Fortnightly, 19 April 2017

Fortnightly, 19 April 2017

April 19, 2017


19 April 2017
23 Nissan 5777
22 Rajab 1438




1.1  Netanyahu Government Performance Report Shows Revenue Rising & Deficit Falling
1.2  Minister of Finance Unveils Tax Cut Plan
1.3  Historic Plan Unveiled to Link Arab States to Israeli Ports


2.1  Israeli Economy Ranked 3rd Most Stable in the World for 2016
2.2  IAI Signs $2 Billion Indian Missile Deal
2.3  83North Announces New $250 Million Venture Fund
2.4  Valens Raises $60 Million to Boost Growth, Innovation in Automotive Industry
2.5  otonomo Raises $25 Million
2.6  dapulse Raises $25 Million to Continue Rapid Growth of Workplace Management Tool


3.1  Arab Countries Order Husky Mine-Detection Vehicles
3.2  Axalta Coating Systems Opens Regional Auto Refinish Training Centre in Dubai
3.3  REV Group’s Fire Division’s E-ONE Provides Saudi Aramco Two Custom Municipal Pumpers
3.4  Four Seasons Hotels & Mabrouk Group to Open New Luxury Hotel in Tunisia in 2017
3.5  Innovus Pharmaceuticals Receives Patent for Its Sensum+ Product in Morocco


4.1  Some 150 Kilometers of Bike Lanes to Connect Israel’s Central Cities
4.2  Jordan’s Environment Ministry to Install Tracking Devices on Septic Tankers
4.3  Jordan Launches $930 Million Water Strategy for Amman and Zarqa
4.4  Dubai Considers Plan to Turn Organic Waste Into Energy
4.5  Saudi Arabia Seeks 10% Renewable Energy in Six Years


5.1  Lebanon’s Balance of Payments Registered a $508.5 Million Surplus in February 2017
5.2  Lebanon’s Tourism Sector Posted a 12.25% Improvement in February

♦♦Arabian Gulf

5.3  Qatar’s Consumer Price Index for March Increases By 0.2%
5.4  Saudi to Shelve & Restructure Billions of Dollars of Unfinished Projects

♦♦North Africa

5.5  Egypt’s Annual Core Inflation Falls to 32.25% in March
5.6  Egypt’s Trade Deficit Declines by 37% Year-On-Year in January
5.7  Moroccan Rain Saves Economic Growth in the First Quarter of 2017
5.8  Moroccan Automotive Industry Attracting Investors Worldwide


6.1  One in Four Turkish Youth Unemployed As Unemployment Rate Rises to 13%
6.2  Turkey Runs Nearly $4 Billion Budget Deficit Amid Tax Cuts & Economic Measures
6.3  US & Qatar Firms Sign Deal to Explore for Cypriot Oil & Gas
6.4  IMF Says Greek Economy to Grow 2.2% in 2017 and 2.7% in 2018



7.1  Yom HaShoah – Holocaust Martyrs’ & Heroes’ Remembrance Day 2017
7.2  Israel Commemorates Those Who Fell in Service to the Nation
7.3  Israel’s Independence Day – 69 Years After Sovereignty was Regained


7.4  Israel Appoints its First Female Muslim Diplomat
7.5  UAE Public & Private Sector Isra and Mi’raj Holiday Announced
7.6  Egypt’s Parliament Approves Three-Month State of Emergency
7.7  Erdogan Celebrates Referendum Win As Rivals Urge Recount


8.1  Veterans Affairs Purchases 28 Additional ReWalk Exoskeleton Systems
8.2  DarioHealth Corp. Completes $4.5 Million Public Offering of Common Stock
8.3  Mazor Robotics Receives FDA Clearance for Spinal Deformity Correction Planning Software


9.1  Inception Fights “Lagging,” VR’s Worst Enemy – Unveils Interactive Multi-Track Technology
9.2  IRI Forms Strategic Alliance with Freshub
9.3  Chooze Officially Launches IOS App That Uses Psychology to Help With Baby Naming
9.4  Apriva & OTI Announce Semi-Integrated Solution for Unattended Markets
9.5  Safe-T and Check Point Secure the Digital Enterprise
9.6  Mellanox 25Gb/s Ethernet Adapters Chosen By Major ODMs for Next Generation Data Centers
9.7  MySize Engaged by Israeli Postal Service to Provide New Measuring Solutions
9.8  Altair Powers Latest Verizon-Certified Vehicle Telematics Offering from Queclink
9.9  Beamr Announces First of Kind HEVC Content-Adaptive Software Encoder


10.1  Israel’s Inflation Rate in March Increases by 0.3%
10.2  Number of Israeli Jobseekers Falls to a New 10 Year Low
10.3  Israel Welcomes Record Incoming Tourism During First Quarter


11.1  LEBANON: The Economy Has Slowed
11.2  IRAQ: Kurdish Flag Fans Controversy in Iraq’s Kirkuk
11.3  BAHRAIN: IMF Staff Completes 2017 Article IV Mission to Bahrain
11.4  QATAR: IMF Executive Board Concludes 2016 Article IV Consultation with Qatar
11.5  UAE: The UAE’s Evolving National Security Strategy
11.6  SAUDI ARABIA: Fitch Downgrades Saudi Arabia to ‘A+’; Outlook Stable
11.7  MOROCCO: Fitch Affirms Morocco at ‘BBB-‘; Outlook Stable
11.8  MOROCCO: Morocco Finally Gets New Government, But At What Cost?
11.9  TURKEY: Why Turkey’s Growth Data Has Economists Scratching Their Heads
11.10  TURKEY: Where Does Erdogan’s Referendum Win Leave Turkey?


1.1  Netanyahu Government Performance Report Shows Revenue Rising & Deficit Falling

Israel brought in more revenue and built fewer homes than it had planned to in 2016, according to the first figures ever released on how close the Netanyahu government came to meeting its goals on a number of important economic and social issues.  Since 2011, the government has announced its goals for the economy, housing, healthcare, and other key areas, but 6 April marked the first time the public received a report on how the various government ministries were actually measuring up.  The numbers presented refer to 2016.

The Finance Ministry set itself a deficit goal for 2016 of 2.9%, but came in at a deficit of 2.1%.  The state’s revenues for 2016 totaled NIS 321.1 billion ($88.02 billion), higher than the 2016 target revenue of NIS 312.3 billion ($85.61 billion).  In 2015, the state took in revenue in the amount of NIS 297.5 billion ($81.55 billion).

While 60,000 building starts had been planned for 2016, only 54,000 got underway.  But the Israel Land Authority had set a goal of selling land for the construction of 55,000 new housing units and wound up selling enough land to build 71,400.

The Health Ministry published the results of a poll measuring the public’s satisfaction with hospital care.  The general rate of patients’ satisfaction rose in 2016, reaching 78% and meeting the goal the ministry set for itself in this area.  Patient satisfaction with emergency room care was lower, remaining at the same 60% satisfaction rate recorded in 2015 and falling short of the ministry’s goal of 63% patient satisfaction.  The average wait time for an MRI dropped to 20 days in 2016, down from 53 days in 2015, but still longer than the Health Ministry’s target wait time of 14 days.  (IH 06.04)

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1.2  Minister of Finance Unveils Tax Cut Plan

At an 18 April press conference, Israeli Minister of Finance Kahlon unveiled his tax cut plan through which he plans to give back NIS 4 billion in surplus tax collection to taxpayers.  He calls the plan “the family net,” which is aimed at helping “working Israeli families,” and thus cutting the cost of living and reducing gaps between rich and poor.  The main elements of the plan include subsidies for afternoon education programs, more tax points for working parents, incentives and grants for people to go out to work, cancelling excise and purchase taxes on baby clothes, footwear, mobile phones and more.  (Globes 18.04)

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1.3  Historic Plan Unveiled to Link Arab States to Israeli Ports

On 5 April, Israel’s Transportation Minister Katz unveiled an ambitious plan to give Jordan, Saudi Arabia and even Iraq access to the Mediterranean through Israel’s ports in Haifa and Ashdod, in a plan called “Tracks for Peace.”  Under the plan, the Haifa to Beit She’an train link would be extended eastward to the border crossing with Jordan and southward to the Jenin area where the Palestinian Authority could connect to it.  Rail lines would be laid in Jordan to Irbid, and from there it would link with existing and planned lines extending north-south through Jordan, into Saudi Arabia and further east to the Arabian Gulf.  The idea of turning Israel into a land bridge stems, Katz said, from the geographic fact that Israel is located at the meeting of three continents.

Turkey, Katz said, is already using Israel as a land bridge, with 5,000 Turkish trucks landing by ferry at Haifa Port each year, and making their way to Jordan, Saudi Arabia and the Arabian Gulf overland from Haifa to the Jordan River Crossing/ Sheikh Hussein Bridge, and from there further east. (Various 05.04)

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2.1  Israeli Economy Ranked 3rd Most Stable in the World for 2016

Bloomberg financial news agency has ranked Israel as the world’s third most stable and promising economies for 2016.  Near-nonexistent inflation and a low unemployment rate of 4.8% have helped propel Israel to that position.  The Bloomberg list named Hong Kong as the most stable economy in 2016, followed by South Korea.  Denmark, Taiwan, Iceland, Japan, Switzerland, Singapore and Thailand followed Israel to round out the top 10 in the rankings.

Israel’s economy continues to perform well by international parameters.  In January, Israel cracked the top 10 on the 2017 Bloomberg Innovation Index, which rates the level of innovation in a nation’s economy by scoring its spending on research and development and its number of publicly traded high-tech companies.  Earlier this month, a report by Bank of America Merrill Lynch assessed the Israeli economy as “on a robust recovery path with growth rates running at 3 to 4% levels” and noted that the Bank of Israel was “defying gravity” by checking the appreciation of the shekel against the dollar.  (IH  18.04)

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2.2  IAI Signs $2 Billion Indian Missile Deal

On 6 April, Israel Aerospace Industries announced that it been awarded contracts in India totaling almost $2 billion.  The deal includes a huge contract worth over $1.6 billion – the largest defense contract in Israel’s defense industries’ history, to deliver an advanced MRSAM air and missile defense system to the Indian Army.  The company will also supply additional LRSAM air and missile defense systems to be built in India for Indian aircraft carriers.

MRSAM is an advanced ground breaking air and missile defense system that provides the ultimate protection against a variety of aerial threats.  In its current version, MRSAM is operational with the Indian Air Force, Indian Navy and Israel Defense Forces.  The system includes an advanced phased-array radar, command and control, mobile launchers and missiles with advanced RF seekers.  MRSAM was developed jointly for the Indian Army by IAI and India’s Defense Research and Development Organization (DRDO) in collaboration with Rafael Advanced Defense Systems and IAI’s ELTA unit, as well as Indian companies including BEL, L&T, BDL and other private vendors.  (IAI 06.04)

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2.3  83North Announces New $250 Million Venture Fund

83North, the international venture capital firm, announced that it has closed an oversubscribed new fund at $250 million.  The fourth raised in eleven years, 83North IV brings total capital under management to $800 million.  Building upon the successes of its existing funds, the new fund will be deployed in the best and brightest consumer and enterprise technology companies led by aspiring European and Israeli entrepreneurs.  83North now boasts a five-strong team of proven investing partners who have worked with the region’s most ambitious founders to create market-leading technology businesses.  The new fund, 83North’s largest to date, demonstrates the on-going appeal of the firm’s unique model; providing a breadth of expertise and on-the-ground support in three strategic regions – Europe, Israel and the United States.  83North has an unrivalled ability to help founders successfully scale their businesses across the three markets.

Herzliya’s 83North started life as Greylock IL, an affiliate fund of Greylock Partners.  Today, 83North is an independent firm investing in European and Israeli entrepreneurs. 83North is committed to help build global leading companies, with more than half of its portfolio companies having operations in the US.  (83North 05.04)

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2.4  Valens Raises $60 Million to Boost Growth, Innovation in Automotive Industry

Valens has secured an additional $60 million in capital, to fuel the company’s inroads into the automotive industry with its ground-breaking HDBaseT technology.  The round was led by Israel Growth Partners (IGP), and includes Delphi, Samsung Catalyst Fund, Goldman Sachs and MediaTek as new investors, in addition to Valens’ existing investors.  This latest funding round will allow Valens to speed up time to market, develop additional products per market demands and support customers with design and development projects.  Valens introduced its HDBaseT Automotive technology in 2016 to address the challenges of the connected car, including the increasing amount of bandwidth and wiring necessary to cater to infotainment and Advanced Driver Assistance Systems (“ADAS”) needs.

Established in 2006, Hod HaSharon’s Valens provides semiconductor products for the distribution of ultra-high-definition (HD) multimedia content.  The company’s HDBaseT technology enables long-reach connectivity of devices over a single cable and is a global standard for advanced digital media distribution.  (Valens 06.04)

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2.5  otonomo Raises $25 Million

otonomo has closed a $25m series B financing round led by Delphi Automotive with participation from Bessemer Venture Partners, StageOne Ventures and Maniv Mobility.  The company plans using the funds to continue developing its automotive industry data exchange platform, and to expand globally into the US, Asian, and European markets.  otonomo has raised $40 million to date including a $12 million Series A financing round just five months ago in November 2016.  The company has also opened offices in Menlo Park, California.  otonomo’s technology offers a cloud-based solution that seamlessly and reliably connects millions of cars to hundreds of services and applications, enabling a new exchange of car data, as well as new business opportunities.

Founded in 2015, Herzliya’s otonomo is a cloud-based platform enabling car manufacturers, drivers and service providers to be a part of a connected ecosystem.  otonomo aims to give OEM’s and drivers a way of making use of the massive amount of data generated by cars by creating a marketplace that car ecosystem service providers can tap into.  Lead by a founding team of serial entrepreneurs, the company disrupts the connected/autonomous car industry, allowing the integration of new services and a new market and revenues chain around the car ecosystem.  (Globes 07.04)

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2.6  dapulse Raises $25 Million to Continue Rapid Growth of Workplace Management Tool

On 6 April, dapulse, a people-centric SaaS tool that improves team management, communication, and productivity, announced it raised $25 million in its Series B round, bringing its total funding to $34.1 million.  New York-based private equity and venture capital firm Insight Venture Partners led the round with participation from existing Series A investors Genesis and Entree Capital.  The company will use the funding to scale its rapid growth, expand its product offering, and ultimately, impact thousands of new businesses.

Launched in 2014 and headquartered in Israel, dapulse provides a fundamentally different way for teams to work together.  The product structure is simple and flexible enough to meet the needs of just two people working together, as well as vastly complex workplace operations of thousands, spanning different departments and time zones.  The product can be customized to any team’s work process and has widespread appeal across many business verticals. Active customers include Adidas, AT&T, Discovery Channel, Samsung, Uber, WeWork and Wix among over 10,000 others.  The new funding will further dapulse’s ambitious growth strategy, which will scale international operations, develop further product integrations, and continue acceleration of vertical-specific customization.

Tel Aviv’s dapulse is a team management tool designed to improve work processes and create an environment of transparency in business.  As a web-based SaaS company, dapulse facilitates a more efficient and intuitive way to manage teams and entire operations.  The tool is fully customizable to suit any business vertical and currently has over 10,000 paying teams around the world from over 125 countries.  (dapulse 06.04)

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3.1  Arab Countries Order Husky Mine-Detection Vehicles

The US Department of Defense announced on 30 March that it had awarded a $132 million contract to Critical Solutions International (CSI) to deliver Husky second-generation systems with related equipment and services to Egypt, Jordan and Saudi Arabia.  CSI is a US company that has partnered with the South African company DCD Protected Mobility to make its Husky family of mine-detection vehicles a US government program of record.  Designed to keep its operator safe and be easy to repair in the field if it triggers an explosion, the Husky uses ground-penetrating radar and other sensors to detect explosive devices.  The second-generation Husky 2G can accommodate two operators rather than one, making it more appropriate for long-duration route-clearance missions.  (IHS Jane’s Defence Weekly 05.04)

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3.2  Axalta Coating Systems Opens Regional Auto Refinish Training Centre in Dubai

Philadelphia based Axalta Coating Systems, a leading global supplier of liquid and powder coatings, has launched the first of its kind Automotive Refinish Training Centre in Dubai, UAE.  The center will provide expert training in the use of Axalta products that are designed for the repainting of vehicles in body shops.  The opening of the next generation facility follows the October 2016 opening of Axalta’s regional office in Dubai’s Jebel Ali Free Zone Authority (JAFZA).  The Dubai Automotive Refinish Training Centre, Axalta’s 47th such center in the world, will host world class training programs for body shop, repair and refinish technicians to hone their skills and learn to use the latest coating technologies found in Spies Hecker, Standox and Cromax, Axalta’s premium refinish coating brands, and other refinish brands which are available in eighteen countries in the Middle East & North Africa (MENA) region.

During the launch of the Automotive Refinish Training Centre, Axalta agents, customers and regional partners, and members of the media, participated in a series of hand-on activities including spray painting miniature cars, mixing colors and experiencing the differences between waterborne and solvent borne coatings.  (Axalta 17.04)

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3.3  REV Group’s Fire Division’sE-ONE Provides Saudi Aramco Two Custom Municipal Pumpers

Ocala, Florida’s REV Group, a +$2 billion manufacturer of industry-leading motor vehicle brands, announced the delivery of two E-ONE Custom Industrial Pumpers to the Saudi Arabian Oil Company (Saudi Aramco) in Dhahran, Saudi Arabia.  Each pumper is manufactured on an E-ONE custom chassis with the strongest roll cage cab construction in the industry to provide maximum protection and is NFPA 1901 2016 compliant.

Saudi Establishment for Safety Equipment (SESE), an E-ONE distributor since 1989, facilitated the sale and will deliver and service these vehicles.  REV is a leading designer, manufacturer and distributor of specialty vehicles and related aftermarket parts and services.  (REV Group 06.04)

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3.4  Four Seasons Hotels & Mabrouk Group to Open New Luxury Hotel in Tunisia in 2017

Toronto based Four Seasons Hotels and Resorts, the world’s leading luxury hospitality company, and the Mabrouk Group, Tunisia’s preeminent investment group, will be introducing a new luxury experience to Tunisia with the opening of Four Seasons Hotel Tunis in late 2017.  Perched along the hillside of the exclusive Gammarth neighborhood, Four Seasons Hotel Tunis will offer unrivalled views of the coast, combining Arabic-inspired architecture and Mediterranean influences to create a hotel experience unlike anything else in the city.  Set along 500 meters of pristine beachfront, the 200-room Four Seasons Hotel Tunis is conveniently located near Tunis’ central business district and major cultural attractions, including the picturesque town of Sidi Bou Said and the historic ruins of Carthage.

Four Seasons Hotel Tunis will offer the largest accommodations in the city, many with outdoor terraces overlooking the Mediterranean.  The Hotel will also feature an expansive Roman-inspired Spa, as well as a series of pools, gardens, and fountains that echo the design of the historic medina, creating a tranquil oasis within the heart of Gammarth.  Four Seasons Hotel Tunis will be the first Four Seasons in Tunisia and the seventh in North Africa. Four Seasons currently manages two properties in Morocco and four in Egypt.  (Four Seasons Hotels 12.04)

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3.5  Innovus Pharmaceuticals Receives Patent for Its Sensum+ Product in Morocco

San Diego’s Innovus Pharmaceuticals, an emerging over-the-counter (OTC) consumer goods and specialty pharmaceutical company engaged in the commercialization, licensing and development of safe and effective non-prescription medicine and consumer care products to improve men’s and women’s health and vitality and respiratory diseases, has received a patent from the Moroccan Patent Office entitled “Sensitization Composition and Method of Use” for the Company’s Sensum+ product, for reduced penile sensitivity.  The Moroccan patent is scheduled to expire in March 2033.  (Innovus 12.04)

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4.1  Some 150 Kilometers of Bike Lanes to Connect Israel’s Central Cities

Two large scale projects to be undertaken by the government and local authorities are expected to add hundreds of kilometers of bike paths in the bustling metropolis of Tel Aviv and central Israel.  The projects are being largely supported by the Ministry of Transportation and the Ayalon Highway and are due to begin in the coming months.  As part of the project, 150 km of interurban bicycle lanes will be built at an investment of NIS 620 million.  The two-lane, 3.5 meter-wide trails will contain electric charging stations and shaded areas for travelers.  A total of 10 paths will connect the cities of Ra’anana, Herzliya, Ramat HaSharon, Petah Tikva, Bnei Brak, Ramat Gan, Givat Shmuel, Yehud, Or Yehuda, Rishon LeZion, Yehud, Holon and Bat Yam.  The project is expected to be completed by the end of 2019.

There are currently 170 km of urban bike paths in Israel’s central district. Excluding Tel Aviv, where there are 130 km of bike paths, additional paths exist in Bat Yam, Hod HaSharon, Kiryat Ono, Rishon LeZion, Holon, Kfar Saba, Ramat Gan, Ra’anana, Petah Tikva, Herzliya and Ramat HaSharon.  Currently, Tel Aviv has a five-year plan for the construction of bicycle paths that is to double the number of existing trails.  In 2017 alone, the city allocated NIS 32 million for the paving of 25 kilometers of bicycle paths beyond projects led by the Ministry of Transportation.  (Ynet 17.04)

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4.2  Jordan’s Environment Ministry to Install Tracking Devices on Septic Tankers

All of Jordan’s septic tankers will be installed with tracking devices by the start of summer to monitor trucks’ discharge point of sewage.  Under an electronic tracking system, smart devices will be installed on an estimated 700 septic tank trucks to prevent the discharge of municipal wastewater in undesignated locations, according to head of the environment protection at the Ministry of Environment, Hussein Shahin.  An operations center at the Environment Ministry will be set up to accommodate the electronic tracking system, which will feature the authorized locations for the discharge of municipal wastewater and follow the movement of each septic tanker across the country.  The system will send notifications that the septic tanker’s valve has been opened for the disposal of wastewater if it is at an undesignated site.  Authorities are recording a growing number of violations involving random disposal of municipal wastewater in different parts of the country, attributing the rise to the booming population in light of the influx of Syrian refugees.  (JT 18.04)

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4.3  Jordan Launches $930 Million Water Strategy for Amman and Zarqa

On 8 April, Jordanian Prime Minister Mulki launched a $930 million strategy to increase households’ connectivity to the wastewater network in Amman and Zarqa, raising it from the current 80% to 90% by the year 2025.  The strategy entails the implementation of 21 projects including the construction of new wastewater treatment plants, the expansion and refurbishment of existing plants, and the installation of new sewage networks.  The Amman and Zarqa wastewater strategy, set to be fully executed in eight years, seeks to increase linkage to the wastewater network, while utilizing wastewater as one of the Kingdom’s strategic water resources for constrained cultivations and industry.  Mulki stressed Jordan’s long experience and success in managing water resources due to its water scarcity, noting that the Kingdom now ranks among the world’s best countries in the water management sector.

At the launching ceremony, Minister of Water & Irrigation Nasser said that the goal of reaching a 90-per cent household connectivity to wastewater services is a high rate in global terms.  The minister noted that, with the implementation of the projects, the Kingdom will increase the amount of treated wastewater from the current 115 million cubic meters per year to 250 million cubic meters by the year 2025.  The strategy, he said, will also help protect surface and underground water resources from pollution, improving the population‘s health and environmental conditions in the two governorates.

A variety of funding mechanisms will help finance the strategy’s 21 projects, according to the ministry, for which funding will come from the Treasury, as well as easy loans and grants from the US, South Korea, Saudi Arabia, the European Bank for Reconstruction and Development, Germany and Britain.  Nasser noted that some projects were already under way, expressing the government’s appreciation for donor countries’ and agencies’ financial and technical support.  The Jordan Water Company (Miyahuna) provides water services to 150,000 subscribers in Zarqa and 600,000 subscribers in Amman.  (JT 08.04)

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4.4  Dubai Considers Plan to Turn Organic Waste Into Energy

Dubai Municipality is studying offers to generate energy from organic waste, as well as producing compost from the waste. Hussain Nasser Lootah, director-general of the authority, said the plan is part of a strategy to send no more than 2% of waste to landfill.  He said that so far the municipality has been able to reduce the amount of waste from 11,500 tonnes per day four years ago to the current level of 5,532 tonnes per day.  The municipality has also succeeded in reusing around 10% of waste, with plans by 2020 to recycle 75% of waste.  There are 11 landfill sites in Dubai, with hygienic dumping currently being carried out in six landfills, WAM said.  (AB 11.04)

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4.5  Saudi Arabia Seeks 10% Renewable Energy in Six Years

Saudi Arabia wants 10% of its electricity to come from renewable sources within several years as part of a transformation in its power sector, the energy minister Khaled al-Falih.  Saudi Arabia also seeks to sell renewable energy and its technology abroad.  At a forum seeking investment in the sector, he announced “30 projects to be implemented” in order to reach a goal of about 10 gigawatts of renewable energy production early next decade.  Virtually all of the kingdom’s domestic power currently comes from crude, refined oil or natural gas.

However, as part of an economic reform plan to wean the kingdom off oil, the government has embarked on what Falih called an “ambitious” renewables program featuring solar and wind power.  He has said the projects could cost between $30 billion and $50 billion.  Falih said the energy sector is being completely restructured to include an autonomous board of regulators, and with privatized generation capacity.  He formally opened bids on the first 300 MW solar plant under the renewables plan.  The government has shortlisted 51 firms, most of them from abroad, for bidding on that plant and a 400 MW wind farm.  Another wind project will be launched in the fourth quarter of this year, followed by more solar projects, he told hundreds of delegates.  Government estimates say Saudi peak energy demand is expected to exceed 120 gigawatts by 2032.  Falih told the forum that nuclear power will also be part of the kingdom’s energy mix.  (AFP 17.04)

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5.1  Lebanon’s Balance of Payments Registered a $508.5 Million Surplus in February 2017

According to the Central Bank of Lebanon, Lebanon’s Balance of Payments (BoP) witnessed, for the first time in 3 years, a surplus of $508.5M by February 2017 as compared to the $356.3M deficit recorded during the same period in 2016.  In details, the Net Foreign Assets (NFA) of both BDL rose by $605.3M over the period on the back of the Swap operation that took place during the second half of 2016.  As for commercial banks NFAs, they slipped by $96.8M by February 2017 compared to a $562.8M drop a year earlier.  Moreover, the BoP managed to record a growing monthly surplus of $341.8M in February 2017 alone, up from $166.7M in the previous month.  In fact, the NFAs of both BDL and the commercial banks displayed monthly upticks of $306.0M and $35.8M, respectively.  (CBL 04.04)

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5.2  Lebanon’s Tourism Sector Posted a 12.25% Improvement in February

According to the Ministry of Tourism, the number of tourists visiting Lebanon during the first two months of 2017, displayed a 12.25% year-on-year (y-o-y) progress, where the total number of tourists went up from 191,808 to 215,309.  Arabs, representing 40.21% of all tourists, revealed a 26.96% increase to 86,565 by February.  This increase is heavily influenced by the number of Iraqi incomers, which surged 36.49%, to 37,237.  Moreover, the number of tourists from Jordan and Egypt increased 20.11% and 5.33%, respectively. In contrast, the number of incomers from the United Arab Emirates dropped from 948 to 329.  As for the number of European tourists that constituted 37.59% of the total, it rose 33.91% y-o-y to 80,930 by February 2017.  This can be attributed mainly to the numbers of French, British and German tourists which respectively grew by 40%, 33% and 39% to reach 22,307, 9,464 and 9,627.  As for the numbers of American and Asian travelers, they respectively rose by 5.3% and 7.5% y-o-y to 28,710 and 14,013 tourists.  In February alone, tourist numbers reflected a healthy 13.1% progress compared to the same period in 2016.  (MoT 03.04)

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►►Arabian Gulf

5.3  Qatar’s Consumer Price Index for March Increases By 0.2%

Qatar’s consumer price index (CPI) for March reached 108.6, showing an increase of 0.2%, compared to the CPI of February.  Compared to the CPI of March, 2016, (y-o-y basis) a 0.9% rise has been recorded, according to the Ministry of Development and Statistics.  An analysis of m-o-m basis for March compared with February showed there are four main groups where respective indices in the month increased, namely transport by 1.5%, recreation and culture by 0.7%, clothing and footwear by 0.4% and restaurants and hotels by 0.1%.  There was a decrease in prices in food and beverages by 0.6% and housing, water, electricity and other fuel by 0.4%.  The other groups: tobacco, furniture and household equipment, health, communication, education and miscellaneous goods and services remained flat.

A comparison of the March CPI with that of March 2016 pointed to a rise in the general index by 0.9%. This y-o-y price surge was primarily due to the increasing prices seen in transport by 8%, education by 3%, furniture and household equipment and miscellaneous goods and services by 1.4% each and clothing and footwear by 0.2 %.

There was a decrease in price levels in restaurants and hotels by 2.8%, recreation and culture by 1.6%, housing, water, electricity and other fuel by 1%, food and beverages by 0.4%, health by 0.2% and communication by 0.1%.  The CPI for March, excluding housing, water, electricity and other fuels group stood at 107, an increase of 0.4 %compared to February and 1.5% compared to March 2016.  (bq 10.04)

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5.4  Saudi to Shelve & Restructure Billions of Dollars of Unfinished Projects

Saudi Arabia’s government is ordering its ministries and agencies to review billions of dollars’ worth of unfinished infrastructure and economic development projects with a view to shelving or restructuring them, government sources said.  Riyadh’s Bureau of Capital and Operational Spending Rationalization, set up last year to make the government more efficient, is compiling a list of projects that are under 25% complete.  Many of these projects are relics of a decade-long boom of high oil prices and lavish state spending, which ended when oil began sliding in mid-2014, making it increasingly difficult for Riyadh to find the money needed to complete their construction.  Officials will study the feasibility of the projects in light of the government’s reform drive, which aims to diversify the economy beyond oil exports, and decide whether to suspend them indefinitely or try to improve how they are conducted.

Under BOT contracts, private investors finance and build projects and operate them for a period of time to earn a profit before eventually transferring ownership to the government. Riyadh has said it is keen to begin bringing the private sector into projects to ease pressure on state finances.  Seeking to close a huge budget deficit caused by low oil prices, the government clamped down on infrastructure spending last year.  Finance Minister al-Jadaan said in February this year that the efficiency bureau had so far saved the kingdom $21.33 billion.  The plan to review unfinished projects suggests the government is looking for large additional savings this year. In a report at the end of last year, it estimated the cost of completing all capital spending projects currently underway at about 1.4 trillion riyals.  (Reuters 17.04)

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►►North Africa

5.5  Egypt’s Annual Core Inflation Falls to 32.25% in March

Egypt’s annual core inflation eased to 32.25% in March down from 33.10% in February, the central bank (CBE) said on 10 April.  On a monthly basis, core inflation dropped to 0.97%, down from 2.61% in February.  The core consumer price index that the CBE uses to measure the level of prices — which excludes essential commodities such as fruits and vegetables — started to hit double digits in May 2016, when it reached a seven-year-high of 12.2%.  Egypt’s annual headline inflation hit 32.5% in March, up from 31.7% the month before, state statistics body CAPMAS also announced on Monday.  (Ahram Online 10.04)

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5.6  Egypt’s Trade Deficit Declines by 37% Year-On-Year in January

Egypt’s trade deficit dropped 37.1% in January compared to the same month in 2016, reaching $2.34 billion, the state statistics body CAPMAS announced on 11 April.  CAPMAS showed that exports increased by 27.1% year-on-year in January, to reach $1.82 billion, led by crude oil, fertilizers and orange exports.  Imports for the same month slowed by 19.3% compared to January 2016, to reach $4.16 billion due to the drop in the imports of wheat, passenger cars, and steel and iron raw materials.  However, imports of crude oil, petroleum products and corn rose in January 2017, compared to the same month a year before.  (CAPMAS 11.04)

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5.7  Moroccan Rain Saves Economic Growth in the First Quarter of 2017

Despite governmental complications, the Moroccan economy did well in the first quarter of 2017, with a growth rate of 4.3%, according to the High Commission for Planning.  This performance is due mainly to the impact of substantial rainfall during the first quarter of 2017.  The value added in the agriculture sector, which had declined by 9% in the first quarter of 2016, achieved a growth of 12.9% at the end of March, pulling up the overall growth rate of the national economy.  If it weren’t for the remarkable growth in the agricultural economy, the national economy would have increased by only 3%, driven by the activities of the tertiary sectors.

Household consumption has also attracted growth over this period, due to moderate increases in consumer prices and improved incomes in rural areas.  The growth of household consumption increased by 4% in the first quarter of 2017, instead of 3.1% in the fourth quarter of 2016.  It contributed approximately 2.4% to overall GDP growth, instead of 1.8% in the third quarter of 2016.  The second quarter of 2017 is expected to record an increase of 14.8% in agricultural added value and a 3.2% improvement in non-agricultural activities, leading to a growth of 4.6% in the national economy, according to the same source.  (HCP 06.04)

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5.8  Moroccan Automotive Industry Attracting Investors Worldwide

Boosted by the Industrial Acceleration Plan (PAI), the automotive industry dynamics continue to attract the highest sector’s investors worldwide.  As a result, several renowned OEMs have established themselves in Morocco.  Due to the good health of the sector, clearly boosted by the Industrial Acceleration Plan (PAI), Morocco continues to attract the biggest caliber of the automotive industry worldwide, reaping the rewards of a well-managed strategy carefully crafted over several years.  The sector is now well-positioned in the world of equipment manufacturers and renowned multinationals.  Around 60 factories and projects were initiated in 2016, with some are already operational and others still under construction.  Added to this are the capacity expansion projects and other greenfields, which will soon be joined by the two French manufacturers Renault and PSA.

The automotive sector is also experiencing a gradual rise in the range of local companies, attracting Moroccan investors, with local manufacturers, especially in the textile sector, launching themselves into the production of seat caps and other small parts automotive products.  For them, the challenge now is to consolidate what has been achieved and capture new investments, and Morocco must not only to provide the builders installed in the kingdom, but above all to develop local integration.  Further, it must capitalize on the sector’s achievements in its strategy puts to create a favorable environment for major industrialists, around which is grafted a dense fabric of subcontractors to foster mutual growth and technological collaboration.  (MWN 17.04)

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6.1  One in Four Turkish Youth Unemployed As Unemployment Rate Rises to 13%

Close to a quarter of Turkey’s youth did not have a job in January, according to data from the Turkish Statistics Institute (TUIK) that was released on 17 April.  Youth unemployment jumped 5.3% year on year in January to 24.5% overall.

Overall, Turkey’s unemployment rate jumped to 13% in the month, registering a 1.9 year-on-year increase, the highest since February 2010.  The country’s non-agricultural unemployment was also announced at 15.2%, representing a 2.2%age point increase.  Turkey’s seasonally adjusted unemployment rate was 11.8% in the January 2017 period – a 0.2%age point decrease.  The employment rate came in at 44.8% with a 0.2% decrease.  The number of employed persons amounted to 26.7 million following a 397,000-person increase in January 2017 compared with the same period of the previous year.

The number of persons in the labor force was announced as 30.7 million after an increase of more than 1 million people in January 2017 compared to the same period of the previous year.  The labor force participation rate (LFPR) was 51.5%, good for a 0.8% increase.  The LFPR for men was 71.5% – a 0.7% increase – while the rate for women was 32% – a 1% increase compared to the same period of the previous year.  (TUIK 17.04)

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6.2  Turkey Runs Nearly $4 Billion Budget Deficit Amid Tax Cuts & Economic Measures

The Turkish government ran a budget deficit of TL 19.5 billion ($5.32 billion) in March and TL 14.9 billion ($3.7 billion) in the first quarter, mainly due to temporary measures and tax cuts to boost the economy.  Turkish government revenues in the first three months stood at TL 144.7 billion ($39.5 billion), marking a 9.9% rise year-on-year, while budget expenditures were TL 159.7 billion ($43.6 billion), with an increase of 21.3% compared with the same period last year.  In March, budget revenues reached TL 39.1 billion ($10.7 billion), a 3% fall over the same period last year, while budget expenditures increased by 25%, reaching TL 58.6 billion ($16.01 billion).

According to data from the ministry’s budget directorate general, the budget posted a TL 12.4 billion ($3.4 billion) non-interest rate deficit.  In the first three months of the year, the budget gave a TL 3.9 billion ($1.09 billion) surplus when interest rate payments were excluded.

According to the ministry, tax revenues rose by 12% during the first three months to TL 121.6 billion ($33.2 billion).  The government’s expenditures for health, pensions, and welfare were up by almost 43% between January and March to TL 38.2 billion ($10.4 billion) over the same period last year, while personnel expenditures increased by 8.4%, reaching almost TL 42 billion ($11.5 billion).  The government is aiming for a budget deficit of TL 46.8 billion (nearly $12.8 billion) at the end of the year, according to the Finance Ministry.  (HDN 17.04)

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6.3  US & Qatar Firms Sign Deal to Explore for Cypriot Oil & Gas

On 5 April, ExxonMobil and Qatar Petroleum signed a license to explore for oil and gas off the coast of Cyprus, and they expect to start drilling next year.  The venture was selected as part of the island’s third licensing round to explore block 10.  Cyprus Energy Minister Lakkotrypis described as “immense” the firms’ presence in his country’s exclusive economic zone (EEZ) and, for the first time, in the eastern Mediterranean.  The minister said a total of 12 exploration wells would be drilled in the newly licensed blocks: 6, 8 and 10.  Exploration and production sharing contracts were signed on 6 April by Italy’s ENI and France’s Total for block 6, and by ENI for block 8.  Cyprus would receive a total of €103.5 million ($110.5 million) in signature bonuses from the contracts.

ExxonMobil and Qatar Petroleum said they had begun planning for drilling operations and intend to drill a first exploration well in 2018.  The blocks on offer are close to where ENI made a huge find in Egypt’s offshore “Zohr” field that could hold 30 trillion cubic feet of gas.  The field sits adjacent to a Cyprus block licensed to Total.

US firm Noble Energy made the first find off the island’s southeast coast in 2011 in the Aphrodite field (block 12), which is estimated to contain around 127.4 billion cubic meters of gas.  Israeli firms Delek and Avner have a 30% stake in the venture.  Noble has handed over a 35% share to the Britain’s BG International.  Block 12 has been declared commercially viable but an action plan on the next steps has yet to be finalized.

Cyprus needs to find more gas reserves to make a planned onshore terminal financially viable as it seeks to become a regional energy player.  It had planned to build a liquefied natural gas plant that would allow exports by ship to Asia and Europe, but the reserves confirmed so far are insufficient to make that feasible.  Cyprus and energy-starved Egypt are looking into the possibility of transferring gas from the Aphrodite field to Egypt via an undersea pipeline. Cyprus hopes to begin exporting gas, and maybe oil, by 2022.  (AFP 05.04)

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6.4  IMF Says Greek Economy to Grow 2.2% in 2017 and 2.7% in 2018

Economic growth in Greece will reach 2.2% in 2017 and increase to 2.7% in 2018, the International Monetary Fund said in its World Economic Outlook report.  However, the economy will cool down by 2022 and growth will stumble, achieving an increase of just 1% on the year [2022], the report said.  In 2016, the Greek economy will remain unchanged.  The Fund said the Greek economy’s capacity to maintain satisfactory economic growth rates in the long-term without high inflation (the so-called potential output) remains very low.

On unemployment, the report forecasts it will fall from 23.8% in 2016 to 21.9% in 2017 and 21% in 2018.  The last time unemployment in Greece stood at an average of 21% was in 2011.

Concerning Greece’s external deficit, the IMF says the current account in 2016 showed a deficit of 0.6% of GDP, which will be limited to 0.3% of GDP this year and will achieve a balance in 2018, so that in 2022 it will turn into a surplus of 0.1% of GDP.  This performance reflects the Fund’s estimates for an improved competitiveness of the Greek economy, primarily as a result of the ongoing internal devaluation.

On inflation, the report estimates that a 1.1% deflation in 2015 turned to a zero rate in 2016, while in 2017 the country will return to a 1.3% inflation rate for the first time after 2012.  For 2018, the report foresees an increase of inflation to 1.4% of GDP which will increase further to 1.7% of GDP in 2022.  (ANA 18.04)

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7.1  Yom HaShoah – Holocaust Martyrs’ & Heroes’ Remembrance Day 2017

Israel will mark Holocaust Martyrs’ & Heroes’ Remembrance Day (Yom HaZikaron HaShoah ve-laGvura in Hebrew) beginning on Sunday evening, 23 April and Monday, 24 April.  Holocaust Remembrance Day (Yom HaShoah) is a national day of commemorating the six million Jews murdered in the Holocaust.  It is a solemn day, usually beginning at sunset on Hebrew date of 26 Nisan and ending the following evening.  The internationally recognized date comes from the Hebrew calendar and corresponds to the 27th day of Nisan on that calendar.  It marks the anniversary of the 1943 Warsaw ghetto uprising.  This year, the observance begins one day later to prevent the desecration of the Sabbath in preparation for the memorial services.

Places of entertainment are closed and memorial ceremonies are held throughout the country.  The central ceremonies, in the evening and the following morning, are held at Yad Vashem and are broadcast nationally on television.  Marking the start of the day, in the presence of the President and the Prime Minister, dignitaries, survivors, children of survivors and their families, gather together with the general public to take part in the memorial ceremony at Yad Vashem in which six torches, representing the six million murdered Jews, are lit.  The following morning at 10:00, the ceremony at Yad Vashem begins with the sounding of a siren for two minutes throughout the entire country.  For the duration of the sounding, work is halted, people walking in the streets stop, cars pull off to the side of the road and everybody stands at silent attention in reverence to the victims of the Holocaust.  Afterward, there is a central ceremony at Yad Vashem, while other sites of remembrance in Israel, such as the Ghetto Fighters’ Kibbutz and Kibbutz Yad Mordechai, also host memorial ceremonies, as do schools, military bases, municipalities and places of work.  Throughout the day, both the television and radio broadcast programs about the Holocaust.

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7.2  Israel Commemorates Those Who Fell in Service to the Nation

Israel’s Memorial Day for Fallen Soldiers and Victims of Terrorism which will begin at sundown on 30 April, honors the soldiers who have fallen in the line of duty since 1860 (when modern-day Jews first lived outside of Jerusalem’s Old City walls).  The Memorial Day begins with a minute-long siren sounded at 20:00h, followed immediately by official events.  On the following day, a two-minute siren will be sounded at 11:00 as part of Memorial Day ceremonies across the country.  For the duration of the sounding of both sirens, work is halted, people walking in the streets stop, cars pull off to the side of the road and everybody stands at silent attention in reverence to the fallen soldiers and victims of terrorism.

A small flag a black ribbon will be laid on the grave of every soldier who died in the line of duty as an expression of respect and sympathy.  More than a million people are expected to visit military cemeteries across the country.  Though a regular work day, activity is usually curtailed and many leave their offices early pending the Independence Day celebrations that follow.

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7.3  Israel’s Independence Day – 69 Years After Sovereignty was Regained

Celebrations for the 69th anniversary of Israel’s regaining its independence will begin on Monday evening, 1 May throughout the country, continuing throughout Tuesday, 2 May.  The official observance starts when the state flag is raised to full mast at a national ceremony on Mount Herzl in Jerusalem.  Israel Independence Day is celebrated annually on 5 Iyar, which corresponded to 14 May 1948, the date the British mandate ended over the Land of Israel.  A religious and national holiday, Yom HaAtzmaut – Independence Day is a celebration of the renewal of the Jewish state in the Land of Israel, the birthplace of the Jewish people.  In this land, the Jewish people developed its distinctive religion and way of life.  In the Land of Israel, the Jews preserved an unbroken physical presence, for centuries as a sovereign state, at other times under foreign domination.  Throughout their long history, the yearning to return to the Land has been the focus of Jewish life.  With the rebirth of the State of Israel, in 1948, Jewish independence, lost 1,878 years earlier, was restored.

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7.4  Israel Appoints its First Female Muslim Diplomat

On 5 April, Israel’s Foreign Ministry appointed Rasha Atamny, 31, to represent the Jewish state in Ankara, Turkey, making her Israel’s first female Muslim diplomat.  Atamny, who is completing the final months of the ministry’s cadet course, will serve as the embassy’s first secretary in Ankara.  Atamny hails from the Arab town of Baqa al-Gharbiya in central Israel.

She is not Israel’s first female Arab diplomat.  Christian-Arab Rania Jubran, the daughter of Supreme Court Justice Salim Jubran, worked for the ministry from 2006 to 2009, but left shortly before she was due to be sent to Cairo.  Israel also has several male Muslim and Christian diplomats.  (ToI 06.04)

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7.5  UAE Public & Private Sector Isra and Mi’raj Holiday Announced

The UAE public sector will enjoy a long weekend for the Isra and Mi’raj holiday this month while private sector employees mark the holiday on Saturday, 22 April.  The Federal Authority for Government Human Resources said public sector employees would be given Sunday, 23 April off.  Ministries and Federal agencies will resume work on Monday.

Known as the Prophet’s Ascension or the Night Journey, Isra and Mi’raj are the two parts of Prophet Mohammed’s journey from Mecca to the farthest mosque during a single night.  He is said to have travelled on a winged horse before ascending to heaven to speak to God, who gave him instructions to take back to Muslims regarding the details of prayer.  The fruit of this gift is the five daily prayers.  According to tradition, God initially commanded the Prophet to tell his followers to pray 50 times every day.  But on his way back to Earth, the Prophet met Moses, who advised him to ask God for a reduction in the number of prayers to make worship more realistic for Muslims.  Many Muslims will observe the event with prayers at mosques or at home late into the night, and some will fast.  (The National 09.04)

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7.6  Egypt’s Parliament Approves Three-Month State of Emergency

On 11 April, Egypt’s parliament unanimously approved a three-month state of emergency, broadening the power of authorities to crack down on what it called enemies of the state days after two church bombings killed at least 45.  Two suicide bombings claimed by the IS terror group at churches in Alexandria and Tanta plunged the nation into mourning and sent shockwaves through a Coptic Christian community, which has increasingly been targeted by militants.  The countrywide state of emergency was declared by President Abdel Fattah Al Sisi after the attacks but required parliamentary approval according to the constitution.

The end of emergency law was a key demand during the 2011 uprising that ousted former president Hosni Mubarak, who had imposed a 30-year state of emergency to crush opposition.  The law was lifted after Mubarak stepped down but re-imposed temporarily in the years that followed.  Addressing parliament, Prime Minister Sherif Ismail said the state of emergency was essential to combat what he called terrorist groups bent on undermining the country.  The law grants the executive branch sweeping powers, allowing it to close companies, shutter media outlets, halt demonstrations and monitor personal communications without judicial approval.  (Reuters 11.04)

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7.7  Erdogan Celebrates Referendum Win As Rivals Urge Recount

On 17 April, Turkish President Erdogan celebrated a narrow win in a referendum giving him sweeping new powers that exposed bitter divisions in Turkey and left incensed rivals demanding a major recount.  The referendum was seen as crucial not just for shaping the political system of Turkey but also the future strategic direction of a nation that has been a NATO member since 1952 and an EU hopeful for half a century.  The ‘Yes’ camp won 51.41% on the 16 April referendum on a new presidential system and ‘No’ 48.59, according to near-complete results released by the election authorities.  But Erdogan’s victory was far narrower than expected, emerging only after several nail-biting hours late Sunday which saw the ‘No’ result dramatically catch up in the later count.  Turkey’s three largest cities — Istanbul, Ankara and Izmir — all voted ‘No’ although ‘Yes’ prevailed in Erdogan’s Anatolian heartland.  The new system is due to come into effect after elections in November 2019.

Erdogan declared that Turkey’s had made a “historic” decision and appeared standing on top of a bus in front of thousands of cheering supporters outside his Huber Palace Istanbul residence on the shores of the Bosporus.  But the opposition were not content to rest on their better-than-expected performance despite a lopsided campaign in which the ‘Yes’ camp enjoyed vastly greater resources and dominated the airwaves.  Both the main opposition Republican People’s Party (CHP) and the pro-Kurdish Peoples’ Democratic Party (HDP) said they would appeal the results from most of the ballot boxes due to alleged violations.  They were particularly incensed by a decision by the Supreme Election Board (YSK) to allow voting papers without official stamps to be counted, which they said opened the way for fraud.

Throughout the campaign, Erdogan launched bitter attacks on the European Union, accusing member states of behaving like the Third Reich in failing to allow his ministers to campaign among expats.  The initial reaction from Turkey’s Western allies was far from ebullient, with top EU officials saying Turkey had to find the “broadest possible” agreement on the changes in view of the closeness of the result.  In an indication more strife with Brussels could be in the offing, Erdogan said he would now hold talks on reinstating capital punishment, a move that would automatically end Turkey’s EU bid.  If the opposition failed to support such a bill, he said another referendum could be held on reinstating the death penalty.

The new system would dispense with the office of prime minister and centralize the entire executive bureaucracy under the president, giving Erdogan the direct power to appoint ministers.  It would also mean that Erdogan, who became president in 2014, could seek two more five-year terms leaving him in power until 2029.  (AFP 17.04)

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8.1  Veterans Affairs Purchases 28 Additional ReWalk Exoskeleton Systems

ReWalk Robotics announced that the U.S. Department of Veterans Affairs (VA) purchased 28 ReWalk Personal Exoskeleton Systems to support an ongoing national multi-center clinical trial.  ReWalk confirmed shipment of 20 systems to the VA in Q1/17; the remaining eight systems from this purchase will be shipped in the second quarter of this year.   The 28 system purchase follows an initial purchase of 20 systems by the VA in 2016, which helped with the initiation of the multi-year, multi-center study.  The clinical trial is the first-ever study conducted in the US to study the impact of exoskeleton use in a personal setting.  The study is enrolling 160 randomized patients, half of whom use ReWalk Robotics’ exoskeleton system and half of whom use standard wheelchairs.  Currently, there are six VA centers actively enrolling participants in the study, with four more VA centers set to be included by this summer.  At the end of the study, all participating patients could qualify for procurement of a ReWalk exoskeleton system.

Founded in 2001, Yokneam Illit’s ReWalk Robotics develops, manufactures and markets wearable robotic exoskeletons for individuals with spinal cord injury.  Their mission is to fundamentally change the quality of life for individuals with lower limb disability through the creation and development of market leading robotic technologies.  (ReWalk 06.04)

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8.2  DarioHealth Corp. Completes $4.5 Million Public Offering of Common Stock

DarioHealth Corp. announced the closing of its previously announced underwritten public offering of 1,450,000 shares of its common stock at an offering price of $3.10 per share of common stock.  Gross proceeds to Dario from this offering are approximately $4,500,000 before deducting underwriting discounts and commissions and other estimated offering expenses payable by Dario.  Dario intends to use the net proceeds from this offering for commercialization efforts of its products, including increased marketing and production expenses, and for general working capital purposes.  Aegis Capital Corp. acted as the sole book-running manager for the offering. Migdal Investment Banking served as Dario’s Israeli advisor in the offering.

Caesarea’s DarioHealth Corp. is a leading global digital health company serving tens of thousands of users with dynamic mobile health solutions.  They believe people deserve the best tools to manage their treatment, and harnessing big data, we have developed a unique way for our users to analyze and personalize their diabetes management.  With their smart diabetes solution, users have direct access to track and monitor all facets of diabetes, without having the disease slow them down. The acclaimed Dario Blood Glucose Monitoring System all-in-one blood glucose meter and native smartphone app gives users an unrivaled method for self-diabetes management.  (DarioHealth 05.04)

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8.3  Mazor Robotics Receives FDA Clearance for Spinal Deformity Correction Planning Software

Mazor Robotics has received FDA clearance for its Mazor X Align software.  Mazor X Align is designed to assist surgeons in planning spinal deformity correction and spinal alignment for procedures performed with the Mazor X Surgical Assurance Platform.  Mazor X Align leverages Mazor Robotics’ extensive experience in pre-operative planning, image processing, computerized anatomy recognition, and registration of different imaging modalities.  It is the latest module to be added to the Mazor X proprietary Pre-operative Analytics software suite, and enables surgeons to create a patient-specific, three-dimensional spinal alignment plan.  The 3D plan simulates an entire spine, allowing pre-operative estimation of the impact of a planned surgical correction on the patient’s posture post-operatively, considering segmental range-of-motion and final alignment parameters.  Mazor X Align will be released to a selection of Mazor X customers in early May.  This early release will be followed by a widespread release during the second half of 2017.

Caesarea’s Mazor Robotics believes in healing through innovation by developing and introducing revolutionary technologies and products aimed at redefining the gold standard of quality care.  Mazor Robotics Guidance Systems enable surgeons to conduct spine and brain procedures in an accurate and secure manner.  (Mazor Robotics 12.04)

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9.1  Inception Fights “Lagging”, VR’s Worst Enemy – Unveils Interactive Multi-Track Technology

Inception unveiled its new layer of innovation that utilizes multi-track real time streaming and spatial audio for a seamless interactive VR experience.  This recent development overcomes VR’s major pain – the ability to create more immersive and interactive experiences.  Inception’s solution lessens bandwidth issues and allows users to navigate interactive VR experiences by switching between video and audio tracks with minimal lagging.

Until now, VR technology has struggled to deliver a fully immersive virtual experience that can withstand high quality visual and audio effects and navigate through scenes as they unfold without interruptions.  Multi-track technology will be implemented across the Inception app, and can be applied to special effects, audio tracks, and video overlays diminishing buffering or lagging to create a more lifelike VR experience.  Imagine stepping into a virtual world with one click, where the sound and visual stimulation around you adjusts according to your movement and guides you in a certain direction, so you know where to look when immersed in 360 and fully enjoy it with minimal lag.  Inception’s recent technological development helps break down existing immersive VR barriers and supplies users with an engaging interaction that’s user friendly, mimics real-world conditions, and enhances VR.

Tel Aviv’s Inception is fast becoming the leading 360 & VR destination of choice for premium content for millennials.  Inception launched in October 2016, and has apps for Oculus Rift, Samsung Gear, iOS, Android, Google Daydream, HTC Vive, with Sony PS coming soon.  It has already become one of the top Entertainment VR apps.  Inception utilizes a unique combination of proprietary technology, a distribution platform and exclusive content formats and rights, to deliver the most engaging VR experiences via a best-in-class app, cost effectively and to the very highest standards.  (Inception 04.04)

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9.2  IRI Forms Strategic Alliance with Freshub

Chicago’s IRI, the global leader in innovative solutions and services for consumer, retail, media and over-the-counter health care companies, entered into a strategic alliance with Freshub, the pioneer of Smart Kitchen Commerce solutions that brings together grocery retailers and appliance manufacturers to make the IoT-driven Smart Kitchen a reality.  The new relationship will enable IRI and Freshub to provide retailers with relevant, dynamic and actionable information based on traditional data sources, as well as IoT-based data sources.  In connection with this alliance, IRI and Freshub clients will now have the ability to target household-level product recommendations and enjoy direct access to rich “alternative products” suggestions.  The relationship also will spur development of a range of additional innovative features, such as product-level health indicators.

Petah Tikva’s Freshub is a leading Smart Kitchen Commerce ecosystem business adviser, technology provider and systems integrator.  The company brings grocery retailers and appliance manufacturers together to make the smart kitchen a reality, offering direct access to online supermarkets via such kitchen appliances as connected microwaves, countertop music players and smart bins.  Consumers can add products to their digital shopping carts by simply scanning grocery items and packages in front of appliances or naturally issuing voice commands.  (IRI 05.04)

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9.3  Chooze Officially Launches IOS App That Uses Psychology to Help With Baby Naming

Israeli startup Chooze announced the official launch of its science-based iOS app that helps expectant parents choose the perfect baby name.  Chooze is a revolutionary approach to an age-old challenge that today drives 1 million monthly searches on Google and countless conversations between partners.  Chooze uses the latest in cognitive psychology to help parents decipher their subconscious preferences for names, giving expectant parents peace of mind while preventing the regret that hits 1 in 5 parents according to a study conducted by  To celebrate the official launch, Chooze will be offered at a promotional rate of $0.99, normally $1.99.

With Chooze, expectant parents are asked to provide 2 names they dislike and 2 names they’re considering and associate them as quickly as possible to negative and positive topics like hate and love.  Tapping into the normal winnowing down process of choosing names, Chooze serves as a much needed tie-breaker when expectant parents are down to the last few options.  Chooze measures and tests the speed of association to determine the future parents’ emotional connection to specific baby names.  The end result is a scientifically-based calculation of true name preferences.

Tel Aviv’s Chooze is an iOS app developed by a team of entrepreneurs, cognitive psychologists, software engineers & designers to help parents worldwide find the right names for their children.  (Chooze 06.04)

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9.4  Apriva & OTI Announce Semi-Integrated Solution for Unattended Markets

Scottsdale, Arizona’s Apriva, a leading provider of omni-channel payment solutions and secure mobile communications, and On Track Innovations announced a partnership to bring a new end-to-end EMV solution to markets supporting unattended payments.  This pre-certified payment solution immediately supports magnetic stripe reader (MSR) transactions, and will soon be EMV certified on various processors through Apriva.  As a semi-integrated solution, the OTI TRIO reader is securely interfaced with the Apriva gateway, which means a quick integration process for unattended systems.  Security includes real-time data encryption, using the industry standard DUKPT (derived unique key per transaction) encryption method, with no cardholder or card data stored.

For over two decades, OTI has provided enterprises worldwide with cashless payment options, including NFC products and solutions.  OTI’s TRIO is a modular payment device that can support up to three cashless payment interfaces in one enclosure.  The TRIO is specifically designed for installation in unattended environments, such as kiosks and vending machines, to enable cashless payment with magnetic payment cards, as well as mobile (Apple Pay, Android Pay, Samsung Pay), EMV chip and contactless payment cards.

Rosh Pina’s On Track Innovations (OTI) is a global leader in the design, manufacture, and sale of secure cashless payment solutions using contactless NFC technology with an extensive patent and IP portfolio.  OTI’s field-proven innovations have been deployed around the world to address cashless payment and management requirements for the Internet of Payment Things (IoPT), wearables, unattended retail and petroleum markets.  (OTI 11.04)

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9.5  Safe-T and Check Point Secure the Digital Enterprise

Safe-T Data and Check Point Software Technologies announced a joint partnership designed to help organizations secure all incoming data channels from known and zero-day attacks.  With the joint solution, organizations using Check Point SandBlast for scanning files can now seamlessly and automatically scan any file entering the organization from any source to any destination, regardless of network topology, including cloud, remote/local employees, customers, third-party business partners and remote applications.  This is achieved by integrating Safe-T HDS into all data storage locations and transfer flows, using Safe-T Connectors and APIs, and combining it with Check Point SandBlast.

Herzliya Pituah’s Safe-T Data is the provider of solutions designed to mitigate attacks on business-critical services and data for a wide range of industries, including: financial, healthcare, government, etc.  Safe-T’s High-risk Data Security (HDS) Solution mitigates data threats: un-authorized access to data, services, networks, or APIs; as well as data related threats, including data exfiltration, leakage, malware, ransomware, and fraud. Companies and Governments around the world trust Safe-T to secure their data, services, and networks from insider and external data threats.  Focused on providing security solutions for the enterprise market, Safe-T enables organizations to benefit from enhanced productivity, efficiency, heightened security, and improved regulatory compliance.  (Safe-T Data 13.04)

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9.6  Mellanox 25Gb/s Ethernet Adapters Chosen By Major ODMs for Next Generation Data Centers

Mellanox Technologies announced that the ConnectX-4 Lx 25Gb/s OCP and PCIe Ethernet adapters have been adopted by major ODMs.  The ConnectX-4 Lx 25 gigabit Ethernet adapters provide 2.5 times the data throughput at lowest latency needed for data center applications while utilizing the same infrastructure as 10 gigabit Ethernet, thus maximizing the data center return on investment.  The company is currently shipping hundreds of thousands of Ethernet adapters every quarter, reflecting a growing demand for Mellanox Ethernet solutions.

Since 2016, Wiwynn Corporation, a leading cloud infrastructure provider of high quality computing and storage products, has shipped its OCP server SV7221G2 product family with the Mellanox 25GbE ConnectX-4 Lx OCP Mezzanine NICs and PCIe cards to major Internet service providers.  Acer, a Taiwanese multinational hardware and electronics corporation specializing in advanced electronics technology has also qualified ConnectX-4 Lx PCIe adapters and will soon offer their servers Altos R380 F3, R360 F3 and AW2000h F3, to the market.  Since 2016, Mitac-TYAN has been shipping ConnectX-3 Pro 40GbE OCP mezzanine cards and recently added the ConnectX-4 Lx 25GbE OCP mezzanine cards to its GT86A-B7083 server offering.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end Ethernet and InfiniBand intelligent interconnect solutions and services for servers, storage, and hyper-converged infrastructure.  Mellanox intelligent interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance.  Mellanox offers a choice of high performance solutions: network and multicore processors, network adapters, switches, cables, software and silicon, that accelerate application runtime and maximize business results for a wide range of markets including high performance computing, enterprise data centers, Web 2.0, cloud, storage, network security, telecom and financial services.  (Mellanox 18.04)

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9.7  MySize Engaged by Israeli Postal Service to Provide New Measuring Solutions

MySize announced a new cooperation agreement has been signed with the Israeli Post.  This agreement calls for MySize to supply the Israeli Postal Service with two new services.  MySize solution for the courier market is proprietary to MySize and the company seeks to provide a solution to global Courier market.  This application will provide a solution to measure all types of packages using only a smartphone.  Based on the package size, the user will be quoted a shipping price and picture of the package dimension.  In addition, The Israel Post has developed relationships in the online fashion apparel markets with fashion retailers and contracted with MySize for solutions to ship the correct size with using their “TrueSize” application.  These technology solutions are being developed in accordance with the specific specifications provided by the Israel Post. A team from the Israel Post will be selected to work on this project with MySize staff.

Once these solutions are developed MySize will provide The Israel Post with a 3 month trial period.  Subsequent to the trial period, the Israeli Post will have the service operational for another 3 months at no charge.  At the end of the second 3 months, an agreement shall be finalized by both parties on the commercial terms of this new service for a non-exclusive agreement with the Israeli Post.

Airport City’s MySize is developing unique measurement technologies based on sophisticated algorithms and cutting edge technology with broad applications including apparel industry, e-commerce, shipping and parcel industry measurement.  This proprietary technology is driven by several patent-pending algorithms which are able to calculate and record measurements in a variety of novel ways.  (MySize 18.04)

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9.8  Altair Powers Latest Verizon-Certified Vehicle Telematics Offering from Queclink

Altair Semiconductor announced that Verizon Wireless has certified a new vehicle telematics device manufactured by leading machine-to-machine (M2M) solution provider Queclink, and powered by Altair’s LTE CAT-1 chipset.  Queclink’s tracking products are designed for automotive tracking, fleet management, tracking & tracing, lone worker safety, mobile health care, remote monitoring and control of assets, and wireless alarms to cover most popular applications via the Internet.  The newly launched mini vehicle tracking device can remotely immobilize a car if the owner defaults on their lease payments.

Altair’s CAT-1 chipset employs advanced idle and sleep mode power management.  Designed specifically for IoT and M2M applications, including vehicle telematics, wearables, smart meters and security systems, the ALT1160 offers a combination of low cost, reduced power and small size that is unmatched in the market.

Hod HaSharon’s Altair Semiconductor is a leading provider of single-mode LTE chipsets.  Altair’s portfolio covers the complete spectrum of cellular 4G market needs, from supercharged video-centric applications all the way to ultra-low power, low cost IoT and M2M.  Altair has shipped millions of LTE chipsets to date, commercially deployed on the world’s most advanced LTE networks including Verizon Wireless, AT&T, Softbank and KT (Korea Telecom).  (Altair Semiconductor 18.04)

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9.9  Beamr Announces First of Kind HEVC Content-Adaptive Software Encoder

Beamr Imaging announced the first-of-its-kind commercial implementation of a quality driven content-adaptive HEVC software encoder, Beamr 5x.  This innovative product utilizes Beamr’s 29 granted patents and 18 pending patent applications to produce HEVC video encodes that are up to 50% smaller than Beamr’s market-leading HEVC software encoder, Beamr 5.

The consumer expectation for higher video quality is growing, and with HEVC decode capability expanding rapidly across the mobile device, TV and set-top box ecosystem, the industry is approaching an inflection point where services unable to deliver 1080p in under 2Mbps, and 4K HDR under 10Mbps, will struggle to compete in the crowded entertainment services marketplace.  Beamr 5x has been shown to deliver amazingly low bitrates while maintaining unusually high video quality.  The innovation at the heart of Beamr 5x is the perceptual optimization technology that powers Beamr’s H.264 content-adaptive video optimizer and JPEGmini image optimization solutions which are used by the world’s largest media & entertainment companies.  When combined with the best implementation of the most advanced codec in the market (HEVC), content owners and distributors no longer need to sacrifice quality for bitrate.

Tel Aviv’s Beamr is the leading provider of content-adaptive video encoding and optimization solutions for the world’s top MSOs, OTT streaming service providers, Hollywood studios, video distribution platforms, and social media content publishers.  Beamr’s high-performance H.264 and H.265/HEVC video processing solutions are fully scalable for use in on-premise and cloud deployments.  With 29 patents granted and 18 pending, Beamr’s content-adaptive technology is setting a new standard for quality and bitrate performance.  (Beamr 18.04)

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10.1  Israel’s Inflation Rate in March Increases by 0.3%

The Central Bureau of Statistics announced that Israel’s Consumer Price Index (CPI) rose by 0.3% in March, reported this afternoon, and has now risen 0.9% over the past 12 months.  The March CPI was higher than the analysts’ consensus of a 0.1% rise.  Notable price rises during March were: fashion and footwear (4.9%), housing costs (0.8%) and entertainment and culture (0.1%). Notable price falls included public transport (0.5%).  The Central Bureau of Statistics also published the Home Prices Index for January-February 2017, which showed a slowdown in price rises.  Home prices rose a negligible 0.1% in the first two months of the year and have risen 6% over the past 12 months.  After three years of negative inflation, there are signs that inflation may be returning to the Bank of Israel’s desired target range of 1-3%.  (CBS 14.04)

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10.2  Number of Israeli Jobseekers Falls to a New 10 Year Low

The Israel National Employment Service (INES) released data that showed some 167,400 jobseekers registered at INES offices in March (the figures are seasonally adjusted), compared with 168,800 in February, marking a 0.8% decrease.  The figures indicate a 10 year low in unemployment and an all-time low in comparison with the number of employed, which has risen steeply in recent years, due to both natural population increase and a higher rate of participation in the labor force.  The decline is stark in comparison with previous years.  The number of those appearing at INES offices averaged 168,800 in Q1/17, down 9.2%, compared with Q1/16, when the number was 185,800 jobseekers.  The decline since Q1/15 is 18.3%.  (INES 06.04)

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10.3  Israel Welcomes Record Incoming Tourism During First Quarter

Israel’s Ministry of Tourism announced that the number of tourists entering Israel reached an all-time record of 739,000 in the first quarter of 2017, up 24% from the corresponding quarter of 2016.  For March alone, 293,000 tourists arrived in Israel from abroad, a 22% increase over March 2016.  The sharp rise in tourism comes despite the significant strengthening of the shekel, which makes Israel an expensive destination.

Over the first three months of 2017, incoming tourism earned the Israeli economy an estimated NIS 4 billion, up NIS 730 million from the corresponding period of 2016.  The rise in tourism has added some 5,000 new jobs to the Israeli economy.  In 2016, nearly 3 million tourists came to Israel, up 3.6% from 2015.  Virtually all tourists enter Israel by air; in March, 256,000 tourists arrived by air and only 38,000 by land or sea, including 12,000 day visitors – a decline from the 19,000 in March 2016.

The Ministry of Tourism has taken advantage of the situation to launch a major marketing campaign and is paying carriers bonuses for bringing tourists to Ovda airport in the Negev and for opening new routes to cities previously without direct flights to Israel.  (MoT 13.04)

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11.1  LEBANON:  The Economy Has Slowed

According to the Central Administration of Statistics (CAS), Lebanon’s real GDP growth reached its lowest since 2011.  Real GDP growth continued its decline reaching 0.8% in 2015, after a real growth of 2.8% in 2012 and 2.6% in 2013 and 2% in 2014.  The GDP deflator had reached 6.5% in 2012 and dropped to 2.2% in 2013 and 1.9% in 2014 to later increase to 2.6% in 2015.

The GDP deflator remained positive in 2015 while the average inflation rate measured by the Consumer Price Index (CPI) turned negative that same year standing at -3.76%.  In fact, 2015’s negative average inflation rate was due to the decline in oil prices and the depreciation of the euro.  The main difference between CPI-measured inflation and the GDP deflator is that the former does include imported goods while the latter measures only domestically produced products.

The Gross National Disposable Income (GNDI) exceeded GDP in 2015.  The reason behind this is that the GNDI includes net transfers from abroad (mainly remittances).  Net transfers from abroad reached $2.25 billion in 2015 up by 43% from $1.57 billion in 2014.  Furthermore, the GNDI, which includes factor income and net transfers, reflects the income available to the total economy for final consumption and gross savings.

Lebanon’s External Position Remains Weak

The deficit in the balance of trade aggravated.  Lebanon has chronically suffered from a deficit in its trade balance which reached $15.65B in 2016, up by an annual 3.56%.  According to CAS, “Exports of goods had decreased in volume by 10% in 2014 and by 1% in 2015.  Export of services had decreased by 9% in 2014 but increased by 11% in 2015.  The Net exports balance is negative, equal to -20% of the GDP.”  The CAS report adds “Lebanon exports services (19% of GDP) more than goods (8%) while it imports goods (35%) more than services (12%).”


Lebanon’s Trade Deficit, In Thousands of USD


The fragility of a country’s external position is best represented by its balance of payments.  The 2015 external position indicators make it easy to predict that the balance of payments would reach its highest deficit in over two decades of $3.35 billion during that year.  It also corroborates the Central Bank’s need to boost its foreign currency position by engaging in a swap operation with the commercial banks which allowed the Balance of Payments to return to positive territory in 2016 with a surplus of $1.24 billion and of $508.5 million by the first two months of 2017.


Lebanon’s Balance of Payments, In Millions of USD


Low Growth Negatively Impacted Private and Public Investment and Consumption

The GDP seen from the expenditure approach reveals the large gap between the capital formation of the public sector and that of the private sector.  Public gross fixed capital formation (GFCF) represents only 1% of GDP as opposed to 20% of GDP for the private gross fixed capital formation.  With a chronic deficit in the fiscal balance, the government lacks the funds to carry out much needed infrastructure investments.  Overall, the capital formation declined both in volume and value terms; in volume terms by 7% in 2014 and 4% in 2015 and in value terms by 2.9% in 2014 and 4.6% in 2015.

The consumption expenditure, by both households and government, which accounts for 99% of GDP, has increased in real terms but at a slower pace.  While the consumption expenditure registered a real growth rate of 7% in 2014, it only grew by 3% in 2015.  The fact that even the consumption expenditure of both households and government has slowed, indicates how deep the economic slowdown ran in 2014 and 2015.  This means that the economic slowdown not only impacted the decisions to venture in large, long-term investments but also has impacted short-term spending and investment rationales.

The slowdown in consumption was reflected by the BLOM Lebanon PMI and new car registrations have reflected.  The BLOM Lebanon PMI, which tracks the activity of the private sector economy, has been below the 50-points mark separating economic expansion from recession for almost the entirety of its computation and that is in big part a result of the poor performance of the “New Orders Sub-Index” which indicates the level of local demand.  New car registrations have also been subdued, pointing to a weak durable goods demand.



When assessed from a growth perspective, three sectors registered the highest increases in 2015.  In terms of volume, the financial services sector registered a 10% upturn in 2015 after growing only by 3% in 2014.  The financial services sector in Lebanon is mostly dominated by banks whose assets are around 4 times the country’s GDP.  The information and communication sector grew by 7% in 2015, up from a growth of 4% in 2014. The transport sector also grew by 9% in 2015 compared to 6% in 2014.

The information and communication sector, not a traditional strong point for the Lebanese economy, was the second fastest growing sector in 2015.  This may very well be due to the growing knowledge economy in Lebanon, fostered by the Central Bank’s 331 circular.  The circular allows banks to invest directly in the capital of startups or in Venture Capital funds with the Central Bank guaranteeing 75% of the banks’ investments.  The circular, aimed solely for Lebanese startups, has and is still encouraging talented Lebanese expatriates to return to their home country, creating much needed job opportunities for Lebanon’s youth and creating a new channel for economic growth.

On the other hand, the real estate and tourism sectors, which have long been pillars of the Lebanese economy pursued their downtrend in 2015.  In volume terms, the real estate sector decreased by 3% in 2015 compared to a 4% decline in 2014.  Hotels and Restaurants did increase by 2% in 2015 but that was after having decreased in volume between 2011 and 2014.  The manufacturing of food products, water supply, waste management and construction decreased in 2014 and 2015.

Agriculture and forestry, a sector that has fallen behind even before the economy started to slow in 2011 witnessed a 19% decrease in 2015 in volume terms after a 14% growth in 2014.  This sector could benefit from the recent Agritech program, funded by Berytech and the Embassy of Kingdom of Netherlands, which aims at bringing much-needed innovation to the Lebanese agriculture sector.

Along with the real estate sector, the sector of commercial trade and motor vehicle repairs holds a sizeable share in GDP.  The sector of commercial trade and motor vehicle repairs actually represented the same percentage share in GDP as the real estate; both constituting 14% of GDP in 2015 compared to a share of 15% in 2014.  The commercial trade and motor vehicle repairs sector in its majority comprises small to medium businesses and its sizeable share in GDP highlights the importance and weight of small and medium businesses in Lebanon.  Their size makes them the most vulnerable to fluctuations in the economic cycle and that’s why they need to be offered buffers by the financial institutions and by the government.  According to the Ministry of Economy, over 90% of enterprises currently active in the economy can be categorized as SMEs.  Consumption and Investments are subdued but also new channels for growth such as the knowledge economy have the potential of creating jobs and boosting growth.  However, the need for structural reforms such as fiscal adjustment and debt sustainability remain inescapable challenges that we need to address in order to see a brighter economic picture.  (BlomInvest Bank 07.04)

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11.2  IRAQ:  Kurdish Flag Fans Controversy in Iraq’s Kirkuk

On 4 April in Al-Monitor, Mustafa Saadoun posted that the raising the Kurdistan flag atop the governmental buildings in Kirkuk sparked tension in the province and in Baghdad.

Controversy ensued when the flag of the Kurdistan Regional Government (KRG) was raised in Kirkuk on 28 March.  The local government in the province insisted on having the Kurdish flag fly alongside the Iraqi federal one, although the federal government in Baghdad disapproved of this decision.

The local government in Kirkuk province, in northern Iraq, voted on raising the KRG flag alongside the Iraqi federal one atop state institution buildings in the province.  The voting session, held on 28 March, was boycotted by 16 Arab and Turkmen members; only the 25 Kurdish members attended.  Less than 24 hours later, demonstrators took to the streets in Erbil, the KRG capital, to protest the decision.  However, no one expected such demonstrations to occur in Erbil, which is controlled by the Kurdistan Democratic Party (KDP) led by Massoud Barzani, one of the most prominent supporters of Kurdish dominance in Kirkuk.

In a session held on 1 April, the Iraqi parliament rejected the Kirkuk council decision and voted in favor of displaying only the Iraqi flag on public buildings in Kirkuk.  Kurdish members left the parliament before the vote took place.  On the other hand, the KRG presidency supported raising the Kurdish flag over state buildings in Kirkuk, saying, “Raising the KRG flag atop Kirkuk’s buildings and facilities is both natural and legal, just as raising the Iraqi flag is.”

An official position was also expressed by Iraqi Prime Minister Haider al-Abadi, whose spokesman Saad al-Hadithi said that raising the KRG flag in Kirkuk, which is not part of the KRG, is a violation of the Iraqi Constitution and the law governing provinces outside of the KRG.

Hadithi said in a press statement on 28 March, “Kirkuk was not within the areas under the KRG government’s control on 19 April 2003.  This is why it follows the federal government instead and it is still receiving the salaries of its employees from the government.  So it cannot take such a decision [to raise the Kurdish flag] without first consulting the federal government.”

Meanwhile, member of the KRG parliament Salar Mahmoud supported raising the flag and did not believe such a move violated the constitution because none of its articles stipulate that the KRG flag should not be raised in other provinces.  He told al-Sumaria news agency that terrorism in Kirkuk was defeated under the KRG flag.

Both supporting and opposing points of view keep mentioning the constitution, although the Iraqi Constitution includes no mention of this issue and does not specify whether or not the KRG flag is allowed to be raised along with the Iraqi flag.  This may imply that this issue can only be resolved by a political consensus over whether to keep the flag or take it down.

It should be noted that the KRG flag has been raised along with the Iraqi flag in provinces affiliated with the KRG and over official institutions in Erbil, Dahuk and Sulaimaniyah.  The KRG flag has also been placed in buildings affiliated with Kurdish parties in other provinces, but never on top of buildings for the public to see.

Before Kirkuk’s provincial council voted on the decision to raise the KRG flag over government buildings, the governor of Kirkuk, Najmiddin Karim, called in a press conference on 14 March to raise the KRG flag over government buildings in the province, provoking controversy within Iraqi political circles.  “The Iraqi Constitution does not include a text preventing Kirkuk from raising the KRG flag.  Raising the flag will deepen the brotherly bond between the province’s components,” Karim noted.

It was somewhat unexpected for Kirkuk to take such a decision, particularly since Karim, who holds the highest executive authority there, is a leader in the Patriotic Union of Kurdistan, led by Jalal Talabani, who has close ties with Iran and is known to be on good terms with the federal government’s policies.

On 22 March, the United Nations expressed “concerns” about raising the KRG flag in Kirkuk and warned against taking steps that threaten the peaceful coexistence in the province.  The UN mission in Iraq noted in a press statement, “The Iraqi government has made it clear that according to the constitution, Kirkuk falls under the central government’s jurisdiction, and only the Iraqi flag should be raised in the province.”

For its part, Turkey opposed raising a flag other than the Iraqi one in Kirkuk.  Hussein Mufti Oglu, the spokesman for the Turkish Foreign Ministry, said in a press statement on 20 March, “We were shocked by the official letter issued by the Kirkuk province, in which the provincial council called on raising the KRG flag next the Iraqi one over official buildings in the city.”  He added, “Any unilateral decision regarding the future of Kirkuk affects the security and stability of Iraq and such an attempt also affects the social and economic aspects.”

Iraqi Vice President Osama al-Nujaifi described raising the Kurdish flag next to the Iraqi flag as a violation of national unity and the spirit of cooperation and understanding between the components of the province.  He noted in a statement, “It is unacceptable to impose the will of one component or one party over everyone else.”

For Kirkuk to pose such an issue at this time may be a prelude to a bigger issue, that of determining the fate of this city.  The Arab-Kurdish, Kurdish-Turkmen and Arab-Turkmen power struggle there is anxiously waiting for such issues to erupt and ultimately force conflicting parties to show their cards to the public.  In a nutshell, the federal government in Baghdad can, along with the Iraqi parliament, summon the governor of Kirkuk and question him about the purpose of raising the Kurdish flag next to the Iraqi one, and since Karim works under the central government, Baghdad is expected to have a say in taking the flag down.  (Al-Monitor 04.04)

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11.3  BAHRAIN:  IMF Staff Completes 2017 Article IV Mission to Bahrain

An International Monetary Fund (IMF) mission visited Manama from 12 – 23 March 2017 for discussions on the 2017 Article IV consultation.  Subject to management approval, the findings of the mission will be presented to the Executive Board for consideration in June 2017.  At the conclusion of the visit, the mission issued the following statement:

“During 2016, economic activity was solid and inflation remained subdued.  Overall GDP growth is estimated at 3.0%, with strong non-oil growth of 3.7% aided by the implementation of GCC-funded projects.  Despite significant fiscal measures that were implemented, lower oil prices led to the overall fiscal deficit and public debt in 2016 near 18% and 82% of GDP, respectively.  The external current account deficit is estimated at 4.7% of GDP.

“Overall growth is projected at 2.3% in 2017, continuing to be driven by strong infrastructure spending from GCC funds.  Inflation is expected to stay moderate.  Owing to the higher expected oil prices and continued implementation of measures to reduce spending and raise non-oil revenues, the fiscal deficit is expected to fall to 12.6% of GDP in 2017 and remain close to that level over the medium term.  A substantial increase in debt is projected.

“A sizable fiscal adjustment is urgently needed to restore fiscal sustainability, reduce vulnerabilities, and boost investor and consumer confidence.  In this context, fiscal measures in the near term could include the VAT, which is already agreed at the GCC level, and further rationalizing spending on subsidies, which disproportionately benefit the wealthy, and social transfers.  The wage bill, which is nearly 12% of GDP and among the highest in the GCC, can be reduced in the near term by streamlining allowances and freezing nominal wages.  Over the medium term, sizable further consolidation can be achieved in the context of a civil service review and will help support the goal of boosting private sector employment of Bahrain nationals.  Other measures are also needed to raise non-oil revenue to help finance the provision of government services.  Reforms to strengthen the fiscal framework would support the process of fiscal consolidation.  The adjustment should be designed to minimize the adverse impact on vulnerable groups.

“Bahraini banks’ strong capitalization and liquidity will help them weather a slowing in the pace of economic growth.  The Central Bank of Bahrain continues to strengthen its regulation and supervision of the financial sector, which will support the continued development and stability of the financial system.  The exchange rate peg to the U.S. dollar continues to serve Bahrain well, and will be supported by fiscal consolidation.

“Measures to reduce the costs of doing business are key to boosting growth prospects and achieving economic diversification in Bahrain.  They can help raise productivity and catalyze private investment, thereby contributing to create better paying private sector jobs for nationals and diversify the economy.”  (IMF 10.04)

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11.4  QATAR:  IMF Executive Board Concludes 2016 Article IV Consultation with Qatar

On March 20, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Qatar.  Qatar has been implementing an ambitious diversification strategy, while strengthening its policy framework.

Lower hydrocarbon prices have adversely impacted macroeconomic performance. Growth has slowed despite still resilient non-hydrocarbon activity.  Real GDP growth of 2.7% is estimated for 2016. Inflation remained low despite subsidy cuts, averaging about 2.7% in 2016.  Fiscal and external balances have deteriorated from large surpluses to deficits due to sustained lower energy prices.  The authorities are adjusting by cutting current expenditures in 2016, undertaking energy pricing and labor reforms, and placing stronger emphasis on raising non-hydrocarbon revenues.  While banking system liquidity has tightened and credit to the private sector has moderated, banks remain sound and well capitalized.

Macroeconomic performance is expected to remain resilient under the baseline.  Real GDP growth is projected at 3.4% for 2017, reflecting still significant expansion in the non-hydrocarbon sector owing to public investment commitments, and supported by the added output from the new Barzan gas project.  Growth is expected to slow in the medium term, as public investment growth tapers off and hydrocarbon output continues to slow down.  Further subsidy cuts, a moderate recovery in global commodity prices, and the introduction of a VAT are expected to improve the fiscal and external balances gradually over the near to medium term.  The main risks relate to the possibility of lower hydrocarbon prices compared to the baseline and to weaker expenditure efficiency and/or inflationary pressures from the large public investment program.

Executive Board Assessment

Executive Directors noted the macroeconomic challenges brought by sustained lower hydrocarbon prices, but agreed that Qatar is well positioned to mitigate them given its substantial financial buffers.  Directors welcomed the authorities’ responsiveness to adjust to lower energy prices, and encouraged them to sustain their sound policies, which will help strengthen the fiscal position, maintain financial stability, and promote more diversified and sustainable growth.

Directors agreed that gradual fiscal consolidation over the medium term is key to ensuring the intergenerational equity of Qatar’s exhaustible hydrocarbon wealth.  They supported ongoing and envisaged revenue and expenditure measures, including subsidy reforms, containment of public-service benefits, lower spending on goods and services, and the introduction of a VAT and excise taxes.  Directors agreed that additional revenue measures, including broadening the base of existing taxes, particularly for the corporate income tax, should be explored over the medium term to mobilize sufficient resources for the implementation of the second national development strategy while supporting further consolidation.

Directors commended the ongoing fiscal-structural reforms, particularly the progress being made in preparing a medium-term fiscal strategy and the introduction of a new tender law and public finance law.  They encouraged further efforts to enhance the monitoring of public expenditures to improve efficiency and management of investment spending, as well as further improving transparency to facilitate a more robust assessment of the fiscal position.

Directors concurred that Qatar’s fixed exchange rate regime remains appropriate.  They noted that further strengthening the monetary policy framework as well as deepening domestic financial markets, particularly the domestic debt market, will prove helpful as the economy diversifies.

Directors agreed that banks remain sound and well capitalized, but noted that they could face risks from sustained low hydrocarbon prices or increasing interest rates.  Noting the impact of government financing on banks, they recommended developing a more active liquidity forecasting framework.  Directors welcomed the progress made with the implementation of Basel III and macro-prudential regulations, the elaboration of the new Strategic Plan for Financial Regulation, and the development of an early warning system.  They also supported the efforts to enhance the framework for anti-money laundering and combating the financing of terrorism.

Directors supported the authorities’ efforts to enhance economic diversification and promote private sector development.  They encouraged additional measures to further improve the business environment, and noted that labor market and education reforms will help raise productivity, increase potential output, and support inclusive growth.  Directors welcomed the improvements in economic statistics, and underscored that further efforts are needed to address remaining gaps.  (IMF 10.04)

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11.5  UAE:  The UAE’s Evolving National Security Strategy

The Arab Gulf States Institute in Washington released a review of the UAE’s evolving national security strategy.  Confronted with serious challenges, but also blessed with remarkable assets, the United Arab Emirates has developed a distinctive, and in some ways unprecedented, national security strategy.  The UAE is one of the smaller countries in the world, especially demographically, with only about 1.5 million citizens, but is one of the wealthiest per capita.  It is the seventh largest international petroleum producer, and possesses about 6% of the world’s proven oil reserves.  It is also located in a highly strategic and volatile neighborhood, along the southeastern coast of the Gulf, bordering Saudi Arabia and Oman.  Its northernmost point thrusts into the waters near a crucial maritime chokepoint, the Strait of Hormuz, and is separated from Iran by a narrow body of water.

Given its geography, demography, and natural resources, the UAE has had to cope with extraordinarily complex security concerns, and has both limitations and assets that are extremely unusual.  From the time of its formation in 1971, the UAE’s national leadership recognized that the country’s biggest challenge was how to overcome its relatively small population.  It sought to do this through careful long-term planning, including systematic economic and military development; investing in the country’s human capital, increasingly including women, in all sectors; developing technological solutions and innovations; and importing foreign labor.  From its earliest days, the UAE sought to use its financial resources and the soft power of aid and development to build international friendships, promote its perspectives, defend its interests, and enhance its reputation, particularly in Arab and Muslim countries.

The UAE has quietly built its own independent defense capabilities.  Over the decades, it has methodically constructed relatively small but sophisticated military assets such as its air force, special forces and high-tech offensive and defensive weaponry.  As this military capability has grown, the country has become more willing to use force, usually in conjunction with some set of allies, to secure its vital interests.  It has deployed these hard power capacities hand-in-hand with its more traditional soft power approaches.  It is also at the beginning stages of developing its own domestic defense industry.

The UAE has carefully nurtured a set of crucial strategic and military alliances, especially with Saudi Arabia and the other Gulf Cooperation Council members, as well as the United States.  The country seeks to do what it can for itself, but recognizes that much of what it needs to accomplish to secure its vital interests will have to be conducted in collaboration with others.  The formation of the GCC in 1981 was a direct response to the security crisis facing the Gulf Arab countries due to the 1979 Iranian Revolution and the outbreak of the Iran-Iraq War in 1981.  The focus of the GCC and its members, including the UAE, at the time of the council’s founding until the present day has been the defense of regional security, and stability in the face of threats emanating from Iran and regional conflicts.  In important respects, the UAE has developed into Washington’s most important Gulf Arab ally, with close military and intelligence cooperation reflecting the trust and respect the Emirati military has earned from senior U.S. commanders.

The UAE’s increasing willingness to act militarily to secure its interests is perhaps best reflected in the intervention in Yemen that began in 2015, which is primarily led by Saudi Arabia in the north and the Emirates in the south.  To support this campaign, and more broadly acquire greater strategic depth, the UAE has recently established military bases in the Horn of Africa, most notably at Assab in Eritrea.  To sustain this strategic expansion, and build on its logic, the UAE will almost certainly have to develop greater blue water naval capabilities in the coming decades.

In addition to its conventional military capabilities, the UAE is deeply committed to counterterrorism and counter radicalization efforts.  Much of its military campaign in southern Yemen focuses on counterinsurgency operations against Al-Qaeda in the Arabian Peninsula and other extremist groups, and the UAE was an early and enthusiastic participant in the air war in Syria against the Islamic State in Iraq and the Levant.  The UAE takes the hardest line of any Arab government, with the possible exception of Egypt, against Islamists in general, seeing them all as part of a continuum of radicalism.  It does not conflate the Muslim Brotherhood with al-Qaeda and ISIL or pro-Iranian Shia militias, but it does regard them all as different iterations of extremism to be categorically opposed.

In addition to counterterrorism and counter radicalization initiatives, the UAE is investing heavily in cybersecurity, using technology to combat both cyber criminals and, at times, domestic political dissidents.  Human rights organizations have raised concerns regarding some of these cases.

This study outlines how these ambitious national security strategy pillars developed and are being pursued.  In the process, it examines why the UAE is convinced it has few alternatives to playing a disproportionately significant economic, diplomatic, political, and military regional role, and how it is acting on that conclusion.  Finally, it assesses the impact this growing Emirati role and influence is having on a range of Middle Eastern dynamics, and where the UAE fits in the strategic landscape of this unsettled but still crucial region.  (AGSIW 06.04)

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11.6  SAUDI ARABIA:  Fitch Downgrades Saudi Arabia to ‘A+’; Outlook Stable

On 30 March, Fitch Ratings downgraded Saudi Arabia’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to ‘A+’ from ‘AA-‘.  The Outlooks are Stable.  The issue ratings on Saudi Arabia’s senior unsecured foreign-currency bonds have also been downgraded to ‘A+’ from ‘AA-‘.  The Country Ceiling has been downgraded to ‘AA’ from ‘AA+’ and the Short-Term Foreign and Local Currency IDRs have been affirmed at ‘F1+’.

Key Rating Drivers

The downgrade of Saudi Arabia’s Long-Term IDRs reflects the continued deterioration of public and external balance sheets, the significantly wider than expected fiscal deficit in 2016 and continued doubts about the extent to which the government’s ambitious reform program can be implemented.

Government deposits declined by SAR242b to SAR841b (35% of 2016 GDP) between June 2016 and January 2017, only about half the peak level of SAR1,643b in August 2014, although this decline partly reflects transfers between the government and the Public Investment Fund (PIF).  General government debt rose to 9.7% of GDP, from 4% in 2015.  This included sales of local-currency bonds during the first three quarters of last year and a $17.5b Eurobond issued in October.  The government balance sheet remains strong relative to ‘A’ and ‘AA’ category peers but will become less of a support for the rating unless the deterioration in public debt dynamics is arrested.

The deterioration in the government balance sheet reflects the large central government budget deficit of SAR416b or 17.3% of GDP in 2016, up from SAR362b in 2015 and much higher than the budget target of SAR326b.  The deterioration was mainly due to the clearance of arrears on capital expenditure of SAR75b.  The arrears arose in 2015 because payments for many projects were halted while the government was seeking greater visibility on the entirety of outstanding project commitments.

In its budget for 2017, the government has targeted a central government deficit of SAR198b or 7.7% of GDP for 2017.  The main factors behind the improvement will be the rise in crude oil prices, which will more than offset the effect of OPEC production cuts on government oil revenue, and the absence of further arrears payments.  According to the budget, oil revenue will rise by SAR151b in 2017 which is in line with our projections.  The government projects a decline in expenditure, mainly because it expects no further need for arrears clearance and no further accumulation of arrears.  We expect the central government deficit to fall to 9.2% of GDP in 2017 and 7.1% of GDP in 2018.  This will again be financed by some further run-down in deposits as well domestic and international issuance.  As a result, general government debt will rise to 14.5% of GDP in 2018.

The government has already taken several fiscal consolidation measures, including cuts in civil service allowances and a hike in administered utility prices.  Further measures are being implemented under the government’s consolidation plan, the Fiscal Balance Program (FBP), which targets to eliminate the fiscal deficit by 2020.  According to the FBP, phased hikes in regulated energy and water prices will bring additional revenue of SAR209b per year in 2020.  Gradual implementation of non-oil revenue measures (including a levy on expats to be phased in over several years and a value-added tax to be introduced at the beginning of 2018) will bring SAR152b and operational and capital expenditure control will also be enhanced.  To raise the social acceptance of these measures, an allowance for the poorest households with an annual cost of ultimately SAR60b-SAR70b per year in 2020 will be phased in.

These measures will help to contain further balance sheet erosion, but in Fitch’s view it is unlikely that they will all be achieved.  The FBP itself is ambitious and comes together with reforms to reduce Saudi Arabia’s oil dependence, including the IPO of Saudi Aramco planned for 2018 and an ambitious privatization agenda (our fiscal forecasts contain no IPO/privatization receipts as these will probably be transferred to the Public Investment Fund) as well as numerous sectoral initiatives.  The commitment of the political leadership to the reform program is very strong.  However, in Fitch’s view, the scale of the reform agenda risks overwhelming the government’s administrative capacity. In addition, the economy may not be able to absorb rises in administered energy prices, which could severely affect energy-intensive industries, or the planned expat levies, which could undermine large parts of the domestic private sector.

On the external side, partly as a result of the fall in government deposits, the Saudi Arabian Monetary Authority’s (SAMA) net foreign assets fell $46b or 7.2% of GDP between June 2016 and January 2017 to $517b.  We estimate the current account deficit at 6.1% for all of 2016, down from 8.7% in 2015, reflecting largely the rise in oil prices.  The reduction in government imports of goods and services during the build-up of arrears in the first three quarters, which improved the current account further, was probably reversed in Q4/16 as the arrears were cleared.  The deficit in 2017 will fall further to 3% boosted by higher oil prices.

Saudi Arabia’s ratings also reflect the following rating drivers:

GDP grew by 1.4% in 2016 according to preliminary data, with a rise in oil sector GDP of 3.4% and an increase in the non-oil sector by just 0.2%.  Weak non-oil growth reflected the liquidity crunch due to the delay of government payments during the first three quarters of last year and the increased uncertainty as a result of the reform efforts, which may have held back investment.  In 2017, oil production will be scaled back as a result of the OPEC production cuts, with Saudi Arabia committed to cutting its production by 323b/d.  Fitch expects the non-oil sector to grow by 1.4%, supported by arrears payments in late 2016 and early 2017 and a slower pace of fiscal consolidation.  After turning negative in January 2017, inflation is likely to be boosted by rises in excise taxes, utility price hikes and the VAT introduction but will remain moderate given limited demand pressures.

Fitch views Saudi Arabia’s banking sector as strong and stable.  Fitch’s banking sector indicator for Saudi Arabia remains ‘a’, which is one of the strongest indicators for all Fitch-rated sovereigns and weaker only than Australia, Canada, Singapore and Sweden.  The non-performing loan ratio, at 1.4%, and the capital adequacy ratio, at 17.5% in Q4/16, remain very healthy despite the more difficult economic environment.  Banking liquidity tightened up to Q3/16, but these pressures eased due to the clearing of government arrears, measures taken by SAMA and increased confidence following the successful Eurobond issuance in October.  Nonetheless, private sector credit growth slowed to 1.8% in January 2017, down from 8.1% in June 2016, due to tighter lending conditions by banks and the weak investment environment.

Geopolitical risks remain high relative to ‘A’ category peers. Saudi Arabia and its allies are fighting a war against Houthi rebels in Yemen and an end to the conflict remains elusive.  Tensions with Iran, Saudi Arabia’s main regional rival, also persist and could escalate, although direct military conflict remains highly unlikely.  The line of succession has been clearly defined, but Fitch believes rivalries within the royal family could become a source of instability.  Austerity measures, although very carefully phased in and combined with offsetting citizen account benefits, could raise discontent among the population but major sustained civil unrest remains unlikely.

Income per capita is in line with the ‘A’ category median, but the World Bank governance indicator and the business climate are well below the medians for ‘A’ category peers.

Rating Sensitivities

The following factors, individually or collectively, could trigger negative rating action:

– Continued rapid erosion of the fiscal or external positions, for example as a result of a failure to implement fiscal reforms or due to a renewed fall in oil prices.

– Spill-over from regional conflicts or a domestic political shock that threatens stability or affects key economic activities.

The following factors, individually or collectively, could trigger positive rating action:

– Fiscal consolidation sufficient to stem the depletion of fiscal and external buffers and put the budget on a path to a surplus.

– A sustained period of higher oil prices.

Key Assumptions:  Fitch forecasts Brent crude oil prices to average $52.5/b in 2017 and $55/b in 2018.  (Fitch 30.03)

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11.7  MOROCCO:  Fitch Affirms Morocco at ‘BBB-‘; Outlook Stable

On 7 April, Fitch Ratings affirmed Morocco’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘BBB-‘ with a Stable Outlook.  The issue ratings on Morocco’s senior unsecured foreign- and local-currency bonds have also been affirmed at ‘BBB-‘.  The Country Ceiling has been affirmed at ‘BBB’ and the Short-Term Foreign- and Local-Currency IDRs at ‘F3’.

Key Rating Drivers

Morocco’s ratings are driven by its economic performance, public finance and external finance metrics in line with ‘BBB’ medians and structural features (as reflected in development and governance indicators) that are weaker than peer medians.

Economic policy focuses on maintaining macroeconomic stability and is unlikely to change much as a result of the parliamentary election in October 2016.  The Justice and Development Party (PJD), the main governing party in the previous parliamentary term, remained the biggest party but differences between parties meant it took until March 2017 for a new government to be formed.  The main parties in the new government are the same and there is little indication that the addition of one smaller party will change the direction of policy.  However, the prolonged negotiation has meant little progress was made on reform projects under the caretaking government and it is likely that the reform momentum will take some time to return.

GDP growth fell to 1.6% in 2016, from 4.5% in 2015, mainly because of the worst drought in 30 years following a bumper harvest in 2015.  As a result, cereal production fell by more than 70% and agricultural value added decreased by 9.6%.  Confidence effects from the weak agricultural performance and low growth in the euro area as the key export market depressed the non-agricultural economy, which grew 3.1%, after 3.5% in 2015, illustrating the limited effect of the industrial strategy on growth so far.  Rainfall for the 2017 agricultural season has been favorable, suggesting that there will be a significant rebound in the agricultural sector and this should help lift growth to 4.3% in 2017.  In 2018, base effects will no longer boost GDP growth, leading to a deceleration to 3.2%.

Despite the weakening economy, the central government deficit decreased to 4.1% in 2016, from 4.3% in 2015, although it stayed well above the budget target of 3.5%.  Apart from the impact of weaker growth, the underperformance relative to the budget reflected a higher execution of investment projects, an acceleration of VAT refund payments and another fall in disbursements of grants from GCC countries.

The budget for 2017, submitted to parliament in October, foresaw a deficit of 3% of GDP, but due to the lower starting point we expect the deficit will come in at 3.8% of GDP.  The improvements will partly reflect the economic recovery, although the tax take from the agricultural sector is quite small.  In addition, improved budget administration as a result of the Organic Budget Law (OBL) will also help to contain expenditure.  Fitch estimates that the fiscal deficit of the general government, which also includes social security, local governments and special treasury accounts, was 1.7% of GDP in 2016, down from 1.8% in 2015, with a further decline to 1.3% in 2017.  In addition to the improved central government, the improvement reflects the impact of pension reforms approved last year.

The delay in forming a new government and in approving the budget for 2017 has had only limited impact on fiscal execution.  The OBL has streamlined fiscal management for periods where no approved budget is in place, and under a government decree the draft budget 2017 is being implemented with the exception of civil service recruitment and the implementation of new projects.

Fitch estimates general government debt peaked at 49.6% of GDP in 2016 and is likely to decline gradually in subsequent years.  The government faces significant additional contingent liabilities from guarantees mainly for infrastructure projects managed by state-owned enterprises, estimated at 19% of GDP in 2016.  The guarantee exposure is expected to continue rising moderately, but the track record suggests a low likelihood that the liabilities will move to the government balance sheet.

The current account deficit deteriorated substantially in 2016 to 3.9% of GDP, from 2.1% in 2015 despite the beneficial effect of lower oil prices.  The deterioration primarily reflected a sharp rise in capital goods imports, which rose by 27% in MAD terms.  The deficit was also affected by soft prices for phosphates and phosphates-based fertilizers, one of Morocco’s main export commodities (accounting for 18% of exports).  We expect the government’s policy of attracting foreign investment to lead to a continued high demand for capital goods, but the deficit should gradually decline as growth in exports will remain solid.  This could help net external debt, which at 11.5% of GDP remains higher than the BBB median of 0.6% of GDP end-2016, to decline gradually.

However, significant capital inflows meant that the Bank al-Mahgrib was able to raise international reserves $2.3 billion to $24.4 billion or 6.5 months of current external payments at end-2016.  The currency is considered to be broadly aligned with fundamentals and the authorities are still planning to gradually move to a more flexible exchange rate arrangement.  Fitch believes this will initially only mean wider fluctuation against the currency basket against which the dirham is pegged.  Capital account liberalization, reducing restrictions on Moroccan investments abroad, will be phased in only gradually.

Development and governance indicators are weaker than ‘BBB’ medians. In particular, GDP per capita and the World Bank’s human development indicator are lower than both the ‘BBB’ and the ‘BB’ category medians.  Exposure to financial shocks is moderate, due to a developed and broadly sound banking sector.

Rating Sensitivities

The Stable Outlook reflects Fitch’s assessment that upside and downside risks to the rating are currently balanced. The main factors that may, individually or collectively, lead to positive rating action are:

– Continued fiscal consolidation and reduction in public debt-to-GDP

– Structural improvement in the current account balance consistent with declining net external debt to GDP

– Over the medium term, improvement in development indicators illustrating rising debt tolerance

The main factors that may, individually or collectively, lead to negative rating action are:

– A widening of twin deficits, leading to rising public and external debt burdens

– A weakening of medium-term growth prospects

– Political and security developments that affect macroeconomic performance

Key Assumptions

Fitch assumes that Brent crude prices will average $52.5/b in 2017 and $55/b in 2018.

Fitch assumes that the Eurozone economy will grow by 1.7% in 2017 and 1.6% in 2018.  (Fitch 07.04)

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11.8  MOROCCO:  Morocco Finally Gets New Government, But At What Cost?

Imad Stitou posted on 12 April in Al-Monitor that the announcement of a new Cabinet in Morocco after months of difficulty revealed that the Islamist Justice and Development Party (PJD) may have had to pay a heavy price for compromise.

Now that Morocco has a new Cabinet and prime minister, the dust is finally settling after six months of wrangling over the appointments — though one journalist described the outcome as a “dangerous democratic setback.”

When the leading Islamist Justice and Development Party (PJD) failed in five months to negotiate a new government, King Mohammed VI dismissed Prime Minister Abdelilah Benkirane in March, replacing him with the party’s second in command, Saadeddine El Othmani.  The new 39-member Cabinet, which was announced on 5 April, has 13 first-time appointees representing six of the 10 parties that participated in the election.

The PJD, led by Benkirane, had rejected conditions proposed by other parties supported by the king and refused to include the Socialist Union of Popular Forces (USFP) in the governmental coalition.  In fact, Benkirane had vowed that, come hell or high water, the socialist party would not be involved in the government as long as he was prime minister.  His refusal might have stemmed from the USFP not negotiating with him directly to participate in the government; instead, it joined a bloc of four parties to negotiate.

It seems the PJD had to face reality, as further opposition would have pitted it against the king and violated the party’s political principles — to focus on gradual reform and to avoid radically opposing the king.  Consequently, Islamists had to accept the palace’s demand for coexistence, giving the party only a limited role that doesn’t match its public base and electoral weight.

Othmani agreed to involve the USFP in the governmental coalition.  The party caved in and made painful concessions that might have tough repercussions in its future.  Complaints were leaked from the PJD describing the concessions as “treacherous” and “contradictory to Benkirane’s approach.”

Benkirane, a moderate Islamist, was willing during the negotiations to form the government with National Rally of Independents leader Aziz Akhannouch, as he gave up his condition to include the Istiqlal Party in the government and agreed to the presence of the Constitutional Union.  However, he escalated the tone of his rhetoric against the remaining political parties, which he accused of impeding government formation.  He repeatedly said attempts to draw a new political map would turn the PJD into a minority within the government despite the single party winning 125 parliamentary seats out of 395 total.

He was right.  The four-party bloc led by Akhannouch and backed by the king was given strategic portfolios in the government like economy, finance, agriculture and commerce.  The bloc got a total of 17 ministries, compared with the PJD’s 11.  Among the new Cabinet are 25 technocrat ministers close to the king.

Abdul Rahim al-Allam, a political science researcher at Cadi Ayyad University in Marrakech, said the king achieved the goals he sought by preventing formation of a Benkirane-led government.  He undermined the Islamists, making them a minority in the government they lead and giving them marginal ministries.  The king also managed to get rid of the sometimes unruly but widely popular Benkirane who, despite his loyalty to the king, stirred an internal PJD crisis.

“This is undoubtedly the first real internal crisis that the Islamist party has faced since its establishment in 1998,” Allam told Al-Monitor.  “The party faces several challenges due to the multiple last-minute concessions and the approval of the appointment of a new leader instead of Benkirane.  The members’ agreement to the conditions that Benkirane had previously refused condemn him and verify the story of his adversaries, who blamed him personally for the stalled government formation.”

Allam noted that Othmani’s government probably lacks the wide Islamist popularity that Benkirane’s government enjoyed.  “The situation does not look promising for Islamists. It will be hard for them to defend a government in which they play a marginal role. Benkirane’s take on these developments is also influential.  He has so far tried to distance himself and refrain from giving negative or positive comments on the concessions.  If he openly voices his support for Othmani, any signs of a crisis would vanish. But his silence will not be as reassuring because it might be interpreted as lack of consent,” Allam said.  “Othmani would then lose his party’s internal support. Besides, the Islamist public base is closely linked to Benkirane, as he represents demagoguery that goes beyond political conviction.”

Bilal al-Talidi, the former editor-in-chief of the Islamist-affiliated Al-Tajdid newspaper, said that although the PJD is going through tough times, he doesn’t expect internal divisions and he believes the party’s upcoming national conference in September will be decisive in determining political guidelines.  “The concessions that Islamists made during the government formation after Othmani’s appointment definitely affected the party, and there is a general state of anger that the 7 October results triggered, amid attempts [by other parties] to weaken the party and increase disagreements within it,” he told Al-Monitor.

“This is a moment of dangerous democratic setback necessitating re-evaluation of the democratic transition,” he said, adding that the upcoming conference will determine how best to face current circumstances.  “The suggested options include calling for Benkirane’s return as leader of the party by changing the party’s organizational law.  But I think the PJD will remain united because it is a party of institutions.  So far, it has only expressed stances that do not attack Othmani as a person, but rather reflect a conviction that overruling Benkirane’s approach would cost the party a high price, and the successive concessions serve as proof.”

Talidi thinks Benkirane stepped aside and did not announce a firm stance after his dismissal because he did not want to clash with the king or burst Othmani’s bubble.  This is why he did not participate in Othmani’s deliberations with the other parties or in meetings to choose the party’s ministers.

The PJD’s hopes are hanging on its upcoming conference, which will be decisive. The party is torn between opposing currents.  One is led by Benkirane’s supporters, who want him to remain at the helm of the party and are calling for distance from the current government.  The other current wants to weaken the PJD and claims it is the party’s duty to support the government despite modest participation in it.

Imad Stitou is a Moroccan writer and journalist who specialized in investigative journalism for al-Aan and Hespress magazines and al-Massae newspaper.  He also worked as a correspondent for a number of Arab newspapers in Morocco, notably London’s Al-Quds al-Arabi and the Lebanese News.  He is an opinion writer for the Radio Netherlands Worldwide website.  He made the short list for the Arab journalism award for youths in 2014 and has published several articles in Arabic cultural, literary and research magazines.  (Al-Monitor 12.04)

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11.9  TURKEY:  Why Turkey’s Growth Data Has Economists Scratching Their Heads

Mustafa Sonmez observed on 5 April in Al-Monitor that Turkey’s latest growth data, which suggests the economy rebounded strongly in the fourth quarter of 2016, appears out of sync with other key indicators, fueling doubts over Ankara’s new calculation method.

On the data calendar of the Turkish Statistical Institute (TUIK), 31 March was the day to release the country’s fourth-quarter economic growth for 2016 and thus the overall rate for the year.  The figures came as a surprise.  Following a contraction in the third quarter, the Turkish economy rebounded strongly in the fourth quarter, growing 3.5%.  This put the overall growth rate for 2016 at 2.9%.  Hungry to showcase some economic success, Ankara was in an upbeat mood, but the figures rekindled questions on just how reliable the data is — a debate that had flared in December, when TUIK announced a retrospective revision of whole data sets, using a new calculation method.

For the majority of Turkish economists, excluding those who curry favor with the government, the credibility of the data is questionable.

The introduction of a new calculation method last year had resulted in a staggering upward revision in the gross domestic product (GDP) for 2015.  The revised figure stood at $861 billion, a 20% increase from the original one.

According to TUIK, the Turkish economy grew 2.9% last year, based on local currency and with inflationary adjustments.  When the GDP in current prices is divided by 3.04 Turkish lira, the dollar’s average exchange rate last year, the GDP amounts to $857 billion.  This places Turkey among the world’s 18 largest economies.  The per capita income in dollars is $207 less from 2015, but the $10,807 figure still makes the government happy.

Based on the $857 billion figure, the current account deficit of $32.5 billion is 3.8% of GDP, and the country’s $404 billion foreign debt stock at the end of 2016 amounts to 47.1% of GDP.  Hence, despite the nearly 3% growth rate, the Turkish economy retains its “fragile” status amid the Turkish lira’s dramatic depreciation against the dollar, the resulting deficits and a foreign debt burden that has not downsized.

It is important to note that the 2.9% growth rate involves fresh retrospective revisions that TUIK announced 31 March.  While the 4.5% growth rate for the first quarter of 2016 remained unchanged, the 4.5% rate for the second one was revised up to 5.3%, and the 1.8% contraction in the third quarter was revised down to 1.3%.  Without those “improvements,” the overall growth rate for the year would have been 2.5%.

Government ministers and President Erdogan hailed the figures, quickly adding them to their talking points for the 16 April referendum, which will seal the fate of constitutional changes designed to equip the presidency with sweeping executive powers.

True to style, Erdogan gloated at credit rating agencies, which he has frequently slammed for unfairly cutting Turkey’s grades.  “Look, Turkey has grown 2.9%,” he told the crowd at a 2 April rally.  “Remember those renowned economic assessment agencies that I use to dress down? [The growth rate] turned up 1 point higher than their forecasts.”  He then used soccer terms to make his point: “This means another curve ball.  They should keep in mind that this nation is good at scoring penalties [penalty kicks].”

Deputy Prime Minister Mehmet Simsek was happy the economy had come back from the verge of recession despite global financial trends that diverted money from emerging economies, a decline in tourism revenues as a result of the crisis with Russia and a string of terrorist attacks, shrinking agricultural production and the political clamor from the coup attempt last year.  “The Turkish economy has continued to grow despite all those shocks. … [It] has rapidly overcome the shock of the treacherous coup attempt and has not technically entered recession,” he said in a 31 March statement, claiming that a “yes” outcome from the referendum would give fresh impetus to the economy.

An important detail that such analyses miss is the contrast between the two halves of 2016.  The 15 July putsch attempt and its aftermath aggravated all of Turkey’s risk factors, creating a climate much different from the first half of the year.  This led to large outflows of foreign capital and negative assessments by credit rating agencies, which, in turn, caused the Turkish lira to fall much faster against the dollar than other currencies.  All this resulted in a blow to economic production, as evidenced by the overall growth rates in the two halves of the year — 4.9% in the first and 1.1% in the second.

What is more, the new GDP data sets appear out of sync with other key economic indicators.  The most glaring inconsistency is between the growth and unemployment data.  With the jobless rate close to 11% on average in 2016, rising fast especially in the last quarter, a pronounced momentum in growth in the same period remains a mystery to many.

Some Turkish economists such as the prominent Mahfi Egilmez refrained from an outright comment on the latest GDP figures without a lengthy prelude questioning the new calculation method.  More radical pundits, who see the new calculation method as unacceptable, argue that the data should be completely rejected and call for alternative growth calculations based on the old method.

In a joint declaration, a group of renowned economists, including Korkut Boratav, Oktar Turel and Tuncer Bulutay, offered a scathing review of the new calculation method.  In his column in BirGun daily, Boratav said TUIK had gone “well beyond” revision recommendations by the statistical agencies of the United Nations and the European Union.  “With the stated aim of ‘improving statistics,’ the GDP’s level and growth trend after 2002 have been raised excessively, the shares of sectors have been changed significantly and the levels of investment and saving have been increased,” he wrote.

According to Boratav, TUIK had databases in line with international standards that covered production, business and turnover statistics in the industry and service sectors and that were complete with corresponding sets on employment, wages and salaries.  The previous GDP calculations relied on those databases, he said.

In the new calculation method, however, the database has shifted to administrative and bureaucratic records by the Finance Ministry, especially the tax authority, the Interior Ministry and the Banking Regulation and Supervision Board, Boratav said.  This means the principal data now comes from accounting records such as tax returns instead of production surveys.  “Such records could be detached from real economic variables,” Boratav warned.  “The concepts are different, resting on administrative and legal definitions rather than economic ones.  Different rules, taxes and definitions would produce different results.”

In sum, Turkey’s new GDP data remains a subject of dispute, and the International Monetary Fund (IMF) has not yet started using it.  As long as growth figures remain in conflict with key indicators such as unemployment, the question of credibility will linger on.  How much the IMF and credit rating agencies will trust the new data is a curious topic to watch in the coming days.  (Al-Monitor 05.04)

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11.10  TURKEY:  Where Does Erdogan’s Referendum Win Leave Turkey?

Cengiz Candar observed on 17 April in Al-Monitor that the result of Turkey’s referendum was far from the mandate the country’s president was seeking and leaves much of the population — and outside world — questioning the legitimacy of the process.

The outcome of Turkey’s 16 April referendum wasn’t exactly the victory President Recep Tayyip Erdogan was aiming for: clear support for constitutional amendments that would give him more executive power than even republic founder Kemal Ataturk had envisioned for himself.  Dissent was strong in the country’s largest cities, and European officials also have registered their disapproval.

Before the results were even announced, Prime Minister Binali Yildirim delivered the first victory speech of the night, not Erdogan himself.  But with Erdogan’s pragmatism, which for all practical purposes is necessary for his survival, he was quick to give a speech declaring victory, even as the results of the referendum were being contested with allegations of irregularities and fraud.  Given the controversy of the neck-and-neck results blemished with the allegations of rigging, Erdogan couldn’t resist — but he did not look confident or triumphant.

In an unusually brief and uncharacteristically muted speech, with a stony expression on his face, he insisted he had won the contested referendum and called on the outside world for acknowledgment.  He once again mentioned enacting capital punishment.

According to official figures, approval for an executive presidency — which many Turks believe will amount to a one-man rule — came out with roughly 51.4% of the vote, while the “no” votes made up 48.6%.  Turnout was measured at 83.3%.  There were 24,325,985 “yes” votes counted against 23,189,021 “no” votes — a difference of 1,136,964.  More than 800,000 votes were invalidated because they weren’t clearly marked or weren’t submitted properly.  However, even as the voting was underway, the main opposition Republican People’s Party (CHP) and the pro-Kurdish Peoples’ Democratic Party (HDP) registered a complaint with the Supreme Election Board, alleging 2.5 million ballots were used without official seals on them.  Under Turkish election law, those ballots would have to be considered invalid.  Yet the Supreme Election Board, known to be close to Erdogan, dismissed the allegations.

Irregularities reported from all around Turkey are abundant.  Even if all of them are unfounded, Erdogan’s win can best be defined as a Pyrrhic victory: victory, but at what cost?  The most important indicator of such a judgment is his loss of all the big cities.  In Istanbul, historically the economic and cultural megalopolis of Turkey, and in the capital city of Ankara, “no” votes exceeded “yes” votes.  In the third-largest city, Izmir, the ratio was devastating: 69% rejected the amendments.

All the areas along the Mediterranean and Aegean (southern and western) coastlines of Turkey, all the way to Istanbul, across the Marmara Sea, to the Black Sea coast overwhelmingly voted against the referendum, including the fourth-largest town, Adana and the new touristic metropolis of Antalya.  In the latter two, the difference was clear: 60% against; 40% in favor.

Turkey’s mostly Kurdish southeast produced stunning results.  Almost 70% of voters in Diyarbakir, the Kurdish spiritual center, rejected the referendum.

The ratio of “no” votes was strikingly high in most militant Kurdish towns where the mayors had been arrested and their administrations turned over to trustees appointed from Ankara.  Some of those towns had been reduced to rubble as a result of heavy fighting and have remained under curfew almost for a year.  The “no” votes in those towns were as follows: Cizre, 80%; Nusaybin, 79%; Silvan, 77%; Silopi, 75%; Lice, 85%; and Varto, 87%.

Erdogan derived his support mainly from vast agricultural regions of central Anatolia, some central-eastern provinces, and most of the staunchly conservative, nationalistic constituencies along the Black Sea coast.

Erdogan’s motto during the one-sided campaign was “One state, one nation, one flag.”  But with the referendum results, it is safe to say Turkey is more polarized and divided than ever.  Though it is still considered one state under one flag, it most likely is now three nations pretending to be one: two increasingly irreconcilable Turkish nations and the Kurdish nation.

It should never be forgotten that — even if the election proves to be fraud-free — Erdogan’s Pyrrhic victory was achieved in an unprecedented, unfair campaign.  The campaign was conducted under a state of emergency.  Anybody against the referendum was dubbed by the president himself a traitor to the nation or a “terrorist” linked to Gulenists, the Kurdistan Workers Party (PKK) and the like.  During March and April, Istanbul was plastered with signs supporting the referendum and posters of Erdogan.

The visual and print media controlled by the president engaged in the “yes” campaign almost entirely.  For instance, according to a survey covering 1 – 10 March, during primetime, the presidency enjoyed 53½ hours of coverage; the ruling AKP, 83 hours; and the ultranationalist, pro-referendum Nationalist Action Party (MHP), 14 hours.  The main opposition — the CHP — received 17 hours of coverage, and the pro-Kurdish HDP (whose chairman and 12 lawmakers are in prison) got only 33 minutes.  The “yes” campaign had live coverage for 485 hours compared with 45½ hours for the opposition.

In fact, the Council of Europe’s advisory body on legal issues, the Venice Commission-European Commission for Democracy through Law, issued a report on Turkey in March saying that holding a referendum under the state of emergency conditions must be considered invalid if not illegal.

“In particular, the extremely unfavorable environment for journalism and the increasingly impoverished and one-sided public debate that prevail in Turkey at this point question the very possibility of holding a meaningful, inclusive democratic referendum campaign about the desirability of the amendments,” the report said.  “In conclusion, the Venice Commission is of the view that the substance of the proposed constitutional amendments represents a dangerous step backward in the constitutional democratic tradition of Turkey.  The Venice Commission wishes to stress the dangers of degeneration of the proposed system toward an authoritarian and personal regime.”

On the night of the referendum, Social-Democrat Kati Piri — the Netherlands’ representative to the European Parliament and rapporteur for Turkey’s accession bid — wrote on her blog: “In an unfair election environment, a narrow majority of the Turkish population has endorsed the constitutional package that will give President Erdogan unchecked powers, which will fit an authoritarian system.  This is a sad day for all democrats in Turkey.  It is clear that the country cannot join the [European Union] with a constitution that doesn’t respect the separation of powers and has no checks and balances.  If the package is implemented unchanged, this will have to lead to the formal suspension of the EU accession talks.  Continuing to talk about Turkey’s integration into Europe under the current circumstances has become a farce. … The result of today’s vote is a major shift away from European values. Erdogan’s autocratic behavior has deeply polarized Turkish society and harmed the economy.”

As the first loud European voice on the most recent developments in Turkey, she continued tweeting about the contested results.  “In unfair elections, narrow majority for ‘yes.’ Too small margin for such drastic changes,” she wrote.  “Almost half of Turkish population voted ‘NO.’ Imagine if it had been a fair electoral campaign!”

Notwithstanding Turkey’s foggy EU prospects, life went on and Turks and Kurds awoke 17 April to a “New Turkey.”  After a probably rigged referendum and a Pyrrhic victory, the future is no more certain for its main protagonist, Erdogan and even more uncertain for the almost 80 million citizens of Turkey.  (Al-Monitor 17.04)

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