Fortnightly, 28 December 2016

On 18 December, the Netanyahu government approved a round of budget cuts totaling NIS 1.2 billion ($310 million), or 1.25% of the total state budget. The cuts came in response to changes required in government expenditures since the budget was approved several ago and due to expanded coalition agreements. The move followed fierce debate, with a previously proposed tax on the third or more properties belonging to a single owner prompting the various sides to postpone the vote on the proposed budget cuts. However, when it became clear that a separate debate would be held later on the “third apartment” tax, the cuts were voted through.

Among the reasons for the cuts are: the need to provide funds to find housing solutions for the evicted residents of Amona and Ofra; to leave the public broadcasting apparatus as is until the end of April 2017; and to increase funding for the ultra-Orthodox school system as part of the coalition agreements. Shas-run schools will receive a budget infusion of NIS 65 million ($17 million) for 2016, and another NIS 80.5 million ($21 million) the following year.

Major cuts have been made to the budgets of some of the biggest ministries. The Defense Ministry budget will be reduced by some NIS 167 million ($43 million); the Transportation Ministry budget will be cut by NIS 155.9 million ($40 million); the Education Ministry budget will be cut by NIS 88.3 million ($23 million); and the budgets of local authorities will be slashed by NIS 44 million ($11 million). (IH 19.12)

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1.2 Knesset Approves 2017-2018 State Budget Following Marathon Vote

The Knesset approved the 2017-2018 state budget in the early hours of 22 December, with a vote of 60 MKs in favor and 48 against. The budget for the next two years will total NIS 906.8 billion – for 2017 was set at NIS 446.8 billion ($117 billion) and the 2018 budget at NIS 460 billion ($120 billion). The marathon vote, which began on the afternoon of 20 December, also saw lawmakers approve the economic arrangements bill, which complements the state budget bill and incorporates amendments needed for the government to fulfill its economic policy. With additions dependent on revenues, the budget could reach NIS 491.7 billion in 2017 and NIS 502 billion in 2018 for a total of NIS 993.7 billion (gross). The biennial budget reflects a 5.8% lateral cut to all ministries’ budgets.

The budget appropriated NIS 70 billion ($18 billion) for defense spending across the next two years, alongside NIS 57 billion ($15 billion) for education, and NIS 33 billion ($8.6 billion) for health care. The opposition filed a record 8,500 reservations to the budget prior to the vote. (Various 22.12)

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1.3 Israel and Kazakhstan Sign R&D Agreement and MOU

Following a historic meeting earlier in December in Kazakhstan between Israeli Prime Minister Benjamin Netanyahu and the President of Kazakhstan Nazarbayevsi, a new research and development (R&D) agreement between the two nations was signed. The Kazakh economy is the second largest amongst Euro-Asian countries, after Russia. During Netanyahu’s visit to Kazakhstan, a business forum took place in the presence of the Israeli Prime Minister and the Prime Minister of Kazakhstan, Mr. Bakytzhan Sagintayev. The forum was attended by leaders from 70 Israeli companies in the agriculture, water, health, HLS, energy and financial sectors, who accompanied Netanyahu on the official visit.

One of the most interesting contracts between the two countries is between Astana International Financial Centre (AIFC) and Fintech Group Israel, which signed a memorandum of understanding (MOU) to commence collaboration in promoting the development of financial technologies (fintech) ecosystem in Kazakhstan and the region. The MOU identifies key areas of mutual cooperation towards building the “Digital Bridge“ between the two countries, which will create a direct connection between Astana and Israeli technology cluster and help enrich local human capital. Both parties expressed willingness to work together in order to brand AIFC as a leading fintech hub leveraging on the experience and expertise of their new Israeli partners. (Various 22.12)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Israeli High-Tech Industry Sees ‘Exits’ Plummet by 67% to $3.5 Billion in 2016

Israeli tech exits plummeted from $7.2 billion in 2015 to $3.5 billion in 2016, according to a new report by accounting firm PwC. The total value of Israeli high-tech and startup companies sold in 2016 – through acquisitions and IPOs (initial public offerings) – reflects a 67% decline from last year. In total, there were 55 exits in 2016, lower than both 2015 and 2014, with 70 exits each. The average value per exit in 2016 was $64 million, sharply down from $153 million in 2015.

According to Rubi Suliman of PwC, there are not enough “global buyers that are familiar and comfortable enough with the Israeli high-tech to drive a continuous wave of deals. When potential buyers are relatively scarce, deal prices are expected to go down. This is a problem, but also an opportunity, since it points to the enormous potential of the local tech industry.”

One of the largest deals this year was the acquisition of Ravello by Oracle for $430 million. Founded in 2011 by Rami Tamir and Benny Schnaider, Ravello is a cloud service that enables customers to run any type of workload through the cloud. In addition, this year, global chip maker Intel bought Israeli startup Replay Technologies for $175 million. Founded in 2011, the company has developed a method of filming called freeD, which generates instant, real-time 3D replays that have already been used at the 2012 London Olympics, in Yankee Stadium, and at the Consumer Electronics Show (CES) in Las Vegas and most recently in the El Closico soccer showdown between Barcelona and Real Madrid.

This year’s acquisition of Playtika for $4.4 billion is not included in the report, since it was previously sold in 2014 to Caesars Interactive Entertainment, a North American corporation.

Most of the exits in 2016 are in the computing and corporate software sectors; life sciences startups accounted for 15% of total exits. The semiconductors sector is the only one in 2016 that experienced an increase relative to 2015, thanks to the Cisco acquisition of Leaba for $320 million. “Israeli innovation is still strong, and the amount of experience gained while running those successful companies is increasing every year,” Suliman says. “This alone should make us optimistic looking ahead. We will clearly have many more boom years later on.” (PWC 21.12)

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2.2 Québec Premier Couillard to Lead Multi-Sectoral Mission to Israel

Québec Premier Philippe Couillard will lead a multi-sectoral mission to Quebec in Israel and Judea & Samaria from 19 to 24 May 2017. He will be accompanied by the Minister of the Environment, Economics, Science and Innovation, Dominique Anglade, and the Parliamentary Assistant to the Minister of Education, Recreation and Sports and to the Minister responsible for Higher Education, David Birnbaum. This mission will be an opportunity to strengthen and develop new partnerships to stimulate exchanges in key areas of the global economy such as research, innovation, entrepreneurship (start-ups), life sciences, Aerospace, agri-food, information and communications technologies and digital technologies. (Telbec 22.12)

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2.3 Intezer Raises $2 Million Led by Samsung NEXT

Intezer has raised $2 million in a seed round co-led by Samsung NEXT and Alon Cohen founder and former CEO of CyberArk Software and FilesX (now IBM). Several additional angels participated in the round. Intezer has developed a virtual “security camera” for the digital space of the enterprise. This system displays a simple visual map of all the software programs currently active within an organization at any given moment, down to the single code fragment level. It is able to deal with all the unrecognized software, using a unique technology that maps the software’s code DNA to identify its nature and origins.

Tel Aviv’s Intezer is a cyber security company that provides a unique solution for medium to large organizations, giving customers unparalleled visibility and control over their systems. Intezer has developed a virtual “security camera”? for the enterprise cyberspace. This solution displays a simple visual map of all the software running in the organization at any given moment, down to the single code fragment level in the memory — leaving no stone unturned. The solution enables security teams to detect and respond to the most sophisticated cyber-attacks, regardless of the malware’s behavior and signature. (Globes 15.12)

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2.4 Israel to Double Water Supply to Jordan

This coming January, following Supreme Court approval and a 2010 agreement between Israel and Jordan, Mekorot National Water Company will be able to start laying a new pipeline through the Jordan Valley, intended to double water supply to the Kingdom of Jordan. In exchange, as stated in the peace accord between the states, Israel will receive water from the Jordanian desalination plant to be established in Aqaba. The new, 5.5 km Kinneret-Beit Shean pipeline will pass mainly through Jordan Valley agricultural areas and will provide the Hashemite kingdom with up to 100 million cubic meters of water per year, compared with 50 million cubic meters at present. The laying of the new pipeline is of critical importance for Jordan. Due to the ongoing civil war in Syria, millions of refugees have flocked to Jordan, resulting in a real water crisis which has made the need to increase water supply more vital than ever. (Globes 14.12)

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2.5 Lumus Raises $45 Million to Make Wearable Augmented Reality Displays

Lumus has completed a $45 million funding round for its augmented reality displays for smartglasses. Lumus previously announced it had raised $15 million and now it is announcing an additional $30 million as part of the same round. Quanta Computer, one of the biggest Taiwanese laptop makers, led the round, with additional participation from HTC and other strategic investors. Shanda Group and Crystal-Optech also participated.

Lumus technology enables the production of wearable eyeglass displays that are compact, comfortable and fashionable. The Lumus near-to-eye transparent display technology consists of a unique lens that contains an array of ultra-thin transparent reflectors (the patented Light-Guide Optical Element) and a mini-projector that injects an image into the lens, also patented. These two elements are combined to create a wide field of view, true color, daylight brightness and a see-through display.

Rehovot’s Lumus makes the optical engine that empowers AR solutions. Founded in 2000, Lumus is on a mission to create optics that transform the way people interact with their reality. The company is working on optical technology for see-through wearable displays and serves multiple AR vertical markets, including health care, manufacturing logistics, avionics and consumer products. The Lumus solution is based on its patented Light-guide Optical Element (LOE) waveguide, which combines the smallest dimension eyewear for any given field of view. (Lumus 19.12)

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2.6 Dynamic Yield Raises $22 Million

Dynamic Yield has raised $22 million in Series C financing round led by Vertex and ClalTech, with participation from Baidu and Global Founders Capital. Existing investors Bessemer Venture Partners, Marker LLP and Innovation Endeavors also participated. The funds will be used to fuel further global growth of Dynamic Yield’s personalization technology across the world. Dynamic Yield’s advanced machine learning engine builds actionable customer segments in real time, enabling marketers to increase revenue via personalization, recommendations, automatic optimization & 1:1 messaging.

Tel Aviv’s Dynamic Yield was founded in 2012 and has raised $37 million to date, including the latest financing. Dynamic Yield’s platform is being used by product and marketing teams to create machine-learning based personalized experiences that are synchronized across all digital channels including web, mobile web, apps and email. The company has personalized the experiences of more than 500 million people, and it continues to expand its global footprint by serving industry leaders in eCommerce, Media & Publishing, Gaming, Travel, B2B and other verticals. (Dynamic Yield 20.12)

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2.7 Optimal+ Selected as a 2016 Red Herring ‘Top 100 Global’ Company

Optimal+ has been selected as a 2016 Red Herring Top 100 Global company. Optimal+ was selected for its leadership in innovation and technology advancements with other leading private companies from North America, Europe and Asia. With over 50 billion integrated circuits and printed circuit boards analyzed in 2016, Optimal+ has demonstrated that its big data solution enables better enterprise-wide decision-making through increased visibility into the global supply chain.

Red Herring’s Top 100 Global list has become a mark of distinction for identifying promising companies and entrepreneurs. Red Herring editors were among the first to recognize that companies such as Facebook, Twitter, Google, Yahoo, Skype, Salesforce.com, YouTube, and eBay would change the way we live and work.

Holon’s Optimal+ is the only big data analytics software company providing an end-to-end solution that measurably improves quality, yield and productivity for semiconductor and electronics manufacturing. From chip to board to system, their enterprise-grade solutions ensure that all of your global manufacturing data is collected, cleaned and analyzed in real time, enabling decisive actions that enhance, certify and monitor the quality of semiconductor and electronic products over their entire lifetime. With over 50 billion devices processed annually, Optimal+ provides Manufacturing Intelligence solutions that enhance yield and productivity, reduce RMAs and usher in an age of robust, long-term quality products. (Optimal+ 19.12)

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2.8 Nevada & Israel Sign Landmark Cooperation Deal on Water Innovation

Nevada and Israel have signed a memorandum of understanding on water-use innovation, marking a first-of-its-kind collaboration agreement between a US state and a Middle East country. The deal, reached between Nevada’s WaterStart public-private joint venture and Israel’s National Technological Innovation Authority, was signed at BusinessH2O Summit, a one-day conference in Las Vegas organized by the US Chamber of Commerce. This paves the way for Israeli water technology companies to set up research and production facilities in the semi-arid state of Nevada.

The Israeli-American Coalition for Action (IAC for Action), a non-profit that advocates to policymakers on behalf of the Israeli-American community, said the memorandum of understanding “provides new opportunities for cooperation that will benefit both Nevada and Israel by broadening and deepening research and development collaboration in the critical area of water management and conservation.”

Israel has become a regional water empire due to its advanced desalinization plants. Its water technologies are highly sought around the world. From California to Africa, there is a global water shortage, yet Israel, a tiny country in the middle of a desert, has found remarkable solutions. Regularly effected by drought, Israel has prioritized the establishment of desalination plants and the development of economical desalination systems and other innovative solutions. (JNS 14.12)

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2.9 Snapchat to Buy Israeli Startup Cimagine for Estimated $40 Million

Multinational technology and social media company Snap Inc., owner of the popular mobile multimedia messaging application Snapchat, has finalized a deal to buy Israeli augmented reality startup Cimagine Media for an estimated $40 million. This marks Snapchat’s first acquisition in Israel and it will allow Snap to establish its first research and development center in the Middle East. Cimagine’s 20 employees are expected to stay on with the company, which is now looking to expand its workforce.

Founded in 2012, Cimagine specializes in computer vision, real-time image processing, mobile development and international marketing. One of the Israeli company’s developments is True Marketless Augmented Reality – commerce-focused technology that allows users to virtually place furniture and appliances they wish to purchase in the space of their home, on their mobile devices, at the click of a button. Cimagine already does business in the U.S., U.K. and Australia, and has partnerships with Shop Direct, John Lewis and Coca-Cola, increasing its appeal to Snap, which may seek to introduce shopping through Snapchat in the future, as means of exploring additional revenue opportunities. California-based Snapchat is expected to go public as early as March with a valuation of as much as $25 billion. (Snap 26.12)

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2.10 Knowmail Raises $3.5 Million to Apply AI to Your In-Box

Petah Tikva’s Knowmail is building what it calls personalized Artificial Intelligence help employees manage email and other messages better. Knowmail also closed $3.5 million in new funding. Leading the round is CE Ventures, with participation from existing investors AfterDox, Plus Ventures, 2B Angels, INE Ventures, and various unnamed private investors. The company says it plans to use the new capital to continue building out Knowmail’s functionality as it gears up for a full launch early next year.

The problem that Knowmail has set out to solve can perhaps be best described as communication or information overload, something that it believes AI is best positioned to tackle. As the product exists today, Knowmail is an AI engine that installs on top of Outlook, studies your email habits, time management and personal preferences and is able to deliver the emails to you more appropriate to your needs. Specifically, this means the ability to view emails that have been automatically categorized as ‘urgent’ (knowing that these need to be handled before anything else), ‘important’ (when you have additional time to attend to your email), and everything else.

There are a number of additional features enabled by Knowmail’s predictive model, such as one-click moving of a message to the predicted email folder, deferring an email for a later time/day to reduce in-box noise, and intelligent auto-complete search to find the exact email you’re looking for, and more. (Knowmail 14.12)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Dubai’s MAF Signs Deal to Bring American Girl to the Arabian Gulf

Majid Al Futtaim announced an exclusive retail agreement with American Girl, a division of Mattel, and a premium brand for dolls. The deal also includes Majid Al Futtaim being awarded exclusive distribution rights in the UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman, spanning bricks and mortar retail, airport-based retail and e-commerce. The first American Girl store in the UAE is slated to open in 2017 and will feature retail experiences, like the popular Doll Hair Salon and an on-site restaurant, as well as all of the latest product offerings, it said in a statement. The US brand will further bolster MAF’s collection of international brands including LEGO, lululemon athletica, AllSaints and Abercrombie & Fitch. (AB 19.12)

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3.2 Oman to Build Gulf’s Largest Egg Supply Facility

Oman is expected to complete work on the Arabian Gulf’s largest “table egg” facility during the next two years, which will have an annual capacity of 2,300 million eggs. The facility is joint venture between Oman Flour Mills Company, Gulf Japan Food Fund, UAE’s IFFCO group and Japan’s Ise Foods. The first phase, coming up at Ibri, a city located in the country’s northwest, will cost $40 million. Currently, 45% of the country’s requirement for eggs is met through imports, but with the new facility, Oman will be exporting eggs. (AB 21.12)

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3.3 National Oilwell Varco Announces New Composite Pipe Manufacturing Facility in Saudi Arabia

Houston’s National Oilwell Varco announced that it is expanding the operations of its Fiber Glass Systems business unit with a new composite pipe manufacturing facility located near the city of Dammam, Saudi Arabia. The facility will establish NOV as Saudi Arabia’s first local manufacturer of high-pressure spoolable composite pipe and will further enhance the company’s ability to provide lightweight, corrosion-resistant, engineered solutions from its global team of experts supported by 12 manufacturing facilities around the world. The new, state-of-the-art, manufacturing complex will produce spoolable and jointed pipe, including the flagship line of Fiberspar spoolable products, STAR Glass Reinforced Epoxy high pressure line pipe, and downhole tubing and casing. Operations are expected to begin in the first quarter of 2018.

National Oilwell Varco is a worldwide leader in the design, manufacture and sale of equipment and components used in oil and gas drilling and production operations, and the provision of oilfield services to the upstream oil and gas industry. (NOV 22.12)

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3.4 Choice Hotels International Expands Portfolio in Greece

Rockville, Maryland’s Choice Hotels International signed a multi-unit development agreement with GVK Enterprises, a hospitality management and development firm, to introduce and establish a hotel portfolio in Greece. Choice anticipates the first property under the agreement will open by the summer of 2017 under the Comfort brand flag in Athens, and four additional properties will be developed on the Greek mainland and islands under the Comfort, Quality and Clarion brands.

This agreement follows several other EMEA market portfolio expansions that Choice has announced in 2016. In April, the company announced it had signed an agreement to deliver approximately 25 hotels and 8,000 rooms in UAE and Saudi Arabia by 2021. Other deals signed include establishing multiple hotels in Belgium and the co-branding of 19 properties in Germany, Austria and Hungary under the Comfort and Quality brands. Choice recently launched its upscale Ascend Hotel Collection brand in the UK and France, with Turkey to follow in 2017. (CHI 16.12)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Saudi Energy Firm Wins Deal to Build Solar Project in Mexico

Fotowatio Renewable Ventures (FRV), a developer of large-scale solar power plants and part of Saudi-based Abdul Latif Jameel Energy, has been awarded a 30 year 300 MW solar project in Mexico. With this build-operate-own agreement, FRV said it is extending its global footprint into the Mexican market at a rate of $26.99/MWh for the first 15 years of the project. The construction of the plant will begin in mid-2018 and will become operational in mid-2019, and will create approximately 250 local jobs as part of the construction phase and a further 20 jobs during operations. The plant will generate enough green electricity to supply approximately 76,100 homes, while reducing greenhouse gas emissions by approximately 97.7 million tons of CO2.

It added that the agreement was part of a second electricity market auction conducted by the National Energy Control Centre (CENACE). FRV said the help the Federal Commission of Electricity’s plans to generate 35% of its electricity from renewable energy sources by 2024. FRV was acquired by Abdul Latif Jameel Energy in April 2015. (AB 23.12)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanon’s Average Consumer Prices Fell 1.14% y-o-y by November 2016

According to the Central Administration of Statistics (CAS), average consumer prices in Lebanon dropped by 1.14% y-o-y by November 2016 as reflected by the average Consumer Price Index (CPI) which decreased from 97.14 points by November 2015 to an average of 96.03 points in the same period of 2016. Average prices of food and non-alcoholic beverages (20.6% of CPI) fell 1.35% y-o-y by November 2016. Moreover, with the decreasing oil prices, transportation (13.1% of CPI) and water, electricity, gas & other fuels (11.9% of CPI) registered average yearly decreases of 4.18% and 9.60%, respectively. Also, health (7.8% of CPI) and communication (4.6% of CPI) recorded respective average falls of 2.14% and 0.24% y-o-y.

However, the education sub-index, which grasps 5.9% of the CPI, rose by 1.86% y-o-y on average by November 2016. Moreover, as tourism activity started to recover during the first eleven months of 2016, average restaurants & hotels prices (2.6% of CPI) increased by 2.61% y-o-y by November 2016. The actual rent sub-index for households (old and new rent), with a weight of 3.4% of the CPI, grew by an average of 4.06% y-o-y. (CAS 22.12)

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5.2 Total Number of Lebanon’s Registered New Cars Dropped to 35,976 by November 2016

According to the Association of Lebanese Car Importers, the total number of newly registered commercial and passenger cars dropped 5.42% year- on- year (y-o-y) to 35,976 cars by November 2016. The number of registered commercial cars grew by 11.62% y-o-y to 2,363, while the number of registered passenger vehicles fell 6.43% to reach 33,613 cars by November 2016. Japanese model cars constituted the largest market share in total passenger cars, with a share of 37% by November 2016, followed by Korean cars, with a market share of 34.47%, and European cars with 20.74% of the total market share. Moreover, American and Chinese cars observed an increase in their sales with a rise y-o-y of 13.70% and 5.74%, respectively, while European, Japanese, and Korean cars’ sales dropped 5.34% and 10.25%, and 6.41%, respectively. In terms of car brands, Kia maintained its the largest share of 19.76% of newly registered passenger cars, followed by Hyundai, Toyota and Nissan with respective shares of 14.55%, 13.22%, and 9.57%. (ALC 17.12)

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5.3 Presidential Elections Positively Impact Beirut’s Hotel Occupancy Rate

According to Ernest and Young’s Hotel Benchmark Survey, Beirut’s hotel occupancy increased to stand at 65%, compared to 57% in November 2015. This sharp increase can be justified by the improving political situation, as a new President had been elected. Moreover, Dubai hotel occupancy rates increased from 84.8% in November 2015 to 89.5% in November 2016 due to the largest construction event in the Middle East. As for Abu Dhabi hospitality market, the Formula1 event allowed occupancy rate to remain constant at 84%.

On a year to date basis, Beirut hotel occupancy rate steadied 58% by November 2016, when compared to the same period last year. This was complemented with hotels dropping their room rates as depicted by both the average rate per room and the revenue per room that dropped by 16.2% and 15.2% y-o-y to reach $137 and $81, respectively. The best performer in the region was Cairo, where its hotel occupancy rates increased by 15 p.p to 63% by November 2016. This rise was also accompanied by annual upticks of 18.8% and 54% in the average rate per room and revenue per room, which reached $132 and $83, respectively. However, Kuwait witnessed the largest loss in hotel occupancy rates of 4 and 5 star hotels by November this year. (EY 19.12)

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5.4 German Aid to Jordan in 2016 Totals €471.7 Million

Jordanian Minister of Planning and International Cooperation Fakhoury, said the total aid commitments from Germany to Jordan in 2016 have reached €471.7 million, some €153 million of which are humanitarian aid related to Syrian refugees. The rest is bilateral development support or projects related to host communities within the Jordan Response Plan to the Syrian refugees’ crisis (JRP) 2016-2018. The German aid to the Kingdom has reached a “historic” level, Fakhoury noted, adding that the majority of the provided, €400 million in grants and €70 million were soft loans. Jordan and Germany has signed all of the aid agreements except for €130 million to be signed in Q1/17.

Meanwhile, Minister Fakhoury and Water & Irrigation Minister Nasser on signed a soft loan and grant agreements worth €33 million to support water and sewage sector. The financial support, provided by the KfW Entwicklungsbank (German Development Bank) will be used for water supply projects and improving sewage networks to save water resources, according to a planning ministry statement. Fakhoury said that the first agreement is a complementary grant worth €3 million for a project to enhance water supply of Syrian refugees’ host communities. (AMMONNEWS 13.12)

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5.5 Japan to Provide $254 Million Grant to Jordan

The Jordanian government signed with a $254 million grant agreement Japan to enhance the financial situation and support development policies to reform public services in the Kingdom. The agreement was signed by Minister of Planning and International Cooperation Fakhoury and the Japanese Ambassador to Jordan Sakurai and chief representative of the Japan International Cooperation Agency in Amman. Fakhoury said that the loan is the third that supports the general budget in order to address challenges that face the Kingdom due to the influx of a large number of Syrian refugees to the Kingdom. The loan comes in the wake of King Abdullah’s visit to Japan last October. The minister praised Japan’s continued support to Jordan as well as its understanding of the economic and social challenges facing the Kingdom due to hosting 1.4 million Syrian refugees. The Japanese ambassador stressed his country’s commitment to provide support to the Kingdom in various domains, thus further boosting bilateral ties. According to official figures, Jordan has received assistance from Japan totaling $1.021 billion since 1999, $491.2 million of which are in the form of grants and the rest as soft loans. (AMMONNEWS 21.12)

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5.6 World Bank Supports Iraq with $1.5 Billion Package

The World Bank Group has endorsed a new $1.485 billion package to support reforms to improve public service delivery and transparency, stimulate private sector growth and support job creation. Iraq continues to face a large humanitarian crisis with 10 million people, over one quarter of the population, estimated to be in need of assistance, of which 3.4 million are internally displaced people and 240,000 refugees. The institution’s Board of Directors approved the Second Expenditure Rationalization, Energy Efficiency and State-Owned Enterprise Governance Development Policy Financing (DPF) Project, for a total of $1.443 billion including guarantees from the governments of the United Kingdom ($371.82 million) and Canada ($72 million), a testament of strong international support to Iraq. (WB 22.12)

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►►Arabian Gulf

5.7 GCC Said to See $25 Billion Annual Revenue Boost from VAT Launch

The adoption of value added tax (VAT) by GCC countries in 2018 is expected to generate additional revenues of more than $25 billion per year, according to EY. The advisory firm said the launch of VAT represents a major shift in tax policy “that will impact all segments of the economy and lead to a fundamental change in the way businesses operate across around the region”. It added that the extra tax revenues will allow GCC governments to amend other fees and charges and increase infrastructure investments.

All GCC countries are working towards VAT implementation by 1 January 2018 to avoid transaction and sales issues that could arise from intra-GCC trade. Businesses that are not ready by the VAT go-live date may suffer fiscal consequences from the inability to pass on the underlying VAT to the end customer. The expected VAT laws are not ‘business as usual’ and may require several months for companies to successfully integrate a VAT functionality into their systems. It is a unique and transformative time for the Gulf. Last month, it was reported that the UAE will use the money generated from VAT to launch new developments projects. (EY 17.12)

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5.8 In 2017 GCC Economies to Record Weakest Growth Since 2009

The Middle East & North Africa (MENA) region will next year record its weakest economic growth since the global financial crisis in 2009, according to the latest outlook from Capital Economics. Capital Economics warns the region will “struggle” again in 2017 as fiscal policies are tightened to plug current account and budget deficits, which have widened in the past two years as a result of persistent low oil prices.

Saudi Arabia is likely to see subdued growth for the most of the year, while, on the other hand, the UAE is expected to be the best performing economy in the Gulf in 2017 going into 2018. Overall average growth in the region is likely to weaken to 1.5% in 2017.

Capital Economics noted that dollar pegs in the Arabian Gulf would remain in place “but that means policymakers will be forced to follow the US Federal Reserve and hike interest rates”. The report says that the UAE should begin gradual recovery in the coming quarters and is likely to be the best performing economy in the Gulf in 2017-18. In Kuwait, meanwhile, economic growth is expected to remain weak due to the “fractured” political environment despite a strong balance sheet. It noted that Qatar’s economy, too, is likely to stay sluggish as fiscal policy becomes more restrictive and credit growth eases, while Bahrain and Oman will “underperform” their Gulf peers. (Capital Economics 13.12)

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5.9 GCC Car Sales Forecast to Rise to 1.4 Million by 2020

The number of passenger cars in use in the GCC region is expected to grow at 5% annually from an estimated 10.3 million in 2015 to 13.2 million in 2020, according to Alpen Capital. Its report said new passenger car sales are projected at 1.4 million in 2020, compared to 1.2 million in 2015. Although new sales declined in 2016 and will be under pressure in 2017, Alpen said it expects to see steady growth starting 2018 as the economic environment stabilizes and creates pent-up demand. The anticipated growth is slower compared to that during last five years as consumers tighten discretionary spending and delay buying new cars, the report said.

Saudi Arabia, the UAE, and Kuwait collectively are expected to continue holding more than 75% of the region’s passenger car fleet in 2020. New car sales in the UAE are projected to grow at an annualized rate of 4.5% to over 267,000 in 2020 from an estimated 214,000 in 2015 while sales of new cars in Saudi Arabia is likely to reach nearly 743,000 in 2020.

The cost of vehicle ownership in the GCC is lower compared to other countries globally, due to a favorable tax structure. Additionally, attractive insurance and financing options makes it easier to own a car in the GCC. One of the key drivers of the automotive industry in the GCC is availability of low-cost fuel. Although oil-based economies have recently resorted to raising energy prices in a bid to reduce subsidies, the cost of fuel is still much below the global average. Alpen added that the presence of several dealers makes the GCC automobile market highly competitive, resulting in price sensitivity and low brand loyalty among consumers. (Alpen Capital 17.12)

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5.10 Kuwait Eyes $1.7 Billion Tank Deal with the United States

The US State Department has approved a possible foreign military sale to the Government of Kuwait of 218 tanks and related equipment, support, and training. The estimated cost of the sale is $1.7 billion. It said the Government of Kuwait has requested the possible sale in support of its recapitalization of 218 M1A2 tanks, to include 240 .50 Cal M2A1 machine guns; 480 7.62mm M240 machine guns; 240 radios; and 1,085 night vision goggles.

Kuwait intends to use the equipment to modernize and extend the service of its fleet of tanks. The proposed sale of this equipment and support will not alter the basic military balance in the region. Implementation of this proposed sale is estimated to require five to seven contractors and 25-30 US government representatives being sent to Kuwait. (DoD 24.12)

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5.11 UAE’s $13.3 Billion Budget for 2017 to Focus on Education & Healthcare

The UAE’s Federal National Council on Tuesday endorsed the budget for 2017, set in late October by the Cabinet at AED48.7 billion ($13.3 billion), with a prime focus on education, social development and health. The budget is a marginal rise on the AED48.5 billion budget set for 2016, suggesting UAE authorities remain cautious about spending as low oil prices pressure state finances. The approval came at a third session of the FNC’s 16th legislative chapter.

About 20.5% of the 2017 budget, or AED10.2 billion, was earmarked to the education sector, 8.6% to the healthcare sector, 8.2% to public sector wages, 6.6% to social development and 3.3% to housing. The UAE budget traditionally accounts for only around 14% of total fiscal spending in the country – the seven individual emirates, mainly oil-producing Abu Dhabi, provide the rest. The IMF projects the UAE will post a consolidated fiscal deficit, including the federal government and all the emirates, of 3.86% of GDP this year. (AB 20.12)

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5.12 UAE Considering Self Sufficiency in Production of Generic Drugs

The UAE is close to being self-sufficient in producing generic drugs as 16 pharmaceutical facilities are manufacturing up to 1,000 such drugs, according to a senior official from the Ministry of Health and Prevention. The UAE is also planning to increase the number of manufacturing facilities to 30 by 2020. This is another indication of the strong growth of the pharmaceutical industry and the efforts being exerted to improve the UAE’s global competitiveness. Different from totally synthesized pharmaceuticals, these include vaccines, blood, blood components, allergenics, somatic cells, gene therapies, tissues, recombinant therapeutic protein and living cells used in cell therapy. (AB 17.12)

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5.13 Dubai’s Ruler Approves 2017 Budget with $680 Million Deficit

On 21 December, Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum approved the 2017 budget for the emirate which will see a deficit of AED2.5 billion ($680 million). Sheikh Mohammed, also Vice President and Prime Minister of the UAE, endorse Dubai’s Department Of Finance budget which has total expenditure of AED47.3 billion, up from AED46.1 billion for 2016. The deficit represents 0.6% of total gross domestic product (GDP). According to the 2017’s budget, oil revenue is expected to represent 6% of the total revenues while 3,500 new jobs are expected to be created. The 2017 budget will see spending on infrastructure next year rise by 27% as the emirate continues to launch development projects ahead of its hosting of the World Expo in 2020. Despite the overall budget deficit, the government expects to run an operating surplus – excluding items such as loan repayments and capital receipts – of AED2.9 billion next year. (AB 21.12)

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5.14 Dubai Says Seven New Hospitals in Pipeline With Three Others to Expand

Dubai Health Authority (DHA) has announced that seven new hospitals are in the pipeline to be built in the emirate to support growth in the healthcare sector as it adapts to a growing and ageing population. Another four hospitals are under review, while three existing hospitals will undergo expansion, the DHA added. Currently Dubai has 26 hospitals, which are among the 2,833 health facilities in the emirate. Of these 22 are internationally accredited and four are in the process of getting accredited. The health facilities include outpatient clinics, diagnostic clinics, pharmacies, hospitals and allied health facilities. (DHA 17.12)

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5.15 Oman Government Budget Deficit Grows to $12.5 Billion

Oman’s government posted a budget deficit of OR4.81 billion ($12.5 billion) in the first 10 months of 2016, according to latest official figures. The January-October deficit compared to a deficit of OR3.26 billion, as low oil export prices slashed its revenues, provisional Finance Ministry data showed. The government’s original 2016 budget plan envisaged state expenditure of OR11.9 billion and revenues at OR8.6 billion. Officials said their 2016 economic plans assumed an average oil price of $45 a barrel.

Oman is imposing a series of austerity measures after it posted a budget deficit of about OR4.5 billion last year. Gasoline and diesel price subsidies have been cut and similar cuts are planned for electricity and liquid petroleum gas. In August, the World Bank said Oman’s subsidy bill is expected to fall by 64% this year as the government seeks to reform its finances amid lower oil prices. (AB 23.12)

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5.16 Saudi Arabia Projects $53 Billion Deficit in 2017

On 22 December, Saudi Arabia projected a 2017 budget deficit of about $53 billion and a lower than expected shortfall for this year after government cost-cutting in response to lower oil prices. Expenses next year will reach 890 billion riyals ($237 billion) against revenues of 692 billion riyals ($184 billion). This year’s deficit will be 297 billion riyals ($79 billion), down 8.9% from 2016’s budget forecast. Revenues for this year are expected at 528 billion riyals, higher than projections a year ago of 513.75 billion. Spending is expected to come in at 825 billion riyals for 2016, 1.8% lower than foreseen.

The world’s biggest oil exporter froze major building projects, cut cabinet ministers’ salaries, and imposed a wage freeze on civil servants in the wake of last year’s record deficit, which reached $97 billion. (AFP 22.12)

►►North Africa

5.17 World Bank Approves Second Tranche as Egyptian Pound Falls

On 20 December, the World Bank agreed to provide Egypt with the second tranche worth $1b of its $3b total loan aimed at supporting job creation and spurring growth. As news of the loan broke, the value of the Egyptian pound depreciated as the US dollar registered a new record high against the pound. The exchange rate hit EGP 19.40 for buying and EGP 19.85 for selling at its highest, while the lowest value was set at EGP 19 for buying and EGP 19.20 for selling. The high demand on the dollar is caused by companies finalizing their budget and foreign companies repatriating their profits abroad, next to the usual demand by importers.

Meanwhile, the Egyptian Exchange (EGX) closed at its highest level at 12,148 points, driven by the exchange rate hike at banks. The EGX increased by 3.37%, supported by foreigners’ purchases worth EGP 112m, while Egyptians bought shares worth EGP 10.8m and Arabs EGP 101.2m. The market capital reached EGP 602.2b during trading on 20 December. (DNE 20.12)

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5.18 Finance Ministry Planning on 5% Economic Growth for Egypt in 2017/18 Budget

Egypt’s Finance Ministry will aim for an economic growth rate of 5% in the next financial year, according to details from its outline 2017/18 budget released on 25 December. The ministry also said it hopes to reduce the budget deficit to 9.5% of GDP and the total public debt to 94%. Egypt’s total public debt amounts to EGP 2.6 trillion or 94.5% of the GDP, according to the central bank’s data. The budget will also aim for an unemployment rate of 11%, down from the current 12.6%. The targeted growth rate will be achieved through adopting a range of economic policies, including support for productive sectors, such as industrial activity, investment and increasing exports. The focus on national mega projects will likewise continue, with growth in mind.

In 2014, Egypt embarked on a plan to introduce a number of fiscal reforms, including fuel-subsidy cuts, as well as imposing new taxes to ease a growing budget deficit. In early November, Egypt’s central bank decided to freely float the pound and raise key interest rates as part of a set of reforms aimed at alleviating a dollar shortage and stabilizing the country’s flagging economy. Egypt’s economic growth rate registered 4.3% of GDP in the fiscal year 2015/16, down from 4.4% in the previous fiscal year. The budget deficit for the fiscal year ending June 2016 registered 12.3% of GDP, according the ministry’s latest monthly bulletin. (Ahram Online 25.12)

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5.19 In 2015/16 Egypt’s Oil Ministry Signed 8 Deals Worth $709 Million to Find Energy Reserves

Egypt’s petroleum ministry said that in 2015/16 it signed eight agreements with six international and local companies to search for oil and gas reserves in the Mediterranean, the Western Desert, the Gulf of Suez and Upper Egypt, with total investments worth $709 million. The ministry said that the agreements also include drilling 33 new energy wells. The ministry highlighted that it has succeeded in increasing the natural gas production per day to around 4.45 billion cubic feet of gas by accelerating the search for natural gas reserves in the Mediterranean. In early December, Egypt announced that it accepted investment offers in oil and gas drilling and exploration worth $200 million from companies including Shell, British Petroleum, Apache and Apex.

The consumption of petroleum and gas products at international prices during the 2015/2016 fiscal year registered at EGP 279 billion, while the cost of providing the fuel to consumers reached EGP 181 billion. The revenue of the subsidized products in the local market amounted to EGP 130 billion, while the subsidies of the petroleum and gas products cost EGP 51 billion.

The government plans to trim the petroleum subsidy bill by 43.5% to reach EGP 35 billion and the electricity subsidy bill by 6.4% to reach EGP 29 billion in 2016/17 due to the drop in global oil prices. Egypt’s economy has been struggling since the 2011 uprising, with a sharp drop in tourism and foreign investment, two main sources of hard currency for the import-dependent country. (Ahram Online 25.12)

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5.20 Egypt Reports Suez Canal Revenues in November at 21 Month Low

Egypt’s revenues from Suez Canal commerce hit a 21 month low in November 2016, generating $389.2 million, down roughly 5% compared to the same month last year, according to data from the Suez Canal Authority (SCA). November’s receipts are the lowest since February 2015, when the vital Egyptian waterway generated $382 million. November’s data also shows a drop in earnings from the previous month, which registered $418.1 million in revenue. The Suez Canal revenue normally sees a decline in revenue from October to November each year.

The canal is the fastest shipping route between Europe and Asia and is one of the country’s main sources of foreign currency. The SCA is considering a new initiative that would require the world’s top container shippers to pay tolls in advance of using the waterway. According to the authority, the carriers would receive discounts in return for being charged in advance. The payments would likely be made three years in advance. (Ahram Online 23.12)

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5.21 Moroccan Central Bank Lowers Growth Forecasts to 1.2% in 2016

On 20 December, the Bank Al Maghrib (the Moroccan central bank) reduced growth forecasts to 1.2% for 2016, with a 9.6% decline in the agricultural value added and a 2.6% deceleration in the nonagricultural GDP. In the medium term and assuming an average crop year in the next two years, growth is expected to accelerate to 4.2% in 2017 and 3.7% in 2018. Nonagricultural GDP would accelerate to 3.4% and 3.7% in 2017 and 2018, respectively, driven by stronger revenues, particularly from the agricultural sector, and accommodative monetary conditions. (MWN 20.12)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Electricity Consumption Soars as Turkey Abandons Winter Time

Turkey’s electricity consumption surged sharply in November due to the country’s move to ditch the winter time system, despite a slight slowdown in the economy and moderate weather conditions. According to a new report by the Chamber of Electrical Engineers (EMO) on power consumption data from the Turkish Electricity Transmission Company (TEIAS), the country’s decision not to set its clocks back as usual led to a rise in electricity consumption, rather than planned energy savings.

Turkey first adopted summer time, also known as daylight saving time, in 1940, and applied it uninterruptedly after the 1970s, following the example of Europe, until this year. Today the system is used across the 28-nation European Union. The clocks did not, however, go back an hour for winter this year at the end of October, putting Turkey three hours ahead of Greenwich Mean Time (GMT), ostensibly in a bid to make energy savings of up to TL 1 billion.

The country’s electricity consumption, however, saw a 6.5% year-on-year increase in November, a record high rise in the last five years, and rose to 22.7 billion kilowatt/hour. Turkey’s electricity consumption was 21.3 billion kWh in November 2015, 21 billion kWh in 2014, 20 billion kWh in 2013, and 20.3 billion kWh in 2012. The change in the decades-long practice triggered strong criticism, as the sun does not rise until almost 8:30 a.m. in western provinces like Istanbul, while many businesses need to work extra hours so as to coincide with Western partners.

Turkey’s Energy Ministry is set to reassess its choice to abandon winter time, which has increased the country’s time difference with Europe amid a series of complaints from across Turkey about the darkness in the mornings. (HDN 22.12)

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6.2 Central Bank of Cyprus Sees Growth Rate of 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. 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. This 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.

The export of goods and services are forecast to increase 2.6% this year and pick up to 3.4% in 2018 and 2019, following a 4.4% increase in 2016, it continued. Imports will increase 1.1% next year before rising 3% and 3.1% in 2018 and 2019 respectively. This year, they are projected to rise 5.1%.

The unemployment rate is expected to drop from 14.9% in 2015 to 12.8% this year to 10.7% in 2017, the central bank said. In 2018, it will drop for the first time to 8.8%, and for the first time since 2012 to a one-digit figure, before it further drops to 6.9% in 2019. Unemployment remained below what Cyprus’s international creditors had predicted “mainly because of the significant reduction of foreign workers in Cyprus, the ongoing recovery in employment and the flexibility demonstrated by the Cypriot labor market concerning salaries”. (CDN 22.12)

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6.3 Eurozone to Unblock Greek Short-Term Debt Relief Deal in January

The Eurozone finance ministers, Eurogroup, will unblock the now suspended short-term debt relief measures for Greece in January after Athens reassured euro zone lenders it would honor its bailout commitments. Lately Greece raised significant concerns regarding the country’s bailout commitments among its euro zone lenders with plans to pay out a Christmas bonus for pensioners and keep lower value added tax on some islands. The lenders decided to suspend a short-term debt relief deal for Athens, which would reduce its public debt by 20% of GDP by 2060, until the effects of the Greek measures on bailout (MoU) targets is fully assessed. (Reuters 24.12)

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7: GENERAL NEWS AND INTEREST

*REGIONAL:

7.1 Lebanon Forms New Government

Lebanon’s President, Michel Aoun, and Prime Minister Saad al-Hariri have formed a new government of 30 ministers drawn from most sides of the country’s political spectrum and from all of its religious sects. Aoun, an ally of the Shi’ite group Hezbollah which dominates the country’s politics, was elected president by members of parliament in October, after more than two years without anyone occupying Lebanon’s highest office of state. His election was partly the result of a political deal under which he would ask Hariri, a former political opponent, to be prime minister. However, some leading Lebanese politicians did not support the deal, contributing to Hariri’s delay in being able to form a government.

Lebanon has had a caretaker government for more than two years, led by former prime minister Tammam Salam, contributing to a political crisis that has weakened government services. Among the main cabinet posts, Gebran Bassil, a Christian and ally of Aoun, stays on as foreign minister, while Ali Hassan Khalil, a member of the Shi’ite Amal party to which Parliament Speaker Nabih Berri belongs, remains finance minister. Nouhad Machnouk, a Sunni Muslim and member of Hariri’s Future Movement, retains his post as interior minister. The new defense minister Yacoub al-Sarraf is a political ally of Aoun. The other important post, energy and water minister, went to Cesar Abou Khalil. (Reuters 19.12)

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7.2 Individual Arming Jumps in Turkey

The individual acquisition of arms is rising in Turkey, with the number of registered and unregistered personal guns up tenfold in the past decade. Most of the weapons are unlicensed, according to a report published by daily Cumhuriyet on 25 December. The daily also said the reason for the move to acquire arms is the lack of “feeling of security in Turkey.” According to a report prepared by the Umut Foundation, which fights against the individual acquisition of arms, the increase in civilian arming stems from the increase in the number of terror attacks and regulations regarding hunting.

According to data obtained by the foundation, there are around 20 million individual weapons in Turkey, nearly 85% of which are unregistered. Nearly everyone in Turkey is capable of obtaining a weapon and some 17 million weapons are without licenses, whereas a small amount, nearly 2.5 million, are licensed. When calculated in terms of population, one in four citizens has a weapon in Turkey, making it 27th in the world in terms of gun ownership. Some 65% of the crimes that are committed with individual weapons are carried out with firearms. Unlicensed weapons are used in nearly 84% of the crimes that are committed with firearms.

According to statistics from the Umut Foundation, 2,175 armed incidents were covered in the news in 2015. Some 71% of the incidents that were committed with firearms and edged weapons were carried out using firearms like rifles and pistols, while 29% were carried out with sharp objects. (HDN 25.12)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Can-Fite’s Namodenoson (CF102) Inhibits Liver Fibrosis – Supports Potential Treatment Efficacy

Can-Fite BioPharma announced that new preclinical data show its liver disease drug candidate Namodenoson (CF102) inhibited, in a dose dependent manner, the growth and proliferation of the liver fibrosis cells. This outcome suggests the anti-fibrotic effect of the drug and supports its development as an agent to combat non-alcoholic fatty liver disease (NAFLD), the precursor to non-alcoholic steatohepatitis (NASH). Pre-clinical studies which evaluated the effects of Namodenoson on fibrogenic hepatic stellate cells were conducted at Hadassah University Hospital, Ein Kerem. These latest study results add to the growing body of data that demonstrate Namodenoson’s potential efficacy in NAFLD and NASH, indications for which there is currently no FDA approved drug. They are advancing Namodenoson into a Phase II trial that we expect to commence in the coming months through leading medical institutions in Israel. By 2025, the addressable pharmaceutical market for NASH is estimated to reach $35-40 billion.

Petah Tikva’s Can-Fite BioPharma is an advanced clinical stage drug development Company with a platform technology that is designed to address multi-billion dollar markets in the treatment of cancer, inflammatory disease and sexual dysfunction. The Company’s lead drug candidate, Piclidenoson, is scheduled to enter Phase III trials in 2016 for two indications, rheumatoid arthritis and psoriasis. The rheumatoid arthritis Phase III protocol has recently been agreed with the European Medicines Agency. Can-Fite’s liver cancer drug Namodenoson is in Phase II trials for patients with liver cancer and is slated to enter Phase II for the treatment of non-alcoholic steatohepatitis (NASH). (Can-Fite 16.12)

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8.2 CartiHeal Gets FDA Approval of Its Agili-C Implant for the Treatment of Joint Surface Lesions

CartiHeal announced the FDA approval of the Investigational Device Exemption (IDE) application submitted by CartiHeal for their Agili-C implant, towards a PMA application. The 2 year-long pivotal study will involve a minimum of 250 patients in US and OUS centers. The study is aimed to show superiority of the Agili-C implant over surgical standard of care, i.e. micro-fracture and debridement, in the treatment of cartilage/osteochondral defects in both osteoarthritic knees and in knees without degenerative changes, making it the first approved study of such broad indications using a single implant. The study is designed as a prospective, multicenter, open-label, randomized and controlled trial, involving up to 3 lesions in the same joint and with a total treatable area of 1-7cm2. Results of these prior investigations demonstrated the potential for cartilage regeneration and remodeling of the underlying subchondral bone, along with pain and symptom relief.

Kfar Saba’s CartiHeal develops proprietary implants for the treatment of cartilage and osteochondral defects in traumatic and osteoarthritic joints. Backed by extensive pre-clinical and clinical data, its flagship product Agili-C, an aragonite-based biodegradable scaffold, has been shown to promote restoration of hyaline cartilage and remodeling of its underlying subchondral bone through a natural process, without the use of cells or growth factors. Clinical results in the knee, ankle and big toe demonstrated the potential of significant improvement in pain reduction, as well as reduction in related symptoms – through a simple, single-step implantation procedure. In the United States, the Agili-C is an investigational device that is limited to use in the IDE study. It is not available for sale. (CartiHeal 20.12)

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8.3 INSIGHTEC’s Exablate Prostate System Gets CE Mark for Treating Locally-Confined Prostate Cancer

INSIGHTEC announced that the Exablate Prostate system received CE Mark for treating locally-confined prostate cancer with MR-guided Focused Ultrasound (MRgFUS). The Exablate Prostate system is based on INSIGHTEC’s proprietary MRI-guided focused ultrasound technology. It uses focused ultrasound waves to precisely target and ablate (destroy), the targeted tissue in the prostate, while minimizing damage to adjacent structures. The treatment is done under Magnetic Resonance Imaging (MRI) guidance for high resolution visualization of the patient’s anatomy as well as real-time temperature monitoring. The treatment does not require incisions, is performed in a single session, allowing patients to quickly return to normal activity. The Exablate Prostate system features an endorectal probe integrated into a treatment bed which is compatible with GE MRI 1.5 and 3T. Ultrasound energy is delivered by a high frequency, 1,000-element phased array transducer which delivers focal therapy under MRI guidance and real time thermal feedback. This enables the physician to control and personalize the therapy.

Haifa’s INSIGHTEC is the world leader in MR-guided Focused Ultrasound (MRgFUS). The company’s non-invasive therapy platforms, Exablate and Exablate Neuro, are transforming patient treatments for various indications in Neurosurgery, Oncology and Women’s health. A growing number of renowned physicians are realizing the clinical and economical value of focused ultrasound around the world. (INSIGHTEC 20.12)

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8.4 Israeli Researchers Find Revolutionary Deep-Sea Bacteria Treatment for Prostate Cancer

Using lasers and a drug made from deep-sea bacteria, Israeli scientists have now developed a non-surgical method to treat men in the early stages of prostate cancer, drastically improving their chances of completely eliminating the disease without the need to remove the gland. The novel approach, which has already been tested across Europe, eliminates tumors with minimal side effects. In the treatment, doctors inject a light-sensitive drug derived from deep-sea bacteria into a patient’s bloodstream, killing cancer cells without destroying healthy tissue.

The treatment, called vascular-targeted photodynamic therapy or VTP, was developed at Israel’s Weizmann Institute of Science, in collaboration with the privately-owned company STEBA Biotech, and additional researchers from Europe. Results of a clinical trial in 413 patients at 47 hospitals in 10 countries across Europe, most of which were performing VTP for the first time, showed that the drug, which is activated with a laser to destroy tumor tissue in the prostate, was so effective that 49% of patients go into complete remission, compared to 13.5% in the control group. That is almost four times more effective.

As reported in the published study, WST11, the light-sensitive drug used, is derived from bacteria found at the bottom of the ocean. To survive with very little sunlight, they have evolved to convert light into energy with incredible efficiency. The Weizmann scientists exploited this feature to develop WST11, a compound that releases free radicals to kill surrounding cells when activated by laser light.

Men with low-risk prostate cancer are currently put under active surveillance, where the disease is monitored and only treated when it becomes more severe. Radical therapy, which involves surgically removing or irradiating the whole prostate, has significant long-term side effects, so it is only used to treat high-risk cancers. While radical therapy causes lifelong erectile problems and incontinence, VTP only caused short-term urinary and erectile problems that are resolved within three months, the researchers said. No significant side effects remained after two years. In the trial, only 6% of patients treated with VTP needed radical therapy, compared with 30% of patients in the control group. (NoCamels 21.12)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 IAI’s TaxiBot in Final Stages of Certification for the Airbus 320

Israel Aerospace Industries (IAI) is continuing to progress with its TaxiBot, the semi-robotic pilot-controlled vehicle for dispatch towing. Certification tests on an Airbus 320neo were completed successfully at Airbus facilities in Toulouse, France on 8 December 2016. The TaxiBot reached its maximum speed of 23 knots, performed multiple turns at different speeds and tight turns at low speed. An engine start of one and both engines of the A320neo during TaxiBotting was performed satisfactorily, as were other tests conducted by Airbus test pilots.

TaxiBot, a semi-robotic pilot-controlled vehicle, is designed to transport commercial airline aircraft from terminal gates to the runway and back, without using the airplane’s own engines. TaxiBot started dispatch-towing commercial Lufthansa Boeing 737 (Classic) flights departing out of Frankfurt Airport in November 2014. Since 2008, IAI, together with its industrial risk-sharing partner TLD, has been cooperating with Lufthansa LEOS in the development of the TaxiBot, with support of both OEMs Airbus and Boeing. Lufthansa LEOS has integrated the TaxiBot project into its “E-PORT-AN” initiative, aimed at taking passenger airplane towing and surface-traffic performance beyond the existing limits of environmental sustainability at Frankfurt Airport.

Israel Aerospace Industries (IAI) is Israel’s largest aerospace and defense company and a globally recognized technology and innovation leader specializing in developing and manufacturing advanced, state-of-the-art systems for air, space, sea, land, cyber and homeland security. Since 1953, the company has provided advanced technology solutions to government and commercial customers worldwide including: satellites, missiles, weapon systems and munitions, unmanned systems, robotic systems, electronics, radars, C4ISR, navigation systems and EO payloads. (IAI 13.12)

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9.2 Dragonera Launches New AI-Driven Software Development Service

Dragonera has raised $3 million in seed funding from Singulariteam. The new funding will allow the company to accelerate the roll out of its automated development service to new markets. When companies want to launch a new product, there is often a long and tedious delay between the initial idea and when an early version is available. Dragonera is looking to accelerate that process with a new service that can automate up to 70% of the early development of new products and services. Dragonera has created an AI-based software development service to build software products end-to-end. By relying on AI and microservices, Dragonera is able to deliver everything from prototypes to final production products at a fraction of the cost in a fraction of the time. The remaining parts of the product that are not covered by microservices are covered by Dragonera’s experienced designer and developer network. Dragonera’s use of AI and automation minimizes cost, with services starting at a few thousands of dollars for a Minimal Viable Product (MVP).

Founded in 2016 and after raising $3M seed round from Singulariteam, Dragonera launches the platform that assists companies and entrepreneurs to overcome hurdles that involve designing and building their MVP. Dragonera provides end to end solutions by learning the needs and aspirations, defining the product, building it and deliver it successfully. (Dragonera 20.12)

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9.3 Mobiquity and Insert Team up to Provide Real Time, In-App Personalization

Mobiquity, a digital engagement provider for Fortune 500 companies, and Insert announced a partnership to deliver real-time, in-app personalization to mobile users. The partnership brings together Mobiquity’s end-to-end mobile services with Insert’s technology for rapidly deploying in-app engagement features, allowing app owners and mobile marketers to develop more meaningful customer relationships. As enterprise brands increasingly rely on mobile solutions for improving customer engagement and business outcomes, they must deliver the right mobile moments, at the right time, in the right context. However, providing these personalized experiences requires a deep understanding of customer data and can take weeks of development time to deliver.

Through their partnership, Mobiquity and Insert will enable brands to enhance an existing solution, or build a new app, for maximizing customer interactions in real-time. Mobiquity will focus on mobile strategy, design, and development while Insert’s platform can be used to add dozens of pre-built features to an app, including messages, videos, surveys, and tooltips, without any coding or app store approval. App owners and mobile marketers can then leverage the data that Insert provides to optimize these features and achieve their goals.

Yakum’s Insert is the first automated in-app marketing platform. It offers a broad set of customizable features – “inserts” – which can be launched into any live app in minutes, with no coding. These pre-built features include videos, banners, messages, surveys and more – allowing app marketers to better engage, convert and retain their customers. Insert was created to enable mobile marketers and product managers to drive user loyalty and conversion, without writing a single line of code. (Mobiquity 20.12)

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9.4 Magna and Innoviz Partner on LiDAR for Autonomous Driving Systems

Aurora, Ontario’s Magna International and Innoviz Technologies announced they are partnering to deliver LiDAR remote sensing solutions for the implementation of autonomous driving features and full autonomy in future vehicles. Recognizing that LiDAR is imperative for achieving the desired levels of performance and safety, Magna selected Innoviz’s technology to be integrated into its autonomous driving systems to provide a complete sensor-fusion solution to automakers. Driven by a unique hardware architecture and innovative software technologies, Innoviz offers a comprehensive market solution. The high-definition, solid-state LiDAR enables 3D remote sensing to produce highly accurate real-time images of the vehicle’s surroundings while meeting automotive standards and significantly reducing cost and size. Varying from solutions currently on the market, the Innoviz LiDAR can be seamlessly integrated into any vehicle and is designed to effectively manage changing light and weather conditions.

Kfar Saba’s Innoviz provides LiDAR remote sensing solutions for fully autonomous vehicles as well as 3D Computer Vision solutions including Object Detection, Tracking and Classification and accurate Mapping and Localization. Innoviz’s growing team is comprised of leading experts in Electro-Optics, Computer Vision, MEMS design, Digital Signal Processing and more. (Magna 20.12)

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9.5 Nano Dimension Delivers 3D Printer to One of the 10 Largest U.S. Banks

Nano Dimension Technologies has delivered, in return for payment, a DragonFly 2020 3D Printer to a Fortune 500 company, one of the 10 largest bank holding companies in the United States. The printer will be installed in the client’s hardware development center. This marks Nano Dimension’s sixth delivery of the DragonFly 2020 3D Printer in 2016 to a beta customer. With this delivery, Nano Dimension has met its targets for 2016, as presented to investors. The beta customer conducts activities related to electronics and hardware development for the financial services sector. Previous deliveries to leading companies from a variety of industries include a U.S.-based Fortune 100 multinational corporation in the technology industry; U.S.-based FATHOM; one of the top 10 largest defense companies in the world; PHYTEC, based in Germany; and a leading defense company in Israel.

Nano Dimension’s beta program involves the delivery of the company’s DragonFly 2020 3D Printers to leading companies and partners worldwide. The customers are pioneers of additive manufacturing technology’s entry into the world of electronics. They will qualify the DragonFly 2020 technology and use it, amongst other possibilities, to speed up their product development times. The DragonFly 2020 3D printer also has the potential to strengthen the customer’s in-house innovation capabilities while providing them with enhanced R&D IP security. In return, the company receives valuable feedback for product development and other considerations, including payment.

Ness Ziona’s Nano Dimension, founded in 2012, focuses on development of advanced 3D printed electronics systems and advanced additive manufacturing. Nano Dimension’s unique products combine three advanced technologies: 3D inkjet, 3D software and nanomaterials. The company’s primary products include the first 3D printer dedicated to printing multi-layer PCBs (printed circuit boards) and advanced nanotechnology-based conductive and dielectric inks. (Nano Dimension 20.12)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s CPI Drops By 0.4% in November

The Central Bureau of Statistics announced that Israel’s Consumer Price Index fell by 0.4% in November, bringing the rate of inflation for the year to date to minus 0.2%. Prominent price drops last month were in fresh produce (-5.9%), transport (-0.6%) and food (-0.4%). The clothing item rose by 2%. The housing price index rose 0.9%, bringing the annual rate of price rises in housing to 8.7%. This follows a 1.3% rise in October. (CBS 15.12)

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10.2 Israel’s Exports Increase by 3% in 2016

Israel’s exports of goods and services totaled $95 billion in 2016, 3% more than in 2015, according to an initial summary by the Israel Export and Industrial Cooperation Institute published on 27 December. Excluding the sale of startups and diamonds, exports totaled $86 billion, 2% more than in 2015. High-tech exports (industrial and services) totaled $41 billion, up 4%, compared with the preceding year, and are projected to account for 43% of Israel’s exports of goods and services. The increase is a result of rapid growth in exports of computer, software and R&D services, in line with the trend in recent years. According to the Export Institute’s forecast, exports are projected to grow by 6% in dollar terms to over $100 billion in 2017. Export Institute economists predict a real 4% rise in exports. (IE&ICI 27.12)

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10.3 Overnight Stays in Israel by Tourists Surged in November

The Israel Hotel Association said on 26 December that some 970,000 tourists stayed at least one night in Israel in November, an increase of about 38% compared to November 2015. The number of tourists who stayed overnight in November this year was also 23% higher than in the equivalent period in 2014, which followed Operation Protective Edge in Gaza, and on par with November 2013. Earlier this month, it was reported that record numbers of tourists visited Israel in November 2016. Revenue from incoming tourism in November generated more than NIS 1.5 billion ($390 million), about the same as the Tourism Ministry’s annual budget for promoting inbound tourism. This is NIS 400 million ($100 million) more than the revenue generated by inbound tourism in November 2014. (Various 27.12)

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10.4 Rehovot Leads Israel’s Revenue Per Household

According to the Central Bureau of Statistics 2015 Household Expenditure Survey on the 14 Largest Cities in Israel, Rehovot has the highest net revenue per household – NIS 19,099. The data indicates that the gross average revenue per household in Israel is NIS 18,671, while net revenue is NIS 15,427. Average expenditure is NIS 12,323. In contrast to Rehovot, Bat Yam has Israel’s lowest revenue per household – NIS 11,005. Of Israel’s large cities, Tel Aviv has Israel’s highest net revenue per capita and expenditure per capita – NIS 8,053 and NIS 6,419, respectively. Rehovot also has the largest gap between net revenue and expenditure – NIS 5,974; the smallest gap was noted in Ashkelon and Bnei Brak – about NIS 250.

In Rehovot, Ashdod, Petah Tikva and Rishon LeZion – over 80% of revenue is from salaries, while in Bnei Brak about 25% is from allowances and financial aid, over twice the national average. In all cities, the highest household expenditure article is housing (24.7%). Ashdod has Israel’s highest percentage of expenditure on food (18.8%), healthcare (7%) and clothing and shoes (4%). The national average of people living in homes they own is 67.6%, and the percentage of people living in rented apartments is 26.7%. In Rishon LeZion, Rehovot, Bnei Brak and Ashdod over 70% of households live in apartments they own. Tel Aviv, as should have been expected, has the highest average rent price – NIS 4,563 per month. (Globes 19.12)

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10.5 Israeli Families Below Poverty Line Increase to 19.1% of Population

Almost one in every five Israeli families lives beneath the poverty line, the National Insurance Institute (NII) report for 2015 revealed. The report found that although there was a slight fall in the number of poor people, the poor have become poorer. Israel also remains at the top of the rankings in terms of the level of poverty and inequality in OECD countries. The NII found that there were 468,800 families living under the poverty line in Israel in 2015, comprising 1,217,900 people including 764,200 children. The report found that although the number of poor actually fell slightly, the percentage of poor families rose from 18.8% in 2014 to 19.1% in 2015.

The report shows that the level of the poverty among poor families, as expressed by the gap between the level of income of the families and the poverty line, has grown by 3.2%. The National Insurance Institute pointed out that a contributing factor to increased poverty was a 3.3% rise in the standard of living while welfare payments remained unchanged. The biggest rise in poverty was recorded in the age group that actually has the lowest level of poverty – 46 to pension age. Poverty in this age group grew by 17%. Even so the level of poverty in this age group remains well below the average. At the same time there was a sharp drop of 13% in the number of one-parent families living below the poverty line, while their proportion among the poor fell 16%. However, poverty among families with children grew by 4%.

The report found that poverty in the Israeli Arab population continued to grow. In 2015, 53.3% of Israeli Arabs lived below the poverty line compared with 52.6% in 2014. However, poverty in the Haredi (ultra-orthodox Jewish) population fell sharply from 54.3% to 48.7% over this period. This stems from increased child allowance payments and work income. (Globes 15.12)

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11: IN DEPTH

11.1 ISRAEL: Greece-Israel-Cyprus Relations: Ripe for Expansion?

Dr. George Voskopoulos wrote on 18 December in the Jerusalem Center for Public Affairs Institute for Contemporary Affairs that inter-state relations consist of rational choices aimed at producing desired outcomes. For Greece, Cyprus and Israel, this means a continuation of stability and security in the chaos that has erupted from the Arab Spring. In light of this upheaval in the Middle East, cooperation between Greece, Cyprus and Israel is essential to produce a haven of stability.

First, for Israel, Greece and Cyprus represent a bridge of stability to Europe, a stable region close to home. This security dimension is important for a country surrounded by pockets of instability and sources of radicalism. Both countries provide Israel with an allied neighbor and bring Israel closer to Europe in terms of security, trade and energy.

Second, Israel is also a crucial security actor in a region affected by drastic domestic changes within states lacking a culture of peaceful co-existence. Currently, Greece is heavily saddled by the influx of refugees fleeing war. Cyprus, Greece and Israel share similar significant interests such as security, energy security, and the need to deal with radicalism and terrorism.

Third, Israel, Greece and Cyprus are the only working democracies in a region of undemocratic, semi-democratic and failing states. This is a powerful motivation factor for cooperation since democratic values are a fundamental criterion for partnerships. This strategic partnership could set the groundwork for future cooperation among these states.

In the last few years, Greek-Israeli relations have intensified due to the intensity of threats, the urgency and the need to solidify relations in a region tormented by multifaceted threats. Israeli-Greek relations have advanced to a degree where the militaries are conducting joint air force operations and joint maneuvers by Greek and Israeli navies. Greece permitted an overfly mission by Israeli military aircraft in Greek air space in 2014. An Israeli military attaché has been stationed in Athens since 2014. These are major choices on the part of Athens, whose foreign policy of the past had focused exclusively on building a one-way relationship with the Arab world, leaving Israel out of the picture.

Israel expressed deep gratitude to both countries for sending fire-fighting aircraft when widespread fires hit Israel in November 2016.

A Stable Axis of Power

Greece-Cyprus-Israel relations are setting clear ground rules of engagement for states to operate as regional stabilizers. Jerusalem, Athens and Nicosia constitute a stable axis of power that should be expanded to fill the vacuum of leadership in the region. The tripartite cooperation between the three countries as well as the joint declarations that followed recent meetings were labeled “non-exclusive,” thus leaving the door open for others willing to participate. Yet, any potential candidates for joining this cooperation will have to be clear about its intentions, policy choices and above all their support for peace and democracy. These trilateral understandings are a message to the region. Israel, Greece and Cyprus are initiating an alliance of stable nations, who share common values, and are willing to fight (in different ways) terrorism.

The recent advances constitute just the security dimension of this new tripartite cooperation. Cyprus and Greece provide Israel with close proximity to Europe, a continent where, despite problems, democracy flourishes. The intensity of threats, as well as the deteriorating security in the Middle East, point to the need of further cooperation between the stable forces in the region. This is a historic moment for the future of this region and the time is ripe to produce more allied relationships amidst the chaos of the Middle East.

In a very promising development, Greece, Israel and Cyprus have decided to formalize their proposal for the construction of a pipeline from gas fields off the coast of Israel. They are taking their case to the EU Climate Action and Energy Commissioner, thus making a formal step in materializing the project. The feasibility report of the proposal and its financial competitiveness are encouraging. The project possesses strategic advantages since it uses the safest route to Europe. The three democratic countries can guarantee in the long-term a secure means of delivery in the effort to minimize Europe’s dependence on Russian gas.

George Voskopoulos, Ph.D., is Associate Professor of European Studies at the University of Macedonia, Thessaloniki, Greece, and the former head of the department. (JCPA 18.12)

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11.2 KUWAIT: Fitch Says Kuwait Election a Risk to Reform But Fiscal Strength Robust

Kuwait’s recent elections will increase tensions between the executive and legislature, hindering economic and fiscal reforms, although the extent to which this will happen is unclear, Fitch Ratings said on 8 December.

The composition of Kuwait’s parliament changed substantially in elections late last month, after most opposition groups revoked their boycott and took part in the poll. The absence of a formal party system makes it hard to quantify the precise size of parliamentary opposition, but it appears that pro-government MPs (including voting ministers) will constitute a tiny majority at best.

The outcome is in line with our view that the elections would deliver a less government-friendly legislature, as we commented when we affirmed Kuwait’s ‘AA’/Stable sovereign rating earlier in November. We believe mounting parliamentary opposition to the government’s fiscal program was the key trigger for dissolution by the Emir, which precipitated the election.

The nature of the post-election relationship between the executive and legislature remains to be seen. The fragmented nature of the parliament could enable the government to forge political alliances. The prime minister may be able to placate opponents by recommending to the Emir some ministerial candidates from their ranks. But the Emir’s re-appointment of the previous prime minister may suggest that the government is preparing to take a more confrontational stance.

Kuwait’s parliamentary system creates substantial opportunities for MPs to obstruct the government’s agenda by rejecting proposals. The parliament’s power to summon ministers for questioning and revoke confidence in ministers gives it influence even on issues that would not formally require a parliamentary vote, such as recent fuel subsidy reforms. The government may back down from more substantive initiatives such as public sector pay reform, particularly if the oil price recovery is sustained. Nevertheless, it could still pursue some of its fiscal agenda with smaller, less contentious measures, for example enforcing existing subsidy rules or linking public sector bonuses to job attendance.

If parliament were dissolved again, the likely popular frustration about lack of representation and perceived unfair reforms could return Kuwait to the kind of political uncertainty of 2011-2013, when there were three dissolutions of parliament and widespread protests.

Kuwait’s exceptional fiscal strengths, which underpin its sovereign rating, would not be immediately affected by a return to this level of political volatility. We forecast the fiscal breakeven price at $46/bbl in FY16/17, one of the lowest among Fitch-rated oil exporters, taking into account wealth fund investment income in revenue, and excluding statutory transfers to wealth funds from expenditure. We estimate that the assets of the Kuwait Investment Authority, if the government were prepared to fully use them, could last decades if financing needs stayed at the level we expect for FY16/17.

High execution risk means our fiscal forecasts have not assumed full effect of fiscal measures even where they are already being implemented. One of the most tangible results of the political instability of 2011-2013 was poor execution of infrastructure spending, which if repeated would support fiscal balances, although at the expense of development goals.

But a reversal of economic and institutional reform would reinforce rating weaknesses, which include heavy oil dependence (leading to GDP and budget revenue volatility), weak governance and competitiveness indicators, and a weak economic policy framework compared with rating peers. A generous welfare state and the large economic role of the public sector present long-term structural challenges as the population grows. (Fitch Ratings 08.12)

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11.3 EGYPT: Fitch Affirms Egypt at ‘B’; Outlook Stable

On 15 December 2016, Fitch Ratings has affirmed Egypt’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘B’ with a Stable Outlook. The issue ratings on Egypt’s senior unsecured foreign- and local-currency bonds are also affirmed at ‘B’. The Country Ceiling and the Short-Term Foreign- and Local-Currency IDRs are all affirmed at ‘B’.

Key Rating Drivers

Egypt’s ratings balance a large fiscal deficit, a high general government debt/GDP ratio, strains on the balance of payments and recent volatile political history, with low albeit rising external debt and renewed progress in implementing an economic and fiscal reform program.

The government’s program of economic and fiscal reform has regained momentum, after stalling in the fiscal year to June 2016 when the budget deficit widened to a preliminary 12.2% of GDP. In July the government implemented a second round of electricity subsidy reform by raising prices 35% – 40%. VAT came into effect in September, after parliament approved an amended law, which put the rate at 13% initially and 14% at the start of FY17.

The central bank floated the EGP on 3 November, leading to a sharp depreciation of the currency, which has since averaged EGP17.1 against the USD (up to 12 December), compared with a prior auction rate of EGP8.8. This followed an extended period of pressure on the currency amid depressed levels of foreign exchange, which was severely limiting economic activity. The government also enacted a second round of fuel subsidy reform (the first round was in mid-2014), raising fuel prices by 30.5%-46.8%. This step was part of the government’s program following the EGP flotation to control the fiscal cost of imported fuel.

IMF board approval for the three-year $12b extended fund facility followed these reforms, on 11 November with a first tranche of $2.7b disbursed immediately. Details of the IMF agreement have yet to be released beyond the following general aims: reducing government debt/GDP by almost 10 percentage points by the end of the program, implementing structural reforms and entrenching the newly liberalized exchange rate regime.

Egypt has also been raising external financing from a number of other sources, including the GCC, the World Bank, a currency swap with China worth around $2.6b, and $2b from a consortium of international banks. The liberalization of the EGP has attracted renewed portfolio inflows. Egypt’s stock of international reserves climbed to $23.1b at end-November, from $19.1b in October and a low of $15.6b in July. We estimate that current reserve levels are just above four months of current external payments (CXP), a ratio that had been less than three in 2012-15.

Net external debt/GDP (11.7%) and net sovereign external debt/GDP (8.1%) are lower than the ‘B’ peer medians in 2016, but are rising on the back of greater recourse to foreign financing. Nevertheless, the bulk of sovereign external debt is concessional and the ratings are supported by the absence of a recent history of debt restructuring.

The public finances will remain a key weakness of Egypt’s credit profile. Despite VAT and subsidy reforms, we expect only modest narrowing in the budget deficit in FY17, to 11.6% of GDP. Tax revenue growth will be strong and the civil service law (approved by parliament in October) will continue to restrain public-sector wage growth. However, the subsidy bill will increase because the impact of the weaker EGP on import costs of fuel, for example, outweighs the subsidy price reform. Also, the higher interest rates that accompanied the EGP flotation imply a substantial increase in interest payments. We expect greater fiscal consolidation in FY18, with the budget deficit narrowing to 9% of GDP and the primary deficit to 0.3% of GDP.

Government debt/GDP is likely to peak in FY17, at around 99%, pushed higher by the combined effect of large additions to external debt and a sharply weaker EGP (assuming an end-June exchange rate of EGP16 to the $). We forecast government debt/GDP to fall to 93% in FY18, on a smaller budget deficit and currency appreciation to EGP14.5. The level of guaranteed debt and contingent liabilities is currently unclear. The Public Finance Management unit, recently established within the MoF, expects to release data on this in early 2017.

We expect that GDP growth will be weaker in FY17, at 3.3%, given the challenges the economy was facing before the EGP flotation, especially in manufacturing and tourism, and because the fiscal and monetary reforms will initially be a drag on private consumption. Despite fiscal consolidation, we forecast stronger GDP growth in FY18, at 4.5%, as the exchange rate adjustment beds in, as gas production starts at the giant Zohr field, and with stronger investment.

With inflation set to rise above 20% in the first half of 2017, fiscal and monetary reforms present some risk of social backlash, especially given ongoing structural problems including high youth unemployment, deficiencies in governance and the business environment, as well as intermittent security issues. The government is seeking to mitigate these risks by emphasizing that it is bolstering social safety nets (including cash transfer schemes) and that the reforms will deliver better economic performance and employment. Furthermore, food subsidy allocations have increased and electricity provision has improved markedly.

Rating Sensitivities

The Stable Outlook reflects Fitch’s assessment that upside and downside risks to the ratings are currently balanced.

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

-A track record of progress on fiscal consolidation leading to declining government debt/GDP.

-Sustained stronger economic growth supported by reforms to the business environment leading to increased investment and employment.

-Significant accumulation of international reserves following a sustained narrowing of the current account deficit and higher net foreign direct investments.

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

-Failure to narrow the fiscal deficit and put government debt/GDP on a downward trend.

-Reversal of fiscal and/or monetary reforms, for example in the face of social unrest.

-Renewed downward pressure on international reserves due to further strains on the balance of payments, including weaker access to foreign financing.

Key Assumptions

Fitch assumes local banks remain willing and able to finance the fiscal deficit. The political environment is assumed to be more stable than in 2011-2013, although sporadic, and at times serious, attacks on security forces are assumed to continue and underlying political tensions will remain. (Fitch Ratings 15.12)

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11.4 EGYPT: Egypt Pivots to Medical Tourism

Ahmed Hidji observed on 13 December in Al-Monitor that an Egyptian pharmaceutical company launched a campaign that highlights low-cost treatment to hepatitis C patients from all over the world as part of efforts to promote medical tourism to the country.

“Tour n’ Cure, what are you waiting for?” With these words, English journalist and documentary filmmaker Tim Coleman ended a video message 12 June, in which he relays his journey to being treated for the hepatitis C virus in Egypt, after having contracted it over 30 years ago.

Coleman said in the video that his particular treatment in England with what are being called revolutionary drugs would cost £120,000 (roughly $152,000) and that he has sought to get free treatment from the English National Health Service (NHS), but still has not received it. He said that during a trip to Cairo, he saw the Tour n’ Cure campaign ad and found out that the Egyptian campaign offers a complete course of hepatitis C medication for no more than £1,200 ($1,500). He said that he received free treatment in Egypt with the new drugs for six months starting 15 February and feels much better.

He had applied to be treated under the NHS program in 2015. In part because the treatment is so expensive in Britain, NHS England is rationing care. It is planning to fund 10,0000 hepatitis C courses annually, although 160,000 people are estimated to have the disease in England. A 12-week course there can cost up to around $50,000; some patients require more than one course.

The Tour n’ Cure is a campaign that Prime Pharma, a private Egyptian pharmaceutical company, launched on 24 May after six months of promotional efforts to revive therapeutic tourism in Egypt. According to the official website of the campaign, it started its activity by attracting hepatitis C patients from around the globe and offering them low-cost treatment and a one-week sightseeing program. Tamer Wajih, the chairman of Prime Pharma, told Al-Monitor, “Researchers at the company succeeded in innovating low-cost therapeutic protocols with 97% cure rates instead of relying on imported medication reaching $100,000 per treatment regimen.”

According to a recent field survey conducted by the Egyptian Health Ministry in December 2015, the number of Egyptian citizens with hepatitis C is estimated at 3.6 million, or 4.4% of the population.

In October, the World Health Organization held an event that celebrated the treatment of 1 million patients in low- and medium-income countries in 2015 and 2016 under the new treatment regimen. Qadri al-Said, the CEO of the Egyptian National Committee for the Control of Viral Hepatitis, said in his speech during the event that this figure included 830,000 Egyptians. Wajih said that Egypt’s success in developing a cure for hepatitis C, in addition to the five-year period needed to register the medication in European markets, have made the therapeutic tourism campaign inevitable. The aim is to extract the most economic benefits by offering a treatment and an entertainment program that costs €4,900 ($5,200) at most, including the cost of medication.

Wajih added, “We want to bring in 100,000 patients in 2017. The campaign seeks to turn the spotlight on Egypt as the world healer of hepatitis C, so that patients would need to come to Egypt. Besides, the patient’s daily expenditure would exceed that of a tourist visiting Egypt only for tourism and opting for the cheapest choices. Tour n’ Cure packages include residence in five-star hotels, direct flights and daily leisure tours.”

Wajih detailed the steps that a patient must take before deciding to travel to Egypt: The patient must provide the campaign with the home country’s test results so that the medical team can look into the case and assess whether the patient is eligible for treatment in Egypt. According to him, the medical team is focusing on countries that are relatively close to Egypt geographically, such as Spain and Italy as well as England, as they have a high number of hepatitis C patients. He said, “The citizens of these countries know Egypt well. They can easily be persuaded with the quality of touristic and therapeutic services we offer.”

Wajih emphasized the complete coordination between the campaign and the relevant ministries, namely the Civil Aviation, Health and Tourism ministries. He said that Minister of Health Ahmed Emad El-Din Rady suggested using the state hospitals and labs, but the campaign had already signed contracts with private labs and hospitals. Wajih expected the campaign to expand its activity to include cancer patients. He did not seem worried about foreign patients’ treatment in public hospitals.

In this regard, the director of the Therapeutic Tourism Department at the Ministry of Health, Abdelati al-Manai, told Al-Monitor, “The Health Ministry has been capitalizing on the infrastructure of some public health facilities and on the skills of Egyptian medics to attract patients from Arab and African states.” Wajih said this doesn’t mean he doesn’t trust public hospitals, but that they opted for private hospitals to give patients the most appropriate medical service in Egypt.

The Tour n’ Cure campaign chose Cairo as a starting point for its activity. Wajih said that the capital abounds with human resources and medical facilities. He said that patients could be welcomed in Sharm el-Sheikh hotels if the influx exceeds the capacity of Cairo’s facilities.

International soccer players are also promoting therapeutic tourism in Egypt. Wajih said, “The campaign has teamed up with FC Barcelona’s striker, the Argentinian Lionel Messi, to launch the initiative from Cairo to ensure the right of hepatitis C patients to receive low-cost treatment.” The head of the Egyptian Tourism Activation Authority, Hisham al-Demiri, told Al-Monitor over the phone that he fully supports the campaign and that his committee is trying to promote therapeutic tourism in Egypt. He asserted that this sort of tourism is popular around the world, and that it can attract foreigners who are not used to visiting Egypt for tourism purposes. The aim is to help Egypt’s tourism sector to overcome its current stagnation.

The tourism sector in Egypt has been stagnating for five years. According to the Central Agency for Public Mobilization and Statistics, 506,200 tourists visited Egypt in October 2016 as opposed to 909,400 in October 2015 — a 44.3% decline. The economic performance indicators that the Ministry of Planning issued in early December showed that the tourism sector witnessed a 28.7% decline during the 2015-16 fiscal year, while it had achieved a 19.5% growth in the preceding fiscal year.

Demiri said, “People traveling for treatment do not come alone. They are often accompanied by family members. During and after the treatment, they get the chance to discover Egypt, and they might be interested in visiting again even after being healed.”

On whether the campaign can bring 100,000 patients to Egypt in 2017, Demiri said, “Egypt is new to the therapeutic tourism sector, and it is still in the promotion phase. The committee has not assessed the outcome of the promotional campaigns yet.” He concluded that some European tourism companies in Spain, Belgium and the Netherlands are interested in the medical treatment programs in Egypt. (Al-Monitor 13.12)

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11.5 TURKEY: Fitch – Turkish Bank Outlook Negative Amid Macro, Political Risks

On 7 December Fitch Ratings revised the Turkish bank sector Outlook for 2017 to Negative from Stable. We expect heightened risks to political stability and the operating environment to put pressure on bank credit fundamentals and increase the potential for further currency and interest-rate volatility. High levels of short-term foreign-currency wholesale funding leave banks exposed to significant refinancing risks and swings in investor sentiment towards Turkish country risks.

Political uncertainty, as demonstrated by July’s attempted coup, is likely to undermine Turkey’s longer-term economic performance and bank asset quality. Foreign-currency lending makes up about a third of total loans and is at risk as the Turkish lira has fallen sharply since 2013 and could fall further. Many borrowers are likely to be hedged only in the fairly short term or partially.

SME lending is significant at about a quarter of the portfolio and is particularly sensitive to slower growth. Problems could also arise from relatively small segments, such as tourism, which has been hit by worsening security conditions, and energy, which has been under pressure from low energy prices and the weak lira.

However, we forecast the sector’s non-performing loans ratio will increase only moderately to about 4% at end-2017 from 3.3% at end-9M16. The economy is still growing and the fairly long-term nature of most foreign-currency loans mean they will season relatively slowly. Regulatory forbearance also supports a gradual increase in the bad debt ratio. Nevertheless, performing ‘watch list’ loans that have been restructured are likely to continue to rise to reflect a weakening of asset quality. Single-name concentrations could also push up our non-performing loans ratio forecast.

Turkish banks rely heavily on short-term external funding, but this risk is long-standing and financing has been resilient in the aftermath of July’s attempted coup. Nevertheless, funding costs could increase further in 2017, depending on investor sentiment and perception of Turkish country risks, while investor demand and rollover rates could also weaken. We believe Fitch-rated banks have the ability to raise sufficient foreign-currency liquidity to service their foreign debt for up to a year, although prolonged market closure would put pressure on their liquidity and on Turkey’s external finances more generally.

The move to a Negative rating Outlook was also influenced by the fact that about 80% of Fitch-rated Turkish banks are on Negative Outlook, largely to reflect the sovereign rating Outlook. The Negative Outlook reflects the potential for a deterioration in the government’s ability to provide support for state-owned banks and for a downgrade of the Country Ceiling for foreign-owned banks. For privately owned banks, Negative Outlooks reflect the negative impact of a weakening operating environment on standalone credit profiles. (Fitch Ratings 07.12)

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11.6 TURKEY: How Turkey Used Math to Drastically Boost its Economy

Mustafa Sonmez posted in Al-Monitor on 20 December that a 20% upward revision in the size of the Turkish economy will notably improve the country’s economic profile on paper, but not without controversy over the new calculation method and the discrepancies it created.

The Turkish Statistical Institute (TUIK), an official agency attached to the prime minister’s office, had announced a while ago its intention to change the calculation method used to determine the country’s main economic indicators. The new method was to be based on ESA2010, the European Union’s accounting framework, to align with the way EU countries calculated their gross domestic product (GDP). With this explanation at hand, the planned change seemed necessary and reasonable.

On 12 December, however, the release of the new GDP data sparked myriad objections and criticism disputing the scientific merits and objectivity of the way the revision was made. Pundits had been especially curious about the third-quarter growth rate, which was expected to be in the negative. So it turned out, but according to the TUIK, the economy contracted 1.8% in the third quarter, well beyond the 0.5% expected in line with earlier data sets. Then the entire picture painted by the new calculation method raised questions, both in terms of methodology and consistency.

According to the new data, Turkey’s GDP was, in fact, bigger than what the previous calculation had found. The difference is staggering — nearly 20%. In 2015, for instance, the Turkish economy was said to have produced goods and services worth TL1.953 trillion at current prices. The new calculation method puts the figure at TL 2.338 trillion, meaning that an extra TL 385 billion in GDP had been somehow “discovered.” This amounts to about $140 billion, based on the average exchange rate last year. So the Turkish economy’s size for 2015 grew from $718 billion to $857 billion overnight. Accordingly, the per capita income also increased — from $9,257 to $11,082.

The revision is said to be made according to EU standards, but unlike the EU, which took 2010 as the basis year, Ankara opted for 2009, a crisis year in which the Turkish economy had contracted by about 5%. Relevant to 2009, GDP increases in following years turned in bigger, meaning that an important part of the overall increase stemmed from the choice of a problematic basis year.

While applying the EU method, the TUIK seems to have thought the construction sector was not done justice previously, for its share in the GDP increased from 4.4% to 8.2%. The share of the manufacturing industry, meanwhile, rose by 1% to 16.7%. In short, a third of the 20% increase in the revised GDP came from the construction sector, which is now ranked third in size after the manufacturing and commerce sectors.

Similarly, the TUIK seems to have thought that investment expenditures were under-calculated, revising them up by 74%. This means that domestic savings, too, are now bigger than what we previously knew, amounting to 24% of GDP and not 14%, as stated in the government’s medium-term economic program, adopted in September.

The revisions produced a new set of growth data, whose credibility was also called into question. In the 2013-2015 period, for instance, the average growth rate rose to 6.5% per year, up from 3.7% previously. More importantly, the new growth data looks out of sync with unemployment figures. For 2013, for example, the growth rate was raised from 4.2% to 6.5%. In an economy with such a robust growth, the jobless rate is expected to decrease, at least a little bit. Yet according to the TUIK’s labor force data, not only did it not decrease, but it rose from 8.8% to 9.1%.

No doubt, the 20% upward revision in GDP impacts positively a number of other indicators, which are important for foreign investors in particular. To start with, Turkey’s overall economic profile has now improved. With some $720 billion in GDP and per capita income of about $9,000, Turkey had dropped out of the world’s top 20 economies. Now it will make it back to the list.

Major indicators, watched closely by the International Monetary Fund (IMF) and credit-rating agencies, will now speak of a lesser fragility. Take, for instance, the current account deficit-GDP ratio, which denotes the foreign exchange deficit. It stood at 4.5% for 2015, but will now go down to 3.7%. Similarly, the $421 billion external debt stock’s ratio to GDP will decrease by a few percentage points from its previous level of some 60 % and Turkey’s borrowing capacity will look stronger. Military expenditures, too, will look more “reasonable” in proportion to GDP. With a higher GDP, the related public debt and budget deficit ratios will also improve, contributing to a more pleasant shop window for the country.

Some figures, meanwhile, will look worse. The ratios of health, education and social benefit spending to GDP are seen as important indicators when comparing countries and government policies. With the upward revision in GDP, the ratios will fall, and what Ankara spends for its people in those realms will look more inadequate. “If the cake was found to be 20% bigger, who got the newly discovered slice?” many will ask, and the credibility of income distribution and poverty surveys will be questioned further.

Inevitably, the new GDP requires revision in Ankara’s medium-term program, which outlines economic targets for the next three years. The program was already destined for revision after the economy began to contract fast in the third quarter, sending crisis signals and dampening expectations. How the government will review targets for 2017 and the following two years remains to be seen. An even more crucial question is how credible the new GDP figure will be in the eyes of the IMF and other foreign actors.

Mustafa Sonmez is a Turkish economist and writer. He has worked as an economic commentator and editor for more than 30 years and authored some 30 books on the Turkish economy, media and the Kurdish question. (Al-Monitor 20.12)

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11.7 TURKEY: Dollar-Hungry Turkey Eyes Middle Eastern Markets

Mustafa Sonmez posted in Al-Monitor on 13 December that scrambling to overcome a foreign exchange crunch, Turkey’s government has outlined incentives to prop up exporters. While Middle Eastern markets figure high on the target list, Ankara’s political conflicts with neighbors present an obstacle that needs to be addressed.

The turbulence in the Turkish economy, marked by a dramatic depreciation of the Turkish lira, is forcing Ankara to consider emergency measures. While President Recep Tayyip Erdogan led a campaign against the threat of dollarization, the government recently unveiled a package of measures to appease and buoy up economic actors. With the domestic market expected to shrink, the measures focus on encouraging exports and overseas contracting. As part of this drive to open up abroad and generate foreign exchange, the potential of Middle Eastern markets is remembered anew. Turkish traders and contractors had performed impressively in the region before wars and political conflicts hit economic ties. Whether and how they can revive that performance are issues with both economic and political question marks.

Erdogan’s call on citizens to convert dollar assets to Turkish liras appeared to bear fruit for a couple of days, but after regaining some ground against the dollar, the national currency began to slide again.

Prime Minister Binali Yildirim announced that some $10 billion had been converted to Turkish liras as part of the campaign, but soon it became clear that the shift was driven not by citizens, but by state banks and other public institutions converting their foreign exchange reserves to Turkish liras. After an initial retreat, the dollar rose again, fueled mostly by foreign investors exiting the Turkish stock exchange. The official sell-off figures were not yet announced at the time this article was written.

The sell-off seems to have been driven by the relative decline of the dollar price. How? Short-term foreign investments in Turkish stocks and government bonds amount to about $61 billion. These investments, however, are made in Turkish liras, and when investors want to go, they tend to await the right moment with more favorable exchange rates. Hence, the retreat of the dollar provided such a window of opportunity.

Deterring foreign investors from leaving Turkish markets is not the only option in overcoming the foreign exchange deficit. Earning foreign exchange is another way to battle the crunch, and that’s what led the government to outline a series of incentives for exporters.

Announcing the measures after a meeting of the Economic Coordination Board on 8 December, Yildirim said, “Companies need cash on the market. We are creating a credit line of up to 250 billion Turkish liras [$72 billion] … to ease the cash crunch and even boost employment. It’s a new fund to overcome the cash crunch of exporters and small- and medium-sized enterprises.”

As a country hit by a foreign exchange deficit, Turkey has indeed neglected exports as a way of generating foreign exchange. In the 2010-2015 period, the average worth of exports was $142 billion per year while imports were $227 billion, meaning an annual average deficit of $85 billion. The biggest deficit in this period — $105 billion — was in 2011, while the smallest — $63 billion — was in 2015 under the impact of falling energy prices and the country’s weakening economic growth.

Amid a continued slowdown (growth is expected to be 2% this year), the deficit will decrease a bit more, but it obviously remains an acute problem that needs to be tackled. Tourism revenues alone cannot heal a foreign trade deficit of $85 billion per year, covering only a fourth of the gap. Thus, Turkey continues to be a fragile economy with a chronic current account deficit. Its maneuvering room is further narrowed by a $421 billion external debt stock, the result of both short-term borrowing and bank loans to cover the gap, which means a debt burden of nearly 60% of gross domestic product.

In short, the country was late in remembering exports — but as the Turkish proverb says, “No matter where you cut on losses, it’s a gain.” If the European Union is the first region to be targeted with the export incentives, the Near and Middle East is the second, being a market where Turkey had once had good economic ties and is now compelled to remember.

In the 2010-2015 period, Turkey’s imports from Middle Eastern countries were worth $18.5 billion per year, while its exports amounted to $33 billion, meaning an annual foreign trade surplus of nearly $15 billion.

Turkey began to focus on the region in 2003, which led to the trade volume surging from $9 billion to $64 billion in 2012. Turkey’s increased energy exports from the region played an important part in the staggering 611% increase, but the importance it placed on Middle Eastern markets was equally effective, as evidenced by the fact that Iraq became the second-largest market for Turkish exporters after Germany.

Here’s how things stand today, according to the latest available data: In the first 10 months of 2016, Turkey’s trade volume with the Near and Middle East region amounted to about $36 billion, or 13% of its total $280 billion foreign trade, which is hardly a satisfactory figure.

With an $8 billion bilateral trade volume, Iran is now Turkey’s top regional partner. Due to the fall in global energy prices, Turkey, which buys gas and oil from Iran, has secured a $600 million net export advantage against its eastern neighbor. The United Arab Emirates is another major partner, with $6.5 billion in bilateral trade and a $1 billion advantage in Turkey’s favor. Trade with Iraq has notably declined in recent years, but the country remains high on the list, buying $6 billion worth of Turkish goods, which makes it Turkey’s third-biggest market after Germany and Britain. Saudi Arabia and Israel are two other regional countries that stand out, importing $2.5 billion worth of Turkish goods each in the first 10 months of the year. In total, the five Middle Eastern countries mentioned above account for 72% of Turkey’s $36 billion trade volume with the region.

The upward trend in oil prices, decreasing war expenditures and Iran’s warming ties with the West mean that Turkey stands a chance to boost its regional trade. This, however, is only a potential. To make it a reality, Turkey needs to improve its political ties in the neighborhood, and regional countries need to tackle their own economic and political problems to rise above annual growth rates of some 3% projected by the International Monetary Fund for the region.

Direct investment presents another major potential for Turkey. The direct investment in Turkey from the region is worth no more than $2 billion. Attracting more regional investment to Turkey, expanding cooperation in the tourism sector and boosting the volume of construction projects could also come to the agenda in the coming days if peace efforts in the region bear fruit. It all depends on the establishment of peace, cohesion and a mutual spirit of cooperation. (Al-Monitor 13.12)

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Fortnightly, 28 December 2016

Fortnightly, 28 December 2016

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