Fortnightly, 28 June 2017

On 15 June, Israel, Greece and Cyprus agreed to accelerate plans for the development of a pipeline channeling natural gas discovered in Eastern Mediterranean reserves to Europe. Prime Minister Netanyahu, Cypriot President Anastasiades and Greek Prime Minister Tsipras met in Thessaloniki, Greece, to discuss the joint venture, and signed an agreement to continue their collaboration in laying what would become the longest undersea gas pipeline in the world, a proposed 2,200 kilometers (1,350 miles). European governments and Israel agreed in April to move forward with a Mediterranean pipeline project, setting a target date of 2025 for completion. Once completed, the pipeline will transfer natural gas from Israel’s offshore reserves via Cyprus, Greece and Italy to Europe. Greece and Israel are also planning an undersea electricity cable link and are considering a Mediterranean data cable.

The three also signed a joint declaration on foreign relations, infrastructure, energy and water in a bid to strengthen economic cooperation in the fields of energy, environmental protection, research and innovation, telecommunications technologies, industry, and small and medium businesses. A joint statement said the three countries are “determined to work together and share experience, knowledge and expertise and to bring about productive partnership that benefits not only their people but the entire region.” (IH 15.06)

Back to Table of Contents

1.2 Israel Adopts Draft Bill to Ban All Binary Options Transactions

The Israeli government on 18 June adopted a draft law banning the country’s firms from selling binary options to clients abroad, after widespread complaints of fraud. The move comes a year after authorities in Israel banned the sale of binary options to Israeli citizens. The draft law is to be submitted to the Knesset, where it must pass three readings. The bill also bans the sale by Israeli firms of financial products if the trader carrying out the transaction is not licensed in the country where the client lives.

Israel has had the lion’s share of companies doing brisk business selling binary options, with 15,000 employees handling hundreds of millions of dollars. In the past few years, binary options have become very popular, allowing investors to buy and sell online in the way of gamblers, betting on currency fluctuations, commodities or shares. Transactions are usually short-term, and investors sometimes only have minutes to decide, for example, if the price of the dollar against the euro will go up or down. (AFP 19.06)

Back to Table of Contents

1.3 Seventy Percent of Israeli Government Decisions Implemented

A monitoring report published on 22 June by the Prime Minister’s Office indicates that the Netanyahu government had carried out 70% of all the measures decided since the beginning of the its term in office by the end of 2016. The Prime Minister’s Office said that Israel was one of the few OECD countries that individually monitors the implementation of its decision, and publishes the monitoring report.

Prime Minister Netanyahu said, “I’m proud that the government I head is checking transparency and informing the public about the proportion of the government decisions that has been implemented.” Prime Minister’s Office director general Eli Groner said, “Publication of implementation of decisions is another important part of the dramatic change that we have been leading for the past two years in the government’s organizational culture. The budget control mechanism, reducing regulation, preparing a work plan, setting measurable targets for each ministry – all of these steps are aimed at creating a more modern and efficient work environment in the public sector.”

The report monitors implementation of all the operational decisions taken by the current government in which the target date for carrying them out was before the end of 2016. There were 195 such decisions, involving 1,052 items for implementation for which the current implementation status was listed in the report, based on reports by the government ministries and support units. For example, in case of government decision no. 1957 – “Government Policy for Promoting Optimal Integration of Immigrants from Ethiopia in Israeli Society,” NIS 2 million was not budgeted to the Ministry of Culture and Sport to fund the program, even though the Prime Minister’s Office director general was responsible for this. The report said that the reason for this was that the Ministry of Culture and Sport had not finished preparing the tender documents required for obtaining the budget. It has now has been agreed that the transfer of the funds will be delayed until 2017. Other budgets listed in the decision were fully or partly allocated. (Globes 22.06)

Back to Table of Contents

2: ISRAEL MARKET & BUSINESS NEWS

2.1 Israel Diamond Exchange Opens Tech Innovation Center

The Israel Diamond Exchange (IDE) joins the Start-Up Nation with the opening of a technological incubator for Israeli and international diamond-related start-ups. Called Diamond Tech, it will provide a home and financial support for start-ups in the initial stages of development. Diamond Tech will promote new technologies for diamonds in the broadest sense. This includes industrial platforms, robotics, semi-conductors, medical technologies, space technology, software, finance, and B2B and B2C marketing platforms. IDE is partnering with Sarine, the Israel-based world leader in technologies for the diamond industry and the Hennig Diamond group, which has an international investment arm specializing in diamond technologies. The Technion-Israel Institute of Technology has signed on as a strategic partner for research and development. Key international organizations Brinks Global Services, CIBJO – The World Jewelry Confederation and Pantheon Pacific Group from China have expressed support for the project. (IDE 22.06)

Back to Table of Contents

2.2 Elbit Systems of America Celebrates 25 Years as an American company

Elbit Systems of America announced its 25-year anniversary as a leading provider of advanced technology products, system solutions, and support services for the defense, homeland security, commercial aviation, and medical instrumentation markets. The original company was incorporated in the State of Delaware in 1992. In early 1993, the company started operating in Fort Worth, Texas, after purchasing a manufacturing plant from another defense contractor. Operations in Fort Worth began with 170 employees, one key customer and one key program supporting the U.S. Air Force’s F-16 aircraft.

Over the years, Elbit Systems of America grew to nearly 1,800 employees. It acquired six wholly owned subsidiaries to become an industry leader in aircraft helmet mounted display technologies, night vision systems, precision guided seekers, and laser targeting systems. The company is also a systems integrator for border security technology, a pioneer in commercial aviation enhanced vision systems, a provider of sustainment and support solutions for military aircraft and ground vehicles, and an innovator of medical instrumentation equipment. Through its broad business base and extensive network of American suppliers, Elbit Systems of America has contributed billions of dollars — and thousands of jobs — to our nation’s economy in the past 25 years.

Elbit Systems of America currently operates from eight major locations across the United States. It remains headquartered in Fort Worth, Texas, in the same building it purchased in 1993. Elbit Systems of America is a wholly owned subsidiary of Haifa, Israel’s Elbit Systems, a global high-technology company engaged in a wide range of programs for innovative defense and commercial applications. Elbit Systems celebrated its 50th anniversary earlier this year. (Elbit Systems 21.06)

Back to Table of Contents

2.3 Foresight Begins Trading on NASDAQ

Foresight Autonomous Holdings listed its American Depositary Shares (ADSs) on the NASDAQ Capital Market. Trading of the Company’s ADS on the NASDAQ Capital Market began on 15 June under the symbol “FRSX”. The Bank of New York Mellon is serving as depositary for the ADSs, each ADS represents 5 ordinary shares of the Company. Ordinary shares will continue to trade on the Tel Aviv Stock Exchange under the symbol “FRST”.

This listing adds to recent milestones for Foresight, including entering into a memorandum of understanding with large Chinese automobile manufacturers as well as their investment in Rail Vision to align with Foresight’s long-term strategy to lead the automated transportation industry.

Ness Ziona’s Foresight, founded in 2015, is a technology company engaged in the design, development and commercialization of 3D multi-camera-based Advanced Driver Assistance Systems (ADAS). The Company, through its subsidiary, develops advanced systems for accident prevention, which are designed to provide real-time information about the vehicle’s surroundings while in motion. These systems, which are based on 3D technology, advanced algorithms and artificial intelligence, will revolutionize ADAS by providing an automotive grade, cost-effective platform, enabling highly accurate and reliable detection while ensuring the lowest rates of false alerts. (Foresight 15.06)

Back to Table of Contents

2.4 WhiteSource Raises $10 Million to Expand Leadership in Open Source Security & Compliance

WhiteSource announced a $10M Series B financing round led by 83North, with additional participation from Microsoft Ventures and individual investor David Strohm of Greylock Partners. The new funding will help WhiteSource expand its market leadership in open source security and compliance solutions.

Application development has undergone a revolution in recent years as organizations embrace open source software, in some cases making up to 80% of the code base. These practices not only reduce cost and accelerate delivery times, but also introduce management challenges and security vulnerabilities. Some of the most publicized security breaches of recent years, such as the Heartbleed bug, were introduced through the deployment of vulnerable open source components. WhiteSource’s namesake solution secures and manages open source components of hundreds of enterprises and SMBs around the world. It empowers customers to fully control open source usage with real-time alerts, reports and automated enforcement of policies across the DevOps continuous process.

Bnei Brak’s WhiteSource allows engineering, security and compliance officers to effortlessly secure and manage the use of open source components in their software, allowing developers to focus on building great products. WhiteSource fully automates all open source management processes: component detection; security vulnerability alerts and fixes; license risk and compliance analysis along with policy enforcement; quality review, and new version alerts. It offers a complete suite of control, reporting and management to help software teams manage open source truly effortlessly. (WhiteSource 14.06)

Back to Table of Contents

2.5 Cybereason Announces $100 Million Investment by SoftBank

Cybereason announced the signing of a $100 million investment from SoftBank Corp., a subsidiary of SoftBank Group Corp. SoftBank is Cybereason’s biggest investor and one of its biggest customers and distribution partners. Following this financing, Cybereason has raised a total of $189 million in capital from SoftBank, CRV, Spark Capital, and Lockheed Martin since being founded in 2012. This new financing solidifies Cybereason as the leading cybersecurity startup changing the status quo in the security industry, with 500% growth in revenue and nearly 200% growth in employees across the globe last year. Cybereason’s proprietary, automated SaaS cybersecurity technology and advanced monitoring services have protected hundreds of Fortune 1000 companies from highly advanced attacks including, most recently, the global WannaCry Ransomware attack.

Cybereason is the leader in endpoint protection, offering endpoint detection and response, next-generation antivirus and managed monitoring services. Founded by elite intelligence professionals born and bred in offense-first hunting, Cybereason gives enterprises the upper hand over cyber adversaries. The Cybereason platform is powered by a custom-built in-memory graph, the only truly automated hunting engine anywhere. Cybereason is privately held and headquartered in Boston with offices in London, Tel Aviv and Tokyo. (Cybereason 21.06)

Back to Table of Contents

2.6 Air Canada Celebrates First Montréal-Tel Aviv Flight

The departure 22 June of flight AC082 from Montréal-Trudeau airport marked the successful launch of Air Canada’s non-stop Montréal service to Tel Aviv. This new seasonal service will operate twice weekly from 22 June to 16 October 2017. Flights will be operated with 292-seat Airbus A330-300 aircraft with three cabins of service, including Air Canada’s International Business Class cabin, featuring 27 Executive Pods with 180- degree lie-flat seats all configured for direct aisle access. The Premium Economy cabin has 21 seats that offer generous personal space, wider seats and extra legroom and recline, as well as premium meals, complimentary bar service and priority check-in and baggage delivery at the airport. The Economy cabin has 244 seats providing comfortable personal space and a state-of-the-art individual on-demand entertainment system. Flights are timed for convenient connections with Air Canada’s extensive domestic and trans-border network.

Air Canada is Canada’s largest domestic and international airline serving more than 200 airports on six continents. Canada’s flag carrier is among the 20 largest airlines in the world and in 2016 served close to 45 million customers. (Air Canada 22.06)

Back to Table of Contents

2.7 Boeing & EL AL Israel Airlines Finalize Order for Three Additional 787 Dreamliners

Boeing and EL AL Israel Airlines finalized an order for three 787 Dreamliners at the 2017 Paris Air Show, firming up additional commitments originally announced in 2015. Valued at more than $729 million at current list prices, the order includes two 787-8s and one 787-9. EL AL now has six unfilled orders for 787s, with lease agreements in place for a further seven Dreamliners. The 787 is a family of technologically advanced, super-efficient airplanes with new passenger-pleasing features. In addition to bringing big-jet ranges to midsize airplanes, the 787 will provide EL AL with unmatched fuel efficiency and environmental performance, using 20% less fuel and with 20% fewer emissions than the airplanes it replaces. EL AL has been an all-Boeing carrier since taking delivery of its first new Boeing airplane in 1961 and currently operates a fleet of more than 40 airplanes including Next-Generation 737s, 747s, 767s and 777s. The Tel Aviv based carrier is set to take delivery of its first 787-9 later this summer. (Boeing 21.06)

Back to Table of Contents

2.8 Elbit Systems Contract to Supply DIRCM Systems for a VIP Gulfstream G650 Aircraft

Elbit Systems was awarded a more than $20 million contract by an African-based customer to equip a VIP Gulfstream G650 aircraft with J-MUSIC Directed Infrared Countermeasure (DIRCM) systems that include Elbit Systems’ advanced Infrared based Passive Airborne Warning System (IR PAWS). The contract will be performed over a one-year period. Having accumulated more than 30,000 hours of operation, Elbit Systems’ MUSIC family of DIRCM systems is in use by many customers worldwide on a wide range of small, medium and large aircraft platforms.

Haifa’s Elbit Systems is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems. (Elbit Systems 21.06)

Back to Table of Contents

2.9 LetsVenture and OurCrowd Join Forces in Strategic India-Israel Partnership

OurCrowd has signed a strategic collaboration agreement with LetsVenture, India’s largest marketplace for startup funding. As part of this partnership, OurCrowd will offer curated deals to Indian investor syndicates managed by LetsVenture, as well as showcase Indian startups on OurCrowd’s platform, giving selected Indian startups access to accredited investors globally and to business development opportunities. OurCrowd and LetsVenture will be also be collaborating on an ‘India Fund’ to invest in Israeli, Indian and global startups. The investment into this fund would primarily be from family funds and HNWIs in India and OurCrowd’s global network of accredited investors. Leveraging LetsVenture’s domestic network, OurCrowd will offer Indian corporates access to the Israeli innovation ecosystem. In addition to this, LetsVenture will facilitate ‘Take to Market’ activities for OurCrowd’s portfolio companies to access the Indian market, the activities of which are under development by LetsVenture and are targeted to commence in 2018.

Jerusalem’s OurCrowd is the leading global equity crowdfunding platform for accredited investors. Managed by a team of seasoned investment professionals. OurCrowd vets and selects opportunities, invests its own capital, and brings companies to its accredited membership of global investors. OurCrowd provides post-investment support to its portfolio companies, assigns industry experts as mentors, and takes board seats. The OurCrowd community of almost 20,000 investors from over 112 countries has invested over $450M into 120 portfolio companies and funds. OurCrowd already has thirteen exits to date, two IPO’s and eleven acquisitions. (OurCrowd 27.06)

Back to Table of Contents

2.10 TechSee Secures $7.5 Million in Series A Funding to Support its Ambitious Growth Plan

TechSee announced it has successfully completed a $7.5 million Series A round of financing. The round is led by Planven Investments with participation of existing investors OurCrowd and strategic investors innogy, Comdata Group and other investors. The new investment will help TechSee leverage its strong momentum and market leadership to further accelerate its market penetration, technology development and bring innovative products to their customers and prospects. Their Investors strong network in Telecommunication, Utilities and Financial Services is a force multiplier for TechSee’s leadership position in the emerging “Support of Things” category across Telecommunication, Consumer Electronics and Financial Services markets.

Herzliya’s TechSee is global Leader in Visual Support Technologies for the Smart Home. TechSee revolutionizes the customer support domain by providing the first intelligent visual support solution powered by artificial intelligence and augmented reality. TechSee’s visual support solution today empowers technical support teams across the globe to execute visually interactive remote diagnoses and resolutions of problems; it is building a massive database of every interaction and resolution to enable customers to experience the rapid, wholly automated, robotic visual resolution of technical issues via their smartphones. (TechSee 26.06)

Back to Table of Contents

2.11 Qognify Expands Global R&D Center in Israel

Pearl River, New York’s Qognify, the leader in big data solutions for physical security and operations, today announced that it has expanded its global development center with the opening of new offices in Israel’s premier industrial area in Ra’anana. Qognify develops smart security systems that enable organizations to optimize response, mitigate risks, reduce business exposure and improve performance. The company’s corporate headquarters are located in New York and it operates sales and service offices in Europe, Singapore and India. The Israeli operation is Qognify’s development center in which most of the employees are engineers and developers, with plans to expand investment in R&D throughout 2017 and 2018. Qognify’s customers include major airports, seaports, public transportation and infrastructure companies, financial institutions, smart cities and commercial entities. Qognify is considered world leader in its field and the demand for its video management, video and data analytics and PSIM/ Situation Management solutions around the world is constantly growing. (Qognify 26.06)

Back to Table of Contents

2.12 Upstream Security Raises $2 Million to Protect Connected and Autonomous Fleets

Upstream Security recently completed their seed round, securing $2m in an investment led by Glilot Capital Partners, a venture capital fund specializing in Enterprise Software that was recently ranked as the 3rd best performing fund in the world (according to Preqin), with investment by Maniv Mobility. Upstream Security leverages advanced cloud technologies, big data, and machine learning to provide OEMs and large fleets with unprecedented, comprehensive, and non-intrusive defense. Utilizing their cloud-based layer-7 security gateway and strong analytics engine, threats are detected and prevented before they reach the vehicle’s network.

Herzliya’s Upstream Security is the first cloud-based cyber-security solution that protects the technologies and applications of connected and autonomous vehicles. Founded by cyber-security veterans, Upstream Security leverages big data and machine learning to provide OEMs and vehicle fleets with unprecedented, comprehensive, and non-intrusive defense. With Layer 7 security, real-time data protection and anomaly detection, attacks are identified and blocked before they reach and harm the vehicle’s network. (Upstream Security 26.06)

Back to Table of Contents

3: REGIONAL PRIVATE SECTOR NEWS

3.1 IBM and Zain Launch Cloud Disaster Recovery Service in Kuwait

IBM and Zain, Kuwait’s leading telecommunications company, announced their collaboration to launch a new cloud disaster recovery service that will provide IBM and Zain’s enterprise customers with cloud-based business continuity capabilities and faster disaster recovery of their critical IT systems, without incurring the infrastructure expense of a second physical site. Through the new service, customers will benefit from the added flexibility of keeping their data in-country on IBM Cloud.

The disaster recovery as a service (DRaaS) market size in the Middle East is $100.64 million and is expected to see a compound annual growth rate of 44.8% through 2021. The Middle East region is experiencing a significant increase in DRaaS adoption due to the increasing number of cyberattacks and other data threats like security breaches, software and hardware failures, and power outages, according to MarketsandMarkets.

The new cloud disaster recovery service will help protect IBM and Zain customers against data loss from their own servers or from other cloud services, and can maintain readiness without the need to invest in additional physical space or stand-by hardware. The service will provide replication of critical applications, infrastructure, data and systems to IBM Cloud so customers can recover from an IT outage within minutes. (IBM 21.06)

Back to Table of Contents

3.2 GenePeeks & Alliance Global Group Sign Distribution Agreement for MENA

Cambridge, Massachusetts’ GenePeeks, a computational genomics company focused on transforming genetic disease risk analysis, and Dubai’s Alliance Global Group (AGBL) announced a new partnership to bring GenePeeks’ Virtual Progeny Analytics (VPA) technology platform to select markets in the Middle East and Africa. AGBL is the largest biomedical gateway in these markets. This collaboration marks another international market for the GenePeeks Preconception Screen, which identifies combined parental risk of passing on more than 1,000 serious genetic diseases. Under the terms of the agreement, AGBL will expand its genetic testing by offering GenePeeks Preconception Screen to patients, healthcare providers and laboratories in the Middle East and Africa. AGBL will also introduce additional applications of GenePeeks’ technology through partnerships with centers of excellence throughout the region. (GenePeeks 19.06)

Back to Table of Contents

3.3 Skype Says Website and Video Services ‘Blocked in the UAE’

Skype, the instant messaging app that provides online text message and video chat services, has been blocked in the UAE, the company said on 25 June. On Skype’s message boards, users living in the UAE have spoken of their frustration at not being able to contact family and friends.

The Skype problems come just days after the UAE’s telecoms regulator issued a statement to refute reports that WhatsApp’s voice and video calling features has been unblocked in the country. Users reported that the call and video features on WhatsApp were fully operational but a statement issued by the Telecommunications Regulatory Authority (TRA) said there is no change in the UAE’s Voice over Internet Protocol (VoIP) Policy. The service was later blocked again. The video and calls feature, officially rolled out by WhatsApp in November 2016, was blocked in UAE as it was a VoIP service, which is restricted in the UAE and only licensed providers Etisalat and du are allowed to provide such services. The TRA has not commented on the Skype issue. (AB 25.06)

Back to Table of Contents

3.4 Egypt Signs $575 Million Agreement with GE for 100 Multi-Use Locomotives

Egypt signed a $575 million agreement with General Electric Co to provide 100 new multi-use locomotives, 15 years of technical support and spare parts, and maintenance and upgrades of 81 trains. Egyptian Transport Minister Arafat said the first shipment of 25 locomotives would arrive in 2018 as part of a plan to have 25 million tonnes of goods transported via railway by 2022.

The agreement also includes GE carrying out maintenance and upgrades on 81 trains the Egyptian National Railways bought in 2008, and training Egyptian engineers. The agreement comes nearly a week after Arafat and minister of investment and international cooperation Sahar Nasr met with the CEO of GE Egypt Ayman Khattab to discuss GE proposals to contribute to developing the Egyptian railway network through procuring 100-200 train carriages, 35% of which to be manufactured in Egypt. (Reuters 17.06)

Back to Table of Contents

3.5 Toshiba Announces Renewed Focus for Turkey’s Business PC Market

Japan’s Toshiba announced its renewed strategy for Turkey, cementing its focus for the business computing market through the development of business to business (B2B) PC devices and solutions. Working in partnership with IT distributor Armada, an Ingram Micro company, Toshiba will concentrate its efforts on ensuring customers across the country have access to its innovative product solutions built on mobility, security and reliability. Toshiba’s renewed focus is to grow their presence in Turkey, and ensure they are seen as a leading B2B PC business that provides innovative technology – helping businesses to address the challenges that trends such as digital transformation and the mobile workforce are presenting to them. (Toshiba 19.06)

Back to Table of Contents

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Israel Halts Research into Haifa Pollution & High Cancer Rates

After no clear link was found between the studies and Haifa’s high morbidity rates, the Ministry of Health and Ministry of Environmental Protection call for a halt to the current research and a focus instead on biological monitoring, a methodology that was able to find a connection. The Minister of Health and Minister of Environmental Protection accepted the recommendation of the scientific committee accompanying the epidemiological study monitoring the Haifa Bay.

In February 2016, it was reported that infants in polluted parts of the Haifa Bay were born with 20-30% smaller heads than infants born in adjacent, less polluted areas. Additionally, the rate of morbidity in lung cancer and lymphoma is five times higher in the Haifa Bay area than the national average. These findings were raised in a comprehensive study by the University of Haifa. In August 2016, the ministers accepted the recommendation of the scientific committee to discontinue the implementation of three models in the study on the risk of developing cancer, childhood asthma and asthma of those intended for defense services. This due to the fact that according to the committee’s conclusions, the research methodology and results did in no way point to a clear connection between air pollution in the Haifa Bay region and morbidity rates in the area. (Ynetnews 25.06)

Back to Table of Contents

4.2 Israeli Innovation Feeds the World – With More Fish Protein

A Hebrew University researcher found a new way to grow larger fish to feed the expanding world population. While wild fisheries have been on the decline for the last 20 years, aquaculture, or fish farming, is the fastest growing food-producing sector in the world, and will play an increasingly vital role in our planet’s food resources in the years to come. One of the challenges to aquaculture is that reproduction, as an energy intensive endeavor, makes fish grow more slowly. To solve this problem, Prof. Berta Levavi-Sivan at the Hebrew University of Jerusalem identified tiny molecules named Neurokinin B (NKB) and Neurokinin F (NKF) that are secreted by the brains of fish and play a crucial role in their reproduction. Prof. Levavi-Sivan, a specialist in aquaculture at the Hebrew University’s Robert H. Smith Faculty of Agriculture, Food and Environment, then developed molecules that neutralize the effect of NKB and NKF. The molecules inhibited fish reproduction and consequently led to increased growth rates.

These inhibitors can now be included in fish feed to ensure better growth rates. For example, young tilapia fed the inhibitors in their food supply for two months gained 25% more weight versus fish that did not receive the supplement. So far, NKB has been found in 20 different species of fish, indicating that this discovery could be effective in a wide variety of species. The technology was licensed by Yissum, the Technology Transfer company of the Hebrew University, to AquiNovo. AquiNovo is further developing the technology to generate growth enhancers for farmed fish. In recognition of her work, Prof. Berta Levavi-Sivan was awarded the Kaye Innovation Award for 2017. (Arutz Sheva 27.06)

Back to Table of Contents

5: ARAB STATE DEVELOPMENTS

5.1 Lebanon’s Average Annual Inflation Rose by 4.61% by May 2017

According to the Central Administration of Statistics (CAS), Lebanon’s average inflation rate rose by 4.61% by May 2017 compared to May 2016. The average costs of “Housing and utilities (water, electricity, gas and other fuels)” constituting a combined 28.4% of the Consumer Price Index or CPI rose by 6.97% year-on-year (y-o-y) by May 2017. In details, “Owner-occupied” rental costs, which grasped 13.6% of this category, rose by 3.97% y-o-y. As for the average costs of “Water, electricity, gas, and other fuels” (11.8% of the Housing & utilities component), they increased by an annual 14.85% by May 2017.

In turn, the average price indices for “Food and non-alcoholic beverages” (constituting 20% of the CPI), “Transportation” (grasping 13.1% of the CPI), and “Education” costs (6.6% of CPI) registered yearly upticks of 2.63%, 7.04%, and 2.68% by May 2017. However, average “Health” costs (7.7% of the CPI) slipped by 1.52% y-o-y over the same period. In May 2017, the CPI grew by 4.29% compared to May 2016. The increase was driven by respective annual up ticks of 4.61% and 5.34% in the costs of “Housing and utilities” and “Food and non-alcoholic beverages”. “Utilities” alone rose by an annual 9.67% in May which may be attributed to the recovery in oil prices by June 2017, while “Clothing and Footwear” recorded a 15.06% y-o-y rise. (CAS 22.06)

Back to Table of Contents

5.2 Number of Lebanon’s Registered Cars Slips by 1.81% Annually by May

According to the Association of Lebanese Car Importers (AIA), the number of newly registered commercial and passenger cars declined by an annual 1.81% to stand at 15,022 cars by May 2017. The drop follows the 3% yearly decline in the number of newly registered passenger cars to 13,836 and the 14.59% uptick in newly registered commercial vehicles to 1,186. Japanese cars were the most demanded cars in Lebanon in May 2017, grasping a 37.08% share of total passenger cars. Also, Korean cars were second in the ranking with a market share of 31.65% by May 2017, while European cars maintained their third rank with a market share of 22%. In terms of brands, Kia held the largest share of newly registered passenger cars (21.7%), followed by an 11.69% stake for Toyota. Hyundai and Nissan came next in the ranking, as Hyundai grasped 11.67% of newly registered passenger cars, while Nissan held 8.76%. In terms of sales per importer, Natco acquired the biggest bulk of registered cars with 19.99% of the total, followed by Rasamny-Younis Motor (13.19%), BUMC (12.24%), and Century Motor Co. (11.11%). (AIA 20.06)

Back to Table of Contents

5.3 Jordan’s GDP Grew by 2.2% in First Quarter

The Hashemite Kingdom’s gross domestic product (GDP) in the first quarter grew by 2.2%, compared to the same period of last year, the Department of Statistics said on 22 June. Most production sectors showed positive growth during the 2017 first quarter, where the extraction industries sector achieved the highest growth rate of 14.7%, followed by the agricultural sector with 8.2%. The electricity and water sector and the commissions sector, which are both non-profit sectors, achieved 4.3% growth rate each. In terms of sector contribution to the growth, the finance, insurance and real estate sectors contributed to 0.71% of the total growth rate, while he agriculture sector had 0.3%, and the share of the extraction industries stood at 0.23%. (JT 23.06)

Back to Table of Contents

5.4 EU Assistance to Jordan Exceeded €1.3 Billion Since 2015

The EU’s assistance to Jordan has exceeded €1.3 billion over the past two years. The assistance included grants worth €200 million under the European Neighbourhood Instrument, which aims to support the development of the private sector, waste water management, democratic governance and renewable energy. Released by the European External Action Service and European Commission, the report added that a total of €392 million were leveraged in 2016 alone to fund investments in water and energy.

In addition, €367 million in grants was channeled to enhance the “resilience of the country and mitigate the spillover effects of the Syrian crisis”, of which €166 million went to humanitarian assistance, while an additional €380 million was extended in the form of loans. The report, which tracked relations between Jordan and the EU in the period between March 2015 and April 2017, noted that the EU stepped up its support to Jordan during the period studied, strengthening diplomatic ties as well as economic and trade cooperation.

The EU has allocated more than €950 million in assistance to refugees and vulnerable communities in Jordan since 2011. In addition, the EU has made available an average of €100 million each year in grant assistance to Jordan, bringing the overall amount earmarked for the Kingdom to over €1.55 billion since 2011. (JT 19.06)

Back to Table of Contents

5.5 Japan Gives $22 million Grant to Water Project in North Jordan

Jordan’s Ministry of Water and Irrigation signed a $22 million Japanese grant agreement to carry out the second phase of a project to raise the water sector’s efficiency in northern governorates hosting Syrian refugees. Water and Irrigation Minister Al Nasser said during the signing ceremony that his ministry was working with all resources to overcome the “imbalances” caused by the Syrian refugee crisis, which had placed increased pressure on water resources in the Kingdom’s north. He said the ministry had provided all the means for a positive and effective approach to address the water supply and sanitation problem in the region and deal with the repercussions of the situation in neighboring Syria and secure the best possible service to Jordanian citizens as well. Nasser said the second phase followed the first phase in an urgent program to raise the water efficiency in northern governorates, particularly in areas with the highest number of Syrian refugees, including Howara and Sarih, which was funded by a $25 million grant from JICA. (AMMONNEWS 17.06)

Back to Table of Contents

5.6 Trade Between Jordan and UAE Hits $1.8 Billion

The volume of trade exchange between Jordan and the UAE reached $1.8 billion in 2016, according to official figures by the UAE Ministry of Economy. The ministry’s figures showed that re-exports accounted for half of the trade exchange, reaching $840 million. Meanwhile, UAE non-oil exports to Jordan reached $500 million, while Jordanian exports to the GCC state reached $430, the official figures also showed. (Petra 27.06)

Back to Table of Contents

►►Arabian Gulf

5.7 Most GCC Patients Say Healthcare Improvements Needed

Eighty-five percent of GCC patients believe not enough is being done to improve patient experience, according to a new report by advisors EY. Consumers across the GCC are no longer satisfied with healthcare providers just meeting their basic physical needs, adding that most patients would opt to get care for serious conditions outside the GCC region. EY said that many healthcare organizations in the GCC region lack a mature patient experience management function despite 82% of healthcare professionals indicating that patient experience is a priority. A further 83% of respondents said they believe there should be a greater investment in healthcare technology. In the same survey, 51% of healthcare professionals rate overall healthcare quality as inconsistent.

The patient experience is comprised of the various interactions that patients have with a healthcare system and is a critical component of overall healthcare quality. A positive patient experience focuses on the whole delivery of an interaction, from booking timely appointments to having their medical history easily accessible to healthcare staff across clinics.

The survey also showed that limited engagement with clinical staff and the lack of consistency led to only 40% of patients believing that they were being adequately informed about their health. Furthermore, only 34% of patients are relying on their physician for healthcare information above any other source. EY said potential solutions for the GCC healthcare system include the digitization of electronic medical records, which is happening in the UAE, mobile applications, remote patient monitoring and the automation of medical centers. (AB 26.06)

Back to Table of Contents

5.8 Dubai to Start Testing Autonomous Air Taxis in Fourth Quarter

Dubai will begin trials of an autonomous air taxi (AAT), capable of carrying two passengers, in the fourth quarter 2017, the Roads and Transport Authority (RTA) said on 19 June. The authority has signed an agreement with Volocopter, a Germany-based specialist manufacturer of autonomous air vehicles. The move to include air taxis is part of RTA’s effort to provide autonomous transportation by conducting the required technological tests of those vehicles under the climatic conditions of Dubai. The emirate’s smart autonomous mobility strategy seeks to transform a 25% of the total mobility journeys into autonomous transport by 2030. The AAT, which is powered by electricity, comprises 18 rotors to ensure safe cruising and landing of the taxi in case of any rotor failure. The air taxi is characterized by its autopilot or autonomous flying, thus enabling the movement of people from one place to another without human intervention or a need for flight license holder. During the trial period, all aspects relating to the operation as well as security and safety of the autonomous aerial taxi will be verified and checked. (AB 19.06)

Back to Table of Contents

5.9 Saudi Economic Growth Set to Level Off in 2017 in New Era of Oil

Saudi Arabia’s economic growth during 2017 is likely to level off due to a sharp decline in oil sector gross domestic product (GDP), according to analysts. The latest macroeconomic update from Jadwa Investment forecast growth this year of just 0.1%, compared to 1.4% seen last year. It said Saudi Arabia’s commitment to OPEC cuts, which were recently extended by another nine months to March 2018, will result in oil production having negative effects on GDP. Jadwa analysts forecast that as a consequence of lower oil production, and therefore oil revenue, the 2017 budget deficit is set to hit SR182 billion, 6.9% of GDP. The non-oil economy is set to perform better, reaching 1% growth during 2017, compared to 0.2% in 2016.

Jadwa noted that non-oil GDP will be supported by yet to be realized government capital spending. The recent Q1/17 budgetary data showed that only 11% of estimated capital expenditure, at SR260 billion for 2017, had been used. The report said that despite a recent rise in interest rates by the US Federal Reserve which saw Saudi Arabia’s central bank mirroring the hike, further Fed hikes “will not significantly affect the kingdom’s liquidity situation”. It added that while economic indicators point to a mild improvement, risks do remain. Aside from the risk of another sizable decline in oil prices, there are also the unknown effects on how the economy will react to electricity price hikes, and possibly gasoline and diesel price reform, later this year. (Jadwa 26.06)

Back to Table of Contents

►►North Africa

5.10 Central Bank of Egypt Reports Rise in Egypt’s Exports

Egypt’s exports totaled $5.1 billion in the second quarter of the fiscal year 2016/17, an increase on the $4.3 billion recorded during the same period of 2015/16, according to a Central Bank of Egypt (CBE) report published on 25 June. The CBE report revealed significant increases in leading sectors, with petroleum and oil products recording exports of $1.4 billion during the second quarter of 2016/17. Meanwhile, finished products saw $2.5 billion in exports and semi-finished products recorded $882.4 million during Q2.

According to the report, Egyptian exports to the US during the Q2 of 2016/17 totaled $356.6 million, with $1.7billion to Arab nations, $155.4 million to non-Arab Africa, $1.5 billion to the European Union, $454.7 million to non-EU European nations, $385 million to non-Arab Asia, and $483.3 million to other regions. The only recorded decrease in Egyptian exports was to Russia and the Commonwealth of Independent States, dropping from $52 million in Q2 of 2015/16 to $22.6 million in Q2 of 2016/17.

Last March, Egypt’s trade and industry ministry revealed a strategy to almost double the nation’s exports by the year 2020, from the current $19 billion to $34 billion. The strategy will include implementing new export plans and policies, as well as targeting new markets for cement, agricultural products, ready-made clothes, construction materials, chemical products, and engineering and electronic goods. In November 2016, the CBE floated the pound against the dollar in an attempt to rescue the country’s flagging economy. The move caused the pound to drop to an average exchange rate of EGP 18 to the dollar, compared to EGP 8.88 prior to the flotation. (CBE 25.06)

Back to Table of Contents

5.11 Egypt Ranks 14th in 2017 Global Cybersecurity Index

Egypt has achieved a high ranking in the 2017 Global Cybersecurity Index, coming 14th out of 165 countries and second among the Arab states, Egypt’s Ministry of Communications and Information Technology said on 18 June. The new report highlights advances in Egypt’s cybersecurity efforts, ranking it above nations such as Germany, Switzerland and Israel. Within the region, Egypt came second only to Oman, beating high-tech competitors such as Qatar and the UAE. According to the report, Egypt has “a full range of cooperation initiatives” relating to cybersecurity and “a number of bi-lateral and multilateral agreements”. Among its international activities, says the report, Egypt is a member of the UN Government Group of Experts (GGE) on cybersecurity. According to the ministry’s June 2016 report on Information and Communications Technology Indicators, there are 29.8 million internet users in Egypt. (Ahram Online 18.06)

Back to Table of Contents

5.12 Egypt’s Tourism Rises 51% Year-On-Year During First Four Months of 2017

The number of tourists arriving in Egypt rose 51% year-on-year in the first four months of 2017, with an expected “significant increase” starting this winter, the Tourism Promotion Authority announced. The latest promotional tourism campaign, which was launched in September in 2016 in 11 countries and is still ongoing, has extensively improved tourism. Some $19 million were spent on the campaign in 2016, while in 2017 $9 million have been spent so far. The campaign has played a crucial role in improving Egypt’s image abroad, leading to the recent lifting of the flight bans imposed by many of the main European markets for tourism to Sharm El-Sheikh, hit hard after the crash of a Russian passenger flight in Sinai in October 2015. Arrivals from Ukraine and Poland more than doubled in 2017 compared to last year; while German arrivals increased by 50% year-on-year; Italian visitors by 30% and British tourists by 20%.

Egypt said earlier this year it was confident that it could lure back millions of foreign visitors after the sector was heavily hit. Tourism revenues dropped to $3.4 billion in 2016, a 44.3% decline from the previous year. The number of tourists visiting Egypt this year could come close to levels seen before its 2011 uprising, encouraged by investments in airport security and a cheaper Egyptian pound. (Egypt Independent 15.06)

Back to Table of Contents

5.13 Morocco Leads North Africa in Latest Global Innovation Index

Morocco leads North Africa and is among the top 10 countries in its income bracket according to the 2017 Global Innovation Index (GII), released and coauthored by Cornell University, INSEAD and the World Intellectual Property Organization. Each year, the GII surveys some 130 economies using dozens of metrics, from patent filings to education spending, according to the accompanying release. In this latest edition, Morocco led North Africa and ranked 72nd overall out of 127 countries, and seventh out of 27 lower-middle-income economies. Morocco was also noted as a standout performer in agricultural labor productivity.

This latest report is one of many industry and business indices of recent years awarding Morocco high marks. Earlier this year, Morocco was again named among the 50 most innovative economies in the world and one of just two such economies in Africa by the 2017 Bloomberg Innovation Index. In September last year, the World Bank’s 2017 “Doing Business” report ranked Morocco 68 out of 190 countries in ease of doing business, a two-spot gain over the previous year, making it number one in North Africa and fourth overall in the greater Middle East/North Africa region. KPMG International and Oxford Economics’ 2015 Change Readiness Index (CRI) ranked Morocco as the most “change-ready” country in the Maghreb, with particularly positive results in the category of “enterprise capability.” In 2014, the Wall Street Journal’s Frontiers/FSG Frontier Markets Sentiment Index reported that Morocco is among the top ten frontier markets – and the only one in the Maghreb – most favored by foreign corporations. (MACP 19.06)

Back to Table of Contents

6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Shadow Economy Costs Turkish Economy $17 Billion

The shadow economy costs the Turkish economy TL 60 billion ($17 billion) annually, Labor Minister Mehmet Muezzinoglu has said, adding that new measures would be taken to slash it. The share of the shadow economy in the whole economy is 32%, he said. “A 1% increase in the informal economy results in an additional TL 2 billion ($567 million) cost to the Social Security Institution (SGK), namely to the state … The regression of this kind of economy from 52% in 2002 to 32% now has brought nearly TL 40 billion ($11.4 billion) back to our economy. This is good. However, on the other side of the coin, the shadow economy which totals 32% costs our economy and our state TL 60 billion ($17 billion),” he told a group of journalists on 21 June.

The government aims to cut the share down to 25% initially, the minister noted, adding that an action plan had been prepared to achieve the goal. The informal economy is most common among small businesses which hire less than 10 workers, the minister said, calling on employees who witness wrongdoings to inform state institutions. (HDN 22.06)

Back to Table of Contents

6.2 Pakistan to Begin Negotiations for Purchase of T129 Attack Helicopters from Turkey

Pakistan will reportedly commence formal negotiations for the T129 ATAK attack helicopter from Turkish Aerospace Industries (TAI). Both sides plan to announce a deal, which could involve 30 aircraft, by the end of 2017 or early 2018. Turkish officials told Shephard Media that Pakistan was interested in the T129, but numbers have not yet been agreed upon. This follows a year of active interest from Pakistan, beginning with trials in June 2016, when the Pakistan Army put the T129 ATAK (i.e. P6) through rigorous hot-and-high performance tests. The P6 was flown at Pano Aqil when it was 50° Celsius. It was also flown at high-altitude at 14,000 feet in the Hindu Kush in the Himalayas. Endurance tests included a 480 km non-stop from Quetta to Multan.

At IDEF 2017 in May, TAI and PAC had signed a memorandum-of-understanding (MoU) committing to expanding cooperation. Recently, the Pakistan Army’s Chief of Army Staff made an official visit to Turkey, where he met with TAI and inspected TAI’s T129 production site. Pakistan also has 12 AH-1Z Viper and four Mi-35P Hind attack helicopters on order from Bell Helicopter and Russian Helicopters, respectively. The first three AH-1Z and all four Mi-35P are scheduled to arrive in Pakistan by the end of 2017.

Aselsan, Roketsan and Havelsan would have opportunities to expand activities in Pakistan through the T129. Aselsan is the principal supplier of the T129’s EO/IR turret, avionics and countermeasures suite. The Roketsan Mizrak ATGM is among the T129’s main weapons. Havelsan developed a complete simulator suite for the T129. Pakistan may have the incentive to tie sales from these companies to commercial offsets, particularly in the form of investments in or partnerships with Pakistani companies. (QUWA 27.06)

Back to Table of Contents

6.3 Greece Granted Lifeline as IMF Joins Bailout

Eurozone governments threw Greece another 11th-hour credit lifeline on 15 June worth $9.5 billion and sketched new detail on possible debt relief as the International Monetary Fund (IMF) finally offered to help out after two years of hesitation. The €8.5 billion of loans from the Eurozone’s 18 other states, including Berlin which is wary of easing terms for Greece ahead of a German election in September, lets Athens avoid defaulting on bailout repayments next month and recognizes unpopular cuts and reforms the left-wing government has made. The accords gave enough clarity to investors on how Greece can manage its crushing debt burden that it should be able to borrow on the market again “in due course” after effectively relying on bailout support from other sovereigns since 2010.

A proposal by the French government under new President Emmanuel Macron to help bridge differences on debt relief will underpin further euro zone discussions. Macron wants to work with Germany to strengthen the 18-year-old common currency, which was nearly wrecked by the sovereign debt crisis. To accommodate the IMF’s need for more specifics on debt relief, the Eurozone finance ministers said in a statement that in 2018 they would be ready to consider extending the maturities and grace periods of their loans to Greece by a range from zero to 15 years. The average maturity now is 30 years. But they did not go any further than that and the IMF said it was not enough to calculate Greek debt sustainability.

The euro zone has been reluctant to commit to concrete debt relief numbers now because it argues that if Greece does all that is required of it and keeps a high primary surplus – the budget before debt servicing costs – for decades, it may not need any debt relief at all. (HDN 16.06)

Back to Table of Contents

7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 New School of Medicine to Open at Ariel University

On 28 June, Prime Minister Netanyahu and Education Minister Bennett, who also serves as head of the Council for Higher Education, are scheduled to attend a cornerstone-laying ceremony for the construction of the Health Sciences and Medicine Building at Ariel University. Netanyahu and Bennett, along with Health Minister Litzman, were instrumental is pushing through the initiative to found a sixth school of medicine in Israel. The building that will house the school is being constructed as part of a general plan for the expansion of Ariel University. The building is expected to cost some $28 million, most of which the university intends to raise through donations. Bennett will undertake to have the faculty’s curriculum approved by the relevant authorities.

About 4,000 students are currently studying medicine at Israel’s five medical schools, at the Hebrew University of Jerusalem, Tel Aviv University, Ben-Gurion University of the Negev, the Technion-Israel Institute of Technology in Haifa, and Bar-Ilan University’s Faculty of Medicine in the Galilee, from which the first class graduated in 2016. Beginning from the 2017-2018 academic year, the number of students accepted to medical schools will increase by about 100 per year, enabling more Israeli students to complete their studies in Israel and making more Israeli-trained doctors available to the health care system, which is facing a shortage of doctors.

Ariel University was founded as Ariel University Center of Samaria in 1982 as a satellite of Bar-Ilan University. In 2004, it became an independent public college, and in 2012, it received full university status. (IH 19.06)

Back to Table of Contents

7.2 Jerusalem Zoo Inaugurates City’s First Aquarium

Jerusalem’s Biblical Zoo has inaugurated the city’s first aquarium, which displays hundreds of species of marine life from the Mediterranean and the Red seas. The 7,000 square-meter aquarium, which took eight years to build and cost $284 million, is due to open to the public soon. The aquarium, built next to the zoo, contains 33 tanks housing diverse species such as stingrays, clownfish, sea urchins and sharks. One of the aims of the aquarium, other than being a popular tourist attraction, is to help raise public awareness for the preservation of marine habitats. (Various 22.06)

Back to Table of Contents

*REGIONAL:

7.3 Work Starts on New University ‘Super Campus’ in Dubai

Construction work has started to build Brighton College and Dwight School of New York in Dubai with a combined development value exceeding $74.8 million. Airolink, a design and build construction conglomerate, said that construction is taking place at a 10 acre site in Dubai. It was awarded the contract by the education arm of Abu Dhabi-based Bloom Properties. Brighton College UK and Dwight School New York will open branch campuses in Dubai in September 2018. The two schools, which will be located within a ‘super campus’ will have a combined enrolment capacity of up to 4,000 students. The schools will also offer extensive sports facilities, including tennis and squash courts, and a full soccer pitch with a 400-metre running track. The 89,000 square meter campus will also accommodate the Centre of Excellence for Arabic Language, Culture and the Arts.

Founded in 1845, Brighton College (UK) is a top-tier UK independent secondary day and boarding school offering a British curriculum through to GCSE and A Level. New York’s Dwight School is a top-tier private education institution in Manhattan and the Dubai school will be its first Middle East campus. Two “big ticket” facilities will be shared with Dwight school – a 600-seat auditorium and an IAAF standard running track. (AB 20.06)

Back to Table of Contents

7.4 Saudi Arabia’s Mohammed bin Salman Appointed Crown Prince

Saudi Arabia has announced that Prince Mohammed bin Salman was made the kingdom’s crown prince while Prince Mohammed bin Nayef has been relieved from his position after a royal decree was issued by King Salman bin Abdulaziz early on 21 June. Saudi Arabia’s Allegiance Council voted 31 out of 34 members of chose Mohammed bin Salman as the kingdom’s crown prince. King Salman has called for a public pledging of allegiance to the Crown Prince in Mecca. Mohammed bin Salman was also named deputy prime minister, and maintains his post as minister of defense. (Al Arabiya 21.06)

Back to Table of Contents

7.5 Egypt’s Cabinet Approves Extending State of Emergency for Another Three Months

The Egyptian cabinet approved in a meeting on 22 June the extension of a nationwide state of emergency for another three months. The renewal still requires parliamentary approval. On 11 April, Egypt’s parliament voted in favor of imposing a three-month state of emergency following two deadly suicide bombings that hit two churches in Alexandria and Tanta, killing 47 people and injuring dozens more during prayer services. The Islamic State terrorist group claimed responsibility for the attacks.

Egypt has had a state of emergency since 2014 in some parts of North Sinai as part of efforts to battle an Islamist insurgency that intensified after the ouster of Islamist president Mohamed Morsi in 2013. According to the Egyptian constitution, any state of emergency must be approved by parliament by majority vote within seven days of its declaration by the president, with renewal also requiring parliamentary approval. The state of emergency grants authorities expanded powers including trying civilians in special courts, restricting or regulating movement in public places, and more authority to regulate media outlets. (Ahram Online 22.06)

Back to Table of Contents

7.6 Egypt Agrees to the Transfer of Red Sea Islands to Saudi Arabia

Egypt’s parliament approved on 14 June a controversial maritime agreement with Saudi Arabia that transfers two Red Sea islands to the kingdom. The vote came after days of heated debate in parliament with opponents even interrupting one committee session with chanting. Courts had struck down the agreement, signed in April 2016, but a year later another court upheld it. Lawyers are now challenging the deal before the constitutional court.

The accord had sparked rare protests in Egypt last year, with President Abdel Fattah al-Sisi accused of having traded the islands of Tiran and Sanafir for Saudi largesse. The government has said the islands were Saudi to begin with, but were leased to Egypt in the 1950s. Opponents of the agreement insist that Tiran and Sanafir are Egyptian. (AFP 14.06)

Back to Table of Contents

8: ISRAEL LIFE SCIENCE NEWS

8.1 TyrNovo to Participate in 2017 BIO International Convention

TyrNovo, a Kitov Pharmaceuticals Holdings company focused on the development of small molecules to overcome cancer drug resistance, has been selected to be a part of the Israel Pavilion at the 2017 BIO International Convention, which took place in June at the San Diego Convention Center, San Diego. The Israeli Pavilion was sponsored by the Israel Innovation Authority (formerly known as Office of the Chief Scientist of the Ministry of Economy and Industry).

Herzliya’s TyrNovo is developer of novel small molecules in the oncology therapeutic field which is majority owned by Kitov Pharmaceuticals. TyrNovo is developing NT219, a potential oncology combination product. NT219 is a small molecule that presents a new concept in cancer therapy. In combination with various approved oncology drugs, NT219 has demonstrated potent anti-tumor effects and increased survival in various cancer models, including sarcoma, melanoma, pancreatic, lung, ovarian, head & neck, prostate and colon cancers. Its mechanism of action is through the prevention of acquired resistance in tumors and by regression of resistant tumors. (Kitov Pharmaceuticals 15.06)

Back to Table of Contents

8.2 Evogene Reports Positive Results in Control Seed Trait Program Against Western Corn Rootworm

Evogene announced the advancement of a gene displaying insecticidal activity against Western corn rootworm into Phase 1 focusing on validation in target crops, following positive laboratory assay results. Additionally, the company announced for the first time the identification of a set of genes displaying initial toxic activity against southern green stinkbug, a major pest in soybean and other crops.

Evogene is advancing into Phase 1 a gene, EVO30495, displaying high potency against Western corn rootworm, which is a major pest in corn. EVO30495 has met all of the phase advancement criteria, including efficacy and initial estimation of lower risk of toxicity to other organisms such as bees, animals and humans. Phase 1 will include introduction of the gene into corn, followed by greenhouse experiments and further validation activities; initial results are anticipated within 1-2 years.

Additionally, for the first time Evogene has identified a set of genes displaying initial toxic activity against another major pest, the southern green stinkbug. The discovery of toxin gene traits against stinkbug is particularly significant, as there are currently no commercially available insect control seed trait solutions for this major pest in soybean and other crops.

Rehovot’s Evogene is a leading biotechnology company for the improvement of crop productivity for the food, feed and fuel industries. The Company operates in three key target markets: improved seed traits (addressing yield increase, tolerance to environmental stresses and resistance to insects and diseases); innovative ag-chemicals (developing novel herbicide solutions for weed control); and ag-biologicals. Evogene has collaborations with world-leading seed and ag-chemical companies. (Evogene 20.06)

Back to Table of Contents

8.3 The Retina and the Microbiome

Age-related macular degeneration is the leading cause of blindness in developed countries, but its causes are unknown, and no effective treatment exists. In a collaborative study with Tufts University, Weizmann Institute of Science’s researchers have discovered a connection between the development of this disease and the intestinal microbiome. As reported recently, the Tufts researchers showed that when mice ate simple carbohydrates, they had an increased risk of developing macular degeneration. But once the mice switched to a diet including complex carbohydrates, the degeneration stopped. Weizmann Institute’s team of the Computer Science and Applied Mathematics Department then entered the picture. The scientists found that when the mice switched to eating complex carbohydrates, the composition of their intestinal microbes also changed. This discovery may allow in the future the possibility to prevent or stop this degeneration by altering the microbiome. (Weizmann 19.06)

Back to Table of Contents

8.4 Gamida Cell Announces $40 Million Private Financing

Gamida Cell announced the signing of a $40 million financing to support the ongoing Phase 3 trial of the Company’s FDA Breakthrough Designated clinical-stage product, NiCord, to facilitate bone marrow transplantation. The financing is being led by new investor Shavit Capital. Additional primary participants include new investors VMS Investment Group and Israel Biotech Fund, as well as existing investor and major shareholder, Novartis. Current shareholders Clal Biotechnology Industries (CBI) and Israel HealthCare Ventures (IHCV) also participated in the financing. Gamida Cell plans to use the proceeds to complete NiCord’s Phase 3 clinical trial and prepare for product commercialization by expanding its in-house manufacturing capacity, and the Company’s presence in the US, as well as continuing to develop additional pipeline products such as CordIn for rare genetic diseases and NK cells as a treatment for cancer.

NiCord is a stand-alone graft derived from a single umbilical cord blood unit which has been expanded in culture and enriched with stem and progenitor cells using Gamida Cell’s proprietary NAM technology. NiCord leverages the advantages of umbilical cord blood which does not need full tissue matching to the patient, and can therefore be available to practically all patients in need. It also aims to address the major barrier of umbilical cord blood transplantation – delayed hematopoietic recovery – by demonstrating an advantage with a primary endpoint that is clinically meaningful.

Jerusalem’s Gamida Cell is a world leader in cellular and immune therapies for the treatment of cancer and orphan genetic diseases. The company’s pipeline of products are in development to treat a wide range of conditions including cancer, genetic hematological diseases such as sickle cell disease and thalassemia, bone marrow failure syndromes such as aplastic anemia, genetic metabolic diseases and refractory autoimmune diseases. Gamida Cell’s current shareholders include Novartis, Clal Biotechnology Industries, Elbit Imaging (part of the Elbit Imaging Group), Israel Healthcare Ventures, Denali Ventures and Auriga Ventures. (Gamida Cell 19.06)

Back to Table of Contents

8.5 Growing Demand for Annatto Coloring Creates a Unique Ecosystem

Frutarom Natural Solutions BU offers local women farmers and growers in Latin America a secured income and versatile collaboration to ensure a safe, sustainable and consistent supply of natural annatto coloring. In Peru, Brazil, Guatemala and other countries, women are the primary keepers of the household but are struggling with basic subsistence. In light of this challenge, and with the growing demand for natural annatto coloring, Frutarom has initiated a collaboration with a local agriculture partner to encourage local women to become independent farmers and grow annatto in their fields.

Together, Frutarom and its partner support the local farmers from mother plantation to education and training, including technical support on how to grow and harvest high quality annatto. Frutarom is committed to buying all the fresh annatto harvested at a fair price. The outcome of this collaboration is providing a safe, stable income to the growers, working directly with local farmers.

Annatto is an oily seed from the Achiote tree (Bixa orellana). Natural pigments present in the seeds are the carotenoids bixin and norbixin. It has a wide color range of yellow to orange tones with mid to high stability against light, heat and oxidation. As a key player in this segment, Frutarom is increasing its support by creating sustainable partnerships in Latin America and working closely with the farmers.

Herzliya’s Frutarom Natural Solutions offers a complete natural portfolio for healthy conscious consumer products including: flavor & Color, natural antioxidants and healthy ingredients, addressing the growing demand in health and wellness. (Frutarom Natural Solutions 22.06)

Back to Table of Contents

8.6 Kadimastem Received Approval to Conduct a Clinical Trial in ALS Patients

Kadimastem has received approval from the IRB (Helsinki Committee) of the Hadassah Ein Kerem Hospital for the phase 1/2a clinical trial in ALS patients using the cell therapy product developed by the Company. The commencement of the clinical trial is subject to the approval of Ministry of Health’s Supreme Committee for clinical trials in humans, which is expected to convene in the upcoming months. After receiving the Ministry of Health’s approval, the Company intends to commence the trial in ALS patients under the Ministry’s supervision. The trial will include 21 patients and will be conducted by the Department of Neurology of the Hadassah Ein-Kerem Medical Center in Ein-Kerem, a world-leading center in the field of ALS.

Kadimastem’s product, AstroRx is a cell-based treatment for ALS, based on astrocytes produced from stem cells. Kadimastem’s unique technology enables large-scale production of the cells according to Good Manufacturing Practices (GMP) standard. The cells will be injected into the patients’ spinal fluid using a standard injection procedure, performed routinely in hospitals worldwide.

Ness Tziona’s Kadimastem is a biotechnology company, operating in the field of regenerative medicine – a groundbreaking field in which the malfunctioning of organs which leads to diseases is repaired by external cells, tissues or organs. The company specializes in the development of human stem cell-based medical solutions for the treatment of diabetes and neurodegenerative diseases, such as ALS and Multiple Sclerosis. The company was founded in August 2009 and is traded on the Tel Aviv Stock Exchange. Kadimastem employs 35 people, of which 11 are PhDs, and its 1,700m2 offices and labs are located in the Ness Ziona Science Park. (Kadimastem 21.06)

Back to Table of Contents

8.7 DarioHealth Looks to Accelerate Market Penetration with Expanded Health Insurance Coverage

DarioHealth Corp. is expanding its insurance coverage provider network across the U.S. with additional service providers that will be able to target up to 10 million consumers with diabetes. Earlier this year, DarioHealth began offering a 3rd party insurance coverage option for U.S. consumers who wanted to have their DarioHealth products reimbursed by insurance. After a successful pilot program, industry leader DarioHealth is expanding its provider network as it continues market acceleration with additional insurance coverage e-access for U.S. consumers. The Dario all-in-one diabetes management system, with a native smartphone app, is highly engaging and has the feel of a wearable technology, while maintaining the highest medical standards. Since its 2016 U.S. market launch, DarioHealth has shown sequential quarterly growth in its U.S.-customer base due to a user-centric approach, which is altering the digital health landscape.

Caesarea’s DarioHealth Corp. is a leading global digital health company serving tens of thousands of users with dynamic mobile health solutions. With their smart diabetes solution, users have direct access to track and monitor all facets of diabetes, without having the disease slow them down. The acclaimed Dario Blood Glucose Monitoring System all-in-one blood glucose meter and native smartphone app gives users an unrivaled method for self-diabetes management. (DarioHealth 21.06)

Back to Table of Contents

8.8 BARDA to Exercise First Contract Option to Fund MediWound’s NexoBrid Development

MediWound has received from the U.S. Biomedical Advanced Research and Development Authority (BARDA) a written Notice of Intent to exercise an option to fund further research and development (R&D) activities for expanding NexoBrid’s indications. The BARDA contract advances the development and manufacturing, as well as the procurement of NexoBrid, MediWound’s proprietary pharmaceutical product for enzymatic removal of eschar in deep-partial and full-thickness thermal burns, as a medical countermeasure for preparedness for mass casualty events.

The five-year base contract signed in September 2015 includes $24 million to support U.S. FDA approval of NexoBrid for use in thermal burn injuries as well as $16 million for procurement of NexoBrid, which is contingent upon FDA Emergency Use Authorization (EUA) and/or FDA marketing authorization for NexoBrid. In addition, the contract includes options for up to $22 million for expanding NexoBrid’s indications for which the Company received the Notice of Intent and an option of up to $50 million for additional procurement. The total non-dilutive funding to MediWound under the BARDA contract is up to $112 million.

NexoBrid is an easy-to-use, topically-applied product that removes dead or damaged tissue, known as eschar, in approximately four hours without harming the surrounding healthy tissues. NexoBrid received marketing authorization from the European Medicines Agency for the removal of eschar in adults with deep partial and full-thickness thermal burns, and is commercially available in Europe, Israel and Argentina. Representing a new paradigm in burn care management, NexoBrid demonstrated in clinical studies, with statistical significance, its ability to non-surgically and rapidly remove the eschar earlier than other modalities, without harming viable tissues.

Yavne’s MediWound is a fully-integrated biopharmaceutical company focused on developing, manufacturing and commercializing novel therapeutics based on its patented proteolytic enzyme technology to address unmet needs in the fields of severe burns, chronic and other hard-to-heal wounds, connective tissue disorders and other indications. MediWound’s first innovative biopharmaceutical product, NexoBrid, received marketing authorization from the European Medicines Agency as well as the Israeli and Argentinian Ministries of Health, for the removal of dead or damaged tissue, known as eschar, in adults with deep partial- and full-thickness thermal burns and was launched in Europe, Israel, and Argentina. MediWound’s second innovative product candidate, EscharEx, is a topical biological drug being developed for debridement of chronic and other hard-to-heal wounds and is complementary to the large number of existing wound healing products, which require a clean wound bed in order to heal the wound. EscharEx contains the same proteolytic enzyme technology as NexoBrid, and benefits from existing development data on NexoBrid. (MediWound 23.06)

Back to Table of Contents

8.9 Eloxx Pharmaceuticals Receives a $6 Million Investment from KIP and DCS

Korea Investment Partners (KIP), DSC Investments, Sevion Therapeutics and Eloxx Pharmaceuticals announced a $6 million investment in Eloxx Pharmaceuticals. This investment increased the total series C fund raising to a $30 million. The round was led by Dr. Phil Frost, OPKO Health and Pontifax, a leading VC in Life Sciences, and is part of the Acquisition Transaction announced between Sevion and Eloxx.

On 2 June 2017, Sevion and Eloxx announced the signing of a definitive agreement for an acquisition transaction. Under the terms of the agreement, Eloxx will become a wholly owned subsidiary of Sevion. Upon completion of the transaction, Sevion will change its name to Eloxx Pharmaceuticals and intends to apply to have its shares listed for trading on NASDAQ. Eloxx is planning to initiate multiple clinical studies for ELX-02, its lead development candidate, and anticipates achieving substantial clinical milestones over the course of 2017 and 2018, particularly in the lead clinical programs in cystic fibrosis and cystinosis patients carrying nonsense mutations.

ELX-02 provides a unique opportunity to potentially be the first disease-modifying therapy for treatment of this set of devastating diseases, for which there are no effective treatments.

Rehovot’s Eloxx Pharmaceuticals is a clinical stage company developing first in class therapeutics for the treatment of genetic disease caused by nonsense mutations. (Eloxx Pharmaceuticals 26.06)

Back to Table of Contents

8.10 Kitov Updates its KIT-302 New Drug Application

Kitov Pharmaceuticals Holdings has begun the process of digitizing its New Drug Application (NDA) for KIT-302, its lead drug candidate, through Parexel International Corporation, a clinical research organization, which has been engaged by Kitov for the preparation of the NDA into the standard, accepted electronic format of the U.S. FDA. KIT-302 is Kitov’s patented combination of celecoxib and amlodipine, is intended to treat osteoarthritis pain and hypertension simultaneously. In accordance with the FDA’s usual practice, within 60 days of its receipt of the electronic submission of the complete set of NDA modules, the FDA is expected to determine whether the NDA is complete and acceptable for filing. As such, Kitov expects that the formal filing of the NDA by the FDA will occur by the end of the third quarter of 2017.

Tel Aviv’s Kitov Pharmaceuticals is an innovative biopharmaceutical drug development company. Leveraging deep regulatory and clinical-trial expertise, Kitov’s veteran team of healthcare professionals maintains a proven track record in streamlined end-to-end drug development and approval. Kitov’s flagship combination drug, KIT-302, intended to treat osteoarthritis pain and hypertension simultaneously, achieved the primary efficacy endpoint for its Phase III clinical trial. (Kitov Pharmaceuticals 26.06)

Back to Table of Contents

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Space Florida & Israel Innovation Authority Announce Winners of Innovation Partner Funding

Space Florida, the aerospace and spaceport development authority for the State of Florida, and the Israel Innovation Authority announced the fourth-round winners of industrial research and development funding tied to the Space Florida-Israel Innovation Partnership Program.

In October 2013, Florida and Israel created a $2 million recurring joint fund to support research, development and commercialization of aerospace and technology projects that benefit both Israel and Florida. For this Call for Projects, in total, 22 joint proposals were submitted by teams of for-profit companies in Florida and Israel, and five teams have been selected for the fourth-round awards. The winners were as follows:

Micro – gRx/Sanford Burnham Preby’s Medical Discovery Institute (Lake Nona, FL) & SpacePharma (Israel)
Harris Corporation (Melbourne, FL) & Nano Dimensions (Israel)
SynergyWerks Aerospace (Hobe Sound, FL) & D-Vision (Israel)
HeuRobotics (Daytona Beach, FL) & A-Growing (Israel)
Semplastics Inc. (Oviedo, FL) & Nano Dimensions (Israel)

Each company will receive their respective funding awards from Space Florida and the Israel Innovation Authority. Additionally, the Israeli Innovation Authority has approved funding in the fourth round for Israel-based Semi-Conductor Devices (SCD), which continues to work in partnership with Vision Engineering Solutions (Merritt Island, FL). The next joint call for applications is expected to be released in July 2017.

The Israel Innovation Authority has three main roles: creating infrastructure to support diverse industries, developing tools and programs that suit the needs of the industry, and budgeting and financing high-risk projects and products. In addition to these roles, the Authority serves as a central hub for knowledge and consists of six customer-oriented “Innovation Divisions,” each providing a variety of tools for each market segment and stage in the life cycle of a product: Technological Infrastructure, Advanced Manufacturing, International Collaborations, Societal Challenges, Growth and Early Stage. (Space Florida 13.06)

Back to Table of Contents

9.2 Elbit Systems’ SkEye WAPS –Revolutionary Surveillance Solution for HLS & Defense Needs

Visual Intelligence (VISINT) gathering was traditionally available in a designated video format. The user could see and record only the area the Electro Optic (EO) payload was viewing, while missing the surrounding area. SkEye WAPS changes this paradigm by persistently observing and recording a wider area than ever before and offering the system’s users the ability to select real-time or “back in time” video footage within the covered area without being limited to a single segment. Up to ten Regions of Interest (ROI) can be thoroughly analyzed simultaneously using video footage from the recent and previous missions. Developed specifically to address requirements raised by defense and law enforcement agencies, responding to natural disaster recovery events, terrorism and homeland security threats, SkEye WAPS comprises advanced capabilities in the field of imagery intelligence gathering, providing a complete high-resolution picture and up to 80 square kilometer coverage of the Area of Interest (AOI) to a large number of users.

SkEye WAPS provides a clearer picture in less time, thus exponentially increasing trust in the decision making process. While looking over a large Area-of Interest (AOI), operators can zoom into multiple Regions of Interest (ROI) simultaneously and understand the connection between them. This is achieved without neglecting the rest of the area, which is still being recorded and constantly analyzed. At the heart of the system is an airborne segment consisting of the EO sensor unit, an advanced image processing unit, a large mass storage unit and analysis applications. Via an embedded data link, the relevant information is transmitted from the aircraft to the SkEye, Control and Management Center (SCMC) (fixed or mobile), which can be integrated with the customer’s Command & Control (C2) solution.

Haifa’s Elbit Systems is an international defense electronics company engaged in a wide range of programs. The company operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems (UAS), advanced electro-optics, electro-optic space systems, EW suites, signal intelligence (SIGINT) systems, data links and communications systems and radios. (Elbit Systems 12.06)

Back to Table of Contents

9.3 Kyushu University’s New Supercomputer Accelerated by Mellanox EDR InfiniBand Solutions

Mellanox Technologies announced that RIIT (Research Institute for Information Technology) at the Kyushu University, Japan, will introduce Mellanox EDR InfiniBand smart interconnect solutions for their new supercomputer, a Fujitsu-built system comprised of a PRIMERGY server solution. The InfiniBand technology provides the university with smart accelerations, enabling in-network-computing. This ensures faster data processing, higher performance, and efficiency for the various applications workloads. The system is planned to be fully operational by January 2018, and to deliver over 10 Petaflop of peak computing power.

The Mellanox EDR InfiniBand solutions enable in-network computing through smart offload engines, including the SHARP, Scalable Hierarchical Aggregation and Reduction Protocol technology. This technology analyzes data as it being transferred within the network so that a large portion of its burden is offloaded from the communication layers into the network hardware. This results in an order of magnitude applications performance improvement.

Back to Table of Contents

9.4 SnatchBot Allows Bot Admins to Accept Payments via PayPal

SnatchBot announced their new functionality that allows bot admins to accept in-bot payments from anywhere in the world with their merchant PayPal account. SnatchBot is a free complete platform-as-a-service (PaaS) designed to eliminate the complexity of bots and help customers build the best possible messaging experience for consumers. Already the company boasts a clientele of some of the world’s premiere brands, and is now among the first PayPal merchant bots that can accept payments on all of its supported channels.

The platform provides robust administrative features and enterprise-grade security that comply with all regulatory mandates with the new capability of accepting in-bot payments via PayPal, bot admins can complete transactions anytime from anywhere in the world. SnatchBot does not personally store any payment details; all sensitive data is passed securely to Paypal, where it is stored and used only to process payments. The application and connection process is quick and effortless; it takes only minutes to test the function and begin accepting in-bot payments. When a customer enters payment details with a bot, their information is saved in PayPal’s system, which is well-known for its unparalleled security. The next time the user wants to make a transaction with that bot, their information will already be available.

Herzliya Pituah’s SnatchBot is a privately-funded company founded in January 2015 with the goal of expanding the accessibility of chatbots and making bot-building easy and free for anyone in any application. SnatchBot provides free access around the world to sophisticated, natural-language conversational bots (chatbots) with highly engaging user experiences and lifelike conversational interactions across all communication channels. (SnatchBot 19.06)

Back to Table of Contents

9.5 IAI Successfully Completes Operational Firing Trial of the LORA Weapon System

Israel Aerospace Industries (IAI) has successfully completed a firing trial with LORA (Long-Range Artillery weapon system) as the conclusive stage of several deals that involve the system. The trial consisted of launching a long-range LORA missile to a pre-planned target.

LORA is an artillery weapon system, which consists of a long-range tactical ground-to-ground missile developed by IAI’s MALAM division. It is intended for strike scenarios with a range of up to 400 km and precision of 10 meters or better. The LORA missile weighs approximately 1,600 kg. During the trial the ground version of the artillery weapon system was positioned on a naval vessel far out in the sea, in compliance with safety requirements for trials of this kind. The missile was launched from an operational system that consists of a command trailer and ground launcher. Following the launch, the missile has navigated its course to the target, striking the designated target with high precision. Both the weapon system and the missile have successfully met all objectives.

Israel Aerospace Industries (IAI) is a globally recognized leader in the delivery of state-of-the-art systems for the defense and commercial markets. IAI offers unique solutions for a broad spectrum of requirements in space, air, land, sea, cyber, and HLS. IAI is the largest government owned defense and aerospace company in Israel. Over the past 60 years IAI delivered, supplied and supported advanced systems for the Israeli Ministry of Defense as well as many demanding customers worldwide. (IAI 20.06)

Back to Table of Contents

9.6 CyberArk Named Undisputed Privilege Management Leader by KuppingerCole

CyberArk has been named the Overall Leader by independent analyst firm KuppingerCole in its Leadership Compass: Privilege Management 2017 report. Maintaining its leadership position for the third year in a row, CyberArk surpassed 17 other vendors and was once again named the overall Leader, demonstrating unsurpassed advantages across product, market and innovation categories. The firm called CyberArk “the one to beat in Privilege Management,” and gave the CyberArk Privileged Account Security Solution the highest possible product rating across security, usability, functionality, integration and interoperability categories.

CyberArk was recognized for the strengths of its comprehensive CyberArk Privileged Account Security Solution, including capabilities for threat analytics and alerts; support for AWS and Microsoft Azure management consoles; and its large and solid partner ecosystem.

Petah Tikva’s CyberArk is the only security company focused on eliminating the most advanced cyber threats; those that use insider privileges to attack the heart of the enterprise. Dedicated to stopping attacks before they stop business, CyberArk proactively secures against cyber threats before attacks can escalate and do irreparable damage. The company is trusted by the world’s leading companies – including more than 45% of the Fortune 100 – to protect their highest value information assets, infrastructure and applications. (CyberArk 22.06)

Back to Table of Contents

9.7 Beyond Verbal Makes Sure Your Virtual Private Assistant Knows How You Feel

Beyond Verbal is launching a brand new cloud-based API engine dedicated to raising the Emotional Intelligence (EQ) and emotional understanding of Artificial Intelligence (AI) assistants. With this new launch, different virtual private assistants (VPAs) will be able to reveal customized recommendations based on individual moods, all from the privacy of your own home. Virtual private assistant interfaces are the next stages in AI. However, until now, these platforms were ‘request based only’ and they did not take into account your emotional state. With this in mind, Beyond Verbal set out to eliminate virtual private assistant’s blind spots and enable Humanoids and Bots to understand the emotional message, context, and intent carried by our vocal intonations. Vocal Intonations represent 35-40% of the emotions we convey in our communication, making it a fundamental role in making Artificial Intelligent Assistants more emotional.

Beyond Verbal’s Emotional Analytics technology takes raw voice input and analyzes it for mood and attitude. The technology only requires 10 seconds of continuous voice input in order to render an emotional analysis. The operating system then measures the speaker’s tone of voice and the results are distributed into groups and analyzed in real-time.

Since its launch in 2012, Tel Aviv’s Beyond Verbal has been using voice-driven emotions AI to dramatically change the way we can detect emotions and reveal health conditions. The only input needed is the human voice, making this technology non-intrusive, passive and cost effective. Beyond Verbal’s technology has been developed based on ongoing research into the science of emotions that started in 1995. By combining the company’s patented technology with its proprietary machine learning-based algorithms and AI, Beyond Verbal is focusing on enabling devices to understand our emotions and health. (Beyond Verbal 21.06)

Back to Table of Contents

9.8 CellMining Virtual Network NPS Drives Market-Wide Mobile Subscriber Retention

Caesarea’s CellMining, a leading provider of behavior-based network analytics and optimization, announced the launch of Virtual Network NPS, which is the first technology able to predict network detractors across the entire mobile subscriber base without the need for an NPS survey.

By correlating the responses of surveyed subscribers with key quality indicators (KQI) observed and analyzed by CellMining’s Subscriber Network Analytics – such as low quality VoLTE calls, slow video streaming, or frequent dropped connections when traveling – CellMining’s unique embedded machine learning model can actively predict the detractors from the entire subscriber base for which it has analyzed KQIs. This breakthrough gives the marketing team the power to identify both detractors for retention campaigns and promoters who can be nurtured. It also directly provides the network team with insights for automating network configuration changes, performance optimization, and enhanced prioritization for network tasks, based on subscriber data including NPS metrics.

Virtual Network NPS integrates with CellMining’s Network CEM Solution, which provides marketing and customer experience (CX) teams with market-wide customer satisfaction metrics that correlate subscriber experience data with parameters that include device type, cells, technology, service, and quality. A range of advanced products are available to extend the capability of Network CEM, including: Connected Journey Experience, Inbound Roaming, Business Account Quality, VIP Quality Monitoring, Handset Analytics and On-Demand Analytics, in addition to Virtual Network NPS. (CellMining 21.06)

Back to Table of Contents

9.9 Mellanox Ethernet & InfiniBand Chosen by AMD as their Preferred Interconnect Solutions

Mellanox Technologies announced that the company’s Ethernet and InfiniBand interconnect solutions have been chosen to accelerate the new AMD EPYC data center platforms. Mellanox 25, 50 and 100G Ethernet and EDR InfiniBand represent the ideal networking solutions to connect AMD EPYC CPUs, delivering the highest return on investment for Cloud, Web2.0, Big Data, Machine Learning, storage and high-performance computing infrastructures. AMD EPYC data center CPUs deliver unmatched data throughout options and when connected with Mellanox intelligent and high speed interconnect solutions, the combined platform delivers world-leading performance for broad set of applications. As demonstrated by AMD at the EPYC announcement event, this fully integrated solution brings together best in breed technologies and was tested for the industry’s most reliable out of box experience.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end Ethernet and InfiniBand intelligent interconnect solutions and services for servers, storage, and hyper-converged infrastructure. Mellanox’s intelligent interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance. Mellanox offers a choice of high performance solutions: network and multicore processors, network adapters, switches, cables, software and silicon, that accelerate application runtime and maximize business results for a wide range of markets including high performance computing, enterprise data centers, Web 2.0, cloud, storage, network security, telecom and financial services. (Mellanox 21.06)

Back to Table of Contents

9.10 Stratasys FDM 3D Printing Supports German Space Exploration Mission to Mars

Stratasys announced that the German Aerospace Centre (Das Deutsche Zentrum fur Luft- und Raumfahrt e.V.) is using Stratasys FDM 3D printing for the production of a fully-working prototype of ‘TransRoPorter’ (TRP). TransRoPorter, built at the Institute for Robotics and Mechatronics, is an exploration robot designed for unmanned flights to Mars and set for launch in four to five years. To successfully explore Mars with a robot, design and functionality are key factors to meeting the objectives of the mission. Using a Stratasys Fortus 900mc Production 3D Printer, the research team 3D printed a working prototype, significantly reducing production times compared to traditional methods. This enables the team to test the design and functionality of the robot under simulated extreme conditions ahead of time.

Using the Stratasys Fortus900mc Production 3D Printer, the research team are 3D printing large parts in FDM thermoplastic materials. The ASA material was ideally suited for testing the TransRoPorter prototype, enabling the team to produce a strong enough Box to contain all the technology safely within.

For nearly 30 years, Stratasys has been a defining force in 3D printing and additive manufacturing, shaping the way things are made. Headquartered in Minneapolis, Minnesota and Rehovot, Israel, the company empowers customers across vertical markets, including Aerospace, Automotive, Healthcare, Education, and Consumer Products, by enabling new approaches for design and manufacturing. Stratasys solutions offer design freedom and manufacturing flexibility, reducing time-to-market and lowering development costs, while improving products and communication. Subsidiaries include MakerBot, Solidscape and Stratasys Direct Manufacturing, which offers 3D printed parts on demand. (Stratasys 21.06)

Back to Table of Contents

9.11 Inomize Selected by OryxVision to Develop Its LIDAR Solution

Inomize, a leading provider of turnkey ASIC design solutions, announced it was selected by Oryx-Vision to design the integrated circuit of its Laser-based object sensing solution for Advanced Driving Assistance Applications (ADAS) and autonomous driving. Inomize analog team, together with Oryx’ engineers, will implement the company’s next generation FMCW LiDAR technology in an advanced ASIC solution that will enable superior vision capabilities for future vehicles. The combined engineering teams developed a single mixed signal silicon chip that incorporates state of the art low noise trans-impedance amplifiers array with all the supporting circuits needed to shape and drive the large amount of data generated by the Oryx sensor.

Netanya’s Inomize is a professional Research & Development firm specializing in the design and delivery of hardware solutions. Inomize offers a wide range of services tailored to meet project needs and product constraints in terms of cost, performance and power consumption.

Petah Tikva’s Oryx Vision is developing a revolutionary long-range, high-precision automotive depth sensing system. Based on a radically innovative sensor technology, Oryx’ coherent object sensing system uses arrays of microscopic antennas to receive light waves, resulting in 100x better performance than any competing solution. It meets all the requirements of next-generation Advanced Driving Assistance Applications (ADAS) and autonomous driving. (Inomize 20.06)

Back to Table of Contents

9.12 Mellanox Solutions Scale Deep Learning Platforms Provide World-Leading Performance

Mellanox Technologies announced that the leading deep learning frameworks such as TensorFlow, Caffe2, Microsoft Cognitive Toolkit, and Baidu PaddlePaddle now leverage Mellanox’s smart offloading capabilities to provide world-leading performance and near-linear scaling across multiple AI servers. Mellanox RDMA and In-Network Computing offloads and NVIDIA GPUDirect are key technologies enabling users to maximize their application performance and system efficiencies.

Deep learning is used across industries and the research community to help solve many big data problems such as natural language processing, speech recognition, computer vision, healthcare, life-sciences, financial services and more. Mellanox is enabling these industries into a new era of performance and scalability with the powerful data-centric offload architecture that has been employed by the world’s most advanced machine learning platforms.

Back to Table of Contents

9.13 Argus Cyber Security Named Top 25 Technology Company to Watch by the Wall Street Journal

Argus Cyber Security announced that The Wall Street Journal (WSJ) included the company on its list of the Top 25 Technology Companies to Watch. Argus supplies car manufacturers (OEMs), their Tier 1 suppliers, fleet operators, and aftermarket connectivity providers with multi-layered, end-to-end solutions and services that protect connected cars and commercial vehicles from cyber-attacks. Argus secures infotainment and telematics units, in-vehicle networks, individual ECUs and aftermarket devices, and provides situational awareness of a vehicle fleet’s cyber health and the means to protect each vehicle throughout its lifespan. Tested by OEMs, Tier 1s and independent third-parties, Argus’ technology has the highest detection rate in the industry, with a false positive rate of zero.

Founded in 2013, Tel Aviv’s Argus is the world’s largest, independent automotive cyber security company. Argus’ comprehensive and proven solution suites protect connected cars and commercial vehicles against cyber-attacks. With decades of experience in both cyber security and the automotive industry, Argus offers innovative security methods and proven computer networking know-how with a deep understanding of automotive best practices. Customers include car manufacturers, their Tier 1 suppliers, fleet operators and aftermarket connectivity providers. (Argus 22.06)

Back to Table of Contents

9.14 Fieldbit Named as Winning Startup in ENGIE Innovation Week

Fieldbit has been named as a ‘winning startup’ in ENGIE’s international Innovation Week. This is the third consecutive year that ENGIE, Europe’s leading energy company, has organized a week-long event dedicated to highlighting innovative projects in the energy sector. Among hundreds of applicants and dozens of finalists worldwide, Fieldbit was recognized as a winner for its Fieldbit Hero augmented reality platform for field services.

Using augmented reality, Fieldbit Hero enables remote experts to superimpose precise instructions on top of the physical machine, guiding the technician step-by-step through complex machinery fixes. Particularly relevant for energy and other utility companies, Fieldbit Hero helps preserve the practical field services knowledge of aging workforces by organically capturing the knowledge created during the service process. This information is then stored in a knowledge base for search, sharing and reuse across the organization.

Founded in 2014, Hod HaSharon’s Fieldbit is a leading developer of real-time augmented reality collaboration solutions. Its enterprise class, out-of-the-box, hands-free technology enables on-site service engineers to collaborate seamlessly with experts in the service center, and to receive all the know-how and guidance they need to solve issues quickly. Fieldbit increases remote resolution and first time fix rates, minimizing costly downtime and enhancing customer satisfaction. (Fieldbit 22.06)

Back to Table of Contents

9.15 APERIO Systems Named a ‘Cool Vendor’ in Industrie 4.0 by Gartner

APERIO Systems has been named a Gartner Cool Vendor in Digitalization Through Industrie 4.0, 2017 report. According to the Gartner Cool Vendor Report, “Industrie 4.0 Cool Vendors offer significant advantages over common industry practices.” APERIO Systems’ proprietary Data Forgery Protection (DFP) technology detects artificial manipulations of industrial process data in real time to safeguard industrial control systems, provide true state awareness, and allow operational resilience and quick and effective remediation without disruption to business. Both internal and external attackers can penetrate the most critical infrastructures, causing severe and long lasting damage. In order to do so, they must hide their malicious activity and deceive plant operators by forging the reported values of critical devices – remaining undetected and preventing timely corrective action. APERIO Systems’ Data Forgery Protection technology immediately exposes forged system readings to safeguard critical control systems and allow quick and effective remediation.

Haifa’s APERIO Systems secures critical control systems with a last line of defense against both internal and external cyber threats and malicious actors. APERIO Systems uses statistical physics and state-of-the-art machine learning techniques to detect operational data forgery attempts and reconstruct the true state of industrial control systems in real time. (APERIO Systems 21.06)

Back to Table of Contents

9.16 illusive networks Collaborates with Intel on a Cybersecurity Protection Against Advanced Attacks

illusive networks announced plans to collaborate with Intel for an innovative approach to help combat Advanced Persistent Threats (APTs) by simultaneously harnessing hardware and software competencies. The collaboration between illusive and Intel extends deception-based cybersecurity from software to hardware. This solution detects APTs and seeks to divert them, thereby frustrating further progress. Real-time alerts provide customers with contextual forensics to neutralize the threat in its initial stages. By rerouting capabilities provided by Intel that are already available at the endpoint, this solution also reduces end user security costs. illusive’s award-winning Deceptions Everywhere enterprise technology blankets a network with effective deceptions across endpoint, network, data and application layers. This agentless solution is currently deployed across leading financial institutions, insurance, retailers, law firms, healthcare providers, energy and telecommunication companies across the globe.

Tel Aviv’s illusive networks are pioneering deception-based cybersecurity with its patented Deceptions Everywhere technology that focuses on neutralizing targeted attacks and Advanced Persistent Threats (APT) by creating a deceptive layer across the entire network. By providing an endless source of false information, illusive networks can disrupt and detects breaches with real-time forensics and without disruption to business. (illusive networks 21.06)

Back to Table of Contents

9.17 Autotalks Launches Bike-to-Vehicle (B2V) Technology to Prevent Motorcycle Accidents

Autotalks is launching its bike-to-vehicle (B2V) solution, a technology for the prevention of motorcycle accidents. The solution is based on the B2X (Bike-to-Everything) chipset developed by the Israeli company. Bosch, as a leading global supplier of technology and services, announced on 23 May that it is carrying out a development B2V study that incorporates Autotalks’ B2V technology alongside Ducati’s motorcycles and Cohda Wireless’ software stack. The company also said that according to Bosch accident research, the B2V technology could prevent nearly a third of all powered two-wheeler accidents with casualties in Germany.

Autotalks’ B2V solution enables detection of motorcycles that are not visible to the human eye or cameras of any sort. The advantages of the Autotalks’ solution include, among other things, simple integration, low power consumption, the smallest form factor, highest range of operating temperature and smallest physical size, which results in its resistance to the strong vibration and challenging environmental conditions of motorcycles. The use of DSRC (dedicated short range communications) protocol enables cars and motorcycles to safely exchange data such as speed, direction of travel, location and braking mode. Since motorcycles rarely have telematics services and are not obliged to support the eCall regulation, they do not include a cellular modem. Therefore, according to Autotalks, the simplest and cheapest connectivity for motorcycles is DSRC.

Kfar Netter’s Autotalks, which was founded in 2008, is a V2X chipset market pioneer and leader, providing customers with state-of-the-art V2X solutions. Autotalks helps reduce collisions on roadways and improve mobility with its automotive qualified chipsets. The chipsets offer the most advanced, truly secure and highest performing V2X communication solution architected for autonomous vehicles. Autotalks’ advanced technology, to be mass-deployed by 2019, complements the information coming from other sensors, specifically in non-line-of-sight scenarios, rough weather or poor lighting conditions. (Autotalks 06.06)

Back to Table of Contents

9.18 AudioCodes SBCs Enable Axtel’s UCaaS and SIP Trunking Services

AudioCodes announced that Axtel, a leading telecommunications service provider in Mexico, has deployed AudioCodes Mediant session border controllers (SBC) as a critical component of its unified communications (UC) and SIP trunking service infrastructure. AudioCodes’ Mediant SBCs help Axtel deliver secure and high-quality VoIP services to its businesses customers across Mexico.

AudioCodes’ Mediant SBC provides extensive interoperability, interworking and security functions that have allowed Axtel to accelerate its UC and SIP trunking offering, by efficiently mediating between its business customers, unified communications platform and SIP trunking infrastructure. The Mediant SBC delivers secure and resilient VoIP service by enforcing call admission control, providing end-to-end security and protecting against denial-of-service attacks and other service-impacting events. AudioCodes’ flexible and scalable SBC enables multiple services – including hosted UC and SIP trunking services – to be supported in a single platform, administrated via AudioCodes’ powerful and user-friendly management systems.

Lod’s AudioCodes designs, develops and sells advanced Voice-over-IP (VoIP) and converged VoIP and Data networking products and applications to Service Providers and Enterprises. AudioCodes is a VoIP technology market leader, focused on converged VoIP and data communications, and its products are deployed globally in Broadband, Mobile, Enterprise networks and Cable. The Company provides a range of innovative, cost-effective products including Media Gateways, Multi-Service Business Routers, Session Border Controllers (SBC), Residential Gateways, IP Phones, Media Servers, Value Added Applications and Professional Services. (AudioCodes 26.06)

Back to Table of Contents

9.19 AllCloud Proves its Expertise in Deploying Microsoft Workloads on AWS

AllCloud achieved Amazon Web Services (AWS) Microsoft Workloads Competency status. This designation recognizes that AllCloud holds proven expertise and deep knowledge in helping customers design, migrate, deploy, and fully manage their Microsoft-based applications on AWS with specific focus on workloads based on .NET applications, Active Directory and Microsoft SQL Server. Achieving the AWS Microsoft Workloads Competency differentiates AllCloud as an AWS Partner Network (APN) member that provides specialized and demonstrated technical proficiency and proven customer success with specific focus on workloads based on Microsoft Productivity Solutions and Database Solutions. To receive the designation, APN members must possess profound AWS expertise with customer references that prove delivery of seamless Microsoft workload deployments on AWS.

Rosh HaAyin’s AllCloud is a global leader in migrating and deploying all businesses from startup to enterprise to the cloud. Bringing more than 8 years of experience and thousands of successful cloud deployments, their expertise range from designing state of the art cloud architecture to deploying and managing cloud environments through Professional and Managed Services including DevOps, 24/7 Service Assurance (NOC) Operations with 15 min SLA, Automation, Monitoring and Security solutions. (AllCloud 26.06)

Back to Table of Contents

10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s Inflation Rate Rises by 0.4% in May

Israel’s Consumer Price Index (CPI) rose 0.4% in May, the Central Bureau of Statistics announced on 15 June. The May returns bring the rate of inflation over the past twelve months to 0.8%. A 0.9% rise in prices of clothing and footwear stood out in May. The Housing Price Index rose 0.5% last month. The twelve month rise in housing prices moderated to 4.4%. The Housing Price Index, published separately from the CPI, represents a weighted average of process of homes sold in the period March-April 2017. (CBS 15.06)

Back to Table of Contents

10.2 Israel’s First Quarter Growth Revised Downwards

Israel’s Central Bureau of Statistics announced that the economy grew by only 1.2% in Q1/17. The original estimate for the quarter, published last month, was 1.4%, on an annualized basis. The revised growth figures for the third and fourth quarters of 2016 were 4.1% and 4.6%, respectively.

Growth in the first quarter was affected by a steep 72.8% annualized plunge in vehicle purchases. The Central Bureau of Statistics said that excluding the effect of vehicle imports, GDP grew 3.1%. Spending on other consumer goods, such as refrigerators, washing machines, and air-conditioners grew by an annualized 5.7% in the first quarter, following a 2.1% annualized drop in the preceding quarter.

The main changes in the estimates are a revision in the growth rate in business product from 0.6% to 0.3%. The estimate for growth in exports, on the other, was raised from 8% to 8.6%, while the estimate for the decrease in fixed assets in the first quarter was altered from 6% to only 3.4%. Imports of goods and services fell by 9.3% in the first quarter, while spending on private consumption dipped 1.7%, compared with 1.6% in the original estimate. Spending on public consumption was up 2.5%, compared with a 2.6% rise in the original estimate. (CBS 18.06)

Back to Table of Contents

11: IN DEPTH

11.1 ISRAEL: The EastMed Pipeline Could Be a Giant Step Towards Enhancing Regional Security

On 22 June, George N. Tzogopoulos posted in BESA Center Perspectives Paper No. 505. He stated that the EastMed pipeline, a proposed means of transporting gas from the eastern Mediterranean to new markets, would be expensive and difficult – but it is feasible. Easier and less expensive solutions are also being considered, but the security element works in EastMed’s favor. EastMed would allow Cyprus, Greece and Israel to collaborate while developing their roles as hubs of stability in a turbulent neighborhood. The EU and the US would likely see improvement in Western energy dependence. Israel would also have the opportunity to improve its relationship with the EU, not only by participating in a project of European interest but also by finding new clients for its own gas in the European market.

The gas discoveries in the eastern Mediterranean are altering regional dynamics. Transporting that gas to new export destinations, principally in Europe, will be complicated but feasible.

With this challenge in mind, Cyprus, Greece, and Israel have intensified their contacts of late. Trilateral summits are regularly taking place with the participation of Cypriot President Nicos Anastasiades and Greek and Israeli Prime Ministers Alexis Tsipras and Benjamin Netanyahu (In April 2017, Italy joined the club, signing a declaration in Tel Aviv to that effect).

The first trilateral summit took place in Nicosia in January 2016 and the second in December 2016 in Jerusalem. A third was held only recently in Thessaloniki. At that most recent summit, the leaders agreed to deepen their energy collaboration by exploring means of constructing an underwater “EastMed” pipeline.

The project envisages a 1,300 km offshore pipeline and a 600 km onshore one from Eastern Mediterranean sources to Cyprus, from Cyprus to Crete, from Crete to mainland Greece (the Peloponnese), and from the Peloponnese to Western Greece. Then, the plan is to connect Western Greece to Italy east of Otranto via a 207 km offshore pipeline across the Ionian Sea, the so-called Poseidon.

At first glance, the biggest obstacle to the construction of the EastMed pipeline – which, if constructed, would be the longest and deepest subsea pipeline on earth – is its technical viability. Practical challenges abound. On the approach to Crete, for example, there is a stretch of about 10 km where the depth is quite high, which could cause construction problems. However, the companies involved are optimistic that technology will advance sufficiently to enable the pipeline to be built.

The Natural Gas Supplier Corporation (DEPA) of Greece describes the project as “technically feasible,” according to studies it has conducted. To bolster its case, DEPA notes the success of the Medgaz pipeline, which runs between Algeria and Spain. Israeli energy minister Yuval Steinitz, too, has attempted to ease fears about construction issues and suggests that EastMed can be completed by 2025.

Technical feasibility is not the only matter of concern, however. Another challenge is the cost, which has been projected to range anywhere from $4 billion to $7 billion. Low gas prices are also concern, as they could prevent private companies from supporting the project alongside the EU (which is prepared to offer co-financing).

Alternatives scenarios are on the table to address these concerns. LNG bases in either Cyprus or Israel could work in theory, but the prohibitively high cost of constructing them makes them a nonstarter. On a practical level, there are two real options available.

The first is to construct a 550 km submarine pipeline beginning from the Leviathan reservoir in Israeli waters, passing through Cypriot waters, and reaching southern Turkey. Israeli gas would then be shipped from southern Turkey to Europe via existing, and perhaps some newly constructed, pipeline networks. This project is estimated to cost half or possibly even less than half what EastMed would cost. But in view of the lack of resolution on the Cyprus Question, Israel is hesitant to proceed to an agreement with Turkey on this matter.

The second option is to use already existing LNG facilities in Egypt. Gas from the eastern Mediterranean could theoretically be supplied to the two Egyptian facilities in Damietta and Idku, turning Egypt back into a gas exporter. But the recent discovery of the Zohr field represents an unknown factor. It cannot be anticipated how this field will influence Egypt’s energy priorities and the balance between domestic consumption and exports. Also, neither the construction of new pipelines nor the reversal of the existing one connecting Israel to Egyptian LNG facilities would be an easy process.

If the Cyprus Question is resolved soon, the Turkish option will gain ground. But the restarted talks between Anastasiades and Turkish Cypriot leader Mustafa Akinci are highly unlikely to lead to a breakthrough. In any case, Turkey will not be considered a reliable partner by Israel for as long as President Erdogan dominates the political sphere, despite the rapprochement achieved last summer. Israel also has reservations vis-à-vis Egypt: the growing Russian role in Egypt’s energy sector cannot be ignored.

Israel has always attached great significance to political and security parameters. If the EastMed project develops, it will certainly improve Israel’s relationship with the EU. Commissioner for Climate Action and Energy Miguel Arias Canete has said construction of this pipeline would contribute to the reduction of Europe’s dependency on Russian energy, a potential result also viewed with favor by the US.

The traditional division among EU member states on their view of Moscow can work in EastMed’s favor. While Germany is looking favorably towards Nord Stream II, which will complement Nord Stream I in the transporting of Russian gas to Europe under the Baltic Sea, the EU might well emphasize energy security and push (with the support of the US) for the realization of EastMed.

Israel is the driving force for energy development in the eastern Mediterranean and its choices on this matter will have serious implications in terms of both strategic calculations and long-term economic planning. By cooperating with trustworthy democratic countries, Jerusalem will be able to mitigate the risk of instability, secure clients on the Continent, strengthen its relationship with the EU, and improve its image in Europe.

George N. Tzogopoulos is a Lecturer at the Democritus University of Thrace and Visiting Lecturer at the European Institute of Nice. (BESA 22.06)

Back to Table of Contents

11.2 JORDAN: IMF Executive Board Completes First Review Under the Extended Fund Facility

On 21 June, the Executive Board of the International Monetary Fund (IMF) completed the first review of Jordan’s economic performance under the Extended Arrangement under the Extended Fund Facility (EFF). The completion of the first review enables the disbursement of SDR 51.465 million (about $71 million), bringing total disbursements under the program to SDR 102.93 million (about $141.9 million). The Executive Board also approved the authorities’ requests for waiver of non-observance of performance criterion on the NIR of the Central Bank of Jordan (CBJ) and the rephrasing of access.

On 24 August 2016, the Executive Board approved a three-year extended arrangement under the EFF for Jordan for an amount equivalent to SDR 514.65 million (about $723 million at the time of approval of the arrangement, or 150% of Jordan’s quota) to support the country’s economic financial reform program. This program aims at advancing fiscal consolidation to gradually lower public debt and broad structural reforms to enhance the conditions for more social-friendly inclusive growth. Following the Executive Board’s discussion on Jordan, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, said:

“The Jordanian economy has performed favorably under a difficult external environment. Macroeconomic stability and external viability have been maintained thanks to a prudent monetary policy and progress in reducing the fiscal deficit. However, with below-potential economic growth, high unemployment, and difficult social conditions, steadfast implementation of reforms is critical to preserve these achievements and enhance inclusive growth.

“The authorities are committed to continue with a gradual and steady fiscal consolidation to bring public debt toward more sustainable levels. To help public finances rest on a sounder foundation, the removal of exemptions on the general sales tax and custom duties will continue over the program period. These reforms are being complemented by others to tackle tax evasion, rationalize expenditures, contain contingent liabilities, and improve the financial condition of the energy and water sectors.

“The Central Bank of Jordan has tightened its monetary policy stance since November 2016 and stands ready to increase the policy interest rates further to support the peg. The banking system is well capitalized and profitable. The gradual adoption of Basel III, and the authorities’ decision to complement it with an additional capital buffer, provide important resilience to shocks and will help preserve financial stability.

“Efforts to promote financial inclusion and facilitate access to credit and improve the business environment should help support investment and productivity, and enhance inclusive growth. Further reforms to reduce the cost of formal jobs are critical to address high unemployment, particularly for young people and women.

“Continued donor support through sufficient budget grants and concessional financing will be important to help Jordan cope with the refugee crisis and support the authorities’ program goals.” (IMF 21.06)

Back to Table of Contents

11.3 BAHRAIN: Fitch Revises Bahrain’s Outlook to Negative; Affirms IDR ‘BB+’

On 12 June, Fitch Ratings revised Bahrain’s Outlook to Negative from Stable and affirmed the sovereign’s Long Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at ‘BB+’. The issue ratings on Bahrain’s senior unsecured foreign and local currency long-term bonds have been affirmed at ‘BB+’.

The ratings on the sukuk trust certificates issued by CBB International Sukuk Company 5 have also been affirmed at ‘BB+’. The Country Ceiling has been affirmed at ‘BBB+’ and the Short-Term Foreign- and Local-Currency IDRs at ‘B’. The issue ratings on Bahrain’s senior unsecured local-currency short-term bonds have been affirmed at ‘B’.

Key Rating Drivers

Bahrain’s ratings are supported by high GDP per capita and human development indicators (relative even to the BBB median), a developed financial sector and the boost to external financing flexibility from strong GCC support. The strengths are balanced by double-digit fiscal deficits, high and rising debt, a highly oil-dependent government budget and domestic political tensions that hamper fiscal adjustment. The revision of the Outlook to Negative reflects the following key rating drivers:

Beyond various near-term measures to rein in the fiscal deficit, the government has yet to identify a clear medium-term strategy to tackle high deficits and a rapidly growing government debt ratio. The lack of a medium-term fiscal framework, combined with the absence of the two-year budget for 2017 and 2018 six months into the budget period, creates increasing uncertainty around the outlook for debt and deficits.

The government deficit widened to 16.2% of GDP in 2016 from 15.4% in 2015, with subsidy reforms not fully offsetting a decline in oil revenue, and interest costs undermining savings elsewhere on expenditure. Although Fitch expects the deficit to narrow to 10.2% of GDP by 2018, this will be insufficient to stabilize the debt trajectory. Under Fitch’s baseline assumptions, which include a moderate rise in oil prices and implementation of fiscal measures already identified, debt will continue to rise, hitting 100% of GDP in 2026 (from 74% of GDP in 2016). Fitch’s deficit numbers include estimated extra budgetary spending of 2.6% of GDP.

In Fitch’s view, the slow progress towards the new budget and a medium-term fiscal strategy reflects the difficulty of building consensus over the next wave of fiscal consolidation measures. Reining in the deficit further could call for deeper reforms to Bahrain’s social and economic model, traditionally characterized by low taxation and generous benefits. In Fitch’s view, the country’s leadership is generally committed to reform, but this commitment is not yet shared by other stakeholders, and the government remains wary of social pressures.

Bahrain’s ‘BB+’ rating also reflects the following key rating drivers:

Fitch expects hydrocarbon revenue to rise by around 28% and non-hydrocarbon revenue to rise by about 16% in 2017. Gradual increases in administered gas and fuel prices partly offset the negative effect of weak oil prices on hydrocarbon revenue in 2016 and will augment revenue increase this year. The government has already introduced higher fees for various government services and a fee on certain commodities ahead of GCC-wide implementation of an excise tax. The government is working to introduce a VAT in 2018 in line with agreement among GCC states, which could provide a fiscal boost in the region of 2% of GDP, according to IMF estimates. Fitch assumes that this implementation will be delayed from early 2018 into 2H18, given the magnitude of the technical challenges involved.

Spending was flat in 2016 and Fitch expects it to grow at well below GDP growth in 2017-2018. Subsidy expenditure fell almost 8% in 2016 and a schedule of gradual increases to water and electricity tariffs holds out the promise of a further 4-5% decline per year in the subsidy bill in 2017 and 2018. Capital spending also fell by around 7% and will shrink further as the government’s project pipeline is increasingly financed through the GCC Development Fund. The government’s nominal wage bill was roughly constant in 2016, with significant government efforts to contain benefits and allowances to its employees offsetting the effect of a 1.5%-3% increase to base salaries.

Fitch expects real GDP growth of 2.4% per year in 2017-2018. This reflects constant hydrocarbon volumes (after a slight fall in 2016) and a moderation of non-hydrocarbon growth to 3% from an estimated 3.7% in 2016. Spending on projects financed by the $7.5 billion (20% of GDP) GCC Development Fund provides the most significant support to growth amid government retrenchment. Some $3.1 billion of projects had been awarded to contractors at end-2016, up from $1.1 billion at end-2015. Growth is also supported by state-owned enterprise projects (in oil, gas, and aluminum) and strong GCC demand for Bahrain real estate.

Growth of credit to the private sector slowed to an estimated 2.5% in 2016 after 8.8% in 2015. Banks would be well-placed to extend more credit to the economy, given their sound profitability, high capitalization and liquidity, and low non-performing loan levels. However, deposit growth has slowed and the high yields on government debt make some private sector lending unattractive. As a result, Fitch expects growth of credit to the private sector to stay muted at 2%-3% per year.

The GCC Development Fund reflects the broader support that Bahrain enjoys from some GCC countries, particularly Saudi Arabia and Kuwait. This support is rooted in deep historical, cultural and familial ties as well as regional rivalries. Bahrain gets most of its oil from the Abu Sa’afa field shared with Saudi Arabia (it is entitled to 50% of production, but has sometimes received significantly more as a form of support). In Fitch’s view, further material support from the GCC would be forthcoming in case of extreme political, financial, or fiscal instability, given Bahrain’s small size and strategic importance. The expectation of such support has helped to maintain Bahrain’s market access and US dollar peg despite low foreign exchange reserves, which had fallen to an estimated 1.2 months of current external payments at end-2016.

Fitch expects Bahrain’s recent severing of ties with Qatar to have a limited direct dampening effect on growth. Qataris make up slightly more than 1% of inbound arrivals to Bahrain, but loss of flights from Doha and heightened risk perceptions could deter some non-GCC visitors (currently more than a third of the total). Qatar had not been contributing to the GCC Development Fund, but some private real estate investment will likely be forgone. The ban on flights by Qatar Airways could provide an opportunity for state-owned Gulf Air to seize market share on regional routes and reduce reliance on government subsidies.

Tensions continue between the government and the predominantly Shia opposition, resulting in sporadic and isolated incidents of violence and clashes with security forces. Courts have now banned the two main opposition groups, which boycotted the previous election and were charged with fomenting violence and terrorism. Fitch’s baseline assumption is that Bahrain’s security forces will continue to prevent the sort of escalation of domestic tensions that would materially affect economic growth. However, Fitch believes that the government’s recently more hardline stance increases the risk of instability, notwithstanding a tight security environment and strong regional support.

Rating Sensitivities

The main factors that could lead to negative rating action are:

– Failure to shrink the fiscal deficit and set out a clear path towards stabilizing the government debt-to-GDP ratio;

– Severe deterioration of the domestic security environment.

The main factors that could lead to positive rating action are:

– A narrowing of the budget deficit consistent with a decline of the government debt-to-GDP ratio in the medium term;

– A broadly accepted political solution to domestic political tensions.

Key Assumptions

Fitch assumes that Brent crude will average $52.5/bbl in 2017 and $55/bbl in 2018.
Fitch assumes no change to the rule of the royal family.
Fitch assumes that regional conflicts will not directly impact Bahrain or its ability to trade.
Fitch assumes no change to the peg of the Bahraini dinar to the US dollar. (Fitch 12.06)

Back to Table of Contents

11.4 OMAN: Fitch Revises Oman’s Outlook to Negative; Affirms at ‘BBB’

On 19 June 2017, Fitch Ratings revised Oman’s Outlook to Negative from Stable and affirmed the sovereign’s Long Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘BBB’. The issue ratings on Oman’s senior unsecured foreign-currency bonds and on the sukuk trust certificates issued by Oman Sovereign Sukuk S.A.O.C. have also been affirmed at ‘BBB’. The Country Ceiling has been affirmed at ‘A-‘ and the Short-Term Foreign- and Local-Currency IDRs at ‘F2’.

Key Rating Drivers

Oman’s fiscal deficit widened to 21.4% of GDP in 2016, the highest of any Fitch-rated sovereign, after 16.6% in 2015. Although government spending fell nearly 6% from 2015, it was still 8% above budget against a fall in revenue of 17%. High defense spending and the policy of completing infrastructure projects thwarted the government’s efforts to achieve the much sharper spending adjustment outlined in the 2016 budget.

A forecast recovery in oil prices, expenditure adjustment, and the implementation of new hydrocarbon projects play a key role in the expected fiscal consolidation in Oman. We forecast that the budget deficit will narrow to 11.9% of GDP in 2017 on the back of higher oil prices and lower defense and investment spending. More fiscal measures are also in the pipeline. A review of corporate tax exemptions and an increase of tax rates is effective from January 2017 and will begin to have a cash flow impact in 2018. The government expects to implement an excise tax this July and VAT in 2018, which Fitch expects to have a meaningful impact on revenue starting in 2019.

The risks to fiscal consolidation are high and the credibility and cohesion of the government’s approach continues to be tested. Defense spending could prove difficult to cut given regional security challenges. The government could be reluctant to let infrastructure spending fall because of its importance to growth and to the diversification plan. A small annual increase in civil service salaries highlights the social sensitivity of wage restraint. Similarly, the government’s decision to cap the price of a particular grade of fuel pending the introduction of a compensatory mechanism for poorer citizens highlights that subsidy reforms are not yet entrenched.

Oman’s external balance sheet strengths are dwindling as the government issues debt and uses its wealth funds to finance deficits and bolster central bank reserves. Sovereign net foreign assets will fall to 14% of GDP in 2018 in our forecast, little more than a quarter of their peak of nearly 58% of GDP in 2015. We estimate that the country moved into an overall net external debtor position in 2016. Under our baseline assumptions, which include a moderate rise in oil prices, implementation of identified fiscal measures and no draw-downs from wealth funds beyond 2019, Oman’s government debt will surpass 50% of GDP in 2026 (from 13% of GDP in 2015). As a result, it will soon compare unfavorably with the ‘BBB’ median government debt ratio of nearly 43% of GDP.

Oman’s sovereign net foreign asset position will continue to exceed the ‘BBB’ median of 3% of GDP, underpinned by the $18 billion in foreign assets held by the State General Reserve Fund of Oman (SGRF) as at end-2016, which is not included in central bank reserves. This buffer supports Oman’s market access and the stability of the exchange rate peg. The reserve coverage ratio, at 5.6 months of current external payments, was slightly below the ‘BBB’ median and is inflated by the presence of Iranian deposits at the Central Bank of Oman (CBO) worth around $4.4 billion.

We expect real GDP to contract 0.3% in 2017 before rebounding in 2018. The contraction is led by Oman’s commitment to cut oil production in line with OPEC. Non-hydrocarbon growth will also slow amid government consolidation and somewhat tighter banking sector liquidity. Growth already slowed to 2.3% in 2016, as growing oil output and strong real estate and construction activity offset a contraction in trade and manufacturing. We expect the Khazzan gas field to come on stream in 2018, eventually increasing gas production by 25% (worth around $5 billion), supporting domestic industries and allowing Oman to fully utilize its existing LNG export capacity.

Oman scores in line with the ‘BBB’ median on World Bank governance indicators, held back by low scores on ‘Voice and Accountability’. The domestic political scene remains stable, but uncertainty continues to surround the succession to 76-year old Sultan Qaboos, who has undergone extensive medical treatment abroad but has not publicly designated a successor. The constitution stipulates that the ruling family must choose a new Sultan within three days of the post becoming vacant; otherwise a letter is opened with the Sultan’s recommendation. We see little risk of sanctions being directed at Oman over its close relationship with Iran.

Rating Sensitivities

The main factor that could lead to a downgrade would be continued rapid erosion of the fiscal or external positions, for example as a result of a failure to implement fiscal reforms or due to a renewed fall in oil prices. The main factor that could lead to a revision of the Outlook to Stable is:

– Narrowing of the budget deficit allowing stabilization of the government debt/GDP, either through active fiscal measures or a sustained increase in oil prices.

Key Assumptions

Fitch assumes that Brent crude will average $52.5/bbl in 2017 and $55/bbl in 2018.
Fitch assumes that an eventual transition of power from Sultan Qaboos will be smooth and ensure broad policy continuity.
Fitch assumes no change to the peg of the Omani rial to the US dollar. (Fitch 19.06)

Back to Table of Contents

11.5 SAUDI ARABIA: The New ‘King’ of Saudi Arabia

Simon Henderson wrote in TWI Policy Alert on 21 June that although pro-American, now-crown-prince Muhammad bin Salman has a firm view of Saudi Arabia’s place in the world and his own role in securing it.

The latest Saudi transition had been predictable since soon after King Salman ascended the throne on the death of his older half-brother Abdullah in January 2015. Within three months, Salman had positioned Muhammad bin Salman, the eldest son of his third wife, as his intended eventual successor. The only question was when the transition would occur. It has now happened, although raising new questions: When will MbS, as he is known, become king in name and under what circumstances?

Those answers are hard to guess, but the king’s now-dismissed predecessor, Muhammad bin Nayef, or MbN, was long perceived by many as a stopgap. Additionally, although an experienced minister of interior and the kingdom’s counterterrorism chief, he was scarred by the 2009 experience of having a supposedly surrendering jihadist meet him wearing a rectal device.

King Salman’s own health is also uncertain. At eighty-one, he walks with a cane and, when meeting foreign leaders, sits before a computer screen to remind him of his talking points. Once reputed to be the House of Saud’s institutional memory, Salman now often displays a puzzled visage and has leaned increasingly on MbS for advice, apparently regarding him as almost a reincarnation of King Abdulaziz, known as Ibn Saud, Salman’s father and the founder in 1932 of Saudi Arabia.

Unlike Salman’s other sons, one of whom has a doctorate from Oxford, MbS was not sent abroad for education. At thirty-one, MbS wears sandals rather than the Gucci shoes favored by some of his cousins, and does not speak fluent English. He is said to allow his views to be challenged — but does not change them. His greatest strength, or weakness, may be his ruthlessness. A widely believed anecdote is “the bullet story.” As told (to the author) by one of the crown prince’s cousins, after leaving university in Riyadh, MbS sought to establish himself in business. At one point, he needed a judge to sign off on a deal. When the judge refused, MbS removed a bullet from his pocket and told him he had to sign. The judge acquiesced but complained to then king Abdullah, who banned MbS from his court for several months.

This is the young man who is already the main contact between his country and the Trump White House, as well as the architect of the deadlocked war in Yemen, the Saudi lead in regaining two Red Sea islands from Egypt, and a hardliner in the current Gulf row with Qatar. He is said to be obsessed with the danger posed by Iran and favorable, one day, to open relations with Israel. On top of all this, he is the key arbiter of Saudi policy on oil, the price of which is, for Riyadh, worryingly low and trending lower, imperiling the polar edge IPO of Saudi Aramco.

Beyond the many roles already outlined, MbS is the lead figure on Vision 2030, the kingdom’s ambitious plan to reform its economy and society. Such change needs to be encouraged, although the cultural barriers are great and reduced oil revenues mean funding is problematic.

The reported 31 to 3 votes in favor of MbS’s new appointment by the Allegiance Council, a key royal family conclave, indicates wider al-Saud opposition to his new role may not be as great as might have been expected. Very few of his uncles remain on the council, and those still alive are mostly represented by their eldest sons. (In one case at least, the son voted yes whereas his father would have voted no.)

A series of other new appointments of individual princes also in their thirties suggests a complete generational makeover of a system previously dominated by royals marked by age and experience. Additionally, the new appointments acknowledge legacy bloodlines. The Ministry of Interior has been passed to a nephew of MbN. Another person promoted is the son of the former Saudi ambassador to Washington Prince Bandar bin Sultan – Khaled bin Bandar is the new ambassador to Germany. (MbS’s own younger brother is already the newly arrived incumbent in DC.) One further change to be expected involves the fate of Prince Mitab bin Abdullah, an MbN ally who remains head of the Saudi Arabian National Guard, a huge and capable paramilitary force that is U.S. equipped and trained.

MbS’s appointment as crown prince should confirm the improved working relationship with Washington after the strains experienced during the Obama administration, chiefly over Iran and the nuclear deal. But sharp differences remain between the U.S. and Saudi positions on certain issues, including Yemen and — apparently – Qatar. Future ties will not necessarily be harmonious.

Simon Henderson is the Baker Fellow and director of the Gulf and Energy Policy Program at The Washington Institute, and coauthor of its 2017 Transition Paper Rebuilding Alliances and Countering Threats in the Gulf. (TWI 21.06)

Back to Table of Contents

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

On 22 June 2017, 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, and recent volatile political history, with renewed progress in implementing an economic and fiscal reform program and improving external finances.

The government has pressed on with its reform program, which regained momentum in the second half of 2016, and remains on track with the $12 billion three-year extended fund facility (EFF) signed with the IMF in November. In May 2017 the IMF and Egypt completed the first review of the EFF, which should lead to the second disbursement, of $1.25 billion, in June or July.

After the floatation of the EGP on 3 November, the Central Bank of Egypt (CBE) seems not to have intervened in the market and the authorities have been gradually removing a number of capital controls. The subsequent depreciation was the second-largest among Fitch-rated sovereigns in 2016. The pound, which was managed at EGP8.9:$1 prior to 3 November, has averaged EGP17.9:$1 since (up to 16 June 2017).

The shift in exchange rate regime has proved a turning point for Egypt’s external finances. CBE’s stock of international reserves rose to $31.1 billion in May 2017, from $19.1 billion in October 2016 (and a recent low of $15.6 billion in July 2016). Multilateral and bilateral assistance and substantial bond issuance have boosted reserves. Egypt issued $4 billion of Eurobonds in January and another $3 billion in May. There has been a renewal of foreign investment in government T-bills and T-bonds. Furthermore, there are some early signs of external rebalancing, with the current account deficit narrowing to $3.5 billion in Q1/17, from $5.7 billion in Q1/16. We estimate that current foreign reserves are now around six months of current external payments (CXP), up from less than three months during the period of 2012-15.

The public finances will remain a key weakness of Egypt’s credit profile, but we expect further gradual fiscal consolidation to start to reduce government debt/GDP in the fiscal year ending June 2018 (FY18). In the first nine months of FY17 the budget sector deficit narrowed to 8% of GDP from 9.4% in the year-earlier period. The primary deficit more than halved to 1.2% of GDP.

The government has exercised restraint across some expenditure items, notably compensation for public sector employees, which only edged up in July-March, thus representing a large cut in real terms. The introduction of VAT (replacing the existing GST) in October 2016 has had a positive effect on revenue growth. In July-March VAT revenue from goods and services was 30% higher y-o-y, of which VAT from goods was 62% higher, because Egypt had a better administrative system in place for implementing the tax on goods. Subsidy spending, however, continued to rise strongly, by around 30% y-o-y, despite electricity and fuel price reforms, because the weakening of the EGP increased import costs.

The IMF has commended the draft FY18 budget, which is targeting a budget sector deficit of 9% of GDP and a primary surplus of 0.3% of GDP. Budget sector primary deficits have averaged 3.6% in FY11 to FY17, so to reach a surplus would be a significant achievement. We forecast the budget sector primary balance will get close to balance, at -0.3% of GDP. VAT implementation should improve further in FY18, when it will also have a full-year effect and the rate will increase to 14% from 13%.

While the government’s budget assumptions are largely realistic, the projected inflation rate of 15.2% is likely to prove too low. FY18 inflation may be closer to 20%. In this context, there may be pressure to boost some expenditure items, to mitigate the risk of greater social tensions. This could lead to a larger-than-projected budget deficit. There is also uncertainty over the timing and extent of further energy price reforms, which have yet to be publicly announced.

We forecast that general government debt/GDP will rise above 100% by end-FY17, owing to significant additions of external debt and the weaker exchange rate. This debt stock creates a large burden of interest payments for the government (more than 40% of government revenue). We forecast that government debt/GDP will moderate to 93% in FY18 and 87.9% in FY19, assuming faster real GDP growth (averaging 5%), declining but still high inflation, and a small primary surplus in FY19. The key risk to this outlook is that reform momentum weakens, as it did after a round of reforms in FY15. The level of guaranteed debt and contingent liabilities is currently unclear. The Ministry of Finance expects to release data on this later in 2017.

Monetary and fiscal reforms are having a significant macroeconomic impact in Egypt, especially on inflation. Inflation has averaged 30% y-o-y in January-May, driven up by the weaker exchange rate, VAT and higher fuel prices. We forecast that inflation will remain above 20% for the remainder of 2017 and fall back to an average of 13.5% in 2018. CBE is pursuing monetary targeting, which is subject to indicative targets as agreed with the IMF, and has continued to raise its policy interest rates, most recently in May 2017.

Headline real GDP growth has slowed in FY17, but has proved more resilient than we expected and is likely to be just under 4% for the year. 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.

Fiscal and monetary reforms continue to 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:

– Continued 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;

– Further strengthening 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

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 and social tensions will remain. (Fitch Ratings 22.06)

Back to Table of Contents

11.7 EGYPT: Adjusting Egyptians’ Inflation Expectations

Brendan Meighan wrote in Sada on 22 June that although Egypt’s decision to raise interest rates will do little to curb inflation in the short term, its policy is based on a longer view.

The Central Bank of Egypt’s (CBE) decision to raise its interest rates by 2% on 21 May 2017 caught the Egyptian business community and investors by surprise. In a Reuters’ survey of economists following the Egyptian market conducted five days prior, all but one of the fourteen experts expected the central bank to hold rates steady. The central bank had already raised interest rates by 3% in November 2016, in conjunction with their decision to liberalize the foreign exchange market, which saw the Egyptian pound lose more than half of its value against the dollar.

The consensus among investors in the Egyptian marketplace was that interest rates were high enough to stem any outflow of foreign currency and clamp down on demand-driven inflation, and any further increase at this point would simply raise the cost of borrowing money for the private sector. However, in a surprise to many investors, the Egyptian authorities decided to raise the rates following a meeting with the International Monetary Fund (IMF) on 11 May regarding the second tranche of its $12 billion loan to Egypt. While investors applauded many of the initial reforms implemented in conjunction with the loan agreement in November – such as floating the pound, introducing a value-added tax and reducing energy subsidies – this most recent move, understood to be at the behest of the IMF, drew criticism and condemnation.

This opposition to the rate hike makes sense in the short term given the significant spike in inflation that Egypt has experienced over the last year. When the currency was devalued in November, goods and services imported from abroad cost more in Egyptian pounds, with year-on-year inflation levels rising above 30% in early 2017 and remaining there. Although increased interest rates in times of accelerating price increases can boost the incentive to save instead of spend, this is only the case when a substantial portion of the population saves their money in a bank. Estimates from 2014 and 2015 – prior to the exchange rate liberalization – indicated that only 7 to 14% of Egypt’s population of more than 90 million had an open bank account, making the transmission of monetary policy through interest rates difficult. In addition, even if the number of banked Egyptians were higher, only a sharp appreciation in the value of the pound would lower the level of inflation in the short term.

Egypt’s businesses will also face higher borrowing costs. Unlike most Egyptian citizens, businesses, especially small- and medium-sized enterprises, rely on loans from banks to expand their operations and launch new projects. At higher interest rate levels, fewer businesses will take the opportunity to grow if their expected returns are lower than the rate they can get by keeping their money in the bank. However, while borrowing costs in the short term have nominally increased, businesses still face negative real interest rates (that is, the nominal interest rate offered by the bank, minus the rate of inflation) in the short term. Only if inflation slows substantially but interest rates remain high in the long run do businesses face prohibitively high real interest rates.

As critics of the CBE and the IMF have argued, these rate increases will likely have little to no effect on continued high inflation in the coming months. Even the Ministry of Finance has revised its inflation expectations for the coming fiscal year upward, stating that inflation will still average 22.8% and only fall to pre-devaluation levels the following fiscal years, after the one-off effects of the currency devaluation have already taken their toll, with prices settling at a much higher level.

However, these critiques have largely failed to take into account the long-term implications of the CBE’s rate increase and the signals it sends to the market. While much of the business community is understandably focused on the cost of borrowing in the short term, the CBE, and implicitly the IMF, must take a longer view. Their aim is not simply to satisfy the demands of the business community in the short term, but to restore credibility to Egyptian monetary policy by bringing inflation under control.

Prior to the float of the pound, year-on-year headline inflation averaged just over 10% for every month going back to February 2014. Though this was partly due to the CBE’s gradual devaluation of the pound during this time, this inflation was primarily instigated by the government continually papering over its budget deficits by expanding money supply and perpetuated by Egyptian consumers, who built an annual 10% price increase into their expectations. Given that the annual pre-float inflation rate had held steady around 10%, the CBE and IMF had little reason to expect inflation to fall any lower even after the immediate effects of the depreciation had worn off. In fact, it is precisely because of this expectation that, without a somewhat draconian interest rate policy, prices will continue to rise in the coming years.

Expectation-driven inflation is the quintessential self-fulfilling prophecy. Strong inflation expectations can cause businesses to assume a certain price increase over time. When workers see these price increases, they begin to demand higher wages. As wages rise, demand increases, causing businesses to see their expectations become reality, thus hardening their future inflation expectations. Interest rate increases by the central bank can lower inflation levels, but only if businesses and consumers believe that the higher interest rates, or lower inflation levels, are here to stay. In other words, monetary policy can only control inflation when people actually believe that the central bank will back up its words with actions.

Decades of profligate spending by the government on energy and food subsidies, combined with a loose monetary policy, have badly hurt the CBE’s credibility with Egyptian consumers, and distrust of the government and banks in general runs too high for promises of future prudence to have much of an impact. Instead, if it does indeed intend to usher in an era of low inflation in the coming years, the CBE needs to upset inflation expectations for the medium- and long-term by actively eliciting surprise and dissent from the business community.

This focus on the long-term economic outlook by the CBE and the IMF is not without its detractors from outside the business community as well. Another criticism of the recent hike in interest rates has noted that the government is allocating an increasingly large portion of its budget to interest payments, often at the expense of social programs and subsidies. But again, this argument focuses on political stability and the plight of the poor in the short term. In the long term, curbing inflation would raise the real value of the pound, slowing the growth of subsidies and social spending in the future, especially on imported goods bought with dollars. Subsidies do need to come down over time, but if lower-income Egyptians can retain more purchasing power over time, the effects of subsidy cuts can be at least partially offset.

Ironically, given the IMF’s past emphasis on austerity measures, after rumors of a subsidy cut sparked protests in March, Minister of Supply and Internal Trade Ali Moselhy promised that there would be no upcoming cuts to food subsidies at all. Chris Jarvis, the IMF mission chief for Egypt, explicitly praised the expansion of social protections in the draft 2017-18 budget following the IMF’s meetings with Egyptian authorities in May over the second installment of the loan. While increased interest payments in the future should certainly prompt caution, these officials recognize that a lower level of inflation and appreciating currency offset these increases.

Still, given Egypt’s myriad macroeconomic problems, this strategy of raising interest rates is certainly risky. History is rife with examples of central banks struggling and failing to regain credibility among the people. In order to genuinely change the expectations of the market, the CBE must be patient and possess the fortitude to keep interest rates elevated in the face of government and business criticism. An extended period of high interest rates could substantially hurt Egypt’s economic growth, but loosening up too quickly could entrench the sentiment that the CBE lacks the will to fight inflation. For the time being, the interest rate hike indicates that the government and CBE are trying to back up their words with actions for once and looking toward Egypt’s future.

Brendan Meighan is a macroeconomic analyst focusing on the Middle East. (Sada 22.06)

Back to Table of Contents

11.8 TURKEY: Turkey’s Altay Tank Project Not Ready To Roll After All

Mehmet Cetingulec posted on 19 June in Al-Monitor that now that Turkey’s government has rejected Otokar’s bid for the Altay tank contract, other companies will participate in the tender, including BMC — a Turkish/Qatari partnership whose chairman is a close friend of President Erdogan.

After Otokar spent nine years developing the prototype for Turkey’s indigenous Altay tank, the government has rejected the company’s proposal for mass production and will open the multibillion-dollar contract to bidding. The unexpected setback, announced 9 June, shocked the defense industry.

Otokar, a subsidiary of Koc Holding, one of Turkey’s leading companies, announced “the Defense Industry Undersecretariat (SSM) today informed us that they had reviewed the administrative, financial and technical aspects of our offer but because of lack of agreement on stipulations of the contract, and above all the price quoted,” the SSM will be going with a tender process.

Why was the offer rejected after Otokar, jointly with the SSM, spent $1 billion and almost a decade working on the project? Recently, there were optimistic media reports that Turkey was about to export the Altay tank. Now we know it wasn’t even built yet.

Until now, the project had been praised incessantly and supported by the president, prime minister, defense minister and the military command. Because of the government’s close interest and all the official praise, the market assumed that mass production by Otokar was a foregone conclusion. This naturally boosted the company’s market value. In June 2016, Otokar shares were selling at TL 95 ($27). They reached TL 149 in February. The day after the SSM rejected Otokar’s offer, its shares slumped to TL 113.

Otokar Chairman Ali Koc had recently said that if his company’s offer was accepted, Otokar would deliver 250 tanks in five years. Koc also said his company had made all the programming and infrastructure preparations for mass production, which could commence within 18 – 22 months after the go-ahead was given.

The company hasn’t said whether it will participate in the new tender. If so, will it agree to a lower price? This uncertainty seems to be encouraging several local companies to try their hand at the bidding process.

For example, while Otokar’s shares were losing value, shares of Katmerciler, a company involved in armored vehicle production, registered significant gain.

There is another company manufacturing commercial and military vehicles whose shares are not publicly traded, but its name is being widely mentioned: BMC Automotive Industry Corp. BMC’s chairman, media mogul Ethem Sancak, is a member of the Central Committee of the ruling Justice and Development Party (AKP). Three years ago he sold 50% of BMC’s equity to Qatar Armed Forces Industry Committee. Sancak is a personal friend of Turkish President Recep Tayyip Erdogan.

Large contracts normally have to go through the tender process, but because Otokar had been involved in the project for so long, many people assumed it would be awarded the contract without bidding. Sancak apparently was not among those people, however.

On 16 December, Sancak told the daily Aksam the route his company would take: “We have prepared a strategy that will meet the entire list of needs of our ground forces, from tanks to missiles, with 100% local production. The SSM subsidized one of the most prominent companies of Turkey $500 million to produce five tank prototypes. The company successfully produced the Altay tank prototypes and delivered them. Now the SSM will open a tender for mass production. We are ready to participate in that tender.”

Who will win the tender?

Murat Muratoglu of Turkey’s mass-circulation opposition daily Sozcu concluded 12 June, “BMC will get it.” Analysts agree BMC has the best chance of getting the contract. If Otokar doesn’t submit a bid, it could provide technical support to BMC. Otokar managers have been quoted as saying that their company could provide support to other contractors.

Relations have been tense between the AKP government and Koc Holding, which has now suffered three major contract setbacks. In December 2002, Koc Holding and its partners won a $5.7 billion bid to privatize the management of express roads and bridges, but that contract was annulled abruptly in February 2013. Koc had also won the tender for the Milgem national shipbuilding project worth €1.5 billion in January 2013 ($2 billion at the time). But after the company built two vessels, the Prime Ministry Audit Board said the tender had been improperly conducted and the SSM decided to annul the contract that September.

One of the biggest businesses in Turkey has been excluded from giant projects that it had been awarded, one by one: the national shipbuilding project, the express roads-bridges management tender and now the national tank contract. Can anyone really say these are coincidences? (Al-Monitor 19.06)

Back to Table of Contents

11.9 GREECE: Moody’s Upgrades Greece’s Sovereign Bond Rating & Changes Outlook to Positive

On 23 June 2017, Moody’s Investors Service upgraded Greece’s long-term issuer rating as well as all senior unsecured bond and program ratings to Caa2 and (P)Caa2 from Caa3 and (P)Caa3, respectively. The outlook has been changed to positive from stable. Greece’s short-term ratings have been affirmed, at Not Prime (NP) and (P)NP. The key drivers for today’s rating action are as follows:

Successful conclusion of the second review under Greece’s adjustment program and release of a tranche of €8.5 billion in the coming days. Beyond the near-term impact of allowing Greece to repay upcoming maturities, we consider the conclusion of the review to be a positive signal regarding the future path of the program, as it required the Greek government to legislate a number of important reform measures.

Improved fiscal prospects on the back of 2016 fiscal outperformance, expected to lead soon to a reversal in the country’s public debt ratio trend. The government posted a 2016 primary surplus of over 4% of GDP versus a target of 0.5% of GDP. Moody’s expects the public debt ratio to stabilize this year at 179% of GDP, and to decline from 2018 onwards, on the back of continued substantial primary surpluses.

Tentative signs of the economy stabilizing. While it is too early to conclude that economic growth will be sustained, Moody’s expects to see growth this year and next, after three years of stagnation and a cumulative loss in output of more than 27% since the onset of Greece’s crisis.

The decision to assign a positive outlook to the Caa2 rating reflects Moody’s view that the prospects for a successful conclusion of Greece’s third adjustment program have improved, which in turn raises the likelihood of further debt relief. The euro area creditors have committed to further extend Greece’s repayment terms to the EFSF (European Financial Stability Facility; senior unsecured Aa1 stable) if needed after August 2018 when the program ends. Later repayment to official creditors would improve Greece’s capacity to service debt held by private sector investors, to which Moody’s ratings speak.

The long-term country ceilings for foreign-currency and local-currency bonds have been raised to B3 from Caa2, to reflect the reduced risk of Greece exiting the euro area, and the long-term ceiling for foreign-currency and local-currency deposits has been raised to Caa2 from Caa3. Moody’s maintains a two-notch gap between the bond and the deposit ceilings to reflect the ongoing capital controls. The short-term foreign-currency bond and bank deposit ceilings remain unchanged at Not Prime (NP).

Rationale for the Upgrade to the Rating to Caa2

First Driver: Successful Conclusion of the Second Review

The successful conclusion of the second review under Greece’s current program and the release of an €8.5 billion tranche in the coming days will allow the Greek government to repay upcoming maturities of €6.6 billion in July, including to the ECB (€3.9 billion) and private-sector bondholders (€2.3 billion). It will also allow for the clearance of some of the government’s arrears, thereby injecting much needed liquidity into the economy.

Moody’s considers the importance of the second review to go beyond the short-term financial support it will yield. It required the Greek government to legislate a number of measures, some of them politically difficult (such as further tax increases and pension cuts, changes to employment legislation and some with the potential to improve Greece’s growth prospects over the coming years (such as those aimed at strengthening the banking sector).

Moody’s also considers that the progress made on the Program illustrates how the risk of an exit from the euro area has diminished somewhat. While the events of 2015 illustrate the volatility of Greek politics, the current political situation is calmer, and opinion polls indicate a broad-based shift of support towards parties that are in favor of continued euro area membership.

Second Driver: Improved Fiscal Prospects for the Coming Years and Reversal in the Debt Trend

The government managed to exceed the fiscal targets for 2016, posting a primary surplus of 4.2% of GDP versus a target of 0.5% of GDP. Part of the stronger-than-expected performance was due to temporary factors, but it also reflected improvements in tax collection that Moody’s considers to be more permanent in nature. Moody’s expects primary surpluses this year and next to be smaller, but still large enough to ensure that the public debt ratio starts to decline from next year onwards.

The government also legislated additional fiscal measures totaling 2% of GDP for 2019 and 2020, which go beyond the end of the current program and would be activated if needed. These provide some assurance that the fiscal stance will remain appropriately tight in the coming years. Moody’s expects the debt ratio to stand at around 176% of GDP by end-2018, compared to the peak of 179.7% in 2014. That said, the debt trend remains highly vulnerable to growth and fiscal shocks and the decline will likely be slow.

Third Driver: Tentative Signs of a Stabilization of the Economy

While it is too early to conclude that the economy has definitely turned the corner, Moody’s expects to see positive growth this year, after three years of stagnation and a cumulative loss in output of more than 27% since the onset of Greece’s crisis. Employment has been rising for more than a year, thereby supporting private consumption. Investment is expected to get a boost from an acceleration of EU structural funds that amount to €15.2 billion (8.4% of 2017 GDP) for the 2014 – 2020 period. On top of the EU structural funds, significant funding is available from the European Investment Bank (EIB, Aaa stable) and the European Bank for Reconstruction and Development (EBRD, Aaa stable). Importantly, fiscal policy will be significantly less of a drag on growth than in 2016.

Rationale for Assigning A Positive Outlook

The positive outlook reflects Moody’s view that the prospects for a successful conclusion of Greece’s third adjustment program have improved. While significant implementation risks remain, the ‘heavy lifting’ in terms of legislating structural reform measures has been achieved now, which in turn reduces political risks related to the stability of the government. Successful completion would be credit positive for Greece, inter alia because of the further debt relief which it would likely bring.

Greece’s euro area creditors have already committed to considering a further extension of the weighted average maturities of the EFSF loans and a further deferral of interest and amortization on those loans, by up to 15 years. The IMF’s intention to remain involved via a new stand-by agreement and to continue to press for additional debt relief also supports Moody’s view that steps will be taken to make Greece’s debt burden sustainable. The principle of linking debt relief to economic growth outcomes — which the Eurogroup will consider — would be a further positive step for the country.

Rationale for the Caa2 Rating

That said, Greece’s economic, fiscal and political risks remain very elevated. Negative scenarios – in particular linked to political events and delays in implementing the agreed measures – are entirely plausible. They are the key reason why Moody’s considers that a Caa2 rating remains appropriate, at least until the means and extent of the promised medium-term debt relief has been fully clarified, the conditions for any such debt relief are clear, and a longer and stronger track record of parliamentary and electoral acquiescence in reform implementation has been established.

What Could Change the Rating Up?

Greece’s ratings could be upgraded further if there was clear evidence that the economy was on a sustained and reasonably strong growth path, associated with solid implementation of agreed reforms, including measures to address asset quality problems in the banking sector. Agreement by Greece’s official-sector creditors to implement material further debt relief which rendered Greece’s debt burden more sustainable over the medium to long-term would also place upward pressure on the rating, provided there remained broad support for the fiscal and other conditions associated with such relief.

What Could Change the Rating Down?

Downward pressure on the ratings would emerge if there are signs that the willingness of the Greek authorities to implement the agreed measures wanes or a renewed lengthy period of political uncertainty hampers the economic recovery and leads to a material deviation from the fiscal targets. (Moody’s 23.06)

Back to Table of Contents

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

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

Fortnightly, 28 June 2017

Fortnightly, 28 June 2017

Leave a Reply Cancel reply