Fortnightly – March 21, 2007

On 19 March, the Bank of Israel
published its updated growth forecast for 2007. The Bank of Israel predicts
5.1% GDP growth, up half a percentage point from its previous forecast of 4.6%
published in December 2006. It expects the unemployment rate to fall to 7.5%
on average. The Bank believes that growth will be led by the business sector,
which in the updated forecast is expected to expand by 6.2%. The Bank of Israel
also predicts an increase in the trade surplus in 2007. The Bank of Israel
said that the forecast was revised on receipt of the latest National Accounts
data, the Manpower Survey, and the Bank of Israel’s Companies Survey for the
last quarter of 2006, as well as monthly indicators of economic activity in
January – February 2007 and changes in the economic environment.

The main changes that led to the
upward adjustment of the forecast included the high rate of GDP growth and the
lower than expected unemployment rate in Q4/06. There also a high rate of
increase of private consumption. The fact that the upward trend in investment
in housing is becoming more firmly based, reflected by the rise in the area of
housing starts and the rise in the number of residential building permits, also
added to the revision. The Bank of Israel warned however that there was a
slower than expected recovery in incoming tourism. There was also a slowdown
in investment in the principal industries in Q4/06 and the continued slowdown
in imports of capital goods. (BoI19.03)

Back to Table of contents

2: ISRAEL MARKET & BUSINESS NEWS

2.1 Candela Acquires
Inolase in Cash Transaction

Wayland, Massachusetts’ Candela
Corporation will acquire all share capital of Inolase (http://www.inolase.com) of Netanya, Israel, in a cash transaction valued at approximately $16.5m, excluding certain earn-out royalty
payments contingent on the attainment of specified performance targets.
Inolase is the developer and manufacturer of Pneumatic Skin Flattening (PSF), a
breakthrough vacuum driven technology that provides pain- free, efficacious
enhancements to all laser and light-based devices. PSF is FDA approved for use
in hair removal when used with lasers or IPLs and is CE marked. It is also
under investigation for use in a variety of other applications including
non-ablative skin rejuvenation, skin tightening and treatment of pigmented
lesions and tattoos. PSF is currently being adapted for use by the majority of
the worldwide installed base of more than 70,000 lasers and IPLs, as estimated
by Millennium Research. Subsequent plans are to market PSF to optimally work
with Candela’s installed base of equipment beginning in the Fall of 2007. The
acquisition is expected to be accretive to earnings within 18 months. Candela
Corporation manufactures, and distributes innovative clinical solutions that
enable physicians, surgeons, and personal care practitioners to treat selected
cosmetic and medical conditions using lasers, aesthetic laser systems, and
other advanced technologies. (Candela07.03)

Back to Table of contents

2.2 Motorola Invests in
AMIMON

Motorola, through Motorola
Ventures, its strategic venture capital arm, announced that it has made an
equity investment in AMIMON. AMIMON's wireless high-definition interface
(WHDI) technology enables wireless transmission of uncompressed high-definition
video streams in the 5GHz unlicensed band. WHDI enables applications such as
wireless flat-panel TVs, wireless projectors, wireless HDMI (high-definition
multimedia interface) and wireless VGA repeaters (dongles). Herzliya, Israel’s AMIMON (http://www.amimon.com) is a fabless
semiconductor company pioneering wireless uncompressed high-definition video
for universal connectivity among CE video devices. AMIMON's uncompressed
Wireless High-Definition Interface (WHDI) allows flat-panel televisions and
multimedia projectors to wirelessly interface to all HDTV video sources at a
quality equivalent to that achieved with wired interfaces such as component
video, DVI and HDMI. (Motorola13.03)

Back to Table of contents

2.3 BDI Says Teva Best Regarded Israeli Company for 3rd year Running

Business Data Israel (BDI)
announced that Teva Pharmaceutical Industries is considered the most highly
esteemed company in Israel in 2006. This has been their findings for the third
year in a row. The company held onto its top position despite the change in
CEOs and a drop in its share prices. Teva chairman Eli Hurvitz is the most
esteemed executive. BDI asked 500 managers to rate companies on three
variables: best management, worthwhile goods or services, and financial
success. Partner Communications was ranked second, rising from fourth place in
2005. Delek Group rose to third place from eighth. Eight of the top ten
companies in the 2006 rankings also achieved that distinction in 2005. These
are Teva, Partner, Delek Group, Bank Hapoalim, Strauss Group, Africa-Israel
Investments, Bank Leumi and IDB Holding Corp. They were joined by Iscar and
Cellcom Israel. The acquisition of 80% of Iscar by Berkshire Hathaway greatly
strengthened the company’s stature among the respondents. Some 57% of the 100
most esteemed companies are public, 38% private, 12% are foreign-owned and 5%
of government companies. (BDI07.03)

Back to Table of contents

2.4 Tnuva Sale Finalized

On 8 March, the Tnuva Food
Industries shareholders committee approved the sale of the company to Apax
Partners for $1.025b by a huge majority. Only seven of the 550 kibbutzim and
moshavim representatives opposed the deal. The meting was attended by 550 of
the 620 members of the Tnuva cooperative society. The kibbutzim will make NIS 1.5 billion on the sale, after deducting 25% of the sale proceeds to the state and
banks, 3% to moshavim, and 3.5% ($35m) to Tnuva employees. There is an ongoing
legal battle over the moshavim’s rights in Tnuva. A 7% tax levy will be paid
on the net amount after debt repayments. United Kibbutz Movement secretary
general Bar-Gil said that with the sale of Israel’s largest cooperative society
and food company completed, the United Kibbutz Movement would sell its 36%
stake in Dor Alon Energy in Israel (1988). After Dor Alon, they will also sell
Bituah Haklai-Central Cooperative Society and Hazera Genetics. These sales are
aimed at covering the kibbutzim’s $1b in debts over within five years. (Globes
06.03)

Back to Table of contents

2.5 Israel’s Software Sales To Reach $720 Million In 2007

IDC Online predicts that software
sales in Israel will reach $720m in 2007 and reach $870m during 2010. The
survey was published ahead of a software manufacturers conference. IDC says
that Israeli’s IT market totaled $3.9b in 2006, of which software packages
accounted for 16.7%. Software packages accounted for 26.3% of the IT market in
the US, and 20.5% of the European market. IDC added that software
manufacturers were facing growing demand to customize their products to their
customers’ specific needs. At the same time, the use of open code programs is
expanding, because they enable companies to achieve greater flexibility in developing
customized software products. IDC says that trends in the hardware and
software market were changing the market. These trends include multi-core
processing, virtualization, and software-as-a-service. (Globes 11.03)

Back to Table of contents

2.6 Tower
Semiconductor Announces $29 Million Equity Private Placement to US
Institutional Investors

Tower Semiconductor announced
that it has agreed to issue through a private placement approximately 18.8
million ordinary shares and 9.4 million warrants to US institutional investors
for aggregate gross proceeds of approximately $29m. The warrants are
exercisable for a period of five years at an exercise price representing a 20%
premium to yesterday’s closing price of the Company’s ordinary shares. The
Company intends to use the net proceeds of the private placement to continue to
execute its Fab2 capacity expansion plans. Citigroup Global Markets Inc. and
C.E. Unterberg, Towbin acted as placement agents. Migdal Ha’Emek, Israel’s Tower Semiconductor (http://www.towersemi.com) is a
pure-play independent specialty wafer foundry established in 1993. The company
manufactures integrated circuits with geometries ranging from 1.0 to
0.13-micron; it also provides complementary technical services and design
support. In addition to digital CMOS process technology, Tower offers advanced
non-volatile memory solutions, mixed-signal & RF-CMOS, and CMOS
image-sensor technologies. (Tower15.03)

Back to Table of contents

2.7 RADA Receives
Compliance Letter from NASDAQ and Change of Trading Symbol

RADA Electronic Industries has
received a compliance notification from NASDAQ dated March 5, 2007 stating that
the Company has regained compliance with Marketplace Rule 4320(e)(2)(E)(ii).
The Company's ordinary shares are currently traded under the NASDAQ symbol:
RADID. The symbol changed from RADID to RADA at the opening of business on 15
March 2007. Netanya, Israel’s RADA Electronic Industries (http://www.rada.com) is an Israel based company involved in the military and commercial aerospace industries. The
Company specializes in Avionics systems (Digital Video Recorders, Ground
Debriefing Stations, Stores Management Systems, Flight Data Recorders, Inertial
Navigation Systems), Trainers Upgrades, Avionics systems for the UAV market,
and Electro optic cameras for airplanes and armored vehicles. (RADA15.03)

Back to Table of contents

2.8 Pointer Signs Non-Binding
MOU to Acquire Cellocator

Pointer Telocation signed a
non-binding MoU to acquire the assets and liabilities of Cellocator, a private
Israeli company active in the field of cellular location-based services and
technology. The closing of the transaction is expected in June 2007 subject to
the completion of a due diligence process to the satisfaction of Pointer, and
reaching a definitive agreement. Based on Celloator's forecasts, as provided
to Pointer prior to the due diligence, the activities of Cellocator are
anticipated to generate annualized revenues, for year 2007, of approximately
$15m. Cellocator (http://www.cellocator.net)
provides sophisticated, cost-effective and reliable OEM products for the
vehicle security and fleet management service industry, as well as solutions
for wireless M2M (machine to machine). Cellocator is a B2B company that
supplies and integrates its technology with solutions for its partners/clients
in different business sectors. Givatayim, Israel’s Pointer Telocation (http://www.pointer.com) provides a range of
services to insurance companies and automobile owners, including road-side
assistance, vehicle towing, stolen vehicle retrieval, fleet management and
other value added services. Pointer Telocation provides services, for the most
part, in Israel, through its subsidiary Shagrir, and in Argentina and Mexico through its local subsidiaries. Independent operators provide similar services
in Russia and Venezuela utilizing Pointer's technology and operational
know-how. (Pointer16.03)

Back to Table of contents

2.9 Shalom Hooters: Franchise
Agreement Signed for Introducing Popular Restaurant Concept in Israel

Hooters of America is pleased to
announce that it has entered into an exclusive franchise agreement with llana
and Ofer Ahiraz to open the first Hooters Restaurant this year in Israel, with
many additional locations to follow. There are over 430 Hooters Restaurants in
the US and 23 other countries including China, Australia, Switzerland and Brazil. In the next 2 years, the soon to be World famous chain will bring its hot
wings and fun atmosphere to Columbia, Dubai, Guam, New Zealand and India as
well. The Hooters brand has become a popular culture icon. In addition to the
restaurants, Hooters has launched a Credit Card, Energy Drink, Magazine,
Calendar, grocery store food product line and even a Casino Hotel in Las Vegas. (Hooters 19.03)

Back to Table of contents

3: REGIONAL
PRIVATE SECTOR NEWS

3.1 Raving Brands
Portfolio to be Developed in Partnership with A.A. Turki Corporation

Raving Brands, the global
multi-concept restaurant portfolio of choice, signed a transaction with the
A.A. Turki Corporation for Trading and Contracting (ATCO) to develop and open
115 restaurants in the next five years in eight countries in the Middle East. The multi-unit transaction, which incorporates many of the Raving Brands
concepts, was completed with the advisory of The Mayfair Group, a New
York-based merchant bank specializing in hospitality and retail investment and
advisory. The Middle East agreement covers, Bahrain, Egypt, Jordan, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. Unlike the challenges so many other
franchise systems have faced previously with international expansion, Raving
Brands believes the timing of entry into the Middle East is ideal due to recent
economic and demographic shifts. With approximately 65% of its population
under the age of 25, the proliferation of satellite television and the
internet, and exposure to Western cultures, the Middle East demand for dynamic
American concepts is on the rise. Founded in Atlanta, Georgia, in 2000, Raving Brands currently operates more than 600 restaurants in 38 states with plans
to open more than 200 in 2007. A.A. Turki Corporation for Trading and
Contracting (ATCO) is the flagship of the A.A. Turki Group of Companies (the
ATCO Group), a leading, 4000-employee strong conglomerate that has successfully
operated since the mid-1950s in Saudi Arabia’s governmental, industrial,
commercial and consumer sectors. (Raving Brands12.03)

Back to Table of contents

3.2 Houston Companies Win
Contract To Build $250 Million Power Plant in Kuwait

Houston’s HPI LLC and S&W
Energy Solutions recently edged out much larger engineering and construction
companies in a competition for the right to build the 200-megawatt Shuwaikh
Power Plant in Kuwait. The low emissions, gas-fired power plant is scheduled
for completion by 31 May and is expected to be operational in six months – much
faster than average construction times for similar power plants of its kind –
and is designed to ensure a dependable power supply to Kuwait during peak
summer months. Many Persian Gulf countries, including Bahrain, Kuwait, Qatar, and Saudi Arabia, are experiencing significant growth and development – more
than their existing power network can handle. With a rise in electricity
brownouts and blackouts, the Middle East has an immediate need for additional
power generation and is planning a regional electricity grid. In bidding for
major overseas energy projects, Houston companies, such as HPI and S&W,
benefit from having direct access to local industry resources and equipment,
and the city’s major international port operations. Other companies competing
for the contract included Pratt & Whitney, a Hartford, Connecticut
manufacturer of aircraft engines and gas turbines, and Foster Wheeler, Ltd., a Clinton, New Jersey engineering and construction company. The contract, awarded by the
Kuwaiti Ministry of Electricity and Water, includes a five-year operations and
maintenance component. HPI and S&W are partnering with Alghanim
International, a leading Kuwaiti civil and electromechanical engineering and
contracting company, which is responsible for handling all of the civil works
and site construction efforts associated with the project. HPI is a
Houston-based company specializing in the design and development, engineering,
manufacturing, testing, installation, and commissioning of control and
monitoring systems for industrial turbo-machinery applications. (HPI 07.03)

Back to Table of contents

3.3 Halliburton Will Move HQ
to Dubai

Oil services giant Halliburton
Co. will soon shift its corporate headquarters from Houston to Dubai, the company announced on 11 March. Halliburton will be opening its corporate
headquarters in Dubai while maintaining a corporate office in Houston. The
company’s chairman, president and CEO will office from and be based in Dubai to run the company from the UAE. In 2006, Halliburton earned profits of $2.3
billion on revenues of $22.6b. More than 38% of Halliburton's $13b oil field
services revenue last year stemmed from sources in the eastern hemisphere,
where the firm has 16,000 of its 45,000 employees. (Various11.03)

Back to Table of contents

3.4 Industrial Nanotech
Targets Middle East Oil Markets with Exclusive Distributor in UAE

Naples, Florida’s Industrial
Nanotech, an emerging global leader in nanotechnology, announced the signing of
the Al Samah Company as its exclusive distributor in the United Arab Emirates, one of the world’s largest oil producers. Al Samah Company is
headquartered in Abu Dhabi, the capital of the United Arab Emirates. The Al
Samah Company has five locations and services many of the major oil producing
countries. Al Samah Company will be responsible for distributing Industrial
Nanotech’s line of Nansulate products, including the Company’s new Nansulate
Wrap, for use on oil and gas pipelines. Together with their new distributor,
Al Samah Company, Industrial Nanotech has a tremendous opportunity to showcase
forward-thinking solutions to the UAE. From pipeline work to tankers, oil
platforms, and existing refineries, Nansulate products has much to offer these
countries. (INI14.03)

Back to Table of contents

3.5 Oman’s Nawras Selects Telenity’s Service Delivery Platform (SDP)

Monroe, Connecticut’s Telenity, a
leading provider of next generation converged services platforms and
applications for communications networks, announced that Nawras, the second
leading operator in Oman, has selected its Canvas CSP, Converged Services
Platform as an end-to-end SDP solution to make its network programmable and
offer converged multimodal services cost-effectively and quickly. Under the
agreement, Telenity will deliver the complete Service Delivery Platform (SDP)
solution to Nawras’s mobile network including key components for Web Services,
Messaging Gateway, Charging and Provisioning. With the deployment of Canvas
CSP, Nawras will be able to open its network to third party partner application
developers easily and securely while quickly creating, managing and delivering
new innovative services to its subscribers. Nawras launched the second mobile
services in Oman on the 16th of March 2005 and is a venture between Qtel, the
fixed and mobile operator in Qatar; – TDC, a leading European telecom operator
in Denmark; and strong local Omani partners. Nawras brings a unique blend of
international expertise of Qtel, Qatar and TDC, Denmark and the local expertise
from a range of Omani partners. By combining the best of technology with the
best of personnel, we bring a whole new dimension of customer experience in the
mobile communications sector. (Telenity 13.03)

Back to Table of contents

3.6 Partnership With
Influential Zamil Group Expands FOX-TEK's Saudi Arabian Footprint

Toronto, Ontario’s Fiber Optic
Systems Technology, a developer of patented non-intrusive sensing systems,
announced that it has entered into a Distributor Agreement with Zamil Group, a
Saudi Arabian-based provider of industrial, commercial and consumer solutions
and services. This agreement signifies the beginning of a powerful alliance to
provide Saudi-based Oil and Gas and Petrochemical companies with FOX-TEK's
novel new approach to monitoring corrosion. FOX-TEK plans to increase the
availability of its product and service offerings within the area, with Zamil
Group playing the role of marketing, sales, engineering and support services in
the Kingdom of Saudi Arabia. A key technical expert from FOX-TEK will be stationed
in Saudi Arabia to service the region, assist in the rollout and provide
technical expertise. Zamil Group Holding Company is a family controlled global
investment company with diverse industrial, petrochemical, commercial and
consumer interests worldwide. (FOST14.03)

Back to Table of contents

3.7 Turkish Firm Orders 20
Wind Turbines

Vestas Italia has received an
order for 20 V90-3.0 MW wind turbines for a project in the Catalca region near Istanbul. The order comprises supply, installation and commissioning of the wind
turbines, including a service contract for two years. Delivery is scheduled to
begin during the summer of 2007, and the project will be completed during the
first half of 2008. The order has been placed by Ertürk Elektrik
Üretim, a Turkish company owned by the Sanko Group, which is one of the
most important industrial players in Turkey. Last year, Sanko Group started to
invest in the wind energy sector and Vestas was chosen as the preferred
supplier of wind turbines. Due to the fast economic growth that has
characterized Turkey in recent years, energy consumption has risen at an annual
rate of 7-8%, according to Eurostat 2005 statistics. At present, thermal power
plants mostly generate power production in Turkey and the country is strongly
dependent on gas imports. In order to face this growing demand for energy,
there is a need to rearrange the energy mix and to include new energy sources,
such as wind. Many Turkish companies, like Sanko are focusing more on the wind
energy sector. Turkey has Europe's second largest wind potential and may
develop this into a very significant market. The wind power plant has an
estimated annual production of 211,000 MWh, which corresponds to an annual
emission saving of more than 115,200 tons of CO2 compared with average EU
electricity, according to Vestas officials. (Vestas14.03)

Back to Table of contents

3.8 KKTCELL Selects Telenity
to Launch Converged Value Added Services Infrastructure

Monroe, Connecticut’s Telenity, a
leading provider of next generation converged services platforms and
applications for communications networks, announced that KKTCELL, mobile
operator in Northern Cyprus, has selected Telenity to provide converged value
added services including personalized ringback tone (RBT) and converged
messaging solutions to its customer base. With Telenity’s next generation
Canvas CoolRings, Personalized Ringback Tone service, commercially deployed in
its network, KKTCELL now offers its subscribers the ability to replace the
traditional ringing tones that their callers hear before a call is connected
with personalized audio clips. The service capacity has doubled within the
first two weeks of its successful launch. The existing RBT service from
Telenity can be extended in the future to support video RBT in KKTCELL’s 3G
network. Kuzey Kibris Turkcell (KKTCELL) is the leading GSM operator which
started providing its subscribers (in Turkish Republic of Northern Cyprus) with services as the 4th external subsidiary of Turkcell Communications Services.
As of the end of 2006, KKTCELL owns %75 market share in Turkish Republic of Northern Cyprus despite entering the market 4 years after its competitor.
(Telenity 07.03)

Back to Table of contents

4: ISRAEL MACRO-DEVELOPMENTS

4.1 Israel’ First Private Prison Project Gets Underway

Sources inform Globes that on 15
March Accountant General Zelekha and Bank Leumi signed a financing agreement
with Africa-Israel Investments and Minrav Holdings for the construction and
operation of Israel’s first private prison. The two companies won the tender
and the High Court of Justice dismissed petitions against the prison. The two
companies will receive $714,000 of an $11.9m grant for starting construction.
The companies will receive an additional $30m when construction is completed.
Sources involved in the project told Globes that closing the financing “was
difficult, partly because of conflicting opinion in the government concerning
the project.” The sources said the closing financing would enable construction
of the prison walls to begin immediately. The private prison will be built
near Beer Sheva as a BOT (build, operate, transfer) project. Construction
costs are estimated at $43m, a tenth of the total contract with the state. The
state will pay $405m over 25 years for operating the prison, which will house
800-1,000 prisoners. Africa-Israel and Minrav undertook to allocate 5.2 sq.m.
per prisoner, and the state will pay $49 per prisoner per day. (Globes 18.03)

Back to Table of contents

4.2 Japan to Invest $100 Million in
Jericho Agro-Industry Zone

Japanese Prime Minister Abe
announced that Japan will invest $100m in a joint Jordanian-Palestinian-Israeli
agro-industrial zone on both banks of the Jordan River near Jericho, announced
a mini-summit of the three countries hosted by in Tokyo. Abe said fostering
economics would contribute towards regional stability and that Japan wanted to play an active role in various projects, including an agro-industrial zone and an
airport in Jordan for exporting produce, as well as the training of thousands
of people in modern agricultural techniques. He plans to call on Japanese
companies to participate in tenders for Peace Valley projects. (Globes 14.03)

Back to Table of contents

5: ARAB STATE
& PAKISTANI DEVELOPMENTS

5.1 US Grants to
Support Jordanian Water Sector

The US Trade & Development
Agency (USTDA) on 15 March provided two grants worth $742,000 to support the
Kingdom’s water sector. The first grant, worth $450,000, will fund a
feasibility study, carried out by the Water Authority of Jordan, for
establishing a wastewater treatment plant to serve the southern areas of Balqa
Governorate. Towns in the area currently rely on cesspits and septic tanks to
dispose of wastewater. The USTDA-funded study will analyze wastewater
collection, treatment and effluent reuse from communities west of Salt to
determine the most appropriate technical solutions for a wastewater collection
and treatment in the area. The second $292,000 grant will finance technical
assistance programs to analyze the Aqaba Water Company’s distribution of water
from the Disi aquifer with the goal of upgrading the reliability of the
system. Jordanian Minister of Planning & International Cooperation Al-Ali
and American Ambassador Hale signed the grant agreements. The US annually allocates around $70m in technical and infrastructure development projects to support
the water sector in Jordan. USTDA, which started its activities in Jordan in 1996, provides funding for feasibility studies and orientation visits that
support the economic needs and priorities of countries around the world. In Jordan, USTDA is most active in the telecommunications, power and transportation sectors.
(JT16.03)

Back to Table of contents

5.2 US Trade With GCC Countries
Jump 8.7% to $53.8b in 2006

Saudi Arabia has become the
largest trading partner of United States as its trade valued at $36.4b in 2006
or 62% of the total. According to statistics posted on the US Census Bureau's
web site, US imports of petroleum and petroleum products from Saudi Arabia valued at $28.7b, pushing the total imports from the country to a total of
$29.4b, or 81% of total imports from the Gulf Cooperation Council (GCC)
countries.

Similarly, 96% of US imports from
Kuwait were petroleum and petroleum products. Large US imports of petroleum and petroleum products from Saudi Arabia and Kuwait resulted in trade
deficits for the US of $22.4b and $2b, respectively. US trade deficit with Oman and Bahrain stood at barely $100m each. US trade with the GCC countries jumped by 8.7% in the
first 11 months of 2006 to $53.8b from the same period in 2005, while trade
with UAE was valued at $12.2b or 21% of the total. US trade with the other GCC
member countries was valued at $9.7b as trade with Kuwait reached $5.5b, Oman, $1.7b and Bahrain, $1.0b.

On the other hand, imports of the
same products from the UAE constituted only 16% of US imports from the
Emirate. Imports of nonferrous metals and garments contributed 19% and 13%,
respectively. UAE was the largest export market of the US in the GCC, absorbing nearly half (49.1%) of US exports to the region. Major exports to
the UAE were machineries ($203m) and transport equipment ($548m) consisting
predominantly of aircraft and associated equipment and parts. The same product
groups dominated US exports to Saudi Arabia, valued at $251m (machineries) and
$180m (transport equipment). The latter, however, consisted primarily of motor
cars. These products also dominated US exports to other GCC countries,
although at much lower scale. (KT20.03)

Back to Table of contents

5.3 Bahrain to Own 80% of Gulf Air

Bahrain is set to own 80% of
Gulf Air stake by May 1, the aviation company currently equally co-owned by Bahrain and Oman. The new ownership deal, which leaves Oman with only 20% was announced by Bahrain's finance minister Shaikh Ahmed Bin Mohammad Al Khalifa on 14 March. But the
minister did not divulge further details, saying that there would be a series
of meeting to discuss the developments and the company's needs. Its board of
directors consists of eight members split equally between Oman and Bahrain. It is also not clear if the move is aimed at a complete withdrawal of Oman from Gulf Air's board, as the country is developing its own airline, Oman Air.
(TradeArabia16.03)

Back to Table of contents

5.4 Emirates Lifts Economic
Growth By 8.9%

The United Arab Emirates’ (UAE’s)
growth continues at breakneck speed, with the Arab world’s second-biggest
economy expanding 8.9% last year. Real gross domestic product (GDP), the
measure of goods and services produced at constant prices, increased as the
Gulf state pumped more oil and invested more. The UAE, owner of 8.1% of the
world’s proven oil reserves, has invested in tourism, property and financial
services as it attempts to reduce its dependence on crude exports and to create
jobs. The declared aim of the UAE’s economic policies is to secure the highest
standard of living worldwide to the UAE citizens. UAE nationals make up less
than 20% of the population, which grew 75% in the 10 years to December 2005,
according to the latest national population census. The UAE earned an average
of $65 a barrel of oil last year, up 21.5% from the previous year and $1.25
below the average New York crude contract last year. The oil and gas sector
accounted for 37% of nominal GDP, up from 35.7% in 2005, as the price of oil
rose. Nominal GDP, the measure of goods and services produced at current
prices, increased to $163b from $132b, an increase of 23.5%. The UAE earned
$48.5b from crude exports last year, representing 36% of total exports.
(BD20.03)

Back to Table of contents

5.5 UAE Residents Even Worse
Off This Year

Research by global management
consultancy Hay Group reveals that high inflation rates in the Middle East this
year will eat into pay rises. In the UAE, overall pay rises of 5% will be
stripped away by a predicted inflation rate of 7.3%, leaving workers 2.3% worse
off in real terms, the company says. "While salaries continue to rise, in
general, pay increases have been lagging behind inflation. This is causing
difficulty for companies struggling to maintain internal equity.”
"Companies are offering more competitive salary packages for new hires,
particularly in managerial and executive positions, where heightened demand for
talent from traditional expatriate markets is outstripping supply."
Meanwhile, impressive economic acceleration in India and China is having a dramatic impact on pay packets, according to the study. Extremely high
pay rises in India last year – 7.2% across the board -look set to continue into
2007, the company says. The country boasts the second highest pay increase
predictions for 2007, with hefty salary increases of 6.2% forecast across the
three job levels. Senior managers can anticipate a real rise of 6.9% with
professionals and administrators 5.9% each. India is the chief source of
management manpower in the UAE. (GulfNews13.03)

Back to Table of contents

5.6 Libya to Build First Nuclear Power Plant

On 12 March, Libya’s state run news agency JANA announced that the United States is to help Libya to build a first nuclear power plant under an agreement to be signed soon. The
Libyan parliament or General People's Committee (GPC) gave its approval on 11
March for the foreign ministry to sign the deal. The agreement aims at
establishing a nuclear station in Libya toproduce electricity, desalting water
and developing the radiochemistry performance at energy researches centre. The
draft Agreement offered by the United States to Libya covers joint research and
technical projects, as well as establishing a regional center for the nuclear
medicine, exchanging the technical expertise and encouraging the linking of the
American Libyan research and technical institutions. The draft agreement
approved by Libya on 11 March provides for Libyan students to receive training
in nuclear technology in the United States and for the establishment in Libya of a regional centre for nuclear medicine, the news agency said. (Mena Report 13.03)

Back to Table of contents

5.7 US to Give Pakistan $750 Million for Tribal Areas Uplift

The United States is to give Pakistan $750 over five years to develop its troubled tribal areas bordering Afghanistan. US Assistant Secretary of State for South & Central Asian Affairs Boucher
announced the funding after holding talks with President Musharraf. The Bush
administration will now seek the approval of Congress for the aid. The
Pentagon was also asking the US Congress for $75m to upgrade the Frontier
Corps, Pakistan's paramilitary border force that has borne the brunt of the
fight against militants. Islamabad launched military operations in 2003 to
clear the tribal areas of hundreds of Al Qaeda and Taliban militants who fled Afghanistan after the fall of the Taliban regime in late 2001. But after the deaths of
hundreds of soldiers and around 1,000 militants it signed peace deals with
tribal elders and militants in Waziristan. US officials in Afghanistan say attacks on foreign forces have since increased. US Vice President Cheney
paid a surprise visit to Musharraf in February, during which he urged him to
crack down on militant safe-havens in the tribal areas, saying that the Taliban
and Al Qaeda were regrouping there. (BR15.03)

Back to Table of contents

6: TURKISH
& CYPRIOT DEVELOPMENTS:

6.1 Turkey’s Foreign Debts Fall to $36.1 Billion

Turkey’s short-term foreign debts
fell by 13.9% in January 2007 when compared to the end of 2006 and dropped from
$41.9b to $36.1b. According to the Central Bank data, Turkey’s short-term foreign debts which were $41.984b at the end of 2006 decreased by 13.9%
at the beginning of this year and totaled $36.127b. The short-term debts
reduced by $5.857b during this period. In a period during which the Turkish
Lira appreciated, the short-term foreign borrowing as an inexpensive financing
method might become an expensive borrowing due to the exchange rate risk caused
by the fluctuations in the exchange rates. In January 2007, the banking sector
borrowed $4.781b less than the figure at the end of 2006. The short-term
borrowing amount of the banking sector fell from $19.830b to $15.049b. This
year, the banking sector made borrowings worth $7.189b in foreign currency
credits, $2.756b in foreign currency accounts, $3.350b in bank accounts and
$1.754b in YTL deposits. During this period, no decrease in the short-term
foreign debts of the private sector was experienced as much as those in the
banking sector. In January 2007, the private sector made borrowings YTL 1.009b
less when compared to the end of 2006. Thus, the short-term foreign debts of
the private sector reduced from $19.830b to $18.582b. A great part of the
debts of the private sector were the commercial credits. The sector made
borrowings worth $17.163b via commercial credits and $12.166b due to imports debts.
Out of the debts of the private sector, $4.997b originated from the exports
made in cash. The Central Bank’s short-term foreign debts dropped by $67
million and fell from $2.593b to $2.496b. The Central Bank’s short-term
foreign currency debts stemmed from the deposits with letter of credit.
(EkoTürk15.03)

Back to Table of contents

6.2 Turkish High-Speed Train
Trials Set To Start On April 23

The high-speed train will begin
running speed trials between capital Ankara and central Anatolian city of Eskisehir on April 23rd, said executives of the Turkish State Railways (TCDD). The trial
travels will be made by four cars, hired from Italy. According to the
executives, the trials will first be carried out at lower speeds but the speed
of the train will be raised in time. The tests will continue for four months
until the train reaches 250 km/h speed. At first, the high-speed train will be
used by foreign railway engineers. Later, TCDD train operators will start
using the 12 high-speed trains to be purchased from Spanish CAF company. The
high-speed trains are to start carrying passengers between Ankara and Eskisehir towards the end of 2007. The train will travel between the two cities in one
hour and 15 minutes. On the other hand, the second part of the project,
covering the route between Eskisehir and Istanbul, has not been implemented yet
due to some delays in the tender process. After the firm, awarded with the
tender, completes credit talks, the Eskisehir-Istanbul line will be constructed
within 24 months. The Ankara-Istanbul high-speed train journey is expected to
be launched in 2009 and it will take only three hours. (EkoTurk10.03)

Back to Table of contents

7: GENERAL
NEWS AND INTEREST

*ISRAEL:

7.1 Passover
Observance Will Begin on 2 April

On Monday night, 2 April, Israel and world Jewry begin the week long celebration of the Passover (Pesach) holiday.
One could say that Pesach is indeed the "Independence Day" or
"National Liberation Holiday" of the Jewish People, since it marks
the liberation of the Jewish People from slavery in Egypt by the hand of G-d.
It is central to Jewish identity and Jewish practice, since the Exodus and life
in the wilderness led to the true birth of the Jews as a distinct entity.
Jacob and Josef came to Egypt numbering 70 souls and Moses led 600,000 out
after the defeat of Pharaoh. Probably the most significant observance related
to Pesach involves the removal of chametz (or leaven) from Jewish homes
and businesses. This commemorates the fact that the Jews leaving Egypt were in a hurry and did not have time to let their bread rise. Even converts to
Judaism relate to the Exodus as their own ancestors as having left Egypt. It is also a symbolic way of removing the "puffiness" (arrogance, pride)
from our souls. Instead, a special non-leavened bread called matzah is
consumed, among a myriad of other special holiday dishes.

On the first night of Pesach
(first two nights for traditional Jews outside Israel), there is a special
family meal filled with ritual to remind Jews of the significance of the
holiday. This meal is called a seder, from a Hebrew root word meaning
"order," because there is a specific set of information that must be
discussed in a specific order. The seder is full of symbolism, all
pointing to one salient point: that Jews all remember that G-d took us out of
slavery in Egypt to freedom to observe his Torah. Pesach lasts for seven days
(eight days outside of Israel). The first and last days of the holiday (first
two and last two outside of Israel) are days on which no work is permitted.
Work is permitted on the intermediate days. These intermediate days on which
work is permitted are referred to as Chol Ha-Mo'ed, as are the
intermediate days of Sukkot. Though work is permitted, many take vacations and
a full work environment returns only after the holiday. Passover ends on 9
April in Israel, 10 April in the Diaspora.

Back to Table of contents

7.2 Israel Goes Over to Daylight Savings Time

Israel will shortly turn its clocks to Daylight Saving
Time. On Friday, March 30, 2007, when local standard time is about to reach
2:00 AM, clocks will be turned forward 1 hour to 3:00 AM local daylight time
instead. Daylight Saving Time will end on Sunday, September 16, 2007 at 2:00 AM,
clocks will be turned backward 1 hour to 1:00 AM local standard time instead.

Back to Table of contents

7.3 Tel Aviv Templar Building Demolished

Just when the fascinating history
of Tel Aviv’s 19th century Templar neighborhood of Sarona is being related to
and its tourist potential is becoming apparent, one of the buildings has been
demolished. This month, the Tel Aviv municipality legally implemented an old
plan to demolish the Koutine House at 23 David Elazar St. for the construction
of road tunnel to the Kirya project. The adjacent historic building was also
demolished. Koutine House was one of the first structures built by the
Templars in the area and was part of the winery. In 1948, Beit Koutine was the
first headquarters of the Israel Air Force. The Society for the Preservation
of Historical Sites central district said though Beit Koutine was slated for
preservation, a unilateral act by a Tel Aviv municipal engineer removed from
the list of buildings to be preserved. Had the building been renovated, it
would have had immense value, given its history as the place where the Air
Force was founded. (Globes 13.03)

Back to Table of contents

7.4 Israel Based Islamic Movement Slams Arab Gay Meeting

A conference of Israeli-Arab
lesbians, scheduled to be held in Haifa at the end of March, has raised the ire
of Israel's Islamic Movement leaders. In early March, the movement's heads
published a statement calling on "all respectable people from all
communities and streams to stand up against preaching sexual deviance among our
women and girls." The Haifa-based Asawat, an Israeli-Arab gay women's
organization, most of whose 85 members hail from Israel and the Palestinian
territories, has called the March 28 conference to mark its five-year
anniversary. The Islamic Movement statement also said, "We must not let
this fatal cancer spread in our community." Last year, the Southern
Islamic Movement cooperated with Orthodox Jewish groups in protesting the Gay
Pride parade planned for Jerusalem. (Haaretz12.03)

Back to Table of contents

*REGIONAL:

7.5 Birthday of Muhammad – Milad al-Nabi to be Observed
in 31 March

Milad al-Nabi is the celebration
of the birthday of Muhammad, the final prophet of Islam. The Prophet was born
on the twelfth day of Rabi-ul-Awwal, the third month of the Muslim year. In
2007, this will fall on 31 March. His death anniversary also falls on the same
day. The word ' barah ' stands for the twelve days of the Prophet's sickness.
During these days, sermons are delivered in mosques by learned men, focusing on
the life and noble deeds of the Prophet. Shi'a Muslims and most Sunni Muslims
celebrate the Mawlid with great dedication; processions are held; homes or
mosques are decorated; delicious food is prepared and distributed; stories
about the life of Prophet Muhammad are narrated by learned people of Islam and
poems are recited by children. Children receive a special sweet for the
occasion and there is plenty of revelry to commemorate this holy day. Shi'a
Muslims celebrate this day on the 17th of Rabi'-ul-Awwal, coinciding with the
birth date of the sixth Imam, Ja'far al-Sadiq. This date will fall on 5
April. Wahhabi/Salafi do not celebrate at all as they consider it to be an
innovation and against Islam.

There is a difference of opinion
about whether the Milad al-Nabi should be a time of celebration. There is
evidence that the Prophet, his Companions, and the early followers after them
did not celebrate or otherwise observe his birthday. On the contrary, Muhammad
was careful to warn his people not to imitate other faiths, whose followers
elevated their prophets and added to the religion what was not in the original
teachings. Those who disagree claim that although not practiced in the early
years of Islam, the remembrance of the Prophet's birthday is a "good
innovation." They see it as a time to read the Koran and remember the
life, teachings, and example of the Prophet Muhammad.

Back to Table of contents

7.6 World's Tallest Clock
Tower to be Built in Mecca

The Islamic holy city of Mecca is
soon to become home to the world’s tallest clock tower following the
announcement of the decision made by the Custodian of the Two Holy Mosques,
King Abdullah bin Abdulaziz, to construct the Mecca clock tower. The clock is
to be placed on top of the fifth tower of the King Abdulaziz Endowment project
opposite the Holy Mosque at 380 meters high, making it the world's highest
clock. The four sides of the clock will be adorned by the name of Allah. The
project will use four clock faces for each side of the tower, including 2 main
clocks that are 80 meters high and that will adorn the name of Allah, and that
will be 65 meters wide with a 39-meter diameter. The other two clocks will be placed
65 meters high and will be approximately 34 meters wide with a 25-meter
diameter. There will be an elevator to take visitors to the surrounding
balcony below the four clocks. The project is still tentative and the company
that will build and install the clock and the cost of the project are yet to be
determined. The Saudi Bin Ladin Group is in charge of developing the King
Abdulaziz Endowment project and may be assigned to oversee or coordinate the
details of building the clock. The project is expected to take six months to
complete.

The King Abdulaziz Endowment
project, which overlooks the Holy Mosque and has been chosen as the site of the
world's highest clock, is one of the world's largest construction projects.
The project was rated the largest architectural building in view of the total
area, which exceeds 1.4 million square meters. Designed using the Islamic
architecture, it contains 7 adjacent towers, with 6,000 housing units, and has
over $1.6b in investments. (AAA14.03)

Back to Table of contents

8: ISRAEL LIFE SCIENCE NEWS

8.1 Endogun Medical
Systems Launches Human Clinical Study for Prolapse Repair

Endogun Medical Systems announced
that it has launched a human clinical study for the treatment of Pelvic Organ
Prolapse. The clinical study is being performed in leading medical centers in Western Europe. Endogun was granted FDA clearance in September 2006 to market its first
soft-tissue attachment product in the USA. The company is now working towards
obtaining the CE-Mark for this product. The launch of the clinical study is a
key milestone towards bringing Endogun’s Prolapse product to market. The
company believes that their solution has significant advantages over what is
available today, for patients, physicians, payors and providors, as a result of
the ability to increase the safety level and reduce the overall costs
associated with prolapse repair. Pelvic Organ Prolapse occurs in women, often
following births or excess weight, and develops as a result of weakening of the
pelvic muscles which support internal organs (womb, bladder, rectum and
vagina). Associated symptoms include discomfort, a feeling of heaviness, pain,
and the condition may carry the risk of infection. Endogun has completed two
rounds of financing, led by Pontifax Funds. Kiryat Shmona, Israel’s Endogun (http://endogun.com) has developed novel
implantable solutions for minimally invasive surgery markets that require safe
and effective fastening of internal tissue. Tissue anchors which are easy to
insert and removable create a facile effective solution with an excellent
safety profile. (Endogun12.03)

Back to Table of contents

8.2 Compugen Announces Second
Diagnostic Agreement With Biosite Incorporated

Compugen announced a second
agreement with Biosite Incorporated of San Diego, California, for the
development and commercialization of immunoassay diagnostic products. Under
the new agreement, in addition to expanding the number of potential diagnostic
biomarkers available for selection by Biosite, Biosite obtains access to Compugen’s
increasing inventory of immunoassay biomarkers. Furthermore, the collaboration
is expanded to cover cardiovascular, oncology and additional diagnostic areas.
As with the initial agreement, Compugen will receive milestone payments and
royalties from the sale of any products emerging from the collaboration.
Compugen retains the exclusive right to therapeutic applications of both the
targets and associated antibodies. The collaboration combines Biosite's
expertise in both rapid, high-affinity antibody development and successful
commercialization of proprietary testing platforms for single and multiple
biomarker assays with Compugen's unique discovery capabilities based on its
comprehensive predictive analysis of the human proteome and related discovery
engines.

TEL AVIV, Israel’s Compugen’s (http://www.cgen.com) mission is to
be the world leader in the discovery and licensing of product candidates to the
drug and diagnostic industry. The Company’s powerful discovery engines enable
the predictive discovery of numerous potential therapeutics and diagnostic
biomarkers. This capability results from the Company’s decade-long pioneering
efforts in the deeper understanding of important biological phenomena at the molecular
level through the incorporation of ideas and methods from mathematics, computer
science and physics into biology, chemistry and medicine. To date, Compugen’s
diagnostic and therapeutic product discovery efforts and its initial discovery
engines have focused mainly within the areas of cancer, immune-related and
cardiovascular diseases. (Compugen 07.03)

Back to Table of contents

8.3 BioLineRx In-Licenses
Novel Drug Delivery System for the Treatment of Solid Tumors & Bone
Infections

BioLineRx signed worldwide
exclusive license agreements with Jerusalem, Israel’s PolyGene (http://www.poly-gene.com) and Efrat
BioPolymers of Efrat, Israel for the development and commercialization of their
proprietary polymer drug delivery system designed to improve the efficacy,
safety and ease of administration of a variety of drugs. Financial terms of
the license were not disclosed. BioLineRx will continue the development of the
proprietary system for delivering chemotherapy to solid tumors (designated
BL-4010) and for delivering antibiotics to bone and other infections
(designated BL-4011). BioLineRx plans to submit the project for funding by the
Israeli Office of the Chief Scientist through BioLine Innovations Jerusalem
(BIJ) under the National Biotech Grant received in November 2004.

BL-4010 and BL-4011 are based on
a biodegradable polymer, developed by Professor Domb, from the Faculty of
Medicine, Hebrew University of Jerusalem and Founder and Chief Scientist of
PolyGene and Efrat BioPolymers, which allows the administration of therapeutic
agents to the site of the disease while avoiding systemic side effects. The
technology is adaptable to a variety of therapies, enhances drug stability and
was shown to be safe in preclinical trials. Unlike currently available drug
delivery polymers, the polymer is not water-soluble, therefore allowing slow
release of the drug from the polymer at a constant rate at the site of
injection. Earlier stages of the development of BL-4010 received funding from the
Canada-Israel Industrial Research and Development Foundation (CIIRDF).

Jerusalem, Israel’s BioLineRx (http://www.biolinerx.com), a clinical
stage drug development company traded on the Tel Aviv Stock Exchange (BLRX), is
dedicated to building a robust pipeline of promising therapeutics for unmet
medical needs. The Company’s current product pipeline consists of 10
compounds, 3 of which are in or impending clinical trials. Its lead product,
BL-1020, for the treatment of schizophrenia, successfully completed Phase 1
clinical trials; and BL-1040, for the treatment of damaged heart tissue post
myocardial infarction, is expected to enter the clinic in the second quarter of
2007. Additional products under development include compounds for the
treatment of cancer and CNS, cardiovascular, metabolic, infectious and
autoimmune diseases. (BioLineRx12.03)

Back to Table of contents

8.4 Mazor SpineAssist
Delivers 98% Reduction in Surgeon Radiation Exposure

According to a new study,
surgeons using the Mazor SpineAssist miniature robotic surgical guidance system
experience up to a 98% decrease in x-ray exposure compared to those using
conventional minimally invasive techniques. The study also demonstrated that
the SpineAssist’s surgical guidance enhanced implant placement precision 2.5
times over freehand placement. The research on cadavers was conducted at the
Cleveland Clinic, Texas Back Institute, Johns Hopkins University and UCLA Medical Center with 15 spine surgeons from throughout the US. It utilized minimally
invasive and conventional techniques to place a total of 217 screws for spinal
pedicular fixation in lumbar and thoracic fusion procedures. One group of
surgeons worked with the guidance of the SpineAssist system, while another
group performed the same procedures freehand. Radiation exposure dosimeters
indicated that surgeons operating conventionally were exposed to radiation
levels an average of 51 times greater than the surgeons using SpineAssist. At
the same time, with SpineAssist’s guidance, placements deviated by an average
of only 1.1 mm from surgical plan site. Placements made using freehand
techniques deviated an average of 2.8 mm. which is 2.5 times higher than with
SpineAssist’s guidance. Further, the SpineAssist surgeon group, consisting of
experienced and inexperienced users, differed from one another in screw
placement by only 0.5 mm, suggesting that the device enhances implant placement
across all levels of surgical experience.

The SpineAssist system enables
surgeons to plan precise locations for spinal fusion screw placement and
related surgical interventions. It consists of a miniature robot, a patented Hover-T Bridge, which allows the robot to glide freely above the patient’s spine, and a
workstation running advanced surgical planning software. Headquartered in
Caesarea Israel, Mazor Surgical Technologies’ (http://www.mazorst.com)
SpineAssist platform received FDA clearance in 2004, followed by Hover-T Bridge approval in 2005. International investors include Alice Ventures, Johnson
& Johnson DC, Israel HealthCare Ventures, Shalom Equity Fund, Dor Ventures
and Proseed. (Mazor 13.03)

Back to Table of contents

8.5 Obecure Initiates Phase
II Weight Gain Prevention Study for Patients Taking Zyprexa

Obecure has conducted the first
initiation visit for its Phase II clinical trial to evaluate the efficacy of
the company’s OBE101 drug candidate for prevention of weight gain in patients
treated with Zyprexa, (olanzapine) an antipsychotic medication. The study is a
double-blinded, placebo-controlled multicenter trial in about 78 subjects over
a period of four months. In January of this year, Obecure commenced another
Phase II study aimed at evaluating the efficacy of OBE101 for weight loss in
obese patients in the U.S. OBE101’s use for weight management, alone or in
combinations, is protected by worldwide patent-pending applications including
in the U.S. The idea for using betahistine in weight management is based on
breakthrough research carried out in obese patients by Dr. Barak, a nutritional
and internal medicine expert who serves as Obecure's Chief Scientific Officer.
Dr. Barak’s research successfully demonstrated the key role that histamine
receptors and OBE101 play in controlling appetite and the desire for fat
consumption. In a double-blinded pilot study, involving 20 human subjects over
four weeks, OBE101 reduced both calorie and fat intake in the treatment group,
resulting in significant weight loss versus placebo.

Ramat Gan, Israel’s Obecure (http://www.obecure.com) is a
biopharmaceutical company dedicated to the development of weight management
drug therapies. The Company is currently pursuing the clinical development of
its lead compound OBE101 for three indications: (i) general obesity and (ii)
weight gain associated with anti-psychotic drug therapy and (iii) as adjunct to
statin therapy for improving blood lipid profiles. In addition, the Company is
evaluating additional proprietary analogues for both weight gain and weight
loss in preclinical models. (Obecure13.03)

Back to Table of contents

8.6 Endogun Medical Systems
Launches Human Clinical Study for Prolapse Repair

Endogun Medical Systems has
launched a human clinical study for the treatment of Pelvic Organ Prolapse. The
clinical study is being performed in leading medical centers in Western Europe. Endogun was granted FDA clearance in September 2006 to market its first
soft-tissue attachment product in the USA. The company is now working towards
obtaining the CE-Mark for this product. Pelvic Organ Prolapse occurs in women,
often following births or excess weight, and develops as a result of weakening
of the pelvic muscles which support internal organs (womb, bladder, rectum and
vagina). Associated symptoms include discomfort, a feeling of heaviness, pain,
and the condition may carry the risk of infection. Although estimates suggest
that close to 7 million women are in need of prolapse repair, only
approximately 500,000 procedures are performed annually in the USA and Europe combined. Direct costs associated with these surgical procedures reach hundreds of
millions of dollars. Current surgical offerings are significantly invasive
requiring substantial skill. Endogun’s solution is simple and is performed
entirely in a minimally invasive procedure. Kiryat Shmona, Israel’s Endogun (http://endogun.com) has developed novel
implantable solutions for minimally invasive surgery markets that require safe
and effective fastening of internal tissue. Tissue anchors which are easy to
insert and removable create a facile effective solution with an excellent
safety profile. (Endogun13.03)

Back to Table of contents

8.7 Impliant Receives CE Mark
Approval for the TOPS-on-Fusion System

Impliant (http://www.impliant.com) announced that its
wholly owned subsidiary, Impliant Ltd., has received CE Mark approval for its
patented TOPS-on-Fusion System. This is the world's first total posterior
motion preservation device that integrates lumbar fusion with total posterior
arthroplasty at two adjacent levels to treat spinal stenosis with or without
facet arthrosis and spondylolisthesis. In clinical trials in South Africa, Belgium and Turkey, the TOPS-on-Fusion System has demonstrated effectiveness in
alleviating pain stemming from degeneration of the posterior elements. The
TOPS-on-Fusion System is the second in a family of products at Impliant that
provide surgeons with a broad range of alternatives to traditional spinal
fusion. The device is indicated for L3-L5 and L4-S1 patients where the
inferior segment is fused and the superior level is treated with total
posterior arthroplasty. Impliant is applying cutting-edge materials and
biomechanical engineering techniques to develop a new class of spine
arthroplasty devices that target more than 400,000 patients worldwide who
undergo fusion surgery and could benefit from a total posterior arthroplasty
solution. Impliant's TOPS System, a mobile posterior device, is designed to
stabilize but not fuse the affected vertebral level to alleviate pain stemming
from spinal stenosis with or without degenerative facet arthrosis and
spondylolisthesis. Following a laminectomy and medial facetectomy, the device
is affixed to the spine via four pedicle screws using a standard posterior
surgical approach. Impliant is a privately held company engaged in the
development of novel spine arthroplasty solutions for motion preservation. The
company is currently developing the TOPS System, which is designed to alleviate
pain resulting from degenerative facet arthrosis, spondylolisthesis and spinal
stenosis by stabilizing but not fusing the affected vertebral level. Impliant
is headquartered in Princeton, NJ with research facilities located in Ramat Poleg, Israel. (Impliant14.03)

Back to Table of contents

8.8 Clinical Trial Finds
MindFit Software Significantly Improves Short-Term Memory

Against conventional wisdom, the
computer training in MindFit cognitive skill assessment and training software,
created by CogniFit (http://www.cognifit.com),
was found to improve short-term memory, spatial relations and attention focus –
all skills used in driving and other daily activities that maintain our
independence as we age. The trial was conducted at the Tel-Aviv Sourasky
Medical Center of Tel- Aviv University in Israel, where researchers are taking
a leading role in the study of age-related disorders. Each study participant
was randomly assigned to spend 30 minutes, three times a week during the course
of three months at home, using either MindFit or sophisticated computer games.
While all study participants benefited from the use of computer games, MindFit
users experienced greater improvement in the cognitive domains of spatial short
term memory, visuo-spatial learning and focused attention. Additionally,
MindFit users in the study with lower baseline cognitive performance gained
more than those with normal cognition, showing the potential therapeutic effect
of home-based computer training software in those already suffering the effects
of aging or more serious diseases. MindFit software helps to assess and build
overall cognitive skills for baby boomers, seniors and people of all ages. In
other research studies, MindFit has helped users to improve their short-term
memory by 18%. The comprehensive cognitive training program assesses, trains
and enhances cognitive skills–including memory, focus, learning and
concentration–and safeguards overall cognitive vitality, an overall concept
patented by CogniFit. Yokneam, Israel’s CogniFit is a pioneer in the
assessment and training of human cognitive abilities. The company focuses on
developing advanced software tools for consumers and businesses that assess and
enhance basic cognitive skills such as memory, perception and attention. Its
initial award-winning product offerings are DriveFit and MindFit.
(CogniFit17.03)

Back to Table of contents

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Magal Security Systems Receives $3 Million in
New Orders for Projects in Israel

Magal Security Systems recently
received new orders from Israeli customers amounting to approximately $3m. The
new orders include two turnkey projects to secure civilian and government sites
in Israel. The orders cover a broad spectrum of the Company's products and
security platforms and include one of the Company's latest products, the
state-of-the-art Dreambox intelligent video, audio and sensors management
platform. The orders are expected to be supplied during 2007. The first order
is for a turnkey project to supply an intrusion-detection and
video-surveillance systems to protect a sensitive site in Israel. As part of the project, Magal will implement its Vibration Intrusion Detection
System and its Magnet Command & Control System. The second order is an
extension of an existing order for a total of over $1m for their advanced
DreamBox video content analysis solution. Yahud, Israel based Magal Security
Systems (http://www.magal-ssl.com) is
engaged in the development, manufacturing and marketing of computerized
security systems, which automatically detect, locate and identify the nature of
unauthorized intrusions. Magal also supplies video monitoring services through
Smart Interactive Systems, Inc., a subsidiary in the U.S. (Magal08.03)

Back to Table of contents

9.2 CANTV Chooses RADCOM's
Omni-Q for Network Service and Revenue Assurance Monitoring

RADCOM announced that CANTV, Venezuela's tier 1 carrier, selected Omni-Q for end-to-end monitoring of its signaling and
Voice over IP networks. CANTV will deploy the distributed system to facilitate
fault management, service performance analysis, troubleshooting and
pre-mediation. The Omni-Q system purchase is comprised of multiple R70s, the
highest performance probe in the industry. The total solution is fully
scalable and enables easy monitoring of all network activity. Omni-Q detects
and analyzes voice, video and fax calls. It captures and reports signaling
information, quality of service metrics and perceived call quality. Tel Aviv, Israel’s RADCOM (http://www.RADCOM.com) develops,
manufactures, markets and supports innovative network test and service
monitoring solutions for communications service providers and equipment
vendors. The company specializes in Next Generation Cellular as well as Voice,
Data and Video over IP networks. Its solutions are used in the development and
installation of network equipment and in the maintenance of operational
networks. (RADCOM08.03)

Back to Table of contents

9.3 fring the First to Publicly
Launch 3rd Party VoIP Application on S60 2nd and 3rd Edition on Symbian OS

fring officially launched its
free, mVoIP (mobile VoIP) service for S60 devices. Developed by Nokia, S60 is
the world’s leading smartphone software, as Nokia alone has shipped
cumulatively over 84 million S60 based devices by the end of 2006. fring is a
light downloadable mobile phone application enabling anyone with a compatible
handset to make free calls and text messages or “chat” to other fring users in
addition to Skype, Google Talk and MSN contacts. Used in more than 140
countries only three months after launch, fring is now available for S60
devices via download from http://www.fring.com.
S60 offers mobile users an easy-to-use and intuitive user interface, a good
inter-working application suite, and a rich application-development
environment. fring uses 3G mobile networks to transmit VoIP data; fringsters
simply use the data within their existing subscription agreement. The service
can also connect over Wi-Fi at home, in the office or at the many “hot spot”
cafes; these calls consume neither voice nor data air time. fring is a mobile
Voice over Internet Protocol (mVoIP) application that allows users to make free
calls over mobile and cellular data networks or a Wi-Fi connection.
Headquartered in Tel Aviv, Israel, fringland is a privately-held mobile
application developer company. It is dedicated to the concept that people
should have the benefits of the internet combined with the user-culture of
mobile telephony. fring is dedicated to giving consumers simultaneous freedom
of speech and freedom of movement. (fring12.03)

Back to Table of contents

9.4 Mellanox Technologies
Delivers Microsoft Logo Qualified InfiniBand Adapters for Windows

Mellanox Technologies announced
the immediate availability of InfiniBand adapters that have passed Microsoft
Windows Hardware Quality Labs testing for Microsoft Windows Server 2003 and
Windows Compute Cluster Server 2003 operating systems. With this
accomplishment, Mellanox 20Gb/s InfiniBand adapters, known for their
industry-leading high-bandwidth, low-latency and low CPU overhead
characteristics, now carry the “Designed for Windows” logo from Microsoft. The
WHQL-qualified InfiniBand stack for Microsoft Windows Server 2003 and Windows
Compute Cluster Server 2003 will be available from Mellanox’s web site (http://www.mellanox.com) and from other
leading InfiniBand system providers in the future. Mellanox Technologies is a
leading supplier of semiconductor-based, high-performance, InfiniBand
interconnect products that facilitate data transmission between servers,
communications infrastructure equipment, and storage systems. The company’s
products are an integral part of a total solution focused on computing, storage
and communication applications used in enterprise data centers,
high-performance computing and embedded systems. In addition to supporting
InfiniBand, Mellanox's next generation of products support the industry-standard
Ethernet interconnect specification. Founded in 1999, Mellanox Technologies is
headquartered in Santa Clara, California and Yokneam, Israel. (Mellanox12.03)

Back to Table of contents

9.5 NTT West Deploys
Broadband Networks in Okinawa Using Alvarion's BreezeACCESS VL

Alvarion announced that NTT West
Corporation Okinawa Branch Group has successfully deployed the multiple
broadband networks in Okinawa using its market leading BreezeACCESS VL system.
The deployment came after the request by the Okinawa Prefecture to the NTT West
Okinawa Branch Group. Building on the ongoing and long term relationship
between the two parties, NTT WEST Okinawa Branch Group adopted the VL at 4.9
GHz to answer its Tier 1 carrier requirements for offering wireless broadband
services and fast Internet access to residences and municipalities on the
Okinawa islands of Tokashiki, Zamami and Aka. BreezeACCESS VL’s advanced
features such as NLOS operation resulting from long experience of OFDM
technology implementation, extended reach of more than 30 kilometers, high
capacity of up to 54 Mbps, encryption, and quality of service (QoS), enable
carriers, mobile operators, ISPs, enterprises and other service providers to
offer triple play services to both business and residential subscribers.
Operating in the 5 GHz bands, VL supports great flexibility in frequency
planning with its 20 MHz channel spacing, automatic clear channel selection
(ACCS) and built-in spectrum analyzer, which monitors and avoids noise on any
given channel. With more than 3 million units deployed in 150 countries,
Alvarion (http://www.alvarion.com) is
the world’s leading provider of innovative wireless broadband network solutions
enabling Personal Broadband to improve lifestyles and productivity with
portable and mobile data, VoIP, video and other services. Leading the market
with the most widely deployed WiMAX system in the world, Alvarion is leading
the market to Open WiMAX solutions with the most extensive deployments and
proven product portfolio in the industry covering the full range of frequency
bands with both fixed and mobile solutions. (Alvarion12.03)

Back to Table of contents

9.6 Optibase Provides an IPTV
Carrier-Grade Headend for ON Telecoms, Greece

Optibase announced that ON
Telecoms, an IPTV provider in Greece, has selected Optibase’s IPTV headend
equipment to deliver local and satellite television channels to its
subscribers. Optibase provided its carrier-grade streaming platforms, MGW
5100, which are controlled and monitored using Optibase Cluster Manager. Herzliya, Israel’s Optibase (http://www.optibase.com)
provides professional encoding, decoding, video server upload and streaming
solutions for telecom operators, service providers, broadcasters and content creators.
The company’s platforms enable the creation, broadband streaming and playback
of high quality digital video. Optibase’s breadth of product offerings are
used in applications, such as: video over DSL/Fiber networks, post production
for the broadcast and cables industries, archiving; high-end surveillance,
distance learning; and business television. (Optibase12.03)

Back to Table of contents

9.7 ECI Telecom Unveils
Smallest Multi-ADM64 Multi-Service Aggregation Platform for Metro Networks

ECI Telecom introduced the XDM-300,
the smallest Multi-ADM64 multi-service aggregation platform for metro access,
metro edge, and wireless backhaul networks. With its high flexibility,
capacity and small footprint, the XDM-300 is the most cost-effective
multi-service aggregation solution for fast growing applications such as
wireless backhaul and Metro Ethernet services. It provides an optimized
migration path from TDM to Ethernet based services and from 2.5G to 10G
networks. The high-density XDM-300 supports high-performance MPLS, Carrier-Class
Ethernet, SDH /SONET, PDH, ATM and CWDM/DWDM services. As a member of the XDM
product family, the XDM-300 cards are fully interchangeable and compatible with
the XDM-50 and XDM-100. Furthermore, the XDM-300 enables in-service smooth
migration from STM-16/OC-48 to STM-64/OC-192 and full scalability from
multi-ADM1/4 to multi-ADM-64. The XDM-300’s ability to aggregate multiple
sub-networks within a single shelf helps to eliminate the need to use multiple
interconnected elements at the site, and provides carriers with increased
deployment flexibility. In addition, smaller multi-service optical metro
platforms, like the XDM-300, offer operators lower entry point costs, and help
conserve OPEX and CAPEX as they migrate to higher capacity networks. Petah Tikva, Israel’s ECI Telecom (http://www.ecitele.com)
delivers innovative communications platforms to carriers and service providers
worldwide. ECI provides efficient platforms and solutions that enable customers
to rapidly deploy cost-effective, revenue-generating services. (ECI
Telecom13.03)

Back to Table of contents

9.8 ECI Telecom's Hi-FOCuS-5
MSAN First to Feature Virtual Routing in the Access Network

ECI Telecom introduced the first
access platform with virtual routing capabilities enabling Layer 3 VPN
applications. The L3 VPN-like capabilities allow service providers to offer
cost-effective per-service granularity to their business, residential and
wholesale customers. Per-service segmentation enables operators to provide flexible
business models and Service Level Agreements (SLAs) for voice, data and video
applications. In addition, virtual routing in the access portion of the
network provides OPEX and CAPEX optimization by freeing expensive ports in the
aggregation and edge layers. Current Analysis has ranked ECI’s Hi-FOCuS-5 as
the top DSLAM broadband access platform based on five major buying criteria:
scalability, standards, capacity, QoS support and pricing. With virtual
routing, the Hi-FOCuS-5 MSAN integrates all major voice, data and video network
services onto a single high-bandwidth platform, over either copper or fiber
technologies. In addition to virtual routing, the Hi-FOCuS-5 introduces
enhanced IP capabilities, including improved unified network management, resiliency,
security and expanded ability to handle a greater number of subscribers. Petah Tikva, Israel’s ECI Telecom (http://www.ecitele.com)
delivers innovative communications platforms to carriers and service providers
worldwide. ECI provides efficient platforms and solutions that enable
customers to rapidly deploy cost-effective, revenue-generating services. (ECI
14.03)

Back to Table of contents

9.9 Pointer Telocation
Receives a $750,000 Products Order

Pointer Telocation received an
order for products worth $750,000 to be supplied in 2007. The order was
received from Latin America customer for products to be installed in the cars
of new subscribers. Pointer's business partner in Latin America provides SVR
services based on Pointer's technological infrastructure. Givatayim, Israel’s Pointer Telocation (http://www.pointer.com) provides
range of services to insurance companies and automobile owners, including
road-side assistance, vehicle towing, stolen vehicle retrieval, fleet
management and other value added services. Pointer Telocation provides
services, for the most part, in Israel, through its subsidiary Shagrir and in Argentina and Mexico through its local subsidiaries. Independent operators provide similar services
in Russia and Venezuela utilizing Pointer's technology and operational
know-how. (Pointer14.03)

Back to Table of contents

9.10 Tradertools Integrates
GigaSpaces Software Into its Online eFX Trading Platform, STPlatform

GigaSpaces Technologies and TraderTools,
headquartered in New York, have signed an OEM agreement for the integration of
GigaSpaces' infrastructure software into TraderTools' STPlatform order
management and data distribution solution for the electronic Foreign Exchange
(eFX) financial services markets. Under the terms of the agreement,
GigaSpaces' platform for the development of high-performance, low-latency,
distributed enterprise applications is to be embedded in TraderTools'
.NET-based STPlatform. STPlatform is a comprehensive Straight-Through
Processing platform designed to facilitate more profitable trading in a variety
of Foreign Exchange (FX) and Money Market (MM) instruments. It includes
components for streaming executable rates, managing a global order book,
executing FX and MM deals online and providing a real-time messaging
architecture and an in-memory data grid. By integrating the GigaSpaces
infrastructure software, TraderTools expects to shorten development time while
providing differentiating capabilities to STPlatform, such as enhanced
scalability and performance. Both companies are confident that the combined
solution will meet the needs of large financial institutions experiencing rapid
customer growth. Herzliya, Israel’s GigaSpaces (http://www.gigaspaces.com) provides a
single infrastructure software platform for application scalability and
performance. GigaSpaces' unique approach enables developers to write their
business logic as if writing to a single computer and then seamlessly scale out
the application linearly anywhere, and on-demand. It is targeted at
applications characterized by high-volume transaction and data processing and
low transaction latency requirements and provides an alternative to Web
Services for implementing high performance and scalable service-oriented
architectures. (GigaSpaces14.03)

Back to Table of contents

9.11 Tower
Semiconductor Begins Production of Zoran ICs on 0.16 Micron Manufacturing
Process

Tower Semiconductor announced
that it has begun manufacturing additional Zoran Corporation ICs at Tower’s
FAB2, using its cost-effective 0.16-micron geometry. Tower is pleased to
complement Zoran’s expertise in digital solutions with their advanced
0.16-micron geometry offering that provides a cost-effective solution for intricate
digital functionality such as that implemented in Zoran’s advanced products. Migdal Ha’Emek, Israel’s Tower Semiconductor (http://www.towersemi.com)
is a pure-play independent specialty wafer foundry established in 1993. The
company manufactures integrated circuits with geometries ranging from 1.0 to
0.13-micron; it also provides complementary technical services and design
support. In addition to digital CMOS process technology, Tower offers advanced
non-volatile memory solutions, mixed-signal & RF-CMOS, and CMOS
image-sensor technologies. (Tower15.03)

Back to Table of contents

9.12 Samsung Brings Multipoint Video Conferencing to the Desktop in RADVISION Partnership

RADVISION announced that the
Company’s joint effort with Samsung Electronics has resulted in the birth of
Samsung’s innovative and groundbreaking video terminal for the enterprise
desktop. Samsung’s SYNCON LCD video telephony terminal is a unified, light
desktop client terminal, which serves as a PC LCD monitor and multimedia
communications terminal. With a 22” screen and stunning 4-CIF video
resolution, the SYNCON reduces desktop clutter by merging a PC, LCD monitor,
video terminal, IP Phone and Instant Messaging into a single, fully functional
integrated device. RADVISION leveraged both its networking and technology
expertise in order to support this innovative product. The SYNCON LCD video
telephony terminal combines Samsung’s industry leading LCD Video Display
technology with RADVISION’s innovative SIP Multimedia Terminal Framework.
RADVISION’s SCOPIA Multipoint Conferencing Unit (MCU) is integrated with SYNCON
to enable multiparty conferencing. Through the SCOPIA platform, SYNCON is able
to communicate with standard video conference endpoints, including H.323, SIP,
ISDN, and WCDMA 3G video telephony. Tel Aviv, Israel’s RADVISION (http://www.radvision.com) is the
industry’s leading provider of high quality, scalable and easy-to-use products
and technologies for videoconferencing, video telephony, and the development of
converged voice, video and data over IP and 3G networks. (RADVISION 15.03)

Back to Table of contents

9.13 Corenet Selects
ECI Telecom for One of Europe’s Most Advanced ROADM Networks

ECI Telecom announced that
Corenet, a leading provider of state-of-the-art telecommunication services in Finland, has selected ECI Telecom’s XDM all range ROADM platform for deployment of one of Europe’s first and most advanced ROADM mesh networks. The key building blocks in this
deployment are WSS ROADMs, full support of Optical Transport Network (OTN) for
all services and “SDH-like” wavelength management. ECI’s advanced ROADM
network will allow Corenet to swiftly lease high-speed wavelength and
sub-wavelength services across the region, meeting the needs of its customers,
including international carriers who connect Russia and Far East states with Western Europe. With this ROADM network, Corenet is also able to provide TDM and data
services cost-effectively to enterprise customers, such as Research and
Educational Networks (RENs) and Government facilities. By deploying WSS ROADMs
and 10Gbps widely tunable transponders, ECI will enable Corenet to easily and
quickly provision services, from any node to any node across the entire
nationwide network, while dramatically cutting OPEX. Petah Tikva, Israel’s ECI Telecom (http://www.ecitele.com) delivers
innovative communications platforms to carriers and service providers
worldwide. ECI provides efficient platforms and solutions that enable
customers to rapidly deploy cost-effective, revenue-generating services. (ECI

Back to Table of contents

9.14 RADVISION SIP Server
Platform V3.0 Sets New Standards for SIP Service Creation

RADVISION announced the release
of version 3.0 of its market-proven SIP Server Platform. The RADVISION SIP
Server Platform introduces a modular, flexible Service Creation Framework to
the industry. Using pre-defined “service components,” customers can leverage
the investment in off-the-shelf service building blocks to quickly develop
advanced high-performance services in a plug-and-play modular architecture.
The new architecture features a level of customization and flexibility that was
not previously available. For SIP service developers, this translates into
significantly shorter development cycles and greater flexibility. Version 3.0
of the SIP Server Platform also employs a unique High Availability mechanism
which features intelligent layer-7 load-balancing and reliable switchover
capabilities, optimal hardware utilization and minimal failover recuperation
time. This results in consistent, robust performance, superior response time
to failures and allows dynamic scalability and flexible maintainability with no
downtime. In addition, version 3.0 introduces many other new features
including accounting, IMS functionality and solutions for scalability,
redundancy, security and protection. Tel Aviv, Israel’s RADVISION (http://www.radvision.com) is the
industry’s leading provider of market-proven products and technologies for
unified visual communications over IP, 3G and IMS networks. With its complete
set of standards-based video networking infrastructure and developer toolkits
for voice, video, data and wireless communications, RADVISION is driving the
unified communications evolution by combining the power of video, voice, data
and wireless – for high definition video conferencing systems, innovative
converged mobile services, and highly scalable video-enabled desktop platforms
on IP, 3G and emerging next-generation IMS networks. (RADVISION 19.03)

Back to Table of contents

9.15 Fortune-100 WAN
Optimization Customer Orders $1.2 Million of Silicom's Bypass Products

Silicom announced that a Fortune
100 leader of the Internet Networking industry has ordered Silicom products
valued at approximately $1.2m. Silicom will deliver advanced BYPASS adapters
to this recently-announced Design Win in three separate shipments over the next
three months as required to meet the customer’s WAN Optimization appliance
manufacturing schedule. These sizeable shipments, the largest that Silicom has
shipped to this prestigious customer since securing a Design Win with them in
late 2006, confirms the importance of the WAN Optimization market as a growth
driver for Silicom. The fact that Silicom has won three Design Wins from major
WAN Optimization market players demonstrates that its BYPASS adapters are
increasingly perceived as the WAN Optimization industry’s continuity solution
of choice. The BYPASS adapter’s ability to automatically reroute traffic
around non-functioning components enables WAN Optimization appliances to assure
continuous traffic flow in all conditions, safeguarding against network
disruption of any kind. As such, BYPASS functionality is necessary in
practically all WAN Optimization and gateway appliances. Kfar Sava, Israel’s Silicom (http://www.silicom.co.il) is an
industry-leading provider of high-performance server/appliances networking
solutions. The Company's flagship products include a variety of multi-port
Gigabit Ethernet, copper and fiber-optic, server adapters and innovative BYPASS
adapters designed to increase throughput and availability of server-based
systems, security appliances and other mission-critical gateway applications.
Silicom also offers a broad range of its traditional PC cards, PCI cards and
USB products. (Silicom 19.03)

Back to Table of contents

9.16 EFI & Kornit Join
Forces to Bring Digital Inkjet Technology to the Textile Industry

EFI, the world leader in color
digital print servers, superwide format printers and inks, and print management
solutions, and Kornit Digital announced a joint partnership to address the
growing demands of the printed textile industry as it migrates from analog to
digital technologies. As part of the agreement, EFI has made a strategic
investment of $3.5m in Kornit, which develops and sells high-end industrial
digital inkjet printers and inks for the textile industry, primarily for the
finished garment and apparel printing markets. With more than 100 customers,
mostly in North America, Kornit offers digital inkjet printers that specialize
in printing high-quality images on t-shirts and other finished garments, with
print speeds up to 200 t-shirts per hour. Kornit systems can print on a wide
variety of fabrics, including black garments, using proprietary solvent- and
water-based CMYK and white inks that provide high image resolution, color
vibrancy and wash resistance. Kornit is positioned at the high-end of
available offerings in this category due to its performance and reliability.
Moshav HaMagshimim, Israel’s Kornit Digital (http://www.kornit-digital.com) brings
extensive experience in the digital printing industry to the garment and
apparel markets. Based on its proprietary state-of-the-art technology, Kornit
has introduced a line of high-speed digital inkjet printing machines – the
first ones capable of printing direct-to-garment. Together with its unique
textile inks, developed specifically for the garment industry, Kornit’s
products offer custom printers worldwide new revenue opportunities. (Kornit
Digital19.3)

Back to Table of contents

9.17 Optibase to Provide
Complete IPTV Solution for W.T. Services

Optibase has been selected by
W.T. Services as the prime integrator for a new IPTV solution, including
encoding platforms, video on-demand (VOD), middleware and conditional access.
Working closely with CHR Solutions, a premier telecommunications consulting
firm, Optibase will draw upon its proven expertise in video to deliver a system
that will allow W.T. Services to offer customers state-of-the-art television
and on-demand services in the town of Hereford, Texas via FTTP. With Optibase
as the prime integrator, smaller Telcos such as W.T. Services are able to
deliver a cutting-edge, carrier-grade IPTV solution which is cost-effective and
offers flexibility for customization to meet the operator’s specific needs.
Optibase’s experience providing solutions for IPTV services worldwide ensures that
systems are up and running efficiently and effectively with proven
best-of-breed technology. W.T. Services, Inc., a wholly-owned subsidiary of
West Texas Rural Telephone Cooperative, is a Competitive Local Exchange Carrier
(CLEC) in the existing communities of Friona and Bovina. Herzliya, Israel’s Optibase (http://www.optibase.com) provides
professional encoding, decoding, video server upload and streaming solutions
for telecom operators, service providers, broadcasters and content creators.
The company’s platforms enable the creation, broadband streaming and playback
of high quality digital video. Optibase’s breadth of product offerings are
used in applications, such as: video over DSL/Fiber networks, post production
for the broadcast and cables industries, archiving; high-end surveillance,
distance learning; and business television. (Optibase 19.03)

Back to Table of contents

9.18 FaxBack Selects
AudioCodes to Provide Complete High Density VoIP Solutions

Tigard, Oregon’s FaxBack, developer
of NET SatisFAXtion IP, a T.38 VoIP fax solution and AudioCodes announced
availability of a joint solution that combines the powerful FaxBack Port Server
with AudioCodes' Mediant VoIP Gateways. The combined solution resets the bar
for Fax over IP solution designed for carrier class, high density deployments.
Now enterprises and service providers who send and receive exceptionally high
volumes of fax are easily able to route all fax traffic through their Mediant
VoIP Gateway, without having to invest in expensive and unnecessary fax
hardware or sacrifice fax quality and network bandwidth. The Port Server, when
coupled with the Mediant 1000, 3000, 5000 or 8000 VoIP Gateway, provides
advanced fault tolerance and reduced latency, delivering high fax performance,
reliable and secure method for transmitting faxes over the internet. Densities
range from a full DS3 (672 ports) to multi-OC3 (3 DS3). Lod, Israel’s AudioCodes (http://www.audiocodes.com) provides a diverse
range of flexible, comprehensive media gateway and media processing
technologies (based on VoIPerfect – AudioCodes' underlying, best-of-breed, core
media gateway architecture) and Session Border Controllers (SBCs). The company
is a market leader in product development, focused on VoIP Media Gateway, Media
Server and SBC technologies and network products. (FaxBack19.03)

Back to Table of contents

10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s CPI Falls By 0.3% in February

The Central Bureau of Statistics
announced on 15 March that Israel’s Consumer Price Index (CPI) fell by 0.3%
points in February 2007 to 98.7 points (baseline 100 = 2006 average). This is
the seventh consecutive month that the CPI has not risen; it has actually
fallen in five of the past six months. The CPI has fallen by a cumulative 2.2%
over the past seven months; an annualized fall of 4.5%. Three important items
in the February CPI fell: fruits and vegetables (down 3.8%); clothing and
footwear (7.5%); and transport and communications (0.3%). Two important items
rose: food (0.7%); and housing (0.2%). Prices fell by 0.4% between January and
February, and by 0.8% over the preceding 12 months. The factors that brought
the CPI down in February included the weakness of the shekel against the dollar
and seasonal elements, such as a drop in the price of apparel and footwear.
During February, the dollar weakened by 0.3% against the shekel to an average
exchange rate of NIS 4.218 per $, compared with NIS 4.228 in January 2007. In
that month, the dollar strengthened by 0.8% against the shekel. The weakness
of the U.S. dollar last year was one of the main factors that lowered the CPI
to -0.1% in 2006. (CBS15.03)

Back to Table of contents

10.2 Record Balance of
Payments Surplus In 2006

On 14 March, the Central Bureau
of Statistics announced that Israel had a record current accounts balance of
payments surplus of $6.8b during 2006, up from $4.6b in 2005. Net Israeli
foreign liabilities totaled $13.3b at the end of 2006, less than half the
$30.9b debt at the end of 2005. Foreign liabilities owed Israel rose to $31.7b at the end of 2006, up from $22b at the end of 2005. Foreign
investment totaled a record $22.7b in 2006, including $14.1b in direct
investment. This figure includes Warren Buffett’s $4.4b acquisition of 80% of
Iscar through Berkshire Hathaway. Foreign investment in Israeli securities
totaled $8.6b. Israeli investment overseas also totaled a record $22.4b,
including $8.8b in foreign securities, and $13.9b in foreign direct
investment. Israelis deposited $9.3b in foreign banks, mostly by the business
sector for the financing of current business activity and acquisitions.
(CBS14.03)

Back to Table of contents

10.3 Israel’s Goods Exports Slow

The Central Bureau of Statistics
announced on 19 March that Israeli exports to the US and EU in December
2006-February 2007 remained the same as in September-November 2006. Exports to
Asia rose by an annualized 28.3% in November-January, and exports to the rest
of the world rose by an annualized 5.7%, both less than in the preceding three
month period. Imports from the US rose by an annualized 15% in
December-February, imports from the EU rose by an annualized 8%, imports from Asia rose by an annualized 42%, and imports from the rest of the world rose by an
annualized 9%. Altogether imports, excluding fuel, diamonds, ships and planes,
rose by an annualized 10% in December-February, while exports, excluding
diamonds, rose 6.6%. Imports, excluding diamonds, totaled $6.8b in
January-February. Of these, 37% came from the EU, 21% from Asia, 15% from the US and the rest from the rest of the world. Exports totaled $4.9b: 36% to the EU, 27% to
the US, 15% to Asia, and 22% to the rest of the world. (CBS19.03)

Back to Table of contents

10.4 Israel’s February Trade Deficit $900 Million

The Central Bureau of Statistics
announced on 13 March that Israel’s trade deficit totaled $900m in February
2007. Exports totaled $3.2b and imports amounted to $4.1b. Israel’s trade deficit averaged $668m a month in January-February, amounting to an
annualized $8b, the same level as in 2006. Imports totaled $8.1b in
January-February and exports $6.8b. Central Bureau of Statistics trend data
indicate a steady increase in both imports and industrial output, especially by
the high-tech industries. On the other hand, the data also indicate a slowing
in imports of consumer goods and raw materials. (CBS13.03)

Back to Table of contents

10.5 India-Israel Bilateral Trade Reaches $2.7 Billion
in 2006

India – Israel bilateral trade increased by 8.19% during
2006, rising from $2.499b in 2005 to $2.704b in 2006. Indian exports to Israel increased by 12.31% from $1.276b in 2005 to $1.4b in 2006. The share of India’s exports in Israel’s global imports (including diamonds) increased from 2.83% in 2005 to 3.0%
in 2006. (IEI15.03)

Back to Table of contents

10.6 January Unemployment Rate Falls To 7.6%

Israel’s unemployment rate fell
to 7.6% of the civilian labor force in January 2007 in trend figures, down from
7.7% in December 2006 and 7.8% in November, the Central Bureau of Statistics
announced on 20 March. The number of unemployed fell to 216,000 in January from
219,000 a month earlier. The unemployment rate is falling by a
faster-than-expected 0.1-0.2% a month, and has fallen by 1.5%, or 40,000
people, since January 2006. The unemployment rate has fallen by 3.3%, or
90,000 people, since the January 2004 peak of 10.9%. The Bank of Israel
predicted that the unemployment rate will fall to a monthly average of 7.5%
this year. At the present rate of decline, the unemployment rate could fall
below 7% for the first time since the early 1990s. The number of jobseekers
fell to 203,600 in February 2006, down from 209,700 in January and 223,800 in
February 2006. (CBS20.03)

Back to Table of contents

10.7 February Records
121,600 Tourist Entries

On 15 March, the Central Bureau
of Statistics announced that there were 121,600 tourist entries into Israel during February 2007. Of these entries, 100,500 tourists arrived by air, 21,000 by
land (including tourists returning from side trips to neighboring countries,
and the rest arrived by sea. There were 237,400 tourist entries in
January-February, 16% fewer than in the corresponding period of 2006.
Together, 197,600 arrived by air (down 17%), of whom 190,200 arrived at Ben
Gurion Airport (down 14%) and 7,500 arrived on direct flights to Eilat, half
the number in the corresponding period. 39,600 tourists arrived by land (down
15%), and 200 by sea. In February, 182,000 Israeli traveled abroad, of whom
15,000 made more than one trip for a total number of 206,000 departures during
the month. There were 432,000 departures in January-February, 8% more than
during the corresponding period of last year. 381,000 departures were by air
(up 9%), 50,000 were by land (down 2%), including 20,000 departures to Sinai
via Eilat (down 6.4%). 600 departures were by sea. (CBS15.03)

Back to Table of contents

10.8 Wine Sales Spike Ahead
Of Passover

Israelis buy 40% more wine in the
month leading up to Passover than they do during the other months of the year
due to a combination of increased orders from hotels, gifts of bottles of wine
and the liberal use of wine at the seder, according to a poll released on 19
March by Business Data Israel. The group also reported that Israel's wine sales totaled NIS 730 million in 2006, representing 4% growth from 2005. Israeli
wineries produced 54 million bottles of wine in 2006, which is also 4% more than
in 2005. Israel has 250 wineries in operation, five of which – Carmel, Efrat,
Binyamina, Barkan and Golan Heights – account for approximately 85% of the
grape harvest in the country. Red wine controlled 60% of the local market, and
BDI noted in its report that 51% of total wine exports were shipped to the United States. Israelis also seem to have a particular affinity for less expensive wines,
as 55% of all wine bottles sold in the country were sold for less than $6.00,
the study found. (JP20.03)

Back to Table of contents

In Depth

11.1 IVC Research Center: Capital Raised By Israeli VCs $473 Million In 2006

The following are findings from
the Annual Survey of Israeli Venture Capital Fund Raising, conducted by the IVC Research Center, which for more than ten years has been at the forefront of venture capital
and private equity research in Israel. Survey data for 2006 will be published
in detail in the IVC 2007 Yearbook to be published in April.

In 2006, Israeli venture capital
funds raised a total of $473 million by vintage year, a 67% decline from the
$1.46 billion raised in 2005. The drop was anticipated since most large
Israeli VC funds completed their efforts in the previous two years, having
raised a total of $2.52 billion in the 2004-2006 period.

Funds that raised capital in 2006
included Evergreen V (first closing, $135 million), Magnum II ($105 million)
and Greylock Partners’ first Israel-focused fund ($150 million), which followed
the firm’s re-launching of its local office. Seven other venture capital funds
announced first closings during 2006 for a total of $83 million. These
included Infinity III, Peregrine II, Evolution Fund I (focused on bootstrapped
startups), two new cleantech funds – H2Tech and Terra – and a new Web 2.0 fund,
Jerusalem Capital.

According to IVC estimates, $1.5
billion in capital is currently available for investment by Israeli VCs, of
which $0.9 billion is intended for First investments in high-tech companies.
The remainder is reserved for Follow-on investments. An additional $700 million
is expected to be raised in 2007 by Israeli VCs for investment in Israeli high
technology.

Zeev Holtzman, Chairman of IVC
Research Center and Giza Venture Capital, said, “It is expected that the next
capital raising cycle of the leading Israeli VC funds – the fifth cycle since
1992 – will start later this year and will reach its peak in 2008. It is
expected too that all the remaining VC funds – those that last raised capital
in 2000 and 2001 – will also try to raise follow-on funds. Therefore, capital
raised in vintage 2007 is most likely to be higher than in 2006. Currently,
capital available for investment by Israeli funds equals two years investment,
a markedly shorter period than in the US, indicating that there is no
oversupply of capital in the Israeli market.”

Top Funds Capital Raising
1992-2006

Between 1992 and 2006, Israeli
venture capital funds raised approximately $11.07 billion that was exclusively
allocated to investments in Israeli technology companies. Of this amount,
approximately $6.82 billion (62%) was raised between 2000 and 2006. The top 20
Israeli venture capital funds shown in the table below accounted for $7.68
billion of capital raised between 1992 and 2006.

IVC Research Center is Israel’s leading research center providing business leaders with an unmatched wealth
of data on Israeli venture capital, private equity and high-tech industries.
IVC products and services are used regularly by venture capital funds, private
investors, high-tech companies, financial investors and institutions, as well
as public entities such as the Office of the Prime Minister, the Central Bureau
of Statistics, the Bank of Israel and the Office of the Chief Scientist. IVC
enjoys the cooperation of the Israel Venture Association (IVA) in publishing the
most comprehensive guide to Israeli venture capital and high technology
companies – the IVC Yearbook. Among IVC products and publications are the
Quarterly Survey, which examines capital raising trends by Israeli high-tech
companies; the quarterly Israel Venture Capital Journal (IVCJ), which reviews
developments in the venture capital, private equity and high-tech industries;
and a comprehensive online database (http://www.ivc-online.com)
containing over 5,000 Israeli high-tech companies, venture capital funds,
investment companies and technology incubators, as well as news updates and
lots more. (IVC13.03)

Back to Table of contents

11.2 NUSACC Launches 2007
Annual Forecast for U.S. Exports to the Arab World

On 15 March, the National
U.S.-Arab Chamber of Commerce (NUSACC) released its annual forecast for U.S. merchandise exports to the Arab world. "We are charting new territory in America's trade relations with the Arab world," says David Hamod, NUSACC's President
& CEO. "The 2006 numbers are unprecedented, and the outlook for 2007
looks even brighter."

U.S.-Arab bilateral trade reached
$109b in 2006, an increase of 25% over 2005 levels. Total Arab market imports
are expected to reach $405b in 2007, an 11% increase over the year 2006,
according to research conducted for NUSACC by the Institute for Research:
Middle Eastern Policy (IRmep).

The 16-page report, which
analyzes trade with all 22 nations of the Arab world, suggests that the most
important reason for the continuing rise in U.S. exports is the depreciating
dollar, which is making U.S. goods very competitive. In addition, high oil
prices are translating into greater import purchasing power for Arab energy
producing nations, and the region's consumer market – flush with disposable
income – is also helping to drive up U.S. export sales.

The report identifies two
apparent emerging trends. First, the nations that have signed Free Trade
Agreements (FTAs) with the United States saw their trade levels outpace those
of non-FTA nations (32% rise vs. 24%). NUSACC says that the "FTA
Effect" — increased confidence stemming from the perception that these
nations have upgraded their trade and investment standards — is attracting
more business.

Second, foreign direct investment
(FDI) within the Arab world seems to be flowing at unprecedented levels. The
number of greenfield FDI projects in the Arab Middle East jumped 100% from 2002
to 2005, and the results in North Africa were even more impressive – a 154%
rise. After 9/11, as Arab business leaders began investing "closer to
home," intra-Arab FDI inflows jumped to more than 50% of these nations'
total FDI inflow, according to one analyst.

Exports are up, but the report
warns that there may be "storm clouds on the horizon." The 2007 Outlook
notes that there is increasing evidence that regional and global political
trends are beginning to take their toll on America's relationship with the
region. The report cites the war in Iraq, the Dubai Ports World incident, the
war between Israel and Hezbollah in Lebanon, and a strong trend in the
post-9/11 world for Arabs to "Look East" to Asia for business
partners and, increasingly, political support.

$45b in U.S. exports to the region will sustain at least 364,000 direct and indirect U.S. manufacturing jobs at a time of growing economic uncertainty in the United States. "The
bottom line is that the Arab world remains one of America's best export
markets," says NUSACC's David Hamod. "If the early numbers are any
indication, 2007 promises to be a banner year for U.S. companies."
(NUSACC15.03)

Back to Table of contents

11.3 IMF Executive Board
Completes Third and Fourth Reviews under Iraq's Stand-By Arrangement

The Executive Board of the
International Monetary Fund (IMF) has completed the third and fourth reviews of
Iraq's performance under its economic program supported by a Stand-By
Arrangement. The IMF arrangement is being treated as precautionary by the
Iraqi authorities, and no purchase is planned.

The Stand-By Arrangement in an
amount equivalent to about $714.7 million was approved on December 23, 2005.
In completing the latest reviews, the Executive Board also approved the
authorities' request for a six-month extension of the arrangement through
September 28, 2007. Additionally, the Board also approved the authorities
request for a waiver of the non-observance of a structural performance
criterion.

Following the Executive Board's
discussion of Iraq, Mr. Takatoshi Kato, Deputy Managing Director and Acting
Chair, stated:

"Iraq is entering a crucial
period in its economic recovery. Despite very difficult political and security
circumstances, the Iraqi authorities have taken important measures to keep
their economic program on track. The maintenance of fiscal discipline, as well
as the tightening of monetary policy and the appreciation of the dinar, are
commendable. The increase of official domestic fuel prices and the enactment
by the Council of Representatives (CoR) of a law liberalizing the import of
fuel products are important steps. The amendments to the pension law were
submitted to the CoR; we look forward to their early passage into law. The
government's approval of a new oil and gas law augurs well for the future of
the oil sector. Progress is also being made in financial sector reform.

"Inflation, however, remains
high. While this is to an important extent due to the prevailing difficult
security situation and supply disruptions, the Central Bank of Iraq (CBI) may
need to take further steps in order to prevent high inflation from becoming
entrenched and to de-dollarize the economy. Fiscal policy should be supportive
by keeping current spending, including the wage and pension bill, in check. At
the same time, it is important to increase government investment, especially in
the oil sector. The government also needs to reduce supply bottlenecks,
especially of fuel products. To that end, actions are needed to facilitate the
importing of fuel products by the private sector. The pace of structural
reforms needs to be increased. Efforts to modernize the chart of accounts and
the budget classification need to be stepped up, and the Financial Management
Information System should be implemented rapidly. It is important to complete
the census of public sector employees by mid-year. While the restructuring
effort on the two largest banks is commendable, efforts should be made to
restructure the four other state-owned banks. The modernization of the
payments system needs to be expanded to cover all banks.

"The CBI's efforts to
implement the recommendations of the Interim Safeguards assessment report and
the Ernst & Young 2005 audit report are encouraging. The Ministry of
Finance is strongly encouraged to recapitalize the CBI as soon as possible.

"Corruption and violence
need to be brought under control to unlock Iraq's oil wealth. More forceful
actions are needed, especially in the area of smuggling. In this respect, the
implementation of oil metering projects should be finalized as soon as
possible. The authorities' intention to join the Extractive Industries
Transparency Initiative is welcome. "Progress in settling arrears with
private creditors is commendable. However, further progress is needed towards
resolving non-Paris Club official claims," Mr. Kato said. (IMF14.03)

Back to Table of contents

11.4 United States of Petrodollars

Morgan Stanley’s Serhan Cevik
commented on the oil-rich countries of the Gulf region moving towards monetary
unification. The six countries of the Gulf Cooperation Council – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – took the first step
towards economic integration a long time ago, in 1981, with the ultimate
objective of establishing a monetary union.

After decades of protracted
preparations, the GCC has already become a customs union and now plans to
introduce a common currency within three years. With similar socio-cultural
values, political institutions and comparable economic compositions, these
countries seemingly form an optimum currency area and therefore could benefit
from greater monetary integration. However, the harmonization of economic
institutions and policies is still a major hindrance that may not allow all the
countries to be ready for the adoption of a single currency by 2010. Although
a variety of cracks has already become apparent, especially with Oman’s decision to opt out of the planned monetary union, our main worry is not really
about the establishment of a unified monetary system in the region. Instead,
we are concerned more about its sustainability in the longer term.

Gulf countries could benefit from
monetary integration, but not as much as Europe. The European Monetary Union
has confirmed theoretical benefits of monetary unification in practice. Within
a robust institutional framework, member countries benefit from lower transaction
costs and currency risks, which would bring economic savings and promote
intra-regional trade and investment. Furthermore, greater transparency and
competitive pressures would help maintain price stability, while fiscal
requirements would lower the risk premium. As a result, the unified zone would
lead to new investment opportunities and higher income growth.

These are all great points in
favor of establishing a monetary union, but do not necessarily mean that the
GCC could enjoy such benefits as much as the Eurozone countries. First, even
though the GCC has a reasonably open economy, intra-regional trade is still too
small – barely 10% of exports or less than 5% of GDP – to bring significant
gains from lower transaction costs. Second, the degree of economic
diversification is very low, making the planned monetary union highly exposed
to shocks. Third, all the GCC members have long demonstrated a preference for
investment outside the region, which of course limits the gains from financial
integration. Although the adoption of a common currency could arguably
accelerate economic convergence and deepen financial integration, a monetary
union without necessary foundations and policy coordination is unlikely to
survive global and/or regional shocks, in our view.

Oil dependence is the most
significant threat to the sustainability of monetary unification. Even just to
achieve minimal benefits of a common currency, the GCC countries must remain
faithful to a strict set of convergence criteria on monetary variables and real
economic factors. Following Europe’s footsteps, they have already pledged to
keep inflation rates at no more than 2% above the weighted regional average,
budget deficits below 3% of GDP, public debt less than 60% of GDP and interest
rates at no more than 2% above the average of the lowest three countries.
Thanks to the windfall from higher oil prices, all the countries now run huge
budget surpluses and have public debt levels well below the 60% threshold.
However, macroeconomic synchronization is still limited, especially in terms of
inflation dynamics. Even at relatively low rates, there is really no sign of
inflation convergence across the region, and it is likely to become more
problematic as the countries experience a marked increase in inflation rates.
Furthermore, today’s supportive fiscal figures are simply a reflection of the
region’s excessive dependence on the oil sector and therefore may deteriorate
quickly if oil prices move below budgetary projections. This is indeed the
most significant threat to the sustainability of the planned monetary union, in
our view. In addition to creating fiscal challenges, the low degree of economic
diversification and the prevailing differences in resource endowment undermine
the stability of monetary union.

Revaluing national currencies and
switching to a ‘basket peg’ could help the convergence process. Abundant
liquidity and expansionary macroeconomic policies have fuelled domestic demand
and led to a surge in inflation rates in the Gulf region. However, we must not
ignore inflationary consequences of the exchange-rate peg to the US dollar.
With the dollar’s weakness, the GCC countries have experienced a sustained
depreciation of their real effective exchange rates and an increase in imported
inflation. This is why we have argued in favor of revaluing national
currencies and switching to a peg against a basket of currencies, rather than
just the dollar. In our view, although the inflation problem and enormous
current account surpluses alone justify currency revaluation, it would also
help accelerating convergence for the planned monetary union. Likewise, while
pegging to a single currency is a simple approach (especially given the fact
that oil and natural gas prices are priced in dollars), a more flexible
exchange-rate regime would allow these economies to manage the volatility of
oil prices better and make monetary integration sustainable. (MS15.03)

Back to Table of contents

11.5 Kuwait Politics: Revolving Doors

The resignation of the Kuwaiti
government on March 4th has resulted in a political crisis of a peculiarly
Kuwaiti kind–sudden, noisy and lacking any real sense of urgency. As the
foreign minister, Sheikh Mohammed Sabah al-Salem al-Sabah, remarked the
following day, "a cabinet comes, a cabinet goes, a parliament comes, a
parliament goes – what's left is Kuwait". Sheikh Mohammed was then en
route to Saudi Arabia to attend a meeting of Gulf Arab foreign ministers – in
his capacity as "a minister who has resigned". He was responding to
the request of the emir, Sheikh Sabah al-Ahmed al-Jabr as-Sabah, who had asked
the former ministers to continue carrying out their duties until a new cabinet
could be formed. As a result, even without a government, the business of
government in Kuwait appears so far to have been proceeding as usual.

Stuck In the Mud

That is to say, it has not been
proceeding very fast. The Kuwaiti political system has become bogged down over
a series of controversial issues in recent months. Much parliamentary time has
been spent discussing–and repeatedly rejecting–the possibility of
transferring more of the country's current oil boom proceeds to citizens, in
the form of direct subsidies or debt write-offs. The government's modest
attempt at opening up to the private sector in the form of
build-operate-transfer (BOT) contracts has been cast into confusion by the
cancellation of a number of such projects by the State Audit Bureau, on grounds
of lack of transparency – as well as the prospect of further corruption
allegations. There have been setbacks to attempts to build new power and water
generation capacity in time to ward off a repetition of last summer's repeated
shortages and cut-offs. Moreover, it has become increasingly clear that
"Project Kuwait", the government's longstanding plan to increase
production in the country's northern oilfields by inviting foreign investment,
will not gain parliamentary approval in the near future.

The latest controversy, which set
off the current imbroglio, concerned a possible vote of no confidence in the
health minister, Sheikh Ahmed Abdullah al-Ahmed al-Sabah, in a parliamentary
debate scheduled for March 5th. MPs blamed Sheikh Ahmed for poor conditions in
the country's health sector. The loose "opposition" bloc in the
National Assembly, made up of an uneasy alliance between both Sunni and Shia
Islamists, economic liberals and centrist Arab nationalists, had already
managed to dislodge the information minister, Mohammed al-Sanoussi, who was
forced to resign in November for fear of a similar vote. Parliamentarians also
had other cabinet members in their sights, including the influential minister
for cabinet affairs, Ismail al-Shatti, and the finance minister, Badr Mishari
al-Humaidhi.

It was this prospect of future
"grillings" of ministers, combined with Sheikh Ahmed's status as a
member of the ruling family that probably prompted the government's decision to
opt for a mass resignation, rather than a quiet exit for the health minister or
a cabinet reshuffle. On March 5th, the pro-government speaker, Jassem
al-Khorafi, was able to adjourn the parliamentary session on the grounds that
no minister was present, announcing that it would not be reopened until the new
cabinet had been selected, expected to be in about two weeks' time.

Same-Old Same-Old

The new cabinet is unlikely to
look very different from the outgoing one, despite the stipulations of some
MPs. One Islamist member, Saleh Ashour, asked for ministers who were “tougher,
more competent, and more willing to collaborate with parliament”, while
Abdulllah Okash wanted a cabinet that was "proficient, sincere, matched in
strength with the National Assembly”. It has already been stated that the
current prime minister, Sheikh Nasser Mohammed al-Ahmed al-Sabah, a nephew of
the emir, will be asked to form the new cabinet, and the foreign and interior
ministers' positions also look fairly secure. The energy ministry will stay in
the hands of the ruling family, and there is also likely to be at least one
more Al Sabah representative. The more controversial figures particularly
targeted by the opposition (including Sheikh Ahmed) will probably be dislodged-
or at least, moved to different posts. But on the whole, the new cabinet will
be made up of a lot of familiar faces. As a result, a disappointed parliament
is likely to continue to baulk when asked to approve equally familiar
government policy initiatives. (EIU07.03)

Back to Table of contents

11.6 Moody's Issues Annual
Report on Bahrain

In its annual report on Bahrain,
Moody's Investors Service says the Gulf country's investment -grade ratings and
positive outlook are supported by the government's net asset position and
Bahrain's relatively high per capita level of GDP.

The foreign currency country
ceiling for bonds is A1 — upgraded from A2 in October — and is based on the
foreign currency government bond rating of A3 — upgraded from Baa1 at the same
time — and Moody's assessment of a low risk of a payments moratorium in the
event of a government bond default.

"Bahrain's prosperity is
partly based on a vibrant non-oil economy focused on financial services,
manufacturing, and tourism," said Moody's Vice President Tristan Cooper,
author of the report. "Bahrain has developed the most sophisticated
financial sector in the region, which continues to grow strongly, particularly
in the area of Islamic finance."

He said the country's sound
economic fundamentals are supported by its relatively progressive political
system, which includes a directly elected lower house of Parliament, as well as
strong relations with most of its fellow GCC members, the US, and other G8 countries.

"While its revenues are the
least dependent on oil of any Gulf country and its hydrocarbon reserves are
relatively limited, Bahrain remains highly reliant on hydrocarbons," said
Cooper. "In particular, it imports oil as refining feedstock from Saudi Arabia, and is reliant on Saudi facilities for the bulk of its oil exports." He
said the ratings are constrained by this and the relative weakness of the
country’s external and fiscal accounts, which are more sensitive than those of
other oil exporters to a downturn in oil prices.

Further constraints on the
ratings include an employment rate officially estimated at 15%, tensions
between the government and the Shia-dominated opposition, and the risk of
contagion from political instability in the surrounding region. Economic
analysis is also hindered by the poor scope of the government's macro-economic
data, which is not generally available in a timely fashion.

Following its upgrade in October,
Bahrain's ratings were placed on positive outlook in keeping with Moody's
expectation of a narrowing in the rating differential that currently exists
between the richer Gulf states, including Kuwait, Qatar, and the United Arab
Emirates," said Cooper. "These richer countries are in the Aa rating
category and carry stable outlooks while Bahrain, Oman and Saudi Arabia have lower ratings with positive outlooks." He said these trends assume
that the public finances of Bahrain, Oman and Saudi Arabia will further
strengthen while the ratings of the higher-rated countries remain constrained
by political and institutional factors. Moody's report, "Bahrain: 2007 Credit Analysis," is a yearly update to the markets and is not a rating
action. (Moody's08.03)

Back to Table of contents

11.7 Qatar: Gassing Up

RasGas, a joint venture between Qatar Petroleum (QP) and the world's biggest oil company, ExxonMobil, will launch its Train
5 liquefied natural gas (LNG) production plant this month. The venture, as
reported by the Oxford Business Group, is one of the largest of its kind in the
world.

Due to technological advances,
Train 5 will be able to ship LNG efficiently over long distances, making it
competitive with pipeline shipments. Like Trains 3 and 4, the new plant will
have a production capacity of 4.7m tons per annum (Mta) of LNG, making it one
of the largest and most productive trains in the world. The majority of the
LNG from Train 5 will head to European gas markets via various gas wholesalers,
including Belgian wholesaler Distrigas.

By the end of the decade, RasGas
will have production capacity of approximately 37 Mta and will supply markets
around the world including South Korea, India, Taiwan, Belgium, Italy, Spain and the US. Qatar's total production capacity will be 77 Mta and Qatar LNG
will account for a third of the projected world supply in 2010, said RasGas
Managing Director Mohammed Saleh al-Sada.

In 2008, RasGas will also begin
supplying LNG to the Chinese Petroleum Corporation and in 2009 to the Golden
Pass LNG Terminal in the US. To help fulfill these contracts, RasGas will
construct two more LNG production plants, Trains 6 and 7. Each will have a
production capacity of 7.8 Mta, which together with similar trains built by
sister company Qatargas, will make them the world's biggest LNG plants. Train
6 is scheduled to come on stream in 2008 and Train 7 in 2009. The two are
expected to be mostly dedicated to fulfilling the huge ExxonMobil contract to
supply the US market with first deliveries expected in 2008. This is expected
to contribute significantly to meeting US gas demand.

Like North America, and major
consumers in Asia, Europe doesn't want to rely too heavily on a single
supplier. In the case of European countries, they are increasingly turning to
LNG due to its environmental benefits in relation to oil-based fuels and are
already negotiating long-term contracts to ensure reliable and secure
supplies. Qatar is in an enviable shipping lane location in the Gulf, and has
the potential to supply them all.

Japan, South Korea and India are already well-established markets for LNG. This past February, at a ceremony in South Korea, RasGas announced they would be adding another long-term charter LNG tanker to
their increasing LNG cargo fleet. This means RasGas took another major step
towards controlling their transportation links with a growing portfolio of
worldwide LNG customers. Japanese importers have already requested double
their LNG purchases to about 12 Mta. Likewise, the Koreans are willing to
raise their orders from five to over nine Mta.

The International Energy Agency
published a report in November 2006 that said global LNG demand rose by almost
one third between 2000 and 2005. The IEA estimates that LNG capacity will
double by 2010 to 345 Mta, at a projected investment cost of $73b. The IEA
also expects natural gas consumption to increase around the world over the next
25 years by an average 2% per year to reach 4.7 trillion cu m by 2030.
Although Europe is expected to be importing about 90% of its gas by that time,
the fastest growing countries will be China, where gas demand will grow 5.1%
per year, India at 4.2% and Brazil at 3.8%.

Another project between
ExxonMobil and Qatar Petroleum is the LNG import terminal in Milford Haven, UK. They have recently announced that it will open in 2008 and will operate as demand
requires. ExxonMobil will export LNG on ships from Qatar in partnership with
QP. The LNG will be stored in tankers before being turned back into gas and
injected into the national network when needed. The two companies are building
the South Hook LNG terminal to tap growing demand in the UK, Europe's biggest gas market. (OBG16.03)

Back to Table of contents

11.8 Dubai: Home Base

The decision by giant energy
industry services company Halliburton to open a corporate headquarters in Dubai serves to underscore the growing importance of Dubai as a centre of international
business. By shifting to the emirate, Halliburton is merely following a
growing trend, as noted by the Oxford Business Group. As many as 25% of the
companies listed on the Fortune 500 now have their Middle Eastern and North
African operations based in Dubai, with some 300 having offices there. Major
oil industry service companies Baker and Hughes and Schlumberger both have
large operations operating out of the emirate.

The emirate has been working hard
to position itself as the home of big businesses in the region, both for
domestic corporations and those of companies focused on the Middle East.
Companies moving to Dubai are able to take advantage of a number of incentives
offered by the government to set up shop there. These include little or no tax
on most operations, assistance with procedures required to establish a company,
almost no restrictions governing either bringing staff into the country or
repatriating profits and a strong business infrastructure that has been
developed at a number of specialized corporate parks.

Those companies operating out of Dubai's Jebel Ali Free Zone and Dubai Airport Free Zone do not need to have a local
partner, enjoy duty-free imported materials needed for the business and the
fastest approval process for establishing a company in the region. Ken
Medlock, energy fellow at the US-based James A. Baker III Institute for Public
Policy said in a recent interview, “When it comes to energy, the best business
services can be provided where the oil and gas exist, and you can see the
migration to Dubai.”

Dave Lesar, Halliburton's
chairman, president and CEO, said on March 11 that the company would be
shifting its base of operations from Houston to Dubai and the firm would be
increasing its corporate profile in the region. The news should not come as a
surprise, as Halliburton had announced last year it was planning to concentrate
on its increasing business in the eastern hemisphere. Lesar said that setting
up shop in Dubai was a sound business decision.

“The eastern hemisphere is a
market that is more heavily weighted toward oil exploration and production
opportunities and growing our business here will bring more balance to
Halliburton's overall portfolio,” he said. “This is already a strong market
for Halliburton and we are excited to position the company in this key business
area.”

Halliburton already has more than
one third of its global workforce of 45,000 in the eastern hemisphere, and just
under 40% of its $13b oil-field-services revenue in 2006 came from the region,
a figure predicted to climb. So too are the numbers of its staff, though
Halliburton has yet to announce how many of its employees will move to Dubai. However many are transferred or employed locally, it will be another boost for the
local economy. Halliburton's move can only serve to further focus the
attention of global corporations on the advantages of doing business in the
emirate. With its growing success in attracting big business, Halliburton's
motto of Unleash the Energy could equally be applied to Dubai. (OBG19.03)

Back to Table of contents

11.9 Northern Emirates:
Taking to the Skies

One of the world's newest
airlines, Ras Al Khaimah Airways, is to start operations in May, with the
fourth national flag carrier for the United Arab Emirates being part of Ras Al
Khaimah's push to develop its tourism industry and to promote the country as an
alternative destination to neighboring Dubai. Under the program, according to
a report by the Oxford Business Group, there is to be heavy investment over the
next three years to develop the country's tourism sector, with a number of
high-end coastal resorts valued at around $4.5b being constructed.

Currently, Ras Al Khaimah
attracts around 25,000 tourists annually, a figure officials want to see reach
100,000 by 2010. RAK Airways has high hopes of success, targeting 230,000
passengers in its first year of operations, 580,000 after three years and 2.7
million after five.

The emirate is looking to cash in
on its unspoiled beaches and mountains as well as the soon to be completed
major resorts to offer an alternative to other regional destinations. However,
an added attraction for potential passengers is the close proximity of Ras Al
Khaimah's international airport to Dubai, just 45 minutes down the highway,
offering visitors the alternative of the larger emirate's bright lights
alongside the more rugged natural appeal of Ras Al Khaimah.

At a ceremony held on February 19
to present RAK Airways with its operational certificate, Crown Prince Sheikh
Saud bin Saqr Al Qasimi said the new airline would help put the emirate on the
tourist map and serve as a boost to the economy. “RAK Airways will help
enhance the profile of Ras Al Khaimah as an international tourist destination
and will also help in boosting the infrastructural facilities in the emirate,”
he said.

Though discussed for quite some
time, it was only in the middle of last year that a full feasibility study into
launching a new national airline was undertaken. As such, the launch of RAK
Airways has taken place in a remarkably short time and is a testament to the
government's commitment to reinvigorate the emirate's tourism industry.

On March 4, Sheikh Salem Bin
Sultan Al Qasimi, chairman of the RAK department of civil aviation, announced
the airline would take to the skies in May, initially flying routes to Mumbai, Delhi, Thiruvananthapuram, Kochi and Bangalore in India and Tehran, Isfahan and Bandar
Abbas in Iran. Short-term expansion plans foresee the extension of routes to Bangladesh, the Philippines, Sri Lanka, Pakistan, Egypt, Lebanon and other Gulf Co-operation Council
countries. Within three years, RAK Airways intends to operate flights to Russia and other Commonwealth of Independent States countries, as well as Germany, France, Italy, the UK and Scandinavia.

Initially, the airline will
operate using two Boeing 757-200 aircraft leased from Spanish carrier Iberia, adding at least another four leased planes to the fleet over the next three years
before buying its own aircraft. With start-up capital of $230m, the private
joint stock company is incorporated in the RAK Investment Authority Free Zone,
allowing it to take advantage of tax and trade incentives offered by the
government. The launch of the new airline has not been without teething
problems. Initial plans were for flights to commence in January. However, this
was pushed back to February and then March. As recently as March 1, airline
officials were saying operations would start in April, though just days later
May was set as the date for the first take off.

At the beginning of March, Khater
Massaad, the managing director of RAK Airways, announced that the airline's
CEO, Jack Romero, had been dismissed as a result of the ongoing delays. “There
are a couple of things that haven't gone as expected and by common agreement
with the board and Jack Romero, it was decided he would leave the company,”
Massaad said.

Kishu Teckchandani, an aviation
expert with experience of airline start-ups, has been hired as Romero's
replacement, with the Indian national expected to take up his appointment
before the middle of the month. However, despite the delays, RAK Airways
already has plans for further expansion, with a dedicated cargo division due to
start operating within four years using its own management team and aircraft.
Officials are also looking into joining one of the global airline alliances to
boost growth and expand coverage. Though starting small, RAK Airways has
high-flying ambitions and has mapped out a flight path for the future that it
hopes will see it competing with the region's major players in a matter of
years. (OBG08.03)

Back to Table of contents

11.10 Moody's Issues Annual
Report on Oman

In its annual report on Oman, Moody's Investors Service says that the country's government bond rating of A3 and
positive outlook are supported by strong fiscal and external positions, which
are increasing the stock of wealth that can be called upon in the event of a potential
downturn in oil prices.

The government bond ratings,
together with Moody's assessment of a low risk of a payments moratorium in case
of a government default, form the basis for Oman's A1 country ceiling for
foreign currency bonds.

"These investment grade
ratings are supported by the country's high GDP per capita, which approximated
$18,000 in 2006 in purchasing power terms although this level of prosperity
still lags that of higher rated hydrocarbon exporters in the region such as Qatar or the United Arab Emirates," said Moody's Vice President Tristan Cooper, author of the
report.

Cooper said that Oman's
historically prudent fiscal policy is reflected in its very low level of debt
and rising assets, adding that "the government's economic policies remain
generally sound and have contributed to robust non-hydrocarbon growth, which
has averaged around 7% per annum in real terms over the past five years."

However, Oman's rating is constrained by a number of factors, including a significant economic
reliance on volatile hydrocarbon exports, which generate the bulk of fiscal
revenue and external current account receipts.

"Although hydrocarbon export
volumes have been boosted by the 2006 start-up of a third LNG train,,"
Cooper said, "Oman's oil and gas reserves are limited in size and
increasingly expensive to produce, constraining the potential for further
significant increases in hydrocarbon export capacity." He estimated that
the overall fiscal surplus widened to almost 17% of GDP in 2006 on the back of
burgeoning oil and gas receipts. "Thus boosting the government’s already
substantial net asset position, providing further justification for Oman's positive rating outlook," said Cooper. The rating agency's report, "Oman: 2007 Credit Analysis," is a yearly update to the markets and is not a rating
action. (Moody's08.03)

Back to Table of contents

11.11 Egypt: Twinning Agreements

On 26 February, the Oxford
Business Group reported that the first twinning agreements were signed between
the EU and Egypt in the tourism and postal services sectors, heralding a wave
of partnerships aiming at administrative cooperation under the new European Neighborhood
Policy (ENP). France's La Poste and Austrian Tourist Authorities have been
selected as twinning partners.

The 2007-2013 ENP Action Plan,
which was launched on 6 March in Brussels, has been widely acclaimed by both
Egyptian and international media as a key stepping stone towards strengthening
ties between Egypt and the EU. The EU promotes twinning agreements to transfer
technical knowledge and as a joint process to boost dialogue and cooperation in
various areas across the political and economic spectrum. During her visit to Cairo in early March, Benita Ferrero-Waldner, the EU commissioner for external relations
and the ENP, unveiled an EU aid package worth $736m in support of Egypt's reform program. The overall funds allocated for the twinning program are $36m, of
which $1.8m will be for the postal twinning and $3m for the tourism twinning.

Twinning was initiated in 1998 as
a tool to assist candidate countries to EU membership, to improve their
administrative and judicial systems in accordance with EU standards. Philippe
Devaud, the regional counselor for multilateral cooperation at the French
Embassy in Egypt told OBG, “The idea of extending the twinning system to
countries that have no chance of becoming member states is a very new one and
its true usefulness will only become apparent during the implementation
process.”

The new partnership between La
Poste and the Egyptian Post Authority is expected to lead to better service for
Egyptian citizens. The postal network will be enlarged, diversified,
quality-orientated and La Poste will be able to advise on financial management
and marketing strategy issues. La Poste has been through a similar
restructuring process of its own involving deregulation, greater commercial
emphasis and the separation between postal and communications services. La
Poste staff will be seconded in Egypt and its experience and expertise are
expected to be of great help to the Egyptian Post Authority. Devaud said the
twinning schemes may create a more favorable investment environment in Egypt in the medium to long term.

According to Rudolf Lukavsky, the
commercial counselor for the Austrian Embassy in Egypt, Austria has the greatest tourism income per capita worldwide and each year, the country
receives a number of tourists three times its own population. He told OBG that
Austria's success in attracting tourists could be transferred to Egypt. Austria is expected to provide guidance and assistance for developing an effective
marketing strategy, improving training and encouraging sustainable tourism
projects in Egypt. Lukavsky highlighted the importance of information
technology and particularly internet bookings as an example of how Austria could provide effective assistance. Lukavsky concluded that the positive results
of the tourism partnership could lead to greater numbers of Austrian visitors
to Egypt in the near future and have a direct impact in creating jobs in the
tourism sector. (OBG16.03)

Back to Table of contents

11.12 Turkey – 2007 Article IV Consultation, Concluding Statement of the IMF Mission

1. Turkey's macroeconomic
performance since 2001 has been impressive. A combination of fiscal discipline
and prudent monetary policy by an independent central bank has set off a
virtuous cycle of falling inflation, declining public debt, and high, private
sector-led growth. Political stability, structural reforms, and favorable
external conditions have facilitated this good performance. In particular,
improvements in the bank supervisory framework, tax reform, and privatization
have strengthened the banking system, promoted foreign direct investment, and
enhanced productivity.

2. Recently, the economy has
entered a more challenging phase. Growth has come down from the high rate
(over 7½%) during the rebound from the 2001 crisis. Last year's financial
market turbulence and widening current account deficit contributed to this
slowdown by weighing on confidence and raising risk premia. Moreover, higher
interest rates in response to a concurrent increase in inflation reduced credit
growth and dampened the pace of domestic demand. Looking forward, we expect
GDP growth to ease to about 5%, while, with little slack in the economy,
inflation is likely to converge to target only gradually. Though the trend in
the current account deficit is expected to reverse in 2007 (helped by softer
domestic demand, lower oil prices, and robust growth in Turkey's main trading partners), external financing needs remain large. This leaves the
economy susceptible to financial market turmoil.

3. Against this backdrop, the
Article IV discussions focused on policies to raise potential growth and
increase resiliency to external shocks. While current growth is strong by Turkey's historical standards, it still falls short of the rates seen in the most dynamic
emerging market economies, while unemployment has remained high. Raising
growth potential will require a decisive improvement in the confidence of
markets and potential domestic and foreign investors. In our discussions with
the authorities, there was consensus on policies to achieve this objective:

• continued fiscal and monetary
discipline to secure low inflation and lessen vulnerabilities, especially from
the still high public debt.

• supply-side structural reforms
to bolster productivity and increase employment and investment.

Successful implementation of
these policies could raise potential growth well above 5%. Stronger growth, in
turn, would reduce susceptibility to external shocks by improving the economy's
ability to sustain current account deficits and by tilting external financing
toward more stable sources, such as foreign direct investment.

Maintaining Disciplined
Financial Policies

4. Low single-digit inflation
would support strong and stable medium-term growth. The significant fall in
inflation during the past five years has spurred confidence and enhanced policy
credibility. But it has not gone far enough. International experience shows
the clear benefits for growth of low inflation. Notwithstanding last year's
reversal in the trend of declining inflation, the authorities face a unique
opportunity to make the final push to reduce inflation to the 4% target. From
this perspective, the current level of interest rates is appropriate, and the
central bank stands ready to tighten further if inflation fails to converge
toward target. Once inflation is firmly on a declining trend, interest rates
will be reduced, albeit cautiously. The central bank's operational
independence under the new inflation targeting regime along with a flexible
exchange rate is essential for the pursuit of low inflation.

5. Achieving the 2007 fiscal
targets will help lower inflation and preserve financial market confidence. In
recent years, a steady primary surplus has produced enormous benefits-slashing
public debt, lowering inflation, reducing real interest rates, creating space
for private investment, and bolstering national savings. Maintaining a primary
surplus target of at least 6.5% of GNP will reinforce these trends, contain the
current account deficit, and help shield the economy from adverse shocks. To
attain this objective, spending restraint will be crucial; ad hoc initiatives
that weaken budget quality and erode the tax base also should be avoided.

6. Over the medium term, the
challenge will be to anchor fiscal policies around the key objectives of
reducing public debt and cutting distortionary taxes. There was agreement that
reducing debt to a safer level (around 30% of GNP in net terms) over the medium
term remains the overriding fiscal priority. To this end, the primary surplus
target of 6.5% of GNP should be retained through 2008. Thereafter, there could
be room for lowering the primary surplus target, provided the debt objective is
within reach. However, a new anchor for fiscal policy will be needed. We
suggest consideration of a fiscal rule (such as a formal limit on spending
growth or on the overall deficit). Setting an explicit limit on spending would
not only help keep debt low, but also create space for growth-enhancing tax
reforms, such as cutting the high tax burden on employment and bank
transactions. To be effective, any formal fiscal rule would need to be
supported by ongoing improvements in public financial management and fiscal
transparency, as well as measures, notably civil service and social security
reform, to contain nondiscretionary spending.

Deepening Structural Reforms

7. The immediate post-election
period should provide an opportunity to launch a new agenda of structural
reform. Now is the time to begin preparing reforms to place growth on the high
trajectory seen in the most dynamic emerging market economies. Immediate
priorities should be given to measures that secure long-term fiscal savings,
and bolster productivity and employment.

8. A central element of the
reform agenda should be resurrecting social security reform. The Constitutional Court annulled key elements of the 2006 social security law. Such reform
remains, however, essential to avoid large future deficits in the pension and
health care systems and create fiscal resources for other, growth-enhancing
reforms. We recommend early adoption of revised legislation that achieves the
originally envisaged savings. At the same time, consideration should be given
to additional administrative measures to improve social security collections
and make health spending more cost effective.

9. Future growth will depend
critically on increasing employment and labor productivity. In our
discussions, there was consensus that easing high levels of labor regulation
and taxation could lower unemployment, increase labor force participation, and
reduce the large informal sector. This would help increase productivity and
raise employment to absorb Turkey's rapidly growing population as well as
workers released from the secular decline in the agricultural sector. Specific
measures to reduce labor market rigidities could include (i) alleviating hiring
requirements imposed on medium-sized and large companies; (ii) rationalizing
mandatory severance pay; (iii) allowing more flexible terms of employment; and
(iv) reducing labor taxes. The overall reform needs to be contingent on the
creation of fiscal savings, to the extent necessary.

10. A strong financial system is
also a precondition for boosting growth. The financial system has been
transformed since the 2001 crisis, including by the recent surge of foreign
direct investment into banks. The adoption of the mortgage law is welcome, as
it should further expand households' access to credit by introducing
adjustable-rate mortgage loans. We see scope for measures to develop further
the capital markets, including by increasing the availability of long-term lira
financing and reducing its costs. Priorities are to (i) abolish financial
transaction taxes as budgetary conditions permit, and (ii) carry forward
decisively the privatization of state banks, beginning with the timely
completion of the initial public offering of Halkbank.

11. As the financial sector
develops, a key challenge will be to ensure that institutional and supervisory
frameworks are upgraded in tandem. Building on recent progress in modernizing
the institutional framework for bank supervision, the priority is to further
enhance supervisory practices to meet the high standards enshrined in the new
banking law. As the financial system becomes more complex, supervisors should
ensure that risks are assessed on a consolidated basis. The coverage and timeliness
of corporate balance sheet data also need to be improved to facilitate closer
monitoring of financial risks. Early passage of the Commercial Code, which
among other things requires companies to prepare financial statements in line
with International Financial Accounting Standards, would help in this regard.

12. Our discussions suggest
significant scope to continue improving the investment climate. Foreign direct
investment has soared in recent years, led by banking, telecommunications, and
real estate. There is substantial scope for further expansion in the future.
Advancing the privatization program, continuing reforms aimed at convergence
with the European Union, and easing product market regulations so as to lower
barriers to entry would help support additional private investment.

13. Opportunities for the Turkish
economy are enormous. The goal should be to build on the economic success of
the last five years to firmly entrench high growth, secure low inflation, and
make the economy more flexible and resilient to external shocks. Continued
disciplined fiscal and monetary policies complemented by bold structural
reforms are essential to lift Turkey onto a significantly higher growth
trajectory. The agenda is large and some reforms could face resistance, but
the rewards in terms of sustained improvements in living standards would make
the effort well worthwhile. (IMF09.03)

Back to Table of contents

11.13 Oil Law Creates Rift
Within Turkish Government

Partially vetoed by President
Sezer, the recently debated Turkish oil law has brought a cold breeze between
Prime Minister Erdogan and Energy Minister Guler. Now Erdogan, perhaps for the
first time during the term of his government, is agreeing with President Sezer
for rejecting legislation.

Sezer partially vetoed the oil
law in February, saying certain provisions in it posed a risk for national
security. At the heart of Erdogan's anger lies a provision which stipulates
that the state will get half of the oil revenues and transfer the other half to
the local budget of the province where the oil is extracted. This stands in
total contradiction with a key element of Turkish foreign policy on Iraq, which says oil revenues of the war-torn country should be administered centrally.
Thus, Ankara has long insisted that oil revenues from the disputed city of Kirkuk should be transferred to Baghdad and not governed by the semi-autonomous Kurdish
administration running northern Iraq.

According to sources, Erdogan
explained that it would be a great strategic mistake to introduce an oil law at
home containing such provisions despite the firm policy of Turkey on Kirkuk. Upon reactions from the deputies who noticed this contradiction in the law,
Erdogan recently met with senior executives of his party and the energy
minister and ordered the deletion of the article in question.

Sources said that during this
meeting Erdogan chided Güler, saying: "The president is right in his
veto justifications. This is what Kurdish groups are trying to do, and we
oppose them. How can we enact such a law when we oppose them doing the same
there? You cannot act in such a careless manner on this sensitive issue. What
will happen if there were not Sezer vetoing it? Who would prevent this error?
How can you allow it?"

Deputies in Erdogan's Justice and
Development Party (AK Party) are also split over the oil law. The AK Party
deputies known for their nationalist tendencies argue that the law contains
articles that will cost electoral support for the party. Diyarbakir Mayor
Osman Baydemir from the pro-Kurdish Democratic Society Party (DTP) had
suggested that part of the oil extracted in the eastern and southeastern Anatolia should be transferred to the relevant municipality. His offer has been harshly
criticized by nationalist circles as they regarded it as preparation for a
federation. AK Party deputies from the eastern and southeastern Anatolian
regions have applied to the party leadership, requesting the preservation of
the article line with Baydemir's offer.

Assessing reactions from both sides,
Erdogan has ordered the deletion of the article from the text of the law.
Following this intervention by Erdogan, discussions over the law started in
Parliament's Industry and Commerce Commission. The commission introduced only
one change to the law, whose Articles 2, 4, and 19 and the provisional Article
1 were vetoed by the president. Noting that Sezer had vetoed four articles,
Commission Chairman Soner Aksoy said, “The article providing for the transfer
of half of the state share in oil to the relevant provincial administration was
deleted from the text as objected to by the president.”

No change has been introduced to
the other vetoed articles. Sezer cannot veto the articles that have not been
changed in Parliament a second time, but he can refer them to the Constitutional Court to get them annulled. (Zaman15.03)

Back to Table of contents

11.14 S&P Says Turkey on
Track To Issue Its First Existing-Asset Securitization In 2007

The first Turkish securitization
of existing assets using domestic obligors could take place in 2007, according
to a report published on 15 March by Standard & Poor's Ratings Services (http://www.ratingsdirect.com).

The Turkish market has been
dominated by future flow transactions, which are transactions where Turkish
originators have securitized cash flow streams generated offshore. However, on
Feb. 21, 2007, the Turkish parliament approved a long-waited draft mortgage
law. The law is expected to clear some of the key legal and regulatory obstacles
that have hindered the development of the Turkish market. Underlying assets in
existing-asset securitizations would include residential mortgages, auto loans,
and credit card receivables.

"The successful development
of an existing-asset securities market also requires the stability provided by
political and macroeconomic developments," said Standard & Poor's
credit analyst Jussi Harju. "Turkey has shown remarkable progress in this
respect and its apparent commitment to political reforms following the EU
accession discussions may provide further comfort that Turkey is on its way toward developing an existing-asset securities market."

Mr. Harju continued: "We
consider that Turkey shows strong potential for the development of a market for
the securitization of existing assets. However, some obstacles still remain
and need to be addressed before market participants can tap into this
potential." (S&P15.03)

Back to Table of contents

11.15 Ankara to Decrease VAT
to Fight Unregistered Economy

Turkey has committed itself to
fighting the unregistered economy – a large barnacle on Turkey’s bow, consuming as much as 50% of its economy – and is devising strategies to bring
its practices into the fold.

In its latest such step, the
Finance Ministry has decreased the Value Added Tax (VAT) rates in the food
sector, hoping that in return tax revenue will increase. The Revenue
Administration has drafted a food list comprising 30 items for which the VAT
rates are planned to be decreased. The administration also wants to equalize
rates for all natural foods, between 1 and 18% at present, a rate heavily
criticized by the sector. After weeks of work the proposed regulations have
arrived at their final stage; however, finance experts claim the new rules will
not be as efficacious as expected.

According to the proposal, of
which Finance Minister Kemal Unakitan will decide the final form, VAT rates
will decrease from 18 to 10% for some processed foods such as baby food,
glucose, iodized salt, loose tea and tomato juice. The tax rate for baby
biscuits is 18%. While the rate for crystal and cube sugar is 8%, it is 18%
for glucose. Similarly, 8% of the price for packaged tea is VAT, whereas it is
18% for loose tea. The VAT for salt is the same as that of caviar, 18%.

A simple formula serves as a base
for the ministry’s study. It is assumed that prepared products will be subject
to an 18% VAT while taxes for any product used in home food preparation will be
decreased to 8%. The government intends to draft the regulations as soon as
possible and enact them before the November elections.

The ministry seeks to diminish
the tax rates for food but has shrugged off the demands of restaurant owners
for lower tax rates. Restaurant operators have been complaining about 18% tax
rates for food they sell, which means higher prices and fewer customers. An
official from the Finance Ministry said that the complaints of restaurant
owners are without merit. “None of them are selling a bottle of water for 30
Ykr, which they buy for 20 Ykr. Businessmen in the service sector are already
reflecting tax differences to price and will not sacrifice their profits even
if we cut tax rates to the levels they wish.” (Zaman15.03)

Back to Table of contents

* – Israeli Shekel
conversions done at a rate of NIS 4.20 = $1.00

– Turkish Lira conversions
done at a rate of NTL 1.5 = $1.00

-Cypriot Pound
conversions done at a rate of C£ 1.00 = $1.60

– Jordanian Dinar
conversions done at a rate of JD 1.00 = $1.41

– UAE Dirham conversions
done at a rate of Dh 3.70 = $1.00

– Omani Rial conversions
done at a rate of OR 0.385 = $1.00

– Pakistani Rupee
conversions done at a rate of Rs 60 = $1.00

This
fortnightly newsletter is a free service of Atid, EDI. We are a team of
economic and trade development consultants, headquartered in Jerusalem, with
satellite operations in Istanbul. EDI works with an international clientele
interested in identifying and researching business opportunities in the
region. We also serve as the regional representative offices for a number of U.S. states and bilateral Chambers of Commerce. EDI's other services include development
of feasibility studies and tailored research reports, as well as identification
of potential joint ventures for commercial clients. For more information on how
we may better assist you, please visit our Web site at: http:// www.atid-edi.com.

* END *

Fortnightly - March 21, 2007

Fortnightly – March 21, 2007

Leave a Reply Cancel reply