Fortnightly, 13 July 2016

Israel is coming back to Africa, and Africa is coming back to Israel,” Prime Minister Benjamin Netanyahu declared on 5 July in Nairobi during the second leg of his four-country tour of East Africa, which is intended to strengthen Israel’s commercial, diplomatic and security relations with African countries. The visit to Uganda, Kenya, Rwanda and Ethiopia is the first time in almost 30 years that an Israeli head of state has visited sub-Saharan Africa. Netanyahu spoke earlier at a ceremony commemorating the 40th anniversary of the Entebbe operation, during which his brother Yoni was killed leading the rescue of several hundred hostages after Palestinian and German terrorists hijacked an Air France plane flying from Tel Aviv to Paris and took shelter in Uganda, which was under Idi Amin’s leadership at the time. Both Kenyan President Uhuru Kenyatta and Netanyahu noted that Kenya assisted the rescue mission, allowing Israeli planes to refuel there following the operation. Idi Amin ordered the killing of hundreds of Kenyans in Uganda in retaliation for the country’s support of Israel. Kenya and Israel have enjoyed a close and long-standing relationship, with Israel providing forensic and humanitarian assistance following the bombing of a Nairobi mall in 2013 and other terrorist attacks.

During his trip to Uganda, Netanyahu participated in a regional counter-terrorism summit with the presidents of seven African nations – the four countries he is scheduled to visit, plus Tanzania, South Sudan and Zambia. The heads of state issued a joint declaration, stating that the summit “heralds the opening of a new era in relations between Israel and the countries of Africa,” and vowed to increase cooperation in a variety of areas, particularly counter-terrorism and technology. Israel is well-known for providing medical and disaster assistance and has a long history of sharing its expertise in the fields of agriculture, technology, and water conservation with countries in Africa.

Jerusalem hopes that increased ties with African nations will lead to a shift in their voting trends at the UN and other global forums, thus improving Israel’s diplomatic standing and reversing what Netanyahu called “the automatic majority against Israel.”

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1.2 Jerusalem Set to Approve Budget on 11 August

The government session to approve the budget will be scheduled for 11 August, after the prime minister was presented with the Ministry of Finance reform package for the 2017-18 budget. The date is not fixed, but the budget approval process is underway. Senior Ministry of Finance officials presented the key portions of the Economic Arrangements Bill to the prime minister on 29 June. Agreement has yet to be reached, on the budget framework – the deficit target and the spending cap – though there is talk of pushing the deficit beyond the 2.5% of GDP figure provided by the ministry.

As last year, Minister of Finance Kahlon is expected to unveil an expansive Economic Arrangements Bill, with measures to advance a variety of economic reforms – focusing on education, health, and transportation infrastructure – as well as steps to reduce the cost of living. One of the key reforms is a drastic reduction in the number of technology colleges in an effort to boost their status by creating a model similar to that of the universities – to be managed by a council for technological education. Another key measure is a plan to speed up the construction of three light rail systems in the three largest Israeli cities at a cost of NIS 60 billion. Other measures will focus on reducing the regulatory red-tape small businesses face and modernizing the workflow of government ministries.

The budget deficit will reach NIS 14 billion and the ministry will present several creative measures and tactics to cut government spending and increase revenue – including drawing hundreds of millions of shekels from the Jewish National Fund. (Globes 01.07)

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1.3 Finance Minister Kahlon Plans Tax Cuts

Top Ministry of Finance officials have been holding intensive discussions in the past few days concerning the desire of Minister of Finance Moshe Kahlon to present an economic growth plan alongside the state budget. Kahlon decided to formulate such a plan because of recent negative data on the state of Israel’s economy. A focus of the plan is reductions in companies’ tax and income tax. The income cuts are planned to apply to monthly incomes up to the NIS 12,000 – 13,000 bracket. The aim is to alleviate the tax burden mainly for low and middle wage earners. The tax cuts are at present under discussion and no final decision has yet been made on the matter, but Kahlon is determined to go ahead with at least one of the cuts.

This is surprising given the economic background of the past few months. Ministry of Finance officials have been talking of a budget shortfall of at least NIS 12 billion and of the need to cut government spending further, but Kahlon believes that the actual figures are better. State tax revenues were higher than expected last month, but, beyond that, Kahlon believes that the government needs to institute substantial measures to stimulate economic growth. (Globes 11.07)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Moody’s Says Turkish-Israeli Deal ‘Credit Positive’ for Israeli Economy:

The Turkish-Israeli deal will be positive for the Israeli economy’s credit as it expands the market for its gas exports, Moody’s said in a research note on 4 July. The report also added that the reconciliation between the two countries would provide a firm basis for the development of the Israeli gas sector.

On 28 June, Israel (A1 stable) and Turkey (Baa3 negative) signed an agreement that formally normalizes relations between the one-time allies. The credit-positive accord supports the Israeli economy by expanding the market for its gas exports from the giant Leviathan offshore field, where development will soon begin following the Knesset’s recent resolution of various regulatory impediments. Moody’s expects it will also bolster regional political stability.

Perhaps more significant than the security advantages are the potential benefits for the Israeli economy, particularly for the incipient gas industry. Moody’s believes that Turkey is likely to become a primary market for gas exports from Leviathan – potentially through the construction of a new pipeline in the Mediterranean – now that the two countries are set to begin discussions about a gas deal. Turkey also provides an important route to European markets for exports from the eastern Mediterranean gas basin, and would allow Israeli gas to serve as an alternative to Russian gas, which is frequently used for political leverage in European-Russian disagreements. (HDN 04.07)

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2.2 Nyxoah Raises $20 Million

Nyxoah announced it has raised $20 million. Nyxoah’s new investors in this current round are Glide Healthcare from Holland (which financed 55% of the deal) and SWIR from Belgium. Novallia also participated by providing Nyxoah with a loan of unknown value. All of the company’s prior investors participated in the round, including Taub himself and other private investors. Taub invested about $8 million out of the $26 million raised up until the current round. The company has completed product design and is now preparing to launch clinical trials in the first quarter of 2018. The amount raised will be used for clinical trials (on humans), which, the company claims, will pave the way for marketing approval. The company is currently developing a second generation product.

Sleep apnea is a condition in which, during sleep, the lax tongue and palate block the airways. The obstruction causes the patient to awaken numerous times during the night and affects not only sleep quality but the person’s general health, becoming a risk factor for heart and blood vessel diseases. Nyxoah’s product is implanted under the patient’s chin, stimulating nerves responsible for triggering the tongue muscle. The stimulation causes the tongue to contract in a way that prevents it from blocking the airways.

Tel Aviv’s Nyxoah is a pioneering medical device company, engaged in developing a novel diagnostic and therapeutic solution to combat Obstructive Sleep Apnea (OSA). The company is driven by the vision that OSA sufferers should not be encumbered by clumsy devices or complex and expensive surgical procedures. While Nyxoah was founded in Belgium, its R&D activity is situated in Israel. (Globes 04.07)

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2.3 Delta Galil to Acquire Contemporary Premium Brands from VF Corp

Delta Galil Industries signed a definitive agreement to acquire contemporary premium brands, including the businesses and brands of 7 For All Mankind, Splendid and Ella Moss from VF Corporation. The acquisition is projected to add over $300,000,000 in Delta Galil’s top line annual sales and is expected to be accretive to Delta Galil’s earnings in 2017. The newly acquired brands join Delta Galil’s prominent portfolio including P.J. Salvage, Schiesser, KN Karen Neuberger, Nearly Nude, LittleMissMatched and FIX.

Tel Aviv’s Delta Galil Industries is a global manufacturer and marketer of branded and private label apparel products for men, women and children. Since its inception in 1975, the Company has continually strived to create products that follow a body-before-fabric philosophy, placing equal emphasis on comfort, aesthetics and quality. Delta Galil develops innovative seamless apparel including bras, shapewear and socks; intimate apparel for women; extensive lines of underwear for men; active wear, sleepwear and leisurewear. (Delta Galil 30.06)

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2.4 Jerusalem Signs $63 Million Agreement With Spacecom

The State of Israel has signed an agreement with Spacecom Satellite Communications for the purchase of communications services on the company’s Amos satellites for five years. The contract is worth $63 million. The state purchased an option to extend the contract for a further eight-year period, if the option is exercised, the contract will be worth a total of $164 million to Spacecom.

Ramat Gan’s Spacecom is a leading global fixed-satellite operator, offering tailored end-to-end communication solutions to the Media and Broadband industries. Operating the advanced AMOS satellite fleet, Spacecom provides innovative broadcast and broadband services with Pan-European, Pan-African, Middle Eastern, Russian and Asian coverage and cross region connectivity. (Various 10.07)

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2.5 Twistlock Locks Down $10 Million in Series A Funding

On 6 July, the Israeli cyber security startup Twistlock announced the close of their Series A, bringing in a very sizable $10 million in new funding. The round was led by the security-focused fund TenEleven Ventures with help from new investor Rally Ventures. Previous backers YL Ventures and an unnamed strategic investor joined in as well. With this new funding added on to the $3.1 million raised in two earlier seed rounds, this injection of cash takes Twistlock to a total of $13.1 million raised.

Co-founded in January 2015, the company was the first to market last year with their security solution for protecting containers from vulnerabilities and attacks. Twistlock’s technology highlights include Twistlock Trust, a set of capabilities that manages container vulnerabilities and enforces compliance practices, and Twistlock Runtime, a collection of runtime functions that delivers powerful behavior analytics of containerized applications and defend against zero-day threats in the production environment. They have San Francisco headquarters and an R&D office based in Herzliya. (Various 06.07)

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2.6 Enel Launches Tel Aviv Innovation Hub in Israel

On 11 July, Italian multinational power company Enel has launched its Innovation Hub in t Tel Aviv in the presence of the Group’s CEO Starace, Italian Ambassador to Israel Talò, Managing Partner at Genesis Partners Saacks and others. The inauguration event was held in SOSA’s headquarters. Enel is the first Italian company to run an innovation hub of this size in Israel.

Enel has chosen to team up with SOSA & The Junction, one of the most successful innovation communities in Israel, in order to offer one-stop-shop solutions to Israeli start-ups that are willing to develop and implement cutting-edge products and services that can have business and social impact. Enel Innovation Hub aims each year to scout up to 20 high-potential Israeli start-ups and to offer them a dedicated scale up support program.

In Israel, the Group will adopt the operational model that has tested in other regions like Latin America and that is already paying off, with 30 start-ups that to date are running strategic projects. More specifically the start-ups will be selected by an advisory board made up of Enel senior executives that will evaluate the strategic fit with the Group’s needs and their business potential. Each start-up collaborating with Enel will work alongside with an internal champion that will facilitate the relationship with the global business lines and the Group’s market units.

Start-ups working with Enel will have the chance to receive further financing from the Israeli Ministry of Economy that, according to an agreement in place with Enel, will provide funding equal to the value of Enel’s support. Enel wants to be an active player of the Israeli ecosystem collaborating with universities, venture capital funds, institutions and other corporations in order to feed and enrich the Israeli innovation network and to link it to the other ecosystems in which Enel takes part.

SOSA is a value creation platform for global innovators. Built by pioneers of the Israeli innovation community, SOSA serves as a one-stop-shop for innovation services. It reaches over 2,500 start-ups across sector and stage, 350 multinational and technology companies and more than 20 local and global venture capital funds.

Founded in 2011 by Genesis Partners, The Junction is the leading platform in Israel for early stage start-ups to accelerate and advance their ventures into better products and companies. Accepted companies become part of a new ecosystem with personal mentorship from Genesis Partners, a selected group of high caliber mentors and high profile corporate partners such as HP, SAP, MunichRE, and now, Enel. (Enel 11.07)

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2.7 eBay Acquires SalesPredict for More Than $20 million

eBay announced on 11 July it would acquire SalesPredict, a company whose software tries to preempt consumer behavior and monitors individuals’ buying preferences for online shopping. The move is a bold one by eBay to upgrade its artificial intelligence and data science efforts, according to a statement by the company. While the two companies refused to disclose terms of the deal, it is reportedly worth between $20 and $30 million.

Founded in 2012, SalesPredict helps B2B Marketing & Sales teams drive more revenue by identifying who their best potential prospects and accounts really are and providing insights that help them target inbound and outbound marketing efforts more effectively. How, by predictive analytics. The company is headquartered outside Tel Aviv and has a U.S. office in San Francisco. (eBay 11.07)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Jordan Airport Passenger Numbers Up 11% in May

Jordan’s Queen Alia International Airport (QAIA) witnessed a notable 11.6% annual rise in passenger traffic in May compared to the same period in 2015. According to figures issued by Airport International Group (AIG) – the Jordanian company responsible for the rehabilitation, expansion and operation of QAIA, May also saw year-on-year increases in aircraft movements (ACM) and cargo traffic numbers, continuing the consistent streak of growth witnessed at the airport in 2016 thus far. Throughout the month of May, QAIA welcomed a total of 631,384 passengers in comparison to 565,591 passengers received in the same period last year. In addition, QAIA registered 6,208 ACM as opposed to 5,980 ACM in May 2015, affecting a 3.8% rise. QAIA also handled 8,988 tons of cargo set against 8,809 tons during May of last year for an increase of 2%. As of the end of May, the airport’s overall year-to-date (YTD) passenger numbers for 2016 has reached 2,872,711, registering a significant climb of 8.2% in comparison to the same period last year. ACM and cargo figures have also recorded discernible increases in 2016, achieving YTD rises of 7.4% and 8.5% respectively. (Trade Arabia News 03.07)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Sorek Power Plant Begins Operations

More than a year late, the Sorek private power plant has begun to operate. The power plant was constructed by a consortium of IDE Technologies (owned by Israel Chemicals and Delek Group. The plant will supply 140 mw, half of it for the adjacent desalination plant, owned by IDE and Hutchison Whampoa unit Hutchison Water, and half for factories in the area. The plant was built at an investment of $200 million. The desalination plant will buy power from the new power plant more cheaply than from Israel Electric Corporation. The cheaper power should also lower the price of the desalinated water.

The power plant will be fueled by natural gas from the Tamar reservoir. According to the contract between the power plant developers and the owners of Tamar (of which Delek Group is one) signed in March 2014, the plant will consume 3.3 billion BCM of gas over the contract period. The Tamar partners estimated the value of the contract at $750 million. The commissioning of the power plant was delayed because the Electricity Authority refused to recognize the gas supply agreement on the grounds that the base price in the contract was too high, and that the index-linking would lead to an unjustified rise in the price. (Globes 12.07)

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4.2 Rioglass Solar Signs Additional Contract in South Africa

Beit Shemesh-based Rioglass Solar will provide systems for a thermo-solar power plant to be built in South Africa. This is the company’s third power plant project in South Africa in the past two years, with a total value of NIS 235 million. In the current deal, totaling over NIS 70 million, Rioglass will provide the plant’s receivers. Upon completion, the power plant will produce 100 mW of power for about 80,000 households. In thermo-solar stations, light rays hit giant mirrors and the collected heat is directed to the heating of a tube containing liquid (usually oil). The liquid heats and drives a turbine producing electricity.

Rioglass Solar has recently taken over the global thermo-solar system market, after acquiring Siemens’ thermo-solar receiver operations in 2013. Two years later, it signed an agreement for the acquisition of company German Schott Solar, its biggest competitor and the key player in thermo-solar systems. (Globes 11.07)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanon Seeks Arms from Russia

Lebanon is seeking to acquire arms from Russia in order to bolster its armed forces currently deployed along the flashpoint northeast border to defend against Islamist terrorists. Lebanon hopes to obtain a number of weapon systems within a year, including not only the missiles but artillery as well as Russia’s T-72 battle tank. Beirut is still locked in negotiations with Moscow to acquire the Kornet missile, while also stressing the importance of the Russian guided missile.

A number of foreign powers, including the US and UK, already provide military aid to Lebanon’s Armed Forces, which in the past two years has reinforced its defensive lines in the eastern Beqaa along the Anti-Lebanon Mountain range, from where Syrian militants have launched probing raids into Lebanon. Washington touts that it has provided $1.3 billion in aid to Lebanon’s security services since 2004, including Huey II helicopters, Cessna aircraft, small arms and artillery. Jordan has also stepped into the mix, with King Abdullah II promising to aid Lebanon’s army and security forces in its defense against Islamist militants as his country escalates its campaign against ISIS. (NOW 11.07)

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5.2 Lebanon Ranked 82 out of 160 Countries on World Bank’s Logistics Performance Index

According to the World’s Bank logistics performance index (LPI), Lebanon recorded an LPI score of 2.72 in 2016, which ranked it 82nd out of 160 countries, compared to a score of 2.73 and a rank of 85 in 2014. The LPI measures the performance of trade logistics and that based on the weighted average of six key dimensions: the efficiency of the clearance process, quality of trade related infrastructure, ease of arranging competitively priced shipments, competence and quality of logistics services , ability to track and trace consignments, timeliness of shipments in reaching destination within the scheduled time. In terms of the key dimensions of the LPI, Lebanon’s best performance was in timeliness with a score of 2.86, and its worst performance was in logistics competence with a score of 2.45. Also, compared with the same income group, Lebanon lags behind South Africa, the top performer in this category. South Africa recorded an LPI score of 3.78, which ranks among the top 20 performers in the world. Similarly, Lebanon falls behind the best performer in the region, Egypt which scored an LPI of 3.18 compared with 2.97 in 2014. This increase can be attributed to the improving political situation in the country. The top performer in the world was Germany with an LPI of 4.23 and a high score of 4.45 on timeliness. Germany remained on top of the list throughout the past years, with an LPI score increasing by 2.6% from 4.12 in 2014. (WB 01.07)

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5.3 Jordan’s GDP Posts 2.3% Growth in First Quarter

Jordan’s Department of Statistics (DoS) said the country’s GDP recorded a growth of 2.3% in fixed market prices in the first quarter of 2016, compared to its Q1/15 results. The electricity and water sector achieved the highest growth rate of 16.4%. The agricultural sector registered a 6.4% growth rate, followed by that of the “non-profit” special services sector at 4%. Closely behind, finance, insurance, real estate and business services achieved a 3.6% growth. The social and personal services sector recorded a 3.1% in growth, followed by transport, storage and telecommunications at 3%, the construction sector at 2.6% and wholesale, and retail trade as well as hotels and restaurants at 1.6%. (JT 04.07)

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►►Arabian Gulf

5.4 GCC Forecast to See ‘Lowest Growth in 30 Years’ in 2016

The Middle East and North Africa (MENA) region will see its lowest growth since the 1980s, as countries tighten fiscal policy in response to low oil prices, according to Capital Economics’ Q2/16 Middle East Outlook. While the UAE has the best long-term economic prospects, with anticipated GDP growth of up to 3% in the coming years, Bahrain and Oman are likely to be poor performers with GDP growth of maximum 1% in 2016-2017. Fitch recently downgraded Bahrain’s long-term foreign currency credit rating from BBB- to BB+, making it the first of the six GCC countries to receive “junk” status since oil prices started to fall in mid-2014.

Meanwhile, Saudi Arabia’s economy is also set to slow sharply to 0.3% this year and remain weak “for the foreseeable future”, with anticipated growth of 0.8% in 2017. Capital Economics noted that low oil prices have resulted in large twin budget and current account deficits, and although the country’s strong balance sheet provides some buffer, the shortfalls will need to be addressed within the next two years and the kingdom’s Vision 2030 economic diversification strategy is a longer-term solution.

Qatar’s economy grew by 3.7% in 2015, but this is also likely to soften to 2-3% in 2016-2018. Capital Economics is concerned about the rapid expansion of private sector credit. Kuwait’s economy, meanwhile, is expected to remain “sluggish”, with forecast growth of just 1-1.5% in 2016-2018

The outlook is poor in the rest of the region too, Capital Economics said. In Egypt, depressed tourism revenues along with tighter fiscal and monetary policy will result in very slow growth this year. Morocco has the brightest medium-term prospects in the region but it, too, will weaker growth in the coming year due to a drought. (Capital Economics 02.07)

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5.5 UAE’s Direct Non-Oil Trade Totals $73.3 Billion During First Quarter

The UAE’s direct non-oil trade totaled AED269.5 billion during Q1/16, marginally down on the figures achieved in Q1/15, according to the Federal Customs Authority (FCA). It said that imports (AED166.1 billion) accounted for more than half of the UAE non-oil foreign trade during Q1, while exports totaled AED46.8 billion and re-exports reached AED56.6 billion in the same period. The FCA said the UAE non-oil foreign trade during Q1 showed “remarkable stability”, despite slowing global economic growth rates and declining imports and exports in several UAE key strategic partner countries because of the global oil price crisis.

In terms of weight, the UAE’s total non-oil trade in Q1 recorded 48.4 million metric tons, with Asia, Australia and the Pacific maintained top rank among UAE non-oil trade partners with a share of AED108.3 billion or 42% of the total. FCA’s preliminary statistics also revealed that raw gold and manufactured gold ranked top among imports in Q1 with a share of 15% (AED24.5 billion) of the total. They also showed that Saudi Arabia was the UAE’s top GCC non-oil trade partner with a share of AED8.7 billion, representing 35.7% of non-oil trade with GCC countries. (FCA 09.07)

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5.6 UAE Remittances Reach $1.36 Billion Over Eid Holiday

Expats in the UAE sent home around $1.36 billion (AED5 billion) during the last week of Ramadan. Remittances during Eid Al-Fitr rose by 20% over the same time last year. The daily average sent home by expats over this period was three times the usual daily average registered at other times in the year. The jump was attributed to an overall increase in incomes this year, region-wide economic uncertainty prompting high savings rates from expats, and the strong value of the dollar-pegged UAE dirham. Expats make up over 80% of the UAE’s population. Remittances last year stood at $23.88 billion, according to figure from the UAE Central Bank. (AB 10.07)

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5.7 Ras Al Khaimah Plays Key Role in UAE Growth

Ras Al Khaimah played a crucial role in the growth of the UAE industrial sector in Q1/16. Whilst data showed that the emirate of Dubai accounted for about 50% of the number of new factories built in the country during the first quarter of 2016, Ras Al Khaimah ranked second with 30% of the total new industrial licenses. Industrial investments recorded within UAE had a total value estimated at nearly $40 million (AED 139.8 million) in Q1/16, helping the Emirates to prosper and grow. Foreign investment has doubled in the industrial sector in UAE during the past eight years assisting in this growth.

Ras Al Khaimah, which means ‘head of the tent’ in Arabic, is the northernmost of the seven emirates that constitute the United Arab Emirates. Covering 1,684 km², it has a population of 345,000 (2015) with tourism and industry forming the foundations of the economy. It has one of the fastest growing economies in the MENA region, with a yearly growth rate average of 8.8%. The Ruler of Ras Al Khaimah, Sheikh Saud bin Saqr Al Qasimi, has overseen growth in the region since succeeding his father in 2010. (RAK 10.07)

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5.8 Saudi Economic Growth Slowest in Three Years as Austerity Bites

Saudi Arabia’s economy expanded at its slowest rate in three years during Q1/16 as low oil prices forced the government to cut spending and raise costs for industry. Some analysts said the data pointed to a risk of growth in the world’s top oil exporter slowing to near zero this year, which would be its worst performance since the global financial crisis of 2009.

GDP, adjusted for inflation, grew 1.5% from a year earlier between January and March, down from a revised growth rate of 1.8% in the fourth quarter of 2015, the state statistics office said. It was the slowest growth since 0.3% in Q1/13. The oil sector expanded 5.1% in the first quarter of this year as the world’s biggest oil exporter increased its production of crude and exported more refined products.

But the non-oil sector shrank 0.7%, its worst performance in at least five years. This may be a source of concern to Saudi policy makers because an ambitious reform plan to help the economy cope with an era of cheap oil, announced last month, assumes rapid growth in non-oil businesses. Last December, to curb an annual budget deficit of nearly $100 billion caused by slumping oil revenues, the government announced cuts in spending and energy subsidies. Officials have said there will be more austerity steps in coming years. Within the non-oil part of the economy, the private sector grew just 0.2% in the first quarter while the government sector shrank 2.6%, the official data showed.

The weakness of the non-oil sector was partly due to the fact that Q1/15 was unusually strong; in January that year, King Salman awarded public employees two months’ extra salary to mark his accession to the throne. But Q4/15 growth rate of 1.8% was revised down sharply from an original estimate of 3.6%. That points to the possibility of a similar revision for the first-quarter figures. If the economy slows excessively, the government still has the option of spending more to stimulate growth; the central bank holds $573 billion of net foreign assets, and Riyadh has begun borrowing abroad this year to finance some expenditure. But if it eases up on its austerity program too much it may increase pressure on the Saudi riyal’s peg against the U.S. dollar, fueling concern among some foreign investors about the long-term sustainability of its economy. (AB 03.07)

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5.9 Saudi Arabia Garners $14.3 Billion in Tourism Revenues

The Saudi Commission for Tourism and National Heritage (SCTNH) found that domestic and inbound (foreign) tourism revenues reached SR53.7 billion ($14.3 billion) this year, while outgoing Saudi tourists spent SR24.1 billion ($6.4 billion) abroad. The SCTNH data showed that the number of tourists to Saudi Arabia reached 15.4 million in 2015, up 3% from the previous year, while the number of outbound Saudi tourists reached 6.4 million. Inbound tourism expenditure was reportedly the highest spending group at SR5,120 ($1,365) per capita, compared to SR3,020 ($805) per capita for the outbound tourism group. (AB 12.07)

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►►North Africa

5.10 Egypt’s Parliament Approves State Budget for FY 2016/17

Egypt’s parliament approved on 29 June the state budget for the fiscal year starting July. The budget forecasts total expenditure of EGP 936 billion and revenues to reach EGP 631 billion. In March, the cabinet and President Abdel-Fattah El-Sisi approved the budget bill with a 9.9% projected deficit, according to finance minister Amr El-Garhy. Egypt embarked on a fiscal reform program in July 2014 in an attempt to curb the growing state budget deficit through cutting subsidies and introducing new taxes including the value added tax. Egypt will slash its total subsidy bill in the new budget by 14% in the coming fiscal year 2016/17 compared to the current fiscal year to end in June.

The 2016/17 draft budget shows total subsidy registering EGP 130.1 billion, of which EGP 46.3 billion are allocated for a food and farmer’s subsidy. According to the 2014 constitution, the country’s new budget and development plan should go into effect on the first of July every year. (Ahram Online 29.06)

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5.11 Egypt’s Annual Headline Inflation Hits 30 Month High in June of 14.8%

Egypt’s annual headline inflation hit the highest level in 30 months to register 14.8% in June 2016 from 12.9% in May and compared to 11.5% in the same month last year, state statistics body CAPMAS said on 10 July. The average inflation rate eased to 10.7% in the fiscal year 2015/16 compared to 11% in the last fiscal year. However, the monthly Consumer Price Index (CPI) rose by 0.8%, slightly less than the previous month’s increase of 3.2%. CAPMAS has attributed the CPI annual rise to the food and beverage price hikes, which recorded 18.4% year-on-year in June in addition to a 33.2% jump in healthcare prices during the same period.

Accordingly, the Central Bank of Egypt (CBE) announced that the annual core CPI increased to 12.37% in June from 12.23% in May. The Central Bank of Egypt (CBE) raised interest rates by 100 basis points after the core inflation rate hit a seven-year high in May.

In March, Egypt, which relies heavily on imports of wheat and other staples to feed its population of 90 million, weakened the Egyptian pound by 14% of its value against the dollar in an attempt to eliminate the black market, a move that led to price increases. Another devaluation is expected during FY 2016/17, starting July, to tighten the gap between the official and informal rates of the US dollar. (CAPMAS 10.07)

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5.12 Egypt’s Balance of Payments Deficit Jumps 260% Due to Falling Tourism Revenues & Transfers

Egypt’s balance of payments deficit (BoP) jumped by 260% in the first nine months of the current fiscal year due to ongoing fall of tourism receipts, services income and transfers, the Central Bank of Egypt (CBE) said on 3 July. The overall BoP deficit reached $3.6 billion from July to March in FY2015/16, compared to $1 billion in the same period of the previous year as the current account deficit rose by around 75% to reach $14.5 billion from $8.3 billion.

Tourism revenues dropped by 40% to $3.3 billion from $5.5 billion during July-March compared to the previous year, according to the CBE. The CBE attributed the drop in revenues to the decline in the number of nights tourists spent in the country from 73.4 million to as low as 45.1 million. The trade deficit shrunk slightly during the period in spite of declining export proceeds, falling to $29.3 billion from $29.5 billion as world oil prices declined.

Export proceeds retreated by $3.7 billion to register a total of $13.4 billion during the same period, the bank said in an official release. Non-oil exports rolled back by $1 billion to stand at $9.2 billion. However, the imports bill fell by some 8% to $42.7 billion from $46.6 billion as the value of both oil and non-oil imports dropped.

Net official transfers (which include foreign aid bar loans) plummeted to $60.7 million from $2.6 billion as remittances of Egyptian workers overseas declined to $12.4 billion from to $14.3 billion. The capital and financial account registered a rise in net inflow, reaching $13.9 billion, compared with $6.6 billion in the corresponding period of the previous year as investment inflows increased. Foreign direct investment net inflows rose from $5.1 billion to $5.8 billion, with net inflows to green field investments up by 32%. (Ahram Online 03.07)

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5.13 UAE, Russia & Egypt Agree on Details of $500 Million Investment Fund

The first phase of a Russian-Egyptian-UAE investment fund will be seeded with $500 million following an agreement between the parties. The initial financing will be used to start construction of a 2million sq. m. Russian industrial zone at Egypt’s Port Said. The UAE and Egyptian governments signed a deal in February with the Russian Direct Investment Fund, a fund set up by the Russian government with an initial $10 billion in 2011 to make equity investments in high growth sectors of the Russian economy. The RDIF has secured more than $25 billion through long term partnerships with global investors, 90% of whom are from Asia and the Middle East including UAE port operator DP World.

Under the February agreement, the three countries agreed to launch a fund with the participation of Abu Dhabi Investment Fund and two Egyptian banks – the National Bank of Egypt and Banque Misr. The fund was intended to finance large-scale infrastructure projects in Egypt, such as logistics centers in the Suez Canal development zone, subways and railway lines. (AB 05.07)

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5.14 Morocco’s Economy to Grow 1.2% in Third Quarter of 2016

The Moroccan economy is expected to grow by 1.2% in the third quarter of 2016 compared to 4.1% a year earlier, according to the High Commission for Planning (HCP). Non-agricultural activity is expected to continue its consolidation in the third quarter of 2016 at 2.4%, motivated mainly by an improvement in the production of tertiary branches, while agricultural value added could experience a 13.2% decrease.

Crop production is expected to decline significantly, while the contribution of the livestock industry would be slower, facing an anticipated increase in expenses related to purchases of breeders of cattle feed. In a context marked by uncertainties prompted by the new partnership between the EU and the UK following the Brexit vote and the wait-and-see environment for investment, the global demand towards Morocco is expected to grow by 2.8% year-on-year in Q3/16. (MWN 04.07)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Turkey’s Inflation Rate Rises More Than Estimates Affected by Rising Food Prices

Turkey’s consumer price index increased over estimates in June, mainly due to a hike in food prices during the holy month of Ramadan. Official figures from the Turkish Statistics Institute (TUIK) showed on 4 July that the annual inflation rate rose to 7.64% in June from 6.58% in May. Turkey’s annual inflation slowed in April to its lowest level since May 2013, as hikes in food prices lost pace. The highest monthly increase was seen in food and non-alcoholic beverages, with a 1.16% rise.

Analysts have warned that continuous increases in food prices may be the case again with an expected recovery in Turkey’s food exports to Russia. After Russia had started to impose trade sanctions on Turkey’s agricultural products, food prices fell dramatically across Turkey, pushing down the inflation rate. The Central Bank said in its last monetary policy meeting in June that it would maintain a tight monetary policy in view of inflation expectations and pricing behavior. It noted that inflation showed a marked decline in recent months, mainly due to a favorable course in unprocessed food prices and an improvement in the core inflation trend. (AA 04.07)

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6.2 Turkey’s Exports Plunge Approximately4% in First Half of 2016

Turkey’s exports fell 3.8% to $70.6 billion in the first half of the year compared to the same period of 2015, stated the Turkish Exporters’ Assembly (TIM) on 1 July. Rising regional risks, parity risks and the slow recovery in European economies all played a role in hitting exports, according to officials and analysts. TIM said Turkey’s exports over the month amounted to $11.8 billion, which was a 1.8% improvement compared with data for the same month last year. The country’s 12-month exports declined by 6.6% to around $142 billion, data showed.

The automotive sector again made the highest volume of exports in June, worth $2.13 billion, marking an 8.2% rise from the same month of 2015. The sector was followed by the ready-made wear and confection sector with exports worth over $1.5 billion.

Most exports were to Germany, Italy and the United States, while exports to Britain and Iraq, two of its main markets, declined by 4.4% and 14.9% respectively, compared to the same month of 2015. The agricultural sector’s loss had reached $290 million over this year due to political problems with Russia. (TIM 01.07)

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6.3 Turkey’s Car Industry Hits Highest Monthly Export Figure Since 2008

Turkey’s automotive sector in June made its highest volume of monthly exports since July 2008, strengthening its top exporting status. The sector made exports worth $2.1 billion in June, a 9% increase from the same month of 2015, according to data from the Automotive Industry Exporters Association (OIB). OIB added that it is likely that the sector will reach its yearend export target of $23 billion. The automotive sector, which takes a share of 18% in Turkey’s exports, made $11.7 billion worth of exports in the first half of the year with a 12% increase from the same period of 2015.

Turkey’s car exports to its main market Germany surged to $330 million in June, a 15% increase compared to the same month of 2015. The sector’s exports to its second and third largest markets, Italy and France, rose by 54% and 3% respectively, hitting $508 million in total in June from the same month last year. While Turkey’s automotive exports to Spain increased by 40% and to Iran by 118%, its exports to Britain fell by 19%, to Russia by 37%, and to the U.S. by 51%. The automotive sector was the country’s biggest export market in 2015 with exports worth around $21.3 billion, despite a 4.8% drop compared to 2014. (AA 03.07)

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6.4 Pressure on Greek Government to Catch Up on Reforms

Representatives of Greece’s creditors have increased the pressure on Greek authorities to push through a new slew of reforms over the coming weeks to qualify for the next tranche of €2.8 billion in rescue funding as progress is already behind schedule. Meanwhile, in a 10-page letter to the mission chiefs for Greece, Finance Minister Tsakalotos has accused members of the creditors’ technical teams in Athens of undermining negotiations on reforms. According to Tsakalotos’s letter, the technical staff has called for the reversal of certain new laws and for new legal interventions.

The milestones that Greece needs to tick off over the coming weeks include the approval of the privatization of state-run power grid operator ADMIE and the appointment of staff to a supervisory board for Greece’s new privatization fund, as well as the transfer into this fund of a second set of public utilities. According to the original plan, these actions should have been taken by the end of June. The most politically contentious of the actions Greece must take are changes to labor laws, introducing greater flexibility for employers to hire and fire. (eKathimerini 01.07)

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6.5 Greece Has Second Highest Rate of Defense Spending in NATO

Greece has the second highest spending in NATO on defense, after the US, according to figures issued on 4 July. The country is one of just five countries whose annual spending on defense exceeds 2% of GDP. The country with the highest spending as a proportion of GDP is the US, with 3.61%, followed by Greece with 2.38%. Next comes the UK with 2.21%, Estonia with 2.16% and Poland with 2%. (NATO 04.07)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 17 B’Tammuz to be Observed on 24 July

The Jewish fast day of the 17th of Tammuz is observed this year from sunup to evening on Sunday, 24 July. The fast day itself commemorates five tragedies: 1. Moses descended from meeting G-d and receiving the Torah on Mount Sinai, saw the Jews celebrating with the Golden Calf and broke the two tablets G-d had given him. 2. The daily offering, which had been brought regularly in Temple in Jerusalem, was halted during the Babylonian siege before the Temple was destroyed. 3. The Romans breached the walls of Jerusalem, prior to destroying the second Temple, in 70 CE. 4. A Greek or Roman official named Apustemos held a public burning of the Torah. 5. Idols were set up in the Temple itself; it is not clear what year this happened. The 17th of Tammuz is the second of the four fasts commemorating the destruction of the Temple and the Jewish exile.

In later years this day continued to be a dark one for Jews. In 1391, more than 4,000 Jews were killed in Toledo and Jaen, Spain and in 1559 the Jewish Quarter of Prague was burned and looted. The Kovno ghetto was liquidated on this day in 1944 and in 1970 Libya ordered the confiscation of Jewish property.

The 17th of Tammuz also marks the beginning of the “Three Weeks,” which ends with the fast of the 9th of Av. Some customs of mourning, which commemorate the destruction of Jerusalem, are observed from the start of the Three Weeks. Jewish mourning customs restricts the extent to which one may take a haircut, shave or listen to music, though communities and individuals vary their levels of observance of these customs. No Jewish marriages or other major celebrations are allowed during the Three Weeks, since the joy of such an event would conflict with the expected mood of mourning during this time. The Three Weeks can be thought of as having a variety of increasing levels of mourning. Some restrictions begin on the 17th of Tammuz, some from the beginning of the month of Av, and some only come into effect the week in which Tisha B’Av occurs.

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*REGIONAL:

7.2 Egypt’s Population Jumps 17 Million Over Last Decade

Egypt’s population increased by over 17 million in the past decade, CAPMAS said. The Egyptian population has swelled from 72.8 million in 2006 to 90.1 million in the beginning of 2016, a rise of 23.7%. An increase of 3.3 million people was estimated from 2006 to 2009 before another whopping 14 million added to the overall population over the next seven years. In April, CAPMAS said that the population saw a significant rise from 80 million to 90 million in the past five years, whereas it took 50 years for the population to increase from 10 million in 1900 to 20 million in 1950.

One third of the Egyptian population (31.3%) is comprised of people aged under 15 years, while the elderly (65 years of age onwards) make up a meager 4% of the total population. The statistics agency said that 26.3% of Egyptians live in poverty, while 12.8% are unemployed. The world population was estimated at 7.3 billion in July 2015 and is forecast to hit 9.8 billion by 2050. (CAPMAS 11.07)

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7.3 Egypt’s Cabinet Abolishes Daylight Saving Time

On 4 July, Egypt’s cabinet decided to scrap daylight savings time following recent confusion over whether to restore the time change aimed at energy conservation. Earlier, Minister of Parliamentary Affairs Al-Agati said daylight savings time would be restored as of 8 July and would last until parliament issues a law to abolish it, which was initially approved before it was sent to the State Council for review. However, the cabinet responded saying it would abolish the system, which would shift clocks one hour forward.

First implemented in the country in 1988, the system was introduced as a power-saving measure prolonging daylight hours. It was abolished in April 2011 after the uprising that toppled autocrat Hosni Mubarak, with the government arguing at the time that the practice was ineffective at curbing power usage. The system was temporarily revived in May 2014 in order to ease consumption after the country saw rolling power blackouts. Egypt is normally two hours ahead of Coordinated Universal Time (UTC) and Greenwich Mean Time (GMT) — meaning it was three hours ahead when daylight savings time was applied. (Ahram 04.07)

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7.4 Morocco Switched Back to Daylight Savings Time on 10 July

Moroccans forwarded their clocks one hour (GMT+1) on Sunday, 10 July at 02:00 a.m., according to the civil service and administration modernization ministry. This decision was an implementation of the decision by the head of government dated 14 April 2016, said the ministry in a statement. (MWN 01.07)

Daylight saving time had been implemented since early April, but Moroccan authorities decided to go back to Morocco’s standard time a few days before the beginning of Ramadan. However, the decision to switch to daylight saving time in the spring, switching back to standard time just before Ramadan, and again switching to daylight savings time after the month, was not accepted by many Moroccans felt the decision as harmful to their well-being. In March 2015, a group of Moroccans launched an online petition calling on the government to recant its decision to adopt daylight saving time. The online petition argued that the decision has a negative impact on their health, it increases the risks of heart attack and causes sleeping disorders. (MWN 12.07)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Vidac Pharma Completes $9 Million Series A Financing

Vidac Pharma has closed a $9 million a Series A financing round. The financing was led by a new investor, Israel Biotech Fund. Existing investors, including Mivtach Shamir Holdings, also participated in the financing. Vidac Pharma plans to use the proceeds to advance the development of its lead product, VDA-1102 ointment, which is in Phase 2 clinical trial in patients with actinic keratosis. Actinic keratosis (AK) is one of the most common dermatologic conditions worldwide. It effects an estimated 58 million people in the United States alone with estimated treatment costs in 2004 of $1.2 billion. Vidac pharma is dedicated to discovering and developing first-in-class medicines to help people suffering from a range of oncologic and oncodermatologic diseases. Vidac’s breakthrough technology targets the cancer-specific VDAC/HK2 system without affecting the surrounding healthy tissue. It thus holds the promise of delivering novel drugs that are both efficacious and well tolerated by patients.

Ness Tziona’s Vidac Pharma is a clinical stage innovative biopharmaceutical company dedicated to discovering and developing first-in-class medicines to help people suffering from a range of oncologic and oncodermatologic diseases. Vidac’s breakthrough technology targets the VDAC/HK2 system that is unique to malignant cells. Modulating this target leads to selective apoptosis of cancer cells without affecting the surrounding healthy tissue, and thus holds the promise of delivering novel drugs that are both efficacious and well tolerated by patients.

Rehovot’s Israel Biotech Fund invests in Israeli and Israeli related biotechnology and pharmaceutical companies. The Fund’s goal is to generate strong returns and long term capital appreciation by funding and building sustainable, high value Israel-based biotech companies. (Vidac Pharma 29.06)

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8.2 Aspect Imaging’s WristView MRI System Now Available in Europe

Aspect Imaging has received its European CE Marking. The mark enables the company to sell the WristView hand and wrist MRI system within the European Economic Area (EEA). The FDA cleared, WristView MRI machine is a dedicated hand and wrist MRI system which cuts out the claustrophobic feelings associated with conventional full-body MRI scanner. The system is safe, requiring no special shielding room or cooling systems, while providing high-quality results that can be easily accessed by doctors across a broad range of fields, in medical facilities which would not normally have the budget or the specialized staff required to operate a full-body MRI scan. This also comes at a fraction of the price of a conventional whole body MRI. WristView is based on a one-tesla permanent magnet, the most powerful permanent magnet in the field, with bore size and general design that are robust and optimized for the application. In layman’s terms, it takes all of the power and quality of a large, full-sized MRI machine and squeezes it into the smaller, more compact Aspect design.

Shoham’s Aspect Imaging is part of Aspect Intl. LLC, a Singapore based company, the world’s leader in the design and development of compact MR imaging and NMR systems for medical, advanced industrial, and preclinical applications. (Aspect Imaging 05.07)

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8.3 Mazor Robotics Unveils Mazor X, a Transformative Platform for Spine Surgeries

Mazor Robotics unveiled Mazor X, a transformative guidance platform for spine surgeries. The Mazor X was developed with the goal of enhancing predictability and patient benefit, through the combination of analytical tools, multiple-source data, precision guidance, optical tracking, intra-op verification, and connectivity technologies. The Company will commercially launch the FDA-cleared Mazor X platform during the North American Spine Society (NASS) annual meeting which will be held in Boston, Massachusetts, this October. Mazor recently signed a commercial co-promotion and co-development agreement with Medtronic. As part of the agreement, Medtronic has already placed a purchase order for 15 Mazor X systems.

Caesarea’s Mazor Robotics believes in healing through innovation by developing and introducing revolutionary technologies and products aimed at redefining the gold standard of quality care. Mazor Robotics Guidance Systems enable surgeons to conduct spine and brain procedures in a more accurate and secure manner. (Mazor 12.07)

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8.4 Rosetta Receives U.S. Patent Allowance for microRNA-based Ovarian Cancer Treatment

Rosetta Genomics announced that the United States Patent and Trademark Office (USPTO) has issued a notice of allowance for U.S. Patent Application No. 14/505,548, entitled “Compositions and methods for treatment of Ovarian Cancer,” which covers a method of treatment for ovarian cancer through the administration of an inhibitor of miR-27a. In addition, the Israel Patent Office has allowed Application No. 200247, entitled “Compositions and Methods for Modulating Cell Proliferation and Cell Death,” which claims cover the use of miR-34a or its variants for treating p53-negative cancers. This application covers a core element of Rosetta Genomics’ microRNA technology in the development of cancer therapeutics associated with p53-negative cancers, including lymphoma, breast cancer, ovarian cancer, liver cancer, skin cancer, certain types of lung cancer, and others. The patent is jointly owned with Yeda R&D Co. Ltd., the technology transfer company of the Weizmann Institute of Science in Rehovot, Israel. This technology is licensed to Mirna Therapeutics.

Rehovot’s Rosetta develops and commercializes a full range of microRNA-based and other molecular diagnostics. Rosetta’s integrative research platform combining bioinformatics and state-of-the-art laboratory processes has led to the discovery of hundreds of biologically validated novel human microRNAs. Building on its strong patent position and proprietary platform technologies, Rosetta is working on the application of these technologies in the development and commercialization of a full range of microRNA-based diagnostic tools. (Rosetta Genomics 11.07)

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8.5 FDA Approves INSIGHTEC’s Exablate Neuro System for the Treatment of Essential Tremor

INSIGHTEC, the leader in MR-guided Focused Ultrasound (MRgFUS) therapy, announced today that the FDA has approved its Exablate Neuro system for the non-invasive treatment of essential tremor (ET) in patients who have not responded to medication. Exablate Neuro uses focused ultrasound waves to precisely target and ablate tissue deep within the brain with no incisions or implants. The treatment is done under Magnetic Resonance Imaging (MRI) guidance for real time treatment monitoring. The patient experiences immediate tremor improvement following the outpatient procedure. The treatment carries minimal risk of infection, bleeding or other surgical complications. The treatment requires a single session with no anesthesia, allowing patients to quickly return to normal activity. Earlier this year, Exablate was also approved by Health Canada for essential tremor.

Haifa’s INSIGHTEC is a world leader in MR-guided Focused Ultrasound (MRgFUS). The company’s non-invasive therapy platform, Exablate, is transforming treatment for various indications in neurosurgery, oncology and women’s health. During MRgFUS treatment, focused ultrasound waves ablate the target tissue, while MRI provides image-guidance and real-time thermal monitoring. A growing number of renowned physicians are realizing the clinical value of MRgFUS in more than 120 leading medical centers around the world. (INSIGHTEC 12.07)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Arbe Robotics Wins TechCrunch Award With Its Drone Collision Avoidance Technology

Arbe Robotics has been selected by TechCrunch’s panel of investors and judges as the winner of the TechCrunch Tel Aviv Meetup and Pitch-Off after unveiling its drone collision avoidance technology. With its win, Arbe Robotics is officially proclaimed as one of the front-runners in drone innovation, specifically in relation to collision avoidance. Arbe Robotics is pioneering the use of a trusted technology, radar, in an emerging market, drones. The current field of collision avoidance is dominated by antiquated technology, technology that specifically slows down a drone’s flying speed while simultaneously draining a drone’s battery. Arbe Robotics’s solution focuses not only on protecting drones from all oncoming objects encircling the drone, but protects the two things that make drones fun, speed and length of fly time.

The TechCrunch Tel Aviv Meetup and Pitch-Off marks the first public unveiling of Arbe Robotics’ technology. By developing a radar and operating system for drones, Arbe Robotics has built a more economic and battery efficient collision avoidance technology that also has an unprecedented range of up to 200 meters. Arbe Robotics’ solution includes both a hardware and a software component; hardware that exists as an easily mountable band, in addition to anti-collision autopilot software that provides individual drone navigation that ultimately detects upcoming obstacles. Overall, any oncoming obstacle that is one meter or larger in size can be detected from up to 200 meters away, providing a far better solution than any collision avoidance technology that is currently available in the market.

Tel Aviv’s Arbe Robotics was founded in November 2015. Now, with a team of ten individuals, Arbe Robotics is in the midst of building a global leading solution for collision avoidance, one of the leading issues with drones today. Arbe Robotics has received funding from Canaan Partners Israel, Taya Ventures and Kobi Marenko. (Arbe Robotics 30.06)

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9.2 Telrad & Federated Wireless Create 3.65 GHz Spectrum Management Solution

Telrad Networks announced their partnership with Federated Wireless to undertake a trial for a comprehensive solution in compliance with the FCC Citizen’s Broadband Radio Service (CBRS) 3550-3700 MHz band rules. The joint solution aims to provide operators and other users of wireless technology with a seamless solution in the new CBRS band.

The newly formed CBRS band, created by the FCC in April 2015, provides much needed spectrum to a rapidly growing wireless industry, while addressing potential interference and coordination issues with new spectrum sharing and management techniques. Federated Wireless has worked with the FCC to help establish the standards for accessing the new spectrum and leading the effort to establish the model for SAS and ESC interoperation. Federated Wireless’ CINQ XP platform is built on a foundation of shared spectrum and utilizes a SAS to dynamically allocate and manage spectrum resources.

The goal of the Federated Wireless and Telrad partnership is to help current 3.65 GHz users protect their current spectrum use and access the additional 50 MHz recently made available, as well as help new parties access and utilize the additional spectrum. Telrad offers an end-to-end LTE solution that meets FCC requirements and has already been field-proven in the 3.5 GHz band. The envisioned joint solution will provide features designed specifically to support fixed wireless networks, and aims to enable operator access to LTE with a reasonably priced entry point and scalability. If successfully integrated, the joint solution created by Telrad and Federated Wireless could place them at the forefront of the new FCC spectrum rules.

Lod’s Telrad Networks is a global provider of innovative LTE broadband solutions, boasting over 300 4G deployments in 100 countries. Telrad stands at the forefront of the technology evolution of next-generation TD-LTE solutions in the sub-6 GHz market. Since 1951, the company has been a recognized pioneer in the telecom industry, facilitating the connectivity needs of millions of end-users through operators, ISPs and enterprises around the world. (Federated Wireless 29.06)

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9.3 ironSource & Tipalti Partner to Provide Best-In-Class Payment Experience

Tipalti has been selected by leading app discovery company ironSource to automate their global supplier payment processes. With tens of thousands of supply partners – among them app developers, mobile carriers, and device manufacturers – around the world, ironSource manages complex operational processes around building and growing a robust, loyal network. In addition to the challenge of paying partners and clients in their preferred payment method and local currency of choice across regions, the ironSource finance team had to handle issues related to onboarding new partners, collecting tax IDs, communication of payment status to partners, and conducting payee and payment reconciliation reporting.

For companies like ironSource who offer robust monetization solutions for diverse partners, continued and scalable growth across geos, devices and platforms can be hindered by inefficient manual payment processes. By offering an efficient and reliable solution to automate global payments to partners, Tipalti enables companies like ironSource to dedicate resources to innovation and growth-related initiatives as opposed to accounts payable processes.

Increasingly, monetization platform companies are adopting Tipalti’s cloud payment automation platform to streamline their entire supplier payments operation. This allows them to pay their global partners with minimal effort while enhancing the complete payment experience and strengthening financial, tax, risk, and regulatory compliance safeguards.

Tel Aviv’s Tipalti is the only supplier payment automation solution to streamline all phases of the payment management workflow in one holistic cloud platform. Tipalti makes it painless for finance departments to manage their entire supplier payments operation. (Tipalti 29.06)

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9.4 CyberArk Named a Leader in Privileged Identity Management

CyberArk has been named a Leader in “The Forrester Wave™: Privileged Identity Management, Q3 2016.” The report evaluates the 10 most significant privileged identity management (PIM) vendors. All vendors were assessed based on criteria across three high-level categories: Current Offering, Strategy and Market Presence. According to Forrester, CyberArk has the largest PIM market presence. The report states that “of the solutions evaluated in this Forrester Wave, CyberArk has the largest market presence (based on combined revenues, revenue growth, direct customer install base, and growth).”

Across other criteria, CyberArk is top ranked in host access control and privilege delegation and escalation. CyberArk also received the highest possible score in the following criteria: cloud support, privileged session management and recording, and application-to-application password management. According to the report, “Forrester estimates that 80% of security breaches involve privileged credentials.” CyberArk helps organizations adopt an inside-out security approach by putting a new layer of defense over core business systems and managing all privileged accounts and credentials that exist within the network. The CyberArk Privileged Account Security Solution helps identify existing privileged credentials across networks, makes sure those credentials are locked down and secure, and leverages continuous monitoring of privileged account credentials to detect anomalous behavior and stop an attack early in the cycle to reduce damage and enable the business to continue to operate.

Petah Tikva’s CyberArk is the only security company focused on eliminating the most advanced cyber threats; those that use insider privileges to attack the heart of the enterprise. Dedicated to stopping attacks before they stop business, CyberArk proactively secures against cyber threats before attacks can escalate and do irreparable damage. The company is trusted by the world’s leading companies – including more than 40% of the Fortune 100 – to protect their highest value information assets, infrastructure and applications. (CyberArk 08.07)

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9.5 NICE Introduces Next Generation Skype for Recording for Financial Markets

NICE announced the release of the latest edition of its recording solution for Skype for Business, which brings the trusted capabilities of NICE recording solutions and unique financial services compliance features to Microsoft’s latest unified communications platform. NICE recording solutions are deployed across most of the banks around the globe and the latest Skype for Business solution seamlessly interfaces to those already trusted solutions. Skype for Business, which succeeds Microsoft Lync 2013, cost-effectively enhances the familiar Skype experience with advanced capabilities for an enterprise environment, including the security, compliance, and management of Lync. Expanding upon a six-year history of recording support for Lync, NICE has adapted its recording solution to meet the evolving needs of financial services sector customers as they transition to Skype for Business.

NICE’s Skype for Business recording solution is an integral part of NICE’s industry-leading communications surveillance solution for identifying compliance and fraud risks across multiple communication channels. This includes peer-to-peer voice sessions, conference calls, email, chat, the audio of Skype video calls, mobile communications, and more.

Ra’anana’s NICE is the worldwide leading provider of enterprise software solutions that empower organizations to make smarter decisions based on advanced analytics of structured and unstructured data. NICE solutions help the world’s largest organizations deliver better customer service, ensure compliance, combat fraud and safeguard citizens. (NICE 06.07)

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9.6 Elbit Systems to Supply Uruguay with a “Safe District” Project

Elbit Systems was awarded an approximately $19 million contract from the Maldonado District Administration in Uruguay, to provide a Safe District project. The project will span across six municipal authorities, including the well-known Punta Del Este tourist resort, over a total of 2000 km². The contract will be performed by the Elbit Systems’ subsidiary, Elbit Security Systems (ELSEC), over a two-year period. The Safe District project will include more than 1000 cameras and sensors, including vehicle traffic control, laid out at strategic standpoints. The collected information will be transferred to a control center, which will include C2 (command and control) systems with unique analytics capabilities. The sensors and cameras infrastructure will allow the operators of the control room to obtain real-time data from the field and alert law enforcement officials, including logistics and emergency personnel, in conjunction with the nature of the event.

Haifa’s Elbit Systems is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems. (Elbit 10.07)

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9.7 Niagara Cruises Deliver Broadband Wi-Fi Using Radwin’s Mobility Solution

RADWIN announced that Hornblower Niagara Cruises – the official Canadian Tour Boat operator in Niagara Falls – has deployed RADWIN’s FiberinMotion mobility solution to provide high-speed wireless connectivity onboard its boats. Maresco Telecom Group, a leading full-service solution provider, was in charge of project design and implementation. Tel Aviv’s RADWIN is a leading provider of Point-to-Multipoint and Point-to-Point sub-6 GHz broadband wireless solutions. Deployed in over 170 countries, RADWIN’s solutions power applications, including backhaul, broadband access, private network connectivity, video surveillance transmission as well as delivering broadband for trains and metros. (RADWIN 07.07)

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9.8 CoolaData, Pioneer in Behavioral Analytics, Secures $5.6 Million in Funding

CoolaData, the pioneer in behavioral analytics, bringing a new approach to business intelligence, has raised a total of $5.6M from Salesforce Ventures, TEEC Angel Fund and the existing investors in CoolaData’s Series A, 83North and Carmel Ventures. The funding will be used to accelerate CoolaData’s worldwide growth and extend its reach into IoT and enterprise applications.

CoolaData is a cloud-based behavioral analytics platform offering companies a deep understanding of user behavior across all channels, and providing quick answers to complex business questions. As proven by dozens of CoolaData customers, its time-series analysis of user behavior enables product, marketing and business teams to discover vital information such as user acquisition, churn prediction, retention drivers and customer life-time value optimization, making companies more successful.

Serving customers in Europe and the US from offices in Tel Aviv, London and New York, Ramat Gan’s CoolaData is a pioneer in Behavioral Analytics solutions for online businesses. Its cloud-based behavioral analytics solution includes all infrastructure components for data tracking, warehousing, ETL and data enrichment through to advanced visualization. The platform empowers data-driven businesses to understand and quantify user behaviors and derive actionable insights for business growth. (CoolaData 07.07)

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9.9 IDB Bank New York Launches Mobile Strategy Using Zuznow

IDB Bank and Zuznow released their first mobile app for customers using consolidated statements. IDB Bank has made the strategic decision to offer omni-channel apps to its customers and have chosen Zuznow’s development platform to deliver these apps. In making the decision to offer mobile/omni-channel apps to its customers, IDB Bank needed a solution that would maintain the level of security they were already providing. Plus, the creation of apps had to be fast and, more importantly, easy to maintain and update based on changes in user engagement trends. IDB Bank chose Zuznow to enable their strategy. Zuznow’s AI robo-developer allowed IDB NY to have a publishable app for IOS and Android in only a few weeks with the same level of security provided in their other applications. On average Zuznow clients realize a 300% rise in user engagement with apps created using the platform over previous versions of the clients’ apps.

Tel Aviv’s Zuznow delivers the only Frontend-as-a-Service (FaaS) platform to automatically create and maintain web and native apps, for smartphones, tablets, desktops and laptops. The company helps enterprises accelerate and rapidly deploy omni-channel development projects, improve user engagement and adoption by 300%, reduce time-to-market by 90%, increase KPIs, while keeping pace with the latest technologies. The Zuznow platform enables organizations to support bi-modal development processes and achieve business goals. (Zuznow 12.07)

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9.10 Honeywell & IAI Demonstrate New Sense-And-Avoid Capabilities for UASs

Honeywell is partnering with Israel Aerospace Industries (IAI) to jointly develop a sense-and-avoid capability for IAI’s Heron family of unmanned aerial systems (UASs). Selected for funding from the Binational Industrial Research and Development (BIRD) Foundation, the system will be demonstrated for the first time on the Heron medium-altitude, long-endurance (MALE) UAS platform in 2018. The team was selected following a competitive review process that evaluated projects from many companies.

The demonstrations and flight tests planned for mid-2018 will be conducted on the IAI Heron 1 UAS. The development work will be executed in Albuquerque, New Mexico; Minneapolis; and Redmond, Washington, as well as in Tel Aviv, Israel. Flight testing will take place in Israeli airspace. Both companies plan for the full sense-and-avoid solution to be integrated into the Heron family of MALE UASs. In the near term, the work will set the foundation for safe operation and integration of unmanned aircraft in civilian airspace and will contribute to policies and procedures allowing for certification of avionics and platform systems.

The BIRD Foundation was established by the United States and Israel governments in 1977 to stimulate, promote and support industrial research and development of mutual benefit to both countries. (Honeywell 11.07)

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9.11 Orbotech Inkjet 600 Selected by Amkor Technology for System-in-Package

Orbotech announced that its Orbotech Inkjet 600 system has been selected by Amkor Technology, a leading provider of semiconductor packaging and test services. By using Orbotech Inkjet 600 to print high aspect ratio, 3D under fill dams for new system-in-package (SiP) products, Amkor aims to maximize its manufacturing flexibility, increase its feature position accuracy and reduce its design-to-manufacturing lifecycle.

Under fill dams prevent leakage between active and passive components and are an essential process in SiP packaging for both device and sub-component substrates. With its high-accuracy printing capability, the Orbotech Inkjet 600 enables the formation of tall under fill dams in a single step with real-time local alignment correction for tighter integration of components. This not only leads to a shorter process by replacing existing cumbersome, subtractive processes, but also significantly lowers manufacturing costs.

Yavneh’s Orbotech is a global innovator of enabling technologies used in the manufacture of the world’s most sophisticated consumer and industrial products throughout the electronics and adjacent industries. The Company is a leading provider of yield enhancement, and production solutions for electronics reading, writing and connecting, used by manufacturers of printed circuit boards, flat panel displays, advanced packaging, micro-electro-mechanical systems (MEMS), LED, high speed RF on GaAs, power management device and other electronic components. Today, virtually every electronic device in the world is produced using Orbotech systems. (Orbotech 11.07)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s June Tax Collection Increases by 11%

Israel’s tax revenues increased by 11% in real terms to NIS 22 billion in June, according to figures released by the Ministry of Finance on 7 July. Taxes relating to real estate and indirect taxes were the main contributors to the rise in tax collection. Over the first two months of 2016, tax collection was NIS 1.6 billion above the collection forecast, which is NIS 277.9 billion for 2016 as a whole. In March-June, tax collection was NIS 2.4 billion higher than the updated target. The figures indicate continued growth in tax collection at an annual rate of 6%.

Revenue from direct taxes totaled NIS 11.5 billion in June, representing a rise of 13% after discounting legislative changes. Tax collection from the capital market plummeted 44% in June in comparison with June 2015, and totaled NIS 318 million. Tax collection on securities transactions fell 70.8%, while taxes on interest fell 7.5%.

Net revenues from real estate taxation rose 22% compared with June 2015 to NIS 1.1 billion. Net revenues from betterment tax rose 36% and net revenues from purchase tax rose 14%. Revenues from indirect taxation rose 9% in June this year to NIS 9.7 billion. The rise is mainly accounted for by taxes on imported vehicles. About 79,000 vehicles were imported into Israel in April-June, almost 40% more than in the corresponding period in 2015. (ITA 07.07)

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10.2 Israeli New Car Deliveries Break Record

With 25,223 new cars delivered in June, a record 164,284 cars were delivered in Israel in H1/16. Ten years ago 147,000 new cars were delivered in the entire year. No slowdown is expected to occur in the next two-three months and some car importers currently have a large order backlog following large-scale sales promotions in May and June. Car importer optimism regarding market conditions later this year is further manifested in the substantial concentration of cars in storage lots and sea ports. This is not a dramatic phenomenon: the number of cars already unloaded in Israel is estimated at 60,000 – 70,000, numbers already seen in the past (mainly in the ports of Eilat and Ashdod). Considering the average monthly sales rate this year, this is a reasonable stock for 3 months, rather than a preparation for any contingency. In January 2017, the “green taxation” update is to come into effect, leading to an increase in car taxation. While a significant leap in car imports can be expected towards November – December, as was the case two years ago, this import boom has not started so far. (Globes 05.07)

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11: IN DEPTH

11.1 ISRAEL: IVC-Meitar Exits Report H1/2016

Israeli high-tech exits totaled $3.32 billion in the first half of 2016, with 45 deals, according to the IVC-Meitar Exits report. This figure is sharply down from the $5.29 billion reported by IVC-Meitar for the first half of 2015. The report was published on 5 July by the IVC Research Center and Meitar Liquornik Geva Leshem Tal law firm

The average exit deal reached $74 million in the first half of 2016, 3% above the annual exit average of $72 million in 2015. Four buyout deals accounted for an additional $878 million, hiking up the total to $4.19 billion and setting the average deal (with buyouts) at $86 million, nearly 12% above 2015’s $77 million average deal.

The largest deals in the first half of 2016 were the $811 million acquisition of EZchip by Mellanox Technologies and the $643 million buyout of Xura, followed by the $430 million acquisition of Ravello Systems by Oracle. The top three deals accounted for 57% of total exit deals.

As conditions on international stock markets have been unfavorable since late 2015, it is no surprise that 2016 has so far seen only a single IPO, that of trendIT, which raised $5.9 million at a $17.6 million valuation, on the London Stock Exchange. First half IPO data reflect a huge 99% drop compared with $609 million in IPOs in 2015. Adv. Dan Shamgar and Adv. Alon Sahar, partners at Meitar Liquornik Geva Leshem Tal said, “It is impossible to ignore the decrease in the number of deals in the first half of 2016. This was expected due to a number of trends in the technology markets, mostly in the US and partly in China, as early as the end of the previous year.

As opposed to Israel, the last quarter of 2015 featured an overall slowdown in technology companies’ activity, especially a decrease in capital raising in the US (both in the private sector and public markets, the latter coming to an almost complete halt). The decrease in private companies’ valuations, along with share price fluctuations in the US and China, led to cautious behavior, most prominently to the now-evident hesitation by acquirers. A gap was created between the expectations of buyers and sellers, partially in light of capital raising deals performed by a significant number of companies, which were potential acquisition targets. The gap between the bid and asking prices may not be as large as it had been during the 2008 crisis, but it still managed to halt exit processes, except for deals that were already in advanced stages. We expect this slowdown to continue in the second half of 2016 as well.”

Yet, the report editors explain the while data so far show a drop in exit numbers, such a drop is typical of first year-halves, and in line with the average annual rates in the past six years. It is estimated that by the end of 2016, at least 100 exit deals, with a total of $7 billion in total proceeds, will have closed – 13% below the proceeds generated by 111 deals in 2015.

IVC Research Center CEO Koby Simana says, “We don’t think that 2016 figures will be dramatically different than in previous years. That being said, our projections reflect a decline in exit volumes since we believe companies are using the current market atmosphere to focus on growth rather than exit. Not only are there more companies seeking growth these days, but it seems investors are also more inclined that way, if the relative ease of raising capital for Israeli high-tech companies in growth stages is any indication. We will be publishing the capital raising statistics soon, but I can already confirm that capital raising is on the rise.”

As Israeli high-tech companies mature and grow, more companies are able to expand by utilizing capital raised or earned by acquiring other companies. In fact, the largest M&A deal closed in 2016 so far was completely Israeli – not only the largest exit for EZchip, but also the largest acquisition by an Israeli company, Mellanox. A total of nine such deals were recorded since the beginning of the year, for a total of $916 million. However, most Israeli buyers directed acquisition efforts to international markets, with $1.2 billion spent on acquisitions of foreign companies, in 21 deals.

In the past three years, Israeli high-tech companies have expanded their activity in the local market, and the volume of deals where both parties were Israeli has grown considerably. The Israel Tax Authority and Ministry of Finance are also considering introducing tax incentives that will benefit Israeli companies conducting M&As, according to a memorandum of law submitted to the Ministerial Committee of Law Affairs. Therefore, IVC-Meitar believes that, towards the end of 2016 or beginning of 2017, there will likely be an increase in the number M&A deals in the domestic market. (IVC-Meitar 05.07)

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11.2 ISRAEL: Globes Finds Startups Raised Record $1.4 Billion in Second Quarter

Globes found that Israeli companies raised an all-time record $1.4 billion in the second quarter of the year, compared with $1 billion in the first quarter and $1.1 billion Q2/15 (according to the IVC). The figures for the second quarter of 2016 include a $300 million investment in Israeli company Gett (formerly GetTaxi) by Volkswagen. This extraordinarily large investment was not strictly speaking a venture capital investment, and if subtracted it provides a slightly more precise picture of venture capital investments in Israeli technology companies.

Even after this investment is subtracted, however, the figures still show no real slowdown: $1.1 billion is similar to the first quarter of 2016 and almost identical to Q2/15, thereby maintaining the record pace. $2.4 billion was raised in the first half of 2016, compared with $2.1 billion in the corresponding period last year.

Now that the second quarter has come to an end and Globes has reviewed the figures, their analysis found the following:

The average amount raised per company in Q2/16 was $27.9 million (or $12.1 million if the Gett investment is subtracted), $500,000 less than the average in the first quarter. This is more or less the amount of capital an earlier stage company already making initial revenue needs to keep going for 12-18 months. For H1/16, the average amount raised per company was $14.1 million, or $12.4 million (excluding Gett).

Some 13% of the companies raising money since the beginning of the year were biomedical companies. This means that the majority of available capital for investment is still going to technology companies, because their risk profile is naturally lower. The biomedical companies account for only 10% of the amount raised since the beginning of the year.

Three companies raised over $50 million in the second quarter, compared with four companies in the first quarter – almost the same, but only two compared with four if the Gett investment is excluded. This makes a total of seven companies since the beginning of the year – only 4.2% of all companies raising capital. This figure may indicate a slowdown in the number of potential unicorns – a company value of over $1 billion, which are often successful at raising this amount of money. Gett, which raised $300 million, and Via, which raised $100 million, may be valued in the hundreds of millions of dollars, but they are still far away from $1 billion – at least as of now.

The companies that raised over $50 million jointly accounted for 22% of the total raised in the second quarter and 29% of the amount raised in the first half of the year – in other words, 4% of the companies raised 29% of the total, showing that a very small number of companies receive a substantial proportion of the venture capital funds’ investment budget.

Some 86% of the companies raised up to $25 million in the second quarter, meaning that most of the companies that raised capital were just starting out (initial revenue). The proportion was the same for the first half of the year. These companies raised 45% of the total in Q2/16 (47% in the first half), showing that there were many small companies and few large companies (although it is important to keep in mind that the bigger a company grows, the less it needs to raise capital, and the proportion of small companies is therefore greater). (Globes 03.07)

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11.3 BAHRAIN: Fitch Downgrades Bahrain to ‘BB+’; Outlook Stable

On 28 June, Fitch Ratings downgraded Bahrain’s Long-Term Foreign Currency Issuer Default Rating (IDR) to ‘BB+’ from ‘BBB-‘ and Long-Term local currency IDR to ‘BB+’ from ‘BBB’. The Outlooks are Stable. The issue ratings on Bahrain’s senior unsecured Foreign and Local Currency bonds have also been downgraded to ‘BB+’ from ‘BBB-‘ and ‘BBB’, respectively. The Country Ceiling has been affirmed at ‘BBB+’ and the Short-Term Foreign Currency IDR has been downgraded to ‘B’ from ‘F3’.

Key Rating Drivers

The downgrade of Bahrain’s IDRs reflects the following key rating drivers:

Lower oil prices are causing a marked deterioration in Bahrain’s fiscal position. There is progress in fiscal consolidation, but not a clear path towards reaching a more sustainable position. Fitch expects general government debt to rise to nearly 80% of GDP in 2016 from around 62% of GDP in 2015, well above the ‘BBB’ and ‘BB’ medians of around 40%. Debt service is an increasing burden on the state budget and Fitch expects it to rise to around 41% of revenue in 2016 and 55% in 2017, from 30% in 2015. Interest payments will be around 20% of budget revenue in 2016-2018. Debt issuance costs have risen.

Fitch expects the general government budget deficit to widen to 15.4% of GDP in 2016, from 14.8% of GDP in 2015, under a baseline Brent oil price assumption of $35/bbl for 2016 (rising to $55/bbl in 2018). Fitch estimates that Bahrain’s fiscal break-even Brent oil price is around $130/bbl. The deficit is more than three times the ‘BBB’ and ‘BB’ medians. Oil and gas receipts (historically around 85% of budget revenues) fell approximately 40% in 2015 and Fitch expects them to fall a further 20% in 2016. Fitch’s forecast for 2016 assumes steady progress towards implementation of the government’s revenue and cost-cutting initiatives, with non-oil revenue rising and expenditure falling.

The policy response has been insufficient to significantly ease the unfavorable fiscal and oil price dynamics. According to Ministry of Finance calculations, revenue measures with a full-year fiscal impact of around 1% of GDP have already been implemented in 2015 and early 2016 and measures worth a further 1% of GDP are planned. Subsidy reduction measures could eventually generate savings of more than 5% of GDP per year. Implementation of a 5% rate of VAT in 2018, if agreed, could yield up to 1.6% of GDP in revenue, according to IMF calculations. Even assuming full implementation of these measures and a Brent oil price of $55/bbl, the general government deficit would still be 7.3% of GDP in 2018. More measures to reduce current expenditure are in the pipeline but have not yet been quantified.

Bahrain’s IDRs also reflect the following key rating drivers:

Fitch expects real non-oil growth to remain steady at 4% in 2016-2018 as increased activity associated with state owned enterprise investments and GCC Development Fund projects offsets the dampening effect on demand of tighter fiscal policy. Non-oil growth is also supported by macroeconomic stability, a strong local skills base, a cost advantage and a relatively well-developed environment for doing business, particularly in the financial sector. In conjunction with expected oil sector growth of around 0.5%, this will result in overall real GDP growth of around 3.3% in 2016-2018. Real GDP expanded by 2.9% in 2015, with hydrocarbons sector contracting by 0.9% and output in the non-oil sector rising by 3.9%.

A strong banking sector supports the rating. Banks are well-placed to extend more credit to the economy and the government, enjoying profitability, high levels of capitalization and liquidity, and low non-performing loan levels. Wholesale banks’ foreign assets support Bahrain’s net external creditor position (46% of GDP), well above that of the median ‘BB’ country. Higher policy rates and yields on government bonds have not translated into higher private sector borrowing costs, with many domestic entities being able to borrow below the sovereign curve.

Governance indicators as measured by the World Bank are stronger than the ‘BB’ medians, despite Political Stability and Voice and Accountability scores that are worse than for 85% of all countries rated by Fitch. Tensions continue between the government and the predominantly Shia opposition and sporadic low-level violence continues. Social pressures and the lack of a sustainable political solution hamper implementation of the fiscal reforms necessary to tackle the worsening debt trajectory.

Sovereign Rating Model (SRM) and Qualitative Overlay (QO)

Fitch’s proprietary SRM assigns Bahrain a score equivalent to a rating of ‘BBB-‘ on the Long-Term FC IDR scale.

Fitch’s sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its QO, relative to rated peers, as follows:

– External Finances: +1 notch, to reflect Bahrain’s large net external creditor position.

– Public Finances: -2 notches, to reflect a rapidly worsening fiscal position and rigidities in the government revenue and expenditure profiles.

Fitch’s SRM is the agency’s proprietary multiple regression rating model that employs 18 variables based on three year centered averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch’s QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.

Rating Sensitivities

The main factors that could lead to negative rating action are:

– Failure to reduce the fiscal deficit sufficient to stabilize the government debt-to-GDP ratio.

– Severe deterioration of the domestic security situation.

The main factors that could lead to positive rating action are:

– A reduction in the budget deficit consistent with a decline of the government debt-to-GDP ratio in the medium term.

– A broadly accepted political solution to domestic political tensions.

Key Assumptions

Fitch assumes that Brent crude will average $35/bbl in 2016, $45/bbl in 2017 and $55/bbl in 2018.

Fitch assumes that Bahrain will continue to derive fiscal savings and growth support from the implementation of GCC development projects financed by Kuwait, Saudi Arabia, and the UAE. Lower oil prices are not assumed to impact the flow of funds from these countries.

Fitch assumes no change to the rule of the royal family and the current order of succession.

Fitch assumes that regional conflicts will not directly impact Bahrain or its ability to trade.

Fitch assumes no change to the peg of the Bahraini dinar to the US dollar. (Fitch 28.06)

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11.4 EGYPT: Moody’s Says Egypt’s Fiscal Position Remains Unstable

Despite marginal improvements in international reserves and foreign direct investment and the likely improvement in the balance of payments during the fourth quarter of the 2016 fiscal year, Egypt’s external payments position remains fragile, according to the latest report from Moody’s.

On 3 July, the Central Bank of Egypt (CBE) published a report on Egypt’s balance of payments position for the first three quarters of the fiscal year that ended on 30 June 2016. The report shows that Egypt’s economic position remains fragile due to external vulnerability and remaining structural weakness.

The current account deficit reached $14.5b, up from $8.3b the previous year, 6.7% and 5.3% of GDP respectively. The overall balance of payments deficit more than tripled to $3.6b, up from $1b.

“Although Egypt is a net oil importer, low oil prices do not benefit the country’s trade balance and have in fact affected oil exports more negatively than imports. Oil exports dropped to $1.1b as of March 2016 from a peak of $3.6b in December 2013, whereas oil imports fell to $1.6b from $3.1b during the same period,” says Steffen Dyck, VP-Senior Credit Officer at Moody’s and lead sovereign analyst for Egypt.

Remittances from abroad have also fallen considerably as the total level of cash transfers from abroad were only $61mn during the first three quarters of the 2016 fiscal year. Compared to the same period in 2015 of $14.3b, this represents a drastic fall where private transfers have accounted for $4b per quarter.

Net foreign direct investment has hovered at $1.4b per quarter, which represents a significant recovery from 2011, but is down from the initial spike in 2016 of $2.8b. Total FDI in 2016 currently stands at $5.8b, up from $5.1b during the same period last year.

Other investment, predominantly short-term supplier credits and other liabilities, have been rising since late 2014 and contributed $9.7b during the first three quarters of 2016, sharply up from $3.9b a year ago. However, this surplus was offset by a surge in net errors and omissions, which rose to a cumulative $3.1b and can be interpreted as a sign of capital flight.

As a result, Egypt’s net international reserves have remained low, remaining stable at $16.5b since September 2015 with a slight increase in June to $17.5b, suggesting a marginal improvement and set to meet the forecast of a 5.2% current account deficit by the end of 2016. (Moody’s 12.07)

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The Fortnightly newsletter is a free service of Atid, EDI. We are a team of economic and trade development consultants, headquartered in Jerusalem, but active throughout the region and beyond. EDI works with an international clientele interested in identifying and researching business opportunities in the region. We also serve as the regional representative offices for a number of U.S. states and bilateral Chambers of Commerce, as well as European clients.

Fortnightly, 13 July 2016

Fortnightly, 13 July 2016

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