to swing to a small surplus of 0.5% of GDP in 2014, turning positive for the first time since 2006, from an estimated deficit of 0.3% last year, the IMF report shows.
Overall, while the UAE is likely to cut its fiscal spending to AED317b dirhams ($86.3b) this year from a record AED324b in 2013, its budget stance is still too expansionary to save enough wealth for future generations.
In oil-powered Abu Dhabi, which accounts for 78% of the overall budget expenditure in the UAE, spending is projected to decline to AED241b in 2014 after peaking at an estimated AED254b last year. Abu Dhabi, which accounts for almost all of the UAE's crude oil output, does not publicly release budget plans or regular updates on actual spending. (IMF 06.07)
A measured approach to rolling out the infrastructure for Oman’s advanced broadband network is part of a wider policy of managed development towards becoming a knowledge-based economy.
Oman continues to perform strongly in studies into IT penetration and usage, with a recent report issued by the World Economic Forum (WEF), in conjunction with the international business school INSEAD, ranking the Sultanate 40th globally for IT readiness, the same as in 2013.
In its Global Information Technology Readiness Report 2014 (GITR), the WEF found Oman was making solid progress in transitioning to a knowledge-based society, with the government having a strong commitment to placing IT at the center of state policy and the economy.
While Oman did not move up or down the GITR ladder this year, with an additional four countries covered in the report, taking the total to 148, and with many of those nations bracketed around the Sultanate also having rolled out advances during the past year, maintaining its solid ranking should be considered an achievement in itself.
Improving Fixed-Line Services
According to Said Al Mandhari, the CEO of the Oman Broadband Company (OBC), the state company established to oversee the roll-out of the country’s broadband network and to assist in expanding the digital economy, having to provide coverage to a population of some 3m scattered over a large area makes putting in place a dedicated fiber optic cable network a difficult task.
“Oman is a huge country with the physical infrastructure still being built,” Al Mandhari told OBG. “This is a challenge for us because the last thing we want to do is to dig twice, once to lay a pipe and the second to lay the cable. The trick here is to work with the utility providers to integrate the IT infrastructure into the physical infrastructure.”
Providing a fixed-line system to as much of Oman as possible is essential to ensure the greatest benefits for the economy in the future, he said. “The potential speed on a mobile is not comparable to fixed-line speed and will not be able to handle the bandwidth demands for real economic growth,” said Al Mandhari.
Under OBC’s plans for broadband and IT development, by 2020, 80% of Muscat will be linked to the national fiber optic network, up from the 25% forecast by the end of this year, with 30% of other urban areas also being connected. After a further 10 years, almost all of Oman will have broadband coverage of one form or another, with Muscat and all urban areas of the country having a 95% connectivity rate via fiber optic, along with 30% of rural and remote regions, though these areas will also have 95% coverage through other avenues, such as satellite, wireless and mobile broadband.
Boost for Business
Such expanded high-speed broadband access will open up new opportunities for the Omani economy, according to Alain Sawaya, managing partner at Oman Data Park, the country’s first integrated managed service provider.
“The fiber network will be very important,” he told OBG. “Copper wire can transmit around 10 mbps steadily, but in order to stream movies or properly utilize next generation IT solutions you need more than 50 mbps, which only fiber can take.”
One area that Sawaya identified as having high levels of investment and growth potential is outsourcing. “The more IT services, and the easier they are to use the more demand and uptake of outsourcing services there will be,” he said. “IT is becoming more important, it just needs to be demystified for companies.”
Growth potential along the services chain
While the GIRT report showed that Oman scored well in public and private usage of IT, the WEF study also underscored areas of business opportunity to service and equipment suppliers. According to the study, 62.7% of households in the Sultanate have access to a personal computer, with 60% using the internet. This suggests that there is still strong marketing potential for computers and associated technology, as well as for internet subscription packages for home access.
One area where there is already a heavy concentration of technology is mobile handsets, with penetration rates of just under 160%. However, here too there are openings for service and technology suppliers. With Oman steadily moving toward blanket coverage of mobile broadband services, demand for advanced smartphones and tablets, along with applications and support services, is set to increase to match the spread of access availability. (OBG 01.07)
Simon Henderson wrote in Foreign Policy on 7 July that facing threats from all directions, Saudi Arabia’s King Abdullah is moving to get his foreign policy team in place -- and quell infighting within the royal family.
The usual somnolence of Ramadan in Saudi Arabia is being broken this year by intense politicking within the royal family. Official Saudi work hours for the holy month are limited to just six hours a day, but key princes in the House of Saud are working long and late. Just after midnight local time on 1 July, the official Saudi Press Agency (SPA) announced a "royal order" making Prince Bandar bin Sultan - formerly the long-serving ambassador to Washington and later the intelligence chief - King Abdullah's special envoy. Four minutes later, another SPA story announced that Bandar's cousin, Prince Khalid bin Bandar, had been made head of the Saudi intelligence agency.
The two appointments have both domestic and international significance. The Islamic State's invasion of Iraq leaves Saudi Arabia's borders exposed to the chaos of what is left of the "Arab Spring." Bandar bin Sultan, who was replaced as intelligence chief in April after spending several years spearheading Saudi attempts to depose Syrian President Bashar al-Assad, is now needed to make sure that the jihadists' successes in Iraq threaten Prime Minister Nouri al-Maliki without threatening the kingdom. At home, Khalid bin Bandar's elevation to the top position in the country's intelligence community came after he became the victim of a surprisingly public feud within the royal family that saw him pushed out as deputy defense minister a mere six weeks after his appointment.
The turnover at the Saudi Defense Ministry will probably have prompted at least one foreign embassy in Riyadh reporting home to recall Oscar Wilde's line from the play "The Importance of Being Earnest": "To lose one parent may be regarded as a misfortune; to lose both looks like carelessness." Bandar's exit from the apparently dysfunctional ministry made him the fourth deputy defense minister to lose his job within the space of 15 months. Like his predecessors, he seems to have fallen afoul of a junior cousin, Muhammad bin Salman, a 30-something son of Crown Prince Salman, the defense minister and heir apparent. The elder Salman, who turns 78 this year, has been widely reported to be suffering from dementia (the accounts run the gamut from memory issues to Alzheimer's) making him personally incapable of running the Defense Ministry.
Muhammad bin Salman has come out of nowhere, relatively speaking. While the major royal players below the level of King Abdullah and the other sons of the late Abdul Aziz, also known as Ibn Saud, are in their 50s and 60s, Muhammad's great, and perhaps only strength, is that he is liked and trusted by his father. Starting as a mere advisor, he was made head of the crown prince's court last year and he was further boosted this year to minister of state, which gives him a seat at the weekly meeting of the Council of Ministers. He is the eldest son of Prince Salman's third wife and his older half-kin include tourism chief and one-time astronaut Prince Sultan bin Salman and Deputy Oil Minister Prince Abdulaziz bin Salman, though, significantly, neither is seen very often at their father's side. Although not officially part of the Defense Ministry, Muhammad uses his role as gatekeeper to his father to control decision-making on the kingdom's army, air force and navy, and thwart what is now a long list of ex-deputy defense ministers.
King Abdullah's prompt action in promoting Prince Khalid to head of intelligence just two days after he was forced to resign from the Defense Ministry suggests that the monarch may act decisively to bring order to his government. "Swiftness" in Saudi terms is a relative concept - especially during Ramadan - but at the very least, Abdullah seems unlikely to appoint another deputy defense minister in the current circumstances and would also be unlikely to allow Crown Prince Salman to press the nomination of his son, Muhammad, to this role.
The crisis also provides an opportunity for Abdullah to complete the sidelining of Salman. This began in early 2013, when the king appointed his half-brother Muqrin as second deputy prime minister, a title which allowed him to chair Council of Ministers meetings in the absence of the king or crown prince. Then in March of this year, Abdullah gave Muqrin the new title of deputy crown prince, putting him on the road to be king when Salman and Abdullah die or become incapacitated. The monarch attempted to lock in this decision by forcing senior princes to give an advance oath of allegiance to Muqrin. A majority (though not all, significantly) did so. How such a commitment would work in practice is a matter of speculation: If Abdullah dies first, Salman's supporters would likely press for Salman to be able to declare his own crown prince, ignoring Muqrin's claim on the position.
Abdullah could even take the risky move of citing Salman's inability to control the upheaval at the Defense Ministry and getting a medical committee to certify his mental incompetence, giving the king the opportunity to promote Muqrin as crown prince. Muqrin himself was born on the wrong side of the blanket - his mother was a slave girl of Ibn Saud. But given the challenges facing the country and Salman's record of annoying princes who might in other circumstances be regarded as in his camp, the timing could be right.
With threats building throughout the Middle East, this is not a time for King Abdullah to procrastinate. The Islamic State's declaration of a caliphate challenges Saudi Arabia's self-appointed role as leader of the Islamic world, while Tehran's cozying up to Washington over Iraq as well as the nuclear issue threatens to undermine Saudi leadership of the Arab world as well. Outside the borders of the kingdom, Abdullah will look to Prince Bandar and Prince Khalid to counter these threats. But at home, he will be the key player. This Ramadan could be a time for unusual amounts of action in the palaces of Riyadh and Jeddah.
Simon Henderson is the Baker Fellow and director of the Gulf and Energy Policy Program at The Washington Institute. (TWI 07.07)
On 08 July, Fitch Ratings (http://www.fitchratings.com) said that recently announced fuel price hikes are an important step toward reducing subsidies that contribute to Egypt's substantial fiscal deficit - a key rating weakness.
Tackling subsidies is a key way of reducing Egypt's budget deficit, which we estimate at 12.1% of GDP in 2013/14 (to end June). A double-digit fiscal deficit in each of the last three years has pushed government debt to over 90% of GDP from 76.6% at end-FY11 and contributed to a series of downgrades to Egypt's ratings. The subsidy bill, which is dominated by fuel products, accounted for about one-third of total spending in FY13, or 12% of GDP.
The price hikes, which range between 40%-78% for petrol and 175% for natural gas, follow the adoption of a tighter budget on 29 June. The 2014/15 budget targets a deficit of 10% of GDP, down from the draft budget's 12.2% after President al-Sisi's intervention resulted in a 1% of GDP cut in budgeted subsidy spending and a 1.5% of GDP rise in budgeted tax revenues. Subsidy spending is to be held at the FY13 level and tax revenues are budgeted to rise by 26%. Several new revenue-raising measures have been introduced, including a capital gains tax.
The budget maintains a conservative assumption for grants. Only pledged grants that have yet to be drawn are included in the budget, totaling EGP23b ($3.2b), compared to an official estimate of EGP117b for FY13. Fitch assumes that support, primarily from Kuwait, Saudi Arabia and UAE, will remain forthcoming and anticipates grants to be well above the budgeted level.
Concerns about political stability have prevented previous administrations from tackling the cost of subsidies. The mandate secured by President Sisi following his election victory in May and the effective repression of much of the opposition means the political environment is more conducive to fiscal consolidation. Only isolated protests in response to the price hikes were reported. However, serious political tensions remain and the expected return of inflation to double-digits (from 8.2% in May) may cause social strains.
Fitch reaffirmed its 'B-' long-term foreign currency rating for Egypt on June 27, noting that "material progress on fiscal consolidation" was one factor that could lead to a positive rating action. (Fitch 08.07)
During recent months, the Egyptian Ministry of Defense was awarded several contracts by the Ministries of Health, Transportation, and Housing and Youth worth over $1 billion to carry out large infrastructure projects. The Egyptian Cabinet of Ministers justified its choice of the army over private companies for these undertakings, which range from building new highways and low-income housing to renovating public hospitals and youth centers, on the basis of the army’s efficiency, discipline in rapidly implementing projects, and high standards.
Assigning domestic infrastructure projects to the military is hardly a new practice by Egyptian authorities. But the army’s renewed role in Egypt’s domestic affairs, especially since its ousting of then president Mohamed Morsi in July 2013 and the inauguration of Abdel Fattah el-Sisi as president in June 2014, as well as several recent legal measures with bearing on this issue have raised basic questions about the commercial role of the military, especially the fairness and accountability of its practices. Particularly significant are a number of major new contracts with the UAE. Worth billions of dollars, these agreements reinforce the controversial trend toward a greater role for the Egyptian military in Egypt’s civilian economic affairs.
Traditionally, Egyptians hold the military establishment in high esteem as an icon of national pride and regional power projection. Separate from its role as guardian of the state, however, Egypt’s army has invested for decades in industrial projects that manufacture both military and civilian equipment.
Three specialized enterprises and their subsidiaries run by the Defense Ministry play a direct role in the military’s domestic economic ventures:
National Service Projects Organization: Established in 1979, the National Service Projects Organization (NSPO) has the mission of helping the Egyptian military avoid dependence on the private market for obtaining goods. The body has created companies controlled by the military that invest in different sectors of the domestic economy.
The organization’s website currently lists ten companies that the NSPO owns, spanning a wide range of sectors from construction to agriculture to food and dairy products. Any goods that these companies produce that exceed the military’s needs (and such surpluses always occur) are sold in the local economy as part of a commitment to “social responsibility.”
Arab Organization for Industrialization: Egypt, Saudi Arabia, Qatar and the UAE created the Arab Organization for Industrialization (AOI) in 1975 in a bid for a collective Arab defense industry. After Egypt signed a peace treaty with Israel in 1979, the other Arab states pulled out their shares and Egypt became the sole owner of the enterprise.
The AOI focuses on supplying the defense equipment needs of the Egyptian Armed Forces and uses excess capacities for supporting community development projects in the fields of infrastructure, environmental protection, and transportation. The organization runs eleven factories across Egypt that produce military and civilian equipment and has several international joint ventures with European, American, and Asian conglomerates.
National Organization for Military Production: The National Organization for Military Production is run by the Ministry for Military Production. It manages over fifteen factories that produce mainly military armaments and munitions, in addition to some civilian goods such as electronics and sports equipment.
In May 2014, the director of the Armed Forces Engineering Authority said that the military had executed 473 strategic and service projects in the past year and a half. A list of national projects implemented by the army sheds light on the wide range of industries they cover. These projects include building roads, bridges, and ports; renovating hospitals, schools and youth centers; and extending water pipes and constructing desalination plants. The military’s business deals not only happen at the national level but have also expanded to include partnerships with transnational corporations like General Electric, Lockheed Martin, Mitsubishi and others. Beyond military equipment, these international ventures cover nonmilitary products like television sets, jeeps, and tablet computers.
Extensive Relations With the UAE
Among its international partners, Egypt has traditionally enjoyed strong economic relations with the UAE. It is perhaps no surprise, then, that this Gulf state has been a significant force in support of the Egyptian army’s new wave of economic activity.
In the first half of 2014, the Egyptian military signed two housing projects with UAE-based firms, independent of the substantial funds that the UAE government has pledged to deliver in aid to Egypt. The first project was secured in February, when Emaar Misr, a subsidiary of the UAE-based company Emaar Properties, signed an agreement with the Ministries of Defense, Housing and Local Development to build a retail development, Emaar Square, as part of the Uptown Cairo housing project. The Emaar Square deal involves relocating military camps and upgrading the area’s infrastructure.
In March, the agreement was followed by a second, $40 billion low-income housing project with another UAE construction firm, Arabtec. That deal involves building one million apartments covering 160 million square meters across thirteen sites in Egypt.
Additionally, the Egyptian government and the UAE signed a grant agreement in October 2013 under which the UAE would finance multiple development projects in Egypt. The agreement specifically entrusts the Ministry of Defense to oversee the construction and implementation of a number of these vital projects. This grant is worth billions of dollars in economic and development aid (the total amount and list of projects are unspecified in the notice of the deal posted in the online edition of Egypt’s official gazette).
Fairness and Accountability
One issue raised by the Egyptian military’s extensive role in domestic commercial matters is that of fairness vis-à-vis private Egyptian actors. The army’s industrial and economic assets are unmatched by any other Egyptian entity. The military is the largest caretaker of government land in the country. A 1997 presidential decree gave the military the right to manage all undeveloped nonagricultural land, which is estimated to be 87% of the country.
The military has the ability to use conscripts as cheap labor. Its profits are exempt from taxes and business licensing requirements according to Article 47 of Egypt’s 2005 income tax law. In addition, Article 1 of a 1986 law on custom exemptions stipulates that imports of the Ministry of Defense and Ministry of State for Military Production are exempt from any taxation. All of these factors give the Egyptian military significant advantages in its commercial activities, making it hard for both state-owned and private-sector companies to compete.
Another concern is the military’s level of accountability to the public. Simply obtaining basic information about the scope of Egypt’s military-industrial complex is very difficult. Estimates by independent researchers of the share of the national economy that the military controls range from 5 to 40%. In a May 2014, interview with Reuters, then presidential candidate Sisi attempted to brush off such speculations, asserting that “there is talk that the army owns 40% of the economy. This is not true. It does not exceed 2%.”
Recently, two legislative amendments and one new law promulgated via the executive authority, in the absence of an elected parliament, have heightened concerns about the fairness and accountability of the Egyptian government and, in particular, the military.
In May 2011, the then-ruling Supreme Council of the Armed Forces (SCAF) amended the law on the military judiciary. The SCAF added an article that gives only military prosecutors and military judges the right to investigate illicit gains by army officers, even if the investigation started after an officer’s retirement. This effectively shields them from any prosecution under the civilian system.
In September 2013, Adly Mansour, the interim president following Morsi’s removal, issued a decree to amend the 1998 law on public tenders and auctions, allowing government officials to skip public tender processes in cases of undefined “urgent” matters. The amendment raises the value of services or property that state officials can purchase and sell by direct order. It is not clear whether the military has benefited from this particular provision in its latest contracts, although the legal foundation for such gains exists.
In April 2014, the government approved a law that restricts the right of third parties to challenge business and real estate contracts signed with the state. That right is now reserved for the government, the institutions involved in the deal, and business partners. Although the government justified this law as a way to encourage foreign investment, the action’s potential to diminish oversight and accountability looms large.
Furthermore, three recent NSPO contracts for the construction of new highways fuel additional accountability concerns. These agreements, signed between the Ministries of Transportation and Defense, stipulate that the NSPO company responsible for the establishment, development, and management of roads will build, manage, and lease two of the roads for 99 years, and the third for 50 years. In return, the NSPO will pay the government approximately $843,000 per year. These deals were concluded after the amended law on tenders was passed, illustrating that the military is already benefiting from these changes and will be shielded from any challenges to these deals.
As Egypt moves into a new political phase in which the military appears poised to play an expanding role in domestic affairs, basic issues of fairness and accountability regarding the army’s economic activities take on renewed importance. Given the pressing need for economic reforms that can invigorate new activities by the Egyptian private sector, any crowding out of private actors by the military will be sorely felt. Given the public’s proven hunger for governmental accountability and transparency generally, economic activities by the military that escape public oversight and control may contribute to public frustration and disillusionment. (CEIP 24.06)
The Central Bank of Libya recently reassured all Libyans worried about the breakdown of the country’s national economy and the collapse of the dinar’s exchange rate that such an eventuality would never occur as a result of the bank’s large reserves in foreign currencies, valued at $113 billion, bolstered by an additional 116 tons of gold.
However, the International Monetary Fund (IMF), which confirmed that Libya possessed important reserves that would help it overcome the crisis in the short term, also warned of the imbalance seen in oil production, and the increase in expenditures, which would drain those reserves in less than five years.
In this regard, the director of the Libyan Stock Exchange, Misbah al-Akkari, stated that available liquidity surpassed 4.6 billion dinars ($3.8 billion), both inside and outside the country, with state accounts holding more than $110 billion abroad. But, according to him, the problem still revolved around the ability to move required liquidity from the central bank to commercial banks as lawlessness continued to spread.
While insurance companies refused to cover the transport of funds, the central bank’s governor, Saddek Elkaber, used his personal contacts to secure such coverage for the bank’s headquarters. However, he explicitly indicated that insuring the transfer of money from Tripoli’s Mitiga Airport to the central bank would cost $2.5 million.
Hence the difficulty of the banking sector operating in such dangerous security conditions, following the spate of armed robberies targeting money transport vehicles and bank branches, leading to great confusion in the process of supplying banks with liquidity, particularly those located in remote areas or regions suffering from insecurity. In addition, many bank employees were the victims of attacks in a country where 42 different commercial banks operate a network of branches spread throughout Libyan territory.
In the face of these developments, the central bank was compelled to refrain from supplying banks with liquidity — in particular hard currencies — leading to a monetary crisis and shortages in the availability of dollars in some sectors of the economy, which contributed to the weakening of the dinar.
As fear and panic spread, Libyans flocked to withdraw deposits in dinars and foreign currencies, for fear of further outbreaks of fighting. Some businessmen even warned of a repeat of certain scenarios, when deposits worth $20 billion were withdrawn as the revolution erupted in 2011, forcing Libya to sell the equivalent of $5 billion worth of gold just to maintain fiscal stability.
The production of crude oil, considered to be the main driving force behind Libya’s economy, declined as a result of the same security considerations in a number of export ports, with oil accounting for 95% of GDP, 96% of exports and 98% of state treasury revenues. As a result, Libya suffered a $30 billion loss over a period of 10 months, engendered by a decline in oil production from 1.4 million barrels per day in July 2013, to 200,000 barrels per day as of May 2014, with the decrease continuing unabated.
According to the central bank, the country’s revenues fell from $4.6 billion to $1 billion per month at a time when Libya was spending the equivalent of $3.6 billion per month. Furthermore, to cover this deficit, the country was forced to pay $19 billion out of its foreign currency reserves, which dropped from $321 billion before the crisis to $113 billion today.
Hopes were hanging on the success of economic activities in 2012, but 2013 proved to be disappointing, when unrest began spreading unabated since July, leading to the suspension of most investments, particularly those revolving around state expenditures to finance projects, as a result of the decline in oil revenues.
Before the revolution, foreign investments in Libya were estimated at $3.8 billion, which greatly waned in 2011 only to strongly recover after the revolution’s success and the return of foreign delegations that restored hope in the revival of the country’s economy. In this context, China reinitiated operations, with approximately 26 companies implementing 50 projects worth $19 billion in various sectors that include real estate, oil and communications. Furthermore, 13 out of 25 Austrian companies present in pre-revolutionary Libya resumed their operations while French, British and Canadian delegations visited the country to prospect for business in the oil, health and construction sectors. Also, to meet project implementation needs, the labor market witnessed great demand for a labor force that flocked to Libya from all corners of the globe, especially Arab countries.
Subsequent developments could easily lead to an economic collapse, yet hope revolves around the ability of the government and militia leaders to reach an agreement that would alleviate the repercussions of such a collapse. In this regard, the IMF expressed optimism that Libyan economic activity could recover if oil and gas production returned to its previous level of 1.7 billion barrels per day, thus ensuring the availability of sufficient liquidity to pay state expenditures, as well as finance investment and reconstruction projects. The IMF further noted that the energy sector alone is in need of $30 billion to achieve its full potential, not to mention that airports, the health sector, infrastructure, communications and tourism all require billions of dollars in development funds. (Al Monitor 13.07)
Morocco signed a raft of public and private cooperation agreements with Tunisia during a visit by Morocco's King Mohammed VI in late May, in a bid to strengthen bilateral ties and encourage greater regional integration.
In his three-day trip, the Moroccan King, along with Tunisia’s interim President Moncef Marzouki, sought to spur movement within the Arab Maghreb Union (L’Union du Maghreb Arabe or ‘UMA’), a regional body that also includes Algeria, Mauritania and Libya. Speaking at the Tunisian National Constituent Assembly on May 31, he called for UMA member countries to “overcome artificial hurdles and obstacles hindering the effective launching of our union”. More specifically, he stressed the need for completion of a Maghreb free-trade zone and improvements in regional infrastructure to facilitate the exchange of more economic opportunities.
Originally formed in 1989 to ease economic cooperation and boost political ties between its members, the UMA has not held an annual meeting since 1994, in part a result of disagreements over the Western Sahara. However, the economic potential of its member states, including their vast underground wealth contained in mineral and oil and gas reserves and favorable demographics, as well as the size of the manufacturing and service sectors, mean that scope for stoking intra-regional growth is significant.
The benefits of closer integration are sizable, given the collective heft of the region’s economies. Combined, the Maghreb countries have a population of roughly 90m, a large proportion of whom – more than half in Morocco and Algeria, for example – are below the age of 30, which means there is a sizable pool of potential employees for labor-intensive industries.
The region also benefits from rising consumption, driven by headline growth rates that in recent years have hovered between 2.6% and 5.7% for Algeria and Morocco, the two largest economies. This has led to an increase in demand for, among other things, energy. The region benefits from a diversity of supply, with everything from high insolation rates for solar to significant reserves of oil and gas.
Plenty of Room for Improvement
However, on the whole, intra-Maghreb trade remains well below its potential. A study conducted by the World Bank in 2006 concluded that the low level of regional integration in the Maghreb results in the loss of potential trade revenue equivalent to 2-3% of regional GDP each year. The volume of goods exported within the Maghreb, all countries combined, rose quickly from $1.5b in 2001 to $7.6b in 2011, but remains marginal compared to the total regional export volume of $170.6b. While intra-regional trade volumes accounted for just 3% of annual trade in the Maghreb in 2008, they accounted for 63.6% of trade in the EU, 24.6% in the Association of South-east Asian Nations. Even within Africa, the region lags, with other regional organizations such as the East African Community, seeing intra- regional volumes rise as high as 13% of total trade.
A number of non-political barriers exist between the Maghreb states, including insufficient transport links, high transport costs and the absence of an integrated value chain, but the lack of political consensus has been a key obstacle. The border between Morocco and Algeria, for example, remains closed while instability in Libya continues to focus attention on strengthening border security.
However, efforts to strengthen regional commerce have multiplied in recent years, particularly after the onset of the Eurozone crisis. New infrastructure corridors, such as the Trans-Maghreb Highway – which will eventually stretch 7000 km north from Nouakchott to Rabat, and then east to Tripoli – look set to facilitate cross-border transport, with a number of key sections of the highway already completed.
A series of regional ministerial meetings held in the past three years, with support from the World Bank, outlined proposals for greater economic, fiscal, and commercial integration. In 2010, ministers from UMA member countries signed an accord to implement an agricultural free trade zone that will help to ensure regional food security, and a preliminary list of products was drawn up in May 2012. Recent years have also seen a number of bilateral cooperation accords signed between member states, including the 23 agreements spanning the education, energy and tourism sectors that were signed between Morocco and Tunisia during the King’s recent visit, which was his first official visit to Tunisia since the outbreak of the Arab Spring there in 2011.
There is still plenty of work to do to properly harness the benefits of integration, and until some of the more intractable issues are resolved, substantive progress is unlikely, but certainly the push from Morocco and Tunisia highlights the long-term potential of closer collaboration. (OBG 11.07)
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