Fortnightly, 21 September 2016

On 14 September, Israel and the United States inked a landmark defense aid package, in which Washington has pledged to give Jerusalem $38 billion in military assistance over the next decade. The defense package, which will provide Israel with $3.8 billion a year between 2018 and 2028, is the largest aid package ever given to a U.S. ally. Prime Minister Benjamin Netanyahu welcomed the deal, saying, “This agreement ensures unprecedented U.S. defense aid to Israel over the next decade. This is the biggest defense aid package the U.S. has ever extended any nation, and it will allow us to continue and develop our military strength and our missile defenses. This is a very important achievement for the State of Israel.”

An official with the Prime Minister’s Office stressed that the deal is “a historic achievement for Prime Minister Netanyahu,” adding that in the event of a war, Israel would be able to appeal to Congress for additional aid. The landmark deal was reached despite budget cuts, including defense cuts, in the U.S.

U.S. National Security Adviser Susan Rice hailed the deal as a “win-win” situation that will improve the security of both countries. “We affirm today the unbreakable bond between the United States and Israel,” she said. “Since 2009, the U.S. has provided almost $24 billion in military aid to Israel. We are proud that no other administration has done so much to enhance Israel’s security. We can’t know what will happen in the next 10 years, but we do know that the U.S. will always be there for the State of Israel and its people, today, tomorrow and for generations to come.” President Barack Obama issued a special statement after the deal was signed, stressing that it demonstrates the U.S.’s commitment to Israel’s security in word and deed.

According to a White House fact sheet, the deal includes annual payments of $3.3 billion in foreign military financing to Israel and $500 million a year for Israeli missile defense funding — the first time this has been formally built into the aid package. The funding will allow Israel to update most of its fighter aircraft, including purchasing additional F-35 fighter jets. Israel is scheduled to receive 33 F-35 aircraft, the first two of which will be delivered in December. The deal also includes restrictions: Under the agreement, Israel’s ability to spend part of the funds on Israeli military products will be phased out and eventually it will have to spend all of the money on American military industries. Israel’s preference for spending some of the aid internally had been a major sticking point in the deal. (Various 14.09)

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1.2 Israeli Government to Encourage High-Tech Engineers to Immigrate to Israel

Prime Minister Netanyahu has ordered the establishment of an inter-ministerial team that will deal with encouraging Jewish engineers and software developers to work in Israel. During a recent cabinet meeting, Netanyahu announced this initiative, aimed at tackling the shortage of engineers and developers in Israel’s high tech. The team will be responsible for examining the possibility of offering Jewish engineers with a unique benefit track, based on their eligibility for the Law of Return. The effort will be coordinated by the Prime Minister’s Office Director General Gruner.

According to the Israel Innovation Authority report submitted to the prime minister last June, in the next decade Israel will suffer from a shortage of about 10,000 engineers and programmers. The report warned that “Israel is weakening as an international innovation leader” – due to the decline in the number of computer science, mathematics, and statistics graduates, from 3,000 in 2004 to 2,250 in 2014. (Globes 11.09)

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1.3 Luxembourg PM Visits Israel & Lauds Excellent Bilateral Ties

On 12 September, Prime Minister Netanyahu met with Luxembourg Prime Minster Bettel in Jerusalem. This was the first visit by a Luxembourgish prime minister to Israel. The Prime Minister’s Office described the leaders’ meeting as “very good.” Bettel invited Netanyahu to visit Luxembourg, and the two discussed increasing bilateral trade ties, as well as various regional issues.

Referring to Luxembourg’s first-ever apology for the suffering of its Jewish community during World War II, issued in June, Netanyahu expressed his appreciation for “the forthright position that you took in Luxembourg regarding the events there during World War II and your apology to the Jewish community was deeply appreciated.” Bettel replied that he was “very happy to hear … that the position of my government, 70 years later, to apologize to the Jewish community by saying that we were not all heroes in my country, was deeply appreciated. For me it was important to do that step, because it’s never too late to recognize errors, but the biggest error is not to recognize errors.”

Noting that trade between the two countries nearly doubled between 2014 and 2015, Bettel lauded the “excellent” political and economic relationship between Luxembourg and Israel. He said, “We have a big economic delegation that is also now discussing with its counterparts here in Israel.” Bettel later signed an agreement to increase academic cooperation with the Hebrew University of Jerusalem. (IH 12.09)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 WSC Sports Technologies Secures $12 Million Series B Financing Round

WSC Sports Technologies completed a $12 million Series B round of financing. The round was led by Intel Capital, with participation from existing and new investors including the Wilf family (owners of the Minnesota Vikings), the ownership of the LA Dodgers, and Dan Gilbert (majority owner of the 2016 NBA Champion Cleveland Cavaliers). The investment brings WSC Sports’ total funding to $16 million and will help the company significantly accelerate growth and international expansion. The Series B financing round marks a remarkable year for WSC Sports, which kicked off with a significant deal with the National Basketball Association, the acceptance of the prestigious Sports Technology Award and wide publicity regarding the launch of the first ever Facebook Video chat bot.

WSC Sports’ customers, including the NBA, Turner Sports, Big East Conference, the ELeague and others, are using the company’s platform to automatically generate customized highlights packages in near real-time and utilize the plethora of fan engagement products the platform has to offer; the generated video content is featured across multiple digital and social assets, ensuring fans around the world access to the best moments from every team and player they wish. Several other major deals with leading broadcasting and sports organizations are in the works, though still in stealth mode.

Ramat Gan’s WSC Sports has developed a video creation and distribution platform that automatically and in real-time scans sports broadcasts, identifies each and every event that occurs in the game, generates and then publishes short-form videos to any digital destination, including various fan-facing applications developed by the company. Among WSC’s clients are some of the largest media rights holders: the NBA, Turner Sports (March Madness, ELeague), British Telecom, the Big East Conference and more. (WSC Sports 08.09)

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2.2 MX1 Unveils Complete Global Service Offering

MX1 presented its complete service offering and new innovative, end-to-end media service platform, MX1 360. MX1 the world’s media globalizer, a wholly-owned subsidiary of SES, works with leading media businesses to transform content into the ultimate viewer experience for a global audience. MX1 serves as a complete end-to-end media experience provider, amplifying the value of media content. MX1 has centralized its full suite of next-generation video and media services into its new innovative open media service platform – MX1 360, enabling leading media businesses to manage, deliver and monetize content from a single, hybrid, cloud-based and on-premises service platform.

MX1, a wholly-owned subsidiary of SES, is a global leading media services provider. The world’s first media globalizer works with leading media businesses to transform content into the ultimate viewer experience for a global audience. With more entertainment, more innovation and more impact, MX1 offers a full range of content management, delivery and value-added digital media services. Every day, MX1 distributes more than 2,500 TV channels, manages the playout of over 500 channels, delivers syndicated content to more than 120 leading subscription VOD platforms, delivers over 8,000 hours of online video streaming and delivers more than 500 hours of premium sports and live events. The new company has 16 offices worldwide and operates six global state-of-the-art media centers, enabling customers to reach billions of people around the world. (MX1 01.09)

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2.3 Tel Aviv Helps Kenya Build $14.5 Billion ‘Silicon Savannah’ City

Israel’s ‘startup city’ Tel Aviv is helping Kenya to build its first tech hub in the new city of Konza, just outside the capital Nairobi. The ambitious, $14.5 billion project will feature a science and business park, convention center, shopping malls, hotels and international schools, among other facilities. The new smart city will be built on 5,000 acres of land, about 37 miles south of Nairobi.

Headed by Tel Aviv Global, the city also plans to host seminars and meetups with local startups, in order to foster collaboration between Kenya and Israel, and connect Israeli startups that market to African countries with the founders of the new city of Konza. Israeli companies have been involved in Africa for years, but the Holy Land’s own transition into a modern country can contribute to budding technology centers around the globe.

Kenya approved plans for the new city Konza, which is expected to be completed in 2019, about three years ago. In the initial phase, the city will be home to 30,000 residents and offer 17,000 jobs. By 2030, it is expected to grow to 200,000 residents and add thousands more jobs. But the Konza smart hub, dubbed “Silicon Savannah’ or ‘Techno City,’ has also had its share of criticism. Some say the $14.5 billion investment in building the city should, at least partly, go towards funding local startups. Other critics say Konza is located too far from the bustling capital Nairobi. (NoCamels 14.09)

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2.4 Datorama Secures $32 Million for AI-Based Marketing Analytics

Datorama closed on a $32 million round of Series C funding led by Lightspeed Venture Partners. It plans to invest the funds in artificial intelligence (AI) technologies to support its machine-learning capabilities. Datorama has raised $50 million since it was founded in 2012.

Datorama’s Software-as-Service (SaaS) platform gives marketers the ability to connect all of their data sources together, helping organizations produce marketing data analytics and gain business insight. Its solutions include continuously updated KPIs, analytics and insights. Its dashboards and reporting cover standard KPIs to advanced predictive analytics. Company officials said that Datorama’s Marketing Integration Engine, using AI technologies, automates the process of connecting online and offline data sources from advertising, marketing, sales and customer relationship management (CRM) technologies. It combines that data integration capability with patent-pending data modeling, campaign management tools, data visualization and advanced analytics.

Tel Aviv based Datorama‘s Marketing Integration Engine addresses one of the toughest challenges facing data-driven marketers today: Quickly integrating all of the marketing department’s messy, siloed data. By applying artificial intelligence, the Marketing Integration Engine automates the process by which marketers connect all of their online and offline data sources from the ever-increasing landscape of advertising, marketing, sales and CRM technologies that pervade today’s marketing technology stack.

The platform provides an end-to-end marketing analytics solution for business users that combines this industry-leading data integration capability with patent-pending dynamic data modeling, productized campaign management tools, intuitive data visualization, and advanced analytics that powers unified reporting for real-time data analysis and insights. Datorama helps enterprises, agencies, publishers and platforms of all sizes centralize all of their marketing data while providing the agility to experiment and manage change, two hallmarks of today’s data-driven marketing environment. (Datorama 16.09)

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2.5 Elbit Systems Wins Contract to Supply an Asia-Pacific Country with Advanced Electro-Optic Systems

Elbit Systems was awarded a contract valued at over $90 million from an Asia-Pacific country, for the supply of SPECTRO XR advanced electro-optic systems. The contract will be performed over a four-year period. SPECTRO XR is an ultra-long-range, day/night, multi-spectral electro-optical ISTAR system. At its heart is a large multi-spectral imaging system combining multiple cameras into one, allowing SPECTRO XR to significantly improve performance without increasing size and weight. The implementation of fully digital sensors and lasers, with a very high level of stabilization, provides users with high performance in adverse weather conditions. The modular design enables users to select the configuration best suited to their needs, both in terms of performance and cost. The system can be installed on a variety of platforms including rotary and fixed-wing airborne platforms, aerostats, naval vessels and land applications. A wide variety of command and control interfaces enables simple integration of the SPECTRO XR with various other systems onboard, such as mission computers, radar, data-links and helmet-mounted tracking systems.

Haifa’s Elbit Systems is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (“C4ISR”), unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems. (Elbit 11.09)

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2.6 Sensibo Raises $2.6 Million

Sensibo has closed a $2.6 million seed funding round led by Motus Ventures with the participation of Lool Ventures. The company also announced the launch of Sensibo Inside, its newly launched turnkey IoT solution that enables original equipment manufacturers (OEMs) and distributors to turn any appliance into a smart device without the need for expensive and lengthy R&D cycles or product redesign. Sensibo is partnering with Blue Star, a leading air conditioning company in India, to integrate Sensibo Inside in homes across India. Blue Star will integrate Sensibo Inside to connect air conditioners to the cloud, immediately enabling remote monitoring and control, scheduling and autonomous operations. Air conditioners will automatically turn off when the home is empty and turn back on before everyone’s arrival, fostering advanced energy savings.

Tel Aviv’s Sensibo is a scalable and reliable climate control solution, bringing value to distributors, OEMs and customers. The Sensibo platform provides OEMs with an advanced analytics engine that turns millions of data points generated by customers into meaningful visual and accessible reports. Sensibo’s platform improves customer service by responding to malfunction alerts and automatically sending notifications for air filter replacement. (Sensibo 13.09)

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2.7 Cato Networks Raises $30 Million

Cato Networks has raised $30 million in a series B funding round. The financing was led by Greylock Partners with participation from Singtel Innov8 and existing investors U.S. Venture Partners (USVP), Aspect Ventures and the company’s founders, Shlomo Kramer and Gur Shatz. The funding will allow Cato Networks to offer its cloud-based network security as a service (#NSaaS) solution, the Cato Cloud, to the global market, bringing the cloud’s transformative power to networking and security. This financing, which is the company’s second after closing a $20 million series A round in June 2015, shortly after it was founded, underscores a growing realization that the cloud will alter the way that enterprises address networking and security. This is already occurring in the marketplace, as organizations look to address burdensome network and security complexity.

Founded in 2015, Tel Aviv’s Cato Networks provides organizations with a software-defined and cloud-based secure enterprise network. Cato delivers an integrated networking and security platform that securely connects all enterprise locations, people and data. The Cato Cloud reduces MPLS connectivity costs, eliminates branch appliances, provides direct, secure internet access everywhere, and seamlessly integrates mobile users and cloud infrastructures to the enterprise network. (Globes 13.09)

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2.8 Claroty Exits Stealth Mode With $32 Million in Funding to Protect Industrial Networks

Claroty has exited stealth mode with $32 million in venture capital from marquee investors. Claroty’s backers include Bessemer Venture Partners, Eric Schmidt’s Innovation Endeavors, Marker LLC, ICV, Red Dot Capital Partners and Mitsui & Co. The company enters the market as the most substantially funded cybersecurity startup focused on protecting industrial control systems, and with one of the deepest teams in OT security from organizations including Siemens, IBM, Waterfall Security, Palo Alto Networks, iSIGHT Partners (FireEye), ICS2 and Industrial Defender.

From power plants and oil refineries, to manufacturing and the electric grid, the susceptibility of industrial control systems to cyberattacks was largely a taboo subject and a dark art. However, since the disclosure of Stuxnet, vulnerability reports have exploded, and many attacks – both new and old – have been classified as cyberattacks. Recent examples include the Ukraine power grid and German steel mill attacks. While many legacy cybersecurity companies claim they can apply traditional Information Technology (IT) security to OT systems, the reality is that everything about OT – from protocols to staff – is different and requires technology specifically designed for the mission. The Claroty Platform has been built from the ground up with an unprecedented understanding of ICS, SCADA and other essential OT networks as well as deep cybersecurity knowledge. That focus comes from a team of more than 45 experts, including an elite management team and an unmatched ICS security research organization.

Launched as the second startup from Israel’s famed Team8 foundry, Tel Aviv’s Claroty combines an elite management team and deep technical expertise from both IT and OT disciplines, with backing from premier investors such as Bessemer Venture Partners and Innovation Endeavors. With an unmatched understanding of ICS, SCADA and other essential OT systems, the Claroty Platform provides the deepest and broadest coverage of ICS systems, protocols and networks available on the market today. (Claroty 13.09)

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2.9 CTERA Secures $25 Million in Funding to Catalyze Enterprise Data Infrastructure Modernization

CTERA Networks announced a $25 million investment round led by Bessemer Venture Partners with additional participation from Cisco, and with Vintage Investment Partners joining as a new investor. This new investment round brings CTERA’s total financing to date to nearly $70 million. The funds will be used to fuel sales and marketing initiatives and accelerate global customer acquisition as the CTERA Enterprise File Services Platform becomes a gold standard for file storage, collaboration and data protection among secure and distributed enterprise organizations.

CTERA’s Enterprise File Services Platform is the only solution to address the entire spectrum of end user computing file management and data protection requirements. The solution integrates endpoint, office and cloud file services with uncompromising IT security, cloud choice and automation. As a platform, CTERA’s technology enables organizations to sync, serve and protect data from one centrally managed solution that is 100% secure and deployable on any cloud infrastructure, all behind the customer’s firewall.

Petah Tikva’s CTERA enables enterprise IT to provide secure file services from any cloud. Trusted by the Fortune 100 and leading service providers, the CTERA Enterprise File Services Platform is a private cloud IT-as-a-Service platform for storing, syncing, sharing, protecting and governing data across endpoints, remote offices and servers. (CTERA 13.09)

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2.10 SKECHERS Launches Joint Venture in Israel

Manhattan Beach, California’s SKECHERS USA, a global leader in lifestyle and performance footwear, announced that the company signed a new joint venture partnership for Israel with its current regional distributor, MGS Sport Trading. The joint venture, Skechers Footwear, Ltd., will enable SKECHERS to use its proven sales strategies and global infrastructure to aggressively expand the brand.

International footwear brands are more popular than ever in Israel – in particular, stylish comfort footwear is in high demand – and the firm has an opportunity to boost SKECHERS’ presence. With SKECHERS’ increased investment in this region, solid infrastructure and extensive product offering for every age and activity, they can make a larger-than-ever impact. Israel’s SKECHERS retail network will be run as joint venture stores, and currently includes six destinations, including locations in Tel Aviv and Jerusalem. Consumers can also find the brand’s lifestyle and performance footwear for men, women and kids in major retailers across Israel. (SKECHERS USA 14.09)

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2.11 Applause Raises $35 Million

Applause has raised $35 million in a Series F financing round, led by Direct Equity Partners, an investment program managed by Credit Suisse, with the participation of Accenture. The funding will increase the company’s investment in its strategy as the go-to source for improving customers’ digital experiences. This round brings Applause’s total funding-to-date to more than $115 million. The round had full participation from all of Applause’s previous investors, including Goldman Sachs’s Merchant Banking Division, QuestMark Partners, Scale Venture Partners, Longworth Venture Partners, Mesco and MassVentures. The company’s most recent funding was a $43 million Series E round in January, 2014.

Herzliya’s Applause empowers companies to deliver great digital experiences – from web and mobile to wearables, IoT and beyond. By combining in-the-wild testing services, test automation and quality tools, Applause helps the world’s most recognized brands achieve the digital quality they need across every device, operating system, carrier, location and other criteria their customers value. Thousands of companies – including Google, Fox, Amazon, Concur and Runkeeper – rely on Applause to ensure great digital experiences for their users. (Globes 14.09)

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2.12 Optimove Raises $20 Million

Optimove closed a $20 million financing round from Israel Growth Partners (IGP). The round marks the first funding for the nearly eight-year-old company, after three straight years of 100% year-over-year growth. Optimove has bootstrapped its way to its present status and has never previously taken venture capital funding. Used by more than 200 companies, including 1-800-flowers.com, Zynga, eBags and others, the company’s Customer Marketing Cloud currently sends more than 4 billion targeted, personalized messages to over 900 million customers every year through email, Facebook, Google Ads, SMS, push notifications and other channels. The funds raised will be used to further invest and grow Optimove’s R&D and maintain its position at the forefront of innovation. Optimove will also invest in growing its sales and marketing organization, and to hire aggressively in the US market, especially for the company’s recently opened New York office.

Tel Aviv’s Optimove is the leading Customer Marketing Cloud, helping over 200 brands drive their entire customer marketing operation. Optimove combines the science of data with the art of marketing to deliver personalized, real-time, multi-channel customer marketing campaigns. Optimove’s unique technologies enable marketers to maximize customer engagement, brand loyalty and lifetime value. (Globes 14.09)

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2.13 Totango Raises $8 Million

Totango announced $8 million in Series C financing led by Benhamou Global Ventures (BGV), with participation from returning investors Pitango Venture Capital, Canvas Ventures and Interwest Partners. Since its last $15.5 million financing round in 2014, Totango has launched the enterprise version of its customer success platform and significantly expanded its roster of enterprise customers, including several leading software companies such as Act-On, Autodesk, Pandora, Clarabridge and Zoom. Totango plans using this latest investment to scale sales and marketing operations while continuing to build on its suite of customer success solutions. As the only independent platform to offer solutions for even the most complex customer relationships, Totango has already improved customer success operations at some of the largest public enterprises.

Based in Tel Aviv and San Mateo, California, Totango is a customer success platform that helps recurring revenue businesses simplify the complexities of customer success by connecting the dots of customer data, actively monitoring customer health changes and driving proactive engagements. Leading companies use Totango to reduce churn, grow predictable revenue, and maximize customer value over time. (Globes 14.09)

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2.14 Kuang-Chi Expands GCI Portfolio with Investment in Agent Vi

KuangChi Science Limited, a member of the Kuang-Chi Group, has agreed to become a strategic investor in Agent Video Intelligence (Agent Vi), an Israeli video analytics company. The $4.3million investment, part of Kuang-Chi’s $300 million Global Community of Innovation (GCI) fund launched earlier this year, will expand the company’s portfolio of technologies that enable safe, smart cities. The company is investing alongside public safety leader Motorola Solutions, which first invested in Agent Vi in 2012.

Operating through hundreds of integrators and resellers, Agent Vi’s solutions turn surveillance cameras into intelligent sensors that automatically analyze, detect and search massive volumes of video through its cloud interface. Agent Vi expects to use the invested funds to expand its engineering, sales and management teams. The company plans to open local offices to serve its growing client base in China, Southeast Asia and Europe.

Rosh HaAyin’s Agent Video Intelligence (Agent Vi) is the leading global provider of open architecture, video analytics software. The comprehensive video analytics solutions offered by Agent Vi extend from real-time video analysis and alerts to video search and business intelligence applications, and are fully integrated with a range of cameras, encoders and video management systems. Based on Agent Vi’s unique, patented, Image Processing over IP (IPoIP) software architecture – which distributes the video analysis task between the camera and a server – Agent Vi’s solutions can support up to 200 cameras running a full suite of video analytics functionalities on a single server, while offering superior accuracy and detection performance. (Kuang-Chi Group 14.09)

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2.15 Supplier Payments Score With Tipalti Funding Round

Tipalti, provider of the leading supplier payments automation platform, announced today a $14 million funding round led by SGVC. Tipalti plans to use the new round of funding to aggressively accelerate the company’s growth. Tipalti achieved several major milestones in 2015, growing 200% YOY while maintaining their 99% customer retention and reaching a record $2 billion in annual payment remittance. In 2016, the company released new invoice processing capability, making Tipalti the first ever cloud platform to automate the entire end-to-end accounts payable workflow. This additional investment positions Tipalti to help corporate finance organizations across a much broader range of company sizes, regions, and industries. Tipalti plans to invest heavily in product development, R&D and customer support to deliver on their vision of automating the entire supplier payments operation for fast-growing, mid-sized companies and global enterprises.

Herzliya based Tipalti’s payment automation platform streamlines the way companies make payments to those critical to delivering goods and services – be it supply chains or crowds or 1099 contractors. Tipalti is a comprehensive cloud-based solution that unifies all phases of supplier payments from vendor on-boarding, invoice management, and payment method selection to funds disbursement, while keeping the payer in full tax and regulatory compliance. Letting Tipalti take care of your payments means automating over 26,000 rules across the payment remittance process on a proven platform that serves hundreds of thousands of payees. Tipalti strategically positions innovative companies to scale accounts payable operations while also employing key best practices for reducing risk and improving compliance. (Tipalti 15.09)

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2.16 Zeeko Raises $9 Million

Zeekit has raised $9 million in a Series A round from several angel investors including industry-leading Israeli technology investors, as well as US media, film and lifestyle investors. The company, which has developed a B2C platform and mobile app that reinvents the way consumers browse, share and shop from their mobile devices, has launched an advanced virtual fitting room for consumers and retailers. Using the Zeekit app, consumers can now virtually “try on” fashions before buying online or trying on in-store. After uploading a full-body picture, a shopper taps a product they see online, in print or in store and is able to see how it looks and fits on their actual body. The item can then be mixed and matched with fashions from different retailers in their virtual closet, shared with friends or purchased through a link in the app. Retailers and brands can easily incorporate the Zeekit button in their online, mobile and physical stores to give shoppers the ability to try on their entire catalog of products, virtually.

Zeekit also recently announced a unique partnership with fashion magazine, StyleWatch in which StyleWatch readers can browse and virtually try on 180 pieces from the magazine’s 18-page Fall Trend Report. This unique partnership allows StyleWatch to engage more deeply with its readers by allowing them to realistically see how they look in the fashions recommended in the magazine’s September issue. Zeekit allows StyleWatch, as well as other fashion blogs and magazines, to connect editorial inspiration and content with e-commerce.

Tel Aviv’s Zeekit is a technology company dedicated to create realistic image visualizations. To use Zeekit, users only need to take a quick photo of themselves in a short, tight shirt. Zeekit processes this image and will show the user how any item of clothing will look and fit on their body. As a seller, to integrate the Zeekit capability, all which is required is a single line of code embedded in the existing website. Once this code is embedded, Zeekit will automatically scan all of the store’s online products and prepare it for visualizations, thus allowing customers to take advantage of the store’s Zeekit-enabled virtual fitting room. (Globes 18.09)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 V School Opens Office in Beirut with a 12-Week Coding Bootcamp

Syrian refugees make up half of the 40-student Coding Bootcamp that was just launched in Beirut, Lebanon by Provo, Utah’s V School at the company’s first office outside of the United States. V School is a private company focused on adult technology education. Since launching its first program in the Fall of 2013, V School has provided technology training to eight refugee populations in the state through a partnership with the Governor’s Office of Economic Development (GOED).

Headquartered in Provo, Utah, V School provides immersive, full- and part-time technology education for adults interested in jumpstarting their careers or for those interested in improving their skillsets. For example, V School’s 12-week full-time courses — such as the “Full Stack JavaScript” program it recently launched in Beirut — provides 700 hours of hands-on instruction and training in JavaScript programming and development. All courses taught by V School are delivered “live” by in-class instructors (although students may watch recordings of the classes after-the fact should they wish to do so). In addition to “Full Stack JavaScript,” other courses offered by V School include Cyber Security, Front-End JavaScript, iOS Development and UX Design. (08.09 David Politis Company)

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3.2 Royal Air Maroc Begins Non-Stop Service from Dulles International Airport to Casablanca

On 8 September, Royal Air Maroc, the national airline of Morocco, launched thrice-weekly non-stop service between Washington Dulles International Airport and Casablanca. Washington, D.C. becomes the airline’s third destination in North America, and its second U.S. destination, after New York (JFK) and Montreal (YUL). The Washington, D.C. and New York-to-Casablanca flights, which are operated with a new generation Boeing 787 Dreamliner, will increase the seats offered in the United States by more than 40%.

Casablanca serves as Royal Air Maroc’s global hub, offering convenient connections to more than 90 cities across Morocco, Europe, Africa, the Middle East and the Americas. Morocco offers visitors a cultural experience that will always be remembered and creates lasting memories, including ancient cities, modern metropolises, gorgeous luxury coastal resorts, and remote towns on the edge of the desert. (Royal Air Maroc 09.09)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Israel Reduces Air & Water Pollution

According to figures published by the Ministry of Environmental Protection on more than 540 of the biggest enterprises in Israel, reductions of up to 52% in the emissions of air pollutants were registered in Israel between 2012-2015. However, according to the same data, emissions of nitrogen oxides and sulfur oxides in Israel are still 1.3 and 4.4 times higher respectively than EU countries. Some 87% of sulfur oxide emissions are the result of the operation of coal-fired power plants which are concentrated in Ashkelon and Hadera and still lack advanced pollution control systems. Additionally, the amount of nitrogen, phosphorous and organic carbon discharged into sewage is also much higher relative to EU countries.

On a positive note, the flow of pollutants into the Mediterranean has also dramatically decreased between 2012 – 2015 due to the Gush Dan wastewater treatment plant. A reduction in the amount of activated sludge was a requirement of the commission for discharge permits. All activated sludge discharge will cease by the end of 2016 with the completion of a new treatment facility. Further improvements occurred in the quality of treated wastewater, with a reduction of 11% recorded in the amount of salt present in the treated wastewater between 2013 – 2015. This reduction is due to an increase in the use of desalinated water, with 50% of the total amount of water supplied to consumers being desalinated. (Ynet 06.09)

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4.2 Air Pollution Costs Egypt 3.58% of GDP in Welfare Losses

A significant cost of air pollution on the Egyptian economy has nearly doubled since the last comprehensive report in 1990, with annual total welfare losses estimated at $17 billion or 3.58% of Egypt’s GDP, according to a report on air pollution and the global economy published on 8 September by the World Bank and the Institute for Health Metrics. Aggregating data on premature death, illness and welfare costs, the report estimates that air pollution costs the global economy approximately $5.1 trillion per year, as 87% of the world’s population, consisting predominantly of the poor, lives in areas that exceed the World Health Organization’s air quality guidelines. In the Middle East, welfare losses have been estimated at 2.2% of GDP, the lowest charted for a region by the World Bank.

While Egypt has seen declines in HAP – dropping by 94.9% from 1990 to 2013 – and the number of deaths attributed to air pollution – falling from 40,881 in 1990 to 39,118 in 2013 – the country’s AAP levels are more than three and a half times higher than the WHO standard, having risen slightly from 35.92 micrograms in 1990 to 36.41 in 2013.

According to Sarah Rifaat, an environmental activist, Egypt’s infrastructure severely limits the country’s ability to adequately deal with air pollution. She says there are civil society groups that attempt to reduce emissions, but many of these efforts are hampered due to the fact that there are few available alternatives. While many people may want to cycle, for instance, roads have not been built with that purpose in mind. Curbing the rise of car ownership in Egypt and developing a better mass transit system would allow citizens to use more viable alternatives, according to Rifaat. (Al Ahram 08.09)

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5: ARAB STATE DEVELOPMENTS

5.1 King Abdullah Meets World Leaders in New York

On 21 September, King Abdullah held several meetings with heads of states and delegations participating in the 71st session of the United Nations General Assembly. He met with Spanish King Felipe VI over relations between the two kingdoms and ways to develop them in all fields, as well as the latest regional developments. Separately, the Monarch met with Egyptian President Abdel Fattah Al Sisi and discussed with him the latest developments in the region. Both leaders called for intensifying coordination between key stakeholders in the international community to address the various regional crises and reach solutions that guarantee restoration of security and stability for the hot spots in the region.

At his meeting with British Prime Minister May, talks concentrated on several issues, foremost of which are the latest developments in the region, especially the Syrian crisis and the future of the Palestinian-Israeli peace negotiations. The King highlighted the importance of joining the international community’s efforts aimed at reaching a political solution to Syria’s crisis, which ends the suffering of its people and stops refugee influxes.

Separately, King Abdullah’s meeting with World Bank President Jim Yong Kim focused on Jordan’s relations with the international institution and ways to enhance them, especially in the light of development and economic program agreements the Kingdom is implementing in cooperation with the bank. In this regard, the Monarch voiced Jordan’s appreciation for the bank’s efforts aimed at supporting the national economy and helping the Kingdom realize its envisioned development goals. (JT 21.09)

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5.2 Amman Ready With Plan To Stimulate Economy Before Year’s End

Deputy Prime Minister for Economic Affairs and Minister of Industry, Trade and Supply Jawad Anani on 20 September said that the Jordanian government will announce important decisions to stimulate the economy before the end of 2016. The measures will be based on the recommendations of the Economic Policy Council. Heading a meeting for the ministry’s advisory board to discuss economic and trade policies, Anani said that the sales tax and customs fees would be reduced, while exemptions granted to some sectors would be gradually cancelled to encourage investment. The decisions also include earmarking JD410 million to support SMEs and entrepreneurs, with focus on the governorates other than the capital, applying a financing mechanism in coordination with banks. Anani stressed the Cabinet’s keenness to enhance partnership with the private sector, which will have a more active role, as the government would resort to private businessmen for consultation over economic issues. The ministry has decided to discuss the policies with private sector leaders and listen to their feedback before referring them to the Council of Ministers.

He also stressed the significance of women empowerment as one of the means to fight poverty. Representatives from the industrial and trade sectors, banks, associations, businesspeople, importers and exporters, Business Women Forum and others listened to remarks by the private sector and suggestions on how best to enhance the national economy. Anani asserted that the proposals would be carefully studied to be reflected in the trade and economic policies in favor of the public interest. (JT 20.09)

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5.3 GE Signs $520 Million Iraq Deal

GE has signed a multiyear agreement in Iraq with Mass Energy Group Holding. The $520-million contract includes operation and maintenance services as well as GE’s advanced digital industrial solutions for the 3-gigawatt gas-fired Basmaya Power Plant, 40 kilometers east of Baghdad. This contract represents a continuing effort between Mass Energy Group Holding, the Iraqi Ministry of Electricity (MOE) and GE to bring much-needed power to the people of Iraq. The multiyear service agreement builds on GE’s long-term relationship with Mass Energy Group Holding, which includes prior contracts to provide Basmaya with eight units of its advanced 9FA gas turbines and four units of its C7 steam turbines. The project is being developed in two phases, with each phase delivering 1,500 megawatts (MW) of power, which together is enough power to meet the needs of over 600,000 households.

In addition to extending the entire breadth of operations, maintenance and services support to the power plant, the deal also marks the first time that GE will bring its advanced digital industrial solutions for the power sector to Iraq. Powered by Predix, GE’s advanced cloud-based operating system built exclusively for industry, GE’s Asset Performance Management (APM) software application will draw data to monitor, analyze, enhance and predict equipment health. APM’s anomaly detection capability helps predict outages before they happen, improving power plant reliability, optimizing just-in-time maintenance and reducing plant downtime.

With three offices in Iraq — in Baghdad, Erbil and the southern oil and gas hub of Basra — GE continues to deliver its latest technology and expertise to local customers. Over 130 GE turbines are in operation in the country apart from ongoing agreements to support power generation plants across Iraq. GE has over 40 years of presence in Iraq and supports the country’s infrastructure needs in power generation, oil and gas, water processing, aviation and healthcare, through the company’s diversified multi-business solutions and local presence. (IraqNews 09.09)

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►►Arabian Gulf

5.4 Dubai Plans to Build World’s First ‘Happiness City’

Master developer Dubai South recently unveiled plans for the world’s first city centered around the happiness of its residents. Its first two key real estate projects, The Villages and The Pulse were launched at Cityscape Global, and are part of the Residential District, one of eight districts in Dubai South. According to a statement, it is an “innovative concept in urban living that aims to create a city that is based on the happiness and wellbeing of people”.

It addresses key concerns of residents, while providing solutions to the various issues of everyday living, such as walkability, multiple entry and exit points to avoid bottle-neck traffic congestion and ample parking. Spread over 87 million square feet of real estate at the total estimated cost of AED25 billion, the Residential District at Dubai South is the heart of an integrated dynamic city powering the emirate’s economic growth and bringing to life the fundamental goal of the Dubai Vision 2021.

In close proximity to the Al Maktoum International Airport, the largest airport in the world when complete, and the future gateway to the UAE, the location of the Residential District also adjoins the Expo 2020 Dubai site, which is expected to welcome 25 million visitors. The Villages and The Pulse offer a retail center, a sports center and a community center to a school, gas station, hospital, mosque, nursery, mall and hotels, all within easy accessibility and convenient walking distances. (AB 06.09)

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5.5 Saudi Arabia Overtakes the U.S. as World’s Largest Oil Producer

Saudi Arabia has retaken the position of the world’s top oil producer from the U.S., according to the International Energy Agency. While Saudi Arabia added 400,000 barrels a day of output from low-cost fields since May, about 460,000 barrels a day of “high-cost” production was shut down in the U.S. The US has been the world’s largest producer of crude and other liquid hydrocarbons since April 2014, following the shale oil boom. U.S. output in August stood at 12.2 million barrels a day, including natural gas liquids, according to the IEA. That compared with Saudi Arabian production of 12.58 million barrels a day the same month. The drop in U.S. production came as the number of rigs drilling for oil and gas fell to a record low of 404 on 20 May, according to data from Baker Hughes. That number has since recovered to 508 as of 9 September.

Saudi Arabian crude supply climbed to 10.65 million barrels a day in July, before easing to 10.6 million in August. Production has averaged 10.36 million barrels a day in the first eight months of this year, almost 200,000 barrels a day higher than the year-earlier period. The price to pump oil out of the ground in Saudi Arabia has tended to be at the lower end of the global cost curve, allowing Riyadh to withstand lower oil prices better than its U.S. rivals. Saudi Arabia’s willingness to keep exports stable and satisfy higher domestic demand led to its continued effort to increase output. The drop in U.S. output was mostly driven by a decline in shale oil production, which saw investments slump by 66% since 2014. (IEA 13.09)

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►►North Africa

5.6 President Sisi Ratifies VAT for Egypt

On 8 September, Egypt’s President Abdel-Fattah El-Sisi has ratified the long-delayed value-added tax (VAT). The Ministry of Finance will issue its bylaws for the new legislation within 30 days, according to the government’s official gazette. According to Article 9 of the VAT law, the current sales tax law will continue to be applied until the new VAT bylaws are issued. Egypt’s parliament gave a final approval on 28 August to the implementation of the VAT at a rate of 13% for the 2016/17 fiscal year, to rise to 14% the following year. The long awaited VAT law is part of the government’s fiscal reform program, implemented in July 2014, through which energy subsidies are being cut and new taxes are being introduced to reduce the country’s ballooning budget deficit – estimated at 11.5% of GDP in fiscal year 2015/16. The VAT aims at reducing tax evasion, as it will be applied to each member of the production chain of goods and services, instead of the current sales tax that is imposed as a one-off on the final sale to customers.

The parliament also increased the list of exempted goods and services to 56 from 52 items; it includes local and imported medicine. The minister said in July that the VAT may lead to price inflation ranging between 0.5% for low-income Egyptians and up to 2.3% for the upper class.

The government reform program, which the VAT is part of, has been endorsed by the International Monetary Fund (IMF), leading to an initial agreement between the government and the global lender on a $12 billion fund facility over three years, which is expected to be approved by the fund’s executive board in the coming weeks. Egypt, which relies heavily on imports, particularly of foodstuffs, has been suffering a severe shortage of US dollars in the wake of political and security unrest that has scared off tourists and foreign investors, two major sources of hard currency. (Ahram Online 08.09)

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5.7 Egypt Receives First $1 Billion Tranche of World Bank Loan

The World Bank has provided Egypt with the first $1 billion tranche of a $3 billion loan, as part of its support for the government’s economic program, the Ministry of International Cooperation said on 9 September. The loan is part of the government’s effort to secure billions of dollars in aid from various lenders to help revive the country’s economy and ease a dollar shortage that has crippled recovery. This includes a three-year fund of $4.5 billion from the World Bank ($3 billion) and the African Development Bank ($1.5 billion), the minister added. Cairo has now received $1.5 billion of the financing, the minister said, as well as the first $500 million of the ADB loan received late last year.

The government is already working on finalizing the second tranche of $1.5 billion from the World Bank, as well as from the African Development Bank. In August Egypt reached a preliminary agreement with the International Monetary Fund to secure a three-year $12 billion loan facility. The deal requires Cairo to secure a further $6 billion in bilateral financing. (Ahram Online 09.09)

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5.8 AUC and Cairo University Drop in QS International Rankings

British company Quacquarelli Symonds’ (QS) World University Rankings revealed a drop in the 2016-2017 levels of two Egyptian universities, the American University in Cairo (AUC) and Cairo University. AUC dropped from 345 last year to 365 this year, while Cairo University came in the 551-600 band compared to the 501-550 band last year. Ain Shams and Alexandria universities remained in the 701 band, while Al-Azhar University was ranked this year for the first time, also in the 701 band. QS’ rankings are based on a number of factors, including academic reputation, employer reputation, citations per faculty, student to faculty ratio, as well as the percentage of international students and faculty.

All Egyptian universities, except AUC, dropped in QS’ rankings for academic reputation, while all except Alexandria University dropped in rank for employer reputation. All Egyptian universities ranked lower in terms of global research impact this year. AUC was ranked third in Africa, out of 17 African universities, while Cairo University ranked sixth. In the Middle East, AUC was positioned fifth, while Cairo University was ranked fifteenth. (Mada Masr 06.09)

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5.9 Egypt Makes Breast Exams Mandatory to Get Subsidized Infant Formula

Women seeking subsidized infant formula will be required to undergo breast examinations, as part of a series of new measures to control distribution of the increasingly scarce commodity, according to Egypt’s Heath Ministry. Parents will also be required to carry a smart card, which will be issued by the Ministry following the submission of a child’s birth certificate. The Health Ministry explained the new regulations are not meant as an insult to Egyptian women and strongly denied assertions circulating on social media that claimed women would have to undergo public examinations. The exams will take place in private mobile health clinics. The new regulations were introduced after recent protests over formula shortages and price hikes, which culminated in the military intervening and announcing they would import the formula. The military, in coordination with the Health Ministry, is set to sell the formula for LE30, a 50% markdown on the current market price.

The new regulations also come at time when multiple ministries have come under fire for their inability to control powerful commodity merchants and root out corruption, most notably in the case of the recent wheat scandal. The spiraling cost of infant formula has been impacted by Egypt’s inflation rate, which is currently at its highest in over a decade, resulting in painful price hikes of a number of crucial goods. (Mada Masr 11.09)

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5.10 Egypt, Ethiopia, Sudan Sign Final Contracts on Nile Dam Studies

Egypt, Ethiopia and Sudan have signed the final contracts for the long-awaited technical studies on the impact on downstream countries of a giant dam that Addis Ababa is building. The signing that took place in Sudan’s capital Khartoum on 20 September was made between French consultancy firms BRL and Artelia, as well as British law firm Corbett, which will carry out studies on the potential impact of Ethiopia’s Grand Renaissance Dam on the flow of the Nile. Water and irrigation ministries from the three countries attended the signing ceremony during the 12th session of a tripartite ministerial committee.

The giant hydroelectric dam project Ethiopia is building has been the source of contention between Cairo and Addis Ababa. Egypt, which relies almost exclusively on the Nile for farming and drinking water, fears the dam would significantly diminish its share of the river’s water. The studies the French firms will conduct will include the modeling of water and hydroelectric resources as well as an assessment of the cross-border environmental, social and economic impact of the mega project and will take 11 months. The studies were earlier carried out on the recommendation of a panel of “international experts” on the Grand Renaissance Dam.

Ethiopia began diverting the Blue Nile in May 2013 to build the 6,000 MW dam that has a capacity of 74 billion cubic meters and will be Africa’s largest when completed in 2017. In several rounds of talks, Ethiopia has maintained the project – which is 70% complete – will have no effect on Sudan and Egypt and should benefit all sides. (Al Ahram 20.09)

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5.11 Egyptian Women Contribute 50% to 1.2 Million Micro Enterprises in Egypt

Women have contributed up to 50% to the 1.2 million micro enterprises across Egypt supported by the Social Fund for Development (SFD) from 2009 to 2015, CAPMAS announced. In its study titled ‘The reality of Small and Medium Enterprises (SMEs) 2009 – 2015,’ CAPMAS revealed that there is a total of 2.4 million small and micro-sized enterprises across Egypt with 6.3 million employees. The study also found that women have contributed almost 25% to some 103,000 small enterprises funded by the SFD from 2009 to 2015. Although Egyptian women make up around 50% of the country’s population of 91 million, they constitute less than a quarter of the country’s labor force, according to CAPMAS report in March 2016.

Egypt is home to 44.1 (49%) million women and 45.9 million men (51%), while the number of females in Egypt’s workforce constitutes almost a quarter of that of men – 23.5% as opposed to 72.3%. Egyptian women are the heads of 17.8% of households, according to data released by CAPMAS in 2014. In Egypt, micro enterprises are funded by the SFD, the Ministry of Social Solidarity and the Local Development Fund. The SFD has funded 1.2 million micro enterprises at EGP 5.3 billion, providing 1.3 million job opportunities from 2009 to 2015, while the Social Solidarity Ministry has supported 82,000 micro enterprises with 82,000 job opportunities from 2009 to 2014.

The Local Development Fund supported 41,400 small enterprises in 2009/10 and 2014/15. To support SMEs, the CAPMAS study recommends providing an integrated information system for businesses while facilitating access to credit and reducing interest to encourage the establishment of such projects. The recommendations also include launching a marketing channel for the products of these businesses.

The cabinet approved in August a draft law allowing individuals to launch single-person companies without the need for more employees, as part of its efforts to support SMEs. With the country’s ailing economy and unemployment at 12.5% in the second quarter of 2016, analysts believe SMEs constitute a great opportunity to boost the economy and create jobs. Egypt’s economy has been struggling due to a sharp drop in tourism and foreign investments – two main sources of hard currency for the import-dependent country – caused by political unrest that followed the toppling of Hosni Mubarak in 2011 and later the ouster of Islamist president Mohamed Morsi in 2013. (CAPMAS 14.09)

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5.12 Gen. Haftar Seizes Libyan Oil Ports

Forces loyal to Eastern-based commander Khalifa Haftar have seized oil ports in Libya’s Oil Crescent. The Petroleum Facilities Guards (PFG), headed by Ibrahim Jadhran, lost control of the ports of Es Sider (Sidra) and Ras Lanuf following an attack on 11 September. These ports together account for more than half of Libya’s oil output. Reports said that the ports of Zueitina, and possibly also Brega, had also fallen into Haftar’s control. The development throws further doubts on the viability of the Western-backed project to unite the country under a Government of National Accord (GNA). The Presidential Council of the GNA said the “unjustified escalation will only prolong the conflict and will cause losses of Libyan lives and livelihood.” (Various 12.09)

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5.13 Morocco’s Trade Deficit up 13 % in January-August

Morocco’s trade deficit widened by 13% in the first eight months of 2016 compared to the same period of last year, the Exchange Control Office said. The foreign trade balance stood at MAD 120.345 billion in January – August 2016 against MAD 106.48 billion one year before. The Office further noted that the coverage rate of imports by exports reached 55% against 57.6% by the end of August 2015. (MWN 19.09)

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5.14 Morocco’s Imports of Liquor & Tobacco on the Rise

Over the last seven months, according to Morocco’s Exchange Office, Morocco imported approximately 5,772 tons of liquor estimated at MAD 300 million, and approximately 8,534 tons of tobacco estimated at MAD 926 million since March 2016. The same source noted that Morocco’s exports of liquor showed an increase in the last seven months. It reached 5,772 tons, compared to the same period in 2015 when it reached 4,295 tons. With respect to Morocco’s exports of tobacco, the same source added that Morocco’s exports of tobacco also showed an increase in the last seven months. It reached 8,534 tons, compared to the same period in 2015 when it reached 6,250 tons. A communiqué from Morocco’s Treasury revealed that the revenues from cigarette consumption in July 2016 reached MAD 5.26 billion, compared to the same period in 2015 when it reached MAD 4.6 billion. Last year, L’Economiste reported that the Moroccan treasury received over MAD 1 billion in revenue from the sale of liquor in Morocco. (MWN 09.09)

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5.15 Six Million Tourists Visited Morocco During the First Half of 2016

Some 6 million tourists visited Morocco during the first seven months of 2016, an increase of 0.1% compared to the same period in 2015, according to the Tourism Observatory. The number of foreign tourists declined by 4.3%, while the revenues of Moroccans living abroad increased by 4.7%. Tourist arrivals from UK, Germany, France and Italy fell by 7%, 3%, 2% and 2% respectively. The number of Spanish, Belgian and Dutch tourists increased by 1%, 1% and 2% respectively. Overall overnight stays in hotels rose by 1% compared to July 2015 (-3.8% for non-resident tourists and +11.8% for resident tourists). Marrakech and Agadir accounted for 59% overnight stays during the first seven months of 2016, registering a 1% increase for each city. (MWN 08.09)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Turkey’s Economy Records Over 3% Growth

Turkey’s Gross Domestic Product grew by 3.1% in the second quarter of 2016 compared to the same period in 2015, the Turkish Statistical Institute reported. The GDP increased by 3.1% compared to the same quarter of previous year in the second quarter of 2016 and reached TL 33.06 billion ($11.4 billion) at constant prices, the report said, suggesting the economy had maintained its momentum according to constant prices, which excludes inflation effect from prices. At current prices, the GDP saw a more pronounced increase, rising to TL 525.9 million ($178.9 billion), which is up 9% compared to the same quarter of previous year. The report showed that a seasonal and calendar-adjusted GDP increased by 0.3% compared to the previous quarter. Also, the first quarter of GDP was downgraded 0.1 points to 4.7% from the previously announced 4.8%. (TUIK 09.09)

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6.2 Turkey’s Current Account Deficit Falls in July

Turkey’s current account deficit stood at $2.6 billion in July, down more than $500 million year-on-year largely due to the closing gap between goods imported and exported, the Central Bank said on 9 September. The reduction was also helped by low oil prices. However, the bank said the economy could have performed better if the services surplus had not suffered a $1.42 billion fall because of the tourism sector’s contraction. Revenue from tourism, which makes up most of the services sector, fell to $5 billion in the second quarter of the year, a decrease of 35.6% from the same period last year, the Turkish Statistical Institute said in July. Tourism income from the first six months was $9.04 billion, down from $12.6 billion a year earlier. (AA 09.09)

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6.3 Recovery Roadblocks Raise Greek Sovereign Risk Measures

Moody’s said that Greece’s ability to implement the reforms that were a condition of last year’s rescue package may be causing yet another rift between the country and its creditors. Greece’s Sovereign EDF (Expected Default Frequency) metric, which measures the expected probability of default over a five year time horizon, has declined since the country reached a bailout agreement with its creditors in mid-2015. In May 2016, the Eurozone finance ministers approved a tranche of bailout funds totaling €10.3 billion. That was to be the first payment of the third bailout package, which totals €86 billion and extends through the end of 2018. Greece’s five-year Sovereign EDF measure declined from 4.8% to 2.8% in the month of May alone. However, from the first tranche, only €7.5 billion has been disbursed and the rest is expected to be paid this month. Concern over Greece’s reform progress has been growing among Eurozone officials, as the country has implemented only two of the 15 reforms, in the areas of pensions and taxation. This may postpone further disbursement of the bailout money. Eurozone officials are demanding that Athens push on with plans to set up a new privatization fund, sell specific state assets, and restructure the country’s civil service. This uncertainty has weighed on the country’s credit risk, with its Sovereign EDF measure rising from 3.4% to its current 3.9% over the past two weeks. (Moody’s 19.09)

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6.4 Greek Economy Recovering, Growing, Prime Minister says in Major Policy Speech

Greek Prime Minister Tsipras said the country’s economy is growing faster than projected and its influence in Europe is on the upswing. Mr. Tsipras made his comments during a major policy speech. In the speech, he urged policymakers to further develop Greece’s competitive advantages, which include a highly educated workforce. Mr. Tsipras said the economic tide is turning for the better. The surplus fiscal goals set out in the agreement of last year’s summer are now much lower and hence achievable. Greece’s agreement commitment in 2015 was for a fiscal balance of -0.25% and the state achieved +0.7%. Indeed, the Economic Sentiment Indicator, a technical barometer for the Greek economy, has been rising, even as it has been falling in Europe overall. The Greek unemployment rate is falling, with an estimated 254,000 jobs being added to the economy during the first seven months of 2016. Meanwhile, Mr. Tsipras said, the number of people visiting Greece in 2016 is expected to top last year’s record total of 26.1 million visitors. (GoG 12.09)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Over 1.4 Million Muslims Live in Israel

Israel is home to over 1.4 million Muslims, the Central Bureau of Statistics said on 12 September, ahead of the Islamic holiday of Eid al-Adha. The data on the Jewish state’s Muslim population found the sector made up about 18% of the general population in 2015, numbering 1.488 million people. The Muslim population in Israel has seen a steady decline in birthrate, dropping from 3.8% in 2000 to 2.4% in 2015, the data shows. Fertility rates among Muslims have also dropped to an average of 3.3 children per woman compared with 4.7 in 2000.

Jerusalem has the largest concentration of Muslim residents – 311,000 – in 2015, making up 20.9% of the total Muslim population in Israel and 35.9% of the city’s residents. The Bedouin city of Rahat is home to the second largest Muslims community in the country, with 62,000 Muslim residents. Employment rates among Muslim men over the age of 15 stood at 62.8% last year, compared to 24.6% among Muslim women in the same age group. Employment among Muslim women was significantly lower than among Druze women (32.4%), Christian women (45.2%) and Jewish women (65.8%). The unemployment rate among Muslim men came to 7.2% in 2015, compared to 4.9% jobless rates among Jewish men, 5.4% among Christian men and 5.1% among Druze men. Nearly 45% of employed Muslims were skilled workers in manufacturing and construction industries. About 36% of Muslim women in the workforce hold academic positions. The data also showed that some 5,300 Muslims graduated from Israeli higher education institutions in 2015. (CBS 12.09)

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*REGIONAL:

7.2 UNESCO Says Egypt Among World’s Lowest in Research Spending

Egypt fell among the countries with the lowest rates of expenditure on research and development relative to its gross domestic product (GDP) worldwide, standing at 0.7%, according to the UNESCO Science Report. Although Egypt’s gross expenditure on research and development (GERD) as a percentage of its GDP increased between 2009 and 2013, this ratio still remains low in comparison to worldwide trends. Furthermore, many universities in Egypt and the Arab region do not have research requirements in place. Nonetheless, the number of scientific publications increased from 2,919 in 2005 to reach 8,424 in 2014. The report also states that medical and health services comprise the largest group of researchers – “a reflection of the country’s priorities.” According to the report, Egypt and other countries in the region are not lacking in human resources but rather in investment into research, education and development. The report recommends reforming the distribution of resources and expenditure to invest more in the students and produce “market-ready graduates.” In 2013, women accounted for 42.8% of researchers in Egypt – the highest rate in all Arab countries included in the report – while Saudi Arabian women accounted for only 1.4% of the country’s researchers. (UNESCO 15.09)

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7.3 Algeria to Build Electric Fence on Libyan Border

Algeria is planning to build a 120 km. electric fence on its border with Libya, according to press reports. The aim is to improve security on the porous border and stop the infiltration of terrorists. There has been no official confirmation of these reports from Algerian or Libyan government officials. (The North Africa Post 06.09)

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7.4 Morocco and Algeria Dispute Over the Origin of Rai Music

An Algerian attempt to register Rai music in UNESCO’s World Heritage sparks debate with Morocco over the Music’s origin. The Algerian ministry of culture submitted a file last March to UNESCO requesting the recognition of Rai music as an Algerian popular music. This request stirred a debate between Moroccans and Algerians when it was officially announced on 29 August. The request was filed by Slimane Hachi, the director of National Center of Prehistoric, Historical and Anthropological Research.

The origin of Rai music, described as music of coexistence, has long been disputed between Algeria and Morocco. The Algerian city of Oran is recognized as the ‘Capital of Rai’ and Algerian artists, such as Cheb Khaled, Cheb Hasni, and Cheb Mami have been iconic representatives of this genre. Conversely, the Morocco city of Oujda, on the Algerian border, is where the International Festival of Rai music takes place. Oujda Arts, an association in the same city revealed its hope last year to see “the Moroccan popular song” as a world heritage. (Various 10.09)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 European Commission Supports Deployment of ImmunoXpert to Reduce Antibiotic Misuse in Hospitals

MeMed announced that the European Commission awarded €2.3 million to support AutoPilot-Dx, an international consortium with members from leading medical centers and industry that is coordinating the deployment of ImmunoXpert in Europe. The two-year award was granted through the prestigious Horizon 2020 Fast Track to Innovation Pilot, which recognizes outstanding business innovators.

Bacterial and viral infections are often clinically indistinguishable, leading to antibiotic overuse. This promotes the spread of drug-resistant bacteria – one of the leading global healthcare challenges of our time. As part of the solution, ImmunoXpert is an innovative diagnostic test that uses the body’s own immune system to accurately distinguish between bacterial and viral infections, thereby empowering physicians to make better informed antibiotic treatment decisions. ImmunoXpert has been validated in a series of clinical studies enrolling thousands of patients worldwide, is regulatory cleared for use in Europe (CE-IVD), and is currently in use in select centers of excellence.

Tirat HaCarmel’s MeMed is dedicated to improving patient lives through research, development, and commercialization of pioneering products that decode the immune system’s distinct responses to different health and disease states. The company’s most advanced product, ImmunoXpert, accurately detects whether a patient has a bacterial or viral infection, with the aim of empowering physicians to make better informed antibiotic treatment decisions. ImmunoXpert is CE marked and approved for clinical use in the EU, Switzerland and Israel. (MeMed 08.09)

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8.2 RosettaGX Reveal Thyroid miRNA Classifier Now Available to Be Utilized on ThinPrep Samples

Rosetta Genomics announced that the Company’s first-of-its-kind microRNA classifier for indeterminate thyroid nodules, RosettaGX Reveal, is now available to be utilized on ThinPrep samples. Rosetta conducted a study to confirm that RosettaGX Reveal produces the same high level performance on ThinPrep prepared slides as it does on a direct smear from a thyroid Fine Needle Aspirate (FNA) biopsy. ThinPrep has grown in popularity in recent years due to the convenience it offers the clinicians that utilize this method for FNA cytology. The study results confirm that our molecular microRNA analysis is feasible on ThinPrep slides with the advantage of not requiring additional FNA passes or fine needle procedures. Unlike other tests in this market, Reveal is the only test that allows us to analyze the exact cells that were used to make the initial indeterminate cytology diagnosis. They believe offering customers the option of using Reveal with either ThinPrep or direct smears will expand their customer base and potentially increase test volumes by greater than 50% over the next several months.

Rehovot’s Rosetta develops and commercializes a full range of microRNA-based and other molecular diagnostics. Rosetta’s integrative research platform combining bioinformatics and state-of-the-art laboratory processes has led to the discovery of hundreds of biologically validated novel human microRNAs. Building on its strong patent position and proprietary platform technologies, Rosetta is working on the application of these technologies in the development and commercialization of a full range of microRNA-based diagnostic tools. Through the acquisition of PersonalizeDx, the Company now offers core FISH, IHC and PCR-based testing capabilities and partnerships in Pathology, Oncology and Urology that provide additional content and platforms that complement Rosetta’s microRNA and Next-Gen Sequencing offerings. (Rosetta 07.09)

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8.3 Intec Pharma Granted European Patent for Accordion Pill–Carbidopa / Levodopa

Intec Pharma announced that the European Patent Office has granted a European patent for an Accordion Pill containing certain drugs, including the combination Carbidopa and Levodopa. The patent, granted under No. 2276473, is titled “Gastroretentive Drug Delivery for Carbidopa / Levodopa” and is currently scheduled to remain in force until April 2029. The patent belongs to the company’s IN-7 patent family, which already includes patents granted in the U.S.

Jerusalem’s Intec Pharma is a clinical stage biopharmaceutical company focused on developing drugs based on its proprietary Accordion Pill platform technology. The Company’s Accordion Pill is an oral drug delivery system that is designed to improve the efficacy and safety of existing drugs and drugs in development by utilizing an efficient gastric retention and specific release mechanism. The Company’s product pipeline currently includes three product candidates in clinical trial stages: Accordion Pill Carbidopa/Levodopa, or AP-CDLD, which is being developed for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients, currently in Phase III; Accordion Pill Zaleplon, or AP-ZP, which is being developed for the treatment of insomnia, including sleep induction and sleep maintenance; and an Accordion Pill that is being developed for the prevention and treatment of gastroduodenal and small bowel ulcers induced by Nonsteroidal Anti-Inflammatory Drugs. (Intec Pharma 06.09)

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8.4 Aspect Imaging Introduces Multi-Modality Imaging Tools to Streamline Research

Aspect Imaging is presenting its M-series of compact MR imaging systems specialized for pre-clinical research, as well as a brand new integrated simultaneous PET-MRI that combines PET and MRI modalities. In addition, Aspect Imaging is introducing a new Optical and MRI fusion system. The simple-to-use, efficient, and flexible MRI systems that enable rapid in vivo drug efficacy studies will be showcased at the 2016 World Molecular Imaging Congress (WMIC) in New York. The company is introducing a brand new MRI system that combines PET and MRI modalities for simultaneous PET-MRI research. This system is based on the M7 compact MRI, and is the world’s first permanent magnet commercial product for Simultaneous PET/MRI for Preclinical research.

In addition, the company is presenting a novel optical and MRI fusion technique based on a proprietary animal transport system. This opens the door for the BLI optical research community to fuse optical data with MRI data and take advantage of the exceptional soft tissue image quality provided by the MRI, at an inexpensive cost. This new animal transport system is compatible with the M3 and the M7 compact MRI systems and is compatible with IVIS Spectrum CT, manufactured by PerkinElmer, allowing precise co-localization between 3D optical and MRI data. The fused data is presented from a PerkinElmer Spectrum IVIS® CT system (IVIS spectrum CT and Perking Elmer are trademark or registered trademarks of Perkin Elmer IVIS spectrum CT).

Founded in 2014, Shoham’s Aspect Imaging is part of Aspect Intl., a Singapore based company, the world’s leader in the design and development of compact MR imaging and NMR systems for medical, advanced industrial and preclinical applications. (Aspect Imaging 05.09)

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8.5 Foamix Announces Results in Phase 2 Clinical Trial of FMX-103 Minocycline for Rosacea

Foamix Pharmaceuticals announced the results of Phase 2 clinical trial of FMX103 for the treatment of papulopustular rosacea. This was a double-blind, randomized, placebo-controlled Phase 2 trial involving 233 patients who were enrolled in 18 sites throughout Germany. Patients were randomized to receive high dose FMX103 (3% minocycline foam), low dose FMX103 (1.5% minocycline foam) or vehicle foam over 12 weeks, followed up by a 4-week post-treatment evaluation. The primary endpoints are safety, tolerability and efficacy in the treatment of moderate-to-severe papulopustular rosacea.

Rehovot’s Foamix is a specialty pharmaceutical company focused on the development and commercialization of proprietary, innovative and differentiated topical drugs for dermatological therapy. Their clinical stage product candidates include FMX101, their novel minocycline foam for the treatment of moderate-to-severe acne, FMX102 for the treatment of impetigo, FMX103 for the treatment of moderate-to-severe rosacea, and FDX104, a doxycycline foam for the management of acne-like rash induced by EGFRI anticancer drugs. In addition, they have development and license agreements relating to our technology with various pharmaceutical companies including Bayer HealthCare, Merz, Allergan and Mylan. (Foamix Pharmaceuticals 09.09)

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8.6 Rapid Medical’s Comaneci Remodeling Mesh Exceeds 500 Successful Aneurysm Treatments

Rapid Medical announced that the Comaneci Adjustable Remodeling Mesh has exceeded 500 successfully treated aneurysms worldwide. This milestone comes only two years after Rapid Medical launched the device in Europe. The Comaneci is the first-ever adjustable, fully-visible remodeling device. It is intended to provide temporary assistance for coil embolization of intracranial aneurysms. It integrates the advantages of existing adjuvant devices without the risk of parent vessel occlusion during coiling procedure or the need for long-term antiplatelet medication in case of permanent stenting. The Comaneci uses Rapid Medical’s FlexiBraid technology, a unique and proprietary braiding capability that allows the first fully-visible, controllable device that can be adjusted by the physician to perfectly fit the dimensions of parent vessels and the aneurysm neck.

Yokneam’s Rapid Medical is the developer of game-changing devices for endovascular treatments. This includes TIGERTRIEVER, the first-ever controllable, fully-visible retrievable stent, and Pele, a large lumen distal access catheter. (Rapid Medical 08.09)

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8.7 Philips Healthcare selects Medic Vision’s XR-29 Solution for its CT & PET/CT Scanners

Medic Vision Imaging Solutions was selected by Philips Healthcare to help meet XR-29 regulations. Following a thorough qualification and verification process, Medic Vision’s FDA-cleared SafeCT-29 product is now officially recommended by Philips as a solution for customers that have CT & PET/CT scanners that are not fully compliant with XR-29 standards and for which Philips does not offer an XR-29 update. Philips tested SafeCT-29, evaluated its FDA 510(k) clearance and determined SafeCT-29 to be safe and effective. SafeCT-29 is a patent-pending, innovative, add-on system that provides full compliance with the XR-29 Dose Check and Dose Report (“RDSR”) functions for CT and PET/CT systems of all vendors and models. It is the only third-party XR-29 solution that is FDA-cleared.

Tirat Carmel’s Medic Vision Imaging Solutions is a leading provider of cost-effective, vendor-independent image enhancement and dose management solutions for CT exams. Medic Vision’s FDA-cleared SafeCT products are in routine clinical use at more than 150 major hospitals and imaging centers nationwide, supporting CT scanners of all vendors and models. The company’s SafeCT product suite provides compliance with the latest regulatory requirements and initiatives related to CT radiation. (Medic Vision Imaging Solutions 08.09)

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8.8 DarioHealth Preps for New iPhone

DarioHealth Corp., developer of the Dario Blood Glucose Monitoring System, is adapting its flagship product to also incorporate use with the new Apple iPhone 7. After receiving regulatory clearance for marketing by the U.S. FDA and other applicable regulatory agencies in Canada, Europe and Australia, customers will be able to select which DarioHealth product they require for connection to their smartphone. The long-standing rumor that Apple’s new iPhone 7 would come without a traditional headphone jack in favor of their Lightning connector was confirmed by Apple, leaving out many products that depend on the headphone jack for connectivity. The Dario Blood Glucose Monitoring System, which launched a direct-to-consumer model earlier in the year, relies on connecting its proprietary meter to a smartphone via the headphone jack.

There is no timeframe when the new Dario Blood Glucose Monitoring System, compatible for use with the iPhone 7, will be commercially available.

DarioHealth is a leader in digital health self-management solutions. DarioHealth delivers the ability to combine and analyze consumer health data to personalize treatment and advance medical knowledge. The Dario Blood Glucose Monitoring System is a platform for diabetes management that combines an all-in-one blood glucose meter, native smart phone app, website portal and a wide variety of treatment tools to support more proactive and better informed decisions by users living with diabetes, their doctors and healthcare systems. (DarioHealth 08.09)

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8.9 Afimilk Introduces Automatic Calving Alert Service

Afimilk has integrated a Calving Alert service, including a prolonged calving application, into its AfiAct II cow monitoring system. The new technology will help dairy farmers instantly identify and quickly assist cows experiencing difficult labor, also called dystocia. Difficult labor is associated with increased calf mortality and morbidity. Studies have shown that up to half of first-calf Holstein cows in the U.S. require intervention from a farmer or veterinarian during labor.*

AfiAct II is the first leg-tag system programmed to issue notifications specifically for prolonged labor. Alerts are sent wirelessly from a leg-mounted sensor to a smartphone when calving begins, and again if calving is prolonged. In addition to calving, AfiAct II detects other conditions based on activity and resting behavior, including estrus, abortion, cow comfort problems and illness. Another monitoring system offered by Afimilk, Silent Herdsman, features a neck-mounted sensor that detects estrus, cyclic disorders and illness based on cow activity, rumination and eating patterns. Israel’s Afimilk is a global leader in farm management software, cow monitoring systems and milk analysis tools for dairy producers in 50 countries. (Afimilk 12.09)

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8.10 Timorex Gold Effective Against Black Sigatoka

Black Sigatoka, known as black leaf streak, a disease caused by Mycosphaerella fijiensis Morelet, and considered the most destructive and costly disease in banana production, leads to the use of up to 70 synthetic fungicide sprays per year. However, there exists a solution, which besides being natural, can control Black Sigatoka. Over the past 10 years, the Stockton Company, through various R & D studies, as well as field trials, has proven that the curative and preventive activity of the biofungicide Timorex Gold has shown outstanding efficacy in the control of this disease, and through its multiple mechanisms, controls Black Sigatoka with great efficiency even under the most intense disease pressure conditions.

Timorex Gold is a contact biofungicide based on Melaleuca alternifolia plant extract. Thanks to its multiple components, it controls a broad spectrum of fungal and bacterial disease in various crops, including rice, bananas, berries, coffee, cocoa, fruit, herbs, and vines, besides being an eco-friendly and residue-free product. Timorex Gold is a product widely used by banana growers to control Black Sigatoka (Mycosphaerella fijiensis) in several banana producing countries. Its use has spread for more than a decade in some of these countries. Currently, the product is registered in more than 30 countries, including the U.S.A, where it has been registered by the Environmental Protection Agency (EPA) and classified by FRAC in the F7 Group, Code 46. No risk of inducing resistance has been reported, making it an excellent tool for managing resistance to Black Sigatoka.

Petah Tikva based Stockton (STK) specializes in the development and marketing of botanical based biopesticides. Its core focus is on the incorporation of these bio-pesticides into conventional agriculture spraying programs that use conventional chemical products, thus creating a balanced, cleaner and sustainable agricultural environment. (Stockton STK 12.09)

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8.11 Lipogen Partners with Xenesta for Lipogen PSPA

Lipogen granted Texas’ Xenesta global exclusive rights for marketing a dietary supplement product based on Lipogen PSPA. PSPA is Lipogen’s natural brain ingredient clinically demonstrated to support stress management. It will be marketed through Xenesta’s network marketing (MLM) channel. The new dietary supplement will come in packaging that provides a monthly supply of the daily 400 mg PS + 400 mg PA serving. These amounts have demonstrated optimal results in clinical research. The new product will be marketed under Xenesta’s brand name. Xenesta’s PSPA supplement is natural, vegetarian, and contains no preservatives or artificial colors. Lipogen PSPA is a new, patent-protected solution for stress management and brain health support. It is a high-quality, vegan-friendly blend of phosphatidylserine (PS) and phosphatidic acid (PA).

Haifa’s Lipogen offers high quality specialty Phospholipid nutrients for stress management and cognitive function support, enhancing well-being and improving quality of life. With 25 years of pioneering biotech natural Phospholipid research, development and production, LIPOGEN integrates the perfect synergy between science, experience and quality to manufacture safe, effective, patented protected nutraceutical solutions. (Lipogen 14.09)

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8.12 Teva & Intel to Develop Unique Wearable Tech for Measurement of Huntington Disease Symptoms

Teva Pharmaceutical Industries announced a collaboration with Intel Corporation to develop a unique wearable device and machine learning platform for use in Huntington disease (HD). This platform will continuously monitor and analyze key symptoms that impact daily living, in an effort to better understand disease progression and improve treatment evaluation. Teva, working in collaboration with Intel, will deploy this novel technology platform for the first time in a sub-study within the ongoing Phase 2 Open-Pride HD Study. As part of this, patients will be asked to use a smartphone and wear a smartwatch equipped with sensing technology that will continuously measure their general functioning and movement. These data will be wirelessly streamed to a cloud-based platform specifically developed by Intel to analyze data from wearable devices. Proprietary algorithms will then translate these data, in near real-time, into objective scores of motor symptom severity. The study will start towards the end of the year and will take place in centers in the US and Canada.

This collaboration will leverage Intel’s capabilities in analytics and algorithm development for movement detection, together with Teva’s deep knowledge and experience in HD treatment and research. HD is a devastating illness that is desperate for treatment options, requiring innovative ways to continuously and remotely assess and quantify symptoms in a way that can provide meaningful and actionable feedback to doctors, patients and caregivers.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,800 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products. (Teva 15.09)

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8.13 GI View Receives FDA 510(k) Clearance for the New Aer-O-Scope Disposable Colonoscope System

GI View received FDA 510(k) clearance for the new Aer-O-Scope® Colonoscope System, a disposable, self-propelled, joystick-controlled, easy-to-use colonoscope system, now with therapeutic access. The new system has two working channels that enable therapeutic access using standard tools, such as snares and forceps, to take biopsies or perform polypectomies.

The Aer-O-Scope is the first colonoscope to provide a 360° omni-directional visualization of the colon to detect polyps behind folds. There is also no risk of contamination or disease transmission between patients from the device as it is to be used only once and then disposed. The Aer-O-Scope employs a soft multi-lumen tube designed to significantly reduce pressure on the colon wall, which in turn, increases patient safety. The tube is also hydrophilic, which reduces the friction between bowel and scope by more than 90%. Patient safety and comfort as well as physician ease of use are further maximized by the system’s self-propelled intubation, created using balloons and low pressure CO2 gas. As the system is joystick controlled it is also extremely simple to operate and requires minimal training. Like all colonoscopes, the Aer-O-Scope provides insufflation, irrigation and suction.

Headquartered in Ramat Gan, Israel, GI-View is dedicated to fundamentally advancing the efficiency, accuracy and comfort of colorectal cancer screening. The company’s flagship product is the Aer-O-Scope Colonoscope System, the only disposable colonoscope with a 360° omni-directional view for colon cancer screening. GI-View has been granted ISO certification for quality systems. The new Aer-O-Scope Colonoscope System is FDA cleared for market. (GI View 20.09)

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8.14 Teva & Regeneron Collaborate on Development and Commercialization of Fasinumab

Teva Pharmaceutical Industries and Regeneron Pharmaceuticals announced today a global agreement to develop and commercialize fasinumab, Regeneron’s investigational NGF antibody in Phase 3 clinical development for osteoarthritis pain and in Phase 2 development for chronic low back pain. Under the terms of the agreement, Teva will pay Regeneron $250 million upfront and share equally in the global commercial value, as well as ongoing research and development costs of approximately $1 billion.

Under the terms of the agreement, Regeneron is eligible to receive development and regulatory milestones payments and additional payments based on net sales. Regeneron will lead global development and U.S. commercialization. The companies will share U.S. commercialization efforts by utilizing sales teams and marketing expertise from both companies, and split profit equally in the U.S. In countries outside the U.S., with the exception of those covered by a previously announced collaboration agreement between Regeneron and Mitsubishi, Teva will be responsible for development and commercialization and pay Regeneron a purchase price, which allows both companies to retain approximately equal shares of fasinumab’s global commercial value over time.

Fasinumab is a fully human monoclonal antibody that targets NGF, a protein that plays a central role in the regulation of pain signaling. There is evidence that NGF levels are elevated in patients with chronic pain conditions.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions used by millions of patients every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,800 molecules to produce a wide range of generic products in nearly every therapeutic area. Regeneron is a leading science-based biopharmaceutical company based in Tarrytown, New York. (Teva 20.09)

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8.15 Theranica Closes Seed Funding Round & Reports Promising Clinical Results in Acute Migraine Study

Theranica Bio-Electronics announced the closing of its seed financing round from a group of top angel investors. The company’s first product, Nerivio Migra, addresses the widespread problem of migraine headaches by providing neuromodulation therapy through a non-invasive, wearable, and disposable ‘smart’ patch. The product can be used at the onset of a migraine attack to provide rapid and significant pain relief, often times completely eliminating all pain.

Netanya’s Theranica is a medical device company that has combined neuromodulation therapy with modern wireless technology to develop proprietary wearable solutions that address various medical conditions and disease states. The noninvasive and therapeutic ‘smart’ patches are controlled by a smartphone app to allow for personalized, portable, and affordable care. The patch consists of a proprietary ‘smart’ chip that delivers electrical pulses to neuro-modulate the sensory nerves under the skin. The first application of the technology is for treatment of migraine headaches. (Theranica 20.09)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Giraffic AVA for Content Providers Brings the Next Level of Consumer Viewing Experience

Giraffic announced that its technology can now help content providers meet the growing demand for scalable, high-quality live streaming and VOD. The company’s new SDK makes it easy to integrate AVA with apps, enabling superb viewing experiences as video content consumption migrates to mobile platforms and Over-the-Top (OTT) services. The Giraffic AVA software solution has been adopted by leading consumer electronics manufacturers, including Samsung and LG, and installed in over 70 million SmartTVs, set-top boxes (STBs) and other CE devices to overcome the limitations created by unstable Wi-Fi and cellular networks. Giraffic examined their install base and found that more than 20% of premium HD subscribers to OTT apps encountered buffering pauses during video playback without AVA, despite the growing adoption of Adaptive Bitrate (ABR). Some premium content viewers were able to achieve HD quality over only two-thirds of the video playback.

With a simple integration of Giraffic’s SDK into their apps, content providers can leverage AVA to deliver sustainable and consistent streams of premium HD and UHD 4K VOD content, high-profile live-streaming events, and OTT channels without server or network side integration. This leads to increased viewer retention, engagement and satisfaction, while reducing support costs. AVA technology enables this by achieving significantly higher throughput over existing internet connections, as well as providing up to 300% longer viewing periods at the highest quality resolution available. It also eliminates buffering pauses, low-resolution image quality and latency frequently experienced on mobile devices through efficient use of bandwidth and HTTP optimization.

Tel Aviv’s Giraffic is the inventor of Adaptive Video Acceleration (AVA) – the leading client-side video experience technology, complementing the existing video delivery ecosystem, that enables over 70 million consumer electronics (CE) devices across 120 countries, to deliver High Definition video and UHD 4K, without re-buffering pauses or streaming resolution reduction. Powering 1 in 3 Smart TVs that were shipped globally in 2015, including LG and Samsung, Giraffic’s ground-breaking technology has been adopted by the world’s leading consumer electronics manufacturers to provide dramatic internet throughput increase and a seamless video playback experience. (Giraffic 09.09)

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9.2 Sixgill Signs With Scitum/Telmex for a Solution to Address Cyber Attacks Before They Happen

Sixgill signed a deal with Scitum/Telmex, part of Grupo Carso and the largest integrated information security company in Mexico and the Latin American region. Sixgill’s advanced platform detects and defuses cyber-attacks and sensitive data leaks originating from the Dark Web before they occur, and provides this information through real-time alerts. Scitum will implement and offer Sixgill’s services to other Grupo Carso companies, including with Scitum’s parent company, Telmex, and America Mevil, a leading wireless services provider in Latin America and the fourth largest in the world in terms of equity subscribers. Scitum will offer Sixgill’s solution portfolio as an “on-premise” solution, as well as under a SaaS model. It will be added to Scitum’s portfolio of services related to security and managed services that include the design, implementation, and management of infrastructures of security of information, and consulting.

Yokneam Illit’s Sixgill was founded in 2014 to detect and defuse cyber threats and attacks on organizations originating from the Dark Web. Sixgill is a graduate of the Citi Accelerator in Tel Aviv and is working closely with Citi mentors to adapt the product capabilities to the needs of large global enterprises. Sixgill was also chosen among the top 5 most innovative companies at the Cybox competition at Cybertech in 2016. Sixgill has recently raised $5 million. (Sixgill 06.09)

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9.3 Mellanox Delivers First Complete 10/25/50/100 Gb/s Ethernet Open Networking Switch Portfolio

Mellanox Technologies announced support for Cumulus Linux 3.1 on four new 10/25/50/100 Gb/s Ethernet switch platforms. The announcement enables Mellanox to accelerate the adoption of Open Networking for customers by offering a complete end-to-end solution of Spectrum-based Ethernet switches that are supported by Cumulus Linux, the best-in-class Open Network Operating System. As the speed of servers increase, and flash-based storage has become mainstream, a growing number of server vendors are offering 25 Gigabit Ethernet NICs as the default I/O option in their servers. In addition to providing future proof connectivity, this enables their customers to avoid the cost and complexity of bundling multiple 10 Gigabit Ethernet links. The Mellanox SN2410 is the first generally available switch with native 25 Gigabit Ethernet ports that is able to connect 25GbE servers without requiring breakout cables. Powered by Mellanox’s Spectrum ASIC, the SN2410 offers tremendous throughput of 4Tb/s and with a landmark packet rate 2.98 Bpps switching capacity, all in a compact 1RU form factor.

Another first in the Open Ethernet space, the Mellanox SN2410B switch with Cumulus Linux allows customers with 10GbE attached servers to benefit from high capacity 100GbE inter-switch connectivity. By providing 2.5 times the bandwidth per uplink compared to traditional 10/40GbE switches, the SN2410B reduces cable complexity and facilitates significant cost savings by requiring 2.5 times fewer cables, transceivers, and aggregation (spine) switch ports. This high-speed switch is extremely affordable, with an MSRP that is half the cost of other 10/100 Gigabit Ethernet switch offerings.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end InfiniBand and Ethernet interconnect solutions and services for servers and storage. Mellanox interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance capability. Mellanox offers a choice of fast interconnect products: adapters, switches, software, cables 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 and financial services. (Mellanox Technologies 06.09)

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9.4 Celeno Technology to Power Askey Gateways and Wi-Fi Extenders

Celeno Communications announced that its high performance Wi-Fi technology has been selected to power Askey’s newest range of home Wi-Fi Gateways and extenders. A wholly owned subsidiary of ASUS Computers, Askey specializes in Broadband Connection, Home Networking and Video Entertainment total solution to Telecom and MSO Operators. Askey’s new Wave 2 802.11ac DOCSIS 3.1 Broadcom Gateway (BCM3390) Gateway and three extenders – MOCA, G.hn based, all equipped with Celeno’s technology including Celeno’s ControlAIR multi-AP management software and Celeno’s OptimizAIR 2.0 Wi-Fi management software technology. The 802.11ac Wave 2 Gateway and MOCA extender also include Celeno’s Argus engine in-chip dedicated RF circuitry and DSP-based engine for spectrum scanner and analyzer.

The Argus engine enables zero wait DFS channels entry and automatic, seamless channel change that are critical for satisfying 4K video experience in “real life” congested spectrum environment. The technology enables the gateway to seamlessly transition between Wi-Fi channels to seek the cleanest spectrum for best operation. This transition does not affect service and offers flicker free video without downsizing the radio dimensioning.

Ra’anana’s Celeno is the leading provider of smart, managed Wi-Fi solutions. Celeno’s extensive 802.11ac chip portfolio and ground-breaking software technologies are designed to excel in real life, highly-interfered dense network scenarios, delivering the level of management, performance, speed, coverage, reliability and superlative user experience demanded by Wi-Fi users. Celeno’s field-proven chips and software technology have been successfully integrated into numerous OEM Wi-Fi devices and have been deployed in tens of millions of homes around the world by almost 100 leading service providers worldwide. (Celeno Communications 09.09)

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9.5 BriefCam and Digifort Announce Technology Partnership

BriefCam announced a technology integration partnership with Digifort. This partnership benefits the industry with the most advanced video search and review functionalities, enabling users to extract valuable data collected on their surveillance systems and achieve better security and operational management. Digifort’s VMS (video management software) provides organizations with surveillance, access control and automation in distributed, accessible manner. Digifort can now offer users all the benefits of BriefCam Syndex from within its open VMS platform. The integrated solution enables Digifort users to benefit from new advancements to BriefCam Syndex:

ReView – Investigate large amounts of video data effectively to reduce time-to-target.

ReSearch – Gain business insights and key trends from your video to improve operational management.

ReSpond – Analyze complex scenes in real time and receive smart alerts to handle events proactively.

Modi’in’s BriefCam develops and delivers Video Synopsis solutions, empowering organizations to validate their investment in video by extracting value from video-data across all levels of organizations, maximizing security, operations and business efforts. (BriefCam 08.09)

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9.6 prooV Connects Enterprises To Software Vendors For Seamless Proof of Concept Pilots

prooV announced its global launch along with a $7 million Series A funding round from Mangrove Capital Partners and OurCrowd. prooV consolidates and optimizes the Proof of Concept (PoC) ecosystem, enabling global enterprises to discover, connect and engage with independent software vendors (ISVs) to easily run and evaluate multiple PoCs through remote, secure testing environments. The prooV platform also drastically reduces the demand on time and resources, allowing organizations to complete PoCs within days, not months.

prooV’s user-friendly platform enables enterprises and ISVs to easily discover, and be discovered by potential customers, suppliers and partners, and then seamlessly execute on PoC opportunities. PoC pilots run on prooV’s dedicated cloud-based testing environments that precisely emulate the enterprise’s internal conditions, including data, APIs and systems. Testing environments are automatically created when an enterprise opens and defines new PoC opportunities.

Founded in 2015, Tel Aviv’s prooV is the first Pilot-as-a-Service platform that brings together global enterprises and independent software vendors to discover, connect and execute Proof of Concepts (PoCs) through remote, secure testing environments. Founded by serial entrepreneurs who recognized the inefficiencies in the modern PoC process, prooV offers a radical new approach to testing, tracking and analyzing vendor solutions, accelerating the journey from RFP to PoC. prooV is a privately held company backed by Mangrove Capital Partners and OurCrowd. (prooV 08.09)

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9.7 Menora Mivtachim Insurance Selects Sapiens IDIT Software Suite

Sapiens International Corporation announced that Menora Mivtachim Insurance (Menora), one of Israel’s largest insurance and financial groups, selected the Sapiens IDIT insurance software suite. Menora expanded its long-term, strategic relationship with Sapiens. The company had previously selected Sapiens to manage its life and pension and reinsurance lines of business. By selecting the Sapiens IDIT software suite to manage the full lifecycle of its property and casualty (P&C) business, Menora will further advance its P&C business objectives. This agreement also represents a significant milestone for Sapiens, increasing the company’s global P&C footprint and strengthening Sapiens’ position in the Israeli P&C insurance market. The project will be divided into three phases and is expected to be completed within three years.

Sapiens IDIT is a software solution suite specifically designed for the P&C market. It enables carriers, managing general agents (MGAs) and insurance brokers to meet critical and long-term business goals via traditional insurance, direct insurance, bancassurance and brokers.

Holon’s Sapiens International Corporation is a leading global provider of software solutions for the insurance industry, with a growing presence in the financial services sector. Sapiens offers core, end-to-end solutions to the global general insurance, property and casualty, life, pension and annuities, reinsurance and retirement markets, as well as business decision management software. The company has a track record of over 30 years in delivering superior software solutions to more than 200 financial services organizations. (Sapiens 12.09)

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9.8 CyberArk Receives U.S. Technology Patent for Detecting Cyber Security Risks

CyberArk was recently awarded another patent (U.S. Patent 9,386,044) by the U.S. Patent and Trademark Office for innovative security risk detection technology. This patent follows a previously granted patent (U.S. Patent 9,185,136) and demonstrates CyberArk’s expertise in detecting the risks that make cyber attacks possible in organizational networks. The patent for correlation-based security risk identification covers methods and systems to map risks arising from credentials, especially privileged credentials, present on machines in the network that, once compromised, enable attackers to access and compromise other machines in the network.

CyberArk has implemented this innovative technology in the CyberArk Discovery and Audit (DNA) tool. CyberArk DNA is a valuable tool for security practitioners to quantify privileged account security-related risks and gain visibility into the vulnerable attack surface that exists within enterprise environments. Once compromised by an attacker, privileged credentials can enable lateral movement to other machines in the network. Using CyberArk DNA, organizations can identify specific security risks, such as those associated with Pass-the-Ticket and Pass-the-Hash attacks, and visualize how attackers could abuse credentials and associated access rights to operate in the network.

Petah Tikva’s CyberArk is the only security company focused on eliminating the most advanced cyber threats; those that use insider privileges to attack the heart of the enterprise. Dedicated to stopping attacks before they stop business, CyberArk proactively secures against cyber threats before attacks can escalate and do irreparable damage. The company is trusted by the world’s leading companies – including 45% of the Fortune 100 – to protect their highest value information assets, infrastructure and applications. (CyberArk 14.09)

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9.9 ECI Expands Neptune Family to Provide End-to-End, 5G Ready Backhaul Solution

ECI announced the addition of Neptune (NPT) 1011 and (NPT) 1025 to its growing Neptune family of multi-service packet transport platforms with integrated optics, for best-in-class solutions from metro access to core. Neptune is an integral part of ECI’s ElastiNET solution. The new Neptune products ideally complement ECI’s family offering with end-to-end ELASTIC MPLS solutions perfect for mobile backhaul.

The growth of traffic in the metro is already outpacing the growth in the network core. In the future, 5G networks are expected to exacerbate the situation, which will require increased control and optimization. The Neptune family provides both, using a dual stack (ELASTIC) MPLS that enables seamless interworking between the IP/MPLS and MPLS-TP domains. This eliminates the need to choose between protocols and reduces risk. ECI’s ElastiNET provides a forward-looking, highly-scalable and flexible architecture for current LTE/LTE-A and future 5G requirements. Moreover, ElastiNET supports all the necessary attributes such as low latency, synchronization distribution, reliability and security. The integrated optics ensure efficient and seamless interworking with the optical backbone. As with all of ElastiNET products, ECI’s LightSOFT provides intuitive network management, and ECI’s LightAPPS provide additional network control and flexibility.

Petah Tikva’s ECI is a global provider of ELASTIC network solutions to CSPs, critical infrastructures as well as data center operators. Along with its long-standing, industry-proven packet-optical transport, ECI offers a variety of SDN/NFV applications, end-to-end network management, a comprehensive cyber security solution and a range of professional services. ECI’s ELASTIC solutions ensure open, future-proof, and secure communications. (ECI 14.09)

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9.10 Telematics Wireless Awarded Access to the YPO Framework Agreement for Street Lighting

Telematics Wireless (Telematics) has been awarded access to the YPO Framework Agreement for Street Lighting Products and Services (Framework 711). This agreement will enable Telematics to provide smart lighting solutions to a wide customer base in the UK, including the local public sector and member authorities of YPO. The Framework Agreement is an OJEU compliant process for government authorities to procure products that cover the provisioning of Telematics’ Street Lighting Control Management Systems (CMS) from June 1, 2016 to May 31, 2020. It covers a wide range of terrains including commercial, urban, and rural environments. The Telematics solution will enable YPO’s customers to manage and control all streetlights on an individual or group basis by providing a reliable and secure two-way radio based communications platform between the lighting nodes and data control units. This facilitates the central control of lighting levels to suit various communities’ lighting requirements and fiscal needs of energy usage across the network. Once implemented, the wireless CMS communications platform enables the integration of machine-to-machine sensors, thus expanding the Smart City network.

Holon’s Telematics Wireless is a recognized global leader in the delivery of outdoor lighting control systems, as well as robust, reliable and advanced energy and water resource management systems based on RF wireless networks. With almost 20 years of experience in Machine-to-Machine technologies, our solutions support a wide spectrum of smart city applications, increasing their efficiency, reliability, and cost-effectiveness. The company has deployed tens of thousands of Light Control Units worldwide in dozens of cities. (Telematics 14.09)

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9.11 Nano Dimension Marks First Delivery of DragonFly 2020 3D Printer to the US

Nano Dimension announced that its wholly owned subsidiary, Nano Dimension Technologies Ltd., has delivered its DragonFly 2020 3D Printer to FATHOM. FATHOM is a beta and go-to-market partner with expertise in advanced manufacturing and 3D printing that serves the Silicon Valley region and greater West Coast area. This marks the company’s first delivery of the DragonFly 2020 3D Printer to the United States. The DragonFly 2020 3D Printer will be installed at FATHOM’s Oakland, California headquarters and will be used for evaluations and demonstrations over the next year. Earlier this year, Nano Dimension signed an agreement with FATHOM to collaborate on the introduction of the DragonFly 2020 3D Printing platform to the U.S. market, with a focus on Silicon Valley and the greater West Coast area.

Ness Ziona’s Nano Dimension, founded in 2012, focuses on development of advanced 3D printed electronics systems and advanced additive manufacturing. Nano Dimension’s unique products combine three advanced technologies: 3D inkjet, 3D software and nanomaterials. The company’s primary products include the first 3D printer dedicated to printing multi-layer PCBs (printed circuit boards) and advanced nanotechnology-based conductive and dielectric inks. (Nano Dimension 14.09)

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9.12 Stratasys & threeASFOUR Unveil 3D Printed OSCILLATION Dress

Stratasys announced its ongoing collaboration with fashion leader threeASFOUR and New York-based designer Travis Fitch – debuting one of the designers’ most elaborate and intricate 3D printed dresses during New York Fashion Week. Entitled ‘Oscillation,’ the piece is comprised of 30 individual and highly precise multi-color, multi-material 3D printed parts created via assembly of 270 unique design files. The 3D printed dress serves as the centerpiece for threeASFOUR’s ‘Quantum Vibrations’ collection. Drawing inspiration from source energies and primal, universal vibrations, the collection explores a series of graphic 2D patterns created in partnership with Travis Fitch. Leveraging Stratasys’ color, multi-material 3D printing technology, threeASFOUR brought these vibrational forms to life in range of vibrantly colored 3D printed materials – representing the designers’ most intricate and complex creation to date. The 30 unique dress components were initially printed as flat, unwrapped patches that were later assembled on the body. With Stratasys’ color, multi-material 3D printing capabilities, including advanced precision and the ability to vary material properties, the designers were able to recreate even the most intricate vibrational patterns and geometries without compromising the flexibility and wearability integral to the design.

For more than 25 years, Stratasys has been a defining force and dominant player in 3D printing and additive manufacturing – shaping the way things are made. Headquartered in Minneapolis, Minnesota and Rehovot, Israel, the company empowers customers across a broad range of vertical markets by enabling new paradigms for design and manufacturing. The company’s solutions provide customers with unmatched design freedom and manufacturing flexibility – reducing time-to-market and lowering development costs, while improving designs and communications. (Stratasys 15.09)

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9.13 SuperCom to Launch Mobile Wallet Solution with VeriFone and Nofshonit in Israel

SuperCom announced that Nofshonit, one of the largest loyalty club providers and operators in Israel, has selected SuperCom to provide an e-wallet solution to Nofshonit clients for digital loyalty and pre-paid shopping programs, to be supported at merchant locations over various devices and applications. Nofshonit, through its operating partner Knowledge4all, has more than one million active clients. SuperCom’s secure mobile wallet application, SuperWallet, will be used by existing and selected loyalty club clients throughout Israel and allow for mobile payments at point-of-sales instead of using the pre-chargeable magnetic card method which was previously mainly utilized in these loyalty programs. The solution will provide a range of services such as topping-up funds, paying for goods at the shops and viewing recent activities and inquiries. The roll out has already begun introducing the solution to various Knowledge4all client groups, among them the Israeli workers union, the Israeli department of security, and the employees of Teva Pharmaceutical Industries. The roll-out will continue over the next months.

SuperPay is SuperCom’s secure mobile payment hybrid suite which brings a new level of secured cross-network mobile payment transaction capabilities. Designed specifically as a flexible end-to-end mobile payments solution, the SuperPay suite is a secure and effective customizable answer for governments, MNOs and banks. Solving major money transfer and payments problems, and considering the unbanked population, SuperPay can be used for depositing, withdrawing and transferring funds and for paying for goods and bills on almost any mobile phone.

Since 1988, Herzliya’s SuperCom has been a leading global provider of traditional and digital identity solutions, providing advanced safety, identification and security solutions to governments and organizations, both private and public, throughout the world. Through its proprietary e-Government platforms and innovative solutions for traditional and biometrics enrollment, personalization, issuance and border control services, SuperCom has inspired governments and national agencies to design and issue secured Multi-ID documents and robust digital identity solutions to its citizens and visitors. SuperCom offers advanced, secure mobile payments ranging from mobile wallet to mobile POS, using a set of components and platforms to enable secure mobile payments and financial services. (SuperCom 15.09)

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9.14 LightCyber Extends Behavioral Attack Detection to Amazon Web Services

LightCyber announced new Magna products for Amazon Web Services (AWS) to close the breach detection gap in cloud and hybrid cloud data centers. The new products provide attack visibility for Infrastructure-as-a-Service (IaaS) cloud and hybrid cloud data center workloads. Leveraging all of the existing behavioral profiling and anomaly detection capabilities available in the Magna platform, the new Magna Detector-AWS and Magna Probe-AWS products support deployment within an organization’s AWS Virtual Private Cloud (VPC). LightCyber also announced a new version of its agentless, on-demand Magna Pathfinder for Linux to extend integrated network and endpoint detection features to one of the most common data center server platforms. The new LightCyber Magna products detect the operational activities of malicious insiders or targeted external attackers attempting to gain control of assets hosted in an AWS cloud data center or using it as a point for command and control (C&C) communication and eventual exfiltration of data. Similar to an on premise data center, once attackers gain a foothold, they need to explore the environment through reconnaissance and must expand their realm of control to gain access to assets using lateral movement. The Magna Behavioral Attack Detection platform employs machine learning techniques to detect these reconnaissance and lateral movement activities, as well as C&C and exfiltration, so that an attack can be thwarted before damage is done.

Ramat Gan’s LightCyber is a leading provider of Behavioral Attack Detection solutions that provide accurate and efficient security visibility into attacks that have slipped through the cracks of traditional security controls. The LightCyber Magna platform is the first security product to integrate user, network and endpoint context to provide security visibility into a range of attack activity. Founded in 2012 and led by world-class cyber security experts, the company’s products have been successfully deployed by top-tier customers around the world in industries including the financial, legal, telecom, government, media and technology sectors. (LightCyber 19.09)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s CPI Declines by 0.3% in August

Israel’s Consumer Price Index (CPI) unexpectedly fell 0.3% in August, the Central Bureau of Statistics reported on 15 September, after rising for the previous four consecutive months – 0.4% in July, 0.3% in June, 0.3% in May and 0.4% in April. Prior to that, the CPI had fallen for five straight months. The analyst’s consensus prediction was that the CPI would be unchanged. Over the past 12 months, the CPI has fallen 0.7% – well below the government’s inflation target range of between 1% and 3%. Prominent price falls in August included fashion and footwear (4.9%), fresh fruit (2.5%) and transport and communications (1.3%). Prominent price rises included fresh vegetables (3.3%). The housing price index, published separately from the CPI, showed that home prices rose 0.1% after falling 0.3% in the preceding month. Home prices have risen 6% over the past 12 months. (CBS 15.09)

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10.2 Israeli Exports Jumped 11.5% Between June – August

Israel’s exports have recovered following a decline of 6.8% in annualized terms in March-May 2016. Israel’s exports continue powering ahead: in June-August 2016, the export of goods (excluding ships, planes and diamonds) rose an annualized 11.5%, compared with a decline of an annualized 6.8% in March-May 2016. The Central Bureau of Statistics reports that in August, the import of goods totaled NIS 21.8 billion, goods exports were NIS 14.6 billion and the trade deficit was NIS 7.2 billion.

The rise in exports has been partially explained by one-time events, such as the reactivation of production lines in at the Intel plant in Kiryat Gat. Production lines had been shut down earlier this year, causing exports to decline. In June-August 2016, high-tech exports (about 47% of all industrial exports, excluding diamonds), rose an annualized 12.3%. In comparison, in March-May 2016, they dropped an annualized 14.1%. Export data indicates an annualized 94.6% rise in drug exports (average rise of 5.7% per month). In contrast, the export of electronic components and boards dropped an annualized 11.8%. As for imports, a 34.2% drop in car imports was noted, affecting overall data for consumer durables which dropped an annualized 13.8% in August. (CBS 14.09)

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10.3 Israel’s Second Quarter Growth Revised Upwards

The Central Bureau of Statistics announced on 18 September that the Israeli economy grew at 4% on an annual basis in Q2/16. The Central Bureau of Statistics reported that the Israeli economy grew at 3% on an annual basis in H1/16, compared with its previous 2.9% estimate and 2.7% GDP growth in the first half of 2015. The Central Bureau of Statistics also raised its growth figure for the second quarter from its previous 3.7% estimate to 4%. The improvement in second quarter growth is attributable to a 10% increase in private consumption, an 8.6% rise in spending on public consumption, and a 5.1% rise in investments in fixed assets. Exports of goods and services were up by an annualized 10.9%. (Globes 18.09)

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10.4 Budget Deficit Remains Well Below Government Target

Israel’s August budget deficit amounted to NIS 2.6 billion, making the deficit over the past 12 months 2.2% of GDP. The 2016 budget allows for a 2.9% deficit.

Gross receipts from self-employed people and companies totaled NIS 4.3 billion in August, down 12%, compared with August 2015. Most of the decrease was from companies, particularly financial companies, while receipts from the self-employed fell 2.9%. Government spending (excluding repayment of principal on debt) totaled NIS 26.2 billion in August, consisting of NIS 23.5 billion in spending by government ministries and NIS 2.6 billion in interest on the government debt, plus NIS 200 million in payments of interest and principal to the National Insurance Institute. Revenue from capital market taxes totaled NIS 195 million, down 25%, compared with August 2015. Revenue from tax on interest fell 11%, and taxes on profits from securities trading plummeted 32%. Revenue from taxes on gasoline jumped 10% to NIS 1.5 billion in August, compared with NIS 1.4 billion in August 2015. Since the beginning of the year, state revenue from gasoline taxes totaled NIS 11.9 billion, compared with NIS 11.5 billion in the corresponding period last year. (Globes 07.09)

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10.5 While Wine Consumption Is On the Rise, Israelis Still Not Big Drinkers

Israelis are not big drinkers, but wine consumption in the country is nevertheless on the rise, a recent survey by the local 1848 Vineyard, has found. The poll, held ahead of the High Holidays and released on 15 September, found that the average Israeli consumes only around 5.5 liters of wine a year. Twenty percent of Israelis purchase a bottle of wine every week, while 30% do so once a month. Not surprisingly, when they do go out shopping for a bottle, Israelis stick to traditional wines: Cabernet sauvignon and chardonnay are the most popular red and white wines, respectively, though the survey found white wine is growing increasingly popular. Nevertheless, 59% of the general population said they considered themselves wine drinkers.

While women are drinking more wine now than in the past, Israeli men continue to drink more than their female counterparts: Of those who considered themselves wine drinkers, 65% of wine drinkers in Israel were men, while only 35% were women. Israelis prefer to buy wines from local vineyards. Around 65% purchase wine from Israeli vineyards, while 35% purchase imported wine. Around 10 large vineyards and 250 boutique and premium vineyards operate in Israel today to serve the country’s market. Local wines win prestigious awards at international wine competitions. Wine sales have increased 2.5% annually in recent years, and increase 19% above average ahead of Rosh Hashanah and the High Holidays. (IH 16.09)

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11: IN DEPTH

11.1 ISRAEL: The Israeli Startup Scene in August

For those who did not manage to follow what happened last month, Geektime has collected all the investments, acquisitions and financing rounds on the Israeli startup scene in August in a special summary:

CyberX raises $9 million

Israeli company CyberX, a startup dealing in cyber security for the Industrial Internet, announced the completion of their Series A financing round in which it raised $9 million. International venture capital fund Flint Capital led the round, together with previous investors Glilot Capital Partners, UpWest Labs, GlenRock Group, Swarth Group, Gigi-Levy-Weiss and other investors from the US and Europe.

CyberX offers a solution for detecting cyber-attacks and operational malfunctions in real time by creating absolute visibility of the Industrial Internet at any given moment, based on modeling technology and ISC-ISAC. The purpose of the Industrial Internet is to create a smarter and safer internet connection for industrial machinery.

Panoply.io raises $7 million

Young startup Panoply.io announced the completion of a $7 million seed financing round led by Intel Capital, the American chip giant’s investment arm, and Blumberg Capital, a previous investor in the company.

Panoply.io is developing a new way of storing data on the cloud by turning it into a more accessible and flexible platform than the one currently offered, which is basically an infrastructure that can be operated only by experts. The platform developed by the company is designed to manage data and analytics, essentially what New Relic did for monitoring and performance and Heroku did for apps development.

Velostrata raises $17.5 million more

Israeli company Velostrata, which is developing the first hybrid cloud solution that also works in real time, announced the completion of a $17.5 million financing round led by Intel Capital, Intel’s investment arm, with the participation of previous investors Norwest Venture Partners and 83North Venture Capital.

The technology developed by Velostrata enables organizations to stream calculation tasks from the client’s website to the cloud and back within minutes, without copying the data or the software themselves to the cloud, thereby maintaining optimal performance. According to the company, the solution it has developed is the only one that accommodates on-demand hybrid cloud architecture for core organizational apps, while there is no need to make changes in the apps, the operating system, or the data location, the method of storing them, and their management. In other words, an organization’s personnel can continue using the same tools and processes for managing the calculation infrastructure that they have become used to. The transfer of calculation tasks to and from the cloud is done by clicking on a button.

Israeli company Sedona Systems raises $13.6 million

Sedona Systems announced the completion of a $13.6 million

Series B financing round led by Intel Capital, with participation from new investor NexStar Partners and existing investors Bessemer Venture Partners. Sedona Systems develops technology designed to improve connectivity of networks throughout the world and the efficiency of data centers. It does this with the help of a combination of layers that currently operate independently and do not communicate with each other. By merging two of these layers, it is possible to attain control, receive information, and optimize the organizational network. The company’s technology makes it possible to obtain a great deal of information from the SDN controllers on two layers, such as the volume of traffic and alerts, thereby benefiting from greater reliability on the network. According to the company, organizations can save up to 50% of their communications infrastructure costs through the optimization it offers. NetFusion, the product developed by the company, works with the equipment of all the recognized manufacturers. Once installed, it works automatically, and is transparent to the user.

Spot.IM raises $13 million

Israeli startup Spot.IM, which has developed a widget designed to enhance the involvement of visitors on a website, announced the completion of a $13 million Series A financing round. Funds Index Ventures and AltaIR Capital led the round, together with other investors. The company develops products for the use of websites that create original content in order to enable them to hold on to surfers exposed to the content, and not to lose them as a result of the sharing and display of content on Facebook, YouTube, Twitter, and other social networks.

In order to increase the visitors’ involvement on the website, Spot.IM offers a number of social tools, such as getting rid of the standard responses in the system, and creating real time discourse instead, an alert system that enables users to discover where the conversations are taking place on the website at any time, a news feed composed of the content on the website most frequently viewed by the users, etc. Spot.IM founder and CEO Nadav Shoval says that the combination of these products yields a 20% average increase in the time spent on the website, and a 25% rise in responses and exposure to pages on the website.

Ornim Medical raises $20 million

Ornim Medical, which is developing a brain monitoring device, announced the completion of its Series C financing round, in which it raised $20 million. Chinese investment company LongTec HongTao China Ventures LP led the round, together with previous investors, among them OrbiMed Healthcare Fund Management and GE Ventures.

c-FLOW, Ornim’s flagship device, is based on technology that combines near-infrared light with ultrasound pulses. It is designed for continuous, non-invasive, and simultaneous monitoring of blood flow changes in a selected vicinity of tissue in the brain. The alternative without the device obliges the doctors to use indirect measures that are not specific to the brain, or to use a special device that is both expensive and invasive, and which in most cases provides only partial information. c-FLOW is designed for use mainly in operating rooms, intensive care, recovery rooms, and emergency rooms, and in the future, also in ambulances. As of now, the device is the only non-invasive device in the world with FDA approval that makes it possible to monitor simultaneously and continuously blood flow changes during brain monitoring. Ornim also has FDA approval for continuous monitoring of the O2 saturation in the brain.

Cloudyn raises $4 million

Less than a year after its previous financing round, Israeli startup Cloudyn is raising $4 million more from Infosys, one of the largest IT companies in India. Cloudyn aids organizations in cutting their cloud computing expenses by monitoring and analyzing activity on the public, private, and hybrid cloud.

The SaaS tool developed by Cloudyn helps organizations change work environments and adopt hybrid cloud services and interface with a number of clouds simultaneously. The analysis it provides enables its customers to spot unnecessary expenses and unutilized resources. It carries out simulations of running services between various clouds, and provides information about excessive allocation of resources to public, private, and hybrid clouds. The company’s solution enables its customers to arrive at the right composition of cloud services, thereby improving their operating performance and reducing the organization’s cloud costs. Among other things, the company currently supports Amazon’s AWS, Microsoft Azure, Google’s GCE and OpenStack. The company claims to monitor 8% of Amazon’s cloud platform.

Formlabs raises $35 million

Israeli startup Formlabs, which is developing and producing 3D table printers, has announced a $35 million Series B financing round, led by Foundry Group. Previous investors also took part in the round, including DFJ Growth, Pitango Venture Capital, and former General Manager and Apple VP Europe Pascal Cagni. Together with the investment, the company announced a strategic partnership with AutoDesk for the purpose of improving digital design and production for product manufacturers throughout the world.

The company is designing and producing advanced and accessible 3D printing systems for engineers, designers, and artists. The company’s flagship product, the Form 2 3D printer, uses stereolithography to generate physical objects in high resolution from digital programs.

Insert raises $10 million

Israeli startup Insert announced that it had raised $10 million in its Series A financing round, led by Battery Ventures, with participation from its existing seed investors Shlomo Kramer, Rakesh Loonkar and Mickey Boodaei. The current round puts the amount raised by the company to date at $15 million. In January 2015, the startup, then still operating under the radar, raised $5 million.

Insert offers a diverse catalogue of tools that a marketer can put into his or her mobile apps within minutes, without any development and without going through a process of getting approval again from the apps shop. The focus of the product is on enhancing the loyalty of users in the long term, and on increasing revenue from the app. The tools offered by the company enable the app owner to adapt the agreement with the user to his personal characteristics and his behavior on the app in the past and in real time. For example, Insert makes it possible to dynamically devise a process of accepting a new user, presenting personalized offers, running surveys, video clips, etc.

Kaltura raises $50 million

Israeli startup Kaltura, which is developing an open-code video platform, has completed a $50 million pre-IPO financing round from the Goldman Sachs investment bank. The current round, the company’s Series E, puts the amount of capital raised by the company to date at over $150 million. Kaltura will use the additional capital to continue making its global mark and positioning itself as an “all-video” company, offering leading video solutions for many widely dispersed markets and a broad range of uses.

The platform developed by Kaltura enables its customers to increase their revenue from advertising, while sharing content, acquiring a broader audience and cutting costs related to video broadcasting. The product offers an entire system that enables the customer to integrate video content on their websites and exercise complete control over the pushing of content to websites; statistical analysis; and other important tools for those distributing information in an organization. The system is able to provide a response to a variety of different platforms, including PCs, tablets, and cellular devices, while making adjustments to each of them.

Innoviz Technologies raises $9 million

Innoviz Technologies, an Israeli startup developing sensors and systems for the purpose of producing autonomously driven vehicles, announced that it had raised $9 million in its Series A financing round. The company’s investors include Zohar Zisapel; venture capital funds Vertex Venture Capital, Magma Venture Capital, and Amity Ventures; and Delek Investments.

Innoviz realized that development in the autonomous vehicle market was at its peak, but was still being delayed, due to the gap between the existing technology for scanning a vehicle’s maneuvering room and the ability to distinguish the surroundings in a way that will enable it to direct its path safely. The company is developing a sensor called light radar (LiDAR), a laser sensor that scans the vehicle’s surroundings very accurately and builds around it a detailed 3D image. The company’s technology is called high definition solid-state LiDAR (HD-SSL). LiDAR allows action and sensing at long ranges of several hundred meters and high resolution on both axes, while significantly reducing the size of the product and reducing the price to less than $100 per unit, in contrast to tens of thousands of dollars at present. HD-SSL will serve as a basis for any sensing system need for autonomous driving.

Photomyne raises $2.6 million

Israeli startup Photomyne has completed its seed financing round, raising $2.6 million from a number of Israeli investors, including Eddy Shalev, Yariv Gilat, Leon Recanati and Yariv Eisenberg. The simplest solution today for creating a digital file from a physical picture is, of course, to scan or photograph using a smartphone. The problem is that this action requires the users to shoot every photo separately, and to edit it.

The Photomyne app, on the other hand, enables users to create digital versions of old pictures rapidly and fairly easily by photographing an entire page of the album (regardless of how many pictures it contains). The app will do all the hard work. It is not even necessary to take the photos out of the album itself. The company claims that its solution is the only one currently on the market that makes it possible to scan pictures simultaneously with a single click.

Scene53, developer of Shaker, acquired by Playstudios

Joining forces: American gaming company Playstudios this month acquired Israeli company Scene53, which specializes in games with many players in a mobile virtual environment. Over the past two years, the companies cooperated in developing the free-of-charge game Pop! Slots, a virtual casino that simulates the gaming experience in Las Vegas casinos. The game was launched two weeks ago, and is currently ranked in third place by App Store in the free casino games category. Playstudios, which is responsible for the popular MyVegas Slots game, owns the exclusive right to the famous casino labels of the MGM group in Las Vegas.

Playstudios contacted Scene53 with an offer for a joint venture based on the Scene53 game experience that would enable the players to “visit” a virtual version of giant brands, such as MGM Grand and Bellagio, play together online with friends, win real prizes, such as an evening in a hotel or a ticket to a show, all from their smartphone or tablet. Close to the launch, Playstudios offered to acquire Scene53, and turn the company into its subsidiary. Playstudios Israel will now operate as an independent games studio, focusing on continued development of POP! Slots, and will expand in the future to other games using the technology.

ForClass acquired by Time To Know for millions of shekels

Israeli company Time To Know is acquiring Israeli startup ForClass, which offers a platform for improving learning for teachers and students. The acquiring company provides solutions for creating digital teaching and study programs. The official amount of the deal was not disclosed, but is estimated in the millions of shekels. The acquired company will continue to offer its product to users at least until the end of the coming school year.

Chief product officer Gad Allon, CTO Ofer Belinsky, and CEO Boaz Shedletsky founded ForClass in 2013. The company offers a cloud-based fully integrated cross-platform tool aimed at helping to distribute content, assess students and manage a class. The overall purpose of the product is to encourage students’ involvement in class.

Connecteam raising $1 million from Wix founders

Israeli startup Connecteam has developed a system enabling any organization to develop its own special app within minutes, at an extremely accessible price. The startup this month announced a $1 million financing round from Wix’s investors, and the commercial launch of the system.

The platform developed by Connecteam enables any organization to develop an internal branded free organizational app for its employees in minutes, with no need for technical support. The app enables managers to communicate directly with every employee, obtain feedback about which employee read the notice or saw the video clip, deliver professional updates and online training through the app, operate a location-based time card, conduct surveys, create a list of tasks and manage shifts. Managers can also monitor their employees’ performances in real time, and detect opportunities for making the workplace more efficient, thus saving time and money. The employees, for their part, enjoy various tools, such as complete access to company documents and information previously inaccessible to them.

Dojo Labs acquired by BullGuard

Israeli IoT security company Dojo Labs has been acquired by UK anti-virus manufacturer BullGuard. The Israeli company is developing a unique security gadget that provides remote protection against burglars for all home appliances, and guards the users’ privacy. The companies published no other information about the deal.

The company has developed a gadget named Dojo that connects smoothly with our home router and guards the home network, without any prior knowledge about information security or operation of a firewall being required from the users. Dojo will warn and halt any activity that appears suspicious to it, whether an external hacker is trying to break into the home network or if one of the smart appliances is trying to send out of the home information that is not supposed to reach an external party. If such an event occurs, Dojo will send a warning to the special app on the user’s smartphone, and ask them for instruction on what to do about the problem, whether the attempted communications should be allowed or blocked.

SAIPS acquired by Ford

Israeli startup SAIPS develops computer vision and machine learning solutions. Founded in 2013, the company has announced its acquisition by US auto giant Ford. The acquisition price was not disclosed, but is believed to be in the tens of millions of dollars. Before the acquisition, the entrepreneurs were the sole shareholders in the company, in which no external investments were made since its founding.

SAIPS specializes in developing algorithms based on Deep Neural Networks. Its portfolio includes a number of technologies designed to provide a solution to quite a few challenges in the computer vision field: recognition of patterns and anomalies, detection and tracking, 3D, behavior prediction, positioning, image enhancement and more. Following the acquisition, SAIPS will help Ford develop the advanced artificial intelligence algorithms needed to map a car’s dynamic surroundings and make complicated split-second decisions, which will be crucial to autonomous cars’ functioning.

ColorChip raising $20 million more

Less than a year after completing a $25 million financing round, the Israeli company announced a financing round to raise $20 million more from its existing investors and new investors. The company is developing optical communications technology that makes it possible to transport effectively the bandwidth needed for the large volume of information in large and overloaded data centers.

ColorChip produces the components needed to create optical communications for operating the data centers of leading technology providers. The transceivers and splitters made by the company make it possible to transport effectively the bandwidth needed for the large volume of information in large data centers. The company’s technology, which is protected by patents from universities in Israel and special patents developed in the company, is based on ion exchange in glass. There are many applications of this technology, including optical splitters in communications closets and optical heads for broadcasters and receivers with very high rates of information traffic, reaching 1 Tbsp for ranges of kilometers.

Jeeng raises $500,000

Jeeng, which is developing a solution for smarter following up of content, and seeks to become the world’s leading content follow-up system, announced a $500,000 financing round this month. Participants in the round included Krypton Venture Capital, the WebPick group, Gigi Levy, Startups 500, Aryeh Mergi and others.

Jeeng has developed a smart tool for installation on content websites. It can analyze the content of any article or page and generate topics for follow-up, based on an understanding of the content. For example, if a user is reading an article about rumors concerning the new iPhone, Jeeng will suggest that the user click on a button to access additional articles about the mobile field in general, or about the iPhone in particular, about Apple Computers, iPhone prices, etc.

CEO Shlomi Haybi and CTO Roma Bronstein founded Jeeng in 2015. The company has operated on a limited format to date with publishers in order to test the follow-up technology and its content analysis algorithm. Now, with a little more cash in the kitty, it plans to expand its activity to additional customers around the world.

Somoto acquires Meme Video for $13 million

Somoto, a Tel Aviv Stock Exchange-listed company, announced this month that it had acquired Israeli ad tech company Meme Vido for $13 million in cash and shares. Meme Video, which specializes in advertising optimization for various target markets, reported an operating profit last year. Meme Video’s video advertising business is based on technology developed by it and third parties. The company has developed tools for the digital video segment, which includes, among other things, Ad Server, Waterfall, tools for big data analysis, and a system of algorithms that makes it possible to optimize the price of digital media space.

Nutrinia raises $30 million

Israeli company Nutrinia, which has developed a special form of insulin for feeding premature infants and children following a shortening of the intestine, announced that it had completed their Series D financing round, in which it raised $30 million. The current round was led by the TPG Biotech fund, with participation from the WuXi Healthcare Ventures and H.I.G. BioHealth Partners funds, as well as from existing investors, including Pontifax Venture Capital and Orbimed. Nutrinia will use the money it raised to finance two key clinical trials of its product in the US and Europe.

The special insulin developed by the company enables the intestine to absorb food and consequently assists proper development in an infant. The function of the insulin-based drug is to improve the digestive process among infants and increase the pace at which they gain weight, an extremely important question, especially for premature babies. Nutrinia’s product also has great potential in the prevention of chronic diseases, such as Type 1 (juvenile) diabetes, various allergies, and obesity. The Israeli company’s product remains durable at different temperatures and can be easily dissolved into any formula, or into mother’s milk.

CellSavers raises $15 million

Startup CellSavers, which provides on-demand smartphone repair service, has announced the completion of another financing round, in which it raised $15 million. Carmel Ventures led the round, with participation from Sequoia Capital Israel. The current round follows CellSavers’ $3 million seed round, which Sequoia led in December 2015.

CellSavers offers what amounts to a rescue service for your smartphone; it puts at the customers’ disposal an array of independent technicians who will repair the broken-down device at the time and in the place you prefer, whether at home, in the office, a café, or a gym. The technicians with whom the company works undergo comprehensive testing and checks, and offer their services at a price fixed in advance, while standing behind the company slogan “for life.” The process of ordering the repair takes place online, based on the predetermined fixed prices, without unpleasant surprises, and with the help of assistance from carefully selected experts. The service is usually provided within 30 minutes or less. In principle, the aim is for the technician to visit the customers within 60 minutes, regardless of where the customer is.

HoneyBook raises $14 million

HoneyBook offers professionals involved in organizing events a single platform to manage for them all the fatiguing bureaucratic procedures in their work: price bids, contracts, clearance, writing invoices and handling the contract between the professional and the customers. Among other things, the company is aiming at event organizers, photographers, DJs, hair stylists, event hall owners, flower arrangement artists, etc. According to the company, these are “creative” professions, and bureaucratic paperwork detracts from the flow of their work.

The company recently completed a $14 million financing round, with participation from Vintage Investment Partners and Tank Hill Ventures, as well as all of the company’s previous investors. The latest financing round brings the cumulative capital raised by the company to $46 million, giving it an estimated market value of NIS 170 million.

Uber acquires Otto for $680 million

Otto, an Israeli-American company founded in 2016, is on its way to being acquired by Uber for $680 million. The anticipated signing of the deal followed a week awash with significant announcements in the auto technology industry about autonomous vehicles. Anyone questioning how close we are to an era in which cars, buses, and trucks will drive themselves heard in recent days about a series of concrete steps that have been taken in the last several months. For Otto, this exit is coming very early. The company, founded only eight months ago, has 90 employees, and the price for its acquisition amounts to about 1% of the value of Uber itself.

In recent years, for a wide variety of reasons, the United States has faced a gaping shortage of truck drivers, with growing demand for rapid, land-based transportation of goods. Otto, which noticed this need, combined it with one of the hottest trends in the current global technology market: autonomous vehicles. At a time when the auto industry is busy designing an autonomous vehicle from scratch for the private market, Otto, operating in a completely different sphere, has developed systems that can turn existing trucks into autonomous ones, obviating the need for human beings on the one hand, and appealing to the auto industry in general on the other.

BigaBid raises $2 million

Israeli ad tech startup BigaBid is developing technology for automatic real-time optimization on the various digital stock exchanges. In simple language, the company has developed technology that seeks to replace to some degree the media buyers and analysts with a single computerized smart brain. In order to continue doing so, the company announced this month the completion of a $2 million seed financing round from Naftali Investments and a number of angels, including Gur Shomron. Using BigaBid’s solution, app developers can reach the market of users most relevant to them and focus on users with the highest value. By analyzing the users’ actions, the “brain” generates profiles, and in effect understands who each user is, making it possible to offer each and every user the relevant app (the information of course remains anonymous).

Taiwanese company GMobi acquires MassiveImpact

Taiwanese company GMobi announced its acquisition of Israeli company MassiveImpact in order to reinforce its focus on mobile advertising. Founded in 2007, MassiveImpact initially offered advertising tools for platforms such as SMS and MMS. When smartphones became ubiquitous, the company switched to developing smarter advertising tools adapted to them, and offered a model in which the advertiser paid only when a purchase, download, or incoming call at a company’s sales center was made.

NLT Spine acquired by SeaSpine

American company SeaSpine Holdings Corporation has finalized an agreement to acquire Israel medical equipment company NLT Spine, which develops implants and devices for the treatment of orthopedic problems. SeaSpine will initially pay $1 million in cash for the acquisition, plus additional payments up to a maximum of $43 million if the Israeli company achieves commercial and regulatory targets.

NLT Spine develops a variety of products for minimally invasive spinal surgery (MISS) to treat degenerative spinal conditions. The company’s products and implants, which can be inserted through a small incision, expand and grow into their final shape only when they are already inside the patient’s body.

SkyGiraffe raises $6 million

Israeli startup SkyGiraffe, which is developing a cloud platform for generating organizational apps and management on the cloud, announced that it has completed another financing round, in which it raised $6 million. SGVC led the current round, together with Trilogy Equity Partners, Heroku founder and CEO James Lindenbaum, Parse founder and CEO and Y Combinator partner Ilya Sukhar, and Lookout founder and CTO Kevin Mahaffey.

SkyGiraffe has developed a cloud platform for managing organizations through native business apps installed on the employees’ cellular devices. The company’s product, SkyGiraffe Studio, makes it possible to create apps personally adapted to the needs of employees in various departments, according to the information and specifically relevant access for them. Using the product, information managers in a company can create apps in an especially short time of 15 minutes, while the final product not only allows access to the information, but also accommodates changes and synchronization with the end user. For example, store managers can receive remote updates on products inventories, check which employees appeared for a shift, and even order the necessary products, together with the possibility of being in touch with more employees in the organization.

MOBILAB raises $1 million

A new venture named MOBILAB is threatening to make everyone’s nightmare a little less nightmarish. Within 10 minutes to one hour of receiving a call, a technician will visit you and repair your home appliance. Meanwhile, the company has raised $1 million from private investors.

The model on which MOBILAB operates is very similar to what Gett does with taxis. In other words, the company connects the technicians in its database to nearby customers in need of a repair. The company emphasizes that every technician included in its database has undergone a meticulous selection process, including personality, reliability, and professional tests. He also undergoes the company’s professional training process. Every technician comes to the customer’s home with all the necessary laboratory equipment, original spare parts, and supplementary accessories, such as a screen protector and batteries, which are offered to the customer.

User1st raises $3 million

Nearly three years have passed since the new regulations concerning access to sites for the handicapped went into effect. Israeli startup User1st is seeking to help site owners by making the adjustment process much simpler and faster. Actually, the company enables every site or web-based app to become accessible in compliance with a series of international standards, according to the WCAG 2.0 guidelines developed by the W3C global Internet organization.

This month, the company announced the completion of a $3 million financing round. The Cornerstone fund led the current round, together with 500 Startups, 888 founder Eyal Shaked and Nissim Barel. $5 million has been invested in the company since it was founded. In 2014, User1st won the Prime Minister’s First Prize for Initiatives and Innovation.

IntSights completes $7.5 million financing round

IntSights Cyber Intelligence, a cyber intelligence company founded a year ago by IDF cyber and intelligence units veterans CEO Guy Nizan, CPO Alon Arvatz, and CTO Gal Ben David, announced this month that it had completed a $7.5 million financing round. IntSights provides high-quality intelligence to companies. Its security experts are trying to think like the attackers in order to understand their methods and ways of acting. The company is also offering a way of dealing with intelligence alerts in which all the customer has to do is click on a button.

Behalf raises $27 million

Israeli payments platform Behalf, which offers a unique loan solution for small businesses, announced that it had completed another financing round in which $27 million had been raised. Leading the round was Viola Growth, with participation from existing investors, including Sequoia Capital, MissionOG, Spark Capital and Vintage. The startup provides a special loan service for small businesses based on a direct connection with their suppliers. The capital raised in the round will enable Behalf to expand its sales and marketing efforts, and to develop new products.

Behalf’s credit model is different from ordinary credit: Instead of giving small businesses money, the company pays the businesses’ suppliers. Behalf gives its customers lines of credit ranging from $300 to $50,000 for up to 150 days. The company charges between $11 and $30 for each $1,000 it lends. As befits a startup, there is no need for a personal meeting or branches. The borrower just fills out a short questionnaire with four questions online. Within 60 seconds, the customer receives an estimate of the credit that the company will extend to them, and can select a suitable payments plan.

Compass raises $75 million

Compass, a startup founded by Ori Allon (better known as the owner of the HaPoel Jerusalem basketball team), has announced the completion of a $75 million financing round. The round is believed to reflect a company value of over $1 billion for Compass. Wellington Management led the current round, with participation from previous investors in the company, including the 406 Ventures and Thrive Capital funds, and also the Founders Fund venture capital fund.

The concept behind Compass is designed to make the process of searching for and finding an apartment in high-demand areas throughout the United States more available and accessible than in the past. The company offers a platform that enables users and agents to make better-informed real estate decisions through a display of detailed real-time information about pricing trends and market fluctuations. In addition, the platform displays detailed information about areas, neighborhoods, other deals made, entertainment spots, education, etc.

Revuze raises $4 million

Israeli startup Revuze is developing text analysis technology focusing on criticism by users, and actually any opinion expressed by a customer about a brand, product, or service. Sources reported this month that the company had completed a $4 million seed round led by the Nielsen Innovate incubator (Revuze is one of the incubator’s portfolio companies), NPD Group and TIC group.

Revuze is offering a smart platform able to extract business value from users’ criticisms. The tool scans the various critiques, and singles out hot topics, from which it selects the most relevant parts in order to enable the company to take them into consideration, and to improve accordingly. In this way, e-commerce websites of all types (such as a toy shop, an airline, a bank, a fashion chain, etc.) can learn what the customer really think about them, and about all the entire process, from the buying process to the level of service.

Beyond Verbal raises $3 million

Israeli company Beyond Verbal, which has developed a platform for voice-based emotional analysis, this month announced a $3 million Series A funding round. Chinese technology giant Kuang Chi Science led the round. The company uses machine learning to decode emotions, emotional states, and states of health using voice intonations. Through the technology developed by the company, it is possible, for example, to improve the effectiveness of telephone service centers and monitor states of health for extended periods. Beyond Verbal has collected over 2.5 million emotionally labeled voices in over 40 languages to date.

Beyond Verbal has developed an artificial intelligence platform and an algorithm enabling it to understand human states of health and emotional states, because its technology analyzes the speaker’s voice in real time. It thereby adds a layer of emotional information to a variety of measures and instruments, includes apps, hearing accessories, wearable devices, and organizational solutions.

Revelator raises $2.5 million

The transition to digital has brought quite a few challenges for content companies and artists, including preservation of copyrights and keeping track of the popularity and distribution of their creations. This month, Israeli startup Revelator, which is developing a platform for managing copyrights, announced that it had completed a $2.5 million financing round led by strategic investor Exigent Capital, with participation from Digital Currency Group and the Reinvent venture capital fund.

Once artists and music companies put their music on the company’s servers, Revelator’s platform enables them to keep track of the music’s distribution, the number of times it is played, and the sources making use of it. If, for example, a podcast producer uses the system, he can follow the number of times it is played, the number of times it is installed, and receive royalties for each time it is played. The system, which is offered in an SaaS model, provides artists and music companies with a great deal of information about the distribution figures for their music, and integrates reports, analytics, and sales. (Geektime 08.09)

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11.2 ISRAEL: Israel’s New MOU: The Money and the Message

David Makovsky posted in TWI’s PolicyWatch 2691 on 15 September that while some officials disagree about the financial particulars of Washington’s new military assistance deal, the overall message is one of strong, long-term U.S. support for Israel at a time of massive regional turbulence.

On 14 September, the United States and Israel signed a ten-year Memorandum of Understanding under which Washington will provide $38 billion in military assistance over the fiscal years 2019-2028. The new MOU extends the current one that was signed in 2007 and expires in 2018, enabling Israeli military planners to make even longer-term acquisitions and bolster their technological edge in a turbulent region. Among other things, the money will allow Israel to update its air force fleet by purchasing additional F-35 joint strike fighters.

The MOU is an important signal of American support for Israel’s security in the years ahead – in fact, the United States has no comparable arrangement with any other country. The agreement is also a message to Israel’s adversaries that Washington’s support for its ally remains uniquely deep, despite recent policy disagreements.

Key Changes in the New MOU

The 2007 MOU allocated $30 billion over the course of a decade, which translates to $3.1 billion in foreign military financing (FMF) annually. Israel’s entire defense budget this fiscal year is $15.5 billion, so the U.S. assistance is approximately a fifth of what Jerusalem spends on its own military. According to a White House fact sheet, the new MOU figure is $3.8 billion per annum, “disbursed in equal increments of $3.3 billion in FMF and $500 million in missile defense funding each year for the duration of the understanding.”

Yet the missile issue has led to differing interpretations of the new annual funding level. Previously, Israel asked Congress for missile funding separately; this past year, U.S. assistance totaled $3.7 billion when one factors in the $600 million for missile defense. In total, Washington has provided $1.3 billion for missile defense since 2011, covering most production costs of the Iron Dome system that was so important in preventing Israeli fatalities during the 2014 Gaza war. Once missile expenditures are separated out, some former Israeli officials question the significance of the new MOU’s increase in FMF from $3.1 to $3.3 billion. In a 15 September Washington Post article, for example, former defense minister Ehud Barak wrote that this is not an increase in “purchasing power” given the rise in weapons prices since 2007.

The Israeli Prime Minister’s Office and American officials typically respond to such arguments by explaining that U.S. assistance levels have remained constant in the past. Other U.S. officials have gone further, insisting that this type of counting misses the mark and ignores context. Specifically, they refer to the ongoing clash between the administration and Congress over American defense spending, noting that the amount of global military assistance at the administration’s disposal is relatively limited and that Israel’s share towers over the next recipients (Egypt is second at $1.3 billion, Jordan third at $300 million). Put another way, total U.S. FMF to the entire world is $5.647 billion annually, and 83% of it goes to Israel, Egypt and Jordan.

The new MOU will also phase out a provision called Off-Shore Procurement (OSP). This provision, which is not given to other states, has benefited Israel by allowing it to spend 26.3% of U.S. military assistance in Israel (i.e., about $815 million annually). Congress first allowed for OSP after Israel canceled development of the Lavi fighter jet in 1987, a project that the United States opposed. Yet while the plane’s cancellation hurt Israel’s fragile defense industry at the time, the situation has changed significantly since the 1980s. Judging by its $5.7 billion in annual exports, Israel’s defense industry is now the fifth biggest arms exporter in the world (some knowledgeable Israelis say the figure is actually $7 billion). Its three leading companies, Elbit, Rafael and Israel Aerospace Industries (IAI) are among the world’s top fifty defense exporters.

Under the new terms, the OSP will remain as is until fiscal year 2024, then be phased out gradually until the MOU expires. U.S. firms may agree to continue enabling Israeli firms to subcontract production of parts destined for Israeli planes, but down the road the funding will come out of the Israeli defense budget. (Currently, Lockheed Martin produces the F-15I and subcontracts to Elbit for avionics, Rafael for missiles, and IAI for radar.)

It is also uncertain whether the new MOU is a ceiling or a floor when it comes to congressional assistance. Along with signing the MOU, Prime Minister Binyamin Netanyahu wrote a letter to Secretary of State John Kerry saying that Israel has committed to reimburse the U.S. government if it receives more congressional assistance for FMF or missile defense in the last years of the current MOU (2017-2018). Israel also committed not to lobby Congress for additional military assistance except in the event of conflict in the Middle East; if it does seek more funds, it will have to obtain the administration’s prior consent. Senate Appropriations Committee member Lindsey Graham has charged that the administration’s apparent insistence on Israeli reimbursement is designed to circumvent the congressional appropriations process.

Indeed, Congress likes to assert its authority, and other challenges to the new MOU will likely abound. For example, what if the current turbulence in Israel’s neighborhood increases while still falling short of direct war? If the MOU is not a treaty, will it be equally enforced by both countries when the Obama administration leaves office in a few months? In this regard, Israel proudly insists that it has not sought to change the FMF level during the entirety of the current MOU.

Iran Nuclear Tradeoff

Last year’s Iran nuclear deal was a time of maximal political leverage for Israel, so it is natural to question the deal’s impact on the MOU. Defense Secretary Ash Carter traveled to Israel during the 2015 Iran debates, but Netanyahu pointedly refused to discuss U.S. military assistance at that time, fearing potential perceptions that Israel was being bought off to soften its opposition to the nuclear deal.

That stance has made political waves in Israel ever since. During a speech this summer, Barak declared, “Over the next decade we will receive somewhere between $7-10 billion less than what we could’ve secured a year ago.” Similarly, upon exiting his position as defense minister this spring, Moshe Yaalon said that Washington was offering “more” MOU money in 2015, though he did not give details. Other Israeli sources agree with these characterizations, insisting that multiple U.S. officials were willing to offer an additional $700 million per year if Israel had struck the MOU deal in 2015. For their part, U.S. officials say that no commitments were offered last year.

Wrapping Up The MOU

Both Netanyahu and Obama had an interest in concluding the MOU talks now rather than later. For Netanyahu, who will be speaking at the UN General Assembly in New York next week, signing the MOU offers some respite from Israeli media stories questioning the vitality of the bilateral relationship. The day after, pro-Netanyahu newspaper Israel Hayom ran a banner headline trumpeting the figure “$38,000,000,000.” More broadly, he seems to understand that a long-term MOU signed by President Obama would enhance the perception that the relationship is bipartisan, defusing complaints that Netanyahu leaned toward the Republicans in the 2012 election, among other controversial incidents. He may also believe that locking in the MOU now is an insurance policy in the event that Donald Trump comes to power, since some believe that would introduce a measure of unpredictability to the relationship.

For Obama, signing the MOU reinforces his long-held view that support for Israeli security should be kept separate from any policy disagreements he might have with Jerusalem on other issues. The move also enables him to shore up the pro-Israel wing of the Democratic Party before the upcoming elections.

Some will no doubt speculate about whether the MOU gives Obama greater domestic political leeway to press for peace-related moves that Israelis or Palestinians oppose. Yet like Obama himself, the people will likely distinguish between Israel’s long-term security needs and the diplomatic specifics of any peace initiatives he proposes. Whatever the case, while it is easy to get lost in the new MOU’s particulars, the overall message is one of strong, long-term U.S. support for Israel at a time of massive regional turbulence.

David Makovsky is the Ziegler Distinguished Fellow and director of the Project on the Middle East Peace Process at The Washington Institute. (TWI 15.09)

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11.3 LEBANON: Lebanon’s Waste Management Policies One Year after the 2015 Crisis

Jad Chaaban posted in Jadaliyya on 6 September that the foul odors of waste profiteering, corruption, and the illegal grab of public funds are back in the public eye. Not that they ever disappeared, really. One year after the onset of Lebanon’s waste crisis, the ruling junta is still trying to push unsustainable and overly expensive waste management plans, which only benefit the ruling political parties and their cronies.

Before the 2015 Protests

The situation can be summarized by the following: Lebanon produces an estimated 5,000 tons of municipal solid waste each day. Until last year, one company, Sukleen (Averda), managed waste collection and treatment comprising about fifty percent of this total, specifically in the areas of Greater Beirut, Mount Lebanon and Keserwan, covering about four hundred municipalities. Sukleen, which has been operating since 1994 under a contract with the Council of Development and Reconstruction (CDR), has seen its contract renewed without an open tender by the Council of Ministers (in which most ruling parties are represented). This has occurred three times, and each time the collection and processing fees have increased, all paid using transfers from the Independent Municipal Fund. The operation started with 800 tons per day in 1994, and grew to 2,600 tons per day in 2015, all dumped with minimal sorting and recycling in the Naameh landfill, which had already reached its absorptive capacity ten years ago. Sukleen’s revenues were estimated at more than $170 million per year (about $150/ton), one of the highest rates in the world. Many suspected that a sizeable chunk of these revenues were channeled through kickbacks to political leaders to ensure “smooth operations.”

Since the 2015 Protests

With the closing of Naameh by protesters in early 2015, the government made a series of so-called waste management decisions – all coordinated by the CDR in collaboration with the Ministry of Interior and Municipalities and Ministry of Environment. At the beginning of 2015, the government decided to divide the country into six regions (and therefore Sukleen’s “region” into three). It invited bids for waste management in each region. In April 2015, the bidding period ended unsurprisingly without any bids Beirut and Mount Lebanon. Only one bid per region was received for the North, Bekaa and South.

Following massive protests in the summer of 2015, the government cancelled the bids and decided in November 2015 to export waste, again through plans managed by the CDR. The overly expensive and disastrous scheme faced opposition from a range of activists, especially when details about corruption and falsification of documents emerged by the retained company, Shinook. By early 2016, the export plan was dropped.

In March 2016, the Chehayyeb Plan (named after Minister Akram Chehayyeb) was approved by the Council of Ministers. Briefly, the four-year plan re-opened the call for bidding through the CDR for companies to manage waste in “Sukleen regions.” Yet it also entailed the construction of two coastal landfills in Burj Hammoud (a northern Beirut suburb) and Costa Brava (a southern Beirut suburb, near the capital’s airport). The municipalities surrounding the new landfills received sizeable monetary incentives: $40 million each (municipalities of Bourj Hammoud, Jdeideh-Bouchrieh, Burj al-Barajneh, and Choueifat); $50 million for the three regions for developmental projects over four years; and the right for these municipalities to exploit the coastal landfilled areas. The regions of Aley and Chouf were excluded from the initial plan since no landfill was secured there (and trash has been piling up ever since in these regions). The CDR immediately began launching calls for tenders for all components of this new plan. The Burj Hammoud landfill contract was awarded in June 2016 for $77 million. The Costa Brava landfill contract was awarded in July 2016 to the Jihad Al Arab company for $60 million (Jihad Al Arab was allowed to present a lower bid even after his first one was dismissed). On 2 September 2016, a bid by Jihad Al Arab was also retained by the CDR for the sorting and treatment of waste in all “Sukleen regions,” at a cost of $81 million over four years. The collection and waste transport contract will remain with Sukleen until the bidding process is formally launched.

All in all, one year after the first street protests succeeded in countering the government’s corrupt plans, we now have a “Chehayeb Plan” that costs $528 million over four years, not counting the money wasted on short fixes in Naameh in 2016 (almost $10 million), and other funds spent on “consultants.” A simple calculation shows that the cost per ton of this corrupt plan is well over $130 million per year, which is about $170 per ton if one includes the collection and transport costs. This is $20 per ton more than what Lebanon used to pay for Sukleen. Additionally, one must consider the cost of environmental degradation to the coastline due to new landfills and the health and safety risks they create (most importantly on flights through the airport), among other factors.

The corrupt ruling class, by reverting back to a costly centralized waste management plan through the CDR, has continued its rent redistribution practices to secure allegiances among their cronies. What Sukleen was suspected of practicing under the table is now overtly implemented through the “Chehayeb Plan,” with hefty “compensation payments” and real estate gains for municipalities (and to the political parties controlling them). Similar to what happened in the electricity, water, and other essential sectors, the ruling class continues to divide up the “cake,” while citizens and the next generations pay the highest price.

What a Solution Might Look Like

In light of widespread corruption and the lack of transparency, the role of oversight bodies (such as the largely absent Court of Accounts) and the parliament has not been capitalized on in order to address the citizenry’s interests. It is particularly odd, and (some would argue) worrying, that MPs have not called for a session to question the government on how the trash crisis managed to reach this stage. For their part, political parties have also failed their constituents, as they have continually refused to work toward a solution that is both sustainable for the country as a whole and in the best interests of the people they represent.

The only solution to counter these schemes is the decentralization of waste management, where every municipality implements sorting at the source, and commits to waste reduction, recycling, and treatment of organic waste into compost. This yields the lowest environmental and financial costs, and reduces the size of the “cake”. In parallel, the institutions of this ruling cartel should be at least bypassed, if not completely dismantled. A matter of particular importance is reforming the CDR to ensure there is an accountable procurement system in place.

Also, as part of the solution, Lebanon must take additional steps in conjunction with institutional decentralization by embracing a strong role for oversight agencies and the parliament. Without these measures, the crisis will threaten to drag on, and in the event a “solution” is found without necessary oversight, the powers that be have demonstrated their preferred course of action will not be sustainable, apart from ensuring state money lands in the hands of Lebanon’s corrupt elite. (Jadaliyya 06.09)

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11.4 IRAQ: Fitch Affirms Iraq at ‘B-‘; Outlook Negative

Fitch Ratings on 13 September affirmed Iraq’s Long-Term Issuer Default Rating (IDR) at ‘B-‘ with a Negative Outlook. The Country Ceiling is affirmed at ‘B-‘ and the Short-Term IDR at ‘B’.

Key Rating Drivers

Political risk and insecurity in Iraq are among the highest faced by any sovereign rated by Fitch. Progress has been made in pushing back the Islamic State (IS), but the military campaign brings in its wake major reconstruction and humanitarian challenges. Sectarian and ethnic tensions continue to undermine political stability, relations with the Kurdish Regional Government are volatile and Iraq scores the worst of all Fitch-rated sovereigns on the composite World Bank governance indicator. This reflects not only insecurity and political instability but also corruption, government ineffectiveness and weak institutions.

The bulk of oil production facilities and export infrastructure are located away from areas of insecurity. After expanding strongly in 2015, oil output in the south has stabilized so far in 2016 at 3.5m b/d on average, given lower budgeted government payments to international oil companies, which has constrained investment. Including output from the north, which incorporates Kurdish fields, total oil production totaled 4.6m b/d in July, according to the Ministry of Oil. Given low oil prices we expect the government to budget a similar amount for oil investment in 2017 and we forecast oil production and exports (at 3.3m b/d) to plateau.

Lower oil prices are driving significant deterioration in Iraq’s financial position. Commodity dependence is among the highest of all Fitch-rated sovereigns. Oil accounts for more than 50% of GDP and over 90% of fiscal and current external receipts. The budget deficit in 2015 ballooned to IQD26.4trn ($22.3b) or 13.9% of GDP. This was financed by a mixture of T-bill issuance to banks refinanced to a large degree by the CBI (indirect monetary financing), accumulation of domestic and external arrears and multilateral financing.

Iraq and the IMF agreed a stand-by arrangement (SBA) in July 2016, which entails $5.34b of funding over three years. The funding is front-loaded, providing $1.9b between July and end-2016. Performance criteria under the SBA seem broadly realistic, but implementing earmarked structural reforms is likely to prove more difficult. Risks attached to the program are high, but the Iraqi government has a strong incentive to adhere to the SBA.

In 2016 the IMF programs for a deficit of IQD26trn ($22b) for Iraq. The majority of financing, $17b, will come from T-bills and bonds, $10.7b of which will be refinanced by the CBI and $4b is from government deposits in the banks. The banking sector itself is not strong enough to be a source of much financing. External financing from the IMF, World Bank, US loans and other bilateral loans will make up most of the remainder.

Government debt is rising sharply on the back of these deficits and we forecast it will average 73% of GDP in 2015-17. However, this includes $41b of debt lent to Iraq by GCC countries during the 1980-1988 Iran-Iraq war, which the authorities do not face any pressure to repay or service. If this debt were restructured on the same terms as Paris Club debt was restructured, government debt/GDP would average 52% in 2015-17, closer to the ‘B’ median of 41%.

International reserves are declining, but remain large and support Iraq’s currency peg. Fitch forecasts an average current account deficit of close to 9% of GDP in 2016-17 because of low oil prices. This will contribute to further declines in international reserves, which we project to slip to $45b this year and $41b at end-2017 from $54b at end-2015. This would still equate to almost eight months of current external payments (CXP) in 2017. We assume the authorities will maintain the dinar’s peg to the US dollar, although this could come under pressure.

The banking sector is under-developed and fundamentally weak. Private sector credit to GDP is one of the lowest of any Fitch-rated sovereign. The two large state-owned banks Al-Rafidain and Al-Rasheed, which have high non-performing loans and exceptionally low capital adequacy, dominate the sector. There has been no progress in restructuring these banks, although the government has appointed auditors as required by the IMF. Fitch assumes that restructuring will require recapitalization by the government.

Rating Sensitivities

The main factors that could, individually or collectively, lead to a downgrade are:

-Evidence of stress in financing fiscal shortfalls.

-Further deterioration in the country’s security, particularly if insecurity spreads to new geographical areas or hinders oil production or exports.

The main factors that could, individually or collectively, lead to positive rating action are:

-A sustained period of oil prices higher than our current forecasts, particularly if combined with higher oil production and exports and leading to an improvement in Iraq’s public and external finances.

-A fundamental improvement in the country’s security that allows for stronger non-oil economic development.

Key Assumptions

Fitch forecasts Brent crude to average $42/b in 2016, $45/b in 2017 and $55/b in 2018. We assume that Iraqi oil sells at a consistent discount to Brent. Fitch forecasts Iraqi oil exports (excluding exports from the Kurdish region) to average 3.3m b/d in 2016-17. Fitch does not incorporate into its fiscal numbers an oil-sharing agreement between the central government and the Kurdish Regional Government, given the patchy track record for implementing this agreement. (Fitch 13.09)

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11.5 QATAR: Fitch Affirms Qatar at ‘AA’; Outlook Stable

Fitch Ratings on 02 September affirmed Qatar’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘AA’ with a Stable Outlook. The issue ratings on Qatar’s senior unsecured foreign-currency bonds are also affirmed at ‘AA’. The Country Ceiling is affirmed at ‘AA+’, and the Short-Term Foreign- and Local-Currency IDRs at ‘F1+’.

Key Rating Drivers

The ‘AA’ ratings reflect the large sovereign assets (sufficient to finance more than 20 years of present budget deficits) of Qatar, along with its fiscal adjustment efforts, a large hydrocarbon endowment and one of the world’s highest ratios of GDP per capita. Qatar’s hydrocarbon dependence is a key rating weakness, with oil and gas extraction averaging 50% of GDP and 80% of external receipts and government revenue. Other weaknesses include a government debt level above those of rated peers, and mediocre scores on the World Bank’s measures of governance and the business environment (both below the 70th%ile).

The fall in oil and gas prices has resulted in sharply lower government revenues, but a fiscal adjustment is under way. Under our baseline oil price assumptions, we expect a fiscal deficit of 4.3% of GDP in 2016, including the estimated income of the Qatar Investment Authority (QIA) of around 5% of GDP (which the government does not report or include in the budget). We expect general government revenues to fall 36% to QAR176b in 2016, after decreasing 23% in 2015. We forecast expenditure to fall 20% to QAR202b in 2016, mainly on the back of consolidation of current spending. Non-oil revenue measures and some further recovery of oil prices should bring the budget back to surplus in 2017.

Current spending was down 20% yoy in H1/16, amounting to 45% of the full-year budget for current expenditure. We assume that full-year spending will be close to budgeted amounts, with risks tilted towards overspending given the size of the planned adjustment. The decline in current spending reflects, among other measures, a public sector wage freeze, lay-offs of expatriate workers, reductions in fuel and utility price subsidies, and general restraint on expenses in the public sector (e.g., travel or office expenses). Current spending was first cut in 2014, as fiscal reforms were initiated well before the dramatic souring of the energy price outlook.

Over the past six months, the government has undergone a major effort to re-evaluate its capital spending program, which had included projects worth a total of QAR350b (close to $100b or 60% of estimated 2016 GDP) for the period between 2016 and 2022. A committee set up by the Minister of Finance has scaled back and optimized projects so as to yield expected savings of QAR65b over the period. Of these savings QAR28b will be realized in 2016-2018 and are taken into account in our capital spending forecasts. The committee is still reviewing projects to the value of QAR88b, and we expect the process to be completed by early next year.

The authorities are financing deficits by issuing debt instead of drawing on assets held by the QIA. The government of Qatar made its debut on the Eurobond market by issuing $9b of five-, 10-, and 30-year bonds in May 2016 with strong demand from investors. This follows a $5.5b loan syndication in late 2015. We assume that local debt will be issued to cover existing local maturities, and that foreign debt will be used to cover any remaining financing needs. This would imply more domestic issuance in 2016 and 2017, and additional external issuance of around $5b in 2017. We expect QIA assets, which are not officially disclosed, to rise to an estimated $338b (209% of GDP) in 2016 from $318b (193% of GDP) in 2015.

Banks have continued to provide net funding to the public sector, but, in a time of sluggish domestic deposit growth, liquidity has deteriorated. Loan/deposit ratios in commercial banks have continued to trend upwards in H1/16 with the ratio of total domestic loans to deposits (LDR) reaching 132% in May.

However, banks were able to fund themselves abroad through market placements and non-resident deposits; as a result, bank net foreign assets declined by QAR87b ($24b) in H1/16. LDRs and interbank rates receded in June and commercial bank balances with the central bank rose. The LDR including foreign loans and deposits, which is closer to the central bank’s preferred definition, reached 118% in May.

High but falling government capital spending will not be able to contribute further to GDP growth. Instead, non-hydrocarbon growth will come from private investments on the back of government projects, and from accompanying growth in the services sectors (trade, financial intermediation, and real estate). We expect overall real GDP growth of 3.4% in 2016, after 3.6% in 2015. In our forecast, non-oil growth drops to 6% in 2016 after 8.6% in 2015 and continues to slow in 2017 and 2018.

Hydrocarbon GDP will grow 1% in 2016 and 2% in 2017 after contracting by 0.5% in 2015. The Barzan development should come on stream in 2016 and will add 1.4 billion scft/d (8% increase) of production of gas for local use when it reaches full capacity, on top of additional production of LPG and condensates. The Ras Laffan II refinery should be completed by 3Q16 and will add 146,000 bbl/day of capacity for petroleum products (also a 8% increase). Oil field redevelopments could positively affect hydrocarbon production after 2018.

The outlook for gas prices has weakened in line with that of oil prices. Prices of liquefied natural gas, Qatar’s main export, will also be under pressure from additional global capacity coming on stream at a time of weak demand growth. Qatar is protected from the worst effects of the glut by the most of its contracts to supply gas to customers being long-term and based on a certain percentage of moving average oil prices. However, recent experience shows that customers may seek to renegotiate these contracts.

Rating Sensitivities

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

– Sustained weakness in hydrocarbon revenues and a failure to scale back expenditure, eroding fiscal and external positions.

– A materialization of large contingent liabilities, such as from government-related enterprises or the banking sector, resulting in a rapid draw-down of sovereign assets or build-up of debt.

The main factors that could, individually or collectively, lead to positive rating action are:

– Improvement in structural factors such as reduction in oil dependence, and a strengthening in governance, the business environment and the economic policy framework.

Key Assumptions

Fitch assumes that Brent crude will average $42/bbl in 2016, $45/bbl in 2017 and $55/bbl in 2018.

Fitch assumes natural gas prices will evolve broadly in line with oil prices.

Fitch assumes that regional geopolitical conflicts will not impact directly on Qatar or on its ability to trade and that the domestic political scene will remain stable. (Fitch 02.09)

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11.6 SAUDI ARABIA: Saudi Arabia’s Struggle for Sunni Leadership

Hala Al-Dosari wrote on 7 September that recent changes to Saudi religious institutions are not a sign of wider reform but an indication of the struggle to redefine Saudi Arabia’s religious character.

Saudi Arabia’s decision to limit the authority of the Committee for the Promotion of Virtue and the Prevention of Vice (CPVPV) – barring it from chasing, arresting or interrogating suspects – was positively welcomed by commentators as an attempt “to respond to [public] grievances.” In response to gross violations committed by members of CPVPV, locals have called repeatedly to reform the institution, for example suggesting checking its authority by developing a protocol to describe the specific public offenses that are considered vices. Though there have been small-scale reforms in the last few years, such as asking members of CPVPV to wear badges and refrain from verbal or physical violence, no serious reforms had been enacted. Even the April decision only revoked the publicly visible roles of CPVPV while maintaining its role of public surveillance, including online surveillance. Calls for reforming the institution are drowned by the evident political need to keep this vast and pervasive institution functional.

The timing of this reform was synchronized with the release of the National Transformation Plan 2020 (NTP), which advances Saudi Vision 2030. The grand plan, released in April 2016, aims to increase non-oil based revenues, grow the private sector, and promote tourism and foreign investment. In part, the reforms were meant to address any concerns about CPVPV public arrests by the CPVPV impacting foreign businesses’ decisions to be based in Saudi Arabia, but it also points to the bigger issue of the kingdom’s attempts to rethink and reform its Islamic identity into a more moderate, tolerant one. This could be needed partly to foster a safe and inviting local environment for foreign investors, but more importantly to distance the Saudi version of Islam from any resemblance to that of Islamist insurgencies, which are constantly competing with the Saudi state over whose vision of an Islamic state is more “authentic.”

The intent and scope of religious reforms in Saudi Arabia have often been enigmatic; they can never be easily evaluated as long as religion remains a political tool for changing ends. To reassure its Western allies in the post-9/11 era, the kingdom initiated a series of religious reforms between 2003 and 2006. These included developing a national counterterrorism program to target religious extremists, funded by millions of dollars from the United Nations; establishing an interfaith international dialogue center, a local national dialogue center, a co-ed higher educational facility, and a national anti-terrorism counseling center; and including scholars of other Sunni schools of thought in the Hanbali-dominated Council of Senior Scholars. An informal agreement between top U.S. and Saudi officials to reform religious educational textbooks in 2005 also ascribed the authority to declare jihad only to the king, based on his role as the custodian of the two holy mosques. The king is portrayed as the legitimate leader of the state, and those who defy his orders – whether by protesting or publically expressing dissent – are sinful. Though these textbook changes also included some references to Islam as a religion of peace to all mankind, elements of historical intolerance to Jews and Christians as well as certain Islamic sects or schools of thought can still be found, according to a 2013 U.S. State Department study.

However, reforms to ensure genuine religious freedom and practice, even if relative, have not been substantial enough. A set of laws and decrees were enacted in 2014 to protect the prerogative of the king and the supreme scholars to monopolize religion. For instance, the anti-terror law of 31 January 2014 considers atheism an act of terror. Royal decree 44, issued on 3 February 2014, criminalizes having a religious affiliation to certain groups – such as the Houthis and the Muslim Brotherhood, as well as al-Qaeda and other Islamist insurgencies – or promoting “atheistic ideologies” and casting “doubt on the fundamentals of Islam” (which, naturally, are to be defined by the Saudi authorities). In addition, the religiously based legal system started to use the new laws to sentence individuals for posting critical or controversial views of Islam online. For instance, the court statement issued against journalist Alaa Brinji cited tweets in which he supported the “women to drive” campaign and the release of political prisoners as evidence he deviated from the state’s religious approach and ridiculed its religious scholars. Such laws became the way the state enforces its definition of religion and secures its dominance. Politically unwanted groups or individuals are actively rooted out either as deviants or religious extremists, and the state has the sole authority over religion.

Saudi Arabia’s attempts to counter Iranian regional influence have also intensified the competition over religious domination. In August, a league of over one hundred Yemeni Sunni scholars convened in Riyadh under the patronage of the Saudi Ministry of Islamic Affairs and issued an agreement on Islamic ethics that aimed to cut Iranian access to Yemen through its associated religious and ideological schools of thought. Sheikh Abulhassan Mustafa al-Sulayman, the head of the drafting committee, further declared that because elements of the agreement are inspired by the Quran and Sunnah, it was mandatory for Yemeni Islamic scholars to sign it. He added that the agreement, though aimed to be inclusive, is not intended in any way to mend bridges with rafida, a term often used by Salafists to denounce Shia, because they are “bloody, exclusionary, enemies of security and stability who corrupt any country, in addition to their deviance from Sunni doctrine and their dark, black history with Sunnis, Muslim countries and all Muslims.” He declared that all Muslims, including Sufis and Zaidis, the Houthis’ religious affiliation, are welcome to sign the charter, clearly leaving the door slightly open for Houthis to join the pact as “repentant” subordinates under Sunni patronage.

As Saudi Arabia tries to redefine its Salafi religious narrative according to its political needs, other countries, weary of Salafis’ growing influence, seem to counter those efforts. A recent conference held 25-26 August in Grozny, Chechnya, aimed to redefine “Who are Ahl al-Sunnah wal-Jamaah?” (the Sunni people). The UAE-based Tabah foundation, which organized the conference, described it as a necessary effort at a time when there are “attempts to hijack the designation ‘Ahl al-Sunnah wal-Jamaah’ by groups of Kharijites, renegades, and abusers of Sharia, who are exploiting their faulty practices to tarnish the image of Islam.” More than two hundred Islamic scholars of various Sunni schools of thought participated, including Ali Gomaa, the previous Grand Mufti of al-Azhar. Their concluding remarks included all self-identifying Sunni groups in their definition except the Salafis and, by extension, the Wahhabis, the dominant religious group of Saudi Arabia. The statement indirectly criticized Saudi Salafism for sectarian violence and religious intolerance in excluding the Sunni groups that are not in accordance with state Salafism. As expected, a torrent of condemnation followed from Saudi Arabia’s supreme scholars, as well as Salafis, the Muslim Brotherhood, and Al-Azhar, for what they perceived as Russian meddling in regional politics via religion, Egyptian scholars’ betrayal of their Saudi funders and the implied condemnation of Salafis as Kharijites, or deviants.

Saudi Arabia has based its 2030 vision in its historical position as the birthplace of Islam and therefore as a perceived leader of the Sunni Islamic world. Decades of investment in religious institutions and constituencies, both local and international, heavily influenced and enforced that identity. It is unlikely that a deeper religious reform will take place if it contradicts Saudi Arabia’s envisioned Sunni leadership role, particularly while the regional sectarian divide continues to fuel the kingdom’s political ambitions. Piecemeal religious reforms will be the most likely approach to neutralize temporary political threats, develop a business-friendly environment, and rebrand the decades-long religious identity of the state.

Ms. Hala Al-Dosari is a Saudi writer and a visiting scholar at the Arab Gulf Institute in Washington. (Sada 07.09)

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11.7 SAUDI ARABIA: Fitch Affirms Saudi Arabia at ‘AA-‘; Outlook Negative

Fitch Ratings affirmed on 1 September that Saudi Arabia’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘AA-‘ with Negative Outlooks. The Short-Term Foreign and Local Currency IDRs have been affirmed at ‘F1+’ and the Country Ceiling at ‘AA+’.

Key Rating Drivers

The Long-Term IDRs of ‘AA-‘ reflects the following key rating drivers:

The government’s balance sheet remains an important support for the ratings although it has continued to weaken as a result of lower international oil prices. During the first seven months of 2016, overall government deposits at the Saudi Arabian Monetary Agency (SAMA) have declined SAR92b to SAR1,070b or around 46% of GDP. Government bonds held by commercial banks increased SAR81b as a result of increased debt issuance. The government also took on an international syndicated loan of $10b in May and is expected to issue its debut Eurobond later in 2016. As a result, general government debt is likely to rise to 14.7% of GDP by end-2016, from just 1.6% in 2014 but still well below the ‘AA’-category median of 38.7%.

We expect the balance sheet to weaken further as the general government deficit, while shrinking from the peak of 13.8% of GDP in 2015, is forecast to remain high in 2016 and 2017, at 11.2% and 6.8% respectively, before falling to 2.4% in 2018. The improvement of the deficit will primarily be the result of rising oil prices, but the government’s National Transformation Program (NTP), presented in June, will also have an important impact.

The NTP contains ambitious fiscal targets, including an increase in non-oil government revenues to SAR530b in 2020 (an increase by 15% – 20% of non-oil GDP) from SAR163b in 2015, a reduction in public payroll expenditure, a decrease in annual water and energy subsidies by SAR200b by 2020 and a reduction in expenditure on public sector salaries and wages to SAR456b from SAR480b. An objective is to contain public debt to below 30% of GDP by 2020.

The economic impact of such a fiscal tightening would be so severe that in Fitch’s view the fiscal objectives will probably have to be scaled down. In addition, the broad range of other social and economic objectives and the complexity of implementation may overwhelm the administrative capacity of the government. However, the government has already re-prioritized investment spending, cancelling some projects, and raised visa fees. It will raise ‘vice taxes’ on energy drinks, soda drinks and tobacco and is committed to introducing a value-added tax at a rate of 5% by 2018.

The NTP includes the goal of substantial privatization, although the time line and details are still highly uncertain. The Chairman of the Council for Economic and Development Affairs, Deputy Crown Prince Muhammad bin Salman, indicated that up to 5% of Saudi Aramco would be sold in an IPO. While this could raise some $100b, obstacles in terms of transparency, depth of local markets and reservations about governance remain large, so that privatization receipts are not included in our forecasts although they could help contain the rise in public debt.

Lower oil prices caused a sharp deterioration of the current account balance, to a deficit 8.3% of GDP and the deficit will remain broadly unchanged in 2016 but then should narrow to 5.8% in 2017 and 0.7% in 2018 on the back of higher oil prices and weakening import demand. Sovereign net foreign assets will decline to 74.5% of GDP in 2018 from a peak of 113% in 2015.

Fiscal consolidation is likely to be the driver behind the expected slowdown in GDP growth to 0.9% in 2016, from 3.5% in 2015, with only a modest recovery to 1.1% in 2017 and 1.6% in 2018. GDP growth is supported by a continued expansion in oil production, reaching a record high of 10.7m b/d in July, but non-oil GDP will contract as a result of fiscal consolidation measures, particularly as government investment in infrastructure has been scaled back.

The scaling down of infrastructure spending, combined with payment delays, has hit the construction sector hard, and the government may decide to bail out some of the large contractors. The government hopes that bringing in private-sector participation in infrastructure development will help to provide some support but this is unlikely to be sufficient and will take time.

With a Fitch banking system indicator at ‘a’, weaker only than Australia, Canada and Singapore and unusually strong for emerging markets, banks have proved resilient despite the weakening macroeconomic environment. Domestic liquidity has tightened as deposits in the banking sector have declined while credit to the private sector, while decelerating, is still growing and claims on the public sector are growing rapidly from a low level. As a result, the loan-to-deposit ratio has reached 91% in July, slightly above the regulatory ceiling of 90% and the highest level on record.

The slowdown in private sector lending will lead to deterioration in asset quality, but non-performing loans as a share of total gross loans, at 1.2% in July, are still close to the record low, and the capital adequacy ratio, at 18% in July, is high suggesting sufficient buffer against a rise in non-performing loans.

Given its exposed position in a volatile region, geopolitical risks are high relative to ‘AA’ category peers. Tensions between Saudi Arabia and Iran persist and Saudi Arabia, together with its coalition partners, is fighting a war against Houthi rebels in Yemen, with no clear prospect of an end to the fighting. There are also sporadic terrorist attacks.

Given the high share of young people in the population, the labor force is growing rapidly and the economy will struggle to absorb this growth. This, and the fiscal consolidation measures, may lead to rising disaffection, but widespread domestic unrest is unlikely. While the line of succession has been clearly defined, tensions within the royal family could still be a cause for instability. While income per capita measures are high, other structural indicators, such the World Bank indicators for governance and the business climate are both well below the medians for both ‘AA’ and ‘A’ rated peers.

Rating Sensitivities

The following factors, individually or collectively, could trigger a downgrade:

– Continued erosion of fiscal or external positions.

– A slower-than-expected narrowing in the fiscal deficit, for example as a result of a failure to implement fiscal reforms or due to a renewed fall in oil prices.

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

As the Outlook is Negative, Fitch does not anticipate developments with a high likelihood of triggering an upgrade. However, the following factors, individually or collectively, could lead to a revision of the Outlook to Stable:

– 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 $42/b in 2016, $45/b in 2017 and $55/b in 2018. (Fitch 01.09)

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11.8 EGYPT: Egypt’s Divorced Women Demand Their Fair Share of Assets

Ahmed Hidji posted on 18 September in Al-Monitor that while divorced women in Egypt face significant financial difficulties, some have argued that proposed changes to laws violate Islamic law.

For more than two years, Sabah, an Egyptian woman in her 40s, has been trying to obtain proof of her ex-husband’s monthly income so the Family Court in Giza governorate will require him to provide her a monthly payment that ensures a decent standard of living for their three daughters. Sabah, who didn’t want her last name published, said that her ex-husband divorced her several years ago and married another woman because he wanted to have sons.

She told Al-Monitor her husband is a state employee with the Ministry of Education for which he receives a monthly salary of 1,700 Egyptian pounds ($191), but he also has been involved in trade ventures for 16 years that bring in more than 20,000 pounds ($2,252) a month. Sabah told Al-Monitor that she can’t obtain proof of his full monthly income, because he never registered his trade activities with the commercial registry. She fears that, if the courts rely only on his state salary, her monthly alimony will only amount to around 850 pounds ($96) — an amount she says is much too low to provide a decent life for her girls.

Sabah, like thousands of other divorced women in Egypt, faces significant difficulties due to the Personal Status Law, which requires divorced women wait at least one year from the date of filing for alimony to receive payment. In addition, the court’s procedures to determine the husband’s income often take a long time, and women frequently complain that the court relies on an income less than the actual amount due to efforts by the husband to hide his true earnings.

According to Article 76 of Egypt’s Personal Status Law, a divorced woman shall receive 25% of her husband’s monthly income in alimony if they have no children. If they have one or two children, this rises to 40%, and if they have more than two, it is 50%.

Earlier this year, the Center for Egyptian Women’s Legal Assistance (CEWLA) proposed an amendment to the Personal Status Law that involved a husband and wife splitting assets after the divorce, defining their holdings as “joint wealth.” As part of this proposal, a divorced woman could choose to either receive a monthly payment from her husband or take part of his share of the split assets.

CEWLA Director Azza Soliman told Al-Monitor that Egyptian family matters are still regulated by laws from 1920 that, in her view, are unfair to all, including men. She stressed that adopting the principle of “joint wealth” is necessary, after woman have been faced with no source of income when years’ long marriages come to an end.

Soliman said that the proposal involves wealth acquired by the husband or wife during the marriage and not assets held by either prior. She noted that in the case of homemakers, it allows for the wife to be compensated for housework that allowed her husband to work and make money. However, if the proposal is ratified, a divorced woman will be able to request division of death or her standard rights under Islamic law, not both. Soliman noted that she has dealt with cases where women are enduring difficult marriages and fear filing for divorce, since they know it could take years to receive a ruling for alimony.

Amina Naseer, a professor of religion at Al-Azhar University and a member of parliament, said that a housewife could be entitled to a share of wealth acquired by the husband over many years, since her role at home allowed the spouse to work and kept him from being occupied with family matters.

“The [proposal] does not violate Islamic law,” Nasser told Al-Monitor, noting that if a divorced woman is not compensated for unpaid housework this would violate the Islamic law principle of “there should be neither harming nor reciprocating harm.” Nasser pointed to a Quranic verse on divorce — “either keep [her] in an acceptable manner or release [her] with good treatment” — as evidence that splitting joint wealth was the fair thing to do. She said that the proposal ensures divorced women will not become homeless after leaving the marital home.

Naseer said the proposal would only apply in cases where the wife is a homemaker, not if she is employed elsewhere and receiving a salary. She said she supports the proposal and will defend it if brought before parliament.

On the other hand, Ahmed Karima, a professor of Islamic jurisprudence at Al-Azhar University, said the law is blindly imitating Western societies. Speaking to Al-Monitor, he said that a proper marriage contract in Islam specifies the woman’s rights, including the right to have custody of the children and obliging the father to support them. Karima said that, in an Islamic marriage contract, the husband must provide for his ex-wife throughout the iddah — a period of waiting a woman must observe before remarrying after divorce — and he must provide for the children until they are adults.

Karima said Islamic law is clear in this regard and there is no room for interpretation or adjustment. According to him, the current Personal Status Law safeguards family bonds.

He expressed his view that demands to divide assets between the husband and wife reflect a lack of awareness of Islamic law on the part of those making the proposal. Karima claimed the law would eliminate the “family-friendly nature” of Middle Eastern society, transforming Egyptian family life into a materialistic replica of Western families. He predicted that many men will resort to informal urfi marriage if the proposed change becomes law.

While Soliman stressed that she has respect for all the schools of Islamic jurisprudence, she said they do not fully align with the numerous changes witnessed recently in Egyptian society. “When these schools were formulated, women didn’t suffer as much as they do today,” she said.

“Those who oppose the proposed changes, claiming they violate Islamic law, have their heads lost in [religious books],” Soliman added, stressing that religious men must realize society has changed, pointing out that there are now women who work outside the home and serve as breadwinners for the family, men who abandon their families without providing support and women who face ongoing domestic violence because they have nowhere to go if they leave their husbands. She called on the religious institutions in Egypt to develop solutions to these pressing social problems before they start talking about violations of Islamic law.

Soliman stressed that a family based on clear rights and obligations for both husband and wife is the basis for a stable society, adding that the marriage system in Egypt not only needs a modification of laws but also a modification of societal understandings. In her view, this proposal is merely a step to treat diseases afflicting family life in Egypt. (Al-Monitor 18.09)

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11.9 MOROCCO: Populist Limits to Subsidy Reforms in Morocco

Idriss Jebari posted in Sada on 13 September that despite Morocco’s apparent success in cutting energy subsidies, the government is likely to face difficulties doing the same with staple goods.

Earlier this year, several international observers lauded Morocco for having successfully cut all subsidies on fuel in 2015, managing to make sizeable financial savings without igniting any social conflagration. This decision was taken in 2008 under the previous government and in response to the historically high oil-prices (around $100 a barrel) that were making it more costly for Morocco to meet its energy needs, 90% of which rely on imports. The country’s subsidy regime, also known as “compensation system,” adjusts prices at the source, meaning the state pays for the difference between international commodity market prices and agreed domestic prices before they reach consumers. During those unusually high-oil-price years, subsidies used 6.6% of the state budget in 2012 and contributed significantly to the country’s annual budget deficits.

The first stage of the government’s subsidy-cutting program on fuel began in 2012 and reached its first major landmark in 2015, despite early concerns of the public’s reaction and initial threats of industrial action from the transport industry federations in 2013. Several factors contributed to the relatively uneventful transition. First, the government proceeded cautiously by gradually decreasing subsidies once every year. Second, it carried out public awareness campaigns, vowing to set up special measures for economic actors. The Islamist Prime Minister Abdelilah Benkirane has repeatedly spoken for these cuts and their necessity. Finally, and some would argue more fundamentally, the authorities enjoyed a favorable stroke of luck: low oil prices on the international market. Ordinary consumers barely felt a hit, nor did the economy (despite the state planning for a shrinking economy) and the only complaints were anecdotal.

The Moroccan Ministry of Finance released an important report in July assessing the “compensation reform” and outlining its financial benefits. First, the government managed to reduce its spending on subsidies from 56.6 billion dirhams ($5.8 billion) in 2012 to 32.7 billion dirhams ($3.4 billion) in 2014 and saved a further 12.25 billion dirhams in 2015. As a measure of comparison, the 2012 compensation charge represents 106% of the state’s investment budget or 56% of its payroll. This reform also allowed Morocco to improve its image among its international economic partners, including financial institutions and creditors; in fact, on July 22 the IMF board approved a $3.47 billion loan under the “precautionary and liquidity line,” a formula reserved to support “member countries with sound economic fundamentals and strong records of policy implementation but with some remaining vulnerabilities.” Finally, the Moroccan government took proactive steps toward future energy challenges by shifting its focus from fossil fuel to renewable energies, especially following the Noor solar plant launch in February 2016. When fully operational, the plant will allow Morocco to satisfy 30% of its energy requirements, reducing its dependency on oil imports and satisfying the increasing demands of its growing industrial ambitions.

Despite these positive aspects, this subsidy reform on energy steered clear of butane gas subsidies, a cut that will be included in the next stage. Canisters are used across the country for cooking (and sometimes lighting) purposes. A regular gas canister costs 42 dirhams ($4) for consumers, and would currently cost around 120 dirhams ($12) without state subsidies, which amounted to 13.3 billion dirhams ($1.4 billion) in 2014, a sum that cannot be ignored.

The second stage of Morocco’s subsidy cuts, initially penciled in for 2015–17, targeted household staple goods (sugar, white flour, and butane gas) but has been delayed. These goods represent the cornerstone of consumption, and their subsidized prices keep poorer social groups from falling into total poverty; therefore any cuts to the current regime require extra care to avoid a repeat of the Casablanca riots of 1981. The current standstill owes to the constraining impact of public opinion and the reluctance of the Justice and Development Party (PJD) and other political actors to alienate poorer social classes.

The current government has been unusually reactive to rumors of impending cuts circulated by social and print media, with officials issuing declarations to the contrary or seeking to control the discussion. In 2013, a Reuters article cited Mohamed Najib Boulif, Minister of Governance, as reducing subsidies before Ramadan, which caused a small panic on social media and prompted official denials. In February 2015 similar rumors announcing cuts for butane were circulated, this time by Telquel, an influential weekly magazine, and were promptly denied by Minister of Governance Mohamed Louafa. In a televised interview on 29 October 2015, Benkirane announced that subsidy cuts on sugar will be instituted over the course of eighteen months, but not on “sugar loaves,” the two-kilo (4.4 pound) lumps traditionally used by households across the country. None of these media interventions have provided sufficient clarity, and the ease with which rumors have spread reveals the population’s lack of trust in their political leadership.

In the meantime, academic experts, parliament working groups, and even government and state officials have advocated for reforms. There is general agreement that the current system of adjusting prices at the source for staple goods is badly designed and does not serve its initial goal of driving consumerism. It disproportionally benefits wealthier social groups and the food industry while draining immense state resources because the state is at the mercy of international prices and domestic consumption trends, according to Moroccan economist Mohamed Bentahar. In 2014, sugar subsidies amounted to 3.5 billion dirhams ($360 million) and flour subsidies to MAD 2 billion ($200 million), in addition to subsidies on butane gas, while Morocco continues to occupy low ranks in human development classifications, especially with regard to inequality and income indicators.

Salima Bennani, head of Morocco’s Compensation Fund (Caisse de Compensation), recently affirmed they were looking to substitute blanket compensation with targeted cash flows toward the most vulnerable populations by studying the experiences of Brazil, Mexico, India and Southeast Asia. She assured that savings from subsidies would then be deployed to support more useful programs, although this has yet to show significantly in the latest state budgets. Moreover, several Moroccan experts, such as Hicham Al Moussaoui, offer notes of caution that the substitution of subsidies with targeted cash flows will weaken the lower half of the middle class, drive debt up, and weaken the economy.

Despite these risks and current delays, declarations by Salima Bennani and other state officials are a sure indication the process will be decisively resumed in the coming months. The consensus is that the issue will be the next government’s responsibility for after the 7 October elections and that, regardless of its composition, the reforms will go ahead due to Morocco’s overarching obligations toward international financial institutions. After all, despite its populist base, the Justice and Development Party (PJD) has pursued a firm liberal agenda. A report on this question has been briefly discussed in parliament in June 2016, indicating that a reform package has been designed and is merely waiting for the right timing—which would explain the IMF’s confidence in extending a loan to Morocco. In the meantime, economic actors and the population lack clarity over timeframes, despite how deeply it will affect key segments of the population.

Idriss Jebari is a postdoctoral research fellow with the Arab Council for Social Sciences working on social and cultural change in North Africa. (Sada 13.09)

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11.10 TURKEY: Turks Bicker About Time Change

Zilfikar Dogan posted in Al-Monitor on 13 September that for years, Turkey’s Justice and Development Party (AKP) government has been advocating “permanent summer time” for the country. With a decision made on 7 September, this wish has come true. Turkey’s government has decided to remain on summer time permanently, adding another hour of difference between Turkey and Europe, but putting Turkey in the same time zone as Mecca and Medina.

Like many countries, Turkey moved its clocks ahead one hour in March and back an hour in October. But this fall, time will march on because of a request from Minister of Energy Berat Albayrak, the president’s son-in-law. A new government decree nullifies the practice of moving clocks back an hour, effective 30 October.

By making daylight savings time permanent, Turkey will be at Greenwich Mean Time plus three hours instead of plus two hours. The time difference with Eastern and Central Europe will now be two hours and with Britain, three hours.

The last ministerial attempt to keep the “extra” hour came in 2013 by then-Minister of Energy Taner Yildiz. His proposal was rejected because of potential problems with stock markets, global trade, exports and synchronization with Europe. However, Albayrak said on his official Twitter account there will be year-round energy savings and any synchronization problems will be eliminated quickly.

Opponents claim there are religious motives behind the decision. Turkey will now be in the same time zone with Saudi Arabia and most Middle Eastern and Islamic countries. Theologians have been constantly bickering over prayer times, Ramadan hours and the beginning and end of Eid holidays. With the new arrangement, prayer times will be the same as in Mecca and Medina.

There were also objections that the real intention of the change is to distance Turkey from Europe. Some critics even said Turkey’s switch to Saudi time might well be a prelude to changing Turkey’s weekend to Fridays instead of Sundays.

Ostensibly, the idea of a time change in summer was to save energy and boost the economy; the claim is that the practice saves about $500 million in energy annually. But business executives and exporters say by making summer time permanent, the economy will be losing billions of dollars. Hikmet Tanriverdi, the president of Istanbul Ready-Made Garment Exporters Association, claims that by increasing the time difference with EU countries, Turkey will face serious problems in exports, business contacts and market transactions. To Tanriverdi, this decision will distance Turkey from Europe and make it just another Middle Eastern country.

With the new setup, when London starts its business day at 9 a.m., private companies and official bodies in Turkey will be on their lunch breaks. Turkish institutions will either have to extend their working hours or make their staff work overtime to harmonize with Europe. Investors in London will not be able to conduct any transactions after 3:30 p.m. in Istanbul. Students and workers will have to head to schools and work in darkness before dawn breaks.

The decree will really shake up sports schedules. The European football body UEFA starts Champions’ League games at 9:45 p.m. and European League games at 8 p.m. and 10:05 p.m. With the new hours, Turkish teams will be starting their games at 10:45 p.m., 9 p.m. and 11:05 p.m. local time. Games will end at midnight or in the early hours of the next morning. In major cities such as Ankara and Istanbul, fans won’t be able to return home before 2 a.m. or 3 a.m.

There are now reports that that UEFA is planning to adjust kickoff times for Turkish teams to follow Russian schedules and ask Turkish teams to play their European Cup games at 6 p.m. and 7 p.m. The problem with that is in major cities such as Istanbul, commuters will be on their way home from work or school when the games start. Making the summer time permanent in Turkey is likely to generate many more grievances. (Al-Monitor 13.09)

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11.11 TURKEY: Turkey’s Senior Citizens Get Their First University

Tulay Cetingulec posted on 16 September in Al-Monitor that Akdeniz University has launched Turkey’s first academic program for senior citizens as the problem of an ageing population looms large for the country in the coming decades.

Turkey is a country that often boasts of its youthful population, but this advantage may not last long. According to the Turkish Statistics Institute, the country’s elderly — aged 65 and above — numbered 6.5 million in 2015, or 8.2% of the total population, up from 8% in 2014. Globally, elderly people make up 8.5% of the world’s population. So, Turkey is not that young, having an elderly rate close to the global average. Though it could hardly compare with nations such as Monaco, Japan and Germany, where senior citizens make up, respectively, 30.4%, 26.6% and 21.5% of the population, Turkey still ranks 66th among 167 countries in this category.

Only 11.5% of senior citizens participate in the labor force, which clearly demonstrates that the elderly are rarely employed. Shut out from productive life, they are in a sense left to await death, which brings about low spirits along with health problems.

In 2015, 45.6% of Turkey’s senior citizens were satisfied with their general health, down from 47.5% the previous year, which is another indication that idle lifestyles are not good for the elderly.

To address the problem and encourage senior citizens to be more active in working and social life, Akdeniz University in the Mediterranean city of Antalya has inaugurated an education program called Renewal University, targeting people over the age of 60. The program, which offers courses in sociology, psychology, biology, technology, chemistry, agriculture, pharmacology, medicine, history, philosophy, maintenance and cooking, takes aim at the cognitive renewal of these students. After launching a trial run with 60 students in May 2015, the university has attracted considerable interest, with enrollment exceeding 300.

Though Turkey’s population aged 65 and over is slightly below the global average, the figure for those aged 60 and over is seen as a reason for concern. Ozgur Arun, the head of Akdeniz University’s gerontology department, sounded the alarm at an international conference two years ago, saying, “When the elderly exceed 10% of the population, this indicates that society is aging. In Turkey, people aged over 60 make up 13% of the population. A study of demographic shifts in the past 50 years indicates that the total population has tripled, while the elderly population has grown seven times. The aging process that France completed in 115 years and Switzerland in 85, Turkey will complete in the next 15 years.”

Ismail Tufan, the founder of Akdeniz University’s gerontology department, has been briefing Turkish government officials on the looming problem for the past 16 years. Beyond sounding an alarm, he has done his part in preparing for the new phenomenon: Renewal University is his brainchild.

In remarks to Al-Monitor, Tufan stressed that the initiative aimed to freshen the intellectual, physical and spiritual development of aging people. “Our education program targets people aged 60 and over. Along with the learning process, we created also an environment for debate. Learning is a lifelong process. By learning something new, you enhance your intellectual, physical and spiritual development,” he said. “Our senior citizens will now take more pleasure from living and improve their quality of life. Contributing to a healthier old generation is what we aim for.”

Tufan has coined a slogan — “Learning is cure and remedy” — and is urging universities across Turkey to launch similar programs for senior citizens.

At Renewal University, there are no grades or competition. Learning is the only thing that matters. At the end of the four-year program, senior citizens will be able to return to working life and even serve in executive positions.

Tufan described how a letter he got from a man from the remote eastern province of Ardahan brought him to tears. “He wrote that all his life he wanted to be an agricultural engineer, but managed to finish only primary school because of poverty. He told how he reads anything he lays hands on, how he raised three children who became a judge, a lawyer and an engineer, and requested to be enrolled in our school,” Tufan said, adding they had received applications from people as old as 82.

“Our school is free. We also provide the textbooks,” Tufan said, noting that 26 lecturers were involved in the program. “We started with 60 students last year and reached 127. There are high school and university graduates among them. The university will open officially this year and we have received 370 applications so far. We expect the figure to exceed 500 by the start of the education year.”

Postgraduate and doctoral programs are also available for the students. In one interesting detail, cooking is a compulsory course in all departments, a decision prompted by the fact that elderly men in particular don’t know how to cook. Tufan recalled how an elderly villager he met in eastern Turkey told him, “Wrap your wife in cotton wool. I have 12 children and dozens of grandchildren, but since my wife died, I’ve stopped having hot meals.” Another man rushed to enroll after reading about the cooking course in the newspaper. He was eager to learn to cook vegetable dishes, complaining how he exacerbated his hemorrhoids by frequenting kebab restaurants when his wife went away on long trips.

“We want to enhance the creativity of our people by providing them with an opportunity for lifelong learning, and by making sure that this becomes a national policy,” Tufan said, adding that the establishment of the gerontology department itself took years of painstaking work.

The academic urged more efforts to develop projects for senior citizens, stressing that the number of Turks aged 60 and over would reach a staggering 30 million by 2050, standing at 11.6 million at present.

The average age of staff at hospitals and nursing homes who care for the elderly in Turkey is between 35 and 45, Tufan said. “So, the elderly adopt a lifestyle shaped by the young without questioning it and thus fail to have an active and successful aging process.” In this context, Renewal University graduates, using also their own experience, could claim the management of the establishments that cater to their peers. (Al-Monitor 16.09)

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11.12 CYPRUS: Long-Term Ratings Raised To ‘BB’ On Strong Economic Performance; Outlook Positive

Rating Action

On 16 September, S&P Global Ratings raised its foreign and local currency long-term sovereign credit ratings on the Republic of Cyprus to ‘BB’ from ‘BB-‘. At the same time, we affirmed our ‘B’ foreign and local currency short-term sovereign credit ratings on Cyprus. The outlook is positive.

Rationale

The upgrade reflects our views of Cyprus’ stronger-than-expected economic growth and its further debt reduction, as well as steady improvement in the banking sector’s asset quality, in line with our last sovereign rating action.

We estimate that, after a deep three-year recession, and real economic growth of 1.6% in 2015, the Cypriot economy will expand by about 2.7% this year, exceeding our March 2016 forecast of 2%. Cyprus’ recovery is supported by resilient business services, tourism, gradually reviving private consumption and construction. The restructuring in the financial sector is advancing, but we expect it will be a few years before the sector contributes to economic growth. Although the financial sector is in our view clouding the investment outlook, a number of ongoing and planned investment projects – including investments in the tourism sector (casino, hotel resorts, and marinas), energy (solar thermal plants and the hydrocarbon sector), and business services – will underpin investment activity and contribute to domestic demand over the next several years. We also expect the unemployment rate, 15% at year-end 2015, will drop further to below 12% by 2018, which will support households’ disposable incomes and private consumption. We expect the Cypriot economy will continue to grow at about 2.5% in real terms in 2017-2019, even though high levels of nonperforming loans (NPLs; mainly loans past due for more than 90 days and forborne loans for a minimum observance period even if they meet the new repayment program) remain a key concern for financial stability and economic performance. In the long run, we also factor in the possibility of a reunification of the island, which would represent an important positive contribution to the country’s growth rate, despite initial micro- and macroeconomic challenges.

Following Cyprus’ strong economic performance and budgetary consolidation efforts in recent years, we expect the government’s budgetary position will be close to balance in 2016, before gradually moving into a surplus over the ensuing few years. At the same time, we don’t anticipate that the government will continue with discretionary deficit-reducing measures. Instead, we anticipate the government’s budgetary position will continue strengthening thanks to a gradual reduction in unemployment benefits and an increase in cyclical revenue items amid the economic recovery. Nevertheless, we expect the government will proceed with the implementation of its public administration reform, related primarily to the wage bill, and its reform of property tax.

We forecast that net general government debt will decline to below 85% of GDP in 2019. We project that general government interest payments will average about 6.4% of general government revenues in 2016-2019.

Approximately 40% of Cypriot general government debt – €7.25 billion–represents official lending from the European Stability Mechanism (ESM) and the International Monetary Fund (IMF) under the €10 billion economic adjustment program negotiated in May 2013. This debt (excluding the €950 million loan from the IMF) does not start to mature until December 2025 (with an average maturity of 15 years). The interest rate Cyprus pays on the ESM obligations is well below the expected cost of market financing. Following the conclusion of the IMF/ESM-financed program in March 2016, loss of eligibility for the European Central Bank’s (ECB’s) Public SectorPurchase Program did not impair the sovereign’s access to funding in the financial market. Eventual further easing of borrowing terms by official lenders would support a decline in net government debt to GDP beyond what we currently project, assuming that Cyprus’ primary general government budgetary position, at 1.8% of GDP last year–making it one of the highest in the Eurozone–stabilizes at about 2.5% of GDP after 2018.

The execution of the privatization plan, which the Cypriot government committed to in the context of the ESM/IMF financially supported economic adjustment program, could in our view generate sale proceeds that could lead to a further decline in government debt. Our current government debt projection does not take into account such potential proceeds (for example, from the planned partial sale of Cyprus Telecom).

At the same time, we believe that strengthening private consumption will limit the extent of improvement in the current account balance. Although most of Cyprus’ current account deficit for the past several years represents the accounting treatment of net income payments made on the large stock of inbound equity and foreign direct investment in the economy, we don’t believe this represents a large domestic savings gap. Despite the robust performance in the tourism sector, we believe that the economy’s external vulnerabilities persist, given its large, albeit reduced, stock of external debt, as well as its high net international liability position. We estimate the economy’s narrow net external debt at about 430% of current account receipts on average in 2016-2019, including a portion of Eurosystem financing of the Bank of Cyprus, the largest domestic commercial bank. This financing is, however, on a discernible declining trend (we have revised the underlying data in line with the sixth edition of the IMF’s Payments and International Investment Position Manual). Moreover, we note that the external statistics are substantially and negatively affected by a significant presence of special purpose entities registered in Cyprus that don’t have any direct interaction with the Cypriot economy. Lastly, we expect foreign direct investments will be supported by foreign interest in the tourism sector and energy-related infrastructure, especially in the hydrocarbon sector.

We believe that the banking sector is reducing asset quality concerns, although we still view financial stability as a main risk. In our view, the deterioration in the banking sector’s asset quality peaked in early 2015. The prospects for faster improvement in 2016-2017 have increased, with nonperforming exposures declining by about 10% in nominal terms by May 31, 2016. Banks’ reserve coverage is still low, at about 37% as of May 31, 2016 (including provisions made by cooperatives), but up from 33% in 2014, with the remaining balance covered by tangible collateral. We expect the enforcement of the legislation regarding foreclosures and insolvency procedures, together with a significant increase in banks’ capacity to manage nonperforming assets, sales of nonperforming exposures, their securitization and the swift transfer of title deeds, as well as underlying economic recovery, will continue to support the improving asset quality. The Central Bank of Cyprus introduced incentives for all the banks to reduce their NPLs, and legislation was adopted that allows for the creation of a secondary market for nonperforming assets. Importantly, we expect the Bank of Cyprus’ recourse to the ECB’s emergency liquidity assistance will decline to €1.3 billion by the end of this year from €11.4 billion in 2013, reflecting a sizable restructuring effort. As a result, the bank canceled its €1 billion in government-guaranteed bonds, which reduces the stock of outstanding government guarantees to about €2 billion, decreasing the government’s related contingent liabilities.

Outlook

The positive outlook reflects our view that we could upgrade Cyprus within the next 12 months if its reduction of currently high levels of NPLs accelerates, indicating a conversion of Cyprus’ credit and monetary conditions, including the monetary transmission mechanism, with those of the Eurozone. Moreover, we could raise the ratings if net government debt declined below 80% of GDP.

We could revise the outlook to stable if the banking sector’s stability comes under renewed significant pressure, for example due to unaddressed deterioration in asset quality; if economic growth deviates substantially and negatively from our current expectations, including for instance due to a potentially adverse impact on Cyprus from the U.K.’s June 23 referendum to leave the EU; or if budgetary performance doesn’t reduce government debt to the extent we currently forecast. (S&P 16.09)

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11.13 GREECE: Fitch Affirms Greece at ‘CCC’

On 2 September, Fitch Ratings affirmed Greece’s Long-Term Foreign and Local-Currency Issuer Default Ratings (IDRs) at ‘CCC’. The issue ratings on Greece’s long-term senior unsecured bonds have also been affirmed at ‘CCC’. The Short-term Foreign and Local Currency IDRs and the rating on Greece’s short-term debt have all been affirmed at ‘C’, and the Country Ceiling at ‘B-‘.

Key Rating Drivers

The completion of the first review and approval in May of the second tranche (€10.3b, 6% of GDP) of Greece’s €86b European Stability Mechanism (ESM) program highlights improved relations with creditors, but in Fitch’s view implementation risks are still high. The agreement was reached several months later than planned but the delay did not give rise to marked economic volatility.

The country’s 2015 primary surplus (program definition) was confirmed at 0.7% of GDP, better than the target of a deficit of 0.25%. A run-up of government arrears during creditor negotiations led to a fall in general government debt, to 177% of GDP in 2015 from 180% of GDP in 2014, still the second highest of all Fitch-rated countries. Fiscal performance so far this year is consistent with meeting the 2016 primary surplus target of 0.5% of GDP, but the remaining fiscal targets, of 1.75% of GDP in 2017 and 3.5% in 2018, will be progressively harder to meet.

In completing the first review, the government legislated as “prior actions” measures to meet the estimated fiscal gap of 3% of GDP to 2018, of which just above two-thirds come from pension and income tax reform. Relatively weak domestic ownership of program policy, however, makes their full implementation difficult. The agreement also includes a contingent fiscal mechanism retrospectively triggering further measures if a fiscal target is missed, as well as tax efficiency reforms on which the follow-through is less certain.

The second review is slated to commence in Q4/16, with labor reform expected to be the most contentious component. Fitch estimates that the government will have sufficient buffers (cash, repos and possible arrears build-up) to last into Q2/17 without release of funds on completing the second review, which increases the likelihood of negotiations slipping into next year. The nature of IMF participation is likely to hinge on the scope for relaxation of the medium-term fiscal targets and degree of commitment to debt relief.

So far the Eurogroup has set out only general parameters of a potential debt deal; namely that gross financing needs should remain below 15% of GDP “for the medium term” and below 20% thereafter, and that the more substantial relief such as interest rate caps, coupon deferrals and maturity extensions are conditional on successful program completion in 2018. Delivering debt relief in stages and contingent on delivery could incentivize performance, but could have the opposite effect if it came to be seen by Greek politicians or the public as a distant or unattainable prospect. Uncertainty around the likely outcome also limits the economic benefits through boosting confidence in the long-term sustainability of Greek debt.

Syriza has been losing ground in the polls to the center-right New Democracy, which has less ideological opposition to a number of the program policies but has argued for its renegotiation in particular on fiscal targets. Despite a slim majority, we expect Prime Minister Tsipras to be able to continue to rely on votes from centrist parties, but the potential for political surprises remains. Maintaining sufficient support to deliver on the demanding conditions through to 2018 is highly challenging, particularly in view of the track record of slippage under previous programs.

GDP contracted 0.75% (annualized) in H1/16, and Fitch expects a modest pick-up in the remainder of 2016 taking full year growth to -0.5%. We forecast GDP growth of 1.8% in 2017, supported by an increase in investment and, to a lesser extent, private consumption, and a moderately positive net trade contribution. Unemployment fell to 23.5% in May 2016 from close to 25.9% at the beginning of 2015 and we expect a further gradual fall, to an average 21.9% in 2018, still the highest in the Eurozone. The low oil price and sharp import contraction following imposition of capital controls has taken the current account close to balance from a deficit of 2.1% of GDP in 2014. Fitch expects small current account surpluses in 2016 and 2017, with net external debt remaining elevated at close to 130% of GDP in 2016.

Last year’s bank recapitalization helped stabilize the financial sector but consumer and investor confidence have been slow to recover. Bank deposits have increased only 2% since their 25% (€38b) drop in H1/15, although the relaxation of capital controls in July, in particular the withdrawal of restrictions on new deposits, is expected to lead to some moderate pick-up in deposits in H2/16. As a result, Greek banks continue to face very large funding imbalances, with Emergency Liquidity Assistance (ELA) accounting for 20% of system-wide funding. June’s ECB reinstatement of the waiver permitting Greek government bonds to be used as collateral will allow a fairly small share of ELA funding (estimated 7%) to be transferred to ECB’s regular financing operations at a 150bp lower interest rate.

The key challenge for the Greek banking sector is tackling non-performing exposures (NPEs) which remain extremely high at above 45% of gross loans. Improvement has been made to the legal and institutional framework for resolving loans, but progress in working through problem assets has been relatively slow. High NPEs, funding imbalances and weak credit demand continue to constrain net private sector lending, which Fitch forecasts will contract 2.8% in 2016 and 1.5% in 2017.

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

Fitch’s proprietary SRM assigns Greece a score equivalent to a rating of BB on the Long-Term Foreign Currency IDR scale. In accordance with its rating criteria, Fitch’s sovereign rating committee decided to adjust the rating indicated by the SRM by more than the usual maximum range of +/-3 notches because of Greece’s experience of financial crisis. Consequently, the overall adjustment of five notches reflects the following adjustments:

– Macro: -1 notch, to reflect a history of weak macroeconomic management that contributed to financial crises and steep declines in GDP.

– Public Finances: -1 notch, to reflect public debt at close to 180% of GDP; the SRM does not capture “non-linear” vulnerabilities at such a high level.

– External Finances: -2 notches, to reflect: a) Greece’s high net external debt which is not captured in the SRM, and restricted market access which reduces financing flexibility; and b) the +2-notch SRM enhancement for “reserve currency flexibility” has been adjusted to +1 notch given Greece’s financial crisis experience.

– Structural Features: -1 notch, to reflect political risks to the program, and a weak banking sector reliant on official funding and with capital controls still largely in place.

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

Rating Sensitivities

Future developments that could, individually or collectively, result in an upgrade include:

– A further track record of successful implementation of the ESM program, brought about by an orderly working relationship between Greece and its official creditors and a relatively stable political environment.

– An economic recovery, further primary surpluses, and official sector debt relief would provide upward momentum for the ratings over the medium term.

Developments that could, individually or collectively, result in a downgrade include:

-A repeat of the prolonged breakdown in relations between Greece and its creditors seen last year, for example in the context of a failure to meet program targets and worsening liquidity conditions.

-Non-payment, redenomination or distressed debt exchange of government debt securities issued in the market or a government-declared moratorium on all debt service.

Key Assumptions

-Any debt relief given to Greece under the ESM program will apply to official-sector debt only, and would not therefore constitute an event of default under the agency’s criteria. (Fitch 02.09)

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11.14 GREECE: Greek Recovery Still Far Off Despite Optimism

Greece is coming towards the end of its economic “disaster cycle” according to Prime Minister Alexis Tsipras but many economists believe the country has a long way to go before it reaches financial security. Speaking at an international business fair in Thessaloniki, Tsipras told the audience that now that “all the signs and indicators show that the disaster cycle is closed, we can plan the next day, at least over a five year horizon.” Tspiras used the event, during which it is customary for the premier to set out his policies for the coming year, to paint an optimistic picture of Greece’s near future.

Two years ago, as opposition leader, Tsipras declared the end to austerity policies and support for those on the bottom rung of the economy as Greeks faced the worst financial crisis in recent memory. However, when his left-wing coalition took power, he failed to keep his promise and struck a third bailout deal with the country’s international creditors in July last year. A year on and after further painful reforms, the government is still seeking a way out of the crisis.

According to the ANA-MPA news agency, Finance Minister Euclid Tsakalotos told his Eurozone counterparts that Greece could expect three quarters of successive growth this year and claimed the economy was finally recovering. However, nothing seems likely to stop the spiral of recession that has dominated since 2009. “The government repeats the same policy as its predecessors and now presents a success story,” Apostolos Dedousopoulos, an economics professor at Panteion University, told Anadolu Agency. “Except for the three key elements of the economy, such as exports, investment and private consumption, all steadily recede with a negative total overall despite some minor amendments from the government…Tourism is not able to reverse this climate and the index of retail sales is also negative.”

Dedousopoulos pointed to the huge flow of cash out of Greece as the country struggles to square its debts. “€10 to 12 billion ($11.2 billion to $13.5 billion) for this year alone is hard to make up for,” he said. “It is like an open wound which keeps festering.”

Greek debt currently stands at €358.8 billion ($404.3 billion) or around 214% of the GDP. The unsustainability of the debt has led to calls for payments to be restructured to break free of the crippling commitment. Late last month, in a decisive message to the country’s creditors, Tsipras told the Realnews newspaper that the EU was “sleepwalking towards a cliff” in enforcing austerity rules that created huge inequalities among members. He said Greece expected debt relief to be in place by the end of the year so its economy could recover. However, debt is just part of the problem.

No Room for Optimism

Lambros Pechlivanos, an assistant professor at Athens University of Economics and Business, said the country faced a “multifactorial problem” that included factors such as the impact of capital controls imposed in June 2015, the inefficiency of public administration in exploiting foreign resources, the insecurity caused by geopolitical developments and heavy taxation. “All this doesn’t allow much room for optimism,” he warned.

For most Greeks, who have seen their economic circumstances dramatically curbed over the last few years, the situation has created a similar feeling of debt burden as taxes rise.

According to latest General Secretariat for Public Revenue report, Greeks paid €1 billion more in taxes in June compared to the same month last year, while the number of taxpayers with outstanding debts rose by 125,000 in a month to 4,128,962. The latest additional state revenues come from a sales tax rise, further excise duties and an increase in advance tax payment for businesses and the self-employed. The effects of this tax avalanche are overwhelming.

Ioanna Oikonomidou, 44, runs a grocery store in central Athens. She told Anadolu Agency people were buying less and less as their tax bills rise. “They say that they would like to buy more but can’t afford to,” she said. Calling for an end to new taxes, she added: “We need to be able to plan our lives on safe ground. We can’t have new taxes every now and then destroying everything. We cannot take this anymore.”

Pensioners face a third and final round of cuts to their payments in October while the jobless face little change of getting back into work as the unemployment rate hits 23.5%.

Promises Not Kept

“I have experienced the tax avalanche first hand,” 33-year-old Olga Tsikrika said in a cafe in central Athens. Olga has a degree in psychology and has been unemployed for months. Without her family’s support, she wouldn’t be able to cope. “I feel betrayed,” she said. “Promises were made that were not fulfilled. I want to start working privately but I feel very insecure about this prospect.”

Interior designer Ioanna Mantzavinou, 39, recently found a job. “Things get worse every year and nothing works in our favor – there are only taxes and unemployment. My plan for the future is to stay at work. I only wish my boss is able to keep me employed.”

According to Pechlivanos, the banks could play a vital role in Greece’s recovery. “The reopening of the banking system… is a key parameter because the Greek economy hasn’t had a functional banking system for years now,” he said. “Once this is done, individuals and companies can plan ahead new activities and the banking system will be able to perform its role, which is to offer credit expansion to businesses and households.”

Dedousopoulos, meanwhile, sees a leading part to play for the government. “The government is trapped in a narrative which is disorientating its efforts away from the necessary productive reconstruction of the economy,” he said. “What is really needed in order to start a recovery of an economy such as the Greek one is a change of economic policy according to which the state doesn’t seek yearly surpluses but deficits. “So far, the ongoing policies include small-scaled interventions in individual sectors and were believed to save the day while macroeconomic policies were ignored.

“It is like having a sick person with anemia and instead of giving him a transfusion you perform bloodlettings.” (Atina 13.09)

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

Fortnightly, 21 September 2016

Fortnightly, 21 September 2016

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