Fortnightly, 25 January 2017

On 22 January, the cabinet unanimously approved the appointment of MK Ayoob Kara (Likud) as Minister without portfolio and MK Eli Cohen (Kulanu) as Minister of Economy and Industry. The appointments are designed to make the government more stable and prevent unrest in the two parties.

Up until now, Cohen, 44, has chaired the Special Committee to Discuss the Bill for Increasing Competition and Reducing Concentration in Israel’s Banking Market, which was founded under the coalition agreement with Kulanu, headed by Minister of Finance Moshe Kahlon. Kahlon was seeking to use this committee to bypass the Knesset Finance Committee in order to pass important reforms that he was advocating. Following the resignation of Avi Gabai as Minister of Environmental Protection, one of Kulanu’s founders, Kahlon preferred Cohen as Minister of Construction and Housing in place of MK Yoav Galant, another Kulanu member, whom Kahlon wanted to appoint as Minister of Economy and Industry. The distant relations between Galant and Kahlon since the government was formed and the transfer of employment from the Ministry of Economy and Industry to the Ministry of Labor, Welfare, and Social Services, however, have prevented this measure. (Globes 22.01)

Back to Table of Contents

1.2 Israeli Government to Fund Medical Cannabis Research

Israel’s Ministries of Agriculture and Health will provide NIS 8 million in funding for 13 medical cannabis studies. The measure is the first cooperative effort of its kind between the Ministry of Health medical cannabis unit and the Ministry of Agriculture chief scientist unit. The studies, which will be financed through a fund operated by the chief scientist unit, will deal with biochemical and medical aspects, as well as improving medical cannabis crop yields. The Ministry of Agriculture said on 24 January that funding the studies was a pioneering step for Israel that could enable researchers to conduct basic and applied research for five years, during which tools and infrastructure would be developed to facilitate the next generation of cannabis plant products for medical use.

Among the biochemical and medical studies approved by the Ministries of Agriculture and Health are identification and specification of new ingredients in strains of medical cannabis, the use of cannabis and its effect on vision, involvement of cannabis in the development of colon cancer, treatment of multiple sclerosis using cannabis, the use of cannabis to prevent rejection of transplanted organs, and a test of the plant’s ability to delay the development of harmful bacteria. These studies will soon receive government funding.

In addition to these trials, in the coming years, the state will fund research examining the development of new and improved technologies for irrigating and fertilizing cannabis plants, improved ways of dealing with plant diseases and pests that attack the cannabis plant, development of methods for multiplying and grafting cannabis plants, establishing a genetic bank and national bank of medical cannabis plants, improving and developing new cannabis strains, and more. A special committee examined the proposals, and made its selection for state financial support from the 30 submitted. (Globes 23.01)

Back to Table of Contents

2: ISRAEL MARKET & BUSINESS NEWS

2.1 Canada’s New Tax Treaty with Israel Now in Force

The new Canada-Israel tax treaty entered into force on 21 December 2016. The treaty was first signed on 21 September 2016. Among other provisions, the new treaty adds a “one of the main purposes” test as an anti-treaty shopping measure to the treaty articles on dividends, interest, royalties and capital gains. Regarding the taxation of capital gains, there is a “one-year holding period test” to determine whether shares or partnership and trust interests derive more than 50% of their value directly or indirectly from immovable property. Under the new treaty, withholding tax will generally be limited to 15% for payments of dividends (or 5% for dividends paid to a company that holds directly (or indirectly) at least 25% of the capital of the company that paid the dividends) or 10% for payments of interest and royalties.

The treaty will have effect in Canada for tax withheld at source on amounts paid or credited to non-residents on or after 1 January 2017. For other taxes, the treaty will have effect for taxation years beginning on or after 1 January 2017. (KPMG 17.01)

Back to Table of Contents

2.2 Andersen Global Initiates Expansion in Israel

San Francisco’s Andersen Global announced its collaboration with Beneli Tax Boutique, a tax firm located in Tel Aviv, Israel. The establishment of a Collaboration Agreement with Beneli Tax Boutique broadens Andersen’s presence globally to include the Middle East and is the initial stage to becoming a member firm of Andersen Global. Beneli Tax Boutique assists U.S. and Israeli multinationals, startups and high net-worth individuals with their international tax matters including mergers and acquisitions, tax due diligence, equity compensation, tax accounting and tax efficient corporate structuring. With the addition of Beneli Tax Boutique, Andersen Global now has a presence in 56 locations worldwide. (Andersen Global 16.01)

Back to Table of Contents

2.3 Oracle Opens Israel Startup Accelerator

U.S. software provider Oracle Corp announced today that it was opening an accelerator program in Israel for startups developing cloud technologies or whose technologies are based in the cloud. Run by Oracle’s research and development team, the program provides six months of mentoring from technical and business experts, advanced technology, access to Oracle’s customers, and partners and investors. A pilot program was first launched in India and more centers will be announced soon. Oracle said this was a multi-million dollar program but did not disclose how much it would invest in each center. Oracle’s startup cloud accelerator program builds on its excellence center for Israeli startups, which was established in 2003 by Oracle Israel in cooperation with the government to support the growth of early stage startups. Thirty six companies were approved to take part in the excellence center, totaling more than $150 million in estimated exits. (NoCamels 16.01)

Back to Table of Contents

2.4 Israel’s Corephotonics Raises $15 Million

Corephotonics recently completed a $15 million funding round. To date, the company has raised more than $50 million. Participating in the current funding round are a number of strategic investors: Samsung Ventures; Foxconn, the world’s largest electronic components manufacturer, which among other things manufactures the iPhone; Taiwan’s MediaTek, one of the largest mobile semiconductor companies in the world; and a tier-1 smartphone OEM. Two additional investment funds participated in this funding round, one from China and the other from Hong Kong. Corephotonics’ current investors include Magma VC, Samsung Ventures, Amiti Ventures, Chinese billionaire Li Ka-shing and Solina Chau’s Horizon Ventures, OurCrowd – the equity crowdfunding firm, flash storage solutions company SanDisk, Chinese telephony services provider CK Telecom, and additional private investors.

Corephotonics is the pioneer and market leader of dual camera technologies for smartphones. The company’s technology improves the image quality, and enables imaging capabilities that until now were only available in professional cameras. The technology is based on the combination of two cameras, which enables stills photography with optical zoom of up to 3x and up to 8x zoom in video, even in low light conditions. It also enables creating a bokeh effect (blurring the picture’s background and making the main subject stand out), a considerable improvement in picture resolution, and preventing motion blur.

The investment, along with the existing cash on hand and revenue forecast for 2017, will be used for developing next generation cameras for smartphones, and for expanding existing products’ penetration. In addition, the new funding will help Corephotonics expand into the automotive, drone, surveillance, and action camera markets.

Established in 2012, Tel Aviv’s Corephotonics is the leading licensor of dual camera imaging technologies. The company provides end-to-end dual camera solutions which dramatically improve the image quality and user experience of mobile imaging, while introducing optical zoom, superb low-light performance, Bokeh and depth features, and optical image stabilization in an incredibly slim form factor. Thus far, Corephotonics has raised more than $50 million. (Corephotonics 11.01)

Back to Table of Contents

2.5 Fraugster, a Startup That Uses AI to Detect Payment Fraud, Raises $5 Million

Fraugster, a German and Israeli startup that has developed Artificial Intelligence (AI) technology to help eliminate payment fraud, has raised $5 million in funding. Earlybird led the round, alongside existing investors Speedinvest, Seedcamp and an unnamed large Swiss family office. The new capital will be used to add to Fraugster’s headcount as it expands internationally. Its AI-powered fraud detection technology learns from each transaction in real-time and claims to be able to anticipate fraudulent attacks even before they happen. The result is that Fraugster can reduce fraud by 70% while increasing conversion rates by as much as 35%. The point of any fraud detection technology, AI-driven or otherwise, is to stop fraudulent transactions whilst eliminating false positives.

Once integrated, Fraugster starts collecting transaction data points such as name, email address, and billing and shipping address. This is then enriched with around 2,000 extra data points, such as an IP latency check to measure the real distance from the user, IP connection type, distance between key strokes, and email name match. Then the enriched dataset is sent to the AI engine for analysis. (Various 16.01)

Back to Table of Contents

2.6 UK’s PA Group Invests in Wochit

PA Group – the parent company of the Press Association (PA), the national news agency for the UK and Ireland – has made a strategic investment in Israeli social video creation platform Wochit. Details of the investment were not disclosed, PA Group’s investment will contribute to the development of new tools and features to further enhance Wochit’s award-winning technology, while supporting the expansion of Wochit’s business around the world. The relationship also sees a selection of PA’s News, Sport and Entertainment content added to Wochit’s proprietary library of rights-cleared assets, a resource that allows content creators’ to rapidly produce video packages on trending topics.

Beit Dagan’s Wochit is a video creation platform empowering newsrooms, editorial teams and social media editors to capture and expand audience attention through the power of video. Founded in 2012, Wochit makes video accessible for all businesses to produce and share at scale across all social and digital platforms. With Wochit, videos can be created quickly, using pre-negotiated, rights-cleared assets from AP, Reuters, Getty, Bloomberg and many more sources. Wochit is among the 2016-2017 EContent’s Top 100 companies in the digital content industry as well as the winner of both the Gutenberg Prize for its disruptive technology in the field of journalism and Digiday’s Best Video Technology Innovation for its positive impact on clients’ bottom line. (Various 18.01)

Back to Table of Contents

2.7 AppsFlyer Raises $56 Million to Deliver Measurement Innovation in the Mobile Era

AppsFlyer, a Herzliya, Israel marketing technology platform for apps, has raised $56 million in Series C funding led by Qumra Capital, with Goldman Sachs Private Capital Investing, Deutsche Telekom Capital Partners, Pitango Growth and existing investors participating. The company did not disclose its valuation.

CEO Oren Kaniel co-founded the company in 2011 when he noticed that app makers and the burgeoning market for app install ads had little in the way of measurement tools. AppsFlyer measures the effectiveness of app-install ads, as well as any traffic coming to a specific app, be it via organic Facebook post, QR code, user invite, or email marketing. The company’s software development kit has been installed on more than 2.5 billion unique smartphone devices, which it estimates includes 98% of smartphones. Revenue is tripling each year.

Herzliya’s AppsFlyer has emerged as the mobile measurement industry standard because it empowers advertisers with unbiased and transparent attribution analytics. Most importantly, it values the integrity of maintaining their clients’ data private and secure, which has earned the trust of more than 2000 network and analytics partners who have integrated with us. This vision has attracted the best and brightest to AppsFlyer. The product’s growth is spurred by the dynamic team-player environment we cultivate, which fosters growth and the never-ending learning process. We believe that this atmosphere is a catalyst for innovation and experimentation, ultimately leading to developing the best analytics platform possible. (AppsFlyer 17.01)

Back to Table of Contents

2.8 Rivulis & Eurodrip Announce Merger to Create a World Leader in Micro Irrigation

Rivulis Irrigation of Israel and Eurodrip of Greece have entered into a definitive merger agreement in an all-share transaction, creating a global leader in micro irrigation. Transaction closing is subject to satisfaction of certain conditions including, but not limited to, regulatory approvals. The merged company will have unparalleled market coverage with 18 factories around the world and 1,800 employees across 5 continents and 30 countries. Growers around the world will benefit from an extensive product and solution offering, consisting of trusted industry brands such as T-Tape, Ro-Drip, Hydrogol, D5000, Eolos, Compact, PC2 and Olympos. The merged company will be headquartered in Gvat, Israel and will be named Rivulis Irrigation.

All current shareholders of the two companies – FIMI Opportunity Funds, Israel’s leading private equity fund (FIMI), U.S. based Paine & Partners, LLC (Paine & Partners) and Dhanna Engineering of India – will remain shareholders of the merged company and will remain active on the Board of Directors, ensuring continuity and providing strong support for the success of the merged company. The company will continue to support both the Rivulis and Eurodrip brands, and will remain strongly committed to its mission of providing continuous innovation, and strong service to help growers to optimize yields sustainably and economically while addressing water and land scarcity.

Rivulis Irrigation is one of the leading drip and micro irrigation manufacturers worldwide. Rivulis Irrigation is a major player impacting the growing move of agriculture to drip irrigation. (Rivulis Irrigation 10.01)

Back to Table of Contents

2.9 Cybellum Raises $2.5 Million

Cybellum has raised $2.5 million in a seed financing round led by Blumberg Capital. Tel Aviv-based Cybellum will use the funding to fuel its expansion, including opening a US office in 2017 and to further its R&D efforts. The company also announced the discovery of three new zero-day vulnerabilities that are currently unpublished, unpatched and are potentially being used in the wild. Cybellum has developed the first deterministic zero-day prevention platform to protect companies from zero-day attacks. Zero-day attacks are cyber attacks against software flaws that are unknown and unpatched.

Founded in 2015, Cybellum‘s mission is to create a real and direct solution to cyber problems, specifically zero-day attacks, eliminating the cat and mouse game between the adversary and the organization. Cybellum’s First-Step Threat Protection is the only solution that detects and stops zero-day exploits at the very first step, which is the initial vulnerability stage. Unlike behavioral, machine learning and signature-based solutions that generate a number or percentage of the likelihood of infection, Cybellum’s core technology generates decisive solutions which eliminates the chances of false positives and prevents the attack from spreading to an organization. (Globes 24.01)

Back to Table of Contents

2.10 illusive networks’ Microsoft Ventures Investment Follows Accelerated Global Growth

illusive networks announced a strategic investment by Microsoft Ventures. The new funding will be used to advance global expansion, invest in sales and marketing, and expand the engineering and support teams for the company’s patent-pending cybersecurity deception technology. Microsoft Ventures joins current investors New Enterprise Associates (NEA), one of the world’s largest and most active venture capital firms, Bessemer Venture Partners, Marker LLC, Citi Ventures, Cisco Investments, and Eric Schmidt’s Innovation Endeavors. The earlier Series A and B investments total over $30m.

Tel Aviv’s illusive networks is deployed across dozens of leading financial institutions, insurance, retailers, law firms, healthcare providers, energy and telecommunication companies in the United States, EMEA and APAC. illusive networks’ Deceptions Everywhere solutions, delivered via agentless patent pending technology, blanket a company’s entire network — every endpoint, server and network component — with information that deceives would-be attackers. When attackers act upon the false information, illusive networks neutralizes the attack and triggers a detailed breach report enabling security administrators to detect, track and contain the attack in its early stages. (illusive networks 24.01)

Back to Table of Contents

2.11 Secret Double Octopus Raises $6 Million to Protect Identity Using Nuclear Launch Code Safety Algorithms

Secret Double Octopus, the pioneer of keyless multi-shield connectivity and authentication, announced today that it has closed a $6 million Series A funding round. The financing round included Jerusalem Venture Partners, Liberty Media’s Israel Venture Fund, Iris Capital, Benhamou Global Ventures and angel investor Yaniv Tal. The investment will be used to expand R&D efforts and accelerate growth in key markets, including the US and Europe.

Based on Secret Sharing algorithms, originally developed to protect nuclear launch codes, Secret Double Octopus has developed the only solution on the market that applies keyless authentication and data-in-motion protection for cloud, mobile, and IoT. The Company’s technology prevents cyber attackers from accessing enough critical information to be useful for attacks such as brute force, man-in-the-middle, PKI manipulation, key theft and certificate authority weaknesses.

Beer Sheva’s Secret Double Octopus has developed the world’s only keyless multi-shield connectivity technology to protect identity and data across cloud, mobile and IoT environments. Based on Secret Sharing algorithms, originally developed to protect nuclear launch codes, Secret Double Octopus’ technology prevents cyber attackers from accessing enough critical information to be useful for attacks, eliminating brute force, man-in-the-middle, PKI manipulation, key theft and certificate authority weaknesses. The Company was founded in 2015 by a seasoned leadership team with more than 100 years’ combined academic and industry experience. Secret Double Octopus is backed by Jerusalem Venture Partners, Iris Capital, Liberty Media and Benhamou Global Ventures. (Secret Double Octopus 24.01)

Back to Table of Contents

3: REGIONAL PRIVATE SECTOR NEWS

3.1 US’ WestPoint Home Opens New Bahrain Textiles Factory

WestPoint Home, a NY based textiles manufacturer, has inaugurated its new spinning facility in Bahrain as part of the company’s ongoing growth in the Gulf kingdom. The new $9 million investment marks WestPoint Home’s third expansion in Bahrain over the past five years and more than $160 million of investments over the past 10 years, where products produced generate over 50% of its total global revenues annually. Works on the third spinning expansion were initiated in 2015 with the aim of mitigating the negative financial impacts of the 2016 expiration of the tariff preference level that allowed it and other textile manufacturers in Bahrain to import certain support materials, such as yarn, and export finished goods into the US duty free. The company said also under discussion at the inauguration ceremony were additional future investments in Bahrain including further expansions in production capacity aimed at capitalizing on growth opportunities in the GCC and European markets in addition to the US. (AB 20.01)

Back to Table of Contents

3.2 Emirates Set to Launch ‘Fifth Freedom’ Route to US via Athens

Emirates announced on 23 January that it will launch a new daily service from Dubai to Newark Liberty International Airport via Athens, starting on 12 March. The new ‘fifth freedom’ route complements Emirates’ existing four daily flights between Dubai and New York’s JFK airport. Fifth freedom rights allow an airline to fly between two foreign countries so long as the flight originates or ends in the airline’s home country. Emirates already offers fifth freedom services between Milan and New York.

The announcement comes as three of the largest carriers in the US continue to urge the government to directly intervene and block further flights being launched by Gulf carriers. Delta and other US airlines have accused Emirates, Etihad Airways and Qatar Airways of receiving more than $40 billion in unfair subsidies, and the US airlines’ unions have urged their government to halt the Open Skies agreement. The Gulf carriers have dismissed the charges as false. (AB 24.01)

Back to Table of Contents

3.3 Castle Hall Alternatives Expands to Abu Dhabi

Castle Hall Alternatives has opened an office within Abu Dhabi Global Market (ADGM), the international financial center in Abu Dhabi, UAE. With this expansion, Castle Hall has further broadened its global presence: the firm also has offices in Montreal and Halifax, Canada; Zurich, Switzerland; and Sydney, Australia. Montréal’s Castle Hall Alternatives, a member of AIMA, helps global institutional investors, fund of funds, advisors, family offices and endowments identify and manage the business, operational, cyber and investment risks of asset managers. With a team of 50 professionals, Castle Hall deploys one of the industry’s largest and most experienced due diligence teams. (Castle Hall Alternatives 18.01)

Back to Table of Contents

3.4 Dictum Health Expands Globally, Providing Clinical Care Anytime, Anywhere

Oakland, California’s Dictum Health, an innovative leader in end-to-end telehealth, announced that it received clearances from the FDA of Saudi Arabia, and the Ministry of Health of the United Arab Emirates, for its fully-integrated IDM100 medical tablet. Saudi Arabia and the United Arab Emirates are experiencing increases in aging populations and chronic diseases, resulting in higher demands on clinical care providers. In addition, many patients need ongoing care, or specialist care, in rural, remote, and home settings. To address these challenges, health care providers need an advanced solution that extends clinical reach to patients and expands patient access to care without sacrificing care quality. Dictum Health’s FDA-Cleared IDM100 and Care Central Cloud Services serve as that advanced, telehealth solution by connecting patients and clinicians with real-time video, patient data and alerts.

Dictum Health’s telehealth solution features a virtual exam room with video conferencing and simultaneous streaming of vital signs, cardiopulmonary data, and medical images — allowing even the most at risk patients to be remotely monitored, examined, and treated — with the same clinical accuracy as an in-office exam. Thus, clinics can provide patients with the care that they need, regardless of location, using Dictum Health’s IDM100 and Care Central. (Dictum Health 16.01)

Back to Table of Contents

3.5 Nahdi Medical Chooses Opterus for Store Communications and Operational Execution

Toronto’s Opterus, the leading global provider of cost-effective, web-based store communications and task management solutions, announced that Nahdi Medical Company, the largest retail pharmacy chain in the Middle East and North Africa, has implemented the Opterus solution to their entire retail chain. Nahdi Medical Company serves about 83 million guests annually in more than 130 cities and villages in the Middle East and North Africa. Opterus’ Store Ops-Center is an intuitive, easy-to-use cloud solution designed specifically for retailers to simply and effectively manage and execute store tasks and communications. The solution measures and increases operational compliance, communicates corporate policy, manages day-to-day objectives and tasks, and handles issues between corporate office and store locations. A simple and agile solution, Store Ops-Center allows for rapid implementation and strong user acceptance. (Opterus 16.01)

Back to Table of Contents

3.6 Airbus Said to Finalize Deal to Sell Over 60 Jets to Saudi’s Flynas

Airbus has finalized an agreement to sell more than 60 jets to Saudi Arabian budget carrier Flynas, a move that could help the European manufacturer keep ahead of Boeing in the annual race for new orders. The order from Flynas, partly owned by Saudi billionaire Prince al-Waleed bin Talal’s investment vehicle, is expected to cover over 60 A320neo narrow body jets. An order for 60 A320neos would be worth $6.4 billion at list prices though it is common for manufacturers to grant discounts. Including purchasing options, the agreement includes 100 A320neos.

The A320neo sale would be Airbus’s first in the Middle East since Qatar Airways refused deliveries in December 2015 and said it would swap its order for a larger version. Flynas, which launched as Nas Air in 2007 and first turned a profit in 2015, has been negotiating an order for at least 60 narrow body jets with Airbus and rival Boeing since as early as April 2016. The order, which would replace and expand a fleet of leased A320s, would give flynas one of the largest Middle East low cost fleets after state-owned flydubai, which operate 57 Boeing 737-800s and has more than 100 scheduled for delivery by 2023.

Flynas is facing increasing competition domestically, where it conducts the majority of its operations. Start-up SaudiGulf Airlines and Saudi-owned, Egypt-based Nesma airline were both granted domestic operating licenses in 2016, while state-owned Saudi Arabian Airlines has announced plans for its own budget carrier, Flyadeal, to launch in mid-2017 with a target of 50 jets by 2020. Qatar Airways-owned Al Maha is waiting for a domestic Saudi operating license. (Reuters 10.01)

Back to Table of Contents

3.7 Pfizer Opens New $50 Million Saudi Manufacturing Hub

The Saudi subsidiary of pharmaceutical giant Pfizer has announced the opening of a new $50 million manufacturing facility in the Gulf kingdom. Pfizer Saudi Limited has launched its factory in King Abdullah Economic City (KAEC) and announced the start of manufacturing of a number of life-changing medicines for patients in Saudi Arabia. The opening of this manufacturing facility is part of Pfizer’s support for the Saudi government’s Vision 2030 National Transformation Program. Pfizer said that initially, the plant will produce 16 of the company’s pharmaceutical products in different phases to meet Saudi health needs in five therapeutic areas – cardiovascular, pain, anti-infective, urology and neurology. The Pfizer facility represents investment of around $50 million and the site offers potential for expansion to meet future requirements, the company added. The development incorporates medicine manufacturing and packaging technologies within one complex and is set to create new, skilled employment opportunities for Saudis. (AB 13.01)

Back to Table of Contents

3.8 Dow Says Saudi Innovation Center Set to Open in 2018

Dow announced the “topping out” of its new innovation center in Saudi Arabia, which is expected to become operational in the second half of 2018. Dow reported good progress in the construction of the Dow Middle East Innovation Center at King Abdullah University of Science & Technology (KAUST) in Saudi Arabia. The new center will be the second largest building in KAUST when completed.

Dow currently has an R&D Center at the KAUST Innovation Cluster, focusing on themes such as water, energy efficiency, and reducing environmental footprints that address critical needs in Saudi Arabia and the broader Middle East region. Dow is a founding member of the KAUST Industrial Collaboration Program which aims to commercialize research into practical applications. In 2015, Dow had annual sales of nearly $49 billion and employed approximately 49,000 people worldwide. (Dow 13.01)

Back to Table of Contents

3.9 Turkey’s First Ever Test of 5G Technologies Achieved Speeds of 24.7 Gbps

Turkcell is continuing its work on 5G technologies at full speed. Turkcell and Ericsson completed Turkey’s first ever 5G test, achieving download speeds of 24.7 Gbps on the 15 GHz spectrum, the broadest available. The test was also one of the first in the entire world. Having been working on 5G technologies since 2013, Turkcell will also manage 5G field tests to be carried out globally by NGMN in 2017 and 2018. Thanks to the high speeds offered by 5G, a 100 GB file that can currently be transferred in around 30 minutes at 500Mbps on a 4.5G network will eventually be downloaded in 30 seconds at 25Gbps. (Turkcell 16.01)

Back to Table of Contents

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Ecoppia Completes 40MW Deployment in EDF RE /Arava-Power Middle Eastern Solar Park

Ecoppia announced the full deployment of its E4 robotic solution in the Ketura Solar photovoltaic facility. The deployment in the jointly-owned EDF RE and Arava Power facility reinforces the company’s leadership position in the region, and joins a growing list of successful Ecoppia deployments worldwide.

Soiling – the accumulation of dirt and dust on photovoltaic solar panel surfaces – is one of the greatest impediments to solar energy production. Located in the hot southern stretch the Arava desert, between the Gulf of Aqaba and the southern tip of the Dead Sea, Ketura Solar is close to dust-intensive agricultural sites, suffers from frequent sandstorms, and enjoys virtually no rain. Traditional labor-intensive, water-based cleaning solutions are neither cost-effective nor timely, since immediate recovery from sandstorms is mission-critical to maintain the facility’s LCOE. Ecoppia is the only solution able to restore an entire site to peak energy production in just hours – without water or external electricity consumption.

Arava Power, a pioneer in the field of solar energy, established the first commercial solar field in Israel in 2011 in Kibbutz Ketura. Since then seven additional solar fields have been established and connected to the national grid, including the 40 MW Ketura Solar project. Fifteen additional projects are presently in various stages of development.

Herzliya’s Ecoppia designs and produces innovative photovoltaic panel cleaning solutions to cost-effectively maximize the performance of utility-scale installations. The company’s water-free, automated technology removes dust from panels on a daily basis to ensure peak output, even in the toughest desert conditions. (Ecoppia 16.01)

Back to Table of Contents

4.2 UAE to Spend $163 Billion on Clean Energy Revolution

The UAE will spend AED600 billion ($163.3 billion) over the next three decades in developing the country’s energy market, with a plan for clean energy to power 50% of the sector by 2050. The first unified energy strategy for the UAE has been announced which aims to balance economic needs and environmental goals. The Dubai Media Office feed revealed that the energy plan will combine nuclear and renewables with clean fossil energy with an investment of $600 billion by 2050. The new strategy also aims to boost consumption capabilities by 40%, as well as increasing the contribution of clean energy by 50%, resulting in savings of AED700 billion. The equation targeted by the plan is 44% clean energy, 38% gas, 12% clean coal and 6% nuclear. Dubai already has a clean energy plan for the period to 2050 but this is the first UAE-wide strategy.

The Mohammed bin Rashid Solar Park, which was announced in January 2012 and is currently under construction, is a major part of the Dubai Clean Energy Strategy 2050, which aims to make Dubai a global center of clean energy and green economy. Under the strategy guidelines, the emirate aims to provide seven% of Dubai’s energy from clean energy sources by 2020, increasing this target to 25% by 2030 and 75% by 2050. (AB 10.01)

Back to Table of Contents

4.3 Construction of Phase 3 of Giant Dubai Solar Park to Start By End January

Construction of the 800 MW phase 3 of the Mohammed bin Rashid Al Maktoum Solar Park in Dubai will start at the end of January following the award of the engineering, procurement and construction (EPC) contract for the project. The EPC contract agreement has been awarded to an international consortium led by renewable energy contractor GranSolar of Spain, alongside Acciona, also from Spain, and Ghella of Italy. A Masdar-led consortium was selected last June by Dubai Electricity and Water Authority (DEWA) to develop what will be the world’s largest solar park on a single plot on completion, after setting a record-low bid price for solar power generation of 2.99 cents per kilowatt-hour (kWh). The agreement follows the launch of the Dubai Clean Energy Strategy 2050, which aims to diversify the energy mix so clean energy will generate 7% of Dubai’s total power output by 2020, 25% by 2030 and 75% by 2050.

Construction of the 16 sq. km phase 3 expansion of the Dubai Solar Park will occur in three stages. The first 200MW stage is expected to be completed by the first half of 2018 and the next 300MW phase is due the following year, with the final 300MW tranche to come on stream in the first half of 2020. The Mohammed Bin Rashid Al Maktoum Solar Park is expected to displace an estimated 6.5 million tonnes of carbon dioxide per annum on completion in 2030. (AB 18.01)

Back to Table of Contents

4.4 Saudi Arabia to Launch $30 – 50 Billion Renewable Energy Program

Saudi Arabia will soon launch a renewable energy program that is expected to involve investment of between $30 billion and $50 billion by 2023, Saudi Energy Minister Khalid al-Falih said. Falih said Riyadh would soon start the first round of bidding for projects under the program, which would produce 10 gigawatts of power. In addition to that program, Riyadh is in the early stages of feasibility and design studies for its first two commercial nuclear reactors, which will total 2.8 gigawatts, he said. Under an economic reform program launched last year, Saudi Arabia is seeking to use non-oil means to generate much of its additional future energy needs, to avoid running down oil resources which are required to generate foreign exchange through exports. Falih said Saudi Arabia was working on ways to connect its renewable energy projects with Yemen, Jordan and Egypt. Its finances strained by low oil prices, Riyadh wants to conduct many of its future infrastructure projects through partnerships in which private companies from within the kingdom and abroad would bear much of the cost and risk. (AB 16.01)

Back to Table of Contents

4.5 Infinity Solar & Coca-Cola Agree on Establishing EGP 40 Million Solar Plant

Infinity Solar Systems and Coca-Cola have agreed to establish a solar power plant at the latter’s factory in Alexandria. The plant will produce 1.5 MW at a cost of EGP 40m. Infinity Solar Systems said that Coca-Cola aims to develop its factory in Alexandria to operate on solar power and LED lights, which would improve the consumption of the factory to 97%. QNB ALAHLI and Banque Misr have agreed to finance the Green Company Project, which costs EGP 100m. The project will also include recycling wastewater, establishment of a solar plant, use LED lights, and improve electricity consumption. Infinity will complete the establishment of the plant in six months from the date of signing the contracts, and will be linked to the national electricity grid according to the feed-in tariff policies. (DNE 18.01)

Back to Table of Contents

5: ARAB STATE DEVELOPMENTS

5.1 Tourist Spending in Lebanon Ended 2016 on a Decelerated Shortfall

Although total tourist spending in Lebanon during H1/16 plunged by 14% y-o-y, it improved in H2/16. According to Global Blue, tourist spending in 2016 recorded a decelerated plunge of 9% year-on-year thanks to positive developments in the second half of the year. Spending by Emirati visitors in 2016 was 14%, the largest share of total tourist spending, closely followed by Saudi’s 13% when compared to the year ended 2015. Kuwaiti and Egyptian visitors spent 6%, while Syrians, Jordanian and French expenses stood at 5% each. Notably, the spending of tourists from Kuwait, the US and Qatar particularly increased by70%, 15%, and 14% respectively in Q4/16 compared to the same period last year, while expenditures from other countries all remained negative. In 2016, Fashion and Clothing alone grasped a 73% share of total spending, as well watches and jewelry constituted 13%. However, the significant drop recorded in all categories by Q3/16 was buffered in Q4/16 by an 8% increase for spending on Fashion and Clothing, 21% on Souvenirs and Gifts and 19% on Home and Garden, while Watches and Jewelry declined by 43% compared to Q42015. Nationally, 80% of tourist expenditures were concentrated in Beirut. (Blom 12.01)

Back to Table of Contents

5.2 Lebanon Sees 6.67% Reduction in Newly-Registered Cars by December 2016

Data from the Association of Lebanese Car Importers reveals a 6.67% y-o-y decline in the total number of newly-registered commercial and passenger cars by December 2016, to stand at 38,874 cars. The deterioration goes hand in hand with Blom Bank’s PMI of 47, which signals a moderate deterioration in the health of Lebanon’s private sector economy by end-2016. Of total new cars registered, the number of commercial cars grew by 11.12% y-o-y to 2,548, while the number of registered passenger vehicles declined by 7.71% to reach 36,326 cars by December 2016. By December 2016, Japanese model-cars comprised 37% of total passenger cars, the largest market share. Korean and European cars followed, grabbing 34.3% and 21% of the total market share. Compared to the same period last year, only American and Chinese cars recorded sales increases of 14.6% and 3.8% respectively, while Japanese, Korean, and European car sales declined by 11%, 8%, and 7% respectively. By 2016, the new cars market share was dominated by the Kia brand, which constituted a 19.49%share of newly registered passenger cars. Hyundai, Toyota, and Nissan followed with respective shares of 14.61%, 12.83%, and 9.83%. (Blom 16.01)

Back to Table of Contents

5.3 Jordan’s King Reshuffles Cabinet Amid Growing Security & Economic Challenges

Jordan’s King Abdullah reshuffled his cabinet but retained Hani Mulki as prime minister, granting him more scope to tackle the threat of Islamist militants and to press ahead with unpopular IMF-mandated reforms to cut spiraling public debt. The reshuffle, the second since the business-friendly Mulki was appointed last May, comes at a time of sluggish economic growth, poor business sentiment and concerns over Jordan’s political stability following a series of security lapses. Jordan has stepped up its role in the US-led military campaign against Islamic State in the region and risks being drawn into a prolonged conflict with the militants.

In the reshuffle, Finance Minister Omar Malhas kept his job, in which he is overseeing a tough three-year program agreed with the IMF that aims to cut public debt to 77% of national output GDP by 2021 from 94% now. Politicians and economists say the tough fiscal consolidation plan, which includes raising taxes on basic food and fuel items in the coming months and cutting subsidies, will worsen the plight of poorer Jordanians. Removing subsidies has triggered civil unrest in the past. Jordan’s economy is expected to have grown by 2.4% last year, below an IMF target of 2.8%. (Reuters 15.01)

Back to Table of Contents

5.4 Jordan’s Trade Balance Deficit Declines 8.6%

Jordan’s trade balance deficit declined by 8.6% during the January-November period of 2016, according to the Department of Statistics (DoS). The DoS reported that the value of national export during that period amounted to JD9.3 billion, down by 6.9% compared with the same period in 2015. It added that imports for the same period decreased by 7% to reach JD12.44 billion. As for the main exported commodities, the report said the value of national exports of clothes and related accessories increased by 2.6%; pharmaceutical products (16.9%); while fruits and vegetables exports went down by 22% and raw phosphate by 14%, crude potash by 33%, and fertilizers by 33%. (AMMONNEWS 22.01)

Back to Table of Contents

5.5 Study Finds Jordan Second in Arab World for Economic Freedom

Jordan has been ranked second in the Arab world for “economic freedom”, according to a report published by neoliberal think tanks, with the United Arab Emirates (UAE) maintaining first place, which last year it shared with the Kingdom. The annual Economic Freedom in the Arab World Index 2016, published by the Fraser Institute and the Friedrich Naumann Foundation for Freedom (FNF), awarded Jordan a score of 8.1 out of a maximum score of 10, a fall of 0.1 points.

The index ranks 21 of the 22 Arab League nations, with the exception of Somalia, according to five key criteria, namely: size of government, legal and property rights, access to “sound money”, freedom to trade internationally and the regulation of credit, labor and business.

On individual criteria, Jordan stayed in 3rd place for size of government, rising from 8th to 7th for legal structure and property rights, and ranking 2nd in terms of access to sound money. Despite the Kingdom’s score remaining unchanged at 8 for freedom to trade internationally, it fell from 5th to 6th place. For business, labor and credit regulation, Jordan moved up from 7th to 6th place, even with a 0.1 decrease in this area.

The UAE’s overall score of 8.2 remains unchanged from last year, with Bahrain coming third with a rating of 8. Syria is the “least economically free nation in the Arab world”, according to the report, with a score of 5.4. It was followed by Algeria with 5.5 and Libya with 5.6. (AMMONNEWS 16.01)

Back to Table of Contents

5.6 Jordan’s Tourism Revenues Total JOD2.8 Billion

Jordan’s revenues of tourism have come to stabilize in past two years despite regional turmoil, reaching some JOD2.871 billion in 2016, the Minister of Tourism said. The minister told a press conference that the tourism sector is on the “right path”, and will see major developments in 2017. She indicated that the number of overnight tourists picked up by 2.6% in 2016 while the number of overnight tourist groups jumped by 19.9%. She also noted that 70 tourism projects were completed in 2016 at a total value of 12 million. According to Minister Ennab, around 60,000 people work in the tourism sector in addition to 120,000 others in related sectors. (AMMONNEWS 16.01)

Back to Table of Contents

►►Arabian Gulf

5.7 New Zealand Presses Arabian Gulf States to Finalize Stalled Trade Deal

New Zealand is pressing to finalize a stalled free trade deal with the six-nation Gulf Cooperation Council (GCC) that includes two of the Middle East’s largest economies, Saudi Arabia and the United Arab Emirates. NZ Trade Minister McClay visited the UAE and Kuwait recently in an effort to promote the deal with the GCC, his country’s sixth largest trading partner. The GCC comprises Saudi Arabia, the UAE, Kuwait, Qatar, Bahrain and Oman. New Zealand wrapped up talks on the trade pact in 2009 but it has never been ratified.

Two-way trade between New Zealand and the GCC is worth around NZ$3 billion ($2.16 billion) annually. New Zealand’s main exports to the region include dairy, sheep meat and wood, key components in the Pacific nation’s export basket. McClay’s regional visit follows a meeting with his Saudi Arabian counterpart Majid bin Abdullah Al Qasabi last September when both ministers agreed to complete the deal.

Arabian Gulf states are undergoing a period of economic reform following more than two years of low global oil prices that forced a tightening of regional budgets. McClay said the pressure of low oil prices and other changes in the global economy had prompted the Arabian Gulf states to rethink their policies on foreign trade. (Reuters 17.01)

Back to Table of Contents

5.8 Qatar Inflation Rate Falls to 2016 Low in December

Qatar’s inflation rate fell to 1.8% in December, the lowest mark in 2016, according to Qatar’s Statistics Authority. The December consumer price data shows that the inflation rate fell from 2% in November and from 2.7% in December 2015. The figures showed that housing and utility costs, which account for 22% of the consumer basket, rose 1.1% from a year earlier while food and beverage costs, which account for nearly 13%, sank 3.2%. Earlier this month, the International Monetary Fund (IMF) said that Qatar’s real GDP growth is expected to moderate to about 2.7% in 2016 but is projected to reach 3.4% in 2017. In a new research note, the IMF said that during 2017–18, the Gulf state will see further subsidy cuts, increase in public fees, a moderate recovery in global commodity prices and the implementation of a VAT which will drive inflation, which is expected to moderate back to low levels over the medium term. (QSA 14.01)

Back to Table of Contents

5.9 UAE to See Lowest Inflation Rate in Six Years

Inflation in the UAE will stay low throughout 2017 as the impact of subsidy cuts wears off. The headline consumer price index (CPI) will average 1.8% over the course of the year, the joint-lowest annual average for six years, according to the latest paper from BMI Research. The impact of subsidy cuts made throughout 2015 and 2016 is likely to wear off, while the continued strength of the US dollar – to which the UAE dirham is pegged – and subdued economic growth will combine to keep inflation “very low”. House price inflation is set to remain deflationary in line with a broader slowdown in the regional economy and a significant increase in construction activity anticipated in 2017, the report said. It added that inflation is expected to be higher in Dubai than Abu Dhabi, though, because of the lower level of subsidies in Dubai. Housing and food will be the main drivers of inflation in 2017. The report said the UAE Central Bank is set to follow the US Federal Reserve’s fiscal tightening measures as the dirham is pegged to the dollar. (AB 22.01)

Back to Table of Contents

5.10 Dubai Set to Unveil New Plans for Mandatory Health Insurance

The Dubai government will soon be releasing an update on the mandatory health insurance scheme. In December last year, the Dubai Health Authority (DHA) said that the deadline (31 December 2016) had been extended, allowing insurance companies to accept health insurance applications in 2017. More than four million – or 98% – of residents are said to have taken health insurance so far. No further details were shared of the planned announcement, but DHA official advised residents to get their insurance policies at the earliest.

Though DHA had said that those failing to register under the scheme would face fines of $136.24 (AED500) a month, it has exempted residents from paying this fine for now. Under the Dubai Health Insurance Law No. 11 of 2013, which became effective from January 2014, every sponsor is legally obliged to provide an insurance package – priced between $150 (AED550) and $191 (AED700) – so that those with salaries under $1,090 (AED4,000) receive adequate cover. The scheme is now being enforced for families and dependents. (AB 16.01)

Back to Table of Contents

5.11 Saudi Inflation Rate Hits 10 Year Low Amid Slower Growth

Saudi Arabia’s inflation rate fell to its lowest mark in 10 years in December, according to figures released by the country’s Central Department of Statistics. Consumer price data showed that inflation dropped to 1.7% last month, down from 2.3% the previous month. The figures showed that food and beverage prices fell 4.3% from a year earlier, partly because of the strong US dollar, to which the Saudi riyal is pegged. Prices of housing and utilities climbed 6.4% and transport costs jumped 7.5%, the data also showed.

The figures come just days after the International Monetary Fund (IMF) lowered its growth outlook for Saudi Arabia on back of lower oil production and capital spending. In its World Economic Outlook report update, the IMF said gross domestic product (GDP) will expand 0.4% in 2017. It compares with the fund’s October prediction of 2% growth in the October 2016 report. In December, the Saudi government said growth slowed to 1.4% in 2016, below the average of 4% in the past decade. (AB 23.01)

Back to Table of Contents

5.12 Riyadh Could Shelve $13.3 Billion in Projects in 2017

At least $13.3 billion of government projects are at risk of being cancelled in Saudi Arabia this year because of fiscal pressures and changing government priorities, according to a study by consultants Faithful+Gould. The total value of project awards for 2017 is forecast at $27 billion and could rise to $32 billion if the Makkah Metro project, which was originally expected to be awarded in 2016, goes through this year. The figures suggest $20 billion in contracts were awarded last year, compared with $35.5 billion in 2015.

Faithful+Gould’s 2017 forecast assumes a major infrastructure project will be awarded by “exception or royal decree”, according to the firm’s 17 January Construction Intelligence Report on Saudi Arabia. It referred to expenditure under the 2017 state budget that appears to make room for a big new infrastructure scheme. The report said about 20% of Saudi Arabia’s long-term projects pipeline of $820 billion, or $168 billion worth of projects, could be at risk of being cancelled because of the reprioritization program.

The question really remains around the potential to switch the Makkah Metro scheme from central government funding to a type of PPP (public-private partnership) model or bringing other forms of finance to the table, for example main contractor funding. The value of Saudi contract awards has varied widely year-on-year over the past eight years as state spending ebbed and flowed, with a peak in 2011 of $75.9 billion. Following the sharp drop in oil prices, the government and private companies have taken a much more conservative stance.

Under the government’s economic development plans, vanity projects are being separated from essential schemes. The cancellation of 10 football stadiums that Saudi Aramco had been tasked with developing in major cities around the country is an example of this. (Bloomberg 17.01)

Back to Table of Contents

5.13 Saudi Arabia Introduces New Process to Grant Business Visa within 24 Hours

Saudi Arabia has introduced new measures to grant business visa for foreign investors within 24 hours which came into effect on 1 January. The new rule will allow allowing foreign investors to obtain business visas electronically within a day. The Saudi Kingdom is also introducing a new process for visit visas for commercial firms working in Saudi Arabia. The Saudi Arabian General Investment Authority (SAGIA) has been in contact with businesspeople who have previously been issued with visas to discuss possible investment in Saudi Arabia. SAGIA is also looking to improve reduce its process of requests from foreign business delegations to two days, instead of the current 30-day wait period. (AN 11.01)

Back to Table of Contents

5.14 Saudi Arabia Tells Expats to Register Fingerprints or Face Problems

Saudi Arabia’s Passports Department (Jawazat) has told expatriates to register their fingerprints and those of any dependents aged above six years in order not to lose access to electronic services. Jawazat said it will freeze residents’ computer records and thus their access to electronic services if they do not register. Fingerprinting centers have been set up in the Kingdom and the process will be smooth and hassle free, Jawazat claimed. Earlier, Jawazat denied it is about to launch the second part of a three phase crackdown on illegals in the country. According to the reports, illegal expatriates would be given three months to leave the country or face being imprisoned, blacklisted and deported with no chance of being allowed back in. The organization has, however, reminded people in Saudi Arabia on visit visas to leave before the visa expires, or face legal action. The punishments for overstayers include imprisonment an/or fines, plus deportation. Legal residents and citizens were reminded that they are also responsible for the behavior of visitors on their sponsorship and could face punishment for not reporting overstayers. (AB 18.01)

Back to Table of Contents

►►North Africa

5.15 Egypt Sees Gas Self-Sufficiency By 2018

Egyptian Minister of Petroleum Tarek el-Molla expects Egypt to supply all of its own natural gas needs within two years. This further reduces the chances of exporting gas from Israel’s Tamar reservoir to Egypt, following two approvals granted by Egypt for liquefying Egyptian gas for export at the country’s liquefaction facilities. As of now, Egypt is producing 47 BCM of natural gas a year.

According to the report, in addition to its own production, Egypt is currently spending $250 million a month on imports of liquefied gas. According to el-Molla, these imports are enough to supply all the Egyptian economy’s needs, with an emphasis on industry and electricity production. El-Molla’s optimism about Egypt’s own independent supply is based, among other things, on the beginning of gas production from the huge Zohr reservoir, with production slated to reach an annual 11 BCM by the end of this year. A further supply will be obtained from increased production at the existing fields, among other things 5.2 BCM in increased production from the northern Alexandria field, starting in mid-2017. The Noras gas field, which currently produces 9 BCM annually, is also expected to increase production. In addition, Egypt is taking measures to step up exploration at potential gas fields. Several international companies were recently awarded exploration licenses, and oil and gas exploration agreements totaling $220 million were signed with BP and French company Total. (Globes 16.01)

Back to Table of Contents

5.16 Bloomberg Again Names Morocco Among 50 Most Innovative Economies in the World

Morocco was again named among the 50 most innovative economies in the world and one of just two such economies in Africa by the 2017 Bloomberg Innovation Index said on 17 January. Morocco’s highest rankings were in the areas of R&D intensity, manufacturing value-added, and high-tech density, reflecting the North African country’s success in implementing its longtime strategy to develop its auto and aerospace manufacturing sectors, as well as its leadership in renewable energy development.

According to Morocco’s Minister of Industry, Trade, Investment and the Digital Economy Moulay Hafid Elalamy, Morocco’s aeronautics industry has grown by a factor of six in just a decade, and today boasts 121 companies. In September 2016, the Kingdom and Seattle-based aerospace company Boeing announced plans to establish a Boeing industrial ecosystem in Morocco that will bring 120 Boeing suppliers to the country, create 8,200 skilled jobs, and generate $1 billion in exports. Meanwhile, Morocco is now home to the world’s largest solar power plant. Indeed the 2016 Climate Performance Index ranked Morocco among the top ten countries making the most progress in addressing climate change and number one among “newly industrialized countries,” citing the country’s commitment to generating 42% of its energy needs from renewable sources by 2020. This number was since raised to 52% by 2030. Reflecting Morocco’s commitment to R&D, King Mohammed VI recently inaugurated the Mohammed VI Polytechnic University, a hub for research, training and innovation in Benguerir, Morocco. (MACP 19.01)

Back to Table of Contents

6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Central Bank of Cyprus Sees Growth Rate at 2.8% in 2016 & 2017

The Central Bank of Cyprus said that it expects the Cypriot economy to expand at an annual rate of around 3% over 2017 until 2019 and upgraded its 2016 projection marginally upwards to 2.8%, as inflation is expected to pick up. The Cypriot economy is forecast to grow 2.8% also next year before growth picks up to 3.1% in 2018, the bank supervisor said. Growth in 2019 is forecast to slow down to 3%.

Private consumption which rose 2.5% last year, is expected to continue to increase 2.1% every year over the next three-year period reflecting an increase in disposable income, the central bank said. Fixed capital investment is forecast to increase 1.3% next year, after rising 19% this year, and 7.4% and 6.5% in 2018 and 2018 respectively and will include the expansion of the fuel storage terminal in the Vassilikos area, the Larnaca and Agia Napa marinas, as well as other projects financed by the European Investment Bank and the European Bank of Reconstruction and Development. Public consumption is forecast to rise 1.6% next year after shrining 0.5% in 2016, before it rises 1.2% in 2018 and 2% in 2019, the central bank said, as the government will start paying compensation to public sector workers for the purchasing power lost to inflation. (Cyprus Mail 22.01)

Back to Table of Contents

7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israelis Express Greater Trust in Legal System

The Israeli public’s trust in the Supreme Court, the Attorney General and the State Prosecutor’s office rose in 2016, according to the 15th annual public sector performance index published by Haifa University and Ben Gurion University of the Negev (the index began in 2001, but was omitted in 2015). According to the index, public trust was the highest it has been since the index was first published in 2001, following a prolonged downtrend in public trust in the legal system in recent years.

The data, which were gathered until September 2016, show that public trust in the Attorney General and the State Prosecutor’s Office is at the highest level since the index began. Trust in judges in general, especially military judges, is high. The index examines public trust in a large number of institutions and public servants and rates them on a scale of 1 to 5, with ratings of 1 and 2 corresponding to great distrust and distrust, respectively, 3 corresponding to medium trust, and ratings of 4 and 5 corresponding to trust and great trust, respectively. The index, currently the most comprehensive in Israel, is based on conservative and reliable methodology providing consistent reporting using tools for a comparative assessment of the public’s views and concepts towards a wide range of the services it receives. This is the only index currently capable of providing a comprehensive long-term perspective on the connection between the public, public administration, and government in Israel. A representative sample of the entire adult population in Israel numbering 453 people participated in the survey. The data were gathered in May-September 2016.

Public trust in the legal system reached a peak of 3.25, the highest level since the index was started in 2001, compared with 3.07 in 2014. This puts the legal system in fifth place in Israel among the 22 public institutions examined. The level of trust in the judges themselves is high to very high. The level of trust is in military judges 3.47 and 3.38 in non-military judges. (Globes 23.01)

Back to Table of Contents

*REGIONAL:

7.2 Final Court Ruling Declares Egyptian Sovereignty over Tiran & Sanafir Islands

Egypt’s Supreme Administrative Court (SAC) issued a final ruling on 23 January confirming Egypt’s sovereignty over the Red Sea islands of Tiran and Sanafir, stating that the Egyptian government has not provided adequate evidence supporting Saudi Arabia’s claim to the land. According to the ruling, therefore, the executive branch of Egypt’s government does not have the administrative authority to cede the territory to Saudi Arabia.

In April, a lawsuit was filed in the Court of Administrative Justice (CAJ) to challenge the controversial agreement signed by Egyptian Prime Minister Sherif Ismail and Saudi Arabian Deputy Crown Prince and Defense Minister Mohamed bin Salman during King Salman bin Abdel Aziz’s April 2016 visit to Cairo. The CAJ ruled in June that Prime Minister Sherif Ismail violated the Constitution by signing the agreement and nullified his signature — the court could not rule on the legitimacy of the agreement itself, however, as international agreements fall outside of its jurisdiction. The government challenged this ruling on several fronts: appealing the decision, filing a request for injunction to stay its implementation, preemptively submitting the deal to Parliament and attempting to circumvent and challenge judicial jurisdiction.

While Monday’s ruling was the final verdict in the appellate process within the State Council regarding the agreement, the state filed a separate appeal in August before the Supreme Constitutional Court (SCC) claiming the State Council has no jurisdiction over international agreements. This appeal remains pending, having been adjourned to 12 February. (Mada Masr 16.01)

Back to Table of Contents

8: ISRAEL LIFE SCIENCE NEWS

8.1 DarioHealth Raises $3 Million to Expand Markets for Smart Blood Glucose Monitoring System

DarioHealth announced the execution of definitive agreements for an aggregate raise of $5.1 million. The private placement transaction was organized by DarioHealth. DarioHealth closed on $3.1 million of the transaction on 9 January 2017, with the closing of the remaining $2 million to occur upon receipt of stockholders approval pursuant to NASDAQ rules. The offerings are expected to result in gross proceeds of approximately $5.1 million, assuming stockholder approval for the $2 million portion of the transactions is obtained.

Crowdfunding equity platform OurCrowd Qure led the investment round. The company, which has also done business as LabStyle, said it will use the funding to expand the company’s existing markets as well as move into new geographic areas. Dario launched in the US in March 2016 after receiving FDA clearance, and launched in Canada in 2015. They’ve had a CE Mark for the system since 2013. The pocket-sized Dario device consists of a glucose meter, a disposable test strip cartridge, and lancing device. The companion app, available on iOS and Android devices, includes a nutrition guide, logbook, and monitoring system. The app allows users to view all their information as well as insights and patterns in their data.

Jerusalem’s 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. Dario’s smart diabetes management solution is a platform for diabetes management that combines the Dario Blood Glucose Monitoring System 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. Having recently launched in the largest market in the world for glucose monitoring, U.S. sales are expected to have a significant impact on revenues and gross margins. (DarioHealth 12.01)

Back to Table of Contents

8.2 Monsanto & NRGene Global Licensing Agreement for Big Data Genomic Analysis Technology

Monsanto Company and NRGene have reached a non-exclusive, multi-year global licensing agreement on NRGene’s genome-analysis technology to enhance Monsanto’s ability to predict, compare and select the best genetic makeup from its vast data sets of genetic, genomic and trait information. NRGene’s platform, GenoMAGIC, was developed by a unique mix of highly experienced algorithm designers, software engineers, plant breeders and plant geneticists and is used by seed companies and major academic and research institutions around the world.

Both companies noted their dedication to developing technologies that support farmers as they work to grow better harvests, protect their crops and deliver more to society in the face of mounting environmental challenges. Monsanto’s research and development (R&D) pipeline is focused on providing solutions to those challenges through plant breeding, plant biotechnology, crop protection, ag biologicals, and data science.

With nearly half of Monsanto’s annual R&D investment focused on plant breeding, the use of leading genome analysis technologies like GenoMAGIC – along with the industry’s largest testing capability and scale and premier discovery technologies – are expected to increase current genetic gain. Monsanto may expand its relationship with NRGene into a longer-term commitment following an in-depth evaluation of the technology. The GenoMAGIC platform extends Monsanto’s capabilities for genome selection, trait discovery, and genome enhancement.

Ness Ziona’s NRGene is a genomic big data company developing cutting-edge software and algorithms to reveal the complexity and diversity of crop plants, animals and aquatic organisms for the most advanced, sophisticated breeding. NRGene tools have already been employed by some of the world’s leading seed companies, as well as the most influential teams in academia. (Monsanto 12.01)

Back to Table of Contents

8.3 Illumina & NRGene Accelerate Development of New Molecular Breeding Tools for Cattle

San Diego’s Illumina and NRGene announced a collaboration to develop new molecular breeding tools for cattle. As a first step, the companies also announced the completion of a high quality genome assembly of the Nellore cattle in conjunction with researchers at the Universidade Estadual Paulista in Brazil. The companies will work together to sequence and assemble additional cattle individuals from different breeds to accelerate knowledge of genetic variation across all cattle breeds. This information will aid in the development of new commercial tools that can be used for genomic selection and other genomic technologies in cattle, helping to accelerate breeding programs to enhance global food (meat and milk) production efforts.

Nellore (bos indicus) is the most dominant zebu beef cattle breed for food production in the tropical regions of the world. The sequencing and assembly of its genome was completed using Illumina next-generation sequence data and NRGene’s cloud-based DeNovoMAGIC 3.0 assembly software package. As more cattle genomes are generated, NRGene’s PanMAGIC will be used to compare the complete genome sequences of multiple individual samples to capture the broad genomic diversity. This information will be used to design more efficient genotyping tools to support cattle breeding programs.

The combination of NRGene’s and Illumina’s technologies has already been used for other agriculture projects to decode some of the most complex genomes including the hexaploid bread wheat, tetraploid heterozygote mango, octoploid heterozygote strawberry, along with dozens of new maize, soybean, cotton, and canola genomes.

Ness Ziona’s NRGene is a genomic big data company developing cutting-edge software and algorithms to reveal the complexity and diversity of crop plants, animals and aquatic organisms for supporting the most advanced and sophisticated breeding programs. NRGene tools have already been employed by some of the leading seed companies worldwide as well as the most influential research teams in academia. (Illumina 12.01)

Back to Table of Contents

8.4 Kitov Enters Immuno-Oncology Field Through Acquisition of TyrNovo

Kitov Pharmaceuticals Holdings announced the expansion of its pipeline through the acquisition of a majority stake in TyrNovo, a privately held developer of novel small molecules in the immuno-oncology therapeutic field. The expansion into developing immuno-oncology drugs comes as Kitov plans to file its New Drug Application (NDA) with the U.S. FDA for its flagship combination drug, KIT-302, which is intended to treat osteoarthritis pain and hypertension simultaneously, in Q1/17, with commercial launch anticipated for the first half of 2018. Kitov plans to harness its development and regulatory capabilities in proceeding towards submitting an investigational new drug (IND) application with the U.S. FDA and initiate clinical trials for its newly acquired drug, NT219.

Kitov will initially acquire an approximately 56% equity stake in TyrNovo from its majority shareholder, for consideration of $2 million in cash and $1.8 million equivalent ordinary shares of Kitov based on the closing price of Kitov’s shares on the TASE on January 11, 2017. Following the closing of this initial acquisition, which is expected to take place on January 13, 2017, Kitov anticipates that it may acquire additional equity stakes in TyrNovo from all or part of TyrNovo’s additional minority shareholders for consideration consisting of ordinary shares of Kitov in such amounts as to be agreed with the shareholders.

Herzliya’s TyrNovo is developing NT219, a small molecule originally developed by Dr. Hadas Reuveni and Prof. Alexander Levitzki at the Hebrew University, and exclusively licensed from Yissum, the Hebrew University Research Development Company. TyrNovo demonstrated the potential of NT219 to overcome resistance to multiple anti-cancer drugs, by using the Patient-Derived Xenograft (PDX) models.

Tel Aviv’s Kitov Pharmaceuticals is an innovative biopharmaceutical drug development company. Leveraging deep regulatory and clinical-trial expertise, Kitov’s veteran team of healthcare professionals maintains a proven track record in streamlined end-to-end drug development and approval. Kitov’s flagship combination drug, KIT-302, intended to treat osteoarthritis pain and hypertension simultaneously, achieved the primary efficacy endpoint for its Phase III clinical trial and its New Drug Application with the U.S. FDA is currently being prepared for submission. (Kitov Pharmaceuticals 12.01)

Back to Table of Contents

8.5 Zebra Medical Vision’s New Algorithm Detects Compression & Other Vertebral Fractures

Zebra Medical Vision announced the latest algorithm to be included in its growing Deep Learning Imaging Analytics platform. The algorithm, capable of detecting vertebral fractures, is the latest addition to a line of automated tools that were announced in the past year, among them algorithms that automatically detect low bone mineral density, breast cancer, fatty liver, coronary artery calcium, emphysema and more.

The Zebra VCF algorithm automatically identifies and localizes compression fractures. The algorithm uses deep learning to differentiate between compression fractures and more ubiquitous degenerative endplate changes and osteophytes. This knowledge assists healthcare providers in accurately identifying people at risk and placing them under supervision or fracture prevention programs to reduce the risks of subsequent osteoporotic fractures. The new algorithm, once released commercially, will be offered as part of Zebra’s Imaging Analytics engine for care providers, as well as on its Profound platform, which allows users to upload their imaging scans and receive automated insights regarding their imaging data.

Kibbutz Shefayim’s Zebra Medical Vision uses machine and deep learning to create and provide next generation products and services to the healthcare industry. Its Imaging Analytics Platform allows healthcare institutions to identify patients at risk of disease, and offer improved, preventative treatment pathways to improve patient care. (Zebra Medical Vision 17.01)

Back to Table of Contents

8.6 RondinX Accelerates Drug Development with a Breakthrough Computational Platform

RondinX unveiled a novel approach to discovering how changes in the human microbiome affect health and disease. RondinX’ cloud-based technology platform adds a new dimension to the microbiome drug development process by profiling and predicting microbial growth dynamics from single metagenomic samples. The scientific foundation was established at the Weizmann Institute of Science and exclusively licensed to RondinX from its commercial arm YEDA Research and Development Company. RondinX is also closely collaborating with Weizmann research groups. The company was seed financed by a group of early-stage investors including Elevator Fund and 8VC and has established a leadership team at its new premises in Tel Aviv.

The current generation of microbiome drug discovery platforms provide merely a snapshot of the microbiota, a breakdown of the types of organisms present and their relative frequency in a patient’s gut. This static snapshot falls short of providing the industry with a comprehensive tool for understanding the relationship between human microbiomes and disease. Furthermore, RondinX platform has proven to be hypersensitive to various types of microbiome perturbations and is able to prioritize and streamline potential therapeutic strategies. By using microbiome analytics including growth dynamics, the link between certain members of the microbiome community and specific diseases states has been demonstrated.

Founded in 2016 by leading microbiome experts, Ramat HaSharon’s RondinX has built a cutting-edge microbiome technology platform set to unlock the potential of microbiome therapeutics. RondinX technology, including its PTR (Peak-to-Trough) family of algorithms, exclusively licensed from YEDA (the commercial arm of the Weizmann Institute of Science), is a proprietary, cloud-based, computational pipeline, integrating raw metagenomics, other omics and patient metadata to derive both static and dynamic strain level insights into the bacterial ecosystem. (RondinX 17.01)

Back to Table of Contents

8.7 Medasense Launches New Pain Monitoring Device Following CE Approval

Medasense Biometrics has received CE mark approval for its novel Pain Monitoring Device, PMD200. This new technology is now available to help physicians objectively assess a patient’s pain in critical care situations, where patients are unable to communicate. This allows physicians to ensure pain is properly managed. To address these challenges Medasense has developed PMD200, a pain monitoring device based on the patented NOL technology that quantifies patients’ physiological response to pain. The easy-to-use system consists of a non-invasive finger probe which acquires physiological signals from four different sensors and calculates dozens of pain-related physiological parameters. This data is then analyzed by artificial intelligence algorithms and converted into a single pain index, the Nociception Level (NOL) index, where 0 = no pain and 100 = extreme pain.

The company is also conducting research in other forms of pain, for example chronic pain including long-term back pain, with the aim of broadening the situations where the NOL Index could help with pain management.

Ramat Gan’s Medasense develops innovative medical devices and applications in the field of objective pain monitoring. The company is led by experienced professionals in the fields of signal processing and computer engineering, together with an extensive team of medical industry veterans and prominent pain specialists. Following extensive multidisciplinary research, the company has developed a novel index that quantifies the physiological response to pain. The breakthrough NOL (Nociception level) index technology paves the way for precision medicine, allowing for personalized and optimized pain care. (Medasense 18.01)

Back to Table of Contents

8.8 Vention Medical Acquires Lithotech Medical

South Plainfield, NJ’s Vention Medical announced its recent acquisition of Lithotech Medical, an industry leader in complex nitinol wire-based technologies based in Israel. The acquisition will expand Vention’s broad portfolio of advanced components and technologies for the development and manufacturing of medical devices for the interventional market. In addition to supplying discrete nitinol components, Vention will now have the capability to seamlessly integrate nitinol into customers’ design and development projects. With its ability to scale, Vention will be able to leverage nitinol-based technologies for the manufacturing and assembly of devices from low-volume prototypes to high-volume production.

Founded in 2001, Katzrin’s Lithotech Medical employs a multidisciplinary team of technical experts including physicists, material and mechanical engineers, and regulatory and quality control experts. The team has designed and developed more than 100 products for customers worldwide, with dozens of products currently on the market. (Vention Medical 24.01)

Back to Table of Contents

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 BIRD Foundation Issues New Call for Proposals to Foster Advanced Technologies for First Responders

The Israel-U.S. Binational Industrial Research and Development (BIRD) Foundation announced a new Call for Proposals for ‘NextGen First Responder Technologies’ to promote and fund U.S.-Israel joint development in advanced technologies for First Responders. Projects can receive a conditional grant of up to 50% of their joint R&D budget, maximum $1m per project.

The program was established by the U.S. Department of Homeland Security (DHS) Science and Technology Directorate (S&T) and the Israeli Ministry of Public Security (MOPS). Projects selected should focus on technologies relating to First Responders (Law Enforcement, Firefighters and Emergency Medical Services) and demonstrate significant commercial potential. Projects are defined as two companies or a company and a university/research institution (one from the U.S. and one from Israel) that are engaged in R&D cooperation and commercialization. Projects should demonstrate innovation in areas such as: Command, Control and Coordination, Communications, Data Analysis, Explosive & Hazards Detection, Protective Clothing, Sensors, Simulation & Training, Situational Awareness, Wearable Technologies and others.

Submission details and a full list of capability gaps are available on the Israel-U.S. Binational Industrial Research and Development (BIRD) Foundation website. The deadline for executive summaries is February 15, 2017 and final proposals are due by April 5, 2017. Decisions will take place in June 2017. (BIRD Foundation 17.01)

Back to Table of Contents

9.2 Kaymera Launches Fully-Secured Version of Google Pixel Phone

Kaymera Technologies announced the launch of the Kaymera Secured Pixel, a unique fully-hardened and secured version of Google’s flagship smartphone. Kaymera’s secured version of the Pixel phone uses the original Google device’s purpose-built hardware and retains all of the Pixel’s features and ergonomics, including the fingerprint scanner. It enables users to continue using all of their preferred Android applications, while ensuring that the phone, data stored on it and all communications (voice, data and messaging) are fully secured. The device is immune to all types of external exploit attempts. The secured Pixel phones are also fully managed using Kaymera’s management console. Kaymera devices are centrally managed via the company’s management dashboard, which shows the real-time risk status of each device, and gives users the maximum functionality, productivity, and ease of use according to their current environment.

Tel Aviv’s Kaymera offers government agencies, enterprises and SMEs worldwide the most powerful and versatile Mobile Threat Defense platform. With a contextual, self-learning risk analytics engine and multi-layer mitigation capabilities at its core, the platform can detect and prevent any mobile threat – in real time. (Kaymera Technologies 11.01)

Back to Table of Contents

9.3 Mantaro & Beeper to Develop Advanced Technologies for Public Safety

Mantaro and Beeper Group have entered into a definitive letter of intent to enter into partnership for the purpose of further advancing their products, through the integration of their proprietary technologies. This partnership will better serve their Public Safety, First Responder and Commercial customers. Mantaro Networks, a Germantown Maryland based corporation, has been designing and manufacturing telepresence and robotic systems since 2010. Mantaro’s robotic products are sold to and serve commercial business, healthcare, construction and law enforcement customers. Beeper specializes in the development and manufacture of advanced wireless Bonding technology modems on boards and related components for the wireless broadband communication market. The company is focusing on development of data, voice and video link aggregators, and bonding which enable operators and service providers to deliver high-speed, mobile and “ad-hoc,” cost effective internet and telephony applications to corporate telecommuters, small businesses, home offices and residential users. The two companies have made a strategic decision to leverage their individual technologies, in order to enable wireless operators, NOC’s and broadcasters the ability to provide high speed, integrated video, voice and data on multiple platforms and means, to Police, FR, HLS, Military, MOD and other related “mission critical” end users. The companies will immediately commence with their work together, and expect to be introducing new products and solutions with customers by Q2/17.

Ramat Gan’s Beeper Communications is a leading provider of emergency communication and critical messaging services for Israel’s major security, military and homeland defense organizations. Established in 1988, Beeper develops and operates the following cost effective, end-to-end solutions: mass alert notification system and critical messaging solutions; SD-WAN and 3G/4G multi-channel bonder; earthquake early warning; M2M metering control and energy management Scada system. (Mantaro 12.01)

Back to Table of Contents

9.4 Elbit Systems Wins $17 Million Contract to Supply BrightNite Systems to a NATO Air Force

Elbit Systems was awarded a contract to supply ground breaking, multi spectral BrightNite systems to an air force in a NATO country. The contract, in an amount of approximately $17 million, will be performed over a thirty-month period. Low-flying helicopters are especially vulnerable to threats such as difficult terrain, enemy fire and obstacles in the flight path. Sorties must be performed both day and night and often carried out in DVE conditions, adding to the already heavy workload. Prior to BrightNite, flight crews have had to rely on night vision goggles (which have limited capabilities) to accomplish their mission. Factors like complete darkness, poor weather conditions, brownouts, whiteouts and sandstorms limit the pilots’ Field of View (FOV). Lightweight, compact and cost-effective, BrightNite delivers a crystal clear visual of the landscape, flight data and especially the mission data, directly to both eyes of the pilot, enabling intuitive flight in a head-up, eyes-out orientation in pitch dark and other DVE and low visibility landing conditions.

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 also focuses on the upgrading of existing platforms, developing new technologies for defense, homeland security and commercial applications and providing a range of support services, including training and simulation systems. (Elbit Systems 17.01)

Back to Table of Contents

9.5 GuardiCore Named Finalist in Info Security Product Guide’s 2017 Global Excellence Awards

GuardiCore announced that Info Security Products Guide, the industry’s leading information security research and advisory guide, has named the company as a Security Startup of the Year finalist and Product Excellence of the Year finalist in the Deception category for the 13th Annual 2017 Info Security Products Guide Global Excellence Awards. These prestigious global awards recognize security and IT vendors with advanced, ground-breaking products and solutions that are helping set the bar higher for others in all areas of security and technologies.

GuardiCore is an innovator in internal data center security focused on delivering more accurate and effective ways to stop advanced threats through real-time breach detection and response. GuardiCore’s flagship product, the GuardiCore Centra Security Platform, is the only security product on the market today that provides a single, scalable platform that covers five critical capabilities for effective data center security and protection: flow visualization, micro-segmentation, breach detection, automated analysis and response. GuardiCore provides customers with un-paralleled visibility into their data center traffic, the ability to translate this visibility into fine-grained micro-segmentation security policies, and couples it with real-time breach detection and response capabilities based on innovative and dynamic deception methods and technology. All of this is accomplished without impacting server performance or traffic. The net result for GuardiCore customers is they are able to gain detailed visibility into their data center traffic, make well-informed policy decisions for micro-segmentation, and reduce the “dwell time” for active breaches to stop them before they result in data theft or other damage.

Tel Aviv’s GuardiCore is an innovator in internal data center security focused on delivering more accurate and effective ways to stop advanced threats through real-time breach detection and response. Developed by the top cyber security experts in their field, GuardiCore is changing the way organizations are fighting cyber attacks in their data centers. (GuardiCore 16.01)

Back to Table of Contents

9.6 Inomize is Helping the Vision-Impaired to See

Inomize, a leading provider of turnkey ASIC design solutions, announced it was selected by Herzliya’s Nano-Retina for the design of their bionic retina ASICs. Inomize was selected by Nano-Retina to develop their ASICs, designed for revolutionary sight restoration product. Inomize was responsible for the analog design, verification, and back-end work. The Nano Retina solution is built from 2 ASIC components consist of mixed signal electronic circuitry, CMOS photo-sensors and IR recipients. The ASIC, implementing Nano-Retina 3DNi Technology was successfully delivered. Nano Retina’s product incorporates various miniature components in one tiny implant, approximating the size of a child’s fingernail bed.

Inomize is a leading provider of turnkey ASIC and SoC designs and specializes in managing complex ASIC projects. Inomize’ services includes system definition, architecture, algorithm, digital, verification, analog mixed signal, RF, synthesis backend, manufacturing and silicon validation. Inomize’ comprehensive expertise in semiconductors covers advanced CPU subsystems, a variety of modems (wireless and wire-line), video and imaging.

Netanya’s Inomize is a professional Research & Development firm specializing in the design and delivery of hardware solutions. Inomize offers a wide range of services tailored to meet your project needs and product constraints in terms of cost, performance and power consumption. Inomize successfully delivers ambitious projects on time and on budget. Inomize gets the maximum out of the available technology and, when necessary, pushes it to the limit using the latest advancements to meet the customer’s project needs. With years of experience and a proactive project management approach, Inomize reduces development time and minimize risks of complex hardware design projects. (Inomize 17.01)

Back to Table of Contents

9.7 Transmit Security Makes Passwords Obsolete Using Mobile Device as Primary Authenticator

Transmit Security announced a $40m self-funded round of financing and unveiled a platform that will disrupt the $10b authentication software market. The technology enables organizations to displace passwords and implement any form of identity verification, on any device, across all their customer/partner facing channels. The Transmit Security Platform (SP) uses mobile devices as the primary delivery mechanism to add any form of primary or secondary identity verification (facial/selfie, eye, touch ID and fingerprint, voice biometrics, SMS, etc.) to any application (web, mobile, call center, point of sale, ATMs, etc.). Once deployed, an enterprise can make changes to all their authentication methods and identity risk flows without any code changes to their applications.

To eliminate the need to embed authenticators into each application, Transmit SP uses a simple interface to offload all authentication and provisioning tasks. It provides a wide set of built-in authentication methods that enable organizations to mix-and-match any combination of facial, eye, voice, fingerprint recognition, one time passwords (OTP), push notifications, pattern drawing, Device ID, and other 3rd party or internally developed authenticators. Once an application is connected to Transmit SP, any of the authenticators and any authentication process can be changed, added or removed without any software development. Transmit SP also supports any existing third-party authentication or anti-fraud products in use, and can orchestrate real-time responses based on customer configured policies.

Tel Aviv’s Transmit Security allows organizations to implement frictionless omni-channel (web, mobile, phone, ATM, branch) authentication without modifying their applications. The company’s technology supports any authentication technology, from any vendor, in one modular, micro-services platform that slashes time-to-market and cost-to-market for new identity related projects. (Transmit Security 11.01)

Back to Table of Contents

10: ISRAEL ECONOMIC STATISTICS

10.1 For Third Consecutive Year Israel Registers Negative Inflation

Israel’s Consumer Price Index (CPI) was unchanged in December, as expected, the Central Bureau of Statistics reports, after falling 0.4% in November. This means that the CPI fell 0.2% in 2016. This was the third consecutive year that Israel had negative inflation, with prices falling 0.25% in 2014 and 1% in 2015. Outstanding price falls in December were: fresh fruit (3.6%) and culture and entertainment (1.8%). Outstanding price rises last month were: clothing and footwear (6.5%), fresh vegetables (4.6%). However, home prices rose 0.4% in October, November and have risen 8.1% over the past 12 months. (CBS 15.01)

Back to Table of Contents

10.2 Israel’s Third Quarter Growth Revised Upwards

The Central Bureau of Statistics has upwardly revised Israel’s growth figures for Q3/16. The new figures for the third revision show 3.6% annualized growth, compared with the previous figure of 3.4% and the original figure of 3.2%. Private spending was up by an annualized 3.4%. Exports of goods and services rose by only 0.3%, showing that a problem exists, because this item includes both high-tech exports and exports of physical goods; since high-tech exports performed reasonably, exports of physical goods were clearly very low.

Investment in fixed assets jumped by an annualized 15.3% in the third quarter. This figure reflects mainly real estate purchases, due to the fact that according to various analyses by senior economists in Israel, investments in machinery and manufacturing equipment has been either very low or almost non-existent in recent years.

Business product rose by an annualized 4.2% in the third quarter, following rises of 5.4% in the second quarter and 2.5% in the first quarter. The Central Bureau of Statistics notes that the development of business product in the third quarter reflects increases in output in industry, mining and quarrying (an annualized 9.7%), construction (7.5%), transportation, storage and mail (8.3%), information and communications (5.5%), and financial services, insurance, real estate, and miscellaneous (9.5%). Output in commerce and hosting services was down by an annualized 2.8%. (CBS 16.01)

Back to Table of Contents

10.3 Israel’s Debt-to-GDP Ratio Falls in 2016

On 22 January, Israel’s Ministry of Finance Accountant General Michal Abadi-Boiangiu published an initial estimate of the ratio of public and government debt to GDP in 2016. According to the estimate, the ratio, which includes debts of the local authorities, is projected to drop substantially to 62.1%. Excluding the local authorities’ debts, the ratio is projected to fall from 62.4% in the preceding year to 60.5%, a 1.9% decrease. The upward revision of growth figures by the Central Bureau of Statistics pushed the debt ratio lower than expected. The ratio of debt to GDP is a key indicator of Israel’s financial soundness, and is important in determining its credit rating. The final estimate of the debt-to-GDP ratio will be published in a few months in the framework of the annual report by the Financing and Credit section in the Ministry of Finance Debt Accountant General Department.

A comparative study by the Accountant General Department showed that Israel’s success in lowering its debt ratio was exceptional on an international scale. Israel’s debt-to-GDP ratio fell by 1.9% in 2015-2016, more than in any other Western country other than Germany and Slovenia. Since 2007, Israel has managed to cut its debt-to-GDP ratio by 11%, more than in any other developed country in the world, except for Norway.

The Ministry of Finance states that the main factors contributing to the reduction in the debt ratio are the nominal growth rate, the low budget deficit, and market factors, such as the negative increase in the Consumer Price Index, the strengthening of the shekel against the dollar and euro, and the ongoing fall in the interest rate on the government debt, a result of effective debt management by the Accountant General and her department. (Various 22.01)

Back to Table of Contents

10.4 Israel’s High-Tech Exports Drop by 7% in 2016

On 16 January, the Central Bureau of Statistics announced that Israel’s hi-tech exports fell by 7.1% in 2016 from 2015. The figures show that exports by mixed high-tech industries dropped by 9.7% and exports by conventional technology industries by 0.5%. In contrast, exports by mixed conventional technology industries were up 13.9%.

One of the reasons that high-tech exports fell was that the Intel fab in Kiryat Gat closed down for work on its expansion, mainly in the first half of the year. Computer and electronic and optical devices exports, which account for 10.1% of total high-tech exports, sank by NIS 5 billion in 2016, out of a total NIS 6 billion decline in high-tech exports. Hi-tech accounted for 49% of all Israel’s NIS 200 billion exports of goods in 2016. It should be noted that most of Israel’s high-tech exporting power in recent years has consisted of exports of services (figures for which have not yet been published), including software products, rather than exports of hardware-based goods.

The trade figures show a NIS 50 billion trade deficit in 2016, the largest since 2012. While exports of goods were down 4.6%, imports of goods, excluding ships, aircraft, diamonds and energy products, climbed by 8.7%. Fuel imports plunged 22%, due among other things to plunging oil prices and increased use of natural gas, instead of imported coal. The Central Bureau of Statistics noted that the development of trade in goods in 2016 was affected by changes in the shekel rate against the currencies in which import and export transactions were conducted. The average shekel exchange rate fell 1.2% against the US dollar, 1.5% against the euro and 14.1% against the British pound, while rising 9.2% against the Japanese yen. (CBS 12.01)

Back to Table of Contents

11: IN DEPTH

11.1 GCC: Major Challenges Remain to Gulf’s Move Away From Oil

Overall sovereign creditworthiness in the Arabian Gulf has continued to deteriorate, weighed by a weakening performance in Saudi Arabia, the region’s largest economy, according to Standard & Poor’s. A new research note that covers a total of 13 sovereigns in the region including Abu Dhabi, Bahrain, Kuwait, Oman, Qatar, Ras Al Khaimah, Saudi Arabia and Sharjah, said the average rating has suffered due to rating downgrade on Saudi Arabia. The ratings agency added that “significant challenges” remain to plans by GCC countries to diversify government revenues away from oil.

“We rate eight of the 13 MENA sovereigns in the ‘BBB’ rating category or above,” said S&P Global Ratings sovereign credit analyst Trevor Cullinan. “The average MENA sovereign rating is closer to ‘BBB’ than ‘BBB-‘, but has been trending downward. When weighted by GDP, the average moves closer to ‘BBB+’.” This average, weighted by nominal GDP, has fallen more sharply than the unweighted average over the past 12 months mainly because the rating on the region’s largest economy, Saudi Arabia has been lowered as the Gulf kingdom battles to protect its fiscal position against lower oil prices, he added.

Since July, S&P has also lowered its rating on Bahrain to ‘BB-‘ from ‘BB’ while revising outlooks on Egypt and Lebanon to stable from negative, and outlooks on Oman and Sharjah to negative from stable.

Available data for 2016 shows a weakening trend in GCC economic activity, reflecting the impact of low oil prices and the resulting fiscal consolidation and reduced banking sector liquidity. Cullinan said: “We expect average GCC GDP growth to slow to about 2% in 2016, compared with closer to 4% in 2015 and to remain around these relatively weak growth rates in 2017. “Governments across the region implemented expenditure cuts and subsidy reforms that have weakened both corporate and household activity, while reduced hydrocarbon deposits in regional banking systems and government domestic borrowing have increased interbank rates and squeezed banking sector liquidity.”

S&P said the long-term sustainability of GCC economic growth and the ability of their economies to absorb future increases in their working populations and diversify government revenues away from the hydrocarbons sector will rely on the prospects for growth in the non-hydrocarbon sector. “In our view, significant challenges remain in this regard and meaningful diversification will not happen in the short term,” its report said. S&P Global Ratings publishes a MENA sovereign ratings outlook twice a year, with the next one to be published in July. (S&P 21.01)

Back to Table of Contents

11.2 KUWAIT: IMF Executive Board Concludes 2016 Article IV Consultation with Kuwait

On January 6, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Kuwait and considered and endorsed the staff appraisal without a meeting.

Economic activity in the nonoil sector has continued to expand, albeit at a slower pace, reflecting the impact of lower oil prices. Nonhydrocarbon growth slowed from 5% to an estimated 3½% in 2015, as higher uncertainty weighed on consumption. Notwithstanding an improvement in project implementation under the five-year Development Plan (DP), available indicators point to a further modest softening in nonoil growth this year. Inflation, which has been hovering at around 3%, is set for an uptick to about 3½ this year, reflecting the recent gasoline price increases.

Notwithstanding efforts to contain government spending, the fiscal and external accounts have deteriorated markedly and budget financing needs have emerged. The authorities’ principal measure of the fiscal balance – which excludes mandatory transfers to the Future Generations Fund (FGF) and investment income and better reflects the government’s gross financing challenge – has swung into a large deficit (17½% of GDP in 2016/17). Even when including investment income and before transfers to the FGF, fiscal surpluses have vanished.

The financial sector has remained sound and credit conditions favorable. As of June 2016, banks featured high capitalization (capital adequacy ratio of 17.9%), robust profitability (return on assets of 1%), low nonperforming loans (ratio of 2.4%), and high loan-loss provisioning (206% coverage). Bank liquidity has been comfortable. Credit to the private sector has been increasing at a solid pace, driven mainly by installment loans.

Executive Board Assessment

In concluding the 2016 Article IV Consultation with Kuwait, Executive Directors endorsed staff’s appraisal, as follows:

Kuwait is well positioned to mitigate the impact of lower oil prices on the economy. The fiscal and external positions have deteriorated significantly and nonhydrocarbon growth has moderated—from 5% in 2014 to about 3¼% this year—as a result of the drop in oil prices. However, large financial buffers and low debt provide policy space to implement the necessary fiscal consolidation gradually while increasing public investment to support growth. Against this backdrop, the fiscal and external positions are projected to improve as adjustment proceeds and oil prices recover somewhat, and nonoil growth is projected to regain momentum to about 4% over the medium term supported by a continued improvement in project implementation under the five-year Development Plan. The main risk to the outlook stems from a further sustained decline in oil prices. Slow project implementation, more volatile global financial conditions and spillovers from heightened regional security risks could also affect economic prospects.

Nonetheless, “lower-for-longer” oil prices call for steadfast implementation of reforms. The government’s six-pillar reform strategy is rightly focused on reforming public finances and promoting a greater role for the private sector in generating growth and jobs for nationals. Efforts to streamline current spending, including the recent gasoline and utility price reforms, and measures to facilitate business licensing are steps in the right direction. Maintaining consensus in favor of economic transformation and sustaining the reform momentum is paramount for the success of the strategy.

Fiscal reforms should focus on addressing underlying fiscal vulnerabilities and be designed so as to minimize any dampening impact on growth. Gradual removal of fuel and electricity subsidies and control of the wage bill through a well-designed reform that avoids significant upfront costs would help reduce budget rigidities, while the introduction of the VAT and business profit tax and the repricing of government services would go a long way in diversifying revenue away from oil. These fiscal reforms should be designed and sequenced with a view to striking a balance between generating fiscal savings in line with intergenerational equity levels and mitigating the drawbacks of fiscal consolidation on economic activity. A comprehensive medium-term fiscal framework based on a top-down approach and articulated around clearly-specified medium-term fiscal objectives would help guide the consolidation plans and reduce implementation risks.

Fiscal financing options should be assessed within a comprehensive asset/liability management framework with due consideration to macro-financial linkages. Consistent with the government’s current approach, a balanced financing mix that combines continued drawdown of assets in the GRF, measured amounts of domestic bond issuance and some external borrowing would mitigate potential crowding out of private sector credit while maintaining a high level of liquid buffers. Continued progress toward strengthening the institutional and legal frameworks, including to support a more comprehensive and longer-term view on asset and liability management, improving debt issuance processes, and fostering increased transparency would ensure effective debt management and support the development of domestic fixed income markets.

Steps can be taken to further strengthen financial sector resilience. In light of the potential risks from a sustained further decline in oil prices and given the financial sector risks inherent to a largely undiversified economy, the CBK initiatives to enhance financial sector surveillance are welcome. A formal framework for operationalizing macro-prudential measures, reforms to facilitate debt recovery, developing a liquidity forecasting framework, and strengthening the crisis management framework, including by introducing a special resolution regime for banks and a deposit insurance mechanism, would help further enhance financial sector resilience and ensure orderly resolution of banks in the event of stress.

The peg to an undisclosed basket of currencies is appropriate and can be further underpinned by fiscal adjustment. The peg has provided an effective nominal anchor. A moderate current account gap can be largely closed by increasing fiscal savings as recommended over the medium term.

Labor market reforms and efforts to promote the role of the private sector are important to foster diversification and boost job creation for nationals. Better aligning labor market incentives is necessary to encourage nationals to take on private sector jobs and private firms to create opportunities for them. Greater use of privatization and partnerships with the private sector will help boost productivity, private sector investment and job creation for nationals. Relying on stronger legal and institutional frameworks that foster competition and reduce hidden costs and contingent liabilities for the government is important for the success of this strategy. This should be combined with further steps to improve the business environment, including reforms to facilitate access to land and finance, reduce the burden of administrative procedures and excessive regulations, foster competition, and facilitate SMEs’ access to finance. (IMF 17.01)

Back to Table of Contents

11.3 SAUDI ARABIA: A New Social and Political Order for Saudi Arabia?

Mohamed Elmeshad wrote in Sada on 12 January that Saudi Arabia’s plans of privatizing the economy to overcome oil dependence hinge on opening up its political sphere.

Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman has not only been at the forefront of the kingdom’s political and military forays in the region, but also at the center of what could represent a more profound economic change. Under his leadership, the government announced Vision 2030, seeking to diversify the economy and streamline welfare and subsidy spending. However, the vision is missing long-term political and social reform necessary to break the oil dependency, namely dismantling the political order and drawing new social contracts that are not based on the distribution of oil rents.

Saudi Arabia’s oil wealth is a major reason the ruling system has been stable for so long. This wealth has not only allowed the government to maintain powerful global allegiances and domestic security, but also provided it with the means to keep the population generally content. With Vision 2030, this crutch will be weakened. As the kingdom prepares to shift from a rentier economy to a production-based economy (and eventually a knowledge-based one), a more inclusive and participatory political system necessary for economic development is still missing. One without the other will not be possible, yet political reform does not seem to be factored into the grand vision.

The government’s policies and spending patterns that have helped maintain its power had always been inextricably linked to the price of oil and its revenue. During the boom in oil prices between 2003 and 2013, the Saudi government was able to invest heavily in education, health, infrastructure and job creation. This is in addition to the funds necessary to sustain the expenses and exorbitant set monthly stipends for every member of the royal family, probably the world’s richest. Furthermore, the ruling classes provided citizens easy access to high-paying, public-sector employment, thereby discouraging engagement in productive entrepreneurial activity. The private sector was unable to attract much local talent, as public-sector jobs were paying on average three times more than the private sector. The state was the primary provider of everyday income, rather than a welfare services provider, allowing the government to maintain its “authoritarian bargain.”

However, over the past three years, the government experienced its first fiscal deficits in nearly two decades, and the 2016 deficit is estimated to be well over $75 billion. The kingdom hopes that the plan laid out in Vision 2030 will make the economy, spearheaded by the private sector, more mature, prosperous, and sustainable. An integral element within that proposed mechanism inherently entails profound shifts in the social contract between the government and its people. In order for the private sector to produce more than 65% of GDP, as envisioned, labor must be shifted away from the reliable and high-paying but low-productivity public sector. In order for the government to truly diversify its own income, it must expand its tax collection system. However, the issue of tax collection generally entails the expectation of higher accountability from governments. For a Saudi regime that is now experimenting with income tax increases as part of a new economic plan, it does not seem to be making similar efforts to shift political institutions to reflect citizens’ expectations of transparency – not a hallmark of this monarchy. In short, the government and system of rule would shift from that of patronage to more conventional administrations of the public domain.

This shift is further complicated by citizens’ continued expectations of state patronage. Citizens have become used to viewing the state – by extension, the monarchy – as providers. The state had in the past reinforced that by providing expansive social programs and direct cash transfers of the oil wealth to keep locals quiet. In 2011, when the Arab Spring swept the region, the late King Abdullah bin Abdulaziz Al Saud gave out cash handouts worth a reported $37 billion to the population. At the same time, the government also signed off on nearly $130 billion to finance the creation of 120,000 new public sector jobs and building 500,000 houses. They set a minimum wage of $800 in the public sector, gave all civil servants a bonus, and set up a new unemployment assistance scheme. While these transfers were effective at the time, the government will not be able to afford them, based on the current direction of budget cuts – especially if the budget becomes less liquid as it moves away from oil dependency. This is not to discount some of the more admirable and effective means of public spending, such as an immense foreign scholarship program, and the relatively high levels of spending on scientific research and medical programs. However, even those have become subject to budget cuts.

For the Saudi citizen to wholeheartedly accept such a shift, government institutions would need to lead the way by exhibiting changes in their own right. The Saudi monarchy does not seem to be looking for any structural change to its governance, apart from the deputy crown prince’s nominally modern and forward-thinking approach. To the contrary, there have been indications that freedom of speech and political opposition will continue not to be tolerated in the future – especially regarding religion or the ruling family, issues where recent judicial convictions and even death sentences show the monarchy still clings to the traditional power structure based on religion, tribalism and oil. Even the spread of ideas that could challenge or gradually develop these structures risks being obstructed, creating an intellectual barrier between the monarchy and the outside world. Though Saudi politics are highly complex, at the very least the economic liberalization the monarchy desires would develop more efficiently if there were more openness to progress on all levels.

In the past, Saudi Arabia has focused on implementing counter-cyclical fiscal policies, whereas the need for political change might be just as pressing. While the monarchy had bought some time by introducing these measures, it did not address the need for political and economic institutional transformation to prepare for when the oil cycle was broken, or at least profoundly altered. Even though oil wealth (and periodic price booms) offered the Saudi regime a comfortable cushion to maintain order despite minimal political freedoms, this cannot be the assumption moving forward, especially after acknowledging that the economic order must be changed.

Mohamed Elmeshad is an Egyptian journalist and PhD student at the School of Oriental and African Studies (SOAS) in London, where he is also a researcher. (Sada 12.01)

Back to Table of Contents

11.4 EGYPT: Will New Law Attract More Foreign Investment to Egypt?

Nayrouz Talaat posted on 13 January in Al-Monitor that experts say drafting a new investment law is not enough to lure foreign investors back to Egypt — the entire business climate will need to change.

Egypt has finally come out with the much-anticipated new investment law, raising debate among economists about whether the amendments introduced to the law would lure more foreign direct investment (FDI) to the country. The new draft law, released by the Ministry of Investment at the end of December 2016, included a number of incentives that decision-makers hope will help draw in more investments and create an attractive business climate.

According to the Ministry of Investment data, foreign direct investments grew by 49.3% to $6.9 billion in 2015, up from $4.6 billion a year earlier. Since its issuance late last year, the law has been bogged down in discussions between economists and investors who believe that the new law has brought long-awaited amendments to many of its articles.

According to Article 15 of the new investment law, the Egyptian government will totally ensure fair agreements to foreign investors on an equal footing with local investors. According to the same article, foreign investors will obtain a residence during the period of the investment project. Investors will also be exempt from stamp taxes and fees for documenting the company, according to Article 30 of the law. In addition, investors can recruit 20% of foreign employees in their projects, up from the 10% stated in the previous law.

Lawyer Ahmed Khalil said the new investment law is promising, as it will help create “out-of-court discussions to settle investor-state disputes and grant incentives for investment in specific sectors.” Khalil told Al-Monitor, “According to the investment law, the General Authority for Investments and Free Zones will be a one-stop shop for investors, an important step to end prolonged procedures of establishing a business and eliminate bureaucracy.” Khalil said the new investment law offers a better approach in settling foreign investors’ disputes. “Regarding disputes, the law sets out equal treatment to both local and foreign investors, as both can pay a bail to drop a court ruling,” he said.

Moreover, the law offers a 2% unified custom tax on imported equipment and machinery. In addition, a technology-based system for registering companies will be implemented after 90 days from the date of issuing the law.

According to the World Bank’s Ease of Doing Business Index 2013 report, Egypt has made progress in reducing the number of procedures required to start a business to six and the number of days to seven. According to the Investment Ministry reports, the most populous country saw its ranking in global FDI inflows increase from 15th globally the previous year to fifth place in 2016.

Economist Gouda Abdel el-Khaleq said that attracting investments to the country cannot take place only by drafting a new law, but the whole business climate must be attractive. “The government should take certain moves, such as cutting customs taxes, lowering inflation rates and guaranteeing high rates of returns on such investments,” he told Al-Monitor. The Egyptian government has recently been introducing economic reforms to stimulate economic growth, reduce its budget deficit and attract foreign investors.

The Central Bank of Egypt devalued the Egyptian pound in November 2016. The Egyptian pound was floated to 13 Egyptian pounds per US dollar. But the average rate currently ranges to hit 18 Egyptian pounds versus $1. Prior to the devaluation, the US dollar’s official selling price was 8.88 Egyptian pounds, while the buying price stood at 8.85 pounds. The step, which aims to regain stability in the local economy, was taken by the government to solve the hard currency crunch in recent months that scared off some foreign investors.

Khaleq said the country has to boost its overall macroeconomic outlook. “There must be economic stability, and foreign investors should feel that in order to pump their investment in,” he added.

The country has witnessed two revolutions — in January 25, 2011, and June 30, 2013, ousting former Presidents Hosni Mubarak and Mohammed Morsi. The unrest that followed the two revolutions has scared off both tourists and foreign investors, putting much pressure on the national economy.

In 2015, Egypt held a major investment conference to draw back foreign businessmen. The conference offered investment opportunities to investors from the Gulf, Asia and Africa, together with some European countries in different sectors including energy, textiles, automotive and transportation. Egypt is among the top 10 signatories of Bilateral Investment Treaties worldwide, with a total of over a hundred treaties. It is also ranked second, after Angola, in the list of top African countries, according to UNCTAD World Investment Report 2016.

Ahmed Koura, a banking expert, said that the country should start giving training programs to personnel dealing with investors to guarantee facilitations in paper documentation and license issuance. “In addition, the facilitation of money transfer anytime must be enforced and executed as shown in the articles of the new investment law,” he added. “Tools of enforcing laws bring fruitful results, not only the law itself,” the expert noted. (Al-Monitor 13.01)

Back to Table of Contents

11.5 TUNISIA: Tunisia’s Fledgling Gulf Relations

On 17 January, Sada posted Youssef Cherif’s comments that tensions persist between Tunisia and its former ally the UAE, but Tunisia hopes renewed ties could balance out its current dependence on Qatar.

The weak Emirati attendance at Tunisia 2020, Tunisia’s investment conference held between 29 and 30 November 2016, highlights the country’s uneven relations across the Arabian Gulf. The only Emiratis present were two executives from Dubai Holding, a company owned by Emir of Dubai Sheikh Mohammed bin Rashid Al Maktoum. They were deferentially received by Prime Minister Youssef Chahed as heads of state. Yet though more than $14 billion in loans, grants and investments were pledged during the conference, and several large-scale projects were announced, the UAE’s only announcement at the conference was that EIT (part of Dubai Holding) was selling its 35% stake in Tunisia’s phone operator Tunisie Telecom.

By contrast, Qatari Emir Sheikh Tamim bin Hamad Al Thani, the only foreign head of state attending, announced a financial package of $1.25 billion and the Qatari ambassador to Tunisia signed an additional $2.2 million check to cover the costs of the conference. Overall, Tunisia 2020 looked like Qatar’s response to the UAE-organized Egypt Economic and Development Conference (EEDC) in March 2015, which had allowed the UAE to expand its influence in that country.

Tunisia’s relationship with Qatar grew closer after the 2011 revolution, partly because Al Jazeera had criticized Zine El Abidine Ben Ali’s policies in previous years. Under the Ennahda led-coalition between 2011 and 2013, cooperation between the two countries grew across various sectors, including the economy, social and political development, and military and security. For example, in 2012 former Emir Hamad bin Khalifa Al Thani signed ten agreements with the Tunisian government, including investment and construction deals and to provide humanitarian services and vocational training. Later that year, the Tunisian Ministry of Defense announced that Tunisian armed forces participate in military drills in Qatar even as Doha supplied vehicles to the Tunisian army. Ennahda’s opponents alleged that Qatar was showering money on Islamist organizations like Ennahda and, to a lesser extent, on other political parties like the Congress for the Republic (CPR). At the time, Tunisia was counted as a main Qatari ally, together with Turkey, Egypt, Libya, and non-state actors including Hamas and some segments of the Syrian and Yemeni opposition.

Once Ennahda resigned from government in January 2014 following a protracted domestic impasse and growing tension, Qatar’s standing in Tunisia became less certain. However, Qatar could still claim Tunisia as a foreign policy success – it had supported a country whose democratic transition seemed to work. Qatar has kept backing Tunisia through loans and donations, and continues to provide positive media coverage through influential state-supported outlets such as Al Jazeera and Al-Araby Al-Jadid.

In contrast, the UAE, which had been Tunisia’s second-largest trading partner in the Arab world (after Libya), saw its bilateral ties grow tense after 2011. On the pretext that the future of Tunisia’s politics and security were too uncertain, it halted its investments in the country and gradually distanced itself diplomatically from Tunisia, a divide that peaked with the withdrawal of the Emirati ambassador to Tunis in September 2013. Tunisia’s inclusion of Islamists in politics, its policy of neutrality in Libya and the alliances the country joined were in opposition to the UAE’s own strategic interests.

However, as Qatar’s favored actors in Tunisia – Ennahda and the CPR – were weakening, the UAE opened channels of communication with the opposition, mainly Nidaa Tounes. Once the latter came to power in early 2015, the UAE sent Foreign Minister Abdullah Bin Zayed Al Nahyan to Tunis, his first visit since May 2011. He met with President Beji Caid Essebsi, the founder of Nidaa Tounes, inviting him to visit Abu Dhabi, as several Tunisian officials did later that year. Essebsi also visited to the UAE’s client Abdel Fattah el-Sisi, inviting him to visit Tunisia. The Emirati leadership was looking to move Tunisia into its own camp and away from Qatar’s. They had calculated that their support for Nidaa Tounes would exclude Islamists from the political scene and lead Tunisia to recognize Libya’s eastern government and Khalifa Haftar, its military strongman and Abu Dhabi’s ally. Neither outcome materialized. Furthermore, the government formed by Nidaa Tounes kept excellent ties with Qatar.

As a result, Emirati–Tunisian relations remained tense. By mid-2015, many Tunisian businessmen complained that their visa applications to the UAE were refused for unclear reasons, and Tunisian expatriates living there had difficulties renewing their work permits. The Emirati ambassador to Tunis argued that this was merely the result of increased measures against violent Islamist extremism, given the large number of Tunisian youth leaving to fight in Syria. Many among those whose applications were turned down, however, had no known links to either radical movements or Islamist politics, and the Emirati response seemed instead a means of pressure on the Tunisian government.

President Essebsi attempted to improve the situation in September 2015 by flying to Dubai for the funeral of Sheikh Rashid bin Mohammed bin Rashid Al Maktoum, son of the Emir of Dubai, but he was unable to arrange a meeting with Mohammed Bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi and the country’s de facto leader. Essebsi was later scheduled to visit Abu Dhabi in October 2015, but the Emiratis reportedly postponed this meeting.

In September 2015, perhaps in an attempt to strike back, Prime Minister Habib Essid suddenly called for a ministerial meeting to examine Emirati mega-projects that had been announced prior to 2011 but never implemented due to subsequent corruption investigations involving Ben Ali’s family. Yet the Emiratis did not want to abandon these projects, hoping to make them bargaining tools to influence Tunisian party politics. They would make promises that once the political crisis was resolved, meaning once their preferred Tunisian allies were secure in power, they would again invest in those projects, keeping their Tunisian partners running after a mirage. Yet Essid threatened to cancel the deals altogether and find other investors if the Emiratis were not willing to move forward.

As tensions continue, Emirati media and research outlets remain critical of Tunisia’s ongoing transition, also encouraging a number of Tunisian journalists, prominent figures and intellectuals to share these criticisms. For example, stories and opinions previously expressed by Emirati channels are frequently reproduced by some Tunisian outlets. Meanwhile stalled economic cooperation is costing Tunisia billions of dollars in frozen investments, and visas remain an issue. As evidenced by the UAE’s small showing at Tunisia 2020, there are no signs of improvement.

Yet Tunisia hopes to move away from being dependent on Qatar alone and has been courting the UAE in order to balance out this relationship. Given the uncertainty of future U.S. and E.U. support, Tunisia is looking to strengthen its ties across the Gulf. Tunisia hopes that scaling back ties with Qatar will also calm its internal political tensions, calculating that perhaps greater Emirati support for leading secular parties could counterbalance Qatari support for Ennahda.

The Emiratis have so far favored a zero-sum game: either the Tunisian government accepts their conditions of keeping Islamists out of government and building stronger ties with the pro-Haftar government in eastern Libya, or it gets nothing. But Saudi Arabia, the UAE’s main ally, might be able to influence the UAE’s approach to Tunisia. Riyadh already pledged $850 million during Tunisia 2020 after years of cold relations between the two countries.

However, tensions between Saudi Arabia and the UAE are mounting regarding Riyadh’s warming relations with Qatar and Turkey, its growing rift with Egypt, the UAE’s client regime; and other foreign policy disagreements over Libya, Syria, and Yemen. Even if the Saudis have lost their political leverage over the UAE, they could still assume their former place as one of Tunisia’s largest Arab trading partners, as least so long as Saudi Arabia’s ongoing financial strains allow it to invest significant amounts abroad.

Youssef Cherif is a Tunisian commentator and consultant on North African politics. (Sada 17.01)

Back to Table of Contents

11.6 TURKEY: Turkey Faces Financial Disaster

Cengiz Candar posted in Al-Monitor on 13 January that Turkey’s decision-makers need to step up and change their destructive policies rather than inventing an international conspiracy to blame for the country’s currency crisis.

Gauging the value of the Turkish lira against the US dollar has required the power of divination so far this year. Anxiety is high as Turks wait to see whether the lira will tumble more and reach the once-unimaginable level of 4 lira per $1.

In the first days of 2017, the lira’s value declined so rapidly that even the Turkish Central Bank’s actions could not stop the drop. On 10 January, the bank lowered the level of foreign exchange reserves so it could add $1.5 billion of liquidity to stabilize the lira’s value.

Less than six months ago, when the parity level was 3 lira to $1, the gloomy forecast for 2017 predicted parity could reach 3.85 and stay there until 2018. Within the first 10 days of 2017, the level exceeded that figure, and on 12 January, parity temporarily surpassed the “psychological threshold” of 3.90. Now, 4 lira to a dollar is entirely possible and is seen as a harbinger of the big financial crisis to come.

The Financial Times observed on 10 January, “Turkey appears closer to a full-blown currency crisis than at any point since the ruling AK [Justice and Development] party took power in 2002. In the past three months, the lira has lost almost a fifth of its value against the dollar, as both global and domestic investors lose confidence in their country’s economic prospects.”

In another story on 8 January, the Financial Times observed, “Turkey has gone from investor darling to crisis candidate in a few years. … Ankara enters 2017 little-loved by investors.” The currency dropped more than 9% against the dollar in the year’s first eight trading days, and this figure adds to last year’s 17% slump. The Turkish lira’s depreciation made it one of the worst emerging-market performers in 2016.

To the Financial Times, the headwinds facing Turkey outweigh those of every other major developing country: “With investors wary of committing money, the rehabilitation trade that has supported bonds, equities and currencies in four of the so-called ‘Fragile Five’ – Brazil, South Africa, Indonesia and India – currently eludes Turkey. … The Fragile Five were identified three years ago as the countries most vulnerable to rising US interest rates and a stronger dollar thanks to their large current account deficits. While the rest have recovered their balance and made current account adjustments, Turkey is lagging behind. And long-term investors say the mood appears bleak.”

Last year, Moody’s Investors Service followed Standard & Poor’s by downgrading Turkey’s credit rating to junk, leaving Fitch Ratings as the only major agency that rates the country as investment-grade. But in its latest report, Fitch mentioned Turkey as one of the “most fragile countries against the systemic risk,” along with Venezuela and Ethiopia.

The data indicates Turkey will be facing an inevitable financial collapse or at least a severe economic crisis this year. Such a crisis will worsen the security situation in Turkey, which suffered a terror attack within the first hours of the new year in Istanbul.

Such a gloomy prospect is the consequence of Turkey’s decision-makers, above all President Recep Tayyip Erdogan, who insists on the wrong prognosis. Speaking on 12 January about the meltdown of the Turkish lira against the dollar, he said, “You know that the economy is manipulated for the objective of attacking Turkey. There is no single difference between the terrorist who carries a weapon in his hand and the terrorist who possesses a dollar or euro in his pocket. Both aim to divert Turkey from its targets. They use currency as a weapon.”

Erdogan and government ministers aren’t the only ones voicing that theory recently. It is also entertained by pro-government Islamist circles. They tend to see the financial hardships as the result of a coordinated assault on Turkey by the West in the wake of the 15 July failed coup. Abdurrahman Dilipak, a prominent Islamist columnist for the Islamist daily Yeni Akit, wrote on 11 January, “The value of the Turkish lira dropped even below the Saudi riyal. Fitch is waiting in ambush. There is a collective assault against the Turkish lira.”

In a critical note, he added, “What is MIT [Turkish National Intelligence] doing against this? The dollar operation is the continuation of 15 July. When will an operation be launched against those who take part in this operation?”

Experts, however, say Turkey is suffering from a self-inflicted crisis of confidence and only a swift and sizable rise in interest rates will stabilize the lira. There is an unmistakable correlation between the lira’s unstoppable slump and proposed constitutional amendments to give Erdogan stronger executive powers. The debate in parliament is incredible – each time the subject is broached, there are fistfights and broken noses. Under such political tension, the Turkish lira keeps eroding.

In the 8 January article, the Financial Times reported, “The overwhelming worry is that systemic weakness could unravel into crisis. … Economic growth has plunged amid terrorism, a sharp tourism slump and devaluation. After averaging 6% in 2015, [gross domestic product] growth in the year to the third quarter of 2016 was minus 1.8%. This was before the oil price [rise] of the fourth quarter and the worst of the devaluation.”

Turkey has yet to make the tough decisions that will mend its economy. It seems it will not. Erdogan prefers to blame economic problems on a nefarious conspiracy of international financiers. Though there is a consensus that the only remedy in the short run is for Turkey to raise interest rates dramatically. Erdogan is against it because, obviously, high interest rates will prevent economic growth.

The danger now is not only that Turkey’s economic growth will stop, but that it will stop under rising inflation. The worst-case scenario for economists — stagflation — might be awaiting Turkey.

Though the economy was once a major boon to Erdogan’s political success, he will be haunted by its collapse. The blame, many believe, falls on his suicidal policies.

Cengiz Candar is a columnist for Al-Monitor’s Turkey Pulse. A journalist since 1976, he is the author of seven books in the Turkish language, mainly on Middle East issues, including the best-seller Mesopotamia Express: A Journey in History. Currently, he is a Distinguished Visiting Scholar at the Stockholm University Institute of Turkish Studies (SUITS). (Al-Monitor 13.01)

Back to Table of Contents

11.7 TURKEY: Turkey’s AKP Scrambles to Curb Economic Woes Until Referendum

Mustafa Sonmez posted in Al-Monitor on 20 January that Turkey’s government has mobilized public funds to avert a full-blown economic crisis ahead of a critical referendum on transition to a presidential system, expected in early spring.

After 14 years in power, the Justice and Development Party (AKP), the representative of radical Islam in Turkey, has finally focused on its main objective: a regime change to install a one-man rule. A set of constitutional amendments, drawn up and brought to parliament by the AKP, needs the support of at least 330 deputies in the 550-member legislature to make it through. The ruling party, which holds 317 seats, hopes to pass the bill with backing from the 40 deputies of the Nationalist Action Party, which shares nationalist and Islamic values with the AKP. Should the bill get the necessary support in the upcoming vote, it will be put to a referendum within two months’ time.

If approved, the amendment will legitimize the de facto executive presidency that President Recep Tayyip Erdogan is already exercising, while handing him a number of powers that currently belong to the legislature, the prime minister’s office and the judiciary.

Under the draft, the president can be the leader of his or her political party and determine its candidates in parliamentary elections, dissolve parliament, draw up the budget, issue legislative decrees and veto bills passed by parliament. In the judicial realm, the draft entitles the president to appoint the chair and six of the 13 members of the Judges and Prosecutors Board as well as 12 of the 15 judges of the Constitutional Court. In terms of executive powers, the president would be entitled to appoint the ministers and senior bureaucrats (including ambassadors), shape educational and military institutions, approve international agreements, determine national security policies and declare states of emergency. As commander in chief, the president will also bear on how the country’s armed forces are used.

According to the draft, the president can serve three terms and use all his or her powers without any accountability. He or she can only stand trial at the Constitutional Court if as many as 400 deputies in the 600 member legislature vote in favor of such a move.

This final stretch in the AKP’s 14 year marathon toward a one-man regime has coincided with the Turkish economy’s descent into crisis. The referendum outcome will depend on voters who have begun to slowly feel the heat of the crisis.

In Turkey, the base of Islamist voters is estimated at some 20% of the total electorate. The rest of the AKP’s vote — 49.5% in the last elections in 2015 — has come partially from the collapsed center-right and partially from fluctuating voters. The fluctuating voters have backed the party largely as a result of being gratified by a growing economy, the result of favorable domestic and external conditions from 2003 to 2013.

The economic growth that took place until recently relied heavily on the inflow of foreign funds and loans, amounting to an average of $40 billion per year. This provided jobs and income to voters, even if on a modest level. Coupled with a privatization drive, the economic growth boosted tax revenues and public income, which resulted in new, voter-oriented services in health care, education, transport and social assistance that impressed the masses. Also, some of the foreign funds flowing to Turkey were transformed into consumer loans and credit-card borrowing by banks, which allowed the electorate to spend more, even if on debt, while bonding it to the ruling regime.

Since mid-2013, however, the tide has been turning. Foreign funds, which used Turkey as a temporary parking lot during the global crisis, began to look to the United States amid signals of growth and rate hikes, boding an end to the tailwinds the AKP had enjoyed for a decade. The era of the cheap dollar was over. Besides the economic risks, Turkey also accumulated political and geopolitical risks, which further scared off foreign investors. In 2015, the dollar rose 25% against the Turkish lira, followed by another 20% increase in 2016 and a sharp upward trend in the first weeks of 2017.

The greenback’s dramatic appreciation caught the Turkish economy off guard, upsetting all macroeconomic balances just as the regime-change operation got underway. This, of course, is a cause of concern for the AKP. The government has now intensified efforts to weather the referendum before the fire from the economic crisis engulfs the street, resorting even to providing “referendum candies” to the electorate.

Hiking interest rates on the lira is the antidote of the rising dollar price. This, however, could further slow the domestic market. Erdogan, in particular, is averse to rate hikes, sending chilly messages to the Central Bank. The bank itself is not sure whether hiking rates can do the trick because the dollar has been fueled not only by the flight of short-term foreign investments but also by the heightened demand of Turkish companies indebted in foreign currency. As the Central Bank’s latest Financial Stability Report indicates, the foreign-exchange deficit of companies involved in the government’s “megaprojects” is particularly worrisome.

Yet, the core reason behind the dollar’s extraordinary rise against the lira stems from Turkey’s unrelenting political risks. Instead of seeking normalization to reduce the risks, the AKP has fanned the climate of conflict by bringing up the constitutional change, which hardly helps in luring foreign funds or easing the dollar demand at home.

The government is now seeking a controlled use of the interest-rate weapon, trying to avoid any shock measures until the referendum. In this context, the Central Bank has implicitly raised the banks’ borrowing rate to curb their dollar purchases.

The government has also pressed public agencies and pro-AKP quarters to convert their foreign-currency funds to Turkish lira, but this has had little effect. With the greenback refusing to climb down from 3.75 lira, some measures are being considered to prop up the private sector as companies of all sizes in all sectors are struggling to cope with such a high exchange rate. These include a pledge of government guarantees for credit lines the banks are urged to open. In the meantime, however, the reluctant banks are being accused of “opportunism” as they try to strengthen their foreign-exchange positions and reduce loan repayment risks, with Erdogan personally threatening the sector.

Meanwhile, a long-standing “fiscal discipline,” which has cut the budget deficit to as low as 1% of gross domestic product, seems to allow the government some generosity in the face of the crisis, especially ahead of the expected referendum. But this also requires utmost caution. Turkey’s bitter experience before 2000 teaches a good lesson on how difficult it is to pull things together once budget deficits spiral out of control.

Still, the government is not shying away from pumping money into where it is needed. While public banks are being directed to provide lifesavers, hard-pressed construction companies that enjoy government favor are being offered facilities via state housing developer TOKI, and the state is buying the excess housing stocks of private firms to relieve the sector.

In short, the central government budget and other public funds seem mobilized to prevent the crisis from biting voters ahead of the expected referendum. Yet, the crisis is growing with such menacing speed that fending off popular frustration by sweeping the problems under the rug could prove difficult, even in the short term.

On 16 January, the newest unemployment data came as the omen of an approaching avalanche. The unemployment rate jumped from 11.3% to 11.8% in only one month. This puts the number of jobless at 3.67 million in October, half a million more than a year before. The fact that nearly 1 million of them hold university degrees makes the outlook even more alarming. (Al-Monitor 20.01)

Back to Table of Contents

11.8 GREECE: Greece ‘B-/B’ Ratings Affirmed; Outlook Remains Stable

On 20 January 2017, S&P Global Ratings affirmed its ‘B-/B’ long- and short-term foreign and local currency sovereign credit ratings on the Hellenic Republic (Greece). The outlook is stable.

Rationale

The affirmation reflects our assessment that:

The Greek government is meeting–albeit with delays–the formal terms of its €86 billion financial support program (Third Economic Adjustment Program) financed by Eurozone member states via the European Stability Mechanism (ESM).

We expect program disbursements to meet debt servicing needs, including the redemption of commercial debt of about €2 billion in July 2017, and to reduce the stock of government arrears to the rest of the economy.

The Greek authorities’ relationship with its official creditors, and the IMF in particular, continues to be tested by the composition of Greek general government budgetary spending rather than headline fiscal results. Specifically, spending on pensions absorbs most of Greece’s fiscal resources at the expense of spending on health, education, and the unemployed. The pension system is operating an unsustainably high deficit of close to 11% of GDP, representing an outsized intertemporal transfer from participants in Greece’s heavily taxed labor market to pensioners. At the same time, the IMF publicly supports a more relaxed pace of fiscal austerity in Greece, not a tightening as is often suggested.

The IMF’s participation in the program is yet to be determined. Nor is the inclusion of Greek government securities in the ECB’s asset purchase program yet a certainty, though QE eligibility remains a strong incentive for the government to reach an accord with its EU creditors and the IMF.

Economic growth over 2017-2020 will be supported by tourism, and a gradually improving jobs market. The outlook for investment remains constrained, given challenges to Greece’s banks.

The banking sector will remain impaired over the forecast horizon. The Bank of Greece targets a reduction in overall banks’ nonperforming exposures (NPEs) to 34% in 2019 from 51% currently. Moreover, despite the incremental easing of capital controls, we expect deposits will return to the system quite slowly, maintaining the system’s reliance on official funding.

Despite the high stock of general government debt (at an estimated 180% of GDP in 2016, Greece has the second highest debt-to-GDP ratio of all the sovereigns we rate), the cost of debt servicing is very low, currently ranging between 1.0% and 1.5%. In contrast to most of the governments we rate, the lion’s share of Greece’s sovereign debt – about 84% – is official, with over four-fifths lent by Eurozone governments and institutions at highly concessional rates and maturities, including grace periods on principal payments averaging between three years for the Greek Loan Facility (GLF) to 17 years for ESM loans.

In our view, Greece’s protracted economic crisis has weakened the country’s administrative capacity. One example is the weak absorption of available subsidized financing to Greece to improve conditions in the country’s numerous refugee camps. Impediments introduced by central and local governments have contributed to this low absorption rate, in our opinion.

Compared to our forecast of a 1% contraction in real GDP in our July 2016 review, we now estimate a small statistical recovery for the year. This has been driven by a rebound in investment and private consumption. Employment has been rising, albeit largely in more precarious temporary, rather than permanent, positions. Although down from its peak in 2014, at 23% in October, Greek unemployment remains the highest in the EU and the Organization for Economic Co-operation and Development.

Over 2017-2020, we expect the economy to grow on average by nearly 3% in the absence of any large, disruptive events. We base this forecast on our expectation of a gradual strengthening of the labor market, an improvement in private sector liquidity following the pay-down of government arrears, and the steady, albeit incremental, easing of capital controls. All of these should boost consumer and investor confidence, as would the completion of program benchmarks and restructuring of Greek banks’ high stock of NPEs. An acceleration of the ongoing privatization of state assets, were it to materialize, would also potentially attract foreign capital into the country and boost investment activity.

The outlook for Greece’s major services sectors is mixed. Shipping remains mired in a supply glut, combined with a global slowdown in trade. The performance of the tourism sector, which is a larger contributor to overall GDP compared to shipping, has remained relatively strong, however, enabling the current account deficit to turn into a small surplus of an estimated 1% of GDP in 2016. The current account has also been helped by ongoing import compression, lower prices of imported energy, and EU creditors extending interest rate subsidies to the Greek government on its external debt. We expect that the current account surplus will gradually decline toward balance through 2020, alongside gradually strengthening import demand.

Despite our projections of relatively strong real growth, we still expect that the Greek economy, which has lost a third of its value since 2009, will be about 15% smaller compared to 2008. We estimate investment will amount to below 10% of GDP in 2017 compared to about 25% before the global financial crisis.

The recouping of this lost value will be conditional upon the recovery in Greece’s distressed financial sector, in our opinion. Greek banks depend on official financing, with the ECB and emergency liquidity assistance (ELA) lines covering 25% of assets. Between September 2010 and November 2016, an estimated €128 billion or 70% of estimated 2017 GDP (cumulatively) of deposits exited the Greek banking system, though levels appeared to stabilize in the second half of 2016. With NPEs at 51% of total exposures (on balance sheet only), banks are not in a position to finance private-sector investment, while companies and households may choose to prioritize payment of their rising tax debt (which the Greek tax administration estimates at 50% of GDP) rather than their bank loans.

Distress in the banking system represents a potential contingent liability to the state. Our projections for public-sector debt don’t reflect any further government capital injections into domestic banks, although there is a material risk that additional public support is required. We think that the ECB’s reinstating of its waiver on the eligibility of Greek sovereign and sovereign-guaranteed bank collateral for ECB financing, rather than costlier Bank of Greece ELA, will lift the profitability of Greece’s highly challenged banking system. We anticipate, however, an only gradual lifting of the capital controls still in place, including withdrawal limits on household deposits.

We understand that one of the program’s objectives is to enable the Greek government to refinance itself fully in the commercial debt markets by August 2018, when the program concludes. Despite delays to the second review and the occasional flaring up of tensions between Greece and its creditors, we anticipate broad adherence to program objectives by the Greek authorities. We estimate that the general government primary surplus will accordingly increase through to 2018, putting the general government debt-to-GDP ratio on a downward trajectory. Even then, we estimate that net general government debt will amount to 168% of GDP, among the highest projected debt burdens of all rated sovereigns.

Given the narrow majority of three seats for the Syriza-led government and the rising popularity of the largest opposition party, New Democracy, the probability of implementing long-term reforms, for instance to the judicial system and public administration, seems low. The government’s delivery on structural and particularly labor market reforms appears to us to be piecemeal, with limited success in attracting private foreign capital into sectors that could create employment.

Risks to program disbursements remain: most recently as a consequence of the Tsipras government’s introduction of fiscal easing measures, including a Christmas bonus to pensioners and a freeze on VAT rates for some Aegean islands. As a consequence, Greece’s creditors are delaying short-term debt relief measures to smooth the repayment profile to the EFSF and to fix Greece’s formerly floating interest rate payment schedule on EFSF obligations.

Although we view these short-term debt measures as helpful in backstopping the sustainability of Greece’s concessional debt burden, we don’t see future net present value reductions as equivalent to frontloaded principal write-downs if the goal is to restore confidence in Greece’s solvency, and to enable Greece to finance itself in commercial debt markets at low interest rates and long maturities. Understandably, however, Greece’s creditors are reluctant to concede outright debt write-offs, particularly in a year with a busy electoral calendar.

We think it unlikely that Greece would be included in the ECB’s asset purchase program until the conclusion of the second review and until some of the short-term debt relief measures are implemented. Our forecasts for Greece do not assume that Greek government bonds will be eligible for inclusion in the ECB’s quantitative easing program in the current year. However, if they were to be, we believe that apart from a direct reduction in government bond yields, the borrowing costs for other non-sovereign entities could potentially be lower. Further, a boost to confidence could further aid economic recovery and also the process of deposits returning to the banking system.

Our baseline expectation is that Greece can and will service its limited commercial debt stock (about one-sixth of the total or about 30% of GDP) when it comes due. In 2017, excluding Treasury bills, Greece faces about €11 billion of loan repayments and debt redemptions against an estimated €10 billion of deposit assets (as of September 2016), including about €3 billion in the Treasury Single Account. This means it has some headroom if program reviews are delayed. Having said that, Greece faces a particularly heavy repayment period in July this year with about €6.4 billion coming due, including about €2 billion in commercial redemptions.

Outlook

The stable outlook indicates our view that, over the next 12 months, risks to our ‘B-‘ rating on Greece are balanced.

We could consider an upgrade if we saw stronger growth performance and measurable progress in reducing the still-high ratio of nonperforming loans in Greece’s banking system alongside compliance with the parameters of the ESM program. Rating upside would also stem from the lifting of capital controls, including deposit withdrawal limits, which would be a strong indication of recovered confidence in financial stability and, in turn, growth. We could also consider raising the rating in the event of an unexpected write-down of Greece’s level of net general government debt.

We could lower the ratings on Greece if the delay in or non-implementation of reforms stipulated under the program resulted in a prolonged period where the government’s financing needs weren’t met by disbursements. This could, over time, lead to a default on Greek government debt, including on commercial obligations, and reverse the nascent economic recovery. (S&P 20.01)

Back to Table of Contents

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.

EDI’s other services include development of feasibility studies and tailored research reports, as well as identification of potential joint ventures for commercial clients. For more information on how we may better assist you, please visit our Web site at: http:// www.atid-edi.com.

Fortnightly, 25 January 2017

Fortnightly, 25 January 2017

Leave a Reply Cancel reply