Fortnightly, 17 May 2017

Fortnightly, 17 May 2017

May 17, 2017


17 May 2017
21 Iyar 5777
21 Shaban 1438




1.1  Knesset Passes Bill Removing News Division from the New Public Broadcaster


2.1  ORIX to Acquire 22% Ownership Stake in Ormat from FIMI and Bronicki Investments
2.2  Taranis Raises $7.5 Million
2.3  YL Ventures Closes $75 Million Fund for Seed Stage Israeli Entrepreneurs
2.4  Loom Systems Raises $6 Million in a Round Led by JVP
2.5  ADM Acquires Majority Stake in Israel’s Industries Centers EOD
2.6  Israel’s MoD Approves IDenta as Official Supplier and Places Immediate Order
2.7  Canada’s Stingray Buys Yokee Music
2.8  Guesty Raises $3 Million to be a Sales Force for Property Managers
2.9  Smashbox Opens First Israel Store in TLV Fashion Mall
2.10  Cannabics Pharmaceuticals Raises $3,000,000 in Capital
2.11  Leading Ad Tech Firm, Woobi, Chosen as Finalist for the 2017 Bully Awards
2.12  Large Québec Trade Delegation Visits Israel
2.13  CyberArk Acquires Conjur, Revolutionizing DevOps Security to Drive Greater Business Agility
2.14  Twiggle Raises $15 Million
2.15  Karamba Security Closes $12 Million in Series B Financing


3.1  Honeywell UOP to Provide Technology for Expansion of Jordanian Refinery
3.2  Bahrain’s Investcorp Buys $160 Million in US Industrial Buildings
3.3  KAUST & Thermo Fisher Scientific Open Center of Excellence in Electron Microscopy
3.4  DXC Technology Enhanced Safety of Nearly Two Million Pilgrims During the Hajj 2016
3.5  Saudi Arabia Produces Unmanned Aerial Vehicle
3.6  Camille’s Ice Cream Bars Brings Smiles into Saudi Arabia
3.7  Tilray Announces Medical Cannabis Export to Cyprus


4.1  Emefcy to Merge with RWL Water to Form Innovative Global Water Solutions Company
4.2  Jordan’s King Inaugurates JD400 Million in Solar Energy Projects
4.3  Dubai Wants More People Driving Electric Cars


5.1  Lebanon’s Balance of Payments Recorded a Surplus of $554.8 Million in First Quarter
5.2  King Abdullah Attends Launch of 5 Year Jordan Economic Growth Plan
5.3  US Aid to Jordan Totals $1.3 Billion in 2017
5.4  Jordan Meets US Administration Over Bilateral Ties
5.5  EBRD Announces JD3.2 Million Loan to Support Jordan’s Infrastructure
5.6  Spanish Investments in Jordan Worth JD 600 Million

♦♦Arabian Gulf

5.7  Bahrain’s Economy Strained as Low Oil Prices Persist
5.8  UAE Delays Launch of First Nuclear Reactor until 2018
5.9  Sheikh Mohammed Launches Dubai’s New $1.7 Billion Mega-Project
5.10  Paraguay President Keen to Boost UAE Trade & Investment Links
5.11  Saudi Deficit Plunges After Budget Cuts & Oil Revenue Surge

♦♦North Africa

5.12  Egypt’s Inflation Hits Three-Decade High
5.13  Egypt’s Trade Deficit Declines 56% in February in Annual Terms
5.14  Egypt’s Suez Canal Revenues Rise to $853.7 Million in March & April
5.15  Campaign to Attract 1 Million Chinese Tourists to Egypt to Launch
5.16  Most Moroccan Students Enrolled in Universities Do Not Graduate


6.1  EBRD Expects Slowdown in Turkey’s Growth Amid Security & Geopolitical Risks
6.2  Turkey’s Unemployment Rate Rises to 12.6% in February
6.3  Turkey’s Car Production Hits 10 Year High
6.4  Greek GDP Forecast Reduced to 1.8% by Ministry
6.5  Greek Unemployment Drops Slightly in February, Still Eurozone’s Highest



7.1  Tel Aviv Among the Top Vegan Friendly Cities Worldwide
7.2  Ministry of Tourism Promotes Tel Aviv’s First Bisexuality Themed LGBT Pride Parade
7.3  Ramadan Begins on Eve of 26 May


7.4  Moslem Middle East Users to Spend Extra 57 Million Hours on Facebook During Ramadan
7.5  AURAK Signs MoU with University of Illinois
7.6  New York Cosmos to Play Historic Exhibition Match in Saudi Arabia
7.7  Morocco to Switch Back to GMT Time for Ramadan


8.1  UroGen Pharma Announces Pricing of Initial Public Offering
8.2  Cartiheal Raises $18.3 Million
8.3  INSIGHTEC Receives FDA Approval for Exablate Neuro for the Treatment of Essential Tremor
8.4  Check-Cap & GE Healthcare Reach Milestone in High Volume X-Ray Capsule Manufacturing
8.5  Kaiima & Beck’s Collaborate Using the EP Technology Platform to Improve Corn Hybrid Yield
8.6  Therapix & Hannover Medical School Assess Effect of TXH-TS01 on Tourette Syndrome
8.7  GeneSort Sold for $23 Million
8.8  CollPlant Establishes a Separate Division to Focus on 3D Bio-Printing of Organs and Tissues
8.9  Otsuka & Teva Licensing Agreement for Japan on Prophylactic Migraine Drug Candidate


9.1  iguazio Selected as a Gartner Cool Vendor in Data Management, 2017
9.2  CyberArk Secures Digital Transformation in the Cloud
9.3  mPrest and Vector to Bring “Internet of Energy” to Over a Million NZ Customers
9.4  Elbit to Provide Advanced C4ISR Modernization Program to the Brazilian Marine Corps
9.5  Elbit Systems to Provide Satellite-On-the-Move Systems to Israel’s MoD
9.6  Intezer Code Intelligence – the Future of File Investigations & Malware Analysis
9.7  Stratasys & Desktop Metal Extend Partnership in Adoption of Metal Additive Manufacturing
9.8  Waterfall Security Delivers its Unidirectional Security Gateway DIN Rail Product to Market
9.9 Introduces Real-time Conversation Intelligence for B2B Sales Teams
9.10  Deep Instinct Named “Most Disruptive Startup” in NVIDIA’s 2017 Inception Awards


10.1  Israel’s April Inflation Rate Rises by 0.2%
10.2  Israel Tax Revenues Increase 11% in April
10.3  Israel’s Foreign Exchange Reserves Increase by $2 Billion
10.4  Record Number of Tourists Visited Israel in April
10.5  Israeli April Car Deliveries Fall Below 20,000
10.6  First Quarter Home Prices in Israel Fall by 2.9%


11.1  LEBANON: Lebanon Economic Report – First Quarter
11.2  ARABIAN GULF: The Challenge of the Oil Market to the Gulf States
11.3  UAE: IMF Staff Completes 2017 Article IV Mission to the United Arab Emirates
11.4  UAE: The UAE’s Defense Horizons
11.5  OMAN: Oman after Qaboos: Challenges Facing the Sultanate
11.6  EGYPT: IMF Agreement for Completion of the First Review of Egypt’s Extended Fund Facility
11.7  EGYPT: Cotton Revival Could Keep Egypt’s Economy Spinning
11.8  MOROCCO: How Will Morocco’s Economy Fare in 2017?
11.9  MOROCCO: IMF Concludes the First Review under Line Arrangement for Morocco
11.10  TURKEY: Turkey Foreign & Local Currency Ratings Affirmed; Outlook Remains Negative
11.11  TURKEY: Directionless and Friendless
11.12  GREECE: Greece Agreement a Positive Step Toward Review Completion


1.1  Knesset Passes Bill Removing News Division from the New Public Broadcaster

On 11 May, the Knesset passed a bill to remove the news division from the new public broadcaster and instead establish a separate news department in its place.  Following a lengthy debate, 43 Knesset members voted in favor of the Public Broadcast Law (amendment no. 8) in its second and third readings, while 33 lawmakers opposed it.

While presenting the bill in the plenum, Coalition Chairman MK David Bitan (Likud) explained that it creates two corporations – a news one, and a general one for all other broadcasts, such as sports or entertainment.  According to the reforms, the new public broadcaster’s programming officially launched on 15 May.  However, the news department will be launched separately at a later date, absorb additional IBA employees and will have managers appointed by a judge-led committee to oversee its operations.  The amendment was a compromise between Prime Minister Benjamin Netanyahu and Minister of Finance Kahlon.  A new management and council will be appointed for the new corporation.  (Knesset 11.05)

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2.1  ORIX to Acquire 22% Ownership Stake in Ormat from FIMI and Bronicki Investments

Ormat Technologies announced that Japan’s ORIX will acquire an approximately $627 million ownership stake in Ormat by purchasing approximately 11 million shares of Ormat common stock from FIMI ENRG Limited Partnership, Bronicki Investments, and senior members of management, representing in the aggregate an approximately 22.1% ownership position in Ormat.  The per share sale price to be paid by ORIX at closing (subject to satisfaction of customary conditions, including regulatory approvals) is $57, which was the prevailing market price at the time that ORIX, FIMI and Bronicki reached agreement on the commercial terms of their transaction.  The parties expect closing (including with respect to the agreements described below) to occur in Q3/17.

Under terms of a new Commercial Cooperation Agreement between the two companies, Ormat will have exclusive rights to develop, own, operate and provide equipment for ORIX geothermal energy projects in all markets outside of Japan.  In addition, Ormat will have certain rights to serve as technical partner and co-invest in ORIX geothermal energy projects in Japan.  Also, ORIX will assist Ormat in obtaining project financing for its geothermal energy projects from a variety of leading providers of renewable energy debt financing with which ORIX has relationships in Asia and around the world.

With over five decades of experience, Yavne’s Ormat Technologies is a leading geothermal company and the only vertically integrated company engaged in geothermal and recovered energy generation (REG), with the objective of becoming a leading global provider of renewable energy.  The company owns, operates, designs, manufactures and sells geothermal and REG power plants primarily based on the Ormat Energy Converter – a power generation unit that converts low-, medium- and high-temperature heat into electricity.  (Ormat 04.05)

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2.2  Taranis Raises $7.5 Million

On 4 May, Taranis announced it has closed a $7.5 million Series A round of financing led by Finistere Ventures and Vertex Ventures.  Existing investors, Eshbol Investments, Mindset Ventures, OurCrowd and angel investor Eyal Gura, also joined the round.

Growing its acreage by 2,000% in one year and now managing millions of acres of farmland in the Argentina, Brazil, Israel, Russia and the United States, Taranis offers the first scalable, predictive analytics solution to predict crop threats and prevent them in any climate zone.  Presenting precise information about fields, daily tasks, crop disease/pest and weather alerts based on its advanced forecasting and now-casting technologies, the proprietary Taranis deep learning platform helps large commercial farmers around the globe reduce costs, increase yield and speed farming decisions.  With Taranis, farmers can minimize chemical and pesticide usage by pinpointing where and when they are needed – saving farmers money, while creating a more sustainable farming ecosystem.  The Taranis platform currently monitors fields for critical crops such as soybeans, corn, wheat, cotton, sugar cane and potatoes.  Taranis will use the latest investment to further mature its scalable pest and disease prediction platform and substantially grow its global reach, with a focus on building US momentum.

Tel Aviv’s Taranis uses deep learning on proprietary data sets that includes sub-mm aerial imagery, field sensors, satellite imagery, weather forecast and data from its field scouting app to predict and prevent crop disease and pest losses. Helping farmers increase their yields and cut costs.  (Globes 04.05)

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2.3  YL Ventures Closes $75 Million Fund for Seed Stage Israeli Entrepreneurs

YL Ventures, the premier seed stage venture capital firm headquartered in Silicon Valley while investing in Israel, announced it has closed its third fund, YLV III.  The new fund builds on the success of its two prior funds, both of which generated returns in the top quartile of all North American Venture Capital funds, according to Preqin.  YLV III was significantly over-subscribed with nearly 100% of existing YLV II investors participating, and closed on $75 million, 25% above its target of $60 million.  The fund will invest in seed stage Israeli companies in high-growth sectors including cybersecurity, enterprise software, autonomous vehicles, drone technologies and VR/AR.  YLV III aims to invest in two to three companies per year. Initial seed investments will be $2-3 million, with YL Ventures leading the rounds.  A large portion of the fund is reserved to participate in U.S. VC-led follow-on rounds of its portfolio companies.  Based in both Silicon Valley and Tel Aviv, the firm has early and deep access to the Israeli entrepreneurial ecosystem as well as an active presence and strong network in the U.S.

YL Ventures is a seed-stage venture capital firm that invests in cybersecurity, enterprise software, autonomous vehicles, drone technologies and VR/AR companies, with particular focus on the Israeli market.  Currently investing out of its $75 million third fund, YL Ventures accelerates the evolution of portfolio companies via strategic advice and Silicon Valley-based operational execution.  (YL Ventures 04.05)

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2.4  Loom Systems Raises $6 Million in a Round Led by JVP

Loom Systems secured $6m in Series A funding led by Israel’s leading venture capital firm Jerusalem Venture Partners (JVP), along with Meron Capital and 31Ventures Global Innovation Fund managed by Global Brain Corporations.  The funding will help accelerate Loom Systems’ rapid adoption by expanding sales and marketing, growing international operations and developing the company’s partnership ecosystem.

Targeted at DevOps and IT professionals, Loom Systems instantly analyzes logs and semi-structured machine data for immediate visibility into a company’s digital environment.  Accelerating the ingestion, detection, analysis and resolution of data, to solve IT and OT problems in real-time, Loom significantly reduces the cost and complexity of working with operational analytics, as well as lowers the need for highly skilled personnel for root-cause analysis and actionable mitigation recommendations through its Tribal Knowledge Bank (TriKB).  Loom uses a combination of machine learning technologies to provide predictive insights and a virtual personal assistant recommendation back engine, Sophie.  Via on-premises or SaaS deployment, Loom Systems easily generates insights from raw data and with zero configuration or maintenance, including support for homegrown applications.

Founded in 2015, Tel Aviv’s Loom Systems delivers an advanced AI solution to predict and prevent problems in the digital business.  Loom stands alone in the industry as an AI analysis platform requiring no prior math knowledge from operators, leveraging the existing staff to succeed in the digital era.

Jerusalem Venture Partners (JVP) is a global venture capital fund out of Jerusalem.  Established in 1993, JVP has raised over $1.1 billion across 8 funds, and has been ranked numerous times by Preqin as one of the top-ten consistently performing VC firms worldwide.  Among the pioneering firms of the Israeli venture capital industry, JVP has been instrumental in building some of the largest companies out of Israel, facilitating 12 Initial Public Offerings on NASDAQ and numerous industry sales.  (Loom Systems 03.05)

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2.5  ADM Acquires Majority Stake in Israel’s Industries Centers EOD

Chicago’s Archer Daniels Midland Company has reached an agreement to purchase a controlling interest in Industries Centers, an Israeli company specializing in the import and distribution of agricultural feed products.  Industries Centers, founded in 1993, trades corn byproducts and other grain products.  It has offices in the Tel Aviv area, and operates a 45,000 MT storage facility strategically located at the Port of Ashdod.  The company has a significant and diversified customer base within Israel.  It is privately owned.  The transaction is subject to regulatory approval in Israel. ADM anticipates completing the deal in the coming months.  (ADM 08.05)

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2.6  Israel’s MoD Approves IDenta as Official Supplier and Places Immediate Order

IDenta Corp. announced its approval as an official supplier for the Ministry of Defense in Israel and receives an immediate order of NIS 60,000 for the company’s products.  This official approval is given after a long period of examinations of the company and its products and opens up many possibilities for the company to get extensive orders from the Ministry of Defense which invests many funds in unique and high quality technologies.

Since 2002, Jerusalem’s IDenta Corporation and its subsidiary IDenta recognized as a worldwide leader in the development of proprietary on-site Drug, Precursor of Drug and Explosive detection kits.  IDenta develops, manufactures and distributes revolutionary products for both the professional and civil markets which consistently pass the highest qualifications and testing procedures of law enforcement and security agencies around the world.  (IDenta 08.05)

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2.7  Canada’s Stingray Buys Yokee Music

Montréal’s Stingray Digital Group, a business-to-business multiplatform music provider, has acquired Yokee Music for an undisclosed amount.  Yokee is the provider of three social music apps regularly ranked in the music category’s top 10 in 100 countries: Yokee, Yokee Guitar and Yokee Piano.  Together, the apps have reached over 80 million downloads in four years and have gained 4 million monthly users, with over 50% year-over-year growth.  Although no financial details about the deal were disclosed, according to estimates the acquisition was for tens of millions of dollars.  (No Camels 09.05)

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2.8  Guesty Raises $3 Million to be a Sales Force for Property Managers

Guesty has raised $3 million in a financing round led by Buran VC and with the participation of Magma Venture partners and AltaIR Capital.  The company, formerly known as Superhost, graduated from Y Combinator in 2014.  Guesty provides a service for property owners to manage their apartments listed on Airbnb.  The company is using the money to continue scaling and to bring in an executive layer of engineering, marketing, finance and customer success VPs.

Tel Aviv’s Guesty is a professional management service for Airbnb property managers.  They provide a wide range of services, from 24/7 guest communication and booking management, automation tools and reporting, to Airbnb optimization.  (Guesty 09.05)

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2.9  Smashbox Opens First Israel Store in TLV Fashion Mall

The Estee Lauder group is expanding its business in Israel and opening the first store for its Smashbox Cosmetics professional makeup brand in the TLV Fashion Mall.  Smashbox was founded in Los Angeles in 1996.  Estee Lauder acquired the brand in 2010, and came to Israel in 2015 to market it in a local company.  Sale of the brand will also continue in the April chain, the chain’s website, and special areas in shopping malls.  The new store offers a wide range of specialist makeup products. The store will also sell exclusive products and special collections to be launched only for the brand’s independent stores.  Investment in opening the store is estimated at NIS 2 million.  The brand, which works according to a fiscal year beginning in July and ending in June, finished the year with 72% growth in Israel.  (Globes 10.05)

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2.10  Cannabics Pharmaceuticals Raises $3,000,000 in Capital

Cannabics Pharmaceuticals announced it has entered into a securities purchase agreement with D-Beta One EQ.  D-Beta will purchase 3,000,000 shares of common stock at a purchase price of $1.00 per share, for aggregate proceeds of $3 million and may purchase up to an additional 1,500,000 shares of common stock (the “Additional Shares”) at a purchase price of $2.00 per share over the next 12 months. No warrants are associated with this transaction.

Cannabics Pharmaceuticals (CNBX), a U.S public company, is dedicated to the development of Personalized Anti-Cancer and Palliative treatments.  The company’s R&D is based in northern Israel, where it is licensed by the Ministry of Health for its work in both scientific and clinical studies.  The Company’s scientific focus is on identifying and harnessing the therapeutic properties of specific natural Cannabinoids and is creating individually tailored therapies for cancer patients, utilizing advanced screening systems and personalized bioinformatics tools.  (Cannabics Pharmaceuticals 10.05)

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2.11  Leading Ad Tech Firm, Woobi, Chosen as Finalist for the 2017 Bully Awards

Woobi has been chosen as a finalist for the 2017 Bully Awards.  Each year, the award explores the European Tech Innovation landscape, ‘in search of bright stars’.  The finalists are firms in all stages of business that exhibit excellence in product innovation, leadership, growth and growth potential.  Woobi’s programmatic in-game video platform enables brands and agencies to plan around audiences, buy when users are open to engage and optimize their global advertising, based on performance-driven data.  By creating deep engagement opportunities through in-game advertising, brands can now interact with their audiences where they spend their time and undivided attention, creating a deeper, long-lasting brand engagement.  This year, Woobi’s programmatic video platform has been shortlisted for the European Digiday Video Awards and The Drum’s Digital Trading Award, and has won the Digiday US Video Awards.

Tel Aviv Woobi is an award-winning video advertising company, servicing brands, advertisers, games and app-developers.  Woobi’s programmatic platform enables brands and agencies to plan around audiences, buy when users are open to engage, and optimize their global advertising using verified data.  Woobi’s programmatic platform enables our advertisers a single gateway into games, and our publishers an easy access to premium global demand partners.  By creating deep engagement opportunities through in-game advertising, brands can now interact with their audiences where they spend their time and undivided attention, while reacting to each user’s significant moments during gameplay.  (Woobi 10.05)

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2.12  Large Québec Trade Delegation Visits Israel

Québec Premier Couillard is visiting Israel at the head of a delegation of 80 provincial businesspeople from the aviation, transportation, IT and medical industries.  According to the Israel-Canada Chamber of Commerce, which organized the visit in coordination with the Canadian embassy in Israel, this will be the largest ever business delegation to visit Israel.  The goal of the mission is to promote commercial cooperation with the province.  The visit includes tours and meetings by delegation members at Elbit Systems, Aeronautics, Israel Aerospace Industries (IAI) and the site of Bombardier in Haifa, where 300 diesel railway carriages are being electrified.

The Quebec economy is regarded as one of the fastest developing economies in the Western world in a range of areas.  In addition to Bombardier, the province also houses the headquarters of Rolls Royce aircraft engines, Pratt & Whitney, Lockheed Martin, telecommunications company Ericsson, Motorola, Bell Canada, and software companies UbiSoft AutoDesk and EA Games.  (Various 11.05)

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2.13  CyberArk Acquires Conjur, Revolutionizing DevOps Security to Drive Greater Business Agility

CyberArk Software acquired privately-held Conjur, a Newton, Massachusetts based provider of DevOps security software for $42 million in cash.  Conjur’s revolutionary technology for securing DevOps extends CyberArk’s reach deeper into the DevOps lifecycle to protect secrets and manage machine identities.  With the addition of Conjur, recently named a Cool Vendor in DevOps by Gartner, CyberArk uniquely empowers CIOs and CISOs to accelerate modern software deployment – securely – with the industry’s only enterprise-class security solution that delivers comprehensive privileged account management and secrets protection.

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.  (CyberArk 11.05)

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2.14  Twiggle Raises $15 Million

Twiggle has closed a $15 million series B financing round led by MizMaa Ventures and Korea Investment Partners.  The company has raised $33 million to date including the latest financing round and other investors include Alibaba, Naspers, Yahoo Japan, State of Mind Ventures and Sir Ronald Cohen.  Twiggle will use its new capital to scale up its Semantic API, which allows companies to use its technology without replacing their existing search engines, add new search-related features, hire more executives, and grow its U.S.-based sales team.  Twiggle also plans to add feature extraction from product images, in addition to textual content such as product descriptions and reviews, in order to improve its search results and product recommendations.

Tel Aviv’s Twiggle is using the most advanced technologies in machine learning, artificial intelligence, and natural language processing to power next generation e-commerce experiences.  Twiggle’s solutions are the only search technologies built on both human-like understanding of linguistic structure and a deep retail awareness — allowing your search engine to mimic how an experienced salesperson would (and should) behave.  (Twiggle 11.05)

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2.15  Karamba Security Closes $12 Million in Series B Financing

Karamba Security announced $12 million in Series B funding, bringing total investment in the company to $17 million, one year after closing a seed round.  The funding was driven by investors’ excitement over customer engagements, resulting from Karamba’s unique automotive cyber-prevention technology.  The investment will be used to expand customer support, sales and R&D organizations so that it can meet the rapidly growing demand.  Existing investors YL Ventures and Fontinalis Partners led the round, followed by GlenRock Israel, with new strategic investments from Paladin Capital and Liberty Mutual Strategic Ventures, as well as for existing investor Fontinalis Partners.

Karamba Security has introduced a prevention software that seamlessly protects the car, based on its factory settings, and blocks hacking attempts as they deviate from the car’s factory settings.  This deterministic approach ensures consumer safety by preventing the attack before hackers succeed to infiltrate the car and do harm.

When Karamba announced its solution in April 2016, the automotive industry was mostly evaluating network security solutions, adapted to the car.  Such solutions are based on statistical modeling and are prone to false alarms, aka “false positives,” that risk lives. An example would be the brakes failing because a legitimate command was mistakenly identified as malicious and blocked.  In a little more than a year since coming out of stealth, Karamba has engaged with 16 automotive OEMs and Tier-1 suppliers. In addition, Karamba was recognized with the 2017 North American Frost & Sullivan Award for Automotive New Product Innovation.

Hod HaSharon’s Karamba Security provides industry-leading autonomous cybersecurity solutions for connected and autonomous vehicles.  Karamba’s software products automatically harden the ECUs of connected and autonomous cars, preventing hackers from manipulating and compromising those ECUs and hacking into the car.  Karamba’s Autonomous Security prevents cyberattacks with zero false positives, no connectivity requirements and negligible performance impact.  (Karamba Security 16.05)

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3.1  Honeywell UOP to Provide Technology for Expansion of Jordanian Refinery

Illinois’ Honeywell UOP has signed an agreement with the Jordan Petroleum Refinery Company (JPRC) to facilitate a $1.6 billion expansion of its refinery in Zarqa, Jordan.  This expansion will increase the capacity of the facility to 120,000 barrels per day and will allow JPRC to upgrade the quality of its product to meet Euro V emissions specifications.  As part of the project, which is the fourth such expansion of the JPRC refinery, Honeywell UOP will provide managing licensor services, technology licensing, front-end engineering design consultancy services, and basic engineering design.  It will also provide catalysts and process equipment, and training and start-up services.

Technologies provided by Honeywell UOP will include crude and vacuum distillation units – designed by Houston-based Process Consulting Services, – for distilling crude oil into various fractions.  Honeywell UOP also will provide Unicracking and hydrotreating units to create clean distillate, as well as CCR Platforming, Penex, MinAlk, Merox and Selectfining units for producing cleaner-burning high-octane motor fuels, and a Polybed PSA unit for purifying hydrogen.

The Jordan Petroleum Refinery Company (JPRC) is the sole oil refining company of Jordan, publicly traded on the Amman Stock Exchange, with headquarters in the capital of Amman, and a refinery in Zarqa, 35 kilometers east of Amman.  The company manufactures a variety of fuels and refinery derivatives, and wholly owns a subsidiary oil marketing company.  Moreover, JPRC operates a lube oil blending facility, three LPG bottling stations and LPG storage facilities in Amman, Zarqa and Irbid.  The company also owns and operates an oil terminal and storage facilities in the port city of Aqaba.  (Honeywell 08.05)

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3.2  Bahrain’s Investcorp Buys $160 Million in US Industrial Buildings

Bahrain-based Investcorp has announced that its US real estate arm has invested in an industrial portfolio of properties in the Chicago and Boston metropolitan areas for a total purchase price of about $160 million.  The portfolio includes six properties with an aggregate of approximately 1.8 million square feet of warehouse and distribution space.

The Chicago portfolio is comprised of three buildings that are used primarily for the storage and distribution of frozen food products.  Investcorp said there is limited cold storage industrial space in Chicago and minimal new development that is able to service the city’s growing consumer base as demand for fresh, organic and perishable food products continues to grow.  In Boston, Investcorp has purchased a warehouse, distribution and flex portfolio totaling approximately 1.1 million square feet.  With these investments, Investcorp said it adds to its Boston-based industrial assets, after the firm purchased a four-building industrial portfolio in the region comprising 900,000 square feet in October 2016.  (AB 06.05)

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3.3  KAUST & Thermo Fisher Scientific Open Center of Excellence in Electron Microscopy

King Abdullah University of Science and Technology (KAUST) and Waltham, Massachusetts’ Thermo Fisher Scientific held an opening ceremony on 9 May for the Electron Microscopy Center of Excellence at the KAUST campus in Thuwal, Saudi Arabia.  This new center builds upon the long-standing partnership between KAUST and Thermo Fisher, and will focus on excellence in instrument performance and R&D collaboration.  The Center of Excellence aims to offer KAUST scientists and collaborators exploration and experimentation capabilities through Thermo Fisher’s leading electron microscopy platform.  Industry partners located in the KAUST Research and Technology Park will also benefit from proximity to Thermo Fisher’s deep application knowledge in materials science.

The center’s opening ceremony included the official commissioning of the FEI Titan Themis Z scanning transmission electron microscope (S/TEM), the most advanced analytical transmission electron microscope commercially available to date and the first to be installed in the world.  Materials scientists use the Titan Themis Z to understand relationships between a material’s larger-scale physical properties and its atomic-scale composition and structure.  This system joins other highly advanced electron microscopy systems already installed at the center, including a total of 16 electron microscopes from Thermo Fisher.

This Center of Excellence is the first implementation in a strategy by KAUST to build long-term partnerships with major instrument suppliers.  It will serve as a model for future opportunities to provide state-of-the-art research facilities, training and services to KAUST users and collaborators across Saudi Arabia.  (KAUST 10.05)

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3.4  DXC Technology Enhanced Safety of Nearly Two Million Pilgrims During the Hajj 2016

Nearly two million pilgrims who attended last September’s Hajj 2016 in Mecca, Saudi Arabia, realized a safer and more secure experience with the presence of a world-class safety, security, and crowd control system.  The Makkah Region Development Authority (MRDA) and Tysons, Virginia’s DXC Technology, a leading independent, end-to-end IT services company, worked in partnership to successfully implement the first phase of a multi-year initiative to better schedule pilgrim visitations and reduce the risk of overcrowding at the stations and platforms along the Al Mashaaer Al Mugaddassah Metro Southern Line (MMMSL).  The MMMSL, which has one of the world’s highest metro capacities, shuttles approximately 72,000 passengers per hour at peak periods between holy sites such as Mecca, Mount Arafat and Mina during the Hajj.  In addition to keeping the crowds moving and free from obstruction to ensure their safety and security, MRDA also needed to monitor the deployment of 7,500 employees who oversee the operations at their stations and platforms.

After careful study and assessment, DXC Technology designed and implemented a suite of multi-user technology solutions including a dual-language application in English and Arabic to support staff management, along with a pilgrim dispatch system.  DXC Technology conducted comprehensive training for all staff, and a 24/7 Crowd Control Command Center (CCCC) was established to monitor all aspects of the event and to provide real-time data and analytics updates to MRDA and its staff.  In all, the DXC Technology-enabled system gathered and analyzed 23 million data points into actionable insights to create a seamless and safe experience for the 1.8 million Hajj pilgrims.

A new mobile app for pilgrims called ‘iHajj’ has also just been launched for iOS and Android, providing Hajj and Umrah pilgrims an end-to-end experience. Key features include detailed schedules, access to the Holy Quran, prayer timing alerts, Kaaba directions, a pilgrimage journey tracker, receiving Du’a requests from family and friends as well as finding nearby activities though augmented reality.  (DXC 16.05)

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3.5  Saudi Arabia Produces Unmanned Aerial Vehicle

Saudi Arabia’s King Abdulaziz City for Science and Technology has unveiled a strategic drone program and aircraft.  The Medium Altitude Long Endurance unmanned aerial vehicle is the Saqr-1, which features a KA-band satellite communications system.  Prince Turki bin Saud bin Mohammed, president of KACST, said the Saqr-1 has a range of more than 2,500 kilometers and an endurance of more than 24 hours.  The aircraft flies at an average altitude of 20,000 feet.  Additional details of the drone and the KACST program were not disclosed.  In March, the kingdom announced a deal with China to build the first drone factory in the Middle East.  (UPI 12.05)

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3.6  Camille’s Ice Cream Bars Brings Smiles into Saudi Arabia

Dallas, Texas’ Camille’s Ice Cream Bars, the world’s first U.S. franchise featuring freshly made ice cream, yogurt and sorbet, flash-frozen on a stick, announced its first restaurant in Saudi Arabia has opened in Riyadh.  In addition to Riyadh, Camille’s opened their first Middle East location in Qatar last year.  Camille’s Ice Cream Bars is located in Aqeeq Square in Riyadh – an area known for its quality residential and retail offerings.  Featuring 15 different flavors of bars and countless combinations, Camille’s touts its simple system of Pick (a bar), Dip (in your choice of chocolate) and Dress (in a delicious topping of your choice.)  Camille’s distinctively unique and cool concept of “delivering happiness in 30 seconds” fits well in this fashion forward community.

Camille’s Worldwide Franchising, LLC, (CWF) is a restaurant management company based in Austin, Texas.  CWF is affiliated with the corporate owners of G Ice Cream, Inc. and Camille’s Ice Cream Bars. CWF offers Licensing, Single and Multi-Unit Franchises, Area Developments and International Franchises.  (Camille’s 26.04)

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3.7  Tilray Announces Medical Cannabis Export to Cyprus

Tilray, a global leader in medical cannabis research and production, announced that Tilray cannabinoid products have arrived and are cleared for distribution in Cyprus after the company received necessary approvals in Canada and Cyprus to export cannabinoid formulations for patients in Cyprus.  Tilray is working with the country’s Ministry of Health to import and distribute Tilray Drops, a medical cannabis extract product, at pharmacies and healthcare facilities throughout the country to patients with advanced cases of cancer who have authorization to access medical cannabis products.

Tilray currently supplies pharmaceutical-grade medical cannabis products – including dried whole flower and extract formulations – to tens of thousands of patients, physicians, pharmacies, hospitals, governments and researchers around the world for commercial, compassionate access and research purposes.  Tilray plans to announce additional research partnerships in the coming year.

Nanaimo, British Columbia’s Tilray is a global leader in medical cannabis research and production dedicated to advancing the science, safety, and efficacy of medical cannabis and cannabinoids.  The company operates one of the largest and most sophisticated federally licensed medical cannabis cultivation facilities in the world, offering a range of products to patients, physicians, pharmacies, governments, hospitals and researchers in Australia, Canada, the European Union and Latin America.  (Tilray 04.05)

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4.1  Emefcy to Merge with RWL Water to Form Innovative Global Water Solutions Company

Emefcy Group signed a Letter of Intent with respect to a proposed business combination with New York-based RWL Water that, if consummated, would create a global provider of innovative, distributed water and wastewater treatment solutions.  It is anticipated that the proposed merger would substantially accelerate Emefcy’s deployment into China and other key markets, as well as deliver substantial sales synergies between Emefcy and RWL Water products and systems, resulting in continued strong revenue growth, improving gross margins and increased recurring revenue streams.

The proposed name of the new global group, subject to shareholders’ approval, would be Fluence Corporation Limited.  Fluence plans to provide a range of products and services for water treatment, wastewater treatment, desalination, waste-to-energy and water reuse and recovery.  The combined group would focus on key growth markets including municipal, commercial, industrial, mining, oil & gas, power, food and beverage sectors.

Caesarea’s Emefcy develops, manufactures and markets new, energy-efficient MABR based wastewater treatment solutions, aiming to change the economics of various markets and addressing the growing global demand for clean water in municipal and industrial plants.  With several global innovation awards and a strong scientific background, Emefcy is at the forefront of the next generation of MABR based wastewater treatment. Additional MABR based wastewater solutions out of Emefcy’s extensive R&D operations are expected to be announced in the coming year.  (Emefcy Group 05.05)

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4.2  Jordan’s King Inaugurates JD400 Million in Solar Energy Projects

On 14 May, King Abdullah inaugurated several Jordanian solar energy projects, which include 12 photovoltaic power stations set to generate 200 MW of electricity at a cost of more than JD400 million.  The initial phase of the projects will include building the first solar thermal park, which will extend on a 5 square kilometer plot in Maan Development Area and will incorporate 10 plants with a generation capacity of 170MW.  The 11th plant will be housed in the Aqaba Special Economic Zone Authority, with an electricity generation capacity of 10MW.  The 12th plant will be implemented in Hosha area in Mafraq Governorate, at a capacity of 20MW.

Established under an investment volume of around JD350 million, the first solar thermal park was deemed the “largest at a regional level to be operated at a commercial level”, providing more than 150 jobs.  The inauguration ceremony, organized by EDAMA Association for Energy, Water and Environment, a business association working on solutions for energy independence and environmental conservation, was attended by Prime Minister Mulki.

The first round of the projects was completed by local and foreign companies with funding from local and international investment and funding institutions, including the International Finance Corporation affiliated with the World Bank, the European Bank for Reconstruction and Development, Proparco, which is affiliated with the French Development Agency, in addition to funding from Japan and the US.  (JT 14.05)

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4.3  Dubai Wants More People Driving Electric Cars

Dubai’s energy authority has ratified an incentives program in an effort to encourage more people to opt for electric cars.  Sheikh Ahmed bin Saeed Al Maktoum, chairman of Dubai Supreme Council of Energy, ratified the incentive program to promote the use of electric cars in Dubai.

The incentives plan, details of which were not revealed, was presented by Dubai Electricity and Water Authority (DEWA) and Dubai Municipality at the 45th meeting of the Supreme Council of Energy.  The program supports the Dubai Green Mobility Initiative to increase the uptake of hybrid and electric cars in Dubai.  The Supreme Council has previously issued directives for government institutions to ensure that 10% of all new purchases of fleet vehicles are for hybrid or electric vehicles.

This will support the target for 2020 for 2% of all vehicles to be hybrid or electric, and by 2030 this will rise to 10%.  This will help to reduce total carbon emissions in Dubai by 2021 by 19%.  DEWA has announced plans to double the number of its electric vehicles charging stations to 200 across Dubai.  DEWA said it is setting up different types of charging stations, including fast-charging stations installed at petrol stations that take 20-40 minutes.  DEWA will coordinate with Dubai Municipality and the Roads and Transport Authority (RTA) to ensure that electric vehicle charging stations meet the technical requirements and standards adopted by the relevant authorities.  (AB 10.05)

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5.1  Lebanon’s Balance of Payments Recorded a Surplus of $554.8 Million in First Quarter

In March 2017, Lebanon’s BoP managed to register a surplus of $46.3M, with BDL’s Net Foreign Assets (NFAs) contracting by $1,158.1M and the NFAs of commercial banks surging by a monthly $1,204.4M.  In fact, the decline in BDL NFAs was due to the government’s $1.5B maturing Eurobonds that were mainly held by foreign institutions.  This outflow was only partially compensated by the $600M participation by these institutions into the new Eurobonds issue of $3B on 23 March.  The substantial rise in commercial banks’ NFAs could be attributed to the commercial banks selling part of their holding in the new Eurobonds issue to foreign entities and used the receipts to replenish their foreign assets following last year’s drop as a result of the BDL swap operation.  Therefore, Lebanon’s Balance of Payments (BoP) ended Q1/17 with a surplus that totaled $554.8M, compared to the $644.2M deficit recorded in Q1/16.  In details, BDL’s Net Foreign Assets (NFAs) slipped by $552.8M over the period, while commercial banks’ NFAs rose by $1,107.6M by March 2017, compared to a $237.1M drop a year earlier.  (Blom 08.05)

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5.2  King Abdullah Attends Launch of 5 Year Jordan Economic Growth Plan

On 3 May, King Abdullah chaired a meeting for the Economic Policies Council during which a 5-year plan designed to stimulate economic growth and boost the resilience of the national economy against regional and international challenges was launched.  The Jordan Economic Growth Plan (JEGP) aims at injecting vigor into the national economy and put the Kingdom on the sustainable development trajectory, gradually lessen dependence on aid by relying on expanding economic and investment opportunities and build an economy capable of providing adequate employment opportunities for young people.  It also seeks to invest in human resources as well as developing government institutions to be able to provide public services to citizens with high efficiency.

King Abdullah emphasized that the plan must succeed and translate into better living conditions, urging an all-encompassing effort to realize the objectives of the plan, at the forefront of which are slashing public debt, providing employment opportunities and raising income levels.  The King said a quick and practical implementation and the commitment of all stakeholders is the key to bring about sustainable development.

King Abdullah ordered the Economic Policies Council to follow up on the implementation of the JEGP in cooperation with the government. His Majesty also said the nation’s embassies and ambassadors abroad must play a more vigorous economic role, describing such role as a top priority at this stage.  The JEGP was formulated in a joint effort between the Economic Policies Council and relevant government agencies.  A successful implementation by the government will double the economic growth of Jordan over the next five years, reduce debt, provide jobs and raise income.  (Petra 03.05)

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5.3  US Aid to Jordan Totals $1.3 Billion in 2017

On 9 May, Prime Minister Mulki met with a delegation of US congressional aides to discuss Washington’s assistance to Jordan.  During the meeting, Mulki stressed the strategic partnership between Jordan and the US, expressing appreciation for Washington’s support for the Kingdom, which, he said, helps reduce the pressure on the national budget and allows the implementation of development projects.  The prime minister outlined the repercussions of the regional instability resulting from the Syrian crisis, especially the hosting of 1.3 million Syrians, which has put significant strain on the Kingdom’s resources and state budget, along with the education, health, and infrastructure sectors, apart from military and security burdens.

The premier noted that the government’s economic plan for the next five years aims to stimulate growth in vital fields and reduce the public debt.  The energy sector has played a large role in the mounting debt, as the country has depended on heavy fuel oil to generate electricity, rather than natural gas that used to be imported from Egypt, Mulki noted, adding that the electricity company’s debt has increased from JD800 million to JD5 billion over the last two years.  (Petra 10.05)

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5.4  Jordan Meets US Administration Over Bilateral Ties

Jordanian Minister of Planning and International Cooperation Fakhoury recently held several meetings with senior officials of the US administration to discuss bilateral relations in Washington.  Fakhoury met with officials from the White House, the State Department, the Treasury Department and the USAID, along with members of Congress.   The meetings came as a follow-up on the US support program for 2017 and to renew the memorandum of understanding for 2018-2022, which aims to support Jordan’s reform and development efforts, the statement noted.

The minister highlighted the recent meeting between King Abdullah and President Trump as a “success”, as they discussed several issues such as regional peace and the fight against terrorism.  During his meetings, Fakhoury highlighted Jordan’s role to restore security, stability and peace in the region.  The minister also highlighted Jordan’s international role as a key host of Syrian refugees and the challenges the Kingdom is facing as a result of the unprecedented regional instability.

On the domestic level, Fakhoury said that Jordan is currently working on a comprehensive reform program to achieve prosperity for its citizens and turn challenges into opportunities through maintaining macroeconomic and financial stability in coordination with the IMF.  The official highlighted efforts to improve the business environment by attracting investments, developing human resources and employment strategies, increasing public-private partnerships, and enhancing social protection.  (JT 01.05)

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5.5  EBRD Announces JD3.2 Million Loan to Support Jordan’s Infrastructure

The European Bank for Reconstruction and Development (EBRD) announced a JD 3.2m loan to the Greater Amman Municipality (GAM) to finance the construction of the fifth cell at the Al Ghabawi landfill.  The loan is part of the uncommitted second tranche of a €50 million loan to GAM approved in 2016 to finance improvements in solid waste management and infrastructure.  The €50 million loan is expected to be co-financed by several donors including the United Kingdom Department for International Development, the EU, USAID and others.  The loan was announced as a continuation of the Bank’s support to Jordan as the ongoing influx of refugees from Syria continues to place a massive strain on the country’s resources.  (JT 11.05)

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5.6  Spanish Investments in Jordan Worth JD 600 Million

The volume of trade exchange between Jordan and Spain is currently at JD430 million, compared to JD230 million in 2013, Spain’s Ambassador to Jordan Santiago Cabanas said, noting that the value of Spanish investment in the Kingdom stand at JD600 million.  In a seminar organized by the Centre for Strategic Studies at the University of Jordan, Cabanas added that the two countries are working on developing economic ties between them, adding that trade exchange between Jordan and Spain has doubled since 2013, when it was €200 million and is now at €430 million.  He noted that the number of visas granted to Jordanians to visit Spain has also doubled from 4,000 to 8,000, so has the number of Spanish tourists in Jordan, which increased by 10% to 15% in 2016.  (Petra 07.05)

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►►Arabian Gulf

5.7  Bahrain’s Economy Strained as Low Oil Prices Persist

Bahrain has been unable to stem the decline in its foreign reserves as lower oil prices strain the smallest economy among Gulf Arab monarchies.  Net foreign assets dropped 11% to 645.2 million dinars ($1.7 billion) in February, from the 725.9 million dinars in January, Bahrain’s central bank reported.  Overall, they’re down 71% from a peak of 2.24 billion dinars in November 2014, according to data compiled by Bloomberg.

Bahrain, which pegs the dinar to the dollar, has been more vulnerable to slumping oil prices and regional political instability than richer Gulf Cooperation Council states. Authorities increased spending in response to the global recession in 2009 and civil unrest two years later as sectarian tensions escalated in the Gulf island nation.  The further drop in foreign reserves comes nearly a month after the International Monetary Fund warned that Bahrain, a close Saudi ally and the home of the US Navy Fifth Fleet, needs to make significant spending cuts to restore stability to its budget and improve investor confidence.

The government went to domestic and international markets last year to finance the country’s 2016 budget deficit of 1.5 billion dinars.  Economic growth is forecast to slow to 2.3% this year, the lowest level since 2011, according to data compiled by Bloomberg.  The IMF said in April that the drop in crude prices has largely offset “significant fiscal measures that were implemented,” causing the budget deficit and public debt in 2016 to stand at 18% and 82% of gross domestic product, respectively.  It said fiscal measures could include valued-added taxation and further rationalizing of spending on subsidies and social transfers.  (Bloomberg 08.05)

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5.8  UAE Delays Launch of First Nuclear Reactor until 2018

On 5 May, the UAE delayed the start-up of its first nuclear reactor until next year for further safety checks because regulators have not yet granted an operating license.  The reactor, one of four being built at the $20-billion Barakah plant west of Abu Dhabi by a consortium led by Korea Electric Power Corp (KEPCO), had been due to begin operating this year.  But UAE nuclear regulators are still reviewing the operating license application which was submitted in March 2015, Emirates Nuclear Energy Corp (ENEC) announced.  The delay aims “to ensure sufficient time for international assessments and adherence to nuclear industry safety standards, as well as a reinforcement of operational proficiency for plant personnel,” it said.  The new schedule reflects “lessons learned” from problems at South Korea’s New Gori No. 3 reactor. The Barakah plant is based on the same technology.

Senior nuclear experts from the International Atomic Energy Agency (IAEA) and the World Association of Nuclear Operators will conduct a series of voluntary assessments at Barakah, it added.  ENEC said the project, which will be operated by a joint venture with KEPCO, is now 79% complete.  When fully operational the four reactors are expected to provide up to a quarter of the UAE’s electricity.  (AB 05.05)

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5.9  Sheikh Mohammed Launches Dubai’s New $1.7 Billion Mega-Project

Dubai Ruler Sheikh Mohammed has announced the launch of Marsa Al Arab, Dubai Holding’s latest tourist destination development in the emirate.  The $1.7 billion mega-project, spread across 4 million sq. ft., will be developed on new two islands on both sides of Burj Al Arab Jumeirah.  Marsa (Arabic for marina) Al Arab is expected to be completed by 2020.  One island will be dedicated to entertainment and family tourism, while the other comprises an exclusive luxury resort.  The two islands will add 2.2 kilometers of beach frontage, as well as three new hotels and a number of new tourist attractions.

The family resort island will see Jumeirah Group introduce new leisure concepts and services as well as a new family-oriented hotel.  To boost guest experience, Wild Wadi Waterpark will be moved from its current road-side location closer to the beach, and will be more than double its existing size when fully completed.  Dubai Holding will also develop ‘Marine Park’, a first-of-its-kind marine life edutainment center in the Middle East, with a live theatre of a 1,000 seat capacity that will attract world-class shows to showcase various elements of marine life.

The shopping center will consist of international high-end brands, as well as a selection of restaurants and coffee shops to meet the needs of its luxurious shoppers.  Marsa Al Arab will also offer 300 sea-front residential apartments in the heart of the development.  Together, the enhanced Wild Wadi and Marine Park will sprawl over an area of 2.5 million sq. ft.  The new family destination will house a dedicated theatre with a capacity of 1,700 seats, which will become home to the world-renowned show Cirque du Soleil for the first time in the Middle East.  (AB 14.05)

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5.10  Paraguay President Keen to Boost UAE Trade & Investment Links

Paraguay President Horacio Cartes, announced plans to open the country’s first commercial representative office in the UAE later this year, which will aim to boost trade and investment flows between the two countries.  The announcement came during a recent meeting with a Dubai Chamber delegation in Asuncion, where he expressed his intention to build bridges between business communities on both sides.  The meeting was held on the sidelines of the Global Business Forum on Latin America roadshow, which was organized by the Dubai Chamber of Commerce and Industry.  Dubai’s non-oil trade with Paraguay surged to AED102.8 million in 2016, almost doubling since 2010.  (AB 06.05)

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5.11  Saudi Deficit Plunges After Budget Cuts & Oil Revenue Surge

Saudi Arabia’s budget deficit dropped by 71% in the first quarter of the year, after spending cuts and a major rebound in oil revenues.  Finance Minister Al Jadaan said on 11 May that the deficit had dropped to $6.93 billion in the first three months of the 2017 fiscal year.  Saudi Arabia’s budget deficit was initially projected at $53 billion for the whole year, after an even bigger deficit last year that prompted subsidy cuts, delays in projects and a temporary government salary freeze.  This is the first time that Saudi Arabia has released budget figures on a quarterly basis, a measure it says is aimed at boosting transparency.

Total revenues for the first quarter were at $38.41 billion, an increase of 72% from the same quarter last year.  Oil revenues were notably up in the first quarter at $29.86 billion with a growth rate of 115% from the same quarter last year, driven by a hike in crude prices in international markets.  Non-oil revenues for the first quarter were reported at $8.53 billion, a 1% increase from the same quarter last year.  Expenditure stood at $45.3 billion for the first quarter of this year, down 3% from the corresponding period last year.  Expenditure is projected at $237 billion for this year, down from $260 billion last year.

In September, the country froze salaries and reduced benefits for civil servants — who comprise the bulk of the workforce — as part of a package of austerity measures.  King Salman revoked the measures in a royal decree last month.  Saudi Arabia has also announced foreigners would no longer be allowed to work in Saudi Arabia’s numerous shopping malls, in a measure to boost employment of Saudis.  About nine million foreigners worked in the kingdom at the end of 2015, the most recent official figures available.  (AFP 11.05)

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►►North Africa

5.12  Egypt’s Inflation Hits Three-Decade High

Egypt’s inflation rose to a three-decade high in April, piling pressure on the government to keep a lid on prices as it embarks on politically sensitive economic reforms likely to push them higher.  Egypt has been hit by soaring inflation since it floated its currency in November, allowing it to roughly halve in value.  The float marked the opening salvo in a three-year, $12 billion International Monetary Fund reform program that includes tax hikes and subsidy cuts.

Annual urban inflation rose in April to 31.5% from 30.9% in March, the official statistics agency, CAPMAS, said. That was the highest since June 30, 1986, when it reached 35.1%.  Core inflation, which strips out volatile items like food, decreased marginally to 32.06% in April from 32.25% in March.

Rising prices present a challenge for President Abdel Fattah Al Sisi and his government, which have pledged to push ahead with sensitive austerity measures like fuel and electricity price hikes.  Food prices have spiked, rising by 43.6% year-on-year in April ahead of the holy month of Ramadan, when demand peaks because of heavy consumption following dawn-to-dusk fasting.

On 9 May, the government allocated EGP 1 billion ($55 million) in subsidies to ease Ramadan food purchases.  Though month-on-month inflation has eased in recent months, suggesting the worst of the price rises has passed, yearly inflation above 30% has confounded expectations and sown uncertainty into Egypt’s economic reforms.  (Reuters 10.05)

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5.13  Egypt’s Trade Deficit Declines 56% in February in Annual Terms

Egypt’s trade deficit in February declined by 56% to register $2.1 billion, down from $4.7 billion recorded in the same month last year, according to CAPMAS.  Exports increased by 22.1% in February compared to the same month last year, to reach $2 billion up from $1.6 billion.  Fertilizer exports increased by 173.8% and crude petroleum exports increased by 104.6%.

Exports of some products decreased in February 2017 compared to the same month last year, such as dairy products, down by 24.1%, carpets, down by 17.8%, and furniture, down by 3.2%.  Imports in February 2017 decreased by 35.8% to reach $4.1 billion down from $6.4 billion registered in February 2016.

Imports of Iron decreased by 53.7% while imports of organic and inorganic chemical products decreased by 22.3% compared to February 2016.  Year-on-year, imports of crude petroleum increased by 49.3% and petroleum products increased by 37.6%.

Egypt has undergone a hard currency crisis, especially at the end of last year, which resulted in high dollar rates on the black market and left banks unable to provide companies with the currency needed to service imports.  The Egyptian Central Bank floated the pound against the dollar in November 2016 in an attempt to revive the country’s flagging economy, leading the pound to plummet, reaching an average exchange rate of EGP18.0 to the dollar, compared to EGP8.88 prior to flotation.  (CAPMAS 13.05)

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5.14  Egypt’s Suez Canal Revenues Rise to $853.7 Million in March & April

Egypt’s Suez Canal revenues rose 4.1% to $853.7 million in March and April from $820.4 million in the same period last year, the Suez Canal Authority announced.  Ship traffic through the vital Egyptian waterway rose 4.4% to register 2,973 ships during March and April this year compared to 2,847 ships in the same period 2016.  The increase was attributed partially to what he called the authority’s “flexible marketing policy,” which includes “discounts and bonuses” offered to shipping lines using the canal.  (Ahram Online 10.05)

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5.15  Campaign to Attract 1 Million Chinese Tourists to Egypt to Launch

An international conference to promote Egypt’s tourism industry to the Chinese market will be held on Saturday, 20 May under the slogan “One Million Chinese Tourists to Egypt”, said the chairman of the Egyptian Investment Group in China.  The conference will be held in Yiwu City, Zhejiang Province, near the city of Shanghai, he said, noting that 300 Chinese and international tourism companies will participate in the event.  The conference aims to promote tourism to Egypt in the Chinese market which is currently growing rapidly on the international level.  The conference will focus on displaying the diverse tourism potential to Chinese people through films translated into Chinese about Egypt’s cultural, historical, beach and therapeutic tourism destinations.  (Al-Masry Al-Youm 03.05)

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5.16  Most Moroccan Students Enrolled in Universities Do Not Graduate

Moroccan Minister of Education Hassad has revealed statistics related to university dropout rate, showing that more than half of students enrolled do not graduate.  Morocco’s Ministry of National Education, Vocational Training, Higher Education and Scientific Research presented the statistics, as well as the budget documents for the ministry, to the House of Representatives.

The figures indicate that no more than 42% of the students enrolled in Moroccan universities graduate, whereas the majority, an eye-opening 58%, drops out before obtaining their bachelor degree.  The normal period for obtaining the bachelor degree in Morocco is three years and requires the completion of all the units or modules for each year. In case students fail to complete some or all the units, they are obliged to complete them in the next year.  The Ministry of Education’s report shows that only 13% of university students in Morocco complete the course in first three years.  The graduation rate after four years and five years of study is 15 and 7%, respectively.  The percentage of the students, who obtain their bachelor after 6 years and longer is 7%, continues the report.  (MWN 16.05)

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6.1  EBRD Expects Slowdown in Turkey’s Growth Amid Security & Geopolitical Risks

Turkey is expected to see a slowdown in growth in 2017, partly reflecting security and geopolitical risks that have also led to a downward revision in European Bank for Reconstruction and Development (EBRD) forecasts for countries in the southern and eastern Mediterranean.  In contrast, economic growth is expected to pick up across other EBRD regions this year and next year, according to the bank’s latest Regional Economic Prospects report.  The EBRD said Turkey’s growth is projected to moderate further to 2.6% in 2017, reflecting worsening investor sentiment compounded by the downgrade of Turkey’s sovereign rating to sub-investment-grade level.

The Turkish economy has slowed significantly since 2015, with growth halving to 2.9% in 2016 due to a sharp fall in tourism receipts, Russian sanctions, and geopolitical tensions in the Middle East, noted the EBRD, adding that weak consumption and investment following the attempted military coup in July 2016 compounded these earlier problems.  The latest forecasts were subject to major risks related to geopolitical tensions in and around the EBRD region, set against a backdrop of increased political uncertainty.  (EBRD 10.05)

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6.2  Turkey’s Unemployment Rate Rises to 12.6% in February

Turkey’s unemployment rate was announced at 12.6% in the February period, with a 1.7% year-on-year increase.  This rate showed a slight decrease from a seven-year high at 13% in the previous month, data from the Turkish Statistics Institute (TUIK) showed.  The number of unemployed people over 15 years old increased by 676,000 to 3.9 million people in the period of February 2017 in Turkey compared with the same period of the previous year.  In the same period, the non-agricultural unemployment rate was 14.8% with a 2.1%age point increase.

Youth employment hit 23.3% in the February period, which covered data from January, February and March, with a 4.7% of increase compared to the same period of 2016.  The number of employed people rose by 500,000 to around 27 million in the period of February 2017 compared with the same period of the previous year.  The employment rate was unchanged at 45.3%.  (TUIK 15.05)

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6.3  Turkey’s Car Production Hits 10 Year High

Turkey’s auto production rose by 42% to over 400,000 vehicles in the first four months of 2017, compared with the same period last year, hitting a 10-year high.  A total of 402,094 cars were manufactured in the January-April period, marking the largest number of units produced in the country since 2007, according to an 11 May report by the Automotive Manufacturers’ Association (OSD).  Automobile exports were also on the increase during the same period, going up by 57% to reach 337,000 units.

Overall production on the other hand – including light commercial vehicles – was up 22% year-on-year, standing at 573,239 units.  The OSD said auto sales were down nine% to 237,717 units compared with the same period last year.  The report also revealed that overall exports were up 31%, reaching 473,000 units.  (AA 12.05)

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6.4  Greek GDP Forecast Reduced to 1.8% by Ministry

A day after the European Commission downwardly revised its Greek growth forecast to 2.1% for this year, the Finance Ministry took its own projection even lower, to just 1.8%.  The government’s revision down from the original 2.7% by almost 1% of GDP was released with the publication of an assessment report by the Hellenic Fiscal Council, which is drafting the midterm fiscal plan up to 2021.  The midterm plan itself, which forms part of the bailout review milestones, has yet to be published, but the HFC has included one of its charts in its assessment report.  It therefore emerges that the ministry now expects the economy to grow by just 1.8% this year, 2.4% in 2018, 2.6% in 2019, 2.3% in 2020 and 2.2% in 2021.  (eKathimerini 12.05)

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6.5  Greek Unemployment Drops Slightly in February, Still Eurozone’s Highest

On 11 May, ELSTAT announced that Greece’s jobless rate dropped slightly to 23.2% in February from 23.3% the previous month.  January’s reading was downwardly revised from 23.5%.  The number of officially unemployed reached 1.1 million people. Hardest hit were young people aged 15 to 24 years, with their jobless rate dropping to 47.9% from 50.6% in February last year.  The jobless rate hit a record high of 27.9% in September 2013.  Greece’s jobless rate has come down from record highs but remains more than double the Eurozone’s average. Unemployment in the 19 countries sharing the euro stood at 9.5% in March.

The country’s economy contracted in the final quarter of 2016, performing worse than projected.  Economic output slumped 1.2% compared to the previous quarter.  The government expects the jobless rate to drop to 22.6% this year, based on its 2017 budget, which sees the economy expanding by 2.7%.  The European Commission has revised downward its forecast of Greece’s economic growth to 2.1% this year, from a previously estimated 2.7%, and to 2.5% in 2018 from 3.1%.  (ELSTAT 11.05)

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7.1  Tel Aviv Among the Top Vegan Friendly Cities Worldwide

In a list published recently by British daily newspaper The Independent, ten cities are listed in as recommended for vegan travelers, among them Tel Aviv.  The other cities on the list were Turin (Italy), Berlin (Germany), Helsinki (Finland), Chennai (India), Melbourne (Australia), London (Britain), Vancouver (Canada) and two cities in the US – San Francisco (California) and Austin (Texas).

This isn’t much of a surprise, as nearly 5% of Israelis are vegan, meaning that Israel has the most vegans in the world per capita.  Tel Aviv itself has about 200 vegan restaurants and 10% of the restaurants in the city are vegan-friendly, so that at least a quarter of their menu is vegan.

With over 400 vegan and vegan friendly establishments, cosmopolitan Tel Aviv has become such a hotspot that even Domino’s serves animal-free pizza, and there’s the first vegan – and kosher – cooking school in the country, the Vegan Experience.  Every September the city hosts Vegan-Fest, one of the world’s largest vegan festivals.  The Independent later detailed several restaurants known for their vegan food, recommended trying a few different vegan cuisines, and mentioned that falafel can be found practically everywhere.  A list by British newspaper the Guardian includes Tel Aviv among the ten most vegan-friendly cities in the world.  (Ynet 07.05)

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7.2  Ministry of Tourism Promotes Tel Aviv’s First Bisexuality Themed LGBT Pride Parade

Israel’s Ministry of Tourism is promoting the announcement by Tel Aviv-Yafo that the theme of the 2017 LGBT Pride Parade is “Bisexuality Visibility.”  The parade will be the first large-scale pride parade in the world ever to celebrate the theme of bisexuality.  Starting 3 June, hundreds of thousands of people from Israel and around the world are expected to descend on Tel Aviv for a nonstop week of parties, events, and shows that feature and celebrate the city’s vibrant LGBTQ community, culminating in a massive parade through the city streets on 9 June, expected to draw some 200,000 participants.  Tel Aviv’s pride parade is the largest pride event in Asia and the Middle East, and one of the largest parades in the world.

Every year, members of Tel Aviv’s LGBTQ community choose a theme for the week of events in June. Past themes include last year’s “Women for a Change” and “Transgender Visibility”.  This year, the city’s LGBTQ community has chosen a theme that reaffirms its support for the diverse and inclusive atmosphere that has led to Tel Aviv being dubbed “the world’s gayest city” by The Boston Globe and “the gay capital of the Middle East” by Out Magazine.  The Tel Aviv Pride Parade is the only pride parade in the world that is fully sponsored by the Municipality.  Over the last few years, Tel Aviv has significantly deepened its investments to promote gay tourism to the city, and an estimated 35,000 tourists are expected to arrive this year in Tel Aviv to take part in the pride events.  (MoT 10.05)

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7.3  Ramadan Begins on Eve of 26 May

Ramadan 2017 will begin either on Saturday, 27 May or on Sunday, 28 May, depending on moon sighting on the eve of 27 May, and continue for 30 days.  Ramadan is the ninth month of the lunar Islamic calendar, which lasts 29 or 30 days according to the visual sightings of the crescent moon according to numerous biographical accounts compiled in Hadiths.  Depending on the actual start date of Ramadan and moon sighting on the 29th night of Ramadan, the Eid al-Fitr holiday will this year fall between Sunday, 25 June and Tuesday, 27 June.

Ramadan is the Muslim month of fasting, in which Muslims refrain from dawn until sunset from eating, drinking and sexual relations.  The sawab (rewards) of fasting are many, but in this month, they are believed to be multiplied.  Muslims fast in this month for the sake of demonstrating submission to God and to offer more prayers and Quran recitations.

Ramadan is a time of spiritual reflection and worship.  Muslims are expected to put more effort into following the teachings of Islam and to avoid obscene and irreligious sights and sounds.  Purity of both thoughts and actions is important.  The act of fasting is said to redirect the heart away from worldly activities, its purpose being to cleanse the inner soul and free it from harm.  It also teaches Muslims to practice self-discipline, self-control, sacrifice and empathy for those who are less fortunate; thus encouraging actions of generosity and charity (zakat).

 It becomes compulsory for Muslims to start fasting when they reach puberty, so long as they are healthy, sane and have no disabilities or illnesses.  The elderly, the chronically ill and the mentally ill are exempt from fasting, although the first two groups must endeavor to feed the poor in place of their missed fasting.  Also exempt are pregnant women if they believe it would be harmful to them or the unborn baby, women during the period of their menstruation, and women nursing their newborns.  A difference of opinion exists among Islamic scholars as to whether this last group must make up the days they miss at a later date, or feed poor people as a recompense for days missed.  While fasting is not considered compulsory in childhood, many children endeavor to complete as many fasts as possible as practice for later life.  Lastly, those traveling (musaafir) are exempt, but must make up the days they miss.  Twelver Shi’a believes that those who travel more than 14 miles (23 km) in a day are exempt.

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7.4  Moslem Middle East Users to Spend Extra 57 Million Hours on Facebook During Ramadan

Moslem Facebook users in the Middle East will spend an extra 57 million hours on the social media platform during Ramadan, according to new research.  New data released by Facebook IQ research shows usage during the Holy Month is expected to increase by 5%.  Millions of people in the Middle East will spend more time on Facebook during Ramadan than usual, with research showing the a lot of usage is happening at night, with the largest relative increase in time spent at 3am.  Facebook said that its research also showed that conversations around Ramadan among its users have started earlier this year among the 8.4 million active users in the UAE.

It said that Facebook is playing an increasing role in influencing consumer decisions and advice in the region, whether it’s travel transactions and late night shopping or discussing the challenges of Ramadan fasting and health and fitness.  Facebook’s sister platform Instagram is where a higher concentration of conversations around iftar, desserts and recipe ideas, as well as fashion, cars and home, according to the research.  (AB 14.05)

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7.5  AURAK Signs MoU with University of Illinois

The American University of Ras Al Khaimah (AURAK) has signed a Memorandum of Understanding with the University of Illinois, converting the U.S.-based university into its latest international partner.  The agreement, which was initiated by AURAK’s School of Engineering and the Department of Civil and Environmental Engineering at the University of Illinois’ Urbana-Champaign campus, is centered on the establishment of a ‘3+2’ cooperative academic program in which students can earn a bachelor’s degree at AURAK and a master’s degree in Illinois.

At present, AURAK has a range of international partners across Africa, Asia, Europe and North America, opening a wide spectrum of possibilities to students, including exchange and study abroad programs for up to one year, as well as shorter summer sessions.  While AURAK students have travelled abroad to study at the likes of Appalachian State University in North Carolina, AURAK also receives a number of students from the US and Europe each semester, with international students eager to experience the immersive cultural experience on offer in Ras Al Khaimah.  (AURAK 13.05)

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7.6  New York Cosmos to Play Historic Exhibition Match in Saudi Arabia

The New York Cosmos have accepted an invitation from the General Entertainment Authority of Saudi Arabia to play an international exhibition game against the nation’s most decorated professional club, Al-Hilal FC.  The match will take place in Riyadh, Saudi Arabia at Al-Hilal’s home ground, Prince Faisal bin Fahd Stadium, on Saturday, 20 May 2017.  Saudi Arabia will be the 48th nation visited by the Cosmos, underscoring the club’s long standing reputation as America’s greatest global soccer ambassador.  This friendly exhibition will be the Cosmos’ 128th contest played on foreign soil and the 187th international match, including those played in the United States.

The timing of the Cosmos match with Al-Hilal FC coincides with President Trump’s visit to Saudi Arabia, his first international trip since taking office.  Formed in 1957, Al-Hilal FC is the reigning champion of the Saudi Professional League and the most successful team in league history with a total of 14 titles.

The New York Cosmos are the reigning champions of the NASL and the most recognized American soccer brand in the world.  Since beginning play at Yankee Stadium in 1971, the iconic club has won a record total of 8 professional soccer championships and brought some of the biggest stars in international soccer to the USA.  (NYC 09.05)

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7.7  Morocco to Switch Back to GMT Time for Ramadan

Moroccans will have to switch their watches an hour back on 21 May, as the country will suspend Daylight Saving Time (DST) during the whole month of Ramadan, the ministry of Public Service and Administration Modernization announced on 12 May.  Morocco has been enforcing daylight saving time during summer with an interruption in the fasting month of Ramadan.  (MWN 12.05)

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8.1  UroGen Pharma Announces Pricing of Initial Public Offering

UroGen Pharma announced the pricing of its initial public offering of 4,473,373 ordinary shares at a public offering price of $13.00 per share for aggregate gross proceeds of approximately $58.2 million.  The shares began trading on The NASDAQ Global Market on 4 May 2017 under the ticker symbol “URGN.”  In addition, UroGen Pharma granted the underwriters a 30-day option to purchase up to an additional 671,005 ordinary shares. The offering is expected to close on or about May 9, 2017, subject to customary closing conditions.  Jefferies LLC and Cowen and Company, LLC are acting as joint book-running managers for the offering.  Raymond James & Associates, Inc. and Oppenheimer & Co. Inc. are acting as co-managers for the offering.

Ra’anana’s UroGen Pharma is a clinical stage biopharmaceutical company developing advanced non-surgical treatments to address unmet needs in the field of urology, with a focus on uro-oncology.  The Company has developed RTGel, a proprietary sustained release, hydrogel-based formulation for potentially improving the efficacy and safety profiles of existing drugs.  UroGen Pharma’s sustained release technology is designed to enable longer exposure of the urinary tract tissue to medications, making local therapy a potentially more effective treatment option.  UroGen Pharma’s lead product candidates, MitoGel and VesiGel, are designed to potentially remove tumors by non-surgical means and to treat several forms of non-muscle invasive urothelial cancer, including low-grade UTUC and bladder cancer.  (UroGen Pharma 03.05)

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8.2  Cartiheal Raises $18.3 Million

CartiHeal announced the culmination of an $18.3m financing round.  The funds will finance the company’s recently-approved IDE clinical trial toward a PMA application.  The two-year pivotal study will involve US and OUS centers, with the aim of demonstrating the Agili-C implant’s superiority over the surgical standard of care.  The investment was led by aMoon, together with CartiHeal’s existing investors: Johnson & Johnson Innovation (JJDC), Peregrine Ventures and Elron, who has been consistently supporting and investing in CartiHeal over the years.

CartiHeal’s cell-free, off-the-shelf implant for use in cartilage and osteochondral defects was implanted in a series of clinical trials conducted in leading centers in Europe and Israel, in over 250 patients with cartilage lesions in the knee, ankle and great toe.  In these trials, the implant was used to treat a broad spectrum of cartilage lesions, as per its CE Mark, from single focal lesions to multiple and large defects in patients suffering from osteoarthritis.  Results of these prior investigations demonstrated the potential for cartilage regeneration and the remodeling of underlying subchondral bone, along with pain and symptom relief.

Kfar Saba’s CartiHeal, a privately-held medical device company headquartered in Israel, develops proprietary implants for the treatment of cartilage and osteochondral defects in traumatic and osteoarthritic joints.  The company’s flagship product, Agili-C, is CE marked and has been recently approved by the FDA for an Investigational Device Exemption (IDE) clinical trial toward a PMA application.  (CartiHeal 08.05)

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8.3  INSIGHTEC Receives FDA Approval for Exablate Neuro for the Treatment of Essential Tremor

INSIGHTEC, the leader in MR-guided Focused Ultrasound (MRgFUS), announced that the FDA has approved its Exablate Neuro (Model 4000) system for use with 1.5T MRI in the non-invasive treatment of essential tremor (ET) in patients who have not responded to medication.  Exablate Neuro uses focused ultrasound waves to target and ablate the Vim nucleus of the thalamus with no surgical incisions or implants. The treatment is done under MRI guidance for real-time treatment monitoring.  In July 2016, INSIGHTEC received FDA approval for the Exablate Neuro for use with 3.0T MRI systems.  This approval for a new MR head coil significantly opens new potential markets for INSIGHTEC’S Exablate Neuro as 1.5T systems are the most common MRI systems in use today.

Haifa’s INSIGHTEC is the world leader and innovator of MR-guided Focused Ultrasound (MRgFUS). The company’s non-invasive therapy platforms, Exablate and Exablate Neuro, are proven technology based on sound clinical evidence for treating essential tremor, painful bone metastases and uterine fibroids. The company is dedicated to improving patient lives by collaborating with physicians, medical institutions, academic researchers and regulatory bodies around the world.  (INSIGHTEC 09.05)

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8.4  Check-Cap & GE Healthcare Reach Milestone in High-volume X-Ray Capsule Manufacturing

Check-Cap and GE Healthcare announced the companies have successfully achieved the initial milestone in their ongoing collaboration to develop high-volume, X-ray capsule manufacturing capabilities.  Specifically, X-ray sources produced at GE Healthcare using a customized manufacturing method passed all tests required to ensure compliance with C-Scan system specifications.

Usfiya’s Check-Cap is a clinical-stage medical diagnostics company developing C-Scan, the first capsule-based system for preparation-free colorectal cancer screening.  Utilizing innovative ultra-low dose X-ray and wireless communication technologies, the capsule generates information on the contours of the inside of the colon as it passes naturally.  This information is used to create a 3D map of the colon, which allows physicians to look for polyps and other abnormalities.  Designed to improve the patient experience and increase the willingness of individuals to participate in recommended colorectal cancer screening, C-Scan removes many frequently-cited barriers, such as laxative bowel preparation, invasiveness and sedation.  The C-Scan system is currently not cleared for marketing in any jurisdiction.  (GE Healthcare 09.05)

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8.5  Kaiima & Beck’s Collaborate Using the EP Technology Platform to Improve Corn Hybrid Yield

Kaiima Bio-Agritech and Atlanta, Indiana’s Beck’s, the largest family-owned retail seed company in the United States, announced their agreement to evaluate the integration of Kaiima’s non-GM, EP technology platform, into Beck’s proprietary corn breeding program.  This new collaboration follows a recently completed three-year project that assessed the EP technology’s efficacy in Beck’s elite corn germplasm.  Developed by Kaiima, the EP technology is a breeding tool that enhances plant performance by inducing novel diversity within the genome, using the plant’s own DNA.  Kaiima’s U.S. research team located in St. Louis, Mo., and Beck’s breeding team will begin activities in the spring of 2017.  The project will capitalize on proven EP™ yield performance enhancements to provide Beck’s customers with high yielding corn hybrids.

The EP technology works with all major crops and plant species. Kaiima collaborates with seed companies to apply the EP technology to their elite germplasm.  The technology benefits include increased yield, improved tolerance to biotic and abiotic stresses, as well as reduced product development timelines.

Moshav Sharona’s Kaiima Bio-Agritech is a plant genetics and technology company that has developed a proprietary technology platform called EP.  EP is a new breeding tool that can enhance plant performance by inducing novel diversity within the genome, using the plant’s own DNA.  The technology works with all major crops and plant species.  Kaiima collaborates with leading multinational and regional seed companies to apply its EP technology to their elite germplasm.  (Kaiima 08.04)

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8.6  Therapix & Hannover Medical School Assess Effect of TXH-TS01 on Tourette Syndrome

Therapix Biosciences entered into a trial agreement with the Hannover Medical School to conduct a proof-of-concept Phase II clinical study with its lead compound, THX-TS01, for patients suffering from Tourette Syndrome.  This investigator initiated study, is projected to be initiated during Q3/17, subject to receiving necessary regulatory approvals in Germany.  The study will be conducted at Hannover Medical School in Germany.  The study will be a randomized, double-blind, placebo controlled cross-over proof-of-concept Phase II clinical study to evaluate the safety, tolerability and efficacy of up to twice daily oral THX-TS01 in treating adults with Tourette Syndrome (the “Hannover Study”).  Each subject will be randomized to receive either THX-TS01 or placebo in a 1:1 ratio via oral administration.  A total of 20 patients will be evaluated in a cross-over design.  In the first stage, the patients will be randomized to either treatment or placebo and will be treated for a duration of 13 weeks.  Afterwards, the patients will be crossed-over and will be treated for an additional 13 weeks; patients who initially received placebo will receive treatment and vice versa.  The primary endpoint of the Hannover Study is to evaluate the safety, tolerance and efficacy of THX-TS01.  The primary efficacy endpoint will be measured according to Yale Global Tic Severity Scale Total Tic Score, a widely-accepted index for assessing symptom severity and frequency.  In addition, the effect of THX-TS01 will be evaluated by several secondary endpoints, including additional scales for measuring tics severity as well as other mental disorders that often accompany Tourette Syndrome, including OCD and ADHD.

Tel Aviv’s Therapix Biosciences is a specialty clinical-stage pharmaceutical company led by an experienced team of senior executives and scientists, focused on creating and enhancing a portfolio of technologies and assets based on cannabinoid pharmaceuticals.  With this focus, the company is currently engaged in two internal drug development programs based on repurposing an FDA approved synthetic cannabinoid (dronabinol):  THX-TS01 targets to the treatment of Tourette’s syndrome; and THX-ULD01 targets the high-value and under-served market of mild cognitive impairments.  (Therapix Biosciences 08.05)

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8.7  GeneSort Sold for $23 Million

GeneSort, which specializes in personalized medicine in cancer and hereditary diseases, has been acquired by AID Partners for $23 million. The acquisition will provide the Israeli company with resources and additional support in order to expand into Southeast Asia and other global markets.  The largest investor in the company is Moshe Hogeg’s Singulariteam investment fund, which invested $2.2 million in the company.

GeneSort was founded with the aim of better understanding genetic DNA profiles of various patients and to help doctors select safe and efficient treatments according to the patient’s genetic profile.  Changes in the DNA sequence of certain genes can sometimes lead to changes in the normal functioning of the proteins generated by these sequences, which may eventually lead to cancer.  The company uses sequencing technology that enables parallel sequencing of millions of DNA bases, and uses several tests (panels) that look for genomic changes in the patient’s tumor as well as changes of genetic background.  The same panels contain specific detectors for genes that are clinically significant for treating and preventing the development of the cancer, and each panel tests the gene sequence and recognizes changes.  Diagnosing each patient’s genetic profile, which is done via a biopsy and a saliva sample, allows the doctor to better plan the treatment of his/her patients.

Herzliya Pituah’s GeneSort is a molecular diagnostics company focused on integrating molecular genomics with personalized therapeutic approaches.  GeneSort’s mission is to harness cutting edge technologies in order to elucidate the genetic DNA profile of different patients and assist physicians in selecting safe and effective treatments tailored to each patient’s genetic profile.  GeneSort is focused on providing diagnostic services in cancer and hereditary diseases.  (GeneSort 09.05)

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8.8  CollPlant Establishes a Separate Division to Focus on 3D Bio-Printing of Organs and Tissues

CollPlant announced that, following the expansion of its activities in the field of 3D biologic printing of organs and tissues, the company has created a division that will focus on the further development of a collagen-based biological ink (BioInk).  CollPlant’s BioInk is intended for use in 3D printers that print organs and tissues using various printing technologies.

The collagen protein is a key building block in connective tissues in the human body and therefore is ideal for use as biological ink.  In particular, the rhCollagen is especially suitable for use in humans, due to its superior homogeneity, its high safety profile and the fact that it does not cause an immunological reaction.  CollPlant is currently developing a number of formulations of biological ink for various indications, and are working with several large international companies, with the aim of collaborating in the development of organs and tissues printing.”

Ness Ziona’s CollPlant is a regenerative medicine company leveraging its proprietary, plant-based recombinant human collagen (rhCollagen) technology for the development and commercialization of tissue repair products, initially for the orthobiologics, 3D Bio-printing of tissue and organs, and advanced wound care markets.  The Company’s cutting-edge technology is designed to generate and process proprietary rhCollagen, among other patent-protected recombinant proteins.

The Company’s broad development pipeline includes biomaterials indicated for orthopedics and advanced wound healing.  Lead products include: VergenixSTR (Soft Tissue Repair Matrix), for the treatment of tendinopathy; and VergenixFG (Flowable Gel) wound filler.  (CollPlant 11.05)

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8.9  Otsuka & Teva Licensing Agreement for Japan on Prophylactic Migraine Drug Candidate

Tokyo’s Otsuka Pharmaceutical Co. and Teva Pharmaceutical Industries announced an agreement covering Japan for Otsuka to develop and commercialize Teva’s investigational drug candidate fremanezumab (TEV-48125), an anti-calcitonin gene-related peptide (CGRP) monoclonal antibody for the prevention of migraine.  Fremanezumab is administered monthly as a subcutaneous injection.  Through the agreement, Otsuka secures exclusive rights in Japan to fremanezumab, which Teva is globally developing in other countries.

With the agreement consummated, Otsuka is to pay Teva a lump-sum payment of $50 million.  Milestone payments will be made upon filing and regulatory approval in Japan and then upon achievement of specified revenue targets.  Future clinical trials in Japan will be carried out and funded by Otsuka.  In addition, Otsuka holds exclusive sales rights and will pay royalties on revenues to Teva.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions used by approximately 200 million patients in 100 markets every day.  Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,800 molecules to produce a wide range of generic products in nearly every therapeutic area.  (Teva 15.05)

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9.1  iguazio Selected as a Gartner Cool Vendor in Data Management, 2017

iguazio has been included in the “Cool Vendors in Data Management, 2017” report by Gartner, Inc.  The company’s real-time continuous analytics platform simplifies the data pipeline to accelerate business insights and enhance security.  According to the Gartner Cool Vendors in Data Management, 2017 report, “unified data access, multi-model DBMS approaches, metadata management techniques and real-time data integration top the list of innovations for CIOs and data and analytics leaders.”  The report also finds that “real-time data integration and access to data remain core challenges for data and analytics leaders looking to modernize data management ecosystems.”

Data is at the center of iguazio’s continuous analytics platform: iguazio ingests, enriches, analyzes and serves data – securing data and allowing access to the same records simultaneously through streaming, object, file and database APIs in real-time.  The iguazio solution integrates with the open-source frameworks such as Spark and Kubernetes, allowing transparent integration with leading ecosystem tools.  Early deployment customers benefitting from iguazio’s faster data pipelines and real-time insights include automotive, stock exchanges, global banks, global service providers and large-scale IoT deployments.

Herzliya’s iguazio was founded in 2014 with a fresh approach to the data management challenges faced by today’s enterprises.  The iguazio continuous analytics platform has fundamentally redesigned the entire data stack to bridge the enterprise skill gap and accelerate performance of real-time and analytics processing in big data, the Internet of Things (IoT) and cloud-native applications.  (iguazio 04.05)

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9.2  CyberArk Secures Digital Transformation in the Cloud

CyberArk announced cloud automation capabilities that enable customers to protect against advanced security threats in dynamic cloud environments.  CyberArk’s cloud automation capabilities incorporate the CyberArk AMIs (Amazon Machine Images) and AWS CloudFormation templates that are specifically optimized for AWS environments.  This announcement builds on existing CyberArk cloud security capabilities, including an integration with Amazon Inspector to simplify the discovery and prioritization of privileged account risk, enhanced AWS Access Key protection, as well as support for AWS Security Token Service to allow secure single sign-on to the AWS Management Console.

The CyberArk Privileged Account Security Solution enables protection of cloud assets at each stage of an organization’s cloud journey.  CyberArk delivers a complete solution to help secure privileged user and application credentials used to manage public cloud vendors’ management consoles, configure virtual infrastructure, enable applications to connect with sensitive assets, and dynamically scale elastic production environments – all critical to effective enterprise cloud security strategies.

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.  (CyberArk 04.05)

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9.3  mPrest and Vector to Bring “Internet of Energy” to Over a Million NZ Customers

mPrest announced that its Distributed Energy Resource Management product – mDERMS, will be deployed in Vector’s intelligent grid. Vector is New Zealand’s leading multi-network infrastructure company, which distributes energy and communication services to over 1.2 million homes and businesses.  mDERMS will enable Vector to improve operational efficiencies and in time, offer new services to its customers such as: home energy optimization, choice of clean energy, grid contribution and energy trading.

The mDERMS platform will unify Vector’s varied energy resources including solar photovoltaic systems, next generation storage and demand response onto a single distributed command and control system.  mPrest will also integrate Vector’s internal operations platforms, including GIS, distribution automation and asset health management onto a single information technology (IT) and operational technology (OT) integrated system for control and maximum efficiency, cost and risk reduction for Vector, while increasing choice and reducing energy bills for its customers.  With the evolution of the smart home creating new opportunities for intelligent energy use, customers are expecting more choice from their providers and the capability to have more control over the way they store and use energy.  With the help of the new mDERMS platform, Vector is democratizing the smart grid by making energy generation and even participation in energy markets accessible to all its customers.

Petah Tikva’s mPrest is a global provider of mission-critical monitoring, control and big data analytics software.  Leveraging vast field-proven Industrial IoT experience, mPrest’s integrative system of systems is deployed in diverse sectors including utilities, critical infrastructure protection and defense.  mPrest excels at connecting the dots across multiple disciplines and departments – delivering unified situational awareness, sophisticated analytics, and end to end IT/OT integration and process management.  (mPrest 04.05)

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9.4  Elbit to Provide Advanced C4ISR Modernization Program to the Brazilian Marine Corps

Elbit Systems was awarded a contract from the Brazilian Marine Corps for the supply of advanced C4ISR, Electronic Warfare (EW), radio and communication systems.  The contract, in an amount, of approximately $40 million, will be performed over a two-year period.  The contract calls for the supply of cutting-edge technologies and operational capabilities, including a variety of Battle Management Systems (BMS) applications, C4I systems for artillery, latest generation of Soldier C4I suit as well as advanced EW capabilities.  The systems will be deployed in fixed and deployed command centers and in vehicles/APCs and dismounted configurations, aiming to significantly enhance Marine Forces’ operational effectiveness, and aligning the BMC with the most modern NCW (Network Centric Warfare) concept.

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 Systems 10.05)

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9.5  Elbit Systems to Provide Satellite-On-the-Move Systems to Israel’s MoD

Elbit Systems has won a contract to provide the Israeli Ministry of Defense (IMOD) with dozens of satellite-on-the-move (SOTM) systems.  The contract is in an amount that is not material to Elbit Systems and will be performed over a two-year period.  The ELSAT 2100 SOTM family of systems allows high data rate broadband capabilities to be available to land vehicles on the move.  The systems can be installed on a variety of platforms and are unique in their small footprint and its advanced tracking capabilities, providing seamless communication even in difficult terrain.  This solution allows on-the-move data communication anywhere, anytime, based on utilizing various communication satellites.

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 Systems 08.05)

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9.6  Intezer Code Intelligence – the Future of File Investigations & Malware Analysis

Intezer announced the release of its Code Intelligence solution, a new online cloud service for rapid file investigation and malware analysis.  Code Intelligence provides organizations with an unparalleled understanding of any file by mapping its code at the DNA level, accelerating incident response and SoC operation.  Like no other solution, Intezer’s unique technology takes Malware Detection to a new level. By using an innovative approach, Code Intelligence can detect and attribute attacks still invisible for other security tools.

Tel Aviv’s Intezer provides disruptive cyber security solutions based on its novel technology, Code Intelligence.  The only solution replicating the concepts of the biological immune system into cyber-security. Intezer and its Code Intelligence technology provide enterprises with unparalleled Threat Detection and accelerates Incident Response.  Code Intelligence is like “DNA Mapping” for software, able to identify the nature and origins of any unknown file or binary code.  Intezer Labs was founded in 2015 by a unique team of cyber security professionals, including the founder and former CEO of CyberArk, and the former head of the Israeli Military CERT.  (Intezer 10.05)

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9.7  Stratasys & Desktop Metal Extend Partnership in Adoption of Metal Additive Manufacturing

Stratasys and Burlington, Massachusetts’ Desktop Metal announced an extension of their strategic partnership – designed to accelerate accessibility and adoption of metal additive manufacturing.  Built on a rich history of collaboration, the new agreement includes distribution efforts and explores further go-to-market activities in the future.  The strategic partnership aims to leverage nearly 30 years of Stratasys leadership in polymer 3D printing – alongside Desktop Metal’s pioneering metal 3D printing technologies – to broaden the accessibility and adoption of metal 3D printing to a wide range of engineering teams.  As a result of this partnership, customers will be able to work with leading Stratasys resellers who will begin representing Desktop Metal solutions, including the recently announced Studio System and the Production System, alongside Stratasys’ broad family of advanced FDM and PolyJet solutions.

Expected to ship September 2017, Desktop Metal’s Studio System is the first office-friendly metal 3D printing solution.  At up to ten times less expensive than today’s metal 3D printers, it’s the only metal 3D printing system that is cost-effective for engineering teams.  For the first time, it’s possible to produce highly complex metal parts and assemblies with metal 3D printing without leaving the office.

Following the successful release of the Stratasys FDM-based F123 Series, the companies believe customers will benefit from the complementary nature of both technologies – now with the enhanced ability to expedite product development cycles by producing both plastic and metal prototypes in an office-friendly environment.

For nearly 30 years, Stratasys has been a defining force and dominant player in 3D printing and additive manufacturing – shaping the way things are made.  Headquartered in Minneapolis, Minnesota and Rehovot, Israel, the company empowers customers across a broad range of vertical markets by enabling new paradigms for design and manufacturing.  The company’s solutions provide customers with unmatched design freedom and manufacturing flexibility – reducing time-to-market and lowering development costs, while improving designs and communications.  (Stratasys 09.05)

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9.8  Waterfall Security Delivers its Unidirectional Security Gateway DIN Rail Product to Market

Waterfall Security Solutions announced the launch of its Unidirectional Security Gateway DIN Rail product.  The new DIN Rail version of Waterfall’s market-leading Unidirectional Security Gateway offers the same high throughput, connectivity and functionality as its full-body, rack-mounted version.  The DIN Rail Unidirectional Gateway maintains the highest level of cybersecurity available for protecting industrial control systems and critical infrastructure facilities from remote online attacks.  The availability of a smaller form factor enables electrical, oil and gas, manufacturing and other industries to easily deploy the gold standard of cyber protection for space-constrained sites. In addition, industrial enterprises connecting to cloud platforms or employing many small sites will benefit from using Waterfall’s Unidirectional CloudConnect in this compact form factor.

Waterfall Security’s patented Unidirectional Security Gateway technology and product suite, including the Unidirectional CloudConnect for protection of control networks when connecting to the cloud, represent an evolutionary alternative to firewalls, protecting the safety and reliability of industrial systems in ways that firewalls simply cannot match.  The WaterfallDIN Rail is designed to replace firewalls at network perimeters in electrical generation, transmission and distribution plants, in addition to other utilities, manufacturing, and transportation control systems that require DIN Rail mounting.

Rosh HaAyin’s Waterfall Security Solutions is the global leader in industrial cybersecurity technology. Waterfall products, based on its innovative unidirectional security gateway technology, represent an evolutionary alternative to firewalls.  The company’s growing list of customers includes national infrastructures, power plants, nuclear plants, off and on shore oil and gas facilities, refineries, manufacturing plants, utility companies, and many more.  (Waterfall Security Solutions 10.05)

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9.9 Introduces Real-time Conversation Intelligence for B2B Sales Teams announced the launch of Real-Time Conversation Intelligence[TM] (RTCI) for B2B sales teams, a first in its category.  The company, recently recognized as a pioneer in its field, with Gartner naming a Cool Vendor in CRM Sales, is announcing the launch of real-time conversation intelligence on its popular platform.  This provides sales reps with a competitive edge by alerting them and assisting them in real time with a variety of pain points related to a sales opportunity – customer objections, competitive comparisons, pricing sensitivity, and a host of other potential deal breakers.  Gong uses artificial intelligence and machine learning to analyze unstructured data to help B2B sales teams win more deals by recognizing effective patterns from tens of thousands of hours of spoken sales conversations.

Herzliya’s Gong is the #1 conversation intelligence platform for B2B sales. It helps sales teams improve their calls and demos and gives sales leaders insights into how well calls are being conducted.  Gong records, transcribes, and analyzes sales calls using AI, helping the sales organization understand what works, and what doesn’t.  (Gong 11.05)

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9.10  Deep Instinct Named “Most Disruptive Startup” in NVIDIA’s 2017 Inception Awards

Deep Instinct, the first company to apply deep learning to cybersecurity, announced it has been named the “Most Disruptive Startup” by NVIDIA.  Earlier this year, Deep Instinct was selected out of hundreds of AI and deep learning startups to compete in the NVIDIA’s Inception AI startup competition to find the best AI startups.  The Inception Awards ceremony took place recently in Silicon Valley at the GPU Technology Conference, the premiere AI event with more than 7,000 industry leaders, media, and investors in attendance.

Emerging out of stealth mode in November 2015, Deep Instinct’s patent-pending application of deep learning to cybersecurity results in cutting-edge capabilities of unmatched accurate detection and real-time prevention.  Leveraging the capabilities associated with deep learning, Deep Instinct provides instinctive protection on any device, platform, and operating system.  Zero-day and APT attacks are immediately detected and blocked before any harm can happen to the enterprise’s endpoints, servers, and mobile devices.

Tel Aviv’s Deep Instinct is the first company to apply deep learning to cybersecurity.  Leveraging deep learning’s predictive capabilities, Deep Instinct’s on-device, proactive solution protects against zero-day threats and APT attacks with unmatched accuracy.  Deep Instinct provides comprehensive defense that is designed to protect against the most evasive unknown malware in real-time, across an organization’s endpoints, servers, and mobile devices.  (Deep Instinct 12.05)

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10.1  Israel’s April Inflation Rate Rises by 0.2%

The Central Bureau of Statistics announced that the Consumer Price Index (CPI) rose by 0.2% in April.  The CPI has risen by 0.7% over the past 12 months, below the Bank of Israel’s 1-3% target range for inflation.  Notable price rises during April were: fresh fruit (5.6%), fashion and footwear (1.8%) and entertainment and culture (1.5%).  (CBS 15.04)

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10.2  Israel Tax Revenues Increase 11% in April

Figures for April budget performance and state tax revenues published on 7 May by the Ministry of Finance show that net revenues from real estate taxes totaled NIS 679 million in April, down 20%, compared with April 2016.  Betterment tax revenues totaled NIS 254 million, a real decline of 29%, compared with the corresponding month last year, while purchase tax revenues amounted to NIS 425 million, down 12%, compared with April 2016.

Despite the decline in revenue from land taxes, total revenues from taxes and fees reached NSI 24.1 billion in April, 10.8% more in real terms than in the corresponding month last year.  The figures show that revenues from direct taxes grew 8.8%, while revenues from indirect taxes were up 13.5%.  Tax revenues totaled NIS 100.4 billion in January-April 2017, compared with NIS 93.9 billion in the corresponding period last year.  Excluding legislative changes and postponement of VAT reimbursements, tax revenues grew by 6%.  Revenues from direct taxes were up 11%, among other things due to one-time tax revenues, while indirect tax revenues were 1% higher.

The Ministry of Finance notes that tax revenues in the first quarter exceeded the original budget forecast by NIS 1.6 billion, including NIS 1.2 billion in one-time tax revenues. The 2017 forecast was therefore revised in April from NIS 294.5 billion to NIS 297.0 billion.

The Ministry of Finance budget deficit figures show a government budget deficit of NIS 500 million in April and NIS 2.9 billion in January-April, compared with a NIS 1.1 billion deficit during the corresponding period in 2016. The planned 2017 budget deficit is NIS 37 billion, 2.9% of GDP. The cumulative budget deficit over the past 12 months amounts to 2% of GDP.

Government spending (excluding repayment of the principal on government debt) totaled NIS 28.1 billion in April, including NIS 23.3 billion in spending by government ministries, NIS 1.9 billion in payments for interest on the government debt, and NIS 2.8 billion in repayment of principal and interest to the National Insurance Institute.  (Globes 07.05)

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10.3  Israel’s Foreign Exchange Reserves Increase by $2 Billion

The Bank of Israel announced that Israel’s foreign exchange reserves at the end of April 2017 amounted to a record $105.14 billion, up $1.97 billion from their level at the end of March.  The reserves represent 33% of Israel’s GDP.  The increase was the result of: foreign currency purchases by the Bank of Israel totaling $900 million in April, of which $250 million were purchased as part of the purchase program intended to offset the effects of natural gas production on the exchange rate; revaluation that increased the reserves by about $1.028 billion; and government transfers from abroad totaling about $45 million.  The increase was slightly offset by private sector transfers of about $5 million.

Israel’s foreign currency reserves have risen by about $9.5 billion over the past 12 months from $95.7 billion at the end of April 2016 as the Bank of Israel tries to help exporters and weaken the shekel by purchasing foreign currency.  However, over the same period the shekel has strengthened by 4% against the dollar.  (Globes 07.05)

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10.4  Record Number of Tourists Visited Israel in April

An all-time record for tourism to Israel was reached in April, with 349,000 foreign citizens arriving in the country as tourists — an increase of 38% over April 2016, the Tourism Ministry announced on 9 May.  Revenue from incoming tourism is also breaking records. Since the start of 2017, incoming tourism has poured some NIS 6 billion ($1.67 billion) into the economy.

The incoming tourism numbers for April are 38% higher than April 2016 and a 21% increase over April 2015.  The period from January to April 2017 also marked a record, with a total of 1.09 million tourists arriving in Israel, a 28% jump over the same period in 2016 and higher than the same period in 2014 (prior to Operation Protective Edge), the previous highest record holder for those months.  Some 40,000 of the tourists who arrived in Israel in April did so by land, with 34,000 entering from Jordan and 6,000 from Egypt.  Both these figures are significantly higher than the same numbers from April 2016.  The month of April also saw 24,000 day visitors to Israel, a 27% increase over April 2016 and a 13% increase compared to April 2015.  (IH 11.05)

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10.5  Israeli April Car Deliveries Fall Below 20,000

The downtrend in Israel’s auto market is continuing, as 19,515 vehicles were delivered in April, 15% fewer than in April 2016.  The Passover holiday fell in April this year, meaning that the month featured relatively little business activity, but the figure was still among the lowest for April in recent years.

In deliveries according to brands, Hyundai continued to lead with 17,996 deliveries since the beginning of the year, 10.5% more than in January-April 2016.  Kia Motors was in second place with 14,632 vehicles, up 7.3%.  Toyota took third place with 12,578, a 1% rise, followed by Skoda in fourth with 8,994, up 5.3%.  Nissan climbed to fifth place for the first time with 6,354, a 35% jump, followed by Suzuki in sixth place with 5,841, 50% more than in January-April last year.  Mazda found itself in seventh place for the first time with only 5,583 deliveries.  It is believed that one of the causes for the downturn in the market is the growing difficulty in disposing of used cars, which is weighing the market down and limiting the importers’ ability to offer attractive trade-in terms.  The banks’ policy of cooling down the credit market for cars may also be playing a role.  (Globes 04.05)

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10.6  First Quarter Home Prices in Israel Fall by 2.9%

The Central Bureau of Statistics announced on 15 May that there was a 2.9% fall in the average price of housing in Israel.  Prices dropped for all sizes of housing units, varying from a 1.3% decrease in the average price of 2.5 – 3 room apartments to a 5.8% fall in the average price of 1.5 – 2 room apartments.  The announcement was the first time the Central Bureau of Statistics has reported such a wide fall in housing prices and it was also the first time in three years that the average price of all types of housing units fell.  The last time a similar decrease in prices was reported was in Q4/13, when nationwide prices declined by 0.4%.

Though the nationwide average in home prices fell in Q1/17, an analysis by districts shows a mixed trend, with both rises and falls.  According to the figures, the most significant fall was in the Sharon district (Hod HaSharon, Herzliya, Hadera, Kfar Saba, Netanya, Ramat HaSharon and Ra’anana), where the average home price fell from NIS 1.866 million in Q4/16 to NIS 1.736 million in Q1/17, a 6.9% drop.  Other decreases were in the Jerusalem district (0.6%), the southern district (2.6%) and the Haifa suburbs district (0.9%).  At the same time, while the nationwide average housing price was down, the average price rose in other districts: 2.8% in the central district and 2.3% in both Haifa and the area surrounding Jerusalem. Prices in Tel Aviv were unchanged.  (CBS 15.05)

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11.1  LEBANON:  Lebanon Economic Report – First Quarter

On 10 May, Bank Audi’s Group Research Department released an overview of the Lebanese economy for the first quarter of 2017.

Relative improvement in economic activity this year – The Lebanese economy witnessed a slight improvement in the early months of 2017 from a relatively low base, as confirmed by a faster growth in the average BDL coincident indicator.  The latter has reported an average of 301.3 in the first two months of the year, a year-on-year growth of 4.8%, against an average of 2.6% over the same period of the last three years.  The 11% year-on-year growth in real imports, adjusted for currency fluctuations and oil prices, suggests an improving demand for goods, as imports represent 36% of GDP in Lebanon.  The analysis of most real sector indicators suggests that they were mostly on the upside in the first quarter of 2017.

Significant surge in financial inflows year-on-year – At the level of the country’s external sector, a significant amelioration was observed.  Financial inflows to Lebanon reached $3.3 billion over the first two months of 2017, against $2.1 billion over the same period of last year, an annual growth of 57.2%.  Those inflows were able to more than offset the 13.8% rise in the trade deficit, shifting the deficit in the balance of payments to a net surplus.  The rise in the trade deficit year-on-year is driven by a 13.2% growth in imports, while exports increased by 10.1% year-on-year.

Slight retreat in BDL’s foreign assets amid net conversions in favor of foreign currencies – The first quarter of the year 2017 witnessed a slight retreat in the Central Bank of Lebanon’s foreign assets, along with a contraction in the growth of LP money supply and a healthy expansion in money supply (M3) amid net conversions in favor of foreign currencies, and BDL proved to have somewhat reduced its role as an intermediary between banks and the sovereign.  In details, the Central Bank of Lebanon’s foreign assets reached $40.1 billion at end-March 2017, dropping by $617 million relative to end-2016.  BDL’s foreign assets-to-LP money supply coverage ratio reached 73.2% at end March 2017, down from 74.4% at end-2016, yet still reflecting the Central Bank’s strong ability to defend the currency peg.

Healthy deposit growth coupled with stagnating lending activity amid scarce credit opportunities – The banking sector witnessed a satisfactory activity growth over the first quarter of this year, on the one hand benefiting from the relatively improved political climate and its impact on confidence, yet on the other hand seeing stagnating lending volumes in a sluggish economy amid lingering regional uncertainties.  Measured by total assets of banks operating in the country, the Lebanese domestic banking sector activity grew by $1.444 billion in the first quarter of this year, the equivalent of a 0.7% increase since year-end 2016.  Meanwhile, financial soundness indicators continue to bear witness to a strong financial standing, as reflected by key metrics related to liquidity, capital adequacy, asset quality, and profitability at large.

Net price gains across Lebanese capital markets during the first quarter – Lebanon’s capital markets registered price gains during the first quarter of 2017, mainly supported by improved investor sentiment following the overall domestic political settlement in the last quarter of the previous year.  This was reflected by a slight increase in equity prices along with significant contractions in bond spreads and five-year CDS spreads.  Under these favorable conditions, the Lebanese Republic raised in March 2017 some $3 billion from the sale of a triple-tranche bond in order to finance the public deficit and meet the needs of the State, an issue that was almost six times oversubscribed, which resulted into a final yield tightening relative to initial price thoughts.  (Bank Audi 10.05)

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11.2  ARABIAN GULF:  The Challenge of the Oil Market to the Gulf States

Yoel Guzansky and Shmuel Even published in INSS Insight on 10 May that in recent years, the price of a barrel of OPEC oil has plummeted.  Following the steep decline in their revenues, combined with pressures from various oil producers, the Gulf states – according to the agreement signed in late 2016 – have had to accept cuts in their oil production in the first half of 2017.  The main difficulty in converting the oil-based Gulf economies to economies with diversity is that political stability in these countries is directly related to the high standard of living of their citizens, which is supported by oil money.  The economic situation in the Gulf states is liable to have consequences for the regimes in other Middle East countries that receive direct or indirect economic support from the Gulf states (primarily through employment of workers), including Egypt and Jordan.

The Arabian Gulf states (Saudi Arabia, Kuwait, the United Arab Emirates, Oman, Bahrain and Qatar) continue to face much volatility in the global oil market.  In recent years, the price of a barrel of OPEC oil (the OPEC basket price) has declined from an average of $106 in 2013 to $96 in 2014, $50 in 2015, and $41 in 2016.  The price in 2017 has averaged $51 thus far ($47 in May 8, 2017).  In other words, the Gulf states’ oil revenues are still less than half of what they were several years ago.  In order to deal with the state of the oil market, the Gulf states are adopting economic measures that are posing difficult political challenges to their regimes.

Following the steep decline in their revenues, combined with pressures from various oil producers, the Gulf states, headed by Saudi Arabia, the most important player in OPEC, have had to accept – according to the agreement signed in late 2016 – cuts in their oil production in the first half of 2017.  Out of a 1.2 million barrel cut in the OPEC daily oil production quota, Saudi Arabia, which has a population of 28 million (approximately 30% of whom are foreign nationals), has been assigned a cut of 500,000 barrels a day, and has been forced to accept Iran’s refusal to cut its own production.  The agreement led to a substantial rise in oil prices, compared with the low point reached in 2016, but prices are still relatively low.  At this stage, the Gulf states seek to boost the price of oil to $60 a barrel to help balance their budgets, but there is a great deal of uncertainty about the future price of oil.  The drop in oil prices is likely to resume under circumstances of distrust between the oil producers, increased production by countries not committed to the agreement (headed by the US, whose output is rising), and lower than expected global oil demand.  According to an April 2017 OPEC bulletin, the projected global oil demand for 2017 is a daily average of 96.3 million barrels of oil, compared with 95.1 million barrels in 2016; in other words, only a moderate increase in demand.

The upcoming OPEC meeting in 25 May 2017 is set to decide whether to extend the agreement on production cuts.  On 8 May 2017, the Saudi oil minister said that he is “confident the agreement will be extended into the second half of the year and possibly beyond.”  Other parties to the agreement like Russia have an interest to see the agreement extended – otherwise there’s likely to be a sharp drop in oil prices.

The steep fall in oil revenues in recent years has caused large budget deficits in the Gulf states.  The planned Saudi budget deficit for 2017 is $53 billion (7.7% of GDP).  This is significantly lower than the heavy deficits in the two preceding years, but it still requires continued financing in the form of withdrawals from foreign currency reserves or loans.  Over the past two years, following withdrawals from its reserves, Saudi Arabia’s foreign currency reserves fell from $725 billion in late 2014 to an estimated $550 billion in late 2016, i.e., by $175 billion.  The kingdom is raising money by issuing bonds: $17.5 billion was raised in October 2016 and $9 billion in April 2017.

The depletion of foreign currency reserves and uncertainty about future oil prices have forced the Gulf states to adopt restraint in economic policy, including streamlining and cost-cutting measures.  Cuts in subsidies have already led to higher prices for fuel, electricity, gas, and water.  As part of the economizing measures, various government agencies were instructed to cut their spending on new projects and return unused budget allocations to the Ministry of Finance.

Further plans include introducing a 5% VAT in the GCC bloc starting in 2018.  Drugs and basic food products will be exempt from VAT, but this measure will clearly be interpreted as a change in attitude by the royal houses towards their citizens, who have become accustomed to a tax-free environment.

The economic reforms in the Gulf states also extend to the labor market, which is based primarily on foreign workers.  In recent years, Saudi Arabia has been expelling foreign workers en masse who do not have professional expertise needed for the state’s economic development, and is providing incentives for the employment of local workers.  Many of its young citizens now completing their education, however, lack appropriate qualifications for working in the private sector, and their salary demands are higher than those of foreign workers.  The result is that the public sector employs 90% of Saudi citizens and 90% of the private sector is manned by foreign workers.

The 2017 Saudi budget states that through its fiscal policy and streamlining measures, the kingdom aims at a balanced budget by 2020.  It appears, however, that this target depends mainly on oil prices in the coming years.  Note that despite the budgetary constraints, Saudi Arabia is still not cutting military spending, in view of the military challenges that it faces.  In 2016, military spending amounted to $55 billion (8.6% of GDP), compared with a planned $48 billion.  Approximately $51 billion in military spending is planned for 2017.

In view of the great volatility of oil prices over past decades, the Gulf states seek increasingly to escape their profound dependence on oil revenues – through streamlining, diversification of revenue sources, and adoption of the principles of a modern economy.  This idea underlies the ambitious Vision 2030 multi-year plan announced by Saudi Arabia in 2016.  The first year of this program is 2017.  In order to finance the plan, preparations are already underway to issue 5% of the shares in the Saudi national oil company Aramco.

The main difficulty in converting the oil-based Gulf economies to diversity is that political stability in these countries is directly related to the high standard of living of their citizens, which is supported by oil money.  The question of where to make budget cuts is therefore as much political as it is economic, and is regarded as one of the main challenges facing the Gulf governments.  For example, the increase in gasoline prices in Bahrain and Oman caused by the reduction of the subsidy caused protest demonstrations, albeit on a limited scale, thereby highlighting the risk that will be incurred by a more extensive measure.

Another challenge in carrying out reforms involves adjustment to the rules of a modern economy, in particular the entrepreneurship essential for the development of a private business sector, transparency, inclusion of women in the labor market, and so on.  Entrepreneurial culture, however, is undeveloped in the Gulf states, because their citizens have become used to the state providing their living and almost all of their needs.  They regard free services and regular income from the state as a basic right possessed by virtue of being loyal citizens of the monarchy.  A large scale breach of this right is therefore liable to affect their feeling of loyalty to the monarchy.

The royal houses are aware of these risks, and have behaved cautiously up until now, so that despite the economic pressures, no significant expression of social unrest has surfaced.  At the same time, it is unclear how citizens in the Gulf states will receive the coming measures, such as the introduction of VAT.  Developments in the oil market in various directions are likely to pose a dilemma for the regimes: continuation of the current level of prices, and certainly any decline in them, will make it difficult for the monarchies to pay for the many years of reforms planned.  On the other hand, a sharp increase in oil prices is likely to aggravate public pressure to abandon the reforms, including the processes needed to reduce dependence on the oil market.  It is also likely to encourage a rapid rise in global oil production and accelerate the transition to oil substitutes, a development that will cause further fluctuations in oil prices and revenues.  It is therefore probable that the Gulf states prefer a moderate increase in oil prices.

In conclusion, Gulf rulers assume that the high level of oil prices that prevailed in 2011-2014 will not recur in the coming years, and are preparing for a continuation of the current situation in the oil market.  This preparation focuses on adjustment processes, including spending cuts and VAT for citizens in order to reduce as much as possible the rate of withdrawals from the countries’ foreign currency reserves and accumulation of debt, and to approach a balanced budget.  On the one hand, there is a clear effort to carry out structural changes in the monarchies’ revenue sources in order to reduce future dependence on oil market fluctuations.  On the economic challenge side, the processes of adjustment and reform also pose a difficult political challenge, because their success requires a change in the terms of the “social contract” between the citizens and the monarchies, which has hitherto guaranteed citizens a high level of welfare without effort in exchange for preservation of the existing political order.  As they begin to cut deeper, the economic processes therefore incur risks for internal stability in the Gulf states.  These risks are liable to increase when internal political pressure and external subversion from Iran and its satellites escalate.  Furthermore, the economic situation in the Gulf states is liable to have consequences for the regimes in other Middle East countries that receive direct or indirect economic support from the Gulf states (primarily through employment of workers), including Egypt and Jordan.  (INSS 10.05)

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11.3  UAE:  IMF Staff Completes 2017 Article IV Mission to the United Arab Emirates

An International Monetary Fund (IMF) mission visited the United Arab Emirates (UAE) from 30 April to 14 May 2017 for the annual Article IV discussions.  The findings of the mission, subject to management approval, will be presented to the IMF Executive Board for consideration by end-June 2017.  At the end of the mission, the following statement was issued:

“The UAE is adjusting well to the new oil market realities.  Its large financial buffers, diversified economy and the authorities’ robust policy responses are facilitating the adjustments while safeguarding the economy and the financial system.

“Growth is set to rebound.  Non-oil growth is projected to rise to 3.3% in 2017, reflecting more gradual fiscal consolidation, stronger global trade and higher Expo 2020 investment.  Oil GDP is projected to decline by 2.9% reflecting agreed OPEC cuts in oil production.  As a result, overall growth will ease to about 1.3% in 2017, before recovering to above 3% over the medium term.  Average inflation is projected to rise to 2.2% in 2017.  With the prospects of firmer oil prices, the government’s budget deficit is projected to decline to 4.5% of GDP and the current account surplus to improve to 2.4% of GDP in 2017.

“Existing financial buffers allow fiscal consolidation to proceed gradually.  Reaching the goal of returning gradually to a balanced budget over the medium term would save resources for future generations.  This requires continued efforts to rationalize spending and improve its efficiency, including through careful cost-benefit analysis and continued review of government-related enterprises’ (GREs) infrastructure investments.  A timely introduction of the VAT and excises would diversify government revenues.

“Close coordination of cash flow and liquidity management among the governments, GREs, and sovereign wealth funds would improve predictability in government financing flows and banking system liquidity, fostering continued healthy credit growth in support of private sector activity.  The approval of the debt law would facilitate the development of the domestic debt market, creating an additional instrument for government financing and bank liquidity management over time.

“A stronger fiscal policy framework supported by better fiscal data would facilitate decision-making and help align governments and GRE spending more closely with the National Agenda’s goals of raising productivity and diversifying future sources of growth.  Close monitoring of contingent liabilities would help mitigate an undue buildup of fiscal risks.

“Banks’ liquidity and capital buffers are helping them cope with lower oil prices.  The central bank’s actions to phase in Basel III liquidity and capital requirements should further strengthen the resilience of the banking system.  Swift approval of the draft central bank and banking law would strengthen the prudential policy framework.  Ongoing efforts to further enhance the Anti-Money Laundering/Combating the Financing of Terrorism framework are welcome.

“Continuing policy initiatives to enhance business environment and competition would attract more foreign direct investment and diversify the sources of growth.  Further improving access to finance for small and medium enterprises would foster entrepreneurship and create private sector jobs, including for women.  Multi-pronged efforts to promote innovation and improve the quality education and health care would nurture talent and raise productivity.

“The federal and local authorities have been making progress in strengthening data collection and coordination among statistical agencies.  Enhancing economic statistics to bring them up to par with the UAE’s high level of economic development and sophistication would facilitate policy analysis and decision-making.  (IMF 15.05)

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11.4  UAE:  The UAE’s Defense Horizons

Zoe Stanley-Lockman wrote in Sada on 2 May that the UAE’s focus on its defense industry indicates its aims to become a more credible military actor by enhancing use of equipment and exporting arms globally.

In the past eighteen months, military equipment produced in the United Arab Emirates (UAE) has made its way as far as Russia and as close as Kuwait, with contracts signed at Abu Dhabi’s International Defense Exhibition and Conference in February for future deliveries of Emirati weapons to Egypt and the UAE armed forces.  Motivated by strategic, economic, and symbolic ambitions alike, the UAE’s attempts to bolster its defense industrial base have clearly begun to take shape.  Unlike other Arab states also seeking to develop their defense industries, such as Saudi Arabia, the UAE has also been more explicit about its goals to become a net arms exporter.

Several states pursue defense industrialization because they perceive it as a win-win solution to create high-skilled jobs and simultaneously support the armed forces – all while gaining prestige because of the incredibly difficult nature of building and sustaining a defense industrial base.  Most importantly, arms industries are seen as instruments to become more autarkic in the long term instead of relying on arms exporters such as the United States for military equipment.

Coincident with its bolder military presence and strategic aspirations in the Middle East and North Africa (MENA) region, the UAE has already exhibited preliminary signs of using its defense industry to strategic ends.  Whereas past arms imports trends show the UAE’s tendency to be attracted by the “glitter factor” of expensive weapons, their own arms industry appears to be focusing on developing “good enough” solutions that can be mastered by the UAE armed forces and may have wider appeal in foreign markets.  In December 2014, a major restructuring initiative was announced to create the Emirates Defense Industries Company (EDIC), signaling that, in addition to governance reforms from 2010 onward, the UAE was taking its defense industrial base seriously.  Creating the EDIC helped this industrial base diversify the economy and, more significantly, better align the national defense industry to serve the UAE armed forces and regional clients.

While armaments increasingly carry a “Made in the UAE” brand, this does not mean the UAE is necessarily expanding production.  First, efforts to Emiratize manufacturing face a significant structural roadblock: the native population in the UAE is small.  Given its small educated labor force and low investments in research and development, the Emirati defense industry remains reliant upon foreign engineers for high-skilled workers, meaning sustainable industrial advances are not guaranteed.

Second, rather than designing weapons from scratch or improving existing blueprints, Emirati firms have a tendency to acquire blueprints for weapons or weapons platforms – such as fighter jets, land vehicles, ships and some firearm systems – and rebrand them as “indigenous.”  For example, Tawazun Precision Dynamics derived its Al-Tariq precision-guided munitions (PGMs) from a partnership agreement in 2012 with the South African firm Denel, which makes Umbani PGMs, and the South African RG-31 armored vehicle and RG-35 mine-protected vehicle were rebranded as the Agrab and the N35, respectively.  Furthermore, even if the shell of a platform can be considered local, its parts and components are often clearly imported.

Third, the UAE has been bolstering its defense capabilities by making investments in strategic sectors.  Privinvest, a partial owner of the Emirati shipbuilding group Abu Dhabi MAR, has made investments in various European shipyards, including the French CMN, the designer of the Baynunah-class corvettes used by the Emirati navy.  The UAE has also invested in unmanned systems for air and sea, with stakes in the Italian firm Piaggio Aerospace, due to deliver unmanned aerial vehicles to UAE this year, and the Finnish unmanned surface vessel maker Boomeranger.  Such investments do not necessarily guarantee Emirati industrial skills will develop, but they do bolster marketable Emirati military capabilities.

These three reasons highlight how the UAE leverages its capital resources to further its status as home to a local defense industry.  After all, if the sole objective were to decrease dependence on a traditional arms exporter, it would be cheaper and easier to simply diversify sources of arms.  The exorbitant costs of creating an arms industry are secondary concerns to techno-nationalist and strategic ambitions.  With larger foreign exchange reserves than most European states and the eighth largest oil reserves in the world, the UAE has the capital and political will to fund an arms industry.  Even despite decreasing oil and gas prices, the Emirates maintain substantial state-owned investment groups thirsty for diversified investments.

Regardless of whether the production is truly “indigenous,” the results are already seen in military contexts.  The Saudi-led intervention in Yemen has been a test battleground for Emirati land vehicles, reportedly including the NIMR II Ajban 440A 4×4 chassis, Enigma 8×8 infantry fighting vehicle, and the N35 armored personnel carrier (APC).  The Saudi-led coalition has also approved Baynunah-class corvettes as one of the few naval vessels to enter embargoed ports in Yemen.

The UAE also uses its locally produced armaments to show an interest in conflicts in which it is not directly involved, reportedly including sending an Al-Sabr drone (co-produced with an Austrian firm) to support NATO in Afghanistan and transferring APCs and other land vehicles manufactured in Ras al-Khaimah to Kurdish forces in Iraq.  This allows the defense industry to boast “battle-proven” systems when bidding on contracts, and once again demonstrates how the UAE is using this industrial base to bolster its global image – potentially reaching more international export markets for military equipment, namely in Eastern Europe and Asia, but also other MENA states.  The UAE already uses Algeria as a partner to venture into African markets and Turkey as an industrial partner from which it can glean expertise.

Furthermore, should the Gulf Cooperation Council (GCC) achieve closer defense cooperation, the UAE is attempting to position itself to take leadership on defense services and maritime security.  Regarding services, the creation of EDIC is a strategic move to become the regional hub for maintenance, repair, and overhaul.  As GCC countries become increasingly militarized, the existence of such a service-oriented firm that enjoys well-established relationships with Western arms manufacturers – including for fleets of aircraft, such as F-18 fighters, operated by many Gulf states – is intended to situate the UAE at the forefront of military action.

As part of the UAE’s intention to become an exporter of maritime equipment in particular, the Mubadala subsidiary Abu Dhabi Ship Building (ADSB) is a key provider of local maritime security equipment.  Already Oman and Kuwait operate landing craft produced in the UAE, with Saudi Arabia also rumored to be considering a major purchase of the Baynunah.  The UAE may sell other border patrol and surveillance capabilities, such as its unmanned systems, to fellow GCC members concerned about protection of and freedom of navigation in the Arabian Gulf.

These developments show the UAE is stepping up as a security provider in the region.  Abu Dhabi is far from independent from foreign sources of military equipment, but it is clearly using defense industrialization to increase its profile in a bolder, more militarized approach to conflict.

Zoe Stanley-Lockman is the defense data research assistant at the European Union Institute for Security Studies (EUISS) and coauthor of the March 2017 EUISS Chaillot Paper “Defense Industries in Arab States: Players and Strategies.”  (Sada 02.05)

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11.5  OMAN:  Oman after Qaboos: Challenges Facing the Sultanate

Yoel Guzansky wrote in INSS Insight 4 May 2017 that visitors to Oman cannot help but be awed by the sultanate’s uniqueness, a critical component in the maintenance of its stability.  But the current economic crisis and possible succession crisis are liable to test this stability in the not so distant future.  For nearly half a century, Sultan Qaboos used his ability to mediate and balance hostile neighbors as the key to his foreign policy.  His successor can be expected to maintain this delicate hedging strategy, motivated purely by the will to survive in a hostile neighborhood.  But along with ramifications for the sultanate’s domestic arena, instability in Oman might hurt its ability to continue to play a central role in mediating and reducing regional tensions.

Other than a few localized incidents of violence, Oman navigated the regional upheavals of recent years while maintaining stability.  However, the sultanate is now facing several challenges liable to upset this state of affairs, led by the economic crisis, which has reignited public unrest, as well as a possible crisis of succession that may erupt with the death of Sultan Qaboos bin Said al-Said, who has no officially designated heir.  Similar challenges are shared by several Arab monarchies in the Gulf, but geopolitical conditions and unique characteristics in Oman render these challenges acute.

The Economic Crisis

A major threat to Oman’s stability is the economic crisis caused by the drop in government revenues from the sale of oil.  With 80% of its income coming from oil, the government is now hard pressed to balance the need to pass economic reforms with the need to meet the terms of the unwritten social contract with its populace, which promises welfare in exchange for a preservation of the existing political order.  Indeed, in February 2017, many Omanis took to the street for the first time since February 2011.  This time, the trigger was a sharp increase in fuel costs, since in January 2015 the government started gradually reducing fuel subsidies (while raising the price of electricity and water).  As a result, the cost of gas at Omani pumps rose by 75% to about $0.50 per liter.  A further cut in subsidies is also under consideration, though this is seen as a last resort given the concern about the possible outbreak of large scale social unrest.  While Omani citizens are frustrated with the economic situation and want to play a more active role in the affairs of state, they also want to avoid the bloodshed and chaos that have befallen several Arab states since the spring of 2011.

Oman’s oil and foreign currency reserves are smaller than those of other members of the Gulf Cooperation Council.  For the government to be able to balance its budget, the cost of a barrel of oil must hit $80.  Because of the economic situation, Oman – not an OPEC member – is now asking for advances on the oil it sells. In addition, in January 2018, the sultanate will, like other GCC members, start collecting value added tax from its citizens.  At the current level of oil prices, it is likely that Oman’s modest foreign currency reserves will quickly dwindle if the government does not in tandem privatize assets, borrow money from abroad, and receive additional assistance from its rich neighbors to face the budgetary shortfall.  More Gulf aid is not a given because of the financial pressure experienced by the other GCC members and because of Oman’s ties to Iran.  In fact, Oman can better extricate itself from the current crisis and reduce its dependence on oil by realizing Iranian investments on its soil, first and foremost the laying of a gas pipeline between the two states.  Oman is also hoping that Iran Khodro, the large Iranian car manufacturer, will build a manufacturing plant in the state.

The Question of Succession

The 76-year old Qaboos, the longest ruling Arab leader, seized the throne from his father in July 1970, with help from Great Britain and Jordan.  For many Omani inhabitants, Qaboos is Oman and Oman is Qaboos. His popularity is not accidental: Qaboos ended the backwardness and international isolation that had characterized the sultanate.  But unlike other Gulf monarchs, Qaboos, who was married for only a short period, has neither children nor brothers.  It is widely thought that Qaboos suffers from colon cancer and that his long absences from the country in recent years have been due to medical reasons.  He rarely appears in public, and in recent photographs he looks exceptionally frail.  Hence the concern that it will be difficult to maintain the sultanate’s political stability when his absolute rule – Qaboos holds all the key government portfolios – draws to a close.

In March 2017, Qaboos appointed his 63 year old cousin Assad Ibn Tariq, a former military man who has been the sultan’s proxy since 2002, as a deputy prime minister, in practice positioning him as a potential successor alongside another deputy prime minister, 67 year old Fahd Ibn Mahmud.  The latter’s chances of succeeding Qaboos are slim, given that the mother of his children is not Omani.  Moreover, there is a sense that Oman’s rules of succession were lifted directly from One Thousand and One Nights: Section 6 of the Omani constitution, introduced by Qaboos in 1996, states that within three days of the moment the position of sultan is vacated, “the family council” will determine the successor.  If the council members fail to arrive at a consensus, a letter (in two copies) that the sultan deposited in two different locations in the sultanate must be opened.  The letter will reveal Qaboos’s heir.  Therefore, a crisis of succession is a possibility that must be considered as there may be struggles among different family branches or between the family and the military.  Moreover, it is not inconceivable that different tribes and governorates, including Dhofar, will again opt to rebel.

A Delicate Balancing Act

Qaboos used the sultanate’s revenues, coming from the sale of an average of one million barrels of oil a day, to benefit a development project of tremendous scope.  He also implemented a neutral foreign policy, reflecting the sultanate’s strategic location and relative weakness.  This policy was related to Oman’s unique ethnic composition, especially the moderation attributed to most of its population, who are neither Shiite nor Sunni but belong to the Ibadi strain of Islam.  This may be why Oman is the only Arab state that has no fighters among Islamic State ranks.  As part of its policy of neutrality, and in contrast to its neighbors, Oman has also maintained very close relations with Iran, because Iran helped Qaboos establish his rule and suppress a revolt that broke out in Dhofar.  Therefore, it is not surprising that Oman has not joined the fighting in Yemen alongside the other GCC members, and some even view Oman as an “Iranian proxy.”  This image has been reinforced by reports over the last two years that Oman has allowed Iran to smuggle arms across its territory to the Houthis in Yemen.  Oman only joined the pan-Islamic alliance to fight terrorism, created by Saudi Arabia and in practice aimed against Iran, in December 2016, a year after its inception.  By taking this essentially symbolic step, Oman hopes to reduce criticism and pressure from Riyadh and earn bonus points in negotiations for economic aid from the GCC.

Oman also exploits its relations with Iran as leverage against Saudi Arabia to curb the latter’s political and religious influence.  Oman and Iran, sharing the Straits of Hormuz, the most important naval passage in the world, have strengthened political and economic relations since Hassan Rouhani was elected Iran’s president.  Furthermore, Qaboos’s proximity to Iran helped achieve the nuclear agreement with Iran: already back in 2009, Qaboos, without informing Oman’s GCC partners, offered the United States its good services in negotiating the nuclear issue, which later turned into the secret talks that ended with the JCPOA.  Oman’s attitude to Israel also differs from that of its Gulf neighbors and has, on more than one occasion, been the cause of tensions.  In 1994, the sultanate, which had never fully boycotted Israel, hosted the regional working group on water (a byproduct of the Madrid Conference), and in 1996 agreed to host an Israeli commercial delegation in Oman.  Beyond cooperation in areas such as desalination and irrigation, it has been reported that Oman has received Israeli military aid.  During the second intifada, Oman closed the Israeli mission, but the two states continue to maintain discreet relations.

Visitors to Oman cannot help but be awed by the sultanate’s uniqueness, a critical component in maintaining its stability.  But the economic crisis and possible succession crisis are liable to test this stability in the not so distant future.  For nearly half a century, Sultan Qaboos used his ability to mediate and balance hostile neighbors as the key to his foreign policy.  His successor can be expected to maintain this delicate hedging strategy, motivated purely by the will to survive in a hostile neighborhood.  But along with ramifications for the sultanate’s domestic arena, instability in Oman might hurt its ability to continue to play a central role in mediating and reducing regional tensions.  (INSS 04.05)

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11.6  EGYPT:  IMF Agreement for Completion of the First Review of Egypt’s Extended Fund Facility

An International Monetary Fund (IMF) team visited Cairo from 30 April to 11 May 2017 to discuss policy priorities of the first review for Egypt’s economic reform program supported by a three-year IMF Extended Fund Facility (EFF).  At the conclusion of the mission the following statement was issued:

“The IMF staff team and the Egyptian authorities have reached a staff-level agreement on the first review of Egypt’s economic reform program supported by the IMF’s $12 billion arrangement.  The staff level agreement is subject to approval by the IMF’s Executive Board. Completion of the review would make available SDR 895.48 million (about $1.25 billion), bringing total disbursements under the program to about $4 billion.

“This agreement is a vote of confidence by the IMF staff in the continued implementation of the Egyptian authorities’ program. It is also testimony to the great efforts the Government and the Central Bank of Egypt (CBE) have been making to reform the economy. The authorities’ economic reform process is off to a good start.  The liberalization of the exchange rate, as well as the introduction of a VAT and continuing with energy subsidy reform to strengthen the fiscal position, have all had significant effects. Foreign exchange shortages are resolved and interbank market activity is recovering.  Egypt has regained investors’ confidence, as shown in the great appetite for Egypt’s Eurobond sale in January 2017 and private sector remittances and portfolio investments have increased considerably.  The manufacturing sector-key for job creation–is witnessing a strong rebound and exports have increased significantly.  Meanwhile, Egypt’s GDP growth reached 3.9% in the first quarter of 2017 and primary fiscal deficit has fallen by about 2% of GDP.

“The authorities see reducing inflation as a key priority for safeguarding the welfare of people across Egypt.  We support the CBE’s objective to bring down the rate of inflation to single digits over the medium term consistent with its price stability mandate.  We are confident that the central bank has the tools to achieve this.  We also commend the CBE for maintaining a floating exchange rate regime and sustaining adequate official reserves.

“The Ministry of Finance has drafted a very strong budget.  If enacted by Parliament, it will place public debt on a clearly declining path to sustainable levels.  We welcome in particular the plans to raise the VAT rate, and to continue the process of reforming energy subsidies over the three years of the program.  We also welcome the very good progress made on structural reforms, especially Parliament’s approval of the new industrial licensing and investment laws.  Both acts will help unlock Egypt’s growth potential, attract investors, increase exports and industrial production, as well as create adequate and well-paid jobs to absorb the rapidly growing labor force.

“We are very pleased with the strengthened social protection measures in the program.  We are also very pleased that the government’s program includes steps to make it easier for women to work outside the home.  The Takafol and Karama program has been expanded to include 1.6 million families which is nearly 8 million people; 92% of the program benefits women.  The school meals for children program has been expanded to include all public schools and the government is spending more on a program for nurseries.  In addition, the government is collaborating with the private sector to launch an innovative program to provide safe means of transportation.  These measures are an essential counterpart to the economic reform effort, and they will protect the most vulnerable people in Egypt while the reform effort is underway.

“Egypt’s strong banking system continues to be the anchor for Egypt’s financial stability. It has weathered well the transition to a floating exchange rate regime.  The CBE continues to aim to preserve and further strengthen the resilience of Egypt’s financial sector while complementing the strong framework of banking regulation and supervision with adequate crisis preparedness and management tools.

“Public financial management and fiscal transparency will continue to be strengthened through reinforcing the institutional framework for coordinating among different policy-making bodies and continuing to update the elected parliament of budget updates.

“This is the Government’s program, and the IMF supports it.  The program will lay the foundations for strong and sustainable growth that improves the lives of all Egyptians.”  (IMF 12.05)

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11.7  EGYPT:  Cotton Revival Could Keep Egypt’s Economy Spinning

Menna A. Farouk posted on 2 May in Al-Monitor that the production and export of Egypt’s most famous crop is seeing a revival after quality assurance measures are enacted.

Egypt’s famed cotton industry is starting to revive following a Central Bank decision to float the pound last November and a crackdown on false Egyptian cotton worldwide, the country’s farmers and exporters say.  The production and export of Egypt’s most famous crop have been hit hardest since the January 25 Revolution, which led to a security vacuum and looser regulations degrading the quality of the local cotton.

According to the state-run Central Agency for Public Mobilization and Statistics, Egypt’s cotton exports jumped by 63.9% during the first quarter of the planting season of 2016/17.  In a February statement, the official statistics agency said that Egypt’s cotton exports were 202,500 bales in the period from September to November compared to 123,600 bales in the same period a year earlier.

Experts and farmers attribute the increase in the demand of cotton to record cotton prices in the marketing year 2016/2017 because of a devalued pound, which encouraged farmers to double the area planted with cotton, as well as a worldwide crackdown on fake cotton following a scandal of allegedly fake versions of the crop.

In August 2016, a US retail chain accused India’s textile manufacturer Welspun of using cheaper, non-Egyptian cotton in bed sheets and pillowcases.  The Indian manufacturer acknowledged the accusations, admitting that some of their products were falsely labeled as 100% Egyptian cotton.  Following this announcement, internationally, retailers have begun to more closely monitor their products labeled as 100% Egyptian cotton, many requiring manufacturers to provide attestation for products labeled as such.

In an effort to crack down on these fraudulent practices and ensure quality, in 2016, the Cotton Egypt Association started licensing the use of the Egyptian cotton logo to suppliers and manufacturers all over the world.  Carrying the logo means that the association certifies the authenticity of the Egyptian cotton through DNA analysis.  “The Cotton Egypt Association has been receiving requests from many manufacturers to license their Egyptian cotton logo.  This has increased the demand for Egyptian cotton in the world market and is expected to continue as more companies get licensed,” Wael Alma, the association’s managing director, said.  The Cotton Egypt Association estimates that about 90% of global supplies of Egyptian cotton last year were fake.

In February, the Cotton Egypt Association signed an agreement with India’s Welspun to promote and market Egyptian cotton products worldwide after assessing its supply chains.  Under the agreement, the two organizations agreed to work together to create programs for the promotion of the Egyptian cotton logo in the retail markets across the globe.  “The sheer nature of Egyptian cotton makes it a luxury to be cherished by all. Welspun wants the world to know about Egyptian cotton, and we want to help promote it among the consumers and the makers alike,” said Dipali Goenka, the CEO and joint managing director of Welspun India.

Economist Ahmed el-Shami said that if Egypt’s cotton industry returned to its previous glory, the economy would flourish, the spinning and textile industries would boom, and stalled factories would reopen.  “Egyptian cotton is an abandoned golden egg. If it is well-marketed across the world, it will inject billions of dollars into the state’s coffers and revive an economy in dire need of hard currency,” Shami told Al-Monitor.

In a March report titled “Egypt: Cotton and Products Annual 2017,” the US Department of Agriculture (USDA) forecasted that Egypt’s cotton area would double to 110,000 hectares and production would almost double and reach 340,000 bales in the marketing year (MY) 2017/18.  Imports, the report also indicated, “are forecast to drop by 20% to a record low of 420,000 bales, while exports are forecast to increase by 66% to reach 200,000 bales.”

“Several factors contributed to the rebound in Egypt’s cotton prices in MY 2016/17.  These include a historical drop in cotton area and production, the floating of the Egyptian pound by which it weakened essentially 100% vis-a-vis the US dollar, and an increased demand for Egyptian cotton in international markets,” the report stated.

In MY 2016/17, farmers were able to sell their long staple varieties grown in the Delta between 2,700 Egyptian pounds ($150) and 2,750 Egyptian pounds ($153) per qintar, 116% higher than the indicative prices announced by the government of 1,250 Egyptian pounds ($69) per qintar.

As for short- and medium-staple varieties grown in the Upper Egypt region, farmers sold their crop at 1,900 Egyptian pounds ($105) per qintar, 73% higher than the government’s indicative prices of 1,100 Egyptian pounds ($61) per qintar.

In the past two years, the Egyptian government has taken measures to restore seed purity and cotton quality.  The government’s moves came as Egyptian cotton’s reputation and quality had deteriorated significantly due to the seed companies’ lack of effective quality assurance systems that resulted in inferior, mixed-variety output.  According to an analysis released by the Central Arbitration and Testing General Organization on the physical fiber properties of Egyptian cotton varieties, the length, strength, firmness, color, trash count and maturity have all improved in cotton produced in MY 2016/2017 compared to cotton produced in MY 2015/16.  “This development has increased the demand and the prices for Egyptian cotton in the local and international markets and is expected to continue in MY 2017/18,” the USDA report said.  (Al-Monitor 02.05)

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11.8  MOROCCO:  How Will Morocco’s Economy Fare in 2017?

Morocco has proved to be strong in the face of economic adversity, having nurtured a stable and steadily growing economy throughout the global financial crisis.  This could well attract investments and potentially see Morocco thrive in the coming months and years.  Here is a short look at the current state of the economy.

Growth:  The first quarter of a financial year can be a tentative time for many economies, and a good start to the year can be a major advantage.  Morocco’s economy grew by 4.3% in the first quarter, up from 1.7% the year previous, perhaps showing signs of a strong year to come.

A large portion of the economy is made up of the agriculture sector and this quarter’s growth was largely a result of higher output in this area.  This bodes well for the agricultural industry, which suffered from a debilitating drought in 2015.

World Bank:  The World Bank has also predicted a good run for the economy, provided macroeconomic policies are pursued and improvements to the overall structure of the economy are made.  These suggested improvements include greater access to public transport as well as the modernizing of public administration, which would cultivate a strong economic environment through greater efficiency and empowerment in the system.

Rising world oil prices are unlikely to affect the overall growth of the economy, as Morocco has low levels of external debt.  The biggest risk to the economy as it stands is conflict in the MENA (Middle East and North Africa) region, which has had significant implications on all economies in the area in the past.

Investment:  The current economic climate in Morocco could attract a good level of investment as opportunities to have a share in the growing industries become increasingly lucrative.  Those investors trading on the global markets or involved in their own enterprise have a variety of choice for investment, including tourism and renewable energy.  More investment in these areas should translate to even more growth further down the line, and it is likely that most industries will see decent growth of their own if the right investors are attracted.

Tourism:  As an incredibly popular tourist destination, much of Morocco’s trade benefits from people visiting the country.  Although relatively untouched by the global financial crisis, many of the home countries of tourists are still suffering, impacting on tourism numbers.

Despite this, conflict in neighboring countries has caused an increase in Moroccan tourism, which is now seen as one of the safer options in the MENA region while having a similar climate and culture.  Further investment in this sector, therefore, will bring with it a high chance of prosperity and may encourage further growth.

Morocco looks to be in a very strong position economically, making leaps towards decent economic growth.  After the drought in 2015, the government now has the opportunity to focus on improving the various different sectors of the economy through investment and ensuring that Morocco’s good run continues throughout this year and into the next.  (MWN 06.05)

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11.9  MOROCCO:  IMF Concludes the First Review under Line Arrangement for Morocco

On May 12, 2017, the Executive Board of the International Monetary Fund (IMF) completed the first review under the Precautionary and Liquidity Line (PLL) Arrangement and reaffirmed Morocco’s continued qualification for the PLL.

The two-year PLL arrangement for Morocco in the amount of SDR 2.504 billion (about $3.42 billion) was approved by the IMF’s Executive Board in July 2016.  The Moroccan authorities stated their intention to continue treating this PLL arrangement as precautionary.  It has provided insurance against external risks and supported the authorities’ program to rebuild fiscal and external buffers and promote higher and more inclusive growth.  The arrangement will expire on 21 July 2018.  Following the Executive Board’s discussion, Mr. Furusawa, Deputy Managing Director and Acting Chair, said:

“Morocco’s sound economic fundamentals and overall strong record of policy implementation have contributed to a solid macroeconomic performance in recent years.  The external position remained strong in 2016, as international reserves further increased despite a higher-than-expected current account deficit.  While fiscal developments were less favorable than expected, this was due in part to slower growth and accelerated value-added tax reimbursements.  Growth is expected to rebound in 2017 and accelerate gradually over the medium term, subject to improved external conditions and steadfast reform implementation.

“This outlook remains subject to significant downside risks, including from weak growth in Morocco’s main trading partners, geopolitical risks, and global policy uncertainty.  In this context, Morocco’s PLL Arrangement with the IMF continues to serve as valuable insurance against external risks and supports the authorities’ economic policies.

“The authorities are committed to further reducing fiscal and external vulnerabilities while strengthening the foundations for higher and more inclusive growth.  Building on progress made in recent years, further fiscal consolidation is needed and should be based on continued expenditure control, a comprehensive approach to enhance revenues, civil service reform, careful implementation of fiscal decentralization, and strengthened oversight of state owned enterprises.  Adopting the central bank law and continuing to implement Financial Sector Assessment Program recommendations will help strengthen the financial sector policy framework.  Moving toward a more flexible exchange rate regime will help preserve external competitiveness and enhance the economy’s capacity to absorb shocks.  Finally, improving the business climate and governance, competitiveness, access to finance, and labor market policies is essential to raise potential growth, reduce persistently high unemployment levels, especially among the youth, and increase female labor participation.”  (IMF 15.05)

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11.10  TURKEY:  Turkey Foreign & Local Currency Ratings Affirmed; Outlook Remains Negative

On May 5, 2017, S&P Global Ratings affirmed its unsolicited ‘BB/B’ foreign currency long- and short-term sovereign credit ratings and its unsolicited ‘BB+/B’ local currency long- and short-term sovereign credit ratings on the Republic of Turkey. The outlook remains negative.

At the same time, we affirmed our unsolicited Turkey national scale ‘trAA+/trA-1’ long- and short-term ratings.


Our ratings on Turkey are supported by the government’s low debt burden and our expectation of an only modest accumulation of further liabilities on the government’s balance sheet, relative to GDP.  We expect Turkey’s flexible exchange rate regime will enable the economy to adjust to external shocks, although high dollarization, especially in the corporate sector, limits the benefits of a weaker Turkish lira to the economy as a whole.  Turkey’s persistent current account deficit and its high external financing needs constrain the ratings, because they make economic growth vulnerable to external refinancing risks.  We also consider Turkey’s institutional settings to be weak.  In our view, this is characterized by increasingly centralized decision-making processes with weakening checks and balances and impaired transparency, owing to significant interference by political institutions in the free dissemination of information.

The recent constitutional referendum regarding an executive presidency took place under a state of emergency, which looks set to remain in place until at least mid-July 2017 and was initially declared following the failed military coup attempt in July 2016.  The official results of the referendum will likely be declared in early May 2017.  We do not expect any significant change from the initial count, which indicated that a majority of voters (51.4%, turnout ratio was around 85%) supported the move to an executive presidency.  As a result of the referendum, the office of the prime minister will be abolished and the president will be given significantly enhanced powers to appoint cabinet ministers, issue decrees, choose senior judges and dissolve parliament.  We expect the constitutional reform will limit parliamentary and, potentially also judicial, oversight of government decisions.  We anticipate that presidential and parliamentary elections will take place in November 2019, in line with government statements, at which time the transition to an executive presidency will occur.

In the meantime, legislation supporting the move to an executive presidency is likely to dominate the government’s agenda over the coming months. In our view, this could delay the implementation of further structural reforms – including labor, educational, severance pay and energy reforms – to wean the economy off its dependence on foreign financing.  In our view, the possible postponement of reforms opens Turkey up to risks regarding the reversal of capital inflows.  Rising unemployment and modest economic growth may temper the government’s appetite for structural reforms and could lead to a sharper deterioration of Turkey’s fiscal position than we currently project, as the government shies away from retracting fiscal stimulus and indirect tax receipts under-perform.

The annual change in the general government debt stock accelerated to 3.5% of GDP in 2016, owing to expansionary fiscal policy and the impact of lira depreciation on the government’s foreign currency debt, which stood at just over 40% of the total at end January 2017, compared with 35% in 2015.  This occurred despite substantial revenues from a tax amnesty announced after the July 2016 coup. During the first three months of 2017, value-added tax (VAT) and other tax payments were markedly lower than the expected rate of nominal GDP growth.  However, this may reflect the government’s decision to back-date the timing of large VAT payments, as well as reductions in VAT on white goods and lower value property sales that were introduced in the run-up to the referendum and that now remain in place.  The government is also attempting to stimulate corporate sector loan activity to the tune of Turkish lira (TRY) 250 billion (8.6% of GDP) by extending state guarantees through the public-private KGF credit guarantee fund. It is unclear how strong demand will be for the program. We currently expect the program will generate about 1% of GDP in contingent liabilities for the government.

In our view, fiscal risk remains on the revenue side, if domestic demand–and particularly tax-rich imports–falter.  Turkey’s tax base is skewed toward indirect rather than direct taxes, and the former are highly sensitive to import demand. We foresee the general government’s interest burden at about 6% of revenues and net general government debt at approximately 26% of GDP in 2017-2020.  Nonresidents hold about 17% of government debt. Since 2009, the weighted average maturity of Turkish government domestic borrowing has more than doubled, to about six years.

We expect Turkey’s real GDP growth rate will almost halve, averaging 3% over 2017-2020, compared with about 6% in 2013-2016. We expect consumption will remain the main growth driver, but at a slower pace, partly due to the impact on real wages of the lira’s sharp depreciation against the U.S. dollar (21%, year-end data) and the euro (17%) in 2016. We expect a further 6% slide against the dollar in 2017.  Alongside a weaker contribution to growth from investment, we also expect net exports will remain a marginal drag on economic activity, with the benefits to competitiveness of a weaker lira largely lost because of rising inflation.  We estimate trend growth in real per-capita GDP (which we proxy by using 10-year weighted-average growth) of 2% in 2011-2020, which is in line with peers that have similar wealth levels.

We note that the lira has remained broadly flat since the beginning of 2017, supported by the Central Bank of the Republic of Turkey’s (CBRT’s) monetary policy.  The weighted average cost of CBRT funding to domestic banks increased to 11.8% in early May from 8.3% at beginning of 2017, with the CBRT indirectly tightening policy through increasing the lending rate on its late liquidity window, rather than the more direct method of changing its policy rate.  The reversion to a multi-rate interest-rate framework, in our view, represents a reversal from the previous plan to simplify the monetary arrangement.

We expect inflation will moderate over our forecast horizon through year-end 2020, but given the lira’s volatility, risks remain that the Turkish central bank’s monetary policy response may prove insufficient to anchor its inflation targeting regime, particularly if domestic or geopolitical instability were to flare up in the coming months.  Inflation was 11.9% in April 2017, well above the CBRT’s inflation target of 5%.

Notwithstanding the potential negative repercussions for the sovereign ratings from emerging monetary and fiscal policy weaknesses, Turkey’s external position remains its key structural weakness, owing to the substantial net external liability position and related high external financing needs.  We estimate the country must roll over about 40% of its total external debt in 2017 – amounting to about $165 billion (4x usable reserves; 21% of GDP).  In our view, the risk of a marked deterioration in the availability of external financing for Turkey would result in financial sector stress, increased governmental contingent liabilities, and a sharp economic slowdown.  To the extent that domestic tensions also raise questions about property rights, foreign direct investment’s role in financing Turkey’s large current account deficit is likely to remain well below the highs of the ruling AKP party’s first term in office (3.5% of GDP in 2006).

Turkey’s net foreign exchange reserves, which we estimate at $39 billion in 2017, provide coverage for about two months of current account payments, suggesting relatively limited buffers to offset external pressures.  We estimate Turkey’s gross external financing requirement will average 170% of current account receipts (CARs) plus usable reserves for 2017-2020.  We project the current account deficit will average 4.3% of GDP over 2017-2020.  We anticipate that oil prices will gradually rise to $55 per barrel by 2019.  We expect the country’s external debt will exceed liquid external assets held by the public and banking sectors by about 145% of CARs, on average over 2017-2020.  We note that the latest quarterly gross external debt data shows close to 100% rollover of external debt in the third quarter of 2016, compared with the previous quarter.  The large net open foreign currency position of corporate borrowers (26% of GDP) indirectly exposes banking system asset quality to risks related to a steep depreciation of the lira.  Although the banking sector hedges against foreign currency risk, its foreign currency funding could represent a risk for banks if their hedges do not hold, due to counterparty risk.

We consider that Turkey’s domestic banks (the largest intermediators of the country’s external deficit) will remain well regulated and amply capitalized.  Our Banking Industry Country Risk Assessment for Turkey is ‘6’, with ’10’ being the lowest assessment on our 1-10 scale.  We note the size of state-owned banks is relatively large, representing about one-third of total banking system assets.  Still, we expect banks’ asset quality will gradually deteriorate.  Their stock of outstanding nonperforming loans (NPLs) is at about 3.3%. We expect the sharp decline in tourism receipts in 2016 and the lira’s depreciation will result in higher, but manageable, NPLs for the banks.  We understand that system wide NPLs could be about 2% higher, when including large Turkish banks’ sales of NPLs and large restructurings of closely monitored credits that are not included in NPLs.


The negative outlook on Turkey reflects risks that weak growth and exchange rate volatility could lead to fiscal deterioration or inflationary pressures beyond what we currently project.  In our view, Turkey’s high external financing needs may prove difficult to finance under this alternative scenario.  A sustained annual increase in general government debt by over 3% of GDP or inflation above 10%, could lead to a lower rating.  We expect to assess these risks over the next 12 months.

We could revise the outlook to stable if Turkey’s fiscal position remained in line with a moderating government debt-to-GDP ratio and inflationary pressures abate, likely reflecting a stabilization in the lira exchange rate and a gradually improving external and domestic growth scenario.  (S&P 05.05)

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11.11  TURKEY: Directionless and Friendless

Burak Bekdil posted on 7 May in BESA Center Perspectives that optimists thought Turkish President Erdogan’s inflammatory, anti-Western pre-referendum rhetoric was just election talk that would disappear after the ballots were counted, but that was a vain hope.  The sweeping new powers granted to Erdogan by the constitutional amendments, and the average Turk’s persistent desire for more confrontation with Turkey’s “enemies”, will force Erdogan to keep up the fiery language, especially ahead of crucial presidential elections in 2019.

Populist rhetoric might gain millions of votes and keep a nation proud, but when applied to foreign policy, it can spell trouble.  In the wake of the 16 April referendum that granted President Erdogan sweeping new powers, Turkey’s confrontational foreign policy, which is based on the neo-Ottoman ideal of fighting infidel lands, shows no sign of retreating into any sense of realism.

Until the birth of Erdogan’s Justice and Development Party (AKP), the Turkish foreign minister was a total stranger to the ordinary Turk, whose average schooling is a mere six years.  By the mid-2000s, however, Turkish coffeehouse talk encompassed not only party politics, unemployment, inflation and football, but also the Arab-Israeli dispute, new alliances with the Muslim world, NATO, the EU, China, Russia and Cyprus.  A decade later, “direct democracy” in foreign policy has strengthened Erdogan’s popularity but is also bringing Turkish diplomacy to the brink of collapse.

In 2009, Erdogan’s pick for foreign minister was Prof. Ahmet Davutoglu.  A few years later, Davutoglu’s “zero problems with neighbors” policy had left Turkey with almost no friendly neighbors and a thousand problems.  That was mainly due to Davutoglu’s unrealistic romanticism and political ambitions about reviving the Ottoman Empire to “make Turkey great again.”  In his wording, Turkey in the twenty-first century would “correct the wrong flow of history in the past century.”  Former Ottoman lands would cheer the Turks as their leaders and territory resumed their place at the center of world politics, with the Muslim ummah coming once more under Turkish leadership.  All would be fine, everyone would be happy, and peace would reign.

Turkey the new superpower?  Easy, thought Davutoglu.  Was he being a little self-aggrandizing?  Absolutely not.  His Islamist romanticism fell to pieces, however, after it crashed into a wall of Middle East realism.  During his term as prime minister, a seat he later took up, Turkey was probably the only country in the world to have no full diplomatic relations with Israel, Syria, Egypt, Cyprus and Armenia all at the same time, in addition to very tense relations with Russia, Iraq, Iran, the EU and occasionally, the US.

But the confrontational rhetoric kept bringing in votes for Erdogan, Davutoglu and the AKP.  In August 2014, Erdogan won 51.5% of the nationwide vote to become Turkey’s first directly elected president.  In November 2015, Davutoglu’s AKP won 49.4% of the vote in parliamentary elections [although he was dismissed by Erdogan as party chairman and prime minister in May 2016].

Rallying for a Yes vote before the 16 April referendum on the controversial constitutional amendments, Erdogan appealed to the same nationalist sentiment as he fanned fears of, and enmity towards, real enemies (terrorist organizations) and imaginary ones (the “superior mind” that always conspires against Turkey’s rise).  His conservative/nationalist fans willingly embraced this message, with feel-good psychology dominating election rallies.  Fans waved both Turkish and Ottoman flags, reflecting their support for neo-Ottoman illusions of grandeur.  Turkey was no longer the isolated, powerless, poor, semi-closed country it once was, the punching bag of major western powers.  The Turkish awakening was unstoppable.

In his election campaign, Erdogan often resorted to an “us: good Muslims; them: bad Crusaders” formulation.  Commenting on the serious allegation of election fraud after the referendum, he said: “The Crusader mentality in the West and its servants at home have attacked us.”  He did not explain how a country of nearly 80 million would contain almost 40 million “servants of the Crusader mentality”, as the referendum results gave him a razor-thin victory – 48.6% of Turks voted No to his executive presidential system.

In the same election campaign, Erdogan promised tens of thousands of Turks who “want the death penalty back” that he would reinstate capital punishment, although such a move would kill Turkey’s 54 year-long (theoretical) march towards EU membership.  In his typically populist “You want it, you got it” style, Erdogan once again pleased the average Turk who wants to see Turkey’s enemies hanged.

A few days after the referendum, the Parliamentary Assembly of the Council of Europe, Europe’s top human rights body, voted in favor of reopening monitoring procedures in Turkey, reflecting “strong concern over the functioning of democratic institutions.”  Turkey had been off the embarrassing watch list since 2004 – ironically, during Erdogan’s first term as prime minister.  Instead of admitting fault for gradually easing Turkey into authoritarian, one-man Islamist rule, Erdogan and his men accused Europe of “Islamophobia, racism and anti-Turkish sentiments.”

Optimists thought Erdogan’s inflammatory pre-election rhetoric would dissipate after the referendum and reason would be restored.  That optimism might be well-founded, but only to a limited extent.  It is true that throughout his political career, Erdogan has boldly zigzagged between his Islamist and pragmatic selves.  But he has now been enslaved by a nation that is pressing him for more confrontation with Turkey’s enemies.  They include basically the entire non-Muslim world, plus Iran, Iraq, Syria, Egypt, Muslim Kurds and all the Shia in the Middle East.

Most recently, Erdogan pledged to take Turkey’s EU accession bid to a referendum, hinting that he would campaign for a Trexit.  It is somewhat bizarre that a country would leave the EU without ever having become a member.  But this, too, appeals to the angry Turk who queues in front of EU consular offices to get a travel visa despite the humiliation, who wants to send his children to the West for a better education, but who loves to challenge the “Crusaders”.  Prime Minister Binali Yildirim, a staunch Erdogan confidant who campaigned to dissolve his own office [the constitutional changes abolish the office of prime minister], had to admit that “Turkey’s relations with the EU have reached their lowest point in recent times.”

Meanwhile, Turkey has carried out a series of air strikes against Washington’s Kurdish allies fighting ISIS in Syria and Iraq, angering the US, Russia, Iran, Iraq and Syria all at the same time.  “The collision course is coming. It’s already come in some respects and it’s a question of how badly this deteriorates,” Michael Hanna, a senior fellow at the New York-based Century Foundation, told TIME.  “There are US personnel on the ground. In the worst-case scenario … Turkey, a NATO ally, a close traditional partner of the United States, could kill American personnel on the ground.”

The military campaign in particular showed how baseless western fears of an emerging Turco-Russian alliance could be.  In theory, Turkey seeks to pivot from its conventional western alignment; it appears headed not only towards a break with the EU but also towards a solid pact with Russia.  This theory sounds credible at first glance, especially as Erdogan has fed Turks a steady stream of hatred towards the West.  However, challenging the West will not automatically guarantee a genuine alliance with Russia.

The issue is not only Turkey’s historic rivalry with Russia and the countless wars the two have fought since Ottoman times.  It is not only Turkey’s NATO membership; nor is it solely memories of the Cold War.  It is not just the unpleasant episode of November 2015, which made Turkey the first NATO member state to shoot down a Soviet or Russian warplane since World War II.  Never mind that Erdogan’s countless appeals to Russian President Vladimir Putin for Turkish membership in the Shanghai Cooperation Organization have gone unanswered, to put it mildly.  Forget the unmistakable divergence of Turkish and Russian interests in the Syrian war theater.  There is deep and mutual mistrust on the Ankara-Moscow axis, and it will remain there at least for the next few years.

Erdogan clearly wants to build leverage to force concessions from the US and from what he views as a collapsing and fearful Europe. He wants to fully utilize Turkey’s “nuisance value” – the blackmail dimension in Turkey’s relations with the EU, as clearly seen in the shaky migrant deal of 2016.  He also wants to keep appealing to the average Turk.  After all, in two years he will be rushing once again from one rally to another in a campaign to win another presidential term.

Burak Bekdil is an Ankara-based columnist.  He regularly writes for the Gatestone Institute and Defense News and is a fellow at the Middle East Forum.  (BESA 07.05)

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11.12  GREECE: Greece Agreement a Positive Step Toward Review Completion

The preliminary agreement between Greece and its international creditors is a positive step towards unlocking funds to enable the country to meet its July debt maturities, Fitch Ratings said on 4 May.  It is also a prerequisite for discussions on longer-term debt relief but the eventual timing and outcome of these remains uncertain.

The Greek government and the country’s international creditors said on 2 May that they had reached a preliminary agreement on the second review of Greece’s third bailout program.  Greece has committed to further cut pensions, raise some taxes, and reform labor and energy markets.  If the Greek parliament approves these measures, Eurozone finance ministers could approve the release of around €7 billion of European Stability Mechanism (ESM) funds when they meet on 22 May.  The funds will be partly used for clearance of general government arrears with the private sector as well as for covering €6.3 billion of debt due for repayment in July.

This would be consistent with our baseline assumption when we affirmed Greece’s ‘CCC’ sovereign rating in February.  We took into account Greece’s broad program compliance and the Eurozone authorities’ desire to avoid a fresh Greek crisis.  We also acknowledged that popular and political opposition in Greece to elements of the program remains high, which create substantial implementation risk.  But we think government MPs are more likely to approve the reforms than reject them.

Greece’s European creditors and the IMF said in a joint statement that talks on “a credible strategy for ensuring that Greece’s debt is sustainable” would take place “in the coming weeks”.  It is not clear how close the IMF and some European creditors are to agreeing on the timing and nature of potential debt relief that could enable the IMF to join the third bailout program as a lender.  There is now a very tight timetable for securing such agreement and completing the processes that would underpin IMF participation before July.

As we noted in February, we think Greece’s European creditors would be prepared to disburse funds without IMF involvement, partly because Greece has exceeded program targets (the general government recorded a primary surplus of 3.7% of GDP in 2016, well above the 0.5% target).  Nevertheless, a decision by the IMF not to participate could still complicate the program review and disbursement.

While Greece has exceeded fiscal targets, the macroeconomic picture is more mixed, partly reflecting the impact of program delays on confidence and payments to the private sector.  Some data suggest that the pace of the economic recovery has slowed in 2017.  General government arrears with the private sector rose to €5 billion at end-February, and manufacturing PMIs indicate a contraction in activity in Q1/17, although industrial production has performed well.  (Fitch 04.05)

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