Fortnightly - October 8, 2014

EDI Fortnightly Report

TOP STORIES

TABLE OF CONTENTS:

 1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  Netanyahu & Finance Minister Conclude Budget Battle With Compromise
1.2  Government Approves NIS 20 Billion Privatization Plan 
1.3  Israel Allocates NIS 1.7 billion to Fight Poverty
1.4  Ministerial Committee Approves Angels Law Amendment
1.5  Israel Awards Intel $300 Million Grant

 2:  ISRAEL MARKET & BUSINESS NEWS

2.1  Lockheed Martin & Yissum Sign Long Term Collaboration Agreement 
2.2  Newport Completes Acquisition of V-Gen  
2.3  Kaspersky Lab to Open Jerusalem R&D center   
2.4  Valens Recognized as One of Israel’s Fastest Growing Tech Companies  
2.5  Celeno Among Top 5 Fastest Growing Tech Companies in Israel  
2.6  Magal Solutions Win Best Product Awards at ASIS International 2014  
2.7  Rafael Agrees to Indian Missile Deal  
2.8  Adama Establishes Major Foothold in China  
2.9  Checkmarx Named Fastest Growing Security Company in Israel  
2.10  OurCrowd's Portfolio Company ReWalk Launches IPO on NASDAQ   

 3:  REGIONAL PRIVATE SECTOR NEWS

3.1  Ticketmaster Expands Presence To Qatar
3.2  PepsiCo Opens Innovation Center in DuBiotech
3.3  Dubai to Have 80 More Private Schools Operating by 2020
3.4  Nareva Selects GE Turbines for 100MW Wind Farm in Morocco

 4:  CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1  $50 Million Project Financing for One of Jordan’s Largest Solar Power Plants 

 5:  ARAB STATE DEVELOPMENTS

5.1  Lebanon’s Trade Deficit Widens as Imports Jump 16%
5.2  World Bank Support to Address Water Shortages in Lebanon 
5.3  Israel Gas Deal Will Save Jordan JD 700 Million Annually 
5.4  Jordan’s Shale Oil-Fuelled Power Plant to be Ready Late 2018
5.5  Jordan & US Sign 4 Grant Agreements Worth $633 Million
5.6  Kurds Ship $1.3 Billion in Oil Since May

♦♦Arabian Gulf

5.7  Kuwait Budget Surplus Up In Last Fiscal Year as Spending Slows
5.8  Construction Work Starts on UAE's Third Nuclear Reactor
5.9  US Approves $2.5 Billion to Upgrade Used Military Vehicles for UAE
5.10  UAE President Names New Central Bank Governor
5.11  Saudi Economic Growth Eases to 3.8% in Second Quarter

♦♦North Africa

5.12  Egypt’s Central Bank Says Budget Deficit Shrunk in 2013/2014
5.13  Suez Canal Revenue Rises 12% to $510 million in August
5.14  Morocco Launches Great Casablanca Regional Development Plan

 6:  TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1  Turkish Foreign Trade Gap Grows Above Projections 
6.2  Turkish Inflation Falls Below 9% Due to Tobacco & Food Prices 
6.3  Turkey's Crude Oil Imports Drop in First Half of 2014 
6.4  Turkish Auto Sales Drop 19% in Nine Months 
6.5  Turkish Dairy Producers to Enter Russian Market 
6.6  Fiscal Council Sees 0% Growth for Cyprus in 2015 
6.7  Greece Draft Budget Puts 2015 Growth At 2.9% 

 7:  GENERAL NEWS AND INTEREST

♦♦ISRAEL:

7.1  Israel Spends NIS 32 Million Treating Wounded Syrians
7.2  Sukkot Holiday Celebrated 
7.3  Shemini Atzeret/ Simchat Torah Celebrated 

♦♦REGIONAL:

7.4  Turkey Life Expectancy at Birth Less Than EU Average 

 8:  ISRAEL LIFE SCIENCE NEWS

8.1  Clear-Cut Announces CE Mark for ClearSight MRI System
8.2  Kamada Second Extension of Strategic Agreement with Baxter 
8.3  Galmed & Itamar Medical Collaborate on Assessing Aramchol's Effect  
8.4  Compugen New Results for Target Candidate for Cancer Immunotherapy 
8.5  Cell Cure Neurosciences Files an IND with the FDA for OpRegen 
8.6  Kadimastem Approached the FDA Regarding Its ALS Treatment 

 9:  ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1  Ecoppia Selected for Five New Solar Projects
9.2  Connect One Launches Next Generation IoT WiFi Modules 
9.3  Seatylock - Bicycle Saddle That Turns Into A Lock 
9.4  Yahoo! Japan Selects Mellanox InfiniBand Solutions 
9.5  Giraffic & Vuser Enhanced China’s Over-the-Top Market 
9.6  TowerSec ECUSHIELD Cyber Security Software Showcased 
9.7  StoreDot $42 Million in New Funding to Bring Devices to Market 
9.8  Salt of the Earth Innovative Salt Products Win SIAL 2014 Selection 

 10:  ISRAEL ECONOMIC STATISTICS

10.1  Israel’s August Unemployment Rate Increases
10.2  Israel Ranks 11th in 2014 Global Wealth Report
10.3  Israel’s Defense Exports Down in 2013

 11:  IN DEPTH

11.1  LEBANON: Syrian Refugees in Lebanon Are a Ticking Time Bomb
11.2  LEBANON: An Economy Under Strain
11.3  JORDAN: Pharmaceuticals Propel Jordan’s Economic Diversification
11.4  ARABIAN GULF: Gulf Arab to Grow Faster in 2015 Despite Cheaper Oil
11.5  KUWAIT: New Schools to Meet Growing Demand in Kuwait
11.6  UAE: Abu Dhabi 'AA/A-1+' Ratings Affirmed On Large Net Asset Positions
11.7  TUNISIA: Elections & Steps Toward Democratic Consolidation
11.8  TUNISIA: Will Tunisia Ever Become a 'Mediterranean Tiger'?
11.9  ALGERIA: IMF Staff Concludes 2014 Article IV Mission to Algeria
11.10  ALGERIA: Irrigation Expansion to Support Algeria’s Agricultural Output
11.11  TURKEY: Fitch Affirms Turkey at 'BBB-'
11.12  TURKEY: Turkish-Egyptian Ties are at a Standstill
11.13  GREECE: Getting Water to Greek Islands a Costly Affair

1:  ISRAEL GOVERNMENT ACTIONS & STATEMENTS

 1.1  Netanyahu & Finance Minister Conclude Budget Battle With Compromise

In a successful maneuver of political compromise, Finance Minister Yair Lapid and Prime Minister Benjamin Netanyahu agreed on 24 September to a budget deal that will inject an extra NIS 7 - 8 billion of funds to the Defense Ministry while following Lapid's demands to leave the nation's tax rate as is.  The new funds to the defense budget will be added to the NIS 6 billion already provided to Defense Minister Ya'alon to help cover the heavy costs of the IDF 50-day Operation Protective Edge in the Gaza Strip.

The compromise concludes several weeks of political infighting over the 2015 budget during which Netanyahu said that he supported meeting the Defense Ministry's budgetary demands, while Lapid insisted that he would bring down the coalition before allowing taxes to be raised.  Netanyahu and Lapid worked to come to a deal before the Rosh Hashanah holiday.  An official announcement released at the end of the meeting said that the total defense budget for 2015 will stand at NIS 57 billion while the deficit target would reach 3.4% without increasing taxes.

Lapid's 0% VAT plan was another one of his key initiatives which he was loath to see dismantled in favor of the military budget.  The law exempts certain young couples from VAT taxes on the purchase of their first home.  (Various 24.09)

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 1.2  Government Approves NIS 20 Billion Privatization Plan

On 5 October, the socioeconomic cabinet, headed by Prime Minister Netanyahu, today approved a plan by the Government Companies Authority and the Ministry of Finance to issue shares in government companies on the Tel Aviv Stock Exchange (TASE).

The proposal, with Netanyahu's support, was approved after Prime Minister's Office director general Locker convened the ministers opposed to the initiative for a meeting outside the socioeconomic cabinet.  During this two-hour turbulent meeting, understandings were reached that allowed the Finance Ministry's proposal to be approved.  Among other things, it was agreed that the issue of shares in the companies would require cabinet approval, not merely the Finance Minister's approval.  It was also agreed that the authority of the government ministers responsible for the companies would not be affected.

At the insistence of Minister of Transport Katz, it was agreed that issuing shares in the Ashdod and Haifa port companies would not affect the construction of the two private ports.  On the subject of issuing shares in Israel Railways, it was decided to establish a ministerial committee to consider the need to issue shares in the company.

The initiative is designed to produce NIS 15-20 billion in revenue for the state over the next three years, including NIS 4 billion during the 2015 budget year from the issuing of shares in INGL, one of the two ports companies, and four small government companies in Tel Aviv.  Under the plan initiated by the Government Companies Authority, minority stakes up to 49% will be offered in seven large government companies and the Environmental 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  Israel Allocates NIS 1.7 billion to Fight Poverty

On 6 October, Welfare and Social Services Minister Cohen announced approval of a NIS 1.7 billion budget increase for the implementation of the recommendations of the Elalouf Committee to Reduce Poverty in Israel.  According to the Welfare Minister, NIS 1 billion form the basis of the budget, which will be allocated towards the application of the nation’s Committee to Fight Poverty.  Some NIS 1.4 billion out of the NIS 1.7 billion budgetary addition will be taken from government ministries' already existing budget money intended to be transferred for the implementation of the resolutions.  The funds will come from the Welfare Ministry (NIS 607 million), the Housing Ministry (NIS 110 million), the Education Ministry (NIS 400 million), Finance Ministry (NIS 200 million) and Health Ministry (NIS 129 million). 

The Welfare Ministry will use NIS 320 million to increase the Old Age Pension income supplement (given to 190,000 elderly residents who receive income supplement and are defined as poverty-stricken).  The amount of the additional funds stands at an average of NIS 250 a month.  NIS 90 million will be used for employment grants given to single mothers; NIS 60 million will go towards subsidizing social services in southern peripheral communities, and NIS 137 million will be allocated to a poverty-fighting program and towards the establishment of centers that help citizens realize their rights.  (Various 06.10)

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 1.4  Ministerial Committee Approves Angels Law Amendment

The ministerial legislation committee has approved the amendment to the Angel Investors Law proposed by Minister of Finance Lapid and Minister of the Economy Bennett.  The amendment is designed to encourage investments in young high-tech companies.  The proposed amendment was submitted to the ministerial committee in advance of the cabinet meeting for approval of the state budget.  Up until now, legislative proposals were sent to the ministerial legislative committee only after the cabinet had approved the state budget.  Under the amendment, the state will grant tax incentives to those investing in start-ups at the seed stage of research and development in need of money for development. In addition to the tax breaks, the state is planning a reform in the structure of the Chief Scientist's Office in the Ministry of the Economy, which will be become an Innovation and Entrepreneurship Authority.

The Ministry of Finance believes that approval of the amendment to the Angels Law will give a substantial boost to the volume of capital available for investment in startups, and will maintain Israel's relative advantage in knowledge-intensive industries.  The amendment was approved in the framework of the economic plan for 2015, as part of the economy's growth engines.  According to the amendment, investors in innovative companies approved as "target companies" by the Chief Scientist's Office will receive substantial tax breaks, and will be allowed to deduct amounts invested in start-ups from their taxable income.  (Globes 05.10)

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 1.5  Israel Awards Intel $300 Million Grant

On 22 September, the Ministries of the Economy and Finance approved the award to Intel of a grant worth $300 million, over five years.  Intel is due to make investments in Israel to the tune of some NIS 22 billion over the coming years in upgrading its Kiryat Gat plant.  In addition to the grant, Intel will benefit from a reduced Companies Tax rate of 5% for ten years.  The company has committed to extensive reciprocal procurement in Israel over the next few years, amounting to an estimated NIS 2 billion.  (Globes 22.09)

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2:  ISRAEL MARKET & BUSINESS NEWS

 2.1  Lockheed Martin & Yissum Sign Long Term Collaboration Agreement

Lockheed Martin Israel and Yissum Research Development Company signed an agreement to conduct joint collaborative research.  The collaboration will focus on basic and applicable scientific research in areas such as Quantum Information Sciences and Material Sciences as well as in other areas of joint interest.  Under this agreement, Lockheed Martin will have the option to purchase exclusive license to use any invention or product resulting from joint research endeavors.  This partnership is a key element in both organizations’ ongoing commitment to industrial and academic growth in Israel.

Yissum Research Development Company (http://www.yissum.co.il) of the Hebrew University of Jerusalem was founded in 1964 to protect and commercialize the Hebrew University’s intellectual property.  Products based on Hebrew University technologies that have been commercialized by Yissum currently generate $2 billion in annual sales.  Ranked among the top technology transfer companies in the world, Yissum has registered over 8,500 patents covering 2,400 inventions; has licensed out 750 technologies and has spun out 90 companies.  (Yissum 06.10)

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 2.2  Newport Completes Acquisition of V-Gen

Irvine, California’s Newport Corporation completed its previously announced acquisition of V-Gen, a leading developer and manufacturer of fiber lasers headquartered in Tel Aviv, Israel.  Ramat Gan’s V-Gen (http://www.vgen.com) is a recognized innovator in the field of fiber lasers, and has a significant intellectual property portfolio.  Newport expects V-Gen to generate sales in the range of $15 million to $20 million in the next twelve months, and expects the transaction to be accretive to its earnings immediately.  The Newport Corporation is a leading global supplier of advanced-technology products and systems to customers in the scientific research, microelectronics, life and health sciences, industrial manufacturing and defense and security markets.  (Newport 29.09)

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 2.3  Kaspersky Lab to Open Jerusalem R&D center

Russian software security giant Kaspersky Lab, known for its popular anti-virus system, will open a development center in Jerusalem next year - one of its few outside of Russia.  In its first stage, the development center will employ six workers, but the number is expected to increase over time.  Kaspersky’s R&D center in Jerusalem will be established as part of the joint Jerusalem municipality- Jerusalem Development Authority Jnext initiative.  The Jnext program aims to encourage and support technological initiatives in the city, international start-ups, and young high-tech and biomed companies, through various benefits and grants.  The Kaspersky R&D center follows the opening of a sales, business development, and customer service office in Tel Aviv in 2013, and a close relationship with Israel over the years.  (Globes 06.10)

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 2.4  Valens Recognized as One of Israel’s Fastest Growing Tech Companies

Valens ranked 3rd in the 2014 Technology Fast50, a ranking of the 50 fastest technology companies in Israel.  Rankings are based on revenue growth over five years. Valens grew a staggering 33,244% between 2009 and 2013.  Deloitte’s Technology Fast50 is a leading technology award program, which recognizes technology companies for their significant achievements, innovation and entrepreneurial spirit.  Hod HaSharon’s Valens (http://www.valens.com) provides semiconductor products for the distribution of uncompressed ultra-high-definition (HD) multimedia content. The company's HDBaseT technology enables long-reach connectivity of devices over a single cable and is a global standard for advanced digital media distribution.  (Valens 23.09)

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 2.5  Celeno Among Top 5 Fastest Growing Tech Companies in Israel

Celeno has been ranked 5th in the Israel Deloitte Technology Fast 50 for 2014 – one of Israel’s foremost technology awards ranking the fastest growing technology companies.  Celeno was chosen for an exceptional 17,773% growth over the last five years.  As part of the award, Celeno is automatically entered into the Deloitte Technology Fast 500 EMEA: a ranking of the 500 fastest-growing technology companies in Europe, the Middle East and Africa over the last five years.  Celeno provides high-performance Wi-Fi chips and software for demanding home networking applications.  The company's OptimizAIR 2.0 technology maximizes in-home Wi-Fi capabilities, assuring reliable wireless video service delivery, and quality of experience for multiple connected devices throughout the home.

Ra’anana’s Celeno (http://www.celeno.com) provides high performance Wi-Fi chips and software for HD multimedia and entertainment home networking applications. Celeno’s extensive chip portfolio and OptimizAIR™ technology enable the wireless distribution of multiple and simultaneous HD video streams throughout the home with the highest levels of performance and reliability while ensuring a superlative quality of service and user experience. Celeno’s field-proven chips have been integrated into numerous OEM Wi-Fi devices and have been deployed with over 75 service providers worldwide. Founded in 2005, the company is backed by blue chip investors including Cisco Systems, Greylock IL, Liberty Global, Pitango Venture Capital and Vintage Investment Partners.  (Celeno 22.09)

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 2.6  Magal Solutions Win Best Product Awards at ASIS International 2014

Magal Security Systems announced that two of its new products have been selected as winners in the 2014 ASIS Accolades Competition: Security's Best Award, each in their respective categories.  A team of judges, representing end users and experts in security technologies, evaluated all entries and included two of Magal's products in this year's winners:

  • RoboGuard - a state-of-the-art surveillance robot that complements the overall security of manned and unmanned perimeters;
  • CyberSeal Tungsten Switch - an industrial cyber security Ethernet switch, that provides unique cyber protection for physical security and Industrial Control Systems (ICS).

ASIS Accolades is an awards competition that recognizes the security industry's most innovative new products, services or solutions.  Yehud’s Magal S3 (http://www.magal-s3.com) is a leading international provider of solutions and products for physical and cyber security, as well as safety and site management.  Magal S3 offers comprehensive integrated solutions for critical sites, managed by Fortis4G - our 4th generation, cutting-edge Physical Security Information Management system (PSIM).  The solutions leverage our broad portfolio of homegrown Perimeter Intrusion Detection Systems (PIDS), advanced outdoors CCTV / IVA technology and Cyber Security solutions.  (Magal S3 29.09)

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 2.7  Rafael Agrees to Indian Missile Deal

Rafael Advanced Defense Systems will provide the Indian Navy with hundreds of Barak-1 missiles over the next 18 months in a deal worth $143 million.  India's Ministry of Defense approved the procurement in part because naval commanders have warned of a grave shortage of such missiles in the Indian Navy's inventory.  The Barak-1 is an anti-missile defense system, and the Indian Navy is reportedly down to its last 150 such missiles.  The Indian government decided to procure more than 260 Barak-1 missiles, which are manufactured by Rafael in collaboration with Israel Aerospace Industries and its Elta Industries division.  IAI produces the command and control systems for the missile while Elta has developed the radar.

There was a long period of discussions before the Indian government made its final decision about procuring the missiles due to enquiries into a bribery scandal involving defense manufacturers from other countries.  Rafael and IAI were eventually cleared of any wrongdoing and the Barak-1 missile deal was given the go-ahead.  The Barak-1 missile was developed in the 1990s and with a range of 9-10 kilometers serves as the main defense missile for the Israel Navy.  (Globes 29.09)

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 2.8  Adama Establishes Major Foothold in China

ADAMA Agricultural Solutions (formerly Makhteshim Agan Industries) and China National Agrochemical Corporation (CNAC), a strategic business unit of China National Chemical Corporation (ChemChina) and Adama's parent company, signed a definitive agreement for Adama to acquire control of businesses inChina (the Chinese businesses) with 2013 total sales of approximately $850m.  Once finalized, the acquisition is expected to raise the company's revenues close to$4b and give the company a major foothold in the Chinese market, which is expected, over time, to become one of the Company's key growth engines. Adama expects to close the transaction during H1/15.

Through the acquisition, Adama will acquire 100% of each of Jiangsu Anpon, Jiangsu Maidao, Jiangsu Huaihe (collectively called the Huai'an Hub) and Jingzhou Sanonda Holdings (Sanonda Holdings), for a cash consideration of approximately$324m, together with assumed net debt of approximately $300m.  The Huai'an Hub is based in the vicinity of Huai'an City inJiangsu Province, the heart of the agrochemical industry inChina. Sanonda Holdings owns a 20% stake in Hubei Sanonda Ltd. (Sanonda) a company publicly traded on the Shenzhen Stock Exchange, and its acquisition by Adama will increase Adama's existing stake in Sanonda from 11% to 31%, with Adama thereby becoming the single largest shareholder in the company.  (ADAMA 02.10)

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 2.9  Checkmarx Named Fastest Growing Security Company in Israel

Checkmarx has been ranked the #1 fastest growing security company in the Israel Deloitte Technology Fast 50 for 2014 – one of Israel’s foremost technology awards.  Checkmarx’s outstanding 1,286% growth rate over the last five years positions the company as the 15th fastest growing technology company overall in Israel.  Checkmarx is a creator of software solutions that secure mobile and web applications during the development process.  Checkmarx scans software source-code, quickly identifying security vulnerabilities and regulatory compliance issues, and immediately shows developers and security auditors where and how to fix them.

Tel Aviv’s Checkmarx (http://www.checkmarx.com) is a leading developer of software solutions used to identify security vulnerabilities in web and mobile applications.  It provides an easy and effective way for organizations to introduce security into their Software Development Lifecycle (SDLC) which systematically eliminates software risk.  (Checkmarx 23.09)

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 2.10  OurCrowd's Portfolio Company ReWalk Launches IPO on NASDAQ

OurCrowd, the leading equity crowdfunding platform for accredited investors, announced that its portfolio company ReWalk Robotics (RWLK) has completed its successful IPO on the NASDAQ.  The company issued 3,450,000 million shares and expects to receive total estimated net proceeds from this offering of approximately $36.3 million after deducting estimated underwriting discounts and commissions and estimated offering expenses.  OurCrowd members had previously invested $3.3 million in ReWalk in two separate funding rounds over the past year.  Yokneam Elite’s ReWalk Robotics (http://rewalk.com) develops, manufactures and markets wearable robotic exoskeletons for individuals with spinal cord injury. ReWalk’s mission is to fundamentally change the health and life experiences of individuals with spinal cord injury.  (OurCrowd 30.09)

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3:  REGIONAL PRIVATE SECTOR NEWS

 3.1  Ticketmaster Expands Presence To Qatar

Ticketmaster, a division of Live Nation Entertainment, announced the opening of Ticketmaster Qatar.  This expansion marks the second office in the Middle East and the nineteenth Ticketmaster office in the world.  Qatar's economy is growing rapidly; it has the highest per capita income in the world and has a population of more than 2 million people.  The country was recently selected as the host of the 2022 FIFA World Cup and has planned nine new football stadiums for the tournament.  (Live Nation 30.09)

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 3.2  PepsiCo Opens Innovation Center in DuBiotech

PepsiCo has announced the opening of its first innovation facility in the Middle East, this one located in Dubai, UAE.  The facility, will serve as a hub of new products and flavors innovations for PepsiCo’s businesses across the region.  The new facility is equipped with an advanced culinary center and test laboratories focused on developing and tailoring PepsiCo food and beverage brands for distinct, locally relevant taste preferences throughout the region.  The new facility will allow researchers to quickly test new product ideas and support efforts to significantly accelerate the pace of PepsiCo’s innovation across the region.  The facility is the first PepsiCo food and beverage innovation center in the region, which is designed to continue PepsiCo’s efforts to unlock new opportunities for breakthrough innovation across the company’s diverse portfolio of complementary brands and enable greater speed and efficiency throughout the entire R&D and innovation process.  The new Dubai facility will also work collaboratively with other PepsiCo R&D locations around the world to share insights and best practices.  (AB 28.09)

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 3.3  Dubai to Have 80 More Private Schools Operating by 2020

The number of private schools in Dubai will reach 250 by 2020, adding more than 80 in the next six years, according to Dr Abdulla Al Karam, director general of the Knowledge and Human Development Authority (KHDA).  There are currently 169 private schools in Dubai but this number will increase by almost 50% to accommodate the projected 65% increase in student population from the current 243,000 level to almost 400,000 by 2020.  In 2014/15, 11 new schools opened – the highest recorded number in a single year in the history of Dubai.

Latest data from the KHDA show that more than half of the new schools that have been established since 2007, and 15 out of the 21 schools that have opened in the last two years, cater to a broad mix of international students from a range of countries.  Al Karam said these schools represent the fastest growing market segment of schools in Dubai, outpacing the growth of those catering predominantly to students from a single national or ethnic background.  (AB 27.09)

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 3.4  Nareva Selects GE Turbines for 100MW Wind Farm in Morocco

GE announced it will supply 56 1.7-100 wind turbines for its first wind farm in North Africa developed by Energie Eolienne du Maroc (EEM), a leading developer of wind projects and a wholly-owned subsidiary of Nareva Holding.  The 100 MW wind farm will be located near Akhfennir in southern Morocco.  GE’s 1.7-100 wind turbines will produce wind power in Morocco to help meet the country’s renewable energy goals, while offering EEM enhanced economic returns demonstrating wind’s competitiveness with alternative forms of generation.  The agreement by GE complements the government of Morocco’s Integrated Wind Energy Project, which aims to generate 2000 MW of wind power by 2020 through an investment of MAD31.5 billion.

GE’s 1.7-100 wind turbines are built on an evolution of high performance turbines in order to generate competitive economic returns and capacity factor.  GE’s global fleet of more than 23,000 wind turbines provides more than 37 gigawatts (GW) of installed wind energy capacity, and operates with over 98% availability.  The power generated by the plant is intended to support industrial companies under Morocco’s Power Purchase Agreement, thus further stimulating the economy by creating new jobs and supporting the local supply chain.  (GE 22.09)

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4:  CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

 4.1  $50 Million Project Financing for One of Jordan’s Largest Solar Power Plants

Belmont, California’s SunEdison, a leading global solar technology manufacturer and provider of solar energy services, announced the closing of a $50 million debt financing arrangement with the European Bank for Reconstruction and Development (EBRD) and the Overseas Private Investment Corporation (OPIC).  The debt proceeds will be used to finance the construction of a SunEdison owned 23.8 MW DC solar power plant in the Ma'an Governate, in southern Jordan.  Construction will begin in Q4/14 and interconnection is expected to take place in Q3/15.  The project will cover an area of approximately 50 hectares and will feature SunEdison 330 monocrystalline modules and the AP90 Single Axis tracker.  On an annual basis, the system is expected to generate approximately 57,000 megawatt hours (MWH) of electricity, saving the emission of 35,000 tons of carbon dioxide (CO2).  (SunEdison 29.09)

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5:  ARAB STATE DEVELOPMENTS

 5.1  Lebanon’s Trade Deficit Widens as Imports Jump 16%

Lebanon’s trade deficit continued to rise in the first eight months of this year as imports jumped 16% in the month of August while exports rose by only 2% in the same month, according to statistics released by the Customs Department.  Imports up to August of this year reached $14.057 billion while exports stood only at $2.219 billion in the same period.  In the month of August alone, total imports surged by 16% to $2.120 billion compared to $1.828 billion in the same month of last year.  Total exports in the month of August jumped only by 2% to reach $285 million compared to $279 million in the same month of last year.  The trade deficit has long been one of the major problems facing Lebanon despite attempts by successive governments to narrow the gap by increasing exports.  China, Italy, France and Germany were the leading sources of imports to Lebanon in the first eight months of this year while South Africa, UAE, Saudi Arabia and Iraq were the main export markets for Lebanese products.  (TDS 27.09)

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 5.2  World Bank Support to Address Water Shortages in Lebanon

A $474 million World Bank Group project will address the chronic and severe water shortages faced by over half of Lebanon’s population residing in the Greater Beirut and Mount Lebanon area who receive an average of only three hours of water per day and resort to illegal wells, expensive tanker trucks and bottled water for their home use.  The Water Supply Augmentation Project will reverse the impact of drought, depleted infrastructure and rapid population growth on the sustainable development of the water sector.  The Islamic Development Bank and Government of Lebanon will provide parallel financing of $128 million and $15 million respectively. 

Lebanon’s climate and geography cause significant variations in water availability, with floods common in the winter, followed by droughts in the summer.  Lebanon further only stores 6% of its water resources, compared to the regional average of 85%.  Rapid urbanization, delayed investment and lagging reforms contributed to further exacerbating the water deficit.  Over the past few years however, increasingly acute droughts coupled with the demand for water from over 1.6 million registered and unregistered Syrian refugees has led Lebanon to a full scale water crisis.  (WB 30.09)

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 5.3  Israel Gas Deal Will Save Jordan JD 700 Million Annually

The Jordanian government said on 25 September that the state-owned National Electric Power Company (NEPCO) is expected to buy 250 - 300 million cubic feet per day of natural gas from Noble Energy, which experts said will save around JD700 million annually of the energy bill.  Minister of Energy and Mineral Resources Hamed said that NEPCO is in talks with the American company Noble Energy to determine the prices of gas it will buy from Israeli fields late 2017, expecting a deal soon.  The quantities, experts said, will help slash Jordan’s energy bill that exceeds JD4 billion a year and reduce the losses of NEPCO, which are expected to reach JD1.3 billion by the end of 2014.

Early in September, NEPCO signed a letter of intent with Noble Energy, which owns 39% of the Leviathan natural gas field in Israel, to buy gas over a period of 15 years and at a total cost of $15 billion.  The purchase agreement is expected to be signed in November. 

The minister also stressed that the government is keen on diversifying energy resources and that it is going ahead with plans to build oil shale-run power plants as well as renewable energy projects.  Jordan is also considering buying gas from Cyprus.  (JT 25.09)

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 5.4  Jordan’s Shale Oil-Fuelled Power Plant to be Ready Late 2018

Jordan's first shale oil-fuelled power plant will be operational at the end of 2018.  The facility is expected to slash the country's energy bill by $500 million annually as the electricity it will produce will be bought at half the current price.  The $2.2 billion plant, which will have a total capacity of 470 megawatts (MW), accounting for some 15% of Jordan’s current overall electricity capacity of 3,200 MW, will utilize Jordan's vast reserves of oil shale estimated at more than 70 billion tonnes, Minister of Energy and Mineral Resources Hamed said at a press conference after signing a power purchase agreement with the consortium that will build the power plant, Enefit (Eesti Energia), YTL Power International Berhad and Near East Investments Limited.  The plant will be built on build, own and operate basis.

Under the 30-year agreement, Enefit will sell each kilowatt to the government at about $0.107, which is much less than the current costs of using diesel and heavy fuel to generate electricity.  Currently, each kilowatt generated by burning diesel or heavy fuel costs around JD0.15, which is equivalent to $0.21.  Enefit will finance the plant via loans from the Bank of China and the Industrial and Commercial Bank of China with the support of China Export and Credit Insurance Corp.  It will also play a key role in reducing the losses of the National Electric Power Company (NECPO), which are expected to reach JD4.7 billion by the end of this year.  (Petra 01.10)

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 5.5  Jordan & US Sign 4 Grant Agreements Worth $633 Million

On 30 September, Minister of Planning Saif and USAID/Jordan Mission Director Paige signed four grant agreements, valued at $633 million, under the US regular and additional economic assistance for Jordan for 2014.  The grants will be used to meet budgetary needs, finance several projects and programs geared towards improving basic services, support economic development and boost democracy and governance.   Underlining the importance of the grants for Jordan, Saif said the support reflects the advanced level of Jordanian-US relations, the strategic partnership and the efforts exerted by King Abdullah to strengthen cooperation between the two countries.

Of the overall $633 million grants, $436 million will be extended under a cash grant to support prioritized development projects listed within the State Budget Law for 2014.  The remaining three grants will be used to improve basic services, boost economic development and implement several projects in the areas of enhancement of the rule of law, governance, civil society and political reform.  Basic service projects will cover plans in the areas of mother and child care, reproductive health, family planning, basic education, water and the environment.  These programs and projects will be directly run by the USAID, in coordination with the ministries and concerned government agencies.  (JT 30.09)

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 5.6  Kurds Ship $1.3 Billion in Oil Since May

Reuters reports that Iraqi Kurdistan has shipped a total of nineteen tankers carrying 13.7 million barrels of crude oil since May, using its new pipeline to the Turkish port of Ceyhan.  An official told the news agency that the flow of oil continues without any issues, and a 20th tanker will be loaded in the coming days.  Meanwhile, Turkish Energy Minister Taner Yildiz told reporters that Turkey’s state-run Halkbank, to which buyers of the Kurdish oil make their payments, holds $400 million in respect of Kurdish oil sales.  (Reuters 04.10)

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♦♦Arabian Gulf

 5.7  Kuwait Budget Surplus Up In Last Fiscal Year as Spending Slows

Kuwait's budget surplus edged up to KD12.9 billion ($44.8 billion) in the fiscal year to last March as government spending fell, largely because of a drop in capital expenditure, finance ministry data showed.  The figures suggest Kuwait is still struggling to spend its oil wealth on economic development because of bureaucratic red tape and political conflict between the cabinet and parliament, which has slowed big infrastructure projects.  The budget surplus, equivalent to around 26% of GDP, was up marginally from KD12.7 billion, or nearly 25% of GDP, in the previous fiscal year.  Kuwait has posted budget surpluses since 1995 but its rising public sector wage bill and large subsidies are expected to slash the surplus to around 12.1% of GDP in 2019, the International Monetary Fund estimated in April.

Kuwait's new five-year plan, which has yet to be approved by parliament, envisages spending of over $100 billion in the next five years on infrastructure projects, hospitals, power stations and more than 100,000 residential housing units, state media have reported.  Some of the projects are supposed to involve the private sector in public-private partnerships.  (AB 28.09)

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 5.8  Construction Work Starts on UAE's Third Nuclear Reactor

The Emirates Nuclear Energy Corporation (ENEC) has announced that it has started construction of the third reactor of four being built near Abu Dhabi.  The company said it has started pouring the safety concrete for the reactor containment building for Unit 3.  These milestones follows the receipt of the construction license from the Federal Authority of Nuclear Regulation (FANR).  ENEC said construction of the reactor containment building will be completed over the next three years and Unit 3 is on track to enter commercial operations by 2019. 

Unit 1 is already more than 57% complete and due to connect to the grid in 2017.  Construction of Unit 2 is also well underway and this unit is scheduled to enter commercial operation in 2018.  Once the four reactors are complete, the UAE's nuclear program will provide approximately 25% of the UAE's electricity needs, saving up to 12 million tonnes of greenhouse gas emissions each year.  (AB 27.09)

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 5.9  US Approves $2.5 Billion to Upgrade Used Military Vehicles for UAE

On 24 September, the US government announced approval of $2.5 billion in modifications and upgrades of used US military vehicles that are to be sold separately to the United Arab Emirates as "excess" equipment.  If finalized, the work would be done by Navistar International Corp, Britain's BAE Systems and Oshkosh Corp, the Pentagon's Defense Security Cooperation Agency said.  The agency, which oversees foreign arms sales, said the deal would help UAE protect its troops, better provide humanitarian assistance, and protect vital commercial trade routes.

The Pentagon agency said UAE had requested the refurbishment and modification of 4,569 Mine Resistant Ambush Protected (MRAP) vehicles, which are to be sold separately to UAE as excess US military equipment.  The potential deal also includes kits to improve the underbodies of the vehicles, spare and repair parts, support equipment, and personnel training and training equipment.  Once a weapons sale is approved, it must still be negotiated by the two governments.  (AB 27.09)

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 5.10  UAE President Names New Central Bank Governor

The UAE said on 22 September that Mubarak Rashid Khamis Al Mansouri has been appointed as the new governor of the country's central bank, replacing Sultan Nasser Al Suweidi.  The move is part of a federal decree issued by UAE President Sheikh Khalifa bin Zayed Al Nahyan to restructure the board of directors of the Central Bank of the UAE.  Mansouri is the chief executive of Emirates Investment Authority, a federal investment fund.  He will serve a four-year term.  Mansouri, who served as a central bank board member in the past, also sits on the board of the stock market regulator, the Securities and Commodities Authority, as well as telecom operator Etisalat, Abu Dhabi Securities Exchange and some other Abu Dhabi entities.  The UAE's monetary policy is closely linked to that of the US Federal Reserve due to a long-standing dirham currency peg to the dollar.  (AB 22.09)

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 5.11  Saudi Economic Growth Eases to 3.8% in Second Quarter

Saudi Arabia's economic growth eased to an annual 3.8% in the second quarter of 2014, the lowest rate in a year, because of a slowdown in the oil sector.  But the first-quarter growth rate for inflation-adjusted GDP was revised up to 5.1% - the fastest pace since Q3/12 - from an initial reading of 4.7%.  On a quarterly basis, GDP dropped 3.1% in Q2, the biggest fall since the quarterly data series began in 2010, after a 4.1% jump in the previous quarter.  Saudi Arabian economic growth is usually at its most robust early in the year, when the weather is favorable and few public holidays halt work; GDP then regularly falls in the second quarter from the previous three months.

Growth in the hydrocarbons sector, which accounts for almost half of the $748 billion Saudi economy, slumped to 2.5% year-on-year in the second quarter from 6.1% in the previous three months, the data showed.  The OPEC member exported just below 7 million barrels of oil per day in May-July, the lowest amount since September 2011, because of weak global demand. The kingdom burns more oil domestically in the summer to satisfy growing demand for cooling, which has been eating into exports.

Growth of the non-oil private sector edged up to an annual 4.7% in April-June from an upwardly revised 4.6% in the previous three months, a sign that the impact of labor market reforms might be starting to subside.  Around a million foreign workers left Saudi Arabia last year after a crackdown on visa irregularities as a part of labor reforms aimed at putting more Saudi nationals into jobs.  This dampened consumption and production in some sectors.  (AB 24.09)

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♦♦North Africa

 5.12  Egypt’s Central Bank Says Budget Deficit Shrunk in 2013/2014

Egypt’s overall budget deficit fell to LE253.7 billion or 12.4% of GDP in the fiscal year of 2013/2014, from 13.8% of GDP in 2012/13, according to according to a new report released by Central Bank of Egypt (CBE).  The report also indicated that total revenues of the budget sector (the administrative system, local administration and service authorities) amounted to LE400.1 billion in the FY 2013/2014, and total expenditures LE643.1 billion.  The finance ministry's August report said that the budget deficit is estimated at LE240 billion (10% of GDP), while total government debt (domestic and external) will reach a sum of LE 2.2 trillion at the end of 2014/2015 fiscal year, which is about 90% of GDP, decreasing from 93.8% of GDP for the FY 2012/2013.

In the new budget for the FY 2014/15, government revenues are estimated to reach LE549 billion, recording an annual growth of 8%, compared to LE507 billion, which is expected during the FY 2013/2014.  Meanwhile, government expenditures are estimated to reach LE790 billion with 7% annual growth in the new budget, according to the report.  (Al-Masry Al-Youm 02.10)

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 5.13  Suez Canal Revenue Rises 12% to $510 million in August

Revenues from Egypt's Suez Canal reached $510 million in August, a 12% increase on the same month the previous year, the CAPMAS announced.  The waterway, the fastest shipping route between Europe and Asia, is one of Egypt's main sources of foreign currency.  The head of the Suez Canal Authority had said earlier this month that revenues had reached about $508 million, the highest monthly level in history.  A major expansion of the canal is planned.  (Reuters 27.09)

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 5.14  Morocco Launches Great Casablanca Regional Development Plan

Morocco has officially launched the 2015 - 2020 Great Casablanca Regional Development Plan, involving the cities of Marrakech, Tangier, Sale, Rabat and Tetouan, during a session chaired by King Mohammed VI.  A major portion of the investment under the plan has been allocated for infrastructure and industrial improvement projects in the area.  $3 billion has been earmarked for consolidating mobility in the region through the extension of the tramway line, developing the bus fleet, building urban, provincial and highway roads and building other road facilities and tunnels.  Restructuring of existing industrial zones, building new industrial services and logistics zones and improving the business atmosphere are also in order.  These are aimed at promoting the region’s economic attractiveness and are likely to be co-financed by public and private sectors.  A further $228 million will be pumped into the country’s tourism sector. To this end, the plan features building a large theater and a sports village, overhauling the Mohammed V compound and La Casablancaise and rehabilitating the coastal area, the Merchich forest and the Ain Sbaa Zoo.  (BNC 28.09)

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6:  TURKISH, CYPRIOT & GREEK DEVELOPMENTS

 6.1  Turkish Foreign Trade Gap Grows Above Projections

Turkey’s foreign trade deficit widened far beyond expectations in August, as the country’s imports rose for the first time in seven months amid pressure on exports due to the crisis in Iraq.  The country's foreign trade deficit rose to $8.03 billion in August, from $7.08 billion in July, marking a 13.65% rise, according to figures released by the Turkish Statistical Institute (TUIK) on 30 September.  Analysts had expected the trade deficit to remain flat in August, remaining at around $7 billion.

The foreign trade deficit contracted by 34.8% on an annual basis in July, due to a steep decline in gold and automotive imports.  Analysts had warned that the July recovery may be temporary due to seasonal effects, and August’s figures indicate that these warnings may have been correct.  While exports rose only 2.9% to reach $11.44 billion in August, imports into the country have surged for the first time since January, reaching $19.48 billion with a 7% rise.  The foreign trade deficit for the eight month period was $54.17 billion, marking a 20% decline from the same period of last year.

Decreases in Turkey’s exports to its second largest trade partner, Iraq, have also caused the deficit to grow in August.  Exports to Iraq have fallen to $646.7 billion, contracting by around 40% since June.  However, the EU’s share of Turkish exports rose to 44.3%, from 41.4% last year.  The biggest export country has once again become Germany, importing $1.14 billion in Turkish goods during the month.  The UK and Iraq followed Germany, with $647 million and $530 million, respectively.  (HDN 30.09) 

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 6.2  Turkish Inflation Falls Below 9% Due to Tobacco & Food Prices

Turkish inflation dropped under 9% in September for the first time in five months, beating the market expectations, during the month before the hike in gas and electricity prices are implemented.  A nearly 1% drop in tobacco products, an important indicator in the country’s inflation calculation basket, in addition to a 3.5% fall in wine, played a role in the downward move.  The food prices in general terms supported the fall.  The consumer price index (CPI) increased by 0.14% in September.  The inflation figures have been closely observed by markets for months, since the Turkish Central Bank vowed to maintain interest rates until it noticed clear signs of recovery in the inflation outlook.  (TurkStat 03.10)

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 6.3  Turkey's Crude Oil Imports Drop in First Half of 2014

Turkey’s crude oil imports in the first six months of the year dropped to around 9.3 million tons, down 12% from the same period last year, while diesel imports rose by 12% to about 1.5 million tons, the Energy Marketing Regulatory Authority (EPDK) has announced.  According to EPDK’s July 2014 report, the total production of gasoline and diesel at refineries was around 957 tons and the total production of oil products was 1.7 million tons during the first six months of 2014.  During the same period, gasoline exports fell by 25% to about 1 million tons.  The production of refineries fell to about 10 million tons in H1/14, an 11% drop from the same period last year.  (AA 26.09)

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 6.4  Turkish Auto Sales Drop 19% in Nine Months

Turkish auto sales, including light commercial vehicles and cars, have declined by 19.25% during the January to September period compared to the same period of 2013, recent data released by the Automotive Distributors Association (ODD) have revealed.  According to the figures, while domestic car sales registered an 18.92% decrease with 366,768 units sold, domestic light commercial vehicle sales narrowed by 20.35% to 106,730 units year-on-year in the January to September period.  The total auto sales dropped to 473,498 units in the same period.  Auto sales declined by 2.11% year-on-year in September.  The drop in sales is attributed to, in part, the depreciation of the lira against the US dollar, hikes in interest rates, an increased share of private consumption tax in auto prices, restrictions on credit transactions imposed by the Banking Regulation and Supervision Agency (BDDK), a slowdown in the growth rate and weakening consumption.  (Today's Zaman 03.10)

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 6.5  Turkish Dairy Producers to Enter Russian Market

Turkish dairy producers aim to begin exporting milk products to Russia during October, to the Milk Producers and Exporters Union.  Russia has begun to look elsewhere for its food imports after it banned imports from the European Union, the United States and other Western countries following trade sanctions that were imposed on Russia for its annexation of Crimea.  Turkey has been aiming to enter the Russian market for four years and a Russian delegation has been involved in talks with Turkish producers regarding export agreements.  However, Turkish milk products will not dominate the Russian market, as Turkish producers are only able to meet 5% of Russian demands.  (Cihan 26.09)

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 6.6  Fiscal Council Sees 0% Growth for Cyprus in 2015

The Cyprus economy is expected to record a flat growth rate of 0% next year, according to the Fiscal Council, which notes that the assumptions used by the Finance Ministry in drafting the 2015 state budget are “acceptable”.  However, Council President Georgiades called on the Finance Ministry to be prepared to take the necessary measures if needed, as the current projections may change. 

The Troika of international lenders revised up their estimate of a negative growth of 0.4% of GDP, up from -0.9% seen earlier.  Furthermore, the Council also said it believes that the economy will continue to contract in 2014 albeit at a smaller rate than the Troika projections, due to higher private consumption.  According to the Troika, the economy in 2014 will contract with a rate of -4.2%, whereas the Finance Ministry believes that the 2014 growth rate will be contained to -3%.  The Council will publish its Autumn report before the end of October.  (FM 29.09)

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 6.7  Greece Draft Budget Puts 2015 Growth At 2.9%

Greece should climb strongly away next year from a six-year recession which axed a quarter of its economy, turning in growth of 2.9%, deputy Finance Minister Staikouras said on 6 October.  The minister forecast a return to growth of 0.6% this year, an estimate which many economists think is unduly optimistic.  The forecast for next year points to a strong upturn but from an exceptionally low point since the Greek economy and people are still weighed down by pension and pay cuts and a mountain of debt.  The country, which has been through six years of trauma following a rescue from near bankruptcy and radical economic reforms, has just benefited from a highly successful tourism season.  The Greek debt crisis marked the beginning of a wider debt crisis which nearly tore the Eurozone apart and has led to several big Eurozone-wide reforms.  Last month, credit rating agency Standard and Poor’s estimated that this year the Greek economy would still be in recession, although much reduced, of 0.2%.  The outline budget for next year also foresees a budget surplus before the cost of debt interest of 2.9% of gross domestic product, or $6.8 billion.  (Various 06.10)

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7:  GENERAL NEWS AND INTEREST

♦♦ISRAEL:

 7.1  Israel Spends NIS 32 Million Treating Wounded Syrians

The Ministry of Health revealed that Israel has spent NIS 32,487,415 (about $9 million) since the beginning of 2013 on the treatment of wounded Syrians seeking medical treatment in Israel.  The information was released as part of a report addressing the expenses of four northern hospitals in Tiberius, Tzfat, Nahariya and Kiryat Shmona, which have been treating Syrians wounded in the country’s civil war.  These numbers do not include the funds targeted by the Ministry of Defense and the IDF for this cause.  The Syrians are usually treated at IDF field hospitals before being hospitalized in Israeli medical centers.  To date, some 1,200 Syrians have been treated at Israeli hospitals, including specialized life-saving procedures.  (Various 06.10)

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 7.2  Sukkot Holiday Celebrated

The Jewish festival of Sukkot begins at sunset on Wednesday, 8 September until nightfall on 16 October (in Israel).  The festival ends on day later outside of Israel.  The holiday begins on the Hebrew date of 15 Tishrei, the fifth day after Yom Kippur.  The word "Sukkot" means "booths" and refers to the temporary dwellings that Jews are commanded to live in during this holiday.  The commandment to "dwell" in a sukkah can be fulfilled by simply eating all of one's meals there or by actually living in the sukkah as much as possible, including sleeping in it.  The holiday commemorates the forty-year period during which the children of Israel were wandering in the desert, living in temporary shelters.  There are intermediate days during the week, which begins and ends with a holiday, referred to as Chol Ha-Mo'ed.

Another observance related to Sukkot involves what are known as the Four Species (arba minim in Hebrew) or the lulav and etrog.  Jews are commanded to take these four plants and use them to "rejoice before the L-rd."  The four species in question are an etrog (a citrus fruit native to Israel), a palm branch (in Hebrew, lulav), two willow branches (arava) and three myrtle branches (hadas).  The six branches are bound together and referred to collectively as the lulav.  The etrog is held separately.  With these four species in hand, one recites a blessing and waves the species in all six directions (east, south, west, north, up and down, symbolizing the fact that G-d is everywhere). 

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 7.3  Shemini Atzeret/ Simchat Torah Celebrated

On 16 September, or 22 Tishri, the day after the seventh day of Sukkot, is the holiday Shemini Atzeret.  In Israel, Shemini Atzeret is also the holiday of Simchat Torah.  Outside of Israel, where extra days of holidays are held, only the second day of Shemini Atzeret is Simchat Torah: Shemini Atzeret is Tishri 22 and 23, while Simchat Torah is Tishri 23.

These two holidays are commonly thought of as part of Sukkot, but that is technically incorrect; Shemini Atzeret is a holiday in its own right and does not involve some of the special observances of Sukkot.  Shemini Atzeret literally means "the assembly of the eighth (day)."  Rabbinic literature explains the holiday this way: our Creator is like a host, who invites us as visitors for a limited time, but when the time comes for us to leave, He has enjoyed himself so much that He asks us to stay another day.  Another related explanation: Sukkot is a holiday intended for all of mankind, but when Sukkot is over, the Creator invites the Jewish people to stay for an extra day, for a more intimate celebration.

Simchat Torah means "Rejoicing in the Torah."  This holiday marks the completion of the annual cycle of weekly Torah readings.  Each week in synagogue we publicly read a few chapters from the Torah, starting with Genesis Ch. 1 and working around to Deuteronomy 34.  On Simchat Torah, the last Torah portion is read, then proceeds immediately to the first chapter of Genesis, reminding us that the Torah is a circle, and never ends.

This completion of the readings is a time of great celebration.  There are processions around the synagogue carrying Torah scrolls and plenty of high-spirited singing and dancing in the synagogue with the Torahs.  As many people as possible are given the honor of an aliyah (reciting a blessing over the Torah reading); in fact, even children are called for an aliyah blessing on Simchat Torah.  In addition, as many people as possible are given the honor of carrying a Torah scroll in these processions.  Children do not carry the scrolls (they are much too heavy!), but often follow the procession around the synagogue, sometimes carrying small toy Torahs (stuffed plush toys or paper scrolls).  Shemini Atzeret and Simchat Torah are holidays on which work is not permitted. 

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♦♦REGIONAL:

 7.4  Turkey Life Expectancy at Birth Less Than EU Average

According to the Turkish Statistics Institute (TurkStat), in 2013, life expectancy for Turks at birth was 76.3 years on average, 73.7 years for men and 79.4 years for women.  A comparison of TurkStat's findings with 2012 statistics from Eurostat indicates that Turks have a lower life expectancy than Europeans.  The average life expectancy at birth in 28 EU member states is 80.3 years.  In the two largest Turkish cities, Istanbul and Ankara, life expectancy averaged 77.2 years total with 74.4 for males and 79.9 for females. The average in Turkey's major cities is higher than the national average.  (TurkStat 01.10)

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8:  ISRAEL LIFE SCIENCE NEWS 

 8.1  Clear-Cut Announces CE Mark for ClearSight MRI System

Clear-Cut Medical announced the CE Marking of its ClearSight MRI system for the examination of breast tissue.  The ClearSight system is a revolutionary compact Magnetic Resonance Imaging system intended for the assessment of the margins of excised breast lumps taken from breast cancer patients undergoing Breast Conserving Surgery or Lumpectomy procedures.  The CE Marking of the ClearSight system allows the commercialization of the system in Europe.

Rehovot’s Clear-Cut Medical (http://www.clrcut.com) was established in 2010 to develop and commercialize its proprietary MRI technology for real-time assessment of excised tissue.  The company's first product, the ClearSight system, is intended for intraoperative margin assessment of surgically removed lumps in Breast Conserving Surgery.  (Clear-Cut Medical 23.09)

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 8.2  Kamada Second Extension of Strategic Agreement with Baxter

Kamada announced the second extension to supply Glassia to Baxter in its strategic agreement with the biopharmaceutical business of Baxter International.  Through the extended agreement, Kamada secured $26 million in additional revenues of Glassia, the Company’s proprietary, ready-to-infuse liquid alpha-1 antitrypsin (AAT) treatment that is indicated as a chronic augmentation and maintenance therapy in adults with clinically evident emphysema due to severe congenital AAT deficiency, through 2017.  As a result, Kamada expects that total revenue generated through this agreement from October 2010 through end of 2017 will increase to a minimum of $191 million compared with a minimum of $110 million contained in the original agreement executed in 2010 and a minimum of $165 million contained in the May 2013 extension.

In addition, the Company reports that the supply of Glassia to Baxter has been extended through 2017 and that the transition to royalty payments for Glassia produced by Baxter is not expected to begin before 2018.  Until that time, Kamada will continue to produce Glassia for distribution by Baxter. Kamada is confident in its ability to support the increased demand from Baxter throughout the term of the amended agreement.  In 2010, Kamada and Baxter entered into an exclusive strategic cooperation agreement for the distribution and license of Glassia.  Under the agreement, Baxter is the exclusive distributor of Glassia in the U.S., Canada, Australia and New Zealand, and is licensed to produce Glassia using Kamada’s technology at a Baxter facility for sales in those countries.

Ness Tziona’s Kamada (http://www.kamada.com) is focused on plasma-derived protein therapeutics for orphan indications, and has a commercial product portfolio and a robust late-stage product pipeline.  The Company uses its proprietary platform technology and know-how for the extraction and purification of proteins from human plasma to produce Alpha-1 Antitrypsin (AAT) in a highly-purified, liquid form, as well as other plasma-derived proteins.  The Company’s flagship product is Glassia, the first and only liquid, ready-to-infuse, intravenous plasma-derived AAT product approved by the U.S. FDA.  (Kamada 29.09)

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 8.3  Galmed & Itamar Medical Collaborate on Assessing Aramchol's Effect

Tel Aviv’s Galmed Pharmaceuticals (http://www.galmedpharma.com), a clinical-stage biopharmaceutical company focused on the development and commercialization of a once-daily, oral medication for the treatment of liver diseases and cholesterol gallstones, purchased 60 EndoPAT devices and accessories from Itamar Medical.  Galmed intends to use Itamar Medical's EndoPAT technology to include an assessment of endothelial function in its planned Phase IIb clinical trial of its drug candidate, aramchol, involving 240 Non-Alcoholic Steato-Hepatitis, or NASH, patients suffering from obesity and insulin resistance.  As Galmed previously disclosed, this Phase IIb clinical trial is expected to begin later this year and involve medical centers within the European Union, Israel and Latin America.

Caesarea’s Itamar Medical (http://www.itamar-medical.com) is a publicly-traded medical technology company utilizing PAT (Peripheral Arterial Tone) signal technology and applications.  The PAT signal is a non-invasive "window" to both the cardiovascular and autonomic nervous systems.  The FDA-cleared EndoPAT test is non-invasive and simple, similar to having blood pressure tested (both use a standard blood pressure cuff) and is easily performed in a physician's office or hospital setting.  (Galmed 29.09)

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 8.4  Compugen New Results for Target Candidate for Cancer Immunotherapy

Compugen disclosed results from recent studies further confirming CGEN-15049 as a promising target candidate for cancer immunotherapy.  These recent studies evaluated the function of this Compugen-discovered immune checkpoint candidate on immune cells derived from the tumor environment of melanoma patients.  Based on these and earlier experimental results, CGEN-15049, which is expressed on various cancers including lung, ovarian, breast, colorectal, gastric, prostate and liver, is further advancing in the Company’s Pipeline Program, with ongoing therapeutic antibody development activities against this novel target.  More specifically, these studies have shown that overexpression of CGEN-15049 in human melanoma cells inhibits the activity of tumor antigen-specific cytotoxic T cells (CTLs) derived from melanoma patients’ tumors.  These effector immune cells, also referred to as tumor infiltrating lymphocytes (TILs), infiltrate tumors and are known to play a major role in anti-tumor immune responses.  The results suggest that CGEN-15049 can inhibit the activity of the immune system in the tumor microenvironment through its impact on TILs, which would otherwise fight the tumor.

Tel Aviv’s Compugen (http://www.cgen.com) is a leading drug discovery company focused on therapeutic proteins and monoclonal antibodies to address important unmet needs in the fields of immunology and oncology.  The Company utilizes a broad and continuously growing integrated infrastructure of proprietary scientific understandings and predictive platforms, algorithms, machine learning systems and other computational biology capabilities for the in silico (by computer) prediction and selection of product candidates, which are then advanced in its Pipeline Program.  (Compugen 01.10)

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 8.5  Cell Cure Neurosciences Files an IND with the FDA for OpRegen

BioTime, HBL Hadasit Bio-Holdings and Cell Cure Neurosciences announced that Cell Cure has filed an Investigational New Drug (IND) application with the United States Food and Drug Administration (FDA) seeking to initiate a Phase I/IIa clinical trial of OpRegen in patients with geographic atrophy (GA), the severe stage of the dry form of age-related macular degeneration (dry-AMD).  OpRegen consists of retinal pigment epithelial (RPE) cells derived from human embryonic stem cells and is intended to be administered as a single dose into the subretinal space of patients’ eyes in order to treat this leading cause of blindness.  The filing of this IND is the culmination of 12 years of research and development starting at the Hadassah Human Embryonic Stem Cell Research Center at Hadassah University Medical Center, Jerusalem.

Age-related macular degeneration (AMD) is one of the major diseases of aging and is the leading eye disease responsible for visual impairment of older persons in the US, Europe and Australia.  Cell Cure's OpRegen consists of RPE cells that are produced using a proprietary process that drives the differentiation of human embryonic stem cells into high purity RPE cells.  OpRegen is also “xeno-free," meaning that no animal products were used either in the derivation and expansion of the human embryonic stem cells or in the directed differentiation process.  The avoidance of the use of animal products eliminates some safety concerns.

Cell Cure Neurosciences (http://www.cellcureneurosciences.com) was established in 2005 as a subsidiary of ES Cell International (ESI), now a subsidiary of BioTime.  Cell Cure’s second largest shareholder is HBL Hadasit Bio-Holdings.  Cell Cure is located in Jerusalem, Israel on the campus of Hadassah Medical Center.  Cell Cure's mission is to become a leading supplier of human cell-based therapies for the treatment of retinal and neural degenerative diseases.  (BioTime 06.10)

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 8.6  Kadimastem Approached the FDA Regarding Its ALS Treatment

Kadimastem announced that only one day after approaching the FDA regarding the cellular treatment that it is developing for ALS, an encouraging response was received.  Based on the quality of the data presented, the FDA recommends rapidly moving forward in the approval process towards product development and safety (towards clinical trials). 

In the framework of talks with the FDA, Kadimastem intends to consolidate a preliminary outline for its continuing trials for this indication.  Recently, the company reported positive results in a pre-clinical trial it conducted. In the trial, the efficacy of injecting support cells (astrocytes), produced by the company in a unique technology, into the spinal fluid of ALS model mice, was tested.  This model is highly significant in predicting the treatment's activity in humans.  The results of the trial showed an increased life expectancy in the mice treated, as well as a significant improvement of their motor (muscle) function, compared to the untreated mice.  The efficacy of the treatment was also demonstrated in other indices indicating a delay in disease onset. Injections into the spinal fluid are standard procedure performed routinely in hospitals around the world.  The company found that injections into the spinal fluid enable the even dispersion of cells throughout the central nervous system, thereby establishing the method of cell penetration in future treatment of patients.

Ness Ziona’s Kadimastem (http://www.kadimastem.com) uses human stem cells that are differentiated to create medical solutions for diabetes and degenerative diseases of the nervous system and for drug screening.  The company’s technological platform enables the differentiation of stem cells into a range of functional human cells, including neuron-supporting cells in the brain as well as pancreatic cells that secrete insulin – beta cells.  (Kadimastem 07.10)

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9:  ISRAEL PRODUCT & TECHNOLOGY NEWS

 9.1  Ecoppia Selected for Five New Solar Projects

Ecoppia announced the deployment of its E4 robotic solar panel cleaning system at five Middle Eastern PV production facilities.  Upon the projects’ completion in early 2015, Ecoppia’s technology will clean more than 5 million panels every month, deployed across more than 40 MW of installations.  The new additions to Ecoppia’s portfolio are owned by Arava Power Company, a leading solar developer based in Israel.  The five newest E4 deployments are at solar PV production facilities located in the harsh Arava and Negev deserts.  Both are notably arid, receive very little rain, and suffer frequent dust storms originating in Saudi Arabia and the Sahara desert.  Ecoppia’s water-free technology uses a soft microfiber and controlled airflow to cost-effectively remove 99% of solar panel dust daily, maintaining optimal production levels year-round.  The self-charging, self-cleaning units are supported by a robust control system to enable remote programming, management and monitoring.

Herzliya’s Ecoppia (http://www.ecoppia.com) designs and produces innovative photovoltaic panel cleaning solutions to cost-effectively maximize the performance of utility-scale installations.  The company’s water-free, automated technology removes dust from panels on a daily basis to ensure peak output, even in the toughest desert conditions.  (Eccopia 24.09)

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 9.2  Connect One Launches Next Generation IoT WiFi Modules

Connect One has launched its next-generation (G2) WiFi modules to support the latest 802.11b/g/n wireless standards for the Internet of Things (IoT) market.  With the rapid advances in IoT infrastructure, many applications such as medical, security, industrial control, smart grid, asset management, and point of sale, need the fastest, more secure wireless standards for their communications.  G2 incorporates these latest standards at up to 40% savings, while creating a no-change upgrade path for customers.  In addition to preserving form, fit, and function of existing modules, Connect One has enhanced and enriched the functionality available across the entire G2 line.  The G2 modules can also serve as independent WiFi access points where WiFi infrastructure does not exist.  Customers can use the modules to connect to and manage their deployed, in-field devices via standard WiFi devices, such as iPhones, iPads, Android phones, and other mobile phones and devices.

Established in 1996, Kfar Saba’s Connect One (http://www.connectone.com) is widely regarded as the device networking authority, with many innovative firsts to its credit.  The company manufactures semiconductors, modules and device servers that facilitate secure, reliable, and robust Internet protocol-based communication for everyday devices.  (Connect One 23.09)

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 9.3  Seatylock - Bicycle Saddle That Turns Into A Lock

Israel’s Seatylock (http://seatylock.com) saddle and lock is so revolutionary to the bicycle sector that Seatylock’s creators already have a registered patent on their technology.  With urban cycling gaining in popularity due to the convenience, health benefits and exposure to hourly rental services like New York’s Citi Bike, Seatylock’s dual bike seat and lock is sure to gain fans, and fast.  Seatylock’s customizable bicycle saddle transforms into a one meter solid lock that can be hooked, like other bike locks, on any fixed object.  However, unlike the standard bike locks that weigh a ton and can throw off your center of gravity while riding a bike, Seatylock’s bike lock folds and stows swiftly and safely into the saddle of the bike, wrapping around together with the lock to keep your bike safely in place.  Then, once you are ready to hop on your bike again, all you need to do is unlock the Seatylock with a key, fold the locks arms back into the saddle and secure the seat back in its place.  Seatylock is designed to be a solid, sturdy lock.  It is made out of six hardened steel links that are over-molded with plastic to protect your frame from scratches.  The cylinder is secured in hardened steel housing that is protected against drilling.  The bike saddles are expected to ship by March 2015.  (NoCamels 24.09)

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 9.4  Yahoo! Japan Selects Mellanox InfiniBand Solutions

Mellanox Technologies announced that Yahoo! Japan Corp. (Yahoo! Japan) has deployed Mellanox’s end-to-end FDR 56Gb/s InfiniBand solutions for database acceleration at several data center sites in Japan.  With Mellanox, Yahoo! Japan improved its database performance by 10X while dramatically reducing job processing and backup times.  Yahoo! Japan deployed Mellanox’s end-to-end FDR InfiniBand for database and storage servers to support its daily business services that require high performance and reliability, such as services provided by Yahoo! Japan’s websites and its internal operations.  By switching to Mellanox InfiniBand solutions, Yahoo! Japan improved its system and user I/O by approximately 50% from its previous 10GbE solution.  The company also reduced its job processing time by nearly one-tenth and its database backup time by 80%.  FDR 56Gb/s InfiniBand enables unified connectivity for networking using IPoIB (IP over InfiniBand) and for storage access, using iSER (iSCSI over RDMA), to enable the highest performance at the lowest total cost of ownership.

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 29.09)

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 9.5  Giraffic & Vuser Enhanced China’s Over-the-Top Market

Giraffic announced that Vuser Electronics, a developer of software and hardware systems for IP-based set-top boxes (STBs) and high quality DLP Pico Projector (WiPao), has selected and integrated Giraffic’s Adaptive Video Accelerator (AVA) technology into its unique all-in-one “over-the-top” (OTT) TV system.  Vuser’s IP-based set-top box is an innovative Android media-streaming device, which connects via Wi-Fi to the Internet, and offers a broad selection of content.  Vuser’s box plugs into any monitor via HDMI but is also equipped with a high quality DLP Pico Projector.  This enables users to beam the content on to the wall, making it a portable, all-in-one high performance “Smart TV.”  By using Giraffic’s AVA, Vuser is poised to deliver more consistent and higher viewing quality, offering true HD playback.

Giraffic’s AVA technology is an easy-to-deploy client-side solution that maximizes TCP throughput by combining real-time analytics and playback shaping to virtually eliminate rebuffering, and ensure consistent quality-of-service for all HTTP based playback and media downloads.  AVA runs on all popular operating systems and any class of streaming media device, including IP set-top boxes, smart TVs, smartphones and tablets.  It accelerates connection performance by 300%, on average, delivering HD video and enabling 4K streaming, regardless of the content source or connection.

Tel Aviv’s Giraffic (http://www.giraffic.com) is the inventor of Adaptive Video Acceleration (AVA) – a new client-side network throughput optimization technology that offers consumers High Definition video, without re-buffering pauses or streaming resolution reduction.  With millions of users worldwide enjoying accelerated high-quality video via Giraffic AVA, and thousands of Giraffic-enabled devices or Apps being deployed daily, Giraffic’s ground-breaking technology has been validated and benchmarked by some of the world leaders in Consumer Electronics and OTT TV, to provide dramatic Internet throughput increase.  (Giraffic 01.10)

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 9.6  TowerSec ECUSHIELD Cyber Security Software Showcased

ECUSHIELD, an embedded software product from TowerSec, detects cyber threats and prevent attacks in real-time.  It was publicly unveiled on SEGULA Technologies' life-size, three-seat concept car during media days at the Paris Auto Show.  TowerSec has spent years listening to the "voice of the customer" and has responded with immediately available, cost effective security product.  As a result of its proven value proposition, TowerSec gains strong credibility and intimate relationships with key OEMs and Tier 1 and Tier 2 suppliers.  By taking advantage of weaknesses in the in-vehicle networks (e.g. CAN-BUS) or exploiting wireless communication vulnerabilities, hackers and intruders can manipulate ECUs and other on-board computerized modules.  These intrusions can take over or hamper critical systems such as the engine, brakes and even steering all of which compromise the vehicle's safety and security.

ECUSHIELD solves that problem.  Once integrated into a CAN-BUS accessible ECU, telematics controller or infotainment unit, ECUSHIELD provides continuous monitoring while identifying new threats to the vehicle.  It prevents malicious communication intrusions from reaching mission critical systems inside the vehicle that could put lives and personal data at risk.  With ECUSHIELD no redesign is needed. It is flexible and can be easily and cost effectively installed in new and used vehicles, including fleets.  It turns any ECU into an Intrusion Detection and Prevention (IDS/IPS) system and any gateway ECU into a smart firewall.

Herzliya’s TowerSec (http://www.tower-sec.com), an automotive cyber security company, delivers on-board cyber security technology to OEMs, suppliers and the aftermarket.  Founded in 2012 by team of highly trained Israeli cyber security experts backed with decades of automotive manufacturing experience, TowerSec combines its unique knowledge to deliver its on-board solutions globally.  (TowerSec 01.10)

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 9.7  StoreDot $42 Million in New Funding to Bring Devices to Market

StoreDot completed its Series B Round of financing of $42 Million.  Singulariteam, a private investment fund that focuses on early stage new and disruptive technology companies, provided seed funding for StoreDot.  New funding comes from several strategic partners including $10 million from Russian businessman Roman Abramovich’s private asset management company, Millhouse LLC.  StoreDot attracted the world’s attention earlier this year when it demonstrated, for the first time, the prototype of an ultra-fast-charge battery that uses “Nanodots” derived from bio-organic material.  This new round of funding will enable refinement and commercialization of the ground-breaking battery technology, new hiring, and the development of other products in a new state-of-the-art research facility in Herzliya, Israel.

StoreDot’s real innovation is the discovery of new generation, self-assembled nanomaterials derived from cost effective bio-organic elements that, due to their size and electrochemical attributes have the potential to disrupt a number of technology markets.  Manufacturing Nanodots is relatively inexpensive as they originate naturally, and utilize a basic biological mechanism of self-assembly.  Nanodots can be made from a vast range of bio-organic raw materials that are readily available.  Therefore, StoreDot’s technology can potentially be manufactured at order-of-magnitude cheaper levels.

Ramat Gan’s StoreDot (http://www.store-dot.com) is a privately owned nanotechnology startup, incorporated in Israel in 2012, which develops technologies that apply bio-organic nanomaterials to displays and energy storage devices.  Additional target products of StoreDot technology include flash memory, image sensors and semiconductor materials.  (StoreDot 02.10)

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 9.8  Salt of the Earth Innovative Salt Products Win SIAL 2014 Selection

Executing innovation strategy in developing new premium low-sodium sea salt and gourmet sea salt products for retailers and food manufactures just paid off for Atlit’s Salt of the Earth (http://www.saltoftheearthltd.com).  Three of the company's innovative sea salt products won SIAL Innovation Selection 2014 awards.  The forward-thinking company invested two years in developing advanced product lines of low-sodium sea salt and gourmet salt products for consumers, and advanced sea salt ingredients for sodium reduction in food applications.  Practical Innovation, Israel, a consulting agency specializing in product innovation, worked with Salt of the Earth to create the products based on extensive investigation of market trends and research. 

Salt of the Earth's new competitive-edge product line include WonderSalt, a low-sodium sea salt for kids, naturally colored with fruit and vegetable extracts.  It contains 50% less sodium than regular salt and helps children control salt intake by using this fun-colored salt that allows them to clearly see how much they are using.  Their Umami-Essence Sea Salt is a propriety liquid formula derived from tomato extract and pure salt from the Red Sea that can reduce the level of a recipe's sodium while boosting homemade recipe flavor via the exotic 5th taste known as umami.  (Salt of the Earth 06.10)

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10:  ISRAEL ECONOMIC STATISTICS

 10.1 Israel’s August Unemployment Rate Increases

The Central Bureau of Statistics announced on 22 September that Israel's unemployment rate rose to 6.4% in August from 6.2% in July.  The number of people aged 15 and over participating in the workforce was 3.787 million in August. 3.546 million were employed, and 241,000 unemployed.  Among the employed, there were 1.878 million men (compared with 1.873 million in July) and 1.668 million women (compared with 1.675 million in July).  The rate of participation in the workforce was 64.2% in August, unchanged from July.  The rate among men was stable, at 69.4%, while the rate among women declined to 59.2% in August from 59.3% in July.

The number of full-time (35 hours or more per week) employees fell by 0.6%, or 16 thousand people, in August in comparison with July.  The number of people in part-time jobs rose by 3%, or 23 thousand.  The percentage of employees usually in full-time employment out of the total number of employed people fell to 77.3% in August from 77.9% in July.  (CBS 22.09)

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 10.2 Israel Ranks 11th in 2014 Global Wealth Report

Israel has been ranked 11th in the 2014 Global Wealth Report, composed by multinational financial services company Allianz.  The report, which reviews the average financial assets per capita, in euros, across the world's 20 leading economies, was released over the weekend. 

Switzerland topped the Global Wealth Report with net average financial assets per capita amounting to €146,540 ($185,873).  The United States ranked second, with €119,570 ($151,664) and Belgium ranked third with €78,300 ($99,316) in net financial assets per capita.  The Netherlands ranked fourth, followed by Japan, Sweden, Taiwan, Canada, Singapore and Britain, which rounded up the top 10.

The report pegged the average financial assets per capita in Israel at €55,840 ($70,828), awarding it the 11th place -- above Austria (12), Denmark (13), Italy (14) France (15) and Germany, which was ranked 16th.  A ranking of the gross average of financial assets per household pegged Israel at the 16th place out of 20, above Italy, Germany, Austria and Finland.  (IH 28.09)

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 10.3 Israel’s Defense Exports Down in 2013

Figures published on 7 October by the defense exports department of the Ministry of Defense are a further indication of the difficulty being experienced by Israeli defense companies in global markets.  Defense exports by Israeli companies declined from $7.47 billion in 2012 to $6.54 billion in 2013, although they are still higher than the $5.82 billion exports recorded in 2011.  The Defense Ministry figures refer to new contracts signed in 2013.  Most of these contracts were for airplane upgrades, aerial chasses and systems, airborne software systems, electronic communications and warfare equipment, various types of munitions, unmanned aerial vehicles, and radar.  The defense exports department said that the global defense market trend last year was towards slimmer defense budgets in Israel's main markets, headed by the US and Europe.  Another factor affecting global demand for weapons systems is the withdrawal of coalition forces from Iraq and Afghanistan.  The Defense Ministry figures also show that contracts of small and medium-sized Israeli defense companies totaled $500 million in 2013, about the same as in 2012.  (Various 07.10)

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11:  IN DEPTH

 11.1 ISRAEL:  Moody's Says Ratings Underpinned by its Resilient Growth Model

Israel's A1 sovereign rating and stable outlook are underpinned by its resilient growth model and effective governance, says Moody's Investors Service (http://www.moodys.com) in a report published on 30 September.

Key to Israel's economic dynamism is a high-tech export sector that benefits from the country's well-educated, relatively young population, as well as one of the highest levels of per capita investment in research and development.  Foreign capital inflows are also substantial, as evidenced by the recent decision of Intel to build its $6 billion new chip plant there.

The rating agency's report is an update to the markets and does not constitute a rating action.

Moody's says that Israeli growth started to slow this year even before the latest conflict with Hamas in Gaza, mainly because of the negative impact on exports of a steeply appreciating currency.  The Gaza conflict will put a significant dent in third quarter growth, further weighing on the overall forecast for 2014.  "Growth is likely to pick up next year due to the impact of easier monetary policy and the associated weakening of the shekel since late July.  Israel will benefit from stronger growth of the US economy, its most important trading partner, and the more modest pickup in European growth," says Kristin Lindow, a senior vice president at Moody's.

The current account surplus has shrunk during the past two years and will continue to remain narrow due to the rollout of investment programs to expand offshore natural gas development.

Additional defense spending has derailed plans for bringing the government budget deficit down to 3% in both 2014 and 2015, especially since the Finance Minister has ruled out tax increases.  Moody's expects Israel's debt-to-GDP ratio to remain stable at around 67%.

According to Moody's, Israel's extensive geopolitical challenges continue to constrain the ratings.  These include territorial disputes with the Palestinians, intense civil strife in Egypt and Syria and the stand-off with Iran over its nuclear program.  Intermittent conflicts pose near- to medium-term risks for the public finances and impair Israel's standing in the international community.

Israel's creditworthiness could improve following a substantial further reduction in the government's debt levels would improve Israel's creditworthiness.  Conversely, the rating outlook could be lowered to negative if the commitment to fiscal discipline, in particular the consensus around fiscal consolidation, were to wane.  The rating also could be downgraded in the event that geopolitical developments appear to pose heightened challenges to Israel's economic stability and result in a significant deterioration of the public finances.  (Moody's 30.09)

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 11.2  LEBANON:  An Economy Under Strain

The Lebanese economy is facing a major threat.  For the third consecutive year, Lebanon’s public debt is growing well beyond its real economy. For instance, although public debt increased by 10.1% in 2013, economic growth did not exceed 1.5%.  This does not bode well.  Drastic action is needed at all levels of government in order to reverse the trend, rein in the budget deficit, and deploy effective strategies for growth.

The root causes of the economic crisis largely stem from the deterioration of security amid the three-and-a-half year Syrian crisis, the political paralysis and freezing of public institutions, the lack of inclusive politics, and the absence of much-needed reforms. 

Most of the engines of growth are sputtering.  Tourism, which has accounted for more than 20% of GDP in past years, is in sharp decline.  The number of tourists visiting Lebanon has decreased by 6.7% in 2013.  In the same period, and for similar reasons, foreign direct investment (FDI) dropped by 23% and greenfield FDI dropped by 48%, indicative of the government’s failure to channel investments into productive sectors of the economy.  This has had a negative impact on the real estate sector, which now suffers from less capital inflow from the Arabian Gulf; the number of real estate sales transactions declined by 7.2%.

Other sectors with high growth potential are faced with legal barriers or lack of reform, including electricity and telecommunications, in addition to Lebanon’s offshore oil and gas fields that are still awaiting exploration.  Meanwhile, the government does not seem impressed or bothered by the absence of growth and its crippling public finances.  It keeps spending at an alarming rate: government expenditures for 2013 rose by 2.4% while the budget deficit widened by 3.9%.

The Syrian refugee crisis came at the wrong moment for Lebanon.  Neither its economy nor its weak infrastructure could withstand such a burden.  More than 1.1 million registered Syrian refugees - between one-quarter to one-third of Lebanon’s population - have settled here.  Not only does it impose huge costs on the Lebanese economy, but it also endangers the country’s delicate social fabric.  To put things in perspective, in a visit to Lebanon early this year the president of the World Bank likened the refugee influx to the entirety of the Mexican population resettling into the United States during a three year period.

In the World Bank’s report presented to the United Nations in September 2013, the cost of the Syrian crisis on the Lebanese economy was estimated at $7.5 billion over three years. It is very likely that the cost to Lebanon will rise several billion dollars more for the 2014 fiscal year.

All of this paints a dire outlook for the Lebanese economy.  The only way for Lebanon to cope with the economic fallout is to enact better security measures, make politics inclusive, and implement targeted reforms.  All of these seem beyond the reach of Lebanon’s political establishment, which must shy away from the broader regional upheaval and focus on limiting the spread of sectarianism at home.

Sami Nader, an economist and columnist at Al-Monitor’s Lebanon Pulse.  (Sada 03.10)

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 11.3  JORDAN:  Pharmaceuticals Propel Jordan’s Economic Diversification

Much discussion of Jordan’s economic potential focuses on the mining and processing of minerals, but knowledge sectors like pharmaceuticals may offer a more effective tonic for the economy.

The latest data released by the kingdom’s Department of Statistics show that pharmaceuticals exports in the first half totaled JD218.5m ($308.4m), up 6.6% from the same period last year.  By comparison, the value of traditional export commodities such as crude potassium (or potash) and phosphates fell by 20% year-on-year to JD223.6m ($315.6m) and 3.8% to JD155.0m ($218.8m), respectively.  

Energy Effects

The raw numbers, however, tell only part of the story.  While the extractive industries and related spinoffs provide significant revenues, producers are doubly exposed – as buyers and as sellers – to shifts in global commodity markets.  For example, Amman-based Arab Potash Company (APC) posted a fall in profits of more than 50% in the first six months, which it attributed to both lower prices for its own products and higher ones for the energy it uses to produce them, the same factors it blamed for a 35% drop in profits for 2013.  The increased fuel costs are exacerbated by Jordan’s near total reliance on energy imports, which have been interrupted repeatedly by regional unrest in recent years, forcing companies like APC to burn more expensive heavy fuel oil.  APC has agreed to buy gas from neighboring Israel’s promising offshore fields but that flow is not scheduled to start until 2016.

By contrast, pharmaceuticals companies operate in the high-skill, high-tradability knowledge sector of the economy, which, while still relatively small in Jordan, continues to expand at a rapid rate.  Companies in this segment, which also includes information and communications technology (ICT), and air transport, tend to be export-oriented, hire well-educated employees and offer relatively strong wage, and benefit packages. 

Employment driver

While extractive industries will always be partly hostage to energy supplies and costs, pharmaceuticals play to Jordan’s strengths.  The country’s workforce is among the most educated in the MENA region and it also ranks near the top of the region on the UN’s Human Development Index.  In addition, the pharmaceuticals business enjoys multiple synergies with another beneficiary of Jordan’s reserves of highly skilled human capital: its relatively advanced health care system, including a medical tourism industry.  In recent years, the pharmaceuticals sector directly employed some 5000 people in Jordan, with 3,000 more indirect jobs created in areas such as packaging, shipping and marketing.

“The pharmaceuticals industry is [Jordan’s] second-most-valuable export … after mining.  The export market accounts for 80% of all revenues … which shows just how strong the sector is in itself, and for Jordan,” Maher Kurdi, managing director of Hayat Pharmaceutical Industries, told OBG.

Kurdi warns that the industry must not rest on its laurels, particularly in terms of training tomorrow’s workforce.  “The education system in Jordan has been gradually slowing down … and I believe this will have ill effects on our long-term competitiveness, unless this is reversed,” he said. 

Regional ambitions

According to the Jordan Association of Pharmaceuticals Producers, around four-fifths of production is for export, with around 90% of foreign sales going to Arab countries, thanks to strong growth across the region.

London-listed Hikma Pharmaceuticals, which was founded in Jordan and has a US FDA-approved manufacturing facility in the country, noted strong growth in key markets such as Egypt and Saudi Arabia when reporting its first-half results in August, posting a 44% jump in adjusted profit to $176m and a 16% rise in revenue to $738m.  In its annual report, it noted that pharmaceutical sales for the top nine private retail markets in the Middle East and North Africa (MENA) region grew by 7% in 2013, to reach $11b, according to IMS Health.

The Gulf’s own pharmaceuticals sector is relatively underdeveloped due to several factors, including the lack of focus on the development of a manufacturing sector in the GCC until a few years back, the difficulty of raising funds for an industry that is inherently capital-intensive and involves a long payback period, as well as a shortage of suitably trained personnel, according to a sector report by Alpen Capital.

Here the early establishment of Jordan’s pharmaceuticals industry in the 1960s is paying dividends.  The kingdom, along with Egypt, has matured into an important regional center from which major multinational companies export drugs into the Gulf.  It was the largest exporter of medicines in the Arab world in 2011, according to the World Trade Organization data, as well as the second largest in MENA, behind Israel.

The GCC countries offer major markets in which drug prices are “significantly higher than the world average” and changing lifestyles are increasing the incidence of chronic health conditions such as diabetes, driving increased consumption of both prescription and over-the-counter medications, noted Alpen Capital.  (OBG 26.09)

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 11.4  ARABIAN GULF:  Gulf Arab to Grow Faster in 2015 Despite Cheaper Oil

Gulf Arab economies are likely to grow slightly faster in 2015, propped up by strong private business activity despite further falls in oil prices, a Reuters poll of analysts showed on 29 September.  Brent crude oil, now at just above $96 a barrel, is down almost $20 from June’s peak. Many economists expect the downtrend to continue in coming years, although at a slower pace, because of ample supply.

But the financial positions of most Gulf Cooperation Council governments are expected to stay healthy enough for them to continue spending heavily, while private sector growth may offset any drop in activity in the hydrocarbon sector.

Saudi Arabia’s $748 billion economy – the biggest in the Arab world – should expand 4.3% next year, a tad more than the 4.2% rate expected in 2014 and 2016, according to the consensus of 18 analysts polled over the past two weeks.

Both the 2015 and 2016 forecasts for Saudi Arabia’s real gross domestic product growth are unchanged from the previous Reuters poll on the region, conducted in April.  “The fall in oil prices to under $100 per barrel is unlikely to knock underlying growth in GCC economies significantly off course,” said Daniel Kaye, senior macroeconomic editor at the Oxford Economics consultancy.  “In most countries, non-oil growth should remain in the 4-6% range.  However, it is possible that Gulf oil output could be cut more sharply than expected as the OPEC leadership looks to provide support to prices.”

Small Qatar is expected to keep outperforming the other five GCC states with a 6.7% growth rate in 2015, much faster than the 6.0% forecast in April, as it spends billions of dollars on construction before it hosts the 2022 football World Cup tournament.  That also means, however, that price pressures in the world’s top liquefied natural gas exporter are expected to intensify, taking the inflation rate to 4.0% in 2015 and 4.5% in 2016, the highest among the Gulf countries.

“Capital investment into the economy is expanding, population is growing at a double-digit rate and projects are getting fully underway,” explained Farah Ahmad Hersi, senior economist at Masraf al-Rayan in Doha.  “Despite all of this infrastructure-building activity, the construction inflation in the country is still remarkably low.”

In the United Arab Emirates, where a double-digit jump in Dubai property prices has sparked fears of another bubble, GDP is projected to grow 4.5% next year.

Growth is expected to slow to 4.3% in 2016, when GCC members are likely to feel the dampening effect of U.S. interest rates, which are expected to start rising in 2015.

Most GCC states peg their currencies to the dollar, meaning they cannot diverge much from U.S. interest rates over a long period, otherwise they risk destabilizing capital outflows.

On the fiscal front, prospects are less bright for the GCC economies since years of breakneck government spending have left them requiring higher oil prices to post state budget surpluses.

Sliding oil revenues are bad news for small oil exporters such as Oman, which analysts expect to tip into a budget deficit of 0.8% of GDP in 2015, and Bahrain, which could tumble deeper into the red with a 5.7% gap next year.  Even oil giant Saudi Arabia has seen its fiscal forecasts slashed; it is now expected to post a surplus of 2.0% of GDP in 2015 and just 0.3% in 2016, instead of the 3.7% and 3.5% predicted in the April survey.

“Growing government spending commitments on subsidies combined with high spending on infrastructure and other projects will mean reduced surpluses as oil exports remain stagnant or even contract slightly over the years," said Oxford Business Group, an economic and business research publishing firm.  “By 2016, Saudi Arabia could be at the break-even point or even running a small deficit. But with the conflicts in Iraq, Libya, and Ukraine as well as the deteriorating security situation in Nigeria, oil prices will not fall as much as some expect.”

The erosion of large fiscal surpluses may add to political pressure in GCC countries to restrain state spending.  While they have enjoyed the surpluses, governments have been reluctant to curb spending on generous cradle-to-grave welfare systems at a time of unrest in the Middle East.  (TDS 01.10)

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 11.5  KUWAIT:  New Schools to Meet Growing Demand in Kuwait

A growing population and crowded public school system have led Kuwait to move forward on a host of investments in education.  The government recently launched tenders for a series of primary and secondary school construction projects while private sector contractors are poised to benefit as a university city is built.

While the nation’s population growth averaged 3.1% annually between 2000 and 2012, according to the IMF, the Public Authority for Civil Information (PACI) reported that 57% of Kuwaitis are currently under the age of 25.  Furthermore, the IMF predicts that between 74,000 and 112,000 Kuwaitis will enter the local labor market between 2012 and 2016.  Kuwait’s current population is around 3.97m, according to the PACI.

This has put significant pressure on the public education system, with the government stating this year: “The quality of existing schools is a concern to the Ministry of Education [MoE], as a number of public schools are not equipped with the latest technologies and are in poor condition.  This translates into poor motivation and participation from both students and teachers.”

Policy reforms are also needed, including a legal framework that will allow both public and private schools to address ongoing staff shortages.  A pilot project launched in conjunction with the World Bank will see public school curricula revamped, but long-term policy reforms regarding foreign teachers are still needed if the state is to keep pace with regional peers. 

Private support for public schools

In March, Kuwait’s Partnerships Technical Bureau (PTB) and the MoE issued a request for expressions of interest to build nine schools under the Kuwait Schools Development Program.  The project, which will be offered to private firms under a design, build, finance, operate and maintenance contract, will see the construction of five kindergartens, three elementary schools and one middle school, as well as an Olympic-sized swimming pool and staff accommodation.  The PTB expects to announce pre-qualified bidders before the end of the year.

This follows the government unveiling its executive development strategy for public education last year, as well as plans to build new schools and educational facilities in 2014 in a bid to increase private sector participation.

Tertiary education upgrades are also in the pipeline.  On 2 August, trade publication Construction Weekly Online reported that work on the 6 sq. km. Sabah Al Salem University City – set to become Kuwait University’s primary campus – was well under way at a site 10 km south of Kuwait City.

The $3b project will include a 18,000 sq. meter campus for men and 26,000 sq. meter female campus, with buildings to be equipped with advanced low-voltage systems and an array of audio-visual equipment, enabling the city to become one of the most technologically progressive in the region.  At the same time, the Kuwait Development Plan, which runs from 2010 to 2035, includes $382.51m for MoE projects, including the construction of 100 new public schools. 

Beyond bricks and mortar

Although these schools will be a welcome addition to the state’s public education sector, stakeholders including the IMF have stressed that the Kuwait should also move forward on policy reforms aimed at improving the quality of education.

In April 2013, the MoE partnered with the World Bank to launch a pilot project in 48 schools across the state called the National Curriculum Framework.  This includes the development of a national curriculum, targeting a reduction in absenteeism as well as improving standards more generally in the school environment.  The curriculum is to be implemented in the next two or three years and will require intensive teacher training.

While policies aimed at enhancing teacher performance will go a long way towards improving public education, other stakeholders have argued that the problem lies in attracting and retaining foreign teachers to meet growing demand.  Expatriate staff are estimated to account for 84% of the labor market, but Kuwait is set to reduce the number of foreign workers by 1m from 2013 to 2023 at a rate of 100,000 per year.

The MoE recently announced it was easing restrictions on hiring foreign teachers in an effort to combat the staffing shortage, allowing foreign instructors to teach at public schools for the first time in the 2013/14 school year.  But should staffing policies remain unchanged and plans to reduce expatriate laborers come to fruition, Kuwait’s school staffing shortages will likely persist into the long-term.  (OBG 22.09)

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 11.6  UAE:  Abu Dhabi 'AA/A-1+' Ratings Affirmed On Large Net Asset Positions

On 3 October, Standard & Poor's Ratings Services (http://www.standardandpoors.com) affirmed its 'AA' long-term and 'A-1+' short-term foreign and local currency sovereign credit ratings on the Emirate of Abu Dhabi, a member of the United Arab Emirates (UAE). The outlook is stable.

Rationale:  The ratings are supported by Abu Dhabi's strong fiscal and external positions, which afford it fiscal policy flexibility.  The exceptional strength of Abu Dhabi's net asset positions also provides a buffer to counter the negative impact of oil price volatility on economic growth and government revenues, as well as on the external account.

The ratings are constrained by our view that the emirate has less-developed political institutions than those of non-regional peers in the same rating category.  Limited monetary policy flexibility, in view of the dirham's peg to the U.S. dollar and the underdeveloped local currency domestic bond market, also weighs on the ratings.

Abu Dhabi is one of the world's wealthiest economies; we estimate GDP per capita at $102,000 in 2014.  Economic growth is supported by rising oil production, high public spending, and a broadening of the economy's production base, including services and manufacturing.

Real growth (that is, adjusted for inflation) and nominal growth levels have been robust.  However, real GDP per capita growth, weighted as per our criteria, is contracting by about 3% largely due to the high flow of foreign workers into the emirate.  Real GDP per capita growth is well below peers' in the same GDP-per-capita category.  We believe, however, that in a heavily resource-endowed economy such as Abu Dhabi, nominal GDP growth, which averaged 11% annually during 2007-2013, is a better measure of prosperity and could substantially cushion potential risk.

We assume that oil prices will moderate to about $100 per barrel (bbl) in 2016 and beyond, from about $105 per bbl in 2014.  Consequently, we estimate the fiscal surplus will average about 7% of GDP (including Abu Dhabi National Energy Company dividends) in 2014-2017, helping to bolster the emirate's net asset position, which we project at more than 200% of GDP over the same period.  The government has strengthened its oversight over public-sector debt, aiming for sustainability and the prevention of financial stress at its government-related entities (GREs).  We estimate the debt of Abu Dhabi's GREs at about 18% of GDP in 2014, including parent-level debt at Mubadala Development Company, International Petroleum Investment Company, Tourism Development and Investment Company, and Abu Dhabi National Energy Company.  These entities are backed by the government's statement of support to the effect that their creditworthiness should not be differentiated from that of the government.

The dirham's peg to the U.S. dollar constrains monetary policy independence.  In addition, Abu Dhabi's underdeveloped capital markets weigh on the transmission of monetary policy decisions.

The government has made some progress in strengthening its economic institutions.  It has established a debt management office, undertaken a public expenditure review, and set up a medium-term budget framework.  However, the availability of macroeconomic data and disclosure related to the government's external assets is poor compared with that of similarly rated peers.  Moreover, we believe political institutions in the UAE are nascent compared with those of non-regional peers.  The decision-making process remains highly centralized, with checks and balances between institutions largely absent.

Notwithstanding that the UAE does not tolerate calls for political reform, UAE leadership fosters domestic stability through financial largesse with regard to the Emirati population and via consensus building.  Through its regional and international alliances, the UAE government strives to maintain a balanced foreign policy to safeguard its strategic and commercial interests.  In its energy and foreign policy, Abu Dhabi has been proactively mitigating its exposure to geopolitical risks as well as securing its oil supply to strategic end users.  To this effect, the government completed the Abu Dhabi Oil Pipeline in 2012, which now has the capacity to deliver just over 65% of Abu Dhabi's oil exports directly to the Fujairah terminal on the Indian Ocean, bypassing the Straits of Hormuz.

In our view, domestic security forces in the UAE will likely continue to significantly restrict the ability of extremist groups to operate within the country.  We therefore do not expect material spillover effects on Abu Dhabi from the UAE's currently more activist military policy in Syria against the radical Islamist group, the so-called Islamic State.

Outlook:  The stable outlook reflects our view of balanced risks to the ratings on Abu Dhabi over the next two years.  We believe that Abu Dhabi's economy will remain resilient and its fiscal policy will stay prudent and flexible, but we also anticipate that structural and institutional weaknesses will remain.

We could consider raising the ratings if we observed pronounced improvements in data transparency, including on fiscal assets and external data, alongside further progress in institutional reforms.  What's more, measures to improve the effectiveness of monetary policy, such as developing domestic capital markets, could be positive for the ratings over time.

We might consider a negative rating action if we saw a sharp and sustained decline in oil prices or marked deterioration in fiscal and external balances.  The ratings could also face pressure if domestic or regional events compromised political and economic stability.  (S&P 03.10)

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 11.7 TUNISIA:  Elections & Steps Toward Democratic Consolidation

4 October marks the formal launch of Tunisia's campaign period for parliamentary and presidential elections, scheduled for 26 October and 23 November, respectively.  These will be the second elections held since the December 2010 self-immolation of an exasperated street vendor Muhammad Bouazizi which sparked protests that led to the overthrow of President Zine al-Abidine Ben Ali and the wider regional upheaval often known as the Arab Spring.  The path to the upcoming vote has not always been smooth, but a successful transfer of power in Tunisia would be a crucial next step for the country and a rare bright spot for the region.

The Bumpy Road to the 2014 Elections

Since January 2011, Tunisia's political transition has gone through four phases.  The first began immediately after President Ben Ali's ouster, when a series of interim governments culminated in the country's first free and fair legislative elections in October 2011.  Those elections ushered in a second phase, in which the newly elected parliament began drafting a constitution and the country's main Islamist party, Ennahda (Renaissance), agreed to govern in a coalition, or troika, with two smaller secular parties.  Against heated debates between Ennahda's supporters and opponents over the place of religion in the new foundational law and in Tunisian public life, this second phase saw increasing violence by radical religious groups, including a September 2012 attack on the U.S. embassy in Tunis.  The violence spiked in mid-2013, when two political assassinations and an assault on a military installation in Tunisia's western region - all perpetrated by indigenous jihadists - plunged the country into a political crisis.  This crisis phase, the third of the transition, extended from mid-2013 to January of this year, when a National Dialogue representing the political parties, labor unions and civil society oversaw the long-awaited promulgation of the constitution, and the Ennahda-led government agreed to step down in favor of a technocratic cabinet.  The installation of an interim government in January launched the transition's fourth phase, during which key achievements have included the adoption of an election law and a reduction in violence.  Still, these gains remain tenuous and the incoming government will be expected to outline much-needed economic and political orientations to guide the country for years to come.

Key Issues

Unlike earlier phases of the transition, when issues of religion and state dominated the public discourse, the prevailing themes in the current campaign cycle will be the economy and security.

Economy: Rising unemployment, cronyism, and regional economic disparities fueled the popular uprising that toppled Ben Ali in 2011.  According to a recent World Bank study, Tunisia's economy remains plagued by "a financial sector hampered by governance failures, labor rules that paradoxically promote job insecurity, regulatory policies that limit competition, and an industrial policy and agricultural policy that introduce distortions and deepen regional disparities..."  As a result, unemployment continues to hover around 15% nationally (rising to 30% among college graduates); foreign direct investment has decreased by 26% relative to this time last year; and the growth rate has not surpassed 2.3% since the start of 2014.  The U.S. government has provided much-needed economic assistance, including loan guarantees on $1 billion in Tunisian government bonds; $40 million toward private-sector business development projects; and bilateral trade to the tune of $1.5 billion.  An International Monetary Fund loan of $1.74 billion, negotiated in 2013, has also helped keep the country afloat.  Still, a heavy burden will fall on the incoming government to begin remedying deep structural impediments to Tunisia's economic prosperity.

Security: In contrast to Egypt, Libya and Yemen, Tunisia's initial uprising in 2011 was relatively peaceful.  However, 2012 and 2013 saw increasing violence and terrorist activity, a development partly attributable to factors such as a general amnesty granted in 2011 to five hundred political prisoners, some of whom went on to engage in violent acts; the emergence of al-Qaeda-affiliated groups like Ansar al-Sharia; a relaxation in state control of mosques; and an increasing flow of weapons through porous borders with Algeria and Libya.  This past July, al-Qaeda-affiliated militants killed fourteen soldiers and wounded another twenty in the border region with Algeria.  Tunisian officials estimate that 2,500 citizens have traveled to Syria to join rebel groups fighting the regime of Bashar al-Assad, and a Tunisian jihadist group recently announced its allegiance to the Islamic State (IS) after declaring a caliphate in parts of Syria and Iraq.  Since 2011, the United States has provided more than $100 million to the Tunisian military, $35 million to the Ministry of Interior for security-sector training programs, and twelve Black Hawk helicopters.  While such assistance has facilitated the interim government's progress in degrading terrorist cells in Tunisia, the security portfolio will remain a top priority for incoming lawmakers.

Key Players

More than 1,300 candidate lists will compete in up to 33 electoral districts for 217 seats in parliament. Meanwhile, 27 individuals are running for president.  The dizzying number of political contenders can be grouped into four major blocs.

1. Ennahda: The Islamist party, whose leader Rachid Ghannouchi visited Washington recently, captured 41% of the votes and a plurality of seats in the 2011 parliamentary election.  But its popularity declined during the violence and ensuing political crisis of 2012-2013 and polling suggests the party would capture around 30% support if the parliamentary election were held tomorrow, making it likely Ennahda will once again need to govern in coalition with other parties.  Still, the party remains the best organized and -- as one of the few parties fielding candidates in all 33 voting districts - is the odds-on front-runner.

2. Nidaa Tounes (Call of Tunisia): Following Ennahda's strong performance in the 2011 parliamentary election, Beji Caid Essebsi, a veteran statesman from Habib Bourguiba's presidential tenure and an interim prime minister following Ben Ali's departure, created a new party and began rallying Tunisians around a broadly anti-Islamist message.  Since 2012, Nidaa Tounes has emerged as the main rival to Ennahda, attracting a mix of secular liberals and former regime supporters eager to counterbalance the Islamists' ascension.  Essebsi is also a leading contender for the presidency.  Still, while Essebsi has been polling well ahead of the other candidates, large majorities of survey respondents have indicated they remain undecided about their choice for president.

3. Al-Jabha al-Shabiyah (Popular Front): Since early 2013, roughly a dozen secular political parties have formed an electoral bloc known as the Popular Front. Chokri Belaid and Mohamed Brahmi, the two politicians assassinated by Ansar al-Sharia militants in 2013, were Popular Front members.  The coalition, which bills itself as a socialist, anti-Islamist alternative to the troika, could garner enough seats in parliament to check both Ennahda and Nidaa Tounes.

4. Smaller parties and independents: Since 2011, a host of smaller political parties and independent figures have emerged as an additional group in Tunisian politics.  These include the two secular, centrist parties of the troika - the Congress for the Republic (CPR) and the Democratic Forum for Labor and Liberties (Ettakatol) - and secular-liberal parties such as al-Joumhouri (Republican Party) and Afek Tounes (Tunisian Horizon).  With the exception of Essebsi, most of the presidential candidates are affiliated with these smaller parties or are running as independents.

Implications for U.S. Policy

The Obama administration has repeatedly reiterated its support for the Tunisian transition and U.S. governmental and nongovernmental organizations have played a constructive role in this transition.  Since none of the electoral blocs is likely to obtain enough votes to govern alone, the postelection period will be the critical determinant of the transition's success.  To ensure that Tunisia consolidates its democracy, U.S. policymakers will need to encourage members of the incoming government to eschew the polarizing rhetoric and behavior that nearly halted the transition last year.  Continued security and economic assistance will also be essential. Measures such as assisting the Tunisian government to secure the border with Libya would reduce the threat of militants and arms entering the country, and would help cut down on smuggling that has undermined Tunisia's economic recovery.

Sarah Feuer is the Soref Fellow at The Washington Institute.  (TWI 03.10)

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 11.8  TUNISIA:  Will Tunisia Ever Become a 'Mediterranean Tiger'?

Tunisia is in an economic paradox; it has everything it needs to become the “Tiger of the Mediterranean.”  Yet, it struggles to materialize its economic potential.  There are several factors that led to the Tunisian economy’s low performance: insufficient job creation, systemic corruption as well as a low export rate and persistent regional disparities.  These are all facts that contributed, inter alia, to the outbreak of the 2011 revolution.

On 17 September, the World Bank and the Arab Institute of Business Managers (IACE) organized a conference on the latest Development Policy Review (DPR) report titled, “The Unfinished Revolution: Bringing Opportunity, Good Jobs and Greater Wealth to All Tunisians.”

This is the first report that provides a comprehensive analysis of the Tunisian economy since the revolution in 2011.  It provides a detailed analysis of the main barriers to growth and job creation and proposes reforms that might accompany or accelerate the structural transformation needed within the Tunisian economy.  The event was attended by Hakim Ben Hammouda, the minister of economy and finance; Shantayanan Devarajan, chief economist of the World Bank's Middle East and North Africa region: and Ahmed Bouzguenda, IACE president.

During his speech, Ben Hammouda emphasized the report's importance, since it reviewed different challenges faced by Tunisia and suggested solutions to overcome the crisis and revive the national economy.  The minister of economy and finance has also highlighted the dichotomy between the political and economic period after the revolution.  Indeed, the report indicates that during the three years following the revolution, Tunisia has made “significant progress on the political level, which resulted in a consensus over a new constitution.”  However, the economic system that existed under ousted former President Zine El Abidine Ben Ali has never really changed and the demands of Tunisians for access to economic opportunities remained unsatisfied.  There are multiples causes and symptoms of the paralysis of the Tunisian economy, as evidenced by the World Bank study.

Tunisia is characterized by a protectionist regulatory framework that significantly reduces competition and private investment, in particular direct foreign investment.  More than half of the Tunisian economy is only open to a limited number of companies.

The lack of competition is costing the economy more than $2 billion per year, or about 5% of the country's wealth.  A significant number of privileged companies licensed to operate in protected sectors are public companies, which account for 13% of the GDP and 4% of total employment.

These companies often receive financial support from the state (3% of the state budget in 2013).  Under these conditions, it's impossible for the most efficient private companies to grow and compete with these public companies.  Ben Ali owns 220 private companies which operate in lucrative sectors such as telecommunications, air transport, advertising and many others, and are not open to competition.  They achieve more than 21% of all of the profits of the private sector to the detriment of all other sectors.  Nearly four years after the revolution, the economic and regulatory policies system that serves as a veil of deception for rent-seeking has remained intact.

Moreover, the management of bureaucratic and regulatory barriers consumes 25% of the time of managers and nearly 13% of the total revenue of companies.  Consequently, Tunisian companies are only competitive in labor-intensive services provided by unskilled labor force, such as assembly works, since the wages of unskilled workers in Tunisia are still low compared with other countries.

Tunisian companies mainly import foreign-made ingredients and assemble them in Tunisia for re-export, which translates into fewer jobs, lower wages and few opportunities for many skilled graduates in the country.  Excessive regulations and the state's tight grip have led to widespread corruption, cronyism, tax and custom evasion, among others.

The cost of corruption is estimated at 2% of the annual GDP in Tunisia.  Custom fraud, tax evasion and abuse of government procurement have undermined competition by encouraging the best connected and corrupted companies.  This creates an environment based on privileges and annuities, which prevents competition and efficient sources reallocation between more productive firms, ultimately leading to limited numbers of jobs with lower quality.

Many economic policies are misguided in Tunisia, according to the study. For instance, the Labor Code does not encourage investment in activities requiring intensive workforce; it paradoxically contributes to the exploitation of workers and job insecurity.

Furthermore, more than 50% of workers are not covered by social security, despite the high cost of payroll taxes.  Meanwhile, the financial sector is also not very efficient.  The overall level of banks’ lending to the private sector remains below potential, constituting about 10% of GDP.

The quality of funded projects is also disappointing, as evidenced by the high rate of projects unable to settle loans used for their start-up and implementation.

The World Bank study highlights the fact that the banking sector is characterized by significant failures in governance, especially the large public banks that are protected against competitors and receive grants, allowing them to finance well-connected entrepreneurs instead of successful projects.

Therefore, well-connected individuals have easy access to credit.  Meanwhile, public banks have accumulated losses amounting to 3% of GDP, which is more than $1.5 billion, necessitating a bailout from the public budget.

This is another failure of the investment incentives policy, "which is expensive and does not contribute to either creating jobs or reducing regional disparities."  This policy is costly: 2.2% of GDP in 2009.  It is mostly a waste, as only 21% of companies could invest without tax benefits.  These incentives come to the advantage of exporting companies that are located along the coast, while only 16% of jobs were created in the inland regions of the country.

The dichotomy between "onshore and offshore" is at the heart of the poor performance of the economy: The low efficiency of protected "onshore" sector is adversely affecting competitiveness of "offshore" sectors.

Tunisia is at crossroads and can choose a new model to release its economic potential. Increased competition and reforms in the banking sector would double job creation and yield an increase in domestic private investment.  Tunisia could also become a world leader in the export of manufactured and agricultural products, paving the way for a services sector.  To achieve this, a new vision and a strong political leadership are essential so as to introduce reform and go beyond the current system.  (Al-Monitor 22.09)

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 11.9  ALGERIA:  IMF Staff Concludes 2014 Article IV Mission to Algeria

An International Monetary Fund (IMF) mission, led by Mr. Zeine Zeidane, visited Algeria 17 September – 1 October, 2014, for the annual Article IV discussions.  The consultation will conclude with the preparation of a report that, subject to management approval, could be discussed by the IMF Executive Board in December 2014.  At the end of the visit, Mr. Zeidane issued the following statement:

“Economic activity has picked up in 2014, with real GDP growth projected to reach 4.0% following 2.8% growth in 2013.  The hydrocarbon sector is expected to expand for the first time in eight years, while non-hydrocarbon growth remains supportive—particularly the construction and services sectors.  Inflation has decelerated sharply to below 2%, thanks in part to tighter monetary policy, but bears watching closely given the potential for new inflationary pressures to emerge.

“Algeria is in the enviable position of having built up substantial external and fiscal buffers over the years thanks to its hydrocarbon wealth, but threats to macroeconomic stability are growing.  For the first time in nearly 15 years, the current account is expected to record a deficit.  Slumping hydrocarbon production, strong domestic hydrocarbon consumption, and lower oil prices are weighing on exports, while imports continue to grow.  Reversing these trends will require more investment in the hydrocarbon sector, higher domestic energy prices, a more competitive exchange rate, and a significant increase and diversification of non-hydrocarbon exports.

“The fiscal deficit is expected to widen to over 6% due to lower hydrocarbon revenue, a sharp increase in capital expenditure, and continued high current spending.  The oil savings fund remains large but is expected to decline for the second consecutive year.  Ambitious and sustained fiscal consolidation is necessary to place fiscal policy on a sustainable path and ensure that hydrocarbon wealth is saved for future generations.  Fiscal consolidation should entail mobilizing more non-hydrocarbon revenue and containing current spending, particularly wages.  The mission reiterated its recommendation that the authorities adopt a fiscal rule to help manage hydrocarbon revenue and impose spending discipline.

“The financial sector is generally healthy but underdeveloped.  Reforms are needed to improve access to finance, especially for small- and medium-sized enterprises and households.  In addition, listing well-performing public companies would help to develop the stock exchange.  The mission welcomed the steps taken by the authorities to begin implementing the recommendations of the 2013 Financial Sector Assessment Program mission.

“Although Algeria has enjoyed macroeconomic stability, faster and more inclusive growth is necessary to provide enough jobs for the country’s youthful population.  Meeting this challenge will require a comprehensive set of structural reforms that will allow the private sector to thrive.  Reforms are needed to improve the business climate, remove constraints to foreign investment, promote international trade integration, and reduce labor market rigidities.”  (IMF 01.10)

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 11.10  ALGERIA:  Irrigation Expansion to Support Algeria’s Agricultural Output

External pressures in 2014 have left Algeria’s agricultural sector more exposed than usual, which presents a perennial challenge given the size of the country’s import bill. But measures to strengthen long-term performance such as expanding the use of irrigation are beginning to yield benefits.

Since late July, the cattle industry has been dealing with an outbreak of foot-and-mouth disease that began in Sétif and has spread to 19 provinces.  The number of animals affected remains small thanks in part to a stepped-up vaccination campaign following an outbreak of the disease in neighboring Tunisia in May.

More worryingly, this year has also seen a comparatively poor cereal harvest. According to provisional figures released in late July, cereal production for the 2013/14 harvest fell by more than third to about 3m tonnes and a five-year low.  The early onset of hot, dry conditions in April had a particularly dramatic impact on the eastern provinces, which represent a large portion of national production, with 12ha of cereal acreage destroyed by more than 20 crop fires in the Sétif region alone.  The decline in output highlighted the variability of Algerian cereal production given the sector’s heavy reliance on rainfall. Only 3% of local production is based on irrigation.

Given local consumption of around 8m tonnes of cereals per annum, the reduced harvest is set to substantially push up an already-high wheat import bill, which averages around €4b a year.  This has helped make Algeria one of the largest overall wheat importers – and the biggest importer on a per capita basis – in the world.

Although output for the year is low by recent standards, the country also suffers from small cereals yields generally.  Productivity stood at 1.7 tonnes per hectare in 2012 according to World Bank data, compared to an average of around 7 tonnes per hectare in developed countries. 

Dam builders

Over the long term, however, the country’s cereal output has increased, from an annual average of around 2.7m tonnes over the past two decades to around 5m tonnes in the five years to 2012/13.  Productivity is also on the rise – the number of farmers achieving output of more than 5 tonnes per hectare grew from 16 in 2010 to 279 last year.

Irrigation is top of the state’s agenda.  The government plans to increase the amount of land benefiting from irrigation to 1m ha by 2019, which it is hoped will help lift yields. The Algerian Cereals Office (Office Algerien Interprofessionnel des Cereales, OAIC) announced that it had distributed some 900 irrigation systems to local farmers in 2014, increasing the irrigated surface area of cereal plantations to 600,000ha by April.

To help achieve this, the government has undertaken a major dam construction program.  The number of dams rose from 44 with a combined storage capacity of 3.7b cu meters in 1999, to 68 in 2010 with a capacity of 7b cu meters.  The authorities targeted the construction of a further 18 barrages between 2010 and 2014 and another 30 with a combined capacity of 1.5b cu meters between 2015 and 2019.  According to local press reports in July, the authorities are also planning to put an end to electricity production at two major hydroelectric dams and use them to provide water for agriculture and households instead.

Such measures should increase the availability of water for irrigation, improving agricultural productivity and helping to stabilize output.  Other measures such as improving mechanization and reducing the fragmentation of the sector by combining smallholdings into larger farms may help to improve yields, which could rise by a factor of as much as 2.5 over the next decade, according to Laid Benamor, president of the Cereal Trade Committee (Comite Interprofessionnel des Cereales, CIC).

Bilateral ties

In addition to expanding the use of irrigation, the government is also planning a number of new measures to help modernize the sector and increase agricultural output. In late July, the minister for agriculture and rural development, Abdelouahab Nouri, told media that the government intended to pass several new laws and regulations for the sector in the coming parliamentary term, including finalizing plans to lease state-owned agricultural land.

A number of cross-border initiatives with European government bodies are also looking to improve agricultural productivity. In July, the Austrian ambassador to Algeria, Aloisia Worgetter, said that the two countries were holding talks on a joint agricultural investment project in the Khenchela province related to livestock, building on several pre-existing agricultural cooperation agreements.  In recent years, several bilateral projects have been established between France and the Algerian agriculture sector so the latter can benefit from modernization techniques established in France. A pilot project was launched in early 2013 between Algeria and the French region of Normandy to improve techniques for rearing dairy cattle.  (OBG 18.09)

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 11.11  TURKEY:  Fitch Affirms Turkey at 'BBB-'

On 03 October, Fitch Ratings (http://www.fitchratings.com) affirmed Turkey's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'BBB-' and 'BBB', respectively.  The Outlooks are Stable.  The issue ratings on Turkey's senior unsecured foreign and local currency bonds have also been affirmed at 'BBB-' and 'BBB', respectively.  The Country Ceiling has been affirmed at 'BBB' and the Short-term foreign currency IDR at 'F3'.

Key Rating Drivers

The Outlooks on Turkey's sovereign ratings are finely balanced.  Turkey's upgrade to investment grade in November 2012 owed much to a demonstrable track record of fiscal consolidation and a reasonably healthy banking system.  These rating attributes largely remain intact.  Similarly, the economy continues to show encouraging signs of rebalancing, notably a moderation in the current account deficit (CAD) and credit growth with no 'sudden stop' of capital inflows.  However, Turkey's buffers against potential volatility in global investor risk appetite remain relatively thin in the light of the capacity for domestic policy reversals, doubts over the durability of economic rebalancing and rising geopolitical risk.

Fitch considers policy coherence and credibility to be weaker in Turkey than its rating peers. In January, the Central Bank (CBRT) raised interest rates by 425bp-550bp to assuage market pressures and restore external financial stability.  Since May, the CBRT has cut interest rates by 175bp, even as inflation has continued to rise, citing easier global liquidity.  Headline inflation climbed to 9.5% y-o-y in August, before moderating slightly to 8.9% in September; core inflation has been stuck at 9% since the start of the year.  Both measures are well above the CBRT's medium-term target of 5%.

Fitch views post-presidential election assurances that the current economic team will remain in place ahead of parliamentary elections in June 2015 as constructive.  Nonetheless, Turkey retains a strong predilection for higher growth in line with the aspirations of the Medium-Term Program (4% in 2014, 5% in 2015-16).  Fitch expects the CBRT to remain under pressure to adopt a more expansionary policy stance at the earliest opportunity.  This leaves the coherence and credibility of policy-making subject to some doubt.

Economic rebalancing has made progress: annual credit growth to the non-financial sector slowed from 25% at end-2013 to 17% at end-H1/14, reflecting monetary tightening and tough macro-prudential measures.  Similarly, the CAD narrowed by almost 40% in US dollar terms in the first seven months of 2014 compared with the same period in 2013.  However, as a share of GDP it remains among the highest in EMEA, while over half of the improvement in 1H14 was attributable to net gains in the gold trade.  There are also signs of a resumption of credit growth, according to the CBRT's preferred 13-week moving average metric, with potentially adverse consequences for the CAD.

Rising geopolitical risks and faltering economic recovery in the Eurozone pose additional challenges for Turkish economic rebalancing. Iraq and Russia are Turkey's second and fourth largest trading partners, respectively.  Exports to Iraq have plummeted in recent months, while trade with Russia has been volatile.  Turkish exporters have traditionally displayed great resourcefulness in switching between markets in Europe and the Middle East and North Africa, but their room for maneuver could become more limited, slowing further improvements in the trade balance.

Net exports have become the driving force behind economic growth as domestic demand has receded.  However, Fitch notes that net exports have rarely been an enduring part of the Turkish growth story, while the recent retrenchment in domestic demand owes as much to a decline in private investment (with adverse implications for growth) as it does to consumption.  Q2/14 real GDP growth decelerated sharply to 2.1% y-o-y from 4.7% in Q1/14.  Growth rates in the range of 2%-4% are unlikely to be politically acceptable for long, yet the deteriorating trade-off between growth and the CAD suggest structural factors have become more binding over time.

A large CAD and appreciable gross external financing needs (12% of GDP) are credit weaknesses.  Conversely, Fitch believes that Turkey's resilience to external shocks should not be underestimated.  Banks and corporates continue to enjoy unrestrained access to international capital markets and the sovereign has issued over $6.5b this year.  Net short-term capital inflows have diminished significantly as a share of funding relative to FDI and longer-term capital.  However, there has been only a modest rebuilding of international reserves, while net external debt/GDP (31% in 2014) has risen from three to six times the 'BBB' median since 2012.

Turkey's macroeconomic imbalances are mostly attributable to the private sector.  Primary surpluses are an enduring feature of Turkish public finances, while gross general government debt/GDP remains on a declining trend, falling to a projected 33% in 2016 from 36% in 2013, and has proven remarkably resilient to shocks.  Fitch acknowledges there are risks regarding broader contingent liabilities, but notes that government guaranteed debt and loans subject to debt assumption agreements amount to barely 2% of GDP.

Turkey's sovereign ratings are supported by the banking system's investment grade ('bbb') Fitch Banking System Indicator.  The system is well-capitalized, profitable and has only modest non-performing loans of less than 3%.  On the other hand, rapid credit growth over a sustained period implies that loan books are highly unseasoned, while banks' net external debt has more than doubled to an estimated 17% in 2014 from 7% of GDP in 2010 and is predominantly short term.  Many corporate clients have large net open FX positions.

Rating Sensitivities

The current Rating Outlook is Stable.  Consequently, Fitch's sensitivity analysis does not currently anticipate developments with a material likelihood, individually or collectively, of leading to a downgrade.  However, the following risk factors individually, or collectively, could trigger negative rating action:

-       Further erosion of policy credibility and coherence that weakened Turkey's buffers against volatility in global investor risk appetite.

-       Sustained reversal of the recent consolidation in the current account deficit, leading to a rising external funding need and an even steeper rise in net external indebtedness over time.

-       Deterioration in the quality of core public institutions that led to more erratic policy-making, decreased government effectiveness and/or a weaker business climate.

Conversely, the following factors, individually or collectively, could result in positive rating action:

-       A more coherent and predictable monetary policy framework that delivers lower and more stable inflation.

-       Increased confidence in the sustainability of Turkey's external finances, potentially including a material and lasting reduction in the current account deficit (without bringing growth to a halt), and/or a rebalancing of net capital inflows towards longer-term instruments.

-       Structural reforms that translate into higher gross domestic savings, a more flexible labor market and greater foreign direct investment.

Key Assumptions

Turkey's ratings are based on a number of key assumptions:

-       Continued commitment to fiscal sustainability.

-       No sharp escalation in geopolitical risk to a level that would be disruptive for Turkey's economy

-       The global economy evolves broadly along the lines expected in Fitch's September Global Economic Outlook  (Fitch 03.10)

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 11.12  TURKEY:  Turkish-Egyptian Ties are at a Standstill

Semih Idiz posted on 26 September 2014 in Al-Monitor that prospects for a rapprochement between Ankara and Cairo, whose ties hit rock-bottom following Mohammed Morsi's ouster by the Egyptian military in 2013, appear bleaker than ever after Turkish President Recep Tayyip Erdogan used some of the harshest language to date against Egypt in his UN General Assembly address on 24 September.

According to Middle East experts in Ankara contacted by Al-Monitor, Erdogan’s remarks, which elicited a sharp rejoinder from Egypt, show that Turkey will remain a staunch backer of Morsi and a keen supporter of the Muslim Brotherhood in Egypt and across the Middle East.

This, however, flies in the face of many regional countries that are opponents of the Brotherhood and raises questions about whether Ankara can play any significant role in the Middle East while remaining at loggerheads with a principal Arab power that the West and many Arab countries are cooperating closely with.

Referring to the “slaughter of democracy” in Egypt in his speech to the UN General Assembly, Erdogan accused the United Nations and the democratic countries of the West of “simply looking on” as the popularly elected president of Egypt was toppled in a military coup, and as thousands who wanted this to be accounted for were massacred.

Egypt’s response to Erdogan was quick in coming and also showed that tensions between the two countries were unlikely to abate anytime soon.  "There is no doubt that the fabrication of such lies and fabrications is not something strange that comes from the Turkish president, who is keen to provoke chaos to sow divisions in the Middle East region through support for groups and terrorist organizations," a statement from the Egyptian Foreign Ministry said.

Providing insight into how Erdogan’s remarks were received in the region, the United Arab Emirates Foreign Ministry also denounced Erdogan, accusing him of “irresponsible and blatant interference in the internal affairs” of Egypt.

Erdogan has consistently criticized the Egyptian military and its backers in most of his public speeches since its coup against Morsi and the Muslim Brotherhood.  Meanwhile, Erdogan’s grassroots Islamist supporters continue to admire Morsi and bear an ideological affinity with the Brotherhood, which has been labeled a “terrorist organization” in Egypt.

Having pursued policies that clipped the political wings of the Turkish military, to guard his Islamist government against the possibility of being ousted in a coup similar to those that took place in Turkey in past decades, Erdogan clearly feels politically duty-bound to oppose any military-led ouster of elected governments, and particularly Islamist ones, in the region.

Nebahat Tanriverdi, a senior researcher with the Ankara-based Center for Middle Eastern Strategic Studies (ORSAM), also stressed this point when answering questions for Al-Monitor.  “Opposing military coups has become a centerpiece of Ankara’s foreign policy following the Egyptian coup in 2013.  There are no signs that this value-based doctrine, which has replaced Turkey’s previous doctrine of maintaining good ties with regional countries, will change soon,” Tanriverdi said.  She added that this also indicates there will be no early change in the current state of Turkish-Egyptian relations.

Umit Ozdag, the director of the 21st Century Turkey Institute, another Ankara-based think tank, struck a more alarming note when explaining the motivation behind Erdogan’s attack on Egypt at the UN.  “There is an ideological motivation behind his words that shows Turkey will become the center for the Egyptian opposition, and especially the Muslim Brotherhood, in the coming period,” Ozdag, a political science professor and former deputy from the Nationalist Movement Party (MHP), told Al-Monitor.

He said this was not just any public speech by Erdogan but one that was carefully prepared with the assistance of his foreign policy advisers with a view to sending a clear message to members of the Muslim Brotherhood and Salafists in the Middle East.

Asked if this would not damage Turkey’s chances of playing an influential role in the region by putting it at odds with the region’s principal powers, Ozdag said the answer to this depends on one’s point of view.  “Looked at rationally, it's obvious that Turkey is isolated in the region. But the architects of Turkey’s current policies refer to this as ‘precious isolation’ and believe supporting Salafists and the Brotherhood is the correct thing to do,” he said.  Ozdag went on to assert that Ankara’s support for these groups would do “extraordinary damage to Turkey the way Salafists in Afghanistan did to Pakistan.”

Retired Ambassador Osman Koruturk, who served as special envoy for Iraq in 2003-05, and whose previous postings as ambassador included Tehran, also believes that Erdogan’s fury against Egypt is ideologically motivated, rather than reflecting a genuine concern for democracy.  He pointed out that Erdogan’s own democratic credentials in Turkey were far from perfect.

Koruturk, a deputy from the main opposition Republican People's Party (CHP), maintained that Erdogan dreamed of a political system in the Middle East that was based on the Muslim Brotherhood’s Islamist outlook.  “The anger in his UN speech is essentially against those countries that are supporting [President Abdel Fattah al-Sisi's] government in Egypt and preventing the Muslim Brotherhood from ascending to power,” Koruturk said.

Retired diplomat Ali Tuygan, whose ambassadorial posts included Riyad (1995-97) and who served as undersecretary for the Foreign Ministry in 2004-06, for his part, questioned how Turkey expected to be elected to the UN Security Council — which it is lobbying for — with Erdogan venting his anger at Egypt in this way.

Tuygan also told Al-Monitor that it was not possible for Turkey to play an important role in the Middle East without Egypt’s support.  “Even [Palestinian President] Mahmoud Abbas made this point during his visit to Ankara in July, when he openly emphasized Egypt’s regional importance during a panel discussion,” Tuygan said.  Despite his critics, Erdogan’s continuing anger at the Egyptian government and his support for the Muslim Brotherhood, and its affiliates like Hamas, continue to command great respect and admiration among Turkey’s conservative Islamic masses.

Arguing that Turkey’s foreign policy was “neither dictating nor condescending,” Seral Koprulu, an analyst for the pro-government daily Yeni Safak, wrote in a current column that hatred and violence was increasing by the day in the Middle East.  “The solution is for all Muslims to act with a sense of solidarity and to unite,” she said in her commentary in which she lauded Prime Minister Ahmet Davutoglu’s, and hence Erdogan’s, foreign policy that she indicated was aimed at trying to secure this.

This, then, is how Erdogan’s supporters see the Middle East.  Erdogan’s morality-based approach to the region is also one of the reasons behind the strong support he secured in the 10 August presidential elections, when he was elected with 52% of the vote.

The ruling Justice and Development Party (AKP) that he headed until he became president was preparing for the June 2015 general elections, only nine months away.  It is aiming for a strong victory in those elections, based on policies that have brought it one electoral victory after another since first coming to power in 2002.  This also makes it unlikely in the coming period that Erdogan will change tack on Egypt, or any of his diplomat hobbyhorses relating to the region, and ensures that Turkish-Egyptian ties will remain in the doldrums for the foreseeable future.  (Al-Monitor 26.09)

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 11.13  GREECE:  Getting Water to Greek Islands a Costly Affair

Over the past nine years, the General Secretariat for the Aegean and Island Policy has spent the staggering sum of €68.4 million on the transportation of water to Greece’s arid islands – millions of euros that have basically evaporated, used to bring temporary relief rather than a permanent solution.  An even greater shame is the fact that much of the water is lost owing to leaky and ill-maintained island water grids.  Island water policy is a big issue made more pressing by the crisis and demands a new and comprehensive approach.

Things have changed a lot since 1969, when Syros became the first Greek island to get its own desalination plant.  The number of islands with insufficient natural resources has risen along with tourism, pushing demand up every year.  At the same time, islanders who were once cautious about their use of water and ensured a degree of self-sufficiency by building reservoirs and using other means of storing the resource have become more reliant on imported water and more complacent about its sufficiency.

It is a common misconception that water transfers are cheap if not free.  Data from the General Secretariat for the Aegean and Island Policy showed €68.4 million have been spent since 2006 on the transportation of water to the country’s arid islands.  The most expensive year was 2008, at €12.5 million.  The cost is estimated to come to around half of that by year-end, with €2.6 million already spent since January.

“There is a lot of demand this year due to tourism growth and we have had requests from islands that never had a problem before,” Nikos Zoidis, general secretary for the Aegean, told Kathimerini recently.  “A characteristic example is Myconos, which will cost us around €800,000 by the end of the year, not for the transportation of water but for the temporary installation of a desalination unit operating for three months.  We also had a request from Leros for two or three shipments and from Patmos for another three.”

It is estimated that there are around 45 desalination units in the Aegean today.  No one can say exactly how many there are or how much drinking water they produce as there is no central record and they have not all been installed by the same company or state body.  There is also a number of plants which have been paid for and installed but are not operating; the government aims to have them all up and running by May 2015.

The general secretariat has allotted funds for desalination plants on the islands of Patmos, Leros, Donousa, Kimolos, Amorgos and Symi, while the Regional Authority of the Aegean has funded units on Leros, Koufonisia and Halki.  The Halki plant is the only one that is working, meaning that the remote island is no longer dependent on water shipments.

Desalination is not a complete solution to the problem.  For Greece’s islands to have the same high-quality water as that available on the mainland, several steps need to be taken.

“Desalination plants need to be meticulously maintained, which is why our proposal is for this task to be assigned to private companies,” said Zoidis.  “Furthermore, islands need to start replacing their water grids.  You can’t spend so much money on water and have losses in the 30 - 40% range. Depending on water imports is just wrong.”

Following the launch of a new desalination plant on Hydra, the state is exploring the possibility of assigning an entire network of units on all islands to private companies in a bid to acquire the infrastructure at as low a cost to the state as possible.  (ekathimerini 26.09)

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