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The Israeli economy should be able to weather the effects of the global economic situation in relatively good shape, according to Bank of Israel Governor Stanley Fischer. As quoted in the Jerusalem Post, Fischer said "We are going through a crisis, but we have a good chance to overcome this period better than in the previous crisis in 2003…If responsible fiscal discipline and budget policies are pursued, we can return to previous growth rates of over 5%." Fischer said being part of the global economy, including Israel's road map to becoming a member of the Organization of Economic Cooperation and Development, could not go hand in hand with an interventionist monetary policy. "The first half of the year was impressive enough," he told the business leaders. "We estimate that the second half will be less good. (JP12.09)

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1.2 Finance Minister Bar-On Warns of Slowdown in Economic Growth

On 10 September, the Jerusalem Post reported that Finance Minister Ronnie Bar-On warned of a fall-off in the growth rate of the economy as a result of the global economic slowdown and reiterated the importance of keeping to budget discipline and passing the draft of the 2009 budget in spite of the unstable political situation. His comments were made at a meeting of the Federation of Israeli Chambers of Commerce discussing the 2009 budget draft with business leaders. Bar-On added that in recent budget debates the question has been raised regarding the rush to pass the 2009 budget before coalition negotiations and a new government is elected, which may be expected to make changes to the draft. Bar-On feels that passage of the 2009 budget will to show fiscal responsibility and maintain stability in the economy, especially for overseas audiences. Bar-On pointed out that the preparation of the 2009 budget was very challenging in view of the numerous commitments the government has agreed to. Furthermore, Bar-On emphasized the importance of continuing to reduce the public-debt-to-GDP ratio from the current 80% to 58% by 2015. In 2003, for example, Israel's public-debt-to-GDP ratio was over 100%, said Bar-On, adding that if this situation had continued, Israel would have not been able to contain the costs of the second war in the Lebanon. (JP10.09)

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1.3 Virginia-Israel Cooperation Agreement Signed

On 11 September, Virginia Governor Kaine and Ambassador of Israel to the US Meridor signed an agreement to strengthen bilateral cooperation between the Commonwealth of Virginia and the State of Israel on private sector industrial research and development. Under the agreement, an approved joint research and development project will receive financial support from the governments of Virginia and Israel, which will significantly reduce the costs that Virginian and Israeli companies would normally have to incur if they were to conduct the project independently. The Virginia-Israel agreement is of mutual benefit since both have advanced high-technology industries. This agreement will strengthen the commercial relationship between Virginia and Israel, as there are dozens of Israeli companies presently operating in the Commonwealth. (MoF12.09)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Red Hat Advances Virtualization Leadership with Qumranet Acquisition

Raleigh, N.C.'s Red Hat, a leading provider of open source solutions, announced the acquisition of Qumranet. The acquisition includes Qumranet's virtualization solutions, including its KVM (Kernel Virtual Machine) platform and SolidICE offering, a virtual desktop infrastructure (VDI), which together present a comprehensive virtualization platform for enterprise customers. In addition, Qumranet's talented team of professionals that develop, test and support Qumranet solutions, and its leaders of the open source community KVM project, will join Red Hat. This acquisition advances Red Hat's efforts to transform the virtualization market and drive comprehensive virtualization technology and management solutions into every system, from servers to desktops, on both Linux and Windows. Red Hat can now deliver what virtualization-only vendors cannot: a comprehensive solution integrated with the operating system, which can drive down IT costs while simultaneously enhancing the flexibility and responsiveness of IT infrastructure. This acquisition adds to Red Hat's differentiated and comprehensive solutions portfolio for the virtual enterprise, enhancing the opportunities for customers to improve the productivity and reduce the cost of IT infrastructure.

Based in Sunnyvale, CA and Netanya, Israel, Qumranet (http://www.qumranet.com) is an enterprise software company offering a virtual infrastructure platform to enable Independent Computing. Organizations use Qumranet's first product, Solid ICE, to host Windows and Linux desktops centrally on servers in the data center, creating what Qumranet calls an Independent Computing Environment (ICE) for users. This enables centralized provisioning, management, storage and policy enforcement for desktop environments, and at the same time, provides a superior end-user experience. (RedHat04.09)

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2.2 ASOCS Closes $8 Million in a Second Round Funding Led by FGF

ASOCS has secured $8m in a round was led by FinTech GIMV Fund (FGF) and included existing investors: Vertex Venture Capital and Harel Hertz Investment House. So far ASOCS has raised $20m. The company will use the current investment to further scale its presence in the Japanese and US markets and ramp its sales up in conjunction with developing marketing activities to support its growing customer base.

Fintech GIMV Fund (FGF) is a unique venture capital fund that focuses on information and communication technology as well as life sciences. Vertex Venture Capital is a top-tier Israeli VC with $600m under management, a strong international investor base, an experienced multi-disciplinary team of professionals and an impressive track record of exits through M&A and IPO. Founded in 1994, with offices in Tel Aviv and Tokyo, Hertz Investment House (HIH) is a privately held consulting company and investment boutique, specializing in creating and promoting business activities between Japan and Israel.

Rosh HaAyin's ASOCS (http://www.asocstech.com) develops and markets MultiComms processors designed to enable seamless connectivity over diverse air interface networks. ASOCS' ModemX is a unique solution based on patented algorithm technology and a flexible software-based modem. It ensures low power consumption and effectively runs multi-communication standards concurrently. (ASOCS 03.09)

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2.3 iSkoot Acquires Social.IM

iSkoot announced that the company has acquired Social.IM, the social network IM client. This acquisition positions iSkoot to grow beyond mobile VoIP and create a compelling and valuable consumer solution with a growing lineup of Web communications that can be integrated and pushed to your phone. Social.IM built a customizable desktop application and Web service that adds real-time communication and desktop notifications for social networks, online communities and Web sites. The technology includes a desktop IM client and also the capability to deliver new message alerts, information and content to social network or online community members. Social.IM also released a developer API that allows for social network application developers to reach their users on desktop. iSkoot already delivers mobile VoIP solutions for carriers and millions of consumers around the world. But this year, the mobile VoIP leader has begun to focus on the development of mobile products and services that integrate the mission-critical Web services that consumers value most into mobile handsets. San Francisco-based iSkoot (http://www.iskoot.com), with offices in Beit Shemesh, Israel, brings leading internet services like Skype to mobile handsets around the world, delivering rich consumer experiences with minimal impact on operator networks. iSkoot launched the first and only carrier-grade, carrier-deployed Skype-for-Mobile application in 2006, and now powers the Mobile World Congress award-winning 3 Skypephone currently sold in eight countries on three continents. (iSkoot 05.09)

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2.4 Arison Group Invests $100 Million to Form 'Miya,' Global Urban Water Efficiency Solutions Provider

Israel's Arison Group announced on 8 September that it had formed a global water company called Miya and invested $100m to assemble the world's foremost thought-leadership to find solutions for municipalities and utilities concerning water loss management issues. Miya was established by Shari Arison through Arison Investments, the business arm of the Group. In 2006 Arison took the first step in creating Miya by engaging one of the world's leading experts on water, Booky Oren, as its president and chief executive officer. Oren is a widely sought-after international expert in water issues and was serving as the chairman of Israel's national water utility, Mekorot, at the time. After creating the strategic and business plan for the new company, Arison Investments and the Miya executive team set about acquiring six firms and recruiting leading industry experts from around the world. Already, Miya holds the largest accumulated experience and knowledge in creating comprehensive, practical solutions for municipal distribution systems worldwide in water loss management.

Miya estimates that a third of the world's drinking water is lost through leaking pipes, most of which are hidden underground and need to be actively detected and repaired. Recouping the water currently lost is one of the most environmental and cost effective ways to address global water shortages. Reducing these losses by only half, for example, will provide an additional 130m people with fresh drinking water. Miya's solution is based on a proven methodology that uses a combination of technologies focused on pressure management, active leakage detection and repair, and selective pipe replacement, rather than massive infrastructure replacement. Miya also offers flexible business models and financing solutions to address the varying financial needs of its customers.

The Arison Group is a global business and philanthropy group, headquartered in Israel. The Group's activities are carried out via two channels (business and philanthropy) that bring to fruition the values of sustainability. Arison Investments focuses on the business core of sustainability and applies the vision of securing the human existence to the field of global business. (Arison Group 08.09)

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2.5 TPG Capital Acquired a 25.1% Stake in Strauss Coffee for $293 Million

The Strauss Group announced the completion of the partnership agreement with TPG Capital, headquartered in Fort Worth, Texas, which acquired a 25.1% stake in Strauss Coffee for $293m. The investment was made based on a pre-money enterprise value of approximately $1b. TPG Capital was additionally granted a two-year option to acquire additional shares equivalent to 9.9% based on the current enterprise value plus 6% interest per annum from closing until exercise of the option and subject to adjustments for future dividend payments. TPG Capital is the global buyout group of TPG, a leading private investment firm founded in 1992 with more than $60b of assets under management. TPG Capital has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, joint ventures and restructurings. The Strauss Group (http://www.strauss-group.com), Israel's second largest food and beverage Group, has over the past few years become an international corporation with a steadily growing part of its business conducted outside of Israel. The Group focuses on key consumption trends in the food industry via three business divisions: Health & Wellness, Fun & Indulgence and Coffee. The Group collaborates with a number of leading multinationals - Danone, PepsiCo and Lavazza. Strauss Coffee is the sixth largest coffee company in the world in terms of green coffee procurement and one of the world's fastest growing coffee companies over the past five years. Strauss Coffee's activities focus on the R&G (Roast & Ground) sector and other coffee-related products (instant coffee, chocolate and cocoa powders, cappuccino, espresso, organic coffee); and on services. (Strauss Group 10.09)

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2.6 eglue & Tata Interactive Systems Sign Worldwide Partnership Agreement

eglue and India's Tata Interactive Systems (TIS), a global pioneer in workforce performance and e-learning, signed a worldwide partnership agreement under which eglue is now the preferred provider of customer interaction management solutions to TIS customers. The two companies will initially focus their efforts on North America and India. Under the terms of the agreement, TIS will promote and distribute the eglue InterAct suite. TIS will also provide professional services around eglue's products, including business analysis, customization and implementation, as well as maintenance and support. In addition, TIS will establish a dedicated team of professionals that will sell eglue's solutions, and provide pre- and post-sales support. Ein Shemer's eglue (http://www.e-glue.com) is a global software company that provides unique real-time customer interaction solutions to enterprises. eglue makes it possible for companies to achieve the efficient and optimum result during every customer interaction, by continuously adapting and responding in real time to both changing business circumstances and the unpredictability of the customer interaction. (TIS09.09)

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2.7 Percello Raises $12 Million to Fund Accelerated Growth

Percello announced the completion of a $12m Series B financing. The company is developing baseband processors for the 3G and LTE femtocell market. A femtocell is a small cellular access point, typically designed for use in residential or small business environments, and the femtocell concept is considered a revolution in mobile network architecture. The round was co-led by US-based Granite Ventures and Israel-based Vertex Venture Capital. The company also welcomed T-Mobile Venture Fund from Germany as a strategic investor. The capital raised will be used primarily to complete product development and to initiate sales and marketing activities. The company's $6m Series A was led by 7-Main. This capital was used to establish the team and the foundation of Percello.

Herzliya's Percello (http://www.percello.com) is a fabless semiconductor company developing digital baseband processor chips, the main component inside the femtocell CPE (Customer Premises Equipment), for the 3G and LTE femtocell market. Percello's first chip, PRC6000, is the first worldwide SoC (System on a Chip) solution dedicated for the emerging 3G UMTS femtocell market. The chip is a highly integrated device supporting all femtocell backhauling functions such as timing, security and others. PRC6000 is compliant to 3GPP Rel 7 baseline and is capable of delivering 21.6Mbps downlink and 5.76 uplink. (Percello09.09)

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2.8 Connect2Media Acquires Israel's RayFusion

UK mobile content publisher Connect2Media announced that it has acquired RayFusion, a global distributor of mobile content. The deal will enable RayFusion to facilitate expansion of its distribution network to include major carrier accounts in the EMEA, Asian and Latin American regions. Israel-based RayFusion will continue to operate as a standalone entity with operational independence from Connect2Media. It will retain its name and corporate identity and there will be no changes to its personnel or operations. However Connect2Media's support will enable RayFusion to refine the development of its 'mobile content technology set' which will create a real point of differentiation for RayFusion content suppliers and raise the bar on service levels and transparency. Tel Aviv's RayFusion (http://www.rayfusion.com) is a global distributor of mobile content. Specializing in games since 2004, it has been distributing mobile entertainment content through a vast global distribution network of major operators, portals. Operating in Europe, the Americas, Middle-East and Asia, the company offers the best entertainment content from the world's leading brands. RayFusion has an extensive portfolio of mobile games (Java and BREW), wallpapers, screensavers and videos. (Connect2Media05.09)

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2.9 Bloomberg News Expands in the Middle East with Jerusalem Bureau

On 11 September, Bloomberg announced the opening of its newest bureau, in Jerusalem, Israel. The Bloomberg Jerusalem bureau will expand Bloomberg News services in the region, augmenting the current Bloomberg bureau in Ramat Gan. Bloomberg has appointed several leading Israeli journalists to manage their operations. These new appointments and extended resources are part of Bloomberg's ongoing commitment to local and global newsgathering and editorial resources to serve Bloomberg Professional service customers and add value to Bloomberg's multimedia services. Bloomberg is the global provider of financial data, news and analytics. The Bloomberg Professional service and Bloomberg's media services provide real-time and archived financial and market data, pricing, trading, news and communications tools in a single, integrated package to corporations, news organizations, financial and legal professionals and individuals around the world. (Bloomberg11.09)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 CryptoMetrics Named Exclusive Provider of Facial Recognition Technology for the UAE

Tuckahoe, NY's CryptoMetrics, a leading global provider of biometric enabled critical infrastructure and key asset protection systems, announced that they have entered into a twenty-five year exclusive partnership with the Ministry of Interior of the United Arab Emirates (UAE) and BioDentity Systems to develop and deploy state-of-the-art face recognition-based systems for enhancing the security of the UAE and countries in the Gulf Cooperation Council (GCC) and Middle East and North Africa (MENA) region. The systems to be developed and deployed use industry leading facial recognition technology created by CryptoMetrics to confirm a person's true identity as well as proactively identify persons who pose a threat to the State. The long term partnership, between CryptoMetrics and the UAE's Ministry of Interior, follows CryptoMetrics' recently announced contract to deploy facial recognition technology at all ports of entry to the UAE. CryptoMetrics produces a comprehensive family of biometric enabled products and solutions designed to protect the critical infrastructure and key assets of a nation and its business, as well as contribute to the well being of citizens and visitors. CryptoMetrics technology is used by countries seeking to enhance security while facilitating the processing of persons travelling, crossing borders and acquiring Passports and identification documents. (CryptoMetrics09.09)

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 Bringing Water to Jerusalem

The National Infrastructures Planning Commission has approved a proposal for a fifth water line, designed to meet Jerusalem's water needs until 2065. The project has been submitted to the government for its approval. In light of the project's urgency, the Mekorot Water Company is preparing to begin work as soon as the government approves it. If the new line is not built, water shortages will begin to be felt in the capital and environs as early as four years from now. The four existing water lines supply the city from north, east, south and west. The new line will roughly parallel the western line, beginning in Hulda, northwest of Beit Shemesh, and ending in Beit Zayit dam area. Its planning takes ecological concerns into account, ensuring minimal damage to open areas and detailing how the construction damages will be rectified. Jerusalem's new water piping route is expected to provide 150 million cubic meters of water a year, including desalinated water, and thus double the city's supply. The new line will provide "operative flexibility," the proposal states, and will enable a reduction in the amount of water drawn from the Mountain Aquifer. The project is also expected to save on energy costs, and will improve the reliability of the water supply by creating a separation of pressure areas. Supplying Jerusalem with water has historically been a complex and sensitive matter, from Biblical times through the Roman conquest and up to the War of Independence in 1948. The intricate network of ancient aqueducts, tunnels, pools and cisterns found in and under the Holy City attests to the efforts invested in providing it with water. (IsraelNN16.09)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Mid East Internet Traffic Growth World's 2nd Fastest

Internet traffic in the Middle East has doubled every year since 2005 as connections have multiplied and users developed a taste for high-bandwidth services such as online video, according to the findings of TeleGeography, a telecommunications research and advisory firm. They stated that global internet traffic, a measure of how much data are being sent across the world, increased 53% in the 12 months to June. In the Middle East, where the number of internet users has risen more than 10-fold since, traffic has surged 97% a year since 2005. Only in the fast-growing economies of South Asia has traffic grown faster, at an average annual rate of 103%, the paper quoted the report as saying. By comparison the slowest growing region of the world, North America, had increased its internet traffic by more than 50% each year on average, a significant figure given the region is the world's largest consumer of internet bandwidth. The report also said that there was a risk of future bottle-necks, given that the region was shaken by widespread internet blackouts in late January following the simultaneous failure of two major undersea cables off Egypt's Mediterranean coast. The Middle East is connected to the rest of the world by only a handful of undersea cables and the need for new capacity has long been recognized. Every major telecommunications company in the region is involved in one or more international cable projects, with more than $1b of investment in new capacity announced last year alone, it said. (AB09.09)

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5.2 Jordan's Inflation Goes Up By 14.9%

Jordan's consumer price index (CPI), a measure of inflation, rose during the first eight months of this year by 14.9% to 138.41 points from 120.48 points during the same period last year. According to the Department of Statistics (DoS), the increase resulted from a rise in the prices of several main commodities and services such as fuel, electricity, dairy products, table eggs, meat, poultry, cereals, in addition to transport charges. The CPI measures the average price of consumer goods and services purchased by households. The government has been working to reduce inflation but the higher prices are mainly attributed to external factors, including the high price of imported petroleum whose bill eats up some 20% of the Kingdom's gross domestic product. Meanwhile, industrial production index for July of this year rose by 3.3% compared with the same period last year. The increase was empowered by a rise in the prices of the output of the manufacturing industries, electricity and mining industries, the DoS indicated. (Petra10.09)

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5.3 Jordan Tops Region as Medical Tourism Hub

A study prepared by the Private Hospital Association (PHA) indicated that over 250,000 patients from 84 Arab and foreign countries were treated in Jordanian private hospitals, clinics and medical centers last year. World Bank medical tourism experts have ranked Jordan number one in the Arab region and the fifth in the world as a medical tourism hub. Revenues from medical tourism reached $1b in 2007. Apart from Arab patients, primarily Iraqis, but also Palestinians and Sudanese, more than 1,800 US citizens and 400 Canadian citizens sought medical treatment in the Kingdom last years. There are currently 58 private hospitals in Jordan, of which 44 are members in the PHA. (JT08.09)

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5.4 IMF Sees Iraq's Economic Prospects Improving

The International Monetary Fund (IMF) said the economic horizons of Iraq are improving and that, with the recent improvement in security, oil production and exports are increasing while inflation has been reduced. The Fund also approved financing assurances under the Stand-By Arrangement (SBA). The Special Drawing Rights (about $746.3m) arrangement was approved in December 2007. It is being treated as precautionary by the authorities. Iraq expects a budget surplus in 2008 in excess of $30b and any borrowing from the IMF serves perhaps more the interest of the IMF which needs to lend because of shrinking business than for Iraq to borrow. The IMF stated that the strengthened fiscal and external positions offer Iraq a good opportunity to rebuild its institutions and infrastructure in order to achieve sustained higher economic growth. The success of these endeavors will hinge on continued improvements in security, sound management of oil revenues and implementation of key structural reforms. The IMF concluded that the authorities are making commendable efforts to conclude debt agreements with official non-Paris Club and private creditors that have not yet provided debt relief to Iraq. The Paris Club, made up of representatives of wealthy nations, consider debt relief, debt restructuring and debt cancelation for developing countries. (IMF03.09)

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5.5 Shell Signs Up To $4 Billion Iraq Gas Deal

The Iraqi Ministry of Oil ministry announced on 9 September that Anglo-Dutch energy giant Royal Dutch Shell has agreed a gas joint venture with Iraq worth up to $4b. The deal, which will see the gas extracted from Iraqi fields being both sold in Iraq and abroad, will be signed in October. Shell will become the first Western oil group to sign a deal with Baghdad since the US led liberation of the country in 2003. Iraq's cabinet has agreed to the contract, which gives the state-owned Southern Oil Company 51% and Shell 49% in the venture. Last month China became the first foreign group to reach an agreement with Iraq in a three billion dollar deal to exploit oil that revived a 1997 contract granting China rights to develop the Al-Ahdab oil field in central Iraq. (AFP09.09)

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5.6 GCC Countries Climb in Ease of Doing Business

Rankings of Gulf countries continue to climb in Doing Business 2009, the sixth in an annual series of reports published by IFC and the World Bank. While Saudi Arabia and Bahrain are ranked among the top 25 worldwide in ease of doing business, the UAE has climbed 8 positions from 54th last year to 46th this year. Doing Business 2009 -the sixth in an annual series of reports published by IFC and the World Bank. The report makes special mention of the UAE, Egypt, Morocco and Tunisia for improving access to credit. Qatar and Kuwait slipped marginally and Oman maintained its ranking at 57th. In two-thirds of the region's economies, the report records 27 reforms between June 2007 and June 2008 that make it easier to do business. For the third time, Egypt is among the top 10 economies that reformed their business regulations. Egypt advanced 11 places in the global rankings. For a fifth year, the region's most popular sector for reform is business start-ups, with nine economies making improvements. Yemen implemented one of the boldest reforms, reducing the world's second-highest minimum capital requirement and launching a one-stop shop for start-ups. Doing Business 2009 ranks economies based on 10 indicators of business regulation that record the time and cost to meet government requirements in starting and operating a business, trading across borders, paying taxes and closing a business. Singapore tops the global rankings on the overall regulatory ease of doing business for a third consecutive year. New Zealand is runner-up, and the United States is third. Newcomers to the top 25 this year include Bahrain, which debuted in the Doing Business aggregate rankings at 18th. (Various10.09)

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5.7 GCC Common Ground on Inflation

Gulf Arab states are working to align by next year the methods they use to calculate consumer price inflation in preparation for monetary union, according to Naser al-Kaud, GCC deputy secretary-general. Most Gulf states will begin using 2007 as the base year of the consumer price indices (CPI) by 2009, he said. Countries in the region have conducted household spending surveys to change the weights of their consumer price baskets, with Saudi Arabia, the UAE and Oman agreeing to begin using the new baskets by the first quarter. Qatar and Bahrain are also modifying their CPI baskets this year, while Kuwait has not yet committed to when it will change its basket. The oil producers, except Oman, are negotiating a single currency by a 2010 deadline many policymakers have said would be very difficult to meet. Gulf states should improve their statistical capacity to provide more comparable economic and financial data for monetary union, the Dubai International Financial Centre said last month. Currently, the UAE releases inflation data annually and usually months after the end of the year. Saudi Arabia, Kuwait, Bahrain and Oman release inflation data monthly, while Qatar does so quarterly. The UAE economy ministry said in June it planned to modify its CPI to reflect price trends more accurately and to release data monthly beginning next year. An inflation target of no more than 2% above the regional average has been the most contentious of the European Union-style convergence criteria agreed by Gulf states. Inflation ranges from 3.1% in Bahrain to almost 15% in Qatar. (Various08.09)

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5.8 Kuwait to Reduce Reliance On Expats

Kuwait wants to lower reliance on foreign workers and clamp down on visa traders after Asian workers staged violent protests in the country. Hundreds of mainly Bangladeshi workers staged demonstrations in the state in July to demand better pay and working conditions amid inflation of about 11%. The protests turned violent and some workers overturned cars and ransacked offices. Hundreds of Bangladeshis were deported. Social Affairs & Labor Minister Al-Duwaila told a special parliament session that the government was studying in which areas nationals could replace expatriates. Duwaila said Kuwait may set up a company to organize immigration of expatriates and ensure their rights are not violated after workers complained unscrupulous employers deducted housing, medical and meal costs from their salaries. The government was considering scrapping a system under which foreigners have to be sponsored by a Kuwaiti to get a work permit, the minister said. Expatriates make up two-thirds of Kuwait's population of 3.2 million. Parliament approved recommendations asking the government to reveal names of visa traders, and a plan to teach workers about their legal and financial rights in their own languages. The recommendations also included putting a five-year cap on residency for low-skilled laborers, limiting the percentage of any nationality to a maximum 10% of the total expatriate population. (TradeArabia11.09)

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5.9 UAE Real GDP Set To Grow 7.2% This Year

The United Arab Emirates economy is likely to grow 7.2% this year as slower credit growth and lower oil prices in the second half dampen an economic surge in the first six months, Merrill Lynch said on 9 September. A more than five-fold rise in oil price since 2002 has underpinned strong economic growth across the Gulf Arab region, where state and private investors are investing windfall oil export revenues into infrastructure, real estate and industry. The UAE, the world's fifth-largest oil exporter, should earn $120b in oil revenues this year, based on an average oil price of $110 a barrel. Oil prices averaged $72 a barrel last year. The UAE's real gross domestic product (GDP) should grow 7.2% this year and average 6.5% in the next two to three years, the bank added. GDP growth has averaged just under 10% since 2003. Total investment projects in the UAE advanced 36% in the first eight months of 2008 to $952b as interbank lending rates tumbled to a May low of 1.9% for the three-month Emirates Interbank Offered Rate (EIBOR), Merrill said. The UAE pegs its currency to the dollar, which has forced it to keep interest rates low in line with the US Federal Reserve. (Reuters09.09)

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5.10 UAE Considers Canal To Bypass Strait Of Hormuz

Officials in the United Arab Emirates are examining a proposal to build a $200b, 112-mile canal to transport oil around the volatile Strait of Hormuz. The proposed canal would allow oil tankers to bypass the Strait of Hormuz, where roughly 40% of the world's oil passes each day. The massive project would have to accommodate oil tankers weighing more than 330,000 tons through mountains in Dubai to the Indian Ocean, The Times of London reported. Iran has the ability to affect the transportation of some 17m barrels of oil a day through the waterway linking the Persian Gulf to the Indian Ocean. Other regional oil suppliers, such as Iraq and Kuwait, would benefit from an alternative energy transportation route, as Iran has said it would close the waterway if Western nations launched a military attack on the Islamic Republic. The proposal includes a series of locks and canals from the port of Fajairah in the Indian Ocean across the Hajar Mountains. Abu Dhabi has started work on an oil pipeline from Fajairah to bypass the Strait of Hormuz as well. (Various09.09)

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5.11 Egyptian Urban Inflation Rises To 23.6%

Consumer prices in urban parts of Egypt rose 23.6% in the year to August, up from 22.0% in the year to July, the government statistics agency Capmas said. The figure is a 16 year high. Prices in the country as a whole rose even faster, at 25.6% compared with 23.1% in the year to July, it said. Economists have focused on the urban index because the countrywide index was previously updated every other month. As for much of the past year, food prices were one of the major driving forces between the increases in inflation. In urban areas food prices rose 30.9% in the year to August, faster than for any categories other than education at 38% and hotels and restaurants at 45%. Food prices have hit the poor especially hard because they spend a higher proportion of their income on food. The government tried to mitigate the effects of inflation by raising public-sector salaries by 30% starting in July. (Various10.09)

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5.12 Egypt Posts $5.4bn Balance Of Payments Surplus in 07/08

Egypt recorded a balance of payments (BoP) surplus of $5.4 billion in the year to June, up from $5.2 billion a year earlier, central bank figures showed on 6 September. Net services and transfers Revenue from tourism jumped 32.3% to $10.8 billion, and revenue from the Suez Canal rose 23.6% to $5.2 billion due to an increase in shipping through the waterway and an increase in tonnage. The trade balance, however, deteriorated to record a deficit of $23.42 billion, compared with $16.20 billion for 2006/2007. Exports of oil and gas jumped nearly 50% to $14.47 billion while net foreign direct investment (FDI) inflows continued to be strong with the country attracting net FDI of $13.24 billion compared with $11.05 billion in the previous financial year. (Reuters07.09)

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5.13 Saudi Arabia Earned $220 Billion in Oil Revenues through August 2008

According to a report issued by the U.S. Energy Information Administration, net revenues of OPEC members rose to $740b through August of this year. These revenues have exceeded the total revenues of $671b for the entire 2007. Saudi Arabia earned during the first 8 months of the year $220b, exceeding the total revenues of 2007 estimated at 194b. Saudi Arabia was followed in terms of oil revenues by the UAE with $70b, Kuwait - $62b, Iraq - $62b and Algeria - $53b. Iran earned $46b and Libya, $43b. The agency projects total revenues for OPEC members at $1,116b by the end of this year, a new record but smaller than an earlier projection of $1,251b. In terms of oil revenue per capita for the entire OPEC membership it will be $1863 in 2008 and projected to grow to $2015 in 2009 but was $1137 in 2007. The oil revenue per capita in 2007 was the highest in Qatar at $28,360, followed by Kuwait, $21,860 and Saudi Arabia, $7,103. (Al-Sharq Al-Awsat12.09)

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5.14 Saudi Unemployment Falls To 9.8%

Unemployment in Saudi Arabia, which has a population of 17 million, has slipped by 1.4% to 9.8% in the period from August last year to February. The Saudi Ministry of Labor reported that male unemployment fell in February this year to 6.9% from 8% in August 2007 and to 24.9% from 26.6% for women. The report said unemployed people in the largest Arab economy accounted for 400,000 out of a total potential workforce of 4.07 million. Nearly 79% of male jobseekers had completed secondary school, while 76% of the women had university degrees. Jobless Saudis are entitled to social security if they register for free job training and the government's Human Resources Development Fund helps pay salaries once they find jobs in the private sector. The Ministry of Labor is trying to replace foreign labor with Saudis and has set private sector quotas. There are some 7 million foreigners working in Saudi Arabia. (Various15.09)

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5.15 Saudi Arabia & Chevron Extend PNZ Operating Agreement 30 Years

Chevron Corporation announced the extension and amendment of its agreement with the Kingdom of Saudi Arabia. This agreement grants Chevron the right to operate on behalf of the Saudi government for its 50% undivided interest in the petroleum resources of the onshore area of the Partitioned Neutral Zone (PNZ) between the Kingdom and the State of Kuwait. The agreement extends the existing arrangement for 30 years, through February 19, 2039. Under the agreement, Saudi Arabian Chevron (SAC), a subsidiary of Chevron, will continue to explore for and produce crude oil and natural gas on behalf of the Kingdom in the onshore PNZ. The field operations are managed jointly by SAC and Kuwait Gulf Oil Company. Saudi Arabian Chevron and the Kuwait Gulf Oil Company, operator for Kuwait's equal 50% undivided interest in the petroleum resources of the onshore PNZ, jointly operate four fields in the area – Wafra, South Umm Gudair, South Fuwaris and Humma – that produce mainly heavy crude from 10 reservoirs. In 2004, the 3 billionth barrel of oil was produced in the onshore PNZ. Operations in the PNZ are managed by the Saudi Arabia/Partitioned Neutral Zone Strategic Business Unit of the Chevron Europe, Eurasia and Middle East Exploration and Production Co., one of four Chevron upstream operating companies. California's Chevron Corporation is one of the world's leading integrated energy companies, with subsidiaries that conduct business across the globe. (Chevron10.09)

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5.16 Food Price Inflation Continues to Dominate the Headlines in Saudi Arabia

Research and Markets (http://www.researchandmarkets.com) announced in its Saudi Arabia Food Drink Report that food price inflation continues to dominate the headlines in Saudi Arabia, increasing the pressure on the government to take whatever actions necessary to keep prices down for consumers. In early April the government made the decision to cut customs tariffs by 15-20% on 180 products, including a variety of foodstuffs, building materials and consumer goods. The tariff on wheat was cut from 25% to zero, while dairy products, frozen chicken, vegetable oil, canned food and other products that were previously imported with a 20% tariff have had this cut to 5%. This was largely in response to inflation – barely an issue prior to the oil boom – reaching a 27-year high of 8.7% earlier this year. Saudi Arabia has a major negative food and drink trade balance, as it is the largest importer of these products in the Gulf region. This trade balance has been the subject of significant government attention, as the oil-rich government has pumped millions of dollars into improving agricultural output. BMI believes that these efforts will begin to have an effect over the next five years, as we are forecasting growth of 102.4% in the value of Saudi's food and drink exports to 2012, with the majority of this revenue being generated from fellow GCC countries and by the country's more advanced dairy and beverage industries. This should help bring about a modest 5.5% reduction in imports. The country's hot and arid climate, however, will prevent any level of government investment revolutionizing the agricultural industry entirely. As certain food and beverage-processing sectors grow, ingredients will need to be imported to meet demand, which means that the food and drink trade balance will remain negative. With Saudi Arabia currently awash with oil revenues, the government is continuing to develop the non-oil sector, which includes agriculture. (R&M16.09)

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5.17 Saudi Non-Oil Exports Surge 13%

Saudi Arabia's non-oil exports rose 13% to $2.8b in June, the Saudi Department of General Statistics & Information announced on 8 September. The department said petrochemicals topped exports during the month, followed by plastics, ordinary minerals and their bi-products, as well as re-exported commodities. Non-oil exports to other GCC member states increased 25% in June to 2.52b riyals. Imports rose by 22% to 32.3b riyals during the month. Imports included machines, electrical devices and equipment, transport equipment, ordinary minerals and their bi-products and foodstuffs. The department said the UAE was the biggest importer of Saudi goods in June, followed by China and Qatar. The United States was the biggest exporter of goods to kingdom during the month, followed by China and Germany. (DGS&I08.09)

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5.18 American Companies Reluctant to Enter Libyan Market

The visit to Libya of Secretary of State Condoleezza Rice recently should have offered the green light to American companies to enter the Libyan market. However, things are not that simple. Analysts maintain that the widespread bureaucracy, the absence of coordination among policy-makers and the distrust toward foreigners accumulated over decades of isolation mean that foreign companies could face difficulties in benefitting fully from the profit-making opportunities in Libya. Moreover, large US companies were reluctant to enter the Libyan market because of the fear that US courts could confiscate their assets in the absence of agreement on compensation to be paid by Libya for the Lockerbie attack in which a Pan Am jumbo was blown up in the air by Libyan agents. This issue has been resolved with the establishment of a special fund to compensate the relatives of the victims.

Libya is accumulating large amounts of cash as a result of the high prices of crude oil. Some of this cash will eventually find its way into the American market in the form of investment in U.S. assets. While the U.S. was hesitating about the nature of the future relations with Libya European and Asian companies have been active in concluding energy and other deals. The American companies are bound to face severe competition from the European and Asian companies and therefore need to engage the market directly. Libya has earned more than $40b in oil revenues in 2007, and the government is seeking to double its oil production to 3m b/d by 2012. Finally it is important to balance the benefits of doing business against the risks in Libya where many ministries and tribal groups have their say in the policies of the country. While Qaddafi has moderated slightly his socialist regime's transparency does not exist. (Al-Ittihad05.09)

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkey's Lower Than Expected CPI: -0.24%

Turkey's monthly inflation for August came in negative since the food prices did not have the Ramadan effect this year. The food prices were in an increasing trend due to global rise in food prices, thus it is probable that there was not enough room for further hikes in food segment. Turkey's CPI in August was a negative 0.24% and PPI was a negative 2.34% in August over the previous month. During the first eight months of 2008, CPI increased 6.35% and PPI rose 12.49%. Due to the price hike of 16.9% in natural gas prices the highest increase was seen in housing group in consumer prices with 2.12%. Monthly price increase was 1.54% in health, 0.78% in restaurants and hotels and 0.51% in education. Producer prices were a negative figure for the first time in the last nine months on the back of oil prices losing ground. If oil prices continue to come down further, it is likely to see further declines in PPI which came in at 14.7% in August Y-o-Y, compared to 18.4% in the previous month. Agricultural prices decreased 1.99% and industrial prices were down by 2.41% in August. Year-to-date price increase in agricultural segment came in at 6.03%. Monthly price increase was 0.68% in processed food prices, the lowest price increase since June 2007. (BGC04.09)

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6.2 Cyprus HICP Inflation Rate Down At 5.1% in August

The EU-harmonized inflation rate in Cyprus fell slightly to 5.1% over the same period of the previous year in August, from 5.3% in July, thanks to falling oil prices. This performance was similar to the consumer price inflation rate reported last week, which showed the CPI rate falling to 5.4% from 5.6% in July. However, the HICP rate was rather higher than average inflation in the eurozone, where the HICP for August was estimated by Eurostat at 3.8%. For the period January-August 2008, the HICP recorded an increase of 4.7% compared to the corresponding period of 2007. The highest increases were recorded in housing, water, electricity and gas, up by 11.4% and transport, up by 8.4%. (FM08.09)

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6.3 Cyprus Tourism Revenue Falls Even Further Than Arrivals

Cyprus tourism revenue in July was even more disappointing than arrivals, as revenue from tourism reached €272.9 mln, a decrease of 5.0% compared with the €287.3 mln recorded in July 2007. The number of arrivals fell year on year by 2.8% to 342,554 in July 2008, compared with 352,423 in July 2007. Similarly, for the period January - July 2008, revenue from tourism is estimated at €944.8 mln, a fall of 2.0% compared with the €963.7 mln recorded in the corresponding period of 2007. Revenue has probably been hit by the weak sterling, as Britons account for more than half of all tourists. For the period January - July 2008 arrivals of tourists increased by 1.2% to 1,332,406 compared with 1,316,521 in the corresponding period of 2007. (FM11.09)

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6.4 Greek Inflation Slows On Energy Prices

Greece's headline inflation rate eased slightly in August, moving away from a 10-year high, due to falling energy prices, with a further slowdown on the cards in coming months, according to economists. The National Statistics Service (NSS), Greece's statistical office, said inflation decelerated in August to 4.7% year-on-year from 4.9% previously. The figure, however, remains almost a full percentage point above the Eurozone's average figure which stood at an estimated 3.8% last month. Housing costs, including rentals and maintenance fees, rose 10.8% last month and transport charges advanced 6.5%. Food and non-alcoholic beverages advanced 4.5% while a further breakdown of figures shows bread and pasta prices jumping by 17 and 27% respectively for the same period. Greece's EU-harmonized inflation rate for August also retreated slightly to 4.8% from 4.9% in July. The government recently revised its inflation forecast for this year, expecting it to average out at 3.5% from a previous 2.8%, to reflect stronger-than-expected upward price pressures. The Development Ministry has put together a list of 41 measures to battle inflation, including stepping up price checks to catch profiteers. Violators have been threatened with hefty fines and being put on a black list. (Kathimerini09.09)

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6.5 Greece's Overdue Plan to Cut Red Tape

The Greek Development Ministry is putting together a draft bill that will drastically reduce the steps required to set up a company, in a much overdue plan, as bureaucracy remains one the of country's biggest problems. Greece was ranked in position No 96 out of 181 countries on an international competitiveness ranking released by World Bank, scoring poorly on the number of steps required to set up a business. Albania, the Former Yugoslav Republic of Macedonia (FYROM), Montenegro and Kazakhstan all scored better than Greece. Ministry sources said changes being prepared will allow entrepreneurs to set up a limited liability company after a single visit to a Chamber of Commerce that will require €300 and obtaining two signatures. Currently, the same procedure requires 15 administrative steps plus trips to Tax Offices, Chambers of Commerce and some €1,700. Procedures currently take 19 days. It is not clear when the draft bill will be submitted to Parliament or when it is expected to come into effect. The World Bank report, which examines conditions that facilitate and obstruct business activity, gave Greece a lower score than almost all of its European Union peers. Greece also garnered one of the lowest scores in the world when it comes to its heavily regulated business start-up procedures by World Bank. According to European Commission figures, bureaucracy costs the economy almost 7% of gross domestic product (GDP) every year versus 4.6% in Spain and Italy. The EU average stands at 3.5%. (grhomeboy 15.09)

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6.6 Foreign Direct Investment Continues Decline in Greece

Foreign direct investment (FDI) in Greece posted a dramatic decline of 64.3% in 2007 year-on-year, according to data by the Organization for Economic Cooperation and Development (OECD). FDI in this country shrank from $5.4b in 2006 to just $1.9b in 2007. That was against a trend in the other OECD member-states, which saw an average increase of 31% in FDI on a yearly basis last year. The so-called structural changes of the previous Greek governments and the “reforms” of the current one have apparently failed to persuade foreign investors that Greece has a business-friendly environment. Bureaucracy, corruption, inflexibilities in the labor market and the unstable institutional environment has condemned Greece to the last spot on the OECD chart in terms of competitiveness and the attraction of FDI. Greece finds itself below countries such Kazakhstan, Uzbekistan and Costa Rica in terms of attractiveness for investment and competitiveness. Worse, every year Greece falls lower: In 2002, it held the 40th spot according to the competitiveness and entrepreneurship index; in 2006, it was at the 48th place and in 2007 it fell to the 53rd spot. FDI inflows are smaller every year in Greece compared with neighboring countries, such as Bulgaria, Italy and Turkey, with Albania being the only exception. While those countries receive investments of $5-$20b, Greece gets no more than $2b. Even that amount actually concerns share capital increases and stakes in existing Greek companies. The only year that saw a significant inflow of foreign investment was 2006, when major foreign funds came in for the acquisition of Greek banks, such as Emporiki and Geniki. Foreigners' investor preference for existing companies is obvious by their positioning in Greek stocks and bonds as well as other investments, reaching €400m in total.

At the same time, Greek businesses and investment capital seeking opportunities abroad continue to increase. Unlike foreign funds invested in Greece, local capital going into the Balkans, the eurozone and Asia prefers to create new production units, as well as investing in existing firms. Data up to 2007 show that total FDI reached €21b, while Greek investment abroad amounts to €36b. Investors in Greece come mostly from the eurozone (€1.4b in 2007 and €3.2b in 2006); Greeks in turn prefer to invest in Turkey, Spain and the Balkans (€2.1b in 2007, €2.3b in 2006). (grhomeboy 07.09)

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6.7 Greece's Tourism Numbers At 2007 Level

Tourist arrivals in Greece during the first eight months of the year were unchanged from last year's levels despite slower global economic growth and the appreciation of the euro. SETE, the Association of Greek Tourist Enterprises, said data from 13 of the country's main airports – which account for 95% of arrivals – showed a 0.7% year-on-year drop in incoming visitors to 8.467m tourists. Destinations that saw the biggest growth rate – among visitors flying into Greece – were Chios and Cephalonia with arrivals jumping 24.4 and 19.3% respectively in the January-August period. On the downside, tourist arrivals on Santorini fell 4.38% year-on-year and 3.43% in the case of Corfu. (SETE08.09)

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6.8 Greece's Open-Access to Optical Fibers' Network

Greece's Finance and Transport & Communications Ministers have finalized agreement for the financing of optical fibers network project which will provide high speed, 100mpbs, internet access to 2m households and businesses in Athens, Thessaloniki and 50 other cities. The 2.1b euros project will be co-financed by the private sector and the 4th Community Support Framework while cooperation of private and public sectors is also being examined. The optical fiber network will be developed in the next seven years. The optical fiber network is a group of cables receiving energy from a light source achieving speedier and better quality transfer of data compared to compatible copper cables which operate with electrical energy. Connection with optical fiber network will provide access to high definition channels, videophone and high-speed internet. Regarding high-speed internet connection, Greece is the last in EU member states list although connections with high-speed internet went up 108% last year and 1,945 new broadband connections are being made every day. (HRI03.09)

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6.9 Greek Growth Slows In Second Quarter

Greek economic growth continued to decelerate in Q2/08, sliding to 3.5% from 3.6% in the first quarter, according to official data of the National Statistics Service (NSS) released on 3 September. Despite the resilience of economic growth in Greece when compared to its fellow eurozone members, it is increasingly being affected by the international crisis. In the same period last year, growth had reached 4.1% of GDP. The slowdown is attributed to the decline in investment and consumption. For the third quarter in succession, investment dropped, this time by 2.7% year-on-year, owing to a sharp dip in construction activity. Building accounts for 15% of GDP and in the first five months of the year it dropped by 13.1% in terms of volume, 15.2% in surface and 19.1% in terms of number of permits. In previous years, especially after the country's entry to the eurozone and a series of interest rate cuts, construction has served as the locomotive of the economy, rising sharply prior to the imposition of value-added tax and the rise in official property values used for tax calculation purposes. These latter developments caused a rise in prices but did not affect demand as the cost of renting remained relatively low. The cost of building or buying a house has also increased due to price hikes of fuel and raw materials. It is characteristic that the growth in housing loans in the first six months of 2008 came to 12.4% against 19.5% in the same period of 2007. Consumption has also slowed, with its growth rate reaching just 2.5% against 4.4% in Q2/07. Imports are down by 3.9% compared to the second quarter of 2007, while exports have increased by 4.6% on an annual basis. (Kathimerini04.09)

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6.10 Bulgaria Retains Stable Ranking in Doing Business 2009 Report

Bulgaria has retained its stable ranking in the global lists of countries conducting regulatory reforms, according to the "Doing Business 2009" report, the sixth in a series of annual reports published by the International Monetary fund (IFC) and the World Bank. Bulgaria's "Doing Business 2009" rank is 45th among 181 economies. Bulgaria is ahead of Romania (47th) and other countries from the area, members of the European Union (EU) such as Slovenia (54), Italy (65) and Poland (76). "Doing Business" ranks economies based on 10 indicators of business regulation that record the time and cost to meet government requirements in starting and operating a business, trading across borders, paying taxes, and closing a business. The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions or crime rates. In 2005 Bulgaria has realized five of the reforms that are monitored by "Doing Business": Starting a Business, Paying Taxes, Enforcing Contracts, Closing a Business while Dealing with Construction Permits has been made more difficult. Bulgaria passed two new laws - the Civil Procedure Code and the Law for the Commercial Registry, which will speed the resolution of bankruptcy.

The Civil Procedure Code removed the requirement for the Supreme Cassation Court to hear all cases. Now the court can decide whether or not to hear a case. Bulgaria made business start-up easier by creating a central electronic database for commercial registration. This reform consolidated and reduced the number of registration procedures and cut other registration formalities. Amendments to the civil procedural code have helped speed contract enforcement. They reformed rules for evidence and default judgments, raised the minimum threshold for cases in the lower courts and empowered the civil court of last instance to decide which cases to hear, limiting abuse of the appeals process. Bulgaria introduced a new Corporate Income Tax Act and a new Value Added Tax Act to synchronize local tax legislation with EU legislation. (TSW13.09)

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6.11 Bulgaria Struggles With Energy Goals

The Bulgarian government is looking to link to regional oil and gas pipelines but is lagging in its goals to emerge as a major energy hub. Bulgaria is strategically located for energy transit routes to Western Europe, but there are other opportunities in the sector. Sofia expressed interest in joining the Nabucco and South Stream natural gas pipelines as well as a trans-Balkan oil pipeline to Greece, but developments are in the very early stages. Before Bulgaria can emerge as a major energy transporter, it needs to shore up its electrical export capabilities following European demands to close a Chernobyl-era nuclear plant. The state-owned NEK electric company is expected to develop a joint venture to rebuild its nuclear energy program but needs to generate revenue through a stock offering or develop a strategic partnership with a rival company. Furthermore, the slow place of compliance with requirements from the European Union has caused several investors to remain on the sidelines of the Bulgarian energy sector. (TSW11.09)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Rosh Hashanah – the Jewish New Year

Rosh Hashanah, commonly known as the Jewish New Year, is celebrated on the first and second days of Tishrei, which this year falls on the evening of 29 September and continues until 1 October. In Hebrew, Rosh Hashanah literally means "first of the year." The name Rosh Hashanah is not used in the Bible to discuss this holiday. The Bible refers to the holiday as Yom Ha-Zikaron (the day of remembrance) or Yom Truah (the day of the sounding of the shofar). The holiday is instituted in Leviticus 23:24-25. The shofar is a ram's horn; the sounding of the shofar in the synagogue is one of the most important observances of this holiday. The Bible gives no specific reason for this practice, though one that has been suggested is that the shofar's sound is a call to repentance. No work is permitted on Rosh Hashanah. Much of the day is spent in synagogue, where the regular daily liturgy is somewhat expanded. In fact, there is a special prayer book called the machzor used for Rosh Hashanah and Yom Kippur because of the extensive liturgical changes for these holidays. Religious services for the holiday focus on the concept of G-d's sovereignty. One popular observance during this holiday is eating apples dipped in honey, reflecting the wish for a sweet new year.

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7.2 Eid Al-Fitr to Begin on 1 October

Eid Al-Fitr, which marks the end of the holy month of Ramadan, will start on the October 1 (the first day of the month of Shawwal). The three day festival marks the end of Ramadan, the month of fasting. This festival is a time of gift giving and of giving alms. The fasting of Ramadan is meant to remind people what life is like for their less fortunate brethren and the alms giving at Eid (known as Zakat-el-Fitr) is a continuation along the same idea. Both fasting and the giving of alms are two of the five pillars of the Islamic faith. Ramadan is a holy month in which drinking, smoking and eating is prohibited. Fasting is forbidden on Eid el-Fitr and Moslems are encouraged to rise early and partake of some dates or a light, sweet snack, significant because for the past 30 days they have abstained from all food and drink from dawn till dusk. Muslims are encouraged to dress in their best clothes, new if possible, and to attend a special Eid prayer that is performed in congregation at mosques. Before the prayer the congregation recites the Takbiir: The Eid prayer is followed by a sermon and then a prayer asking for forgiveness, mercy and help for the plight of Muslims across the world. It is then customary to embrace the persons sitting on either side of you as well as your relatives, friends and acquaintances. Children are normally given gifts or money. Women (particularly mothers, wives, sisters and daughters) are normally given special gifts by their loved ones.

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7.3 Sixty Mayors From Around the World To Gather In Jerusalem

On Sunday, 14 September 2008, 60 mayors from five continents will gather in Jerusalem as the guests of Mayor Uri Lupolianski for a four-day conference aimed at tackling some of the toughest challenges facing mayors of modern cities. This is the 26th annual Jerusalem Conference of Mayors. The Conference is sponsored by the Council for World Jewry and the American Jewish Congress in conjunction with the Ministry of Foreign Affairs and in close association with the City of Jerusalem. During their stay in Israel's capital, the mayors will be briefed by leading experts from both the private and public sectors and hold group discussions about ways to utilize environmental and high-tech innovations to improve the quality of life in urban areas. In addition to formal sessions, the mayors will also visit the Holy City's cultural and religious sites, and tour some of Jerusalem's leading high-tech companies. Participating mayors include: Albuquerque, Antwerp, Addis Ababa, Turin, Wroclaw, Entebbe and Suva in the Fiji Islands. (MFA09.09)

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*REGIONAL:

7.4 Thousands Evacuated As Tremors Hit UAE

Thousands of people have been evacuated from high-rise towers across Dubai after an earthquake tremor hit the UAE on 10 September. The quake's epicenter, measuring 6.2 on the Richter scale, was in southern Iran about 316km from Abu Dhabi, but strong tremors were felt in the UAE. The tremors were felt most strongly in the Northern Emirates, with the aftershock measuring 4.8 on the Richter scale. Buildings all along Sheikh Zayed Road were evacuated after the tremor struck at around 3.00pm, with crowds of confused people flooding out into the street. Eyewitnesses have described frantic scenes as people rushed for the exits as buildings swayed from side to side. The last major earthquake to hit the UAE was in November 2005. The earthquake, which measured 5.9 on the Richter scale, struck Qeshm Island off Iran's southern coastline and was the strongest to hit the Gulf state in over 100 years. (GN10.09)

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7.5 Zardari Sworn In As President of Pakistan

Newly elected Pakistani President Asif Ali Zardari has taken over on 6 September as the 14th and most powerful civilian president of the country after he took oath on 9 September. Chief Justice Abdul Hameed Dogar administered the oath of office to new president. Asif Ali Zardari, the widower of assassinated former prime minister Benazir Bhutto, won Pakistan's presidential elections on 6 September amid violence that killed at least 30 people and injured dozens. Mr. Zardari, of the Pakistan People's Party (PPP), secured 480 out of 702 electoral college votes beating out opponents Saeeduzzaman Siddiqui, a former judge, and Mushahid Hussain Sayed, a senior official of the party that backed former president Pervez Musharraf and ruled under him. The voting process in the federal upper and lower houses of parliament as well as the four provincial legislatures produced what was a widely expected result.

However, Mr. Zardari's election has also divided the country, at a critical time when national unity has become increasingly significant, especially to lead Pakistan in fighting militancy and terrorism. Mr. Zardari's political opponents claim that past controversies would haunt his presidency. Mr. Zardari has for years been dogged by allegations of corruption. According to court documents filed in London, he had been diagnosed by US doctors as recently as last year with a range of serious illnesses including dementia, depression and post traumatic stress disorder.

Mr. Zardari's political journey has been overshadowed by differences between the PPP and the Pakistan Muslim League-Nawaz (PML-N) of former prime minister Nawaz Sharif. The two parties were partners in a ruling coalition until the August 18 resignation of Mr. Musharraf, the former president and once the military ruler. The alliance split when Mr. Sharif accused Mr. Zardari of failing to live up to his promise of restoring judges who were dismissed by Mr. Musharraf last year because they were widely believed to be independently minded. Mr. Zardari however promised to work toward consolidation of democracy. A former businessman, Mr. Zardari is close to the United States and has stressed Pakistan's commitment to the widely unpopular campaign against militancy.

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7.6 Greek Government Ratings Sink After Year In Power

Greece's conservative government has fallen behind the socialist opposition for the first time in years, hit by corruption allegations and a slowing economy, an opinion poll showed on 16 September. Prime Minister Karamanlis narrowly won re-election last year, weathering scandals and deadly forest fires. However, a new wave of graft accusations and tax hikes to fill budget gaps has further eroded his party's popularity. Analysts said no single party was seen emerging victorious if elections were held now and the government was expected to hold on to power until at least next year. A Metron Analysis poll showed 28.8% of those asked would vote for socialist PASOK compared to 26.6% for the ruling New Democracy, the biggest gap since the conservatives swept to power in 2004 pledging to clean up Greek politics.

New Democracy was re-elected on Sept. 16, 2007 with 41.8% of the vote, vowing to tackle graft and push reforms needed for Greece to catch up with its EU partners. But a slim majority of 152 deputies in the 300-seat parliament weakened it. A slowing world economy and a huge debt, at 95% of the €230b economy, have forced the government to take unpopular measures to avoid returning to the EU's list of budget offenders. Lately, Karamanlis asked his merchant marine minister Voulgarakis to resign after pressure from senior party members over allegations of improper property transactions. The resignation came the same week that parliament approved tax rises on the self-employed and capital gains from stocks and dividends, which have prompted threats of strikes and protests by powerful unions and opposition parties. Voulgarakis, who denied any wrongdoing, was the second minister to quit in a year. Although polls show that neither party would win outright, both major parties have ruled out the prospect of coalitions. With the government expected to limp along, large scale reforms in areas such as social security and education, were bound to be slow, analysts said. (Various16.09)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Hadasit's Double Lumen PCI Guiding Catheter Prototype Successful

Hadasit announced the successful pre-clinical testing of a prototype of the Double Lumen PCI Guiding Catheter for use in the treatment of coronary artery disease. Unlike today's conventional catheters, the Double Lumen PCI Guiding Catheter has two lumens rather than one. The second lumen allows for a continuous medication infusion to the coronary artery during percutaneous coronary intervention (PCI), the part of the procedure when the narrowed coronary artery is dilated. Hadasit (http://www.hadasit.co.il), the Technology Transfer Company of Hadassah Medical Organization (HMO) in Jerusalem, Israel, promotes and commercializes HMO's continuously generated intellectual property (IP) and R&D capabilities. IP generated by HMO has already gained global recognition due to Hadasit's successful enterprising of Hadassah's biomedical technology, including novel therapeutics, diagnostics and devices. (Hadasit03.09)

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8.2 Hadassah Study Shows Neural Cells From Human Embryonic Stem Cells Reduce MS Symptoms

Hadassah University Hospital and Hadasit, the technology transfer company of Hadassah Medical Organization, announced today that scientists at Hadassah University Hospital have discovered a new application for human embryonic stem cells. They have demonstrated for the first time that transplanted neural cells derived from human embryonic stem cells can reduce the clinical symptoms in animals with a form of multiple sclerosis. Human embryonic stem cell-derived neural precursors were transplanted into the brains of mice with an experimental form of MS. The grafted human cells integrated in the mice brains and migrated towards the sites of inflammation. They suppressed the inflammatory process in the brain, and consequently protected the animals from demyelination and nerve cell extension (axonal) injury, which are the pathological hallmarks of MS. Multiple sclerosis, the most common cause of neurological disabilities in young adults, is caused by an inflammatory reaction of the patient's own immune system against the myelin sheath that envelops the nerve processes. The destruction of myelin leads to the degeneration and loss of nerve cells and permanent neurological disabilities.

Cell Cure Neurosciences, a Hadasit BioHoldings company focused on the development of cells derived from human embryonic stem cells for the treatment of neurodegenerative diseases, has started a translational research program that will lead to clinical trials in MS patients. The study will take place at the new Clinical Research Center at Hadassah and is anticipated to start recruiting patients for baseline studies within the next year. Hadasit BioHoldings is the publicly traded subsidiary of Hadasit (http://www.hadasit.co.il), the Technology Transfer Company of Hadassah Medical Organization (HMO) in Jerusalem, Israel, which promotes and commercializes HMO's continuously generated intellectual property (IP) and R&D capabilities. IP generated by HMO has already gained global recognition due to Hadasit's successful enterprising of Hadassah's biomedical technology, including novel therapeutics, diagnostics and devices. (Hadasit08.09)

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8.3 Teva and Barr Receive FTC Request for Additional Information

Teva Pharmaceutical Industries and Barr Pharmaceuticals announced that, as expected, each party has received a request for additional information (commonly referred to as a “second request”) from the U.S. Federal Trade Commission (FTC) in connection with Teva's pending acquisition of Barr. The parties have been cooperating with the FTC staff since shortly after the announcement of the transaction and intend to continue to cooperate with the FTC to obtain HSR clearance as promptly as possible. The effect of the second request is to extend the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) waiting period until thirty days after the parties have substantially complied with the request, unless that period is terminated sooner by the FTC. The companies continue to expect that the transaction will close in late 2008, following completion of the HSR clearance process, the obtaining of the other required antitrust approvals and the satisfaction of all other closing conditions contained in the merger agreement between the parties, including the approval of Barr stockholders. Israel's Teva Pharmaceutical Industries (http://www.tevapharm.com) 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. (Tea03.09)

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8.4 Obecure Recruits First Patient in Phase II Obesity Study in Pre-Menopause Women

Obecure has commenced a Phase II clinical trial to evaluate the efficacy of Histalean in obese patients. This study, encoded BET-207, is a follow-up to the Company's post-hoc findings in a prior Phase II study, suggesting that treatment with a 48 mg/day dose of the drug provides significant weight reduction in obese women up to the age of 50. The current study is a double-blinded, placebo-controlled, multi-center, dose ranging study to confirm the efficacy of a 12 week treatment with the drug in obese but otherwise healthy premenopausal females aged 18-50. The study will randomize about 180 obese women, with a body to mass ratio (BMI) ranging from 30 - 40 kg/m2, into three study arms: 60 women will be treated with 48 mg/day Histalean, 60 women will be treated with 96 mg/day Histalean and 60 women will receive matching placebo. The study will be carried out in about 12 investigation sites in Europe and regulatory approval has already been received in Belgium and the Netherlands.

Obecure is also pursuing the use of Histalean for preventing the massive weight gain plaguing patients taking olanzapine (Zyprexa), a highly effective antipsychotic medication. The weight gain has been mainly attributed to the anti-histaminic effect of olanzapine in patients' brain and may thus be offset by histaminergic activation. The Company is therefore conducting a clinical trial in eight investigation sites across Canada and in Israel to evaluate the potential of Histalean to attenuate the deleterious effect of co-administered Zyprexa. It is notable that Eli Lilly, manufacturer of Zyprexa, is providing research support to Obecure for conducting this trial.

Ramat Gan's Obecure () is a biopharmaceutical company dedicated to the development of weight management drug therapies. The Company is currently pursuing the clinical development of its lead compound Histalean for general obesity and for weight gain associated with anti-psychotic drug therapy. Obecure has a worldwide exclusive license from Mor Research Applications, the Technology Transfer Office of Clalit HMO to clinically develop and commercially exploit the technology. (Obecure08.09)

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8.5 New Study Shows Cloning from Dried Cells Now Possible

Core Dynamics announced that cloning with freeze-dried cells is possible for the first time, according to new study findings in the August issue of the research journal PLos One. The company's patented IMT freeze-drying technology was used in the study. Cloning starts when an egg without genetic material is injected with cells with it. Until now, these cells had to be fresh or frozen and thawed just before injection. In the investigation, the cells were freeze-dried and stored for three years at room temperature. They then were revived by adding water and successfully used to form sheep embryos. The key benefit is that now clinicians can preserve cells with minimal storage costs for long periods of time.

Core Dynamics (http://www.coredynamics.com) is a privately held biotechnology company that is stretching the horizons of the science of cryopreservation. The company is active in the research and development of unique freezing, thawing and freeze drying technologies that are being applied in work with cell preservation, blood transfusion and tissue and organ transplantation. The company has developed unique protocols, equipment and solutions for cryopreservation of cells and of tissues such as osteo-articular cartilage and of whole organs. Core Dynamics' R&D center is located in Ness Ziona, Israel. (Core Dynamics08.09)

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8.6 Can-Fite Signs MOU with Korea's Kwang Dong for Licensing CF101 Rights for Korea

Can-Fite BioPharma signed a Memorandum of Understanding with Kwang Dong Pharmaceutical Co., a Korean company, granting Kwang Dong exclusive rights to develop and commercialize the drug CF101 for the treatment of rheumatoid arthritis in Korea. CF101, Can-Fite's lead drug, is currently being tested in multi-national Phase IIb study for its therapeutic activity in the treatment of rheumatoid arthritis and in two Phase IIa studies: one for the treatment of psoriasis and the other for dry eye syndrome. In accordance with the MOU, the two companies intend to proceed toward signing a definitive License Agreement by November 1, 2008. The terms of the license, as specified in the MOU, will include an upfront payment as well as milestone payments to Can-Fite in an aggregate amount of $1.5m, and royalties on sales. Additionally, as stipulated in the MOU, Kwang Dong will also purchase equity in Can-Fite in an amount representing 1% of Can-Fite's outstanding share capital at a premium of 50% above market price. Kwang Dong is among the largest pharmaceutical companies in Korea and is highly experienced in introducing drugs, originating from foreign sources, into Korea. Petah Tikva's Can-Fite BioPharma (http://www.canfite.co.il) is a public company traded on the Tel Aviv Stock Exchange. The Company focuses on the development of molecule-based drugs that bind to receptors of cancerous or inflammatory cells and inhibit their development. (Can-Fite09.09)

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8.7 Teva Extends Collaboration with Proteologics by Licensing Three Programs

Proteologics announced the licensing of three programs to Teva Pharmaceutical Industries. Under the agreement, Proteologics will discover and conduct early development of cancer treatments, while Teva will proceed with later stages of development, manufacturing and worldwide commercialization of the products. Proteologics and Teva first collaborated in March 2005 developing cancer therapeutics in two discovery programs, based on the ubiquitin system components. The new deal further reinforces the collaboration by granting Teva the right to continue drug development in these two programs, in addition to a license of the new discovery program. In return, Proteologics is entitled to payments pending on the achievements of milestones, as well as royalties from sales. Proteologics retains freedom to collaborate on different programs with any other partners. Rehovot's Proteologics (http://www.proteologics.com) is a leading force in investigating the ubiquitin system for the discovery and development of novel therapeutics. Concurrent with major efforts in small molecule drug discovery, Proteologics was one of the pioneering companies in the implementation of siRNA technology for the discovery and validation of novel therapeutic pathways. (Proteologics15.09)

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8.8 Teva Receives EU Marketing Authorization for TevaGrastim

Teva Pharmaceutical Industries announced that the European Commission's Directorate General for Enterprise and Industry granted Teva a Marketing Authorization for its human granulocyte colony stimulating factor (G-CSF) product. This Marketing Authorization follows the positive opinion issued by the CHMP, the scientific committee of the European Medicines Evaluation Agency (EMEA). Teva's product is the first biosimilar G-CSF to receive a Marketing Authorization in the European Union and will be marketed under the brand name TevaGrastim. Teva will progressively begin marketing the product throughout Europe in 2009. G-CSF, mainly indicated for the treatment of chemotherapy-induced neutropenia, was developed by Teva in collaboration with a partner. The brand product, Neupogen Filgrastim had worldwide sales of approximately $1.3b and approximately $300m in the EU. Teva currently markets a portfolio of biopharmaceutical products including human growth hormone (hGH) in the United States, as well as interferon alpha 2b, G-CSF and hGH outside the United States. Teva's biogeneric pipeline includes many other products to be launched in the US and the EU, as well as in other markets. 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 human pharmaceuticals and active pharmaceutical ingredients. (Teva16.09)

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8.9 Oramed Launches GLP1-Analog Program Based on its Proprietary Drug Delivery Platform

Oramed Pharmaceuticals has launched pre-clinical trials of ORMD 0901, a GLP1-analog. ORMD 0901 belongs to the Incretin family of drugs which helps to manage diabetes, including reduction in blood glucose levels and inhibiting glucagon secretion. Incretins have been cited in causing regeneration of pancreatic insulin secreting cells, and in tissue protective properties including protection of the heart. GLP1 and analogs are associated with gradual weight loss, which is very desirable in diabetes patients. Oramed plans to launch phase 2b trials of ORMD 0801, its oral insulin capsule, in India in Q1/09. Jerusalem's Oramed Pharmaceuticals (http://www.oramed.com) is a technology pioneer in the field of oral delivery solutions for drugs 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. (Oramed 16.09)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 KBC Group Selects Ness Technologies to Standardize Reference Data

Ness Technologies announced that KBC Group, an international financial group with headquarters in Brussels, has selected the Ness Financial Data Enterprise solution as its consolidated data management platform in a large multi-year agreement. Through a combination of Ness' proprietary software and services, Ness Technologies will provide KBC Group with an end-to-end data management solution ensuring that the data-driving processes such as performance attributions, risk analysis, pricing, research, fund accounting and customer servicing is clean, complete and consistent across KBC group companies. The Ness Technologies Financial Services vertical offers specialized and proprietary solutions for institutions focused on Banking, Capital Markets and Investment Management. Proprietary software includes the Ness Financial Data Enterprise solution, which automates the acquisition, management and distribution of reference data and accelerates provisioning of higher quality and dynamic intelligence to end users.

Tel Aviv's Ness Technologies (http://www.ness.com) is a global provider of end-to-end IT services and solutions designed to help clients improve competitiveness and efficiency. The Ness portfolio of solutions and services consists of software product development, including both offshore and near-shore outsourcing, system integration, application development and consulting, and software distribution. With over 7,800 employees, Ness maintains operations in 18 countries, and partners with numerous software and hardware vendors worldwide. (KBC03.09)

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9.2 RiT Technologies to Provide Infrastructure Management Solution for European Airport

RiT Technologies received a $500,000 order from an OEM partner in connection with the first stage of an extensive network and infrastructure management project that it is deploying for a large European airport. The full project, which is expected to yield to RiT a total of up to $1m, is scheduled to be deployed over the next few quarters. This project extends an ongoing relationship between RiT and the aviation authority in charge of this airport, which began in 1999 when the aviation authority selected RiT's PatchView system as its infrastructure management standard. The RiT solution features its proprietary intelligent infrastructure management solution and Category 6 and 6A components, together with RiT's Dashboard for online tracking of key performance indicators (KPI's). To answer the customer's needs, RiT developed its new managed Voice Block 110, and integrated the PatchView system with a CAD system. In addition, to enable further customization and integration, the system includes RiT's advanced SDK (Software Development Kit).

Tel Aviv's RiT (http://www.rittech.com) is a leading provider of intelligent solutions for infrastructure management, asset management and network utilization. RiT Enterprise solutions address datacenters, communication rooms and workspace environments, ensuring maximum utilization, reliability, decreased downtime, physical security, automated deployment, asset tracking, and troubleshooting. RiT Carrier solutions provide carriers with the full array of network mapping, testing and bandwidth qualification capabilities needed for access network installation and service provisioning. (RiT03.09)

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9.3 Magal Receives a $20 Million Order for Municipal Surveillance Security Solution

Magal Security Systems announced its subsidiary Senstar-Stellar has received an order for the installation of a municipal surveillance security solution in a large city in Latin America, based on its FORTIS Command and Control System. The majority of the approximately $20m project will be completed during 2008. This FORTIS System to be installed in this large Latin American city will integrate hundreds of cameras, emergency call units, and intelligent video analysis based on Magal's DreamBox, all connected to one unified command and control center operated by several security personnel during each shift. The FORTIS System, via a cellular network, will enable the command and control center to monitor, control and dispatch security alerts to approximately 150 patrol cars and fast-response forces, some equipped with cameras for bi-directional video transfer. The FORTIS System is based on an advanced technology that includes a unique graphic control center and real-time live video of the protected zones which are the subject of an 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'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. (Magal03.09)

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9.4 Cimatron's GibbsCAM Post Processors Available for Mori Seiki's New NZ Series

Cimatron released GibbsCAM post processors developed for Mori Seiki's NZ series of machine tools. GibbsCAM's posted output effectively supports the advanced capabilities of these multi-tasking machine tools, because of a collaborative effort with Mori Seiki. As competitive pressures grow, so does the market demand for high-efficiency mass production machine tools like the Mori Seiki NZ line which can dramatically reduce machining time. The Mori Seiki NZ series of machine tools are ideally suited for mass-production machining. The NZ series machines can be configured with up to three turrets, all using Mori Seiki's BMT (Built-in Motor Turret) technology. By placing the motor inside the turret, heat generation and vibration are kept to a minimum and transmission efficiency is improved. Cutting performance, speed and precision are also significantly increased.

With over 25 years of experience and more than 40,000 installations worldwide, Givat Shmuel'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. (Cimatron 03.09)

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9.5 Aladdin eToken and eSafe Win Network Products Guide Reader Trust Awards

Aladdin Knowledge Systems announced that Network Products Guide, a Silicon Valley Communications publication and a world leading publication on technologies and solutions, named Aladdin eToken NG-FLASH winner of the 2008 Best Products and Services Award for "Best in Tokens" and named Aladdin eSafe "Best Secure Web Gateway." The respected awards program honors products and services that represent the rapidly changing needs and interests of the technology end users worldwide. As part of the tech industry's leading global awards program, 2008's Best Products and Services were nominated from all over the world. Network Products Guide, published from the heart of Silicon Valley, is a leading provider of products, technologies and vendor related research and analysis.

Petah Tikva's Aladdin Knowledge Systems (http://www.Aladdin.com) is an information security leader with offices in 12 countries, a worldwide network of channel partners, and numerous awards for innovation. Aladdin eToken is the world's #1 USB-based authentication solution, offering identity and access management tools that protect sensitive data. Aladdin HASP SRM boosts growth for software developers and publishers through strong anti-piracy protection, IP protection and secure licensing and product activation. Aladdin eSafe delivers real-time intelligent Web gateway security that helps protect data and networks, improve productivity, and enable compliance. (AKS03.09)

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9.6 Celeno Debuts WiFi Technology for Carrier Grade HD Video Home Networking

Celeno Communications announced the availability of its new WiFi System on a Chip (CL1300), enabling service providers to deliver the perfect user experience. Powered by the Celeno patent-pending OptimizAIR technology, the new CL1300 WiFi chip can reliably stream up to four concurrent and different HD streams with whole-home coverage while maintaining wire-like quality of experience. Celeno's carrier-grade WiFi technology, allows service providers to quickly and easily deploy true concurrent, multi stream wireless HD video home networking over standards-based plug & play WiFi – from any source or device. For example, it is possible to wirelessly stream HD video from a home gateway, network attached storage (NAS) or a digital video recorder (DVR) to any set top box, laptop or any other screen in any room in the home. The CL1300 is a standards-based 802.11 System on a Chip targeted at wireless video home networking access point applications which includes full 802.11 PHY and MAC functionality, a wireless network processor and an embedded CPU. The CL1300 chip may be integrated into consumer electronics devices such as IPTV home gateways; DOCSIS 3.0 gateways; NAS devices, multi-room DVR set top boxes or wireless video extenders and adapters. Powered by Celeno's patent pending OptimizAIR technology, the solution supports extreme range of over 50 meters (150feet) through multiple walls and ceilings with enough throughputs for 4 HD streams and with no packets loss or visual artifacts. The CL1300 also demonstrates superior performance with third party client chipsets, 802.11a/b/g or 802.11n and even with very low-cost single antenna client designs. Ra'anana, Israel's Celeno Communications (http://www.celeno.com) is a leading provider of semiconductors for multimedia WiFi home networking applications. (Celeno08.09)

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9.7 Ethos Networks Revolutionizes Packet Transport with High-Capacity Switch

Ethos Networks announces its E-80 Ethernet service transport switch, the latest addition to Ethos' E-series line of purpose-built solutions, designed to deliver an advanced, revenue-generating set of multi-tiered Ethernet services. Now commercially available, the E-80 allows Quality-of-Service (QoS)-enabled services to be delivered over a Provider Backbone Bridges – Traffic Engineering (PBB-TE) network. With unmatched QoS and traffic engineering capabilities, the E-series switches are optimized to address Ethernet service delivery with high scalability coupled with the highest service assurance. Unlike most switching products in the market, the E-80 was designed from the ground up as a PBB/PBB-TE Carrier Ethernet switch. It delivers programmable traffic management capabilities, supporting flexible future upgrade to Ethos' DynTE engine, an end-to-end Connection Admission-Control (CAC) mechanism that adapts to traffic conditions in real-time. The E-80 is fully integrated with Ethos' Domain Management System (DMS) to offer dynamic, real-time centralized carrier-grade control. The E-80 also offers an integrated hybrid card combining 1GB and 10 GB for maximum flexibility. Herzliya's Ethos Networks (http://www.ethos-networks.com) has pioneered connection oriented Ethernet by providing a dramatically enhanced solution for intelligent network traffic engineering. Ethos provides a complete solution including PBB-TE devices and a network management system combining management resource analysis and optimization. (Ethos08.09)

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9.8 Gilat Deploys SkyEdge Broadband Satellite Network in Honduras

Gilat Satellite Networks has completed deployment of a SkyEdge broadband satellite network for Administradora de Redes (Aduanett), a private company owned by Honduras' leading customs brokers. Administradora de Redes will use the VSAT network to provide customs offices and other Honduran businesses with private networking services including interactive data, broadband Internet access, and Voice over Internet Protocol (VoIP). Gilat's SkyEdge is a satellite communications system that delivers high-quality voice, broadband data and video services over a powerful unified system. SkyEdge represents Gilat's extensive knowledge base and field-proven product offering, acquired through two decades of experience. SkyEdge's flexible architecture and efficient space segment utilization make it an ideal platform for operators and service providers.

Petah Tikva's Gilat Satellite Networks (http://www.gilat.com) is a leading provider of products and services for satellite-based communications networks. The Company operates under three business units: (i) Gilat Network Systems ("GNS"), which is a provider of network systems and associated professional services to service providers and operators worldwide; (ii) Spacenet Inc., which provides managed services in North America for businesses and governments through its Connexstar service brand and for consumers through its StarBand service brand; (iii) Spacenet Rural Communications, which offers rural telephony and Internet access solutions to remote areas primarily in Latin America. (Gilat08.09)

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9.9 Neotel Brings High Speed Broadband to Macedonia using Alvarion's Mobile WiMAX Solution

Alvarion announced that Neotel, a leading company in electronic communication, is deploying Mobile WiMAX throughout Macedonia using Alvarion's 4Motion solution. The network, operating in the 3.5 GHz frequency, will provide business and residential users with advanced broadband data and voice services, offering high quality and easily available internet access at affordable rates. Alvarion's partner for this WiMAX project is Neocom. Adopting WiMAX as its preferred technology, Neotel plans to launch the network services to the general public in September 2008 and complete deployment of the Macedonian commercial network by December 2009, resulting in full data and voice service delivery. Neotel is the first WISP (Wireless Internet Service Provider) in Macedonia that operates a licensed WiMAX frequency band countrywide, and offers competitive package deals for the various services in its portfolio. Alvarion's end-to-end 4Motion solution is the foundation of the company's OPEN WiMAX ecosystem, which combines BreezeMAX and other best-in-class systems. A complete all-IP Mobile WiMAX solution, 4Motion is designed to enable service providers to offer subscribers fixed and mobile personal broadband services, comprised of core network, radio and IP networking elements and end-devices, anytime, anywhere.

Tel Aviv's Alvarion (http://www.alvarion.com) is the largest WiMAX pure player ensuring customer long-term success with fixed and mobile solutions for the full range of frequency bands. Based on its OPEN WiMAX strategy, the company offers superior wireless broadband infrastructure and an all-IP best-of-breed ecosystem in cooperation with its strategic partners. (Alvarion 09.09)

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9.10 Aladdin Announces Enhanced HASP SRM Anti-Piracy Tool for Mac Software Developers

Aladdin Knowledge Systems announced that Aladdin HASP SRM now offers an Envelope for automatic file wrapping of software developed for the Apple Macintosh operating system. Software publishers developing software for Macs can now take advantage of the same automatic file wrapping capabilities that current HASP SRM Envelope customers use for Windows and Linux. Within minutes, the HASP SRM Envelope "wraps" applications with robust HASP SRM anti-piracy and intellectual property protection, which securely binds software to the HASP SRM USB-based hardware key to prevent unauthorized use and reverse engineering. The HASP SRM Envelope includes universal binary support and a GUI for increased ease-of-use. Petah Tikva's Aladdin Knowledge Systems (http://www.Aladdin.com) is an information security leader with offices in 12 countries, a worldwide network of channel partners, and numerous awards for innovation. Aladdin eToken is the world's #1 USB-based authentication solution, offering identity and access management tools that protect sensitive data. Aladdin HASP SRM boosts growth for software developers and publishers through strong anti-piracy protection, IP protection & secure licensing and product activation. (AKS08.09)

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9.11 Orad to Introduce Interact

Orad Hi-Tec Systems is unveiling Interact, a new 3D HD/SD interactive graphics system. Interact was designed to address the growing need for interactive graphics during live TV productions, and is an ideal solution for weather presentations, sports highlights, and election coverage. Interact is a revolutionary product which allows a show anchor or presenter to place 3Dtracked graphic elements in a conventional or virtual studio, and then interact with those same graphics. The host can move the graphics in the 3D space with his or her hands and can also automatically program graphic events to occur. This groundbreaking technology for studio production opens doors to endless production possibilities in which users can easily interact with 3D, real-time graphics in the studio space. For example, in a sports highlight show, the presenter can drag a 3D table with the standings or the roaster of a team into the studio space at-will, and can then update the data in real-time, execute a video clip highlighting a certain player, and even remove the graphic element entirely. Interact is based on Orad's proprietary infrared tracking technology. Kfar Saba's Orad (http://www.orad.tv) is a world leader in TV graphics and production technology. Orad's product line includes virtual sets, on-air graphics systems, channel branding, virtual advertising, sports production solutions and hardware for the Virtual Reality industry. (Orad 03.09)

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9.12 BOS Receives Orders for Electronic Components From a Strategic Customer

B.O.S. Better Online Solutions announced that its fully owned subsidiary, Odem Technologies, received orders for electronic components from a strategic customer. These orders amount to over $600,000 and are anticipated to be supplied during the fourth quarter of 2008. The customer is engaged in the aviation industry and is a supplier to large civil aviation customers in the United States. The electronic components are intended for a pilot in the business jets industry, an industry that enjoys a growing demand in the last couple of years. Teradyon's B.O.S. Better Online Solutions (http://www.boscorporate.com) is growing rapidly to become a global leader in providing comprehensive mobile and RFID solutions. (BOS09.09)

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9.13 Commtouch Enhances Apache SpamAssassin Spam & Malware Detection with New Plug-In

Commtouch announced the availability of its new plug-in for Apache SpamAssassin, which offers enhanced spam and malware detection based on Commtouch Recurrent Pattern Detection technology. The Commtouch Plug-In is a quick, easy way to inoculate SpamAssassin-protected mail servers against zero-hour threats, and to beef up detection against zombie- or botnet-generated spam. Spam has reached new heights over the past several quarters, and new types of malicious code and blended threats are constantly being introduced by email. Only an automated real-time solution like Commtouch's can defend against these nimble threats. Commtouch RPD technology is a service “in the cloud” that works by analyzing massive volumes of internet traffic in real-time to identify recurring malware and spam patterns. The Commtouch plug-in retrieves relevant spam and malware classifications from the Commtouch Detection Centers in real-time. As a result the plug-in provides superior detection against new outbreaks, often hours, or even days, before most other solutions. Internet Service Providers, software and hardware vendors and very large enterprises can benefit from the Commtouch plug-in, incorporated as an add-on to their SpamAssassin implementations.

Netanya's Commtouch Software (http://www.commtouch.com) is the source of proven messaging and web security technology for scores of security companies and service providers, founded on a unique datacenter-based approach. Commtouch's expertise in building efficient, massive-scale security services has resulted in its patented technology being used to mitigate Internet threats for thousands of organizations and hundreds and millions of users in over 100 countries. Commtouch's Global Detection Centers automatically analyze transactions in real-time to identify new spam, malware and zombie outbreaks as they are initiated. (Commtouch09.09)

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9.14 Radwin Chosen for Digital City Video Surveillance Project

Radwin (http://www.radwin.com) announced that the Ness Ziona municipality in Israel has chosen its systems for its flagship Digital City project. Radwin's systems are used to create a wireless network delivering real-time video from surveillance cameras deployed throughout the city to the municipality's central command & control center. This project is one of the first Digital City projects in Israel. Leadcom Integrated Solutions, a leading international provider of innovative telecommunication solutions, was in charge of the design and the successful deployment of the comprehensive video surveillance project. The aim of the Ness Ziona Digital City project is to enhance public safety and reduce crime by providing surveillance coverage of the city. Radwin's systems are deployed in public areas and institutions where video cameras are installed. The systems transmit video in real-time from schools, community centers, shopping centers, public parks as well as busy traffic intersections back to the Ness Ziona municipality's central command & control center, which is also linked to a private security company that can provide immediate response when needed.

Tel Aviv's Radwin delivers wireless backhaul and broadband access solutions in the sub-6GHz space, empowering carriers and service providers to connect subscribers everywhere. Whether voice, data or video streaming, the company provides wireless broadband solutions of unrivaled performance, capacity, range and quality at competitive prices. (Radwin09.09)

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9.15 RiT Technologies to Supply Cabinet Mapping Solution to Bezeq

RiT Technologies has delivered equipment for the first phase of a large-scale project to Bezeq, Israel's largest telco. The project consists of the deployment of an advanced NGPair cabinet mapping system as part of its mass-scale installation of MSAG cabinets that requires conversion of passive street cabinets to active ones. Before signing the contract, Bezeq conducted a thorough technological evaluation including pilot tests in several locations. Tel Aviv's RiT (http://www.rittech.com) is a leading provider of intelligent solutions for infrastructure management, asset management and network utilization. RiT Enterprise solutions address datacenters, communication rooms and workspace environments, ensuring maximum utilization, reliability, decreased downtime, physical security, automated deployment, asset tracking, and troubleshooting. RiT Carrier solutions provide carriers with the full array of network mapping, testing and bandwidth qualification capabilities needed for access network installation and service provisioning. (RiT09.09)

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9.16 Coship Launches Personal Navigation Device with Mobile TV Powered by Siano

Leading Chinese digital TV provider, Coship, announced today the launch of a new member, the CPND-4303A, to its GPS product line, with DVB-T mobile TV capability, powered by Siano's receiver chip. Based on Siano's leading SMS1130 multi-standard receiver chip, the CPND-4303A offers high quality reception of DVB-T signals, coupled with best-in-class power consumption and exceptional mobility performance, allowing consumers to enjoy high-resolution digital TV programs for long hours, indoors as well as outdoors, while travelling at high speeds. Established in June 2004, Netanya's Siano Mobile Silicon (http://www.siano-ms.com) provides integrated silicon receivers for the mobile digital TV (MDTV) market. Tailored specifically for handheld and mobile devices, the company's all-CMOS multi-standard solution overcomes formidable engineering challenges such as mobility reception, hand-offs, power consumption, form factor and small antenna. The company was founded by a group of Israeli entrepreneurs with vast experience in semiconductor modems, mobile phone architecture and digital TV systems. (Siano12.09)

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9.17 Mellanox Provides Scalability & Performance for HP BladeSystem Switching Infrastructure

Mellanox Technologies announced that its InfiniScale IV switch IC, introduced less than three months ago, has been adopted by HP due to its unparallel scalability and enhanced communication features that provide uncompromised performance capabilities for high-density computing infrastructures. The new HP BLc 4X DDR IB Gen 2 Switch for HP BladeSystem c-Class provides superior server-to-server and server-to-storage I/O connectivity and enables green data centers and efficient high-performance computing. Mellanox's InfiniScale IV switch silicon device was architected to address the massive scale-out demands of data centers and high-performance compute centers that require the best price-performance and most energy efficient interconnect. Organizations using HP server and storage blades and the new HP BLc 4X DDR IB Gen 2 Switch should realize the potential of their application environments, including data warehousing, financial services, government and education, industrial design and manufacturing, life sciences, and web serving and collaboration.

Yokneam's Mellanox Technologies (http://www.mellanox.com) is a leading supplier of semiconductor-based, interconnect products to world-class server, storage and infrastructure OEMs servicing Fortune 500 data centers, the world's most powerful supercomputers, and mission critical embedded applications. The company's Virtual Protocol Interconnect (VPI) enables standard communication protocols to operate over any converged network (InfiniBand, Ethernet, Data Center Ethernet) with the same software solution. (Mellanix15.09)

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9.18 Testuff Launches an On-Demand Software Test Management Tool

Following a successful beta with over 1,000 participant companies, Testuff launches its on-demand software test management tool. Aside from the standard features for test stuff management, Testuff offers an intuitive interface, bug tracker integration and test video recording, all at an affordable price. Why another test management tool in a market flooded with solutions? The founders of Testuff were dissatisfied with the existing products out there. They were too expensive, too big, too complicated and required high maintenance. Testuff was born to provide a better solution to a neglected audience: small companies that didn't wish to spend thousands of dollars on test management. Integration with the existing work environment is also important for Testuff. Development teams usually install and use a bug tracker before any QA personnel is hired. Therefore, Testuff isn't bundled with a built-in bug tracker like most tools. Instead it integrates with the existing bug tracker by exporting all defects to it. One of the innovations Testuff offers is built-in test video recording. When executing a manual test one can record the screen, mouse and keyboard. The video is then included in exported defects so that the dev team may easily see bugs recreated in front of their eyes, not able to use the "works for me" excuse any more. Testuff (http://www.testuff.com) is a startup company based in Tel Aviv, Israel. It is focused on making software that improves the QA life by giving them the best tools of the trade and decreasing annoyances and bureaucracy. (Testuff 15.09)

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9.19 Keller Williams Protects Critical Email Systems with PineApp's Mail-Secure

PineApp announced that Keller Williams has selected PineApp's Mail-SeCure perimeter security appliance to protect the company and its networks from malicious email and spam attacks. Keller Williams Charlotte provides real estate guidance and services throughout the region of Charlotte, NC. With such a large clientele of potential new home buyers, maintaining streamlined, spam and virus free email operations is critical to success. Based on PineApp Mail-SeCure's high level of security, ease of use, simple deployment and cost compared to other appliances and software solutions, Keller Williams selected PineApp to replace a previous ineffective spam solution that was already in place. Protecting over 550 users at Keller Williams, Mail-SeCure is an advanced anti-spam and email security appliance that combats evolving email-based threats such as botnets, image and MP3-based spam and sophisticated virus attacks.

Nesher's PineApp (http://www.PineApp.com), a leader in securing networks and email systems, offers comprehensive appliance solutions for small, medium and large organizations. Since its founding in 2002, PineApp has specialized in email and content security systems and has established itself as a pioneer in the development of unique and innovative technologies to fight the different threats that exploit email systems. As a result, PineApp has become a leading supplier of comprehensive appliance based security solutions for email systems, suitable for organizations of all sizes from small offices to large enterprises. (PineApp15.09)

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9.20 Advasense Successfully Develops 1.4-Micron Pixel for CMOS Image Sensors

Advasense Technologies announced the successful development of a high performing 1.4-micron pixel for the company's flagship ASIO product line. The sensor array of 1.4um pixels is incorporated into the ASIO5 – a 5 megapixel, quarter-inch optical format CMOS Image Sensor (CIS). Mobile phone manufacturers are demanding increased image sensor quality and higher resolutions, while keeping the same physical dimensions for the image sensor. As a result, smaller pixel sizes, with inherent light sensitivity and dynamic range issues, are being developed to enable higher resolutions. Advasense's proprietary FCP (Feedback Controlled Pixel) technology enables Advasense to use deep photodiodes, which result in full well capacity (FWC) that is comparable with, or better than the capacity of 2.8 - 3.2um pixels. This makes Advasense's FWC around 3-4 times higher than standard industry capabilities for 1.4um FWC. The high red QE is also due to the properties of the deep photodiodes used by Advasense. The FCP enables Advasense to improve the pixel performance significantly because charge transfers and fully pinned photodiodes are not required. The True Image Stabilization is using the pixel array as a memory array to compensate for inadvertent hand motions.

Ra'anana's Advasense (http://www.advasense.com) is a privately held fabless semiconductor company that provides high image quality high image resolutions CIS products to the mobile phone market. Advasense's patented Feedback Controlled Pixel (FCP) technology enables True Dynamic Range, On-Chip True Image Stabilization and True Colors, which address the major challenges associated with ensuring high picture quality using small pixels, enabling vivid, colorful images in a broad array of natural and artificial light scenarios. (Advasense15.09)

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9.21 Orsus & Pelco Combine Benefits of Situation Management & Video Security Systems for Customers

Orsus announced a partnership with California's Pelco, a world leader in the design, development and manufacture of video security systems. Together they provide the full benefits of a Situation Management solution with digital video recording capabilities from Pelco. As a result of this partnership, Situator from Orsus fully integrates with the enhanced digital video recording capabilities from Pelco. This alliance enables those who have deployed or plan to implement digital video recording solutions from Pelco to seamlessly integrate these devices with Situator. For Orsus, the partnership with Pelco builds upon its commitment to Situator by incorporating more functionality in its security and safety offering an unprecedented expanded view in any control room. Pelco offers a scalable DVR solution, an important element for enterprise security systems. In addition, Situator supports live streaming video and playback from Pelco cameras. Or Yehuda'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. (Pelco 15.09)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel's August CPI Rises by 0.8%

On 15 September, the Central Bureau of Statistics announced that Israel's Consumer Price Index (CPI) rose by 0.8% in August to 107 points. Inflation for the past 12 months now stands at 5%. This is the highest gain in the August CPI since 1995. The rise was at the upper end of market expectations of 0.5 - 0.8%. The housing maintenance item rose by 3.7% contributing 0.6% to the CPI. The rent item rose by 3.5%, contributing 0.1% to the CPI. Many shekel-denominated leases came up for renewal last month, with a big jump in rent. The domestic and foreign recreation item rose by 7% in August, contributing 0.3% to CPI. Food costs edged down by 0.1% in August, with the price of rice falling 8.2% and instant coffee prices dropping 7.1%. However, prices for fresh vegetables rose by 12.5%, which also added to the CPI. Water and electricity rates also rose last month. Three key items kept the CPI in check: fuel fell by 4.4%, footwear fell by 6.5% and clothing fell by 9%. Housing prices rose steeply, by 3.7%, but health costs were unchanged. (CBS15.09)

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10.2 Israel's Trade Deficit Narrows As Chemical Exports Rise

The Central Bureau of Statistics announced on 11 September that Israel's trade deficit narrowed last month for the first time since January 2007 as exports of chemicals soared. Chemicals exports rose an annual 83% to $1.38b. Israeli exports of goods increased at an annualized rate of 22.9% in June-August and since the start of the year industrial exports have grown by about 27%. Hi-tech exports, the engine of growth of the Israeli economy, climbed at an annualized rate of 18.2% in the past three months, while mixed high-tech exports increased by an annualized rate of 33.4% during the June-August period. Only growth in exports of traditional mixed technology industries (23% of overall industrial exports) showed a more moderate increase in the past three months, rising by 15.4% at an annualized rate over this period. Industrial exports totaled $4b in August, while imports amounted to $5.7b leaving a trade deficit of $1.7b. In the June-August period, imports of goods increased by 2.8% at an annualized rate after a rise of 14% in March-May, while imports of raw materials (excluding diamonds and energy) rose in June-August by 14% at an annualized growth rate. But during June-August imports of consumer durables fell by 27.5% at an annualized rate.

The deficit, excluding diamonds, ships and aircraft, fell to a seasonally adjusted $1.2b, down from $1.25b in August last year. Israel's economy has expanded by more than 5% in each of the past four years, led by booming exports. Growth will probably slow to 4.2% this year and 3.5% in 2009 as the global economy cools and demand for Israeli products weakens. The burgeoning global demand for food in emerging markets is driving demand for phosphates used as fertilizers, produced by companies such as Israel Chemicals. Simultaneously, Teva Pharmaceutical Industries and others in the healthcare sector are little affected by business cycles. During August, while imports of raw materials rose a bit during August, imports of capital goods declined. Merchandise imports climbed 21% to $5.06b in August, while exports rose 31% to $3.86%. The trade deficit has widened this year as global oil prices soared. (CBS12.09)

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10.3 Israeli Monthly Household Expenditure Rises

The Central Bureau of Statistics announced on 7 September that the average monthly household expenditure was $3,310 in 2007, 3.5% more than in 2006. A quarter of household expenditure by the bottom 20% is for food, while a quarter of household expenditure by the top 20% is for transport and communications. Israelis' shopping patterns are also changing: 8% buy electronics and home entertainment products online. More Israelis own mobile phones than landlines. 67% of households in the top 10% have a dishwasher compared with 7% in the bottom 10%. Almost half of households in the top 10% have at least two cars, compared with 1% of households in the bottom 10%. Between 1997 and 2007, the proportion of households with an internet connection rose from 5% to 59% and the proportion of households with at least two mobile telephones rose from 7% to 64%. (Globes 08.09)

10.4 Israel's Top 30% Generates Over Half of Household Income

The top 30% of households generate more than half of total household income, and the top 10% of households generates a quarter of total household income, according to the Central Bureau of Statistics 2007 Income Survey. The bottom 30% generated 11% of total household income. There have been no substantial changes in the income distribution in the past decade, except that the income of households in the seventh decile fell by 0.6% and the income of households in the top decile rose by 0.7%. There is some good news however: the Gini coefficient, a measurement of income inequality, narrowed by 2% to 0.382 in 2007 from 0.39 in 2006. This is the first decline in the Gini coefficient since 2000.

Part of the inequality is due to differences in the number of persons and income-earners in households. Although the national average was 3.3 persons and 1.7 income-earners per household in 2007, the average number of persons per household in the bottom 20% was 4.2, 1.6 times the 2.6 persons per household in the top 20%. At the same time, the average number of income-earners was 1.5 per household in the top 20%, compared with 0.6 per household in the bottom 20% The Central Bureau of Statistics reports that the average gross household income was NIS 12,935 per month in 2007, 4.2% more than in 2006. Average net household income, after deducting income tax, health tax and National Insurance levies, was NIS 10,463 per month in 2007, 3.3% more than in the preceding year. (Globes 10.09)

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10.5 Israel's Car Sales Finally Start to Ebb

Israel Motor Vehicles Importers Association figures shows that Israel's automobile market is beginning to show signs of a slowdown, whereby 16,387 cars were delivered in August, 3.5% less than in August 2007. Globes cited automobile sector sources, who believe the figures point to a slowdown mainly in deliveries to private customers and that the recession will affect the sector as a whole in Q4/08. Deliveries to leasing fleets remain brisk, although this sector is also expected to experience a certain degree of weakness. The corresponding month last year was characterized by a protracted shortage in popular family models. There are almost no shortages at all this year; supply levels at most importers remain fairly high, and this is now being translated into substantial discounts to customers. Between January-August, 151,955 cars were delivered to Israel, 16% more than in the corresponding period in 2007. Deliveries to private customers totaled 123,569 units, an increase of 15%. Deliveries of off-road vehicles soared 32% over the corresponding month in 2007 to 11,937 units.

Mazda had the most deliveries during the first eight months of the year, with 26,569 units, up 41% over the corresponding period last year. In second place came Hyundai with 16,317 deliveries, an increase of 6.6%. Toyota came third with 15,525 deliveries, an increase of 2.1%. Chevrolet was fourth with 11,016 deliveries, an increase of 48%. Honda was in fifth place with 9,948 deliveries, an increase of 6.5%, followed in sixth place by Ford, with 8,507 deliveries, 13% less than in the corresponding period last year. Delek Motors Ltd. was the leading importer with 35,076 deliveries, an increase of 23%. There has been a marked slowdown since the beginning of the year in the luxury vehicle segment with deliveries of many leading brands remaining flat or even falling. The exceptions are those brands that have adopted an aggressive marketing policy such as Volvo, which saw 128% growth in deliveries compared with the corresponding period last year, and Cadillac, which saw 142% growth, both of which were thanks to the aggressive pricing of key models and easy payment terms. (IMVIA02.09)

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10.6 Israel's Grape Harvest Expectations Sanguine

Israel's grape harvest has begun with high expectations from all involved. The Grape & Wine Council anticipates a yield of 45,000 tons compared to 42,000 tons last year. The Council said vineyards now account for some 11,000 acres and 750 new acres which were planted before the sabbatical year. Thousands of additional acres are to be planted over the next three years. Vineyards stretch from the Golan Heights to the Negev in the south. Council officials say that more vineyards are cultivated each year. Wine production is expected to exceed 35 million bottles, 70% red and 30% white. Exports account for 20% of sales, half in the U.S. and the rest in Europe. Wine exports total $30m. (KN08.09)

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10.7 Israelis & French Fries

Kosher News noted that two thirds of the Israeli population eats their French fries at home. A survey conducted by Tapugan, Israel's largest producer of fresh and frozen potato products, found that the main market is not surprisingly, teens between 14 and 18 years of age. Some 30% of the people asked said they eat French fries once a week, while 12% said French fries are part of their diet two to three times a week. According to the survey, Israelis consume 50,000 tons of French fries (also known as chips) per year. (KN08.09)

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10.8 OECD Says Israel's Education a Mixed Bag

As cited by the Jerusalem Post, the annual education report of the Organization for Economic Cooperation and Development (OECD) ranked Israel near the bottom of 57 Westernized countries - citing underpaid teachers, oversized classes and abysmal performances by students in math and science. It showed that Israeli teachers earn around half of the global wage average, reported that class sizes in Israel are among the largest in the world and featured results from the Program for International Student Assessment (PISA) exams that placed Israeli students in 39th and 40th place in math and science, respectively, out of 57 participating nations. On a positive note, the OECD report did show that a relatively high proportion of Israeli pupils complete 12 grades of school (90%), compared to the OECD average of 83% and the US's 77%.

It was suggested that overcrowding is a major factor, causing a chain reaction of negative trends and a possible link to the low PISA scores. Junior-high schools hold an average of 33 students per classroom, as opposed to an average of 24 in other Western countries. Elementary school students fair slightly better with 28 kids per class, compared to 22 in other OECD countries. Consequently, the student-teacher ratio in Israel is also one of the highest in the world - with an average of 17 students per teacher. As for teachers' wages, the report showed that the average Israeli teacher earns about $13,257 a year, as opposed to the average $27,828 in other Western countries and $34,895 in the US.

Paradoxically, the report shows that, despite Israeli pupils' low achievements, their hours in the classroom were among the highest among the countries examined. Pupils aged 7 spent 878 hours in compulsory classes and 15-year olds spent 1,040 hours (the total intended hours were 787 for 7-year olds and 1,089 for 15-year olds). The OECD average was of 770 compulsory class hours for 7-year olds and 910 for 15-year olds. (Various09.09)

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10.9 Majority of Israelis are Apartment Dwellers

According to a survey by Heker Rating Marketing Research, 65% of Israelis live in apartments and 35% live in semi-detached and private houses. The proportion of apartment-dwellers is higher among young families, ultra-orthodox)(71%) and the poor (78%). A breakdown by region shows that 80% of residents in the Dan region (greater Tel Aviv) live in apartments, and that proportion of apartment dwellers is lowest in the Sharon (45%) and in the north (51%). Some 6% of apartment dwellers live in apartments that occupy an entire floor, 37% live in two-room apartments, 14% in three-room apartments, 31% in four-room apartments and 11% in five-room or larger apartments. The average number of apartments per floor is three. 59% of buildings in Jerusalem and 56% of buildings in north have two apartments per floor. 63% of buildings in the Dan region have three apartments per floor, as do 59% of buildings in the south and Shfela region. 11% of apartment dwellers said that the optimal number of apartments per floor is one, 46% said two apartments, 13% said three and 22% said four or more. (Globes 11.09)

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11: In Depth

11.1 ISRAEL: Foreign Trade Statistics – August 2008

As of July 15 2008, the new Israeli tariff on exports came into force. In the tariff, changes have been made in the codification of the goods (from 7 to 8 digits), as in the harmonization according to the international classification of goods or Harmonized System 2007. The changes also affect the data presented by other classifications: by economic industry and by SITC1. It should be noted that data related to August were influenced by the fact that the ports did not work regularly.

In August 2008, Israel's import of goods totaled $5.7b, export of goods totaled $4b and the trade deficit totaled $1.7b. Final data for 2008 will be published on April 2009. In addition, the data do not include import and export of services that include, among others, software. Development of trade in goods in August 2008, compared with July, was influenced by changes in the value of the US dollar against other currencies in which import and export transactions are conducted.

Breakdown of the findings:

Export of Goods

In August 2008, manufacturing exports (excluding diamonds) constituted 87% of all export of goods. Export of diamonds constituted 12%, and the 1% was agricultural exports. Distribution of manufacturing exports by technological intensity (excluding diamonds), indicates that high technology industries constituted 42% of it in August 2008 ($1.5b). Trend data of exports by high technology industries point to a rise of 18.2%, at an annual rate, in June-August 2008 following a rise of 22.4% in March-May 2008.

Exports by medium-high technology industries (30% of total manufacture exports) in August 2008 totaled $1.1b. Trend data of exports by medium-high technology industries point to a rise of 33.4%, at an annual rate, in June-August 2008. Exports by medium-low technology industries (23% of all manufacture exports) in August 2008 totaled $800m. Trend data of exports by medium-low technology industries point to a rise of 15.4%, at an annual rate, in the last three months.

Exports by low technology industries (5% of all manufacture exports) in August 2008 totaled $200m. Trend data of exports by low technology industries point to a rise of 14.5%, at an annual rate, in June-August 2008. Export of diamonds (polished and rough) in January -August 2008 totaled 7.6 higher by 8.4% than January-August 2007. Agricultural exports in January -August 2008 totaled $882M (temporary data) – lower by 3.9% than January-August 2007.

Import of Goods

Import of goods, in current prices in U.S. dollars, totaled – as mentioned - $5.7b. A breakdown of the data of import by use indicates that in August 2008, 36% of total imports were import of raw materials (excluding diamonds and fuels); 13% was machinery, equipment and land vehicles for investment; 13% was consumer goods, and the rest diamonds, fuels and ships and aircraft.

Import of raw materials (excluding diamonds and fuels) in August 2008 totaled $2.1b. A breakdown of trend data reveals that in June-August 2008, import of raw materials rose by annual rate of 14%. A breakdown by groups of import of raw materials in the last three months, points to a rise of 47.1% in the import of iron and steel. Import of investment goods (excluding ships and aircraft) in August 2008 totaled $800m. A breakdown of trend data indicates that in June-August 2008, import of investment goods dropped by an annual rate of 10.6%. A breakdown by groups points that import of machinery and equipment point to a drop of 1.9% in the last three months.

Import of consumer goods in August 2008 totaled $700m. A breakdown of trend data indicates that in the last three months, import of consumer goods dropped by an annual rate of 6.7%. Import of non-durable goods rose by an annual rate of 17.2%. Most of the rise was recorded in import of food and beverages (21.5%). Import of durable goods dropped, by an annual rate of 27.5% during the last three months. Import of diamonds (rough and polished) in January-August 2008 totaled $6.7b, a rise of 12.3% compared to the same months in 2007.

Import of fuels (crude oil, distillates and coal) in January-August 2008 totaled $9.5b. During the same months in 2007 the import of fuels totaled $5.6b. (CBS11.09)

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11.2 LEBANON: Fitch Affirms at 'B-'; Outlook Stable

On 12 September, Fitch Ratings (http://www.fitchratings.com) affirmed the Republic of Lebanon's Long-term foreign and local currency Issuer Default ratings (IDR) at 'B-' (B minus). The Outlooks on both ratings remain Stable. The Short-term foreign currency IDR is affirmed at 'B' and the Country Ceiling is affirmed at 'B-' (B minus).

"May's Doha Accord, followed by the election of a new president and formation of a new government, holds out the prospect of long overdue implementation of critical reforms," says Richard Fox, Head of Middle East and Africa Sovereign Ratings at Fitch. "However, reform implementation will remain challenging, with parliamentary elections scheduled in May. Lebanon's public finances are the weakest of any sovereign rated by Fitch."

Progress towards reducing Lebanon's heavy debt burden has been stymied since 2005 by a number of political shocks: the assassination of former Prime Minister Rafik Hariri in early 2005; the Hezbollah war against Israel in 2006 and the subsequent political standoff between government and opposition that left Lebanon without an effective government for 18 months and without a president since November 2007. Political tensions came to a head in May and prompted the Doha Accord, brokered by the government of Qatar. In the following three months parliament reconvened and elected a new president, a new government was agreed and won a vote of confidence in August. It now has a window of opportunity to implement key reforms agreed at the Paris III donor conference in 2007 and reaffirmed by the government in August.

The authorities have done well to contain the budget deficit and debt burden in the face of severe shocks - not just political but also the increase in oil prices, which has required higher transfers to heavily loss-making Electricite du Liban. Both the debt burden and deficit improved last year, after swelling under the impact of the 2006 war. Nevertheless, government debt of 170% of GDP and a deficit of 11% of GDP are both amongst the highest of Fitch-rated sovereigns and must be significantly reduced before positive rating action is warranted. Fitch will review the 2009 budget and monitor its implementation, as well as progress towards the intended privatization of the mobile telecom network that could have a material impact on the debt burden.

Lebanon's creditworthiness is supported by the Lebanese diaspora, which provides substantial transfers and investment, and deposits in Lebanon's banks. International reserves - a key barometer of confidence - have risen to new highs this year. Meanwhile, banks own 60% of government debt and have been willing to maintain their exposure in difficult circumstances. Foreign governments have also provided support at critical times, most recently at the Paris III conference. This combination of support factors has been critical in helping Lebanon retain its unblemished debt service record. As well as the high debt burden and turbulent politics, Lebanon's ratings are also constrained by the systemic risk inherent in a monetary system featuring a pegged exchange rate, a highly dollarized banking system and potentially volatile non-resident deposits. Shocks that triggered sustained falls in non-resident deposits and reserves would likely bring negative rating action. (Fitch12.09)

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11.3 LEBANON: Industrial Optimism

The prospect of greater political stability in Lebanon is having a direct effect on the country's economy, with investments increasing, tourism numbers on the rise and a program of economic reforms that will, if implemented, help to ease the state's massive debt burden. One segment of the Lebanese economy that is showing distinct signs of life is the industrial sector. A report issued by the Ministry of Industry in late August shows a sharp rise in imports of industrial equipment in May and June. This coincided with the signing of the Doha agreement, which ended Lebanon's political stalemate, paving the way for the election of Michel Suleiman as president and the forming of a national unity government.

The report, based on figures provided by the Higher Customs Council, shows that high levels of plant and machinery imports in May and June of this year contributed to a 6.1% increase in industrial equipment imports over the first half of 2007. In total, Lebanon imported $84.7m worth of industrial equipment during the first half of 2008, with May and June accounting for $40m.

In general, Lebanon has seen a shift away from manufacturing industries in the past 25 years towards a more services-dominated economy. Current estimates put industry's contribution to Gross Domestic Product (GDP) at between 18% and 20%, while the services industries dominate with around 72%, according to a Bank Audi report issued at the end of August. Nevertheless, industry currently dominates Lebanon's export trade, accounting for $1.68bn of $1.74bn in overseas trade in the first half of this year, according to the report from the Customs services.

Yet, though Lebanon's industries are increasing their export earnings, there has also been a sharp rise in costs of materials. Mineral products, electrical equipment and base metals, which account for 46.9% of Lebanon's total imports, have all risen in price this year. This has contributed to deepening the country's trade deficit to $5.56bn from January to June, compared to a $4.1bn deficit in the first six months of last year. According to Louis Hobeika, professor of economics at the American University of Beirut, Lebanon's government needs to focus more on the industrial sector in order to broaden the base of the economy. Indeed, the Lebanese economy has become overly dependent on the tourism and service sectors since the 1990s, at the expense of production-orientated sectors such as industry and agriculture, he told the local press on August 29. This has left the country's economy exposed during times of instability, such as following the war against Israel in mid-2006, Hobeika said. "The agricultural and industrial sectors, already weakened by the government strategy, were further impaired by the war, while the service industry came to a full stop during the entire time of the conflict," he said. "I believe this should prompt the new government to rethink its economic approach."

The policy statement issued by the new national unity government in early August did offer some hope for industry, describing the sector as vital for the economy. However, though saying soft loans and incentives would be made available to the manufacturing sector, the statement did not set out a timeline for when this assistance would be made available, nor did it give details of what exact form it would take.

The government also made clear it was not in a position to carry out far-reaching economic reforms, saying that the "period of its mandate is constitutionally limited, which limits its ability to conduct a comprehensive treatment for all the raised issues." These issues include maintenance of electricity supplies - crucial for the country's industries. High demand coupled with production inefficiencies at some of Electricite du Liban's aging power stations has resulted in severe electricity shortages, hitting industries such as the cement and ceramics sectors hard.

While the government announced plans on August 3 to reduce electricity fees for hotels and other tourism establishments as a measure to help them recover from the 2006 Hezbollah war and the more recent political turmoil, no such offer was made to the industrial sector. With high import bills for materials, a strong state focus on supporting the services sector and an uncertain investment environment, it may be hard for Lebanon's industries to expand their share of GDP. That said, if the latest trend in plant and equipment imports is anything to go by, the industrial sector still has room for optimism. (OBG12.09)

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11.4 IRAQ: IMF Executive Board Completes First Review Stand-By Arrangement

On 3 September, the Executive Board of the International Monetary Fund (IMF) completed the first review of Iraq's Stand-By Arrangement (SBA), which is designed to support the country's economic program through March 2009. The Board also completed a financing assurances review under the SBA. The $746.3m arrangement was approved in December 2007. It is being treated as precautionary by the authorities and no purchase is planned.

As part of the completion of the first review, the Board also approved Iraq's request for a waiver of an end-June 2008 quantitative performance criterion on the government wage and pension bill.

Following the Executive Board's discussion of Iraq's economic performance, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, said:

"After several very difficult years, economic prospects for Iraq are improving and the authorities are persevering with the implementation of their economic program in 2008. With the recent improvement in security, oil production and exports are increasing while inflation has been reduced. The strengthened fiscal and external positions offer Iraq a good opportunity to rebuild its institutions and infrastructure in order to achieve sustained higher economic growth. The success of these endeavors will hinge on continued improvements in security, sound management of oil revenues, and implementation of key structural reforms.

"To accelerate economic reconstruction and meet other pressing needs, the supplementary budget for 2008 provides for a sizable spending increase. The additional investment, following several years of public underinvestment, is welcome but will require vigilance to ensure that the quality of public investment is maintained. A civil service salary increase will be phased in over 2008 and 2009 in order to avoid overheating the economy. To keep inflation under control, the Central Bank of Iraq will tighten its monetary policy stance, notably by increasing the pace of appreciation of the dinar and by keeping its policy interest rate positive in real terms.

"Some fuel prices were increased in mid-2008, and the government intends to raise other fuel prices early next year to reduce still-sizable indirect fuel subsidies. The Fund stands ready to assist the authorities in developing an appropriate adjustment mechanism for setting domestic fuel prices.

"It will be important to step up the pace of structural reform. Of particular urgency are the early adoption of a comprehensive reform plan for modernizing public financial management, the finalization of the census of public service employees to eliminate ghost workers, and the streamlining of the in-kind Public Distribution System. In the financial sector, restructuring programs for two major commercial banks based on the completed financial and operational audits should be taken forward, and the set of prudential regulations for commercial banks completed. Establishment of a new legislative framework for the hydrocarbon sector will facilitate investments in the sector.

"Progress has been made in strengthening governance and fighting corruption in the hydrocarbon sector, through oil-metering and Iraq's participation in the Extractive Industries Transparency Initiative. An extension of the metering system to all oil sector activities will further strengthen transparency in the sector.

"The central bank intends to continue to implement the recommendations of the IMF's Safeguards Assessment Report and the external audit report of its 2007 financial statements. The adoption of reserves management guidelines is an important step in this regard. "The authorities are making commendable efforts to conclude debt agreements with official non-Paris Club and private creditors that have not yet provided debt relief to Iraq," Mr. Kato said. (IMF03.09)

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11.5 GCC: Middle East Economy- Labor Rations

Governments in the booming Gulf Arab states are becoming increasingly anxious at the erosion of their national cultures, as their growing economies suck in ever-larger numbers of expatriate workers. They are now devising a range of measures to limit the growth of segments of the expatriate population - in particular those at the less skilled end of the spectrum - while not impinging on the continued expansion of their economies. The concerns call into question the entire basis of the Gulf development model, entailing ambitious targets for economic growth and diversification, which cannot feasibly be achieved without a substantial increase in the expatriate population.

UAE student pool

The problem is most clearly evident in the United Arab Emirates, where expatriates account for more than 90% of the private-sector labor force and where the population is thought to have grown by almost one-third over the past three-four years. According to the most recent census, whose results were published in 2005, the UAE's population was 4.3m; it is now generally estimated to be about 6m. The UAE government announced in early September that it is setting up a national demographic agency that will be tasked with finding ways to slow down the growth of expatriate labor imports. Among the initial measures that have been proposed is a scheme to allow students who are enrolled in UAE universities and who are the children of foreign residents to take up part-time jobs. This measure appears to be targeted at children of long-term residents from other Arab countries, who have more cultural affinities with Emiratis than do Asian and European residents, who predominate in the expatriate community. The students would be expected to gravitate towards semi-skilled jobs in the services sector that tend to be performed by Asians.

The government is also considering the establishment of ethnic and cultural diversity quotas within companies, so as to prevent certain national groups predominating. Other ideas include changing building codes so as to reduce reliance on foreign construction workers and introducing much more automation into the services sector, for example at petrol filling stations.

However, these measures will have only a marginal impact on the overall size and make-up of the expatriate population. There is no sign of any let-up in the construction activity associated with investment in infrastructure, real estate, tourism, financial services and industry, which suggests that the current total of some 1.5m expatriate building workers is only likely to increase. Once this wave of construction is completed, there will be growing demand for imported services and factory workers to operate and maintain the new hotels, offices, apartment buildings, leisure and cultural centers, transport facilities and industrial plants. The businesses importing the labor are likely to continue to insist on their freedom to recruit from whatever market suits their needs best.

Picking and choosing

Elsewhere in the Gulf, Bahrain and Kuwait provide examples of the pitfalls of trying to impose ethnic selection in structuring the labor force. Following an incident in Bahrain earlier this year in which a Bangladeshi mechanic was charged with the murder of his Bahraini employer, the government considered applying a policy of refusing to renew work permits of Bangladeshis and banning the entry of any more workers from the Asian country. However, this policy has since been quietly dropped following protests from employers' organizations. Bangladeshi workers also found themselves in the firing line in Kuwait in July, when they were blamed for instigating protests, some of which turned violent. Several hundred Bangladeshis were expelled, and there were reports that the government was thinking of adopting a policy similar to that under consideration in Bahrain. The Kuwaiti government has addressed the immediate problem through instituting a minimum wage for security and cleaning staff and through cracking down on trafficking in worker visas. However, a number of MPs have started to agitate for a national strategy to be charted for the labor question, based on targets for reducing reliance on expatriates.

A proposal to impose a limit of five or six years on the residence of foreign workers is expected to be tabled for discussion at the annual summit conference of the Gulf Co-operation Council (GCC), to be held in Oman at the end of this year.

Streamlining

The Kuwaiti response to the recent labor unrest showed that GCC governments have a pragmatic self-interest in ensuring that legitimate grievances of expatriate workers are addressed. In this vein, Saudi Arabia is considering proposals to relax some of the rigid regulations on sponsorship of workers, in an effort to create a more flexible expatriate labor market. Saudi employers have maintained near-absolute control over the lives and welfare of their foreign employees because foreign workers have generally been required to surrender their passports to their sponsors in the Kingdom (usually their employer). Foreign workers are also unable to change jobs or leave the country without their employer's permission, leaving them vulnerable to exploitation; there are frequent reports of expatriates working for months for no pay. The labor minister, Ghazi al-Gosaibi, is said to be considering a new law setting up a regulatory agency that would draw up contracts between local companies and expatriate employees, thereby diminishing the powers of the sponsor and enabling workers to find new jobs once their contracts have expired.

Mr. Gosaibi earlier this year worked a shift flipping burgers in a fast-food restaurant in Jeddah, in an event staged to demonstrate that Saudis should not consider such jobs to be beneath their dignity. However, there is still a yawning gap between the pay and conditions that Saudis and other Gulf nationals regard as acceptable and the minimum that expatriates are happy to work for. That gap has probably increased as a consequence of the booming economic conditions, which in turn have driven demand for more expatriate workers. (EIU02.09)

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11.6 KUWAIT: Fitch Upgrades Kuwait to 'AA'; Outlook Stable

On 4 September Fitch Ratings (http://www.fitchratings.com) upgraded Kuwait's foreign currency Long-term Issuer Default rating ("IDR") to 'AA' from 'AA-' ('AA minus') and has affirmed the local currency Long-term IDR at 'AA'. The Outlooks on both ratings remain Stable. The Short-term foreign currency rating is affirmed at 'F1+' and the Country Ceiling is upgraded to 'AA+' from 'AA'.

"High oil prices have generated a large revenue windfall, which Kuwait has largely used to strengthen its external balance sheet," says Charles Seville, Associate Director in Fitch's Sovereign Group. "Kuwait ran a fiscal surplus of over 40% of GDP in the fiscal year ending in March 2008."

Sovereign wealth funds managed by the long-established Kuwait Investment Authority are accumulating official, non-reserve foreign assets at a rapid rate. The net sovereign foreign asset position, which counts all assets held by the government, including equity assets, is projected to reach $300 billion by the end of 2008, almost double its end-2004 level. The net public external creditor position, which excludes equity holdings on the asset side, is as strong as any sovereign rated by Fitch, including Abu Dhabi ('AA/F1+/Stable Outlook'). Although Abu Dhabi is substantially wealthier in per capita terms, it is also more exposed to contingent liabilities in the wider public sector.

The strong external balance sheet offers a sizeable cushion in the event of a major fall in oil prices, which is still the main economic risk. However, even accounting for a large transfer to the social security fund under the present budget, the oil price would have to fall below $50 per barrel to erase the fiscal surplus. Excluding the transfer, the breakeven oil price falls to nearer $25 per barrel.

Since the Central Bank of Kuwait re-pegged the dinar to a basket of currencies in May 2007, the authorities have gained some monetary policy flexibility to manage money supply growth and speculative inflows. The dinar has appreciated by up to 9% against the US dollar under the new regime, although inflation has also continued to rise. Fitch believes that inflation will subside gradually following recent falls in food prices, although it will take time to return to its formerly low level.

The authorities have taken steps to cool growth in bank lending, which as elsewhere in the Gulf has been associated with rapidly growing asset prices, first in equity markets and more recently in real estate. Fitch regards risks to the banking sector and the sovereign from rapid credit growth to be less than elsewhere in the Gulf. Nevertheless, a fund set up earlier this year to assist private citizens with bad debts to the banks has injected unwelcome moral hazard into the system.

Kuwait's more democratic system of decision-making has resulted in public sector reform lagging its Gulf neighbors - Abu Dhabi in particular. Nationals are very dependent on the public sector for employment. A transfer of $20bn to the social security fund in the current budget is designed to address concerns over the long-term sustainability of the generous welfare state, pending a future reform, and a similar-sized transfer is expected in the next fiscal year.

The state-owned oil industry is investing to modestly increase oil and gas production capacity, perhaps making greater use of foreign expertise. Kuwait's economy is oil-dependent to a similar extent to its closest peers, Saudi Arabia ('AA-' (AA minus)/F1+/Stable Outlook') and Abu Dhabi, and the authorities are keen to diversify the economy. Abu Dhabi's public sector enterprises are borrowing to fund ambitious investment projects at home and abroad, and Saudi Arabia is seeking foreign investment and setting up new industrial and commercial poles to create jobs for its rapidly growing workforce. Kuwait's diversification has so far rested more on growing official investment income and the expansion abroad of private sector firms, a less ambitious strategy but one which exposes the sovereign to fewer potential contingent liabilities.

In common with others in the region, Kuwait's rating is depressed by geopolitical risk, with the clearest risk posed by an escalation in tensions between Iran and the international community over its nuclear program. (Fitch04.09)

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11.7 Kuwait: Re-engaging with Iraq

Kuwait is moving to mend fences with its neighbor Iraq, seeking to heal some of the wounds left over from Baghdad's 1990 invasion and the subsequent widespread devastation to the Kuwaiti economy and society. The Oxford Business Group noted that on September 7, Kuwait's Prime Minister Sheikh Nasser Mohammed Al Ahmed Al Sabah announced he had accepted an invitation to go to Baghdad, in what would be the highest-level visit by an official of the emirate in 18 years. The announcement, which came during an official visit by Iraqi Finance Minister Bayan Jabr Solagh, is the latest step in Kuwait's slow process of reconciliation with Baghdad.

In July, Kuwait named Ali Al Momen, formerly the head of the country's defense forces, as its first post war ambassador to Iraq. Al Momen is expected to preset his credentials during the prime minister's visit, tentatively scheduled for after the finish of the holy month of Ramadan at the end of September.

The resumption of high-level relations between the two neighbors could in time provide a further stimulus to the Kuwaiti economy. Though still trying to recover from the effects of the 2003 Gulf War, and the subsequent civil unrest, Iraq can serve as both a source of imports - notably non-oil minerals and agricultural produce - and investment opportunities. Kuwait already benefits from being on Iraq's doorstep, with much of the supplies and aid being channeled into the country being transshipped through the emirate.

One Kuwaiti firm that has not waited for diplomatic ties to be strengthened is Al Aqeelah International Real Estate, which is leading up an investment group involved in a series of projects in Najaf, site of the shrine of Imam Ali, the son-in-law of the Prophet Mohammad. The firm has ploughed some $50m into rebuilding the Najaf airport, and has announced plans to construct thousands of homes and a number of hotels in and around the city, which attracts up to 9m Shiite pilgrims every year.

Nazeh Khajah, the head of marketing and public relations for Al-Aqeelah, said a proposal for a multi-billion redevelopment of Najaf had been lodged with Iraqi authorities. According to Iraqi officials, the development proposal includes the construction of 200,000 new homes, schools, medical facilities and an artificial island in Lake Najaf. As a region that draws millions of visitors, Najaf is a natural choice for investment, Khajah said in an interview with Reuters in late July. "The question shouldn't be why we chose to invest in Najaf. The question should be why don't we choose Najaf? It's one of the most noble places in the world," he said.

Al-Aqeelah recently baulked at another venture put forward by Iraq, which of developing an island on the Tigris River in central Baghdad into a honeymoon resort. According to Khajah, there is not a sound business case for developing leisure tourism in Iraq at the moment. "Iraq is not exactly the place you want to spend a romantic time with your newlywed, if you know what I mean," Khajah told the local press on August 31. "So I don't think we'll be ready to jump into such a project."

While the two neighbors are moving closer together, there are still a number of issues that divide them. Foremost among these are Kuwaiti claims for compensation stemming from damage and losses caused by Iraq's 1990 invasion. Through a fund set up by the United Nations Security Council, Iraq contributes 5% of its oil earnings towards paying compensation for the war. To date, some $11bn has been paid to Kuwait from the fund, with the UN having approved claims of around $45bn. Baghdad has called for the remaining debts and reparations dating from the war and the Saddam era to be written off, though this request has only received a lukewarm response from Kuwait.

The compensation issue resurfaced in late August, when national flag carrier Kuwait Airways (KAC) won an injunction from a Canadian court allowing it to seize up to 10 aircraft being supplied to Iraqi Airways (IAC) in part reparation for losses resulting from the 1990-91 war. The planes, being built by Canadian firm Bombardier, are part of an order placed by Iraqi Airways and the Iraqi government earlier this year. KAC, with the support of the Kuwaiti government, had been forced to seek the seizure order following the failure of Iraq to commit to meaningful negotiations over compensation, said Christopher Gooding, a legal advisor for the airline.

"I hope that this action will act as a wake-up call," he said on August 29. "As I have said before, it is not the intention of KAC to take aggressive action for its own sake, but in the absence of any meaningful dialogue and in the light of KAC's duty to protect public funds, IAC and Iraq can expect further similar action to be taken without further warning." It appears that the warning has been heeded. The dog fight between the two airlines may be about to be resolved though, with Solagh telling media during his trip to Kuwait that a memorandum of understanding to settle the compensation claims had been signed. "We have agreed to resolve the dispute between Kuwait Airways and Iraqi Airways. We have agreed on the main points and left a technical team to discuss the details," Solagh said.

While it may be a long time before all of the wounds from the war are healed, economic and political salves are being applied, to the benefit of both Kuwait and Iraq. (OBG12.09)

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11.8 OMAN: Loyal To The Peg

Although rising inflation and a weak US dollar have spurred some regional economies such as Kuwait's to drop their dollar peg, the Central Bank of Oman (CBO) has made moves to squash speculation of a revaluation of the Omani rial. On August 31, CBO Executive President Hamoud Sangour Al Zadjali outlined for the Oxford Business Group the relevance and benefits of the fixed dollar peg for the sultanate. "The fixed peg of the rial to the dollar has served as one of the key underlying factors behind sustained monetary and financial stability in an open and oil-dependent economy, and the exchange rate stability has also been a potent driving force in promoting investment and growth in the country," he said.

Al Zadjali explained that the current fixed peg has the benefit of preventing exchange rate speculation, thus encouraging promoting trade and investment. He added that the monetary discipline of the US Federal Reserve ensures the stability of the fixed peg, which in turn provides a nominal anchor for the CBO's monetary policy.

The latter point is of concern to some critics of the CBO's policy on inflation as - given the US economic slowdown and credit crunch - the Fed has been cutting interest rates in an effort to stimulate growth. While this policy may suit the US, it is the opposite of what the Omani economy needs, namely moderate interest rate increases to rein in exuberance.

Al Zadjali conceded that, "No regime has only benefits, without any costs. The choice of the regime has to be specific to the needs of the country, so that costs are minimized while the benefits are maximized in relation to the needs. Revaluation may have many harmful and undesirable effects on the economy." He explained that Oman's oil income accrues almost entirely in dollars and that a revaluation would correspondingly reduce these revenues in rial terms. At the same time, budgetary expenses would remain allocated in rials. "Revaluation would, therefore, come as a major pressure on Oman's fiscal situation," Al Zadjali said. "Given the import-dependent nature of the economy, revaluation-induced higher purchasing power of the rial may encourage higher consumption of imported goods and services, which would exert pressure on the sultanate's balance of payments," he added.

Murray Sims, CEO of the National Bank of Oman, also feels that revaluation of the rial could potentially hurt the economy. "Oman is looking to encourage its fledgling export sector as part of its diversification process. If the CBO were to revalue the rial, Omani exports would become less competitive," Sims told OBG on July 27.

Conversely, Munir Abdulnabi Yousef Makki, managing director and president of Fincorp, one of the sultanate's leading investment banks, argues in favor of appreciating the rial. "Because the Omani economy is in an upswing due to major investments in infrastructure, manufacturing and real estate, without appreciation of the value of the rial, the current value of the currency will not reflect its intrinsic strength," he told OBG on August 9th. Makki went on to say that Oman had devalued its currency in the 1980s by 11% to address the challenges of slumping oil prices. He argued that if the government was able to devalue its currency at that time, then there is a strong case for appreciation now, during this time of growth and high oil prices.

In addressing concerns that the fixed peg to a depreciating dollar automatically translates to a major source of imported inflation, Al Zadjali conceded that there are valid points to this argument. However, he said that changing monetary policy based on this argument alone tends to be too short-sighted and ignores the enormous benefits of the peg for the overall economy. "One must notice that in the last six months or so, the dollar has gradually reversed its depreciating trend, and oil prices have also declined by more than 20% from their mid-July peak levels," he said. "The fixed peg still looks like the most appropriate regime for Oman, and the CBO remains fully committed to defend the peg as one of the key pillars of its overall approach to monetary and financial stability in the sultanate," concluded Al Zadjali.

In the same vein, Sims explained, "Exchange rates go in cycles and what we have now is perhaps a more vicious cycle in the depreciation of the dollar versus other currencies, but it is still nevertheless a cycle. Cycles have been endured before and will no doubt be endured in the future." (OBG05.09)

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11.9 EGYPT: The Russians are Coming

The Oxford Business Group observed that Western European tourists have new competition for hotel rooms in Egypt. For the first time, Russians are expected to surpass other visitors, with 2m projected to arrive in 2008. The Egyptian tourism industry has benefited from the shift. According to a report by lastminute.com, an online travel and tourism agency, Russian tourists spend more money and have lower expectations about service than their German, British and American counterparts.

Increased Russian presence in Egypt is part of a larger global trend. According to the Russian Tourist Industry Association, Russia is the world's fast growing outbound market with 9.36m Russians travelling abroad in 2007, a 20.8% increase compared to the previous year. In 2007, 1.5m of these tourists chose to spend their vacation in Egypt.

Russians, along with other tourists, have boosted the Egyptian tourism industry. According to the ministry of tourism, there has been strong growth in the sector through the first six months of 2008. Despite competition from other Mediterranean locations, Egypt has tried to develop distinct offerings at affordable prices. This strategy has lead to a 25% increase in tourist arrivals from June 2007 to June 2008, with numbers growing from 9.8m to 12.3m, according to Tourism Minister Zoheir Garranah. This is a significant increase for a sector that already accounts for 11.3% of the country's Gross Domestic Product (GDP) and employs 13% of the total workforce.

Egypt has sought to diversify its tourism offerings to attract a broader range of visitors. "We now have a lot of people that don't come just for the historical side," Mohammed El Shabrawy, vice chairman & managing partner of American Express Travel Serves, told OBG. "They come for the diving, for the shopping and for the cruises." It is getting even easier for tourists to get to their chosen Egyptian destinations. Tourism has benefited from an increased number of charter flights from outbound markets such as Russia and Europe, making it simpler and more affordable to vacation in Egypt.

Although the sector is currently strengthening, the world economic downturn and the climbing local inflation may eventually affect tourist arrivals. Analysts believe that the global economic situation will have an uneven impact on the industry. Some lower-end travelers may decide to stay home, but it is anticipated that others will continue to visit Egypt. "We are still comparably low priced, so for the middle class tourist, Egypt is still a desirable and affordable destination," said El Shabrawy.

To capitalize on the recent growth and to avoid downturns, the Egyptian tourism operators will have to take proactive measures, said Garranah. "Increases in daily living and fuel costs, which impact airline prices, are a concern. The solution is not to raise ticket prices." He said that this strategy would likely fail, which would lead operators to start making special offers. If this happens, Egypt would become known as a discount destination, he told OBG in a recent interview.

Discount destination is a label Egypt is trying hard to avoid. Instead, to combat anticipated declines in arrivals from traditional markets, Egypt is working to expand its tourist bases, particularly into China and India. By the year 2020, China and India are expected to provide 150m tourists per year.

In addition to targeting burgeoning markets in Asia, Egyptian operators are trying to target less obvious markets, like Australia, El Shabrawy told OBG. To attract these customers, operators have developed a number of strategies and partnerships. They have joined with carriers like Alitalia and Singapore Airlines to offer free stopovers in Egypt, allowing visitors to have short stays as part of longer trips from Australia and Asia to Europe.

Given the rising costs that airlines bear and the influx of tourists to Egypt, this partnership is advantageous for both parties. "The airlines discovered that they cannot survive on their own. But if they partner with tour operators they can fill the seat, and the operators can sell the tours. They know they have to work together," said El Shabrawy.

Expanded collaboration might be the best protection for the Egyptian tourism industry against the global economic downturn. Product bundling would likely increase volumes and boost revenues. "When there is high demand, businesses tend to increase prices. But you have to give value for this increase. The more you give, the more you get," Garranah told OBG. (OBG05.09)

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11.10 MALTA: Fitch Affirms at 'A+'; Outlook Stable

On 5 September 2008: Fitch Ratings (http://www.fitchratings.com) affirmed the Republic of Malta's Long-term foreign currency and local currency Issuer Default ratings (IDRs) at 'A+' with Stable Outlooks. Fitch has also affirmed the Short-term IDR at 'F1'and Country Ceiling at 'AAA', the common country ceiling for the euro-area.

"The rating affirmation follows Malta's successful adoption of the euro on January 1 2008 and reflects the sharp consolidation of the public accounts in recent years in advance of joining EMU and the government's sponsorship of reforms to enhance growth and competitiveness," says Chris Pryce, Director in the Sovereign Group. "The government is now expected to take advantage of its renewed electoral mandate to further constrain the growth of public spending while continuing its reforms in education and training. These are needed to enhance competitiveness and attract foreign direct investment which will remain central to the development of the economy."

Malta's 'A+' rating is supported by healthy governance indicators reflected in strong institutions, a well capitalized banking system and membership of the euro area which reduces exchange rate and external financing risks. GDP per capita is in line with the 'A' range median of $17,500 but still well short of the average of $31,300 and $29,800 for the euro area as a whole and the 'AA' median respectively. Public debt is still high relative to 'A' rating category norms but its continued decline assuages concerns, while recent structural reforms should help the economy to diversify, supporting medium term growth.

The recent improvement in Malta's fiscal position has been quite dramatic. In the past four years the public spending ratio was cut from 47.8% of GDP in 2003 to 42.5% in 2007, at which level the agency now expects it to stabilize. Over the same period revenue rose by just under 3% of GDP and subject to cyclical developments will continue to rise albeit mildly for some years. The impact on the public debt ratio was equally pronounced. Having risen during the decade of fiscal laxity from under 40% of GDP to top out at almost 73% in 2004, it fell back below 63% by end-2007. Fitch detects no evidence of a slackening fiscal resolve now that Malta is a full member of EMU and the outlook is for a continuing fall taking the ratio below the Maastricht 60% criterion within the next two years.

Economic growth recovered in 2005 from the downturn following the IT bust at the beginning of the decade and has regained the buoyancy it exhibited in the 1990s as the two staples, tourism and computer micro chip production, recovered. The country is also developing new industries and services. These include the manufacture of pharmaceuticals and security paper, aircraft leasing and repair facilities, call centers and on-line gaming. These new sources of growth will be increasingly needed to bolster employment and earnings as the manufacture of computer chips moves eventually to low wage areas of Asia. In contrast tourism, the other major source of foreign earnings, has been innovating to support recent growth. The government has also recognized the need to make the economy more flexible to cope with future shocks inside the currency union.

The banking system attracts a SAIR of 'C', roughly in line with the sovereign rating 'A' median and while exposure to the real estate sector is sizeable the sector is well placed to manage a slowdown in the property market. The sustainability of Malta's long-term public finances has been increased by a major pension reform introduced in late 2006. (Fitch Ratings05.09)

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11.11 LIBYA: IMF Executive Board Concludes 2008 Article IV Consultation

On July 18, 2008, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Socialist People's Libyan Arab Jamahiriya.

Background

Since the lifting in 2003-04 of the UN sanctions, which lasted more than 10 years, Libya has launched a series of structural reforms and accelerated its transition to "people's capitalism." The normalization of diplomatic relations with the U.S. and the EU in the second half of 2007 has contributed to increased foreign investors' interest, particularly in the hydrocarbon, banking and infrastructure sectors. However, while progress has been made in recent years to liberalize the economy, it remains largely state controlled and heavily dependent on hydrocarbon resources. Crude oil and gas accounted for about 70% of GDP, 90% of total government revenues and 98% of total exports in 2007.

A Wealth Distribution Program (WDP) was launched in March 2008 to distribute part of the oil wealth to the population and reduce the size of the government. Disbursements will be in the form of both cash and shares in projects. The initially announced amount was $20-25b, but subsequently only $3.8b was approved for this year. The authorities are still considering the size, form and modalities of the annual distributions in the years ahead.

Macroeconomic performance strengthened further in 2007, notwithstanding an acceleration in inflation. Real GDP grew by 6.8%, supported by an expansion in the hydrocarbon sector (3.9%) and a rapid increase in non-hydrocarbon activities (10.3%). Growth was particularly strong in construction, transportation and trade. At the same time, average inflation increased substantially to 6.2%, largely driven by higher food prices and a marked increase in public expenditure. Inflation accelerated further in the first quarter of 2008, averaging about 12% (year-on-year).

Despite higher oil revenues, Libya's fiscal surplus in 2007 narrowed to 26% of GDP, compared to 35% in 2006. This reflected a rapid increase in virtually all expenditure items (45%), albeit at a slightly slower rate than what was envisaged in the budget. The decision to raise public wages resulted in an increase in the wage bill of around 50%. Capital expenditure also grew rapidly.

On the external side, the current account surplus declined to 34% of GDP, compared to 46% in 2006, due to a marked increase in imports (33%). Continued high oil exports resulted in a further build up of the net foreign assets of Central Bank of Libya (CBL) to almost $80b. The real effective exchange rate of the dinar appreciated by 1% in 2007, and about 5% in the first quarter of 2008 due to the combined effects of the rising inflation and the strengthening of the euro against the SDR (to which the dinar is pegged).

Broad money growth accelerated to 41% in 2007, reflecting the substantial increase in net foreign assets and the rapid increase in public expenditure, including on-lending by SCIs. Credit extended to the nongovernment sector by these institutions grew by about 36%, while that extended by commercial banks grew by about 15%. Interest rates remained low and became negative in real terms with the rise in inflation. In an effort to address excess liquidity, the CBL recently increased its policy interest rate to 2.25% and the reserves requirement to 20%. It introduced in May 2008 its own certificates of deposit as part of its ongoing effort to enhance the monetary policy framework.

The Libyan Investment Authority (LIA) was established in March 2007. The authorities plan to invest the LIA's initial $40-50b mostly abroad on a commercial basis and ensure that the LIA will be run by a qualified and independent management. Recent enhancements of its operational framework are largely in line with staff's recommendations.

Progress has been made in various structural reforms, partly in line with past Fund TA recommendations and the Medium-Term Reform Strategy. A sound framework for the management of the oil wealth has been established through the creation of the LIA. Customs administration has been reformed and a large taxpayer's office established; the presentation of the budget has been consolidated and a macrofiscal unit initiated; a large number of public enterprises have been privatized; and one third of public employees are being retrenched to the private sector. Two large state-owned banks were privatized in 2007 and 2008, and two of the three remaining public commercial banks were merged in April 2008. Most regional banks have also been merged into one bank, and agreement has been reached with financial institutions from UAE and Qatar to establish two new banks.

Libya's debt relief to heavily indebted poor countries (HIPCs) continues to be based on forgiving interest payments and using a combination of swaps and rescheduling of principal. The authorities indicated that agreements based on these modalities have already been reached with some HIPCs, and that negotiations are ongoing with others.

Executive Board Assessment

Executive Directors welcomed Libya's continued solid macroeconomic performance, as reflected in the acceleration in GDP growth - in particular in the non-hydrocarbon sector - and the large fiscal and external current account surpluses, based on both the favorable external environment and the authorities' ongoing economic reforms. Directors agreed that Libya's medium-term outlook remains positive, but underscored the need to reverse the recent acceleration in inflation - caused in particular by the increase in food prices - and to further advance structural reforms in the period ahead, in support of the authorities' welcome initiative to speed up the transition from a state-dominated to a market economy.

Directors stressed that efforts to contain inflation should focus on tightening the fiscal stance by limiting the rapid increase in public expenditure, which could also pose risks for expenditure quality. They welcomed the authorities' plans to limit any further increases in public sector wages and to complete the civil service reform. While recognizing the need to upgrade the infrastructure, Directors encouraged the authorities to continue to prioritize public investment and to stand ready to scale back more of the planned projects if inflationary pressures do not recede. Public financial management also needs to be strengthened further, including by unifying the process of budget preparation and implementation under the Ministry of Finance.

Directors welcomed the authorities' decision to limit the scope of the Wealth Distribution Program in 2008 - while maintaining the focus on strengthening human capital - against the background of the economy's absorptive capacity constraints and increased inflation. This conservative approach will need to be maintained in the period ahead in order to avoid crowding out priority spending, to discourage rent-seeking activities, and to further reduce inflationary pressures. Directors considered that the planned reform of the public administration in the context of the WDP could present an opportunity to address inefficiencies, but care should be taken not to jeopardize the delivery of essential public services. They recommended that the authorities consider the reform plans carefully in consultation with the World Bank.

Directors commended the authorities for launching the Libyan Investment Authority in a transparent fashion, and the recent enhancement of its operational framework. They emphasized the importance of limiting domestic investments by the LIA. Directors encouraged the authorities to continue to enhance the operational framework of the LIA in line with the evolving best practices for sovereign wealth funds.

Directors commended the recent efforts of the Central Bank of Libya to tighten monetary policy by raising both the CBL policy interest rate and the reserves requirement. They noted that greater reliance on indirect monetary policy instruments would be beneficial, and in this regard, they welcomed the recent introduction of CBL certificates of deposit.

Directors commended the authorities for the progress made in bank privatization and restructuring. They encouraged the authorities to finalize the plans to privatize the two remaining public commercial banks. It would also be important to establish an independent bank restructuring agency that would take over ownership of the specialized credit institutions and oversee their restructuring and privatization.

Directors agreed that the dinar's peg to the SDR has served Libya well as it provides a strong monetary anchor while allowing some flexibility in the dinar's exchange rate vis-à-vis individual major currencies. An eventual move to greater exchange rate flexibility would be beneficial, but would need to be gradual and preceded by a switch to market-based monetary management and development of expertise in foreign exchange markets. Directors took note of the staff assessment that the dinar is moderately undervalued at present, but that this undervaluation is likely to be transitory given the expected evolution of the fiscal and current account positions based on current policies.

Directors welcomed the authorities' commitment to continue to improve economic and financial statistics in order to facilitate better monitoring and analysis of developments to guide policy formulation. They urged the authorities to establish a framework for Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) in line with international standards. Directors encouraged the authorities to continue to provide full debt relief to heavily indebted poor countries in line with the Heavily Indebted Poor Countries (HIPC) Initiative. (IMF09.09)

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11.12 ALGERIA: Scenarios for the Presidential Election

Algeria has entered the countdown stage for the April 2009 presidential election, a critical test for its democratic experiment. Algeria's foray into pluralism had a bitter start when the electoral process was halted in January 1992 due to the threat posed by the Islamic Salvation Front (FIS). After winning the majority of parliamentary seats, the FIS increased its belligerent rhetoric against the powers of the political regime and the military in particular. This led a group of officers to choose to call off the elections and force President Chadli Ben Jadid to resign, a decision that plunged Algeria into a cycle of violence called "the bloody decade" for the social and economic catastrophes it caused.

Neither the rules of the game nor the candidates in the coming election are clear yet, but it is expected that President Abdelaziz Bouteflika will amend the constitution to allow himself to be nominated for a third term. This likely development shows the stagnation in political life. There is no strong opposition, whether in the democratic parties with their diversity and internal weakness, or the Islamist parties with their plurality and contradictions. The only incident breaking the monotony recently was a joint statement issued by Front of Socialist Forces leader Hocine Ait Ahmed, former Prime Minister Mouloud Hamrouche, and former National Liberation Front (FLN) Secretary General Abdulhamid Mehri in which all three committed themselves to building an open, pluralistic, democratic system.

Bouteflika still calls all the shots politically, the latest being a June 2008 cabinet reshuffle that the opposition called a handoff between the two parties in power, the FLN and the National Rally for Democracy (RND). Prime Minister Abdelaziz Belkhadem was dismissed to allow for an internal reorganization of the FLN that would give Bouteflika, the party's honorary president, more control should he be nominated for a third term. The return of RND Secretary General Ahmed Ouyahia to the position of prime minister also is connected to the upcoming election; the president needs Ouyahia to give the impression that there is a consensus inside the Algerian ruling elite. Some also see Ouyahia 's appointment as an attempt to neutralize him as a serious potential competitor for the presidency, even though Ouyahia has already said he would not run against Bouteflika and that he was favorable to a constitutional amendment to allow Bouteflika to run.

Political forces outside the ruling coalition have not yet mobilized for the election. There has been no real action yet from the Front for Socialist Forces, whose leader Ait Ahmed has been based in Geneva since the onset of political pluralism. His deputy in Algeria is Karim Tabou, a young man lacking political experience. In addition, there is the Rally for Culture and Democracy (RCD) party, whose leader Said Sadi has drawn media attention both at home and abroad with his description of the ruling clique as “Tikritis” seeking to Balkanize and Lebanonize Algeria. Beside these two parties, there is the moderately leftist pro-Bouteflika Workers' Party led by Louisa Hanoune, as well as the wild card Algerian National Front led by the anti-Bouteflika Moussa Touati.

There are two principal scenarios for what will happen next spring. The first is that Bouteflika and his supporters will triumph on the strength of the ruling coalition's presence in parliament; they hold 249 of 389 seats. The president is also trying to enhance his acceptability for a third term by emphasizing the economic and social progress made during his two terms so far, as well as the return of peace and stability through the national reconciliation project.

A second scenario entails the transformation of the political situation in two possible directions. The most positive possibility would involve Bouteflika refraining from running (for health or other reasons), thereby giving full freedom of choice among other candidates. This would boost lagging voter turnout and avoid repeating the experience of the 1999 presidential elections, when most of the candidates withdrew at the last minute, citing the military's backing for Bouteflika. A more negative sort of transformation might take place if some of the parties resorted to violence to oppose Bouteflika's nomination for a third term. This would most likely involve the Front of Socialist Forces or the RCD exploiting the predominately Berber Kabyle region, which might explain why the president selected a prime minister from that region.

All scenarios remain feasible at present, although a constitutional amendment allowing Bouteflika to continue as president is the most likely. But that outcome hinges on an agreement between Bouteflika and Ouyahia on a division of political power (that would allow Ouyahia to become vice president) as well as financial interests (namely, not infringing on the interests of those bankrolling Ouyahia). Should the two leaders clash over these points, this could open the doors for the second scenario: strengthening the opposition and mobilizing the political street, particularly in the Kabyle region, against a third term for Bouteflika. Likewise, Islamist groups could exploit the political void or chaos on the streets should the ruling factions not maintain a common front, paving the way for the return of political figures from the dissolved FIS, many of whom are still yearning for a comeback.

Mostafa Saidj is a professor of European-North African relations at the University of Algiers. Paul Wulfsberg translated this article from Arabic. (ARB10.09)

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11.13 TURKEY: Turning Green

In Turkey, the negative effects of climate change are rather evident. Over the past few months, Turkey has experienced one of its driest and hottest winter seasons. During last winter, the country suffered severe floods, the worst in the past 100 years. The situation is rather problematic and its projection in the near future is not optimistic. Turkey's high rate of energy-related carbon emissions growth is expected to accelerate, with emissions rising to almost 400 million tons in 2020 according to estimations. The fast economic development of the country is surely presenting an explanation for the high CO2 emissions, as economic growth outweighed environmental regulations:

Energy-intensive, inefficient industries remain under government control with soft budget constraints, contributing to undisciplined energy use. In the industrialized and high populated areas, the CO2 emissions are much higher than in other parts of the country:

Moreover, carbon intensity in Turkey is higher than in the western developed countries average. Turkey as an Annex I country in the Convention on Climate Change had a ratio of 3.3 ton CO2 emissions per capita in 2003. The country is listed in the bottom of the OECD countries, EU-15 countries and also below the world levels.

The Role of Central Government

In spite of the efforts and a number of success stories since the early 1980's to address pollution and degradation of environmental resources, environmental management in Turkey has long been suffering from a number of deficiencies. These include over-reliance on regulatory mechanisms, limited public participation and awareness, lack of environmental information, deficiency of budgetary resources allocated to environmental protection and rehabilitation, and lack of capacity of institutional structures at local level.

Despite the fact that planning, policy-making and implementation practices often fail to incorporate environmental rules, Turkey is currently trying to respond to the threat of climate change. The country had an important decision at the 7th Conference of Parties (COP7) in Marrakech in 2001. This places Turkey in a different situation from that of the other Parties included in the Annex I of the Convention. The United Nations Framework Convention on Climate Change (UNFCC) came into force on May 2004, with Turkey becoming the 189th Party of the Convention and thus obliged to implement the addressed commitments.

Currently, the overall objectives of energy-related environmental policies in Turkey are to ensure sufficient, reliable and economic energy supplies to support sustainable economical and social development while protecting and improving the environment. The country's environmental policy considers that energy policy should take into account environmental problems and that a balance should be found between increases in energy demand that are required for economic development and environmental concerns.

Institutionally, in charge of the environmental policies and responsible for raising public awareness on the issue is the Ministry of Environment and Forestry. The Ministry undertakes important actions towards the dissemination of the pressing issue of climate change, as well as in educating and raising the awareness of society regarding future adverse impacts of global warming.

The Turkish Grand National Assembly (TGNA) recently adopted a decision to set up a Research Commission on the causes and effects of global warming in the country. The new Commission –consisting of 14 members of Parliament – will provide input as the country attempts to adapt to climate change.

Turkey has not yet adopted the Kyoto protocol, as it was not part of the UNFCCC when the Protocol was adopted in 1997. Thus, Turkey does not have a quantified emission limit or reduction target in the first commitment period of the protocol running from 2008 through 2012.

The new Research Commission, established by the TGNA, is expected to produce a study that might introduce a new dimension in Turkey's approach with regard to the first and consecutive commitment periods of the Kyoto Protocol. Right now, public awareness of the danger of climate change is building across the country. Without doubt, the prospect of Turkey's accession to the EU requires the harmonizing of the Turkish legislation with the Acquis Communautaire. Environmentally friendly policies will be a precondition for accession and environmental issues will be addressed within the framework of the 27th negotiation Chapter. (The Bridge Q1/08)

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11.14 TURKEY: Courting Turkmenistan To Diversify Energy Imports

UPI (http://www.upi.com) reported in 3 September that the implications of the recent conflict between Russia and Georgia continue to reverberate far beyond the two countries. The confrontation exposed the vulnerability of Western export routes of Azeri Caspian oil across Georgia into Turkey via the $3.6b, 1,092-mile Baku-Tbilisi-Ceyhan pipeline. The million-barrel-per-day BTC pipeline, the world's second-longest, began operations in May 2006 and provided a fiscal bonanza not only to exporter Azerbaijan, but to Georgia and Turkey as well, which were able to collect lucrative transit fees.

Ironically, it was not the military confrontation in South Ossetia that exposed the pipeline's vulnerability as much as an Aug. 5 attack on the pipeline claimed by the separatist Kurdistan Workers' Party. Turkey consequently is considering any and all options to safeguard its energy imports, including reaching out to Turkmenistan.

The explosion occurred about 11 p.m. on Turkey's BTC pipeline segment at Yurtbasi village, forcing officials to shut off Valves 29 and 31 as officials waited for the oil contained in the 4-mile segment of No. 30 terminal to burn out. While the pipeline is buried along its entire length to prevent such assaults, its valves and electrical power infrastructure are not, and the attack forced pipeline operator BP to declare force majeure. The attack occurred three days before Georgia began its ill-advised military incursion into South Ossetia. The closure of BTC cost Turkey $300,000 a day in lost transit revenues; since the line became operational, Ankara received $2.6b in transit fees.

During the five-day campaign Tbilisi claimed that Russian aerial forces targeted the BTC pipeline, asserting that bomb fragments were found near the line. Georgian Security Council Secretary Aleksandr (Kakha) Lomaia stated, "Russians bombed the BTC pipeline south of the city of Rustavi," but the Russian military denied the charges, and subsequent surveys of the pipeline revealed no damage. The Georgian segment of BTC is 155 miles, while 669 miles of the pipeline traverse Turkey. BP only reopened the pipeline on Aug. 25.

The incident reminded Ankara, not that it needed reminding, of the vulnerability of its energy imports, which fuel 90% of the country's needs. Both major suppliers of natural gas to Turkey are currently in disfavor with Washington. Iran currently provides nearly one-third of Turkey's domestic demand, while Russian energy giant Gazprom provides 63.7% of Turkey's natural gas imports, primarily via the Black Sea undersea Blue Stream pipeline, with smaller volumes coming from Azerbaijan. Turkey's giant northern neighbor also provides 29% of the oil used in Turkey.

The problem for Turkey is that it's caught in the larger regional "power politics." Last Dec. 31 Turkmenistan suddenly halted natural gas shipments to Iran, citing "essential" work on its pipeline. Iran in turn cut its natural gas shipments to eastern Turkey, and when Ankara appealed to Gazprom to increase its shipments to make up the shortfall, it received a polite nyet, forcing it to tap its strategic natural gas reserve until the crisis was resolved.

Moscow also has indicated its displeasure with Turkey allowing U.S. warships carrying humanitarian relief for Georgia to pass the Turkish Straits by suddenly and unilaterally halting Turkish truck shipments into Russia, citing new customs regulations, with Ankara estimating that $3b in losses to the two countries' $38b annual bilateral trade turnover have already occurred. In an attempt to resolve the issue, Russian Foreign Minister Sergei Lavrov just visited Turkey, his second visit in three months. In light of Moscow's ambivalence, Turkey is turning once again to the possibility of expanding energy ties with Turkmenistan.

On Sept. 2, the same day that Lavrov left Ankara, Turkish Minister of Energy and Natural Resources Mehmet Hilmi Guler met with Turkmen President Gurbanguly Berdimuhamedov in Ashgabat and discussed prospects for increasing energy cooperation, according to the press service of the Turkmen president. Raising Guler's hopes, Berdimuhamedov said, "Turkmenistan is open for mutually beneficial cooperation with all countries, first of all with reliable and long-standing friends such as Turkey." Berdimuhamedov invited Turkish participation, possibly partnering in projects to explore Turkmenistan's Caspian Sea coast as well as Ankara participating in high-technology ecology-friendly energy projects.

Good intentions aside, there exists the minor inconvenience that as yet there exists no direct Turkmen-Turkish natural gas pipeline; as noted earlier, all current Turkish imports of Turkmen natural gas are first routed through Iran via the Saparmurat Niyazov-era $190m, 124-mile Korpehze-Kurt Kui 8b cubic meters (bcm) per annum natural gas pipeline, opened in September 1998. Korpezhe-Kurt Kui was Turkmenistan's first pipeline not crossing Russian territory.

Turkey for years has pinned its hopes on the proposed $5b Caspian undersea Trans-Caspian Gas Pipeline, which would have an annual capacity of 30 bcm of natural gas and would run from Turkmenistan's eastern Caspian port of Turkmenbashi to Azerbaijan's capital, Baku, where the gas would be pumped westward through the South Caucasus Pipeline, also known as the Baku-Tbilisi-Erzurum Pipeline.

Unfortunately for Turkey, there exist several substantial obstacles to such a project. First, Gazprom has been ardently courting Turkmenistan to sell it its surplus natural gas production, dangling the enticing incentive of paying market rates for it, a temptation that Berdimuhamedov, despite Western energy company approaches, may find irresistible.

The second obstacle is geographical - the five nations bordering the Caspian have yet to agree to a definitive division of its seabed and it's unlikely that the Trans-Caspian Gas Pipeline therefore could be expected to attract significant foreign investment, especially as Russia and Iran most likely would oppose the project, as it bypasses them both.

The third and final obstacle is again geographical, in that the Trans-Caspian Gas Pipeline would feed into the Baku-Tbilisi-Erzurum Pipeline and, as recent events have shown, the pressure that Russia can bring to bear on energy exports transiting Georgia is substantial.

In light of such realities, it would seem, at least in the short term, which Turkey, like Georgia, is going to have to find a way to coexist with a resurgent Russia, as are Gazprom's European customers, however much thawing Cold Warriors might wish to revive a confrontational posture toward Russia. If present political trends continue, then millions of European and Turkish consumers might see the new Cold War reflected in their thermostat settings. (UPI03.09)

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- Israeli Shekel conversions done at a rate of NIS 3.50 = $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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