Fortnightly, 3 April 2019

On 1 April, the first meeting of the Financial Stability Committee was held. The Financial Stability Committee was established pursuant to Chapter Eleven—1 of the Bank of Israel Law, 5770-2010, following the completion of the legislative process in the Knesset in November 2018. In accordance with the law, the Committee will work toward the goal of supporting the stability and orderly activity of the financial system. At the meeting, each Committee member presented their perspective on the Committee’s future work procedures.

The members of the Committee agreed that its establishment is an important pillar in maintaining financial stability for the welfare of Israel’s citizens. The Committee members are of the opinion that it is important to have a systemic view of the financial risks and close coordination among financial regulators and the stabilizing entities. In accordance with the law, the Committee includes Governor of the Bank of Israel Prof. Yaron (Chairperson), Ministry of Finance Director General (Vice-Chairperson); the Deputy Governor; Ministry of Finance Accountant General, the Supervisor of Banks and others. (BoI 02.04)

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1.2 Israel Railways to Order Some 30 to 40 Bombardier Carriages

Israel Railways has received approval from the Ministry of Finance to make an immediate order of between 30 to 40 carriages from Bombardier as part of a 2010 tender that the Canadian company won. These carriages will help ease the shortage of carriages created by the opening of the Jerusalem – Tel Aviv fast rail link last year. The Ministry of Finance has until now been opposed to the immediate procurement of carriages, despite the pressing need, because of criticism by the State Comptroller, who had demanded the no new carriages be obtained without a tender. At the same time, Israel Railways will publish a tender to procure hundreds of carriages for billions of shekels.

The dispute between the Ministry of Finance and Israel Railways over the purchase of new carriages has been rumbling on for several years. Israel Railways repeatedly asks to buy new carriages using the 2010 tender and has been foot dragging over issuing a new tender. Under the terms of the new tender, Israel Railways will buy carriages to renew its fleet of 680 carriages, most of them of the IC-3 type that are considered very old.

Meanwhile, Israel Railways management is trying to persuade Siemens to delay the delivery of electric carriages because they cannot be operated while the electrification of the railways is bogged down with the exception of the Jerusalem – Tel Aviv fast rail link. Siemens has apparently agreed to delay delivery until the beginning of 2021. In December 2017, Israel Railways ordered 60 double-decker electric carriages for use on electrified tracks, and overall Siemens was meant to provide 330 such carriages starting in 2020 for €1.36 billion. (Globes 26.03)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Guesty Raises $35 Million in Series C Funding

Guesty raised $35 million in Series C funding. The round, which brought total funding to $60M, was led by Viola Growth with participation from Vertex Ventures, Journey Ventures, Kingfisher Investment Advisors, La Maison Compagnie d’Investissement and existing investors, TLV Partners and Magma Ventures.

The company intends to use the funds to open new offices in key growth markets, enhance product capabilities, introduce AI and machine learning into the platform, increase its presence in verticals adjacent to urban properties, including the vacation rental space, and build out its Integrations Marketplace by continuing to sign partnerships and integrations with third-parties that facilitate short-term rental management and improve guest experiences.

Tel Aviv’s Guesty is the ultimate property management platform for short-term and vacation rentals. Their end-to-end solution simplifies the complex operational needs that property managers face on a daily basis – from guest communication to task assignment to payment processing. With Guesty, property managers save time so they can focus on what matters most: growing their business. (Guesty 21.03)

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2.2 Yellzz Raises $1 Million

Yellzz announced a $1 million financing round from Rami Bader, the Nielsen Innovate Fund, and the Israel Innovation Authority. The company will use the money to increase its activity with global partners and extend its technological development and international sales.

NIF is the Israel-based incubator and investment arm of New York-headquartered consumer research company Nielsen Holdings Inc. Yellzz joined NIF’s incubator in Caesarea in August of 2018.

Yellzz’s technology can be integrated into online billboards and marketplaces allowing professionals to contact users actively searching for services they provide. The system analyzes search terms in real time to determine the most suitable service provider according to the client’s needs, taking into account availability, location, and specialties. Yellzz’s platform enables small and medium-sized business owners advertising on websites and online bulletin boards, such as Marketplaces, to be proactive and interact with potential customers at the exact moment when the customers are looking for the service or product offered by the business, instead of waiting for customers to contact them.

Caesarea’s Yellzz, founded in 2017, aims to proactively connect business owners and advertisers with potential customers. The technology developed by Yellzz is installed in websites and advertising bulletins. It enables customers to obtain offers of the service that they are looking for in real time from the advertisers themselves. Yellzz has both global customers in various markets and customers in Israel. (Yellzz 21.03)

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2.3 Skoda Expands Collaboration with Israeli Startups

Skoda plans expanding its cooperation with Israeli car-tech startups, the company reported in its 2018 summary. The company’s Skoda Auto Digilab in Tel Aviv, which was opened in 2017 in partnership with Champion Motors, is currently collaborating with 13 Israeli startups in the fields of artificial intelligence, big data, cybersecurity and vehicle sensors.

Skoda illustrates this strategic focus with three examples. Anagog specializes in developing and applying artificial intelligence in the context of mobility. The Israeli startup uses software to analyze customer behavior in certain situations, understand it and, for example, navigate motorists to the next available parking space. Chakratec is working on electric car charging stations with energy storage devices based on a flywheel concept that offers an almost unlimited number of deep charge and discharge cycles. This will enable charging stations to be installed in remote locations in the future. UVeye is working on technology in the form of a camera that scans the underbody of a vehicle to detect any damage, which is very useful in the production and quality control departments. (Globes 20.03)

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2.4 HYPE Sports Innovation Launches World’s First Blockchain Accelerator for Sports Technology

HYPE Sports Innovation (HYPE), a global platform which facilitates connections and investments among the sports innovation ecosystem, announced the launch of the first ever Blockchain accelerator for Sports Tech. The program will feature 14 week accelerators for 10 of the leading startups from around the world focusing on blockchain for sports technology. The accelerators will run globally, and startups selected for the 2 boot camps will participate at the Preston Robert Tisch Institute for Global Sport at New York University as well as the ISDE Higher Institute of Law and Economics in Barcelona.

Blockchain technology is already revolutionizing the sports industry with its many unique applications. Italian soccer club Juventus launched the “Official Fan Token” to enable the clubs’ 340 million fans worldwide to interact with and create a personal connection to the club, while the LA Kings of the National Hockey League launched the first augmented reality blockchain authentication platform, utilizing blockchain’s authentication features to ensure fans can easily verify the authenticity of their memorabilia purchases.

HYPE’s blockchain accelerator is the 12th unique accelerator program offered by HYPE and is designed to identify the most promising companies working on blockchain applications, and aid them in their quest to improve the world of sports. The program includes an intensive two day boot camp, personalized mentoring processes, weekly remote classes from top experts, and access to an unrivaled ecosystem all culminating in a demo-day in front of partners, investors and sports clubs. To date, HYPE has 11 accelerator programs partnered with leading sports brands such as FC Cologne and Shakhtar Donetsk, as well as universities such as University of Queensland, George Washington University and Loughborough University.

Hod HaSharon’s HYPE Sports Innovation has built the largest, global ecosystem in sports innovation. With over 40,000 members, including retail brands, athletic clubs, federations and academia. Together with over 11,000 startups, HYPE Sports Innovation has an unrivalled capacity for outreach to global partners across all sectors in this highly diverse field. The company’s business model is to leverage this platform to grow from the surging needs of the sports industry to innovate. Since its inception, HYPE Sports Innovation has created and expanded unique offerings and services, all with unprecedented successes and value added for investors, partners, and consumers.

Among its clients are UEFA, Adidas, Spalding, Silicon Valley Bank, Asics, Google, and many more. The company’s mission is to impact people’s lives through the power of sports and innovation. (HYPE Sports Innovation 21.03)

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2.5 Israel Infrastructure Partners (IIP) Unveils $350 Million Debut Fund

Israel Infrastructure Partners (IIP) is a private equity firm focused on infrastructure investments. In March 2019, the firm unveiled its debut fund, IIP I, a $350 million fund targeting investments in Israel. Led by a team of senior investment professionals with over 115 years of combined industry experience, IIP was established to facilitate foreign investments in Israel. IIP seeks to invest in businesses comprised of hard assets with leading market positions, in a broad range of infrastructure assets, such as communications, defense, energy, environmental services, power & renewables, transportation, utilities, waste management and water.

The discovery of vast reserves of natural gas in the Mediterranean, including the Leviathan gas field, the largest deep water gas reservoir found anywhere in the world over the past decade, has revolutionized the geopolitical situation in Israel. The coming years will see many offerings, specifically relating to gas exploration and extraction, seaports, airports, highways, railways, energy and natural resources, and water. (IIP 21.03)

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2.6 McDonald’s Acquires Dynamic Yield to Improve Customer Experience

McDonald’s Corporation (MCD) and Dynamic Yield announced an agreement by which McDonald’s will acquire Dynamic Yield. With this acquisition of Dynamic Yield, based in New York and Tel Aviv, McDonald’s builds on its significant technology investments for growth. McDonald’s will utilize this decision technology to provide an even more personalized customer experience by varying outdoor digital Drive Thru menu displays to show food based on time of day, weather, current restaurant traffic and trending menu items. The decision technology can also instantly suggest and display additional items to a customer’s order based on their current selections.

This will enable McDonald’s to be one of the first companies to integrate decision technology into the customer point of sale at a brick and mortar location. McDonald’s tested this technology in several U.S. restaurants in 2018. Upon closing of the acquisition, McDonald’s will begin to roll this technology out in the Drive Thru at restaurants in the United States in 2019 and then expand the use to other top international markets. McDonald’s will also begin work to integrate the technology into all of its digital customer experience touchpoints, such as self-order kiosks and McDonald’s Global Mobile App.

Tel Aviv’s Dynamic Yield is an AI-powered Personalization Anywhere platform that delivers individualized experiences at every customer touchpoint: web, apps, e-mail, kiosks, IoT, and call centers. The platform’s data management capabilities provide for a unified view of the customer, allowing the rapid and scalable creation of highly targeted digital interactions. Marketers, product managers, and engineers use Dynamic Yield daily for launching new personalization campaigns, running server-side and client-side A/B tests, leveraging machine-learning for product and content recommendations, and employing algorithms for smartly triggered email and push notifications. (McDonald’s 25.03)

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2.7 Infinity Augmented Reality Israel Joins Alibaba Family

InfinityAR will join Alibaba’s Israel Machine Vision Laboratory, following a three years’ collaborative partnership to accelerate the development of frontier technologies including AR, computer vision and AI. Alibaba’s expertise in turning technologies into next generation products will be a great platform for the future technologies of computer vision. InfinityAR has been working with Alibaba since 2016. Their research and development team will now be working from Alibaba’s lab in Israel, which is one of the labs rolled out by Alibaba DAMO Academy to explore fundamental technologies such as computer vision and navigation. Over the past year, the Alibaba lab has been partnering with Tel Aviv University to advance studies in video analysis and machine learning, making contribution to the technology development in Israel.

Founded in 2013, Ramat Gan’s InfinityAR is about creating a new digital environment that will allow people to naturally interact with augmented content in their physical surroundings, all by creating a new Mixed Reality platform that will digitally enhance every person’s physical world. InfinityAR’s technology turns AR glasses into a powerful content augmentation platform with the most accurate inside-out Simultaneous Localization and Mapping (SLAM) solution, allowing application developers to bring unmatched mixed reality experiences. (InfinityAR 21.03)

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2.8 CyberX Capitalizes on IIoT Security Momentum with Additional $18 Million in Funding

CyberX has raised $18 million in a strategic funding round led by Qualcomm Ventures and Inven Capital. Existing investors Norwest Venture Partners, Glilot Capital Partners, Flint Capital and OurCrowd also participated in the round, bringing total funding to date to $48 million. The new funding will enable CyberX to further capitalize on its market leadership position by expanding its global go-to-market footprint, innovative product development, and IIoT threat intelligence capabilities.

Qualcomm Ventures has a demonstrated track record of investing in some of the top global AI and IoT startups and has experienced nine $1-billion-plus portfolio exits to date, including Fitbit and Waze. Inven Capital is the CEZ Group’s venture capital fund supported by the European Investment Bank (EIB).

The latest round of funding comes at a time when CyberX has experienced significant customer growth across all industrial and critical infrastructure sectors including energy, oil and gas, manufacturing, pharmaceuticals, mining, water utilities, building management, and other sectors.

Founded in 2013 by military cyber experts with a proven track record of defending critical infrastructure from nation-state attacks, Herzliya’s CyberX is the only industrial cybersecurity company to have been awarded a patent for its innovative, ICS-aware threat detection analytics and machine learning technology. Purpose-built for the specialized protocols and devices of OT environments, CyberX’s agentless platform enables organizations to continuously auto-discover unmanaged IIoT devices and monitor their OT networks for destructive cyberattacks such as WannaCry, NotPetya and TRITON. (CyberX 25.03)

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2.9 Rewire Raises $17 Million

Rewire announced the completion of a $12 million financing round led by Viola FinTech, with the participation of French banking group BNP Paribas SA through its venture capital arm Opera Tech Ventures as well as OurCrowd, Moneta Fund and South African bank SBSA. Private investors also participated in the round, which brought the amount raised by Rewire to $17 million.

Rewire hopes that the latest financing round will allow it to expand to other countries in Europe. The company also hopes to hire 10 more employees and bring its work force to 55. Rewire also plans signing cooperation agreements with additional banks.

Tel Aviv’s Rewire is a licensed remittance company that allows you to send money from anywhere in Israel. Rewire is shaping the way international workers are managing their finances. They are building the first international banking platform for migrants during their time abroad until their return home to a more secure future. Rewire believes in full transparency, effortlessness and a fair banking system for everyone. (Rewire 26.03)

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2.10 eToro Buys Danish Blockchain Company Firmo

eToro announced that it has acquired Danish company Firmo, which enables smart contracts for derivatives to be securely enabled on any major blockchain. No financial details were disclosed. The acquisition of Firmo will enable eToro to accelerate the growth of their tokenized assets offering. Blockchain and the tokenization of assets will play a major role in the future of finance. eToro believes that in time all investible assets will be tokenized and that we will see the greatest transfer of wealth ever onto the blockchain.”

The Firmo team will act as an internal innovation unit tasked with bringing to life the goal of tokenizing all assets on eToro. This will involve research and development of infrastructure for the representation of assets and the execution of trade processes on blockchain infrastructure.

Bnei Brak’s eToro, the world’s leading social online trading platform, is a revolutionary fintech company that has been at the forefront of online trading for more than a decade. By engaging millions of users with their innovative social features such as the CopyTrader system, the Popular Investor program and CopyPortfolios, they strive to make money management available to everyone. They have developed an intuitive trading platform which gives traders and investors access to global stock markets, commodity trading, cryptocurrency trading and more. (eToro 25.03)

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2.11 Cobwebs Raises $10 Million

Cobwebs Technologies announced the completion of a $10 million financing round. The company did not reveal who participated in the round. The current round follows a $2 million seed round by the company from private investors when Cobwebs was founded in 2015.

Cobwebs’ product is a search engine that gather data from the internet and is capable of gathering both public and concealed information that has not been indexed or classified by conventional search engines like Google. This information, plus information from the social networks, which is also not accessible through an ordinary search, is analyzed by the company through an AI and machine learning algorithm. Business and security information relevant to Cobwebs’ customers is extracted from this information.

Herzliya’s Cobwebs Technology offers systems for national security agencies and private sectors, identifying web relations, criminal activities, and terrorist threats. The company provides a range of products including end-to-end solutions, professional services, and detailed analysis reports. Cobwebs works with clients from all over the world, assisting them with investigations and targeted data analysis. (Cobwebs 24.03)

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2.12 Historic Partnership Between the Weizmann Institute of Science and Institut Curie

On 22 March, the Weizmann Institute of Science in Rehovot, Israel, and Institut Curie in Paris, France, two major world-class research institutes, signed an historic partnership that will allow their teams to work closely together to improve knowledge in the field of life sciences, particularly in the areas of physics and chemistry, and most specifically – in the field of cancer research. This is a milestone in the history of these two institutes that have been working together for 15 years, particularly in the field of biophysics.

This partnership will extend to many disciplines, including physics, chemistry, cellular biology, epigenetics, genetics, immunology and single cell approaches, imagery and data collection. The complementarity of the research between the various groups at Institut Curie and at the Weizmann Institute has been recognized in particular at the occasion of joint scientific workshops held regularly alternatively in Paris and Rehovot. Each research program will be organized around a pair of researchers with a scientist from Institut Curie and a scientist from the Weizmann Institute of Sciences, who will receive support on the annual basis. This partnership also includes exchanges of scientists and a Curie-Weizmann symposium organized every two years, with alternate locations in Rehovot, Israel, and in Paris, which will be focused on one of the subjects of research cooperation.

To finance the start of this cooperation, Institut Curie and the Weizmann Institute of Sciences will finance this research program for €200,000 each and will organize a joint fundraiser with philanthropists and corporate sponsors. (Weizmann Institute 25.03)

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2.13 OurCrowd Named Most Active Venture Investor in Israel by PitchBook Two Years in a Row

OurCrowd has been named Israel’s most active venture investor for a second year in a row, in a ranking published by Seattle-based market research company PitchBook Data, Inc. PitchBook compiled a list of the ten most active Israeli players in the local venture capital scene since 2014, examining the number of deals in Israel in which each venture capital firm took part; OurCrowd participated in 138 deals in Israel during that period. Following OurCrowd on Pitchbook’s top 10 most active Israeli investors in the country are other Israeli venture funds, including: Altair Capital, with 111 deals since 2014; 83North, with 86 deals; Pitango Venture Capital, with 71; Magma Venture Partners, with 64; Viola Ventures, with 63; iAngels, with 58; Sequoia Capital Israel, with 57; Jerusalem Venture Partners, with 48; and Vertex Ventures Israel, with 42.

The report states that Last year, Israeli VCs participated in deals worth an aggregate of $5.4 billion – the highest total in the last five years. Companies in the technology sector saw 53.3% of that funding ($2.89 billion), with healthcare startups raking in 28.2% ($1.53 billion). As of 14 March, Israel’s VC investors have participated in 42 deals this year totaling $808.1 million.

Jerusalem’s OurCrowd is a global investment platform, bringing venture capital opportunities to accredited investors worldwide. A leader in equity crowdfunding, OurCrowd is managed by a team of seasoned investment professionals. OurCrowd vets and selects companies, invests its own capital, and invites its accredited membership of investors and institutional partners to invest alongside in these opportunities. (OurCrowd 25.03)

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2.14 innogy Innovation Hub Invests in FirstPoint Mobile Guard

The innogy Innovation Hub closed a seed investment round in FirstPoint Mobile Guard (FirstPoint), global innovators in cellular Cybersecurity-as-a-Service. Financial terms were not disclosed. FirstPoint’s network-level protection shields all cellular devices against hidden network vulnerabilities that stump security teams: IMSI catchers (fake base stations), malicious SMSs, location trackers, and other tactics that can steal sensitive communications and data. This military-grade, proven Cybersecurity-as-a-Service detects, alerts, protects and deceives, without requiring user intervention to install or update anything. Organizations can also customize protection by defining and modifying policies per device, which cannot be achieved with other solutions.

The innogy Innovation Hub led the investment, joined by prominent private investors including previous round investors, the Stolero Group, Gideon Argov and an investment group that participated in Mobileye’s first funding round.

Netanya’s FirstPoint protects any cellular device against hidden vulnerabilities in the network. Their agent-less, cellular network-based approach to cybersecurity identifies known and unknown attacks 24/7, instantly activating protective measures. FirstPoint solutions are completely transparent to the user/device, with no device installations, updates or slowdowns, protecting any device; e.g., mobile phones, M2M, security sensitive IoT and connected systems.

Tel Aviv’s innogy Innovation Hub believes that new technologies, business models and consumption patterns will redefine the energy market of the future. This future will be driven by four core global trends; decarbonization, decentralization, digitization and democratization. The innogy Innovation Hub has created a €162m portfolio (as of December 2018) through investing in disruptive individuals, start-ups and early stage businesses and provided opportunities for nearly 90 start-up and scale-up companies to collaborate. The Hub is funded by innogy SE, a leading German energy company, with revenues of around €37 billion (2018). (innogy 25.03)

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2.15 Perimeter 81 Completes a $5 Million Funding Round for Digital Security

Perimeter 81 has completed a $5M funding round. The round was led by Spring Ventures and private US-based investors, with additional funds from existing shareholders. The company will use the funds to accelerate growth, primarily investing in expanding the sales, marketing and R&D teams in its Tel Aviv and New York offices, and developing new cloud firewall capabilities.

Since the launch of the product, Perimeter 81 has gained immediate traction in the market, growing at a rapid, double-digit rate month over month and quickly acquiring hundreds of clients – including Fortune 500 companies and some of the leading industry names in government, entertainment, technology, and AI. Additionally, Perimeter 81 has been named an Ingram Micro Mass Challenge Comet Finalist, an InfoSecurity Product Guides Global Excellence “Cybersecurity Startup of the Year” and “Cybersecurity Vendor Achievement of the Year” winner, and a Cybersecurity Breakthrough Awards winner.

Perimeter 81 was recognized as a Sample Vendor under the Software-Defined Perimeter category in three Gartner Hype Cycle reports. Perimeter 81 is unique in the market in that its holistic, cloud-agnostic solution offers both customizable networking capabilities and advanced security features, and also ensures secure access at the network and application level. The software service can be rolled out quickly and provides automatic gateway deployment, easy multi-tenant management, and full network visibility.

Tel Aviv’s Perimeter 81 is a Secure Network as a Service that has taken the outdated, complex and hardware-based traditional network security technologies, and transformed them into a user-friendly and easy-to-use software solution — simplifying secure network access for the modern and distributed workforce. Founded by two IDF elite intelligence unit alumni, Perimeter 81 serves a wide range of businesses, from midsize to Fortune 500 companies, and has established partnerships with the world’s foremost integrators, managed service providers and channel resellers. (Perimeter 81 25.03)

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2.16 EDP Invests in Presenso, Machine Learning-based Predictive Maintenance Solution Provider

EDP Ventures, the Venture Capital arm of EDP, decided to invest in Presenso. EDP, the fourth largest player in renewable energy, ranks among Europe’s major electricity operators and is one of the largest business groups in Portugal. This investment supports a strategic partnership between EDP and Presenso, aiming to accelerate Industry 4.0 adoption within the utility sector.

Haifa’s Presenso provides AI driven Industrial Analytics tools for Predictive Maintenance using data science innovations such as Automated Machine Learning (AutoML). These tools are accessible to maintenance and reliability professionals without the need to hire Big Data experts. Presenso solution is available today for both OEM’s which are now developing their Industry 4.0 offerings and to end users operating their own equipment. (Presenso 25.03)

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2.17 Variscite & Grossenbacher Partner for Embedded Systems Solution in the DACH Market

Variscite announced a significant partnership with Grossenbacher Systeme, a Swiss Electronic Engineering & Manufacturing Services (EEMS) specialist, focusing on industrial embedded systems such as control systems, display systems, and medical electronics. The goal of this partnership is to harness the advantages of the System on Module technology and to provide complete system support for companies who develop ARM-based devices; from the early concept stage, through custom hardware and software design, up to successful mass production.

Variscite is expanding its business activity in the DACH region (Germany, Austria and Switzerland) by establishing Variscite GmbH as its local subsidiary in Germany and upgrading its website and marketing assets to support the local needs. The partnership with Grossenbacher Systeme is an additional step in the overall course of the company in the DACH region.

Grossenbacher Systeme’s customers in the embedded solutions, controllers and display systems markets will benefit from accelerated hardware development of their own system around Variscite SoM solutions which will further shorten time-to-market and lower overall system development costs and risks, while benefit from local support for the entire process of system design and integration of their customized platform.

Lod’s Variscite has developed, produced and manufactured a powerful range of System on Modules, consistently setting market benchmarks in terms of speed and innovation. The company’s portfolio is based on leading SoC vendors including NXP/Freescale, Qualcomm, Texas Instruments and Marvell. All Variscite production is performed at fully ISO 13485, 9001 and 14001 compliant facilities, satisfying an international customer and regulatory requirements for a broad range of industries including medical devices and related services. The company’s production facilities are equipped with the most advanced SMT machines that ensure punctual deliveries and high-quality products. (Grossenbacher Systeme 25.03)

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2.18 Innoviz Technologies Raises $132 Million in Series C Funding

Innoviz Technologies has raised $132 million in Series C funding. The round is marked by the entrance of new major investors China Merchants Capital (SINO-BLR Industrial Investment Fund, L.P.), Shenzhen Capital Group and New Alliance Capital; and Israeli institutional investors Harel Insurance Investments and Financial Services and Phoenix Insurance Company. Given demand from additional investors, the Series C round will remain open for a second closing to be announced in the coming months.

This significant raise will support Innoviz’s commercialization of its leading InnovizPro and InnovizOne solid-state LiDAR solutions and address growing demand for cutting-edge autonomous vehicles (AV) technologies worldwide. The company is focusing expansion efforts in key automotive markets including the U.S., Europe, Japan and China. Innoviz also plans to expand its research and development efforts by investing in the buildout of next-generation products and software that will feature more cost reductions and improved performance.

Innoviz’s perception software coupled with its advanced LiDAR technology creates a holistic hardware and software stack that turns LiDAR data into an indispensable input for autonomous driving. Rather than focusing on bringing quick solutions to the market, Innoviz has chosen an ambitious path of developing a product and perception software through partnerships with original equipment manufacturers (OEMs) and Tier 1 suppliers, including Magna, HARMAN, HiRain Technologies and Aptiv, to assure full compliance with the highest automotive-grade production standards.

Rosh HaAyin’s Innoviz is a leading manufacturer of high-performance, solid-state LiDAR sensors and perception software that enable the mass-production of autonomous vehicles. InnovizPro is a solid-state LiDAR that offers outstanding performance and value for automotive and other applications. InnovizOne is a cutting-edge, automotive-grade LiDAR sensor that provides superior 3D sensing for Level 3-Level 5 autonomous driving. (Innoviz 26.03)

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2.19 Sayata Labs Emerges From Stealth with $6.5 Million in Seed Funding

Sayata Labs has emerged from stealth with $6.5 million in seed funding. Sayata uses advanced cybersecurity and data science expertise to provide insurers with the ability to quickly and accurately assess cyber risk, as well as provide existing and potential insureds with actionable mitigation recommendations that significantly improve their cyber risk posture. Sayata is already partnering with AXA, a global insurance leader, to enhance the firms’ cyber risk capabilities. Elron, an Israeli early stage venture capital firm specializing in cyber, led the round. The funds will be used to accelerate Sayata’s global operations in the burgeoning cyber insurance market.

Sayata provides insurers and brokers with extensive cyber risk visibility by analyzing a range of data sources that are directly linked to the vast majority of cyber breaches – a capability currently non-existent for SMB underwriting. Powered by AI-based algorithms, the solution provides insurers and SMBs with data-driven insights that are specifically related to actual cyber losses. The quick scan accurately ascertains levels of cyber-threat exposure and preparedness unmatched in the industry. Sayata’s solution is specifically designed to be scalable and intuitive, providing insurers with essential cyber security benchmarks that enable them to grow their business portfolio while minimizing risk and maintaining profitability. The comprehensive solution is quick to run and priced to fit within the SMB underwriting budget.

Tel Aviv’s Sayata Labs is an enterprise-grade risk assessment solution for the cyber insurance industry that is tailored to the SMB segment. Powered by AI-based algorithms and utilizing granular data that is directly linked to the vast majority of cyber breaches, the solution leverages deep cybersecurity and data science expertise to provide profound insights to better assess cyber risk. Sayata also delivers actionable recommendations that enable insureds to easily improve their cybersecurity posture. (Sayata Labs 26.03)

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2.20 Rewire $12 Million Round for Its Cross-Border International Banking Platform for Migrants

Rewire announced a Series A investment round of $12 million. This latest round, led by venture fund Viola Fintech, is supported by new and existing investors BNP Paribas through their venture capital fund Opera Tech Ventures, OurCrowd, Moneta, Professor Yair Tauman, Yaron Lemelbaum, Leon Vaidman and the strategic partner, Standard Bank of South Africa. Part of the funding will be earmarked for global expansion and penetration into additional European markets, complementing existing operations already implemented in Germany and Italy, where a high concentration of migrants reside. Additionally, funding will be allocated towards extending and strengthening partnerships with local banks in origin countries, with the goal of reaching numerous customers.

In support of their European operations, Rewire recently opened offices in Amsterdam. Rewire currently employs community managers representing migrants in Europe and is expected to grow their staff by 40% in the next year with a focus on expanding the R&D team.

Tel Aviv’s Rewire provides an international banking platform for migrant workers who usually transfer most of their income to their countries of origin. By partnering with leading banks in migrants’ countries of origin, Rewire’s innovative technology enables migrants to deposit money into a digital bank account which can be used locally, issued a debit card by Rewire and transfer funds home.

Herzliya’s Viola FinTech is a $120M cross-stage venture fund that invests in global FinTech companies alongside leading venture investors. The fund brings together financial institutions and innovative startups to accelerate the modernization and digitization of financial institutions and support the growth of FinTech companies. It is part of Viola, largest Tech investment group in Israel with over $3B AUM. (Rewire 26.03)

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2.21 CB4 Raises $16 Million Series B to Further Deliver AI Software to Brick & Mortar Retail

CB4 announced their completed series B for $16M. The round was led by Octopus Ventures with the participation of Sonae IM and existing investors Sequoia Capital and Pereg Ventures. Octopus Ventures is one of Europe’s largest Venture Capital teams, with successful exits from Microsoft, Twitter, Amazon and Google.

CB4’s software uses machine learning and advanced AI algorithms to identify high local demand for specific products in stores. When a product fails to sell to predicted demand levels, CB4 sends an alert to the store manager, highlighting the floor execution issue and suggesting ways to fix it. Retailers using CB4’s software see a 0.5-2% increase in net new sales, improved customer experience, and increased product findability.

Herzliya’s CB4 provides a patented software solution for brick and mortar retailers that increases net new sales by up to 2% using simple sales data. The software requires no in-store hardware and most customers are up and running in a single day. (CB4 27.03)

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2.22 Market Beyond Raises $4 Million in Funding

Market Beyond raised $4 million in funding. Backers were not disclosed. The company is using the funds to continue to expand operations and its business reach. Market Beyond uses AI to turn market intelligence into actionable, real-time, product level insights for retailers and brands to know and sell more of what people want, in order to get a leg up on their competition.

Its new dashboard, which is GDPR compliant, taps into AI to provide retailers with insights on what consumers really want while machine learning algorithms handle the complex data-filled world of online shopping. It provides e-commerce analytics with product-level granularity for millions of SKUs, based on real consumer shopping journeys across the entire e-market.

Tel Aviv’s Market Beyond provides Fortune 500 brands and online retailers with actionable insights which optimize e-commerce inefficiencies at the product level. Their unique technology employs advanced Machine Learning and AI across billions of online shopping journeys, correcting deficiencies in product assortments, pricing models, website traffic and other conversion factors, thereby ensuring growth by both revenue and market share. (Market Beyond 26.03)

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2.23 proteanTecs Completes Successful Series B Funding and Launches Out of Stealth Mode

proteanTecs has completed a series B financing round of $35 million. Investors include Avigdor Willenz, Intel Capital, ITI Venture Capital Partners, Mitsubishi UFJ Capital, Redline Capital Management S.A., Viola Ventures, WRVI Capital, Zeev Ventures and others. proteanTecs introduces Universal Chip Telemetry, a new language of inferred measurements for chip health and performance monitoring. They offer a one-stop cloud-based platform, which combines data derived from proprietary Agents embedded in chips, with machine learning and data analytics. This significantly improves chip and system production quality, while tracking operational reliability and alerting on faults before they become failures. proteanTecs provides unprecedented insights throughout the value chain, from Chip Vendors to System Vendors and Digital Service Providers.

proteanTecs’ solutions are already being used by a diversified range of customers. The company has secured funding of nearly $50 million to date. The funding will be used to further accelerate the development and adoption of proteanTecs’ technology.

Haifa’s proteanTecs develops revolutionary Universal Chip Telemetry for electronic systems throughout their entire lifecycle, increasing their performance and reliability. By applying machine learning to novel data created by embedded Agents, proteanTecs provides meaningful insights unattainable until today, leading to new levels of quality, reliability and scale. Founded in 2017, the company has offices in New Jersey and San Francisco. (proteanTecs 01.04)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 MENA Spending on IT Forecast to Reach $160 Billion in 2019

Information technology (IT) spending in the Middle East and North Africa (MENA) is projected to reach $160 billion in 2019, a 1.8% increase from 2018, according to the latest forecast by Gartner. The achievement of a 1.8% growth rate this year is placing MENA seventh out of the 11 regions tracked by Gartner in 2019, he said. The research comes as consumer spending in MENA has reached a tipping point. Consumers are on pace to spend $532 million on upgrading or replacing their mobile phones in 2019 and expect to spend $63.7 billion on mobile services in 2019, up $1 billion from 2018.

In the enterprise sector, organizations are increasing their spending on software, which continues to be the fastest growing sector in 2019. Nevertheless, despite the rapid growth of software as a service in the region (25.8% in 2019), the region is below the global average for the percentage of total cloud spending. Gartner analysts said software and IT services are projected to exhibit the strongest growth in 2019, with an 11.5 and 7.5% increase year over year respectively.

The communications services segment, the largest spending segment in MENA and the fourth fastest growing segment in the world, is set to increase 1.8% year over year. The devices market is projected to exhibit a decline of 2.2% in 2019. Gartner also said the banking and securities industry is projected to total $13.2 billion in 2019, the largest IT spending among 11 industries. It will also exhibit the fastest growth rate at 5% year over year. The transportation, education and wholesale trade sectors are on pace to achieve growth of 1%, 2.4% and 2.8% this year respectively, and are set to be the three industries achieving the weakest IT spending growth rates in 2019. (AB 23.03)

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3.2 Ibtikar Fund Announces Investment in Receet

On 25 March 2019, the Ramallah based Ibtikar Fund announced its newest investment in Receet, a mobile app platform for providing digital receipts in any business transaction where a receipt is needed. Consumers are not required to turn over their name, email address or phone number to get a digital receipt. Receet uses Bluetooth and NFC technology to instantly push the digital receipt to consumer’s smartphones. In addition to the great customer experience Receet offers for customers and merchants, Receet solves the significant environmental impact of paper receipts. Paper receipts contain BPA and BPS chemicals that are harmful for workers and customers.

The Receet platform generates a rich digital receipt that allows for unique personalization opportunities, for example, merchants can add a YouTube link on how to assemble the item bought or a pharmacy can add actionable reminders for prescription refills. The digital receipts generated by Receet can be indexed, categorized and easily searched for, all of which is not possible with email receipts. Ibtikar’s investment will help Receet perfect their product and gain initial traction. (Ibtikar Fund 25.03)

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3.3 Andersen Global Enters Qatar

San Francisco’s Andersen Global announced a collaborating agreement in Qatar with Al-Khalifa Law, a leading Doha-based law firm. The collaboration is Andersen Global’s first in Qatar and is part of the organization’s continued growth in the Middle East.

Al-Khalifa Law was founded 20 years ago and established itself as a premier firm in the region. The team at Al-Khalifa Law has diversified, deep experience providing services in a wide variety of business sectors, such as commercial contracts, taxation, employment, real estate and retail, intellectual property, dispute resolution and litigation and arbitration.

Andersen Global is an international association of legally separate, independent member firms comprised of tax and legal professionals around the world. Established in 2013 by U.S. member firm Andersen Tax LLC, Andersen Global now has more than 4,000 professionals worldwide and a presence in over 134 locations through its member firms and collaborating firms. (Andersen Global 26.03)

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3.4 Uber to Acquire Careem to Expand Regional Opportunity Together

Uber and Careem have reached an agreement for Uber to acquire Careem for $3.1 billion, consisting of $1.7 billion in convertible notes and $1.4 billion in cash. The acquisition of Careem is subject to applicable regulatory approvals. The transaction is expected to close in Q1/20. Uber will acquire all of Careem’s mobility, delivery, and payments businesses across the greater Middle East region, ranging from Morocco to Pakistan, with major markets including Egypt, Jordan, Pakistan, Saudi Arabia and the United Arab Emirates.

Upon closing, Careem will become a wholly-owned subsidiary of Uber, preserving its brand. Careem co-founder and CEO Mudassir Sheikha will lead the Careem business, which will report to its own board made up of three representatives from Uber and two representatives from Careem. Careem and Uber will operate their respective regional services and independent brands. The greater Middle East region is already seeing the economic and social benefits of rapid technology adoption and improved access to transportation. This transaction supports the collective ability of Careem and Uber to improve the region’s transportation infrastructure at scale and offer diverse mobility, delivery and payment options. It will speed up the delivery of digital services to people in the region through the development of a consumer-facing super-app that offers services such as Careem’s digital payment platform (Careem Pay) and last-mile delivery (Careem NOW).

Dubai’s Careem is the internet platform for the greater Middle East region. A pioneer of the region’s ride-hailing economy, Careem is expanding services across its platform to include mass transportation, delivery and payments. Careem’s mission is to simplify and improve the lives of people and build a lasting organization that inspires. (Uber 26.03)

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3.5 UAE & Virgin Galactic Sign Deal to Pave Way for Space Tourism Flights

The UAE Space Agency and Virgin Galactic have signed an agreement to open up the possibility of space tourism flights. Under the agreement, the parties intend to plan for a SpaceShipTwo and carrier aircraft vehicle pair that would be operated from the UAE, collaborate to develop a “center of excellence” for microgravity research in the UAE and develop spaceship operational plans for UAE’s Al Ain airport. The space vehicle will be used by customers in the UAE and the region as a science platform for high-frequency space research, as well as private individuals to experience space.

The director general of the UAE Space Agency and the CEO of Virgin Galactic and The Spaceship Company (TSC) signed a memorandum of understanding (MoU) that outlines cooperation across a range of areas. These include plans to bring Virgin Galactic spaceflights to the UAE for education, science and technology research, as well as potential space tourism flights in the future.

The agreement, coming shortly after Virgin Galactic’s historic commercial space flights in December 2018 and February 2019, marks an important step as the company progresses toward commercial operations. It added that the UAE is well positioned to cater to such an important potential activity following significant advances in the UAE space regulatory and investment environment. The agreement also builds upon the longtime UAE investment in Virgin Galactic and TSC, held by Mubadala Investment Company. (AB 25.03)

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3.6 Mubadala Partners With Microsoft, SoftBank Vision Fund & ADGM to Launch Hub71

Mubadala Investment Company, Abu Dhabi’s largest wealth fund and one of the world’s biggest investors, has opened its doors to tech startups. Hub71, a tech ecosystem founded by Mubadala Investment Company, Microsoft and SoftBank Vision Fund, working in close collaboration with Abu Dhabi Global Market, is aimed at accelerating the Emirate’s goal of becoming the nucleus of a vibrant tech startup ecosystem. The founding partners have committed to an AED535 million fund to invest in tech startups.

The fund will be administered by Abu Dhabi Investment Office and, starting from 28 April 2019, it will be co-investing with venture capitalists in Hub71-based tech startups through a government matching scheme, as well as in first-time fund managers to support their establishment and growth in the Emirate. Hub71 will also be offering fully subsidized housing, office space and health insurance for seed-stage tech companies, while more established tech ventures will be offered 50% subsidy packages.

Hub71 is a key initiative of the Government’s Ghadan 21 economic accelerator program announced last September by Sheikh Mohammed bin Zayed al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces. Abu Dhabi’s Hub7 is a groundbreaking project that will see technology companies, startups, academics and investors collaborating to create something truly exciting for the tech sector across the region and beyond.

With this initiative, Abu Dhabi brings together three key pillars that are essential for the success of its tech ecosystem – capital providers, business enablers and strategic partners. The founding partners explain that the tech hub has been established to address the financial and regulatory roadblocks facing startups all around the world and is finalizing talks with global investor firms to deploy funding to exceptional startups. (Entrepreneur Middle East 25.03)

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3.7 Dubai’s Beehive Launches Crowdfunding Platform in Bahrain

The Economic Development Board of Bahrain (EDB) and Dubai-based Beehive has announced the launch a debt-based crowdfunding platform in Bahrain. Beehive in Bahrain aims to open up new funding avenues for small and medium-sized enterprises (SMEs) and help drive innovation across the Kingdom and region.

Beehive, launched in Dubai in 2014, is MENA’s first regulated peer to peer lending platform and one of the region’s leading fintech pioneers. It uses innovative crowdfunding technology to eliminate the cost and complexity of conventional finance by connecting businesses directly with investors. It recently announced it had secured new funding worth $4 million to support expansion plans across the GCC and South East Asia.

Beehive’s launch in Bahrain follows new regulation issued by the Central Bank of Bahrain in 2017 to enable both conventional and Shari’a compliant financing-based crowdfunding for small and medium sized businesses. (AB 23.03)

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3.8 QuadGen Expands in the Middle East and Opens Dubai Office to Accelerate Growth

King of Prussia, Pennsylvania’s QuadGen, a global software-enabled, next-generation network and engineering services company, announced its expansion in the Middle East. To fast-track its rapid growth and better serve customers, QuadGen also announced its new office in Dubai. The expansion in the Middle East enables QuadGen to more efficiently help its customers deploy new technologies, improve network capacity, reduce costs and optimize network performance. The office in Dubai serves as regional hub between QuadGen’s co-headquarters in the United States and India, and will accommodate its growing, highly-skilled engineering workforce.

QuadGen is a global software-enabled, next-generation network and engineering services company, enabling customers to deploy new technologies, improve network capacity, reduce costs and optimize network performance. Our highly-trained staff, in-house proprietary tools and breadth of capabilities enable QuadGen to deliver the highest quality of network improvements that unlock value with velocity and precision. (QuadGen 26.03)

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3.9 The Most Popular Used Car in the UAE Revealed

Dubizzle Motors, the UAE’s largest used car marketplace, has revealed that listings for sedans from Japanese brands received the most inquiries from potential buyers last year. Its 2018 motors report, based on an analysis of over 210,000 used cars listed on the platform, showed that the Toyota Camry, Toyota Corolla, Honda Accord and Nissan Altima were most popular. The Toyota Camry was identified as the most viewed car, recording over 1.18 million page views from users of the platform. The Nissan Patrol ranked second (1.15 million page views), followed by the Toyota Land Cruiser (1.11 million), the Mercedes-Benz S-Class (996,000) and the Mercedes-Benz E-Class (956,000). The Bugatti Chiron supercar was the most expensive car listed throughout the year, priced at AED14.9 million.

In terms of price distribution of used cars in the market, 61% of the cars listed on Dubizzle Motors last year were for less than AED60,000, 20% were between AED60,000–119,999 and 8% between AED120,000–179,999. The remaining 11% of cars listed were over AED180,000 and included the Mercedes Benz G-Class, S-Class, and the Land Rover Range Rover. The report also revealed a margin of negotiation up to 13.6% between listing price on Dubizzle Motors and actual selling price, based on prices provided by private sellers upon successfully selling their cars and removing their listings. (AB 26.03)

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3.10 Energy Recovery Awarded $8.8 Million for Water Projects in Saudi Arabia

San Leandro, California’s Energy Recovery, a leader in pressure energy technology for industrial fluid flows, announced total awards of $8.8 million to supply its PX® Q300 Pressure Exchanger® devices to multiple desalination facilities in Saudi Arabia. The devices are expected to ship in Q2/19.

Energy Recovery estimates the PX Pressure Exchangers supplied to these desalination facilities will reduce power consumption for all projects by 54.3 megawatts (MW), saving over 469 gigawatt hours (GWh) of energy per year. The facilities will produce up to 380,000 cubic meters of water per day, equivalent to filling more than 150 Olympic-sized swimming pools daily. (Energy Recovery 28.03)

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3.11 US Firm to Boost Libyan Airport Security

Alexandria, Virginia’s Culmen International was awarded a grant from the US Department of State (DOS), Bureau of Counterterrorism and Countering Violent Extremism (CT) to implement the Libya Airport and Aviation Security Program. Culmen will be responsible for increasing Libyan airport security, its capacity to monitor terrorist threats, screen against terrorist transit, and develop standard operating procedures to mitigate such threats at three key airports through assessments, equipment procurement, training, and the development of a national aviation security strategy.

This DoS grant allows Culmen to expand its service capabilities in aviation security, a continued key focus in the fight against terrorism. According to Libya Herald, the Libyan Airports Authority (LAA) has said that “initially” the three “key” airports will be Mitiga, Tripoli International and Misrata airports, implying that other airports could be added. (Culmen 12.03)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Sharjah to Build Dh 2 Billion Sustainable City

Sharjah Investment and Development Authority (Shurooq) in partnership with a Dubai real estate company, plans to build a Dh2 billion sustainable city. Spread over 668,902 square meters, Sharjah Sustainable City will be completed in four different phases. Located nearly 11 km. from the Sharjah International Airport, the city will be completely solar powered and recycle its waste and water. Construction will start in the next three months and the first phase will be finished by the last quarter of 2021. Remaining phases will be completed in the next one to two years. The sustainable city will house various amenities such as residential clusters, mall, farm, school and sports facilities. (AB 27.03)

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4.2 Egypt to Introduce Eco-Friendly Public Toilets Around Cairo by the Summer

Egypt signed a partnership agreement to launch eco-friendly toilets across its capital city Cairo in a move to conserve water. The bathrooms will consist of three stalls: one for men, one for women and one for people with disabilities. Each will be equipped with a water conserving system. The average toilet consumes as much as 22 liters of water per flush, but these eco-friendly toilets use anywhere between three to six liters of water per flush. Cairo’s governor Ali Abdel Aal revealed that by the inauguration of the 2019 African Cup of Nations, which falls on the end of June, at least 30 eco-friendly toilet units would be installed across various districts in Cairo.

The U.N. expects Egypt to be in a state of absolute water scarcity by 2025, some five years from today. The increasing water poverty rate in Egypt is one of the most significant impacts of climate change, with an expectation of increasing water demand by 20% by 2020. In 2018, Egypt’s per capita share of water dropped to 0.57 liters, almost half of the international standard, which is almost 1,000,000 liters per year. Amid the growing water shortage, Cairo is trying to reduce the gap between water resources and the mounting consumption through [using] treated water, which represents 25% of current use. (ES 31.03)

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4.3 Egypt’s Red Sea Governor Bans Single-Use Plastics

Egypt’s Red Sea governor, General Ahmed Abdullah, has decided to ban single-use or disposable plastics starting from June after agreeing to the proposal submitted by HEPCA (Hurghada Environmental Protection & Conservation Association). The ban of the single-use of plastics will apply on any food related outlets, including restaurants, coffee shops, supermarkets, groceries, butchers, fisheries, fruits and vegetables shops and pharmacies, as well as plastic cutleries like knives, plugs, plastic hooks, cups and dishes. The Red Sea governorate will also not give authorization for the production of plastic bags within the city.

An awareness campaign about the negative impacts of plastic on marine life and human health will be launched by HEPCA, which will include ground activation with events, giving lectures for public and private schools, clean-up campaigns for islands, beaches and underwater in collaboration with schools, diving centers, and the red sea community.

An EU-funded initiative was launched by the Egyptian environment ministry in 2017 calling for “Enough Plastic Bags”, to eliminate the country’s dependency on plastic bags, due to their negative effects on the environment and the economy. The initiative aims to encourage citizens to reduce their consumption of plastic bags and to shift towards more environment-friendly alternatives. Egyptians use about 12 billion plastic bags each year, causing severe problems to the Nile River and the seas. Hence, it negatively affects environmental tourism and diving. (Egyptian Streets 01.04)

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4.4 Cyprus at the Low End of Collected Electrical Waste

Cyprus had an estimated 3.5 kg of waste electrical and electronic equipment collected per inhabitant making it one of the lowest rates in the EU. At the European Union level, it is estimated that 8.9 kg of waste electrical and electronic equipment was collected per inhabitant in 2016, an increase of 25% over the five years since 2011. The total amount of waste electrical and electronic equipment collected in the EU Member States in 2016 varied considerably, ranging from 1.6 kg per inhabitant in Romania to 16.5 kg per inhabitant in Sweden. (FM 26.03)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanon’s Average Inflation Rate Rises 3.16% in February 2019

According to the Central Administration of Statistics (CAS), consumer prices rose on average by an annual 3.16% in the first two months of 2019. The rise is attributed to increases in prices across all components of the Consumer price index (CPI), except Communication and Transportation. The average costs of Housing and utilities (including: water, electricity, gas and other fuels), which composed 28.4% of the CPI, climbed by 3.15% year-on-year (y-o-y) in the first two months of 2019. The breakdown of this component showed that Owner-occupied rental costs (13.60% of the 28.4%) increased by 2.82% y-o-y, and the average prices of Water, electricity, gas, and other fuels (11.80% of the 28.4%), rose by an annual 3.40% over the same period. In its turn, the average prices of Food and non-alcoholic beverages (20% of CPI) increased by 7.10% y-o-y by February 2019. In addition, the average Health (7.7% of the CPI) and Education (6.6% of the CPI) sub-indices recorded respective upticks of 2.07% and 5.29% y-o-y by February 2019. As for the average prices of Clothing and Footwear (5.2% of CPI), they substantially rose by an average of 7.15% over the same period. Meanwhile, transportation Sub-index( 13.10% of the CPI), that is relying mainly on oil declined by an annual 2.58%,given the average price of oil retreated from $67.48/barrel by February 2018 to $62.24/barrel in the same period this year. The communications component recorded a slight decrease of 0.07% over the same period. (CAS 21.03)

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5.2 Jordan’s National Exports Increase by 13.6% & Imports Decrease by 2.7% in January 2019

The statistical data issued by the Department of Statistics indicate that the value of total exports reached JOD 421.9 million during January 2019, marking an increase by 12.1% compared with the same period of 2018. Meanwhile, the national exports value reached JOD 358.7 million during January 2019, marking an increase of 13.6% compared with the same period of 2018. The value of re-exports reached JOD 63.2 million during January 2019, which indicates an increase by 4.3% as compared with the same period of 2018. The imports value reached JOD.1188.1 million during January 2019, thus decreasing by 2.7% compared with the same period of 2018.

The deficit in the trade balance, which is calculated by deducting the value of imports from the value of total exports, has reached JOD 766.2 million. Therefore, the deficit has decreased during January 2019 by 9.3% compared with the same period of 2018. The imports coverage by total exports has become 35.5% during January 2019 while it was 30.8% for the same period of 2018, which means an increase by 4.7%. (DoS 02.04)

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5.3 Royal Jordanian Contributes 3% to Jordan’s GDP

Royal Jordanian (RJ) announced that the flag carrier is a key source of hard currency to the national economy with around $1 billion annually and contributes 3% to the Gross Domestic Product (GDP). RJ employs 3800 people; 97% of them are Jordanians and also helps create many indirect jobs. There are many challenges facing the carrier, namely regional turmoil, higher fuel prices and airport fees which are the highest in the region. RJ also suffers from what it considers unfair competition from rivals, mainly low-cost airlines companies that operate extensive flights from Europe to both Amman and Aqaba. (Petra 01.04)

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5.4 Jordanian Expats’ Remittances Rise 4% in Two Months to $600 Million

Jordanians working abroad sent home a staggering $600 million in the first two months (January and February) of 2019, indicating an increase of 4% compared with the same period in 2018, official data revealed. The Central Bank of Jordan said in a statement that Jordanian expatriates’ remittances in February was up 3.5% at $278 million against $269 million in the same month last year. (CBJ 20.03)

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►►Arabian Gulf

5.5 UAE Minister Launches Roadmap to Improve Food Security

The UAE’s bid to become one of the world’s top 10 food secure nations has taken a major step forward with the launch of a food security roadmap for the Middle East. Launched by Mariam Almheiri, the UAE’s Minister of State for Food Security, the roadmap aims to further the objectives of the UAE’s National Food Security Strategy and to support regional improvement. The roadmap relies on five pillars – building a food data strategy; developing an innovation research & development (R&D) strategy; establishing a national food waste program; expanding nutritional guidelines; and enhancing the regional trading environment.

A meeting held recently represented the first of what will be a series of discussions between the UAE’s food security stakeholders and The Economist Intelligence Unit moving forward. During the meeting, Almheiri and stakeholders looked at developing food-security-related data guidelines and an R&D strategy that focuses on biotechnology. They also examined how to best support national and regional strategies to reduce food waste, how to enhance nutritional guidelines to improve the quality of diets and how to draw up an agricultural trade strategy that positions the UAE as a regional trading hub for food in the Middle East. (AB 22.03)

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5.6 Sheikh Mohamed Approves Dh5.6 Billion Budget for Food & Water Research

On 25 March, the UAE reaffirmed its commitment to tackle pressing issues of water scarcity and food security with major fund allocation and new partnership, approving Dh5.6 billion to support research and development into the global challenges of water scarcity & food security over the next five years.

The UAE is pulling all stops to find sustainable and innovative solutions through Ghadan 21 – a Dh50 billion stimulus program started last year. In a step forward in Ghadan 21 R&D initiative, the executive committee of the Abu Dhabi Executive Council entered into a three-year partnership with XPrize Foundation to launch a series of XPrize Abu Dhabi competition that will unite talented minds from the UAE and globally to develop solutions for world’s biggest challenges. (WAM 26.03)

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5.7 Dubai’s GDP Grows by 1.9%, adds $108bn in 2018

Dubai’s GDP at constant prices achieved a growth rate of 1.94% in 2018 with a value added of AED398.1 billion ($108.3 billion), according to Dubai Statistics Centre (DSC). Dubai’s GDP growth in 2018 was largely driven by the performance of the trade activities which grew by 1.3% compared to 2017, and contributed 18.1% of the total growth and 30% of the growth achieved during the second half of 2018. The real estate activity also grew by 7% in 2018 and contributed by nearly 25% to the total economy growth achieved.

Moderate rental rates in Dubai boosted demand “considerably”. The figures also showed that the transport and storage sector accounted for 13% of the GDP growth during 2018, as a result to the sector’s growth by 2.1%. Growth of accommodation and food services (hotels and restaurants) rose by 4.5% in 2018. Data showed that hotel and hotel apartments reservations grew by 3.2% in 2018 compared to 2017. Financial and insurance sectors grew by 0.6% during 2018. The government sector achieved a growth rate by 1.4% in 2018 accounting for 3.6% of the total growth achieved in Dubai’s economy. (AB 27.03)

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5.8 Dubai’s RTA Reveals Progress on New $160 Million Traffic Control Hub

Dubai’s Roads and Transport Authority (RTA) has revealed that construction of a AED590 million ($160.6 million) project for the expansion of smart traffic systems in Dubai is nearly a quarter completed. The new center aims to expand the coverage of Dubai roads by smart systems from 11% to 60%, and cut the time of detecting accidents and congestion on roads and ensure quick response. It will also provide instant traffic information to the public about roads condition via new variable messaging signs and smart apps, and enhance the efficient management of traffic movement during major events, such as Expo 2020.

The new control center which comprises four divisions – a traffic control center, two wings for support offices and the reception lounge connecting the four divisions. It also has an attached utility building for electricity and air-conditioning units. The building structure has now been fully completed and work started in the cladding and electromechanical works. (AB 23.03)

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5.9 New $81 Million Hospital Set to Open in Ajman

Saudi German Hospitals Group, one of the largest private hospital groups in the MENA region, is set to open a new AED300 million ($81 million) healthcare facility in Ajman. The tertiary-care specialty and sub-specialty facility will be the biggest hospital in Ajman, designed to cater to the growing population across all northern emirates. Spanning over 41,062 square meters, the 200-bed hospital will commence operations soon, the company said in a statement. With 46 clinics and over 20 specialties, Saudi German Hospital, Ajman, will be the group’s third healthcare facility in the UAE, and 10th across the MENA region. (AB 22.03)

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5.10 Aramco’s Huge Chemical Buyout Loads Saudi Arabia’s Coffers

Aramco, Saudi Arabia’s giant oil company, announced that it had bought 70% of the kingdom’s state-controlled petrochemical company, Sabic, for $69.1 billion. This is an alternative to an Aramco IPO. The deal for a majority stake in Sabic will provide a windfall for its majority owner: Saudi Arabia’s sovereign wealth fund. Aramco’s postponed plan to sell some of itself on a public stock market would have accomplished something similar.

Saudi Arabia now has the money it wanted to modernize its economy. The kingdom’s crown prince, Mohammed bin Salman, hopes to fund a campaign to wean Saudi Arabia off oil, by investing in new technology and clean energy. Aramco has now given his government the billions required to do so. As well, financial firms that had worked on an Aramco IPO pivoted to advisory roles on the Sabic deal and many will arrange what’s expected to be a huge bond sale to help finance the transaction. (Various 28.03)

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►►North Africa

5.11 Egypt Sets Up $57 Million Fintech Startup Fund

Fintech startups in Egypt could soon have access to EGP 1 billion (approximately $57-million) after the country’s government set up a fund via the Central Bank of Egypt (CBE). According to the CBE, the fund will support research into fintech as well as start-up companies focused on digital finance. The objective is to position Egypt has a regional center for electronic financial services said the finance institution.

While Egypt has the largest population in the Middle East and North Africa (MENA) region, only 14% of the adult population has a bank account, according to the World Bank Global Findex. The North African country has one of the largest mobile telecom markets in Africa, with effective competition and a penetration rate of approximately 105%. The main challenges facing fintech start-ups include funding, the ability/ capacity to create partnerships with banks and reaching the unbanked sector. (ITWeb Africa 20.03)

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5.12 Egypt’s Banking Net Foreign Assets Hit $14.35 Billion by March

Net foreign assets at the Egyptian banking sector reached a surplus of $14.349 billion in February, compared to LE 8.312 billion in January, according the Central Bank of Egypt (CBE). CBE’s data showed that surplus of net foreign assets of the banking sector recorded an increase of $6.037 billion during February. The data read that this increase came by the support of foreign assets in banks which recorded $19.328 billion, compared to $13.978 billion, with an increase of $5.4 billion. It added that during February, banks received huge inflows from foreign customers to invest in governmental debt instruments, in addition to the increase of the remittances of the Egyptian expatriates.

Foreign assets in the central bank rose to $42.877 billion by the end of February, compared to $41.676 billion in January, with an increase of $1.2 billion. Egypt received that fifth tranche of the IMF-loan worth $2 billion in February. As per foreign liability, it reached $47.856 billion by the end of February, compared to $47.522 billion by the end of January. Liabilities at the Central Bank of Egypt recorded $28.349 billion in February, down from $28.76 billion by the end of January, while liabilities at banks hit $17.462 billion by the end of February, compared to $18.761 billion by the end of January. (Egypt Today 01.04)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Trilateral Summit Between Cyprus, Greece and Jordan to Take Place in April

A trilateral summit of Cyprus, Greece and Jordan is expected to take place in mid-April while other efforts for similar regional alliances are at an advanced stage. The trilateral summit between Cyprus, Greece and Jordan will take place in Amman, Jordan. Efforts for a trilateral cooperation between Cyprus, Greece and Egypt with the ad hoc participation of France (formation 3+1) are underway.

Cypriot Foreign Minister Christodoulides has said that efforts through diplomatic channels to set a specific date for this are at a final stage. He had also said that another goal is to organize the first trilateral meetings with Arabian Gulf countries, adding that interest has been expressed to that effect.

The government has decided to establish a permanent secretariat in Cyprus that will deal with the trilateral cooperation schemes with Greece and other countries of the region, in the context of its foreign policy to enhance relations with countries in the Middle East and the Gulf. (FM 26.03)

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6.2 Greece’s Energy Minister Admits to Chinese Control of Power System

The Greek energy minister admitted that Chinese state investors are now in control of the national electricity transmission system operator (TSO), supporting public concerns that they plan to enhance their influence throughout Greece by investing in infrastructure projects, much to the disappointment of EU partners and the US. This could explain why the Tsipras administration in Athens has had a change of heart in the past year and wants to build an electricity cable to Crete on its own, awarding the contract directly to Chinese companies and abandoning a Cypriot venture that has been underway since 2012 with the support of the European Commission. This has drawn the attention of Brussels, with Commission sources pointing to China’s growing influence, especially in economically vulnerable countries.

In the case of Greece, the giant China State Grid Corp. swooped in and grabbed a 24% stake in electrical grid operator ADMIE providing some €200 million in desperately-needed credit and offering to support a

€2 billion development plan over 10 years. In 2016, China’s biggest shipping company COSCO Shipping bought a 51% stake and currently controls the port of Piraeus, while Greek infrastructure group Copelouzos struck a deal in 2017 with China’s top coal miner Shenhua Group that acquired a 75% stake in four wind parks.

Constructing the Crete-Attica interconnector cable as a “national” project would cost Greek consumers about €450 million more than if the link is completed as part of the Euroasia Interconnector, a €3.5 billion system hooking up the Israeli grid with continental Europe via Cyprus.

Greek Energy & Environment Minister Stathakis made the admission of Chinese control during a parliamentary debate on 7 March to pass an urgent bill that would allow ADMIE to hire about 80 new staff, with some 30 more headed for the ‘national’ interconnector project, which all opposition parties said smelled of party favoritism ahead of local and EU elections in May. (FM 23.03)

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6.3 Bank of Greece Warns of Stagnant Growth Rate

Governor of the Bank of Greece Yannis Stournaras warned on 1 April of the risks of a fiscal derailment and reform backtracking due to the upcoming election this year, when growth is now expected to come to just 1.9%.

The BoG downwardly revised its growth rate estimates for this year to 1.9%, the same as the rate recorded in 2018 and considerably below the level of 2.5% provided by the state budget. Stournaras actually stated that even this rate depends on a number of conditions, such as the continuation of structural reforms, the implementation of the privatizations program without delays and the strengthening of productive investments. The former finance minister went on to stress that this growth rate is not satisfactory, and a greater expansion pace is required to compensate for the losses the economy has suffered during its recession.

The 2019 risks not only include the elections and their consequences, Stournaras argued, but also the danger from the Eurozone slowdown. Another domestic risk factor is the high taxation that, as he said, reduces the competitiveness of Greek enterprises, limits the improvement in confidence, and generates tax fatigue with the shrinking of the tax base and the exhaustion of citizens’ taxpaying capacity. However, the main fiscal risk comes from the possible application of Council of State verdicts against previous pension and bonus cuts. He explained that this makes the sustainability of the Greek debt harder to maintain and generates further uncertainty regarding the social security system. He also said the minimum wage hike might boost consumption in the short term, but will have a medium-term impact on employment and could harm exports as the increase is much higher than the rise in the productivity rate. (eKathimerini 01.04)

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6.4 Greece Found to be European Skills Laggard

Greece and Spain are the European laggards when it comes to skills, as both countries face a 77% skills deficit, Alpha Bank noted in a bulletin. The lender’s report showed that Greece’s scores are particularly low in three main indexes: development and the activation and matching of skills; the latter appears to be the most significant, as it is supposed to ensure that the supply and demand of skills in the labor market coincide: This is where Greece is rock bottom – two points below Spain’s score too.

Alpha says that the failure to match skill supply and demand is also reflected in the high percentage of long-term unemployed in Greece. Remaining out of work for a long period weakens human capital and undermines skills, thereby making it that much more difficult for people to find full-time employment as they constantly become less competitive. This also leads to an increase in employment in other economic fields that are irrelevant to their expertise or skills. Furthermore, it slows down the reduction rate for structural unemployment. (Alpha Bank 26.03)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 UN Says Israel is One of the Happiest Countries in the World

Israelis remain some of the happiest people in the world, according to the U.N. World Happiness Report 2019, published on 20 March. The latest happiness report ranked Israel the 13^th happiest country in the world, a slight drop from last year’s report, which placed Israel at No. 11. According to the report, the happiness nation in the world is Finland, followed by Denmark, Norway, Iceland, the Netherlands, Switzerland, Sweden, New Zealand, Canada, Austria, Australia, Costa Rica and then Israel.

Israel was ranked above Britain (No. 15), Germany (17) and the U.S. (19). The lowest-ranked country in the report was south Sudan. The 2019 report covers the years 2016-2018 and was compiled using questionnaires distributed to representative samples of the population in each country surveyed. Respondents were asked to rank their lives on a scale of 0 – 10. Israel received an average “grade” of 7.139, compared to 7.769 for Finland. Despite the drop from last year’s report, Israel’s overall level of happiness has improved over the past decade, rising 0.045 points from the happiness scores Israeli gave their country in 2005-2008. (Various 20.03)

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7.2 April Showers Further Boost Water Level of Sea of Galilee

Spring has begun and the clocks have been put forward for summertime, but Israel is still being buffeted by stormy winter weather. After an extremely wet March, April blew in with unseasonably cold weather, snow on Mount Hermon, floods in the Negev and heavy showers everywhere in between.

Lake Kinneret (Sea of Galilee) has risen 15 centimeters since 28 March and is now 316 centimeters below its maximum level, according to the Israel Water Authority, and is likely to fill up completely as the heavy snows melt on the peak of Mount Hermon through the spring. Over 100 millimeters of rain fell in the Golan between the 28th and 1 April and 80 millimeters in the Upper Galilee, bringing the amount of rain there to more than 1,000 millimeters this winter, well over the annual average of 718 meters. Haifa has received 47 millimeters in the past few days bringing the amount of rain there this winter to 752 millimeters of rain compared with an average of 550 millimeters.

Netanya has received 30 millimeters of rain over the past few days bringing the total this winter to 614 millimeters compared with an annual average of 570 millimeters. Jerusalem’s total rainfall this winter so far stands at 760 millimeters, compared with a 582 millimeters annual average. Ashdod has received total rainfall to 710 millimeters compared with 520 millimeters and Kiryat Gat has total rainfall there this winter to 501 millimeters compared with an annual average of 410 millimeters. (Globes 01.04)

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*REGIONAL:

7.3 UAE Named Gulf’s Happiest Country and Ranked 21st Globally

The UAE has been named as the happiest country in the Arabian Gulf region, ranking 21st globally in a new list topped by Finland. Saudi Arabia (28th), Bahrain (37th) and Kuwait (51st) were also included in The World Happiness Report, an annual publication of the United Nations Sustainable Development Solutions Network which ranked a total of 156 countries.

The UAE has created a National Programme for Happiness & Wellbeing, one of seven policies to help the country hit its 2071 goals. In 2017, the UAE launched the world’s first happiness council. Dubai ruler Sheikh Mohammed announced the formation of the 13-member council, saying the world needs to adopt a new approach to achieve human happiness, which should be based on co-operation and the integration of efforts.

The World Happiness Report 2019, which ranks countries by how happy their citizens perceive themselves to be, according to their evaluations of their own lives, was produced in partnership with The Ernesto Illy Foundation. (AB 22.03)

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7.4 Algeria’s Bouteflika to Resign Before His Mandate Ends on 28 April

Algerian President Abdelaziz Bouteflika will resign before his mandate ends on 28, the state news agency APS said on 1 April, bowing to weeks of mass protests and army pressure seeking an end to his 20-year rule. There was no immediate reaction from leaders of the protest movement that has buffeted the major oil producer since 22 February. Many protesters want a new generation of leaders to replace an elderly, secretive ruling elite seen by many as out of touch and unable to jump-start a faltering economy hampered by cronyism.

APS said Bouteflika, who is 82 and in poor health, would take important decisions to ensure “continuity of the state’s institutions” before stepping down. It did not spell out a date for Bouteflika’s departure or give more details immediately. Under Algeria’s constitution, Abdelkader Bensalah, chairman of the upper house of parliament, would take over as caretaker president for 90 days until elections are held.

Bouteflika, rarely seen in public since he suffered a stroke in 2013, at first sought to defuse the unrest by saying on 11 March he was dropping plans to run for a fifth term. But he gave no timetable for his exit in favor of waiting for a national conference on reforms to address the outpouring of discontent over corruption, nepotism, economic mismanagement and the protracted grip on power of veterans of the 1954-62 war of independence against France. Bouteflika’s hesitation further enraged protesters, spurring the powerful army chief of staff to step in by proposing to implement a provision of Algeria’s constitution that calls for a constitutional council to determine whether Bouteflika was still fit to govern or allow him to resign. But Bouteflika signaled late on 31 March that he was on his way out when he appointed a caretaker Cabinet, since an interim leader cannot appoint ministers under the constitution. Incumbent Prime Minister Noureddine Bedoui will head the caretaker administration.

Bouteflika established himself in the early 2000s by ending a civil war with Islamist militants that claimed 200,000 lives. But dissatisfaction grew with an establishment widely seen as unaccountable, raising pressure for a new generation to take over capable of modernizing the oil-dependent state and giving hope to a young population impatient for a better life. (Various 01.04)

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7.5 Turkish President Erdogan’s Party Loses Ankara and Istanbul in Bruising Local Vote

The opposition mayoral candidate for Istanbul has won Turkey’s largest city, although the alliance led by President Erdogan’s Justice and Development Party (AKP) won the most votes nationwide. The capital Ankara, the second-largest city, also fell to the opposition Republican People’s Party (CHP), as did the fifth-largest, Adana, and the Mediterranean city of Antalya. Erdogan’s AKP said it would challenge the results in Ankara, Istanbul and other areas. The AKP’s General Secretary said the party’s objections over invalid ballots and other irregularities in Ankara would be lodged with the election board, which would accept appeals up to 15:00 on 2 April.

The loss of Ankara and Istanbul – particularly the latter, where President Erdogan grew up and launched his political career – was a serious blow to the AKP’s prestige. But winning more than 50% of the overall vote with its ally, the Nationalist Movement Party (MHP), gave the president some grounds for claiming success. However, the AKP is calling for recounts across the country, including in the Black Sea province of Bartin, where it plans to challenge the win of its MHP partner. Appeals against initial counts could last until the middle of next week as the complaints can be taken all the way to the Supreme Election Board if they are turned down at district and provincial level.

The vote count in Istanbul, which, like Ankara, had been governed by the AKP or its predecessors for 25 years, was the most dramatic. The CHP retained control of Turkey’s third city Izmir by a comfortable margin. (Various 02.04)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Sheba Medical Center Ranked World’s 10th Best Hospital

Chaim Sheba Medical Center at Tel HaShomer has been ranked one of the world’s 10 best hospitals by Newsweek magazine, ranking No. 10 on the magazine’s list. The famed Minnesota-based Mayo Clinic received the top ranking.

In its report, Newsweek called the medical center in Ramat Gan “a leader in medical science and biotechnical innovation, both in the Middle East and worldwide” and noted it “includes centers for nearly all medical divisions and specialties and serves over 1 million patients per year.” According to the magazine, 25% of all clinical research performed in Israel is carried out at Tel HaShomer’s state-of-the-art facilities. Tel HaShomer said the hospital’s ranking was “the product of 70 years of excellence, professionalism and innovation and thanks to the thousands of dedicated Sheba employees, both past and present. “As a state hospital, we will continue to be here in order to provide the best medical treatment for all those who need it and stretch the boundaries of what is possible, to challenge and be challenged and place the State of Israel in a respectable place on the global health map.” (Various 21.03)

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8.2 Psychiatry UK and Taliaz Launch Artificial Intelligence-Genetic Testing to Depression Sufferers

Taliaz and Psychiatry UK, the UK’s leading online psychiatry service, have launched a groundbreaking online service to deliver AI-driven genetic testing to depression sufferers. The online medically-managed Predictix service aims to reduce patient suffering by helping psychiatrists better identify the right antidepressant medication earlier. The service was fully launched at PUK’s Annual General Meeting at the end of last month, following a successful pilot phase with great feedback:

Tel Aviv’s Taliaz is an AI-health analytics company that develops personalized medicine software solutions that rely on genetic, demographic and clinical patient information to help doctors accurately identify the right treatment for each individual. Taliaz’s flagship solution to empower doctors to better treat depression, Predictix Antidepressant, is available in the UK, France and Israel. (Taliaz 20.03)

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8.3 DarioHealth Licensed by Health Canada to Sell Dario Smart Glucose Meters for Enabled iPhones

DarioHealth announced the receipt of a license from Health Canada to sell its Dario™ Blood Glucose Monitoring System for Lightning power connector-enabled iPhone smart mobile devices. iPhone users in Canada, including those with prior models that use a headphone jack, as well as those with the Lightning power connector, will now have access to DarioHealth’s acclaimed digital diabetes products and lifestyle management app features, like glucose level tracking, real time patient glucose data access for healthcare providers, carb counting, hypo alerts, amongst other diabetes countering features. DarioHealth has marketed the product in Canada exclusively for Apple iOS 6.1 platform and higher, and for leading Android devices since receiving a license from Health Canada in May 2015. With this license, DarioHealth’s addressable Canadian market expands to include the entire iPhone user base.

Caesarea’s DarioHealth Corp. is a leading global Digital Therapeutics (DTx) company revolutionizing the way people manage their health across the chronic condition spectrum. By delivering evidence-based interventions that are driven by data, high quality software and coaching, they developed a novel approach that empowers individuals to adjust their lifestyle in a personalized way. Their Cross Functional Team operates at the intersection of life sciences, behavioral science and software technology to deliver highly engaging therapeutic interventions. Already one of the highest rated diabetes solutions, its user-centric approach is loved by tens of thousands of consumers around the globe. (DarioHealth 20.03)

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8.4 Teva Launches Generic Version of EXJADE Tablets for Oral Suspension in the US

Teva Pharmaceutical Industries announced the launch of a generic version of EXJADE1 (deferasirox) Tablets for Oral Suspension, 125 mg, 250 mg and 500 mg, in the U.S. Deferasirox Tablets for Oral Suspension are an iron chelator indicated for the treatment of chronic iron overload due to blood transfusions in patients two years of age and older.

With nearly 500 generic medicines available, Teva has the largest portfolio of FDA-approved generic products on the market and holds the leading position in first-to-file opportunities, with over 100 pending first-to-files in the U.S. Currently, one in eight generic prescriptions dispensed in the U.S. is filled with a Teva generic product.

Teva Pharmaceutical Industries is a global leader in generic medicines, with innovative treatments in select areas, including CNS, pain and respiratory. Teva delivers high-quality generic products and medicines in nearly every therapeutic area to address unmet patient needs. Headquartered in Israel, with production and research facilities around the globe, Teva employs 43,000 professionals, committed to improving the lives of millions of patients. (Teva 22.03)

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8.5 neuroAD System for Alzheimer’s Disease Treatment Considered by FDA Committee

Neuronix announced that the U.S. FDA Neurological Devices Advisory Committee met on 21 March to consider data and receive public comment about the neuroAD Therapy System, a non-invasive medical device for the treatment of mild-to-moderate Alzheimer’s disease.

The neuroAD Therapy System is currently approved and available to patients in Europe, Australia and Israel. In the US, the neuroAD Therapy System remains an investigational device and is not yet available. The technology combines transcranial magnetic stimulation (TMS), which stimulates specific cortical brain regions known to be affected by Alzheimer’s disease, concurrently with individualized cognitive training exercises aimed to match the same brain regions being stimulated by TMS.

NeuroAD was accepted for review under the Expedited Access Pathway (EAP) program, which is reserved exclusively for medical devices that present novel and breakthrough technologies, and that target an unmet medical need which is life threatening or irreversibly debilitating.

Yokneam’s Neuronix has developed and manufactures novel breakthrough medical-device technology for the treatment of mild-to-moderate Alzheimer’s disease. The neuroAD Therapy System is a patent-protected, non-invasive medical device, uniquely combining MRI-scan guided transcranial magnetic stimulation (TMS) with cognitive training, to concurrently target brain regions affected by Alzheimer’s disease. This dual-stimulation is designed to improve cognitive performance of patients, following an intervention protocol, which lasts for six weeks, five days per week, with one hour-long session per day. (Neuronix 22.03)

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8.6 ADAMA Partners with Tactical Robotics – Elevating Farming to New Heights

ADAMA has partnered with Tactical Robotics in a joint feasibility study for a High-Payload, Unmanned Aerial Vehicle (UAV) for Aerial Spraying. Tactical Robotics has developed the Cormorant, a multi-role, compact, high payload, unmanned Vertical-Take-Off-and-Landing (VTOL) aircraft with unique capabilities. The Cormorant can carry an effective payload of more than 500 KG (up to 764 KG including fuel), it does not require an airstrip and can be transported by truck. The Cormorant is a versatile UAV platform capable of preforming multiple tasks, ranging from logistics and cargo services to fire-fighting and aerial spraying.

As part of the collaboration, ADAMA and Tactical Robotics will work together to develop the Ag-Cormorant, an innovative solution for aerial spraying. ADAMA’s expertise and know-how of the Ag industry alongside its farmer-centric approach dedicated for bringing valuable solutions to the farm ecosystem will guide the development direction and define the Ag-Cormorant capabilities.

The Ag-Cormorant’s unmanned operation and unique design promote a new standard of safety in aerial spraying. It eliminates the risks of pilot injuries and exposed rotor accidents. With a relatively low acoustic signature and 24/7 flying capabilities it will significantly increase the available window for application. The Ag-Cormorant’s ability to adjust flight height and speed according to the mission in combination with unique aerodynamic properties enables better canopy penetration, drift reduction and variable rate application capabilities. Watch Video

Airport City’s ADAMA is one of the world’s leading crop protection companies. They strive to Create Simplicity in Agriculture – offering farmers effective products and services that simplify their lives and help them grow. With one of the most comprehensive and diversified portfolios of differentiated, quality products, their 600 strong team reaches farmers in over 100 countries, providing them with solutions to control weeds, insects and disease, and improve their yields.

Yavne’s Tactical Robotics, a subsidiary of Urban Aeronautics, has developed Cormorant, the world’s first compact footprint / high payload, internal rotor VTOL UAV. Cormorant’s groundbreaking, multi-role, vertical lift capabilities bring new solutions to a variety of sectors including, emergency response and disaster relief, firefighting, cargo delivery, utility work and many others. (Adama 25.03)

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8.7 neuroAD System for Mild-to-Moderate Alzheimer’s Disease Treatment Considered by FDA

Yokneam’s Neuronix is a privately-owned company, with subsidiaries in the US and UK. Neuronix has developed and manufactures novel breakthrough medical-device technology for the treatment of mild-to-moderate Alzheimer’s disease. The neuroAD Therapy System is a patent-protected, non-invasive medical device, uniquely combining MRI-scan guided transcranial magnetic stimulation (TMS) with cognitive training, to concurrently target brain regions affected by Alzheimer’s disease. This dual-stimulation is designed to improve cognitive performance of patients, following an intervention protocol, which lasts for six weeks, five days per week, with one hour-long session per day. (Neuronix 22.03)

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8.8 Computational Pathology Pioneer Ibex Raises $11 Million

Ibex Medical Analytics completed an $11 million Series A funding round led by aMoon Fund. Ibex’s initial product is the Second Read system for prostate core needle biopsies diagnosis, which has been clinically deployed at Maccabi Healthcare Services and will soon be commercially deployed also internationally in pathology labs, establishing Ibex as a first-mover in the emerging computational pathology space.

Through its strategic collaboration with Maccabi Healthcare Services, Ibex has access to a unique dataset with millions of pathology slides and electronic medical records of 2.5 million patients, enabling it to develop breakthrough algorithms at unprecedented accuracy levels. This is in addition to collaborations with leading institutes and international hospitals, including Pittsburgh-based UPMC, a world-renowned health care provider, and MediPath, the largest private pathology lab in France.

Additional investors in the round include Kamet Ventures, an investment arm of AXA Insurance, one of the largest global health insurance providers, 83North, a global venture capital fund and Dell Technologies Capital. Funds will be used to broaden the company’s solutions and global presence, including expansion of the type of tissues and applications supported.

Tel Aviv’s Ibex Medical Analytics has developed an AI-driven diagnostic system which delivers efficient, metric-driven and accurate cancer diagnoses for tissue biopsies. It combines AI, data science, image analysis and Deep Learning technologies and applies them to cancer diagnostics in digital pathology, impacting pathology labs efficiency, patient outcomes and quality of life. (Ibex Medical Analytics 26.03)

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8.9 BioFishency Raises $2.4 Million for its Water Treatment Systems for Aquaculture

BioFishency, a portfolio company of The Trendlines Group, completed an investment round of $2.4 million. The primary investors in the round were a private investor from China, Aqua-Spark, a global investment fund based in the Netherlands and The Trendlines Group.

BioFishency is an aquaculture solutions provider focused on dramatically increasing growers’ productivity and sustainability through its innovative technologies and extensive knowhow. BioFishency develops and produces cost-effective, easy-to-use water treatment systems for use in land-based aquaculture. The Company sells its SPB Single Pass BioFilters (SPB) in various capacities as a plug-and-play, complete systems, and manages turn-key projects. BioFishency’s systems operate effectively in countries around the world, including Israel, Congo, Bangladesh, India, Indonesia and China. There is strong interest for additional units in Nigeria and Vietnam (for the shrimp market). With over $1.3 million in sales for 2018, BioFishency has more than doubled its total 2017 revenues. The Company continues negotiations with potential customers around the world, including for a number of large projects in China.

BioFishency’s technology has demonstrated a 95% reduction in water use for intensive tanks, a two- to fivefold increase in yields for extensive ponds, 2x greater nitrification (ammonia removal) for improved water quality, significant increase in yield per water and land use.

Misgav’s BioFishency was founded in 2013 by experienced aquaculture project managers and consultants. BioFishency aims to develop a water treatment system with high-end technological capabilities, yet accessible and viable to all fish farmers. BioFishency’s all-in-one water treatment system for aquaculture increases fish productivity, has a minimal ecological footprint, enhances water conditions, and significantly grows profitability. (BioFishency 27.03)

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8.10 Stem Cell Medicine (SCM) Receives Israeli Government Funding for Gene Therapy Facility

Stem Cell Medicine (SCM) has received funding from the Israeli Ministry of the Economy to build a gene therapy facility. The new facility will enable SCM to manufacture gene therapy products for commercial launches, benefiting from the favorable global regulatory and marketing environment for its products. The first gene therapy product under development at SCM is for the treatment of neuropathic pain.

The plant will be built in Jerusalem, a Zone A region, allowing tax and grant benefits, in an investment of over NIS 20 million (approximately $5.5 million), of which 20% will be covered by the grant. The new production facility will make available production space in SCM’s existing GMP approved facility for production of exosomes from stem cell for collaboration with large biopharma companies.

Jerusalem’s SCM is a biotechnology company that develops second generation cell therapy products as stand-alone treatments or in combination with pharmaceuticals, with a focus on neurological indications, including MS, pain and neuromuscular injuries, and manages the production, registration and marketing of such products. SCM’s facilities include state-of-the-art R&D laboratories and GMP production cleanrooms that enable an optimal environment for the development of products up to and including clinical trials. (SCM 26.03)

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8.11 OWC & Sourasky Medical Center Safety Study on Cannabis-Based Tablets

OWC Pharmaceutical Research Corp. announced an agreement with the Tel Aviv Sourasky Medical Center Fund. The medical center will perform a single-dose, randomized crossover study to compare the safety, tolerability and pharmacokinetics of OWC’s tablet with Buccal Sativex in healthy adult volunteers. The tablet is designed to provide rapid API uptake through buccal membranes and to be a substitute for patients being treated with medical cannabis by smoking.

OWC Pharmaceutical Research Corp. is focusing its efforts on developing cannabis-based therapeutic products and treatments, specifically designed for several medical conditions and diseases. The company’s solutions include a topical ointment to treat skin diseases, such as psoriasis, a sublingual disintegrating tablet to treat chronic pain, and a unique formulation aimed at treating multiple Myeloma, a cancer of the plasma cells found in bone marrow.

Ramat Gan’s OWC Pharmaceutical Research Corp. conducts medical research and clinical trials to develop cannabis-based pharmaceuticals and treatments for conditions including multiple myeloma, psoriasis, fibromyalgia, PTSD and migraines. OWCP is also developing unique and effective delivery systems and dosage forms of medical cannabis. (OWC 27.03)

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8.12 BioSeedXL Supports BioTech & Cannabis Startups in Its Acceleration Program

After four companies successfully graduated from its acceleration program, BioSeedXL has decided to officially open its doors and offer its services to a select and hand-picked number of Biotech and Cannabis startup companies.

BioSeedXL’s experienced staff took a part in the first startup to be SOLD in Israel in the field of Cannabis pharmaceuticals to a publicly traded company when Kalytera Therapeutics acquired the Israeli medical cannabis developer Talent Biotechs. In addition, BioseedXL has deep experience in IPO’s on the TASE and NASDAQ exchanges.

Many companies, especially startups, fail due to limited resources, management or financial mistakes and/or lack of connections. BioSeedXL is planning to support the business needs of startups and supply a variety of services as needed.

Bnei Brak’s BioSeedXL, founded in 2019, is an incubator that provides the perfect eco-system for startup companies in the field of Cannabis. As there are many struggling startup companies in their first steps of their journey, BioSeedXL is dedicated to support young and developing startups, providing them all the necessary tools, guidance R&D support and more for succeeding, prospering and transforming to a working business in the pharma, medical device, diagnostics, OTC and cosmetics fields of Cannabis. (BioSeedXL 28.03)

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8.13 Gat Foods Is Zeroing in on Refined Sugars

Gat Foods launched Fruitlift, a real-fruit-based ingredient that can replace refined sugars in RTE cereals. The innovative formulation consists of natural fruity goodness, including fibers, and offers a wide range of fruits. The base can give a fruity flavor or can be easily blended into a cereal brand’s signature flavor.

Fruitlift is composed of 90% fruit components in a liquid base that can be injected into any flour mixture in the extrusion line, or applied via the coating drum in the production of cereals. The fruit base delivers a mild sweetness, with or without a fruity flavor. Fruitlift offers food companies a wide choice of fruits to choose from, including apple, banana, mango, citrus fruits and pineapple. In addition, sweetness levels can be adjusted to anywhere from just a hint of sweetness up to a more full robust flavor, in line with the desires of the client.

Gat Foods’ patent-pending technology overcomes the challenge of integrating a wet solution into a dry product, ensuring flavor and sweetness without losing any of a cereal’s crispy texture. Moreover, anti-caking agents are not necessary. Gat Foods applies a built-to-fit approach, allowing the fruit base to be customized to fit any type of manufacturing or extrusion procedure. The right solution can also be formulated to fit any type of flour mixture.

Kibbutz Givat Haim’s Gat Foods is a wholly owned subsidiary of Central Bottling Company Group (CBC Israel) which, since 1942, has been developing, producing, and marketing innovative fruity solutions for beverage manufacturers, providing added value ingredients to help create tailor-made products with proven on-the-shelf success. The company is now deploying its know-how to incorporate its innovative ingredients into food formulations as well. (Gat Foods 01.04)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 WonderLogix Announces Support for Siemens’ TIA Portal

WonderLogix expanded their capabilities to include the Siemens TIA Portal. With this latest integration, Siemens Programmable Logic Controllers (PLC) can now leverage the advantages of the WonderLogix software platform for easier, safer, and more cost-effective industrial automation design. WonderLogix’s ability to support Siemen’s PLCs is due in large part to the $2.2 million equity-free investment awarded by the European Union’s Horizon 2020 SME program. When combined with the current support for Rockwell Automation’s PLCs, the WonderLogix platform is now available to a vast majority of PLC implementations worldwide.

The WonderLogix platform accomplishes this by allowing users to intuitively define, visually and in plain English, how their facility should operate, and then automatically generate PLC code and the supporting documentation. Additionally, clients are able to import existing functional blocks for re-use in designing new systems or upgrading existing ones. Companies using Siemens PLCs will now enjoy the benefits of using the WonderLogix platform, including increased accuracy due to safety and diagnosis features, enhanced efficiency and ultimately shorter commissioning times and easier software maintenance.

Yokneam’s WonderLogix is disrupting the world of industrial automation with patented technology that enables designing and programing control systems in plain English, with no low level coding required. These solutions apply to a range of market segments, including water treatment, energy, biotech, food & beverage and oil & gas. (WonderLogix 20.03)

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9.2 Guardicore Threat Intelligence Helps Cybersecurity Research Attacks & Mitigate Risks

Guardicore announced the launch of its Guardicore Threat Intelligence community resource. Developed by the Guardicore Labs research team, Guardicore Threat Intelligence is a freely available public resource for identifying and investigating malicious IP addresses and domains. With an easy to understand dashboard, Guardicore Threat Intelligence rates top attackers, top attacked ports and top malicious domains, giving security teams the insight they need to research and understand attacks and mitigate risks.

Guardicore Threat Intelligence is currently the only publicly available community resource to focus exclusively on data center attacks. Specifically, it includes data not available in other public feeds, including the role of IP addresses in specific attacks and detailed attack flow, providing context for attacks on Internet-facing servers with a single aggregated view. Security analysts, threat hunters, and incident response or forensics teams can leverage Guardicore Threat Intelligence as an aggregated source to verify threats, understand attack patterns, and update IoCs quickly, eliminating the need to check multiple feeds and accelerating the time to response. Ultimately, Guardicore Threat Intelligence can help defenders anticipate future attacks and mitigate risks. Guardicore sources data from its Guardicore Global Sensors Network (GGSN), which streams early threat information to Guardicore Labs’ team for new attack identification and analysis.

Tel Aviv’s Guardicore is a data center and cloud security company that protects your organization’s core assets using flexible, quickly deployed, and easy to understand micro-segmentation controls. Their solutions provide a simpler, faster way to guarantee persistent and consistent security — for any application, in any IT environment. (Guardicore 25.03)

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9.3 Safe-T Protects Industrial IOT Networks with Zero Trust Solution

Safe-T announced the launch of a new version of its Software Defined Perimeter (SDP) solution, designed for Industrial Internet Of Things (or IIOT) organizations. The new version extends the Zero Trust network and SDP solution to the world of IOT.

Safe-T, having the know-how and expertise in Zero Trust network design and SDP, has recognized this need and developed the first-ever SDP solution, protecting not only the IOT devices but also the IIOT organizations’ data center from remote IOT devices. Safe-T’s Zero Trust solution is built on the company’s patented reverse-access technology platform, which reduces the attack surface of the IIOT network by controlling which IOT device can access the backend systems (meter data management systems, IOT platforms, etc.), enabling “qualified” IOT devices to participate in a Zero Trust strategy.

Safe-T’s new solution achieves this by forcing the IOT device to authenticate first before being granted access. Authentication can be done by sending a predefined token or credentials from the IOT devices to Safe-T’s SDP solution. Only after Safe-T’s secure access solution has authenticated the IOT device, it is granted on-demand access to the specific backend system. This process of authentication first, access later, ensures that breached/hacked IOT devices or IOT devices which do not have the Safe-T API (Application Programing Interface) will never be granted access to the IIOT network.

Herzliya’s Safe-T® Data A.R is a provider of zero trust access solutions which mitigate attacks on enterprises’ business-critical services and sensitive data. Safe-T solves the data access challenge. The company’s software-defined access (SDA) platform reduces the attack surface, empowering enterprises to safely migrate to the cloud and enable digital transformation. With Safe-T’s patented, multi-layer software-defined access, financial services, healthcare, utility companies and governments can secure data, services, and networks from internal and external threats. (SAFE-T 28.03)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Bank of Israel Annual Report for 2018 Released

On 31 March, Prof. Amir Yaron, Governor of the Bank of Israel, released the Bank of Israel Annual Report for 2018. It reported that Israel’s GDP grew by 3.3 % and the composition of growth was balanced, as in 2017. Domestic services continued to grow, supported by the accommodative monetary policy and expansionary fiscal policy. Exports grew at a pace similar to the growth rate of world trade. The full employment environment and the deterioration in the terms of trade weighed on further expansion of activity, and together with the contraction of residential construction investment led to growth that was slightly slower than in the previous two years. The full employment environment and the deterioration in the terms of trade also acted to reduce the surplus in the goods and services account, and thus supported the depreciation of the real exchange rate, after its continued appreciation in the past decade. The employment rate continued to increase this year and the full employment environment was well reflected in the labor market – the unemployment rate continued to decline and reached its lowest level in several decades, the increase in wages accelerated and the share of labor income in GDP increased markedly.

Although at the end of 2018 annual inflation was 0.8%, slightly below the lower bound of the target range (1–3 %), beginning from the second half of the year it stabilized in the lower part of the target, after more than four years of being below it. The increase in inflation was supported by the full employment environment, an increase in oil prices worldwide and the depreciation of the shekel. One year inflation expectations also stabilized in the lower part of the target beginning from the second half of the year.

These developments explain the decision by the Bank of Israel’s Monetary Committee in November to increase the interest rate to 0.25%, after it had remained at 0.1% for almost 4 years. Note that even after that increase, monetary policy continues to be accommodative and supports the continued increase of inflation toward the midpoint of the target range. Since February, the Bank of Israel purchased foreign exchange only through the program to offset the impact of natural gas production on the exchange rate and in November the Monetary Committee announced that purchases through the program will be discontinued in the beginning of 2019. (BoI 31.03)

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11: IN DEPTH

11.1 ISRAEL: Fitch Affirms Israel at ‘A+’; Outlook Stable

On 25 March, Fitch Ratings affirmed Israel’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘A+’ with a Stable Outlook.

Key Rating Drivers

Israel’s IDRs balance strong external finances, robust macroeconomic performance and solid institutional strength against a government debt/GDP ratio that is high relative to peers and ongoing political and security risks.

Israel’s public finances remain a weakness relative to ‘A’ category sovereigns, despite a strong trend of improvement in recent years, and the fiscal outlook has become more challenging in the near term. The central government budget deficit widened to 2.9% of GDP in 2018 (in line with the budget target), from 1.9% in 2017, when budget performance was better than planned for the fifth consecutive year. We forecast the deficit to widen to 3.5% of GDP in 2019. Government debt/GDP increased moderately in 2018, to 61.2%, ending a long downward trend from 75% at end-2007 and 95.0% at end-2003. It remains significantly higher than the ‘A’ median of 49% in 2018. The general government budget deficit and interest spending/revenue are also weaker than the peer medians.

Other features of public debt are fairly favorable. The share of external debt is low, at 7.7% of GDP in 2018 down from 20% of GDP in 2006. Israel benefits from high financing flexibility. It has deep and liquid local markets, good access to international capital markets, an active diaspora bond program and US government guarantees in the event of market disruption.

Recent budget planning has been somewhat pro-cyclical and has sought to respond to long-standing public complaints regarding the cost of living. There is also more discussion of tolerating a moderate increase in the debt ratio in order to boost investment in infrastructure and education. We forecast that the government debt/GDP ratio will edge up further in 2019 and 2020 on the basis of larger deficits.

Israel passed the 2019 budget in March 2018, earlier than normal due to political considerations, and while the official target remains 2.9% of GDP, in January the Ministry of Finance updated its forecast for the central government deficit to 3.5% of GDP if no additional changes are made to reduce spending or raise revenue. The updated forecast incorporates spending that was voted for after March 2018 and slower revenue growth. We project the central government budget deficit to widen to 3.5% of GDP in 2019, before narrowing to 3.0% of GDP in 2020. The forecast takes into account the limited legislative space to implement consolidation until several months after government formation following the 9 April election.

In 2020, our base case is that the new government will take steps to narrow the deficit, given the country’s track record of deleveraging and the high level of the deficit given Israel’s position in the business cycle. Nonetheless, there are strong political pressures to address income inequalities, reduce the cost of living and tackle perceived shortfalls in investment in human and physical capital, while also continuing to enhance Israel’s security and military, which could delay a fiscal adjustment.

Israel’s macroeconomic performance has been impressive and the economy remained buoyant in 2018, with real GDP growth of 3.3%, low unemployment, rising wage growth and still low inflation. Five-year average real GDP growth is stronger than rating category peers and growth volatility has been lower. We forecast that growth will remain robust in 2019-2020, just above 3% per year. There are upside risks, related to production gains at the expanded Intel factory and the start of gas output from the Leviathan offshore field in 2020. Downside risks relate to any large security incidents or further weakening of world trade. More generally, the economy has benefited from supportive fiscal and monetary policies and a stronger global economy. These three factors are likely to become less supportive over the medium term.

The Bank of Israel (BOI) is aiming to normalize monetary policy, but still faces inflation at the lower limit of its target band. It increased its interest rate to 0.25% in November 2018 and plans to bring it to 1.25% by the end of 2020. While inflation averaged 0.8% in 2018, below the BOI’s 1%-3% target band, it has averaged above 1% since mid-2018. The BOI expects some of the factors holding inflation back, such as shekel appreciation and the impact of government policy, to fade, but recent monetary policy decisions in the US and Europe could slow the pace of interest rate rises.

Israel’s external balance sheet remains strong. Israel has returned current account surpluses each year since 2003 and Fitch expects further surpluses in 2019-2020. Foreign-exchange reserves reached $118 billion in February 2019 (11 months of current external payments). Israel’s net external creditor position reduced slightly to 48% of GDP at end-2018 but remains significantly stronger than the ‘A’ median and is also stronger than the ‘AA’ median. Fitch’s international liquidity ratio for Israel has continued to improve strongly. Further gas sector development will lend additional support to the external balance sheet, with production from the offshore Leviathan gas field planned to start in 2020.

Israel’s ratings are constrained by political and security risks, but its credit profile has shown resilience to periodic conflict and political shocks over an extended timeframe. Conflicts with military groups in surrounding countries and territories flare up intermittently and can lead to increased spending commitments or be damaging to economic activity. Domestic politics can be turbulent, with coalition governments often not lasting their full term.

The April parliamentary election comes at a challenging time for the prime minister, Benjamin Netanyahu, who faces the prospect of indictment in several criminal cases. The newly-formed Blue and White party, led by former chief of staff Benny Gantz, presents a meaningful challenge to Mr. Netanyahu’s Likud party. With both parties polling below 35 seats out of 120, coalition building could be tough. If Likud wins the election and Mr. Netanyahu is able to form a coalition, confirmation of his indictment later in 2019 could destabilize the coalition.

Ongoing instability in Syria and the geopolitical position of Iran continue to present risks to Israel. Israel is concerned by the influence of Iran in neighboring Syria and Lebanon. Israel continues to intervene in Syria with air strikes to counter the presence and activities of Iran or Iranian proxies. Risk remains of another conflict with Hezbollah, although there has not been a clash since 2006 and both sides would suffer losses, and there are periodic flare-ups in the Gaza strip, although the latter are unlikely to present a material security risk to Israel. There has been no tangible progress towards peace between Israel and the Palestinians and Fitch assumes no breakthrough in agreeing a peace deal.

Israel’s well-developed institutions and education system, despite disparities of quality among demographic groups, have led to a diverse and advanced economy, with an innovative high-tech sector. Human development indicators and GDP per capita are well above the peer medians. However, Doing Business indicators, as measured by the World Bank, remain below those of peers. The government also faces socio-economic challenges in terms of income inequality and integration of growing but less economically productive sections of the population into the labor force.

Rating Sensitivities

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

-Significant further progress in reducing the government debt/GDP ratio.

-Sustained easing in political and security risks.

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

-Sustained deterioration of the government debt/GDP ratio, either through widening fiscal deficits or a structural decline in GDP growth.

-Serious worsening of political and security risks.

Key Assumptions

Fitch assumes regional conflicts and tensions will continue. Fitch does not assume any breakthrough in the peace process with the Palestinians or a prolonged serious deterioration in domestic security conditions. (Fitch 25.03)

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11.2 ISRAEL: Edge Computing and AI Take Israeli Auto-Tech Beyond Cars

On 21 March, Globes surveyed the many technologies developed by the Israeli auto-tech sector that also have military applications, which could lead to US demands to restrict Chinese investment.

Interest among investors all over the world in Israel’s auto-tech sector is as lively as ever, despite its lower profile and the fact that the consensus date for mass appearance of driverless cars has been postponed to the middle, or even the end, of the next decade.

Auto-tech technologies developed in Israel are also likely to have a major impact far beyond the auto industry. Yet it appears that the combination of global interest and strategically important breakthroughs is liable to create the most difficult barrier encountered by the auto-tech sector so far.

Investments: The Heavy Guns are Moving In

The open and official index for global interest in the local sector consists of official announcements of completed financing rounds, and there are plenty of those. Since October 2018, Israeli companies operating directly and indirectly in smart auto technologies announced financing rounds totaling $150 million, but this is only what has been disclosed. Under the surface, tier-1 investors continue to invest in general funds and those specializing in auto technology.

Recently, the Maniv Mobility venture capital firm held an investors’ conference under the media radar on the occasion of the closing of its new fund. Almost all of Maniv Mobility’s portfolio is now focused on Israeli auto-tech companies, and the same is true of its new fund, which is planned to exceed $100 million and bring Maniv Mobility’s total investments in the sector to over $250 million.

Although Maniv Mobility is a private specialist fund, the event drew unprecedented global attention. The only public announcement that coincided with the event was by US tier-1 auto supplier Lear Corporation, which announced its investment in Maniv Mobility. Lear, a company with an $8.8 billion market cap and nearly 150,000 employees working on production of components and technologies for the auto industry, directly acquired Israeli company EXO Technologies last year. It is definitely a prestigious addition to the fund.

Sources inform Globes that some heavy guns joined Lear in the new fund, such as the venture capital fund of Hyundai Motors, the investment arm of Jaguar-Land Rover and the new investment fund of BMW, which has not previously operated in Israel, in addition to the $1 billion venture capital fund of Renault-Nissan, which joined Maniv Mobility last year.

This information has not been officially confirmed although judging by the senior rank of the international representatives who attended the conference, however, including Renault-Nissan, which is visiting Israel for the first time, the sector is still red-hot and arousing interest.

Autonomous Cars are Only the Beginning

Investors’ interest in the sector is a direct result of the accelerated progress in Israeli auto-tech, the potential of which is now expanding beyond the auto industry. One especially prominent example is technology in the general category of edge computing, which aims at bringing computer power closer to where it is really needed.

In an autonomous vehicle, for example, this technology is of critical importance. Edge technology makes it possible to equip a vehicle with a brain-on-chip that is able to merge and process an enormous quantity of visual information, and after it streams in from the vehicle’s sensors, to turn it into real-time decisions, without wireless transmission of the data to the cloud and processing of the information there.

The decisions involved are critical ones, such as avoiding obstacles, drivers and pedestrians, and decisions about driving policy, such as merging into road traffic. Up until now, the consensus in the sector was that artificial intelligence (AI) was needed to perform the heavy task of simulating the decisions of a human driver. AI programs, however, require very strong processors with a big appetite for electric power, and that is a real problem.

In recent years, the world’s best IT giants have been trying to overcome the paradigm under which AI = processing power = electricity consumption. The really big breakthrough, however, is coming right now from Israeli auto-tech companies like Hailo, Cortica, Brodmann17, IonTerra and others.

Each of these companies has a different technological approach to solving the problem. Some of them use thin AI algorithms, others offer a revolutionary electronic architecture. The final result in every case, however, is designed to be the same: chips that can handle massive quantities of information without complicated, expensive, and electric power-hungry hardware.

The moment the breakthrough from theory and software to hardware is achieved, and it is taking place right now, it is clear to investors that an autonomous vehicle will be only an intermediate stop – an important and prestigious stop, but one that is overshadowed by the inherent potential of these technology outside the auto industry.

The bottom line is that the sector is now developing the missing link likely to utilize and realize the full potential of AI in a way that is independent, relatively cheap, friendly to electricity consumption, and able to accommodate mass production.

Competition Between Countries has Begun

The problem is that a considerable proportion of the technologies being developed by Israeli auto-tech, especially edge computing technology, are classified as dual-use technologies, meaning that they have the potential to change the rules of the game in both the civilian and military markets.

There is a great similarity between autonomous vehicle technologies and those that make it possible to manufacturer autonomous weapons. For example, imagine a completely autonomous assassination drone equipped with a very efficient electric battery that is not controlled by an operator or control carriage in real time. It independently navigates itself to a target set without any wireless connection with its home base. It uses micro-radar and miniaturized LiDAR to detect obstacles, protect itself using cyber security technologies on a chip, and uses machine vision to identify a target selected in advance, whether a person or a vehicle. It carries out targeted killings independently according to field conditions, which are recorded and processed by its sensors, while obscuring its direct connection to whoever sent it on the mission.

These components are already being developed now in Israel and elsewhere by auto-tech companies, with the missing link being AI-based edge computing processors that can identify and map the surroundings and make real-time decisions using a drone’s limited micro power sources. This was impossible two years ago, but it is definitely possible now, thanks to the autonomous vehicle.

This technological duality and the threat posed by its reaching the wrong hands is currently of great concern to many decision-makers all over the world. In mid-March, at a conference in Berlin, German Minister of Foreign Affairs Heiko Maas called on the major powers and international regulatory agencies to immediately impose tight international supervision on such technologies. “Killer robots that make life-or-death decisions on the basis of anonymous data sets, and completely beyond human control, are already a shockingly real prospect today,” Maas said. “Fundamentally, it’s about whether we control the technology or it controls us.”

His remarks may sound like a script for a sequel to “The Terminator,” but almost all of the major powers are now in a race to obtain technologies that can be used to produce “fire and forget” autonomous assassins, while at the same time attempting to prevent, or at least delay, the obtaining of such key technologies by competing powers.

Since the defense export channels are usually blocked and protected against leaks of strategic technologies, the dual-use auto-tech channel is ideal for obtaining the bits of technology needed to complete the jigsaw puzzle of autonomous weapons.

Who Dares to Limit the Chinese?

The Israeli regulator has had trouble in keeping up with developments in this area, and perhaps did not want to. The US, which is in a race to deny the Chinese access to strategic Western technologies, is pushing behind the scenes to halt, or at least restrict, Chinese entry through this side door. This policy was officially voiced by Israel Security Agency director Nadav Argaman at a conference concerning the establishment of a supervision mechanism for the matter, and by US National Security Advisor John Bolton during his recent visit to Israel.

It is unclear what is happening behind the scenes, but according to data from the IVC research company, Chinese investment in the Israeli technology sector grew to $325 million in the first three quarters of 2018, compared with $274 million in 2016.

As far as is known, one quarter of this amount went directly or indirectly (through participation in general funds) to the auto-tech sector. If Chinese investments in Israeli auto-tech companies with dual-use technologies are restricted, it is likely to constitute an important bottleneck in the VC pipeline. This, however, is the result of straddling the nether region between the defense and civilian sectors. (Globes 21.03)

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11.3 UAE: Moody’s Affirms UAE’s Aa2 Rating; Maintains the Stable Outlook

On 26 March, Moody’s Investors Service affirmed the long-term issuer rating of the Government of the United Arab Emirates’ (UAE) at Aa2.The outlook remains stable. The rating affirmation is supported by the following key rating factors:

-Moody’s assumption of unconditional support from Abu Dhabi (Aa2 stable) to the federal government.

-Strong credit fundamentals including very high fiscal strength, with a broadly balanced budget and negligible or very low federal government debt, high wealth levels and robust institutions.

The stable outlook indicates that the risks to the ratings are broadly balanced supported by the stable outlook on the Abu Dhabi sovereign rating, upside potential from continuing diversification efforts, and constrained by lingering government-related entity contingent liabilities and geopolitical tensions.

The UAE’s long-term and short-term foreign-currency bond and deposit ceilings remain unchanged at Aa2 and Prime-1, respectively. The UAE’s long-term local-currency bond and deposit ceilings also remain unchanged at Aa2.

Ratings Rationale

Unconditional Continued Support from Abu Dhabi: The affirmation of the Aa2 rating incorporates Moody’s view that the government of Abu Dhabi, the wealthiest of the seven Emirates that comprise the UAE, stands fully behind the federal government of the UAE. This view is supported by strong institutional linkages and the Abu Dhabi government’s substantial and continued financial contribution to the federal budget.

The federal budget derives over a quarter of its revenues in the form of grants from Abu Dhabi. The Emirate’s strong financial position, which Moody’s expects to be maintained, will support the federal government’s revenues. Moody’s forecasts Abu Dhabi’s government budget to be in deficit but close to balance in 2019 and 2020, after transfers to the federal government, before moving into surplus in 2021 and 2022 as oil production increases sharply on the back of planned upstream investments.

Strong Credit Fundamentals Including Very High and Stable Fiscal Strength, High Wealth Levels, Robust Institutions

Moody’s projects no or very low federal government debt in the foreseeable future and very high fiscal strength for the UAE, even as new debt issuance powers have recently been bestowed to the federal government.

The federal government retains 30% of the revenue raised from VAT, introduced in January 2018. Moreover, established revenue sources are also likely to remain robust. Royalties and dividends from the telecommunications sector will continue to benefit from the providers’ privileged position in the domestic UAE market. Although government fee revenues are unlikely to increase significantly given the recent commitment to freeze fee increases as part of recent efforts to support economic activity in the private sector, current sources of revenue will broadly balance expenditure, if oil prices remain around their current levels in line with Moody’s assumption.

The passing of the federal public debt law in October 2018 has granted the federal government with the ability to fund a portion of its spending using debt issuance for the first time. However, Moody’s expects that the debt ceiling embedded in the debt law will prevent the debt burden from reaching levels that would alter the rating agency’s view of the UAE’s fiscal strength. The current structure of federal revenues and expenditure allow the federal government to adhere to the ceiling with very high likelihood. The Federal government may choose to issue debt even without a funding requirement in order to develop the domestic debt market. However, the public debt law stipulates that in such an event the proceeds would be invested in high quality liquid assets, mitigating the impact on the federal balance sheet.

The UAE’s rating continues to be supported by very high wealth levels. GDP per capita of around $68,646 in 2017 on a PPP-adjusted basis provides significant shock absorption capacity to the economy. Although real GDP growth has slowed since the oil price shock, Moody’s forecasts real GDP growth to average 3.2% over 2019 and 2020, which will maintain very high income levels. Domestically, growth in the private sector should benefit from the economic reforms taken at federal and emirate level as well as higher fiscal spending under Abu Dhabi’s three year stimulus package. Externally, a gradual easing of fiscal restraint in Saudi Arabia (A1 stable) should also be supportive of non-oil goods and services exports. However, a more robust acceleration in growth will be constrained by oil prices staying around their current levels.

The UAE’s rating is also supported by robust institutions. The UAE’s current position in the Worldwide Governance Indicators (WGI) marks a significant improvement from 2010, reflecting improvements in competitiveness underpinned by business environment reforms such as the new foreign direct investment law and recent changes to the visa framework to create long-term visas for investors as well as key specialist professionals and exceptional students. Stronger regulation and tightened underwriting practices introduced after the 2008 financial crisis have helped to lower the risks to the banking system from the real estate sector. However, the availability and timely publication of macroeconomic and fiscal data, particularly at the Emirates level, falls short of other Aa-rated governments, potentially hampering policy effectiveness.

The UAE’s rating incorporates Moody’s assessment of the sovereign’s susceptibility to event risk, driven by geopolitical risk. Regional tensions have increased following the diplomatic dispute with Qatar (Aa3 stable) and the withdrawal of the US from the Joint and Comprehensive Plan of Action. Nonetheless, the risks to the UAE’s credit profile have not increased materially. The Qatar diplomatic dispute has had a minimal impact the UAE’s economy, reflecting very little direct trade with Qatar before to the dispute. Meanwhile, the UAE’s Habshan-Fujairah pipeline mitigates the risks related to a potential closure of the Strait of Hormuz shipping lanes.

Rationale for the Stable Outlook

The stable outlook indicates that risks to the rating are broadly balanced.

Fluctuations in oil prices will continue to affect Abu Dhabi’s and other Emirates’ fiscal metrics but unless oil prices depart significantly and durably from Moody’s assumption that prices will hover around the current levels, the credit implications of such changes in prices will be limited.

Geopolitical risks — primarily related to tensions with Iran, including through the war in Yemen — remain a source of low-likelihood but potentially high-impact downside risk should an escalation lead to disruptions, for example through the Strait of Hormuz, that affect the whole region. Conversely, a material appeasement of geopolitical tensions could offer an eventual path to a higher rating level, if combined with a significant improvement in transparency at both federal and Emirate level.

What Could Take the Rating Up/Down

At this rating level, the threshold for an upgrade is high. However, an upgrade of Abu Dhabi’s rating would support an upgrade of the UAE’s rating given the strong interlinkages. Furthermore, and potentially associated with an upgrade of Abu Dhabi’s rating, a decline in contingent liability risks or a material and lasting appeasement in regional geopolitical tensions could also support an upgrade if combined with significant improvements in policy transparency and data availability at the Emirate and federal level.

Similarly, a downgrade of Abu Dhabi’s rating would most likely result in a downgrade of the UAE’s rating. A combination of the following factors, also potentially associated with a downgrade of Abu Dhabi’s rating, would also put downward pressure on the UAE’s rating: the crystallization of large contingent liabilities on the federal or Emirates’ governments’ balance sheet; an escalation in domestic or regional political risk that threatened to disrupt international trade. (Moody’s 26.03)

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11.4 UAE: Moody’s Affirms Abu Dhabi’s Aa2 Rating; Maintains the Stable Outlook

On 26 March, Moody’s Investors Service (Moody’s) affirmed the long-term issuer and senior unsecured ratings of the Government of Abu Dhabi at Aa2. The outlook remains stable. Moody’s has also affirmed the short-term issuer rating at P-1, and the long-term and short-term MTN program ratings at (P)Aa2 and (P)P-1, respectively.

The affirmation of Abu Dhabi’s Aa2 ratings is supported by Moody’s expectations that the sovereign’s fiscal strength will remain very high, with very low government debt and vast sovereign assets. Prospects for a medium-term increase in economic activity and revenue from the hydrocarbon sectors and reforms aimed at developing the non-oil sector also support the ratings.

The stable outlook indicates that the risks are broadly balanced, supported by current oil prices and upside potential from continuing diversification efforts, and constrained by lingering government-related entity contingent liabilities and geopolitical tensions.

Ratings Rationale for Affirming the Aa2 Rating: Very High Fiscal Strength, With Very Low Government Debt and Vast Sovereign Wealth Fund Assets

Moody’s expects Abu Dhabi’s fiscal strength to remain very high, with very low government debt and vast financial assets. Moody’s estimates that Abu Dhabi’s budget was close to balance in 2018. Over the medium-term, under the assumption that oil prices hover around the current levels, after a small deficit in 2020 the budget balance will likely move to a small surplus as Abu Dhabi increases hydrocarbon production in line with its investment plans. As a result, Moody’s forecasts Abu Dhabi’s debt/GDP to remain under 10% in the foreseeable future despite a likely shift in policy focus towards supporting the economy from fiscal consolidation.

After a period of fiscal restraint following the oil price shock, government spending has started to rise more rapidly. In addition to last year’s easing of spending constraints, in May 2018 Abu Dhabi announced plans to implement a $13.6 billion (AED50 billion, around 5% of GDP) stimulus package (Ghadan 21/Tomorrow 21) which will be spread over a period of three years, starting in 2019.

These relatively modest increases in spending have been matched by more significant increases in hydrocarbons revenues, predominantly due to higher oil prices but also by modest increases in production. Hydrocarbon revenues aside, the implementation of VAT in January 2018 has also expanded the government’s non-oil revenue base, although the disbursement of these receipts is pending agreement on the distribution formula among the Emirates, which collectively will receive 70% of VAT receipts.

Underpinning Abu Dhabi’s very high fiscal strength is the government’s exceptionally strong balance sheet, with assets under management at the Abu Dhabi Investment Authority (ADIA) that Moody’s estimates at more than $590 billion as of 2018 far exceeding the total liabilities in the wider public sector. As a result, Moody’s assesses that the contingent liability risks posed by government-related entities (GREs) are modest in comparison to Abu Dhabi’s sovereign wealth fund assets, and estimates that total GRE liabilities in the UAE amounted to around 28% of ADIA’s assets.

Further Developments in Hydrocarbons and Reforms Supporting the Non-Oil Economy Point to Robust Growth

The re-imposition of OPEC production cuts late last year has constrained the near-term outlook for hydrocarbons production in Abu Dhabi, although a ramp up in production just prior to the announcement of the cuts has resulted in a production allocation for 2019 which is slightly larger than last year’s production, meaning that Moody’s expects hydrocarbon real GDP will still post a positive contribution to growth.

Notwithstanding these near-term production constraints, Abu Dhabi National Oil Company (ADNOC) has announced $132 billion of new investment plans in downstream and upstream sectors. If fully executed these investments will lift daily production capacity by to 4 million barrels per day by 2020, compared to production levels of around 3 mbpd in 2018, supporting both economic activity and government revenues. Around $45 billion of this investment will flow into the downstream sector to support the development of ADNOC’s refining and petrochemicals capacity, an important sector for Abu Dhabi’s economic diversification efforts. Recent initiatives to tap Abu Dhabi’s sour gas reserves will also eventually reduce the sovereign’s reliance on imports of gas from Qatar (Aa3 stable) as they start to come online from 2025 onwards.

Moreover, in response to the weaker growth environment of the last few years, the government’s focus has shifted away from fiscal consolidation towards economic reforms which Moody’s expects will gradually support the development of the non-oil sector although Abu Dhabi’s economy will continue to be dominated by the hydrocarbon sector for the foreseeable future.

The government measures include a number of changes at the federal level to the investment and visa frameworks, aimed at facilitating inwards investment. The Foreign Direct Investment law came into force in September 2018, which provides the UAE Cabinet with the ability to remove the 49% ownership restriction for foreign onshore investment in selected sectors of the economy. Changes to the UAE’s visa framework to provide long-term (five and 10 year residency visas) for investors as well as to key specialist professionals and exceptional students came into effect in March 2019. To the extent that these visa changes reduce fluctuations in the expatriate population they will support demand for residential real estate and domestic economic activity in general.

Rationale for the Stable Outlook

The stable outlook indicates that the risks to the ratings are broadly balanced.

Fluctuations in oil prices will continue to affect Abu Dhabi’s fiscal metrics but unless oil prices depart significantly and durably from Moody’s assumption that prices will hover around the current levels, the credit implications of such changes in prices will be limited.

Over the longer term, effective implementation of the government’s plans would foster increasing diversification of economic activity, allowing the government to broaden its revenue base and limiting the need for government support to the economy during periods of lower oil prices.

Downside risks relate to a potential significant worsening in the financial health of GREs leading to large financial support from government of Abu Dhabi. Moreover, geopolitical risks – primarily relating to regional tensions with Iran, including through the war in Yemen – remain a source of low-likelihood but potentially high impact downside risk should an escalation lead to disruptions, for example through the Strait of Hormuz, that affect the whole region. However, the UAE’s Habshan-Fujairah pipeline mitigates the impact of this risk compared to some other GCC sovereigns.

What Could Take the Rating Up/Down

Although the threshold for an upgrade is high at this rating level, prospects of significant diversification of economic activity from hydrocarbons and an associated decline in the government’s dependence on hydrocarbons revenues would likely prompt an upgrade of Abu Dhabi’s rating. A more positive assessment of Abu Dhabi’s creditworthiness would also involve greater transparency over fiscal policy and the size and composition of government assets, and declining contingent liability risks from GREs.

Conversely, a prolonged period of oil prices well below Moody’s current assumptions would likely prompt a rating downgrade if not accompanied by effective measures to preserve the government’s fiscal strength. A rising probability that large contingent liabilities posed by government-related entities may crystallize on the government’s balance sheet would also likely prompt Moody’s to downgrade the rating. (Moody’s 26.03)

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11.5 SAUDI ARABIA: Saudi Arabia ‘A-/A-2’ Ratings Affirmed; Outlook Stable

On 29 March 2019, S&P Global Ratings affirmed its ‘A-/A-2’ unsolicited long- and short-term foreign and local currency sovereign credit ratings on Saudi Arabia. The outlook is stable.

Outlook

The stable outlook reflects our expectation that Saudi Arabia will maintain a pace of moderate economic growth and retain strong government and external balance sheets over the next two years, despite wider fiscal deficits.

We could raise the ratings if Saudi Arabia’s economic growth prospects improve beyond our current expectations, for example, as a result of a more diversified economy.

We could lower our ratings if we observed fiscal weakening beyond our expectations, or a sharp deterioration in the sovereign’s external position. An unexpected materialization of contingent liabilities or a buildup of arrears could also place additional pressure on expenditure. Additionally, the ratings could come under pressure if we observed a significant increase in domestic or regional political instability.

Rationale

The ratings on Saudi Arabia are supported by its strong external and fiscal stock positions, but constrained by its limited monetary policy flexibility, sizable fiscal deficits, and the limited transparency of its government assets and institutional framework.

We expect that the government will try to reduce its budgeted expenditure to achieve its goal of a balanced budget by 2023, especially in light of oil production cuts following the December 2018 OPEC agreement. However, our fiscal expectations have weakened since our last review, due to our revised oil price assumptions, lower expected oil production volumes, and higher budgeted fiscal expenditure.

While decision-making structures are centralized and, in our view, relatively opaque, we do not expect any major deviation from the stated domestic policy course of planned economic diversification and gradual socioeconomic liberalization.

Institutional and Economic Profile: An era of change brings both risks and opportunities

-The Saudi government has articulated an ambitious strategy to reduce the economy’s dependency on oil and imported labor, to transform the domestic education and job market, and balance the budget by 2023.

-Policy decision-making is centralized, with limited institutional checks and balances.

-We expect that the pace of reform implementation will slow slightly, allowing time for the numerous introduced measures to show results.

We expect that the key parameters of Saudi Arabia’s institutional framework will remain broadly steady through 2022. Decision-making around future policy reform is likely to remain centralized. We anticipate that the government will strive to rebalance its public finances away from hydrocarbons and attract foreign investment, while reducing its reliance on expatriate labor. Fiscal reforms are yielding results, with 2018 non-oil revenues increasing by approximately 35% over 2017. That said, we expect that any material economic benefit from the overall reform package will likely only materialize beyond our ratings horizon.

The country will partly fund its ambitious economic reform program using the large fiscal and external buffers that it amassed during the pre-2015 era of twin balance of payments and budgetary surpluses. The government is implementing a series of reforms that include social measures aimed at increasing labor participation (particularly of women), improving levels of educational attainment, and raising the private sector’s role in the economy, while achieving a balanced budget by 2023.

However, following the announcement of an expansionary fiscal budget for 2019, we do not expect the government to meet this budgetary target. We estimate the central government deficit will average close to 7.5% of GDP over 2019 to 2022. We also take into consideration our updated oil price assumptions, which we have revised downward since our last review and our expectation of lower oil production volumes (10.2 million barrels of oil per day [mbpd] in 2019). We note the government’s over-compliance with OPEC production cuts, which aim to boost oil prices. If oil prices increase, this could quickly improve Saudi’s fiscal position, as it did in 2018.

We continue to anticipate that public investment will increase under a four-year stimulus plan whose goal is to stabilize private-sector demand. In addition, the announced increase in 2019 expenditure underpins our real growth expectations, which average about 2% per year over the forecast horizon. Despite some positive signs in high-frequency private-sector data, we expect only moderate credit growth. Given that oil production makes up a significant portion of Saudi Arabia’s GDP, our growth forecast for the country continues to be highly sensitive to assumptions of OPEC production targets – not least because Saudi Arabia maintains the world’s largest installed crude oil production capacity at around 12 mbpd, and is the key marginal producer. In November 2018, Saudi produced just over 11 mbpd. Our GDP per capita estimate is just under $23,000 in 2019, and we expect that, on a trend basis, growth will remain well below that of peers.

Official labor force statistics show the number of non-Saudi employees has declined by about 1.3 million since 2017. However, this change is not visible in official population statistics. Without employment contracts, we understand that non-Saudis have to leave the kingdom, and note that if net emigration of skilled labor were significant it could lead to weaker growth prospects.

We expect the long-standing tension with Iran to remain high. Saudi Arabia’s war in Yemen contributes to military and security services being the single-largest spending item, at about 30% of total government expenditure. We do not expect any of these foreign policy challenges to significantly impact the domestic economy. Rather, we believe that they add to the government’s already heavy policy program, which could weaken its commitment to its fiscal adjustment plans.

Flexibility and Performance Profile: Strong external and fiscal positions from a stock perspective, despite ongoing fiscal pressures

-We expect wider fiscal deficits over the next two years than in our last review, due to lower oil price assumptions and higher fiscal expenditure, despite improved non-oil revenue collection.

-While we forecast an accumulation of foreign currency reserves, we note a continued increase in external debt that somewhat moderates Saudi Arabia’s strong external stock position.

-Monetary policy effectiveness is limited by the fixed exchange rate, which largely requires Saudi Arabia to follow movements in the U.S. federal funds rate, even when they may not be appropriate for Saudi Arabian economic conditions.

We now expect the government’s net debt position will weaken by over 4% of GDP per year on average over 2019 to 2022. Lower oil price assumptions, as well as the government’s expansionary stance, have heavily weighed on these expectations. We expect oil prices to drop to $55 per barrel in 2021 and beyond, and that production will remain at around 10.2 mbpd on average over 2019, before gradually increasing to 10.5 mbpd by 2022. We note that Saudi Arabia’s daily production increased by 500,000 barrels in November 2018 from September, and this ability to ramp up production at times provides significant upside to revenue. Still, we expect that the government will reduce expenditure in response to lower oil revenue and to try achieve a balanced budget by 2023.

In addition to the budget, we understand that the government has a separate plan focusing on domestic capital expenditure that is being implemented by the Public Investment Fund and the National Development Fund, with related expenditure totaling an estimated 5% of GDP in 2018. Compared with many rated sovereigns, the Saudi authorities spend far more on investment, and this could raise growth potential toward the end of our ratings horizon.

We assume that the central government deficit is financed 30% by asset drawdowns and 70% by debt issuance. This split implies that Saudi Arabia would report gross liquid financial assets of about 82% of GDP by 2022. These fiscal assets include the central government’s deposits and reserves (accounted for on the liabilities side of the balance sheet of the Saudi Arabia Monetary Authority), government institutions’ deposits, and an estimate of investment income. We also include in our calculation an estimate of government pension funds’ liquid assets.

Our general government balance consolidates the central government and the social security system and it also includes our estimate of investment income from sovereign wealth fund assets. The latter largely accounts for the difference between our central government and general government deficit projections.

Although Saudi Arabia’s fiscal profile has been weak on a flow basis in recent years, we believe it has remained strong on a stock basis. We expect net general government assets (the excess of liquid fiscal financial assets over government debt) will average just over 50% of GDP between 2019 and 2022; this compares with about 65% in our last review. We have revised the figure downward, due to the potential impact of continued wide fiscal deficits.

We do not expect that the recently announced purchase of Saudi Basic Industries Corp. (A-/Stable/A-2) by Saudi Aramco will directly affect the government’s fiscal position. However, given the large size of the acquisition (reportedly $69 billion), potential debt raised by Saudi Aramco to facilitate the transaction could, under certain conditions, affect our assessment of the contingent liabilities the government is exposed to through its government-related entities. We note, however, that none of the ratings on Gulf Cooperation Council sovereigns have been negatively affected by our assessment of their potential contingent liabilities so far.

We continue to view Saudi Arabia’s external position as a strength and estimate that current account surpluses will average 5% of GDP through 2022 versus an average deficit between 2015 and 2018. We expect that Saudi Arabia’s liquid external assets, net of external debt, will average about 160% of current account payments over 2019-2022. This figure has weakened somewhat, because we expect an increase in public-sector external debt (we expect entities, such as the Public Investment Fund, and potentially some GREs, like Saudi Aramco, to raise debt externally). Gross external financing needs will likely remain at about 40% of the sum of usable reserves and current account receipts over the same period, suggesting ample external liquidity. We expect usable reserves will increase over the forecast period, in line with current account surpluses. In our calculation of usable reserves, we subtract the monetary base from gross foreign currency reserves for sovereigns that have a long-standing fixed peg with another currency (because the reserve coverage of the base is critical to maintaining confidence in the exchange-rate link).

Given the Saudi riyal’s peg to the U.S. dollar, we view monetary policy flexibility as limited. The longstanding currency peg helps to anchor the population’s inflation expectations, but binds Saudi Arabia’s monetary policy to that of the U.S. Federal Reserve. We expect that the peg will be maintained. (S&P 29.03)

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11.6 SAUDI ARABIA: Future of the Saudi Arabian Defense Industry – 2019

The “Future of the Saudi Arabian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2024” report has been added to ResearchAndMarkets.com’s offering.

Regional disturbances such as the interstate power projection strategies of Iran, coupled with the growing threat from terrorist organizations across the region is compelling Saudi Arabia to become one of the largest defense spenders in the world. In 2015, the country briefly managed to displace Russia and emerge as the third largest defense spender, behind only the US and China. The volatility in oil prices forces the government to carefully balance expenditures within anticipated revenues and keep the deficit at a sustainable level.

Saudi Arabia has the one of the largest defense budgets globally which is expected to grow at a forecast CAGR of 6.45%. The 2019 budget aims to allocate sufficient funds to strategic infrastructure projects, as well as maintain infrastructure and continue to push for economic diversification by enhancing the participation of the private sector. The main factors driving defense expenditure in Saudi Arabia are the ongoing arms race among Middle Eastern nations due to growing turbulence in countries such as Syria, Iraq and Yemen, combined with the threat from Iran.

Saudi Arabian homeland security expenditure is expected to reach $38.1 billion in 2024. Homeland security is an area that has gained prominence in Saudi Arabia over the last decade, with expenditure expected to increase from $30.1 billion in 2020 to $38.1 billion in 2024 at a CAGR of 6.03%. After the Arab Spring revolution in the Middle Eastern and the North African (MENA) region and minor protests in Riyadh, the country is expected to increase expenditure to enhance security measures. The spread of the extremist group, IS, in neighboring Syria coupled with the Houthi rebellion in adjoining Yemen, has forced Saudi Arabia to invest in securing its borders.

Saud Arabia is the fifth largest global importer of military hardware. Although, the country plans to develop its local defense sector through SAMI under Vision 2030, it is anticipated that the production will be limited to small arms, maintenance and support services. The US was the leading supplier of arms to Saudi Arabia, occupying a share of 68% with major contracts including the modernization of the Saudi M1A2 Tank fleet and E-3 AWACS, and the supply of UH-60 helicopters. In May 2017, Saudi Arabia’s King Abdulaziz City for Science and Technology (KACST) unveiled its Saqr 1 unmanned aerial vehicle, which has a range of 2,500km and features a satellite communication system. The country’s capital expenditure increased from $8.6 billion in 2015 to $14.5 billion in 2019, a CAGR of 13.77%, attributed primarily to the drastic erosion in global oil & gas prices worldwide. (ResearchAndMarkets 21.03)

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11.7 EGYPT: Fitch Upgrades Egypt to B+ from B, Maintains Stable Outlook

On 21 March, Fitch Ratings upgraded Egypt’s Long Term Foreign Currency Issuer Default Rating (IDR) to ‘B+’ from ‘B’, while maintaining a stable outlook. According to Fitch, the upgrade of the IDRs reflects the progress in implementing economic and fiscal reforms, which are driving improved macroeconomic stability, fiscal consolidation and stronger external finances.

“It seems likely these reforms will continue to generate better economic outcomes beyond the IMF agreement. General government debt/GDP is on a downward path, underpinned by structural improvements to the budget and the emergence of primary budget surpluses. We expect spending on wages, subsidies and interest to fall by almost 5% of the GDP from June 2016 to June 2020,” Fitch added.

Fitch forecasts budget deficit to narrow to around 8.6% of the GDP in fiscal year (FY) 2019 (fiscal year ending June 2019), with a primary surplus of 1.6% of the GDP, close to the government target of 2% of the GDP.

According to the report, subsidies and social benefits spending are to fall by 1.1% of the GDP in FY 2019, while interest spending to continue consolidation, on the back of lower interest payments because of the disinflation trend, lower interest rates and lower debt, as well as another round of subsidy reforms, including the introduction of an automatic fuel tariff adjustment mechanism.

Additionally, Fitch believes that further moderation of the wage bill/GDP and continued efforts to improve the tax administration will also contribute to further consolidation and lowering deficit. In Fitch’s view, there is political commitment for further fiscal consolidation and there have been significant structural improvements in the budget that are likely to persist.

“In FY 2020 we expect wages and compensation to fall below 5% of the GDP, down from an average of 8% in FY 2015/16, underpinned by the civil service law. We expect subsidies and social spending to fall to 5.3% in FY 20, from 8% in FY 17, following several rounds of tariff hikes across utilities and other regulated prices. Interest payments are likely to peak in FY 19 at 10.2% of the GDP, before falling by at least 1pp of the GDP in FY 20,” the report indicates.

However, the report highlights the return of political instability or a negative shock to economic growth as the main risk to policy slippage.

Macro-Picture in the Medium Term

For the medium term, the report forecasts that consolidated general government debt/GDP will decline to 83% in FY 20 from 93% in FY 18 and a peak of 103% in FY 17.

In regards to inflation, Fitch foresees an average inflation of 12% and 10% in 2019 and 2020 respectively, building in another round of subsidy reforms in June/ July 2019.

The Central Bank of Egypt (CBE) cut its overnight deposit rate by 100bp to 15.75% in February 2019, maintaining positive real interest rates. We forecast that the real GDP growth will remain robust at 5.5% in FY 19 and FY 20, with risks tilted slightly to the downside.

According to the report, Egypt’s current account deficit (CAD) moderated to 2.5% of the GDP in 2018 from 3.5% in 2017, with the CAD plus net FDI close to balance, and it is forecasted to an average 2.3% of the GDP in 2019/20, supported by growth in tourism revenues, nonoil exports, and rising gas production which has eliminated the need to import gas for now.

“We project Egypt’s external debt service to average around $10bn or 12% of the current external receipts in 2019/20, in line with the current ‘B’ peer median. Within this, we forecast sovereign external amortization and interest costs at around $7.5bn on average in 2019/20,” the report added.

Fitch believes that the CBE’s cancellation in December of the profit repatriation mechanism, mitigated potential upward or downward pressures on the currency from portfolio inflows, should herald greater Egyptian pound volatility.

The pound weakened only modestly, by 1.7%, against the US dollar between midApril and endDecember, during the period of portfolio outflows. With the return of portfolio inflows in 2019 (equivalent to a quarter of the previous outflows), the Egyptian pound has appreciated by 3% against the US dollar up to mid-March. (Fitch 21.03)

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11.8 SUDAN: Sudan’s Shifting Calculus of Power

Luka Kuol posted on 11 March in the Africa Center for Strategic Studies that Sudan’s Omar al Bashir’s emergency declaration aims to consolidate support within the military while popular protests continue to demand change.

President Omar al Bashir’s declaration of a year-long state of emergency in Sudan indicates that he has opted, for now, to take the route of greater repression to quell the popular protests that have been unfolding across the country since December 2018. The initial response from Sudanese citizens, however, has been even more protests. These protests are being led by Sudan’s professional associations and large youth population who are chafing for more economic opportunity and political freedoms after 30 years under Bashir’s rule.

The emergency declaration was accompanied by the dissolving of state governments and the appointment of military or intelligence officers as new governors in the country’s 18 states.

These actions should be assessed from the perspective of Bashir’s political base. Bashir’s long tenure in power can be attributed to his cultivation of three main pillars of support: the military, the National Congress Party (NCP), and an embrace of political Islam. The current protests are straining each of these pillars and how they relate to one another, leading to some shifting alliances.

The Military

Bashir’s appointment of military and intelligence leaders as state governors and of Defense Minister Awad Ahmed bin Auf as his first vice president, while he retains the role of defense minister, shows that Bashir is trying to consolidate his standing within the security institutions. Bashir was a Brigadier General in the Sudanese army prior to leading the 1989 military coup that brought him to power. Accordingly, the military is a natural base of support for the embattled president. Bashir also maintains support from the intelligence services, which is dominated by his own riverine ethnic group, the Ja’aliyin. Some observers feel these appointments are also a means to set the stage for Bashir’s re-election in 2020.

Bashir is trying to consolidate his standing within the security institutions.

At the same time, Bashir’s heavy reliance on the security services opens the door for him to hand over power to the Army as occurred following the uprising of 1985 when power transitioned to the minister of defense, Abdel Rahman Swar Al-Dahab. As happened then, such a transition could involve the transfer of leadership to a respected personality who will oversee the formation of technocratic government. This option may be appealing to Bashir as the Army may be the only institution that would provide him with strong guarantees against prosecution should he resign.

An attractive exit package that would allow Bashir to depart with dignity would be a key component of any scenario involving Bashir stepping down. Bashir is less worried about the indictment of the International Criminal Court than he is about his pride and the legacy of his 30 years in power. Part of this agreement would involve a commitment from a technocratic transitional government to not take any legal action against him if he decides to stay inside the country or to take refuge in a friendly foreign country.

The Sudan Parliament

By consolidating support with the military, Bashir has effectively abandoned his ruling National Congress Party (NCP) and the hardline Islamists in it. This has set off a war within and between members of the NCP. The National Islamic Front (NIF), which later became the NCP, was a small party in the 1960s but it grew in the post-independence era. With its focus on students’ movements, using religion to appeal to the Sudanese population, and support from international Islamic movements, the NIF gradually grew more influential by winning more seats in the parliament. Now it dominates the parliament with 323 out of a total of 426 seats as a result of general elections in 2015 that many observers felt lacked credibility.

The NCP faces ongoing power struggles and is now divided into many factions. These include the Popular Congress Party established in 1999 by the NCP’s founding leader, the late Hassan El Turabi. There are also competing factions within the party led by the former first vice president Ali Osman and former presidential advisor Dr. Nafie Ali Nafie. While Osman and Nafie are veteran political Islamists that oppose the increasing encroachment of the military in the affairs of government at the expense of the dominance of Islamists, both compete for the leadership of Islamist movement in Sudan. Some analysts argue this rivalry has increasingly taken on ethnic lines between Nafie’s Ja’aliyin and Osman’s Shayqiyya groups. Ghazi Salah al-Din, a key intellectual of the early NCP also broke away from the NCP and formed his own party in 2013, the Reform Now Movement.

Bashir has not only disowned the NCP but he is now blaming its members for the failure of government to deliver improved living conditions during his 30-year tenure. Bashir has demonstrated abrupt shifts in allegiances previously, such as his hot and cold relationship with Hassan El Turabi.

Speculation is now rife that Bashir may form his own political party or that displeased members of NCP may abandon the party and form a new political party. As the NCP has been surviving on the power and resources of the state, some believe its political base will rapidly erode after being abandoned by Bashir. If so, the NCP could face the same fate as that of President Gaafar al-Nimeiry’s Socialist Union Party that vanished after the coup in 1985.

The appointment of Ahmed Haroun as deputy chairman of the NCP (vested with the powers of the chairman) has been particularly divisive for the party. Like Bashir, Haroun is indicted by the ICC and does not hail from the hardcore Islamist leadership of the party. Most ideological members of the NCP are not supportive of his appointment and this may further split the NCP.

Political Islam

It is widely believed that Bashir declared the state of emergency to give himself more latitude to quash the protests. Just as important, however, is the prospect that he will use the Army to confront the forsaken hardline Islamists in the NCP.

This factor taps the underlying tension regarding the role of Islam in Sudanese society. Although Islam is the dominant religion in Sudan, Islamic fundamentalism only arrived in the country with the NCP in 1983. By rejecting the country’s diverse reality, political Islam has failed to bring about Sudan’s promised renaissance. Instead, Sudan has seen its place on most global indices decline. Sudan is listed 167th out of 189 countries on UNDP’s Human Development Index and 172th out of 180 countries on Transparency International’s Corruption Perceptions Index. The waning of political Islam is apparent in its absence in the slogans and articulated political agendas of the protesters.

The Sudanese population has historically embraced Sufism, which domesticates and internalizes the teaching of Islam to the African context, which is characterized by tolerance and accommodation. The protesters have explicitly expressed their dismay at the politicization of Islam. However, it remains to be seen how the post-protests arrangements will address the link between religion and the state in Sudan’s political marketplace.

The key driver for change in Sudan is, of course, the popular peaceful protests that have been held across 35 urban areas in the country since December 2018. Led by middle-class professions, unions, women and youth, the protesters’ call for an end to Bashir’s 30-year rule has resonated among many within Sudanese society, including the families of the ruling party, the national army, the intelligence agencies and other uniformed services. Women, in particular, have participated in sizeable numbers. Women protesters have also indirectly showed their rejection of Islamist fundamentalism by dressing in Sudanese dress with the traditional tobe headscarves rather than the strict hijab dress as prescribed by ultra-orthodox Islam. The depth of the protests’ popular support is a key factor driving the recalculation of the pillars of power within Sudan.

Notably, the protests in Sudan are led by non-Islamist forces. Moreover, they are nonviolent and well organized with a clearly articulated political agenda. Maintaining the peaceful nature of the protests will be key to sustaining this support. This will be more difficult if the security forces increase their use of force. Adding to the complexity is that disgruntled members of the NCP may join the protests, which may trigger violent confrontations.

The intricate internal dynamics that are reshaping the pillars of power in Sudan make it difficult to predict how the current crisis will unfold. The peaceful protests calling for a transitional, technocratic government leading to genuine elections are an attempt to provide an alternative pathway to stability and peace in Sudan. Doing so would be a break from Sudan’s historical legacy of power changing only through uprisings and military coups d’état. (ACSS 11.03)

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11.9 MOROCCO: The Future of the $4.7 Billion Moroccan Defense Industry

The “Future of the Moroccan Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2024” report has been added to ResearchAndMarkets.com’s offering.

Morocco is a constitutional monarchy with an elected parliament. The country has been a key Western ally in its fight against Islamist terrorism. Morocco is enhancing its military capabilities in response to the recent wave of unrest in the Middle East and North Africa (MENA) region. The prime factor stimulating the country’s defense expenditure is its ongoing arms race with adjoining Algeria, which receives a steady supply of weapons from Russia.

Over the forecast period, the increased threat of terrorism from internal and external terrorist groups and the ongoing modernization of its armed forces are the key factors expected to drive military expenditure. The country also faces insurgency in the Western Sahara region, where the local insurgent outfit Polisario Front is engaged in a violent struggle with the Moroccan regime for territory. The threat posed by the prospect of prolonged insurgency within the Western Sahara region makes it imperative for Morocco to allocate substantial expenditure to counter-terrorism and counter-insurgency efforts.

Morocco is projected to increase its defense budget from $3.7 billion in 2019 to $4.7 billion in 2024, at a CAGR of 4.24%. Moroccan homeland security (HLS) expenditure increased from $2.1 billion in 2015 to $3 billion in 2019, registering a CAGR of 8.56%. On a cumulative basis, Morocco is expected to spend a total of $21.4 billion on its armed forces over the forecast period, compared to $17.5 billion over 2015-2019. The country’s capital expenditure is expected to increase from $1.2 billion in 2020 to $1.4 billion in 2024, growing at a robust CAGR of 4.31% over the forecast period.

The Moroccan government is expected to procure transport aircraft, multirole fighters, submarines, missile defense system and armored vehicles, among others. Additionally, opportunities in security systems and platforms such as military IT networking, wireless systems, motion sensors, alarms, and radar systems are expected to arise as a result of the country’s focus on strengthening border security.

The rise in defense spending is mainly driven by the procurement of F-16 Fighting Falcons, Single Channel Ground and Airborne Radio Systems (SINCGARS) combat net radio, M1A1 tanks, electric submarines and patrol ships. (ResearchAndMarkets 19.03)

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11.10 CYPRUS: Staff Concluding Statement of the Third Post-Program Monitoring Mission

An International Monetary Fund (IMF) mission visited Nicosia during 18 – 27 March 2019 for the third post-program monitoring (PPM) discussions. PPM is part of the IMF’s regular monitoring of countries with significant outstanding IMF credit, which focuses on risks to capacity to repay the IMF. The IMF mission was coordinated with the European Commission, the European Central Bank, and the European Stability Mechanism.

Economic growth has been strong, supported by construction, tourism and professional services. Unemployment has declined further. The underlying budget remains in a large surplus. Banks’ balance sheets are being strengthened: non-performing loans (NPLs) have declined sharply following transfers of sizable loan portfolios out of the banks. While this progress is welcome, continued efforts are needed to address challenges that remain from elevated public and private indebtedness, still high level of bank NPLs, large fiscal risks, and increasing headwinds to sustained growth.

Growth momentum is expected to slow gradually but remain strong. Real GDP growth is projected to reach a still-robust 3–3½% in 2019–20, from 3.9% in 2018, led by foreign direct investment. Private consumption growth is expected to remain solid, supported by rising jobs and wage increases, but will gradually decelerate as borrowers step up debt servicing. Domestic credit is expected to remain weak, however, constrained by the NPL overhang in the banking sector. The high import content of investments and lower exports growth, reflecting a slowdown in Europe, will keep the current account deficit elevated. In the medium-term, growth is expected to ease to its potential rate of around 2½%.

Cyprus’s capacity to repay the Fund is adequate under this baseline. Public debt service – interest plus principal – is expected to remain broadly constant over the coming years. Strong economic growth and a sizable primary fiscal balance are expected to support a durable decline in gross public debt and continued favorable market borrowing terms. However, repayment capacity could be weakened if growth slows significantly or if some specific risks materialize from banks’ still weak asset quality; the realization of fiscal guarantees; or unexpected spending, including from court cases. This could be exacerbated in the event of weaker than expected growth in Europe, or a hard Brexit.

Policies can help mitigate these vulnerabilities and strengthen capacity to repay:

Facilitating deleveraging, reducing NPLs and strengthening bank profitability: Further efforts are needed to address the troubled legacy assets—which remain among the highest in Europe. Steadfast implementation of the foreclosure framework, including e-auctions, is key to lowering debt. Banks are encouraged to continue maintaining appropriate capital and provisioning levels and reducing NPLs and real estate property holdings to targeted levels. Diversifying income sources while maintaining high quality underwriting standards and consolidating operations would help address the system’s inefficient cost structure. An appropriate governance structure for the state-owned asset management company should be put in place expeditiously to maximize recovery. Ensuring ongoing compliance with the eligibility requirements for the Estia scheme is crucial to prevent abuse of taxpayer resources.

Avoiding pro-cyclical fiscal policy and maintaining debt sustainability: Spending growth should be firmly maintained at a pace below that of medium-term GDP and cyclical and windfall revenues should be saved, to ensure a neutral fiscal policy stance, build up buffers, and anchor public debt on a firmly downward path. Keeping growth of the wage bill below nominal GDP growth is particularly important given the gradual reversal of crisis-era public wage and pension cuts. Reforms aimed at making the public health sector more competitive and managing incentives for providers and patients adequately are crucial to mitigate fiscal risks from the introduction of a public health insurance system.

Strengthening structural reforms: Ongoing judicial reforms to increase the efficiency of courts and accelerate enforcement of commercial claims should help address the legacy of the crisis and improve the investment climate. Reforms of the civil procedure code and introduction of the e-justice system should be completed. Despite some progress with the issuance and transfer of property titles, a substantial backlog remains: its clearance should be accelerated. Continuing efforts to mitigate AML/CFT risks remains a priority to reduce risks to growth. Improving corporate governance of commercial state-owned enterprises and reforming local government will help reduce contingent fiscal liabilities and raise productivity. Amendments to the Central Bank of Cyprus legislation should be expedited to strengthen its governance. (IMF 28.03)

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Fortnightly, 3 April 2019

Fortnightly, 3 April 2019

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