Fortnightly, 10 January 2018

In December, U.S. President Donald Trump signed into law an extensive tax reform package that will see corporate tax in the U.S. lowered from 35% to 21%. The new legalization also increases taxes on overseas earnings of American companies. On 1 January 2018, Prime Minister Benjamin Netanyahu convened senior Israeli government officials to discuss the possible impact the U.S. tax reform may have on Israel’s economy.

The reform may have significant implications for Israel’s economy, and specifically for the country’s burgeoning innovation industry. Some fear the reform will increase the costs of operating Israeli research and development, like the ones created by hundreds of multinational corporations, many of which are U.S.-based. Additional taxation of revenues derived from intellectual property registered outside the U.S. included in the reform may motivate companies to prefer stateside registration. The reform poses challenges for Israel not only with regard to U.S.-based corporations but also with regard to Israeli companies that operate in the U.S., which will now face a heavier tax.

Mr. Netanyahu instructed the chairman of Israel’s National Economic Council, Avi Simhon, to form a team that will study the tax reform and devise recommendations within 30 days, according to people familiar with the matter. The chances that Israeli legislative reaction to the reform in the U.S. could be included in the country’s national budget plans for the fiscal year 2019, expected to be approved within the next three months, are low. (Various 02.01)

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1.2 Israel Signs Aviation Agreements with 10 Countries

Israel’s Ministry of Transport has signed new air transport agreements with 10 countries. During 2018, new direct air routes between Israel and Chile and Brazil will be inaugurated as well as a wide range of new direct flights between Israel and Switzerland, Ukraine, Russia, Jordan, Canada, China and other countries. The new air transport agreements were signed during the annual conference of the International Civil Aviation Organization (ICAO) recently in Sri Lanka. The agreements were signed with Switzerland, Chile, South Africa, Vietnam, Canada, Dominican Republic, Uganda, Tanzania, Jordan and the UK (for when the UK leaves the EU). The Israeli delegation also held talks with Laos and Rwanda and hopes to sign air transport agreement with them in the near future.

Minister of Transport Yisrael Katz said that the agreements, which were signed as part of the Open Skies agreement, will allow direct flights between Israel and more destinations as well as an increased number of flights on existing routes. The agreements will also enable El Al Israel Airlines to sign code-sharing deals with more carriers. Katz added that implementation of the final phase of the Open Skies policy with the EU will allow for increased frequency of flights between Israel and Europe. In addition agreements with Russia, Ukraine and Georgia have been revised in order to allow for more direct flights. (Globes 01.01)

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1.3 Israel Streamlines Application Process for Entry of Foreign Hi-Tech Experts

Israel’s Population and Immigration Authority has announced that it will launch an online application form for foreign high-tech experts, in order to ease the process for those looking to enter the country. The form will be available shortly. The Population and Immigration Authority has created the interface with the Israel Innovation Authority. A company will not have to apply in person or send an application by mail, but rather applications may be filed remotely and all documents attached. In the past, applicants had to file papers and wait for months for a response from the Foreign Trade Administration in the Ministry of Economics and sometimes from the Industrial Administration. Permits expire after a year, but foreign high-tech experts have been allowed two years, as long as the work permit is renewed each year, according to the country’s law of entry.

In January 2017, the Netanyahu government approved the “National Program to Increase Skilled Personnel for the High-Tech Industry,” with the aim of addressing the estimated shortage of 10,000 high-tech workers in Israel. The program focuses mainly on returning Israelis but addresses and encourages the inclusion of foreign high-tech workers. (NoCamels 03.01)

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1.4 Israel to Boost Manufacturing Sector With $300 Million Investment

Israel’s Finance Ministry said that it plans to invest some NIS 1.5 billion (roughly $333 million) over the coming years to boost the country’s manufacturing sector in order to increase competitiveness. The ministry’s director general recommended allocating NIS 675 million towards research and development and technological innovation, NIS 365 million to increasing skilled manpower and NIS 110 million to removing regulatory barriers. The plan will help provide the tools for traditional industry to improve human capital and productivity while adopting new technologies. In addition, the Israel Innovation Authority and the Ministry of Economy recently said that their budget for traditional industry would increase from NIS 85 million (over $24 million) in 2016 to NIS 125 million (over $36 million) in 2018. (NoCamels 07.01)

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1.5 Bank of Israel Rules Bitcoin is an Asset, Not a Currency,

The Bank of Israel said on 8 January that it would not recognize virtual currencies, such as bitcoins, as actual currencies and that it is difficult to devise regulations to monitor the risks of activities in this area to the country’s banks and their clients. Deputy Governor Baudot-Trajtenberg said there had been public complaints that Israeli banks were making it difficult for some customers to transfer funds from their accounts to buy bitcoins. However, she said this was something the central bank would not be able to address, and other central banks were facing the same problem. She said there is no government responsibility for investors in bitcoins, who gravitate to the digital currency mostly for the anonymity it offers. Baudot-Trajtenberg said the central bank is studying the issue of virtual currencies but cannot learn much from the situation globally since no regulator anywhere in the world has issued guidelines to the banking system on how to act in relation to customers’ activities in virtual currencies.

Recently, Israel’s markets regulator proposed regulations that would ban companies whose main business revolves around bitcoins and other cryptocurrencies from trading on the Tel Aviv Stock Exchange. (Various 09.01)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 BIRD-F to Invest $7.75 Million in 9 New Projects

During December meeting in Tel Aviv, the Board of Governors of the Israel-U.S. Binational Industrial Research and Development (BIRD) Foundation approved $7.75 million in funding for nine new projects between U.S. and Israeli companies. In addition to the grants from BIRD, the projects will access private sector funding, boosting the total value of all projects to approximately $19.3 million. Projects submitted to the BIRD Foundation are reviewed by evaluators appointed by the U.S. National Institute of Standards and Technology (NIST) and the Israel Innovation Authority.

The nine projects, approved by the Board of Governors, are in addition to the nearly 950 projects, which the BIRD Foundation has approved for funding during its 40 year history. To date, BIRD’s total investment in joint projects has been about $350 million, helping to generate direct and indirect sales of more than $10 billion. The projects approved include:

-AgRobics (Shfaram, Israel) and Bennett & Bennett (Lemoore, CA) will develop an innovative anaerobic wastewater treatment for food processing plants.

-Axon Vision (Tel Aviv, Israel) and DermaSensor (Miami, FL) will develop a medical household device for skin cancer evaluation powered by cutting edge Artificial Intelligence.

-Farm Dog Technologies (Tel Aviv, Israel) and Deere & Co. (Urbandale, IA) will develop a variable rate pesticide application based on in-field observations.

-ImageSat Israel (Or Yehuda, Israel) and Balcony.io (Sunnyvale, CA) will develop a system that aggregates high-resolution satellite imagery with crowd sourced mobile user information.

-Motorola Solutions Israel (Airport City, Israel) and Neurala (Boston, MA) will develop on-edge video analytics for public safety.

-MyndYou (Tel Aviv, Israel) and Genesis Rehab Services (Kennett Square, PA) will develop artificial intelligence (AI) optimized care for a growing elderly population.

-NSLComm (Airport City, Israel) and Space Micro (San Diego, CA) will develop high bandwidth communications for nano-satellites.

-RunEL NGMT (Rishon LeZion, Israel) and Anokiwave (San Diego, CA) will develop a 5G cellular communication platform.

-Taranis (Tel Aviv, Israel) and Advanced Microbial Solutions [Agricen] (Frisco, TX) will develop crop abiotic stress detection and prevention.

The BIRD (Binational Industrial Research and Development) Foundation works to encourage and facilitate cooperation between U.S. and Israeli companies in a wide range of technology sectors and offers funding to selected projects. The BIRD Foundation supports projects without receiving any equity or intellectual property rights in the participating companies or in the projects, themselves. BIRD funding is repaid as royalties from sales of products that were commercialized as a result of BIRD support. The Foundation shares the risk and does not require repayment if the project fails to reach the sales stage. (BIRD 04.01)

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2.2 Israeli Startups Raise Over $5 Billion in 2017

IVC-ZAG announced that Israeli startups have raised over $5 billion in 2017, beating last year’s record of $4.8 billion. Startups raised a record $3.8 billion in the first nine months of 2017. Israeli startups raised more than $1.3 billion during the final quarter, according to press releases issued by companies that have completed financing rounds. The figure may be more as some companies prefer not to publicize the investments they have received.

After raising $550 million in October and $300 million in November, Israeli startups raised about $500 million in December. The trend by which fewer startups are raising more money was again evident in December, with three startups raising over 60% of the funds. Medical device company Insightec raised $150 million, online insurance company Lemonade raised $120 million and 3D imaging company Vayyar Imaging raised $45 million. (IVC-ZAG 28.12)

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2.3 El Al Airlines Will Begin Nonstop Flights to San Francisco

On 3 January, El Al Israel Airlines, Israel’s national airline, announced it will begin nonstop flights between Tel Aviv and San Francisco later in the year. The carrier said it will begin flying the route three times a week with the Boeing 787 Dreamliner aircraft acquired by the company in August 2017. The San Francisco Airport is also about 30 minutes by car from Silicon Valley, home of many of the world’s largest technology companies including Apple, Cisco, Google Intel, and HP. Silicon Valley is in the southern part of the San Francisco Bay area in Northern California. El Al began to receive a delivery of 16 new 787 aircraft to replace its current long-haul fleet. The aircraft will continue to be delivered through 2020. El Al is facing increased competition from low-cost carriers including United Airlines, which began flights between the two cities in 2016. In November, El Al began nonstop flights to Miami from Ben Gurion Airport.

EL AL Israel Airlines, Israel’s national airline, established in 1948 alongside the State of Israel, offers more non-stop flights than any other airline to/from Israel. EL AL flies to 36 destinations non-stop from Israel and serves hundreds of other destinations throughout the world via partnerships with many other carriers. (El Al 03.01)

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2.4 AlgoSec Closes $36 Million Investment from Claridge IL

AlgoSec announced a $36m investment by Claridge IL, a growth technology investment partnership between CDPQ – one of the largest institutional investors in North America with net assets of over $220 Billion, and Claridge Inc. the Stephen R. Bronfman Family Office. This is the first external investment in AlgoSec, following a decade of consistent growth and profitability. The Company has, over the years, delivered its market leading solution to over 1,500 enterprise customers globally and employs over 350 employees worldwide, of which 120 joined in 2017 alone.

The leading provider of business-driven security management solutions, Petah Tikva’s AlgoSec helps the world’s largest organizations align security with their business processes. With AlgoSec users can discover, map and migrate business application connectivity, proactively analyze risk from the business perspective, tie cyber-attacks to business processes and intelligently automate network security changes with zero touch – across their cloud, SDN and on premise networks. (AlgoSec 03.01)

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2.5 SuperMeat Picks Up $3 Million in Seed Funding

SuperMeat has raised $3 million in seed funding and has formed a strategic partnership with PHW, one of Europe’s largest poultry producers, and an equity investor in the company. The recent seed round was led by US-based venture capital fund New Crop Capital and mission-oriented VC firm Stray Dog Capital. Both firms are openly committed to investing in more sustainable food systems, and have previously backed big names in the alternative protein field such as Beyond Meat and SunFed. This new round of funding comes on the heels of a wildly successful Indiegogo campaign which raised $230,000 in pre-orders for SuperMeat’s clean meat products.

SuperMeat’s clean meat is produced by growing cells that have been painlessly extracted from a chicken. The cells are then grown in conditions that allow them to thrive, forming high-quality chicken cuts. This process puts an end to the industrial need to mass produce animals for slaughter, while eliminating exposure to animal waste and food-borne illnesses; the potential benefits for public health and animal welfare are therefore considerable. At the same time, clean meat is also highly beneficial for the environment, with drastically reduced carbon and ecological footprints compared to current meat production methods.

SuperMeat is a Tel-Aviv-based biotechnology company whose mission is to create healthy, sustainable and animal-friendly meat products using advanced cell culture techniques. With the recently secured funding, the company expects to bring its clean chicken products to market in the very near future, at a price point similar to the conventional chicken products currently available in stores. (SuperMeat 02.01)

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2.6 Japan’s NEC and Tel Aviv University Set Up Incubator

Tel Aviv University (TAU), TAU Ventures and Japanese electronics giant NEC are founding AlphaC, a new incubator program for early stage startups. With its first class scheduled to begin this February, the program will focus on cyber ventures. A selection process will take place during January that will shortlist 10 early stage ventures that will join an intensive, 3-month incubation program. AlphaC will run from a new space designated and prepared for this purpose at TAU Technical Engineers School at the Broshim Compound near TAU campus in north Tel Aviv. The participants will receive close, personal support from the project’s manager and representatives of partner companies, access to University resources, specialized business and technological mentors, a spacious and comfortable work space, high quality, focused content and direct communication channels with industry. (TAU 01.01)

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2.7 Forbes to Hold First-Ever Under 30 Summit Global in Israel

US business magazine Forbes announced that it will be holding its upcoming Forbes Under 30 Summit Global in Israel for the first time. The summit will take place in Tel Aviv and Jerusalem from 6 – 9 May 2018. The conference will host the “greatest young entrepreneurs and disruptors from all around the world in Israel to foster game-changing ideas and collaborations,” according to the event site, and will bring together approximately 800 people from previous the Under 30 Summit in the US and regional summits based in Asia, Europe and the Mideast and Africa. Forbes Editor Randall Lane said: “We’re thrilled to pull the best of the best young entrepreneurs and game changers from Asia, Europe, the US, Africa and the Middle East. This summit represents a true crossroads, a meeting of people who will help run every field in every country for the next half-century.” (NoCamels 05.01)

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2.8 Qumra Capital Closes $150 Million Second VC Fund

Qumra Capital announced the closing of its $150 million second fund, six months after the closing of the first $115 million of the fund and its initial investments. Like its first fund, Qumra Capital II is a late stage fund investing in growth startups with an international market presence and annual sales of at least $10 million. Qumra Capital II plans to invest up to $15 million in each of 2-3 companies each year and overall invest in about 12 companies over the next four years. Qumra Capital I was a $100 million fund which invested in eight companies: Fiverr, JFrog, Appsflyer, Riskified, Signals Analytics, Minute Media, Sweet Inn and Eyeview.

Qumra Capital, a pioneer of late stage funds in Israel, was founded in 2014 by partners who worked together at Evergreen Venture Partners, one of Israel’s veteran venture capital funds. The investors in the second fund are mainly family offices that invested in the first fund as well as US, European and Israeli financial institutions.

Last September, Qumra Capital II led a $31 million investment in oren and Talkspace. In the past 18 months, $1.6 billion has been invested in 45 late-stage companies, in what is a market with growing demand. Half of the market is not relevant for Qumra, which only invests in financing rounds of up to $50 million. Qumra says that although there was demand of more than $150 million for the fund, Qumra II was capped at the original target. Investments made by Qumra have so far been in companies operating for five years and with an average annual revenue of $18 million and an annual rate of growth of 150%. (Globes 08.01)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Tallest Hotel in the World Set to Open in Dubai

The tallest hotel in the world is set to open in Dubai, taking the crown from the current holder, also located in the emirate. The Gevora Hotel, at 356 meters in height (or 75 floors), will overtake Business Bay’s JW Marriott Marquis by just one meter when it opens in Q1 this year. Located on Sheikh Zayed Road in the Trade Centre area, Gevora Hotel will have 528 guest rooms and suites and four restaurants. The smallest deluxe rooms measure 46 sq. m, Time Out Dubai reports, with the largest two-bedroom suite measuring 85 sq. m. The new hotel will be a dry one and promises to “boast the best of Middle Eastern hospitality and exclusivity”. As well as a main pool deck with swimming pool (pictured below), Jacuzzi and kids’ pool, the health club on the 12th floor includes state-of-the-art facilities and separate ladies’ and men’s gyms. The hotel also has a luxury spa on the 71st floor. (AB 07.01)

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3.2 Boeing Wins $480 Million Repair & Support Deal for Saudi Arabia

The Boeing Co., St. Louis, Missouri, has been awarded a $480 million fixed-price-incentive-firm contract for the Royal Saudi Air Force (RSAF) repair support services effort. This program is comprised of logistical in-Kingdom repair and return of parts for F-15C/D/S/SA fleets and repair of aerospace ground equipment, hush house/open air test cell equipment for the RSAF F-15 program. Repair support services will be performed at various original equipment manufacturer locations within the U.S. and within the Kingdom of Saudi Arabia, and is expected to be completed by June 2025. This contract involves 100% foreign military sales to the Kingdom of Saudi Arabia and is the result of a competitive source selection effort, where four offers were received. This contract includes a 24-month base period, five 12-month option periods and one six-month option period. This is not a multi-year contract (DoD 28.12).

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3.3 Aselsan Agrees to Equip Antonov Aircraft With Avionics

The Ukraine’s Antonov announced on 22 December that it had reached agreements with Turkey’s Aselsan that could see Aselsan integrate its avionics subsystems, such as auto-pilot system, to Antonov’s aircraft. Antonov – which is under Ukraine’s UkrOboronProm – and the Turkish electronics supplier Aselsan conducted meetings at the Istanbul Technical University (ITU). Following those meetings, the two companies signed a set of agreements outlining potential integration work for Aselsan onboard Antonov aircraft. This meeting follows a memoranda-of-understanding (MoUs) signed by Antonov with Aselsan, Havelsan and Turkish Aerospace Industries (TAI) in at the 2017 International Defence Industry Fair (IDEF) last May. In their MoU, Antonov and Aselsan agreed to form working-groups to explore potential areas of bilateral cooperation, which included the prospect of integrating Aselsan subsystems to Antonov’s An-158 airliner and An-178 military transport aircraft.

If brought to fruition, this would be a manifestation of UkrOboronProm opening a representative office in Turkey in February of last year. It was apparent that Turkish suppliers such as Aselsan and Havelsan were being viewed as potential sources for contemporary electronics subsystems. This is now coming to pass through Aselsan’s engagement with Antonov and its supply of radio systems for Ukraine’s T-72AMT. Kiev likely believes that these partnerships will strengthen the commercial competitiveness of its products.

However, Kiev is also becoming a defense customer of Turkey. In October 2017, Aselsan announced that it signed a $43.6 million U.S. deal for radio systems with UkrOboronProm. In 2016 Kiev released a tender for 600 very high-frequency (VHF) radio systems. In November 2017, the Ukrainian Army’s Signal Corps Chief Maj. Gen. Volodymyr Rapko stated that the Ukrainian Army will equip itself with Aselsan’s VHF radio systems from 2018 through 2020. The radios will be manufactured in Ukraine under license. (Quwa 31.12)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Investment at UAE Solar R&D Center to Reach $136 Million by 2020

Investments at the research and development center at the Mohammed bin Rashid Al Maktoum Solar Park will reach $136 million by 2020, according to the Dubai Electricity and Water Authority (DEWA). According to DEWA, the R&D center – which was launched in 2014 – is focused on four areas: the production of electricity using clean energy, the integration of smart grids, energy efficiency and water. The 4,400 square meter center’s infrastructure includes indoor laboratories to study and test the reliability of systems, as well as outdoor laboratories to conduct field tests and studies on mitigating the effects of dust on solar panel performance. The labs will include high-tech devices designed to conduct internal tests and analyze the efficiency of Integrated Photovoltaic Panels (BIPV) currently being installed on the roof and outer walls of the center to product energy.

The R&D center also includes a lab that was built using 3D printing technology, which was the first building in the UAE to be fully printed onsite. The lab aims to study the use of unmanned aerial vehicles and 3D-printing, and enables DEWA engineers to design and build customized circuits for various drone applications. (AB 31.12)

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4.2 Restructuring Saudi Power Market Could Generate $4 Billion in Economic Growth

A new study published by the King Abdullah Petroleum Studies and Research Center (KAPSARC) has claimed that restructuring Saudi Arabia’s power generation sector, in conjunction with accompanying price reforms, has the potential to contribute an additional SR15 billion ($4 billion) to the Saudi economy. The report, titled Restructuring Saudi Arabia’s Power Generation Sector: Model-Based Insights, was written with the goal of helping policymakers in the kingdom achieve two key objectives: improving efficiency in supply during periods of peak consumption and reducing inefficient consumption. To help illustrate their findings, they developed a model that simulated the effects of private generation companies entering the sector as well as revising the price of fuel to $3 per one million British thermal units (MMBtu).

The KAPSARC is an independent think-tank that provides research into energy policy, technology and the environment, in collaboration with the Principal Buyers Department of Saudi Electricity Company. Their findings resulted in surplus driven by greater efficiency and, therefore, a reduction in fuel subsidies. They calculate that this exceeds the reduction in consumer spending caused by the fuel increases as the surplus will be enough to fund compensation schemes such as the Citizen Account. (AB 07.01)

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5: ARAB STATE DEVELOPMENTS

5.1 Contraction of the Lebanese Private Sector Economy Continued in December

Lebanon’s Purchasing Managers’ Index (PMI) ended the year with further contraction following the continuous instability on the Lebanese political scene and signaling a worsening activity within the private sector. The weakness of the PMI came on the back of lower new orders as well as diminishing output. Commenting on the December 2017 PMI results, the Chief Economist of BLOM Bank said while Lebanon was reverberating from the political shock of Prime Minister Hariri’s resignation in early November 2017, the December 2017 BLOM Lebanon’s PMI stood at a lowly 46.1, despite the withdrawal of the resignation in late November 2017. Only employment seems to have held steady, against faster declines in output, exports, and new orders. More disturbing is the deterioration in future expectations, in spite of the political settlement brokered by the French president and the Council of Ministers’ approval to start oil and gas exploration next year. It looks like Beirut will have its hands full to reverse these expectations through serious reforms and growth measures, and to do that soon and not wait till after the parliamentary elections in May 2018. (LPM 04.01)

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5.2 Number of Tourists Visiting Lebanon Rises 11% Annually by November 2017

According to the Ministry of Tourism, the number of tourist arrivals increased by an annual 10.86% to settle at 1.71M by November 2017. In fact, the number of tourists coming from the Arab countries, Europe, and the Americas pushed total tourist arrivals upward. In details, European tourists who made up 34.33% of total tourists, rising by 13.63% y-o-y to 588,706 travelers by Nov. 2017. The French and German visitors increased by an annual 17.25% and 13.98%, to 155,514 and 92,998 tourists, respectively. Travelers from the UK and Sweden also registered annual upticks of 13.91% and 15.27% to reach 64,669 and 36,945, respectively, by Nov. 2017. In addition, the number of visitors from Arab countries, representing 30.55% of the total, rose by 9%, on a yearly basis, to 523,930. The number of Saudi and Kuwaiti tourists following the travel ban lift rose from 35,603 and 22,296 by Nov. 2016, to reach 61,189 and 38,937 by Nov. 2017. In contrast, the number of Iraqi, Egyptian and Emirati tourists fell by a yearly 2.66%, 0.54%, and 4.62% to 215,332, 75,761 and 1,836 respectively. Meanwhile, the number of Jordanians rose by 6.05% to 84,520 by Nov. 2017. American tourists made up 17.6% of the total tourists, their number rising by an annual 11.11% to 301,604 by Nov. 2017. This rise is mainly attributed to the yearly growth recorded in the number of American and Canadian visitors, which increased by 15.36% and 12.35% to 162,635 and 102,683, respectively, over the same period. (MoT 28.12)

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5.3 Jordan’s 2017 Budget Deficit Stands at JD750 Million, Debt-to-GDP Ratio at 95.3%

Jordan’s budget deficit in 2017 amounted to JOD750 million (after adding foreign grants) or 2.6% of Gross Domestic Product (GDP) compared with JOD880 million or 3.2% of GDP in 2016, according to official data. The Ministry of Finance said that the 2017 budget deficit was down 15% compared with 2016, while the rise in the deficit over the past ten years averaged 30% annually. At the end of 2017, public debt soared by 1.2 billion to JOD27.25 billion comprising 95.3% against JOD26.1 billion or 95.1% of GDP in 2016. However, public debt rose in average by JOD2.2 billion over the five years before 2017.

Domestic revenues picked up by 7.7% or JOD484 million in 2017 amounting to JOD6.717 billion compared with JOD6.233 billion in 2016. Foreign grants dropped by 15% or JOD127 million standing at JOD708 million compared with JOD835 million in 2016, the figures reveal. Furthermore, current expenditure in 2017 reached JOD7.097 billion signaling an increase of JOD178 million compared with 2016. Capital expenditure saw a JOD49 million increase or 4.6% amounting to JOD1.078 billion compared with JOD1.029 billion in 2016. The data revealed that domestic revenues covered about 95% of current expenditure in 2017, indicating a 5% rise in coverage ratio. The rise in coverage ratio is driven by a 7.7% increase in domestic revenues. The Ministry of Finance said the drop in the budget deficit is a result of a more robust control of public finance, rationalized public spending and higher local revenues. The measures are part of a larger drive to bring debt-to-GDP ratio to below 80% in the medium term. (Petra 03.01)

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5.4 Jordan’s Exports Rise by 0.4% and Imports Rise by 5.6% During First 10 Months of 2017

The statistical data issued by Jordan’s Department of Statistics indicate that the value of total exports reached JD4.35 billion during the 1st 10 months 2017, a decrease of 2.7% compared with the same period of 2016. Meanwhile, Jordanian exports value reached JD3.67 Billion during the first 10 months 2017. This was an increase by 0.4% compared with the same period of 2016. The value of re-exports reached JD.678.1 million during the first 10 months 2017 which indicates a decrease by 16.3% as compared with the same period of 2016. The imports value reached JD11.9 billion during the first 10 months 2017, thus rising by 5.6% compared with the same period of 2016.

The deficit in the trade balance, which is calculated by deducting the value of imports from the value of total exports, has reached JD7.56 billion therefore; the deficit has increased during 1st 10 months 2017 by 11.1% compared with the same period of 2016. The imports coverage by total exports has become 36.6% during 1st 10 2017 while it was 39.7% for the same period of 2016, which means a decrease by 3.1%. (Petra 28.12)

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5.5 Bank Account Usage Remains Low Across Jordan

Less than half of the population over 21 years of age in Jordan have bank accounts, a survey by the Arab Advisors Group showed on 9 January. The study, which was conducted with 925 individuals over 21 years of age, revealed that around 45% of the respondents have bank accounts in one or more of the operational 25 banks in Jordan. The survey indicated that bank adoption among male respondents was higher than among female respondents, where 57.6% of male respondents reported having bank accounts. The survey was conducted based on the demographic breakdown of 12 governorates in Jordan. (JT 09.01)

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►►Arabian Gulf

5.6 Kuwait to Host Iraq Reconstruction Summit

Kuwait will host an international conference in February on the reconstruction of war-torn Iraq, in cooperation with the World Bank and private companies. The Kuwait conference, from 12 – 14 February, will devote its second day to the role of the private sector and civil society organizations in reconstruction.

The secretary general of Iraq’s Council of Ministers said Baghdad and the World Bank had estimated reconstruction would cost at least $100 billion. The Islamic State displaced 5 million people and the authorities succeeded in returning half to their areas, but Iraq needs international support to return the rest of the displaced. The International Organization for Migration said that by the end of 2017, more than 3.2 million Iraqis had returned home, but 2.6 million remained displaced. Nearly one third are reported to have returned to houses that have been significantly or completely damaged. Heavy damage had also affected oil, electricity, transport, communications and manufacturing infrastructure as well as basic services such as water and sanitation. Some Iraqis have complained of delays by central authorities in launching reconstruction efforts. (AB 08.01)

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5.7 Real Salaries in the UAE Set to Drop in 2018

Real wages are expected to fall in the UAE this year as inflation is set to exceed salary rises, according to the Hay Group. Their forecast said that in the UAE, inflation of 4.6% combined with pay increases of only 4.1% means that real wages will fall by 0.5%. With the introduction of VAT and subsequently rising inflation in the UAE and Saudi Arabia, they expect to see a drop in real wage increases across the region. Employers in Saudi Arabia and the UAE are bracing for a challenging time as they battle with managing business costs and meeting the expectations of disgruntled employees. Businesses and employees are dealing with additional complexities of managing costs after the introduction of Value Added Tax (VAT) on January 1.

In the Arabian Gulf, wages are expected to increase by 3.8%, compared to 4.5% last year. Inflation-adjusted wage increases are predicted to be 0.9%, compared to 2.5% last year. Globally, the report revealed that, adjusted for inflation, employees around the world are expected to see real wage increases of an average of 1.5%, down from 2017’s prediction of 2.3% and 2016’s prediction of 2.5%. Across the GCC, despite a period of decline in real purchasing power, there is still a strong demand for professionals and skilled laborers, particularly in growth sectors such as hospitality, food & beverage and healthcare. (AB 02.01)

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5.8 Saudi Arabia & UAE to Raise $21 Billion from VAT in 2018

On 1 January, Saudi Arabia and the UAE introduced value-added tax (VAT), a first for the Arabian Gulf which has long prided itself on its tax-free, cradle-to-grave welfare system. Saudi Arabia compounded the New Year blow for motorists with an unannounced hike of up to 127% in petrol prices with immediate effect from midnight. These are the latest in a series of measures introduced by Gulf oil producers over the past two years to boost revenues and cut spending as a persistent slump in world prices has led to ballooning budget deficits. The 5% sales tax applies to most goods and services and analysts project that the two governments could raise as much as $21 billion in 2018, equivalent to 2% of GDP.

But it marks a major change for two super-rich countries where the mall is king. Dubai has long held an annual shopping festival to draw bargain hunters from around the world to its glitzy retail palaces. Saudi Arabia has deposited billions of dollars in special accounts to help needy citizens face the resulting rise in retail prices. The other four Arabian Gulf states – Bahrain, Kuwait, Oman and Qatar – are also committed to introducing VAT but have delayed the move until early 2019. None of the Arabian Gulf states levy any personal income tax and none have any plans to do so.

The International Monetary Fund has repeatedly urged Arabian Gulf states to diversify their revenues away from oil, which accounts for more than 90% of the Saudi budget and 80% in the UAE. Both Riyadh and Abu Dhabi asked all companies with earnings of $100,000 or more a year to register in the VAT system.

The hike in fuel duty in Saudi Arabia was the second in two years. But it still leaves petrol prices as some of the lowest in the world. High-grade petrol rose 127% from 24 cents a liter ($1.09 a gallon) to 54 ($2.46), while low-grade petrol rose 83% from 20 cents a liter (91 cents a gallon) to 36.5 ($1.66).

The introduction of VAT coupled with the increase in fuel duty is expected to bring an abrupt end to a year of negative inflation in Saudi Arabia. Riyadh-based Jadwa Investment predicted that inflation could reach as much as 5% after the new measures. Saudi Arabia, whose economy contracted by 0.5% last year for the first time since 2009, has introduced a raft of measures to raise revenue and cut spending as it bids to balance its books. Last month, it cut the government subsidy on electricity supply for the second time in two years, leading to a sharp rise in bills.

Riyadh posted budget deficits totaling $260 billion over the past four fiscal years and does not expect to balance its books before 2023. To finance its mounting public debt, the kingdom has withdrawn around $250 billion from its reserves over the past four years, reducing them to $490 billion. It has also borrowed around $100 billion from the international and domestic markets. (AB 31.12)

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5.9 Access to Skype Blocked in UAE

Skype, the popular software that allows users to make voice and video calls between computers, mobile phones and tablet devices via internet, has been blocked in the UAE. According to a tweet by UAE-based telecom company Etisalat, the access to Skype has been blocked over unlicensed VoIP calls. Skype, in a statement on its website, said, “It has been brought to our attention that our website and services have been blocked by the ISPs in the UAE. That means you won’t be able to use Skype in the UAE.” Users across the country reported facing disruptions to the service. Both du and Etisalat have warned that VoIP services remain regulated in the UAE unless they meet the country’s licensing requirements. (Various 31.12)

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5.10 Korea & UAE Discuss Desert Missile Tests

Korea and the United Arab Emirates (UAE) are discussing plans to bolster cooperation in advanced weapons projects, including a test of a Korean-built missile interception system at a site in the Middle Eastern country. The discussion includes a plan to conduct a test in the UAE of an antimissile system being developed as a part of Korea Air Missile Defense [KAMD] program.

KAMD is one of three key projects being pursued by the Korean military to defend against North Korean missile threats. The military is investing in a “Kill Chain” pre-emptive system to deter the North before its missile attacks. KAMD will be used to shoot down incoming missiles. The so-called Korea Massive Punishment and Retaliation (KMPR) operation is designed to attack the North Korean capital of Pyongyang and its ruling regime through intense bombing. KAMD is a terminal-phase, lower-tier missile defense system. It will use U.S.-built Patriot missiles and Korean-made medium-range surface-to-air missiles (M-SAM) for lower-altitude interception. Korea is also developing long-range surface-to-air missiles (L-SAM) for medium and high altitude interception.

Cooperation between Korea and the UAE is possible for the M-SAM system, capable of intercepting incoming missiles at altitudes of 20 to 40 kilometers (12 to 25 miles). It is the core system of KAMD, and the Defense Acquisition Program Promotion Committee decided last month to start mass production. L-SAM is still at an early stage, with a goal of deployment by 2022.

While Korea is investing in its own missile defense system, the UAE also needs to expand its air defense, including a shield against ballistic missiles. Since 2015, the country has been participating in the Saudi coalition to fight Yemen’s Houthi rebels. Earlier this month, the rebels said they had fired a cruise missile at the Barakah nuclear power plant being built by Korea in Abu Dhabi. The Korea Electric Power Corporation (Kepco) won an $18.6 billion deal in 2009 to build the UAE’s first nuclear plant and another bid in 2016 to operate the plant. The deal is expected to bring $49.4 billion in revenue to Kepco over the 60 year contract period. (KJD 27.12)

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5.11 Jadwa Investment Comments on the State of the Saudi Economy

Jadwa Investment issued some key observations on the Saudi economy. Economic indicators showed a mix performance during November. Cash withdrawals from ATMs declined, while POS transactions increased at a slower rate. Meanwhile, the non-oil PMI increased to its highest level since August 2015, during November. The SAMA FX rose by $1 billion month-on-month to $494 billion in November, the highest since June 2017.

In addition, the Saudi unemployment rate remained unchanged quarter-on-quarter in Q3/17, at 12.8%. Provisional data for 2017 showed the Saudi economy contracted by 0.7%, year-on-year in 2017, with growth being dragged down by the oil sector.

The largest ever budgeted expenditure of SR978 billion was announced in the 2018 fiscal budget. Based on revenues of SR783 billion, the government is expecting a slightly lower deficit, at SR195 billion. The Kingdom saw another round of energy price reform, with electricity tariffs and the price of gasoline being raised. (Jadwa Investment 03.01)

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►►North Africa

5.12 Egypt’s Foreign Reserves Increase to $37 Billion at End of December 2017

Egypt’s foreign reserves increased to $37.019 billion by the end of December, up from $36.723 at the end of November, the Central Bank of Egypt announced on 3 January. Egypt’s net foreign reserves had first hit pre-2011 levels in July 2017, reaching $36.036 billion after a $4.7 billion surge in July alone. The reserves have been climbing since Egypt signed the $12 billion loan with the International Monetary Fund (IMF) in November 2016, following the decision to float the pound. Egypt is expected receive its next IMF loan disbursal in the third week of January. (CBE 03.01)

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5.13 UAE Invests $6.2 Billion in Egypt, Named Biggest Investor

The UAE has invested $6.2 billion in a number of service and production sectors in Egypt, making it the biggest financier in the country, the Egyptian Minister of Trade and Industry Tarek Kabil has said. Egyptian exports to the UAE increased 7% from $1.126b in H1/16, to $1.204b during the same period in 2017. Since then, trade relations between the countries have further progressed, as Egypt looks to increase the number of companies exporting to the UAE, as well as those partaking in exhibitions in the Gulf country, according to Kabil.

In the past few year, Egypt has suffered economic slowdown due to political conflict and security issues, which led it to introduce a three-year economic reform plan in 2016 that included energy subsidy cuts, tax hikes and the Egyptian pound floatation to cover shortage of US dollars. This encouraged the International Monetary Fund (IMF) to support the plans with a $12b loan, half of which has reportedly been delivered to the North African country. Moreover, the UAE, along with Saudi Arabia and Kuwait, provided financial support to Egypt’s President Abdel-Fattah al-Sisi following the military ouster of former Islamist President Mohamed Morsi in 2013. Organizers of Expo 2020 Dubai are reportedly expected to visit Cairo in 2019 to discuss the participation of Egyptian companies in the event. (AB 08.01)

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5.14 Egypt’s ICT Sector Grew by 12.5% in FY 2016/17

Egypt’s Information and Communications Technology (ICT) sector achieved a growth rate of 12.5% in the fiscal year (FY) 2016/17, according to the economic performance indicators announced by the Ministry of Planning, Follow-up and Administrative Reform. The ICT sector’s contribution to gross domestic product (GDP) reached 3.2% in FY 2016/17, while Egypt’s outsourcing industry of ICT services increased to a value of $1.87 billion in the same period.

The number of mobile subscribers in Egypt declined to 99.39 million in September, down from 99.5 million in August, according to a report by the Ministry of Communications and Information Technology. According to the ministry report, there are 42.3 million subscribers to Vodafone, 33 million subscribers to Orange Egypt, and 24 million subscribers to Etisalat Egypt. (DNE 31.12)

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5.15 Egyptian Companies Obliged to Label All Food Products with Prices by January

Egyptian companies will begin applying price tags to food products starting 8 January or else be subject to legal penalties, according to the Ministry of Supply & Internal Trade. This follows decree issued by the Ministry in October 2017 obliging all food companies to print a clear, inerasable price label on all products before the 31 December deadline for dealers to sell any unlabeled products. The decision aims to better regulate Egypt’s internal food market in line with wider economic reforms, and applies to companies that produce food products locally as well as those that package imported products.

The decree prohibits dealing with un-priced products anywhere on the supply the line; whether in retail, packing or distribution. It also imposes penalties on those who violate the law with one to five years in prison and a fine between EGP 300 and EGP 1,000, in accordance with Article 9 of the compulsory pricing and profit regulation law. (Ahram Online 31.12)

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5.16 Libyan Oil Revenues Triple in 2017; Budget Deficit Halved

The Central Bank of Libya (CBL) says that Libya’s revenue for 2017 reached LYD 22.31 billion ($16.5 billion). This was made up of oil exports of LYD 19.2 billion ($14.1 billion), tax of LYD 845 million ($623 million), customs duty of LYD 164 million ($121 million) and general revenue of LYD 2.1 billion ($1.5 billion). Reuters reports that oil revenues were nearly three times more than in 2016 (which was $4.8 billion), allowing Libya to halve its budget deficit from LYD 20.3 billion to LYD 10.6 billion ($7.85 billion). (LN 09.01)

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5.17 Morocco’s 2017 Economic Growth: GDP on the Rise, Investment in Decline

According to the latest note of the High Commission for Planning (HCP), Morocco’s economic growth reached 4% in Q4/17. Supported by the healthy rebound in agricultural activities, national economic growth reached 3.8% in 2017, compared to 1.2% in 2016. According to the HCP, this progress is due to the 14.5% increase in agricultural value added, compared with a 13.6% decline in 2016. On the other hand, value added of the secondary sector marked a 2.7% compared to 0.8% in 2016. According to the HCP, this growth is mainly due to the improvement of the mining industries activities with a 17.8% growth against a 1.6% decline in 2016. The processing industries also played a key role in boosting national growth, registering a 1.6% increase in 2017, compared to 0.4% in 2016. However, the growth rate of tertiary sector slowed to 2.6% instead of 3.1% in 2016. With the exception of education, health and social work services showing a decrease of 1.8% in 2017 instead of a 2.4% increase a year earlier, posts and telecommunications activities slowdown to 2.1% instead of 4.8% in 2016.

Overall, the value added of non-agricultural activities increased by 2.7% instead of 2.3% during the same period in 2016, says the HCP, noting that despite the sharp slowdown in taxes on the net revenues of subsidies at 1.6% instead of 9.9%, the GDP by volume grew by 3.8% during Q3/17 instead of 1.3% a year before. The GDP grew by 3.3% in Q3/17 at current prices, thus the rise in the general price level was down 0.5% instead of 2.1% in the same period in 2016.

At the same time, this growth was supported by final consumption and foreign trade, according to HCP, stating that exports of goods and services posted an increase of 10.5% in Q3/17 instead of 2.2% a year ago, while imports experienced a sharp slowdown to 1.5% from 17.1% in 2016. In addition, another feature of the national economy in Q3/17 is the sharp underperformance of gross investment which fell by 5.3% instead of an increase of 18.1% in 2016. This decline marked a negative contribution to growth of 1.8 points instead of 5.5 points, during the same quarter of the previous year. (HCP 02.01)

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5.18 Morocco’s Aeronautics Sector to Create 23,000 New Jobs by 2020

The Moroccan aeronautics sector wants to reach a MAD 26 billion turnover and create 23,000 new jobs by 2020, says the Minister of Industry, Investment, Trade and Digital Economy, Moulay Hafid Elalamy. The minister pointed out that industrials, encouraged by the dynamics of this sector, have even revised upward their targets and project an annual growth of 20% against an 18% rate set initially. They also aim for a local integration rate of 42% by the end of the Industrial Acceleration Plan (IAP).

In 2017, the aeronautics sector achieved a growth rate of more than 18% compared to 2016, due to the increase on aircraft demand reevaluated at 40,000 new aircraft by 2030, and to the greater use of manufacturers to emerging sources, due to the cost-cutting constraint imposed by the airlines. The minister also revealed that in 2017, the aviation platform is preparing for more internationalization with the launch of the Boeing ecosystem that has helped establish the Moroccan industrial base as a preferred emerging platform for the aviation industry. The composite activities have allowed to permanently anchor the aviation industry in Morocco, capitalizing on this technology that gradually replaces the more rigid materials currently used. (MAP 28.12)

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5.19 Another Bumper Year for Tourism in Morocco in 2017

The number of tourists who came to Morocco in 2017 increased by 10% over 2016. According to the Ministry of Tourism, the increase meant a total of MAD 64.4 billion to the Moroccan economy by the end of November 2017, which was a 6.6% increase compared to the same period of 2016. There was a steady rise in the number of tourists coming to Morocco from Europe but the most notable and encouraging increase in tourist numbers came from what can be described as new and emerging markets for the kingdom. There was a staggering increase of 173% in the number of tourists from China last year, an increase of 57% from Brazil and more 30% increases respectively from the US, South Korean and Japanese tourists. More full year-end statistics are expected. (MWN 09.01)

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5.20 Moroccan Diaspora’s Remittances Reach MAD 60.2 Billion in 2017

Morocco’s Exchange Office has revealed that the remittances of Moroccans Living Abroad (MRE) have reached MAD 60.2 billion in the first 11 months of 2017, representing an increase of 4%. Direct investment flows in Morocco reached MAD 21.8 billion during the first 11 months of this year against MAD 19.3 billion in 2016. This represents an increase of 13.2% according to November’s preliminary indicators on foreign exchange. The Office Exchange said that this increase is attributable to a 60.9% drop in expenses (MAD 5.1 billion), which represents a higher percentage than revenues that amounted to MAD 29.9 billion in the same period.

Year on year, Morocco’s travel expenses are on the rise. During the 11 first months of 2017, foreign travel expenses recorded a surplus of MAD 48.6 at the end of November 2017, owing to higher travel revenues that jumped from MAD 4 billion to MAD 64 billion. The expenditures, therefore, increased from MAD 2.6 billion to MAD 15.8, according to the Exchange Office. On 25 December, the office said that during the 11 first months of 2017, foreign travel expenses reached 17.5 billion, compared to MAD 13 billion in 2016, and thus registering a 19.5% increase.

Morocco’s travel revenues are also following the same upward trend, with a 6.5% increase from 2016. Rising from MAD 60.3 billion last year to 64.3 billion in 2017, these revenues, while still modest are largely sufficient to absorb the expenses’ increase. According to the Exchange Office, the travel flows’ balance increased by 2.9% to MAD 48.5 billion compared to 47.2 billion in 2016. (MWN 31.12)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Turkey’s S-400 Deal with Russia Signed for $2.5 Billion

Turkish Defense Minister Canikli said on 27 December that a deal was reached with Russia over the purchase of two S-400 defense missile systems and four batteries, confirming a top Russian representative’s comments. Russia will supply Turkey with four batteries of S-400 surface-to-air missiles for $2.5 billion under a deal that is almost complete. Turkey is the first NATO member state to acquire the advanced S-400 missile system. Ankara is purchasing two S-400 systems and four batteries; all agreements have been finalized. Turkey will pay 45% of the cost up front with Russia providing loans to cover the remaining 55%. Moscow expects to begin the first deliveries in March 2020.

Russian President Putin and Turkish President Erdogan discussed the deal during Putin’s visit to Ankara early in December. The agreement to purchase the latest Russian surface-to-air missile defense batteries is Turkey’s most significant deal with a non-NATO military supplier, and comes amid strained relations between Ankara and several Western countries. Turkey’s decision to buy the Russian system has raised hostility from NATO members, with the Pentagon saying previously that “generally it’s a good idea” to buy equipment that is interoperable with the military alliance’s other systems. (AA 27.12)

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6.2 Greek Budget Shows Primary Surplus of €4.647 Billion in November

The Greek state budget primary surplus amounted to €4.647 billion, in the January-November period this year, from a budget target for a surplus of €3.074 billion. However; this is down from a primary surplus of €5.757 billion in the corresponding period of 2016. More specifically, based on state budget execution data, on an amended cash basis, the state budget showed a deficit of €774 million in the 11-month period, from a surplus of 353 million in the same period last year, and a budget target for a deficit of €2.347 billion. Net budget revenue totaled €45.130 billion in the January-November period, down 0.3% from targets, while regular budget net revenue amounted to €43.748 billion, up 1.2% from targets. (AMNA 27.12)

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6.3 Free Wi-Fi Connection on Athens’ Buses and Trams

Greece has unveiled ambitious plans to install over 2,000 points where commuters in the capital can access the internet on the move. According to the Greek transport and communications ministries plus the local authority in Attica, there are joint moves to provide Wi-Fi on Athens’ buses and its tram line. Officials say their aim is to upgrade urban transport to create 2,030 points on vehicles and trains, allowing passengers to access the Internet on their daily commute. According to a forecast by the Ministry of Infrastructure and Transport, the project is expected to be completed in the autumn of 2018 on buses in Attica. The project, which has an estimated total cost €900,000, will be financed by the Regional Operational Program (ROP) of Attica 2014-2020. (eKathimerini 09.01)

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6.4 Greek Industrial Output Increases in November

Greek industrial output rose 0.8% in November compared to the same month a year ago, after an upwardly revised 0.7% increase in October, statistics service ELSTAT said on 9 January. Looking at index components, manufacturing production rose 0.2% from the same month last year, while mining output dropped 8.4%. Electricity production increased 6.5%. (Reuters 09.01)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israel’s Population Reaches 8 Million Entering 2018

At the end of 2017, the population of Israel reached 8.793 million, the Central Bureau of Statistics announced. Over the past year, the country’s population has grown by 1.9% totaling 165,000 people. The Jewish population has reached 6.556 million (74.6%), the Arab population 1.837 million (20.9%), while 400,000 (4.5%) are defined as others. The population should surpass 9 million in the first quarter of 2019 and 10 million by 2025. Israel’s census does not include the population of foreign nationals working in the country, estimated to have been some 170,000 people at the end of 2016, or people who entered the country illegally through non-recognized border crossings.

Over the past year, 180,000 babies were born and 44,000 people died. Some 37,000 new immigrants came to the country including 26,000 Jewish immigrants; 13% of the Jewish new immigrants came from France, 25.5% from Ukraine, 27.1% from Russia and 9.8% from the US. (CBS 31.12)

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7.2 Israel Ranked Eleventh on OECD List of World’s Happiest Countries

Israel was ranked No. 11 of the happiest countries on a list compiled by the Organization of Economic Cooperation and Development. Israel came out ahead of Germany, the U.S., Japan, Italy, Ireland, Luxembourg, the Czech Republic, Britain, Brazil, France and Mexico. According to data from Israel’s Central Bureau of Statistics, over 93% of Israelis say they are happy or very happy with their lives. The happiest age groups were 20-24, 55-59, and 65-74. The number of Israelis aged 30-39, 45-49, and over 75 who said they were happy was lower, but still over 85%.

Israel also ranked 11th in terms of life expectancy, according to the OECD. The average Israeli lives 82.45 years, compared to the OECD average of 80.5. Countries with longer average life expectancy than Israel included Japan, Spain, Australia and most of Scandinavia. Israelis live, on average, longer than Canadians, Austrians, Belgians, Greeks, British, Danes, Germans, Americans, Turks, Poles, Hungarians and Mexicans. The average life expectancy for women in Israel was 84.2 in 2017, compared to 79.5 in 1995 and 73.9 in 1975. The average life expectancy for men was 80.7 in 2017, compared to 75.5 in 1995 and 70.3 in 1973. Since the 1973 Yom Kippur War, the average life expectancy for both men and women in Israel has increased by more than 10 years. (Various 31.12)

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7.3 2017 Sees Record Number of Organ Transplants Performed in Israel

A record number of organ transplants were performed in Israel in 2017, but 94 terminally ill patients still died while waiting for transplants, according to a report by the National Transplant Center summing up its activities for 2017. A total of 285 organ transplant procedures were performed in Israel using organs from deceased patients. In addition, 113 kidney transplants took place in which the transplanted kidney was donated by relatives of patients, and 109 kidney transplants took place in which the donor kidney came from altruistic strangers. An additional 13 patients received liver lobes donated by family members. More than 100 transplants from living organ donors were facilitated by the nonprofit group Matnat Chaim – Volunteers for Kidney Transplantation. Israeli medical centers performed a total of 359 kidney transplants, 78 liver transplants, and 18 heart transplants in 2017. Combined kidney-pancreas and liver-kidney transplants were also performed.

The percentage of families of brain-dead patients who agreed to donate their loved ones’ organs remained steady at 62%. Despite the increase in organ donations, there is still an urgent need for more donor organs. In 2017, 8.3% of chronically ill patients died while waiting for an organ transplant. Of these, 26 were waiting for a liver and 20 were waiting for a lung. Currently, 1,138 patients in Israel are on the waiting list for donor organs, including 840 waiting for kidneys, 110 for livers and 102 for lungs. Over one-third of transplant recipients (37%, or 107 patients) were given preference over patients in a similar medical condition because they were registered organ donors. One out of eight Israelis – 924,000 – is a registered organ donor. (Various 09.01)

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*REGIONAL:

7.4 Dubai Launches $8 Million Healthcare Fund to Help Disadvantaged Patients

Dubai Health Authority (DHA) has announced the allocation of an AED30 million ($8.17 million) fund to support patients with limited means to receive free and discounted treatment. In line with the Year of Zayed, the DHA has launched the Ataa’ wa Saa’da (Giving and Happiness) initiative in partnership with the private sector. As part of the initiative, DHA will be collaborating with six private health facilities whom have allocated AED30 million budget annually to provide the treatment. Humaid Al Qutami, chairman and director general of the DHA, said the authority is keen to invest its partnerships with the private health sector. Al Qutami commended the private hospitals who have responded positively to achieving the objectives of the initiative, which aims to support patients with limited means, support them and alleviate the pain and burden on their shoulders and their families. There are plans to increase the number of collaborating hospitals, with a number of meetings scheduled in the future. (AB 06.01)

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7.5 Every Hour One Person Gets a Stroke in the UAE

At least 50% of stroke patients in the UAE are below the age of 45, which is an alarming statistic that calls for urgent lifestyle changes and an increase in awareness. In the UAE, after road accidents, stroke is the second leading cause of disability. Annually 8,000-10,000 patients in the UAE get a stroke; this means every hour, one person gets a stroke. Half of the stroke patients in the UAE are below the age of 45 years, as compared to the global average, where 80% of stroke patients are above the age of 65 years. The reasons for such high numbers come from the sedentary lifestyle, diabetes, obesity, dependence on fatty foods and a diet high in salts were some causes.

In the UAE, 18 to 20% of the population is obese and 20% of population are diabetics. Moreover, high salt consumption is a major issue. The average amount of salt needed on a daily basis is two grams, however, the average amount of salt people in the UAE consume per day is 15 grams, which is way above the required limit. In the UAE, stroke patients are much younger than those in western countries. (KT 31.12)

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7.6 New Law Simplifies Divorce Proceedings in Greece

Couples in Greece can now get a consensual divorce, by appearing before a notary public instead of in court, according to a new law published in the Government Gazette on 27 December. Law 4509/2017 requires that both partners agree to the divorce, and stipulates fines for violation of terms, including alimony and child support terms. Once the couple has sorted out the visitation issues of their underage children, if any, they can either visit a notary public in person, or send their lawyers to represent them before a notary. The terms vary for couples married at a Greek Orthodox church. In this case, the procedure of the dissolution of the marriage is ordered by the relevant prosecutor in a first-instance court, following the application of both parties, with the notarial agreement attached. The paperwork is then submitted to the church council of the area where the marriage took place. This is considered obligatory to dissolve the marriage spiritually.

The new law also punishes by a one-year jail term anyone violating the alimony agreement, “forcing the rightful recipient to undergo privation, or to accept the assistance of others,” and punishes by a minimum of six months any one of the parents who violates the terms of visitation and communication rights of the other parent. (ANA-MPA 28.12)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 BiondVax Plans Phase 3 Clinical Trial Following Receipt of Scientific Advice from EMA

BiondVax Pharmaceuticals announced that the European Medicines Agency (EMA)’s Committee for Medicinal Products for Human Use (CHMP) reviewed BiondVax’s Phase 3 trial plan, provided advice, and allowed the Company to proceed with the Phase 3 clinical trial plan for M-001, BiondVax’s universal flu vaccine candidate. The CHMP advice will facilitate procedures in the countries where the Phase 3 study will take place. The placebo-controlled pivotal clinical efficacy Phase 3 trial plans to enroll a total of 7,700 participants over two years. Since assessment of clinical efficacy of influenza vaccines largely depends on the attack rates of circulating influenza strains, the study features flexible enrollment to adjust the required number of participants in year 2. The participants will be aged 50 years and older, with at least half over 65 years of age. The trial is expected to take place in Eastern Europe and begin prior to the 2018/19 flu season.

Ness Tziona’s BiondVax is an advanced clinical stage biopharmaceutical company developing a universal flu vaccine. The vaccine candidate, called M-001, is designed to provide multi-season protection against current and future, seasonal and pandemic influenza virus strains. BiondVax’s proprietary technology utilizes a unique combination of conserved and common influenza virus peptides, activating both arms of the immune system for a cross-protecting and long-lasting effect. (BiondVax 27.12)

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8.2 DarioHealth Granted Another U.S. Patent Strengthening its Core Technology

DarioHealth Corp. announced the U.S. Patent and Trademark Office has issued the Company patent #9832301 titled “Systems and Methods for Adjusting Power Levels on a Monitoring Device.” DarioHealth uses this patented technology to enhance the way its smart meter communicates with users’ smartphone devices. In the U.S. market, the Dario Blood Glucose Monitoring System connects to a smartphone via a coin-sized dongle that does not require a battery for operation; rather, it relies on the smartphone’s battery as its power source. In the effort to reduce battery-dependence and ensure 100% real-time data capture, the application is able to monitor and adjust power levels on smartphones accordingly to enable sufficient output with minimal reliance.

Caesarea’s DarioHealth Corp. is a leading global digital health company serving tens of thousands of users with dynamic mobile health solutions. They believe people deserve the best tools to manage their treatment, and harnessing big data, they have developed a unique way for our users to analyze and personalize their diabetes management. With their smart diabetes solution, users have direct access to track and monitor all facets of diabetes, without having the disease slow them down. (DarioHealth 27.12)

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8.3 Teva Announces Exclusive Launch of a Generic Version of Reyataz in the US

Teva Pharmaceutical Industries announced the exclusive launch of a generic version of Reyataz1 (atazanavir) capsules in the U.S. Atazanavir sulfate capsules are a protease inhibitor indicated for use in combination with other antiretroviral agents for the treatment of HIV-1 infection for patients 6 years and older weighing at least 15 kg.

With nearly 600 generic medicines available, Teva has the largest portfolio of FDA-approved generic products on the market and holds the leading position in first-to-file opportunities, with over 100 pending first-to-files in the U.S. Currently, one in seven generic prescriptions dispensed in the U.S. is filled with a Teva generic product.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions used by approximately 200 million patients in 60 markets every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,800 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has the world-leading innovative treatment for multiple sclerosis as well as late-stage development programs for other disorders of the central nervous system, including movement disorders, migraine, pain and neurodegenerative conditions, as well as a broad portfolio of respiratory products. (Teva 27.12)

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8.4 Israeli & British Researchers Collaborate on Four Joint Stem Cell Treatment Projects

British and Israeli research institutions will team up to work on four joint projects concerning stem cells over the course of a three-year period, the British Council announced. They will be awarded £1.5 million ($2,033,175 million) for their efforts by the Britain Israel Research and Academic Exchange (BIRAX) program, a £10 million ($13.5 million) initiative of the British Council to invest in significant research from the cooperation of British and Israeli scientists. The projects will develop stem cell treatments for diabetes, heart disease, leukemia, anemia and Alzheimer’s. The new round partners together British scientists from Edinburgh University, Exeter University, University of Cambridge and the University of Glasgow with Israeli scientists from Weizmann Institute of Science, the Technion – Israel Institute for Technology and the Hebrew University of Jerusalem.

One of the projects will have a Weizmann Institute of Science researcher collaborating with a University of Edinburgh researcher to explore how cells lining blood vessels in the body develop in order to learn how new blood vessels are regenerated in damaged tissue. Another Weizmann Institute of Science researcher will work with a University of Cambridge researcher to establish “how mutations in blood stem cells affect their function and will lead to a better understanding of why the blood and immune system deteriorate with age,” the report said. The other projects will be collaborations between Hebrew University researchers and University of Exeter researchers investigating type 1 diabetes. Researchers from Technion and the University of Glasgow will look into a “mechanism that may be implicated in Alzheimer’s disease.” BIRAX began six years ago as a collaboration between the British Council, British Embassy in Israel, and the UK Science & Innovation Network with founders Pears Foundation and the United Jewish Israel Appeal. (NoCamels Team 02.01)

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8.5 Can-Fite & Hadassah Further Explore Namodenoson Mechanism of Action in NASH

Can-Fite BioPharma announced the entry into a collaborative research agreement with Hadassah Medical School. This agreement will support research directed by Rifaat Safadi, M.D. aimed at further elucidating the Namodenoson mechanism of action in experimental models of non-alcoholic steatohepatitis (NASH) which represent the human disease.

Recent pre-clinical studies with Namodenoson showed an improvement in three cardinal NASH parameters including steatosis, inflammation and ballooning, which collectively define the histopathologic NAS (non-alcoholic fatty liver disease [NAFLD] Activity Score). Dr. Safadi is the Head of the Liver Unit, Gastroenterology and Liver Diseases, Division of Medicine at Hadassah Medical Center and Professor of Internal Medicine, Bowel, Liver Disease, and Metabolic Syndrome at Hadassah University in Israel.

Lately Can-Fite initiated patient enrollment for a Phase II study with Namodenoson in NAFLD/NASH patients with evidence of active inflammation. Based on the recent pre-clinical data, the company has changed the primary end point of the Phase II study to the anti-inflammatory effect of the drug, as determined by blood ALT levels, and changed the major secondary end point to % of liver fat, measured by PDFF (proton density fat fraction). The Company believes this amendment sets the stage to increase the chances of trial success by aligning the clinical outcomes with the drug’s mechanism of action.

Petah Tikva’s Can-Fite BioPharma is an advanced clinical stage drug development Company with a platform technology that is designed to address multibillion-dollar markets in the treatment of cancer, inflammatory disease and sexual dysfunction. The Company’s lead drug candidate, Piclidenoson, is currently in a Phase III trial for rheumatoid arthritis and is expected to enter a Phase III trial for psoriasis in early 2018. Can-Fite’s liver cancer drug, Namodenoson, is in Phase II trials for hepatocellular carcinoma (HCC), the most common form of liver cancer, and for the treatment of non-alcoholic steatohepatitis (NASH). Namodenoson has been granted Orphan Drug Designation in the U.S. and Europe and Fast Track Designation as a second line treatment for HCC by the US FDA. Namodenoson has also shown proof of concept to potentially treat other cancers including colon, prostate, and melanoma. (Can-Fite 03.01)

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8.6 BlueWind Medical Reports Breakthrough Results for Implantable Tibial Nerve Neuromodulator

BlueWind Medical announced the publication of clinical results of OPTIMIST Study. The multi-center prospective study, tested BlueWind’s innovative leadless, miniature implantable Tibial Nerve Neuromodulation System for the management of overactive bladder (OAB) complaints. An estimated 66 million people in the European Union and 43 million in the USA suffer from OAB, a disease that adversely affects patient’s quality of life. The scientific publication was published in the September issue of the Neuromodulation and Urodynamics journal.

The study was conducted in four prominent clinical centers in the UK and the Netherlands. The study results demonstrate that the RENOVA system has a low-risk safety profile and may be considered an effective treatment option for OAB management. The study also demonstrated that the BlueWind RENOVA system improved all quality of life aspects of the patients, including coping with symptoms, symptom concern, sleep disturbances and problems with social interactions. The research concluded that the BlueWind implantable tibial nerve stimulator is a safe, minimally invasive system that affords OAB patients significant improvements.

Herzliya’s BlueWind Medical was founded in 2010 by the premier Israeli innovation and investment company Rainbow Medical. The company is developing a platform technology of miniature wireless neurostimulators that can be placed in a minimally invasive procedure and treat multiple indications. BlueWind Medical is led by a team of experienced and dedicated engineers and researchers that strive for the highest quality products and most advanced engineering processes. By putting the patients’ needs first, BlueWind is creating a versatile and effective platform that will transform Neurosmodulation as we know it. (BlueWind Medical 04.01)

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8.7 Cellect Announces Breakthrough Clinical Results

Cellect Biotechnology has successfully completed transplantation of the first group of three patients using Cellect’s ApoGraft technology in the Company’s Phase I/II clinical trial and that after one month follow-up, all three patients have demonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported serious adverse events or suspected unexpected serious adverse reactions. The Phase I/II, dose escalating, 4-cohort, open label clinical trial of up to twelve patients is designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent the company’s ApoGraft process and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The Company plans on recruiting a further three patients for the second cohort of patients following review of the independent data and safety monitoring board.

Kfar Saba’s Cellect Biotechnology has developed a breakthrough technology for the selection of stem cells from any given tissue that aims to improve a variety of stem cell-based therapies. The Company’s technology is expected to provide research, hospitals and pharma companies with the tools to rapidly isolate stem cells in quantity and quality allowing stem cell-based treatments and procedures in a wide variety of applications in regenerative medicine. The current clinical trial is aimed at bone marrow transplantations in cancer treatment. (Cellect 04.01)

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8.8 Tel Aviv University Study Augurs Hope for Pancreatic Cancer Patients

A Tel Aviv University study that set out to find what makes some pancreatic cancer patients more likely to survive the deadly disease than others hopes to use the results to develop an effective cocktail of drugs to fight the aggressive cancer as well as other types, researchers said. The study, which was published in Nature Communications, was led by Prof. Ronit Satchi-Fainaro, chair of the Department of Physiology and Pharmacology at TAU’s Sackler Faculty of Medicine.

“Despite all the treatments afforded by modern medicine, some 75% of all pancreatic cancer patients die within 12 months of diagnosis, including many who die within just a few months,” Satchi-Fainaro said. “But around 7% of those diagnosed will survive more than five years. We sought to examine what distinguishes the survivors from the rest of the patients,” she said. “We thought that if we could understand how some people live several years with this most aggressive disease, we might be able to develop a new therapeutic strategy.”

The research team examined pancreatic cancer cells and discovered an inverse correlation between a gene that promotes the development of cancer and a cancer suppressor. The levels of miR-34a, a tumor suppressant, were low in pancreatic cancer mouse models and human cell models, while the levels of PLK1, a known oncogene that boosts development of the cancer cells, were high. However, patients who beat the odds — the so-called long-term survivors — had a completely opposite genetic makeup: they had higher levels of the tumor suppressant and lower levels of the PLK1 gene.

The researchers validated their findings with human samples at the Sheba Medical Center, Tel HaShomer in Ramat Gan and then with a bigger cohort of samples at the University of Maryland. An RNA profiling and analysis of samples taken from pancreatic cancer patients showed the same genomic pattern found earlier in mouse and human models of pancreatic cancer.

In a second stage of the research, the scientists devised a new nanoparticle that can selectively deliver genetic material to a tumor, without side effects for the surrounding healthy tissues. To validate their findings, the scientists injected the new nanoparticles into pancreatic tumor-bearing mice and observed that by re-balancing these two targets — increasing the expression of one and blocking that of the other — they significantly prolonged the survival of the mice. Research for the study was funded by the European Research Council, Tel Aviv University’s Cancer Biology Research Center and the Israel Science Foundation. (ToI 09.01)

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8.9 Two Israeli Companies Selected for Canada-Israel Collaboration Program

Two Israeli companies have been selected for the Ontario-based Canada-Israel Collaboration Program, a joint partnership program by the Center for Aging and Brain Health Innovation (CABHI) and the Israel Innovation Authority (IIA). This program provides Israeli companies looking to test their aging and brain health solutions at Ontario senior healthcare facilities with CA$250,000 ($200,973) from CABHU and added funding from IIA. The two companies are HeartBeat Technologies, an Israeli-founded firm that has developed an algorithm enabling doctors, nurses and patients to monitor heart-related parameters and provide care management and Brainsway, a Jerusalem-based company with patented technology for brain disorder treatment. In 2016, the Ontario government signed Memoranda of Understanding (MOUs) with Israeli organizations in order to establish collaboration and partnerships in innovation. (NoCamels 09.01)

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8.10 Guerbet Buys Israeli Mini-Catheter Company Accurate Medical

French medical imaging company Guerbet signed an agreement to acquire Israeli company Accurate Medical Therapeutics, which specializes in the development of micro-catheters used in interventional radiology. Accurate has developed a range of micro-catheters for embolization procedures of tumors and vascular aneurysms. These products are currently being registered with the US and European health authorities. Guerbet will pay €19.5 million immediately and milestone payments according to regulatory and commercial objectives. The total paid for the acquisition will not exceed €57 million. Guerbet said that the acquisition will already yield major revenue by the end of 2018 and will contribute to the French company’s profitability by 2019. This is a relatively swift exit. Accurate Medical was founded in 2015 by CEO Eran Miller and Dr. Michael Tal and received an investment from Access Ventures. Accurate Medical will retain its structure in Israel and will continue to be led by Miller. (Globes 09.01)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Israel to Launch World’s First Nanosatellite Formation

The Technion, Israel Technology Institute in Haifa and the Israel Space Agency have announced that in late 2018 they will launch the world’s first nanosatellite formation. A group of three nanosatellites developed in Israel, which will fly in controlled formation, will be launched by the Dutch company Innovative Solutions in Space, which specializes in launching nanosatellites on the Indian PSLV (Polar Satellite Launch Vehicle). The goal of the project is to prove that a group of satellites can fly in a controlled formation for one year while orbiting at an altitude of about 600 kilometers.

The satellites will be used for receiving signals from Earth and calculating the location of the source of transmission for search and rescue operations, remote sensing, and environmental monitoring. The size of each of the satellites is 10X20X30 cm, about the size of a shoebox, and they weigh a total of around eight kilograms. The satellites will be equipped with measuring devices, antennas, computer systems, control systems and navigation devices. The flight software and algorithms were developed in the Technion Distributed Space Systems Lab.

The satellite’s unique technology has been developed entirely in Israel: Rafael’s krypton gas-based propulsion system will be the first system in the world to power a tiny satellite. The digital receiver was developed by Israel Aerospace Industries ELTA unit and the guidance control system was developed at IAI’s MABAT plant in cooperation with researchers from Technion. (Globes 04.01)

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9.2 Mellanox Ships BlueField System-on-Chip Platforms and SmartNIC Adapters

Mellanox Technologies announced the first shipments of its BlueField system-on-chip (SoC) platforms and SmartNIC adapters to major data center, hyperscale and OEM customers. Mellanox BlueField dual-port 100Gb/s SoC is ideal for cloud, Web 2.0, Big Data, storage, enterprise, high-performance computing, and Network Functions Virtualization (NFV) applications. BlueField sets new NVMe-over-Fabrics performance records, demonstrating seven and a half million IOPS during initial testing, with zero CPU utilization. Furthermore, BlueField delivers under three microseconds of NVMe latency to enable less than five microseconds of additional latency for end to end access to remote NVMe device over a local NVMe device. BlueField’s NVMe over Fabrics advanced hardware acceleration offload guarantees maximum performance with no CPU utilization, thereby improving system total cost of ownership (TCO). In addition, BlueField delivers up to a smashing close to 400Gb/s of RDMA bidirectional traffic bandwidth over dual 100Gb/s ports.

The BlueField family of products is a highly integrated system-on-a-chip optimized for NVMe storage systems, Network Functions Virtualization (NFV), security systems, and embedded appliances. BlueField dual port 100Gb/s SoC solutions combine Mellanox’s leading ConnectX®-5 network acceleration technology with an array of high-performance 64-bit Arm A72 processor cores and a PCIe Gen3 and Gen4 switch.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end InfiniBand and Ethernet smart interconnect solutions and services for servers and storage. Mellanox interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance capability. (Mellanox 04.01)

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9.3 Foresight Sets a New Standard for Autonomous Vehicle Vision

Foresight Autonomous Holdings announced that the Company will showcase, for the first time, its groundbreaking QuadSight vision system targeting the semi-autonomous and autonomous vehicle market at CES 2018 in Las Vegas. Foresight regards QuadSight as the industry’s most accurate, quad-camera vision system, offering exceptional obstacle detection for semi-autonomous and autonomous vehicle safety. Using proven, highly advanced image-processing algorithms, QuadSight uses four-camera technology that combines two pairs each of stereoscopic infrared and daylight cameras to set a new bar for autonomous vehicle vision. QuadSight is designed to achieve near-100% obstacle detection with near zero false alerts under any weather or lighting conditions – including complete darkness, rain, haze, fog and glare.

QuadSight, Foresight’s breakthrough innovation, is derived directly from field-proven security technology and incorporates accurate image-processing algorithms and sensor fusion, achieving superior detection under all weather and lighting conditions.

Ness Ziona’s Foresight Autonomous Holdings, founded in 2015, is a technology company engaged in the design, development and commercialization of stereo/quad-camera vision systems for the automotive industry based on 3D video analysis, advanced algorithms for image processing and sensor fusion. The company, through its wholly owned subsidiary Foresight Automotive, develops advanced systems for accident prevention, which are designed to provide real-time information about the vehicle’s surroundings while in motion. The systems are designed to improve driving safety by enabling highly accurate and reliable threat detection while ensuring the lowest rates of false alerts. (Foresight 03.01)

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9.4 Celeno Announces Everest 802.11ax Wi-Fi Solution

Celeno Communications announced its Everest 802.11ax silicon solution designed to address the demand for a high performance yet cost optimized solution as well as ensuring rapid migration of existing 802.11ac designs to 802.11ax. Celeno’s Everest solution leverages upon the newly introduced capabilities of the 802.11ax standard including downlink and uplink MU-OFDMA, downlink and uplink MU-MIMO, as well as 802.11ax higher order 1024 QAM modulation, while leveraging Celeno’s unique AX.L technology to introduce a superior, cost optimized, 4.8Gbps performance. Celeno’s Everest is designed to address both 2.4GHz and 5GHz bands, is based on cutting edge 14nm FinFET process node technology and will be available in a compact 12×12 BGA package.

Supporting rapid 802.11ax solution/product engineering, Everest is utilizing a similar solution architecture to Celeno’s CL2400 product family: the Everest interface to the host processor is PCIe; the 802.11ax subsystem HW form factor is similar to that of the 802.11ac subsystem; and it enables fast system integration by supporting feature parity and similar software architecture and interface. Celeno’s Everest program boasts Celeno’s IP, mastered over the years, and combines it with new 802.11ax capabilities to enhance the Wi-Fi experience. An example includes combining Celeno’s scheduling technology with 802.11ax OFDMA, MU-MIMO and trigger-based scheduling to maximize performance in highly interfered and dense environments.

Ra’anana’s Celeno is the leading provider of smart, managed Wi-Fi solutions. Celeno’s extensive chip portfolio and ground-breaking software technologies are designed to excel in real life, highly-interfered dense network scenarios, delivering the level of management, performance, speed, coverage, reliability and superlative user experience demanded by Wi-Fi users. Celeno’s field-proven chips and software technology have been successfully integrated into numerous OEM Wi-Fi devices and have been deployed in tens of millions of homes around the world by almost 100 leading service providers worldwide. (Celeno 04.01)

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9.5 Israel’s Intuition Robotics Wins Top Award at CES2018

Israeli startup Intuition Robotics, which made headlines in 2017 for its ElliQ social companion, an AI-powered robot companion meant to improve the lives of the aging population, has been named the Best of Innovation Winner in the smart home category at the annual CES conference in Las Vegas. The small tabletop robot helps the elderly connect to the outside world and keep active and engaged. ElliQ can suggest content to watch, give reminders about appointments, and set up chats with friends, among other functions.

Founded in 2015, Intuition Robotics raised over $20 million in 2017, including $14 million from Toyota AI Ventures, the investment arm of the Japanese auto giant. Last summer, the Ramat Gan-based company opened an office in San Francisco as it looked to recruit staff and ramp up testing of its product. Intuition Robotics is one of 16 startups that make up the Israeli delegation to CES2018. (NoCamels 08.01)

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9.6 Guardian Offers Solution to Heartbreaking Problem of “Hot Car” Infant Fatalities

Leaving an infant or young child alone inside a locked car is a disturbing mistake that any parent can easily make accidentally at any time, too often with tragic consequences. In the U.S. alone, a child dies from vehicular heatstroke every ten days, most frequently because an adult caregiver forgot there was a child in the back seat. Guardian Optical Technologies helps prevent such heartbreaking accidents with advanced patent-pending technology that enables safer “passenger-aware” cars.

Using just one sensor to monitor the entire car interior, Guardian’s stand-alone automatic system detects the smallest heartbeat and the slightest movement. It’s built from the ground up to work with automotive hardware and software, including all built-in safety systems, such as seatbelts and airbags. Drivers are constantly kept aware of conditions in their cars, allowing them to sidestep dangerous human error. As car makers adopt Guardian’s unparalleled technology, some 37 young lives could be saved each year.

Guardian combines video image recognition (2D), depth mapping (3D), and optical micro- to macro-motion analysis to constantly scan and track occupants and objects anywhere in the vehicle, using low-cost, automotive-grade components – an industry first. The sensor identifies the location and physical dimensions of everyone in the car, distinguishing people from objects. By detecting micro vibrations, the system can register, in some cases, a presence even without a direct line of sight. The Guardian technology employs machine learning along with its unique optical set-up. Real-time, comprehensive “big data” is collected from the motion analysis and 3D input, and is fused with image analysis of the sensor’s video feed, to provide a complete analysis of a vehicle’s the driver and passengers.

Tel Aviv’s Guardian Optical Technologies is dedicated to enabling “passenger-aware” cars, with cutting-edge sensor technology that makes cars safer and more convenient. Just one sensor combined with advanced 2D, 3D and motion analysis protects drivers and passengers by constantly scanning and tracking occupants and objects anywhere in the vehicle. These technologies work with a car’s seatbelts and airbags to sound immediate alerts. The system deploys machine-learning, including image analysis on the sensor’s video feed, as well as “big data” analysis. (GOT 09.01)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s Economy Grew by 3% During 2017

On 31 December, the Central Bureau of Statistics released its preliminary national accounts estimates for Israel in 2017. Overall, these stated that the economic results were good, but not as good as in 2016; there was a decline in almost every sector. The budget deficit reached its lowest point in recent years as a result of tax revenue surpluses and campaigns by the Israel Tax Authority.

According to the figures, GDP grew 3% in 2017, following rises of 4% in 2016 and 2.6% in 2015. Seasonally adjusted figures for GDP by quarters show that GDP was up 3.5% in the third quarter (4.1% in the previous estimate), after rising 2.6% in the second quarter and 0.9% in the first quarter, in annualized figures.

Israel’s population grew 1.9% in 2017, meaning that per capita GDP was up 1.0% in 2017, following a 1.9% rise in 2016. Per capita GDP totaled NIS 144,500 in 2017, or $40,100 in current prices. Private consumer spending rose 3% in 2017, 1.1% per capita, following a 6.1% increase in 2016. Per capita spending on durable goods dropped 10.9% and per capita spending on semi-durable goods (clothing, footwear, etc.) grew by 4.7%. Per capita spending on current consumption (food, housing, fuel, services, etc.) was up 2.2%.

The current account deficit in the government sector totaled NIS 8 billion in 2017, 1.1% of GDP, compared with NIS 15.6 billion in 2016, 1.8% of GDP, and a 2.9% budget deficit target. (CBS 31.12)

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10.2 Israeli Exports for 2017 Expected to Pass $100 Billion for the First Time

Israel’s annual exports of goods and services are expected to exceed $100 billion for the first time when the final figures for 2017 come in, according to a preliminary report by the Israel Export and International Cooperation Institute and the Economy and Industry Ministry. The export total for 2017 is expected to be 5% higher than in 2016.

According to the preliminary report, exports of goods and services, excluding startup technology and diamonds, increased to $92 billion in 2017, up 6% from 2016. Excluding exports to the Palestinian Authority, exports are expected to total $53 billion in 2017, a 1% increase from 2016. Industrial exports, which comprise 85% of goods exported by Israel, rose 3% in 2017, and to a total of $45 billion.

Diamond exports for 2017 are expected to total $7 billion, a decrease of 7% from 2016. Diamonds accounted for 13% of all exports of goods. Agricultural exports are expected to reach $1.2 billion for 2017, a 2% increase from 2016. Agriculture accounts for about 2% of the nation’s total exports. According to the report, Israeli exports to the European Union increased by 20% in 2017. There was also a 7% increase in exports of high-tech services. A total of 243 companies received assistance from the Economy and Industry Ministry in 2017, compared to 129 in 2016. (IEICI 02.010

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10.3 Israel’s Unemployment at Historic Low and Wages Are Rising

Employment and salaries have risen and unemployment rates have fallen to a historic low over the past year, according to a new report released by the Taub Center for Social Policy Studies in Israel. The increase in employment rates, together with the rise in the average wage, have led to an impressive rise in consumption in recent years and to an increase in the standard of living. The report also cited that many industries still suffer from low productivity and wages. It said per capita growth in Israel is low compared to other countries and that despite the overall improvement in the economy in 2017, prices in Israel are still among the highest in the OECD countries.

The report also noted an impressive increase in the integration of ultra-Orthodox men and women in the workforce. Between 2008 and 2013, the percentage of Haredim ages 23 to 30 in the workforce rose by 9%, more than for any other sector, to 73% for Haredi women and 36% for Haredi men. The findings showed that the most influential factor regarding Haredi youth’s employment is the decision to find a job. (IH 27.12)

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10.4 Record 3.6 Million Tourists Visit Israel in 2017

The Ministry of Tourism announced that an all-time record of 3.6 million tourists visited Israel in 2017, 25% more than in 2016, contributing NIS 20 billion to the Israeli economy. The largest number of tourists came to Israel from the US – over 700,000 tourists, 21% more than in 2016. Russia followed with 307,000 tourists, a 26% increase. The increase in tourism from Russia is attributable to the growth in routes and flights from Russia to Israel, some of which are run by low-cost airlines, and the exclusion of Turkey from the Russian tourist map in recent years. In third place is France with 284,000 tourists, 8% more than in 2016, followed by Germany in fourth place with 202,000 tourists, a 34% rise over 2016, and the UK, which supplied 185,000 tourists to Israel, 10% more than in 2016. Other important sources of incoming tourism included Ukraine with 137,000 tourists, China with 105,000, Italy (93,000), Poland (85,000) and Canada (75,000). Some 59% of the tourists who visited Israel this year came for the first time. While 25% described the purpose of their visit as religious, 23% sought touring and hiking, and 10% came for entertainment and enjoyment.

The Ministry of Tourism also gave grants and incentives to airlines that introduced routes to new destinations with incoming tourism potential. €250,000 grants were given for new direct weekly routes landing at Ben Gurion Airport (up to three flights a week) from a destination from which there were previously no flights to Israel. 18 new flight routes to Ben Gurion Airport were begun this year from destinations in Europe, Miami, and Iceland by various airlines, including Wizz Air, Ryanair, LOT, and Wow. The grants for routes landing in Eilat were per ticket, and amounted to €45 per passenger landing at Ovda Airport. There are currently 50 weekly flights operating as part of the winter campaign, in which Eilat hotels are taking part. (MoT 27.12)

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10.5 Record 20 Million Passengers Pass Through Ben-Gurion Airport in 2017

Israel’s Ben-Gurion International Airport marked a record high with the 20 millionth passenger of the year passing through it. The 2017 figure is 3 million more than in 2016. According to the Israel Airports Authority, in 2018, more than 23 million travelers are expected to pass through the airport. By 2022, that number is expected to reach 30 million. Transportation Minister Katz said the number of travelers passing through Israel’s airports has increased by 50% from 2013, when it stood at 13 million passengers. The number of airlines that fly through Ben-Gurion International Airport has increased by 30%, to 140. Plans with an estimated cost of $1.4 billion to adapt the airport’s infrastructure to accommodate the growing numbers of passengers and airlines have already been submitted.

The number of low-cost airlines that operate at the airport has increased by 25%. Flights operated by these airlines now constitute 15% of all departing international flights and cater to more than 1.5 million travelers to and from Israel. Among the top overseas destinations for Israelis in 2017 were Istanbul, Paris, Moscow, New York, London, Rome and Kiev. (IH 28.12)

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10.6 New Car Deliveries in Israel Down in 2017

Some 281,563 new vehicles were delivered in Israel in 2017, down 1.8% from 2016. Last year followed the previous six consecutive years in which the number of new car deliveries rose, however, this was still a very high figure. Only 5,798 new cars were delivered in December, 21% less than December 2016. December is a traditionally very weak month for car sales as buyers await models from the new year.

Hyundai was the best-selling car in Israel in 2017 with 36,731 deliveries, down 6% from 2016. In second place was Kia with 35,663 deliveries, down 6.3% and in third place was Toyota with 31,103 deliveries, up 3.5%. In fourth place was Skoda with 21,742 deliveries, up 11%, in fifth place was Suzuki with 16,619 deliveries up 24% and in sixth place was Nissan with 14,342 deliveries, up 23%.

While sales of mainstream saloon vehicles remained steady in 2017, upmarket brands saw double digit growth and luxury sports cars such as Porsche and Maserati doubled sales last year. As usual the first two months of the year see the strongest sales and market sources expect 50,000-65,000 deliveries in January and February. (Globes 03.01)

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10.7 Average Monthly Wage in Israel Approaches NIS 10,000

The average monthly salary in Israel for October 2017 was recorded at NIS 9,845 ($2,861), the Central Bureau of Statistics reported 7 January. According to a preliminary processing of a sample of employers’ reports to the National Insurance Institute, there were 3.538 million salaried positions in Israel in 2017. In August to September 2017, the number of salaried positions in Israel increased by 1.5% year on year, following a similar rise of 1.7% from May to July. From August to October 2017, the average monthly salary rose by 0.9% year on year, on the tail of a 2.3% year-on-year rise for May to July. (CBS 07.01)

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11: IN DEPTH

11.1 SAUDI ARABIA: Full Court Press

On 8 January, Abdullah Alaoudh and Nathan Brown commented in Diwan that the Saudi regime is reshaping the country’s legal sector in profound ways.

Given the number of startling changes that Saudis have seen recently, few noticed the seemingly technical measure currently being considered by the country’s Consultative Assembly, or Majlis al-Shura. It allows law school graduates to enter the country’s judiciary, which since the country’s establishment has been monopolized by those trained in sharia, or Islamic law. Yet such a move would have far-reaching implications and forms part of a wider set of moves to chip away at the collection of traditions and practices that for a long time made Saudi Arabia’s judiciary relatively independent.

In other Arab countries, judicial activists focus on formal rather than informal guarantees of independence. These include the abolition of special courts, an end to states of emergency and extralegal measures and strong judicial councils that are free from executive interference, can control staffing, appointments and promotion in the judicial sector, and that can enjoy full budgetary and administrative authority.

Only some of these formal attributes have been at issue in Saudi Arabia (which has no state of emergency, for instance). For decades, Saudi judges have instead relied on informal mechanisms that have given them autonomy and influence. But now those mechanisms may be disappearing. Substantial changes in recent years, like the more extensive ones now under consideration, could bring the informal set of mechanisms to an end.

Informal, historical mechanisms have been effective in making Saudi courts strong. Independence was largely a product of traditional learning methods (such as learning circles) and training that allowed for independent legal reasoning and judicial discretion. Similar training and background combined to give judges a strong sense of corporate identity. Saudi rulers tended to show them considerable deference and to tiptoe around them.

To be sure, the tools were not completely informal. The judicial system did have a written legal basis. In 1926, King ‘Abd al-‘Aziz Al Saud issued an order that made the Hanbali school (one of the dominant Sunni approaches) the official tradition to be applied in Saudi courts. Jurists trained in this school are often dubbed “Wahhabi,” though generally not by its own adherents who describe themselves more generally as Sunni and Hanbali. While they study the legal opinions of Mohammed Ibn ‘Abd al-Wahab, they devote just as much attention to their broader Hanbali forbearers. Hanbalis and many Islamic jurists trained in classical doctrines generally tend to resist comprehensive institutionalization. That’s because jurists have traditionally suspected that this would pave the way for state (or other external) control over jurisprudence and religion.

Yet over the years the Saudi state has stepped up formalization in ways that gradually diminished the role of the judiciary. More recently, the pace has increased through the use of three tools. The first has been the reliance on royal and government decrees regarding substantive legal questions – written legislation that leaves decreasing room for the traditional independent reasoning known as ijtihad exercised by judges. The trickle of decrees has recently become a steady stream; judges worry it will soon become a flood.

A second tool has been the formation of specialized courts and quasi-judicial bodies based entirely on state edicts and official procedural guidelines that have gradually eaten away at the jurisdiction of general courts. This set of structures has become so extensive that one judge in the general courts has described it as a “shadow judiciary.” Judges have noted the shift of taxation and insurance matters to quasi-judicial committees. These committees now have the final say over their area of specialization and issue opinions that can no longer be appealed before the general courts. For judges in the general courts, such a change means that the shadow judiciary has fully emerged into the daylight.

A third tool is greater executive oversight of the judicial sector. In 2012, the then-justice minister Muhammad Al ‘Isa became the first person to sit in the highest judicial position as acting president of the Supreme Judicial Council without forgoing his ministerial post. While the minister and his loyalists saw this as necessary for the expeditious implementation of legal and judicial reforms, some judges resented the conflict of interest inherent in ‘Isa’s dual charges. They objected also to the way he used his strong authority to micromanage judicial affairs and found his behavior to be high-handed.

Two additional tools appear to be on the drawing board. The first involves education and training that would increase state monitoring of and control over the education system that trains and produces judges. The introduction of law school graduates into the regular judiciary, as the Majlis al-Shura is discussing, is an important step in this direction. While such graduates would still have to complete a two-year program in sharia, the move would not simply dilute the sharia-based training of the judges, but would also reinforce an existing effort to widen the circle of recruitment for judges.

A second rumored step would be the combination of the various judicial and quasi-judicial systems into a unified institution. These two steps, if taken, would radically curtail the authority and autonomy of traditional general courts. This would indeed transform the “shadow judiciary” into the regular judiciary, as has happened previously in most Arab states, where sharia courts long ago stopped being courts of general jurisdiction for non-personal status cases.

Saudi judges have tried to use their informal sense of community to resist. In 2013, more than 200 of them signed a petition clearly aimed at ‘Isa, which criticized “delayed legal reform.” The petitioners pointed to “continuous promises of the administration [of the Ministry of Justice] and the show of press releases at the expense of responsible actions and reforms.” To them, the ministry “recently sought by all means an overwhelming crackdown and suppression of the real and patriotic voices.” The petition also described a “dominant resentment among judges” and “unprecedented anger” in the judicial sector. It then called for change that guaranteed the independence of the judiciary and “the respect of judges.” Lastly, the petition condemned the harassment by the executive of judges and the circumstances behind a series of resignations of young, vocal judges.

‘Isa struck back. First, his loyalists organized a counter-petition that gathered even more signatories. Second, the signatories to the first petition were subjected to retaliation. Some were referred for investigation. Others were pressured until they resigned. The remainder lowered their heads rather than risk the same fate.

That pattern of public silence has continued. Less than three months ago, the kingdom’s state security launched an unprecedented assault on the judiciary by arresting some judges from specialized (anti-terrorism) courts. No charges were filed and the state did not explain or even announce the circumstances behind the move. Placing judges in extrajudicial detention attracted very little public comment. But the arrests were noticed: last month, one judge told the authors that judges have grown more suspicious of recent promises for legal reform, more worried about their immunity as judges, and more frightened following the unprecedented intervention of the executive into judicial affairs.

Largely because of its past reliance on a corporate spirit and informal tools, the Saudi judiciary has few formal means to resist such institutional challenges. No equivalent exists of Egypt’s Judges Club, or any other means to act collectively. The Saudi judges are now losing even the informal tools they once possessed to shield against control and arbitrariness.

The arrests in November of leading Saudi princes and businessmen, after two rounds of arrests of scholars and judges, have been touted as a sign that leading Al Saud members are no longer outside the “law.” Perhaps, but those arrests were not a step toward the rule of law in any liberal sense. Instead, they were a sign that Saudi Arabia’s top leadership is learning how to use legal tools to meet its policy objectives and consolidate its position. The reality is that it is adding judges, now being asked to act as civil servants, as weapons in its arsenal. (Diwan 08.01)

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11.2 EGYPT: Egypt’s New Health Insurance Law to Give Sisi Pre-Election Boost

Ayah Aman posted in Al-Monitor on 3 January that Egypt’s parliament passed a comprehensive health insurance law in early December, but many doubt it will lead to better health services.

The Egyptian parliament passed a controversial comprehensive health insurance bill on 18 December, less than two months after its referral by the Cabinet, without substantive amendment. The bill is to enter into force on 30 June and its provisions gradually implemented over 15 years, starting off in the Port Said governorate. The rushed approval of the measure comes ahead of the presidential election scheduled for early 2018 and the expected candidacy of the incumbent president. Health Minister Ahmed Emad told Al-Monitor, “The draft law received wide support and continuous follow-up by President Abdel Fattah al-Sisi until it was approved.”

Under the new law, subscription to health insurance will be mandatory for all citizens, who must purchase it from the government’s General Authority for Health Insurance. The state will pay the premiums of those living below the poverty line. The law also provides for the gradual elimination of state-funded medical treatment, a national network run by the Health Ministry for those who cannot afford health insurance as the new insurance system moves toward full implementation.

Three bodies will be established to run the health system: the General Authority for Health Care, to oversee establishing hospitals or health care centers and provide the medical manpower and medications as well as other requirements; the General Authority for Accreditation and Supervision, to assess hospitals’ adherence to standards; and the General Authority for Health Insurance (HIO), to administer and oversee financing of the health insurance plan.

Article 40 of the law cites nine sources of funding for the plan. Subscription fees will be deducted from subscribers’ monthly salaries, as will the percentage share a patient might owe for any medical treatment, for instance, 10% of the cost of an X-ray, 10% of a blood test, 5% of a consultation and 10% of medications.

Other funding sources include the state treasury (for those unable to pay); the proceeds of investments by the HIO; foreign and local grants; and aid and donations from individuals and organizations. Among other sources are fees levied for cigarettes and tobacco products, renewal of driving licenses and identity cards, and licenses for opening clinics, pharmacies and pharmaceutical companies.

Deputy Finance Minister Mohamed Maait told Al-Monitor, “Implementing a comprehensive health insurance law will contribute to achieving social peace and reducing poverty rates, especially since Egypt has very low public spending on health. Patients pay around 75% of the cost of health services provisions in Egypt.” He added, “In the first stages of the bill’s implementation, the new insurance plan will cost about EGP 9 billion [$506.7 million], which will gradually increase in 2032 to EGP 600 billion [$33.7 billion]. Thanks to alternative sources of funding, such as fees on cigarettes, driving licenses, private clinics, sales of pharmaceutical companies and others, the state’s share in the first stages will not exceed EGP 3 billion [around $168.8 million].”

According to HIO figures, as of 30 June 2017, the current health insurance law provided coverage for only 58.8% of Egypt’s population. It only benefits certain groups, including students, pensioners, widows and state employees. Also, the current insurance plan does not cover expenses for all diseases and procedures, and the state provides medical insurance services only through a limited number of hospitals affiliated with the HIO in the major governorates. For instance, six hospitals in Cairo serve 5 million citizens.

Ali Hijazi, who heads the HIO, told Al-Monitor, “The Ministry of Health will start implementing the bill by improving the efficiency of the medical system infrastructure as a whole, including [medical] bodies, physicians, nurses, and pharmacists, so as to ensure availability and access by each patient to medical insurance services in his or her respective governorate.”

Yet several groups spearheaded by the Egyptian Medical Syndicate and some political parties — al-Tagammu and the Popular Alliance — oppose the law, claiming that it is biased toward the private sector and will destroy the public health system in Egypt.

The State Council sent a memorandum to the government in September in regard to the unconstitutionality of some of the bill’s provisions. Of note, the council asserted that the gradual application of insurance coverage across governorates contravenes Article 18 of the constitution, which provides for comprehensive health insurance for all Egyptians. It also said that collecting mandatory fees for funding the health insurance system (Article 40 of the bill) is contrary to Article 40 of the constitution, which requires social justice. Also, the government should not impose taxes on citizens for the sole purpose of covering its own deficit.

Civil and human rights bodies in Egypt have been demanding comprehensive health insurance for years. The topic was broached in 2009, under President Hosni Mubarak, but discussions came to a halt in light of the January 25 Revolution in 2013. Only time will tell whether the new law will provide better health services to citizens or further deteriorate the current system of public health.

Ayah Aman is an Egyptian journalist for Al-Shorouk specializing in Africa and the Nile Basin, Turkey and Iran and Egyptian social issues. (Al-Monitor 04.01)

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11.3 LIBYA: Libya to Hold Elections in Spring 2018

Mustafa Fetouri posted in Al-Monitor on 26 December that Libya is set to hold elections in the spring of 2018, although political and security instability bode ill for the process.

According to the Libyan Political Agreement signed in Morocco on 17 December 2015, Libya should have held its referendum on its new constitution as well as legislative and presidential elections by now. By this time, the Government of National Accord (GNA) should have already been replaced by an elected one. The GNA was formed under the leadership of Fayez al-Sarraj specifically to achieve the goals stated in the UN-brokered deal that gave the country an internationally recognized government — but little else.

However, the second anniversary of the agreement has come and gone, and none of these goals were achieved. The GNA is still there after UN envoy Ghassan Salame attempted and failed to get the GNA in Tripoli and its rival government in Tobruk to agree to certain amendments to the agreement’s core articles so it would be acceptable to both sides of the political divide. After three rounds of talks in Tunis in October 2017, political rivals could not agree on the proposed amendments, thus halting the political progress necessary to move the country forward to national elections.

Libyan strongman Gen. Khalifa Hifter declared in a televised speech on 17 December that, “The Libyan armed forces will never be under the leadership of any unelected body, but will always respond to the Libyan people’s orders.” Hifter did not say whether he will run in the upcoming elections, but he was clear that the GNA has failed and it should go.

But the GNA stayed, as the UN Security Council also issued a statement on 17 December reiterating the council’s support for the GNA as the only legitimate government in the divided country.

Salame found himself unable to proceed according to his plan to form a new transitional government for Libya and secure an amended agreement that would make the document part of Libya’s interim constitution. This pushed Salame to propose new elections sometime next spring. Libya will continue to have two governments for at least a few more months. The Tripoli-based GNA is unable to do much, prompting doubt as to whether it will be able to run smooth and peaceful elections when the time comes. Its Tobruk-based rival is even more hopeless. Both governments have little to offer to alleviate the daily misery of the people they are supposed to serve, and it is not clear if Hifter is going to accept elections in eastern Libya, which he controls.

Despite the political mess, the lawlessness and the daily difficulties facing its people, the country is now gearing up for its third elections since NATO helped topple its longtime leader, Moammar Gadhafi, who was killed by rebels as he tried to flee his hometown of Sirte on 20 October 2011.

The obvious question is how could elections be fair in a country where there is no central government, where hatred still consumes many and where the rival governments can hardly maintain security in territories supposedly under their control?

Above all that, Libya is still being threatened by different terror activities. The elected mayor of Misrata, Mohamad Eshtewi, was kidnapped and assassinated on 18 December as he left Misrata’s airport returning from an official visit to Turkey. No one has claimed responsibility so far and the investigation is still underway. His death shocked many since it happened in Misrata, which has been one of the few secure cities in war-ravaged Libya.

Logistical challenges remain a serious problem, though the High National Election Commission might still have enough time to prepare. Libya is a very large country with a scattered population, particularly along its long northern coastline. The lawless southern region is even more challenging. It is home to all kinds of illegal activities, including human trafficking, smuggling and kidnapping for ransom. Even if the logistical electoral infrastructure were safely in place, it is difficult to see how the actual elections process would be secured.

Another hurdle for the elections is the election law itself. Under the current law, dual citizens are able to vote, even though dual citizenship is widely forbidden. The 2010 legislation that is still in effect annuls the Libyan citizenship of any Libyan who acquires another citizenship without government approval.

Yet the High National Election Commission has already kick-started the voter registration process.

Salame appears to believe that elections are the quickest and best way to stabilize the country he is supposed to help get back on its own feet. His original plan was based on obvious needs like stabilizing the country and making some progress on the national reconciliation process before any elections could take place. He has apparently changed tack by going straight for elections to speed up the stabilization and reconciliation processes. Salame could be right, but holding elections under such circumstances is a big gamble.

Mustafa Fetouri is an independent Libyan academic and an award-winning journalist. (Al-Monitor 26.12)

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11.4 TURKEY: 2018 Fraught With Uncertainties for Turkish Economy

Mustafa Sonmez posted on 29 December in Al-Monitor that despite its spectacular growth this year, Turkey’s economy is burdened with serious problems and fragilities that might spoil the party next year.

As expected, Turkey this month posted a sensational growth rate for the third quarter of 2017. The economy ostensibly grew 11.1%, which put the overall rate for the first nine months at 7.4% and the year-on-year rate at 6.5%. The figure, which casts Turkey as one of the world’s fastest growing economies after China and India, means that the government’s projection of a 4.4% growth rate for 2017 will be easily surpassed. Yet the other side of the coin is not as shiny as the growth numbers suggest at first glance. Under the veneer of success, the Turkish economy’s growth involves arithmetic illusions, fragilities and a chemistry that accumulates stress.

The impressive growth figures this year are the result of internal and external “doping,” in addition to the base effect of last year’s growth, which stood at 3%. The “miraculous” 11.1% rate of the third quarter, in particular, owes much to the base effect of the same period last year, when the economy contracted by about 1%, something the ruling Justice and Development Party is notably trying to obscure.

In general, this year’s growth has relied heavily on the inflow of foreign short-term investments or hot money, driven by seasonal external factors, including US President Donald Trump’s performance, as well as on strong government levers at home, including the encouragement of bank lending at the expense of a widening budget deficit, tax cuts and other incentives resulting in reckless spending from the Unemployment Insurance Fund.

As Trump’s performance failed to inspire confidence, foreign short-term investors turned to emerging economies like Turkey. Up until September, the flow of hot money kept the dollar’s price in check and encouraged imports, which stimulated growth based on domestic demand. In the meantime, however, Turkey’s external debt stock reached $435 billion and the foreign-exchange liabilities of private companies climbed to up to $212 billion.

As of October, the Turkish lira began to tumble against the dollar, hit by political tensions with the United States, piling pressure on the Central Bank to hike rates, and dragging the economy into the pincer of high interest rates combined with high foreign exchange prices.

In short, the flow of foreign funds, dominated by hot money, was a major factor behind Turkey’s economic growth, which is expected to reach 6.5% on overall this year. Riding the wave of hot money and loan expansion, growth was driven by domestic consumption, especially in the third quarter.

In the industry, including the mining and energy sectors, growth in the first three quarters reached 9.5% on average. As such, industry became the lead sector in terms of growth, relying mainly on domestic consumption. The added-value increase in the manufacturing sector was driven largely by the domestic market, especially demand for durable goods. On the investment leg, the lead belonged again to the construction sector. Yet despite the construction frenzy, which has caused huge damage to the environment and historical heritage, investment in machinery and equipment — an indicator of future industrial development — remains low, representing an important weakness.

Moreover, Turkey’s economic growth has been neither employment-friendly nor contributes to the fair distribution of wealth, the statistics show. The unemployment rate has not only not decreased, but remains on the rise. According to official data for September — a month that is part of the third quarter with the 11.1% growth rate — the seasonally adjusted unemployment rate came close to 11%. Non-agricultural unemployment stood at 12.7% and youth unemployment at 20.2%.

The high growth is accompanied by high inflation. Year-on-year inflation in producer prices hit 17.3% in November, including a 24% increase in intermediate goods, which was a major factor pushing consumer inflation to almost 13%.

The most disturbing reality on the other side of the coin is that the spectacular growth rate has been achieved under a state of emergency, which has been in place since the coup attempt in July 2016. The emergency rule has been fraught with legal violations and suppression of labor rights, resulting in the cheapening of labor and a distribution shift in favor of revenues from profits, interest and rent.

The Turkish Statistical Institute’s calculations of gross domestic product (GDP) involve a method based on revenues, alongside others based on production and spending. This method calculates the share the labor force gets from the GDP as well as the “operating surplus,” which consists of profit, interest and rent revenues, with the remaining share considered investment and tax. The data shows that payments to labor stood at 29% of GDP in the third quarter, down from about 35% in the first one. In contrast, the net operating surplus reached close to 47% of GDP in the third quarter, up from 39% in the first one.

In sum, Turkey’s economic growth in 2017 has not only relied on the fragile flow of hot money, but has also come at a hefty cost, marked by two-digit inflation, widening budget gaps coupled with a current account deficit, high unemployment and an increasingly unfair distribution of income. All those problems will continue in 2018. The prevailing view among observers is that Turkey can hardly sustain its current performance, with the growth rate expected to fall by about half next year.

The levers of loan expansion and tax incentives, which the government has used lavishly, jeopardizing the budget, are unlikely to work next year. Moreover, the leverage provided by hot money has weakened, with the flow intermittently stopping or slowing down since October under the impact of the crisis with the United States. As a result, the price of the dollar remains above the desired level, despite being curbed to some extent through Central Bank interventions and rate hikes. The lira is closing the year with a 21% depreciation against the greenback — a devastating figure for those who are indebted or have a dependency on imports. Entering 2018 with such burden is a huge problem in itself.

A fresh rally by the dollar next year under the impact of external factors could aggravate those debt burdens. The US Federal Reserve has drawn up a balance-sheet reduction plan and begun hiking rates, albeit modestly. With the European Central Bank on the same path, the flow of hot money to countries such as Turkey could decrease.

Another risk stems from the guarantees that the Turkish treasury provided in the loan expansion this year. Loan defaults could put a strain on both the treasury and the banking system.

Finally, there is the issue of elections. Critical presidential, parliamentary and municipal polls are scheduled for 2019, but speculation is growing that the government could opt to bring them forward to 2018. If early elections bring about a government policy that insists on growth at the expense of more inflation and budget deficits, all economic balances could further deteriorate.

Mustafa Sonmez is a Turkish economist and writer. He has worked as an economic commentator and editor for more than 30 years and authored some 30 books on the Turkish economy, media and the Kurdish question. (Al-Monitor 29.12)

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11.5 CYPRUS: Eastern Mediterranean May Be Scene of First Conflict Of 2018

Metin Gurcan posted in Al-Monitor on 26 December that developments warn of growing tension between Turkey and the Greek Cypriots over newly discovered hydrocarbon reserves in the eastern Mediterranean.

The eastern Mediterranean is expected to witness the first conflict of 2018, as developments at the end of 2017 are signaling worsening relationships between Turkey and the Greek Cypriot-Greece-Israel-Egypt bloc. Territorial disputes over natural gas and newly discovered hydrocarbon reserves in the eastern Mediterranean basin are the reason.

Up until a few years ago, the hope was that these hydrocarbon reserves would offer a real opportunity for a peaceful settlement of the Cyprus conflict. But these optimistic hopes vanished with both Turks and Greek Cypriots unilaterally speeding up exploration and drilling operations.

In 2004, the European Union had declared the Greek Cypriots the sole entity representing the island of Cyprus and accepted it as an EU member. Feeling that its hand has been strengthened following the EU decision, the Greek Cypriots claimed the right of natural resources exploration in the Exclusive Economic Zone (EEZ) around Cyprus.

Turkey, however, has been insisting that the Greek Cypriot administration in Nicosia cannot unilaterally “adopt laws regarding the exploitation of natural resources on behalf of the entire island,” as it doesn’t represent the Turkish Cypriots. Also, there is a separate disputed EEZ between Turkey and Greece in the eastern Mediterranean — another point of tension in the conflict.

Ankara reacted strongly to the Greek Cypriots’ natural gas drilling efforts in July. The Turkish army dispatched a frigate in the eastern Mediterranean to “monitor a drilling ship that is believed to have begun searching for oil and gas off ethnically divided Cyprus despite Turkey’s objections,” The Associated Press reported.

On 20 November, Egyptian President Abdel Fattah al-Sisi visited Greek Cypriot for a trilateral meeting in Nicosia to discuss hydrocarbon resources in the region. In addition to Egypt’s president, Greek Prime Minister Alexis Tsipras also participated in the meeting, which was hosted by Greek Cypriot President Nicos Anastasiades. The Turkish Foreign Ministry, on the other hand, declared the outcome of the trilateral meeting to be “null and void.”

However, despite Turkey’s opposition, drillship Saipem 12000 sailed to carry out exploration and drilling operations on behalf of French TOTAL and Italian ENI companies in the Calypso region between 1 March and 26 December in accordance with an agreement reached during the trilateral summit.

Moreover, Italy, Greece, Greek Cypriot and Israel had already agreed on the construction of a gas pipeline from newly discovered fields. The project — dubbed “East-Med” — will cost some $6 billion. An over 2,000 kilometer long (1,243 mile long) pipeline will channel offshore reserves in the Levantine basin to Greece and Italy.

The East-Med project could be interpreted as an effort to form a regional alliance between Greek Cypriot and Greece to confront Turkey in the eastern Mediterranean. The Greek Cypriots and Greece also signed a separate agreement with Israel to channel natural gas reserves in the Mediterranean basin via an undersea pipeline. Italy’s participation in this project didn’t come as a surprise, as Italy has already been exploring natural gas in the Mediterranean on behalf of the Greeks. The undersea pipeline is expected to channel natural gas from Israel’s Leviathan Basin and Greece’s 12th plot — also called Aphrodite — to Crete, and then to Europe via Greece.

On 5 December, the energy ministers of Greece, Greek Cypriot and Israel and the Italian ambassador to Greek Cypriot signed an accord in Nicosia on the construction of the East-Med pipeline. The participation of EU representatives in the ceremony indicated Brussels’ support for the project.

In 2017, the Greek Cypriots, Israel and Greece conducted three joint exercises in March, June and November. At the beginning of Nov. 2017, Greece and Egypt held their first joint naval exercise for the first time in quite a while. In response, Ankara initiated its own moves and issued a navigational telex to reserve an area for military exercises. The area covers the disputed sixth, seventh, eighth and ninth blocs that the Greek Cypriots had declared as their EEZ. Ankara’s declaration came at a time when Saipem 12000 arrived in the Mediterranean.

Also, the Turkish army has kept some of its forces in the eastern Mediterranean following NATO’s Standing Maritime Task Force exercise, which was held on 7 – 16 November. The Turkish navy’s TCG Gediz and TCG Barbaros frigates; the TCG Kalkan, TCG Mizrak, TCG Bora and TCG Meltem gunboats; the TCG Akar fuel tanker; and four underwater commando teams are still in the sixth bloc.

In 2018, Turkey will have its first brand-new drilling vessel, the Deepsea Metro II. According to navigation data, the ship left Norway’s Hoylandsbygda port and arrived in Turkey. The critical question now is whether the Turkish navy will be providing military escorts for the new drilling vessel.

If the Deepsea Metro II is to be escorted by a Turkish navy fleet while sailing to the sixth bloc, then the affair is bound to heat up. In the meantime, the Nicosia administration announced that drilling operations in its EEZ began on 30 December and that Saipem 12000 would join the operations as well. Now the question is whether Turkey’s Deepsea Metro II and Saipem 12000 and naval fleets escorting them will confront each other in the disputed sixth bloc.

One should also consider domestic developments in relevant countries when trying to measure the extent of a possible crisis. A possible hydrocarbon crisis is an excellent domestic political issue that all governments can use to consolidate their nationalist support base.

In sum — and in comparison to 2017 — one will witness more eventful scenes in the eastern Mediterranean in 2018. The only actor that could mediate between Ankara and Nicosia is not Washington but Moscow, the new shining star of the Middle East.

Metin Gurcan is a columnist for Al-Monitor’s Turkey Pulse. He served in Afghanistan, Kazakhstan, Kyrgyzstan and Iraq as a Turkish military adviser from 2002 to 2008. After resigning from the military, he became an Istanbul-based independent security analyst. Gurcan obtained his PhD in 2016 with a dissertation on changes in the Turkish military over the preceding decade. He has published extensively in Turkish and foreign academic journals, and his book “What Went Wrong in Afghanistan: Understanding Counterinsurgency in Tribalized, Rural, Muslim Environments” was published in August 2016. (Al-Monitor 26.12)

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Fortnightly, 10 January 2018

Fortnightly, 10 January 2018

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