Fortnightly - November 19, 2014

EDI Fortnightly Report

TOP STORIES

TABLE OF CONTENTS:

 1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  2015 Budget Passes First Knesset Reading
1.2  Social-Economic Cabinet Approves Sheshinski 2 
1.3  0% VAT Bill Passes Knesset Finance Committee

 2:  ISRAEL MARKET & BUSINESS NEWS

2.1  Forter Closes $15 Million in Funding 
2.2  Microsoft Acquires Aorato for Cloud Defense  
2.3  Renewable Energy Storage Company Enstorage Signs R&D Deals   
2.4  SCRA Announces Call for Proposals  

 3:  REGIONAL PRIVATE SECTOR NEWS

3.1  Standard Chartered to Close Middle East Branches
3.2  Lebanese Car imports Increase 9% in October
3.3  Dairy Queen Long Term Development Agreement for the UAE
3.4  Etihad Airways Signs Five-Year Sponsorship Deal with New York City FC
3.5  Largest US Business Team Ever Visits Egypt
3.6  Pharco Licenses Clinical Stage Hepatitis C Virus Inhibitor from Presidio
3.7  China Sunergy & DenizLeasing Promote Financing Turkish Solar Projects

 4:  CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1  No Let Up in Littering on Amman’s Streets 
4.2  Renewable Energy Cost Comparable With Coal for Turkey by 2030 

 5:  ARAB STATE DEVELOPMENTS

5.1  France & Lebanon Sign $3 Billion Saudi-Funded Arms Deal
5.2  Lebanon’s Trade Deficit Narrows 
5.3  USAID Donates Over $40 Million to Improve Public Schools 
5.4  Jordan & Russia to Cooperate in Several Sectors
5.5  Iraq Violence Costing Jordan JD 1 Million Daily

♦♦Arabian Gulf

5.6  World Bank Says GCC Energy Subsidies Outweigh Oil Price Loss
5.7  US Raises Level of Concern on Kuwait Copyright Laws
5.8  Abu Dhabi October Inflation at 4% - Highest Since November 2010
5.9  Dubai Imposes 4.22% Cap on 2015 Healthcare Price Rises
5.10  Minimum Wage for Saudis Over Double Expats’ from 2015

♦♦North Africa

5.11  Egypt’s Economy Grows By 1.1% in First Quarter
5.12  Egypt Issues Micro-Finance Law to Draw Investors
5.13  Egypt's Gas Exports Fall 81.4% in September
5.14  Egypt's Unemployment Remains High at 13.1% in Third Quarter

 6:  TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1  5.5 Million Unemployed In Turkey, Main Opposition Deputy Claims 
6.2  US Direct Investments in Turkey Falling Short 

 7:  GENERAL NEWS AND INTEREST

♦♦ISRAEL:

7.1  Bezalel Academy Wins First Place in Tokyo

♦♦REGIONAL:

7.2  Lebanon Parliament Extends Term 
7.3  Saudi Arabia, UAE and Bahrain End Rift with Qatar 
7.4  UAE National Day Holidays Announced 
7.5  Ailing Ruler Tells Omanis He Will Miss Birthday Celebrations 
7.6  Tunisia Looks to Curb Libya Fallout 
7.7  Moroccan Courts to Adopt Tamazight Language 
7.8  Greek Internet Penetration Rates Soar Across Country 

 8:  ISRAEL LIFE SCIENCE NEWS

8.1  BioLineRx Successful Phase 1/2 Study for Novel Celiac Treatment
8.2  BSP Has Good News for Patients With Acute Chest Pains 
8.3  Galmed First Administration of Aramchol for Cholesterol Gallstones 
8.4  Teva Launches Liquid Formulation of TREANDA Injection in US 

 9:  ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1  Mount Vernon Launches Pango Mobile Payments for Parking
9.2  OriginGPS Launches World’s Smallest GPS Module 
9.3  Mellanox Record ANSYS High-Performance Computing App 
9.4  LyncShield New RSA Token Authentication Solution 
9.5  Plarium Launches “MageCraft: The War” for Android and iOS Users 
9.6  BitBite Launches $60,000 Campaign to Promote Healthy Eating Habits 
9.7  LogDog Anti-Hacking Service Protects Private Information Online 
9.8  Ginger Launches Ginger Keyboard for iOS 8 and Android 
9.9  NICE Robotic Automation Eliminates Back Office Drudgery 
9.10  Mellanox Announces Availability of 100Gb/s Direct Attach Optical Cables 
9.11  MTI Launches New Antenna Line for Toll Road Applications 

 10:  ISRAEL ECONOMIC STATISTICS

10.1  Israel’s CPI Rises 0.3% in October
10.2  Israeli Economy Shrinks by 0.4% in Third Quarter
10.3  Israel’s Budget Deficit Halved in October

 11:  IN DEPTH

11.1  LEBANON: Remittances Key for Lebanon’s Economy
11.2  JORDAN: IMF Executive Board Completes the Fifth Review
11.3  IRAQ: Budget Failure Creates More Economic Woes for Iraq
11.4  BAHRAIN: Steady Growth for Bahrain’s Economy
11.5  UAE: Immune To Global Oil Crisis?
11.6  UAE: IMF Staff Concludes Visit to the United Arab Emirates
11.7  UAE: Sharjah 'A/A-1' Ratings Affirmed On Strong Economic Growth
11.8  EGYPT: Ratings on Egypt Affirmed at 'B-/B'; Outlook Stable

1:  ISRAEL GOVERNMENT ACTIONS & STATEMENTS

 1.1  2015 Budget Passes First Knesset Reading

Finance Minister Lapid presented the Knesset with the 2015 budget proposal and arrangements bill on 10 November for their first reading.  Fifty-eight MKs voted in favor of the budget bill, while 46 MKs voted against it.  The arrangements bill was passed with a vote of 57 to 46.  The arrangements bill, which incorporates various economical and financial legislation amendments needed for the government to realize its economic policy, is traditionally presented to the Knesset alongside the budget proposal, and is widely considered an inextricable part of it.  Both bills will be presented to the Knesset for their second and third readings by 31 December.  At this time, both legislation proposals were referred back to the Knesset's Finance Committee for further review and amendments.

Prior to the vote, Knesset Speaker Edelstein (Likud) informed the plenum that the High Court of Justice had rejected a motion by the opposition to compel the Knesset to postpone the reading.  The motion, citing the MKs were not afforded sufficient time to study the budget proposal, was filed as a result of the fact that Lapid had presented the bill 40 days later than originally planned, thus significantly cutting short the MKs' ability to review the bill prior to voting on it.

The coalition and opposition were able to reach an agreement by which the traditional filibuster held ahead of the budget reading was set aside in favor of an extended plenum session, so to allow opposition members to express their reservations over the budget.  The vote itself was held shortly before midnight.

The bill sets 2015's state budget at NIS 414 billion ($109 billion), including national debt payments.  The actual budget was set at NIS 332 billion ($87.1 billion).  The bill proposes increasing the national deficit from 2.5% of the GDP to 3.4%, or NIS 37 billion ($9.7 billion).

At NIS 64.8 billion ($17 billion), defense spending stands to be the largest article included in the budget. The figure includes a NIS 6 billion increase to the overall defense budget, NIS 7.7 billion ($2 billion) pledged to Israel in U.S. aid funds, and NIS 4.3 billion ($1.1 billion) in auxiliary funds guaranteed to the military following Operation Protective Edge.

The Education Ministry's budget was set at NIS 47.1 billion ($12.3 billion), the Health Ministry's budget was set at NIS 27.5 billion ($7.21 billion) and the Social Affairs and Social Services Ministry's budget was set at NIS 6.1 billion ($1.6 billion).  As part of the legislation proposal, the Knesset's budget for 2015 was set at NIS 667.7 billion ($175.1 billion), the President's Resident's budget was set at NIS 50.99 billion ($13.37 billion), and the MKs' budget was set at NIS 1.09 billion ($286 million) -- with NIS 63.3 million ($16.6 billion) earmarked for the legislators' wages.  (IH 11.11)

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 1.2  Social-Economic Cabinet Approves Sheshinski 2

Israel’s social-economic cabinet unanimously approved the recommendations of the Sheshinksi 2 Committee on the government take from exploitation of Israel's natural resources.  Minster of the Economy Bennett and Minister of National Infrastructures, Energy and Water Shalom voted in favor of the recommendations despite the fact that the directors of their ministries, who were members of the committee, issued a minority opinion dissenting from the committee's report.  The Ministry of Finance intends to submit the draft bill for taxation of natural resources to the ministerial legislation committee in the coming weeks, and thereafter to submit the bill to the Knesset, where it will face a difficult passage.

The committee recommended imposing a graduated surtax on the profits of extractors of Israeli natural resources at rates of 25% and 42%.  The tax is supposed to increase the government's take from production of phosphates, potash and other minerals to 46-55%, and yield the state some NIS 400 million annually.  The new taxation will be imposed only on profits in excess of a 14% return on capital.  (Globes 10.11)

ental Services Company.  The ports companies will be completely privatized.  To this list can be added Israel Military Industries; the complete privatization of the company through sale to a strategic investor by 2016 has already been agreed with the state.  (Globes 05.10)

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 1.3  0% VAT Bill Passes Knesset Finance Committee

On 12 November, the Knesset Finance Committee approved the bill for zero VAT on new homes for first-time buyers meeting the criteria, by a majority of ten to six.  The way to approval of the bill was paved by a deal between Yesh Atid, the party of Minister of Finance Lapid, and Yisrael Beytenu, whereby the in exchange for support for the zero VAT bill, Lapid will submit the section in the Economic Arrangements Bill imposing a tax on medical tourism to the Knesset Labor, Welfare and Health Committee, despite his initial opposition to this.  The zero VAT bill will now go to the Knesset plenum for final approval, although at present it is not clear when the vote will take place, since the opposition members of the Finance Committee have demanded a re-vote on its each of its sections.  The bill will be in force for seven years from the time it is made law.  The Minister of Finance will be obliged to report to the Knesset Finance Committee on the implementation of the law and the degree to which it achieves its objectives.  (Globes 12.11)

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2:  ISRAEL MARKET & BUSINESS NEWS

 2.1  Forter Closes $15 Million in Funding

Forter has closed a $15 million Series B round from New Enterprise Associates (NEA) and Sequoia Capital.  Two of the most influential figures in venture capital – Sequoia Capital's Doug Leone and NEA's Peter Barris participated in the inauguration of Forter's new R&D center in Tel Aviv to address one of the growing concerns in e-commerce – fraud.  The 2014 holiday season is projected to reach $315 billion in e-commerce sales, according to a report from eMarketer.  What could be the most profitable season for retailers may also launch an equally profitable season for fraudsters.  Forter is the only firm to offer a real-time, automated decision for every transaction, delivered with a simple approve or decline decision.  The solution is also backed with a 100% chargeback protection guarantee.  With this approach, Forter removes the hassles of traditional fraud prevention and offers retailers a way to accept more transactions while achieving the peace of mind to focus on their business, not fraud.

Tel Aviv’s Forter (http://www.forter.com) is the first customer-centric fraud prevention solution for the e-commerce industry.  By providing an end to end solution that delivers a real-time, yes or no decision, Forter removes the hassle of managing fraud for merchants, allowing them to grow their business, increase revenue and strengthen every customer experience.  Through its triple layer - cyber, analytic and behavioral - approach to understanding and attacking fraud, Forter's technology is built to stay ahead of the rapidly evolving fraud and e-commerce landscape.  (Forter 11.11)

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 2.2  Microsoft Acquires Aorato for Cloud Defense

Microsoft Corp. confirmed that it is buying Israeli cyber security start-up Aorato.  Financial details were not disclosed.  Microsoft said it was making this acquisition to give customers a new level of protection against threats through better visibility into their identity infrastructure.  With Aorato, Microsoft will accelerate its ability to give customers powerful identity and access solutions that span on-premises and the cloud, which is central to their overall hybrid cloud strategy.

Herzliya’s Aorato (http://www.aorato.com) has sophisticated technology that uses machine learning to detect suspicious activity on a company’s network.  It understands what normal behavior is and then identifies anomalies, so a company can quickly see suspicious behavior and take appropriate measures to help protect itself.  Key to Aorato’s approach is the Organizational Security Graph, a living, continuously-updated view of all of the people and machines accessing an organization’s Windows Server Active Directory (AD).  AD is used by most enterprises to store user identities and administer access to critical business applications and systems.  

Recent acquisitions in Israel by Microsoft include video search company VideoSurf in 2011 and 3DV ventures and gesture recognition company 3DV Systems in 2009.  (Microsoft 13.11)

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 2.3  Renewable Energy Storage Company Enstorage Signs R&D Deals

EnStorage has signed an R&D agreement with international energy management company Schneider Electric and French energy corporation Areva to develop a renewable energy storage system.  The system that is to be developed will allow energy manufacturers, wind farms, and renewable energy manufacturers and operators to store from 150 kilowatts up to many megawatts of energy for six hours or more.  The system will be built in late 2015, and will be sold to end users in late 2016.  The product will be integrated with Schneider Electric Global clients, with worldwide sales potential including Israel.

Yavne’s EnStorage (http://www.enstorageinc.com) was founded in 2008 to commercialize low cost flow batteries based on Hydrogen Bromine technology refined by researchers at Tel-Aviv University.  Backed by leading private equity and venture capital investors, the Enstorage team has advanced the technology into fully functioning, demonstration stage, energy storage systems.  (Globes 13.11)

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 2.4  SCRA Announces Call for Proposals

SCRA (http://www.scra.org) and the Israeli Industry Center for R&D (MATIMOP) jointly released a formal call for proposals that launches the second round of projects to be funded under the South Carolina – Israel Industry R&D program.  The Request for Proposals (RFP) is in support of a collaborative industrial research and development program established in an agreement between the Government of the State of South Carolina and the Government of the State of Israel and managed by SCRA.  The first round of proposals was launched last year and resulted in awarding two projects to S.C.-Israeli teams.  The industry R&D program is designed to promote collaboration opportunities for South Carolina and Israeli partners.  SCRA and MATIMOP will review proposals approximately twice per year, in March and in September.  (SCRA 13.11)

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3:  REGIONAL PRIVATE SECTOR NEWS

 3.1  Standard Chartered to Close Middle East Branches

Standard Chartered is set to cull an unspecified number of branches in the Middle East, as part of plans to cut up to 100 locations in emerging markets next year in a bid to save $400 million.  Standard Chartered had 1,248 branches across the world in June, with more than 10 million customers in 34 countries.  The bank has issued three profit warnings and has suffered a 30% drop in its share price.  It has had to pay $667 million for violating US sanctions on Iran in 2012 and has been affected by a rise in bad debts in China and India.  The bank has not yet decided which countries in the Middle East, where it has a presence in five of the Gulf states, plus Jordan, Lebanon and Iraq, will be affected.  The UAE, where Standard Chartered has 14 branches, is the bank’s fifth-biggest market.

In August, the UAE Central Bank said the lender would be liable to legal action, after it announced that between 1,400 and 8,000 of its accounts in the country would be closed, as part of a $300 million settlement in the US over alleged money laundering.  (AB 12.11)

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 3.2  Lebanese Car imports Increase 9% in October

According to the Association of Car Importers in Lebanon (AIA), there was a 9.09% year-on-year (y-o-y) increase in the number of registered new passenger and commercial cars, reaching 34,002 vehicles by October, compared to the same period last year.  This was due to the 7.94% y-o-y surge in the registration of new passenger vehicles to 32,084 in the first ten months of the year.  Likewise, the number of registered commercial cars inched up by 1.27% y-o-y to 1,918.  Looking at the car sales brand breakdown, Kia topped the list with a 22.59% share of the total, followed by Hyundai (19.19%), Toyota (12.91%), Nissan (12.44%) and Renault (3.46%).  As for the top five distributors in Lebanon by October, NATCO SAL had the highest share of 21.31% of the total, followed by Century Motor Co (18.49%), BUMC (13.09%), RYMCO (13.03%) and Bassoul Heneine (7.20%).  (Audi 18.11)

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 3.3  Dairy Queen Long Term Development Agreement for the UAE

The Dairy Queen system, the international retail treat category leader and part of Berkshire Hathaway, announces that Bajco Gulf, a family-operated quick-service restaurant (QSR) franchise group, has signed a long-term multi-unit agreement to develop DQ Grill & Chill restaurants and DQ Treat stores throughout the United Arab Emirates.  The first DQ Treat store, featuring the soft-serve products that have made the Dairy Queen system an icon in the industry, such as the signature Blizzard Treat, soft-serve cones with the curl on top, sundaes and other delicious treats, is expected to open in early 2015.  This will make UAE the 28th country outside the U.S. and Canada with the ability to expand the Dairy Queen brand.  The Dairy Queen flagship DQ Grill & Chill food and treat concept is scheduled to open by the second quarter of 2015.  American Dairy Queen Corporation (ADQ), which is headquartered in Minneapolis, Minn., develops, licenses and services a system of more than 6,300 Dairy Queen® stores in the United States, Canada and 25 (26 with UAE) other countries.  (ADQ 10.11)

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 3.4  Etihad Airways Signs Five-Year Sponsorship Deal with New York City FC

New York City FC, the new Major League Soccer (MLS) franchise, has announced a major partnership with Etihad Airways.  The Abu Dhabi-based airline becomes the club’s principal partner, which will see its branding on all of the team’s playing jerseys.  In conjunction with the uniform sponsorship, Etihad Airways also becomes one of the club’s founding partners.  The announcement was made as the first home jersey, which is now available for pre-sale, was unveiled for the first time in New York City.  (AVB 16.11)

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 3.5  Largest US Business Team Ever Visits Egypt

Representatives from over 60 US companies completed on 11 November a two-day visit to Egypt described as the largest such delegation in history that aimed to explore potential businesses to boost the country’s ailing economy.  Delegates to the conference, organized by the US Chamber of Commerce, stayed clear of politics.  During a two-hour meeting with President Abdel Fattah Al Sisi, they listened to his vision for improving the economy and the pressures he faces from a disgruntled and demanding population.  The delegation included a personal envoy from US Secretary of State Kerry, Ambassador David Thorne.  Ahead of the visit, Kerry said a critical component of Egypt’s success is economic growth driven by policy reform, a message the delegation will deliver to Egyptian authorities.  The visit coincided with an ultimatum by authorities given to civil groups to register under a restrictive law that was drafted under the regime of Hosni Mubarak, or face shutdown and prosecution.

Sisi has also launched a number of mega-projects aimed at jumpstarting the economy and providing employment.  Such projects, as well as Egyptian interest in investing in them, have triggered interests of private American businesses.  The chamber plans to host another regional investment conference in Egypt next spring.  For Egyptian businessmen, the conference is an opportunity to commit the government to a more business friendly environment.  (AP 11.11)

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 3.6  Pharco Licenses Clinical Stage Hepatitis C Virus Inhibitor from Presidio

Alexandria, Egypt’s Pharco and San Francisco’s Presidio have entered into an exclusive license agreement for Presidio’s HCV NS5A inhibitor PPI-668 for development and commercialization to treat HCV infection in Egypt.  This exclusive license includes an opportunity for Pharco to expand its licensed territory to one or more additional countries in the MENA region.  Pharco will fund clinical development and commercialization of PPI-668 in Egypt, and potentially the MENA region.  Presidio will receive upfront and development milestone payments, as well as tiered royalties based on product net sales in Egypt and potentially the MENA region.  Pharco made an equity investment in Presidio related to the license agreement.

Pharco Pharmaceuticals is the founding member company of Pharco Corporation.  Pharco Corporation is a group of nine health care companies operating in the pharmaceutical field for development, manufacturing, marketing, distributing and exporting a comprehensive array of branded and generic drugs, along with an increasing number of licensed pharmaceutical products.  (Pharco 10.11)

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 3.7  China Sunergy & DenizLeasing Promote Financing Turkish Solar Projects

China Sunergy Co., a specialized solar cell and module manufacturer, announced that the Company has signed an MOU with DenizLeasing, a subsidiary of DenizBank Group, establishing a strategic partnership to finance the solar projects through financial leasing in Turkey.  DenizLeasing was established in 1997 in Istanbul, Turkey, and now carries out financial leasing transactions for various kinds of investment goods.  According to the MOU, DenizLeasing will facilitate and provide capital leasing for solar PV projects of up to 100 MW deploying China Sunergy's solar modules and other components.  (China Sunergy 14.11)

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4:  CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

 4.1  No Let Up in Littering on Amman’s Streets

The number of environmental violations in Amman is rising, a municipal official said, noting that infringements are mostly registered in areas that witness traffic congestion.  Despite organizing several awareness campaigns and doubling fines for littering, the situation is not improving in Amman, according to Ali Marafi, head of the electronic monitoring section at the Greater Amman Municipality (GAM).

Littering is punished by a JD20 ticket under Traffic Law No. 49 of 2008, the GAM official said, noting that littering not only pollutes the city’s streets but also causes traffic accidents.  According to Marafi, GAM’s surveillance cameras registered 51,727 littering violations between January and October this year.  The violations are recorded by 10 cars equipped with cameras roaming the streets of the capital.  Last year, 53,956 tickets were issued for littering, while the number stood at 56,000 in 2012, according to GAM figures.

Recording environmental violations via surveillance cameras seeks to curb pollution of the city’s streets and alter people’s behavior rather than collect fines from the public, according to Marafi.  GAM started applying the electronic monitoring system in 2007 to maintain the cleanliness of the city and address double parking on the streets.  (JT 17.11)

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 4.2  Renewable Energy Cost Comparable With Coal for Turkey by 2030

It is possible for Turkey to meet half of its energy needs from renewable energy resources for around the same cost as its current coal-focused energy strategy, according to a new report.  The World Wildlife Fund Turkey’s report “Turkey’s Renewable Power” shows that an alternative approach, based on building up generation capacity in renewables, could be achieved at comparable costs, while also benefiting Turkey’s environment and reducing its dependence on fossil fuel imports.  According to the report, the cost of Turkey’s existing energy strategy that prioritizes hard coal and local lignite production would be around the same, approximately $400 billion, as a renewable energy-based alternative by 2030.  The expected decline in wind and solar power energy costs in the next 15 years will make this possible, the report also states.  (HDN 18.11)

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5:  ARAB STATE DEVELOPMENTS

 5.1  France & Lebanon Sign $3 Billion Saudi-Funded Arms Deal

On 4 November, France and Lebanon signed a Saudi-funded deal worth $3 billion to provide French weapons and military equipment to the Lebanese army to help it fight jihadis encroaching from neighboring Syria.  The Lebanese army, one of the few institutions not overtaken by the sectarian divisions that plague the tiny country, has few resources to deal with the instability on its border and has been seeking to modernize its military hardware.  Saudi Arabia sees itself as the defender of Sunni Islam in the region and wants to help beef up Lebanese security forces in the face of threats from both the jihadis and Lebanon's powerful Shi'ite movement Hezbollah.  French Defense Minister Jean-Yves Le Drian told parliament on 8 October that the deal included land, air and naval equipment.  Saudi Arabia, which has already provided $1 billion in military aid to the Lebanese army, has recently taken part in US-led air strikes against IS militants in Syria.  (AB 04.11)

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 5.2  Lebanon’s Trade Deficit Narrows

Lebanon’s trade deficit for the first 9 months of 2014 narrowed to $12.43b, down from $12.75b.  Accordingly, trade deficit contracted by 2.50% year-on-year (y-o-y) as exports increased and imports decreased. Lebanon’s exports covered 21.19% of the imports by September 2014, up from 19.86% for the same period in 2013.  Total imports dropped by 0.85% y-o-y to $15.77b.  The three main goods imported to Lebanon were mineral products, which increased by 6.48% y-o-y (25% share of total imports), machinery and electrical instruments, which dropped by 16.53% y-o-y (11% share of total imports) partly due to the weak construction activity and to the mild intensity of the past winter, and products of the chemical or allied industries, which rose 3.27% y-o-y (10% share of total imports).  The three major countries that Lebanon imports products from were China, Italy and France, with respective weights of 12%, 8% and 7%.  Concurrently, total exports widened by 5.79%, yearly, to $3.34b.  This was mainly due to the 40.86% y-o-y surge in machinery and electrical instruments exports (17% share of total exports) and the 25.28% growth in prepared foodstuff, beverages and tobacco exports (12% share of total exports).  However, pearls, precious stones and metals (13% share of total exports) plunged by 35.45%.  The three major countries that Lebanon exports products to were Saudi Arabia, South Africa and the UAE, with weights of 11%, 10% and 9%, respectively.  Lebanon’s trade deficit, for the month of September alone, narrowed by 0.61% y-o-y to $1.27b, triggered by the 39.73% surge in exports.  Imports also inched up by 6.82% in September.  (Blominvest 06.11)

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 5.3  USAID Donates Over $40 Million to Improve Public Schools

The U.S. Agency for International Development launched a $41.2 million education program for public schools in Lebanon in an attempt to redress the imbalance between private and state education in the country.  Currently only a third of Lebanese students attend public schools, where the quality of education is often lower than that at private schools, and USAID’s Improved Basic Education Services Program, run in association with the Education Ministry, has been designed to help change that.  The program focuses on three main components: improving reading skills, expanding access to education among vulnerable populations, and improving education monitoring and management.  With regard to reading skills, the program will include a diagnostic survey to establish each student’s reading proficiency.  Students will also be assessed on their ability to recognize phonetics and associate meaning to given texts.  Gathering this information would allow USAID and the Education Ministry to create relevant training modules for teachers, and also tailor interactive reading games and determine the appropriate reading materials for students, he said.  (TDS 06.11)

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 5.4  Jordan & Russia to Cooperate in Several Sectors

Jordan has requested Russia to offer humanitarian and development financial assistance to the Kingdom and supply its wheat and barley needs at preferential prices.  Jordan annually imports around 300,000 tonnes of wheat from Russia, which represents around 24% of the overall imports of the grain, as well as around 320,000 tonnes of barley.  The request was made during a meeting of the Joint Jordanian-Russian Ministerial Committee for Development, Trade, Economic, Scientific and Technical Cooperation in Moscow.

Planning Minister Saif and Russian Agriculture Minister Fyodorov signed a MOU for commercial, economic and scientific cooperation for 2014-2018.  Amman and Moscow also agreed to cooperate in the energy, agriculture, tourism and transportation sectors.  During the meeting, Jordan and Russia also agreed to increase the exports of Jordanian fruit and vegetables to the Russian market by offering 25% discount on customs duty in the summer and 100% exemption in winter, the ministry statement said.  The Jordanian delegation included officials from the ministries of trade, agriculture, tourism and energy.  (JT 15.11)

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 5.5  Iraq Violence Costing Jordan JD 1 Million Daily

Ongoing violence in western Iraq is costing Jordan over JD1 million per day as cargo flow between the two countries slows to a trickle, trucking companies say.  The Jordan Truck Owners Association said that growing instability and reduced cargo traffic has cost local trucking companies over JD 200 million since the Islamic State’s (IS) seizure of large swathes of land in the west and north of Iraq.  The situation has reduced daily traffic flow between Jordan and Iraq from 400 trucks to between 30 and 50.  Iraqi government forces briefly withdrew from the Iraqi-Jordanian border in June, a period during which tribal militias manned the Karama border crossing.  Although Iraqi government forces have returned to the border, large portions of Anbar province remain in the hands of militias, causing many trucking companies to suspend their Amman-Baghdad routes.   According to Anbar tribes, tribal militias have been working to guarantee the safety of Jordanian trucks heading to the province, the main source of basic food supplies to under-siege regions in west Iraq.  Despite their efforts, sources within Anbar claim IS militias continue to man several checkpoints leading into Fallujah and Ramadi.  (JT 13.11)

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♦♦Arabian Gulf

 5.6  World Bank Says GCC Energy Subsidies Outweigh Oil Price Loss

Gulf countries are paying more in energy subsidies than the total amount of revenue they stand to lose annually if the oil price remains as low as $80 a barrel, figures show.  The World Bank said the six GCC countries spend more than $160 billion on energy subsidies annually.  That is $30 billion more than the $130 billion the IMF has estimated they would lose annually if the oil price remains at its current level of just above $80 a barrel, down more than 20% since June.  The rapid fall in the oil price has forced economists to turn their attention to the GCC state budgets, which rely on oil and gas revenues for as much as 90% of their state income. 

The GCC countries - Saudi Arabia, Kuwait, Oman, Qatar, Bahrain and the UAE - had a combined GDP of $1.64 trillion at the end of 2013, according to the IMF.  About 10% of that was spent on energy subsidies including fuel and electricity every year.  Saudi Arabia accounts for almost half of the GCC subsidies.  The IMF said the Middle East and North Africa region, which is home to 5.5% of the world’s population and boasts 3.3% of its GDP, accounts for 48% of global energy subsidies.  The entire MENA region is estimated to spend more than $250 billion on energy subsidies, while Egypt spends seven times more on fuel subsidies than on health.  Kuwait and Oman have said they are reviewing their subsidy schemes with a view to cutting them except for low-income families.  The fall in the price of oil may cause governments to reconsider their subsidies sooner rather than later, but any cuts would be politically sensitive.  (AB 05.11)

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 5.7  US Raises Level of Concern on Kuwait Copyright Laws

The United States on 10 November moved Kuwait a notch higher in its list of countries to watch for potential breaches of U.S. patents, copyrights and other intellectual property (IP) rights.  The US Trade Representative said Kuwait had failed to introduce a copyright law in line with international standards and to properly protect copyright and trademarks.  Kuwait will join 10 countries, including India and China, on the "priority watch list," one rung higher than its current status.  Being on the watch list signals a higher level of scrutiny and diplomatic pressure to bring policies into line.  (Reuters 15.11)

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 5.8  Abu Dhabi October Inflation at 4% - Highest Since November 2010

The Abu Dhabi Statistics Centre (Scad) announced that the inflation rate in the emirate’s consumer prices for the first ten months of 2014 was 3.1%, compared with the same period of 2013, as shown by the increase in the CPI to 128.1 points during the first ten months of 2014, up from 124.2 points during the same period of 2013.  Housing and utility costs, which account for almost 38% of consumer expenses, jumped 5.4% year-on-year in October.  Prices of food and non-alcoholic beverages, which account for 16% of the basket, increased 4% on an annual basis.  (SCAD 16.11)

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 5.9  Dubai Imposes 4.22% Cap on 2015 Healthcare Price Rises

Dubai Health Authority (DHA) said on 5 November that it will impose a cap of 4.22% on price increases for healthcare services in the emirate in 2015.  The authority said the price regulation model is based on the annual rate of inflation published by the Dubai Statistics Centre.  The regulation will be applicable for all polyclinics, clinics and hospitals in Dubai and services provided to Dubai insurance policies.  The aim of the price regulation model is to ensure balance between allowing price increases and protecting patient's interest."  The deadline for healthcare practitioners to apply for a price increase will be the end of November, with the increase fixed for 12 months.  Dr Haider Al Yousuf, director of health funding at the DHA, said: "Price regulation of healthcare services is a best system applied by various countries.  It is an important tool to ensure that quality is rewarded. This essentially means that price regulation incentivizes quality outcomes."  (AB 05.11)

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 5.10  Minimum Wage for Saudis Over Double Expats’ from 2015

Saudi Arabia is considering fixing the minimum wage for both Saudis and expats in the private sector in 2015 as the third part of its wage protection program.  With a minimum wage for Saudis at SAR5,300 ($1,412) and expats at SAR2,500, the Labour Ministry aims to make the private sector more appealing to Saudis and boost the process of job nationalization.  The chairman of the Saudi Labour Market Committee said that salaries of 1,600,070 Saudis employed in the private sector were less than those of expatriates.  A recent study, conducted by the World Bank and the Ministry of National Economy and Planning, showed that salaries of Saudis working in the private sector were less than the natives of other GCC countries would receive.  (AB 12.11)

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♦♦North Africa

 5.11  Egypt’s Economy Grows By 1.1% in First Quarter

Egypt’s economy grew by 1.1% in the first quarter of FY2014/15, which began in July, according to a report by state-owned Al-Ahram.  The figure was 6.8% higher than the corresponding quarter in the previous fiscal year, which was hit by political instability and violence following the military’s ousting of former president Morsi on 3 July 2013.  It attributed the improvement to growth in the tourism and construction sectors, as well as increased revenues from the Suez Canal.

Minister of Planning Ashraf El-Araby said during a press conference that GDP growth rates in the first quarter show that the government’s economic reform program is working and will bolster the report currently being prepared by the International Monetary Fund (IMF), which is expected to be published before the March economic summit.  El-Araby said that he does not deny the challenges facing Egypt, that include economic reform programs in energy, and reducing the deficit, inflation, and public debt, adding that “we will face these challenges and we are determined to move forward”.  (Al-Ahram 18.11)

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 5.12  Egypt Issues Micro-Finance Law to Draw Investors

The Egyptian Financial Supervisory Authority (EFSA) announced that Egypt issued its first law regulating micro-finance services.  The law regulates microcredit provided by non-bank micro-financiers, such as companies and non-governmental organizations, placing them under the authority of the EFSA, while banks will continue to answer to the Central Bank of Egypt.  The law will attract investors and financiers interested in microfinance, be they companies or NGOs, by establishing a credible supervisory system and outlining clear rules to manage risk and protect participants, and by laying out the requirements for financial solvency and disclosure requirements for licensing.  Egypt's cabinet approved the bill in May, which was just signed into law by President El-Sisi after passing a review by the State Council.  Microcredit programs were first introduced in Egypt in the 1980s by the National Bank for Development and Alexandria Businessmen Association along with the technical and financial support of USAID.  (Ahram Online 13.11)

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 5.13  Egypt's Gas Exports Fall 81.4% in September

Egypt's exports of natural gas in September declined 81.4% compared to the same period last year, the state-run Information and Decision Support Centre (IDSC) reported.  The value of exports totaled $18.1 million, compared to $97.1 million in September 2013.  Meanwhile, natural gas production fell 12.2% lower than its September 2013 level, totaling 3.01 million tonnes of natural gas, compared to 3.4 million in the same month of the previous year.  Electric power generation accounted for some 68.7% of natural gas consumption, up from 59.6% a year before, reflecting Egypt's efforts to meet rising domestic demands for electricity.

Delays in exploration are a result of mounting debts to foreign oil and gas companies following the 2011 uprising that toppled Mubarak.  Gas producers currently receive about $2.65 per 1,000 cubic feet, far below the prices paid in the North Sea and elsewhere.  Exports of crude oil and other petroleum products were valued at $321 million, down 20% from $401 million in September 2013.  Meanwhile, domestic consumption of petroleum products rose 26.1% year-on-year to 3.2 million tonnes.  (Ahram Online 13.11)

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 5.14  Egypt's Unemployment Remains High at 13.1% in Third Quarter

Egypt’s unemployment rate shrank slightly in Q3/14 by 0.2% to record 13.1%, CAPMAS announced on 15 November.  The reduction in unemployment, however, remains well above the 8.9% registered in the period ending 30 September in 2010, preceding the 2011 uprising that toppled Mubarak.  According to CAPMAS, there are 3.6 million unemployed Egyptians nationwide.  The country's labor force totals 27.6 million people.  More than 64% of unemployed people are aged between 15 and 29 and at least three quarters of the unemployed hold diplomas or university degrees.

The World Bank said in a report in August that the Middle East and North Africa (MENA) region needs to grow at 6.5% annually to provide 30 million jobs over seven years in the period between 2014 and 2020, so as to reduce high unemployment rates in the region.  Egypt's economy grew a mere 2.2% in the year ending 30 June.  Since then a new government came to office with the promise to achieve 'inclusive growth' that would create jobs.

When Egypt's economic growth rate was 5.1% in 2010, the unemployment rate was 9%. Egypt's government hopes to achieve 6% growth in FY 2018/19.  Urban unemployment reached 16% in the three months ending 30 September while rural unemployment hit 10.9%.  (CAPMAS 15.11)

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6:  TURKISH, CYPRIOT & GREEK DEVELOPMENTS

 6.1  5.5 Million Unemployed In Turkey, Main Opposition Deputy Claims

The number of unemployed people in Turkey is 5.5 million, much higher than the official figures, as 2.5 million people are not included in the Turkish Statistics Institute (TUIK) studies because they have already lost hope in finding a job, according to a deputy for the main opposition Republican People’s Party (CHP). 

TUIK’s report said the official number of jobless Turkish citizens was 2.98 million in August, at 10.1%, a rise of two digits since February.  However, the CHP claimed that the rate was much higher.  They say that when the figure is stripped of seasonal effects, such as agriculture, construction and tourism businesses, the real rate is 10.4%.  Turkey’s unemployment rate hovered at around 10% between 2003 and 2010 despite rapid GDP growth figures.

Turkey’s economic growth slowed to 2.1% in the second quarter of 2014, down from 4.7% in the first quarter.  The number of unemployed people aged 15 and over surged to 2.94 million in August, an increase of 77,000 from the previous month.  The jobless rate was 8.9% for men and 12.7% for women. The youth unemployment rate was announced as 18.9%.  (HDN 18.11)

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 6.2  US Direct Investments in Turkey Falling Short

Turkey attracted a mere $160 million in foreign direct investments (FDI) from the U.S. in the first nine months of 2014, the president of the Union of Chambers and Commodity Exchanges of Turkey (TOBB) has said, in a ceremony to mark the opening of the Istanbul office of the U.S. Chamber of Commerce.  The figure amounts to only 3% of Turkey’s overall FDI of $5.6 billion.  The U.S. Chamber of Commerce has opened its regional office in Istanbul to boost economic ties with Turkey and other countries in the region.  The U.S. is currently the seventh top recipient of Turkish exports and the fifth highest exporter of goods to Turkey.  U.S. direct investment in Turkey only amounted to $9 billion of the total $137 billion FDI in Turkey since 2002.  (HDN 18.11)

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7:  GENERAL NEWS AND INTEREST

♦♦ISRAEL:

 7.1  Bezalel Academy Wins First Place in Tokyo

A delegation from the Bezalel Academy of Arts & Design in Jerusalem won first place among foreign schools at Tokyo Designers Week for its “How To” project — a series of YouTube videos demonstrating how to make products ranging from cotton candy to a stepstool, and how to do things like picking a lock or charging an iPod using fruit.  Design schools from outside Japan may enter their work only in the foreign category and Bezalel beat out 10 other delegations, from schools in France, Switzerland, Korea, Mexico, England and Taiwan.  Tokyo Designers Week, the largest annual event in design and the arts in Asia, attracts more than 100,000 visitors from around the world.  “How To” was conceptualized and curated by industrial designers from Tel Aviv’s Studio Bet-Melacha.  “How To” debuted at Beijing Design Week in late 2012, using clips made by eight Israeli and six Chinese designers.  (Israel21c 06.11)

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♦♦REGIONAL:

 7.2  Lebanon Parliament Extends Term

On 6 November Lebanon’s parliament voted to extend its mandate until June 2017 amid the political deadlock paralyzing the country that has not elected a new president since Michel Suleiman left office in May.  Ninety-five MPs voted for the extension in a session boycotted by the March 8 coalition’s Free Patriotic Movement and the March 14 alliance’s Kataeb Party.  The Armenian Tashnaq Party, meanwhile, voted against the bill.  A number of civil society activists gathered outside the parliament to protest the vote, the second of its kind after the 17-month mandate extension in May 2013.  Public outcry over the delayed parliamentary elections, however, has been muted in Lebanon, where most politicians have portrayed the extensions as necessary measures.

This vote comes under the shadow of the political stalemate over the election of a new president.  With the legislature’s mandate set to expire on 20 November, the country faced a constitutional crisis if parliamentary elections or a term extension did not occur without the election of a president.  (TDS 06.11)

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 7.3  Saudi Arabia, UAE and Bahrain End Rift with Qatar

Saudi Arabia, the United Arab Emirates and Bahrain agreed on 16 November to return their ambassadors to Qatar, signaling an end to an eight-month rift over Doha's support for Islamist groups.  The announcement was made by the Gulf Cooperation Council (GCC) and came after an emergency meeting in the Saudi capital Riyadh to discuss the dispute, which was threatening an annual summit set to be held in Qatar's capital Doha in December.  In an unprecedented move, the three countries withdrew their ambassadors from fellow GCC member Qatar in March, accusing it of undermining their domestic security through its support of the Islamist movement, the Muslim Brotherhood.

Saudi Arabia, the UAE and Qatar have used their oil and gas revenues to influence events in other Middle Eastern countries and any resolution of their differences could alter the political environment in Libya, Egypt, Syria, Iraq and Yemen.  The UAE and Saudi Arabia have both listed the Muslim Brotherhood as a terrorist organization and see political Islam as a challenge to their own systems of dynastic rule.  Kuwait has attempted to mediate between its fellow GCC members. 

Qatar is seen to have been supportive of the Brotherhood in Egypt and the UAE, and more recently in Libya.  Riyadh and the United Arab Emirates also see the Doha-based Al Jazeera news channel as being a Muslim Brotherhood mouthpiece -- something Qatar denies.  (Various 17.11)

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 7.4  UAE National Day Holidays Announced

State agency WAM announced the UAE National Day holidays for the public sector.  While government employees will receive a three-day holiday, no announcement has been made yet on private sector holidays.  The public sector holidays will start on Tuesday, 2 December and continue until Thursday, 4 December.  So, government workers will be able to enjoy five days off in total, including the weekend.  Work will resume on Sunday, 7 December.  (WAM 09.11)

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 7.5  Ailing Ruler Tells Omanis He Will Miss Birthday Celebrations

Oman's Sultan Qaboos, in Germany for medical treatment since July, said he would miss annual celebrations of his birthday this month in the country he has ruled for more than four decades.  Many Omanis have been praying publicly for the safe return of their 73-year-old ruler after nearly four months abroad - an unprecedented absence for the sultan. 

Since taking power in 1970, Qaboos has transformed the small oil exporter from a poverty-stricken backwater torn by dissent into a prosperous Western-allied state, earning a reputation as a mediator seeking to ease periodic tensions between the Gulf Arab states and neighboring non-Arab Iran.

In a video message broadcast on state television, a frail-looking Qaboos offered greetings to Omanis on the occasion of his birthday, which falls on 18 November and is celebrated in Oman as a national day.  Sultan Qaboos usually presides over an annual military parade in Muscat on his birthday, an event he is not known to have missed since ousting his father in a 1970 palace coup.  In private conversations, some Omanis have expressed concern about reports that the sultan is suffering from colon cancer. The authorities have not commented on the reports.  (AB 05.11)

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 7.6  Tunisia Looks to Curb Libya Fallout

Tunisia on 4 November barred Libyans on its territory from engaging in any political activity or organizing any meetings without notifying authorities in advance.  The decision came in the context of efforts to maintain the country's stability and national security, so as not to drag Tunisia into Libya's internal strife.  The Tunisian foreign ministry stressed that Libyan parties needed to abide by Tunisian laws in this regard.  The Foreign Ministry criticized the fact that Libyan parties had convened a meeting without notifying the Tunisian government.  Tunisia has sought to encourage the various Libyan actors to engage in dialogue to reach a political settlement to end the crisis.  In this context, it has announced on several occasions its willingness to host a reconciliation conference between Libyans on its territory.  (Magharebia 06.11)

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 7.7  Moroccan Courts to Adopt Tamazight Language

A Moroccan court will soon adopt a law that enables Moroccans to litigate in the Tamazight language, according to Prime Minister Benkirane in a speech to the House of Representatives.  The prime minister added that the Ministry of Justice and Freedoms is developing special measures and taking a series of steps to constitutionalize the Tamazight language, which is an official language, alongside Arabic.  Benkirane added that his government was working to create broad programs for Amazigh creativity, such as creating a television journalist award in Tamazight language as well as a prize for Amazigh creativity in the Morocco Book Award contest.  (MEP 11.11)

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 7.8  Greek Internet Penetration Rates Soar Across Country

Penetration of information technology continues to increase in Greece, as Hellenic Statistical Authority (ELSTAT) figures showed a significant rise in the number of Greek households with a Web connection and in the portion of the population that systematically use computers and the internet.  The ELSTAT data showed that 66% of Greek households had internet access in the first quarter of this year, which is 10%age points more than a year earlier.  Out of those households 98.6% have access to broadband internet.  The data also showed that 63% of people aged between 16 and 74 years have made use of computers and the internet this year, with the biggest growth seen in the 65 - 74 years group, while 58.4% of Greek citizens have used mobile internet this year, up from 44.7% last year.  (ekathimerini 11.11)

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8:  ISRAEL LIFE SCIENCE NEWS 

 8.1  BioLineRx Successful Phase 1/2 Study for Novel Celiac Treatment

BioLineRx announced successful final results from its Phase 1/2 study for BL-7010, a novel co-polymer for the treatment of celiac disease.  BL-7010 was found to be safe and well tolerated in both single- and repeated-dose administrations, and the optimal safe dose for future development was determined.  Over the next few months, the Company will conduct additional non-clinical studies and formulation development for BL-7010 in preparation for the upcoming randomized, placebo-controlled efficacy study, which BioLineRx expects to commence in the second half of 2015.  In all single- and repeated-administration cohorts, pharmacokinetic analyses revealed no systemic exposure of BL-7010 in plasma and urine samples.  Based on previous communications with a Notified Body in the European Union, the lack of systemic exposure will likely support a medical-device classification for BL-7010, which would significantly accelerate its development in Europe.

Jerusalem’s BioLineRx (http://www.biolinerx.com) is a publicly-traded, clinical-stage biopharmaceutical company dedicated to identifying, in-licensing and developing promising therapeutic candidates.  The Company in-licenses novel compounds primarily from academic institutions and biotech companies based in Israel, develops them through pre-clinical and/or clinical stages, and then partners with pharmaceutical companies for advanced clinical development and/or commercialization.  (BioLineRx 05.11)

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 8.2  BSP Has Good News for Patients With Acute Chest Pains

The Tel Aviv company BSP (http://bsp.co.il), which develops and produces advanced tools for non-invasive diagnosis of heart disease, recently won approval by the Food and Drug Administration (FDA) to market and sell its HyperQ Rest System.  The HyperQ Rest System aids in the diagnosis of patients with chest pain in the emergency room and helps to identify acute coronary events using unique analysis of high frequency ECG signals, recorded during rest.  BSP has proven in clinical trials that its products achieve significant improvement in the diagnosis and monitoring of cardiovascular disease in relation to Standard stress and rest ECG tests.  The American Heart Association also recently stated that high-frequency ECG technology, which is used by the company, is an effective method for detection of coronary heart disease during a stress test.  The FDA has approved the marketing and sale of the system based on clinical trials conducted in emergency departments for the diagnosis of Acute Coronary Syndrome (ACS) in patients with acute chest pain.  At present BSP holds marketing and sales approval in the US and Europe (FDA and CE) for its Stress and rest ECG systems. (Israel21c 12.11)

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 8.3  Galmed First Administration of Aramchol for Cholesterol Gallstones

Galmed Pharmaceuticals announced the first administration of its drug candidate, aramchol, in its proof-of-concept Phase IIa clinical trial for the treatment of newly formed cholesterol gallstones following bariatric surgery.  The Phase IIa trial is being conducted at the Assuta Medical Center in Tel Aviv, Israel and is a single center, randomized, double blind, placebo controlled study, designed to evaluate the efficacy and safety of a once-daily dose of aramchol for three months in 36 adult patients.  The primary endpoint of the trial is a complete dissolution of newly formed cholesterol gallstones following bariatric surgery.  Secondary endpoints include a decrease of more than 50% in the number of newly formed gallstones, prevention of the formation of additional gallstones during the trial period and dissolution of biliary sludge.  

Tel Aviv’s Galmed (http://www.galmedpharma.com) is a clinical-stage biopharmaceutical company focused on the development and commercialization of a novel, once-daily, oral therapy for the treatment of liver diseases and cholesterol gallstones utilizing its proprietary first-in-class family of synthetic fatty-acid/bile-acid conjugates, or FABACs.  Galmed believes that its product candidate, aramchol, has the potential to be a disease modifying treatment for fatty liver disorders, including Non-Alcoholic Steato-Hepatitis, or NASH.  (Galmed 13.11)

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 8.4  Teva Launches Liquid Formulation of TREANDA Injection in US

Teva Pharmaceutical Industries announced the commercial availability of a liquid formulation of TREANDA (bendamustine HCI) Injection.  This new liquid formulation removes the step of reconstituting lyophilized powder with sterile water prior to adding the required dose of medicine to the infusion bag and administering to a patient.  By eliminating the need for reconstitution, preparation time for healthcare professionals is reduced.  TREANDA is indicated for the treatment of patients with chronic lymphocytic leukemia (CLL).  Efficacy relative to first-line therapies other than chlorambucil has not been established.  TREANDA is indicated for the treatment of patients with indolent B-cell non-Hodgkin lymphoma (NHL) that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen.

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 18.11)

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9:  ISRAEL PRODUCT & TECHNOLOGY NEWS

 9.1  Mount Vernon Launches Pango Mobile Payments for Parking

The City of Mount Vernon is introducing drivers to a new way of paying for and finding available metered parking.  Starting 5 November, drivers can use their mobile phones and the Pango mobile app for instant access to available parking spaces.  Most cities in the New York tri-state area require coin payment but Mount Vernon will be among a small group giving drivers more convenience and choice.  Currently being used in New York City and Auburn, the Pango system allows tech savvy drivers to use their cellphones when paying for metered parking; the system remembers where a vehicle is parked and allows users to share a parking session with Facebook friends.  Drivers can sign up to use the Pango service by going to http://www.myPango.com and downloading the app which is available for iOS, Android, Windows Mobile and Blackberry devices.  Clearly marked signs and decals placed around the city will provide directions on how to park with Pango.   Drivers not wanting to use this service have the option to pay by phone or continue to feeding coins to parking meters.

Israel’s Pango (http://www.myPango.com) is considered the company that invented the science behind the first pay-by-phone parking app and was awarded US Patent (5,940,481) in 1997.  It is one of the only companies in the world to provide on street, gated, valet, event, electronic permits and fleet-based parking services through an app and is a member of the International Parking Institute.  (Pango 05.11)

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 9.2  OriginGPS Launches World’s Smallest GPS Module

OriginGPS announced the launch of the Nano Spider, the world’s smallest fully integrated GPS receiver.  The Nano Spider module is designed to support ultra-compact applications where size is at a premium, such as smart watches, wearable devices, trackers and digital cameras.  OriginGPS, which previously introduced the world’s smallest GPS module, the Micro Spider (5.6x5.6 mm), set a new record once again with the Nano Spider, a fully-integrated, highly-sensitive GPS receiver module that is 47% smaller than previous solutions, measuring just 4x4x2.1mm.  Its proprietary structure is a multi-level circuit for surface mounting, built to reduce footprint size.  OriginGPS’ Nano Spider continuously tracks all GPS satellites in view and provides real-time positioning data in the standard industry format defined by the U.S. National Marine Electronics Association (NMEA).

Airport City’s OriginGPS (http://www.origingps.com) is a world-leading designer, manufacturer and supplier of miniaturized GNSS modules (“Spider” family), antenna modules (“Hornet” family) and antenna solutions.  OriginGPS introduces unparalleled sensitivity and noise immunity by incorporating its proprietary Noise Free Zone technology for faster position fix and navigation stability even under challenging satellite signal conditions.  (OriginGPS 10.11)

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 9.3  Mellanox Record ANSYS High-Performance Computing App

Mellanox Technologies has achieved, through collaboration with Dell, world-record performance for ANSYS Fluent 15.0.7, exceeding previous results submitted by more than 25%.  By connecting Dell HPC Solutions’ 32-node high-performance computing cluster with Mellanox’s end-to-end FDR 56Gb/s InfiniBand solutions and HPC-X v1.2 MPI software library, industrial customers can deploy systems that achieve higher application performance compared to systems that are 3X larger in size, resulting in 67% savings on CAPEX and OPEX.  Yokneam’s Mellanox Technologies (http://www.mellanox.com) is a leading supplier of end-to-end InfiniBand and Ethernet interconnect solutions and services for servers and storage.  Mellanox interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance capability.  (Mellanox 10.11)

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 9.4  LyncShield New RSA Token Authentication Solution

LyncShield, an innovative solution that guarantees secure mobile and desktop authentication, launched a new security solution that enables users of RSA SecurityID tokens to safely connect to their organization's Lync server without using their AD (Active Directory) credentials.  The new solution adds another secured authentication option, enabling strong mobile and external Lync authentication for organizations with a network policy that requires Hardware OTP (One Time Password) or TFA (Two Factor Authentication).  Organizations that use the RSA SecurID Authenticator device and other OTP tokens have a problem using them in conjunction with Lync.  LyncShield therefore offers a solution that enables both mobile and desktop users to connect to Lync using their RSA token while avoiding the usage of AD credentials and implementing TFA.  Moreover, LyncShield can require the user to register in a self-service portal to further add security to the authentication process and make sure only registered devices can connect.  LyncShield's new solution also addresses account lockout protection and TFA for external Lync clients.

Asseret’s AGAT (http://www.agatsolutions.com) is a development company specializing in security applications and digital signature solutions.  Its client base includes government offices, banks and insurance companies.  (AGAT 10.11)

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 9.5  Plarium Launches “MageCraft: The War” for Android and iOS Users

Plarium announced the global launch of its latest real-time strategy mobile game, MageCraft: The War, for both Android and iOS devices.  The MageCraft franchise has achieved tremendous success on a variety of social networks, quickly accumulating over 2.2 million players.  Due to popular demand, this fantasy-themed game is currently free to download in Google Play and the App Store.  During the development of MageCraft: The War, the Plarium team was inspired by fantasy books and board games, resulting in an open storyline that includes dwarfs, elves and other mythological characters.  The real-time interface allows users to interact with and fight against millions of hardcore gamers with a similar passion for deep strategy.  Players must build their empires from the ground up, conquer territories, and climb to power in order to restore the magical world of Argento back to its glory.

Herzliya Pituah’s Plarium Global (http://plarium.com) is dedicated to creating the best mobile and social experience for hardcore gamers worldwide.  With over 90 million registered users, we're proud to be consistently ranked among Facebook’s top hardcore game developers.  Plarium employs more than 700 individuals and is headquartered in Israel with four global offices and development studios across Europe.  (Plarium 11.11)

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 9.6  BitBite Launches $60,000 Campaign to Promote Healthy Eating Habits

BitBite launched its crowdfunding campaign on Indiegogo to raise $60,000 for the development of its innovative wearable technology.  BitBite is an Automatic Dietary Recording System (ADRS) that combines a simple tracking system with direct-response, power-of-suggestion guidance designed to improve eating habits and provide weight loss advice.  BitBite is the first wearable device that monitors and improves how you eat.  With BitBite, you eat with awareness: How much? How often? How fast? When and where? It’s not just what you eat, it’s how you eat.  BitBite helps you chew more, digest better, snack less, and recognize satiety.  It’s the missing link to a healthier you.

BitBite enables low-maintenance weight management.  No more tedious food measuring, planning and logging.  Just eat, and BitBite will help you do it better.  When you slow down, chew more and eat at regular intervals, you’ll feel better and lose weight.  For added precision, you can tell its voice-activated sensors what you are eating and receive a daily automated food log, including calorie count and vitamin and mineral intake.  You’ll also receive alerts with nutritional tips based on your log, for example if you haven’t had enough calcium.  Backed by leading academic clinical physicians, dieticians, top nutritionists and algorithm experts in sound analysis, pattern recognition and machine learning technology, BitBite brings a radical, highly-researched approach to eating.

Israel’s BitBite (http://www.bitbite.co.il) is the first wearable device that uses an Automatic Dietary Recording System (ADRS) to monitor and improve how you eat.  BitBite is a revolutionary patent-pending, modern-designed, ultra-comfort ear piece that monitors the users eating pace, quantity, frequency and location.  It aggregates information using real-time data analysis and pattern recognition technology to create a comprehensive overview of how you eat, showing you how to improve eating patterns.  (BitBite 11.11)

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 9.7  LogDog Anti-Hacking Service Protects Private Information Online

LogDog announced the public launch of its Android app, an anti-hacking service that empowers smartphone users to take back control from hackers.  The app is part of a service that protects users’ private online information by immediately sending an alert at the first sign of suspicious activity.  This is the only service that offers users unprecedented control over their private information, ensuring the highest level of security by actively monitoring activity across multiple accounts, including Google and Yahoo! services, Facebook, Dropbox, Evernote, and more to come.

No matter how strong the front-line security is, hackers will find a way to circumvent it and get into private accounts.  Instead of being a victim, LogDog gives users the ability to constantly protect their personal online information and ‘lock’ a hacker out of their accounts.  Considering that 1 in 4 online accounts are hacked, it is extremely important consumers have an app that acts like an anti-virus that protects and guards all of their personal information stored in various online accounts across multiple devices.

Tel Aviv’s LogDog (http://www.getLogDog.com) is an anti-hacking solution that guards users’ online accounts by monitoring activity across multiple online services.  LogDog sends alerts to users when a security breach happens and before it’s too late.  LogDog immediately flags any suspicious activity, empowers smartphone users to take back the control from hackers.  (LogDog 13.11)

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 9.8  Ginger Launches Ginger Keyboard for iOS 8 and Android

Ginger Software announced the iOS 8 and Android launch of Ginger Keyboard, the world's most advanced keyboard.  Ginger Keyboard is the first keyboard to offer advanced writing tools, including live as-you-type proofreading, alongside standard and advanced keyboard features like word prediction, autocorrect, emoji and swipe typing.  The app, available for free download in the Play Store and App Store, offers a fun, productive keyboard experience that helps people quickly write high-quality, accurate text in any application.  Through its one-tap access to the Ginger Page writing app, Ginger Keyboard provides users with powerful writing tools such as a proofreader capable of identifying contextual spelling and grammar errors, rephrasing, contextual synonyms, definitions, translations and a text reader.  By using the keyboard and the writing app together, users will now be able to enjoy a comprehensive keyboard writing experience.

Tel Aviv’s Ginger Software (http://www.gingersoftware.com), founded in 2008, specializes in developing mobile keyboard and writing enhancement apps that enable everyone to quickly write high-quality, accurate messages.  Ginger has developed the NLP platform (natural language processing), which is the foundation for its advanced text analysis applications.  This platform lies at the core of all of Ginger's mobile, web-based and PC products, providing English corrections, editing options, context appropriate synonyms, translations that match the context and original meaning of the content.  (Ginger Software 13.11)

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 9.9  NICE Robotic Automation Eliminates Back Office Drudgery

NICE Systems launched NICE Robotic Automation, an innovative solution that uses software robots to automate routine back office processes to help improve operational efficiency and resource utilization.  With NICE Robotic Automation, employees can focus on more mission critical activities instead of repetitive clerical tasks that can be automated.  NICE Robotic Automation helps to reduce back offices operating expenses and delivers a clear ROI by automating work processes; it can easily and cost effectively scale according to the organization's needs.  Its ability to operate 24/7 significantly increases productivity, allowing a larger number of tasks to be handled at any given time of the day.  Additionally, automating processes improves processing accuracy and frees up employees to handle more sophisticated tasks.

Ra’anana’s NICE Systems (http://www.nice.com) is the worldwide leading provider of software solutions that enable organizations to take the next best action in order to improve customer experience and business results, ensure compliance, fight financial crime, and safeguard people and assets.  NICE's solutions empower organizations to capture, analyze, and apply, in real time, insights from both structured and unstructured Big Data.  (NICE Systems 13.11)

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 9.10  Mellanox Announces Availability of 100Gb/s Direct Attach Optical Cables

Mellanox Technologies announced sample availability for 100Gb/s Direct Attach Copper (DAC) and Active Optical Cables (AOCs) for both EDR 100Gb/s InfiniBand and 100 Gigabit Ethernet data center networks.  Mellanox is the first and only company to offer plug and play 100Gb/s copper, VCSEL and silicon photonics cables in the QSFP28 form factor.  Their ability to drive 100Gb/s throughput over long distance DAC cables delivers a major cost advantage to our customers and reduces overall data center CAPEX and OPEX.  All their cables are designed to make 100Gb/s deployments as simple as 10Gb/s ones.  Mellanox 100Gb/s Active Optical Cables take advantage of a new generation of ICs which fully integrate multiple 25Gb/s clock and data recovery functions (CDR).  At the same time, these ICs dramatically reduce power consumption for the optical engine to far less than 3.5W, the requirement of the small QSFP package.

Yokneam’s Mellanox Technologies (http://www.mellanox.com) is a leading supplier of end-to-end InfiniBand and Ethernet interconnect solutions and services for servers and storage.  Mellanox interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance capability.  (Mellanox 17.11)

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 9.11  MTI Launches New Antenna Line for Toll Road Applications

MTI Wireless Edge announced the release of new range of RFID antennas for tolling applications.  The new Toll antenna range include high gain linear antennas 12dBi to 16 dBi with relatively narrow AZ beam and are built to sustain extremely harsh conditions.  Antennas are available in the 902-928MHz & 865-870MHz as well as 5.8GHz frequency range and includes many models that differ in the coverage area - AZ/EL of 42°/42° 36°/36°, 29°/36° up to °20/35° in UHF.  These antennas complement MTI RFID offering that includes applications such as: Asset Tracking, Work-In-Process, Asset Management, Retail, Oil and Gas, Transportation, Waste management and more.  Rosh HaAyin’s MTI Wireless Edge (http://www.mtiwe.com), a leader in the development production and marketing of high quality, low cost, flat panel antennas for RFID & Fixed Wireless applications offers large portfolio with over 90 models of Linear and Circular, Single and Dual polarity antennas for active and passive RFID Systems.  The frequencies that MTI offer antennas for are 450MHz, 865 -870MHz, 902-928MHz, 950-956MHz, 2.4GHz as well as Integrated Enclosure Antenna solution (IAE).  MTI Military products include a wide range of broadband, tactical and specialized communications antennas, antenna systems and DF arrays installed on numerous airborne, ground and naval, including submarine, platforms worldwide.  (MTI 17.11)

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10:  ISRAEL ECONOMIC STATISTICS

 10.1 Israel’s CPI Rises 0.3% in October

Israel's Consumer Price Index (CPI) for October rose by 0.3%, the Central Bureau of Statistics reported.  The rise was in line with pundits' expectations with a 0.2-0.3% rise predicted.  Since the start of 2014, Israel’s CPI is unchanged.  The index, excluding fruit & vegetables and energy, has risen 0.1%.  Over the 12 months up to and including October, the index has fallen by 0.3%, while the index excluding housing has fallen 1.1%, the index excluding energy has fallen 0.2% and the index excluding fruit and vegetables in unchanged.  Notable rises in October were in fashion and footwear (5.5%), fresh vegetables (2%), food (0.7%), educational services (0.6%, furniture (0.5%), and housing costs (0.2%).  There were notable falls in fresh fruit (1.9%) and culture and entertainment (0.4%).  (CBS 14.11)

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 10.2 Israeli Economy Shrinks by 0.4% in Third Quarter

According Central Bureau of Statistics data, for the first time since Q3/09 the Israeli economy posted negative growth, with GDP dropping 0.4% on an annualized basis in Q3/14.  This fall is attributed to the effects of Operation Protective Edge.  The fall in GDP in the third quarter follows 2.2% growth in Q2/14 and 3.2% growth in Q1/14.  The decline in GDP in the third quarter reflects a decrease in investments in fixed assets and exports of goods and services, excluding diamonds and startups.  Spending on private consumption and public consumption rose.

Exports of goods and services, excluding diamonds and startups, were down 4.4% in the third quarter, with exports of tourism falling by an annualized 77.5% (31.1% in quarterly terms) and industrial exports, excluding diamonds, falling 1.7%.  On the other hand, exports of miscellaneous services, excluding startups, were up by an annualized 10%.  Total exports of goods and services rose by an annualized 2.8% in the third quarter, following a 13.6% drop in the preceding quarter.  Exports of diamonds rose by an annualized 53.3% (11.3% in quarterly terms), while startup exports fells.

Imports of goods and services were up by an annualized 16.2% in the third quarter, following a 4.5% decline in the preceding quarter.  Imports of goods and services excluding defense imports, ships, airplanes, and diamonds rose 9.8% in the third quarter, following an annualized 2.4% increase in the preceding quarter.

Spending on private consumption rose by an annualized 3.9% in the third quarter, representing a 1.8% per capita increase.  The rise in spending on private consumption follows a 3.3% rise in the preceding quarter and an annualized 0.7% rise in the first quarter of 2014.

Per capita spending on private consumption, excluding durable goods (food, services, clothing and footwear, medication, household expenses, and overseas travel) remained unchanged in the third quarter, after rising 2.4% in the preceding quarter.  Per capita spending on consumption of services dropped 7% in the third quarter.  (CBS 16.11)

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 10.3 Israel’s Budget Deficit Halved in October

On 9 November, the Ministry of Finance Accountant General department published the budget performance and tax revenue figures for January-October 2014.  The figures indicate that the budget deficit in October was NIS 2.1 billion, compared with NIS 4.5 billion in October 2013.  The January-October budget deficit totaled NIS 12.6 billion, compared with an NIS 18.5 billion deficit in the corresponding period last year.  The figures also show that government spending (excluding repayment of principal on the debt) totaled NIS 25.9 billion in October and NIS 204.7 billion in January-October, 3.1% more than in January-October 2013.  Tax revenues totaled NIS 20 billion in October. Nominal tax revenues totaled NIS 212.3 bill in January-October, up 7.2% in nominal terms, compared with the corresponding period last year.  (Globes 09.11)

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11:  IN DEPTH

 11.1 LEBANON:  Remittances Key for Lebanon’s Economy 

Expatriate remittances are one of the few indicators that recently brought hope for and strengthened confidence in the Lebanese economy despite the current recession.  According to the World Bank report “Migration and development brief 23,” issued in October, remittances for 2014 could reach $7.7 billion, or approximately 17% of Lebanon's gross domestic product (GDP), a 1.6% increase over 2013 figures.  Thus, Lebanon came in second in the Middle East in terms of remittances in 2014, behind Egypt and ahead of Morocco and Jordan. 

Remittances have always constituted one section of the Lebanese economy, representing an essential part of the country's GDP.  Lebanon was ranked first regionally and 13th globally in remittance-to-GDP ratio, which amounted to 17% for 2013.  Moreover, remittances are the basic source of hard currency for achieving stability in Lebanon's current account balance, especially in a country suffering from a structural trade deficit.  In addition, remittances often take the form of household assistance, and in this instance are essential in driving consumption.  They also allow for the weaving of a safety net for controlling the spread of poverty and providing social services, most notably education and health care. 

At the financial level, expatriate remittances support the solvency of Lebanon's banks, thus consolidating the banks’ potential to finance the economy, in particular their ability to buy Lebanese treasury bonds.  This promotes monetary stability, the only source of stability in a country buffeted by the region's political and security crises, whose repercussions have had negative effects at the economic, military and political levels. 

The most important thing about this source of funding is its sustainability and stable growth rate compared to foreign direct investments, which experienced fluctuations and setbacks since 2006.  On average, since 2002, remittances to Lebanon have mostly increased, with only a few dips, and have been relatively steady for the past four years.  Thus, they constitute a safety valve for the Lebanese economy. 

Remittances rely on the rich and diverse Lebanese diaspora of some 18 - 20 million immigrants, who exceed the number of Lebanese in Lebanon by three or fourfold.  Makram Sader, secretary-general of the Association of Banks in Lebanon, told Al-Monitor that remittances to Lebanon primarily depend on an estimated 500,000 Lebanese nationals who have immigrated since 2006. 

Commenting on the results of the World Bank report, Sader said, “We were not surprised by these figures, which are in line with our expectations and consistent with the global trend. … The striking point is the remittances-to-GDP ratio [16% of the GDP for 2014], which is a very high ratio even when compared to countries such as Mexico [1.9% of the GDP] and the Philippines [9.8% of the GDP], both known for exporting workforce and for the size of their expatriates' remittance inflows.” 

Sader went on, “This indicates an increase of the Lebanese emigrant workforce compared to the Lebanese resident workforce.  There are approximately 400,000 Lebanese workers in the Gulf region, which is a high number, compared to the overall workforce in Lebanon of around 1.5 million workers.  In other words, a large proportion of productive Lebanese nationals have migrated in the last decade.” 

Referring to the World Bank figures, Sader said, “While Lebanese GDP constitutes 2% of total Arab GDP, Lebanese remittances account for 15% of overall Arab remittances.”  This is an additional indicator of the massive migration of the Lebanese workforce. 

The results in the World Bank report are consistent with those of a study published in October, “Emigrants' financial contribution and its influence on the livelihoods in Lebanon,” by the University Observatory of Socio-economic Reality at Saint Joseph University.  The study indicated that Lebanese expatriates in Arab Gulf countries constitute the highest proportion of Lebanese expatriates and provide the largest share at 66.3% of remittances.  The study also showed that 61.4% of recipient Lebanese households use their remittances for food expenses, while 58.9% use them for accommodations and 53.9% to improve their living standards. 

According to the study, remittances to Lebanon play a role in poverty alleviation and serve as a cushion for social services.  The relative frequency of households earning less than 1.2 million Lebanese pounds ($800) a month declines from 21.8% among those who do not receive remittances to 15.9% for families who benefit from remittances.  About 52% of members of households receiving remittances have medical coverage, compared to 60% among those belonging to households without remittances.  As for education, the proportion of young people dropping out of schools and universities to enter the labor market is higher among families who do not benefit from remittances. 

Expatriate remittances are thus a pillar of the Lebanese economy.  Their familial and sustainable structure makes them a safety valve at the economic and social levels, especially in the absence of a state capable of adequately managing the affairs of citizens and ensuring their basic rights. Imagine the situation for Lebanese residents if not for remittances in light of the current economic stagnation and the effects of the Syrian war on the country. 

If politicians were to look at these figures, they might begin to assess the needs of the citizens and the economy differently.  They fully recognize that most of the Lebanese workforce has migrated due to domestic struggles, but nonetheless keep extending a helping hand to their families to fill the void that they, as politicians, have created.  They might also tone down their language toward countries serving as markets for Lebanese workers, who weave Lebanon's safety net with the resources they earn.  (Al-Monitor 07.11) 

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 11.2  JORDAN:  IMF Executive Board Completes the Fifth Review 

On 10 November, the Executive Board of the International Monetary Fund (IMF) completed the fifth review of Jordan’s performance under the authorities’ three-year economic program supported by a Stand-By Arrangement (SBA).  The 36-month SBA in the amount of SDR 1.364 billion (about $2 billion, or 800% of Jordan’s quota at the IMF) was approved by the Executive Board on 3 August 2012.  The completion of the fifth review enables the immediate release of SDR 85.25 million (about $125.4 million), bringing total disbursements under the program to SDR937.75 million (about $1.38 billion). 

In completing the fifth review, the Executive Board approved the authorities’ requests to re-phase the undrawn Fund purchases in three disbursements over the remaining program period; for a waiver of nonobservance for the end-September 2014 performance criterion on the combined public deficit; for a waiver of applicability for the end-September 2014 performance criterion on the primary fiscal deficit; and for the modification of the end-December 2014 performance criterion on the combined public deficit. 

Following the Executive Board’s discussion on Jordan, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, said:

“Jordan faces an increasingly difficult regional environment.  The conflicts in Syria and Iraq, as well as the disruptions in gas supply from Egypt, are putting pressure on the economy, in particular on the fiscal and external accounts.  Nonetheless, the macroeconomic situation has remained largely stable, with growth gradually recovering, inflation contained, the current account deficit narrowing, and international reserves at a comfortable level.  Performance under the Fund-supported program continues to be broadly on track. 

“The authorities remain committed to fiscal consolidation.  Fiscal measures for 2015, including contingencies, provide assurances that public debt will move onto a downward path, starting in 2016.  The income tax law currently under discussion in parliament is a welcome step.  Nevertheless, further tax reforms are paramount and should focus on making the tax system more progressive and on removing tax exemptions. 

“The losses of the electricity company have been higher than expected due to shortfalls in gas supply, with the additional costs being financed by grants.  Steadfast implementation of the energy strategy will be important to ensure cost recovery of the company in the medium term.  While longer-term prospects are now better because of the possibility of gas imports from the Mediterranean, additional measures may be needed should gas supply fall short of the expectation. 

“The central bank is appropriately focused on maintaining comfortable international reserves buffers. Efforts will also continue to further strengthen banking supervision and contain macro-financial risks. 

“Progress has been made in implementing structural reforms.  However, stronger and deeper reforms are needed to address the structurally-high unemployment and boost growth.  Priority should be given to labor market reform, further improving the business climate, and upgrading public financial management and tax administration.”  (IMF 11.11) 

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 11.3  IRAQ:  Budget Failure Creates More Economic Woes for Iraq 

With persistent hurdles delaying Iraq’s approval of the 2014 budget, new ones are standing in the way of the 2015 budget, including the drop in oil prices on global markets and the deduction of the north oil revenues from Iraq’s crude oil production due to military operations following the Islamic State’s (IS) control of large areas of northern and western Iraq since 10 June.  Moreover, the Kirkuk field’s oil production, which is estimated at 400,000 bpd, was excluded from the total Iraqi exports after peshmerga forces took control of the field.  This resulted in disputes between the central government and the Kurdistan Regional Government (KRG) over the oil exports of Kirkuk and other oil fields in the Kurdistan region. Add to this the rise in military spending. 

According to the Iraqyoon News Agency, with the end of 2014 just around the corner and with the late budget approval and the former government’s spending of all oil revenues of the first seven months, the budget amendment and approval is becoming a hard task. 

In this framework, economist Bassem Antoine told Al-Monitor that the delay in the 2014 budget approval was affecting Iraq’s economic growth.  He asserted that the Iraqi government has to realize the great danger surrounding the Iraqi economy, as the delay in approving the budget has led to economic recession, especially in the fields of investment and operation.  Moreover, the private sector, which includes more than 4 million employees, has been crippled.  Antoine stressed the importance of limiting the 2014 budget to essential spending and postponing the remaining commitments until the year after. 

Member of parliament Hareth Shanshal al-Harithi, a member of the budget approval committee, told Al-Monitor that the parliamentary committee and the Ministry of Finance have not reached any results.  The ministry is in a state of confusion because it does not have the power to initiate the state budget.  Meanwhile, the other ministries requested from the latter advances to cover their operating expenses, such as employees’ salaries.  The Ministry of Finance will then settle the advances from the budget allocations of the ministries when the state budget is approved. 

The operating budget for 2014 was disbursed as payments allocated to other ministries by the Ministry of Finance.  This has become a fait accompli. This disbursement was made from the accumulated excesses of the ministries’ budgets for the previous years.  Harithi expected the investment budget to be forwarded to the next year once the 2015 public budget was approved. 

Regarding the budget deficit, Technology and Science Minister Fares Jajo told Al-Mada newspaper that the huge budget deficit was still surprising because the budget draft law prepared by Nouri al-Maliki’s government overstated its oil revenue expectations and carried forward burdensome financial commitments that pushed the executive authority to demand reviews of armaments contracts and military commitments. 

Oil expert Hamza al-Jawahiri told Al-Monitor that there was a huge underlying deficit in the current 2014 budget due to the drop in oil exports from the northern fields.  This stems from the security situation and because Kurdistan is not exporting its agreed-upon share.  Its production remains outside the federal government’s calculations, resulting in a loss of more than 1 million bpd and a drop in prices due to vague and contradictory reasons. 

“To overcome this crisis, we need a courageous decision from a strong government that puts the country’s total imports under the control of the federal government.  We also need to know whether the statements from the Kurdistan region about approaching 700,000 barrels a day worth of imports, in addition to the imports from land outlets and agricultural production, are true and whether the region has reached autonomy.  In this case, Kurdistan would have to deduct 17%, which is its share of the general budget, and hand in the rest to the federal government.  Moreover, an austerity policy should be adopted in all ministries and departments.  The country and its budget are heading into the unknown,” Jawahiri said. 

Oil Ministry spokesman Assem Jihad told al-Fayhaa Satellite Channel on 28 October of attempts by the federal government and the Iraqi Kurdistan government to resolve the oil dispute, saying, “Both parties are trying to end the oil dispute and resolve the pending problems between Baghdad and Erbil.” 

Economic adviser to the Iraqi premier Abdul Hussein al-Ankabi told Al-Monitor, “The 2014 general budget is a fait accompli.  It is no longer a budget because it was actually spent and its approval now is just a documentation of expenses.”  He said work is in progress to delete some of the articles from the draft law to decrease the deficit, especially because it has reached around $40 billion. 

Ankabi said the delay in the final accounts of three ministries had nothing to do with the approval of the budget, which he expected to be voted on by parliament before the end of 2014.  He highlighted the importance of approving the 2015 budget before the new year because the competent committee completed its work a while ago.  He also stressed the importance of reviewing the budget as soon as possible, since the 2015 budget was based on oil prices of $90 per barrel.  However, this price should be pegged at $70 per barrel as part of the austerity measures needed to decrease the expected deficit.  (Al-Monitor 11.11) 

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 11.4  BAHRAIN:  Steady Growth for Bahrain’s Economy 

A solid performance from the non-oil sector and increased state spending are forecast to drive economic growth in Bahrain above both regional and global averages this year, though falling oil prices and rising debt levels could impact expansion in 2015. 

In its latest global economic outlook, released on 7 October, the IMF projected that Bahrain’s economy would expand by 3.9% this year, well above the 2.7% predicted for the broader Middle East.  Though the IMF’s growth forecast is stronger than the regional average, it does indicate a slowing of the economy, which expanded by 4.9% in 2013, according to the fund’s estimates.  This trend is expected to continue into 2015, with the IMF forecasting GDP to increase by a more moderate 2.9% next year. 

Growth is forecast to keep a steady pace through to 2019, with expansion set to be 3.3%.  This slightly decelerated rate of growth sits in the context of the fund’s expectations for the Middle East in general, with regional GDP set to rise by 3.9% in 2015 and 4.6% by 2019.

The IMF’s projections could come up slightly short, however, if indications from the economy’s performance in the second quarter are anything to go by.  Data issued by the statistics agency, the Central Informatics Organization, in September showed year-on-year (y-o-y) growth was 7% at current prices, with the construction, transport, communications and financial services sectors all expanding well above the IMF’s forecast rate.  The hydrocarbons sector posted growth of 9.3% y-o-y, though it was coming off a low base in the second quarter of 2013, when significant portions of production capacity were out of service due to maintenance. 

Infrastructure Lift 

Some of the forecast growth in the coming year will be generated by a stepping up of state-backed infrastructure development, with the government allocating up to $4.4b for major capital works, coming both from direct budgetary allocations and funds provided by the GCC. 

According to Kamal bin Ahmed, the minister of transport and the acting chief executive of the Economic Development Board, the heightened infrastructure spending will supplement existing growth levels and also strengthen the economy’s base for longer-term development.  “This will not only act as an immediate stimulus, but also help to put in place the infrastructure that will support long-term growth,” he told Bloomberg in September.  “For example, the development of the GCC railway and the investment in Bahrain International Airport will help to improve our already strong connectivity with our GCC neighbors.” 

Debt Shadow 

While the government is planning to boost capital works spending, it will be wary of adding too much to its existing debt stock, which has grown in recent years.  Debt levels rose to $13.2b, representing 44% of GDP at the end of 2013, up from 36% in 2012, with further debt-funded spending having the potential to push this close to 50% of GDP this year.  Higher spending across the 2013 fiscal year left Bahrain with a $1.1b budgetary deficit, and with additional outlays planned this year and next, this could rise further. 

While debt levels are seen as a problem, ratings agency Moody’s has said the government has shown it is determined to improve its financial position.  In a report issued in late September, the agency said that while Bahrain faced various challenges, including the limited scope for additional revenue generation and popular pressure to increase current spending, the government’s renewed commitment to reinforcing fiscal balances should lead to gradual improvement. 

Among the positives cited by Moody’s in its investor note were the return to profit of government investment fund Mumtalakat and a strengthening of the domestic banking sector, which had its outlook upgraded from negative to stable by the agency in March. 

On the other side of the ledger, Moody’s said that limitations to local oil production meant Bahrain would be restricted in boosting revenue from that source, which accounted for 85.6% of total state income last year. 

That ledger could see more red ink in the coming year with the steady easing of oil prices, which by mid-October fell to below $90 a barrel, a four-year low.  With some estimates putting the break-even point for Bahraini oil at $116.40 for next year, the government could be faced with a widening gap in its budget revenues in 2015 unless there is a significant rebound in the global market.  However, with forecasts for prices to remain flat or even retreat further by 2016, Bahrain may not be able to rely on its modest oil production to bridge its budgetary deficit.  (OBG 10.11) 

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 11.5  UAE:  Immune To Global Oil Crisis? 

Philip P. Merrell wrote on AME (http://ameinfo.com) that UAE authorities and analysts have begun to calculate the cost of plunging oil prices on the local, energy-driven economy. 

Having lost almost a quarter of its value since June 2014, Brent crude has stumbled to a four-year low of $85 in early November 2014, amid growing concerns for the world’s major exporters. 

As one of the world’s biggest exporters, the UAE is more than aware that the current downward trend is eerily approaching its fiscal breakeven price of $81.3 per barrel, after which crude production will no longer be profitable.  Moreover, implications for the wider region are vast too, as every $10 fall in the price of oil cuts the Gulf’s export revenue by $60 billion, according to estimates from Capital Economics. 

AMEinfo asks, therefore, whether the time has come for UAE authorities to start reaching for the panic button. 

“There will be no impact” 

Speaking to Reuters, Mohammad Ahmad bin Abdul Aziz Al Shehhi, undersecretary at the Ministry of Energy, suggested that the UAE is well up for the fight.  “Oil accounts for less than 30% of our GDP, so there will be no impact.  The UAE economy is now very diversified,” he says. 

Another significant factor that works in the Gulf state’s favor is that, much like its neighbors, it has built up ample financial reserves while energy costs were soaring.  That, coupled with very low sovereign debt, means the UAE should be comfortable in riding out any short-lived oil slump, argues George Abed, from the Institute for International Finance (IIF).  “The GCC countries are probably the only group of oil producers that may not feel bound by the calculus of immediate profitability as they generally base their energy investment decisions on long-term, strategic considerations. They also have the financial means to take this view and act on it,” says the IIF’s chief economist. 

As for the effects of the price dip on the economy, the UAE’s GDP is still projected to grow by 4.5% in 2015, according to a Reuters poll of analysts. 

Global crisis, regional dilemma 

Mubasher Trade, a Dubai-based online broker, points out that the factors behind the price decline are numerous.  Namely, “lower economic growth forecast by the International Monetary Fund (IMF) on concerns of weaker growth in the euro zone, Japan and emerging markets,” and “a growing shale-oil industry in the US, which increases the overall supply of energy in the world,” have contributed to a global demand/supply imbalance that is driving the price down, the company’s economic report reveals. 

As such, the GCC states face a dilemma of whether to defend the market price by cutting supply, or their market share by increasing their individual output. 

Speaking to AMEinfo, Abed suggests that an increase in US shale operations should actually not have a significant impact on Gulf exports, to the States at least.  “The surge in oil production in the US from shale deposits has certainly been a game changer in the global oil market.  The main impact, however, has been a huge reduction in the import of light, sweet crude, but continued US reliance on heavy, sour crude imported mainly from the GCC and Venezuela, albeit in smaller amounts than before.” 

Moreover, with the UAE slightly increasing its production in September to 2.77 million barrels per day (bpd), which is just shy of its 2.9m bpd production capacity, and even Saudi Arabia, the world’s swing producer, increasing output amid the crisis, it would seem that we are heading for an all-against-all struggle for the market. 

Diverse yet dependent 

Despite the confidence, there are several factors to suggest that the UAE is by no means immune from an oil industry in crisis.  Namely, while the country has made significant steps towards diversifying its economy, unlike Kuwait, for instance, whose wealth is 90% driven by crude, there is considerable overlap within sectors, with oil playing a central role. 

The booming influence of Dubai and Abu Dhabi in the aviation industry, as an example, has helped the UAE become a major, global transit hub; with authorities claiming that the sector could contribute up to 30% of GDP by 2020.  However, a key factor for the rapid growth of Etihad Airways and Emirates Airline has been their reliance on subsidized fuel, which requires a healthy energy sector.  Moreover, considering aviation also affects industries such as tourism and logistics, also key contributors to GDP, the future of oil will clearly have a cross-sector impact on the UAE economy. 

Furthermore, while decades of production and high prices, which were sitting comfortably at $110 as recently as June 2014, have contributed to huge sovereign reserves, state-financed projects have been significantly increasing in recent years, on the premise that oil would continue providing a steady income, claims Abed. 

Most notably, having been awarded the Expo 2020, infrastructure projects in the UAE have increased five-fold in 2014 when compared with the previous year.  The launch of the Dubai Tram, phase one of the Emirates Rail, as well as the continued efforts in transforming Al Maktoum Airport into the world’s biggest, have chipped more than $15bn out of the state budget in 2014. 

With public spending showing no signs of slowdown, authorities must understand that an energy industry at risk affects all and must be confronted heads-on.  Diversification, while useful, is simply insufficient in an economy that sprung up hand in hand with oil production.  (AMEInfo 03.11) 

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 11.6  UAE:  IMF Staff Concludes Visit to the United Arab Emirates 

An International Monetary Fund (IMF) mission visited the United Arab Emirates (UAE) during 28 October – 5 November to review macroeconomic and financial developments.  At the conclusion of the visit, the IMF issued the following statement today in Dubai: 

“Economic recovery has continued at a solid pace, supported by construction, logistics, and hospitality.  Ongoing public projects in Abu Dhabi and continued strength in Dubai’s services sectors have continued to underpin growth.  Growth in real hydrocarbon GDP has continued to moderate in the context of an amply supplied global oil market.  Overall, GDP is projected to grow at around 4¼% this year, supported by ongoing strength in non-oil growth (around 5½%). 

“Residential real estate prices in Dubai stabilized over the summer as sales volumes moderated.  The slower momentum in the market is welcome news following a period in which prices had increased at a fast pace. 

“Fiscal policy this year has continued to gradually unwind the large expansion that was put in place in the wake of the 2008/9 global financial crisis.  The decline in oil prices by around 20% over the last three months, if sustained, could have a significant impact on oil revenue.  The UAE has sovereign wealth fund buffers and a relatively lower fiscal breakeven price compared to other major oil producers, allowing it to continue on its path of gradual fiscal consolidation and thereby to minimize the drag on growth.

 “Banking system developments have been broadly encouraging.  Amid ample liquidity in the banking system, private sector credit has continued to strengthen.  The banking system has remained well-capitalized and non-performing loans have continued to decline.

 “Dubai’s government-related entities (GREs) have continued to improve their debt profiles.  Following the completion of the major debt restructurings from the 2008/9 crisis, several GREs have begun making early repayments of upcoming maturities.  While debt levels for some GREs continue to be significant, overall, stronger financial positions and lengthened maturity profiles have further reduced debt-related risks.  Looking ahead, with Dubai GREs periodically announcing new large projects in real estate and hospitality, close coordination will be needed to ensure that the provision of new supply remains in line with reasonable demand projections.  (IMF 05.11) 

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 11.7 UAE:  Sharjah 'A/A-1' Ratings Affirmed On Strong Economic Growth 

Overview 

  • We estimate real per capita GDP growth, weighted as per our criteria, at 4% in the Emirate of Sharjah over 2008-2017.
  • This relatively high growth rate is supported by trends in neighboring emirates and Sharjah's relatively diverse economy.
  • We are affirming our 'A/A-1' ratings on Sharjah.
  • The stable outlook balances our view that Sharjah's relatively high GDP per capita will benefit from the United Arab Emirate's robust growth against the Sharjah government's still-high interest burden compared with similarly rated sovereigns.

Rating Action 

On 7 November, Standard & Poor's Ratings Services (http://www.standardandpoors.com/) affirmed its 'A/A-1' long- and short-term foreign and local currency sovereign credit ratings on the Emirate of Sharjah.  The outlook is stable. 

Rationale 

The ratings are supported by the solid growth in Sharjah's GDP per capita and an improvement in the government's debt servicing costs following the finance ministry's refinancing program this year.  The ratings are also supported by the advantages Sharjah derives from its membership in the United Arab Emirates (UAE), which include low external risks for Sharjah.  We believe that, under certain circumstances, Sharjah would receive extraordinary financial support from the UAE if needed. We do not currently anticipate that such a need will arise, however. 

The ratings on Sharjah are constrained by its underdeveloped political institutions and highly centralized policy-making, which we think can undermine policy predictability similar to our assessment of other Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE).  In addition, the emirate's economic and demographic data, including national income and external accounts, are substantially weaker, in terms of availability and timeliness, when compared with other rated peers. 

Sharjah is the third-largest member of the UAE based on population, GDP and geographic area.  It has approximately 10% of the UAE's total population and accounted for about 5% of the UAE's GDP in 2013. 

Policy-making is highly centralized and depends heavily on Sharjah's ruler, Sheikh Dr. Sultan bin Mohammed Al Qasimi.  In our opinion, this could undermine institutional effectiveness and policy predictability.  On the other hand, having ruled Sharjah since 1972, Sheikh Sultan has been instrumental in implementing the emirate's long-term economic and social development objectives.  We do not expect any significant changes in the government's policy stance.  Scope for political participation is limited to the Sharjah Consultative Council, but citizens' relatively easy access to the leadership strengthens domestic stability, in our view. 

The real economy in Sharjah is supported by a relatively diverse production base.  The four largest sectors in the economy are real estate and business services (about 20%); manufacturing (16%); mining, quarrying, and energy (13%); and wholesale and retail trade (12%).  We estimate GDP per capita at $27,000 in 2014. In the absence of official real GDP data, we estimate real GDP growth using consumer price inflation as a proxy deflator.  We estimate real economic growth at about 6% this year, in line with trends in neighboring emirates.  In our view, Sharjah's economic performance is closely tied to that in the Dubai and Abu Dhabi emirates, where many Sharjah residents travel for work.  Our estimate of real per capita GDP growth, which is a weighted average for the 2008-2017 period, stands at 4%.  This is high compared with peers with similar wealth. 

The Sharjah government's budget is small, largely because the federal budget covers a large share of public services.  We estimate that government expenditures will equate to 8% of GDP in 2014.  The government's revenue base is similarly small, at about 6% of GDP. 

The government's 2014 budget outlines the major contributors to government revenues as oil and gas (18%), customs (17%), company registration fees (15%) and the police department (14%; mainly fines).  The Sharjah government aims to meet current spending - that is, the cost of running the various government departments - from its recurrent revenue base.  One-off expenditures are typically met from extraordinary revenue items, such as revenue from land sales.  The government generally limits its borrowing to finance its capital expenditures, which are typically aimed at infrastructure investments to supplement the basic services provided at the federal level. 

The government provided about 0.5% of GDP in financial support to loss-making Sharjah Electricity and Water Authority (SEWA) in 2009-2012.  We estimate that the government is likely to provide a similar amount in 2014, as SEWA's cost base has increased, partly resulting from higher-than-expected purchases of diesel fuel.  We expect declining domestic hydrocarbon production to accentuate pressure on SEWA's finances and require additional government support over the medium term. 

In our opinion, the general government deficit will likely widen in 2014 as capital expenditures expand.  We think the government will post modest deficits of less than 2% of GDP during 2014-2017.  In our baseline scenario, we expect that government borrowing will be limited to that required for capital spending, and that net government debt will average 7% of GDP in 2014-2017. 

Partly owing to the small size of the overall budget, government interest expenditures are relatively high as a proportion of government revenues.  We think this ratio will average about 9% in 2014-2017, down from the 12% we estimated in May 2014, primarily due to the government's refinancing this year of much of its debt.  The government has issued a $750 million, 10-year, al-ijara sukuk.  The government has consolidated its borrowings into a smaller number of transactions, reduced the cost of funds, decreased interest rate risk and extended the weighted average maturity of its debt to 6.1 years from 3.8 years.  

Under our criteria, we use UAE data to assess Sharjah's external risks, because data on Sharjah's balance of payments and external position is not available.  We think that Sharjah's external risks are limited by the UAE's extremely strong external balances, combined with its system of fiscal transfers and banking coordination.  We expect the UAE's current account to show an overall surplus of about 7% of GDP in 2014-2017. 

We estimate Sharjah's risks from contingent liabilities as limited.  We would expect potential contingent liabilities from the financial sector to be modest, given that Sharjah-based banks are well capitalized.  Furthermore, Sharjah-based banks are supervised by the Central Bank of the UAE (CBU) and would be eligible for liquidity and capital support from the CBU and the UAE federal government if the need arose.  In our view, the UAE's monetary and banking union limits the external risks of the smaller emirates, including Sharjah, and would provide a cushion in the event of an external shock.  The UAE dirham is pegged to the U.S. dollar.  This foreign exchange regime has removed some uncertainty for Sharjah's private sector, albeit at the expense of diminished monetary flexibility. 

Outlook 

The stable outlook balances our view that Sharjah's nominal growth will remain strong, averaging about 8% in 2014-2017, against the Sharjah government's still relatively high interest burden, which we anticipate it will keep relatively stable over the same period.  We expect the UAE's system of fiscal federalism to continue supporting Sharjah and covering its basic services.  We assess as strong the likelihood of extraordinary support from the UAE (with backing from Abu Dhabi) to Sharjah in the event of financial distress. 

We could consider lowering the ratings if Sharjah's economic or fiscal performance deteriorated markedly.  For example, we foresee pressure on the ratings if Sharjah's GDP per capita falls noticeably below our current estimates or if we revise upward our estimates for the average annual change in Sharjah's general government debt by more than 1% of GDP. 

We could raise the ratings if Sharjah's data transparency and development of public institutions improved significantly.  Moreover, improvements to fiscal performance, including measures to raise revenues, could be positive for the ratings.  (S&P 07.11) 

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 11.8  EGYPT:  Ratings on Egypt Affirmed at 'B-/B'; Outlook Stable 

On 14 November, Standard & Poor's Ratings Services (http://www.standardandpoors.com) affirmed its 'B-/B' long- and short-term foreign and local currency sovereign credit ratings on the Arab Republic of Egypt.  The outlook is stable. 

Rationale 

The affirmation reflects our view that Egypt's political landscape has begun to stabilize following a fairly smooth electoral process and a subsequent improvement in the security situation, alongside the implementation of a series of economic reform measures. 

In addition, given Egypt's important geopolitical status, we expect that official donors will continue to provide the Egyptian government with sufficient foreign funds (and oil supplies) to manage the country's short-term fiscal and external financing needs. 

Former Chief of Army Staff, Field Marshal Abdel-Fattah El-Sisi, was sworn in as president in June 2014 and since then the Egyptian political landscape has seen a broad return to law and order and stability.  President Sisi's election campaign ran on a platform that included restoring law and order and disbanding the Muslim Brotherhood. 

These policies are in line with the geopolitical interests of key Gulf Cooperation Council (GCC) states that are providing financial support to Egypt.  Nevertheless, recent bombings in the Sinai region have killed 31 soldiers, highlighting the fragility of Egypt's security and newfound political stability. 

In addition, problems regarding the social inclusion of all elements of Egyptian society remain. Parliamentary elections are due to be held by end-March 2015 and will be another key political milestone. 

As stability has improved, growth has seen a mild uptick.  The financial year runs from July to June and real GDP grew by 3.7% year-on-year in the last quarter (April-June) of the 2013/2014 financial year, up from 2.5% in the previous quarter. 

However, owing to low growth in the first half of the year, economic output in FY2014 averaged only 2.2%.  Although stimulus packages in late 2013 and early 2014 supported the economy, tourism and the extractive industries suffered, hitting growth rates. 

The government plans to boost the economy further by unveiling a number of projects at an international investor conference scheduled in Sharm-el-Sheikh for March 2015.  It has also begun to assist Egypt General Petroleum Corp. in paying off its existing arrears.  Combined with the sale of exploration licenses, this should help to improve economic prospects. 

We forecast that GDP growth will improve to an average of 3.2% between 2014 - 2017 and that GDP per capita will grow by 1.5% on average.  That said, we consider this a low rate of growth for a country that has a GDP per capita of about $3,500.  Inflation and crowding out of credit for the private sector (owing to high government debt levels) will also weigh on growth. 

In addition to stabilizing the security situation and stimulating growth, the government has launched a number of fiscal reforms.  These include raising subsidized fuel and electricity prices; it plans to reduce and eventually phase out fuel subsidies over the next five years.  The government also raised taxes on high-end income and corporates, as well as on property.  It also plans to introduce a value-added tax to replace the existing goods and services tax.

These measures are intended to reduce the deficit over the medium term, but are partially counterbalanced by increased spending on health, education, and scientific research, which is constitutionally mandated, and on more targeted benefits.  The government also views the fiscal measures as an attempt to meet its broader policy objectives: the redistribution of wealth and the promotion of social justice.  The government's target is to cut the fiscal deficit to 10.5% of GDP in FY2015 from the 12.8% recorded in June 2014. 

We estimate the annual change in general government nominal debt will average about 12% of GDP in 2014-2017.  The government's stock of debt is very high, due to high fiscal deficits.  A recent issuance of Suez Canal investment certificates was significantly oversubscribed, but adds to government debt.  We expect general government debt (net of liquid assets) to average about 81% of GDP in 2014-2017 after rising sharply from 68% in 2012. 

General government interest payments increased sharply to about 34% of revenues in 2013, from 27% in 2012, and we estimate that they will average 35% between 2014-2017.  We consider the government's ability to significantly cut spending is limited, particularly given Egypt's shortfall in basic services, its constitutionally mandated expenditures, and its attempts to redistribute wealth. 

Domestic banks are heavily exposed to the Egyptian government.  Banks' customer deposit bases have continued to grow, but private-sector credit has remained relatively flat.  Banks chose to invest their excess liquidity in domestic government debt offerings.  They have therefore remained keen buyers of government paper, but these purchases could stop if banks' risk appetites change or they see a sharp slowdown in deposit growth. 

The banking system's nongovernment local currency deposits are currently growing by about 21% a year.  In our view, if this growth were to slow significantly, the Egyptian government would face even higher rates of monetization (and thus inflation) and could even default on its local currency obligations.  In addition, the Central Bank of Egypt (CBE) is already absorbing a significant portion of the government's domestic debt. 

We estimate this high degree of monetization, alongside supply-side constraints, will generate average annual inflation of 11% in 2014-2017. 

Our external forecast indicates that Egypt's current account deficits will average 2.3% of GDP between 2014-2017.  Over the same period, we estimate its external debt (net of official reserves and financial sector external assets) will average a relatively modest 27% of current account receipts (CARs). 

Egypt's overall net external liability position reached a much more significant 109% of CARs in 2013, according to our estimate. 

We anticipate that official donors will continue to provide the Egyptian government with sufficient financial support to prevent a balance-of-payments crisis.  Kuwait, Saudi Arabia, the United Arab Emirates, and Qatar provided Egypt with $16.6 billion in FY2014 (5.7% of GDP). 

Of this amount, $3 billion was in grants; $7.6 billion was in the form of energy products; and $6 billion was deposited at the CBE, provided as a zero-interest loan to the CBE to boost reserves. We expect a slightly lower level of support in FY2015, delivered in a similar form. 

We assess Egypt's monetary policy flexibility as low, reflecting our view of the CBE's intermittent interventions in the foreign exchange market and its exposure (along with that of the banking system) to the government.  Despite the CBE's interventions, the Egyptian pound has depreciated by about 23% against the U.S. dollar since January 2011, including about 3% during 2014. 

Outlook 

The stable outlook balances our expectation that Egypt will remain politically stable and that its economic growth prospects will improve, against its high fiscal deficits and significant financing pressures. 

We could lower the ratings if fiscal or external indicators were to deteriorate significantly or if the financial sector's appetite for government debt issuance were to change.  We could also lower the ratings if we anticipated that sufficient and timely donor support to help Egypt meet its external financial obligations would not be forthcoming.  A downgrade could also signal our concern about the imminence of default risk. 

We could consider raising the ratings if growth rates were to rise alongside an improvement in fiscal and external performance.  (S&P 14.11)

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