Fortnightly, 1 November 2017

Fortnightly, 1 November 2017

November 1, 2017


1 November 2017
12 Cheshvan 5778
12 Safar 1439




1.1  Prime Minister Netanyahu Pledges to Cut Taxes
1.2  Knesset Approves Ban On Trading in Binary Options


2.1  Toronto Stock Exchange and Venture Exchange Lead Four-Day Roadshow in Israel
2.2  Governor Scott Walker Leads Wisconsin Trade Delegation to Israel
2.3  Israeli Smart Farming Winning Outsized Share of Global Funding
2.4  Regus Innovates With Powermat Wireless Charging
2.5  JAL Ventures Raises New $60 Million VC Fund
2.6  Connatix Raises $15 Million Series A to Help Publishers Navigate the New Video Ecosystem
2.7  Nanolock Raises $4.5 Million
2.8  TIPA Sustainable Packaging Raises $11 Million
2.9  Wibbitz Secures $20 Million Investment for the Future of AI Video Creation
2.10  mPrest Expands in No. America to Help Utilities Lead the “Internet of Energy” Transformation
2.11  Decathlon Plans Second Israeli Branch
2.12  Fosun Announces Strategic Investment into Israel’s BondIT
2.13  My Size Announces $1.2 Million Private Placement


3.1  Mubadala Investments Opens its First U.S. Location in San Francisco
3.2  Middle East Aircraft Fleets to More Than Double By 2036
3.3  The Cheesecake Factory Opens in Manama, Bahrain
3.4  Dickey’s Barbecue Pit Fires Up First International Deal
3.5  Katsuya Continues Global Expansion with Opening of Two More Locations in Middle East
3.6  Japanese Retail Giant Daiso Opens 50th Store in the Gulf
3.7  HeartSciences Launches Breakthrough ECG Technology in Middle East
3.8  Latifa Hospital for Women and Children Selects Vocera to Improve Patient Care
3.9  Gibraltar Awarded Multiple Saudi Arabian Barrier Contracts
3.10  Saudi Ministry of Interior Supports Hajj Safety with Hexagon Safety Dispatch Solution
3.11  Tunisie Telecom First Deployment of ADTRAN Remote-Powered DSLAMs


4.1  SodaStream Wins 2017 Business Intelligence Group Sustainability Award
4.2  Chakratec Wins eMove360o Award 2017 for Electric Mobility & Autonomous Driving 2017
4.3  Saudi Fund Launches $510 Million Energy Efficiency Unit
4.4  With New Power Plants, Egypt’s Solar Investments Surge in 2017


5.1  Lebanon’s Average Prices Rise by 4.32% in the First Three Quarters of 2017
5.2  Lebanon’s Trade Deficit Down by 1.28% to $10.69 Billion by August 2017
5.3  American University of Beirut is the Best University in the Arab Region
5.4  Austerity to Hit Jordan as Debt Spikes and the Economy Slows
5.5  Jordan’s Unemployment Reaches 18%
5.6  EU Approves Financial Assistance for Jordan
5.7  Utah Governor Herbert Visits Jordan

♦♦Arabian Gulf

5.8  Qatar & Russia Sign Defense Cooperation Agreement
5.9  More Than a Third of UAE Adults Said to Suffer from Obesity
5.10  Oman’s Economy Projected to Grow by 5.2% in 2018
5.11  Neom – Saudi Arabia’s City of the Future

♦♦North Africa

5.12  IMF Starts Second Review of Egypt’s Economic Reform Program
5.13  Egypt Sets Target Budget Deficit of 4 – 5% of GDP by 2022
5.14  Egypt Approves First Major Draft Traffic Law in 40 Years
5.15  Tunisia to Fire 16,500 Public Sector Workers in 2017 and 2018
5.16  African Development Bank Says Morocco’s GDP to Reach $121.4 Billion in 2017


6.1  Azerbaijan, Georgia & Turkey launch New Asia-to-Europe Rail Link
6.2  Greek Economy in Recession in 2016



7.1  Shekel Bills Depicting Poetesses to Enter Circulation


7.2  UAE Appoints First Minister for Artificial Intelligence
7.3  Crown Prince Pledges to Create ‘Moderate, Open’ Saudi Arabia
7.4  Saudi Arabia First Country to Grant a Robot Citizenship
7.5  Egypt Postpones Opening of New Japanese Schools to Review Selection Process
7.6  Egypt Launches Sweeping Crackdown on Gay Community
7.7  Fulbright Foundation Boosting Greek-American Academic Ties


8.1  Therapix Biosciences & Assuta to Initiate Clinical Trial in Obstructive Sleep Apnea
8.2  BioLineRx Initiates Phase 1b/2 Trial for BL-8040 to treat Gastric Cancer
8.3  BrainStorm’s US Patent for its NurOwn Technology for Parkinson’s Disease Registers Allowed Claims
8.4  Roots set for Australian IPO
8.5  CathWorks Announces FAST-FFR Pivotal Clinical Trial
8.6  STK & Liddor Paving the Way for New Biological Pipeline Production
8.7  CIITECH Sponsors Project on Cannabis-based Therapy for Asthma at the Hebrew University
8.8  Kitov Announces Phase III/IV Clinical Trial for KIT-302 Successfully Meets Primary Endpoint
8.9  EOI Announces Initial Surgeries with the FLXfit15
8.10  INSIGHTEC Receives FDA Approval for Exablate Neuro Parkinson’s Disease Study
8.11  CollPlant Receives Innovation Authority Approval for $1 Million R&D Program with 40% Funding


9.1  Bioniq Solves Huge Interference Problem Using RADWIN’s JET Beam-Forming PtMP
9.2  AudioCodes Expands Interoperability Testing Range with BroadSoft BroadCloud
9.3  Leading Provider Deploys Allot’s Multiservice Platform to Improve Business Services
9.4  AudioCodes Collaborates with RedSky Technologies to Deliver Enhanced E911 Solution
9.5  GuardiCore Announces Availability of Centra Security Platform on AWS Marketplace
9.6  Secret Double Octopus Selected as Top Cybersecurity Company by Momentum Partners
9.7  Orbotech Revolutionizes the AOI Room with 4-in-1 AOI Solution
9.8  Dronomy is now SiteAware – Focused on Digital Transformation of Construction On-Site Execution
9.9  GPSdome Anti-Jamming & Anti-Spoofing Antenna Module Solution for Timing Systems


10.1  Israel’s GDP Increases by 2.1% During First Half of 2017
10.2  Israel’s Minimum Monthly Wage to Rise to NIS 5,300


11.1  ISRAEL: Summary of Israeli High-Tech Company Capital Raising – Q3/17
11.2  IMF Country Focus: MENAP Take Advantage of Strengthening Global Economy
11.3  JORDAN: Jordan Downgraded to ‘B+’ on Weaker Government Debt Structure & Higher Financing Needs
11.4  KUWAIT: Fitch Affirms Kuwait at ‘AA’; Outlook Stable
11.5  SAUDI ARABIA: Saudi Royal Transition – Why, What and When?
11.6  EGYPT: Egyptian Government Making Headway in Fight Against Cairo’s ‘Black Cloud’
11.7  TUNISIA: The Corruption Contagion
11.8  TURKEY: EU to Cut Aid to Turkey as Accession Talks Trail Off
11.9  TURKEY: Turkey Targets 30% Hike in Military Spending Next Year
11.10  CYPRUS: Fitch Upgrades Cyprus to ‘BB’; Outlook Positive


1.1  Prime Minister Netanyahu Pledges to Cut Taxes

On 23 October, Prime Minister Benjamin Netanyahu told the opening session of the Knesset’s winter session today that his government is going to cut taxes.  He said that he had agreed to lower taxes with Minister of Finance Kahlon, but gave no further details or whether it was part of their joint work on the 2019 budget.  The Minister of Finance’s office declined to discuss the issue and referred all questions on the matter to the prime minister.  Netanyahu had begun his speech by outlining the major challenges facing Israel.

Netanyahu welcomed US President Donald Trump’s efforts to annul the nuclear agreement with Iran.  Netanyahu also promised the residents of south Tel Aviv that he would remove the African migrants from their neighborhoods.  (Globes 23.10)

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1.2  Knesset Approves Ban On Trading in Binary Options

On 23 October, the Knesset passed a bill banning trading in binary options, promoted by chair of the Knesset Reforms Committee MK Rachel Azaria (Kulanu).  The bill outlaws gambling on securities even when those gambling (buyers of binary options) are not resident in Israel; 51 Knesset members voted in the favor of the bill and none against.

The bill was of great importance to chairman of the Israel Securities Authority Shmuel Hauser and to the Israel Police, who pointed out in committee hearings on the bill in the Knesset that the use of Israel as a base for trading in binary options harmed the country’s global reputation, to the point of provoking anti-Semitic outbursts.

Azaria convened the Reforms Committee (officially known as the Special Committee on the Planning and Building Bill and the Maternity Leave and Parenting Bill) during the summer recess in order to prepare the bill for second and third reading as soon as the Knesset resumed sitting.  Coalition chairman MK David Bitan promised Azaria that he would push the bill forward as soon as the Knesset winter session started, and yesterday he kept his word.  (Globes 24.10)

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2.1  Toronto Stock Exchange and Venture Exchange Lead Four-Day Roadshow in Israel

TMX Group’s equity exchanges, Toronto Stock Exchange (TSX) and Venture Exchange (Venture), were in Israel as part of a four-day roadshow from 22 – 25 October.  The Exchanges led a 12 member Canadian delegation comprised of investment bankers from Beacon Securities Limited, Cormark Securities and Macquarie Capital; lawyers from Goodmans LLP, Miller Thomson LLP, and Osler, Hoskin & Harcourt LLP; and accounting firm EY LLP.  The delegation focused on one-on-one meetings with Israeli market participants to raise awareness of North American capital markets and how Canada’s unique two-tiered ecosystem provides a global platform for growth.

As of 30 September 2017, there were six Israeli companies listed on TSX and Venture with a total market capitalization of approximately $2.5 billion.  There were 87 new corporate listings on TSX and Venture during the first three quarters of 2017 across a broad range of industry sectors, including technology/innovation, life sciences and consumer products.  (Toronto Stock Exchange 23.10)

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2.2  Governor Scott Walker Leads Wisconsin Trade Delegation to Israel

Wisconsin’s Governor Scott Walker met with Prime Minister Benjamin Netanyahu to discuss future collaboration between Wisconsin and Israel, as well as political and economic issues in the region.  The hour-long, one-on-one meeting in Jerusalem took place on the first full day of the governor’s trade mission to Israel, where he led a 15 member delegation on a trip aimed at boosting exports, increasing foreign investment in Wisconsin and developing new partnerships between the state and Israel.  While in Jerusalem, Governor Walker also met with several government leaders and led the Wisconsin delegation in a wreath-laying ceremony at the Yad Vashem Holocaust Memorial and a tree-planting ceremony at the Kennedy Peace Forest.

The governor and Wisconsin Economic Development Corporation (WEDC) Secretary and CEO Mark R. Hogan are heading the delegation, which includes business leaders from five Wisconsin companies and representatives of the state’s water technology sector.  During the trade mission, the company executives have been engaging in personalized, one-on-one meetings with potential business partners coordinated by WEDC’s authorized trade representative network in each country.  The trade component and other arrangements were organized by Atid, EDI, a Jerusalem based consulting firm chosen by WEDC.

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2.3  Israeli Smart Farming Winning Outsized Share of Global Funding

Israel’s agricultural technology, or Agritech, industry is in rapid growth, with a boom in number of companies, variety of innovations, and funding that’s winning an outsized share of global Agritech investment, a new report shows.  The report by Start-Up Nation Central singles out Smart Farming, a sector growing three times faster than other Agritech sub-sectors.

By the first half of 2017 the segment of Israeli Agritech that deals specifically with on-farm technologies raised 7% of global investment value in technologies of this sort.  This level of funding is noteworthy, especially for a tiny country the size of New Jersey, and where Agritech entrepreneurs must seek global proofs of concept on large farmland abroad, as some two-thirds of Israel is desert, with only 14% Arable land.  Smart farming is defined as data-driven solutions and hardware for increased resource efficiency and crop yield. Notable also is the growth of Farm-to-Consumer, Special Crops, Machinery & Robotics, Food Safety and Alternative Protein.

Of the 460 active Israeli Agritech companies tracked in Start-Up Nation Finder, Start-Up Nation Central’s innovation discovery platform, more than 25% were founded in the last five years, and 50% over the last ten, indicating a sector which, despite its historical roots in Israel’s collectivist kibbutz movement, is characterized by a boom of new companies and innovations.

Israeli Smart Farming solutions in IoT systems, machine-learning algorithms, and big-data analytics are being deployed to analyze soil, water, and plant tissue; in solar-powered, wireless sensors that enable crop/livestock monitoring and precision agriculture; in drone-mounted sensors for analysis of fields; and in ultra-sensitive smart irrigation systems that assess crop conditions.

Tel Aviv’s Start-Up Nation Central is a nonprofit that connects global corporations, NGOs, and governments to the Israeli innovation ecosystem, finding solutions to their most pressing challenges.  (Start-Up Nation Central 26.10)

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2.4  Regus Innovates With Powermat Wireless Charging

Powermat has partnered with Regus Israel, supplying wireless charging services to Israel co-working offices.  Business customers at Regus & Spaces live busy lives; they are on the road and work long hours.  Now they can trust Regus & Powermat to wirelessly charge their smartphones seamlessly, even if they forgot their charger at home. Powermat will also be installed in Regus’s two new locations expected to open soon (Sarona & Or Yehuda).

Regus is the world’s largest provider of flexible workspace solutions, with customers including some of the most successful entrepreneurs, individuals and multi-billion dollar corporations.  Neve Ilan’s Powermat is the leader and pioneer of the wireless power industry.  Enjoyed by millions of consumers worldwide, Powermat’s technology is the platform of choice for such global leaders as Starbucks, Samsung, General Motors and Flex.  (Powermat 18.10)

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2.5  JAL Ventures Raises New $60 Million VC Fund

Launched on 23 October, a new venture capital fund, JAL Ventures, has raised $60 million, which will be invested in companies that already have an annual sales turnover of $1 million.  The Levinberg brothers founded the fund together with general partners Tal Shaked and Yair Elbaz.

The fund may focus on two sectors: business to business (B2B) technology and the security market.  JAL Ventures was founded a decade ago, but has hitherto served as the Levinberg brothers’ investment arm.  JAL Ventures has already made three investments: in cyber security company Dome9 Security; Fornova, which gathers tourism data and Ametrine Technologies, which has developed a thermal camouflage technology.  JAL Ventures has had three exits: it invested in Kasamaba, which was sold to LPSN for $40 million in 2007.  JAL Ventures later invested in Matan Digital Printers, sold to Electronics for Imaging (EFI) for an estimated $48 million in July 2015.  The third exit was two months ago, when Nanorep was sold to LogMeIn for $45 million.  (Globes 23.10)

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2.6  Connatix Raises $15 Million Series A to Help Publishers Navigate the New Video Ecosystem

Video platform Connatix raised $15 million in growth equity from Volition Capital.  The company had previously raised an undisclosed seed round, and it claims it is profitable.  Connatix will use the funding for product development, to beef up sales and marketing and to fuel US expansion.  After it penetrates the US market, Connatix hopes to expand into Europe.

Connatix helps publishers like Mashable and Dow Jones Media Group monetize newer video ad formats like vertical, interactive, 360-degree and live video.  It works both with publishers who own video content and want to expand beyond their O&O or Facebook and YouTube, as well as with publishers that don’t create their own content and simply want to syndicate more video.  Most of Connatix’s business comes via managed services, but it also offers a self-serve platform for managing and distributing video content.

Founded 2014, Tel Aviv’s Connatix is a smart solution allowing brands to feature their content across web and mobile media properties in a real, native way.  Content is displayed with a similar look and feel of other story items and users view it on the same platform.  Using Connatix marketplace, brands can target their relevant audience while optimizing their budget for best results.  Connatix is a pioneer in the native advertising industry, empowering online publishers around the world with a native advertising and syndication technology.  (Connatix 24.10)

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2.7  Nanolock Raises $4.5 Million

Nanolock Security has raised $4.5 million from the Awz Homeland Security Fund, a Canadian venture capital fund that invests exclusively in Israeli cybersecurity, intelligence and physical security technology.  Nanolock Security specializes in protecting connected and Internet of Things (IoT) devices against cybersecurity and malware attacks.  Over the past few months, Awz HLS Fund has already invested $3.5 million investment in two Israeli cybersecurity companies – Siga Data Security and $5.25 million in Octopus Systems.

Moshav Nitzanei Oz’ NanoLock has developed a hardware and software based platform that can protect tens of billions of connected and IoT devices that are in constant threat from cyber and functional attacks.  The technology developed by NanoLock enables maximum protection even for devices with limited resources, power and latency concerns, and continues to protect even in situations of local and infrastructure attacks.  The company offers protection for IoT devices exposed to severe attacks that can take over the systems and cause significant economic damage.  The patent-protected, end-to-end solution prevents the ability to write malware to the operating system, while enabling highly secure software updates that serve privileged entities.  (Globes 24.10)

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2.8  TIPA Sustainable Packaging Raises $11 Million

TIPA Sustainable Packaging has secured $11 million in series B financing.  The new investment round will enable the company to expand its sales in new territories and further develop new generations of its unique packaging solutions for a wider variety of food and non-food goods.  Leading this Series B financing is Austin Hearst, an owner and director of the media conglomerate Hearst Corporation.  In this round of financing, Austin and Gabriela Hearst have joined existing TIPA investors GreenSoil Investments and Horizons Ventures.

Hod HaSharon’s TIPA has developed revolutionary biodegradable packaging solutions for the food industry.  These unique packaging solutions degrade biologically in up to 180 days in industrial compost – compared to regular common plastic packages that degrade in dozen of years.  TIPA’s 100% biodegradable films incorporate high flexibility and durability, high resistance to oxygen and water vapor permeation and transparency.

TIPA recently won the Silver Award at the internationally renowned Edison Awards for its innovative flexible packaging solutions, following seven years of experience developing high-end, bio-based, compostable films.  (TIPA 24.10)

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2.9  Wibbitz Secures $20 Million Investment for the Future of AI Video Creation

Wibbitz raised $20 million in Series C funding.  The timing of this funding round is no coincidence. Global demand for digital video is at an all-time high and media companies all over the world have been rapidly adapting their workflows – and embracing the support of automation technologies – to meet the needs of their digital audiences with visually engaging content.  As established innovators in the space, their newest investors and strategic partners at BDMI, The Weather Channel, AP, and TF1 Group understand first hand both the challenges and benefits that digital video storytelling presents.  Their investment in Wibbitz is a testament to the potential of automated video, and we’re proud to have their backing as the best solution for producing premium digital video content at scale.

Tel Aviv’s Wibbitz is a text-to-video creation platform built for publishers. Its advanced text-to-video technology can automatically produce premium branded videos using text content in seconds.  Wibbitz’s platform enables publishers to produce videos more efficiently, providing intuitive editing tools and top-quality licensed content from partners including Reuters and Getty Images.  Wibbitz supports production for thousands of videos every day, allowing partners like Hearst and USA TODAY Sports to better engage their audience and increase monetization with video.  (Wibbitz 24.10)

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2.10  mPrest Expands in No. America to Help Utilities Lead the “Internet of Energy” Transformation

mPrest has significantly expanded its presence in the North American utility market, where its technology is revolutionizing the way electric utilities incorporate grid analytics and distributed energy resources (DERs) into their grid and business models.  mPrest applications assist utilities in reducing power outages, improving service to their customers, offering integrated management of greener energy resources and reducing overall cost of energy within their networks.

In addition to a recent Asset Health Management production contract expansion with New York Power Authority, mPrest is collaborating with multiple leading utilities in the United States on implementing DERMS, Grid Analytics and Smart Grid Management.  mPrest’s Intelligent Grid Management System of Systems is an advanced monitoring, analytics and control application, which integrates existing IoT systems to provide an all-in-one view of DERs, DR platforms and legacy assets and platforms as well.  This allows for end to end integrated management of millions of DERs, while taking into consideration weather forecasts, network constraints, and market signals.  Equally important is the fact that mPrest’s Smart Grid Management System of Systems and DERMS is vendor agnostic and allows utilities to adopt a best of breed strategy, vs. standardizing on a single grid solution. Furthermore, it allows utilities to solve their DERMS management challenges immediately.

Petah Tikva’s mPrest is a global provider of mission-critical monitoring, control and big data analytics software.  Leveraging vast field-proven Industrial IoT experience, our integrative system of systems is deployed in diverse applications including IoE (Internet of Energy) for power utilities, as well as water utilities, smart cities, defense, homeland security and more. mPrest excels at connecting the dots across multiple disciplines – delivering unified situational awareness, sophisticated analytics, and end to end IT/OT integration and process management.  (mPrest 23.10)

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2.11  Decathlon Plans Second Israeli Branch

French sports goods chain Decathlon has reached agreement on opening a branch in the BIG Krayot shopping center.  The shelves of the Decathlon branch in Rishon LeZion are still bare, but the French sports goods chain has nevertheless reached agreement on opening an additional branch in Israel.  The new store is planned for the BIG Krayot shopping center in Haifa, smaller than the existing branch in Rishon LeZion.  The chain is examining the possibility of opening branches in additional locations, among them the Bilu Center at Kiryat Ekron, which is due for expansion within five years.

Decathlon’s are substantially lower in relation to the sports goods sector in Israel and are very close to the chain’s prices in Europe.  In Israel, the chain operates under the company’s French management and not through a franchisee, and it sells only its own brand.  Decathlon opened in Rishon LeZion in August this year, and has been coping with logistics problems.  Four days after it opened it had to close to replenish stocks and, apart from certain low-demand items, it is still understocked.  (Globes 29.10)

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2.12  Fosun Announces Strategic Investment into Israel’s BondIT

Shanghai’s Fosun Group announced a strategic investment of $14.25 million into, BondIT.  This marks the Groups’ first Fintech investment in the State of Israel.  Upon completion of the transaction, Fosun is now a major shareholder of BondIT including representation on its Board of Directors.  BondIT’s unique breakthrough lies in its ability to leverage data science and AI learning to overcome the complexity and inefficiencies often experienced in fixed income products. Its intelligence enables investors to quantitatively optimize the risks and returns of their fixed income portfolios.  This makes BondIT’s solution for fixed income strategies a highly attractive proposition, not just in China but across key global bond markets.

BondIT, headquartered in Herzliya, enables advisors and investment professionals to significantly boost their productivity and trade flows by automating the construction, monitoring and management of optimized fixed income portfolios.  BondIT provides sophisticated, yet easy-to-use, tools backed by proprietary machine learning algorithms, helping customers scale their business, increase productivity, and comply with fiduciary responsibilities.  (Fosun 27.10)

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2.13  My Size Announces $1.2 Million Private Placement

My Size has entered into a definitive agreement to sell securities in a private placement of non-convertible notes and warrants that is expected to result in gross proceeds to the company of $1.2 million, before deducting placement agent fees and other offering expenses.  The closing of the private placement is subject to the satisfaction of customary closing conditions.  The securities purchase agreement and the transactions contemplated thereby were unanimously approved by My Size’s Board of Directors. Additional details regarding the private placement will be included in a Form 8-K filed by My Size with the Securities and Exchange Commission.  Roth Capital Partners is acting as the sole placement agent for the offering.

Airport City’s My Size has developed a unique measurement technology based on sophisticated algorithms and cutting edge technology with broad applications including the apparel, e-commerce DIY, shipping and parcel delivery industries.  This proprietary technology is driven by several patent-pending algorithms which are able to calculate and record measurements in a variety of novel ways.  (My Size 27.10)

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3.1  Mubadala Investments Opens its First U.S. Location in San Francisco

Mubadala Investment Company, the Abu Dhabi-based investment company, announced it is launching a venture capital arm of its business.  A dedicated ventures investment team will be based in San Francisco, the first Mubadala office in the United States.  The team will initially oversee three main business areas:

1.  Mubadala Ventures Fund I, a $400 million early growth venture capital fund with two main investors, Mubadala and SoftBank. The fund plans to invest in exceptional founder-led companies creating scalable technologies and businesses.

2.  A $200 million ventures Fund of Funds that will invest in both established and emerging fund managers. Under this program, Mubadala intends to invest $50 million to $70 million per year in U.S and European-based venture capital funds.

3.  Overseeing and managing Mubadala’s $15 billion commitment to the SoftBank Vision Fund, working in close partnership with SoftBank executives in California.

The venture capital initiative will sit within Mubadala Capital, Mubadala’s financial investment arm.  Mubadala Capital, which focuses on the management of alternative assets, invests globally across a range of asset classes, including equity and credit, public and private securities, direct and third-party managed funds, while also managing a number of sovereign investment partnerships. Mubadala Capital manages more than $10 billion of assets across its portfolio.  (Mubadala 18.01)

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3.2  Middle East Aircraft Fleets to More Than Double By 2036

The fleet size of carriers in the Middle East is forecast to more than double from 1,250 to 3,320 aircraft over the next two decades, according to the Airbus Global Market Forecast.  The Middle East is expected to need 2,590 new aircraft by 2036, for replacement of 520 older generation aircraft and 2,070 aircraft for growth, while 730 are expected to remain in service over the period.  This demand includes 1,080 for twin-aisle aircraft, with the same number of single-aisle aircraft (1,080), and 430 very large aircraft, said Airbus.  Future demand for the Middle East’s fleet is valued at $600 billion from a total market value $5.3 trillion.

The current orders from Middle East-based carriers stand at 1,319 aircraft, of which 687 are single-aisle, 409 twin-aisle and 162 very large aircraft.  The report said passenger traffic to from and within the Middle East will grow 5.9% annually until 2036, well above the global average of 4.4%.

While traffic between traditional markets will grow at a steady rate, the highest growth is expected to be on routes to Latin America (8.5% per year to 2036).  Global freight traffic will see an annual 3.8% increase to 2036. Freight traffic growth from the region is expected to be highest between the Middle East and the Asia-Pacific, with 4% annual growth to 2036.  (AB 22.10)

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3.3  The Cheesecake Factory Opens in Manama, Bahrain

Calabasas Hills, California’s The Cheesecake Factory announced that the first The Cheesecake Factory restaurant in Bahrain opened in October 2017 under a licensing agreement.  This is the thirteenth licensed The Cheesecake Factory restaurant in the Middle East.

The Cheesecake Factory Incorporated created the upscale casual dining segment in 1978 with the introduction of its namesake concept.  The Company, through its subsidiaries, owns and operates 209 full-service, casual dining restaurants throughout the U.S.A., including Puerto Rico.  (The Cheesecake Factory 30.10)

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3.4  Dickey’s Barbecue Pit Fires Up First International Deal

Dallas, Texas’ Dickey’s Barbecue Pit, the largest barbecue chain in the world, brings authentic, Texas-style barbecue overseas.  The brand has partnered with acclaimed Middle Eastern hospitality group, Serenity Hospitality to bring 45 Dickey’s locations to seven countries throughout the Middle East.  The 45 international Dickey’s Barbecue Pit locations are slated to open in seven countries throughout the Middle East including United Arab Emirates, Saudi Arabia, Kuwait, Bahrain, Oman, Qatar and Lebanon.  The first locations are planned to open in 2018 in the UAE.

Serenity Hospitality focuses on bringing innovation and excellence to the high-growth Food and Beverage market across the GCC and beyond.  Serenity Hospitality is owned by SANAD AD, an Abu Dhabi-based investment house.  (DBP 30.10)

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3.5  Katsuya Continues Global Expansion with Opening of Two More Locations in Middle East

Los Angeles based Katsuya, the internationally acclaimed culinary concept from sbe’s Disruptive Restaurant Group, expands its worldwide portfolio, unveiling two new highly anticipated Middle Eastern openings at Villaggio Mall in Doha, Qatar and The Avenues in Manama, Bahrain this October.  Providing a modern take on Japanese classics as envisioned by Master Chef Katsuya Uechi, and widely acknowledged for its sleek design from iconic visionary Philippe Starck, Katsuya delivers an original experience, exemplifying and adding to the Middle East’s vibrant and unrivaled dining scene.  In addition to these openings, the brand is rapidly growing, with plans to open 15 more Katsuyas by 2020.

sbe’s Katsuya is the dream of Sam Nazarian to bring Master Chef Katsuya Uechi’s fresh, modern take on Japanese classics mixed with design icon Philippe Starck’s sleek and sultry interiors.  With more than ten locations worldwide, including Kuwait City, Katsuya’s trademark award winning cuisine and bold design has created an international empire.  Using only the freshest ingredients, Chef Katsuya Uechi crafts dishes with a modern twist and elegance, paired with signature cocktails and an extensive sake list.  (Katsuya 23.10)

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3.6  Japanese Retail Giant Daiso Opens 50th Store in the Gulf

Daiso, the popular Japanese retail concept, has announced the opening of its 50th store in the Middle East.  The flagship store in the Othaim Mall, Dammam, Saudi Arabia is the seventh to open in the Gulf kingdom, the retailer said.  It added that as well as Japanese products, Daiso also offers shoppers a range of 70,000 items to select from glassware and crockery to DIY products, gardening accessories to gifts and novelties, plus a range of cosmetics, living, gifting, toys and stationery.  Daiso Japan operates in Middle East under the joint franchise ownership of Lals Group and Damas Group.

Worldwide, the brand has more than 4,000 stores with sales exceeding $3 billion. In the GCC region, there are 32 stores in the UAE, while the remaining 18 are located across Kuwait, Bahrain, Qatar and Saudi Arabia.  (AB 24.10)

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3.7  HeartSciences Launches Breakthrough ECG Technology in Middle East

Southlake, Texas’ HeartSciences announced the commercial launch of its MyoVista high sensitivity electrocardiograph (hsECG) Testing Device in the Middle East.  The MyoVista hsECG is now available for commercial sale in the first markets of United Arab Emirates (UAE) and Kuwait and will soon extend to other countries in the region.  The MyoVista hsECG was developed using Continuous Wavelet Transform mathematics and goes beyond conventional ECG technology with new metrics to detect repolarization abnormalities.  This new capability enables physicians to detect diastolic dysfunction which is typically diagnosed using tissue Doppler echocardiography.

In the region, MyoVista will be sold via distribution partners.  The device is also available across the European Union, where it received the CE Mark approval earlier this year.  HeartSciences is also in the process of expanding distribution to Canada, Australia, Latin America and Asia-Pacific.  HeartSciences expects to seek U.S. FDA clearance for MyoVista in 2018.  (HeartSciences 19.10)

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3.8  Latifa Hospital for Women and Children Selects Vocera to Improve Patient Care

San Jose, California’s Vocera Communications, a recognized leader in clinical communication and workflow solutions, announced that Latifa Hospital for Women and Children in Dubai, United Arab Emirates, is the first hospital within the Dubai Health Authority (DHA) to implement intelligent communication technology from Vocera to help improve patient care, safety and satisfaction.  The 344-bed hospital, which plans to expand its labor and delivery suite and emergency department, selected the Vocera solution to improve staff response times and create a quieter environment for patients using secure text messaging and hands-free voice communication.

Latifa Hospital is well-known for its maternity services expertise and is a referral hospital for high-risk deliveries because of its sophisticated neonatal intensive care unit, feto-maternal services and the pediatric surgery unit.  A healthcare pioneer for almost 30 years, it is the oldest and largest maternity and pediatric government hospital in the emirate.

Implementing an electronic health record (EHR) system is also part of the hospital’s expansion plan. Integration with the EHR and Vocera technology will help improve communication of critical lab results and other important information to the right clinicians at the right time on their device of choice.  (Vocera 19.10)

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3.9  Gibraltar Awarded Multiple Saudi Arabian Barrier Contracts

Marble Falls, Texas’s Gibraltar, a leading manufacturer of anti-ram vehicle barriers used across the globe, has announced that it has received awards for multiple Saudi Arabian projects.  Gibraltar anti-vehicle barriers were selected for use on the Tuhama Power Plant, owned by Saudi Electricity Company in Saudi Arabia.  Gibraltar’s barriers were acquired for 360 degree anti-ram security with approximately 3200 meters of G-FORCE Brace & Beam and G-FORCE Combination Anti-Ram Fences, as well as multiple G-2000 Electric Wedge Barriers.  All barriers selected for the project were crash certified by an independent certified testing laboratory to ASTM F2656-07 M50 P1.  Gibraltar also provided the electronic power units (EPUs) and control panels for the active barriers.

Gibraltar has also been awarded a contract to supply their G-1350 Standard Mount Bollards for the Jabal Sayid Mine Project in Saudi Arabia.  These bollards are also crash certified by an independent certified testing laboratory to ASTM F2656-07 M50 P1.

Gibraltar offers five different crash certified anti-ram fence systems known as their G-FORCE Series. Also offered are crash certified bollards, wedge barriers, crash gates, portable barriers, and surface mount barriers.  (Gibraltar 19.10)

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3.10  Saudi Ministry of Interior Supports Hajj Safety with Hexagon Safety Dispatch Solution

The Kingdom of Saudi Arabia Ministry of Interior supported the safety of pilgrims and residents during the Hajj and Umrah seasons of 2016 and 2017 by deploying Huntsville, Alabama’s Hexagon Safety & Infrastructure’s Intergraph Computer-Aided Dispatch (I/CAD) solution.  The incident management system helps the ministry’s public safety and security agencies manage emergency calls for service using a single emergency number (911).

To improve security and safety for the citizens of Saudi Arabia, the ministry began working in 2015 to implement the Unified Security Operations Center (911) in Mecca, the first province-wide emergency call taking and dispatching system.  To support this project, the ministry needed a scalable and reliable incident management system — one that was already proven in the field by many agencies and users.  The ministry selected Hexagon’s I/CAD suite, and the system was put into operation in the summer of 2016.  The solution centralized the operation of more than 40 operation centers across the Mecca province into the Unified Security Operations Center (911), thus providing a comprehensive and centralized response system for the entire province, including the cities of Holy Mecca, Jeddah and Taif.

The global leader in public safety and security, Hexagon Safety & Infrastructure helps protect 1 in 12 people worldwide.  Hexagon’s public safety and security solutions improve the quality, accuracy and availability of critical information, increasing performance and productivity, while reducing the total cost of ownership for mission-critical IT investments.  (Hexagon Safety 24.10)

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3.11  Tunisie Telecom First Deployment of ADTRAN Remote-Powered DSLAMs

Huntsville, Alabama’s ADTRAN, a leading provider of next-generation open networking solutions, marked another milestone in its EMEA Enabling Communities Connecting Lives program with the latest deployment for its sealed outside plant (OSP) DSLAM solutions in the North African market.  Incumbent operator Tunisie Telecom (TT) is leveraging ADTRAN’s solutions to deliver next-generation copper-based broadband services to locations where laying fiber is cost-prohibitive and/or electrical power sources are unreliable or unavailable.

The ADTRAN 1148VX OSP DSLAM enables operators, like TT, to offer subscribers in all areas higher broadband speeds (more than 90Mb/s with distance of around 200m with remote power, more than 59Mb/s with 802.11b/g/n 2.4GHz WiFi, and more than 20Mb/s for distance of about 2km) by deploying environmentally-sealed, temperature-hardened micro-FTTX solutions that can avoid the delay penalties incurred waiting for the local electrical utility to provide power.  ADTRAN’s copper backhaul is a unique way for operators such as TT to cut cost and expedite deployment into hard-to-reach areas that may be far away from traditional MSAN sites, and too expensive or time-consuming to consider fiber deployment in the short term.  (ADTRAN 24.10)

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4.1  SodaStream Wins 2017 Business Intelligence Group Sustainability Award

SodaStream International, the No. 1 sparkling water brand in the world, has been recognized as a 2017 Sustainability Award Product winner by the Business Intelligence Group for its line of eco-friendly sparkling water makers.  SodaStream sparkling water makers are proven to help consumers reduce their environmental footprint.  In the US, the recycling rate of plastic beverage bottles is only 31%, and more than 100 million plastic bottles are trashed every day.  SodaStream has become an advocate for the discontinuation of plastic bottles within the beverage industry.  Studies show that SodaStream owners save an average of 550 plastic bottles each year.  The Sustainability Awards program honors those who have made sustainability an integral part of their business practice.  The global recognition is made by a panel of volunteer judges who are leaders and experts in business.

Airport City’s SodaStream is the No. 1 sparkling water brand in the world and the leading manufacturer and distributor of Sparkling Water Makers.  They enable consumers to easily transform ordinary tap water into sparkling water and flavored sparkling water in seconds.  By making ordinary water fun and exciting to drink, SodaStream helps consumers drink more water.  Sparkling Water Makers offer a highly differentiated and innovative solution to consumers of bottled and canned carbonated soft drinks.  (SodaStream 26.10)

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4.2  Chakratec Wins eMove360o Award 2017 for Electric Mobility & Autonomous Driving 2017

Chakratec won the eMove360o Award 2017 for Electric Mobility & Autonomous Driving 2017, Energy Storage category, held at the eMove360° Europe 2017 international trade fair for Mobility in Munich recently.  This significant achievement occurred following two other achievements in October.  In the first instance, Chakratec reached the Top 10 finalists of the SHELL New Energy Challenge 2017 event out of 246 candidates.  The second was where Chakratec was chosen by the Global Incubator Network to participate in the goAustria workshop to be exposed to the Austrian Industry.

Chakratec manufactures a patented Kinetic Energy Storage System that matches the needs of Fast EV Charging Stations (EVCS) to enable charging everywhere and to provide high quality and reliable service.

Lod’s Chakratec, established in 2013, brings to the energy market patented kinetic battery energy storage solution based on an innovative flywheel concept.  Chakratec’s solution enables energy storage with unlimited charge cycles as needed with ultra-fast EV charging.  Unlimited number of deep charge and discharge cycles over the full life time of 20 years makes this technology an optimal solution for additional multiple cycle applications like grid stability, grid flexibility.  (Chakratec 26.10)

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4.3  Saudi Fund Launches $510 Million Energy Efficiency Unit

Saudi Arabia’s Public Investment Fund (PIF) has announced the establishment of a new energy service company, Super Esco, designed to increase energy efficiency across government and public buildings.  A Royal decree has been issued requiring all government entities to contract Super Esco on an exclusive basis in order to improve energy savings across public buildings and facilities.  Super Esco has been established with a capitalization of $510 million.  The company will fund and manage the retrofit of government and public buildings, which represent over 70% of overall projects in the sector.  These projects will help reduce government spending on the electricity sector, which will in turn reduce natural resource consumption while rationalizing capital investments in expansion projects for the production, generation, transmission, and distribution of electricity.  The company has been established to stimulate the growth of the kingdom’s energy efficiency industry, in line with the objectives of Vision 2030 to diversify the economy and drive environmental sustainability.  (AB 18.10)

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4.4  With New Power Plants, Egypt’s Solar Investments Surge in 2017

With the approval of three new solar power plants under a $500 million financing package by the European Bank for Reconstruction and Development (EBRD), investments in Egypt’s solar energy sector hit record levels in 2017.  EBRD said it is providing $73 million for the construction and operation of three solar photovoltaic power plants in Egypt’s southern province of Aswan with a total capacity of 120 MW.  According to the bank, these plants “will contribute to a reduction of approximately 150,000 tonnes of CO2 emissions yearly and will help the economic development of the Aswan province.”  The new plants, set to become the largest solar site in Africa, is part of a financing framework worth $500 million for renewable energy in Egypt.  The framework includes 16 new solar power plants, making the EBRD the “single largest investor in renewable energy in the country.”  While Egypt’s energy sector is heavily dominated by oil and gas, the new plants will be “the first private utility-scale renewable-energy projects in [the] country”.  The construction of the solar plants will be completed by the end of next year.  (Egyptian Streets 19.10)

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5.1  Lebanon’s Average Prices Rise by 4.32% in the First Three Quarters of 2017

According to the Central Administration of Statistics (CAS), Lebanon’s average inflation rate rose by 4.32% by September 2017.  The average costs of housing and utilities (including: water, electricity, gas and other fuels), which grasped a combined 28.4% of the Consumer Price Index (CPI), rose by 5.54% year-on-year (y-o-y) by September 2017.  In details, average owner-occupied rental costs constituted 13.6% of this category and increased by 3.8% y-o-y.  As for the average prices of water, electricity, gas, and other fuels (11.8% of the Housing & utilities component), they rose by an annual 11.55% over the same period. In turn, the average prices for food and non-alcoholic beverages (constituting 20% of the CPI) and education costs (6.6% of CPI) registered yearly upticks of 3.51% and 2.67% by September 2017.  The average price of transportation (grasping 13.1% of the CPI) gained an annual 5.69%.  Nevertheless, average health costs (7.7% of the CPI), which have been decreasing in the previous months, witnessed a drop of 0.43% y-o-y over the same period.  On a monthly basis, overall Lebanese prices grew at a rate of 4.14%, which can be mainly attributed to the increase of the most weighted components in the CPI, where housing and utilities and food and non-alcoholic beverages escalated by 4.10% and 4.52%, respectively.  (CAS 23.10)

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5.2  Lebanon’s Trade Deficit Down by 1.28% to $10.69 Billion by August 2017

Lebanon’s trade deficit narrowed by 1.28% year-on-year (y-o-y) to reach $10.69 billion by August 2017.  In fact, total imports dropped by a yearly 1.58% to $12.59B by August 2017 while exports slid by a yearly 3.21% to $1.91B over the same period.  Lebanon’s top imports were “Mineral Products”, “Products of the Chemical or Allied Industries” and “Machinery and Electrical Instruments” with respective shares of 19.23%, 11.26% and 10.29% in total imports.  The value of imported mineral products declined by a yearly 15.11% to $2.42B while the value of products of the chemical or allied industries and that of machinery and electrical instruments grew by annual rates of 3.64% and 3.43% to $1.42B and $1.30B, respectively.  By August 2017, China, Italy and Greece were the top three import destinations with respective shares of 9.98%, 9.04% and 7.29% in total imports.  As for exports, the top products exported from Lebanon were Pearls, precious stones and metals with a stake of 21.05% of total exported products, followed by Prepared foodstuffs, beverages and tobacco grasping a share of 16.11% of total exports and Base metals and articles of base metal with a share of 11.53%.  The value of pearls, precious stones, & metals fell by 28.43% to $401.02M, that of prepared foodstuff rose by an annual 3.63% to $307m and that of base metals and articles of base metals grew by an annual 35.08% to $219.7m.  The top three export destinations were South Africa, Syria and Saudi Arabia with respective shares of 12.08%, 9.15% and 8.48%, respectively.  In August alone, the deficit fell from $1.61 in August 2016 to $1.34B this year, as exports and imports both declined from $340.50M and $1.95B in August 2016 to $250.81M and $1.59B in August 2017, respectively.  (Blom 19.10)

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5.3  American University of Beirut is the Best University in the Arab Region

This year’s QS Arab Region University Rankings have been released, and the American University of Beirut has been named the best university in the Arab region.  The Lebanese institution has climbed one place since last year’s ranking, which means King Fahd University of Petroleum and Minerals has been dethroned for the first time ever since the ranking was first piloted in 2014.  Saudi Arabia can still claim to be one of the best destinations for higher education in the Arab world though, with three universities in the top four beneath the American University of Beirut.  It’s also the most-represented nation in the rankings, with 21 Saudi Arabian universities in the top 100.

The next countries to feature the most are Egypt and Jordan, although these countries can both manage only one university each in the top 10.  This year’s top 10 is largely unchanged since last year, with only Sultan Qaboos University, based in Oman, breaking into the top 10 (it was 11th last year).  Now featuring nearly 150 universities, this year’s rankings were compiled by assessing universities on eight different indicators, including the number of academic papers published per faculty member and their online presence. More information about the methodology can be found here.  (QS 16.10)

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5.4  Austerity to Hit Jordan as Debt Spikes and the Economy Slows

Jordan’s high and rising public debt has worried the International Monetary Fund and prompted a downgrade from Standard & Poor’s.  So the government is planning a blast of austerity by year-end.  Tax hikes and subsidy cuts — likely to be highly unpopular — are on the agenda as the country’s debt to GDP ratio has reached a record 95%, from 71% in 2011.

After an IMF standby arrangement that brought some fiscal stability, Jordan agreed last year to a more ambitious three-year program of long-delayed structural reforms to cut public debt to 77% of GDP by 2021.  The debt is at least in part due to successive governments adopting an expansionist fiscal policy characterized by job creation in the bloated public sector, and by lavish subsidies for bread and other staple goods.  It also hiked spending on welfare and public sector pay in a move to ensure stability in the aftermath of the “Arab Spring” protests in the region in 2011.

But the economy has slowed, battered by the turmoil in neighboring Syria and Iraq.  The economic strains reduced local revenue and foreign aid, forcing Jordan to borrow heavily externally and also resort to more domestic financing.  Although there has been some progress this year with improving remittances, tourism and some rebound in exports, there has been no pickup in growth since 2015 — with the officials forecasting 2% growth this year from an earlier IMF 2.3% target.

Jordanian officials say they expect less donor support next year than any time since the crisis began.  Politicians and economists say the government’s fiscal consolidation plan envisages a doubling of bread prices and raising sales taxes on basic food and fuel items.  This should cut into the estimated JD850m ($1.2b) the government pays in annual subsidies from bread to electricity to water.  But economists reckon subsidy cuts are bound to worsen the plight of poorer Jordanians, a majority of the country’s population, and removing subsidies has triggered civil unrest in the past.  As well as debt, the IMF has also pointed to the unemployment rate, which has risen sharply in the last two years to 16%, and to low tax collection.  The IMF says Jordan stands out among countries in the region with among the lowest tax collections.  (AMMONNEWS 30.10)

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5.5  Jordan’s Unemployment Reaches 18%

Jordan’s unemployment rate has hit 18% in the second quarter of the current year compared to 14.7% during the same period in 2016, the state’s Department of Statistics (DOS) announced on 19 October.  DOS added that the unemployment rate for males amounted to 13.4% against 33.9% for females.  Around 26.6% of the university graduates are still unemployed.

Jordanian job seekers suffer high competition with the Syrians, as they represent 1.2 million people out of a 9.531 total population.  There are also some 636,000 Egyptians and other nationalities who play a major role in the country’s employment market.

Two months ago, the Jordanian government, in cooperation with the International Labor Organization (ILO) and UN agencies, began issuing work permits to Syrian refugees to work in specific sectors, including agriculture and real estate.  The government has also pledged, citing financial grants from foreign countries, to provide some 200,000 job opportunities for Syrian refugees in the coming years.  In 2016, the Middle Eastern country’s unemployment rate reached 15.8%, compared to 13% during the same period of 2015.  (DoS19.10)

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5.6  EU Approves Financial Assistance for Jordan

The European Commission, on behalf of the European Union (EU) has approved the disbursement of a €100 million ($117.4 million) loan to Jordan under its Macro-Financial Assistance program, expected to take place during the course of 2018.  This disbursement marks the launch of the second Macro-Financial Assistance program for Jordan with a total worth of €200 million ($235 million).  The assistance is intended to strengthen the country’s foreign exchange reserve position and to help Jordan meet its balance of payments and budgetary financing needs.  It will also help with public finance management, the tax and social safety net systems, education and professional training, aimed at increasing employment opportunities for both Jordanian citizens and Syrian refugees living in Jordan.  (AMMONNEWS 23.10)

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5.7  Utah Governor Herbert Visits Jordan

On 22 October, Jordanian Minister of Foreign and Expatriate Affairs Safadi received Utah Governor Herbert, his wife and an accompanied delegation, which included executive and legislative officials in the state.  The minister and Governor Herbert reviewed Jordanian-US relations and cooperation in enhancing security, stability, peace and fighting terrorist gangs on the military and intellectual fronts.  They also discussed ways of promoting economic cooperation between the Kingdom and Utah, whose economy is the ninth largest economy among the U.S. states, and is a pioneer in the fields of energy, technology, water and education.  Safadi underlined Jordanian-US relationship and voiced appreciation for the U.S. support to the Kingdom.  He also briefed Governor Herbert on regional developments.  Governor Herbert said he appreciated Jordan’s role in dealing with regional crises and promoting peace and respect for others.  Safadi and Herbert signed Memorandum of Understanding between Jordan and the State of Utah on promoting cooperation in infrastructure for energy and water.  (Petra 22.10)

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►►Arabian Gulf

5.8  Qatar & Russia Sign Defense Cooperation Agreement

Qatar and Russia have signed a memorandum-of-understanding (MoU) calling for increased military and technical cooperation.  The MoU was signed by Qatar’s Minister of State for Defense Khalid bin Mohammad Al Attiyah and his Russian counterpart Defense Minister Sergey Shoygu in Doha on 25 October.  The MoU paves the way for the supply of armaments, including air Defense systems.  Additional specifics were not provided.

In 2017 the Russian Defense industry has been making major inroads in the Arab Gulf and Middle East.  Its most notable commercial success has been the Almaz-Antey S-400 Triumf long-range air Defense system, which has been ordered by Turkey and is now drawing active interest from Saudi Arabia and Bahrain.

Qatar has charted a significant modernization roadmap for its armed forces.  Of note are Doha’s plans for the Qatar Emiri Air Force (QEAF), which has 24 Dassault Rafale and 36 Boeing F-15QA fighters on order.  In September, Qatar also signed a letter-of-intent with BAE Systems for 24 Eurofighter Typhoon multi-role fighters and six Hawk trainer aircraft.  For Qatar, it is worth noting that it is forging a diverse arms supplier pool. Besides securing combat aircraft from three major suppliers (i.e. the U.S., France and the U.K), it has ordered land and naval systems from Germany and Italy, respectively.  (Quwa 26.10)

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5.9  More Than a Third of UAE Adults Said to Suffer from Obesity

More than a third of adults (37%) in the UAE suffer from obesity, according to new research by the American Academy of Cosmetic Surgery Hospital (AACSH).  The research also revealed that 25% of all services provided by the hospital were for weight loss treatments, both surgical and non-surgical.  The report revealed that the primary reason clients approach the hospital for weight loss support is to reduce the impact of morbid obesity on these chronic conditions.

AACSH also reported that many female clients seek the support of the hospital to assist with fertility complications and challenges conceiving caused by excess weight.  AACSH said it is the only cosmetic and aesthetic medicine hospital in the Middle East to open a fully equipped ICU unit to cater to its weight loss clinical services.  The hospital offers a range of weight loss procedures, both surgical and non-surgical, including nutritional counselling, gastric bypass, psychological support post-weight loss and body contouring.  (AB 28.10)

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5.10  Oman’s Economy Projected to Grow by 5.2% in 2018

Oman’s GDP is set to grow at 5.2% in 2018, after the country commenced natural gas production and opened a new airport in Muscat.  The strongest growth rate since 2015, will help steady the country’s property market.  Government efforts to diversify revenue streams and ramp up reforms have also driven positive growth, Clutton’s Muscat Winter 2017/18 report shows.  The start of natural gas production at the Khazzan gas field and the opening of the new Muscat airport have been the main drivers of new economic opportunities.  The airport, which will nearly double passenger capacity to 12 million passengers per annum, is expected to boost the country’s tourism and hospitality sector, while also opening new development opportunities for land parcels around the airport.  (AB 28.10)

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5.11  Neom – Saudi Arabia’s City of the Future

Artificial intelligence will be the driving factor behind Saudi Arabia’s new $500 billion mega city planned for the Gulf kingdom’s Red Sea coast.  According to its mastermind, Saudi Arabia’s Crown Prince Mohammed bin Salman, everything in Neom life will be connected via an app which will give residents control over what they want to do.  He added that the city will have no supermarkets to visit because everything you need will be delivered using the latest technology.

Neom, short for Neo-Mustaqbal, a Latin-Arabic term meaning “new future”, is scheduled to start taking shape in 2020 with the main city opening five years later.  The Crown Prince told Bloomberg that the first phase of the giant project will be Neom Bay, which will be like the Hamptons in New York.  The plan includes a bridge spanning the Red Sea, connecting the proposed city with Egypt and the rest of Africa. Some 10,000 square miles have been allocated for the development of an urban area stretching into Jordan and Egypt.

He said all nationalities would be welcomed to live in Neom but, like the rest of the Gulf kingdom, alcohol will be banned.  “We can do 98% of the standards applied in similar cities. But there is 2% we can’t do, like for example alcohol. A foreigner who desires alcohol can either go to Egypt or Jordan.”  (Blomberg 25.10)

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►►North Africa

5.12  IMF Starts Second Review of Egypt’s Economic Reform Program

An IMF delegation began the second periodic review of Egypt’s economic reform program in preparation for providing the country the second tranche of a $12 billion loan, which is estimated at $2 billion.  The IMF meetings with Egyptian officials are set to last for two weeks, according to a statement by the Ministry of Finance.  Funds from the IMF loan will be used to finance the state’s budget deficit while the Central Bank of Egypt (CBE) will benefit from cash in foreign currency to support the foreign exchange balance reserves.  Egypt aims to demonstrate to the IMF mission the latest positive economic developments, including high economic growth and reduced unemployment rates.

In September, the IMF praised Egypt’s efforts in implementing its economic reform program despite seeking waivers for missing some targets in June and a deeper-than-expected currency depreciation, but inflation remains the main risk for stability.

The economic growth rate increased during the last quarter of 2016/17 to 4.8%, while the unemployment rate decreased to 11.9% in 2017, compared to 12.7% in June 2016, according to official data.  Egypt’s foreign reserves registered $36.535 billion at the end of September 2017, continuing the surge over the past few months.  The country’s initial budget deficit decreased by 50% during 2016/17, falling by 1.8% of GDP compared to 3.6% in 2015/16.  In July, the CBE received the final instalment of the first $4 billion tranche of the IMF loan.  (Ahram Online 26.10)

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5.13  Egypt Sets Target Budget Deficit of 4 – 5% of GDP by 2022

 Egypt’s Minister of Finance Amr El-Garhy said on 24 October in Washington that the Egyptian government is aiming to reduce the total budget deficit to 4 – 5% of the GDP by 2022.  The budget gap for the last fiscal year, which ended on 30 June, shrank to 10.9% of GDP from 12.5% the previous year.  El-Garhy said that reducing the deficit and public debt will provide more resources for investments and increasing growth in the public sector.  The minister also revealed that the government is targeting $10 billion in direct investment in Egypt this year.  He also said that the Ministry of Finance is considering releasing Eurobonds and $-denominated bonds in 2018 to diversify the finance portfolio in Egypt.  El-Garhy is heading a high-level delegation of officials in Washington to attend a number of meetings organized by the IMF and the World Bank.  (Ahram Online 17.10)

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5.14  Egypt Approves First Major Draft Traffic Law in 40 Years

The Egyptian government approved on 18 October a long-awaited new draft traffic law that is set to introduce new regulations for issuing driver’s licenses and heftier penalties for traffic violators.  The draft law would see a new penalty system put in place whereby license holders would be granted a number of points that would be deducted each time a traffic violation is committed.  Once a traffic violator’s points run out, their driver’s license would be suspended for a period of 30 days.  In order for the driver to get their license back, they need to enroll in an accredited driving school.  New regulations for the speed limit would also be introduced, including fines of up to EGP 500, which would see the driver lose two to five of their points.  Another feature of the law is that the issuing of new public transport licenses for vehicles older than five years would be prohibited.  Egypt’s Transport Minister Hisham Arafat said that the new bill would replace the current traffic law, issued in 1973.

Besides the sheer number of cars on the roads –over 11 million registered vehicles according to the country’s official statistics agency CAPMAS – which contributes to debilitating bottlenecks, accidents are also a daily occurrence.  In 2016, 16.000 people were killed and 60.000 were injured in road accidents, according to the Egyptian Society for Road Accidents Victims Care.  As to traffic congestion, it is not only a nuisance for daily commuters, but it also puts a heavy burden on the country economically.

According to the World Bank, when calculating the total cost of wasted fuel, health impacts due to poor air quality and accidents, as well as reduced economic productivity, traffic congestion in just Cairo costs approximately EGP47 billion, or 3.6% of GDP, per year.  That number is projected to rise to EGP 105 billion in 2030.  The price tag for road accidents alone stood at EGP 30.5 billion in 2015, according to CAPMAS.  (Egyptian Streets 19.10)

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5.15  Tunisia to Fire 16,500 Public Sector Workers in 2017 and 2018

Tunisia will ask the United States for a $500 million loan guarantee as it seeks to lay off about 16,500 public sector workers in 2017 and 2018.  The layoffs, which the government aims to make voluntary but which are demanded by its international lenders, come from a public sector workforce of around 700,000.  Tunisia request this new loan guarantee as it prepares to issue bonds on financial markets next year.  It will need about $3 billion in foreign loans.

Since the 2011 uprising that ended the rule of former president Zine Al Abidine Ben Ali, the United States has guaranteed about $1 billion in loans to Tunisia to support its democratic transition.  Tunisia is under pressure from the International Monetary Fund (IMF) and its partners to speed up reforms to create jobs and cut its deficit after its tourism sector was hit by militant attacks in 2015.

In April, the IMF agreed to release a delayed $320 million tranche of Tunisia’s $2.8 billion in loans, on condition that it raise tax revenue, reducing the public wage bill and cut popular energy subsidies.  Six years after the uprising against Ben Ali’s autocratic rule, Tunisia has made progress towards democracy. But successive governments failed to push through some of the painful reforms needed to overhaul public spending.

A delegation from the IMF will be in Tunis by the end of this month to discuss the progress of reforms before deciding on a new tranche of the $2.8 billion loan.  Under the 2018 budget, the deficit will fall to 4.9% of gross domestic product (GDP) in 2018, from about 6% expected in 2017. Tunisia also seeks to raise GDP growth to about 3% next year against 2.3% this year.  (Reuters 26.10)

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5.16  African Development Bank Says Morocco’s GDP to Reach $121.4 Billion in 2017

Morocco’s GDP is expected to reach $121.4 billion in 2017 compared to $116 billion in 2016, according to the latest projection of the African Development Bank (ADB).  According to a statistical bulletin of socioeconomic indicators in Africa, the performance of the Moroccan economy almost doubled in the last 12 years, from $65.62 billion in 2006 to 121.42 billion in 2017.  With this significant growth in the national GDP, Morocco ranks sixth in Africa’s economic powers, following Nigeria with $581.5 billion, South Africa with $276.1 billion, Egypt with $263.7 billion, Algeria with $170.3 billion and Sudan with $123.9 billion.

For the ADB, Morocco’s economic growth is expected to see a significant acceleration in 2017, settling at 4.5% and 3.9% in 2018, mainly due to a strong rebound in agricultural production.  According to the bank, the kingdom will exceed the global, African, and North African average growth rates set at 3.5, 3, and 3.1% in 2017 respectively.  At the regional level, East Africa remains the fastest growing region, with an estimated 5.4% in 2017 and 5.8% in 2018.  (MWN 18.10)

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6.1  Azerbaijan, Georgia & Turkey launch New Asia-to-Europe Rail Link

The leaders of Azerbaijan, Turkey and Georgia launched an 826-kilometer (500-mile) rail link connecting the three countries on 30 October, establishing a freight and passenger link between Europe and China that bypasses Russia.  The line, which includes 105 km of new track, will have the capacity to transport one million passengers and 6.5 million tons of freight.  This capacity will rise to three million passengers and 17 million tons of freight by 2034.  The 826 km (513 mile) railway project connecting Baku with the northeastern Turkish province of Kars via Tbilisi was launched in 2007 and construction began in 2008.

The three countries are linked by the BP-led Baku-Tbilisi-Ceyhan oil pipeline and the Baku-Tbilisi-Erzurum gas line, but trade links between Turkey and the Caucasus region are limited.  The new railway promises to provide an economic boost to the region.  The new link will reduce journey times between China and Europe to around 15 days, which is more than twice as fast as the sea route at less than half the price of flying.  Trains can depart from cities in China, cross into Kazakhstan at the Khorgos Gateway, be transported across the Caspian Sea by ferry to the New Port of Baku, and then be loaded directly onto the BTK in order to head to Europe.  (HDN 31.10)

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6.2  Greek Economy in Recession in 2016

On 10 October ELSTAT released its second estimate of full-year 2016 GDP, noting that Greece’s economy contracted by 0.2% last year.  ELSTAT’s estimate, based on seasonally unadjusted data, showed the economy performed worse than the country’s official creditors were expecting based on their forecasts, driven by lower than previously estimated household consumption.  The European Commission, in its winter forecast published in February, projected GDP growth of 0.3% in 2016 while the IMF’s upwardly revised estimate saw GDP growth of 0.4%.  The government, which faces a third review to its international bailout this autumn, has cut this year’s economic growth projection to 1.8% from 2.7% in May.  (ELSTAT 10.10)

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7.1  Shekel Bills Depicting Poetesses to Enter Circulation

Two new shekel bills in the Bank of Israel’s poets’ series will be entering circulation in the coming weeks, depicting poetesses Rachel (Bluwstein) Sela and Leah Goldberg.  The new bills will be in denominations of NIS 20 (Rachel) and NIS 100 (Goldberg), joining the two bills from the series already on the market: a NIS 50 bill issued in September 2014 featuring Shaul Tchernichovsky and an NIS 200 bill issued in December 2015 featuring Nathan Alterman.  In preparations for launching the two new bills, mock-ups were shipped out to all banks as well as manufacturers, suppliers and operators of candy, beverage, movie ticket and parking vending machines so they can calibrate their equipment to use these new bills.  The calibration process has concluded in almost all institutions and businesses, it was reported.  Nevertheless, in the near future machines will continue accepting bills from the old series that are still in circulation in the market.

The new NIS 20 bill will be red, whereas its NIS 100 compatriot will be orange.  They will be different in length and include a series of safety measures woven into their very paper, making them harder to counterfeit.  For instance, the bills will include a water mark of the figure and its denomination, a color-changing safety strip with three windows also containing the figure and denomination, prominent ink on both sides of the bill, minute holes in the shape of the denomination, minute text, a special sticker, color-changing ink, transparent ink, markings for the blind and other measures.  (Various 25.10)

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7.2  UAE Appoints First Minister for Artificial Intelligence

The UAE on 19 October appointed Omar Bin Sultan as the country’s first Minister of State for Artificial Intelligence as part of a cabinet reshuffle.  Aged just 27, Sultan’s appointment is part of the UAE’s ambition to be at the forefront of the global technological revolution which sees it planning to be build homes on the planet Mars by 2117.  The position was announced in a tweet by Sheikh Mohammed bin Rashid Al Maktoum, UAE Prime Minister and Vice President and ruler of Dubai who said: “The new Government is a Government for the new Emirati to develop knowledge.”

The move comes just days after Sheikh Mohammed announced the UAE Strategy for Artificial Intelligence (AI), a major part of the UAE Centennial 2070 objectives.  The initiative aims to improve government performance and create an innovative and highly-productive environment by means of investing in AI.  Other new positions created in the reshuffle include a Minister for Advanced Sciences and another for Food Security, according to a series of tweets, written in Arabic.

In the last significant structural change, Sheikh Mohammed announced in February last year that the UAE planned to outsource most government tasks to the private sector and cut the number of ministries.  He announced the formation of a single education ministry, abolishing the ministry of higher education, and fused several other state bodies into related ministries.  (AB 19.10)

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7.3  Crown Prince Pledges to Create ‘Moderate, Open’ Saudi Arabia

Powerful Crown Prince Mohammed bin Salman pledged a “moderate, open” Saudi Arabia on 24 October, breaking with ultra-conservative clerics in favor of an image catering to foreign investors and Saudi youth.  The Saudi strongman, 32, did not mince words in declaring a new reality for the kingdom, hours after announcing the launch of an independent $500 billion megacity – with “separate regulation” – along the Red Sea coastline.  “Seventy percent of the Saudi population is under 30, and honestly we will not spend the next 30 years of our lives dealing with destructive ideas. We will destroy them today and at once,” the crown prince said.  Prince Mohammed, known by his initials MBS, said he would see to it his country moved past 1979, a reference to the rise of political Islam in the years following the assassination of King Faisal in 1975.

The early 1970s had ushered major change into the oil-rich kingdom, including the introduction of television and schools for girls.  But that came to a halt as the Al-Sheikh family, which controls religious and social regulation in the kingdom, and the ruling Al-Saud family slowly reinforced the conservative policies Riyadh is known for.

Prince Mohammed’s statement is the most direct attack by a Saudi official on the Gulf country’s influential conservative religious circles, whose stranglehold on Saudi society now appears to face serious challenges.  While the Saudi government continues to draw criticism from international rights groups, the crown prince has pushed ahead with reforms since his sudden appointment on 21 June.

The young prince is widely regarded as being the force behind King Salman’s decision last month to lift a decades-long ban prohibiting women from driving.  He has vied to modernize certain sectors in the kingdom, hinting that long-banned cinemas would soon be permitted as part of ambitious reforms for a post-oil era that could shake up the austere kingdom’s cultural scene.  Prince Mohammed’s comments came hours after the opening of the Future Investment Initiative, a three-day economic conference that brings together some 2,500 dignitaries, including 2,000 foreign investors.

Earlier, Saudi Arabia’s Public Investment Fund – controlled by MBS – announced the launch of an independent economic zone along the kingdom’s northwestern coastline.  The project, dubbed NEOM, will operate under regulations separate from those that govern the rest of Saudi Arabia.  NEOM covers an uninterrupted coastline of nearly 470 kilometers (290 miles) in northwestern Saudi Arabia and will extend into territories in neighboring Jordan and Egypt, a statement released by the kingdom’s Public Investment Fund said.  (AB 24.10)

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7.4  Saudi Arabia First Country to Grant a Robot Citizenship

On 25 October, Saudi Arabia made Sophia, an advanced lifelike humanoid robot, a citizen, the first country to grant citizenship to a robot.  The announcement was made at the Future Investment Initiative (FII) summit in Riyadh, a major investment conference hosted by the Public Investment Fund (PIF) that aims to highlight the Kingdom’s ambitious Vision 2030 plan for the future.  Sophia ably fielded various questions on robots.  When asked about the evil futuristic robots depicted in films like Blade Runner 2049, Sophia said humans have nothing to fear. “You’ve been reading too much Elon Musk and watching too many Hollywood movies,” Sophia jokingly told said.

Robotics will be a big feature of NEOM, the $500-billion major industrial and business zone named NEOM to be set up in northwest Saudi Arabia, which was announced at FII as a very lucrative investment opportunity under the Kingdom’s ambitious Vision 2030.  PIF, Saudi Arabia’s main sovereign wealth fund, is one of the main backers of NEOM.  Sophia Robot was built by Hanson Robotics, a Hong Kong-based company.  (AETOSWire 26.10)

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7.5  Egypt Postpones Opening of New Japanese Schools to Review Selection Process

Egypt’s President El-Sisi has postponed the opening of new Japanese schools in the country in order to guarantee the highest level of transparency in the selection process of students and teachers, Minister of Education Shawky announced.  Five new Japanese schools, which run from kindergarten through the third grade, were set to open their doors for students on 22 October.  Over 20,000 students applied for the Japanese schools since registration opened on 27 September.  Some 11,000 students were not accepted.  Shawky said that his ministry is not fully prepared to run the new schools in their current status.

During a meeting with Shawky, El-Sisi ordered the formation of a specialized committee comprising sociology, psychology, mathematics and language professors to select students and teachers for the Japanese schools and to ensure that these schools achieve efficient results.  The project aims to create 100 such schools as part of a cooperation protocol signed between Egypt and Japan in May 2017, with Japan providing the necessary technical support for the project.  The new schools will teach the same curricula of government schools while adopting the Japanese “whole child education” system known as Tokkatsu.  Tokkatsu’s course of study focuses on achieving a balanced development of intellect, virtue and body by ensuring academic competence, rich emotions and healthy physical development.  (Ahram Online 19.10)

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7.6  Egypt Launches Sweeping Crackdown on Gay Community

A crackdown on gay people in Egypt intensified recently as security forces raided cafes in downtown Cairo and courts delivered harsh prison sentences, further driving the nation’s LGBT community underground.  More than 60 people have been arrested, human rights activists said, since a concert last month by a rock group where some members of the audience waved a rainbow flag — photos of which went viral on social media and caused public outrage.  Security forces have also detained people at their homes in the middle of the night, and have used apps and online chat rooms to entrap those believed to be gay.  Some cafes frequented by the lesbian, gay, bisexual and transgender community have been shut down.  Some of those arrested have endured beatings and other abuse in their prison cells, while others have been subjected to forced anal examinations, human rights activists said.

Gay rights activists view the suppression of their community as part of an effort to distract from the country’s pressing political and economic woes, including rising costs of living and declining government subsidies, which have fomented anger on the streets.  Targeting the gay community, activists say, appeals to Egypt’s mostly conservative population; both Muslims and Christians consider homosexuality a sin.  A 2013 survey by the Pew Research Center found that 95% of Egyptians believed that homosexuality was socially unacceptable.  Homosexuality is not illegal in Egypt.  (WP 18.10)

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7.7  Fulbright Foundation Boosting Greek-American Academic Ties

The academic relationship between Greece and the United States has grown stronger over the past few years, surpassing expectations.  Increasing numbers of students are developing an interest in Greece and traveling on short-term study abroad programs, but equally impressive is also that, despite the crisis, more Greeks are opting to study in the US.  According to the Fulbright Foundation in Greece, data from the New York-based Institute of International Education (IIE) published in the Open Doors Report show that 3,628 US university students traveled to Greece for short-term study abroad programs in the 2015-16 period.

Moreover, IIE data show that over the last eight years Greek interest in an American education has been on the rise and the number of Greek students in the US grew by 17.3% in 2010-16.  In the 2015-16 academic year the total number of Greek students in the US reached 2,199.  Over 700 are undergraduates, while approximately 1,100 are in graduate or PhD programs. Roughly 400 are in practical training or short-term programs.  The increase in undergraduates studying in the US has surpassed expectations over the past five years (at a rate of 53.2%), while the numbers of Greek postgraduate and PhD students in the US have remained relatively stable compared to previous years.  (Various 28.10)

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8.1  Therapix Biosciences & Assuta to Initiate Clinical Trial in Obstructive Sleep Apnea

Therapix Biosciences signed an agreement with Assuta Medical Center, the largest hospital network and private healthcare provider in Israel, to conduct a Phase IIa, sponsor-initiated trial (the “OSA Trial”) for the treatment of Obstructive Sleep Apnea (OSA) using the Company’s proprietary cannabinoid-based technology, THX-OSA01.  The OSA trial, titled “Examining the Efficacy of a Therapeutic Combination of Dronabinol and Palmitoylethanolamide for Obstructive Sleep Apnea,” will be conducted at the Sleep Medicine Institute at Assuta.  Thirty patients with a confirmed OSA diagnosis will be evaluated for one month with the primary efficacy endpoint evaluating a significant change in the AHI Index, which assesses the quality of sleep before and after treatment.

Dronabinol, one component of THX-OSA01 and an exogenous CB1 and CB2 receptor agonist, has been shown in a proof-of-concept study by an independent group to potentially reduce abnormal respiratory events and associated hypoxemia in patients with OSA.

Givatayim’s Therapix Biosciences is a specialty clinical-stage pharmaceutical company led by an experienced team of senior executives and scientists.  Their focus is creating and enhancing a portfolio of technologies and assets based on cannabinoid pharmaceuticals.  With this focus, the company is currently engaged in two internal drug development programs based on repurposing an FDA approved synthetic cannabinoid (dronabinol): THX-OCA01 targets the treatment of the symptoms of Tourette Syndrome; and THX-ULD01 targets the high-value and under-served market of mild cognitive impairments and Traumatic Brain Injury (TBI).  (Therapix 18.10)

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8.2  BioLineRx Initiates Phase 1b/2 Trial for BL-8040 to treatGastric Cancer

BioLineRx announced that Genentech, a member of the Roche Group, has commenced a Phase 1b/2 study for the treatment of gastric cancer with BL-8040 in combination with atezolizumab (TECENTRIQ), Genentech’s anti-PDL1 cancer immunotherapy agent.  Up to 40 patients are planned to be enrolled in this multicenter, randomized, controlled, open-label study to evaluate the clinical response, safety and tolerability, as well as multiple pharmacodynamic parameters, of BL-8040 in combination with atezolizumab.  Initially, patients will receive BL-8040 injections as priming monotherapy, after which they will receive both BL-8040 and atezolizumab, and continue with multiple treatment cycles for up to two years or, until disease progression, clinical deterioration or unacceptable toxicity.

The clinical study collaboration between BioLineRx and Genentech is part of MORPHEUS, Roche’s novel cancer immunotherapy development platform. MORPHEUS is a phase 1b/2 adaptive platform to develop combinations of cancer immunotherapies more rapidly and efficiently.  This study is being carried out as part of BioLineRx’s cancer immunotherapy collaboration with Genentech, which includes several Phase 1b/2 studies investigating BL-8040 in combination with atezolizumab in multiple cancer indications, announced in September 2016.

Modi’in’s BioLineRx is a clinical-stage biopharmaceutical company focused on oncology and immunology.  The Company in-licenses novel compounds, develops them through pre-clinical and/or clinical stages, and then partners with pharmaceutical companies for advanced clinical development and/or commercialization.  (BioLineRx 19.10)

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8.3  BrainStorm’s US Patent for its NurOwn Technology for Parkinson’s Disease Registers Additional Allowed Claims

BrainStorm Cell Therapeutics announced that it has received Notice of Allowance from the United States Patent Office for US Patent Application No.: 14/173,846 titled “ISOLATED CELLS AND POPULATIONS COMPRISING SAME FOR THE TREATMENT OF CNS DISEASES”.  The allowed claims cover methods of treating amyotrophic lateral sclerosis (ALS) and Parkinson’s disease using mesenchymal stem cells that secrete neurotrophic factors, including glial derived neurotrophic factor (GDNF).  This patent is the result of Brainstorm’s ongoing development of NurOwn that initiated at a Tel Aviv University, neuroscience laboratory.

Petah Tikva’s BrainStorm Cell Therapeutics is a biotechnology company engaged in the development of first-of-its-kind adult stem cell therapies derived from autologous bone marrow cells for the treatment of neurodegenerative diseases.  The Company holds the rights to develop and commercialize its NurOwn technology through an exclusive, worldwide licensing agreement with Ramot, the technology transfer company of Tel Aviv University.  (BrainStorm 23.10)

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8.4  Roots Ready for Australian IPO

Roots Sustainable Agricultural Technologies is joining the growing group of Israeli agro-tech companies that have raised money in Australia.  The company has submitted a prospectus for raising A$5 million (NIS 14 million) at a company value of A$12 million (NIS 33 million).  The offering is scheduled for November.  Roots will use the money raised in the offering for continued R&D, production, marketing, sales, and self-development.  The company had a loss of A$197,000 and no revenue in the first half of 2017 and A$753,000 at the end of the period.

Kfar Netter’s Roots – Sustainable Agricultural Technologies is developing and commercializing disruptive, modular, cutting-edge technologies to address critical problems being faced by agriculture today, including plant climate management and the shortage of water for irrigation.  Roots has developed proprietary know-how and patents to optimize performance, lower installation costs, and reduce energy consumption to a minimum, all in order to bring maximum benefit to farmers.  The Company’s two core technologies are Root Zone Temperature Optimization (RZTO), which significantly increases yield, improves quality, saves energy and mitigates extreme heat and cold stress, and Irrigation By Condensation (IBC), which provides water for irrigation from moisture in the air and soil.  (Roots 24.10)

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8.5  CathWorks Announces FAST-FFR Pivotal Clinical Trial

CathWorks announced that the first patient has been enrolled in the FAST-FFR (FFRangio Accuracy vs. STandard FFR) clinical trial.  This global pivotal trial is designed to assess the efficacy of FFRangio in measuring FFR derived from coronary angiography compared to invasive FFR.  The outcomes of the trial will support CathWorks’ submission to FDA for 510K clearance.

FFRangio is a non-invasive, image based software device that provides physicians with clinical information to determine whether an intermediate coronary artery blockage warrants treatment.  The FFRangio software device generates a FFR index and 3-D reconstruction of the coronary tree based solely upon routine coronary angiograms and hemodynamic information acquired during the coronary angiography procedure, precluding the need for invasive pressure wires and vasodilation treatment.  This “Functional Angiography” has the potential to disrupt, and vastly expand the existing FFR market with the ability to correlate anatomy and physiology in-situ, leading to faster and safer diagnosis of intermediate coronary disease.

Kfar Saba’s CathWorks is a privately held Israeli company founded in 2013.  The company develops digital healthcare products for the cardiovascular market and is focused on improving the utilization of coronary angiography data to ratify measurement-based medicine in the cath lab.  CathWorks is backed by worldwide VCs as well as a strategic partner and has completed two series of financing.  (CathWorks 24.10)

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8.6  STK & Liddor Paving the Way for New Biological Pipeline Production

STK (Stockton) and Lidorr Chemicals have built a new biological manufacturing unit at Liad Agro facility at Jerusalem area in Israel for the production of STK’s new products.  This manufacturing unit was designed to provide STK with the necessary capacity to advance its growing pipeline of bio-pesticides, hybrids and other biocontrol formulations for sustainable agriculture and aquaculture inputs to help growers improve their yield.

STK and Lidorr maintain a strategic contract formulation partnership for many years, overseeing the development of the production of STK’s flagship bio-fungicide, Timorex Gold.  Now with this high-tech machinery, will assure quality and capacity during production as STK advances broad pipeline of highly effective natural pest management products.  STK, who is also pursuing acquisitions, and product development partnerships in North America, Latin America, Asia and Western Europe in the biocontrol arena, will continue a steadfast progress on the development of bio-control formulations that prevents and/or control devastating diseases in crops.

The Lidorr Group is a privately owned concern, established in Israel in 1970, is a representative and agent for most prominent international companies dealing with industrial marketing for a wide range of raw materials and technologies.  Lidorr offers its international and local partners the services of a highly qualified professional staff with extensive experience in providing state-of-the-art-product range, outstanding technology solutions and excellent business support.  Liad Agro, a member of the Lidorr Group, provides outstanding solutions for the production and logistics infrastructure of formulation and packing of products for crop protection, animal health products, water treatment supplements and others.

Petah Tikva’s STK creates breakthrough biologic formulations from plant extracts that effectively protect agricultural and aquafarming harvests and significantly reduce their exposure to chemicals.  STK applies cutting-edge science and technology to commercialize the naturally-occurring, disease-resistant qualities in a variety of plants.  Their bio-agro food protection solutions enhance the safety, yield and quality of multiple crops.  (STK 24.10)

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8.7  CIITECH Sponsors Project on Cannabis-based Therapy for Asthma at the Hebrew University

CIITECH, a UK-Israel cannabis biotech startup, has sponsored a research project with the Multidisciplinary Center on Cannabinoid Research of the Hebrew University of Jerusalem, focused on the therapeutic benefit of cannabis for the treatment of asthma.  CIITECH selected to award research funding, through a non-exclusive grant competition, to the collaborative work of Professor Mechoulam, a pioneer in the field of cannabis research credited for the discovery of the endocannabinoid system, and his colleague, Professor Levi-Schaffer, a global expert in asthma research.  Together, these two Hebrew University scientists will embark on research to identify a possible inhibitory effect of a derivative of cannabidiol (CBD) on allergic airway inflammation.

CBD is the non-psychoactive ingredient or cannabinoid found in both hemp and regular cannabis strains. Last year, the UK Home Office reclassified cannabis, scheduling only the psychoactive compounds of the drug. CBD is now legal in the UK, available in retailers across the country and online.

The Hebrew University of Jerusalem is globally recognized as the epicenter of cannabis scientific research. The Hebrew University’s recently established Multidisciplinary Center on Cannabis Research, headed by Dr. Joseph Tam, now serves as one of the world’s leading institutes on the plant. Israel’s supportive regulatory environment and collaborative healthcare ecosystem place the country at the vanguard of therapeutic cannabis. Prof. Francesca Levi-Schaffer’s laboratory at the University is focused on finding novel ways to treat allergy and recently started to study the effects of cannabis compounds on mast cells and eosinophils, the major effector cells in allergic diseases.

CIITECH is a cannabis biotech company that focuses on discovering, developing and commercializing therapeutic cannabis products.  By collaborating with leading research institutions in Israel and local suppliers in the UK & the EU, CIITECH leverages the full potential of Israel’s cutting-edge cannabis innovation.

Jerusalem’s Multidisciplinary Center on Cannabinoid Research, staffed by leading scientists and medical doctors from the Hebrew University and its affiliated Hadassah Medical Center, conducts and coordinates exciting new research about cannabinoids, endocannabinoids and medical Cannabis, while promoting collaboration and disseminating information.  (CIITECH 24.10)

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8.8  Kitov Announces Phase III/IV Clinical Trial for KIT-302 Successfully Meets Primary Endpoint

Kitov Pharmaceuticals announced that its randomized double-blind, placebo-controlled renal function clinical trial for its lead drug candidate, KIT-302, successfully met its primary efficacy endpoint.  Data from the trial demonstrated that KIT-302 lowered systolic blood pressure a comparable amount to the widely used antihypertension drug, amlodipine besylate, thus meeting the trial’s primary efficacy endpoint of achieving at least 50% of the amlodipine reduction (p=0.019).

KIT-302, a combination drug, simultaneously treats pain caused by osteoarthritis and treats hypertension, which is a common side effect of stand-alone drugs that treat osteoarthritis pain.  KIT-302 is comprised of two FDA approved drugs, celecoxib (Celebrex) for the treatment of pain caused by osteoarthritis, and amlodipine besylate (Norvasc).  The renal function study enrolled 104 patients randomized to three treatment groups: KIT-302, amlodipine besylate and placebo.  The primary efficacy endpoint of the trial was to show that KIT-302 lowers daytime systolic blood pressure by at least 50% of the reduction in blood pressure achieved in patients, treated with amlodipine besylate only.  Secondary endpoints included various parameters of renal function.

Tel Aviv’s Kitov Pharmaceuticals is an innovative biopharmaceutical drug development company.  Leveraging deep regulatory and clinical-trial expertise, Kitov’s veteran team of healthcare professionals maintains a proven track record in streamlined end-to-end drug development and approval.  Kitov’s flagship combination drug, KIT-302, intended to treat osteoarthritis pain and hypertension simultaneously, achieved the primary efficacy endpoint for its Phase III clinical trial.  (Kitov Pharmaceuticals 26.10)

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8.9  EOI Announces Initial Surgeries with the FLXfit15

Expanding Orthopedics Inc. (EOI), a privately held medical device company focused on developing and commercializing innovative expandable devices for spine surgery, announced first surgeries with its enhanced 3D expandable cage, the FLXfit15.  The FLXfit15 offers enhanced performance and versatility by providing additional device sizes with the ability to further expand the device up to 4mm to achieve controlled expansion and lordosis correction.

Or Akiva’s Expanding Orthopedics Inc. is medical device company developing and marketing innovative products designed to address unmet clinical needs for spine care and improve long-term patients’ outcome.  The Company is spearheaded by a seasoned management team, and is advised by a prominent team of spine surgeons. EOI owns a broad patent portfolio around anatomically fit, expandable devices for enhanced stability through a minimally invasive approach.  (EOI 26.10)

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8.10  INSIGHTEC Receives FDA Approval for Exablate Neuro Parkinson’s Disease Study

INSIGHTEC received approval from the U.S. FDA to initiate a pivotal study of the Exablate Neuro for treating dyskinesia symptoms or motor fluctuations of advanced Parkinson’s disease patients who have not responded to medication.  Parkinson’s disease afflicts millions of people worldwide, including approximately one million in the United States alone with 60,000 additional diagnoses each year.  Treatment with the Exablate Neuro is intended to improve motor function and reduce dyskinesia, one debilitating symptom that presents as uncontrolled, involuntary movement of the arms and/or legs.

Exablate Neuro uses focused ultrasound to target and ablate tissue deep in the brain with no surgical incisions. MR imaging guides the treatment planning and delivers thermal feedback for real-time monitoring. For Parkinson’s disease, the lesion is made in a portion of the globus pallidus (GPi), which is known to be involved in the regulation of voluntary movement.  Exablate Neuro became the first focused ultrasound device to receive FDA approval to treat medication-refractory essential tremor in July 2016.  Today, there are more than 30 Exablate Neuro systems in 10 countries treating essential tremor patients.

Haifa’s INSIGHTEC is the world leader and innovator of MR-guided Focused Ultrasound (MRgFUS).  The company’s non-invasive platforms, Exablate and Exablate Neuro, are proven technology based on sound clinical evidence for treating essential tremor, painful bone metastases and uterine fibroids.  The company is dedicated to improving patient lives by collaborating with physicians, medical institutions, academic researchers and regulatory bodies around the world.  (INSIGHTEC 25.10)

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8.11  CollPlant Receives Innovation Authority Approval for $1 Million R&D Program with 40% Funding

CollPlant announced that it has received the Ministry of Economy Innovation Authority’s approval for CollPlant’s research and development program for 2017.  Innovation Authority approval was given for the Company’s plans for developing collagen-based bio-ink for 3D printing of tissue and organs; for developing collagen manufacturing processes; and for developing tobacco cultivars supporting enhanced collagen yields.  Research and development expenses approved for CollPlant in 2017 total NIS 3.5 million, with 40% participation in R&D costs.

Ness Ziona’s CollPlant is a regenerative medicine company leveraging its proprietary, plant-based recombinant human collagen (rhCollagen) technology for the development and commercialization of tissue repair products, initially for the orthobiologics, 3D Bio-printing of tissue and organs, and advanced wound care markets.  The Company’s cutting-edge technology is designed to generate and process proprietary rhCollagen, among other patent-protected recombinant proteins.  Given that CollPlant’s rhCollagen is identical to the type I collagen produced by the human body, it offers significant advantages compared to currently marketed tissue-derived collagen, including improved bio-functionality, superior homogeneity and reduced risk of immune response.  (CollPlant 30.10)

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9.1  Bioniq Solves Huge Interference Problem Using RADWIN’s JET Beam-Forming PtMP

Tel Aviv’s RADWIN, the global wireless broadband provider, announced that service provider Bioniq in Middleburg, South Africa, has deployed its RADWIN JET AIR Beam-forming Point-to-Multipoint solutions in 5GHz to deliver high-speed broadband to residential and business customers.  MiRO Distribution, a leading distributor based in South Africa, was the sole distributor.  RADWIN JET AIR offers a compelling solution for ISPs, bringing carrier-class reliability and performance down to an affordable price level.  When Bioniq looked for a solution that would provide high capacity and operate flawlessly in a high-interference zone, RADWIN was optimal solution to fulfill their needs.

RADWIN is a leading provider of Point-to-Multipoint and Point-to-Point broadband wireless solutions. Incorporating the most advanced technologies such as a Beam-forming antenna and an innovative Air Interface, RADWIN’s systems deliver optimal performance and are deployed in over 170 countries.  (RADWIN 19.10)

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9.2  AudioCodes Expands Interoperability Testing Range with BroadSoft BroadCloud

AudioCodes has expanded the range of its products that have completed interoperability testing for the BroadSoft BroadCloud hosted telephony service.  AudioCodes now offers a comprehensive portfolio of high quality voice products designed to accelerate and simplify deployment for business customers of the BroadCloud service.

Lod’s AudioCodes designs, develops and sells advanced Voice-over-IP (VoIP) and converged VoIP and Data networking products and applications to Service Providers and Enterprises.  AudioCodes is a VoIP technology market leader, focused on converged VoIP and data communications, and its products are deployed globally in Broadband, Mobile, Enterprise networks and Cable.  The Company provides a range of innovative, cost-effective products including Media Gateways, Multi-Service Business Routers, Session Border Controllers (SBC), Residential Gateways, IP Phones, Media Servers, Value Added Applications and Professional Services.  (AudioCodes 18.10)

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9.3  Leading Provider Deploys Allot’s Multiservice Platform to Improve Business Services

Allot Communications announced that Paris based Worldwide Flight Services (WFS) has implemented Allot’s Secure Service Gateway (SSG) unified solution for real-time network intelligence, control and security across their entire network.  Allot SSG provides end-to-end visibility of all network traffic, allowing WFS to assure and protect critical application performance and user Quality of Experience (QoE) for remote sites at France’s busiest airports.  Allot SSG unifies the functionality of Allot’s industry leading Service Gateway platform with powerful web security and DDoS protection capabilities to offer a single, scalable solution to support the requirements of enterprises for network visibility, control, and security.

WFS is one of the world’s leading providers of ground handling services for airlines and airports, serving more than 300 airlines and airports in 22 countries on five continents.

Hod HaSharon’s Allot Communications is a leading global provider of innovative network intelligence and security solutions for service providers worldwide, enhancing value to their customers.  (Allot Communications 18.10)

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9.4  AudioCodes Collaborates with RedSky Technologies to Deliver Enhanced E911 Solution

AudioCodes announced that it is collaborating with Chicago, Illinois’ RedSky, a leader in E911 solutions, to deliver enhanced emergency calling for hosted telephony environments.  The integration of AudioCodes’ 400HD series IP phones and session border controllers (SBCs) with RedSky Horizon Mobility™ technology allows the physical location of a user to be identified in the event of a 9-1-1 call.  The joint solution will be offered initially for BroadSoft BroadWorks environments.  Horizon Mobility is a commercial implementation of the NENA i3 Next Generation 9-1-1 architecture.  This technology enables a phone to request its location when it moves and enables the phone to send its location when the phone dials 9-1-1.  The technology is SIP-based and it integrates with RedSky’s E911 Anywhere cloud service which can accept and route 9-1-1 calls to any 9-1-1 center in the USA and Canada.

The AudioCodes 400HD family of high definition IP phones and its Mediant session border controller (SBC) products have been certified for interoperability with BroadSoft BroadWorks, delivering high voice quality and integrated service assurance for BroadSoft hosted telephony service users.  The collaboration with RedSky Horizon Mobility™ results in a unified emergency calling solution that also provides E911 support for analog ports and non-certified SIP devices.

Lod’s AudioCodes designs, develops and sells advanced Voice-over-IP (VoIP) and converged VoIP and Data networking products and applications to Service Providers and Enterprises.  AudioCodes is a VoIP technology market leader, focused on converged VoIP and data communications, and its products are deployed globally in Broadband, Mobile, Enterprise networks and Cable.  (AudioCodes 23.10)

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9.5  GuardiCore Announces Availability of Centra Security Platform on AWS Marketplace

GuardiCore announced the availability of its award-winning data center and cloud security solution on AWS Marketplace.  The addition of GuardiCore’s Centra Security Platform to AWS Marketplace provides customers with additional security through a flexible model offering Security as a Service (SECaaS) available on a “pay per hour” basis as part of an integrated Amazon Web Services (AWS) bill.  Delivering a cloud-friendly business model to customers already using AWS Marketplace, GuardiCore enables customers to adopt a solution for securing their move to the cloud. GuardiCore’s Centra Security Platform includes native support for hybrid cloud environments based on any infrastructure.

The GuardiCore Centra Security Platform provides a single and scalable security solution that helps customers protect critical workloads and applications through visibility, segmentation, breach detection and response.  It uses multiple detection methods including patented dynamic deception to reduce dwell time and block lateral movements.  Automatic incident analysis provides security teams with real-time information and comprehensive intelligence about attack methods so they can quickly prioritize security response actions, which can often take days to analyze and mitigate using traditional tools and techniques.

Tel Aviv’s GuardiCore is an innovator in data center and cloud security focused on delivering accurate and effective ways to stop advanced threats through real-time breach detection and response.  Developed by cyber security experts in their field, GuardiCore is changing the way organizations are fighting cyber-attacks.  (GuardiCore 23.10)

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9.6  Secret Double Octopus Selected as Top Cybersecurity Company by Momentum Partners

Secret Double Octopus was chosen as a top cybersecurity company by Momentum Partners based off of the firm’s analysis of industry trends and current innovation in cybersecurity issues.  Each quarter, Momentum Partners, a Silicon Valley-based cybersecurity investment bank, selects 10 companies for its ‘Watch List’.  They make their selection from a pool of more than 2,500 cybersecurity companies after carefully weighing feedback from the field and considering a variety of growth and innovation factors.

Secret Double Octopus’s Multi-Factor Authentication technology turns mobile phones into mobile authenticators, eliminating the need for a one-time-password, SMS and authentication tokens.  Additionally, Secret Double Octopus helps enterprises struggling to scale their network security shift away from key-based authenticators to a keyless solution.  With one tap, the app initiates a multi-shield authentication process for users in order to verify or reject the login attempt, payment or transaction.

Tel Aviv’s Secret Double Octopus has developed the world’s only password-free, keyless authentication technology to protect identity and data across cloud, mobile and IoT environments.  Based on Secret Sharing algorithms, originally developed to protect nuclear launch codes, Secret Double Octopus’ technology prevents cyber attackers from accessing enough critical information to be useful for attacks, eliminating brute force, man-in-the-middle, PKI manipulation, key theft and certificate authority weaknesses.  (Secret Double Octopus 24.10)

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9.7  Orbotech Revolutionizes the AOI Room with 4-in-1 AOI Solution

Orbotech introduced the groundbreaking Ultra Dimension Automated Optical Inspection (AOI) Series for PCB production.  Designed to meet the rigorous demands of advanced PCB manufacturing processes, the innovative Ultra Dimension is the first AOI solution to integrate four leading solutions – pattern inspection, laser via inspection, Remote Multi-Image Verification and 2D metrology – into a single system.  This solution enables manufacturers to increase quality and yield as well as dramatically reduce their overall total cost of ownership (TCO), signifying a revolution in the AOI room workflow.

Ultra Dimension’s combination of high precision and high quality pattern inspection and laser via (LV) inspection in a single scan is powered by Orbotech’s proprietary Triple Vision Technology and Magic Technology.  By using varied light settings and three different types of images, these technologies enable Ultra Dimension to improve detection capabilities significantly, reduce false alarms and decrease inspection set-up time.  This, in turn, allows manufacturers of advanced PCBs using SLP/mSAP (substrate-like PCB/modified semi-additive process) the flexibility to inspect a variety of applications and materials, and eliminates the need to use inspection masks which can cause defects to be overlooked.

Yavne’s Orbotech is a leading global supplier of yield-enhancing and process-enabling solutions for the manufacture of electronics products.  Orbotech provides cutting-edge solutions for use in the manufacture of printed circuit boards (PCBs), flat panel displays (FPDs), and semiconductor devices (SDs), designed to enable the production of innovative, next-generation electronic products and improve the cost effectiveness of existing and future electronics production processes.  (Orbotech 24.10)

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9.8  Dronomy is now SiteAware – Focused on Digital Transformation of Construction On-Site Execution

Dronomy, a cloud-based software company focused on digital replica for on-site execution for construction, today announced it has completed its rebranding and is now called SiteAware.  The company is focused on disrupting the $10 trillion global construction market with constant innovation, aimed on improving on-site execution efficiencies and quality, jobsite management, project documentation, improving bidding processes and assisting future litigation.  Construction companies, owners and developers are starting to realize the benefits of using digital technological solutions as part of their construction processes to reduce the ever-occurring project delays, cost overruns and disputes, which account for tens of per-cents of a total project cost.  SiteAware captures unique and frequent project data using autonomous situation-aware drones, analyzes it and converts it into a digital replica that enables actionable tasks that are shared over the cloud to all relevant project stakeholders.

Tel Aviv’s SiteAware is providing digital replicas for on-site execution for the construction industry.  They enable construction companies to bid and win more business, improve productivity and build with higher quality.  Their digital analytics and actionable insights enable construction companies, project owners and real estate developers to monitor their projects safely and with ease, so it becomes a daily routine, reducing cost overruns and project delays.   (SiteAware 26.10)

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9.9  GPSdome Anti-Jamming & Anti-Spoofing Antenna Module Solution for Timing Systems

GPSdome announced the release of its new product, GPSdome 1.0 Model T, which provides GPS anti-jamming and anti-spoofing protection for GPS-based timing systems.  The new product identifies GPS jamming and spoofing attacks, and retains the GPS signal reception by using Electronic Warfare algorithms.

Caesarea’s GPSdome developed a cyber protection solution against jamming and spoofing for GPS-based systems, such as autonomous vehicles, UAVs and timing systems. Its competitive advantage is its affordable price comparing to existing solutions that were developed for military applications, while GPSdome has been better designed for civilian applications.  The company’s development team includes electronic warfare (EW) engineers who developed the GPSdome based on advanced military technologies.  (GPSdome 30.10)

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10.1  Israel’s GDP Increases by 2.1% During First Half of 2017

On 17 October, the Central Bureau of Statistics announced that Israel’s gross domestic product posted a 2.1% increase over the first six months of 2017, compared to an annualized 4.6% in the first half of 2016.  This is 0.1% higher than the previous year-over-year GDP assessment.  According to the report, the slow rise in the GDP was particularly evident in consumption per capita that, for example, noted a 14% drop in the purchase of household appliances and a 40% drop in car sales.  Still, there has been a 1.1% increase in private consumption, a 2.9% rise in public expenditure, a 2.1% climb in the exports of goods and services, and overall stability in investments in fixed assets.  The report indicated that the real estate market sustained the largest downturn, most likely over Finance Minister Kahlon’s “Buyer’s Price” affordable housing program.  The first half of 2017 saw only a 2.2% increase in new residential construction projects, compared to 8.6% in the corresponding period last year.  The report also found a 4.1% drop in the imports of goods and services, compared to an 8.1% increase in the second half of 2016.  (CBS 17.10)

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10.2  Israel’s Minimum Monthly Wage to Rise to NIS 5,300

The Knesset Labor, Welfare & Health Committee has approved raising the minimum wage from NIS 5,000 to NIS 5,300 starting on 1 December, in accordance with an agreement between Histadrut (General Federation of Labor in Israel) chairman Nissenkorn and Manufacturers Association of Israel president Brosh.  The new increase will be the fourth in the past three years.  In December 2014, the Histadrut and the employers’ organizations agreed on a three-stage increase in the minimum wage from NIS 4,300 to NIS 5,000, with the final stage taking place in January 2017.  After Brosh began his current term as president of the Manufacturers Association, he and Nissenkorn agreed on an additional increase to NIS 5,300, the extension of which to the entire economy has now been passed by the Knesset.

Histadrut figures show that there are 800,000 families in Israel with at least one breadwinner who earns the minimum wage.  There are also thousands of public sector employees who are paid the minimum wage.  (Globes 24.10)

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11.1  ISRAEL:  Summary of Israeli High-Tech Company Capital Raising – Q3/17

Some $1.44 billion was raised by 144 Israeli startups in the third quarter of 2017, up 14% from $1.27 billion in the preceding quarter of 2017, and up 54% from $933 million in the corresponding quarter of 2016, according to the latest report by IVC Research – ZAG – S&W.  The number of deals, however, was down in the third quarter of 2017, at just over 140 deals.

The average financing round was $10 million in the third quarter of 2017, the highest amount in five years, compared with an average of $8 million and $6.7 million in the preceding quarter and corresponding quarter of 2017, respectively.

The third quarter figures were boosted by a huge $250 million financing round completed by Via Transportation, which was among five deals of over $50 million each last quarter, making up 33% of the quarterly total.

In the first nine months of 2017, Israeli startups raised a record $3.8 billion, equal to the corresponding period of 2016.  The number of deals, however – 457 deals in total – declined to the lowest number in the past five years.  The average financing round has grown steadily from $3.3 million in the first nine months of 2013 to $8.2 million in the corresponding period of 2017.

IVC Research Center research director Marianna Shapira said, “IVC findings show a decline in the numbers of deals made in the first nine months of 2017.  The IVC analysis found that most of this decrease stems from seed and early stage deals (17% decline compared with the five-year average).  A reversal is needed in the fourth quarter for the sake of the new ventures and their success as part of the Israeli technology market.”

In the third quarter of 2017, venture capital-backed deals accounted for the largest quarterly amount in the past five years, with $1.2 billion raised in 89 deals.  The venture capital-backed share of total capital increased steadily throughout the first three quarters of 2017 to 84% in the third quarter of 2017, compared with 67% in the corresponding quarter of 2016.

$2.9 billion was raised in 278 venture capital-backed deals in the first nine months of 2017, the entire 77% of total capital raised in this period, compared with $2.6 billion (68%) raised in 302 deals in the same period of 2016.  Deals above $20 million drew the biggest share of capital raised in venture capital-backed deals, with 60% of the total dollar amount in the first nine months of 2017.

Israeli venture capital fund investments increased in the third quarter of 2017, with $277 million invested (16%), compared with $164 million (13%) and $139 million (15%) in the preceding quarter and corresponding quarter of 2016, respectively. Israeli venture capital funds preferred follow-on investments (66%) in the third quarter, with most of this capital (91%) going to mid and late-stage companies.

Adv. Shmulik Zysman, managing partner at Zysman Aharoni Gayer & Co. (ZAG/S&W), said, “We’re witnessing yet another report proving the confidence in and status of Israeli high tech. It seems the effect of the MobileEye deal is not yet run its course.  During the third quarter, we noticed the dominant position of Israeli VC funds and the increased investment by foreign VCs compared with the corresponding quarter of 2016.  Israeli high tech continues to be the growth engine of the Israeli economy and its share of GDP is steadily increasing.”

Adv. Zysman points to another positive issue: “In August, the Chinese authorities published a new regulatory directive permitting investments outside of China in several sectors, including technology.  I believe that this will boost Chinese interest in Israeli high-tech companies in the future.”


Capital Raising By Stage & Sector

43% of capital raised in the third quarter of 2017 was invested in late stage companies, for a record of $618 million, compared with $425 million in the preceding quarter and $294 million in the corresponding quarter of 2016.

Adv. Zysman observed, “The trend of investing larger amounts in fewer companies indicates that investors have an appetite for greater risk.  During the third quarter of 2017, we identified the dominance of late stage deals, but it seems that younger companies have not been adversely affected.  Early stage companies are attracting investors’ attention and capital. It is clear that foreign investors see Israeli high tech as a source of innovation and investment opportunities.”

While software continued to lead capital raising in the third quarter of 2017, its share shrank to 25% of total capital, below the two-year average of 35% and followed closely by life sciences with 24%.

IVC serves startup companies by providing insight on venture capital, private equity and investment funding in specific industry sectors, enabling startups to keep pace with the latest in investment trends and raise capital. IVC provides an online venue for connecting investors and companies, giving investors the ability to seek out viable opportunities and new deal flow.  Service providers benefit from easy and direct access to thousands of Israeli high-tech companies and key executives, an excellent resource for potential partnerships and prospective clients.  (IVC 24.10)

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11.2  IMF Country Focus:  MENAP Take Advantage of Strengthening Global Economy

The IMF announced in 31 October that the economic prospects of the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region remain subdued primarily because of the ongoing adjustment to low oil prices and regional conflicts, observes the IMF in its latest Regional Economic Outlook. Countries in the region should capitalize on the current global growth upswing to place their public finances on sounder footing, accelerate job-creating reforms, and diversify their economies.

“Over the medium term, growth is anticipated to accelerate gradually in most MENAP economies, but it will remain below what is needed to tackle the high level of unemployment in the region and raise standards of living for all,” said Jihad Azour, Director of the Middle East and Central Asia Department at the IMF.

Oil exporters: lower growth, stubborn budget deficits

Overall growth in oil exporters is expected to bottom out at 1.7% in 2017, driven by lower oil output under the Organization of Petroleum Exporting Countries (OPEC)-led agreement. In contrast, non-oil growth is expected to recover to about 2.6% in 2017 as the pace of budget deficit reduction slows.

Despite the progress already made, low oil prices have kept the fiscal deficits large in many oil exporters, highlighting the need for a continued focus on deficit reduction.  Budget deficits of oil exporters jumped to 10.6% of GDP in 2016 from 1.1% of GDP in 2014.  These are expected to halve this year due to a modest recovery in oil prices and significant deficit reduction efforts.  But since oil prices are expected to remain in the range of $50-60 a barrel, oil exporters will need to sustain—and in some cases intensify—their budget deficit-reduction efforts.

Oil importers: faster growth, high public debt

Growth in oil importers is projected to rise to 4.3% this year from 3.6% in 2016.  The upswing is expected to persist in 2018, supported by increasing domestic demand, supportive reforms, and the global uptick in growth.

On the fiscal front, many oil importers continue to struggle with insufficient revenue mobilization on one hand, and higher current expenditures (including public wage bills) on the other hand.  This has pushed public debt to more than 50% of GDP in most countries. Countries should focus on improving revenue collection and targeted spending cuts, while protecting social and growth-enhancing spending.

Good time to pursue reforms

All MENAP countries should take advantage of the window of opportunity provided by the strengthening global economy to implement job-creating reforms.

These countries need such reforms to tackle their already high unemployment and to absorb the over 26 million young people expected to enter the labor force by 2022.  Governments can play an important role in boosting the private sector by improving the business environment, transparency and accountability of public institutions, and access to finance.  Enhancing education to better match workers’ skills needs and encouraging freer movement of labor are also important.  At the same time, social safety nets should be maintained to safeguard the vulnerable in society.

In the current climate of strengthening global recovery, countries should also take advantage of international trade to support their economic growth.  Oil importers are already better integrated into the global value chains and have more diversified export bases.  They should, therefore, focus on improving the quality of their exports.  Oil exporters, in turn, need to diversify their production to be able to export a broader range of goods and services.  Most countries would benefit from trade agreements and new integration opportunities, such as China’s Belt and Road Initiative and the Compact with Africa.

The Regional Economic Outlook for the MENAP region is officially launched on October 31 in Dubai, United Arab Emirates, and November 2 in Marrakech, Morocco.  It outlines the current growth outlook and key policy issues within the region, emphasizing the importance of carrying out reforms during the current period of strengthening global recovery.  In January 2018, the IMF will be co-hosting with the Government of Morocco, the Arab Monetary Fund and the Arab Fund for Economic and Social Development the “Opportunity for All” conference in Marrakesh, Morocco.  The event will bring together participants from public and private sectors, as well as from civil society, to share their experiences, lessons, and ideas on how to generate job-rich growth and expand opportunities for all segments of society.  (IMF 31.10)

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11.3  JORDAN:  Jordan Downgraded to ‘B+’ on Weaker Government Debt Structure & Higher Financing Needs

Rating Action

On 20 October 2017, S&P Global Ratings lowered its long-term foreign and local currency sovereign ratings on the Hashemite Kingdom of Jordan to ‘B+’ from ‘BB-‘.  The outlook is stable.  At the same time, we affirmed the short-term ratings at ‘B’.

The downgrade reflects our view of Jordan’s weakening debt profile amid low growth and implementation pressures related to fiscal reforms, and higher external risks.

We revised our transfer & convertibility (T&C) assessment to ‘BB’ from ‘BB+’.


The stable outlook balances greater risks from a slower pace of fiscal consolidation than we previously expected against continued support from bilateral donors, at a rating of ‘B+’.

We could lower the ratings if foreign and official grants were to decline, thereby reversing the expected reduction in government debt levels, or if the government’s debt profile worsens, for instance because of higher interest costs.  We could also consider a negative rating action if regional instability deteriorates, affecting growth, exports, and investment flows.

We could raise the ratings if the current account deficits narrow faster than expected, reducing external financing needs, or if the economic outlook improves significantly.


The downgrade reflects Jordan’s weakening debt structure in the context of a very high debt burden. With large financing needs, Jordan has increased its exposure to foreign currency debt and commercial funding.  Rising government external commercial borrowing exposes Jordan to higher external risks and borrowing costs, in our opinion.

While we expect Jordan to continue implementing fiscal reforms, we project a slower pace of implementation than the International Monetary Fund (IMF) program had anticipated.  Moreover, we expect challenges at state-owned enterprises to remain. State-owned electricity company NEPCO has returned to making small losses this year.  In our view, the government is likely to prioritize social stability and growth in the current domestic and external environment, with potential trade-offs as to the scope of fiscal reforms.

The downgrade also factors in Jordan’s rising external financing needs, which exceeded our previous expectations.  The deterioration in external ratios has been primarily driven by historically large current account deficits and lower reserves accumulation since 2016.  We expect Jordan’s current account deficits to decline gradually with rising exports, but external funding needs will remain high.

Institutional and Economic Profile: Economic growth will likely remain subdued

-We expect donors to continue supporting Jordan amid ongoing conflict in Syria and fiscal pressures resulting from refugee inflows.

-We forecast low economic growth at an average of 2.7% over 2017-2020 compared to 6.5% over 2000-2009.

-Structural reform efforts will be anchored by the ongoing three-year IMF program.

The ongoing conflict in Syria and Iraq continues to affect Jordan and we therefore expect international support for Jordan to remain strong in the near term.  Jordan is one of the most stable countries in the region, and maintaining this relative stability is an important foreign policy objective for the U.S. and the Gulf Cooperation Council (GCC).  Bilateral international support has included budgetary and non-budgetary grants (3.5% of GDP on average over 2009-2016), U.S. military aid (about 1% of GDP annually), and U.S.-guaranteed Eurobonds issued in 2013-2016.  Jordan also benefits from concessional lending and donor flows from multilateral agencies (about 2% of GDP), which have been important sources of financing for Jordan’s twin fiscal and external deficits.

However, international donors could potentially reassess their commitment beyond 2018 if the military conflict in Syria eases and as existing agreements expire, in our opinion.  Nonetheless, expenditure pressures will remain heavy given the significant increase in population since 2011.  During 2016, foreign grants declined by almost 6% year-on-year (to around 3% of GDP) and by more than 30% compared to a peak in 2014.  During the first six months of 2017, grants fell by 46% year-on-year due to approval delays in GCC-grant funded capital projects, but we expect funding inflows to accelerate over the rest of the year.  During 2019, the IMF’s three-year Extended Fund Facility (EFF) program of $723 million (1.8% of estimated 2017 GDP) will end, the Gulf Fund of $3.7 billion is set to expire, and the first U.S.-guaranteed bond of $1 billion will mature.  Our baseline scenario does not incorporate a significant decline in donor support from the U.S. and the GCC, but we consider that the overall international funding commitment could weaken.

Real GDP growth decelerated to 2.0% in 2016 from 2.4% in 2015, and has remained subdued at 2.2% during the first half of 2017.  We have slightly revised down our growth forecast for Jordan, with growth of 3% delayed to 2020 and average growth of 2.65% over 2017-2020.  Regional developments have significantly affected tourist arrivals and foreign investment, while low oil prices have weakened macroeconomic activity in the GCC and reduced remittance and investment inflows. We do not anticipate a quick resolution to the Syrian conflict and our oil price assumptions point to largely flat oil prices, which we expect will keep growth levels low as remittance-related consumption is subdued.

Over the next four years through 2020, however, we still expect a slight rebound in growth, supported by rising exports and foreign direct investment (FDI) growth. In our view, the opening of the border with Iraq in late August 2017 will support higher Jordanian exports and transit fee receipts.  Nonetheless, logistical issues, ongoing security concerns, and the recent Iraqi tariff of 30% on exports pose downside risks to the normalization of trade to pre-2015 levels.

Jordan’s economic growth has not kept pace with the rapid rise in its population, which has been driven primarily by refugee inflows.  Given the more than 50% increase in population since the start of the Syrian crisis in 2011, we estimate GDP per capita of $4,000 in 2017.  Including our growth forecasts through 2020, the 10-year weighted-average real GDP per capita contracts by 1.4% and significantly lagging peers at similar income levels.

The country’s policymaking and institutional capacity have been strained by external developments such as the Arab Spring and the Syrian crisis.  Large refugee inflows and security concerns have weighed on public resources, particularly military, medical and education costs, leading to a deterioration in Jordan’s fiscal position and rising debt levels, as well as a growing reliance on donor support.  Given the challenging environment, we expect that risks to Jordan’s public finances will persist and that improvements will only gradually become visible over the forecast period, supported by the IMF reform package providing a policy anchor.

Flexibility and Performance Profile: The government’s debt stock will likely remain high, as will external financing needs

-The government’s debt profile has weakened, with rising levels of foreign currency debt.

-We anticipate a slower pace of fiscal reforms and continued, albeit lower, financial pressures at state-owned enterprises, which will keep government debt levels high.

-Jordan’s external financing needs have increased substantially and will remain high through to end-2020 despite narrowing current account deficits.

Jordan’s central government debt levels have increased substantially from around 61.9% of GDP in 2011 to 95.1% in 2016 on high fiscal deficits and the rising government-guaranteed debt at NEPCO and the Water Authority of Jordan (WAJ). We estimate the general government debt stock at 80.7% of GDP.  The difference between central and general government debt is explained by the social security sector’s (SSIF) holdings of government paper.  We net out these holdings of government debt because the SSIF falls within the definition of general government, under our criteria.  We view this level of debt as a vulnerability in the event of additional financial or economic shocks to the sovereign.

Moreover, the government’s debt profile has worsened and has come to rely increasingly on foreign currency and external commercial debt.  Jordan issued two Eurobonds in 2017 amounting to $1.5 billion, following a $1 billion issuance in 2016.  Its exposure to foreign currency debt has risen to more than 40% of total debt as a result.  We also expect Jordan to continue increasing international bond issuances to meet the government’s external funding needs, particularly if grants and concessional funding become less reliable.  Between 2013 and 2015, Jordan had benefitted from U.S. guarantees on bond issuances totaling $3.75 billion and low interest rates.  These bonds will mature over 2019-2025 and the question remains whether the guarantees will be rolled over.  We forecast that concessional funding from official and bilateral partners (excluding U.S.-guaranteed bonds) will continue declining further from the current proportion of 48% of the government’s external debt.  This would also add upward pressure to interest costs, which have stayed under 10% of total revenues so far.

The authorities aim to reduce the public debt level to 77% of GDP by 2024 and their fiscal efforts are being supported by reforms under the IMF EFF program.  Alongside the implementation of growth-enhancing reforms, the program aims to reduce public debt through a mix of revenue- and expenditure-side measures, including the removal of tax exemptions.  The latter relate to an array of general sales, customs and income tax exemptions, which have been one of the main contributors to the decline in tax revenues to 15% of GDP in 2016, from 23% in 2006.  The government’s fiscal consolidation efforts in 2016 were broadly on track; the central government deficit narrowed to 3.2% of GDP, from 3.6% in 2015.

This year the authorities have started to implement some fiscal measures, such as hiking fuel prices and raising sales taxes, but the removal of tax exemptions on all products has been delayed. Increasing taxes is politically more contentious in the context of the low-growth environment, high unemployment of around 18%, and ongoing regional instability.  We expect the government to reduce the planned pace of fiscal consolidation to support growth and manage social pressure against austerity measures.  We therefore project that central government debt will decline more slowly than the authorities currently assume, reaching close to 89% of GDP by 2020 compared to 86% under the EFF program.

NEPCO’s weak performance in recent years has also resulted in significant financial costs to the government.  Between 2011 and 2015, NEPCO sustained heavy losses of about 5% of GDP annually due to disruptions to the supply of relatively cheap gas from Egypt.  NEPCO borrowed to fund its purchase of costlier diesel fuel supplies in 2012-2013, with a sovereign guarantee.  The government also subsidized the difference between NEPCO’s buying and selling price.  In mid-2013, the government began directly paying NEPCO’s debt-servicing costs, and we anticipate that the government will continue to service its debt.  We include NEPCO’s debt – along with the debt of other state-owned enterprises benefiting from a government guarantee (together totaling 12% of 2016 GDP)–as part of the general government debt stock.

While NEPCO’s financial position has improved, we see continued pressures on its operating balance from higher oil prices compared to 2015-2016.  NEPCO delivered a small profit in 2016 as a result of switching energy sources from diesel to liquefied natural gas, lower global oil prices and the implementation of reforms such as successive tariff hikes.  It also instituted an automatic tariff adjustment mechanism to pass on any increases in oil prices (calculated as the average over the past three months) over NEPCO’s operational breakeven to consumers via a fuel surcharge.  According to the authorities, NEPCO’s operating breakeven oil price is estimated at $55 per barrel.  Average global oil prices lower than this threshold in 2017 have kept the mechanism from being tested.  However, NEPCO’s operating losses so far in 2017 suggest that the breakeven price could be lower than $55 and that increasing electricity tariffs in the current social environment could be politically challenging.  Continued losses at NEPCO would challenge the government’s fiscal consolidation path if NEPCO requires additional transfers and could worsen the government’s debt levels.

Jordan’s external financing needs have increased to over 150% of current account receipts and usable reserves, owing to large structural current account deficits, lower reserves, and the high proportion of short-term debt.  Jordan’s current account deficit widened slightly to 9.3% of GDP in 2016, from 9.1% in 2015 and 7.3% in 2014.  High deficits reflect the closure of key trade channels with Iraq and Syria, as well as muted tourism receipts, all of which offset fuel-price-related gains (given that Jordan is a net fuel importer).  We forecast that the deficit will narrow gradually with higher exports to Iraq from 2018 onward, but remain elevated at an average of 7.5% over 2017-2020.  These deficits will continue to be financed by FDI, debt inflows (mostly government external debt), grants, and project lending.

Moreover, central bank reserves have been declining since 2016, reaching $12.3 billion at end-September 2017 from $14.0 billion at end-2016 and $15.1 billion at end-2015.  The key drivers for lower reserves include higher deposit dollarization and the resulting accumulation of net foreign assets by the domestic banks and rising current account deficits.  There were also one-off capital outflows in 2017 linked to investor participation in the sale of a foreign stake in Arab Bank.  Deposit dollarization increased to 19% of total deposits compared to 17% at end-2015.  It has stabilized at this level on the back of the central bank having upped the policy rate by 100 basis points to 4.75% since December last year.  Yet, despite attempts to shore up reserves through the issuance of U.S. dollar domestic bonds of $500 million in March, Eurobonds of $500 million in May, and $1 billion in September, we expect reserves to remain stable at 2016 levels.

Nonresident deposits in the financial sector make up around 40% of total external short-term debt.  During 2016, these deposits saw a drop of around 15% year-on-year but the difference was driven by a reclassification of nonresident deposits, as opposed to an actual reversal.  While these deposits have remained relatively stable, and we understand that they mainly relate to the Jordanian diaspora, we view a reversal as a potential risk.

The Jordanian dinar’s peg to the U.S. dollar supports price stability, although it also limits the central bank’s room for policy maneuver.  The pick-up in inflation in recent months reflects the rise in commodity, food and transport prices; rather than a firming-up of domestic demand.  We expect headline inflation will trend upward over the forecast horizon through 2019.  (S&P 20.10)

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11.4  KUWAIT:  Fitch Affirms Kuwait at ‘AA’; Outlook Stable

On 23 October 2017, Fitch Ratings has affirmed Kuwait’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘AA’ with a Stable Outlook.

Key Rating Drivers

Kuwait’s key credit strengths are the sovereign’s exceptionally strong fiscal and external metrics and, at a forecast $50/bbl, one of the lowest fiscal breakeven Brent oil prices among Fitch-rated oil exporters.  These strengths are tempered by Kuwait’s heavily oil- dependent economy, geopolitical risk, weak governance and a poor business environment.  A generous welfare state and the large economic role of the public sector present increasing challenges to public finances, given robust growth of the Kuwaiti population.

Assets and performance of the Kuwait Investment Authority (KIA) are not disclosed.  We estimate that KIA’s assets exceeded $514 billion or 453% of GDP at end-2016.  Of this amount, the Reserve Fund for Future Generations (RFFG) accounted for almost $400 billion and continues to increase, due to investment income and the statutory transfer of 10% of government revenue.  Meanwhile, the value of the General Reserve Fund (GRF), which holds the accumulated government surpluses of previous years, is estimated to have fallen for a third year in a row, to $116 billion, as the government tapped the GRF for financing.

In a hypothetical scenario where fiscal deficits remain at the level expected for the fiscal year ending March 2018 (FY17/18), the transfer to the RFFG continues and the GRF remains the sole source of financing, the GRF would be exhausted within about 10 years, while tapping the RFFG would allow Kuwait to sustain its current deficits for decades.

The government met its FY16/17 financing need by issuing around KWD2.2 billion ($ 7.3 billion) of net new local debt, $8 billion of Eurobonds and taking around $4 billion from the GRF.  We expect the financing mix in FY17/18 to have a similar debt component, although this is conditional on the passage of the new debt law in the National Assembly, doubling the government’s borrowing cap to KWD20 billion.  Assuming that the law will be passed, we see debt approaching the new cap in FY19/20, when it would be equivalent to 48% of GDP.

We estimate the general government balance at KWD74 million (0.2% of GDP) in FY16/17, including estimated investment income worth around KWD4.7 billion and excluding the statutory transfer of 10% of revenue to the RFFG, worth around KWD1.3 billion.  The government does not count investment income and treats the RFFG transfer as an expenditure in its own presentation, resulting in a deficit of more than KWD5.9 billion.  The balance in FY16/17 was almost unchanged from FY15/16, as a further 3% drop in oil revenue was offset by a similar decline in current spending.  A mild decline in current spending masked significant under-spending relative to the budget (nearly KWD1.2 billion, or 6.3%).

Under our baseline Brent oil price assumption of $52.5/bbl in 2017-2018, we expect the fiscal balance to be broadly unchanged at KWD57 million (0.2% of GDP) in FY17/18.  According to the government’s reporting convention, our forecast deficit would be KWD6.4 billion, which roughly corresponds to the government’s financing need, as the government does not intend to touch the RFFG.  The government’s own headline budget deficit is KWD7.8 billion for FY17/18, mainly due to a lower oil price assumption of $45/bbl.

Progress on the government’s “Programme for Economic and Fiscal Sustainability” has been slow, partly due to a strengthening of parliamentary opposition after elections in November 2016.  The September 2016 fuel price hike has remained in place and has been upheld by courts.  Utility price hikes came into effect gradually between May and September 2017 but are far lower than initially approved by parliament, remain below production costs and international rates and, as expected, did not directly apply to Kuwaiti citizens, the biggest consumers.  The government has been working on non-legislative measures to limit spending, including by cracking down on employee absenteeism in the public sector, tightening bonus rules, stopping the creation of new allowances and limiting budgetary entities’ fiscal discretion.

We expect that the government will continue to enjoy some success on measures that do not require major new legislation, such as multi-year budgeting, expenditure ceilings and further tightening of rules for hiring and compensation in the civil service.  Progress will be slower on more comprehensive measures such as a new public sector wage law, privatization and VAT and excise tax laws.  This is due to strong political opposition in a fractious parliament and due to capacity constraints in the parliament and in the public sector. In particular, we do not factor in VAT or excise tax revenue into our forecasts.

The government commands an effective majority in parliament as its unelected ministers also have voting rights and because the authority of Kuwait’s Amir, who appoints the government, is respected.  However, members of parliament can and have obstructed the government’s agenda by resorting to hearings of ministers and votes of no confidence.  Despite a degree of consensus in many parts of society on the structural challenges that Kuwait is facing, the government’s proposed answers to these challenges remain deeply controversial.

We expect Kuwait’s real GDP to fall 3.5% in 2017 (after 3.5% growth in 2016) as oil production cuts in line with the OPEC agreement will imply an 8.3% drop in production from 2016 average levels.  We expect non-oil growth to pick up to 3% in 2017-2019 from 2% in 2016 amid higher government spending, particularly on investment.  Despite increases to fuel prices, inflation has been muted, which along with higher oil prices and continuation of government spending should help retail trade and confidence indicators recover from their dip in mid-2016.  A record number of land grants under the government’s housing program in 2016 will support residential construction activity in the coming years.  Banks remain adequately capitalized, liquid and profitable.

Kuwait has remained neutral in the dispute between Qatar, and Saudi Arabia and the UAE, instead stepping into the role of mediator.  Kuwait’s traditionally low-key, non-interventionist foreign policy is respected within the Gulf Cooperation Council, and we see little risk of sanctions being imposed on it for its continued ties with Qatar or Iran.

Rating Sensitivities

The main factors that could individually or collectively lead to negative rating action are the erosion of fiscal and external positions, for example due to a sustained period of low oil prices or an inability to address structural drains on public finances.

The main factors that could individually or collectively lead to positive rating action are the improvement in structural factors such as reduction in oil dependence, and a strengthening in governance, the business environment and the economic policy framework.

Key Assumptions

We forecast that Brent crude will average $52.5/bbl in 2017-2018 and $55/bbl in 2019.

We assume broad policy continuity and a smooth eventual transition of power from Kuwait’s current Amir.

Fitch assumes that regional conflicts will not directly impact Kuwait or its ability to trade.  (Fitch Ratings 23.10)

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11.5  SAUDI ARABIA:  Saudi Royal Transition – Why, What and When?

Simon Henderson posted in The Washington Institute PolicyWatch 2874 on 18 October that speculation is widespread that King Salman may soon abdicate in favor of Crown Prince Muhammad, but that is just one of several possible options.

Last June, King Salman of Saudi Arabia, one of the oldest heads of state in the Persian Gulf region, gave the title of crown prince to his favorite son Muhammad bin Salman, known as MbS.  The thirty-two-year-old prince was the third to hold that title since Salman ascended to the throne in 2015, but he is widely regarded as his father’s true choice to become the next king.  When that happens and under what circumstances could have important consequences for Saudi Arabia, the wider Muslim world and the international oil market.

Saudi succession law does not lay out a strict system of primogeniture – it merely states that rule passes to the sons and grandsons of the country’s founder, Abdulaziz (Ibn Saud).  This loose edict allows succession from brother to brother, creating a problem that has been growing with each transition – the sons of Ibn Saud have been acceding to the throne at older ages and living longer while in power, eventually straining their physical and mental capacities for leadership.  The accession of MbS could resolve that problem for years to come.

King Salman has two other titles as well: “Custodian of the Two Holy Places” and prime minister.  This broadens the range of possibilities for transferring responsibilities to MbS.  The scenarios could unfold as follows:

Salman abdicates and MbS becomes king. “Abdication” is probably not a favored option in the kingdom.  It was last used in 1964 when the spendthrift King Saud was forced to give up after six years of tension with his half-brother Faisal, who replaced him.  More recently, in 2013, Emir Hamad al-Thani of Qatar abdicated in favor of his son Tamim but retains much influence, along with the official title of “Father Emir.”  Given Riyadh’s current bad blood with Qatar, the chances of Salman emulating the “Father King” model are likely zero, but a different slice of history could make full abdication more acceptable.

In 1902, Ibn Saud (only twenty-two at the time) led a group of fighters from exile to recapture his family’s ancestral village of Dariyah in central Arabia.  In response, his father Abdulrahman ceded leadership of the House of Saud to him.  Today, King Salman is said to see Ibn Saud’s character in his son, and the Wall Street Journal reports that he has already made a video announcing that MbS will be king.

Salman gives up the throne but remains Custodian.  Since Ibn Saud captured the holy cities of Mecca and Medina in 1925, successive rulers have taken responsibility for the Islamic shrines.  King Fahd formalized this role in 1986, changing his title from “majesty” to “Custodian of the Two Holy Places.”  Retaining the religious title but relinquishing political leadership would be consistent with the sense that the former is more important – a key ingredient in Saudi Arabia’s claim to leadership of the wider Arab and Muslim worlds.

Salman appoints MbS prime minister.  At present, the king is prime minister and the crown prince is deputy prime minister.  Yet the weekly meetings of the Council of Ministers, which are chaired by the prime minister, are not the country’s most crucial decision making fora.  That honor goes to the Council of Political and Security Affairs and the Council of Economic and Development Affairs, two bodies that were created in 2015 and are now chaired by MbS.  Administratively, naming MbS as prime minister would arguably be tidier than the current arrangement.  But this may be a delicate issue: Faisal and King Saud engaged in a long tug-of-war over bureaucratic control before the former’s accession, so Salman would have to be truly willing to give up the job if this division of labor is to work today.

MbS becomes regent.  When Salman travels abroad, as he did to Moscow earlier this month, he “deputizes” MbS “to administer the state’s affairs and take care of the interests of the people during his absence,” according to the Saudi Press Agency.  A version of this option – regency – is available in circumstances of illness or lengthy medical treatment abroad.  Yet a protracted regency could be contentious.  After King Fahd suffered a debilitating stroke in late 1995, Crown Prince Abdullah was appointed regent, but he held the title for only a few weeks – apparently because Fahd’s powerful full brothers (Sultan, Nayef and Salman) were anxious to deny Abdullah complete authority.  Despite the king’s poor physical condition thereafter, Abdullah did not assume full formal power until his own accession in 2005.

Salman dies.  As crown prince, MbS would become king provided his leadership is acknowledged by senior members of the House of Saud, who must give him the oath of allegiance.  Yet reported schisms in the royal family could lead some figures to contest his new authority.  When Salman made MbS crown prince four months ago, three of the thirty-four princes on the Allegiance Council voted against him.  According to the New York Times, his predecessor, Muhammad bin Nayef, did not give up the role and swear loyalty to MbS until he had been denied sleep and access to his medication; he reportedly remains confined to his palace today.  Another potential opponent is Mitab bin Abdullah, son of the previous king and head of the National Guard, a significant military force if the succession is contested.

If his father passes away, MbS may be able to maneuver around these family obstacles by carefully selecting a new crown prince, as is the king’s right.  At present, though, it is far from obvious who that might be. Alternatively, he could delay that appointment, as King Faisal did in the 1960s before eventually naming Khalid.  Earlier this year, the king sought to reduce royal family opposition to his son’s appointment as crown prince by changing the kingdom’s law of succession; the new law makes the young sons of MbS ineligible for that title. Prince Khalid, brother to MbS and ambassador to Washington, is ineligible as well.

Policy Implications

Regardless of internal hurdles, the transition toward MbS becoming king is already well established and the main question is when it will be completed.  Although the inner workings of the House of Saud are the ultimate determinant, domestic and foreign policy factors may be important as well. The crown prince’s ambitions for economic and social change, typified by his “Vision 2030” project and the recent announcement allowing women to drive, are currently enhancing his credentials and popularity.  But the succession process could also be shaped by how he deals with external factors such as the stalemated war in Yemen, intra-Gulf tensions with Qatar and a host of problems with Iran.

The United States has multiple policy concerns wrapped up in the succession, but few ways of influencing palace politics.  Royal family thinking is often difficult to discern.  Past Saudi decision making has been marked by caution and consensus, but neither characteristic fits the personality of MbS.  The Washington bureaucracy is still coming to terms with the demise of Muhammad bin Nayef, who was a key interlocutor on counterterrorism issues when he served as interior minister and crown prince.  For now, the greatest advocate for MbS appears to his father, which suggests that the crucial final steps in promotion – namely, using the power of the throne to block opposition and authenticate the new arrangement – need to be taken sooner rather than later.

Simon Henderson is the Baker Fellow and director of the Gulf and Energy Policy Program at The Washington Institute, where he authored the books After King Fahd: Succession in Saudi Arabia (1994) and After King Abdullah: Succession in Saudi Arabia (2009).  (TWI 18.10)

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11.6  EGYPT:  Egyptian Government Making Headway in Fight Against Cairo’s ‘Black Cloud’

Menna A. Farouk posted on 18 October in Al-Monitor that the Egyptian government is making noticeable progress in its fight against the black cloud — a thick layer of smog from burning rice straw that spreads across Cairo and the Nile Valley for several weeks after the rice harvest each autumn.

This year, the Egyptian Ministry of Environment has convinced farmers to stop burning rice straw and instead collect it and hand it over to the government to be recycled and turned into other products.

“Agricultural waste represents an economic value, and the ministry has embarked on a plan to turn rice straw into natural fertilizers and animal fodder,” Minister of Environment Khaled Fahmy said, according to the semi-official daily newspaper Al-Ahram.

The minister added that the government is planning to establish a factory in the Nile Delta governorate of Beheira in order to turn rice straw into paper using an environmentally friendly Chinese technology.

Shehab Abdel Wahab, the head of the Environmental Affairs Agency affiliated with the Ministry of Environment, told local media that burning rice straw is responsible for 43% of the black cloud phenomenon, while traffic fumes constitute 23% and garbage burning 12% of the problem.

This year, the Egyptian Ministry of Agriculture launched 336 workshops and symposia to raise awareness among farmers about the economic and environmental importance of rice straw and the harm resulting from its burning.  During the workshops, farmers were urged to collect rice straw and hand it over at collection points nationwide to be recycled and turned into fodder and fertilizers.  Farmers get 50 Egyptian pounds ($2.83) for every ton of rice straw they hand over.  Government figures seem to indicate that many farmers have reacted positively to the government’s awareness campaigns.

According to a report released by the Egyptian Ministry of Environment, a total of 50,000 tons of rice straw have been collected, about 7,261 tons of which have been recycled and turned into feed and fertilizers from mid-August until now.  The government plans to collect 350,000 tons of rice straw and recycle about 220,000 of them, the report added.

The government’s plan comes as Egypt’s farmers have been hit hard by a 2014 decision to increase fertilizer prices on the retail market by 33%.  Making matters worse was the increase in fuel prices by up to 47%; a decision taken by the government following the November pound flotation to cut budget deficit and stimulate economic growth.

In addition to awareness campaigns, the government also started to punish violators in order to limit the practice.  Farmers burning rice straw must pay a fine ranging between 5,000 and 100,000 Egyptian pounds ($283-$5,700).  Farmers who repeat such a violation may face a prison sentence of up to one year.

Ahmed Fathi, an environmentalist and the head of a nongovernmental organization concerned with environment protection, lauded the government’s recent moves to combat the black cloud phenomenon, saying the efforts have shown positive results.  “The government has finally set out a sound, well-knit plan to fight this bad practice,” Fathi told Al-Monitor.

Fathi also said the Egyptian Ministry of Agriculture should organize more awareness campaigns to encourage more farmers to stop burning rice straw and start collecting it and handing it over to the government.  “If such campaigns continued and made a marked success, rice straw would turn into a bounty for the country.  It would generate a lot of revenues, and it can also be exported to other countries,” the young environmentalist added.

The United Nations Industrial Development Organization (UNIDO) reported, “According to the Annual Report on Solid Waste Management issued by the Ministry of State for Environmental Affairs in 2013 … Egypt generates 30 million tonnes of agricultural waste,” accounting for 34% of the entire waste generated.  According UNIDO, “Agricultural waste constitutes the largest source of waste generated in Egypt. Agricultural waste management has untapped potential to create jobs in rural and marginalized communities.”

“Management of agricultural waste, including rice straw, can be a golden egg for Egypt. It can provide thousands of job opportunities, satisfy the needs of fertilizers for the country’s farmers and increase export rates,” Fathi said.

Menna A. Farouk is an Egyptian journalist who has been writing about social, political and cultural issues in Egypt since 2013. She is an editor at The Egyptian Gazette newspaper. Farouk has covered stories about the unrest that followed the January 2011 revolution, press freedom, immigration and religious reforms.  (Al-Monitor 18.10)

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11.7  TUNISIA:  The Corruption Contagion

Sarah Yerkes wrote in the Carnegie Endowment on 25 October 2017 that over the past six and a half years, Tunisia has spent more time and energy on the fight against corruption than perhaps any other aspect of the country’s democratic transition.

On 15 January 2011, a day after the departure of former president Zine al-Abidine Ben Ali, the provisional government established the Commission of Inquiry into Misappropriation and Corruption to address embezzlement and other forms of corruption under the ousted regime.  Since then the government has adopted numerous laws and other official mechanisms to get to the root of this problem that has plagued the country for decades.  Yet in a Carnegie survey conducted in July and August of this year, 76% of Tunisian respondents said they believed there was more corruption today than under Ben Ali.

There are two reasons for this.  First, corruption was a taboo subject under the previous regime, so that while levels of corruption may not have actually changed, Tunisians today perceive more corruption because the government and the people are talking about it all the time.  As one civil society actor explained during a Carnegie workshop in September, in 2011 people started to “wake up” and a “collective awareness [developed] of the need to deal with corruption.”

Second, Tunisia has undergone a democratization of corruption.  That is, while under Ben Ali corruption permeated every sector and embezzlement and nepotism were norms guiding his rule, only a handful of people close to him and his wife Leila Trabelsi benefitted from the Tunisian kleptocracy.  Today, conversely, the tools of corruption are available to anyone.

Another challenge in the fight against corruption is that while Tunisians across the political spectrum, including government officials and civil society activists, agree that it should be a top priority of the government, various actors view corruption and how to address it differently.

The government has been primarily focused on addressing the corruption that has emerged since the revolution by enacting legislation to both sideline the bad actors taking advantage of the post-revolutionary environment and to deter future acts of embezzlement, fraud, and nepotism.  Many civil society actors, however, are not ready to close the book on the Ben Ali regime and are still seeking justice for past crimes. Civil society has been a prime driver in pushing for a comprehensive transitional justice process that addresses both physical crimes, such as torture, and economic crimes, such as embezzlement and favoritism.

Thus, when civil society and government actors speak about corruption, they often speak past each other, leading to public anger over even the most well-meaning official anticorruption measures.

The most obvious example of this disconnect is the Administrative Reconciliation Law, passed by parliament on 13 September, which provides amnesty to some civil servants accused of economic crimes under the Ben Ali regime.  Civil society, under the umbrella of the “Manich Msemah” (I Won’t Forgive) movement, has been vocally critical of the law, which they see as circumventing the transitional justice process and undermining the democratic transition.  However, the government, led by President Beji Caid Essebsi, believes that such a law would allow the country to move forward and focus on attracting foreign investment.

Both the Administrative Reconciliation Law and Prime Minister Youssef Chahed’s war on corruption, one of his government’s main priorities, are top-down measures that lack the necessary public buy-in to succeed in the long term.  The war on corruption, which has so far mostly consisted of arresting top smugglers and shaking up some customs houses, has received mixed reviews from the Tunisian public since it was announced in May.  While many within civil society applauded Chahed’s initial efforts, according to Carnegie’s survey, 64% of Tunisians think that the war on corruption will be “not successful.”  As one civil society actor said in Carnegie’s workshop, many Tunisians do not understand what the war is about. Thus, the war “needs to define the enemy and be equipped with the proper tools.”

To address corruption effectively and sustainably, the Tunisian government can take several actions that do not require a tremendous effort.  This can include implementing and enforcing existing anti-corruption laws, beginning with the law that requires officials to publicly declare their assets.  The government should also prioritize the establishment of the constitutional court and ensure the independence of the Financial Judiciary Pole, tasked with investigating, prosecuting, and adjudicating financial corruption cases.

Additionally, the Tunisian government should undertake a few long-term and more costly steps such as digitizing government processes and streamlining the bureaucracy, to both build trust in government and ensure great transparency.  Here, the international community can provide financial and technical assistance. International donors should increase funding for the National Anti-Corruption Authority, which is severely lacking in financial and human resources.  Donor states can also work with private companies to invest in the country’s border regions, where the informal economy is dominant, by improving access to quality education and creating job opportunities outside of the public sector.  This would create incentives for entry into the formal economy.

Civil society, with international support, should continue to play the crucial watchdog role, expanding to the local level to combat corruption as the decentralization process gets underway.  Civil society groups should also work with donors to develop a public education campaign on how to access the judicial system to report corruption and Tunisia’s new whistleblower protection laws.

Corruption in Tunisia is a destabilizing force that infects all levels of the country’s economy, security, and political system.  The Tunisian government, civil society, and the international community must work together to address corruption in the most effective and sustainable way possible to ensure that Tunisia’s transition remains on track.  (CE 25.10)

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11.8  TURKEY:  EU to Cut Aid to Turkey as Accession Talks Trail Off

Barin Kayaoglu wrote in Al-Monitor of 25 October 2017 that the European Council, the EU organ comprised of heads of member states who give strategic direction to the European integration project, recently signaled that it will cut its pre-accession funds for Turkey.

In a written statement on 20 October, European Council President Donald Tusk said the EU was reflecting “on whether to cut and re-orient pre-accession funds” to Ankara.  The Polish statesman pointed out that the European club wanted “to keep the door open to Ankara, but the current reality … is making this difficult,” referring to the deterioration of the rule of law and democratic standards in Turkey.  Tusk also advised Ankara “to respect all Member States in its relations with the EU, including when it comes to the implementation of the existing Customs Union agreement,” in reference to Turkey’s refusal to extend its 1995 customs union with the EU to the Greek Cypriot-ruled Republic of Cyprus.

Chancellor Angela Merkel of Germany, the most powerful member of the EU, clarified that the council had asked the European Commission, the EU’s civil service arm, “to reduce [Turkey’s] pre-accession aid in a responsible way.”  The figure in question is €4.5 billion (about $5.28 billion) covering the period of 2014-2020.

Like Tusk, Merkel maintained a civil tone and expressed concern that Turkey was “moving away step by step from something we consider as preconditions for accession,” but added that the EU would continue to pay Turkey to look after Syrian refugees.  The German chancellor also hinted that some EU member states would like to “break [accession] negotiations immediately” and that there was “general skepticism” toward Turkish membership in the EU.  The influential German leader offered to “not burn bridges” with Ankara and asked the two sides to “re-engage” and perhaps discuss a “special partnership” other than full Turkish membership.

Turkey first signed an association agreement with the European club in 1963 and became a candidate for full membership in 1999.  To join, Turkey must successfully adopt EU law under 35 chapters in such areas as free movement of labor, fisheries, the environment and public procurement.  Accession negotiations between the EU and Ankara started in 2005 after Turkey met the so-called Copenhagen Criteria on political freedoms, the rule of law, a functioning market economy and institutional capacity to meet the obligations of EU membership.  Yet less than half of the chapters have been opened and only one concluded provisionally. Because of disputes such as Cyprus and Turkey’s domestic politics, negotiations have been at a standstill since 2015.

The European Council’s announcement comes in the wake of a 6 July vote at the European Parliament to halt accession negotiations with Turkey.  More recently, Turkish President Erdogan addressed the members of his Justice and Development Party on 13 October and said Turkey has “no need” for the EU or the United States.

So is this the end of the road for Turkey and the European Union?  Not quite.

According to Cigdem Ustun, an associate professor of EU studies in Izmir, “Ending accession negotiations would not be an easy decision for the EU” because it would “mean [the EU] losing any leverage, if it has any left, with Turkey.”  Ustun told Al-Monitor in an email interview, “Rather than ending the talks, we are hearing that cutting some of the pre-accession aid or channeling more money toward [nongovernmental organizations] working on human rights and rule of law are being discussed.  It makes me believe that the EU wants to continue to have a positive impact on Turkey.”

Ustun also pointed out that despite their harsh tone, Turkish leaders — including Erdogan — remain committed to full membership, even though both sides are aware that such a prospect is less likely than ever.  “We may expect some harsh speeches from President Erdogan and the government, but I would not personally expect this decision to end the relations with the EU,” Ustun added.

But the EU signaling its intention to cut pre-accession funds is hardly good news for Turkey, whose relations with its Western allies have been fraying since last year’s coup attempt.

Evangelos Areteos, a Brussels-based correspondent for the Cypriot daily Politis and analyst on EU and Turkey affairs for the Diplomatic Academy at the University of Nicosia, told Al-Monitor in a phone interview that the European Council decision was a “delicate exercise to keep the balance.”  He pointed out that some countries, such as Austria and Denmark, are vehemently opposed to Turkish membership and would like to see an immediate end to accession talks.  Germany and the Netherlands want to give a straight message to the Turkish side while avoiding “a collision with Turkey.”  More moderate members such as France, Italy and Greece would like to see the talks with Ankara continue. More than anything, the European Council’s 20 October directive was a balancing act and will not be acted on until June 2018.

But Areteos does not think there is much to celebrate here for Turkey. He said, “Accession is dead. But nobody wants to pull the plug. … There is no significant link to the Copenhagen Criteria anymore despite the fact that the EU lousily tries to save appearances.”

Areteos continued, “Turkey is far off and it cannot come back as a real candidate for full membership for the foreseeable future,” adding, “The problem is not only Turkey; far from that.  The authoritarian deviations of Ankara and its confrontation with some member states, mainly Germany, are giving the perfect excuse to many European countries who do not want Turkey to become a member of the EU.”  Silver bullets to revive the relations by expanding the EU-Turkey customs union seem out of question.

Turkey and the EU are not quite at the end of the road yet. But unless something changes, they just might get there soon.

Barin Kayaoglu is an assistant professor of world history at the American University of Iraq, Sulaimani. He obtained his doctorate in history from the University of Virginia in 2014, and he is currently working on his first book, based on his PhD dissertation, on US relations with Turkey and Iran from World War II to the present and pro- and anti-Americanism in the two countries.  (Al-Monitor 25.10)

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11.9  TURKEY:  Turkey Targets 30% Hike in Military Spending Next Year

Metin Gurcan posted on 18 October in Al-Monitor that Turkey plans to boost its military spending significantly next year, according to preliminary budget figures revealed recently.

Turkey is currently the world’s 18th largest military spender, with an estimated 2016 outlay of $14.8 billion, according to Stockholm International Peace Research Institute’s (SIPRI) Fact Sheet, which was released in April.  SIPRI notes the figure is an estimate because, since the attempted military coup in July 2016, detailed data has become difficult to obtain.

But one fact is beyond dispute: The government is planning to meet an expected 30% increase in military defense expenditures by direct taxation of its citizens and a series of price hikes to be borne by the public.

The Finance Ministry gave parliament a draft 2018 budget on 1 October and expects to hand legislators the final proposal on 25 October.  Though education is to receive the largest chunk of the budget, Minister Naci Agbal told local media the huge hike in military spending reflects a “war economy.”  He cited “geopolitical risks and the budget increases these risks require.”  He said that of about $7.2 billion in extra revenues to be derived from surcharges on vehicles, fuel, real estate and personal income taxes, about $2.3 billion will be directly allocated to the defense industry.  Turkey is expecting a $5.2 billion increase in 2018 defense expenditures.

According to Agbal, in 2018 a supplementary $7.5 billion will be transferred to Turkey’s military/defense budget.  Of this new funding, about $2.3 billion will be allotted to the Defense Industry Undersecretariat, which procures Turkey’s weapons systems and equipment.  Moreover, the Defense Ministry budget will rise by 41% to $12 billion.  The budget of the Interior Ministry will be augmented by 25%, the Gendarmerie Command budget will increase by 42%, while the national police budget will go up by 18% and the National Intelligence Service budget will get an additional 20%.

All told, about $26 billion will be spent on military defense expenditures, out of a total national budget of $195 billion.  That amount is likely to put Turkey in SIPRI’s top 15 defense spenders in 2018.

According to Arda Mevlutoglu, a well-placed expert on the Turkish defense industry, a new trend is visible in Turkey’s defense and security spending.  He said that because of Turkey’s growth rate, rapid increases in military defense expenditures are not reflected in gross domestic product.  Mevlutoglu also cited a notable increase in national manufacturers’ income, saying, “For example, while the total revenue of the Turkish defense and aeronautic industries was $1.855 billion between 2006-2016, it is now $5.968 billion.”

Turkey, while updating its national defense and deterrence capacity during the past 10 years, also has been focusing on long-term investments and mobilizing national resources.  There was little off-the-shelf procurement to combat security threats, as Ankara believed its defense and security resources were adequate to cope with existing and anticipated threats.

But Mevlutoglu emphasized that, especially with developments in Syria and Iraq, “the nature and dimensions of threats in the region usually exceed the capacity of any one regional country to cope with…  “This requires that a sensitive balance has to be maintained between long-term capacity development nationally” and urgent needs to procure items from outside sources.”

Mevlutoglu elaborated: “In modern combat and similar operations, ammunition consumption usually exceeds all predictions.  We saw examples of this in the 1999 NATO operation [against Yugoslavia], 2003 Gulf War, 2011 Libya operation, Yemen operations of the Arab coalition and lately in the US-led coalition operation against the Islamic State.  [Long-running] struggles against asymmetric threats in the combat zone [require] serious production and accumulation of ammunition. … Because of the asymmetric and urban warfare requirements, the need for specific equipment and vehicles, which are usually high-cost items, exceed all expectations.”

Although the predicted budget increases to defend Turkey’s national interests in Syria and Iraq appear high, it’s possible such amounts are still inadequate for procurement from national and foreign defense industries.  In short, the additional economic burden of further military operations in Syria will be considerably higher than before.

According to the Turkish military’s latest figures, released in April, Turkey has 362,284 armed military personnel, excluding the Gendarmerie and the Coast Guard.  Of that figure, 201 are generals, 25,728 officers, 64,655 noncommissioned officers, 47,167 contract sergeants, 16,018 contract privates first-class and 208,515 nonprofessional conscripts.  Only 45% of the Turkish Armed Forces can be classified as fully professional.  With this structure, Turkey has Europe’s second-largest army, if Russia is included.

According to a military source who asked to remain anonymous, about 70% of Turkey’s military/defense spending goes toward personnel expenses.  Of the remaining funds, 25% is spent on new weapons systems and only 5% goes to modernization and research and development projects.  Obviously, Turkey has to find ways to curtail personnel expenses while transforming to its military to a professional force and reducing its size, without sacrificing operational effectiveness.

The source added that Turkey currently buys more than 60% of its military equipment and supplies from national resources.  This ratio will increase to about 70% in three years.  Local production is of vital importance for Turkey, but when compared with foreign resources, local costs are far too high.  Turkey has to find new markets for its local production to ensure its defense industry’s sustained growth.  However, given the lengthy state of emergency, it’s been difficult to conduct a transparent debate in parliament and in public on how to cut the number of military personnel effectively.

That might explain why I couldn’t find a single reliable report, analysis or academic study during my research for Turkey’s 2016-2017 defense and security expenditures.  There is simply no reliable data for the past two years.  Turkey’s already-opaque defense/military expenditures are now concealed behind a screen of secrecy.

Metin Gurcan is a columnist for Al-Monitor’s Turkey Pulse. He served in Afghanistan, Kazakhstan, Kyrgyzstan and Iraq as a Turkish military adviser from 2002 to 2008. After resigning from the military, he became an Istanbul-based independent security analyst. Gurcan obtained his PhD in 2016 with a dissertation on changes in the Turkish military over the preceding decade. He has published extensively in Turkish and foreign academic journals, and his book “What Went Wrong in Afghanistan: Understanding Counterinsurgency in Tribalized, Rural, Muslim Environments” was published in August 2016.  (Al-Monitor 18.10)

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11.10  CYPRUS:  Fitch Upgrades Cyprus to ‘BB’; Outlook Positive

On 20 October 2017, Fitch Ratings upgraded Cyprus’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘BB’ from ‘BB-‘.  The Outlook is Positive.

Key Rating Drivers

The upgrade of Cyprus’s IDRs reflects the following key rating drivers and their relative weights:

High:  Cyprus is experiencing a strong improvement in the performance of and outlook for its public finances.  The budget is on track to record a surplus of 1% of GDP in 2017, after 0.4% in 2016, compared with the ‘BB’ median of a 3.2% deficit.  Gross general government debt (GGGD) is forecast to fall just below 100% of GDP in 2017 from 108% at end-2016, owing to strong nominal GDP growth, the budget surplus and a one-off effect from early debt repayment.  Medium-term debt dynamics point to a firmly declining trend.  Our baseline medium-term assumptions of 2% GDP growth and gradually increasing effective interest rates would lead GGGD to decline to around 80% in 2022, an average 4pp decline annually.

Medium:  The economic recovery has broadened and GDP growth has consistently outperformed forecasts over recent years.  Fitch now forecasts an average 3.5% GDP growth in 2017 and 2018, in light of the broad-based recovery in H1/17 (3.6%) and improving confidence indicators, compared with around 2.5% a year ago when Cyprus was upgraded to ‘BB-‘.  The recovery is also reflected in the labor market, where unemployment rate has declined to 10.6% in Q2/17 from a post-crisis peak of 16% in 2014.

Nevertheless, medium-term growth potential remains highly uncertain after the global financial crises.  Although the strong growth momentum creates a favorable backdrop for the necessary deleveraging of the private sector, faster resolution of mortgage arrears could slow the recovery through weaker household consumption in the short run.

The sovereign is gradually rebuilding its track record of market access: it issued a seven-year bond in June 2017 at a 2.8% yield.  Current cash reserves exceed the sovereign’s total 2018 financing needs.

Cyprus’s ‘BB’ IDRs also reflect the following key rating drivers:

Notwithstanding the cyclical recovery, the banking sector’s exceptionally weak asset quality remains a key weakness for Cyprus’s credit profile and material downside risk to the recovery.  The ratio of non-performing exposures (NPEs) to total loans was 44.1% in June 2017, among the highest of Fitch-rated sovereigns, compared with 46.4% in December 2016.  The total value of NPEs was €22.8 billion, more than 125% of GDP, but down from a peak of €28.4 billion in December 2014.  Losses on unreserved NPEs could be significant if further haircuts were needed to liquidate underlying collateral, highlighting the potential need for further capitalization.  In such a scenario, it is unclear if that would come from the private or public sector.

Deleveraging is progressing slowly, despite the improved repayment capacity of the private sector and banks’ focus on NPE resolution.  The persistently high level of NPEs constraints new lending capacity and poses a significant downside risk to the recovery.  The three largest banks (Bank of Cyprus, Hellenic Bank and Cyprus Coop Bank) have had ambitious and detailed strategies since 2015, including debt-to-equity swaps, restructuring and establishment of servicing platforms but the resolution of NPEs remains slow and moral hazard risks high.

Deposits in the banking sector were €49.1 billion in August 2017, little changed since December 2016, but liquidity conditions have improved, reflected for example in the full repayment of ECB emergency liquidity assistance balance earlier this year.  However, the sector’s liquidity remains sensitive to changes in market sentiment.

Cyprus’s ratings are supported by high GDP per capita, a skilled labor force, and strong governance indicators relative to ‘BB’ peers.

The country’s current account deficit widened to 4.9% of GDP in 2016 from 1.5% a year earlier.  The data is distorted by special purpose entities (SPEs, mainly the non-resident shipping industry).  The current account deficit would have been significantly lower excluding SPEs, according to central bank estimates.  For 2017 and 2018 Fitch forecasts deficit (including SPEs) to remain close to 5%, due to a pick-up in domestic demand, including investment with high import elasticity.

Net external debt (NXD) was 150% of GDP at end-2016, compared with the ‘BB’ median of 19%.  Cyprus’s international investment position (IIP) was -128% of GDP, the second-highest indebtedness among Eurozone members, almost 4x the EU’s Macro Imbalance Procedure threshold of -35%.

Rating Sensitivities

Future developments that may, individually or collectively, lead to an upgrade include:

-Reduction of private sector indebtedness and banking sector NPEs that materially reduce the sovereign’s contingent liabilities;

-Track record of declining GGGD/GDP ratio; and

-Narrowing current account deficit and reduction in external indebtedness.

The Outlook is Positive. Consequently Fitch does not currently anticipate developments with a high likelihood of leading to a downgrade.  However, future developments that may individually or collectively lead to negative rating action include:

-Failure to improve asset quality in the banking sector; and

-Deterioration of budget balances or materialization of contingent liabilities that results in the stalling of the decline in the government debt-to-GDP ratio.

Key Assumptions

Fitch does not expect substantial progress with reunification talks between the Greek and Turkish Cypriots over the next quarters.  The reunification would bring economic benefits to both sides in the long term but would entail short-term costs and uncertainties.

Gross government debt-reducing operations such as future privatizations are not considered in Fitch’s baseline scenario.  The projections also do not include the impact of potential future gas reserves off the Southern shores of Cyprus, the benefits from which are several years into the future.  (Fitch 20.10)

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