TOP STORIES
- Microsoft Signs Agreement to Purchase Data Quality Start-up Zoomix
- SAP to Open R&D Center in Israel
- Abu Dhabi Buys 90% Stake in Chrysler Building
- Rising Oil Prices and the Arab Countries - Winners & Losers
- Moody's Warns Turkey Could Face Ratings Downgrade
- Teva to Acquire Barr
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Fischer Steps In To Save the Dollar
1.2 Knesset Committee Approves 16-Week Maternity Leave
1.3 Knesset Members Call for Recycling Policy
1.4 Netanyahu Says Fischer's Influence is Limited
1.5 Israel Widens Bribery Ban
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Microsoft Signs Agreement to Purchase Data Quality Start-up Zoomix
2.2 Mobixell Networks Broadens its Solutions in the Mobile TV and Advertising Domain
2.3 Zon Announces $7 Million Investment Round
2,4 ClassifEye Set Up Shop in Rockville & Raises B Round
2.5 World's Largest Desalination Plant To Use ERI's PX Technology
2.6 Xeround Secures $16 Million in Series B Financing Led By Ignition & Trilogy Partnership
2.7 Aladdin Knowledge Systems to Acquire Eutronsec S.p.A.
2.8 SAP to Open R&D Center in Israel
2.9 Norwegian State Wealth Fund To Invest €500 Million In Israel
2.10 VocalTec Receives $9.2 Million Net from the Sale of 11 of its 22 Patents
2.11 modu Selected By AlwaysOn As the Top Mobile Company Of AO Global 250
3: REGIONAL PRIVATE SECTOR NEWS
3.1 21st Century Systems' HiRSA Technology Selected for Jordan Border Security Program
3.2 IRIS Receives Order for Seven iQ 200 Urine Analyzers for Kuwait Ministry of Health
3.3 Abu Dhabi Buys 90% Stake in Chrysler Building
3.4 Versar Announces New Office in Abu Dhabi, UAE
3.5 Alison Nelson's Chocolate Bar to Open First Gourmet Concept Stores in India and Pakistan
3.6 QuadraMed Signs $10.6M QCPR Contract with Saudi Arabia National Guard Health Affairs
3.7 Maui Wowi Hawaiian Expands to Turkey Master Franchise Signing
3.8 Turkish Airlines Orders Mechtronix Ascent XJ Trainer
3.9 Zila to Begin Distributing Its Proprietary Oral Cancer Screening Product in Greece
3.10 Clear Skies Solar Opens International Office in Larissa, Greece
3.11 Cytori Sells First European Union StemSource Bank with Biohellenika of Greece
4: ISRAEL MACRO-DEVELOPMENTS
4.1 Israel Water Authority Details Emergency Plan
4.2 PM Brown Says Bilateral Trade to Reach £3 Billion by 2012
5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Rising Oil Prices and the Arab Countries - Winners & Losers
5.2 Jordan Thanks US Officials & Asks For Maintaining High Levels Of Aid
5.3 Joint Jordanian-Israeli Delegation to Discuss Trade Relations in Washington
5.4 Jordan's Inflation Rate Reaches 13.3% in First Half of 2008
5.5 Jordan & US Sign Environmental Cooperation Agreement
5.6 Different Perspectives About Poverty in GCC Countries
5.7 Gulf States Garner $1b Daily From Record Oil Prices
5.8 Gulf to Set New Currency Deadline in 2009
5.9 UAE Eyes Asian & African Farm Lands
5.10 UAE Slashes 2007 Economic Growth Estimate
5.11 Ras Al Khaimah Economy To Grow By Up To 18%
5.12 Oman Economy Surges 43%
5.13 Oman Budget Surplus Soars Amid Record Oil Prices
5.14 Oman's Inflation Jumps To Record 13.2%
5.15 Saudi Agrees To Defer Pakistan Oil Payments
6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Moody's Warns Turkey Could Face Ratings Downgrade
7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Methuselah Date Palm Makes World Debut
7.2 Isra Al Mi'Raj to Be Marked by Moslems
*REGIONAL:
7.3 Cairo Screening of Israeli film - The Band's Visit
7.4 UAE to Deport 40 Transvestites
8: ISRAEL LIFE SCIENCE NEWS
8.1 Teva to Acquire Barr
8.2 Gamida Cell Signs Collaboration Agreement With Biologics Delivery Systems
8.3 Orthocrat Announces Sale of TraumaCad for Orthopedic Preoperative Planning
8.4 Alfacell Announces ONCONASE Distribution and Marketing Agreement with Megapharm for Israel
8.5 Oramed Pharmaceuticals Raises $5 Million Through a Private Placement
8.6 BioLineRx's BL-1040 Named One of 10 Most Promising Cardiovascular Projects by Windhover
8.7 Tissera Reports Initial Closing of Bridge Loan Agreement
8.8 Verto Completes Successful Human Clinical Trial of a Treatment for Lupus
8.9 Gamida Cell Announces License Agreement Support StemEx for Hematological Malignancies
8.10 Teva Introduces First Generic Lamictal Tablets in the United States
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Elbit Systems & ATK to Develop Laser Guided Advanced Tactical Rocket System
9.2 Nova Sets an Industry Milestone for Optical CD Metrology
9.3 Panavision & Tower Announce New Family of Re-Configurable Linear Image Sensors
9.4 Cimatron's Microsystem Offers GibbsCAM in Italy
9.5 ECI Telecom Leads Israeli Consortium for Denmark's First Nationwide WiMAX Network
9.6 ECI Telecom Launches World's First GPON Solution with a High Bandwidth Network Processor
9.7 Shunra Marks New Milestone for Interoperability With HP LoadRunner
9.8 IDE Starts Marketing Snowmakers for the Global Ski Industry
9.9 Aladdin & IdenTrust Partner to Strengthen Security for Online Banking
9.10 Port of Houston Authority Further Enhances Security Capabilities With Orsus' Situator
9.11 Turner's MLB All-Star Show Relies on Orad's 3DPlay Solutions for Broadcast Graphics
9.12 Major North American Bank to Optimize Field Workforce Scheduling With ClickSoftware
9.13 Magal Receives an Order to Install a Municipal Command & Control System in an Asian Capital
9.14 Kornit 933 Ends Beta Site Period With Phenomenal Success
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's CPI Rises Just 0.1% in June
10.2 State Of Economy Index Drops Second Month in A Row
10.3 Tourism to Israel Grows by 45% Over Past Six Months
11: In Depth
11.1 ISRAEL: Summary of Israeli High-Tech Company Capital Raising Q2 / H1 2008
11.2 BAHRAIN: Back to Baghdad
11.3 BAHRAIN: E-economy Coming On Line
11.4 UAE: Abu Dhabi - Tool in Reserve?
11.5 SAUDI ARABIA: Fitch Upgrades to 'AA-'; Outlook Revised to Stable
11.6 YEMEN: Economic and Regional Challenges
11.7 TUNISIA: Drills at the Ready
11.8 TUNISIA: IMF Concluding Statement of the Article IV Consultation Mission
11.9 MOROCCO: Fitch Affirms at 'BBB-'; Stable Outlook
11.10 MOROCCO: Multilateral Agreements
11.11 TURKEY: Power Tenders open Market
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Fischer Steps In To Save the Dollar
The Bank of Israel announced on 10 July that it was raising its daily purchases of foreign currency from $25m to $100m to stem the rapid appreciation of shekel against the dollar. The decision to increase the pace of purchases was taken after examining the program in light of current market conditions, and the cumulative and rapid change in the exchange rate of the shekel," the central bank said in a statement. The Bank of Israel will continue to review the program from time to time to take into account changing market conditions. Prior to the announcement, the shekel continued to appreciate against the dollar in inter-bank trading. By midday, the shekel-dollar exchange rate rose to a 12-year high of NIS 3.20. Just minutes after the announcement, the shekel dropped to NIS 3.33 against the dollar, closing at a representative rate of NIS 3.31. In March, Bank of Israel Governor Fischer announced plans to increase the bank's foreign currency reserves to between $35b and $40b from $28b over the next two years by buying $25m of foreign currencies daily. Growing expectations that the Bank of Israel would have to raise the interest rate at the end of the month in response to surging inflation pressures had prodded Israeli investors to sell dollars over recent days. (Various10.07)
1.2 Knesset Committee Approves 16-Week Maternity Leave
On 15 July, the Knesset Committee on the Status of Women approved a bill to extend maternity leave by two more weeks to 16 weeks. The bill will now be sent for its first Knesset reading. MK Gideon Saar (Likud) and MK Sheli Yacimovich (Labor) jointly sponsored the bill. Last year, the Knesset extended maternity leave from 12 to 14 weeks. The committee said that the bill would cost the National Insurance Institute $73m a year, based on estimates submitted to the committee for discussion. Saar and Yacimovich said after the committee discussion that extending paid maternity leave by two more weeks would help reduce the number of women forced to forego their jobs after maternity leave, facilitate the return to work and juggle parenting and the job. They added that the bill was important for social welfare, especially for young families. (Globes 15.07)
1.3 Knesset Members Call for Recycling Policy
Knesset Internal Affairs & Environment Committee chairman MK Pines-Paz (Labor) has called on the government to formulate a recycling policy for household waste as soon as possible. Israel produced six million tons of waste in 2006, according to the Knesset Research Center. The center added that the amount of household waste has increased by 3% a year since 2000, and that each Israeli produces 1.53 kilograms of waste a day. The study found that 80% of household waste ends up in landfills, compared with less than 50% in the EU. Burying waste in landfills creates numerous problems, including inefficient use of land, contamination of groundwater, and emission of greenhouse gases. In terms of waste, organic material, mostly left over food, comprises 40% of municipal waste, 17% is paper, 13% plastic, 8%, carton, and 5% are diapers. In terms of volume, plastic accounts for 46% of household waste, paper accounts for 15%, carton accounts for 13%, and organic material accounts for 10%. Several entrepreneurs told the Internal Affairs Committee about Israel's unexploited recycling potential. (Globes 15.07)
1.4 Netanyahu Says Fischer's Influence is Limited
Likud leader MK Benjamin Netanyahu said on 21 July that Governor of the Bank of Israel Prof. Stanley Fischer has limited influence on the exchange rate. He made the comment at the joint "Globes" and Tapuz TASE and Capital Markets Forum. Netanyahu said, "I have a good opinion of (Governor) Fischer. I had to persuade him to come (to Israel). I think that he's doing the best he can, but his influence is limited. I liken this to waves at sea. You can build a small dam, but the ocean currents are stronger. He made a dramatic move, but it won't help for long. There was large movement here that reflected the rise of other economies." Netanyahu also said that Minister of Finance Bar-On's plan for tax cuts was correct. Netanyahu said that he was not among those who said that this was election economics. In response to a question if he saw himself taking the finance portfolio in the near future, Netanyahu replied, "I don't think so. I'll manage policy from the Prime Minister's Office and I'll take a consistent policy line. Anyone who is considered must believe in the free market and social policy." As for the condition of Prime Minister Ehud Olmert's government, Netanyahu said, "I don't see elections in the offing because the coalition members are showing an impressive ability to hold onto their seats. If we do have elections, I will ask the public's trust for the position of prime minister." (Globes 21.07)
The Knesset Constitution, Law and Justice Committee has approved for second and third reading an amendment to the Criminal Code [New Version] (1977) which sets a maximum prison sentence of three and half years for offering a bribe to a foreign official. The amendment defines a bribe as a payment designed to procure, guarantee or promote business activity or any other business advantage. Until now, the law addressed offenses of bribery relating to Israeli officials only. Under the law, the maximum penalty for giving a bribe to an Israeli official is three and a half years imprisonment, while the maximum penalty for accepting a bribe is seven years imprisonment. The amendment to the law will enable Israel to join the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. (Globes 09.07)
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Microsoft Signs Agreement to Purchase Data Quality Start-up Zoomix
Microsoft announced on 14 July that it has signed an agreement to purchase Zoomix, an Israeli start-up focused on data quality software. With the Zoomix acquisition, Microsoft will provide customers with a manageable and scalable enterprise-class data quality solution which further enhances Microsoft's vision of making SQL Server a complete data platform for all data management needs. Zoomix has developed a unique approach to data quality software. The Zoomix system uses guided self-learning technology to easily build knowledge of how to parse, match, classify and clean data, and apply what it has learned to every new piece of information fed into the system, even if it has not encountered similar data before. Following the acquisition, Zoomix's development staff will join the Microsoft research and development center in Israel, and the Zoomix solutions will be added to those of the Microsoft International SQL Server group. Jerusalem, Israel's Zoomix (http://www.zoomix.com) develops and markets software which automates the delivery of correct, complete, synchronized enterprise data, within the business workflow. The company's proprietary self-learning technology combines advanced semantic and linguistic analysis with machine learning to automatically and accurately classify, match and standardize complex corporate data, including highly-variable product data and financial data. Unlike rules-based systems, Zoomix's products provide a comprehensive solution for correcting, synchronizing and governing enterprise data without the need for manual development of rules or scripts. (Zoomix14.07)
2.2 Mobixell Networks Broadens its Solutions in the Mobile TV and Advertising Domain
Mobixell Networks has received a total of $6m in funding from existing investors Apax, Intel Capital and smac partners. This investment round offers Mobixell additional resources to expand the development and marketing of its mobile multimedia, mobile TV and advertising solutions. The funds will help Mobixell address the many opportunities emerging in the burgeoning messaging, video and advertising market. As Mobixell partners directly with operators on large-scale projects, the new funding will enhance customer support and professional services to support these initiatives, as well as further sales and marketing activities. Ra'anana, Israel's Mobixell Networks (http://www.mobixell.com) develops and delivers innovative mobile multimedia and advertising solutions to the dynamic world of mobile telecommunications. (Mobixell08.07)
2.3 Zon Announces $7 Million Investment Round
Founded only 6 months ago, Zon Networks (temporary name) prefers to completely fly under the radar even after announcing the $7m round led by Draper Fischer Jurvetson (original backer of Hotmail and Skype), Israeli VC funds Tamir Fishman Venture Capital and Megama, as well as Trilogy Partnership - a Seattle-based fund that handles the money of former Microsoft and AT&T executives. The company is keeping a low profile but in interviews to the Israeli media DFJ commented that Zon will change the internet in the same way Skype changed VOIP. Founders revealed that the product is still a theoretical idea, but it will be aimed at the end user and it will leverage communication components of Windows operating system. The co-founder added that if all goes according to plan, the first product will be on the market in early 2009. Zon (http://www.zon-networks.net) is headquartered in Tel Aviv and currently is looking to double in size in the coming months and it is looking for product development talent, particularly in telecommunications and internet protocols. (Zon13.07)
2.4 ClassifEye Set Up Shop in Rockville & Raises B Round
ClassifEye (http://www.classifeye.com), the Israeli startup developing identity authentication software raised a second round of $2m led by Maryland-based Nobska Ventures joined by the state of Maryland's Enterprise Investment Fund ($250,000) and $75,000 from Montgomery County. The investment in ClassifEye was facilitated following a delegation to Israel, led by Governor Martin O'Malley. Following the investment ClassifEye will start its US headquarters with a small team in Rockville, Maryland. In addition to the broad homeland security applications that could spawn off of this technology, fingerprint recognition using cell phone cameras could be a big enabler for M-commerce, M-banking and anything related to mobile micro payments. The technology could literally be ‘big in Japan‘, the leader in mobile transactions. ClassifEye was founded in 2003 and is currently based in Jerusalem with a team of 10 and it is planning to recruit 5 more for its US office. (ClassifEye15.07)
2.5 World's Largest Desalination Plant To Use ERI's PX Technology
San Leandro, California's Energy Recovery, a global leader of ultra-high-efficiency energy recovery products and technology for sea water desalination, announced that the company's PX Pressure Exchanger (PX) technology has been selected by IDE Technologies to be the energy recovery device (ERD) solution for the Hadera Sea Water Reverse Osmosis (SWRO) Desalination Plant. The project is currently under construction and is scheduled for completion in 2009. The Hadera plant, located between Tel Aviv and Haifa in Israel, is being designed and built by IDE Technologies. It will initially produce 100m cubic meters per year (m3/yr), or 274,000 m3/day (72.3m US gallons per day (MGD)) of fresh water and may eventually be expanded to supply 130m m3/yr (94 MGD). The plant is designed with PX-220 Pressure Exchanger energy recovery devices. These devices will save over 34 mega-Watts (MW) of energy compared to operating without an energy recovery solution. IDE selected PX technology for both projects over competing devices due to a proven track record in reliability, high efficiency and energy savings, as well as having the smallest physical footprint. (ERI15.07)
2.6 Xeround Secures $16 Million in Series B Financing Led By Ignition & Trilogy Partnership
Xeround announced the Company has closed a $16m round of Series B funding led by Ignition Partners and Trilogy Partnership. Also participating in the round were existing investors Benchmark Capital and Giza Venture Capital. The newly acquired funds will be used to increase sales and marketing activities as well as to step up research and development to advance the product roadmap. Xeround has developed a live, scalable Intelligent Data Grid, or IDG, which is a groundbreaking cloud computing database with true data virtualization capabilities. With Xeround's offerings, applications no longer need to know where data resides or if it is being managed with relational, hierarchical or object models. Now, applications get access to data in whatever format is needed - wherever it's needed. Xeround (http://www.xeround.com) is a software company delivering a live, scalable Intelligent Data Grid that can unify existing database and enable the rapid launch of new services. With more than three years of research and development, Xeround is providing the industry's first distributed data grid complete with true data virtualization capabilities, effectively eliminating the dependencies between data and applications. Xeround is based in Bellevue, Wash., with research and development in Yehud, Israel.
2.7 Aladdin Knowledge Systems to Acquire Eutronsec S.p.A.
Aladdin Knowledge Systems signed a definitive agreement to acquire Eutronsec, S.p.A., a provider of software protection and authentication products, for approximately €10.0m in cash, including acquisition related expenses. The acquisition of Eutronsec is focused on further expanding Aladdin's market share and presence in the European region and extending their global position as an industry leader in the areas of software protection and authentication. Eutronsec's innovative products are designed to guard against software piracy as well as protect electronic intellectual property and are a complement to Aladdin's award-winning portfolio of IT security products. Eutronsec is a significant player in the Italian software security and authentication market, with full year 2007 annual revenue relevant to Aladdin's primary business just under €5m. The closing of the transaction is subject to customary closing conditions and is expected to be consummated by September 2008. Pending a successful completion of the transaction, the acquisition is anticipated to be accretive to Aladdin on a diluted earnings per share basis during H1/09. Petah Tikva, Israel's Aladdin Knowledge Systems' (http://www.Aladdin.com) Software Rights Management products are the #1 choice of software developers and publishers to protect intellectual property, increase revenues, and reduce losses from software piracy. Aladdin eToken is the world's #1 USB-based authentication solution. The Aladdin eSafe secure Web gateway provides the most advanced protection against the latest Web-based threats and attacks. (Aladdin25.06)
2.8 SAP to Open R&D Center in Israel
SAP co-CEO Leo Apotheker held a press conference in Tel Aviv on 16 July, where SAP announced the establishment of an R&D center in Israel that will operate alongside Ra'anana-based SAP Labs Israel. SAP Labs Israel managing director Mickey Steiner said that SAP could finance research. Earlier, SAP announced that it was buying the SAP activities of Ness Technologies, its Israeli distributor for ERP products to the large and mid-sized enterprise sectors for the past 14 years. The new SAP R&D center will be based on this activity. Ness said that the purchase price was $30m, two thirds of which will be paid immediately and the rest subject to meeting targets within the next two years. (Globes 16.07)
2.9 Norwegian State Wealth Fund To Invest €500 Million In Israel
Haaretz reported that the Government Pension Fund of Norway, which is actually one of the world's largest sovereign wealth funds managing over €270b, has decided recently to invest over half a billion euros in Israel. The Government Pension Fund - Global, is where the Norwegian government invests its surplus oil wealth for future generations. The fund decided to allocate 0.25% of its holdings for investment in Israel, out of its over €270b in assets. The Global fund is said to invest according to ethical policies, and does not invest in arms or cigarette manufacturers. It is allowed to invest half of its assets in global stocks. (Haaretz21.07)
2.10 VocalTec Receives $9.2 Million Net from the Sale of 11 of its 22 Patents
VocalTec Communications announced the closing of the Patent Purchase Agreement (PPA) for the sale of selected patents to Karo Millennium J.P., L.L.C. as previously announced on May 28th, 2008. The transaction was successfully brokered by IPinvestments Group of Atlanta, Georgia. Pursuant to the agreement, VocalTec sold 11 patents and certain patent-related rights, out of the company's portfolio of 22 patents. With the consummation of the transaction and the payment of all transaction-related expenses, including payment to the Office of the Chief Scientist of the Israeli Ministry of Industry (OCS), Trade & Labor, VocalTec retained net proceeds amounting to approximately $9.2m. VocalTec is granted a geographically unlimited, non-exclusive license to use the sold patents and other patent-related rights in connection with the development and marketing of its products. In addition to the 11 patents sold, VocalTec retains a patent portfolio comprising 11 additional patents as well as several trademarks, including “Internet Phone” trademark and Internet domain name. Herzliya, Israel's VocalTec Communications (http://www.vocaltec.com) is a global provider of carrier-class multimedia and voice-over-IP solutions for communication service providers. A pioneer in VoIP technology since 1994, VocalTec provides proven trunking, peering and residential/enterprise VoIP application solutions that enable flexible deployment of next-generation networks (NGNs). (VocalTec21.07)
2.11 modu Selected By AlwaysOn As the Top Mobile Company Of AO Global 250
modu has been chosen by AlwaysOn as the Top Mobile Company of the AO Global 250. Selection as the AO Global 250 Top Mobile Company signifies major developments in the creation of new business opportunities in the global mobile industry. modu was specially selected by the AlwaysOn editorial team and other industry experts spanning the globe, based on a set of five criteria: innovation, market potential, commercialization, stakeholder value and media buzz. The AO Global 250 was selected from over hundreds of companies, nominated by a panel of industry experts in the online technology, media, entertainment, mobile, enterprise and greentech sectors from around the world. modu has developed a disruptive solution poised to revolutionize the mobile handset industry. At the heart of the modu ecosystem is modu - a tiny, sleek and sophisticated mobile phone. modu is designed to be slipped into a wide variety of modu jackets - stylishly designed phone enclosures - and modu mates - modu-enabled consumer electronic devices. modu's ecosystem offers boundless possibilities in a simple and affordable way.
Kfar Saba, Israel's (http://www.modumobile.com) modu manufactures the world's lightest modular mobile phone, with a vision of bringing a fundamental change to the dynamics of the personal communication world. modu has developed a tiny, sleek and sophisticated mobile phone, called modu, which enables users to personalize their mobile experience in a simple and affordable way. Users can customize the look of their phone while gaining functionality by inserting modu into other devices in its ecosystem, including a range of stylish phone enclosures, called modu jackets, as well as enhanced, modu-enabled consumer electronics devices, called modu mates. (modu22.07)
3: REGIONAL PRIVATE SECTOR NEWS
3.1 21st Century Systems' HiRSA Technology Selected for Jordan Border Security Program
Omaha, Nebraska's 21st Century Systems (21CSI) announced that its state-of-the-art High Resolution Situational Awareness (HiRSA) software system will provide the surveillance and situational awareness information technology backbone for the end-to-end Jordan Border Security Program for which DRS Technologies was recently selected. In May 2008, it was announced that DRS Technologies was chosen by the U.S. Army's Communications and Electronics Command (CECOM) for the initial phase of the Jordan Border Security Program. For over ten years, 21CSI has pioneered design, development and fielding of agent-based decision support systems for time and mission-critical applications for the U.S. Department of Defense. The HiRSA technology will provide unique capabilities to help maintain the security of Jordan's border with Iraq. DRS Technologies, headquartered in Parsippany, New Jersey, is a leading supplier of integrated products, services and support to military forces, intelligence agencies and prime contractors worldwide. (DRS15.07)
3.2 IRIS Receives Order for Seven iQ 200 Urine Analyzers for Kuwait Ministry of Health
Chatsworth, California's Iris International, a leading manufacturer of automated in-vitro diagnostics systems and consumables for use in hospitals and commercial laboratories worldwide, announced that its Mideast distributor, Bader Sultan & Bros. Co., has received an order from the Kuwait Ministry of Health for seven iQ200 ELITE Automated Urine Microscopy Analyzers. This initial order covers more than 85% of the Ministry of Health hospital laboratories in Kuwait. Bader Sultan & Bros. Co. is one of the leading medical companies in Kuwait specializing in the healthcare and pharmaceutical business with an active presence in the Kuwait market since 1960. The Company has a wide share of the Kuwait medical market and has achieved annual sales in excess of $100 million. The iQ200 uses Auto-Particle Recognition (APR), a well-trained neural network, to classify and quantify twelve formed elements with true image morphology and walkway capability, providing the highest level of diagnostic accuracy and workflow efficiency. (IRIS16.07)
3.3 Abu Dhabi Buys 90% Stake in Chrysler Building
On 8 July, the government of Abu Dhabi bought a 90% stake in the Chrysler Building for $800m from German real estate investors and Tishman Speyer. However, the Abu Dhabi Investment Council (the emirate's sovereign wealth fund) did not get a controlling interest in the building. Despite having only a 10% holding, Tishman Speyer Properties will continue to control the property and manage it, much as it has since 1997, because it controls the land beneath the 77-story tower, with its trademark stainless steel crown, gargoyles and elevator cabs that evoke the chrome-laden autos of the 1930s. Tishman Speyer and its partner, Travelers Group, bought the Chrysler Building, at 42nd Street and Lexington Avenue, and the adjoining Kent Building in 1997 for about $220m from a consortium of banks and the estate of Jack Kent Cooke. The tower was built in 1930 by Walter P. Chrysler, the automaker, and was briefly the tallest building in New York, losing out months later to the Empire State Building. Now many in the industry say they have seen increased interest from the Middle East, especially in top assets in major US cities such as New York, LA, Washington and Boston, as oil prices soar, the dollar remains weak and building values soften or fall. Now many in the industry say they have seen increased interest from the Middle East, especially in top assets in major US cities such as New York, LA, Washington and Boston, as oil prices soar, the dollar remains weak and building values soften or fall. (Various09.07)
3.4 Versar Announces New Office in Abu Dhabi, UAE
Springfield, Virginia's Versar announced the opening of an office in Abu Dhabi, UAE to provide program management services to private, as well as government clients in the United Arab Emirates. Operating through a limited liability company, VIAP Middle East Engineering Project Management, Versar plans to provide its successful program management and quality assurance services to a host of construction projects in the UAE and other Gulf Council Countries. In mid January Versar participated in the INTERSEC Middle East 2008 at the Dubai International Convention and Exhibition Center, Dubai, United Arab Emirates. INTERSEC speakers provided an overview of global issues facing the Middle East region in 2008 across the areas of security, police, civil defense and safety. Versar is a publicly held international professional services firm supporting government and industry in national defense/homeland defense programs, environmental health and safety and infrastructure revitalization. (Versar 14.07)
3.5 Alison Nelson's Chocolate Bar to Open First Gourmet Concept Stores in India and Pakistan
Alison Nelson's Chocolate Bar, the New York-based chain of cutting-edge gourmet cocoa emporiums, is set to launch 10 stores in India and Pakistan through a partnership with Dubai-based HFK General Trading. Known for its high-quality cocoa and unusual flavor combinations such as "salty pretzel" and "malted milk", Chocolate Bar employs an artful approach, using graffiti-influenced chocolate-bar wrappers designed by iconic New York-based artists. Bespoke gift presentations include embroidered, bejeweled gift boxes, stunning handbags and limited-edition bowls created by Jonathan Adler, a popular designer recently featured on Oprah. HFK Holding is based in Pakistan, with a main branch in Dubai. The total turnover of the company is over $50 Million. The company's activities include major investments in real estate, sugar mills and sugar works, rice mills, and trade in many commodities including sugar, rice, lentils and other food items with key clients in Europe, Middle East and Africa. (HFK Trading22.07)
3.6 QuadraMed Signs $10.6M QCPR Contract with Saudi Arabia National Guard Health Affairs (NGHA)
Reston, Virginia's QuadraMed Corporation announced that the Saudi Arabia National Guard Health Affairs (NGHA), located in Riyadh, signed a contract for QuadraMed CPR (QCPR) service expansion, migration to InterSystem's Cache database and interface licenses that represent sales bookings of approximately $8.8m, with a total contract value of approximately $10.6m. This agreement covers the rollout of the QCPR product to the NGHA facilities throughout Saudi Arabia. Currently installed at one hospital and four primary healthcare centers in the central region of Riyadh, QuadraMed will install QCPR at three additional hospitals and twelve primary healthcare centers: two primary healthcare centers in the eastern region, eight in the western region and two in the central region of Saudi Arabia. The Saudi Arabia NGHA provides modern medical care to National Guard employees and their dependents, as well as to Saudi Nationals with tertiary health problems. (QuadraMed 15.07)
3.7 Maui Wowi Hawaiian Expands to Turkey Master Franchise Signing
Denver's Maui Wowi Hawaiian announced it signed a master franchise agreement with ALOHA Danismanlik Hizmetleri (ALOHA Limited Company), an affiliate of TUNC Group. The move brings Maui Wowi to the Republic of Turkey and further extends Maui Wowi Hawaiian's rapidly expanding global presence. Since the implementation of economic reforms in 2001, Turkey has quickly become one of the world's fastest-growing and most dynamic economies. The country's gross domestic product has grown at an average annual rate of 7.4% over the past five years, with heavy foreign investment and only moderate inflation. Home to over 70m people, the Republic of Turkey has a young population (half its residents are under the age of 28.3) that is heavily urbanized and culturally aware. Now numbering over 500 franchised operating units and with an additional 800 in development, Maui Wowi Hawaiian is a fruit smoothie drink franchise. Maui Wowi has grown from a single smoothie booth at arts and cultural festivals to become the Banzai Pipeline of the franchised coffee/smoothie field. Maui Wowi's coffee creations include gourmet blends from the Kona district of Hawaii as well as blends from the sister islands of Molokai, Kauai, and Maui, while its smoothies are considered nutritionally equivalent to whole fruit due to their high natural fiber content.
ALOHA Limited Company's franchise strategy will focus initially on Turkey's major tourism areas, primarily in the country's Southern and Western coastal regions. Beginning with a fixed store location in a major shopping mall, the company intends to expand with the rollout of mobile kiosks along popular beachfronts. ALOHA Limited Company will begin actively developing franchise opportunities this summer. (Maui Wowi 15.07)
3.8 Turkish Airlines Orders Mechtronix Ascent XJ Trainer
Montreal, Quebec's Mechtronix Systems, a fast growing and third leading provider of flight training equipment in the world, announced the purchase by Turkish Airlines (THY) for the advanced flight trainer, the Ascent XJ Trainer. THY plans to deploy this cost-effective commercial jet Multi Crew Cooperation platform at its ab-initio school by fall of 2008. The new simulator will serve the airline by familiarizing its students with the commercial jet flight deck, FMS, EFIS, performance and speed. THY becomes the first airline in Europe to select the Ascent XJ Trainer. In addition to providing a jet flight model, the device can later be upgraded to a generic turboprop providing extra flexibility. The Ascent XJ Trainer also offers exceptional Full Flight Simulator comparable visual system fidelity featuring a 180degrees Field of View. The airline will be looking to obtain FNPT II MCC certification under JAR-STD 3A. (Mechtronix 15.07)
3.9 Zila to Begin Distributing Its Proprietary Oral Cancer Screening Product, ViziLite Plus, in Greece
Phoenix, Arizona's Zila has selected Intertrade Dental to be the exclusive distributor of ViziLite Plus with TBlue, Zila's proprietary oral cancer screening product, in Greece and Cyprus. Intertrade has placed orders for ViziLite Plus and plans to immediately begin training its sales representatives and preparing the market for the product launch. Terms of the agreement were not disclosed. ViziLite Plus will provide dental professionals in Greece and Cyprus with an effective screening tool in the fight against oral cancer. Greece and Cyprus represent good markets in Zila's continuing efforts to expand their geographical footprint for ViziLite Plus. The combined population of Greece and Cyprus is approximately 11.5 million. (Zila20.07)
3.10 Clear Skies Solar Opens International Office in Larissa, Greece
New York's Clear Skies Solar, a leading developer and provider of solar power solutions, announced the establishment of a corporate office in the city of Larissa, in Central Greece. Partnering with Larissa-based Aspen Energy, whose focus is the procurement of solar energy business opportunities throughout Greece, Clear Skies Solar (CSS) will serve as Aspen's exclusive supplier of renewable energy technology and installation. Due to government tax incentives, Greece has emerged as a leading market for solar power. In 2006, the country's Parliament passed comprehensive Renewable Energy Sources legislation, part of which provides grants and favorable tax treatment as incentives for implementing solar energy solutions. For commercial entities, incentives in the form of grants can run as high as 50% of the total cost of a company's solar system. Furthermore, high levels of environmental awareness among Greece's populace are a driving demand for renewable energy sources. (CSS15.07)
3.11 Cytori Sells First European Union StemSource Bank with Biohellenika of Greece
San Diego's Cytori sold its first European Union StemSource Cell Bank as part of an agreement with Biohellenika. Biohellenika, the leading provider of cord blood stem cell banking services in Greece, will be the exclusive provider of the StemSource Cell Bank cryopreservation services in Greece, which is one of the largest markets for cell banking in Europe. The StemSource Cell Bank is a comprehensive product offering, which allows companies or hospitals to economically process and store their clients' adipose tissue-derived stem and regenerative cells for potential future use. The foundation of the cell bank is Cytori's Celution 900 System, which automates the processing of stem and regenerative cells from adipose tissue to facilitate cryopreservation. Cytori is commercializing the StemSource Cell Bank directly in Europe and the Middle East and additional countries in Asia. (Cytori 14.07)
4: ISRAEL MACRO-DEVELOPMENTS
4.1 Israel Water Authority Details Emergency Plan
On 8 July, the Israel Water Authority Council detailed its emergency plan to deal with the country's water crisis, launching a media campaign entitled "Israel goes from red to black". The reference is to the red line, which mark the minimum safe water levels in the Kinneret and aquifers and the black lines that mark the point of irreversible damage. The Water Authority Council chairman said Israel was at a low point not seen since measurements began in 1932. For the past five years, he has warned that the water level in the country's three strategic sources - the Kinneret and the mountain and coastal aquifers - was nearing the black line. Falling below the black line will cause irreversible damage to the water sources, he warned. As part of the emergency plan, the Water Authority is preparing to immediately drill wells to tap water slated for use after 2010. Israel will invest $3.5b in the water economy in the coming years. In the immediate term, tens of millions of shekels will be invested in treating contaminated water sources. Current desalination facilities will also be expanded. The emergency plan calls for the desalination of 600m cubic meters of water by 2013 and 750m cubic meters by 2020. (Globes 09.07)
4.2 PM Brown Says Bilateral Trade to Reach £3 Billion by 2012
Visiting Israel, on 20 July British Prime Minister Brown emphasized the UK's long-term economic commitment to Israel and the target of boosting bilateral trade to £3 billion by 2012. Over the past decade the bilateral trade has grown by 40% to more than £2.3b per year. The UK was Israel's third largest export destination - not including diamonds - after the US and Germany. Brown added that with over 250 Israeli companies located in the UK and 47 Israeli companies listed on London stock exchanges (41 having joined in the past three years), Israel was one of Britain's top business partners. Furthermore he said he would like to work closer with Israel on an electric car project. The UK Trade & Investment Minister, who headed a business delegation here as part of Brown's visit, said his office was committed to securing 25 more inward investment projects from Israel by 2010. The Minister also met with Israel's Minister of Industry, Trade & Labor Yishai. One of the goals of the meeting was to try and refresh R&D cooperation in industry and technology. Since the UK decided to close Britech, the Britain-Israel Technology Foundation, founded in 1999, there has been a lack of collaborative R&D projects and technology partnerships. Furthermore the ministry is seeking to sign a memorandum of understanding with Britain over advancing collaborative projects in professional training similar to agreements reached with Germany. Yishai said his ministry was committed to strengthening economic ties between the two countries and therefore the number of officials in the economic division of the ministry's representative office in London was doubled over the past year. In 2006, Britain was Israel's 23rd largest trading partner. The ministry said bilateral trade grew by 11% in 2007. Exports of goods amounted to $1.7b last year, an increase of about 18% compared with a year earlier. (JP21.07)
5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Rising Oil Prices and the Arab Countries -- Winners & Losers
The Arab countries controlled 31% of global oil production last year while their consumption was limited to 7%, thereby leaving ample production output for export. This situation will prevail in the future as the Arab countries are likely to control 50% of global reserves. While the revenues totaled $419b in 2007 when the price of crude averaged $61 a barrel, the revenues are likely to be far greater when the average price will be $110 a barrel in OPEC basket. (The highest price of oil is usually reserves of Texas light). These oil revenues do not represent a net income to the oil-exporting countries. Research, exploration and development of new oil fields take a big bite of oil revenues. In some instance, the foreign partner, as in the case of Egypt, earns 40% of the income. A similar situation prevails in Yemen, Sudan and elsewhere. In some Arab countries, the limited refinery capacity impels countries to import gasoline, diesel and other oil derivatives. Falling in this category are Iraq, Syria, Yemen, Tunisia, Morocco, Jordan, Lebanon and Mauritania. A number of these countries, whether producers or consumers, allocate a sizable amount of foreign exchange for importing their oil requirements. While there are 16 Arab countries whose production exceeds their consumption some of them import oil derivatives. Five Arab countries produce no oil at all. These are Jordan, Lebanon, Somalia, Djibouti and Comoros. In some cases, the production represents a fraction of consumption. Eight Arab countries import about 417,000 bpd, divided between 176,000 bpd by Morocco, 113,000 bpd by Jordan, 106,000 bpd by Lebanon, and 22,000 bpd by Djibouti, Somalia, Mauritania and Comoros combined. Arab oil importers normally suffer from deficits in their current accounts, and the rising prices of oil aggravates the problem. Arab oil producing countries have not been generous toward Arab oil importing countries with the exception of two bilateral agreements between Jordan and Iraq and Jordan and Saudi Arabia. King Abdullah's initiative to grant $500m to help all developing countries cope with their oil burden does not go too far. (al-Sharq 09.07)
5.2 Jordan Thanks US Officials & Asks For Maintaining High Levels Of Aid
Planning & International Cooperation Minister Al-Ali thanked the US for approving $450m in supplemental economic and military assistance for 2008 and 2009 and asked that the overall increased assistance levels be maintained for the next few years in light of various challenges Jordan is facing. During meetings with key officials and several members of the US Congress, the minister outlined the challenges facing Jordan and the comprehensive reform agenda aimed at improving Jordanians' quality of life. Discussions with senior State Department officials, including Undersecretary Burns, covered strengthening bilateral relations and maintaining increased US assistance to Jordan in order to forge ahead with investments in water, health and education projects. According to the Ministry of Planning, US officials expressed their understanding to the various challenges which face Jordan and reiterated their commitment to help Jordan's reform and development drive. With the additional assistance in 2008, total US assistance reached $911.5m, of which $561.5m is economic assistance and $350m is military aid. (JT14.07)
5.3 Joint Jordanian-Israeli Delegation to Discuss Trade Relations in Washington
An official joint Jordanian-Israeli delegation met in mid-July with representatives from the office of the United States Trade Representative, Department of State, Department of Commerce, as well as Members of Congress and their staffs to promote the expansion and strengthening of the trilateral United States-Jordan-Israel trade relationship. In order to strengthen this vital economic relationship, the delegation will promote the expansion of the Qualified Industrial Zone initiative (QIZ) beyond the current 11 sites by creating satellite units composed of individual factories to be designated as QIZs and run by current QIZ investors, this change will expand Israeli-Jordanian economic cooperation, help boost Jordan-US trade and help create jobs and spur U.S. investment throughout Jordan and Israel. The proposed satellite units would be located in densely populated areas with high poverty and unemployment rates, particularly among women. It is anticipated that the satellite unit initiative will create 4,500 new job opportunities and training for Jordanians closer to their homes, and may result in an additional $45m in foreign direct investment. The joint delegation will seek to promote the creation of a trilateral accord on rules of origin between the US, Jordan and Israel under the framework of U.S. free trade agreements with Jordan and Israel. This change will expand Israeli-Jordanian economic cooperation, help boost Jordan-US trade and help create jobs and spur U.S. investment throughout Jordan and Israel. QIZs are industrial parks in Jordan from which jointly manufactured Jordanian-Israeli goods can be exported to the US duty free. (HKJ15.07)
5.4 Jordan's Inflation Rate Reaches 13.3% in First Half of 2008
Jordan's inflation rate for H1/08 reached 13.31% as the consumer price index rose to 136.61 points from 120.56 points during the first half of last year. The rise was mainly the result of the increase in the prices of fuel, electricity, transport, dairy and poultry products, cereals and cooking oil, According to data obtained from the Department of Statistics (DoS), the higher prices of the mentioned principal products was coupled with a decline in telecommunication charges. Transport prices shot up recently due to the increase in oil prices. Other statistics showed the industrial production index, which measures real production output, also rose during the first five months of this year compared to that recorded during the same period last year. The rise was empowered by an increase in the output of manufacturing industries by 5.5%, electricity by 10.3% and mining industries by 1.5%. Meanwhile, exports and re-exports rose during the first five months of this year by 18.5% and 49.5% respectively while imports went up by 32% compared to those recorded in the same period last year. As such, the trade deficit recorded at the end of June reached $4.081b compared to $2.959b for the same period last year. Pharmaceuticals, raw phosphate, potash and fertilizers topped the list of the Kingdom's exports while there was a decline in the country's garments and vegetable exports. This was accompanied by an increase in the amounts of several imported goods, such as crude oil, steel, electric equipment, vehicles and cereals. As for the country's principal economic partners, Asian countries, particularly India, and countries of the Greater Arab Free Trade Agreement and the European Union accounted for the largest portion of the Kingdom's exports. Exports to countries of the North American Free Trade Agreement went down as a result of a drop in exports to the US. (JT16.07)
5.5 Jordan & US Sign Environmental Cooperation Agreement
On 13 July, Jordan and the US signed an agreement to boost capacity building and environmental technical training. The $600,000 agreement, which was signed by Ministry of Environment, the US Agency for International Development (USAID) and the US environmental Protection Agency, also aims to improve environmental legislations, inspection laws. Jordanian Minister of Environment Irani said this agreement is a good achievement, which paves the way to train the trainers through an integrated approach for environmental inspection and enforcement of environmental laws. Irani added that the agreement will allow training the ministry's Environmental Police inspectors, judges and prosecutors to strengthen national capacities and protect environment. He added that this agreement would allow the transfer of expertise in different domains, such as advanced environmental inceptions and investigations in line with the latest international standards. The agreement is part of an integrated program developed by the ministry to increase capacity of environmental police. (Petra13.07)
5.6 Different Perspectives About Poverty in GCC Countries
It has been common among government officials in GCC countries to consider any reference to poverty in their countries as “an affront to national dignity". When governments have sought to control the supply or prices of consumer goods voices would rise quickly against such measures perceived as turning the people into beggars who must stand in line before cooperative societies to buy their needs. With oil revenues multiplying any discussion of poverty is even more muted than ever.
There is a variety of official classifications of poverty--below the poverty line, relative poverty and quasi-poverty. The classification is governed by a single criterion: the dollar spent per capita, per day--$1 for “below poverty” to $3 for “quasi-poverty”. In Kuwait, the average income is $18,000 per capita. According to this measurement there is no poverty in Kuwait. The reality is different. Against $30 billion of oil revenue surplus half of the population have difficulty meeting their monthly payments and thousands of families live in areas that demonstrate a glaring problem of wealth distribution. Initial estimates in Saudi Arabia indicate that 20% of Saudis live below the poverty line and more than 75% of the population has long-term consumer debts. People live in huts made of tin and during religious holidays the number of poor people who receive charities and donations rises. Anyone who has been able to wander outside the major cities in the Gulf will discover the real picture of poverty. In the UAE, there are many dwellings made of tin with no electricity and the roads to many villages are unpaved. There is a truly unbalanced equation in countries with the biggest financial surpluses in the world, suffering from bundles of poverty, interruption in the supply of electricity, increasing unemployment and shortage of work opportunities--a combination of poor administration and poor distribution of wealth in a world unequal either in income or expenditures. (al-Sharq10.07)
5.7 Gulf States Garner $1b Daily From Record Oil Prices
Persian Gulf states accumulated $750b in current account surpluses over the last five years on the back of a seven-fold rise in oil prices since 2002, according to Merrill Lynch. Merrill Lynch reported that Gulf Cooperation Council (GCC) members are likely to receive another $360b this year in their external surpluses with oil hovering above $140 a barrel , equating to almost $1b a day. Merrill said that every $10 increase in the price of oil adds around $55b to export revenues of the GCC, home to around 40% of the world's proven oil reserves and 25% of natural gas reserves. The bank forecast GCC economic growth of 6.4% this year and 6.2% in 2009, assuming oil prices stay at around $135 a barrel and interest rates remain low. However, Merrill highlighted high inflation is the biggest challenge facing the Gulf's economic success story and said it could threaten the long-term sustainability of regional economies. It said record oil revenues were fuelling economic growth, but that loose monetary policy and increased public spending were creating a situation where inflation risked spoiling the party. Merrill said inflation, which is above 10% in five out of the six Gulf states, could begin to hamper governments' efforts to diversify their economies away from oil. It said the region was already facing supply bottlenecks - both in terms of human capital and capacity - and inflation was putting GCC plans to alleviate these bottlenecks, namely through increasing the expatriate population and mega infrastructure projects, in jeopardy. However, the bank said the asset bubble still had a long way to go before it was in danger of popping. (Various14.07)
5.8 Gulf to Set New Currency Deadline in 2009
Gulf Arab oil producers are unlikely to decide on a new deadline to launch a single currency until next year as the 2010 target for monetary union becomes "difficult", Bahrain's central bank governor said on 8 July. Bahrain, Saudi Arabia and three other states in the world's biggest oil-exporting region have been working towards monetary union for years, but the project has faced numerous hurdles as economies boom and inflation soars across the region. Saudi Arabia's Central Bank Governor Hamad Saud Al-Sayyari said recently that Gulf states would decide on a "feasible" schedule for rolling out the single currency after reviewing the 2010 target at meetings this autumn. At a meeting in June, Gulf central bankers finalized a draft monetary union deal as well as an agreement to set up the nucleus of a regional central bank. But rapid economic growth spurred by a seven-fold surge in oil prices since 2002 and inflation that is soaring to record- and near-record peaks were placing hurdles before a 2010 deadline set in 2001. Monetary union first hit trouble when Oman chose not to join in 2006 and Kuwait broke ranks, severing its dollar peg in 2007.
As well, Bahrain's GDP will likely expand to 6.5% this year and between 6 and 7% next year; rapid regional economic growth has been a driver of inflation. Dollar pegs in all Gulf states but Kuwait have exacerbated inflation as the US currency tumbled, driving up import costs. Gulf central banks have also been forced to track seven US interest rate cuts since September to defend their pegs, driving real interest rates - the difference between official rates quoted by banks and inflation - into negative territory. (Reuters08.07)
5.9 UAE Eyes Asian & African Farm Lands
The United Arab Emirates is seeking to buy farmland in Vietnam, Cambodia, Africa and South America to secure food supplies for the desert country, according to the Minister of Economy Sultan bin Saeed Al Mansouri. This is part of the UAE's strategic investment in general. Gulf Arab countries, enriched by petrodollars, have seen rising inflation to record or near record highs, sparking fears of food shortages in a region where low rainfall and a lack of arable land mean a heavy reliance on imports. Saudi Arabia moved in May to create facilities to stockpile basic staples and said it would increase global investments to ensure food security. Traders said it was seeking to grow rice in Thailand. Bahrain is also making plans to stockpile food. Mansouri was speaking during a tour of supermarket chains that have agreed with the government to freeze prices of some basic food items at 2007 levels after inflation hit a 20-year peak of 11.1% last year. (Various09.07)
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5.10 UAE Slashes 2007 Economic Growth Estimate
The United Arab Emirates' Ministry of Economy revised down its 2007 economic growth rate to an estimated 5.2% from an earlier 7.6%. The ministry did not say why it revised GDP data going back to 2001. Real GDP of the world's fifth-largest oil exporter reached $135.8b in 2007, compared with $129b in 2006, the ministry announced. In March, the ministry said the economy grew 7.6% as construction, industry and trade sectors surged. The UAE grew 11.6% in 2006, the revised data showed. GDP growth in 2007 was the slowest since 2002. The UAE has been trying to diversify its economy from oil. Oil dominates the economy of Abu Dhabi, while Dubai's relies more on trade, real estate and transport. The value of petroleum sector output fell 1.2% in 2007 to $33b, the data showed, compared with growth of 1% in data released in March. Manufacturing rose 12.4% last year, down from a previous estimate of 15%, while construction gained 14.4%, down from a 17% March estimate. (Various09.07)
5.11 Ras Al Khaimah Economy To Grow By Up To 18%
The economy of UAE emirate Ras Al Khaimah will grow at a rate between 15 to 18% this year, as the government is commissioning an urban development master plan that will include a rapid transit system that will eventually be linked to the national rail system. In five years' time, Ras Al Khaimah seeks to become a major metropolis retaining its own identity and culture as a modern and vibrant Arab society where people from other countries will work and live. Since becoming the Crown Prince and Deputy Ruler of Ras Al Khaimah in June 2003, Sheikh Saud has spearheaded a massive economic development program that is bearing fruits now. The emirate has attracted $2.477b investment in industries, while more than $9.53b are being pumped into its real estate sector. Since then, the emirate launched RAK Properties, RAK Petroleum, Ras Al Khaimah Investment Authority that is spearheading investment in the industrial sector, projects like Al Hamra Village, Mina Al Arab, Al Marjan Islands, the Cove, La Hoya Bay and others. Its real estate development arm, Rakeen, is building Gateway City, RAK Financial City, RAK Convention Centre, among others. (AB15.07)
The Omani Ministry of National Economy announced that Oman's economy grew 42.9% in the first quarter of 2008 - the highest rate of GDP growth in 28 years - on the back of soaring oil and gas revenues and lower interest rates. Growth in the petroleum sector accelerated 60.8%, mainly driven by rising oil prices, which have reached record highs above $145 a barrel in recent weeks, the said in a report carried by the official on Saturday. There was a 4.9% increase in production and a 60% increase in prices in the petroleum sector during the first quarter. The non petroleum sector also performed well, expanding 28.3% during the period, the highest growth since 1996. High growth rates in the wholesale and retail trade, manufacture of basic chemicals, transport, storage and communication and financial intermediation sectors were behind the strong performance. Soaring oil prices and rock bottom interest rates have fuelled economic growth in the Gulf state, but have also driven inflation to record levels. Annual inflation in Oman has risen for 13 straight months and hit 13.2% in May as a global food crisis, high commodity prices and a currency peg to the weak US dollar pushed costs higher. The Ministry of National Economy said last month Oman's budget surplus for the first quarter of this year was $2.37 billion. (OMA20.07)
5.13 Oman Budget Surplus Soars Amid Record Oil Prices
Oman announced on 11 July that its budget surplus for Q1/08 was $2.37b, fuelled by record crude prices. Oman posted a $1.084b surplus in the first three months of 2007, the Ministry of National Economy said in its monthly bulletin. The Gulf Arab state's oil revenue soared 55.8% to $4.18b in the first quarter compared with $2.676b in the year earlier. Like other states in the world's top oil-exporting region, the non-OPEC member's economy is surging on a more than seven-fold increase in oil prices since 2002. The ministry said total government revenue grew 36.5% to $5.5b for the first quarter from $4.03b in the corresponding period last year. (Various11.07)
5.14 Oman's Inflation Jumps To Record 13.2%
Annual inflation in Oman accelerated to a record 13.24% in May from 12.43% in April, as food prices soared, official data showed on 13 July. Oman's consumer price index hit 123.2 points on May 31, compared with 108.8 points on the same day a year earlier, the ministry of national economy said in a monthly report. Food, beverage and tobacco costs - which account for almost a third of the index - jumped 22.9%, the data showed. Rents jumped 16.6%. Inflation is accelerating across the world's biggest oil-exporting region where most countries, including Oman, peg their currencies to the weak US dollar. (MNE13.07)
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5.15 Saudi Agrees To Defer Pakistan Oil Payments
Saudi Arabia has agreed in principle to defer payments for crude oil sales to Pakistan, expected to be worth about $5.9b during Pakistan's present July-June financial year. The agreement would provide a significant boost to the south Asian country's economy just when it is coping with fast-mounting political and economic difficulties. The agreement involves deferring payments until at least June 2009 when the financial year ended. It was not clear if the deferred payments would be paid back. One western diplomat familiar with Saudi ties to Pakistan said the Saudis in 1998 began supplying crude oil under a deferred payment plan after Pakistan carried out its maiden nuclear tests and came under international sanctions. The Pakistani rupee has fallen about 18% against the dollar this year as annual inflation accelerated to a three-decade high above 19% and fiscal and current account deficits have widened, due largely to a soaring oil import bill. Foreign exchange reserves have fallen sharply, largely because of the oil payments and withdrawals from Pakistan's stock market, but some funds have begun flowing back into the country in the form of loans from multilateral lenders and friendly governments. According to Pakistani officials, Saudi Arabia sells about 110,000 bpd of crude oil to Pakistan or about 40 million barrels a year. (Various12.07)
6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Moody's Warns Turkey Could Face Ratings Downgrade
On 8 July, Moody's Investor Service (http://www.moodys.com) said that Turkey's rating could face downward pressure if economic and political developments hit debt ratios. Large external financing and refinancing requirements and “ongoing conflict between secular and religious elements in society” are the two most important credit challenges Turkey is facing. The credit opinion also highlighted that the large, dynamic economy with deep European linkages, well-entrenched macro framework including commitment to primary fiscal surpluses and the strategic geopolitical location are Turkey's credit strengths. Moody's currently rates Turkey “Ba3 credit” for foreign currency bonds and offers its relatively high debt payments burden compared to its revenue-raising capacity as the rationale for this rating. The country's heavy external financing requirements are also cited as the reason for the Ba3 rating, which is definitely not the best rating. Moody's said in a statement yesterday that a recent revision of the nominal gross domestic product (GDP) by an average of 31% over the period 2000-2006, the country's debt ratios relative to GDP are now closer to other Ba-rated countries. “However, these changes do not improve the government's payment capacity, as indicated by its interest payments/revenues or debt/revenues,” Moody's said. Moody's also has a stable outlook for the Turkish economy overall. “Although the pace of structural reform has slowed, a number of initiatives are under way to address longer-term fiscal sustainability and growth,” Moody's opined. But Moody's identified the Constitutional Court case deliberating the closure of the ruling Justice and Development Party (AK Party) as a potential “roadblock to implementation of those reforms.” If the government shows a stronger commitment to producing revenue and paying off debt, the credit rating may be upgraded, the company acknowledged. The other most significant factor that may give way to an improvement in the rating was stipulated as the implementation of structural reforms in the social security system, electricity sector, the labor market and the public sector. As the element that may pull the rating down, Moody's listed economic or political disarray. Such a case will “meaningfully reverse the virtuous trajectory of the government's debt ratios,” it emphasized. (Moody's08.07)
7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Methuselah Date Palm Makes World Debut
This July, Kibbutz Ketura's Arava Institute's Dr. Elaine Solowey made international news by presenting to the world "Methuselah," a 4-foot-tall date tree sapling whose seed dates back at least 2,000 years. Originally discovered in the 1960s during the archaeological excavations of Masada by Prof. Yigael Yadin, the seed was carbon dated to roughly the time of the ancient fortress' siege, in 73 CE. Climatic conditions at the Dead Sea may have contributed to the longevity of this oldest, directly dated, viable seed, which has set a new record as the oldest germinated seed in the world. Today, this sapling is the only living Judean date palm (Phoenix dactylifera L.), a species entirely extinct in this region, which was once covered in forests of the date palm. Dr. Solowey was asked to germinate the seed by Sarah Sallon, Director of the Louis L. Borick Natural Medicine Research Center in Jerusalem, who became interested in the ancient date palm as a possible source of medicines. Dr. Solowey bathed three ancient seeds in fertilizer and enzyme-rich solutions before planting them. "I really never thought we would get life out of this group of seeds because when we first acquired them, they looked so dry," said Dr. Solowey. "Most of the seeds were dead and then suddenly, we saw that we could get life out of this one." Dr. Solowey and her research team are hoping that by reviving the plant they may be able to study its medicinal uses. The tree also has enormous historical value as the seeds were most likely remnants of fruits stored or eaten by the Zealot Jewish community living in Masada during this time period as well as being an abundant plant specie during biblical times. (AI07/2008)
7.2 Isra Al Mi'Raj to Be Marked by Moslems
On or about 30 July, the Moslem world will mark the Isra and Mi'raj, which falls on the 27th day of the Muslim month of Rajab. In Islamic tradition, the Isra and Mi'raj are the two parts of a journey that Muhammad took in one night, in 621. Many Muslims consider it a physical journey but some Islamic scholars consider it a dream. The Isra begins with Muhammad resting in the Kaaba in Mecca, when the archangel Gabriel came to him and brought him the winged steed Buraq, who carries Muhammad to the "farthest mosque". The location of this mosque was not explicitly stated in the Qur'an, but some believe it is Temple Mount in Jerusalem. There, Muhammad takes the second part of the journey, the Mi'raj, when he is taken to heaven, where he speaks with the earlier prophets and with Allah (the Moslem name for G-d). Allah tells him to enjoin the Muslims to pray fifty times a day; however, Moses tells Muhammad that they would never do it, and urges Muhammad to go back several times and ask for a reduction, until finally it is reduced to five times a day. The story is celebrated each year via a festival primarily for children, the Lailat al Miraj. Muslims bring their children to the mosques, where the children are told the story, allowed to pray with the adults and then afterwards food and treats are served.
*REGIONAL:
7.3 Cairo Screening of Israeli film - The Band's Visit
The Israeli embassy in Cairo held a festive screening on 10 July of the award-winning Israeli film, The Band's Visit. The film, which was rejected a year ago for political reasons by the Cairo International Film Festival, was screened for the first time publicly in Egypt as part of the cultural events organized by the Israeli embassy. The film, which met with great success, aroused much public and media attention. More than a hundred people, including prominent Egyptian intellectuals and cultural figures, media personalities, senior government officials, and Egyptian and foreign diplomats were present at the special screening, which took place at an exclusive Cairo hotel. The film's director, Eran Kolirin, was invited to Cairo by the embassy especially for the screening, the first to be held in an Arab country, and afterwards addressed the audience. Kolirin told the viewers that he was very excited about the Cairo screening. Reactions to the film, which won the Coup de Coeur du Jury award at the Cannes Festival, were very positive. The audience burst into laughter many times throughout the screening, applauding enthusiastically at the end of a particularly emotional scene. Many asked where they could see the movie again. The film screening is part of the cultural activities organized by the Israeli embassy in Cairo, which aims to bring closer not only governments but also peoples. (MFO13.07)
7.4 UAE to Deport 40 Transvestites
Forty cross-dressing tourists have been arrested in shopping malls and other public places and they will be deported soon, the UAE police announced on 16 July. The visitors were held after police launched a campaign against transvestites in May. The 40 offenders were referred to the Public Prosecution, which issued an administrative deportation order against them. All of those arrested were visitors and tourists and not residents, police stressed. Any man or woman who dresses up and behaves like the opposite gender in public will be questioned and legal action will be taken against him or her, UAE police chiefs have warned. (GN17.07)
8: ISRAEL LIFE SCIENCE NEWS
Teva Pharmaceutical Industries and Barr Pharmaceuticals have signed a definitive agreement under which Teva will acquire Barr, the fourth largest generic drug company worldwide. Under the terms of the agreement, each share of Barr common stock will be converted into $39.90 in cash and 0.6272 Teva ADRs. Teva expects the transaction to close in late 2008 and to become accretive to GAAP earnings in the fourth quarter after closing. This acquisition will further enhance Teva's leadership position in the U.S. and will significantly strengthen its position in key European and Central and Eastern European markets. On a pro forma basis, 2007 revenues of the combined company would have been approximately $11.9 billion. The combined company will have an unmatched global platform, operate directly in more than 60 countries and employ approximately 37,000 people worldwide. The companies' highly complementary product offerings and development pipelines will extend Teva's generic and proprietary offerings for customers globally. By adding development resources and breadth to Teva's product portfolio and pipeline, particularly the Paragraph IV and first to file opportunities, Teva will bring more products to market while increasing access to affordable medicines. The transaction also bolsters Teva's specialty pharmaceutical platform through the addition of Barr's substantial women's health portfolio to Teva's respiratory franchise, further enhancing Teva's balanced business model.
Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the leading generic pharmaceutical company. The company develops, manufactures and markets generic and innovative pharmaceuticals and active pharmaceutical ingredients. (Teva18.07)
8.2 Gamida Cell Signs Collaboration Agreement With Biologics Delivery Systems
On 14 July, Gamida Cell announced a collaboration agreement with Biologics Delivery Systems Group, Cordis Corporation. Under the terms of the agreement, Biologics Delivery Systems will supply catheters for the upcoming Phase I/II clinical trial of Gamida Cell's CardioCure product for the treatment of post-myocardial infarction (heart attack) patients. CardioCure is a proprietary ex-vivo expanded autologous (from the patient's body) bone marrow product. The randomized, controlled multi-center Phase I/II clinical trial, due to start in Q4/08 in Israel, will evaluate the safety and efficacy of Gamida Cell's CardioCure in 48 post-MI patients. CardioCure will be injected directly into the myocardium using the latest generation of Biologics Delivery Systems' NOGA Cardiac Navigation System and MyoStar Injection Catheter. Jerusalem, Israel's Gamida Cell (http://www.gamida-cell.com) is a world leader in stem cell expansion technologies and therapeutic products. The company is developing a pipeline of cell therapeutics to effectively treat debilitating and often fatal illnesses such as cancer, cardiac disease and peripheral vascular disease. Gamida Cell's therapeutic candidates contain adult stem cells, selected from non-controversial sources such as umbilical cord blood and bone marrow, and which are enriched in culture using the company's proprietary technologies. (Gamida14.07)
8.3 Orthocrat Announces Sale of TraumaCad for Orthopedic Preoperative Planning
Orthocrat announced that Duke University Hospital, in Durham, North Carolina, has purchased TraumaCad. TraumaCad will be integrated with other existing systems at Duke and will ultimately enable surgeons to have single-click access to TraumaCad. Orthocrat's goal is to make preoperative planning for orthopedic surgeons simpler, faster, and available anywhere. The company's flagship product, TraumaCad, has been successfully installed in over 1,000 locations in ten countries, including hospitals, clinics and academic institutions. Petah Tikva, Israel's Orthocrat (http://www.orthocrat.com) was established in 2003 by a team of software engineers and orthopedic surgeons, with the objective of providing the orthopedic community with a 100% filmless working environment. Orthocrat's flagship product is TraumaCad web-based pre-operative planning and digital templating software. (Orthocrat16.07)
8.4 Alfacell Announces ONCONASE Distribution and Marketing Agreement with Megapharm for Israel
Somerset, N.J.'s Alfacell Corporation has entered into a distribution agreement with Megapharm, a leading pharmaceutical company in Israel, for the commercialization of ONCONASE (ranpirnase) in Israel. ONCONASE, the company's lead drug candidate, recently completed an international confirmatory Phase IIIb clinical trial for unresectable malignant mesothelioma (UMM). Under the agreement, Alfacell has granted Megapharm exclusive rights in the defined territory for the marketing, sales and distribution of ONCONASE. Alfacell will receive 50% of all sales in the territory. In addition, Alfacell will manufacture and supply the product to Megapharm, while Megapharm will be responsible for all activities and costs related to regulatory filings and commercial activities in the territory. ONCONASE is a first-in-class therapeutic product candidate based on Alfacell's proprietary ribonuclease (RNase) technology. A natural protein isolated from the leopard frog, ONCONASE has been shown in the laboratory and clinic to target cancer cells while sparing normal cells. ONCONASE triggers apoptosis, the natural death of cells, via multiple molecular mechanisms of action. Megapharm is one of the leading private biotech, pharmaceutical and medical nutrition marketing companies in Israel with a strong biotech orientation, exclusively representing a number of major American and European pharmaceutical companies. (Alfacell15.07)
8.5 Oramed Pharmaceuticals Raises $5 Million Through a Private Placement
Oramed Pharmaceuticals has completed a raise of $5m in a private placement of 8,668,002 shares of its common stock with a select group of investors, led by Montaur Capital Partners. In connection with the private placement, investors received three year warrants to purchase an aggregate of 4,262,337 shares of common stock at an exercise price of $0.90 per share. Oramed will use the funds for its ongoing R&D efforts as well as for the next phase of the Company's clinical trials on its lead product, an oral insulin capsule. The Company is currently conducting Phase 2A trials, testing the capsule for both safety and efficacy. The results from these trials are expected within the next few weeks. Oramed is planning on launching Phase 2B trials of its oral insulin capsule by the end of the year. The trial is intended to evaluate the safety, tolerability and efficacy on diabetic type 2 volunteers. It is anticipated that this study will be conducted over several months, and the subjects will each receive the treatment for a period of 6 weeks.
Jerusalem, Israel's Oramed Pharmaceuticals (http://www.oramed.com) is a technology pioneer in the field of oral delivery solutions for drugs and vaccines presently delivered via injection. Oramed is seeking to revolutionize the treatment of diabetes through its patented flagship product, an orally ingestible insulin capsule currently in phase 2 clinical trials. (Oramed15.07)
8.6 BioLineRx's BL-1040 Named One of 10 Most Promising Cardiovascular Projects by Windhover
BioLineRx announced that BL-1040, a novel myocardial implant for the treatment of acute myocardial infarction (MI), has been selected as one of the Top 10 most promising cardiovascular projects in development available for strategic partnering by an independent committee assembled by Windhover Information, a Connecticut based provider of business information products and services to senior executives in the pharmaceutical, biotechnology and medical device industries. BL-1040 represents a breakthrough approach to supporting cardiac tissue damaged as a result of acute myocardial infarction (MI), improving cardiac function and survival. The novel myocardial implant is a resorbable liquid polymer that is administered via the coronary artery during standard catheterization and flows into the damaged heart muscle. The liquid polymerizes within the infarcted cardiac tissue and forms a protective “scaffold” that enhances the mechanical strength of the heart muscle during recovery and repair, thereby preventing pathological enlargement of the left ventricle after the MI. It is excreted naturally from the body within six weeks after injection, leaving behind a stronger, more stable heart muscle. BL-1040 is currently in Phase 1/2 testing. BL-1040 was in-licensed by BioLineRx from Ben-Gurion University through BGN Technologies. Jerusalem, Israel's BioLineRx (http://www.biolinerx.com), a clinical stage drug development company traded on the Tel Aviv Stock Exchange, is dedicated to building a robust pipeline of promising therapeutics for unmet medical needs. The Company's leading programs are BL-1020 for the treatment of schizophrenia, which has begun a Phase 2b trial, and BL-1040 for the treatment of damaged heart tissue post-myocardial infarction, which is undergoing a Phase 1/2 study. Additional products under development include compounds for the treatment of cancer and CNS, cardiovascular, metabolic, infectious and autoimmune diseases. (BioLineRx16.07)
8.7 Tissera Reports Initial Closing of Bridge Loan Agreement
Tissera entered into a bridge loan agreement with an accredited investor, who was a participant in the Company's December 2006 fund raising. The terms of this agreement are detailed in a separate Form 8-K report to the United States Securities and Exchange Commission. As part of the initial closing of this agreement, a loan in the sum of $200,000, with net proceeds amounting to $170,000, has been received by the Company. The current proceeds are earmarked for the continuing support of the research activity of the Company, performed at the Weizmann Institute of Science. Having reached a solid proof of concept for the therapeutic efficacy of its pancreatic transplantation technology in primate models of insulin-dependent (type I) diabetes, the Company aims at completing its preclinical studies on further primate diabetic models and at engaging into the regulatory pathway leading to the submission of an application for the authorization to initiate human clinical studies on diabetic patients. Herzliya, Israel's Tissera (http://www.tissera.com) is a biotechnology company dedicated to the development of novel tissue precursor regeneration technologies for treating gene deficiencies and diseases in which organ transplantation is necessary, while minimizing the dosage of immunosuppressive drugs. (Tissera 14.07)
8.8 Verto Completes Successful Human Clinical Trial of a Treatment for Lupus
Hadasit Bio-Holdings, (HBL) a subsidiary of Hadasit (the technology transfer company of the Hadassah - Hebrew University Medical Center), announced that one of its portfolio companies, Verto (in which it has a 75% stake), has successfully completed a human clinical trial of a device for treating patients who suffer from systemic lupus erythematosus. The goals of the trial at the Hadassah Medical Center in Ein Kerem, in which ten lupus patients took part, were to demonstrate the safety and efficacy of the Lupusorb, developed by Verto. The treatment was successful and achieved the goals. Verto is developing the Lupusorb for the treatment of systemic lupus erythematosus. The device is a filter column that can be incorporated into the standard process of plasmapheresis (in which the blood is removed from the patient's body, cleansed of immune-system compounds and returned to the body) for lupus patients. The column contains a peptide (short protein), designated VRT101, which specifically binds a subgroup of auto-antibodies that the body has developed against itself, and which cause the disease. At the end of the process the blood is returned to the body with all the vital components intact, except for the auto-antibodies, which have been bound to the peptide in the column. During the trial, ten patients underwent plasmapheresis. Over the next two months they came in for regular check-ups, which included blood and urine tests and medical examinations.
The results indicated a statistically significant decrease in the level of disease-related antibodies in the patients' blood (anti-VRT). The antibody level remained low for three weeks and only than returned to its pre-treatment levels (increased four weeks into the trial) but there was no rebound effect (in which the antibody level exceeds that before treatment), as is usually found in routine plasmapheresis. There was also an improvement in other components of the immune system that bolster the body's resistance to the disease. Hadasit (http://www.hadasit.co.il), a subsidiary and the technology transfer company of Hadassah Medical Organization (HMO) in Jerusalem, Israel, is responsible for commercializing HMO's intellectual property and R&D capabilities in the field of biomedical technology. (HBL22.07)
8.9 Gamida Cell Announces License Agreement Support StemEx for Hematological Malignancies
Gamida Cell announced that the company has executed a licensing agreement with Amgen for the use of a number of proprietary cytokines in the manufacturing of StemEx for Gamida Cell's pivotal registration study of StemEx and its subsequent commercialization. Under the terms of the agreement, Amgen will receive a minority equity interest in Gamida Cell in addition to royalty payments from future sales of StemEx for hematological diseases. Gamida Cell will receive a non-exclusive license to manufacture and utilize a number of cytokines for StemEx manufacturing. StemEx is being developed for treatment of hematological malignancies by Gamida Cell in a joint venture with Teva Pharmaceutical Industries. The clinical protocol for the international, multi-center, pivotal registration study of StemEx received an FDA Special Protocol Assessment (SPA) in October 2006. In November 2007, the first patient enrolled in this study, called ExCell, underwent a StemEx transplant.
Jerusalem, Israel's Gamida Cell (http://www.gamida-cell.com) is a world leader in stem cell expansion technologies and therapeutic products. The company is developing a pipeline of cell therapeutics to effectively treat debilitating and often fatal illnesses such as cancer, cardiac disease and peripheral vascular disease. Gamida Cell's therapeutic candidates contain adult stem cells, selected from non-controversial sources such as umbilical cord blood and bone marrow, and which are enriched in culture using the company's proprietary technologies. (Gamida Cell 21.07)
8.10 Teva Introduces First Generic Lamictal Tablets in the United States
Teva Pharmaceutical Industries announced that it has commenced commercial shipment of its generic version of Lamictal (Lamotrigine) Tablets, 25mg, 100 mg, 150 mg, and 200 mg. Teva's Lamotrigine tablets are the AB-rated generic equivalent of GlaxoSmithKline's Lamictal Tablets, and are indicated as adjunctive therapy in the treatment of partial seizures and the generalized seizures of Lennox-Gastaut syndrome, for conversion to monotherapy in adults with partial seizures who are taking certain other antiepileptic agents, and for maintenance treatment of Bipolar I Disorder. In February 2005, GlaxoSmithKline and Teva entered into an agreement to settle patent litigation under which GlaxoSmithKline granted Teva the exclusive right to manufacture and sell a generic version of Lamictal during the six-month pediatric exclusivity which ends on January 22, 2009. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the world's leading generic pharmaceutical company. The Company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients, as well as animal health pharmaceutical products. (Teva22.07)
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Elbit Systems & ATK to Develop Laser Guided Advanced Tactical Rocket System
Elbit Systems and Minneapolis' Alliant Techsystems signed a teaming agreement to develop the Guided Advanced Tactical Rocket - Laser (GATR-L). GATR-L provides an affordable precision strike capability for all fixed-wing, rotary-wing, and Unmanned Aerial Systems (UAS) platforms. The 70mm rocket employs a Semi-Active Laser (SAL) guidance package to achieve high accuracy against both stationary and moving targets. In addition, GATR-L provides the ability to lock-on before launch to ensure only the target of interest is engaged. GATR-L is compatible with existing 70mm launcher hardware and utilizes enhanced Insensitive Munitions technologies. Elbit Systems is a world leader in laser guided weapon solutions, and ATK is a leader in the production of rocket motors, advanced warhead and fuze applications. The two companies are currently conducting ground and airborne-guided tests. Haifa, Israel's Elbit Systems (http://www.elbitsystems.com) is an international defense electronics company engaged in a wide range of defense-related programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance ("C4ISR"), unmanned air vehicle (UAV) systems, advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. (Elbit09.07)
9.2 Nova Sets an Industry Milestone for Optical CD Metrology
Nova Measuring Instruments announced achieving and demonstrating performance which satisfies an industry challenge previously considered by ISMI/Sematech to be the "Holy Grail" of Optical CD throughput. During an evaluation by a global body of leading semiconductor manufacturers, Nova demonstrated a Move-Acquire-Measure (MAM) time of less than 1 second on CD applications while maintaining all metrology parameters: Total Measurement Uncertainty (TMU), precision, accuracy and fleet matching, well within the required specifications down to the 32nm technology node. The comparative evaluation report acknowledges that Nova's metrology meets the International Technology Roadmap for Semiconductors (ITRS) requirements for TMU and fleet matching down to the 32nm technology node and states that the demonstrated MAM time sets a milestone for Optical CD. Referring to NovaMARS, the report adds that with its set of predefined plug & play ready and complex setup models, a process engineer is not required to be an expert in optical physics and can design a model within less than 3 hours. Rehovot, Israel's Nova Measuring Instruments (http://www.nova.co.il) develops, produces and markets advanced integrated and stand alone metrology solutions for the semiconductor manufacturing industry. Nova is traded on the NASDAQ & TASE under the symbol NVMI. (Nova09.07)
9.3 Panavision & Tower Announce New Family of Re-Configurable Linear Image Sensors
Homer, New York's Panavision Imaging, a pioneering innovator and developer of high performance CMOS image sensors, and Tower Semiconductor announced the DLIS-2K and the DLIS 4K re-configurable line scan CMOS image sensors. The sensors were developed by Panavision using Tower's Advanced Photo Diode (APD) pixel process and pixel IP, and are to be manufactured in Tower's 200mm Fab2 in Migdal HaEmek, Israel. Linear imagers are often used in spectroscopy, barcode, touch screen, OCR, machine vision, measurement and other applications in consumer, industrial, automotive and scientific markets. The addition of the DLIS-2K and DLIS-4K expands and compliments the existing linear product line from Panavision Imaging. The technological advances implemented in these products allow for flexibility in image collection and readout, including: ambient light subtraction, oversampling, non-destructive read mode, binning of different integrations, and a high resolution mode.
Migdal HaEmek, Israel's Tower Semiconductor (http://www.towersemi.com) is an independent specialty foundry that delivers customized solutions in a variety of advanced CMOS technologies, including digital CMOS, mixed-signal and RF (radio frequency) CMOS, CMOS image sensors, power management devices and embedded non-volatile memory solutions. Tower's customer orientation is complemented by its uncompromising attention to quality and service. (Tower09.07)
9.4 Cimatron's Microsystem Offers GibbsCAM in Italy
Cimatron Limited announced that Microsystem Srl., its Italian subsidiary, is now selling and supporting the GibbsCAM advanced machining software solutions in Italy. The Italian subsidiary is joining other Cimatron subsidiaries and representatives around the world in offering the GibbsCAM solutions, following the merger of Cimatron and Gibbs and Associates earlier this year. Microsystem has a strong presence in the Italian market, with over twenty years of delivering best-in-class solutions to thousands of Italian manufacturers. GibbsCAM solutions provide a broad range of CNC programming capabilities for milling, turning, mill-turn, rotary milling, tombstone-fixtured, wire-EDM, and multi-turret/multi-spindle machining. Modeling functionality tuned specifically for manufacturing supports the creation and manipulation of wireframe, surface and solid geometries. Givat Shmuel, Israel's Cimatron (http://www.cimatron.com) is a leading provider of integrated, CAD/CAM solutions for mold, tool and die makers as well as manufacturers of discrete parts. Cimatron is committed to providing comprehensive, cost-effective solutions that streamline manufacturing cycles, enable collaboration with outside vendors, and ultimately shorten product delivery time. The Cimatron product line includes the CimatronE and GibbsCAM brands with solutions for mold design, die design, electrodes design, 2.5 to 5 axes milling, wire EDM, turn, Mill-turn, rotary milling, multi-task machining, and tombstone machining. (Cimatron10.07)
9.5 ECI Telecom Leads Israeli Consortium for Denmark's First Nationwide WiMAX Network
ECI Telecom signed a three-year framework agreement with Danish utilities company ELRO for the deployment of a nationwide WiMAX network across Denmark, beginning in the area of Randers. ELRO was granted a national WiMAX license in 2007 and will be deploying the wide area network for the provisioning of voice and broadband internet services as part of the company's SkyLine service. The nationwide network rollout is expected to be completed by 2010. Joining ECI to build this advance, integrated WiMAX and transport network solution are Alvarion (http://www.alvarion.com), the world's leading provider of WiMAX and wireless broadband solutions, and Ceragon Networks (http://www.ceragon.com), a leading provider of high-capacity Ethernet and TDM wireless backhaul solutions. The network will showcase a comprehensive integrated transport, WiMAX and radio wireless backhaul solution based on IP over next-generation SDH, combining ECI's XDM and BroadGate Multi-Service Provisioning Platforms (MSPP), with Alvarion's award-winning BreezeMAX WiMAX platform based on its OPEN WiMAX strategy and Ceragon's FibeAir microwave technology. Petah Tikva, Israel ECI Telecom (http://www.ecitele.com) delivers innovative communications platforms to carriers and service providers worldwide. ECI provides efficient platforms and solutions that enable customers to rapidly deploy cost-effective, revenue-generating services. (ECI15.07)
9.6 ECI Telecom Launches World's First GPON Solution with a High Bandwidth Network Processor
ECI Telecom will soon showcase the world's first high-bandwidth gigabit passive optical network (GPON) optical line termination (OLT) with a built-in network processor. This next-generation GPON OLT solution, the only one to offer a built-in network processor in a GPON line card, is based on 800 Gbps of switching capacity and offers two new platforms, F152 and F61, significantly enhancing ECI's OLT product offerings based on the Hi-FOCuS Multi-Service Access Node (MSAN) family. The upgraded Hi-FOCuS MSAN OLT is part of ECI's 1Net business framework solution. The integrated network processor provides operators with unique service-enabling intelligence as they transition their networks towards NGN. The solution enables the implementation of market leading functionalities, such as advanced quality of service and security. It also allows for added flexibility, easily adapting to different network designs while providing system agility with the processing headroom for future upgrades – a key promise of the 1Net framework for operators tasked with managing their network transitions. The new service-enabling capabilities also enable network operators to smoothly introduce advanced revenue generating customized services with unique flexibility for future upgrades, while maintaining an architecture that supports current broadband requirements like xDSL or TDM voice services. The Hi-FOCuS MSAN family is the only broadband access solution in the market that simultaneously supports xDSL, VoIP and fiber access services in a single platform.
Petah Tikva, Israel's ECI Telecom (http://www.ecitele.com) delivers innovative communications platforms to carriers and service providers worldwide. ECI provides efficient platforms and solutions that enable customers to rapidly deploy cost-effective, revenue-generating services. (ECI14.07)
9.7 Shunra Marks New Milestone for Interoperability With HP LoadRunner
Shunra announced the HP certification of Shunra VE Desktop for HP Software, a Windows-based solution that tests the impact of applications on networks in all developmental stages by emulating a wide area network (WAN) and detailing network conditions seamlessly during load testing. The interoperability with HP LoadRunner enables a powerful, integrated solution offering customers highly-accurate, network performance testing. Currently, Shunra Software is the only company to provide both hardware and software WAN emulation solutions with market-leading best practices for application development and network performance testing. With heightened demand for network performance due to increased network traffic, Shunra's HP certification marks an important milestone in its commitment to responding to the productivity requirements of global IT professionals. Shunra VE Desktop Professional is ideal for development, testing and networking teams, and anyone who needs to quickly check whether their code or application is 'network-aware' and can be deployed successfully. This complete "picture" of user response times, load and WAN impact provides the information necessary to know if application rollouts, datacenter relocation projects, virtualization initiatives, server consolidation projects will be successful.
Kfar Saba's Shunra Software (http://www.shunra.com) is the market leader in WAN emulation solutions for application performance testing throughout the entire application development lifecycle. Shunra's award-winning solutions enable development, quality assurance, pre-deployment and operations teams to create an exact replica of their production environment or design what-if network scenarios; allowing them to predict exactly how applications or infrastructure changes will perform in any networked environment -- before rollout. Shunra's solutions and services are typically deployed in projects including data center consolidation; application performance readiness testing; VoIP testing; website testing and WAN optimization technology testing. (Shunra 15.07)
9.8 IDE Starts Marketing Snowmakers for the Global Ski Industry
IDE Technologies (IDE), equally held by Israel Chemicals of the Israel Corporation and the Delek Group, is enlarging its core operations with the introduction of a unique refrigeration technology that meets the increasing global demand for man-made snow. Relying on its proprietary technology, which is used for additional applications such as thermal energy storage for building and district cooling, district heating, and deep mine cooling, the Company has begun marketing snowmakers to the global ski industry. The Vacuum Ice Maker (VIM) technology, also known in Israel as the "Zarchin Process" was developed by IDE as early as the 1960s for seawater desalination in Eilat, Israel's southern most city, located in a desert area. Over the past 15 years, IDE has manufactured 10 icemakers for mine and building cooling and district heating, in response to the specific requests of its customers. In view of increased interest demonstrated in its refrigeration technologies, IDE has proactively ventured into developing additional markets and marketing and sales capabilities for a range of applications worldwide. Last year, IDE presented its snowmaking technology to representatives of the global ski industry, including leading ski resorts in the Alps. The accelerated global warming of the past few years has resulted in significantly less snowfall in ski resorts around the world, giving rise to a market for man-made snow.
IDE Technologies (http://www.ide-tech.com) of Kadima is a pioneer and world leader in the delivery of sophisticated water solutions. IDE develops, designs, manufactures, installs and maintains plants for saline water desalination and effluent concentration for industrial and domestic applications. (IDE14.07)
9.9 Aladdin & IdenTrust Partner to Strengthen Security for Online Banking
Aladdin Knowledge Systems announced a partnership with IdenTrust, who possesses the only global bank-centric identity network, to provide identity authentication solutions for secure online banking and financial transactions. Aladdin and IdenTrust are collaborating to offer certificate-based two-factor authentication for unmatched security, enabling financial organizations in the United States, Europe and Asia to implement next-generation technology to improve the security of e-commerce, fight identity theft, increase customer trust and drive revenue. Aladdin and IdenTrust will develop joint initiatives to drive future innovation and expand the options available for secure online banking and other industries requiring globally interoperable certificate-based transactions. A premier provider of authentication solutions to global financial institutions and the United States government, IdenTrust has won numerous awards and received global recognition from Ernst and Young, Bank Technology News and Financial-i. Aladdin eToken PRO is certified by IdenTrust to be compliant with the IdenTrust Rule Set, which provides a standards-based approach for identity authentication and validation developed by the global financial services community and accepted in more than 175 countries. The IdenTrust Rule Set delivers an interoperable framework that enables regulatory compliance for high-assurance identities which are legally binding and universally applicable for all forms of electronic transactions.
Aladdin eToken is the world leader for USB-based authentication solutions. eToken provides strong user authentication and cost-effective password management solutions, enabling secure network access, improved data security through enhanced encryption and digital signing, as well as compliance with a wide range of regulatory requirements worldwide. Petah Tikva, Israel's Aladdin Knowledge Systems' (http://www.Aladdin.com) Software Rights Management products are the #1 choice of software developers and publishers to protect intellectual property, increase revenues, and reduce losses from software piracy. Aladdin eToken is the world's #1 USB-based authentication solution. The Aladdin eSafe secure Web gateway provides the most advanced protection against the latest Web-based threats and attacks. (Aladdin15.07)
9.10 Port of Houston Authority Further Enhances Security Capabilities With Orsus' Situator
Orsus has been awarded a contract for its Situator product suite with the Port of Houston Authority (PHA). The project will integrate hundreds of cameras and access points, plus other devices for the port authority's public terminals and enhance the PHA's capabilities with a more sophisticated and technologically advanced system. The deployment of Situator is scheduled to begin in early August. Situator will be monitored 24 hours, seven days a week at the Port Coordination Center in Houston. A leader in its approach to security, the PHA is the first port authority to receive ISO 28000:2007 certification for its security management system. Along with integrating hundreds of cameras and access points, Situator will bring together video management, video analytics, visitor management, police dispatch software and weather alert systems for the Port of Houston Authority. It will also enable the PHA to integrate with multiple internal and external communication systems, including Houston TranStar, a partnership of four government agencies to provide transportation management and emergency management services to the Greater Houston Region.
Or Yehuda, Israel's Orsus (http://www.orsus.com) is a Situation Management pioneer. Situation Management is a new, holistic approach to optimizing situation planning, response and analysis. Situator is the first comprehensive Situation Management software platform to unify management of the entire Control Room Lifecycle for security, safety and emergency services where the risk of human error can lead to financial loss, injury and damage to public image. With successful implementation in a variety of industries and a reputation for innovative ideas and development Orsus possesses the knowledge, experience and determination to shape the future of Situation Management. (Orsus 16.07)
9.11 Turner's MLB All-Star Show Relies on Orad's 3DPlay Solutions for Broadcast Graphics
Orad Hi-Tec Systems announced that Turner Sports, relied on the company's 3DPlay and RealSet systems to add attention-grabbing graphics to its presentation of the recent Major League Baseball All-Star Selection show. Turner Sports used Orad's 3DPlay to create a bumper package that introduced each All-Star player during the 60-minute broadcast. As host Ernie Johnson talked about each player, a virtual metal cylinder with his name and face opened up beside him, and video of the player in action could be viewed on a TV screen on the right-hand panel. Turner relied on the company's RealSet software to bridge the divide between its bricks-and-mortar set and the virtual graphic, enabling the camera to pan-tilt-zoom on the graphic as if it were an actual part of the set. Orad's 3DPlay is a versatile, on-air graphics solution. The system allows users to create customized controls for different types of production without requiring any scripting or programmers, and enables the introduction of sophisticated logic, multiple events and animations with a single trigger. 3DPlay also can be used for applications such as automatic promos and channel branding. RealSet is Orad's revolutionary HD/SD system that seamlessly integrates 3D virtual objects into a conventional studio set. RealSet allows broadcasters to generate complex graphics which help enhance program quality and illustrate content, and is ideal for news, game shows, sports, financial and election coverage.
Founded in 1993, Kfar-Saba, Israel's Orad (http://www.orad.tv) is a world leader in TV graphics and production technology. Orad's position in the graphics industry is quickly growing while maintaining its market dominance in virtual reality and sports enhancement. Orad's line of products includes virtual sets, onair graphics systems, virtual advertisement, sports production solutions, and middleware for the industrial and military visualization industry. (Orad16.07)
9.12 Major North American Bank to Optimize Field Workforce Scheduling With ClickSoftware
ClickSoftware Technologies announced that one of the largest banks in North America is deploying ClickSoftware for Installation, Maintenance, and Repair Services (ClickIMRS) to automatically schedule hundreds of field technicians who keep telecommunications systems and computers running smoothly. The bank is also deploying ClickAnalyze Insight to gain detailed information on service efficiency and identify opportunities to improve future performance. With more than 30,000 employees across thousands of locations in over a dozen states, the bank has a dedicated team of technicians responsible for telephone set maintenance, router installation, and repairing everything from laptops to desktops, network switches and data servers. ClickIMRS provides the automated scheduling and work order management that takes the guesswork out of determining which technician with what skills to send to which job when. The software deploys rapidly because it was designed and configured specifically to meet the needs of installation, maintenance and repair services. ClickIMRS features pre-configured scheduling and mobile functionality that virtually eliminates the expense, time and effort typically required to custom-design and program schedules. The mobility features in ClickIMRS will ensure the bank's IT managers and field technicians have the most updated information about job status, priorities, history, location, etc. The solution wirelessly connects field service technicians via their handheld devices to job ticket information for field activities and tasks. Technicians can also quickly update dispatchers and managers as to job status, location and delays.
Tel Aviv's ClickSoftware (http://www.clicksoftware.com) is the leading provider of mobile workforce management and service optimization solutions that create business value for service operations through higher levels of productivity, customer satisfaction and cost effectiveness. Combining educational, implementation and support services with best practices and its industry-leading solutions, ClickSoftware drives service decision making across all levels of the organization. (ClickSoftware21.07)
9.13 Magal Receives an Order to Install a Municipal Command & Control System in an Asian Capital
Magal Security Systems has received an order for the installation of a municipal security command and control system in a capital city in Asia, based on its FORTIS System. The first stage of this order which is expected to be completed by the end of August 2008 is approximately $650,000. Following completion of the initial stage, management expects the project to be expanded, and the total sum of the whole project is expected to reach approximately $3m. This order was received following the customer's review of the FORTIS System's performance in a number of major Israeli cities and local municipalities, which systems have been operational since July 2005. The FORTIS System will integrate the command and control of the security systems in this Asian capital city, while protecting public areas, parks and educational facilities from acts of vandalism, burglary and sabotage, and increasing the sense of security for the residents in the city. The FORTIS System is based on an advanced technology that includes dozens of sophisticated cameras, unique graphic control-centers, and real-time live video of the protected perimeter zones under alert. The system enables the operator to promptly receive and dispatch live video and alerts, to and from security vehicles, via wide range wireless, consequently optimizing the operational response. Yehud, Israel's Magal Security Systems (http://www.magal-ssl.com) is engaged in the development, manufacturing and marketing of computerized security systems, which automatically detect, locate and identify the nature of unauthorized intrusions. The Company's products are currently used in more than 70 countries worldwide to protect national borders, airports, correctional facilities, nuclear power stations and other sensitive facilities from terrorism, theft and other threats. (Magal21.07)
9.14 Kornit 933 Ends Beta Site Period With Phenomenal Success
Kornit Digital announced the conclusion of the Kornit 933 beta site period with immense success and its availability for sale. Kornit 933 offers advanced digital printing capabilities combined with screen printing performances in a simple, cost-effective solution. This unique, ground-breaking device added to the company's elite product line last year, is the first and only digital add-on station for screen printing carousels, designed to create combined printing applications and innovative designs, all in one built-in printing module. The 933 machine which is based on Kornit's D.O.G printing technology as its other flagship products, featuring the company's well-known tailor-made inks, was released to three beta sites at the end of last year and has been tested for nine months undergoing continuous R&D tunings. During that time, Kornit was able to reach the highest compatibility between its own inks and most screen decorating applications (flock, foil, metallics, plastisol, etc.) and produce a variety of digital & screen applications while showcasing remarkable printing results. Moreover, the machine was adapted to match most common automatic carousels in the market today. Magshimim, Israel's Kornit Digital (http://www.kornit-digital.com) is a dynamic, leading-edge company that develops, manufactures and markets state-of-the-art solutions for the garment & apparel decorating industry. Featuring a unique balance between the development of custom-made industrial digital inkjet printers and revolutionary chemistry solutions for the garment printing applications, Kornit enables printers to reach optimum digital printing results on a large variety of textile applications and finished garments. (Kornit 22.07)
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's CPI Rises Just 0.1% in June
Israel's Consumer Price Index (CPI) rose just 0.1% in June, the Central Bureau of Statistics reported on 15 July. The rise was well below market expectations of a rise of 0.5-0.6%. The low rise gives Governor of the Bank of Israel Prof. Fischer some maneuvering room for the upcoming interest rate decision and he may decide to keep it unchanged at 3.75%. Clothing and footwear rose 11.9%, transport rose 0.8%, and food rose 0.4%. However, fruits and vegetables fell by 10.3%. Inflation in the first half of 2008 was 2.3%, though inflation excluding housing was 3.3%. Inflation excluding fuel was 2.1%. However, inflation in the past 12 months was 4.8%, inflation excluding housing was 5.8% and inflation excluding fuel was 3.9%. The current CPI is especially good news for the numerous companies that have taken out CPI-linked loans, and have had to deal with particularly high financing costs because of the high indexes of the past few months. Some of these companies will soon be refinancing their debt, and the concern had been that they would not be able to do so. (CBS15.07)
10.2 State Of Economy Index Drops Second Month in A Row
The composite state-of-the-economy index fell by 0.3% in June 2008. The movement of the index in the last two months indicates a slowdown in the economy's rate of growth compared with that in the first quarter. The decline in the index was the outcome of falls in the indices of manufacturing production, trade and services revenue, and services exports on the one hand, and rises in the indices of goods imports and exports on the other. With regard to the components of the index: the index of manufacturing production fell in May by 3.7%, after rising by 3.3% in April. The trade and services revenue index dropped by 4.5% in May, following its 0.6% decline in April. The services exports index declined in June by 1.1%, further to its 5.3% drop in May. The goods exports index rose by 7.5% in June, following its 2.3% decline in May. The imports index went up sharply in June, by 9.5%, after its steep 7.3% drop in May. (BoI20.07)
10.3 Tourism to Israel Grows by 45% Over Past Six Months
Israel has garnered 1.5 million tourists in H1/08 and is on course to reach its projected goal of 2.8 million visitors by the end of the year, an increase of nearly 50%, according to the Ministry of Tourism. In addition, 240,000 tourists visited Israel in June 2008, an increase of one-third over last year. The Tourism Ministry attributed the rise to the country's relatively calm security situation and to the Ministry's new marketing strategies. Most of the visitors are coming to traditional destinations such as Jerusalem and Tel Aviv, but tourism has also risen in areas such as Haifa and the North, as well as Eilat, which has become the direct destination for 10 weekly flights from around the world, as opposed to four last year. Though arrivals are still expected to rise, it is felt that the increase will level off to 20%-30% growth, due to a weak worldwide economy and the relative strength of the shekel. To attract new tourists, the Ministry has appealed to demographics that see Israel as less of a religious homeland and more as an interesting cultural spot in which to relax. This campaign includes advertisement of Israel's spas and wineries, and has resulted in increased tourism from central and eastern Europe. One of the major marketing initiatives is the ministry's participation in international tourism fairs in major cities worldwide. This year the ministry will participate in fairs in London, Moscow, Berlin, Madrid and the United States, where it will showcase attractions as well as hotels and other tourist services. (Various17.07)
11: In Depth
11.1 ISRAEL: Summary of Israeli High-Tech Company Capital Raising Q2 / H1 2008
The following are the findings of the Quarterly Survey conducted by the IVC Research Center, which for more than nine years has been at the forefront of venture capital and private equity research in Israel. This Survey reviews capital raised by private Israeli high-tech companies from Israeli venture capital funds and from other investors. The Survey is based on reports from 80 venture investors of which 51 are Israeli management companies and 29 are other – mostly foreign – investment entities.
In the second quarter of 2008, 115 Israeli high-tech companies raised $465 million from venture investors – both local and foreign. The amount was up 7% from the second quarter of 2007, but was 25% below the unusually high first quarter of the year. In the first half of 2008, capital raised was $1.08 billion, up 28% from H1 2007 levels. “H1 figures were the highest since 2001 with Israeli high-tech investments reaching over $1 billion,” said Efrat Zakai, Director of Research at IVC, “Despite these records, First and Seed investment data suggest investments by Israeli VC funds are slowing. We therefore expect end-of-year capital raising figures to be only marginally higher than the four-year average of $1.6 billion.”
The average financing round was $4.04 million, compared to $3.69 million in the second quarter of 2007 and $4.57 million in the first quarter of 2008. Seventy-eight companies attracted more than $1 million each. Of these, 17 companies raised $5 million to $10 million each, 13 companies raised $10 million to $20 million each, and 3 companies raised more than $20 million each.
Israeli VC Investment Activity
In the second quarter of 2008, Israeli VCs invested $161 million in Israeli companies, a decrease of 17% from second quarter of 2007 ($193 million) and 39% below Q1 levels of $262 million. In the first half of 2008 – benefiting from robust investment levels in the first quarter – Israeli VCs invested $423 million in Israeli companies, a 16% rise from the $364 million in H1 2007.
The Israeli VC share of the total amount invested in Israeli high-tech was 35% in the second quarter and 39% in H1, with the remainder of capital coming from foreign investors as well as non-VC Israeli investors.
First investments by Israeli VC funds were only 22% of their total investments in the second quarter and 35% in the first half, which compares to 38% and 44% in Q2 07 and H1 2007, respectively.
Capital Raised by Companies
The Communications sector led capital raising in H1 2008 with 26% of capital raised followed by Software with 22%, the Life Sciences with 17% and the Internet with 11% of total capital raised.
Seed companies attracted 5% of capital raised in the first half of 2008, compared with 12 present in H1 2007 and 8% in H1 2006. Early Stage (R&D) companies captured 34% of capital raised, Mid-Stage companies (up to $10 million in revenues) 37%, and Late Stage companies 24%.
IVC Research Center (http://www.ivc-online.com) is Israel's leading research center providing business leaders with an unmatched wealth of data on Israeli venture capital, private equity and high-tech industries. IVC products and services are used regularly by venture capital funds, private investors, high-tech companies, financial investors and institutions, as well as public entities such as the Office of the Prime Minister, the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist. IVC publishes the most comprehensive guide to Israeli venture capital and high technology companies – the IVC Yearbook. Among IVC products and publications are the Quarterly Survey, which examines capital raising trends by Israeli high-tech companies; the quarterly Israel Venture Capital Journal (IVCJ), which reviews developments in the venture capital, private equity and high-tech industries; and a comprehensive online database (http://www.ivc-online.com) containing over 6,000 Israeli high-tech companies, venture capital funds, investment companies and technology incubators, as well as news updates and lots more. (IVC16.07)
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11.2 BAHRAIN: Back to Baghdad
Bahrain is on the verge of re-establishing transport links with Iraq, a move seen as vital to strengthening trade ties, as well as bringing Baghdad back into the political fold of the Gulf. On July 13, Ghassan Hussain, Iraq's ambassador to Manama, revealed that direct flights between the two countries could resume within a month, pending the approval of a proposal from Bahrain. "We are looking forward to signing an air transport agreement proposed by Bahrain, the draft of which is in the hands of the Iraqi authorities," Hussain said in an interview with the Gulf Daily News. "We are waiting for our new minister of transport to be appointed and to follow up the matter."
The ambassador also said that there were plans to re-launch a ferry service connecting the two countries, which would serve to boost tourism and potential business contacts. Bahraini companies are once again beginning to operate in Iraq as the security situation improves, Hussain said, and with direct transport links in place it would be easier for businessmen to come and see the potential Iraq had to offer.
The process of improving diplomatic and economic ties has been a cautious one, with concerns remaining over the security situation in Iraq and the perceived close links between Iraq's Shiite Prime Minister Nouri Al Maliki and Tehran. Washington has also sought to prompt the Gulf states to boost relations with Iraq, both to bolster the position of the pro-US government and to help rebuild the Iraqi economy. This maneuvering has had some success, with Manama appointing Salah Al Malki as its ambassador to Baghdad on July 9, following the lead of the United Arab Emirates in nominating an ambassador a few days before.
The Kingdom has not had high-level diplomatic representation in Iraq since its charge d'affaires was shot and wounded in an attack on a convoy in Iraq in 2005. With the planned re-opening of its embassy in Baghdad, Bahraini businesses will have greater support on the ground.
Bahraini companies have, to date, been understandably reluctant to invest in Iraq, mirroring the government's reticence. Yet businesses are beginning to show an interest. Perhaps not surprisingly given Bahrain's strong financial sector, it was one of the country's banks that led the way back to Baghdad. In 2005, the Ahli United Bank (AUB) acquired a 49% stake in the Commercial Bank of Iraq (CBI), the country's largest private bank. Currently, the CBI has 10 branches, nine in Baghdad and one in Basra, with plans to open two further branches in the Kurdish administered north of the country.
Two areas of weakness that can be identified in the Iraqi finance sector are its deficiency in making use of advanced technology and a lack of skilled personnel, both of which are strengths in the Bahraini banking industry. One sector that a Bahraini firm tried and failed to penetrate was Iraq's telecommunications industry. In 2003, the Bahrain Telecommunications Company (BATELCO) invested $5m in setting up a small-scale mobile phone roaming network in Baghdad, only for the operation to be shut down soon after on the orders of the Coalition Provisional Authority (CPA). BATELCO subsequently expressed interest in bidding on one of the three network licenses offered by the Iraqi government in August 2007, but later withdrew from the running.
However, Iraq also offers other opportunities for the kingdom, notably in the oil sector. Its domestic reserves dwindling, Bahrain's refining industry is in need of long-term supplies of raw product to feed the country's processing plants, which produce diesel, kerosene and naphtha as well as petrol. Although Bahrain exported 4.77m tonnes of refined oil products in the first six months of 2008, most of the unprocessed oil came from Saudi Arabia. Should Bahrain seek to diversify its sources, a stable Iraq would be an ideal alternative.
On July 2, Bahraini Foreign Minister Sheikh Khalid Bin Ahmed Bin Mohammed Al Khalifa told a local newspaper that the kingdom has a role to play in supporting Iraq and could not afford to "merely stand by and watch". While referring more to political and sectarian developments in Iraq, the minister's words could be equally applied to Bahraini businesses. With oil money again beginning to flow into Iraq, and the government having asked international firms to return to the energy industry, further opportunities could arise for Bahraini businesses, in particular its banks. If the sleeping giant that is Iraq's economy awakes, Bahrain looks well positioned to profit. (OBG18.07)
11.3 BAHRAIN: E-economy Coming On Line
Bahrain's information and communications technology sector is on the verge of a massive expansion, with flow on effects to ripple through the kingdom's entire economy as the government goes about changing the way it does business. In the middle of 2007, the government announced it would be transferring many state functions on line, and established the E-government Agency to coordinate the initiative. Under the strategy laid out by the government, more than 90% of all state transactions will be able to be carried out on line by 2010. The strategy identified 167 separate services that could be conducted electronically, of which some 50 are already up and running, with another 40 to be added by the end of 2008.
Bahrain has also recently struck an agreement with Microsoft to provide each of its citizens with a free e-mail account, ensuring locals can access the state's electronic services. One of the key planks of the program is putting state tenders on line. In the past, the slow pace and cumbersome nature of the government's tender process attracted criticism, something authorities hope will come to an end thanks to going on line.
Abdul-Hussain bin Ali Mirza, the chairman of Bahrain's tender board, who also serves as the country's minister of oil and gas affairs and chairman of the national oil and gas authority, said that around 2,000 tenders are called annually by the state. Conducting these operations electronically will both automate the workflow of the entire process and open up a potentially lucrative and huge market for companies in the private sector, he said.
As such, "it is imperative for companies to be able to use new technology tools to get their fair share of the action," Mirza said at the launch of a new program to provide training to private firms on the new e-tendering scheme on July 3. "This initiative will expose Bahraini companies to new technology trends to streamline and simplify tendering processes, become more efficient, and lead them to embrace technology as a way to move ahead," he added.
Enthusiasm for on line services is ramping up, according to Sheikh Mohammed bin Mubarak Al Khalifa, Bahrain's deputy prime minister and chairman of the Information and Communication Technology Supreme Committee. Visits to the e-government portal have risen from 200,000 per month when the strategy was first launched to 1 million a month, he told a conference on e-government in late May. The policy being pursued by the Bahraini government is also a boon to the ICT industry, with the shift to electronic dealings meaning increased computer sales.
According to a report issued by London-based market analyst group Business Monitor International (BMI) at the end of April, $113m worth of computers were sold in Bahrain last year, a rise of $8m compared to the 2006 total. Software sales came in at $54m, a figure tipped to reach $84m by 2012. The shift to e-government, along with the expanding financial sector, were two of the main driving forces behind the strong sales growth, the report said. The government's plans to electrify the way it does business is not just about speed and efficiency. By promoting the kingdom's e-credentials and the country's ICT sector, it is hoped more international companies in the industry will set up shop in Bahrain.
This policy is already meeting with some success, as testified by Microsoft basing its regional operations in the Kingdom and Germany's Software AG investing $62m in a research and development centre in Manama. However, Bahrain faces stiff competition in the region to become a major technology hub.
The Dubai Internet City (DIC), which currently hosts more than 800 companies, is one such rival, being the largest ICT centre in the Middle East, while the Paris-based business graduate school INSEAD last year opened its e-lab centre as a regional educational hub for the digital economy in Abu Dhabi. Though having a number of firsts to its credit, including being the first country in the region to introduce 3G and 3.5G high-speed internet download services and to implement nationwide a WiMax wireless network, Bahrain is still ranked behind the United Arab Emirates and Qatar in the World Economic Forum's 2007-08 global information and communications technology readiness index. Despite this, the kingdom did move six places up the rankings, moving to 45th out of the 127 countries surveyed on the back of the government's increased ICT push. This improvement, one of the biggest on the index, could be a sign of even better things to come for Bahrain's ICT sector and the e-economy. (OBG11.07)
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11.4 UAE: Abu Dhabi - Tool in Reserve?
The Oxford Business Group reports that the growth of the UAE's banking sector is indicative of the strong economic growth Abu Dhabi has been experiencing of late, but the positive outlook is being overshadowed by the specter of rising inflation. With relatively few options for tackling price increases, Abu Dhabi may follow some of its neighbors in increasing banks' minimum reserve requirement (MRR). This, however, may not prove to be the answer.
In June, the UAE Central Bank said inflation had reached a 20-year high of 11.1% in 2007. With the market awash with liquidity derived from soaring oil incomes and investment inflows, the money supply has continued to grow this year, putting a further demand pull on inflation. The M2 (broad) money supply grew some 8.37% in the first quarter of 2008 alone.
A report published last month by US banking firm Citigroup said that whilst the short-term outlook for banks was positive, given "the combination of surplus liquidity and strong investment demand amidst a negative real interest rate", in the medium term, the same factors could lead to the authorities moving to trim their lending. "The substantial over-heating of regional economies could prompt regulators to adopt other measures to potentially dampen credit growth," the report warned. But it is not just the glut of money flooding into Abu Dhabi that has driven inflation, there are a number of other factors at play.
On the demand side, a fast-growing population has put pressure on scarce resources, including property. In terms of supply, global food prices have been driven up by changing consumption trends and poor harvests in several key food-producing countries. Abu Dhabi, which imports most of its agricultural produce, has been hit particularly hard. Rising commodity costs worldwide have also added to the problems of bottlenecks in many sectors and lead to further inflationary pressure.
The bulk of the blame has often been attributed to the Emirates' dollar peg, which obliges the central bank to follow the Federal Reserve's policy of cutting interest rates, just at the time when the UAE is looking to keep its spending in check. Furthermore, the falling value of the dollar has pushed up the price of non-dollar denominated imports, a factor compounded by the strengthening value of the Euro. Many imports are from eurozone countries and this in turn has placed further pressure on prices.
So in terms of policy Abu Dhabi is in something of a tight spot and is being forced to pursue a fiscal policy against its better interest. One tool available might be the introduction of direct income taxation, but this could erode the emirate's competitiveness and be counterproductive by increasing wage demands. There are other monetary policy tools available though, and this is where Citi's warnings about constraints on banking growth come in.
A handful of countries in the region have been using the MRR to constrain lending. The rule obliges banks to store a proportion of their deposits in a non interest-bearing account with the central bank, therefore putting a limit on how much of their deposits they can lend. The MRR strategy has been deployed by many central banks across the world, and they tend to vary widely in terms of application. The UAE's MRR is 14% on current, savings and call accounts, while China's is 16%, the United States' 10% and the Eurozone's 2%.
Having an MRR is considered beneficial for several reasons. It acts as a form of insurance in the case of a bank's default, smoothes overnight interest rate fluctuations and helps to create steady demand for a central bank's notes. It can, therefore, contribute to the overall banking system's stability. Increasingly, MRRs are being used as a tool to rein in credit growth, primarily to curtail inflation. In June, Oman hiked its MRR from 5% - 8% and Saudi Arabia increased its minimum to 12% from 10% in April. It is often more appealing as a monetary tool than a pure credit growth cap as it does not put an artificial limit on banking expansion, but merely seeks to slow it.
However, increasing the MRR as a disinflationary tool is questionable. It does not prevent liquidity from entering the market, or from directly increasing the cost of borrowing. Foreign banks in particular can find ways to access and extend credit lines that circumvent the regulation by borrowing from their mother institutions. With Abu Dhabi eager to establish its name as a banking centre, it wants to avoid being seen as penalizing domestic players. Banks also complain that the requirement puts an unnecessary brake on their growth, and discourages saving. Some argue that the MRR actually causes institutions to lend more recklessly, in an attempt to make up for losses caused by regulation.
With inflation high and few other tools available, cranking up the MRR certainly seems to be an appealing policy option. Given the banking sector's stellar performance and bright prospects, tightening the regulatory framework is unlikely to be damaging long-term. Of greater concern is how effective increases in the reserve requirement in combating rising prices can be. (OBG18.07)
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11.5 SAUDI ARABIA: Fitch Upgrades to 'AA-'; Outlook Revised to Stable
On 9 July, Fitch Ratings (http://www.fitchratings.com) upgraded Saudi Arabia's Long-term local and foreign currency Issuer Default ratings (IDRs) to 'AA-' (AA minus) from 'A+'. The Outlooks are revised to Stable from Positive. The Country Ceiling is also upgraded to 'AA' from 'AA-' (AA minus) and the Short-term IDR is upgraded to 'F1+' from 'F1'.
"At today's oil prices, Saudi Arabia is earning around one billion dollars a day from oil exports, reinforcing an already strong external balance sheet and creating a buffer against future shocks," says Charles Seville, Associate Director in Fitch's sovereign team. "Official external assets are expected to be well over 100% of GDP by the end of 2008, leaving Saudi Arabia second only to China as a net public external creditor."
Saudi Arabia's main credit strengths are its very low indebtedness and large domestic and external assets. General government debt, all of it domestic, fell to 7.2% of GDP at end-2007, while the wider public sector, represented mainly by profitable state-owned firms, has little external debt. A strong banking system also makes for low contingent liabilities from that source, notwithstanding some acceleration in credit growth this year.
Given the overwhelming dependence on oil - 90% of central government revenue comes directly from oil - a sharp drop in oil prices is the biggest economic risk. Such a fall would have to be very steep to threaten sovereign creditworthiness.
The government budgets cautiously. Based on Fitch's assumption of a $100/b average oil price in 2008, the fiscal surplus is forecast to reach 25% of GDP; the oil price that would reduce this to zero (the 'breakeven' price) is around $51/b. Assuming a fall in the oil price to $75/barrel next year, the budget and current account surpluses would still be 13-14% of GDP with the net creditor position continuing to strengthen. Sizeable domestic and external assets, not to mention the capacity to borrow, would allow Saudi Arabia to withstand oil prices as low as $30/bl for several years, without major spending adjustments.
Saudi Arabia's oil endowment is huge, but spread over a larger population than Kuwait ('AA-' (AA minus)/Stable) or Abu Dhabi ('AA'/Stable), resulting in a lower per capita income. Higher revenues are allowing the government to address poverty and promote economic diversification. Unemployment among Saudi males fell in 2007 for the first time in at least five years, to 8% from 9%, although youth and female unemployment is higher. The government is encouraging private sector investment to create jobs for a fast-growing population, while addressing the skills mismatches that have forced the private sector to turn to foreign labor to fill most jobs. According to the World Bank's annual "Doing Business" report, Saudi Arabia's business environment is the most favorable of any country in the GCC and compares well with other 'AA' sovereigns. Sustained non-oil private sector GDP growth of 6% is accelerating and arguably more sustainable than in some neighboring countries, and will help raise incomes and employment opportunities over time.
Partly as a consequence of the oil windfall and higher public spending, inflation has risen, topping 10% since April 2008. However, inflation, which has been driven by rising rents and food prices, would have to worsen considerably to threaten the rating, given the resources available to address potential socio-political ramifications.
The establishment of the so-called Allegiance Institution in October 2006 is an important step toward alleviating political risk, with a committee of senior princes helping decide the royal succession after the accession of the Crown Prince. The threat from domestic terrorism has been contained. (Fitch09.07)
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11.6 YEMEN: Economic and Regional Challenges
As troubling as security issues are in Yemen, they are by no means the only threats to stability. Problems in the economy, institution building and regional disputes might not grab headlines the way that terrorism and other security challenges do, but they are just as important. Inadequate economic development and a concomitant decline in living standards are causing civil unrest, fueling regional rebellion and slowly dragging the country toward collapse. Ineffective government reform initiatives have so far failed to address urgent internal problems - including diminishing natural resources, endemic poverty, illiteracy, high fertility rates, and an inadequately trained workforce - and are eroding the confidence of Yemenis as well as outsiders in the country's future.
Since his re-election in 2006, President Ali Abdullah Saleh's promises of reform remain largely unfulfilled. The National Reform Agenda, drafted by the Ministry of Planning and International Cooperation in October 2006, was a comprehensive plan to reduce corruption, enhance transparency, pursue judicial reform and separation of powers, and allow freedom of the press. Nearly two years later, only small parts of the agenda are in place. The most noteworthy outcome was the creation of the Supreme National Anti-corruption Commission, headed by former Minister of Telecommunication Ahmed al-Anesi, in June of 2007. While the initiative earned praise from the international community, implementation has been thwarted. Since its inception, the commission has received more than one hundred forty corruption claims, seventy-eight of them between January and March 2008 alone. So far, only six of those claims have been investigated, uncovering over $ 100m lost to corruption. These numbers reveal both the scope of corruption and the commission's lack of capacity to undertake the task. Even when it does initiate investigations, all the commission can do is turn the cases over to a judiciary that lacks the political resolve to prosecute fully.
Another reform that looked promising at first involved decentralizing authority. On May 18, 2008, local elections took place for Yemen's twenty-one provincial governors, who were previously appointed by the president. Opposition parties boycotted the elections, however, contesting an election law that restricted voting for governors to members of the municipal council. As the municipal councils are dominated by government's supporters, opposition parties correctly predicted that election results would be skewed in favor of regime loyalists
Such attempts at reform suggest that while the Yemeni government and elites can successfully identify issues and potential solutions, implementation generally falls short. Yemen's national institutions are weak, and most Yemenis are loyal to familial or tribal hierarchies rather than the state. Yemen also relies a great deal on foreign assistance and contrary to established wisdom, satisfying the requirements of foreign donors has not always helped strengthen national institutions. Often, government development planning aims at the short-term goal of securing foreign funds rather than long-term strategic goals.
Yemen's stagnant economy offers a troubling prospect, particularly in light of the decline in its main revenue earners, oil and agriculture. Oil production - which accounts for 70% of government revenue - is diminishing, while agriculture - which employs more than half the work force - faces widespread water scarcity and soil depletion due to extensive cultivation of the narcotic qat. International lending and development agencies encourage diversification and liberalization of the Yemeni economy to attract foreign investment. In response, the government is attempting to empower and enlarge its private sector. But these attempts are hampered by rampant corruption and the virtual monopoly of the private sector by a small number of families.
As a result, 45% of Yemen's rural population lives below the poverty line. Unemployment was officially 35% in 2003, the last year for which such statistics are available. Recent global increases in petroleum and basic commodity prices are exacerbating the already high inflation rate of nearly 12.5% and further diminishing the low standard of living.
In addition to the overall economic problems, southern Yemen suffers from special difficulties due to land disputes that lead to higher unemployment, greater poverty and civil unrest. The government has consistently failed to resolve such disputes, which have festered since the 1990 unification of North and South Yemen. In May 2008, riots broke out in southern Yemen because of a sense among southerners that they are not participating sufficiently in the economy or the decision making process - in short, they do not feel integrated into Yemen. Other regional tensions - including the al-Houthi rebellion in the north that has been ongoing since 2004 - further threaten the country's unity.
If trends continue, Yemen is likely to slip into complete chaos and become a failed state similar to Somalia. Yemenis and others increasingly view the government - which promises much but delivers little - as incompetent. While by no means adequate to address all Yemen's many challenges, there are a few important moves the government could make on the economic front that would help the liberalization efforts to which it says it is committed. The government could start by lowering barriers to entering business, increasing transparency, and reforming the tax system. This would both encourage investors and combat corruption from the demand side; a simplified and transparent tax and administrative system also reduces opportunities for corruption. Such steps could not only stimulate the economy but also help rebuild confidence in the government.
Intissar Fakir is assistant editor of the Arab Reform Bulletin and was previously program coordinator for the Middle East and North Africa program at the Center for International Private Enterprise. (ARB07/2008)
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11.7 TUNISIA: Drills at the Ready
While record oil prices may be ramping up inflationary pressures on Tunisia's economy, the high cost of crude hides a silver lining for Tunisia's local energy sector. The significant rise in the cost of oil has helped focus attention on marginal producer countries, which, in the case of Tunisia, has led to a raft of new exploration projects in recent years, many of which are proving highly successful. According to Afif Chelbi, Tunisia's minister of industry, energy and small to medium enterprises, speaking at the Maghreb and Mediterranean Oil and Gas Conference in Tunis last month, investment in hydrocarbon exploration and production is set to rise to $2.5bn in 2008, nearly a fourfold increase over the past three years.
Last year, 60% of foreign direct investment (FDI) in the country was in the energy sector, with several foreign companies active in Tunisia's upstream sector, including Austria's OMV and Royal-Dutch Shell. By the end of 2007, the government had issued 36 exploration and 14 prospecting permits, and - according to the national oil company, Entreprise Tunisienne d'Activites Petrolieres (ETAP) - another 20 exploration wells are expected in 2008. Currently 16 blocs, including 10 offshore licenses, are available for concession either as joint ventures or production-sharing agreements.
One of the most prominent projects in recent months has been the Shurouq field on Jenein Nord concession. Operated by US-based Pioneer Natural Resources (PNC), who acquired the concession in 2006, the field came online in November 2007 and is currently producing 10,000 bpd (barrels per day). Pioneer has spent over $135m on the field, and according to Pioneer executives, output is due to reach 15,000 bpd by the end of 2008, with estimates for drilling capacity at the field as high as 20,000 bpd.
Other foreign companies have followed PNC's lead. Canadian companies Eurogas and Candax have recently begun drilling in new fields. Candax has started tapping an undrilled oil reservoir bloc in the Ezzaoui field, while Eurogas has opened up a new exploration well on the Ras el Besh structure in the Sfax concession. Similarly, Swedish-based PA Resources has completed the drilling of a new 12,500 bpd production well in the mature Didon field.
The successful returns of exploration wells in recent months have encouraged companies to venture further afield. Shell Tunisia aims to spend some $3m on seismic exploration in under-developed fields. The oil giant was recently awarded a two-year permit in the 5000 sq km Metouia area south east of Gabis, which, despite its large size, has been under-explored due to its inaccessible geological structure.
The government has also moved to boost the country's downstream capacity, awarding a tender last year to Qatar Petroleum for a 30-year contract to build and operate a 150,000 bpd refinery in La Skhira, south of Tunis. The new $3bn refinery will supplement Tunisia's existing 35,000 bpd refinery in Bizerte and could significantly increase domestic petroleum supplies. Qatar Petroleum has recently finished its feasibility study for the plant, paving the way for construction to begin.
The improved forecast for investors and new exploration projects come at an ideal time for Tunisia, as some of its older fields are in decline. According to figures from ETAP, Tunisia has some 437m barrels of recoverable oil, in addition to some 116bn cubic meters of gas. Production in 2007 was 35m barrels, bolstered in part by an extensive program of redevelopment that has helped limit decline in the country's more mature oil reservoir blocs.
Yet, while Tunisia's energy sector will enjoy a windfall of new investment over the coming months, the age of many of the country's active fields suggests that long-term expectations for hydrocarbon revenues should be somewhat tempered. A number of Tunisia's blocs, such as the offshore Didon field, consist of mature reservoirs. This means that new drilling techniques can only be effective in slowing the natural decline rather than boosting production. As a result, ETAP is also beginning to explore the potential for overseas initiatives. The company is already involved in projects in Algeria and is looking for new agreements in Mali and Mauritania, local press reported.
With crude oil costs soaring past $140 a barrel, commodity-poor countries around the world are struggling with inflation. Tunisia is no exception. It has seen its inflation rate rise towards 5% - up from 2% in April 2007 - and the government increased petrol prices twice this year. Nevertheless, the heightened oil prices also provide an excellent opportunity for smaller producer countries to reap a short-term windfall, something which has not gone unnoticed in Tunisia. (OBG10.07)
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11.8 TUNISIA: IMF Concluding Statement of the Article IV Consultation Mission
I. Introduction
1. The mission that visited Tunis May 27-June 9, 2008 wishes to thank the authorities for their excellent cooperation, the high quality of the discussions, their usual warm hospitality, and their full availability.
2. Good economic management and social policies continue to bear fruit, as evidenced by accelerated growth and improved social indicators. Real GDP growth over the last ten years averaged 5% and real GDP per capita increased by 45% between 1997 and 2007.
3. In the short term, the major challenge is to limit the impact on inflation and growth resulting from rising world prices of food and petroleum products and global financial turbulence. The slowdown in growth in the European Union (EU), partly due to current financial upheavals, could adversely affect Tunisia.
4. Tunisia's medium-term objective is to further reduce the unemployment rate, particularly during a period in which the country is undergoing a profound demographic shift. Unemployment has declined in recent years, yet it remains relatively high-14.1% in 2007—especially as Tunisia is recording a considerable increase in university graduates.
5. To achieve these objectives, Tunisia must continue to strengthen its resiliency to external shocks by strengthening its macroeconomic position and by pursuing structural reforms, including in the financial sector.
II. Recent Economic and Financial Developments
6. Until now, Tunisia has withstood external shocks relatively well:
• Growth in real GDP has accelerated from 5.5% in 2006 to 6.3% in 2007, reflecting the favorable performance of agriculture, energy, manufacturing industries, and the services sector. On the demand side, this performance reflects the dynamic behavior of exports and investment. Economic growth slowed in first quarter 2008 but held relatively firm at 5.8%, above the average level achieved during the past decade. The slowdown is primarily attributable, in part, to the decline in production of hydrocarbons on account of temporary technical difficulties and also to the economic slowdown in Europe.
• After falling to 3.1% in 2007 from 4.5% in 2006, inflation has picked up once again, largely as a result of renewed increases in world prices of food and petroleum products. In fact, year-on-year inflation reached 5.3% in May 2008. Inflation is also accounted for by pressures on domestic demand deriving in particular from foreign direct investment (FDI). The nominal effective exchange rate depreciated by 2.8% in 2007, on the basis of the index calculated by the IMF, thereby contributing to the inflation acceleration.
• The Central Bank of Tunisia (BCT) responded to inflationary pressures by tightening monetary policy from the second half of 2007. The BCT thus mopped up liquidity through deposit auctions and open-market operations. In addition, it raised the required reserves ratio from 3.5% to 5% at end-November 2007, and to 7.5% at end-April 2008.
• The current account deficit has increased due to declining terms of trade but is comfortably financed by FDI. The current account deficit increased from 2% of GDP in 2006 to 2.6% of GDP in 2007. This decline continued in the first quarter 2008 on account of rising prices of petroleum and basic commodities, the increase in imports of capital goods, and a drop in energy exports caused by a slowdown in gas production due to technical difficulties, which should be resolved during the second semester. With the significant increase in FDI inflows, international reserves amounted to over $8½b—the equivalent of 4.5 months of imports—and exceeded short-term liabilities. Tunisia has strengthened its external position owing to early repayments financed out of privatization proceeds, thereby reducing its total external debt, including short-term debt, from 58.3% of GDP in 2006 to 54.9% of GDP in 2007.
• The fiscal deficit was kept within the 2007 budget target of 3% of GDP, in spite of the sizeable increase in food subsidies. Total subsidies amounted to 2.5% of GDP in 2007. Revenue exceeded expectations, notably from oil companies realizing sizeable profits due to higher crude oil prices and increased domestic production, and from a higher level of customs duty revenues levied on buoyant imports reflecting the dynamic economic activity. This additional revenue offset the increased expenditure due primarily to rising food subsidies. Continued fiscal consolidation and the use of a portion of the privatization proceeds helped to further reduce the public debt/GDP ratio, which stood at 50.9%. The strong performance of tax revenues continued during the first four months of 2008, increasing by 19.3% in nominal terms relative to 2007. This is expected to compensate for the additional subsidies triggered by the continuing increase in world prices of food and petroleum products.
III. World Situation, Outlook and Economic Policy
A. Outlook
7. Prudent macroeconomic policies and structural reforms in the banking sector in particular have further strengthened the Tunisian economy's capacity to withstand external shocks. Accordingly, the global financial upheavals have thus far had only a limited impact on the Tunisian economy.
8. The challenging international environment is expected to slow down economic activity to some extent; however, the outlook remains encouraging. Growth is projected at 5.5% in 2008. Fiscal policy can be expected to keep the deficit within the budget target of 3% of GDP. The current account deficit should be in the range of 3 to 3.5% of GDP as a result of rising food prices. Inflation should remain around 5%.
9. Risks to the short-term outlook are largely attributable to the international environment. Economic activity could record a more pronounced slowdown if growth in the European Union (EU) were to decelerate further. In addition, rising energy and food prices and the growing liquidity resulting from more sizeable capital inflows (particularly FDI) require continued vigilance from monetary policy.
10. The medium-term outlook remains favorable. The Tunisian economy has recorded an appreciable upturn in FDI in most sectors. Furthermore, mega projects in real estate could substantially increase FDI. Two such projects, originating from countries in the Gulf region, have already begun and may attract USD 20b in investment over the next 15-20 years. Given the scale of these projects, it is important that they be incorporated into the macroeconomic framework in order to better anticipate and manage their macroeconomic and financial impact. In particular, it is important that the implementation of these projects does not cause overheating in certain sectors—construction, for example—and to ensure that the potential risks for the government budget (in the form of contingent liabilities) and credit risk for banks are tightly controlled.
B. Macroeconomic Policies
11. The mission supports the authorities' determination to lower inflation while promoting strong growth so as to preserve macroeconomic stability and further reduce unemployment. In this context, the mission underscores the need for close coordination between fiscal, monetary, and exchange rate policies.
Impact of the Global Financial Crisis on Tunisia
The impact of the ongoing global financial market turmoil on Tunisia has been limited so far. The ongoing financial crisis that originated in the U.S. subprime market is likely to affect Tunisia only through the trade channel given Tunisia's relatively strong macroeconomic position and the limited use by Tunisian financial institutions of more complex derivative products. Tunisia's sovereign spread rose broadly in line with that of other emerging markets but remains well below the average spread for emerging markets in the region and elsewhere.
Tunisia's macroeconomic and financial position strengthened substantially over the past decade but vulnerabilities remain:
Public sector vulnerabilities. Fiscal consolidation and privatization receipts helped put public debt on a steady declining path. However, public debt remains relatively high by emerging economies standards, although the share of public debt exposed to exchange rate and rollover risks has declined significantly in recent years, owing to efficient debt management. Government-guaranteed loans were estimated at about 11% of GDP at end-2007.
External sector vulnerabilities. External debt declined but remains relatively high at about 55% of GDP at end-2007. Risks are contained by the following factors: (a) almost 80% of the external debt stock is in long-term liabilities, 70% of which is owed to multilateral and bilateral creditors, implying limited rollover risks; (b) around 75% of the debt is contracted in fixed interest rates suggesting little interest rate risk; and (c) the stock of reserves more than fully covers all short-term liabilities (remaining maturity) in 2007.
Financial sector vulnerabilities. Financial sector risks, in the current environment of relatively closed capital account, remain limited. However, the banking system should continue to strengthen itself to prepare for increased risk as Tunisia continues to deepen its integration into the world economy. While nonperforming loans have declined significantly over the past few years owing to strengthened regulatory and supervisory frameworks and healthy economic growth, they still remain high. As a result, profitability is low and capital adequacy, while above the regulatory minimum, is below the average level in other emerging markets.
Fiscal policy
12. The mission endorses the authorities' decision to maintain the fiscal deficit within the 2008 budget target of 3% of GDP. Despite the sizeable increase in domestic prices of petroleum products (96.3% increase since 2003), the surge in world prices of oil and food commodities has led to a substantial increase in subsidies. However, the latter are expected to be offset by increases in both tax and nontax revenues reflecting: (a) a rise in oil production which should remain at current levels through 2011; (b) sustained economic activity and growing imports; and (c) enhanced efficiency of the tax administration.
13. The authorities have reiterated their intention to persevere with fiscal consolidation in order to further reduce public debt and strengthen the economy's resilience to external shocks. Petroleum reserves may prove insufficient to maintain the level of direct and indirect subsidies (currently estimated by the authorities at 7.1% of GDP) over the long run, particularly in light of growing demographic pressures. Therefore, it is important to control the non-oil deficit (about 4% of GDP in 2007), particularly through the phasing out of oil subsidies as envisaged in the XI Plan. With respect to food subsidies, the authorities have taken steps to ensure better control of expenditures and to boost agricultural production. The mission encourages the authorities to pursue the planned medium-term restructuring of the Caisse Generale de Compensation. In this context, it may be beneficial over the medium term to replace subsidies by a more targeted safety net that safeguards the purchasing power of low-income households while preserving fiscal sustainability and decreasing the country's vulnerability to shocks. Furthermore, this would create the necessary fiscal space for additional social and infrastructure spending, enhance expenditure efficiency, and improve equity. A good communication strategy is important for the success of the reform.
14. The authorities continue reforms aimed at strengthening the efficiency of the tax and customs administration. Specifically, the mission welcomes the promulgation of the new customs code, the establishment of a Large Taxpayer Unit, and the modernization of the information technology system for the tax administration with the development of e-filing.
Monetary and exchange rate policy
15. The Central Bank of Tunisia (BCT)'s restrictive monetary policy is appropriate given the persistent excess liquidity and the growing inflationary pressures. The BCT has thus far mopped up liquidity and raised the required reserves ratio to counter inflationary pressures. However, if inflationary pressures were to persist, it would be necessary to raise the key policy interest rate as well since it is an instrument which has proven its effectiveness in the recent past. Given the time lag involved in the economy's adjustment to shifts in monetary policy, it is important that the BCT sustain the ongoing effort to refine its forecasting tools so as to better anticipate inflationary pressures and take timely action. The remaining restrictions on interest rates and the virtually systematic indexation to the money market interest rate (TMM) applied by banks hamper the development of the money market, restrict the flexibility of monetary policy, and shift interest rate risk to consumers and investors, who are least equipped to manage such risk. In this context, the elimination of the interest rate cap on the special savings accounts is a step in the right direction as is the obligation for banks to fix rates on mortgage credits exceeding a 15 year horizon. Finally, the mission supports the BCT's recent efforts to examine the various options for managing the structural surplus liquidity in the Tunisian financial system, including the option to issue central bank debt certificates.
16. The exchange rate policy remains anchored by the medium-term objective of a floating exchange rate, as demonstrated by the trend decline in BCT interventions on the foreign exchange market. However, greater exchange flexibility in both directions is needed for more effective control of inflation. In this context, it is important to continue improving the coordination of monetary and exchange rate policies.
C. Financial Sector Issues
17. The authorities' dynamic policy has helped strengthen the soundness of the financial system. Bank performance improved notably in 2007, specifically: (a) banking activity and profitability increased; (b) the ratio of NPLs to total loans declined from 19.3% in 2006 to 17.3% in 2007, a decrease largely accounted for by a significant improvement in the management of such claims; (c) the provisioning ratio increased to approximately 53.8%. The authorities' dual objectives for 2009—reducing the NPL ratio to 15% and raising the ratio of provisions to NPLs to 70%—now appear to be within reach. Rapidly attaining—or even surpassing—these objectives would further strengthen the banking system's capacity to absorb potential shocks, particularly in light of the gradual opening of the capital account.
18. The reform of the banking sector is continuing with the recent privatization of Banque Tuniso-Koweitienne (BTK) on favorable terms, the improvement in quality of service, and the preparations for Basel II through the creation of a national committee responsible for facilitating this transition. In addition, a number of steps have been taken to give banks greater flexibility and broaden the scope of their activity. In particular, there are plans to delegate to banks the authority to quote and execute transactions involving exchange rate and interest rate hedging instruments, as well as to lengthen the maturity of such instruments. Listed credit institutions are no longer limited by a cap on their foreign borrowing. The mission is encouraging the authorities to finalize the application procedures needed to allow banks to invest residents' foreign exchange holdings on the international financial market and thereby reinvigorate the interbank foreign exchange market. The Tunisian banking sector—with about twenty banks for a relatively small market—remains fragmented and the small size of banks impedes the exploitation of important economies of scale. Consequently, bank consolidation should be encouraged to enable the sector to cope with the heightened competitive pressures that may result from capital account liberalization.
19. The current financial crisis in the developed countries offers useful lessons regarding banking system consolidation. In particular, it is important to continuously adapt the regulatory and supervisory mechanisms to reflect financial sector developments, collect timely data for adequate supervision, and ensure that contingency strategies are in place in case of a systemic failure of the financial system. The mission encourages the authorities to progress in the implementation of the Basel II mechanism.
D. Other Issues
20. The authorities are continuing to integrate the Tunisian economy into the regional and global economy. Tunisia is pursuing trade liberalization, particularly in the context of the association agreement with the EU that culminated in free trade in industrial products in 2008. Negotiations focusing on agricultural goods and on services are in progress. The Agadir Accord—which entered into force in March 2007 and made provision for liberalization of trade between member countries (Tunisia, Morocco, Egypt, and Jordan) and allowed for accumulation of rules of origin with the EU—has fostered growth in intra-regional trade, although the level of such trade remains relatively low. Tunisia is also actively engaged in promoting regional integration; it organized the third annual conference on this issue, focusing on the role of the private sector. It is continuing to reduce import tariffs under the Most Favored Nation (MFN) regime, with the average tariff rate falling from 28.8% in 2007 to 25.3% in 2008. Further simplification and reduction in multilateral customs tariffs are necessary in order to prevent trade diversion.
21. Current account and capital account liberalization is continuing. Remaining ceilings on the allocation of foreign exchange for current account transactions have been raised and proceeds from exports of professional services may now be placed in a foreign exchange or convertible dinar account and freely used abroad. Concerning capital account liberalization, the mission supports the gradual approach pursued by the authorities. Among recent measures, the mission notes the easing of constraints affecting investment outflows from Tunisia and participations of residents to capital of non-resident corporations based in Tunisia. Furthermore, the exchange authorization for non-resident investors wishing to subscribe in foreign exchange, beyond their preferential right of participation, to capital-raising operations by corporations based in Tunisia—within the parameters of laws governing them, was abolished. The same treatment applies to the use of imported foreign exchange by non residents for the purchase of land and buildings in industrial zones and tourism zones, in the context of the realization of projects designated as important for the economy.
22. Tunisia has recently made significant progress in improving the business climate. The new law on economic initiative, promulgated in December 2007, is designed to foster business creation by simplifying administrative procedures, facilitating financing, and reducing the tax burden. In addition, customs formalities are being comprehensively streamlined, with the total holding period for merchandise being reduced from 9 days in 2006 to approximately 6 days. The goal is to reach 3 days in 2009. Recent advances in tax administration which improve the quality of services for taxpayers are also important for the business climate. Furthermore, the mission supports the Tunisian authorities' efforts to achieve gradual liberalization in the services sector, which has a key role to play in improving the business climate and promoting private investment.
23. The implementation of the Report on the Observance of Standards and Codes (ROSC) on Anti Money Laundering/Combating the Financing of Terrorism (AML/CFT) arrangements is continuing. Tunisia is pursuing its efforts to strengthen its AML/CFT system according to the standards of the Financial Action Task Force (FATF). In this context, the agencies of the Tunisian Financial Analysis Commission (the Financial Intelligence Unit) are implementing the reforms necessary to remedy the deficiencies in the existing system, particularly with the aim of preparing the follow up to the evaluation report, which will take place during the Plenary Meeting of the Middle East & North Africa Financial Action Task Force (MENAFATF) in April 2009. Regarding technical assistance, the authorities stressed the need to train the trainers in the banking and financial area.
24. The mission welcomes the authorities' decision to publish this aide-memoire as usual and commends the Central Bank's participation in the Coordinated Compilation Exercise for Financial Soundness Indicators (FSIs).
25. It was agreed that the next Article IV mission will be held in May 2009. (IMF10.07)
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11.9 MOROCCO: Fitch Affirms at 'BBB-'; Stable Outlook
On 10 July, Fitch Ratings (http://www.fitchratings.com) affirmed the Kingdom of Morocco's (Morocco) Long-term foreign and local currency Issuer Default ratings (IDR) at 'BBB-' (BBB minus) and 'BBB', respectively, both with Stable Outlooks. It has also affirmed Morocco's Short-term foreign currency IDR at 'F3' and Country Ceiling at 'BBB'.
The affirmation of Morocco's 'BBB-' (BBB minus) Long-term foreign currency IDR reflects the country's resilient net external creditor position, which continues to exceed the peer group median despite the emergence of a small current account deficit last year. The latter was due to the higher cost of imported fuel and food, as well as surging imports from strong investment growth, partly associated with growing FDI. The rating is also supported by the continuing shift of the economy towards higher-value-added activities, which has translated into sustained growth of non-agricultural GDP. The main credit weaknesses are relatively high, albeit decreasing, public debt and an expected widening in the budget deficit this year due to increased subsidy costs. Fiscal pressure could lead to downward pressure on the rating if not contained by corrective measures or offset by revenue growth. The ratings also take into account persistent poverty in rural areas and relatively weak social indicators.
Morocco's fiscal performance improved last year, despite the ongoing commodity price shock. The improvement was due to higher than anticipated fiscal revenues, which offset the marked increase in subsidies for oil and basic food products, resulting in an almost balanced budget. In 2008, however, fiscal performance will be adversely affected by the rise in commodity prices and by a substantial increase in capital expenditures. Subsidies could exceed 5% of GDP, although the impact will be partially offset by increased grants from Gulf countries, and strong underlying revenue growth. The impact will also be felt on the external account; however, strong growth in revenue from tourism and remittances from emigrants will limit the current account deficit to less than 1% of GDP. Moreover, rising FDI is expected to allow further improvement in international liquidity measures.
Government debt is likely to remain higher than for 'BBB'- range peers (sovereigns rated 'BBB+', 'BBB' or 'BBB-' (BBB minus)) in 2008-2009, at around 53% of GDP; debt raised on the domestic market will continue to grow, as the state can raise cheap funding, thanks to high liquidity, the depth of the local bond market and declining local interest rates. In contrast, public external debt is relatively low (21.1% of GDP at end-2007) and Fitch expects it to decline further in 2008; Morocco has been a net external creditor since 2004. The financial turmoil in US and European banks had no impact in Morocco, as borrowing from foreign banks is limited.
Fitch expects GDP growth to approach 6% in 2008 and 2009, due to strong growth in public investment, concentrated in infrastructure projects, and good performance of agriculture in H1/08. The reliance of the economy on agriculture and labor-intensive manufacturing is declining, thanks to sustained growth in tourism and development of higher-value-added manufacturing, such as automobile and aerospace components, and services. Inflation has risen this year, despite the increase in subsidies. Strong credit growth, especially to the real estate sector, is also a concern for Fitch, as it may fuel an asset bubble.
The regime has so far weathered the spread of Islamism by liberalizing political life and allowing the development of moderate Islamism. Parti Justice et Developpement (PJD), a moderate Islamist party, now leads the opposition to the government; radical Islamism, however, is rejected by the population. The king, as the leader of Moroccan Muslims, has strong authority and plays a pre-eminent role in ensuring the political stability of the country. Relations with the international community are excellent, except with Algeria, which supports independence of the Saharan provinces. Morocco has made proposals to end this dispute, but it remains unresolved. To ensure political stability over the long-term, the regime will have to reduce poverty in rural areas and unemployment in cities, and stimulate the development of a middle class, as Tunisia did in the 1990s. (Fitch10.07)
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11.10 MOROCCO: Multilateral Agreements
Morocco's free trade agreement (FTA) with the US has taken trade to record levels, while a similar pact with the EU continues to support Morocco's export industries. Further multilateral economic integration between dynamic south and east Mediterranean countries and the EU, though, remains hamstrung - a missed opportunity for all concerned.
Last year, trade volumes between Morocco and the US reached a value of $2.3bn, significantly up from the $1.4bn registered in 2006, Foreign Trade Minister Abdellatif Maazouz announced on June 17. Maazouz told the local press that the increase was partly attributable to a 25% rise in Moroccan exports to the US, and that trade has been facilitated and promoted by the FTA between the two countries.
The FTA was implemented on January 1, 2006. Morocco has signed several other FTAs - notably with Turkey and with the EU - but the one with the US is considered the most wide-ranging, as it encompasses all areas of the economy, including agricultural produce. Robert Jackson, a senior diplomat at the American embassy in Rabat, praised the FTA for attracting more US businesses and investors to the kingdom, especially in the automotive, mining, tourism and aeronautics sectors.
Meanwhile, Morocco is seeking even greater transatlantic cooperation. Maazouz asserted that the establishment of a direct merchant maritime line between Tangier and ports on the US's eastern coast would be an essential step to taking trade to the next level. A further strengthening of ties with the EU is also underway, though a broader Mediterranean free trade zone remains on the drawing board.
Morocco's FTA with the EU, which was signed in 1996, entered into force in 2000 and is being incrementally implemented with the aim of creating a free trade zone between the Union and the kingdom by 2012. The abolition of tariffs on industrial goods has been a boon for Moroccan manufacturers as some 75% of Morocco's exports go to the bloc. The automobile sector is a prime example - Renault constructs cars in Morocco and many of the component manufacturers have sprung up as a result of the French firm's exports to Europe.
The Morocco-EU FTA is designed to be an important step in the process of creating a Euro-Mediterranean free trade area (EU-MEFTA), which theoretically should be launched in 2010. Another key plank of EU-MEFTA is the Agadir Agreement, an FTA deal between Morocco, Tunisia, Egypt and Jordan, all of which have preferential bilateral trade deals with the EU. However, now that negotiations on the Mediterranean FTA include many more countries, talks have become somewhat unwieldy.
Indeed, talks took place on July 2 between the EU and 13 countries, including the Agadir Agreement signatories, with the aim of improving trade in the Mediterranean region. Mazzouz, who attended the meeting, told the media that he was hoping to win some concessions from the EU over trade in agricultural goods and the free movement of labor. "What we want is a reinforced partnership ... in which European countries take into account the concerns of countries on the south rim of the Mediterranean," he said. However, French President Nicolas Sarkozy insists both on continuing to heavily subsidize European agriculture and on tightening immigration to Europe. With France currently holding the rotating EU Presidency, progress on agriculture and migration seems unlikely in the near future.
Furthermore, while the Agadir Agreement countries share good relations, some of the other 13 southern Mediterranean countries invited to the conference, notably Israel and Syria do not, despite the current indirect, Turkey-sponsored talks between the two old foes. The prospects of introducing a wider free trade zone from 2010, therefore, look rather dim.
Morocco can take some comfort from the fact that it enjoys privileged relations with the EU and in particular France and Spain. Sarkozy has been an energetic advocate of Franco-Moroccan relations and has offered to push for Rabat to be awarded "advanced status" with the EU - though what exactly this will entail has yet to be made clear. It seems that major concessions on agricultural subsidies are unlikely to be included.
Having said that, it now looks like a good time to build trading relations with countries outside Europe and North America. Indeed, an IMF report published on May 30 noted that "the marked deterioration in the international environment in 2008 presents new challenges [...] slower world growth, especially in the European Union, could lower growth in Moroccan exports". Additionally, with the US expected to lift import restrictions on Chinese textiles in 2010, Morocco may find its own material and clothing sector undercut.
While Morocco trades enthusiastically with the countries with which it has FTAs, commercial links to other countries often remain under-optimized. With EU-MEFTA talks currently stalled, Morocco may have to look to building bilateral ties with fast-growing economies in the Middle East and North Africa (MENA) region and beyond for the time being. Gulf states are already investing heavily in the country and have eased the cost of oil imports - ties that could be advanced by promoting Moroccan exports to the Gulf Cooperation Council (GCC) member states. A move towards rapprochement with Algeria, Morocco's hydrocarbon-rich and increasingly affluent neighbor, could help revive currently moribund bilateral trade. If political impasses can be breached, a further application of the free trade model in relations with other countries would benefit Morocco greatly. (OBG10.07)
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11.11 TURKEY: Power Tenders open Market
The successful tenders of two Turkish power grids is an important step towards the liberalization of the country's energy supply. With demand and prices rising, however, the process is still just beginning. On 1 July, a consortium of Enerjisa - the energy arm of Turkey's Sabanci Holding - and Austrian electricity company Verbund won the tender to privatize Baskent EDAS, which supplies electricity to 2.9m customers in the Ankara region. With a bid of $1.225bn, Enerjisa beat off competition from local firms Dogan Holding, Hema Endustri Corp, Akcez consortium and Park Holding.
Akcez consortium won the bidding process for a second electricity tender for the sale of Sakarya Electricity Distribution Corporation, successfully offering $600m. The tenders had originally been planned for January 2007 but were postponed until after parliamentary elections in July that year.
Ayse Kolat, Managing Director of Raiffeisen Investment AG Turkey, which acted as sell-side advisers to both deals, told OBG that the final prices and the total number of bidders were good for a deal of this type. However, the fact that only two of the eight foreign companies who had expressed an interest in the privatization in 2006 eventually placed bids is reason for concern. While many in the local press have speculated that the country's ongoing political instability was deterring investors, Kolat said that such risk is often overestimated. "The current political issues affecting the country are not unprecedented and foreign investors coming to Turkey expect such events over the course of 10 to 20 years investment," she added.
More important was the nature of the tender process according to Kolat. "The unpredictability of [the process] causes foreigners to withdraw from these projects. Between the time of pause and restart, there was no clear indication of when the process may resume, and when it became alive. Consequently, investor focus and priorities may have shifted elsewhere," she said. Turkey operates a price cap on electricity that could also have warded off investors in the past. Yet a new pricing system allows energy produces to revise their prices every three months. On June 23, the Energy Market Regulatory Agency said the cost of residential and industrial electricity would be raised by 21% and 22% respectively from July 1.
Privatization of the two power grids is part of a wider attempt by the Turkish government to liberalize its electricity network to meet growing demand in the country. Figures provided by the Turkish Electricity Transmission Company show that demand for electricity has grown by 6-8% per year since the 1990s.
Nevertheless, Turkish per capita electricity usage is only 2000kwh, well below the 6000kwh that the average Spanish citizen, living in a similar climate to Turkey, consumes per year. As well as modernizing and introducing competition in the distribution of electricity, the country's power generation capacity could also be expanded. The current capacity of 39000MW will need to be doubled in the long term, according to the Turkish Electricity Allocation Administration.
In response to rising natural gas prices, some companies are turning back to coal as a source of electricity generation. Tolga Tonguç, Assistant Chairman of Hema Endustri, a local construction firm told OBG, "With Turkey facing an energy gap by 2013, it is important to source new fuels. Turkey has 2bn tonnes of hard coal reserves, a much cleaner source than lignite coal containing no sulfur. With Turkey looking to come into line with EU standards, the environmental impact of coal power stations needs to be taken into account."
Turkey is also looking to source a greater percentage of its production from renewable energy and in recent weeks there have been a number of developments in the area of wind energy. Speaking at the Fifth Turkish Energy Forum, Energy Minister Himi told local press that a wind energy map for Turkey was being prepared with the goal of generating wind power in every city, and that he expected at least 15000MW of wind energy to be installed in the coming years, necessitating a $15-20b investment. "Three new wind power plants will be operational in July in Turkey. This is an important step. Our goal is to manufacture wind turbines in Turkey. The wind turbines market has a potential of $15bn in Turkey," Guler said.
In addition, Guler confirmed that plans to construct two nuclear power plants (NPP) were going ahead. The bidding process for a 4000MW plant to be built in the southern Anatolian town of Akkuyu will end in September, with firms from Russia, Japan and France showing interest reports the international press. A second, smaller NPP is planned for Sinop in the north of the country, but details of the tender have yet to be released.
In areas where technical and financial capability is a key to success, foreign investors can have an advantage over local bidders, says Kolat. With the generation market liberalizing at a faster speed than the distribution market, there will be plenty of opportunities for investors in the coming years. "We may expect more partnerships, in every sector, as there are more licenses and projects in Turkish companies' portfolio than can be executed with their own resources." (OBG16.07)
- Israeli Shekel conversions done at a rate of NIS 3.30 = $1.00
- Turkish Lira conversions done at a rate of NTL 1.10 = $1.00
- Euro conversions done at a rate of € 1.00 = $1.50
- Jordanian Dinar conversions done at a rate of JD 1.00 = $1.41
- UAE Dirham conversions done at a rate of Dh 3.66 = $1.00
- Omani Rial conversions done at a rate of OR 0.385 = $1.00
- Pakistani Rupee conversions done at a rate of Rs 60 = $1.00
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