Fortnightly, 10 February 2016

Fortnightly, 10 February 2016

February 10, 2016


10 February 2016
1 Adar I 5776
1 Jumada Al-Awwal 1437




1.1  Moshe Kahlon Considers Additional Tax Cuts
1.2  Israel, Cyprus & Greece Set Up Gas Export Committee
1.3  Government Approves Massive Budget to Integrate Ethiopians
1.4  Police Seek To Bolster Presence in Arab Sector


2.1  ‘Nano-superpower’ Israel Shows off its Tech in Tel Aviv
2.2  Israeli Startups Raise Over $550 Million in January
2.3  SaaS Startup Memeni Raises $2.5 Million
2.4  Israel Marks Progress in 2015 Corruption Index
2.5  Skybox Security Gets $96 Million Investment from Providence Equity
2.6  Burger King Re-Launches in Tel Aviv
2.7  Nexense Raises $3 Million
2.8  Seebo Raises $8.5 Million Funding Round to Make IoT Simple
2.9  Via Surgical Closes $6 Million Investment Led by Benslie Investment Group


3.1  Omnicell’s First Robotic Dispensing System Installation in the Middle East
3.2  VPS Healthcare & CHOP Enter Into Strategic Alliance
3.3  Lockheed Martin & AEC Open New Sniper ATP Support Center in Saudi Arabia
3.4  Boeing Delivers First 787 Dreamliner to Saudia
3.5  The Melting Pot Expands To Saudi Arabia With First Restaurant
3.6  Bombardier Aims to Produce 80 High-Speed Trains for Turkey


4.1  Israeli Ingenuity Helps Third-World Countries Produce Water From Thin Air


5.1  Lebanese Consumer Prices Declined by 3.75% in 2015
5.2  Lebanon’s Trade Deficit Down by 12.04% at the End of 2015
5.3  Number of Tourists to Lebanon Reaches a 4 Year High in 2015

♦♦Arabian Gulf

5.4  Kuwait Sees Budget Deficit Jumping by 50% in 2016-17
5.5  UAE Plans to Trim Ministries & Outsource Most Government Services
5.6  Etihad Rail Suspends Tendering Process for Phase 2 of UAE Rail Network
5.7  Slowdown Leads to Exodus of Western Law Firms from Abu Dhabi
5.8  Oman Considers Tax on Fast Food & Fizzy Drinks
5.9  Oman Bans Domestic Workers from African Countries

♦♦North Africa

5.10  Egypt’s Central Bank Receives $900 Million from China Under Financing Deal
5.11  Egypt PM Says VAT Bill to go to Parliament This Month
5.12  Morocco 2015 Article IV IMF Consultation
5.13  Morocco’s Unemployment Rate Drops to 9.7% in 2015


6.1  Annual Inflation Nears Double Digits in Turkey
6.2  Turkey Saw Sharp Drop in Visitors from Russia & Europe in 2015
6.3  Cyprus Cancels Leviathan Tender



7.1  Majority of Ultra-Orthodox Men Now Working


7.2  Turkey’s Population Rises By More Than One Million in a Year


8.1  Study Shows Health Improvements Following ReWalk Exoskeleton Use
8.2  Teva & Eagle Announce Commercial Availability of BENDEKA Injection
8.3  Adicet Bio Acquires Applied Immune Technologies
8.4  Teva & AbCellera Agree to Discover Rare Monoclonal Antibodies


9.1  Russia’s DataFort Uses Allot Communications Solutions for Cloud Visibility
9.2  Gigamon Deploys LightCyber Magna to Detect Network Attacks
9.3  CyberArk Delivers Cloud-Based Privileged Account Security to the Endpoint
9.4  SuperCom $2.5 Million Agreement for IoT PureLock Suite in South America


10.1  OECD Says Quality of Life in Israel Among World’s Highest
10.2  Israeli Hoteliers Report 11% Drop in 2015 Stays
10.3  Car Deliveries in Israel Hit New Record in January


11.1  ISRAEL: S&P ‘A+/A-1’ Ratings Affirmed On Economic Resilience
11.2  ISRAEL: Private Equity Investment Rises 3% in 2015
11.3  ISRAEL: Asian Nations Push Courtship of Israeli Tech Companies
11.4  UAE: Fitch Affirms Abu Dhabi at ‘AA’; Outlook Stable
11.5  LIBYA: Libya’s Political Stalemate
11.6  TURKEY: Concluding Statement of the IMF 2016 Article IV Mission


1.1  Moshe Kahlon Considers Additional Tax Cuts

Despite Israel’s revenues surplus, Finance Minister Kahlon will wait a few more months before deciding on tax cuts.  The possibility of tax cuts is likely to put Kahlon on a collision course with economists at the Bank of Israel and Governor Karnit Flug who think that taxes should be raised.  With this difference of opinion in mind, Ministry of Finance officials criticized their Bank of Israel colleagues saying, “Those calling for taxes to be raised are the same people that called for taxes to be raised in 2015 and claimed that the deficit would be 3.4%, when in fact the year actually ended with a deficit of 2.1%.  The Bank of Israel admitted on 9 February in its monetary policy report that it underestimated government revenues by NIS 6 billion in its 2015 forecast.

Tax collection in January totaled a record NIS 27.4 billion, 8% more than in January last year and NIS 1.9 billion above forecasts.  As a result the Ministry of Finance had a NIS 3.9 billion surplus and the deficit over the past 12 months is 2.2%.  (Globes 08.02)

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1.2  Israel, Cyprus & Greece Set Up Gas Export Committee

On 27 January, the Ministers of Energy of Israel, Cyprus and Greece announced the formation of a joint committee to consider cooperation in exports of Israeli and Cypriot gas by way of Greece.  The directors general of the Ministries of Energy of the three countries will head the committee.  At a trilateral meeting, Greece, Cyprus, and Israel decided to establish the committee to consider different ways of exporting Israeli and Cypriot gas to Europe.  One way under consideration is construction of a direct pipeline from the gas fields in Israeli and Cypriot waters to Greece, from where gas can be exported to the European Union.  (Globes 28.01)

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1.3  Government Approves Massive Budget to Integrate Ethiopians

The Israeli government authorized a four-year program for ensuring better quality employment for Israelis of Ethiopian origin.  The plan, coordinated by the Ministry of Economy and Industry, was approved on 19 January and will be allocated a budget of NIS 55 million ($14 million) intended to stimulate an increase in salary and employment rates among thousands of Ethiopians.  The initiative was created following a government resolution in February 2014 designed to extract from the government a new policy for advancing integration of Israeli citizens of Ethiopian descent.

In July 2015, the government adopted an additional resolution which authorized the acceptance of the program’s cornerstones.  These include guidance for better employment, providing vouchers for vocational training, the launch of a dedicated enterprise fund and tracking for job placements for academics.  Employers will also be encouraged to employ those of Ethiopian origin with higher salary packages which will be subsidized by 1%.  Overall, the initiative aims to integrate 3,600 Ethiopians into the workforce over four years.  The plan stemmed from government’s need to implement a wide scale mission to facilitate the maximum integration of Ethiopians into the Israeli society.  (TPF 31.01)

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1.4  Police Seek To Bolster Presence in Arab Sector

The Israel Police seeks to bolster its presence in the Arab sector by enlisting 1,350 additional policemen and setting up 10 new police stations nationwide.  The cost of the plan, which is part of an overall government plan to increase governance in the Arab sector, is estimated at NIS 800 million ($200 million).  A special ministerial committee headed by Immigrant Absorption Minister Elkin and Tourism Minister Levin will oversee the plan’s implementation.  Increased presence on the ground is part of the police’s plan to streamline law enforcement efforts in the Arab sector, especially concerning construction law.

The ministerial committee is also scheduled to discuss the appropriation of NIS 10 billion ($2.5 billion) in the Arab sector’s development.  As part of the government’s plan, the Interior Ministry’s Planning Administration will complete its outline for Arab authorities’ new zoning and construction plans within two years.  Arab authorities found to be in gross violation of constructions laws will not be eligible for additional development budgets.  As part of the Arab sector’s development plan, local Arab authorities will be required to formulate ways to eradicate illegal construction in their jurisdiction, including specific enforcement goals, which the police would have to approve.  (YH 04.02)

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2.1  ‘Nano-superpower’ Israel Shows off its Tech in Tel Aviv

In preparation for the upcoming 22 – 23 February NanoIsrael 2016 event, it was announced that over the past nine years, Israeli nanotechnology researchers have filed 1,590 patents (769 granted so far), published 12,392 scholarly articles on the subject, and had 129 nano-success stories, which include establishing start-ups, selling ideas or technology to multinationals, licensing a patent, etc.  Israeli nanotech innovations are part of some of the world’s biggest most innovative pharmaceutical, water filtration, diagnostic, energy, security – even hair coloring – technologies and products.  Currently, there are over 1,600 ongoing research programs between Israeli universities and local or international companies studying the application of nanotech research conducted here to a slew of industrial, infrastructure, and information technology issues.

A good example: Israeli energy tech firm 3GSolar, which is using nanotechnology to develop integrated photovoltaic energy cells that will allow consumer devices to recharge themselves not in the sun, but with ordinary lighting – including electric lighting – indoors, thus eliminating a need for batteries altogether.

There are currently 1,995 PhD graduates from the six universities in Israel that offer a doctorate in nanotechnology, in addition to 2,908 graduates with masters degrees – besides the several hundred already in school.  The Technion’s Russell Berrie Nanotechnology Institute (RBNI), for example, includes over 110 faculty members and some 300 graduate students and postdoctoral fellows – making it one of the largest academic programs in Israel, and among the largest nanotechnology centers in Europe and the US.  (Various 02.02)

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2.2  Israeli Startups Raise Over $550 Million in January

Globes is keeping track of the unprecedented amount of money being raised by Israeli startups in 2016.  Over the month, Israeli startups have raised an astonishing $556.4 million.  IVC reported earlier that Israeli tech companies raised a record $4.43 billion in 2015, 30% more than in 2014.  Clearly at the current rate of financing rounds being closed, 2016 will be another record year.

Over the last in January alone, 9 startups have raised $148 million led by ForeScout Technologies, which raised $76 million.  Monitoring control company mPrest raised $20 million, as did cyber security company Fireglass, while change conversion company TravelersBox raised $10 million.  Other startups raising money included Internet of Things company Seebo ($8.5 million), mobile security company Nubo ($7 million), cyber security company imVision ($4 million) and SaaS company Memeni $2.5 million.

In the first three weeks of January, three startups each raised $50 million: DevOps developer JFrog, data recovery and protection company Zerto and business intelligence and analytics company SiSense.  Other major financing rounds included fintech invoice factoring startup BlueVine, which raised $40 million, and flash storage company Elastifile, which raised $35 million, and clouds solution company GigaSpaces raised $20 million.  In addition, chip startup MultiPhy raised $17 million, and IoT developer Neura raised $11 million.

In the field of healthcare, chronic heart treatment device developer V-Wave raised $28 million and bone regeneration company CartiHeal raised $15 million.  Both these investments were led by Johnson & Johnson.  Ultrasound developer Insightec raised $22 million, and catheter developer Pi-Cardia raised $10 million.  Only 17% of money raised by startups was in biomed with Internet-of-Things, cyber security, and cloud computing the hot topics in the IT sector.  (Globes 28.01)

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2.3  SaaS Startup Memeni Raises $2.5 Million

Tel Aviv’s SaaS startup Memeni has raised $2.5 million in seed funding from prominent angel investors.  Memeni has developed a platform for brands to create their own customizable online communities.  The company is launching its white-label SaaS solution, giving brands the ability to own a peer-to-peer community, under their own domain.  Memeni’s SaaS solution enables brands to quickly launch custom online communities at affordable prices, where members can enjoy exclusive content and opportunities, and brands gain access to a captive audience.  Memeni provides a site for a brand’s audience to come together and collaborate on issues important to them.  Unlike large social platforms, with Memeni brands and organizations own their social pages and are not limited to a ‘like’ or a ‘retweet’. Memeni lets brands create deeper and more meaningful engagements that will lead to new customers and higher revenues.  (Memeni 26.01)

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2.4  Israel Marks Progress in 2015 Corruption Index

Israel marked an improvement in the 2015 Corruption Perception Index published on 27 January by Transparency International.  Israel received a mark of 61, placing it in 32nd place out of 168 countries.  This was five spots higher than the previous year.  The index ranks countries based on how corruption is perceived to exist among public officials and politicians. It uses a scale of 0 (very corrupt) to 100 (very clean).  This year, Denmark topped the list with a score of 91, followed by Finland, Sweden and New Zealand.

Israel was ranked third out of 19 African and Middle Eastern countries, after Qatar and the United Arab Emirates.  Iraq, Libya and Sudan were ranked the lowest in the region.  (TI 27.01)

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2.5  Skybox Security Gets $96 Million Investment from Providence Equity

Skybox Security received a $96 million investment from Providence Strategic Growth (PSG), the growth equity affiliate of Providence Equity Partners, a global private equity firm with $45 billion in assets under management.  Despite billions of dollars spent annually on cybersecurity tools and services, the time required to resolve a cyberattack continues to increase. The Skybox Security Suite solves these problems by integrating with more than 90 networking and security tools in use by enterprises today.  The Suite utilizes advanced analytics, such as modelling and simulation, to extract relevant and actionable intelligence from the silos of data created by those tools, giving security leaders the most comprehensive view of their attack surface and the insight needed to quickly make informed decisions about where to direct security resources.

In four years, Skybox has grown its acquisition rate of new customers by 220% and revenue by 221%.  In 2015, the company increased year-over-year sales by 55%, fueled by a 59% increase in deals valued more than $100,000 and a 165% increase in deals valued more than $500,000.

Herzliya’s Skybox arms security leaders with a powerful set of integrated security solutions that give unprecedented visibility of the attack surface and key Indicators of Exposure (IOEs) such as exploitable attack vectors, hot spots of vulnerabilities, network security misconfigurations and non-compliant firewalls.  By extracting actionable intelligence from data using modeling and simulation, Skybox gives leaders the insight needed to quickly make decisions about how to best address threat exposures that put their organization at risk, increasing operational efficiency by as much as 90%.  (Skybox 03.02)

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2.6  Burger King Re-Launches in Tel Aviv

After a six-year absence, one of the most recognizable fast food brands in the world is making its Israeli comeback.  The first branch of the re-launch was opened this week on Ibn Gavirol Street in Tel Aviv – the first of five to be opened in February.  The other branches will open later in the month, one in Beer Sheva and three in Tel Aviv (in Ramat Hachayal, the Azrieli Center Mall and Dizengoff Center).  Burger King Israel is backed by Pierre Besnainou, who holds 75% of the Israeli operation, together with Steve Benchimol.  The two have a third partner who holds 25% of the shares.  According to the investors’ plan, the re-launch will expand to 10 branches within a year, at a total investment of $12 million – the figure which the partners committed to Burger King Corporation to invest.

The long-term development plan for the chain calls for expansion to up to 50 branches within five years, with all outlets under the direct ownership of Burger King Israel.  There is no plan for expanding by franchising.  (Globes 02.02)

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2.7  Nexense Raises $3 Million

Yavne’s Nexense is raising $3 million at a company value of $30 million.  The company, which operates in the wearable computer segment, is developing a system for the treatment of snoring and sleep apnea.  The product, which is worn as a chest strap or wristwatch, monitors various physical parameters during sleep.  One investor in the company is General Electric with an 8% stake.  The company hopes to hold an IPO in early 2017.

Nexense’s product has already obtained CE marketing certification in Europe.  The company says it has already sold 1,000 units of its product in Europe and Israel, and adds that the money raised will be used to develop the next generation of the product.  When the product detects snoring or sleep apnea, it vibrates and helps the patient resume breathing or stop snoring, without waking him.  According to the company, the product caused a dramatic improvement in sleep among patients using it continuously. Nexense believes that the sleep disorder market amounts to $10 billion a year.  (Globes 31.01)

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2.8  Seebo Raises $8.5 Million Funding Round to Make IoT Simple

Tel Aviv’s Seebo closed a $8.5 million Series A financing round bringing the total raised to date to $14 million.  The funding was led by Carmel Ventures, a member of the Viola Group, with participation from existing investors, including TPY Capital.  Seebo provides companies with end-to-end tools and technology for the development, production and post launch needs of smart products, enabling product teams to expedite their go-to-market timeline while significantly lowering product lifetime costs.  The company is currently working with numerous companies across a range of industries, including toy and children’s products, health and wellness, sports equipment, furniture and electronics, travel equipment, baby products and fashion.  Most product companies won’t want the headache, expense and commitment of building IoT development and runtime capabilities from scratch.  Seebo’s platform is aimed at helping these companies solve the question of how to build and support connected products, allowing them to keep doing only what they do best.  (Seebo 02.02)

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2.9  Via Surgical Closes $6 Million Investment Led by Benslie Investment Group

Via Surgical has secured a $6 million investment led by Benslie investment group.  The addition of Benslie Investment group to their highly experienced team validates the opportunity to advance patient care with the FasTouch Deployable Suture Fixation System.  Their investment will greatly support the increasing clinical demand for improved fixation through development and commercialization efforts in 2016.  FasTouch, a novel fixation technology is the first with the potential to provide a comprehensive fixation solution in hernia repair.  The lockable sutures are designed to significantly minimize foreign body material, providing the first and only light-weight hernia fixation system.”

Amirim’s Via Surgical provides next-generation fixation technology.  Realizing that many hernia repairs make use of multiple means for mesh fixation – anchor/helical hernia tacks, manually applied transfascial sutures – Via Surgical has developed its FasTouch system to provide deployable suture fixation that is strong and consistent, yet easily and rapidly deployed for hernia repair.  (Via Surgical 08.02)

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3.1  Omnicell’s First Robotic Dispensing System Installation in the Middle East

Mountain View, California’s Omnicell, a leading provider of medication and supply management solutions and analytics software for health care facilities, is installing its first robotic dispensing system in the Middle East after winning a contract and expanding its current relationship with Hamad Medical Cooperation in Qatar.  Hamad Medical Cooperation and Omnicell expect the Omnicell robotic dispensing system to be fully operational at The General Hospital, the country’s main hospital, in February.  The decision to install an Omnicell robotic dispensing system was a natural step in the continuum of care for Hamad Medical Cooperation, which already uses Omnicell automation systems and other solutions in some of their other health care facilities.

Omnicell was selected over other vendors by Hamad Medical Corporation due to its speed in delivery of patient medication packs, the flexibility in configurations to meet the needs of the outpatient pharmacy and the strong regional support for the Omnicell product lines.  (Omnicell 27.01)

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3.2  VPS Healthcare & CHOP Enter Into Strategic Alliance

The UAE’s VPS Healthcare, one of the fastest growing integrated healthcare service providers in the Middle East, Europe and India, and The Children’s Hospital of Philadelphia (CHOP), one of the largest, oldest and most-respected children’s hospitals in the world, officially unveiled their strategic alliance.  The announcement was made during the Arab Health Congress in Dubai.

This is the first of several joint initiatives emanating from the memorandum of understanding (MOU) signed last October in which both organizations committed to establishing standards of excellence for pediatric care at VPS hospitals and clinics.  The move will offer families close-to-home access to world-class pediatric care.  The alliance also ensures that any VPS pediatric patients who need more specialized treatment will have seamless access to CHOP’s main hospital in Philadelphia.

VPS plans to set up a state-of-the art facility – scheduled to open in 2017 – that marks a significant step forward in offering the most advanced medical care to the children of the United Arab Emirates and across the Middle East.  VPS and CHOP, which is one of the top-ranked hospitals for children in the U.S., will conduct a gap analysis of the current state of pediatric care in order to institute specific steps in enhancing local training, technology and treatments to provide world-class patient care in the UAE.  (VPS 27.01)

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3.3  Lockheed Martin & AEC Open New Sniper ATP Support Center in Saudi Arabia

Lockheed Martin and Advanced Electronics Company (AEC) recently celebrated the opening of the Sniper Advanced Targeting Pod (ATP) Expanded Repair Capability center in Saudi Arabia.  This marks the start of operations at the first Sniper ATP support center located outside the United States.  The Sniper ATP Expanded Repair Capability center provides sustainment support for Sniper ATPs.  Due to its in-Kingdom location, the center helps expedite repair times, improving fleet readiness. It also generates in-Kingdom employment opportunities and expands the local manufacturing base.

Lockheed Martin and AEC established the Sniper ATP Expanded Repair Capability in cooperation with the Saudi Arabia Economic Offset Program.  The center is part of an existing offset agreement between the Saudi Arabia Economic Offset Committee and Lockheed Martin. Lockheed Martin and AEC have previously collaborated on various defense products and systems that led to the transfer of technology to the Kingdom of Saudi Arabia.

Headquartered in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that – with the addition of Sikorsky – employs approximately 126,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.  (Lockheed Martin 28.01)

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3.4  Boeing Delivers First 787 Dreamliner to Saudia

Boeing and Saudia, Saudi Arabia’s national airline, celebrated the triple delivery of three Boeing 787-9 Dreamliners and a 777-300ER (Extended Range).  The airline ordered eight 787-9s in 2010.  Saudia is no stranger to such large deliveries.  In December 1999, Boeing delivered three 777s to Saudia.  The airline will now have 48 Boeing airplanes in its fleet that currently include 777-200ERs, 777-300ERs and 747-400s.  Over the last 55 years, Saudia has taken delivery of over 130 Boeing airplanes including 707s, 737s, MD-11Fs, DC-9s and MD90s.  More than 60 customers – including Saudia – from around the world have placed orders for more than 1,000 airplanes, making the 787 Dreamliner the fastest selling twin-aisle airplane in Boeing history.  (Boeing 02.02)

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3.5  The Melting Pot Expands To Saudi Arabia With First Restaurant

Tampa, Florida’s The Melting Pot Restaurants, the world’s premier fondue restaurant and a leading polished casual dining franchise, announced its first restaurant in Saudi Arabia has opened in Riyadh.  In addition to Riyadh, The Melting Pot has five international locations open and 15 others in development across the globe.

The Melting Pot in Riyadh is located on Prince Mohammed bin Abdul-Aziz Street, nicknamed Thalia Street in Riyadh – a street known for its dining, fashion and retail offerings.  Featuring four distinct courses with menu items dipped into heated fondue pots at the center of each table, The Melting Pot’s concept fits well with the hip, modern setting and eclectic community.

Mira Foods is the franchisee responsible for debuting The Melting Pot in Saudi Arabia.  With approximately seven years of combined foodservice and franchising experience, the franchise group also owns four other restaurants, including two Noodle House franchises.  As part of the franchise agreement, Mira Foods will develop an additional four Melting Pot restaurants in Saudi Arabia over the next few years.  The group is currently considering sites in Jeddah and Riyadh to develop their second location, which is slated to open by the end of the year.  (The Melting Pot 03.02)

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3.6  Bombardier Aims to Produce 80 High-Speed Trains for Turkey

Bombardier aims to produce 80 high-speed trains for Turkey’s state railway TCDD in a tender together with local partner Bozankaya.  Bombardier executive Furio Rossi made the comment at a news conference in Ankara.  Bombardier will make a $100 million technology transfer investment in Turkey’s high-speed rail project. Turkey has said it plans to buy 106 high-speed train sets as it expands its high-speed rail network across the country.  Murat Bozankaya, head of the Bozankaya Group, said that onward sales to third countries were also planned.  He said Bozankaya planned to produce 172 underground train sets for Bangkok along with Germany’s Siemens.  The tender for the Bangkok metro is expected to take place before the end of the year.  (Zaman 09.02)

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4.1  Israeli Ingenuity Helps Third-World Countries Produce Water From Thin Air

A former IDF Special Forces company commander set about creating technology which would ensure that soldiers are never short of clean water and that the water supply is never delayed.  Rishon LeZion’s Water-Gen, founded in 2009, developed revolutionary technology designed for the military which can produce clean water out of thin air by extracting water from the ambient air humidity.  The technology is now being supplied to the Israeli, British, French and American armies.

Following the successes of the technology, the company set about bringing the appliance to the civilians in third world countries.  The GENNY, as the civilian version of the appliance is called, is now used in India, Africa, Central America and China.  Since water in these countries is too impure for consumption, many people have to buy bottles of water which are not always affordable.  The GENNY system can produce 20 liters per day for people who simply cannot drink from the pipes because the water is impure.  In 2014, Water-Gen was ranked 21st in the World’s 50 Most Innovative Companies in Fast Company magazine, with Google receiving the top spot.  (Ynetnews 22.01)

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5.1  Lebanese Consumer Prices Declined by 3.75% in 2015

Deflationary pressures succeeded to end 2015 with a decline in consumer prices by 3.75% compared to an inflation of 1.86% in 2014, according to data released by Lebanon’s Central Administration of Statistics (CAS).  The slump in commodity prices during 2015, the depreciation of the euro, and the economic slowdown were the major factors behind the decline in prices last year.

In December alone, consumer prices in Lebanon fell by 3.40% y-o-y as the Consumer Price Index (CPI) declined from 99.29 in December 2014 to 95.92 in December 2015.  Despite that the prices of food and non-alcoholic beverages (20.6% of the CPI) barely changed, December’s deflation was mainly the result of lower energy prices.  With cheaper oil, the price of water, electricity gas and other fuels (11.9% weight of CPI) also declined by 17.57% in December 2015. In addition, health prices constituting 7.8% of the CPI, downturned by 7.19% yearly.  Food and non-alcoholic beverages, which represented 20.6% of the CPI, declined by an annual 0.64%.  In contrast, education prices, with a weight of 5.9% in the CPI, rose by a yearly 1.52%, while the prices of clothing and footwear, with a weight of 5.4% in the CPI, increased by 0.24%.  (CAS 31.01)

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5.2  Lebanon’s Trade Deficit Down by 12.04% at the End of 2015

The trade deficit in Lebanon contracted by 12.04% (year on year) y-o-y by the end of December 2015, to register $15.12B due to a 11.83% decline in total imports outpacing the 10.75% fall in total exports.  This decrease is largely affected by the international low prices of oil and the weak euro.  Removing mineral products, trade deficit tightened by 5.13% to $11.71B.

Total imports decreased by 11.83% to $18.07B by the end of 2015 compared to $20.49B in 2014.  However, the volume of imports increased 1.6% yearly to 15.70M tons in 2015, which might be due to the increased population taking refuge in Lebanon.  The three major product categories that were imported to Lebanon by December 2015 were mineral products (19.03% share of total imports), “machinery and electrical instruments” (11.03% share of total imports) and “products of the chemical or allied industries” (10.76% share of total imports).  Notably, the three major countries that Lebanon imported goods from were China, Italy and Germany with respective weights of 11.48%, 7.10% and 6.77%.

By the same token, total exports fell yearly from $3.31B by December 2014 to $2.95B, with a 13.21% decrease in volume to 1.94M tons by the end of 2015.  This might be linked to the disruptions of some major trade routes in the face of Lebanese exports.  In details, the exported “prepared foodstuffs, beverages, and tobacco” lead Lebanese exports with 16.35% share of total exports, followed by the “machinery and electrical instruments” and “products of the chemical or allied industries”, with respective market shares of 14.02% and 13.92%.  In terms of main Lebanese exports destinations, Saudi Arabia, UAE and Iraq are on the top of the list, grasping corresponding weights of 12.08%, 10.59% and 7.61%.  (BLOM 06.02)

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5.3  Number of Tourists to Lebanon Reaches a 4 Year High in 2015

Lebanon’s tourism sector improved by the end 2015, as the number of arrivals surged by 12% to reach 1.52m tourists.  The number of European visitors (33.29% of the total) reached 505,264.  French tourists, constituting the largest share of European tourists at 27%, went up by a yearly 11.16% to 134,181 visitors.  The number of tourists from Germany, the UK and Turkey also saw respective improvements of 10.05%, 15.11% and 30.39% y-o-y to 74,823, 56,608 and 21,027 in 2015.

The number of Arab tourists (31.67% of the total) displayed a yearly increase of 4.32%, to record 480,723 by December 2015.  Iraqis had the largest share at 40%, with their number increasing by an annual 1.28% to 191,578, over the same period.  It is notable that a large part of Iraqi tourists are actually refugees relocating to Lebanon due to the heightening security developments in their home country.  The number of Egyptian visitors improved by 9.17% from 69,179 to 75,524 while that of the Jordanians increased by 5.61% from 73,822 to 77,960.  The number of Saudi incomers also progressed by 4.46% annually to 47,831 by December 2015.  American travelers accounted for 17.4% of the total, their numbers reaching 264,041 by the end of 2015, a 17.55% y-o-y increase from the same period last year.  (Blom 27.01)

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►►Arabian Gulf

5.4  Kuwait Sees Budget Deficit Jumping by 50% in 2016-17

Kuwait’s finance ministry said on 28 January that the country’s 2016-17 draft budget forecasts a deficit of 12.2 billion dinar ($40.2 billion), nearly 50% higher than the previous year, due to falling crude prices.  The ministry said that expected revenues will be 7.4 billion dinars while expenditures are expected to be 18.9 billion dinars, a drop of 1.6% from a year earlier.  The deficit for the fiscal year, which runs from 1 April to end of March, includes 0.7 billion dinars contribution to the Generations Fund, a nest egg for when oil supplies diminish or the economy suffers other shocks.

Kuwait’s emir, Sheikh Sabah al-Ahmed al-Sabah, recently called for budget cuts and better management of spending to cope with declining revenues due to lower oil prices.  The ministry said revenues would cover only 71% of state salaries and associated costs, which are estimated at 10.4 billion dinars.  The budget provides for 2.9 billion dinars for state subsidies, while capital expenditures are set at 3.3 billion dinars or 17% of budget.

The 2015-16 state budget, which was approved by parliament last July, envisaged a deficit of 8.18 billion dinars ($27.0 billion) – nearly half of total spending.  (Reuters 29.1)

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5.5  UAE Plans to Trim Ministries & Outsource Most Government Services

The UAE plans to outsource most government tasks to the private sector and cut the number of ministries, Prime Minister Sheikh Mohammed bin Rashid al-Maktoum said on 8 February.  The announcement comes as energy-rich Gulf Arab states have been hit by low oil prices, encouraging them to streamline institutions and attract more foreign investment.  He announced the formation of a single education ministry, abolishing the ministry of higher education, and fused several other state bodies into related ministries.  No time frame was given for the changes.  Gulf Arab oil exporters have for years subsidized food, fuel, electricity and water, keeping prices very low in an effort to maintain social order, though the UAE economy is less reliant than some of its neighbors on oil revenue.  (AB 08.02)

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5.6  Etihad Rail Suspends Tendering Process for Phase 2 of UAE Rail Network

Etihad Rail, the developer and operator of the UAE’s $11 billion national rail network, confirmed that it has suspended the tendering process for Stage Two of the project.  All bidders have been informed in writing.  It added that it has suspended the Stage Two tender process while it reviews the most appropriate options for the timing and delivery of this phase of the project.  The decision will have no impact on Stage One operations.

The UAE government has begun to slow some spending and review construction plans in some areas as low oil prices hit state finances.  Stage Two involves the construction of the rail network in the Abu Dhabi Emirate by connecting to the Saudi border at Ghweifat and the Omani border at Al Ain, and by connecting vital areas such as Mussaffah, Khalifa Port and Jebel Ali Port in Dubai.

Etihad Rail commenced commercial operations on Stage One of the rail network, which links Shah and Habshan to the port of Ruwais, after official safety authorizations were granted by the Federal Transport Authority in December 2015.  (AB 26.01)

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5.7  Slowdown Leads to Exodus of Western Law Firms from Abu Dhabi

London-based Simmons & Simmons is the latest in a wave of Western law firms to shut their offices in Abu Dhabi in the last year as low oil prices put a damper on business.  It follows US-based law firms Latham & Watkins and Baker Botts, as well as London and Sydney co-headquartered Herbert Smith Freehills (HSF) in announcing plans to close offices in Abu Dhabi over the past 12 months.  Many international law firms had piled into the capital in the past five years, hoping to bag lucrative contracts linked to the government, in particular the energy sector and the launch of a new financial free zone.  The retreat underscores growing pressure on international law firms for billable hours, prompting a review of their need to have a presence in the capital.

Simmons & Simmons, which decided to close its Abu Dhabi office after a review, said in an emailed statement it would serve its clients through its office in Dubai, moving its Abu Dhabi-based partners to Dubai or London.  Abu Dhabi has cut back or slowed spending on non-essential projects and has lifted subsidies on petrol to ease finances as state revenues decline due to cheap oil.  Abu Dhabi is more reliant on the energy sector and government contracts, whereas Dubai has a more diversified economy propelled by a larger private sector.  HSF said it closed its Abu Dhabi office in the middle of last year and transferred its five resident lawyers to its offices in Dubai or Doha.  Latham & Watkins said in March 2015 it was closing its Abu Dhabi and Doha offices, consolidating the Abu Dhabi office with its office in Dubai.  Baker Botts said it closed its Abu Dhabi office in January 2015.  (Reuters 02.02)

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5.8  Oman Considers Tax on Fast Food & Fizzy Drinks

Unhealthy products such as fast food, soft drinks and cigarettes could be taxed in Oman under plans unveiled by the minister of health.  Dr Ahmed Mohammed Al Saidi said Oman must impose tougher sanctions on unhealthy items.  The minister was reportedly speaking in response to news of a dramatic rise in lung cancer victims in the sultanate.  The Public Authority for Consumer Protection has already banned electronic cigarettes and electronic shisha from the shelves in an attempt to improve public health.  Last November, GCC governments agreed to impose a unified 100% tax on tobacco and related products.  (AB 02.02)

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5.9  Oman Bans Domestic Workers from African Countries

Oman has stopped issuing visas to domestic workers from Ethiopia, Kenya, Senegal, Guinea and Cameroon.  It was reported that the decision was taken to stop the spread of disease from African countries to Oman, and curb criminal activity in the sultanate.  The decision took effect on 31 January.  However, the new rule does not apply to workers from these countries who are already living in Oman.  They can renew their contracts as normal.  (AB 02.02)

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►►North Africa

5.10  Egypt’s Central Bank Receives $900 Million from China Under Financing Deal

Egypt’s central bank has received $900 million from the China Development Bank under a $1 billion financing agreement signed in January, Central Bank Governor Tarek Amer said.  The $900 million will raise Egypt’s dollar reserves to around $17.4 billion.

Egypt, which relies heavily on imports, has been facing a foreign exchange crisis since a popular uprising in 2011 toppled autocrat Hosni Mubarak and drove away tourists and investors, both major sources of hard currency.  Reserves held at the central bank tumbled to around $16.48 billion in January from around $36 billion before the uprising.  Investment and aid deals worth billions of dollars were signed on 21 January during a visit to Egypt by China’s President XI Jinping.  (AB 09.02)

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5.11  Egypt PM Says VAT Bill to go to Parliament This Month

Egyptian Prime Minister Sherif Ismail said the government expects to present a long-awaited value added tax (VAT) bill to parliament at the end of February.  Ismail told reporters on the sidelines of a conference in Dubai that he expected the law to be passed by parliament later this year.  (DNE 09.02)

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5.12  Morocco 2015 Article IV IMF Consultation

The IMF observed that Morocco’s macro-economic situation continues to improve.  Growth is recovering and should reach 4.7% in 2015, but non-agricultural activity remains sluggish. Inflation remains low.  The authorities appear to be on track to meet the 2015 public deficit target of 4.3% of GDP.  The external position continues to improve, benefiting from lower oil prices, the current account deficit will narrow to about 1.5% of GDP in 2015 and international reserves will exceed 110% of the Fund’s Assessing Reserve Adequacy (ARA) metric.  Poverty rates, unemployment and inequalities have declined, but much remains to be done to reduce structural unemployment, increase labor force participation rates, and secure higher and more inclusive growth.  Reforms have slowed down somewhat, especially pension reform and the new central bank law.  The 2015 FSAP assessed that banks are well capitalized and profitable, and benefit from stable funding.  (IMF 08.02)

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5.13  Morocco’s Unemployment Rate Drops to 9.7% in 2015

Morocco’s unemployment rate slightly dropped from 9.9% in 2014 to 9.7% in 2015, according to the High Commissioner for Planning (HCP).  The unemployed labor force decreased by 1.6% from 1,167,000 unemployed in 2014 to 1,148,000 in 2015, HCP pointed out, adding that the overall rate of unemployment decreased by 19,000 people at the national level.  The same source noted that the unemployment rate dropped from 14.8% to 14.6% in urban areas and from 4.2% to 4.1 in rural areas.  However, unemployment increased among young graduates aged 15-24 by 0.7 points.  (MWN 09.02)

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6.1  Annual Inflation Nears Double Digits in Turkey

The inflation rate in Turkey rose by 1.82% in January, triggered by persistently high food costs and tax hikes, especially on alcoholic beverages and tobacco products, lifting the annual inflation rate to 9.58%, close to double digit levels and the highest since May 2014.  According to data released by the Turkish Statistics Agency (TUIK), the highest monthly increase was 9.6% in alcoholic beverages and tobacco products in January.  The indices rose for food and non-alcoholic beverages by 4.28%, for miscellaneous goods and services by 2.71%, for health by 2.42% and for recreation and culture by 2.09%.  The only monthly fall was in clothing and footwear with 6.71%.  The government increased special taxes on cigarettes and alcoholic drinks at the beginning of the year.  Electricity prices were also increased by 6.8% as of 1 January.  (TUIK 03.02)

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6.2  Turkey Saw Sharp Drop in Visitors from Russia & Europe in 2015

Turkey saw a dramatic decline in the number of foreign visitors from Europe and Russia in 2015, though the total number of foreign arrivals saw only a slight drop of around 1.61% compared to 2014, according to data released by the Tourism Ministry on 28 January.  A total of 36.2 million foreign people visited the country in 2015, according to the data.  Overall, foreign arrivals declined by around 7.3% to 1.46 million in December 2015 compared to the same month of 2014.

The number of Russian visitors to Turkey decreased to 3.65 million in 2015 from around 4.5 million in 2014, amid Russia’s economic troubles.  The decline accelerated after the diplomatic crisis between Russia and Turkey erupted on 24 November 2015, with the number of Russian tourists visiting Turkey decreasing by around 46.9% to 25,485 in December 2015 compared to the same month of 2014.

Despite the drop, the Russian market remained the second largest source of foreign arrivals for Turkey, with over 10% of the total.  The leading source of arrivals was Germany, which took around 15.5% of the total with around 5.6 million visitors, while the U.K. was third with a 7% share of the total.  According to sector representatives, escalating security concerns played a big role in explaining the drop in visitors from Europe.

The number of arrivals from Saudi Arabia rose by 31% to around 450,000 in 2015 compared to 2014. Arrivals from Bahrain also saw an increase of 34% to around 32,500 in the same period.  There was also a sharp increase in arrivals from China, with the number of Chinese visitors increasing by 57% to over 313,000 in 2015 compared to the previous year.  An increase of 20% was also seen in the Israeli market, with around 224,500 arrivals from Israel in 2015 compared to 2014.

Tourism revenue is very important for Turkey, accounting for around 4.5% of the country’s $800-billion economy and playing a crucial role in closing its multi-billion-dollar current account gap.  (HDN 28.01)

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6.3  Cyprus Cancels Leviathan Tender

The Cypriot Natural Gas Public Company (DEFA) has been unable to reach any agreement to buy gas from the Leviathan field.  The Leviathan partners notified the Tel Aviv Stock Exchange (TASE) on 9 February that the Cypriot Natural Gas Public Company (DEFA) had cancelled its gas supply tender from the leviathan gas field.  The Leviathan partners reported that they were unable to reach agreement with the Cypriot government on the terms for the tender for supplying gas.  The partners also reported that they are still talking to the Cypriot government about supplying gas from Cyprus’s Aphrodite field.  Noble and Delek’s units also own most of the Aphrodite field.  The Cypriot tender was for the supply of 0.7-0.95 billion cubic meters (BCM) of gas in 2017-25 (at the latest).  (Globes 09.02)

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7.1  Majority of Ultra-Orthodox Men Now Working

The Central Bureau of Statistics announced that over 50% of ultra-Orthodox men are participating in the workforce for the first time in recorded Israeli history.  The new numbers marked a continuation of a 12-year trend.  In 1995, male ultra-Orthodox participation in the workforce reached 48% and seemed to be on the rise, but then the trend reversed, dipping as low as 36% in 2003.  In that same year, then-finance minister Benjamin Netanyahu implemented a series of welfare cutbacks designed to promote participation in the Israeli workforce.  Since then numbers have been steadily on the rise, and have finally passed 50% among male Haredim.  The data indicates that Haredi women have an even more impressive presence in the workforce, with 73% of them working.  This compares to workforce participation among the general Jewish population of 80%.  (CBS 04.02)

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 7.2  Turkey’s Population Rises By More Than One Million in a Year

Turkey’s population rose by over 1 million people in 2015 compared to the previous year, officially reaching 78,741,053, according to statistics released by the Turkish Statistical Institute (TUIK).  The data showed that 39.5 million people (50.2% of the total) were males, while 39.2 million people (49.8% of the total) were females.  As a result, Turkey’s annual population growth rate increased to 13.4 per thousand in 2015, up from 13.3 per thousand in 2014.  Meanwhile, the proportion of Turks living in urban areas, which was 91.8% in 2014, increased to 92.1% in 2015.

In addition, the median age of Turkey’s population rose again, from 30.7 in 2014 to 31 in 2015.  The median age was 30.4 for males and 31.6 for females in 2015.  According to the TUIK data, the proportion of Turkish citizens in the “15-64 working age group” was 67.8% in 2015, a total of 53.36 million people.  The proportion of children aged 0-14 dropped to 24%, or 18.9 million people. The proportion of the people aged 65 and over increased to 8.2%, or 6.5 million people.  (TUIK 28.01)

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8.1  Study Shows Health Improvements Following ReWalk Exoskeleton Use

ReWalk Robotics announced the publication of a first-of-its-kind case study in the peer-reviewed journal Spinal Cord Series and Cases published by the International Spinal Cord Society (ISCOS) demonstrating that use of the ReWalk robotic exoskeleton resulted in significant improvements in the quality of life for an individual with spinal cord injury.  The case study studied the impact on ambulation ability as well as several quality of life measures as part of the SF-36 questionnaire, a 36-item, patient-reported survey of patient health. Following six months of ReWalk use in the rehabilitation setting, the subject was able to walk independently with limited supervision and demonstrated significant improvements in several quality of life measurements including: mobility, risk of falling, motor skills and control of bladder and bowel functions.

The case study also reported no complications such as falls, skin injuries or technical problems, supplementing the existing body of clinical literature demonstrating the safety of the ReWalk robotic exoskeleton.

Yokneam’s ReWalk Robotics develops, manufactures and markets wearable robotic exoskeletons for individuals with spinal cord injury.  Their mission is to fundamentally change the quality of life for individuals with lower limb disability through the creation and development of market leading robotic technologies.  (ReWalk 27.01)

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8.2  Teva & Eagle Announce Commercial Availability of BENDEKA Injection

Teva Pharmaceutical Industries and Eagle Pharmaceuticals, announced the commercial availability of BENDEKA (bendamustine hydrochloride) injection, a liquid, low-volume (50 mL) and short-time 10-minute infusion formulation of bendamustine.  BENDEKA is approved for the treatment of patients with chronic lymphocytic leukemia (CLL) and for the treatment of patients with indolent B-cell non-Hodgkin lymphoma (NHL) that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen.  Efficacy in CLL relative to first-line therapies other than chlorambucil has not been established.

Under a February 2015 exclusive license agreement for BENDEKA, Teva is responsible for all U.S. commercial activities for the product including promotion and distribution.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day.  Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area.  In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products.  (Teva 28.01)

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8.3  Adicet Bio Acquires Applied Immune Technologies

Menlo Park, California’s Adicet Bio, a biopharmaceutical company focused on the development of next-generation cell immunotherapies, announced the acquisition of Applied Immune Technologies (AIT), an Israel-based company that develops immunotherapies directed to the intracellular proteome.  The financing was led by OrbiMed and also included Novartis Venture Fund and Pontifax.

These significant financial resources will allow Adicet to progress its universal immune cell therapy (uICT) platform technology and related products and advance AIT’s programs and product pipeline.  AIT’s technologies, capabilities and intellectual property highly complement those of Adicet and position the combined company to become a leader in next-generation immunotherapy products for cancer and other indications.

Haifa’s AIT specializes in generating and developing T-Cell Receptor-Like (TCRL) antibodies with high affinity and specificity to disease-specific intracellular peptides presented on the cell surface by the major histocompatibility complex (MHC). AIT also established Epitarget, a proprietary technology to identify and validate novel disease-specific peptide targets. AIT technology is based on work by Prof. Yoram Reiter, a world leader in the research of immunotherapies directed to the intracellular proteome.  AIT will continue its operations in Israel as Adicet’s wholly-owned subsidiary.  (Adicet 26.01)

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8.4  Teva & AbCellera Agree to Discover Rare Monoclonal Antibodies

Teva Pharmaceutical Industries and Vancouver, British Columbia’s AbCellera have entered into a collaborative research agreement whereby AbCellera will apply its high-throughput single cell antibody platform for the discovery of rare monoclonal antibodies.  Under the terms of the agreement, AbCellera will receive an upfront payment, research payments, and is eligible to receive undisclosed downstream milestones associated with the development and approval of therapeutic antibodies.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day.  Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products.  (Teva 02.02)

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9.1  Russia’s DataFort Uses Allot Communications Solutions for Cloud Visibility

Allot Communications announced that IBS DataFort, a leading Russian cloud service provider, is using the Allot Service Gateway and Allot Service Protector for real-time network traffic management and analysis and distributed denial of service (DDoS) protection.  The Allot solution monitors and filters network traffic, allowing for greater application visibility, as well as quicker and more effective security threat mitigation.  IBS DataFort chose Allot’s solution for its scalability, advanced traffic management and self-provisioning capabilities, which deliver greater network visibility and control for enhanced application performance.  This approach allows IBS DataFort to offer customers better quality of service as well as effective and comprehensive protection against increasingly sophisticated and targeted DDoS attacks threatening to bring business productivity to a halt.

Hod HaSharon’s Allot Communications is a leading provider of security and monetization solutions that enable service providers to protect and personalize the digital experience.  Allot’s flexible and highly scalable service delivery framework leverages the intelligence in data networks, enabling service providers to get closer to their customers, safeguard network assets and users, and accelerate time-to-revenue for value-added services.  (Allot 27.01)

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9.2  Gigamon Deploys LightCyber Magna to Detect Network Attacks

LightCyber announced that Santa Clara’s Gigamon has selected and deployed the LightCyber Magna platform for security event visibility and detection of targeted and insider attacks, risky behavior and malware that has evaded preventative security.  The Magna platform utilizes continuous behavior-based profiling, rather than technical artifacts, and machine learning to accurately and efficiently detect active cyber-attacks before damage is done.  Magna is the only solution to combine full network deep packet inspection with an agentless endpoint interrogation technology.

Magna uses behavioral profiling to learn what is normal on the network and endpoints, and thereby detect anomalous attacker behaviors that are by-necessity required to perpetrate a successful breach or conduct malevolent goals, including command and control, reconnaissance, lateral movement and data exfiltration.  These behaviors can be identified early to reduce attacker dwell time and curtail the activity.  At the same time, Magna can identify harmful activity from insiders – rogue or unaware employees or contractors – that is either intentionally malicious or unknowingly dangerous. Magna presents a small number of actionable alerts with supporting contextual and investigative details to greatly enhance the efficiency of the Gigamon security operations team in their detection and remediation operations.

Ramat Gan’s LightCyber is a leading provider of Behavioral Attack Detection solutions that provide accurate and efficient security visibility into attacks that have slipped through the cracks of traditional security controls.  The LightCyber Magna platform is the first security product to integrated user, network and endpoint context to provide security visibility into a range of attack activity.  Founded in 2012 and led by world-class cyber security experts, the company’s products have been successfully deployed by top-tier customers around the world in the financial, legal, telecom, government, media and technology sectors.  (LightCyber 02.02)

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9.3  CyberArk Delivers Cloud-Based Privileged Account Security to the Endpoint

CyberArk announced new capabilities for CyberArk Viewfinity that deliver privileged account security to the endpoint.  With CyberArk Viewfinity v5.5, customers can benefit from an enhanced, single privilege management and application control solution to reduce the attack surface while being able to block the progression of malware-based attacks, and balance business user productivity and enterprise security.

Following the acquisition of Viewfinity in Q4/15, CyberArk Viewfinity is now available as part of the CyberArk Privileged Account Security Solution.  With this release, customers can gain greater privilege management and application control features in an on-premises or software-as-a-service (SaaS)-based offering.  New integration with the CyberArk Shared Technology Platform enables all privileged audit logs to be stored and reviewed centrally, as well as new flexible, customizable reporting capabilities.

Petah Tikva’s CyberArk is the only security company focused on eliminating the most advanced cyber threats; those that use insider privileges to attack the heart of the enterprise.  Dedicated to stopping attacks before they stop business, CyberArk proactively secures against cyber threats before attacks can escalate and do irreparable damage.  (CyberArk 02.02)

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9.4  SuperCom $2.5 Million Agreement for IoT PureLock Suite in South America

SuperCom announced that its M2M(IoT) division has signed a $2.5 million agreement to deliver its PureLock suite – a hybrid of products and applications for the tracking and monitoring of assets customized for the Transportation and Cargo/Freight management sector.  The agreement is with a large Cargo Management organization in South America to deliver PureLock solutions for Cargo tracking and monitoring in various locations and transportation routes throughout the continent, with significant potential to increase the quantity and value represented in the original agreement.

The PureLock Suite is a best-of-breed Electronic Seal and Cargo Tracking and Monitoring platform.  SuperCom has leveraged its existing technology base to introduce innovative features such as secure cloud technologies, mobile/GPS applications, locker tamper and customizable alerts, high performance analytics, secure real time location and extremely long battery life.  The PureLock Suite provides Transportation and Cargo Management organizations a complete end-to-end electronic monitoring solution to keep track of assets, which is accurate, reliable and flexible.

Since 1988, Herzliya’s SuperCom has been a leading global provider of traditional and digital identity solutions, providing advanced safety, identification and security solutions to governments and organizations, both private and public, throughout the world. Through its proprietary e-Government platforms and innovative solutions for traditional and biometrics enrollment, personalization, issuance and border control services, SuperCom has inspired governments and national agencies to design and issue secured Multi-ID documents and robust digital identity solutions to its citizens and visitors.  (SuperCom 03.02)

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10.1  OECD Says Quality of Life in Israel Among World’s Highest

Israel is enjoying relatively high economic growth compared to other nations, according to the biannual report by the Organization for Economic Development and Cooperation (OECD).  The report says that Israel’s employment rate is high and increasing, and that per capita income, which stands at an average of $35,000 per year, approaches the per capita income of most advanced countries.  Moreover, the report says that the quality of life in Israel is among the highest enjoyed by OECD member nations. It rated Israel third in quality of life among advanced nations, after Japan and Switzerland.

Israel is better prepared that other OECD nations to deal with an aging population, but public expenditure on pensions is low, according to the report, which also said that Israel’s banking and finance sector demonstrated impressive stability.

Along with the praise, the report noted that not all sectors of Israel’s population were integrated into the workforce, and some sectors had a low employment rate.  Israel’s poverty rate was one of the highest among OECD nations, with 21% of the population living below the poverty line – more than Mexico, Turkey or Chile.  In the mid-1990s, only 14% of Israel’s population lived below the poverty line.  According to the report, not only were more people in Israel impoverished, the gap between the wealthy and the poor in Israel had increased in recent years.  (OECD 31.01)

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10.2  Israeli Hoteliers Report 11% Drop in 2015 Stays

The Israel Hotel Association announced that the crisis in the Israeli tourism industry is ongoing; 2015 ended with an 11% decline in foreign tourist stays compared to 2014.  There was also a 16% decline compared to 2013, which was a peak year.  The figures show that the number of foreign tourist stays stood at just 8.2 million, with 13.5 million stays by Israelis (a rise of 4% compared to 2014).  The overall calculation of stays in hotels shows a decline of 2% compared to 2014 and a 4% decline compared to 2013.  It should be mentioned that the number of hotel rooms in Israel increased by 1% in 2015, compared to 2014, and 4% when compared to 2013.  The IHA statistics also do not take into account tourists stays that occur in places other than hotels (such as rented apartments, with family and friends, etc.).  (IHA 25.01)

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10.3  Car Deliveries in Israel Hit New Record in January

January saw a record in new car deliveries in Israel: more than 36,000 new vehicles with an aggregate value of NIS 3.25 billion, including taxes, were delivered to private and business customers.  The previous record in January 2015 was 34,000 deliveries.  The deliveries are attributable to the new model effect, which leads many private and business customers to postpone their new vehicle purchases over the past three months of the year until January and February.  In December 2015, for example, deliveries were very low – in the vicinity of 10,000 units.

The auto sector, however, believes that the importers’ real orders backlog has grown substantially, and that the exceptional orders will persist into February and March, due to the waiting lists for some models, delivery of which will reach Israel only next month.  Like last year, deliveries of models in the luxury and premium car classes were outstandingly high – more than 5,000 units.  (Globes 02.02)

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11.1  ISRAEL: S&P ‘A+/A-1’ Ratings Affirmed On Economic Resilience

On 5 February, Standard & Poor’s Ratings Services affirmed its ‘A+/A-1’ long- and short-term foreign and local currency sovereign credit ratings on the State of Israel.  The outlook is stable.


The ratings are supported by Israel’s prosperous and diverse economy, strong external balance sheet, and flexible monetary framework.  The ratings are constrained by Israel’s high debt and interest burden and significant security and geopolitical risks.

With per capita GDP at an estimated $37,000 in 2015, the economy is prosperous and well diversified, with high value-added manufacturing and service sectors.  This is underpinned by high expenditure in research and development, amounting to 4.2% of GDP in 2013, the highest among member countries of the Organization for Economic Co-operation and Development (OECD).  The information and communication sector has a 9.8% share of gross value added (GVA) and scientific and technical activities have 2.8%.  We assume Israel’s economy will grow at an average rate of about 2.5% in 2016-2019, despite risks of slower world trade and increasing volatility in the international capital market.  We expect the key drivers of this growth will be robust private consumption, continued corporate investment activity, and healthy service exports.  In per capita terms, this equates to growth of around 1% per year, reflecting robust population growth.

The March 2015 general elections resulted in a right-wing government coalition with 61 of 120 seats in Israel’s parliament, the Knesset.  It was not until November 2015 that the Knesset passed the biannual budget for 2015 and 2016.  As a provisional budget was in place for most of 2015, meaning only one-twelfth of the 2014 budget could be spent per month, we estimate the general government deficit to be around 2.2% of GDP in 2015.  Despite the political and fiscal concessions made to form a new coalition government, we expect the general government deficit will remain below 3% in the coming years.  Fiscal policy is moderately expansionary in 2016–additional spending commitments in the 2015/2016 budget include reversing the cuts in entitlements to child allowances and increasing resources in health and education to reduce waiting time and class sizes.  On the revenue side, cuts to VAT and corporate tax are also likely to widen fiscal deficits.  Should there be an increase in defense spending, we expect the government to cut civilian spending to offset the increase.

Subtracting liquid assets (mostly in the form of deposits at the central bank) from gross government debt, we estimate that net general government debt remained at below 64% of GDP at the end of 2015.  Even without taking into account possible land sales and privatization proceeds, which could reduce government financing needs, we expect the net debt ratio will stabilize at below 65% of GDP in 2016-2019.

As a result of Israel’s strong export performance and sustained current account surpluses, its external balance sheet is strong and its net creditor position versus the rest of the world continues to grow.  We forecast that its liquid external assets will outstrip its gross external debt over the next three years.  This dynamic is also lowering the country’s gross external financing needs, indicating low dependency on external financing.

We also consider Israel’s monetary policy flexibility to be a credit strength.  The Bank of Israel (BoI, the central bank) has become increasingly interventionist, over and above its commitment to purchase foreign currencies to offset the impact of domestic natural gas production on the balance of payments.  We view the exchange rate regime as a managed float, which somewhat hampers monetary policy flexibility.

In addition to making frequent interventions in the foreign exchange market, the BoI has eased its stance on monetary policy, countering the strength of the Israeli new shekel in order to maintain the competitiveness of Israeli exports.  It lowered its policy rate to a historical low of 0.1% in March 2015, but the shekel continued to appreciate against Israel’s key trading partners.  Over the course of 2015, the shekel weakened by 0.3% against the dollar, but strengthened by about 7.3% against the currencies of Israel’s main trading partners, in terms of the nominal effective exchange rate.

One of the key challenges to monetary policy continues to be Israel’s rising house prices.  After years of relative stability, real house prices have increased by around 69% since the end of 2007 and the International Monetary Fund (IMF) assesses that the house prices in Israel are currently overvalued by 30%.  The BoI’s earlier attempt to dampen the housing market by raising interest rates yielded little, only pushing up the foreign exchange rate of the shekel significantly.  The new government has implemented a comprehensive set of measures to address supply-side issues, including freeing up more land for development, changing the tendering criteria, and speeding up administrative processes for construction permissions.  Given the capacity constraints in the construction industry, the time needed to build houses, and continued growth in demand, we do not expect the government measures to fully address the supply shortage in the near term.

The tightening of macro-prudential measures has reduced systemic risks to Israel’s banking industry, but any abrupt correction in house prices could still have other negative economic effects.  We expect that the Knesset will pass general legislation to establish a formal Financial Stability Committee, as recommended by the IMF to enhance policy co-ordination, by the end of 2016.

Overall, institutional and governance structures in Israel are generally effective, with a satisfactory degree of transparency and accountability.  However, we consider that the persistent territorial dispute with the Palestinians threatens political stability and weighs on policy predictability.

The ratings remain constrained by geopolitical risks.  Repeated violent clashes with the Palestinians not only inflict social and economic costs, but also risk reactions by the international community.  On the northern border, the conflict in Syria and Iraq, as well as instability in the Sinai region, pose medium-term security risks.  Any significant armed conflict could have a negative impact on the ratings if it significantly deterred investment, weakened the economy’s growth potential, or strained fiscal flexibility.  We do not expect the nuclear deal between Iran and the international community to have a material direct impact on the ratings on Israel, given the continued regional tensions.


The stable outlook on Israel reflects our opinion that the government will maintain prudent macroeconomic policies and ensure the stabilization of government debt over 2016-2019, despite higher spending concessions agreed by the coalition.  We also expect the impact of security risks on the Israeli economy will continue to be contained.

We could consider raising our ratings if fiscal consolidation exceeds our expectations, resulting in a significantly lower net debt burden or interest costs, or if there is marked progress in defusing external security risks.

Conversely, we could lower the ratings if the economic growth outlook were to weaken substantially, due to an abrupt correction in the housing market or unaddressed structural weaknesses.  A downgrade would also become more likely if the government yields to pressures for more social or security spending and allows deficits to widen and government debt to increase significantly above our current expectations.  Moreover, if a perceived loss of international support were to further isolate the Israeli economy, we could lower the ratings.  (S&P 05.02)

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11.2  ISRAEL:  Private Equity Investment Rises 3% in 2015

The Israeli private equity industry saw 90 investments $3.4 billion in 2015, up 3% from $3.3 billion in 2014, but 3% below the $3.5 billion record amount invested in private equity deals in 2012, according to the latest IVC Shibolet Private Equity Survey by IVC Research Center and Shibolet & Co. Law Firm.  The number of private equity deals in 2015, however, was the highest ever – up 13% from the previous record of 80 deals closed in 2014.

In the fourth quarter of 2015, 20 Israeli private equity deals totaled $841 million, 13% above the past 5-year average of $747 million.  The number of private equity deals in the fourth quarter, however, was the same as in the preceding quarter and the corresponding quarter.  The most prominent deal in the fourth quarter of 2015 was the $300 million investment in Bioenergy Infrastructure Group, followed by the $180 million buyout of Diamonds Direct, a jewelry company, by Blackstone Group.

Israeli private equity funds intensified their activity throughout 2015, spending $902 million, or 27% of total investment up19% from the $760 million they invested in 2014, and up 42% from $636 million invested in 2013.  The three largest private equity deals in 2015 accounted for 23% of their total investments: the two buyouts by FIMI Opportunity Funds– Hadera Paper ($97 million) and Polyram ($59 million), and the $50 million straight equity investment in Bioenergy Infrastructure Group, a UK biomass power company, by HeliosEnergy.

Foreign private equity funds accounted for the majority of Israeli private equity investments in 2015 with $2.2 billion or 64% of the total capital – 9% down from $2.4 billion invested by foreign private equity funds in 2014, the record to date.  The top five deals in 2015, were worth more than $150 million each. The two largest deals were both in the second quarter of 2015 – Lumenis’ $510 million buyout by XIO Group and ClickSoftware’s $438 million buyout by Francisco Partners.  These two deals alone accounted for 28% of total private equity proceeds in 2015.

Shibolet & Co. partner Omer Ben-Zvi said, “The number of Israeli private equity deals and their total dollar amount in 2015 compared to previous recent years show a stable growth of this market.  An interesting sector to be noticed in the private equity arena is life science technologies which produced 15 deals in the amount of $626 million in 2015, compared to 11 deals at $59 million in 2014.  We see more mature companies like Lumenis growing and entering that arena.  On the other hand, in the Internet sector we saw a decrease in the total amount in PE deals, from $1.2 billion in 2014 to $307 million in 2015 with the same number of deals.”

A total of 48 technology deals generated $2 billion, or 58% of the total private equity investments in 2015.  The amount was 5% below the $2.1 billion (63%) invested in 49 technology deals in 2014.  The software and life sciences sectors led private equity investments with 22% and 19%, respectively, partially due to the Lumenis and ClickSoftware deals.

Straight equity transactions show a continuing uptrend featuring them as the favored investment mechanism for private equity funds, with 65 deals in 2015, compared to 62 deals closed in 2014, 48 in 2013 and only 22 in 2012.  The volume of capital invested in companies directly also increased to $1.4 billion invested in 2015, 42% of total private equity investments, and up 16% from the previous record of $1.2 billion (36% of total) in 2012.

Israeli Private Equity Investors

IVC research manager Marianna Shapira said, “The current uptrend in the Israeli private equity market was fortified in 2015 with 11 funds having raised approximately $1.5 billion throughout the passing year.  Moreover, we are tracking 28 active Israeli private equity management companies managing a total of nearly $9 billion, and more than ten new funds are currently in the process of capital raising, expected to raise up to $1 billion by the end of the year.  We therefore expect private equity activity in 2016 to remain dynamic.”

Shapira notes that a large part of the projected activity will focus on growth stage investments: “Many of the funds currently active, and some of the ones presently in the process of raising capital are dedicated to late stage investments, including funds focused on growth stage companies, as well as distress situations, turnarounds and debt funds.  Inspecting the funds currently in process, it seems cleantech, life science, communication, media and real estate are the sectors most likely to attract investments during 2016,” she said.

Ben-Zvi added, “Looking at the number of new growth funds raising capital and the over subscription for Israeli PE funds we have seen, we believe that the positive trend in the Israeli private equity market is likely to continue.  However, one has to remember that the private equity market is affected by global changes, so recent developments, such as the ones in the Asian capital markets, are likely to have an impact on the Israeli private equity market as well.”  (IVC 04.02)

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11.3  ISRAEL:  Asian Nations Push Courtship of Israeli Tech Companies

On 28 January, Dennis Mitzner posted in TechCrunch that China and Japan are forging deeper ties with Israel’s burgeoning tech industry.

While China has been active in the Israeli market for some time, Japan, too, has launched a series of efforts to court the Israeli tech scene.  The signs of warming ties between Israel and Japan can perhaps be traced to 2014 when Rakuten, the largest e-commerce platform in Japan acquired Israel-based messaging app provider Viber Media for $900 million.

However, late January has been particularly significant for Japanese-Israeli relations.  On 26 January, Sony announced its intention to acquire Israel-based Altair Semiconductor for $212 million and during the same week, Honda — eyeing Israel’s vehicle intelligence technologies, apps and software — flew in a group of executives and engineers from Japan and North America to attend the equity crowdfunding platform OurCrowd’s annual summit in Jerusalem.  “We believe that partnering together with entrepreneurs, startups, developers and academic institutions will help us develop truly transformational new products,” said Nick Sugimoto, Sr. Program Director at Honda Silicon Valley Lab.

Japan’s presence was also notable at Cybertech 2016 in Tel Aviv where the country was looking to forge closer ties with Israeli cybersecurity companies and technology ahead of the 2020 Tokyo Olympics.  “Over the past year, there has been a noted increase in the interest of Japanese companies in Israel in a variety of fields, evidenced by the arrival of Japanese companies to Israel and their willingness to host Israeli companies in Japan”, Amit Lang, Director General of the Israeli Ministry of Economy, said in a press release when Israel opened a trade office in the country.

In Singapore and China, Israeli tech know-how is a known quantity, but Japan and countries like Indonesia are only just waking up to the potential partnership opportunities with Israeli tech companies.

“In the past couple of years we have noticed an ever-growing presence of Asian and Far-East countries in Israeli events and conventions.  Singapore has always had a presence here and recently we have seen Japanese investors and corporations setting up shop here and well as of course Chinese,” says Yaron Carni from Maverick VC.  “We had a delegation from Indonesia, one of the world’s fastest growing populations, last year as well. I think that a lot of that is attributed to Israeli ministry of Trade and its economic attachés.”

Although China and Israel established diplomatic relations only in 1992, the two countries have in excess of $10 billion in trade since the beginning of last year.

“The floodgates have opened in a significant way. Chinese investors will increase their allocation to Israeli VC funds and into a growing a number of tech companies,” says Jeremy Lustman, partner at DLA Piper and head of the firm’s Israel Country Group.  “Japan has also opened up, as has Korea and Singapore – each with company reps on the ground in Israel.  Australia is also making a major play this year into Israeli tech and I think that will add to the broader pan-Asian appeal.”

China is already investing in Israeli venture capital funds, including Pitango, JVP, Vertex and others.  “China has a keen appreciation for the world class technology being developed in Israel across a wide spectrum, including cyber, iOT, fintech, agtech, and medtech, to name just a few.  The Chinese are experts at taking these technologies to the mass market in China and elsewhere around the globe.  It’s a huge win/win,” says Lou Kerner form Excellerate and managing partner of The Israel Syndicate on AngelList.

Technology investment from China into Israel is growing by 50% annually and is expected to grow.

“The Chinese are looking for unique technology that goes beyond their traditional copycat style to stay competitive,” says Sephi Shapira, chief executive officer of MassiveImpact International, a mobile advertising company with offices in Tel Aviv and Taiwan.  “I believe that they are looking for technology to help with user experience, big data, anything to take the product they built for the Chinese market and make it work externally.”  (TechCrunch 28.01)

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11.4  UAE:  Fitch Affirms Abu Dhabi at ‘AA’; Outlook Stable

On 02 February, Fitch Ratings has affirmed Abu Dhabi’s Long-term foreign and local currency Issuer Default Ratings (IDR) at ‘AA’ with Stable Outlooks.  The issue ratings on Abu Dhabi’s senior unsecured foreign currency bonds have also been affirmed at ‘AA’.  The Short-term foreign currency IDR has been affirmed at ‘F1+’ and the UAE Country Ceiling at ‘AA+’; this Ceiling applies to Abu Dhabi and Ras al Khaimah.

Key Rating Drivers

Abu Dhabi’s key credit strengths are its exceptionally strong fiscal and external metrics and high GDP per capita, balanced by high dependence on hydrocarbons, a relatively weak policy framework, and weak data availability compared with peers.  Sovereign net foreign assets were an estimated 222% of GDP at end-2015, and debt was 1.7%, all of it external.  Erosion of these buffers will be slower than in other Fitch-rated oil exporters, due to a low fiscal break-even oil price of $54/b.  Consequently, the emirate has time to adjust its public finances to an expected 41% drop in oil revenue between 2014 and 2016.

The 2015 budget deficit widened to 13.2% of GDP from 7.2% of GDP in 2014.  These numbers exclude the dividend paid by the Abu Dhabi National Oil Company (ADNOC) but include estimated investment income of 5.3% of GDP.  The widening deficit reflected a drop in oil and natural gas income to 17% of GDP from 26.6% of GDP, compensated somewhat by reductions in non-current spending.  Under our baseline oil price assumptions, we expect the general government deficit to decline to 11.6% of GDP in 2016 and 5.3% of GDP in 2017.  The 2016 budget is still under discussion but we expect further reductions in non-current expenditure.

The drop in oil revenues has accelerated reform efforts at the UAE level, and these benefit Abu Dhabi as the largest contributor to the federal budget.  The UAE removed transport fuel subsidies in August 2015 and its energy minister announced the intention to remove remaining subsidies for electricity and gas.  Water tariffs have been introduced for UAE nationals in Abu Dhabi and increased by between two and five times for expatriates, depending on consumption levels.  Electricity tariffs were increased by between 30% and 100%.  The government estimates that it could raise significant non-oil revenue by increasing charges for goods and services provided by the public sector.

The debt of government-related and state-owned enterprises (GREs and SOEs) peaked at AED277b (30% of GDP) in 2012 and had fallen to AED246b by H1/15, reflecting the authorities’ commitment to containing indebtedness.  We expect GRE and SOE debt to continue to fall as the Department of Finance exercises greater control over their capital spending and debt issuance plans.  Explicit contingent liabilities are clearly delineated and are not material compared with Abu Dhabi’s assets.

We expect the government to finance its 2016 and 2017 deficits through a combination of transfers from the Abu Dhabi Investment Authority (ADIA), the dividend from ADNOC, issuance of bonds and some further draw-down of general government deposits.  Fitch expects ADIA assets to fall to $475b at end-2016 from an estimated $502b at end-2014 as outflows outpace investment returns.  However, we expect ADIA assets to rise again in 2017, when the ADNOC dividend should be sufficient to cover the budget deficit.  Government deposits in UAE banks fell 16% to AED 158b over 2015, but remain substantial at around 11% of GDP.  The overall level of liquidity in the banking sector is still high.

The Abu Dhabi Department of Finance has intensified consultations with the central bank and commercial banks on local debt issuance.  The timing and size of bond issuance remains uncertain, but we assume issuance of AED40b of bonds in the local market in 2016 and a further AED60b in 2017, effectively replacing the AED100b in certificates of deposit issued by the central bank and held by local banks.  This would help stem depletion of ADIA assets, which are likely to have a higher expected rate of return than Abu Dhabi debt.  Local issuance could also help develop the domestic financial market and pave the way for future issuance by domestic entities, including SOEs and GREs.  Foreign-currency issuance is also being considered.

We estimate that real GDP rose 5.4% in 2015 on the back of a 6.8% rise in oil production volumes.  Oil production is expected to rise 2% in 2016 and 2017, partially reflecting ADNOC’s plans to increase capacity to 3.8m b/d by 2018.  We estimate that non-hydrocarbon growth slowed to 4% in 2015 from 6% in 2014, and we expect it to dip to 3.5% in 2016 as the negative effects of lower oil prices, lower banking sector liquidity and government retrenchment affect confidence and demand in the private sector.  Nevertheless, investment will continue to be a driver of growth.

Structural indicators are mixed relative to peers. GDP per capita is above the ‘AA’ median.  Governance and business environment scores have improved in recent years and are significantly above those of other GCC countries but below the ‘AA’ median.  Fitch considers geopolitical risks to be elevated compared with rating category peers.

Major gaps in the availability of data remain despite recent improvements. In particular, standard international investment position and balance of payments data are unavailable, and there is less information on the sovereign balance sheet than in peers.  Data shortcomings reflect a weak economic policy framework, particularly at the federal level. Authorities have few options for absorbing shocks beyond resorting to fiscal and external buffers.

Rating Sensitivities

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

-A sustained period of oil prices sharply lower than Fitch expects, leading to rapid erosion of fiscal and external buffers.

-Spill-over from a regional geopolitical shock that impacts economic, social or political stability.

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

-Strengthening of economic policymaking institutions and greater availability of key data.

-Reduction of the economy’s dependence on oil.

Key Assumptions

Fitch forecasts Brent crude to average $ 45/b in 2016 and $55/b in 2017.

Fitch assumes that regional geopolitical conflicts will not impact directly on Abu Dhabi or on its ability to trade and that the domestic political scene will remain stable.

No major change is expected in ADIA’s investment policy or in its relationship with and use by the Emirate of Abu Dhabi.  (Fitch 02.02)

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11.5  LIBYA:  Libya’s Political Stalemate

Mattia Toaldo wrote in Sada on 3 February that despite apparent progress toward a power-sharing agreement, Libya’s governing bodies still face problems of neutrality and representation that will hamper their ability to govern effectively.

The Libyan political process is effectively stuck.  The few recent steps toward a power-sharing agreement are unlikely to accomplish its main goal of giving Libya a single government again.  In the meantime, the Islamic State is escalating its presence in Libya, stirring up alarm in Western capitals and creating momentum for a new international intervention in the country, albeit on a more limited scale than the one to dislodge Muammar al-Qaddafi.

In Spring 2014, the situation in Libya devolved into armed confrontation between the two broad components of the anti-Qaddafi uprising: those who had worked with Qaddafi but then had switched sides and those, mostly of Islamist tendencies, who considered themselves to be the “true revolutionaries” looking to build a new state from scratch, starting with the security sector.  These two sides are represented respectively by General Khalifa Haftar with his “Operation Dignity” and the Tobruk-based House of Representatives on the one side and “Libya Dawn” and the Tripoli-based “Government of National Salvation” on the other.

Since September 2014, the West has tried to push the two reluctant factions and their regional sponsors into a power-sharing agreement to be brokered by a Special UN envoy, first Bernardino Leon, then Martin Kobler as of November 2015.  This process culminated with the signing of the Libyan Political Agreement (LPA) in Skhirat, Morocco on 17 December 2015.  The LPA transformed Tripoli’s resurrected General National Congress (GNC), now representing what is left of Libya Dawn, into the consultative State Council, and made Tobruk’s House of Representatives (HoR) the sole legislative authority, with the power to grant a vote of confidence to the new government.  The functions of head of state are exercised by the new Tunis-based Presidency Council, which is now composed of nine people representing all factions.

On 28 January, more than a month after LPA was signed in Skhirat, the HoR, under the control of Dignity though theoretically representing all of Libya, at last decided to approve the agreement, but without clause 8. Clause 8, one of the final provisions of the agreement, transfers all military powers to the Presidency Council, who will then decide on new military appointments within 50 days.  In essence, this means resetting the military leadership of the country – and more importantly, the position currently held by General Haftar as head of the armed forces.  The exclusion of clause 8 puts the whole agreement at risk, as almost none of the other factions are ready to accept an agreement that leaves the general in his current position.  This means that unless a dramatic change is made, the implementation of the LPA is at a dead end.  Even if the Government of National Agreement (GNA) is formed under these circumstances, it is unlikely to move peacefully to Tripoli.

The HoR’s vote on the LPA demonstrated that as long as the process is based exclusively on consolidating the two parliaments into one bicameral legislature it will suffer from several flaws.  First, as long as the HoR is located in Tobruk, in Haftar’s fiefdom, it will hardly take a stance that jeopardizes his position.  This gives him disproportionate leverage over the whole process, considering that among his enemies are those who control Tripoli and Misrata, as well as the Petroleum Facilities Guard in eastern Libya and most military commanders in Benghazi.  The GNC, for its part, is now controlled by a minority of hardliners.  Libya Dawn does not exist anymore as a coalition and this effectively leaves Misrata and other important players out of the diarchy created under the LPA.

Finally, the legal basis of the two parliaments is shaky.  The GNC is a resurrected parliament with many MPs that have been brought in to replace original members without new elections.  A verdict by the Constitutional Court on 6 November 2014 repealed the constitutional amendment that had allowed for elections for members the HoR, whose mandate expired on 20 October 2015 – and it is unclear what its plenum is given that dozens of MPs have been boycotting it for more than a year now.

The coming weeks, the outside world could be faced with a paradoxical situation: the HoR could approve a new list of ministers for the Government of National Agreement while implementing the LPA without clause 8.  The international community would probably recognize this government while saying that further negotiations would be needed on the LPA.  In fact, the GNA would not be able to move to Tripoli anytime soon and would become another government sitting in Tobruk that does not control the state.  Alternatively, Libya could continue to have three governments, none of which is governing the country.

In the meantime, the Islamic State escalated its activities with a 7 January terrorist attack in Zliten that killed dozens and an offensive against oil installations in the east in the same week.  This boosted the argument in Western capitals that even though any intervention against the Islamic State in Libya should come upon request of the Libyan government, in the absence of such, urgent action should still be taken against the group.  The Islamic State in Libya, as elsewhere, has thrived in ungoverned spaces.  Unless there is a political agreement that reduces the number of those spaces and governs them, a military intervention is unlikely to change the picture.

The stalemate of the political reconciliation process can be avoided by reforming the process itself.  To that end, the HoR could be moved to a more neutral location so it can be recognized as the only legislative authority that includes all factions.  Second, a more inclusive consultative body could discuss the way forward on the LPA.  This Shura could include representatives of the municipalities from tribes and of the hukama (local wise men) important to Libya’s social structure.  But these reforms would require political courage and strategic patience from the West—both of which are lacking at the moment.

Mattia Toaldo is a Policy Fellow at the European Council on Foreign Relations.  (Sada 03.02)

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11.6  TURKEY: Concluding Statement of the IMF 2016 Article IV Mission

An IMF team visited Turkey between 20 January and 1 February 2016 for the annual evaluation of the economy as part of the regular consultations under Article IV of the IMF’s Articles of Agreement.

Growth last year was stronger than expected, and the current account deficit fell. Domestic demand is expected to continue to drive growth this year, owing to the higher minimum wage, lower oil prices, and supportive monetary and fiscal policies.  External financing needs will remain high, however, while weak capital inflows will put pressure on reserves and inflation will remain above target and increasing.  In the short run, tighter fiscal and monetary policies can help address vulnerabilities.  A longer term solution will require progress with the authorities’ ambitious structural reform agenda to boost potential growth and domestic saving.

Outlook and Risks

  1. The economy is estimated to have grown by 3.8% last year, driven by domestic demand. Despite political uncertainty, unfavorable geopolitical developments, and a sharp weakening of the lira, private consumption was resilient. Monetary tightening was insufficient to reduce inflationary pressures, amid sharp lira depreciation.  Weak external demand depressed exports growth, but as imports also decreased on the back of cheaper oil, the current account deficit moderated significantly to an estimated 4.4% of GDP.

  1. Strong growth is set to continue in 2016, but with higher inflation. The 30% increase in the minimum wage will raise consumption by an estimated ½ to 1% of GDP this year. In addition, the recent further decline in oil prices, and the insufficiently tight monetary stance will also be supportive. GDP growth is expected to be between 3.5% and 4% this year and inflation to exceed the authorities’ 5% target once again by a wide margin.

  1. The smaller current account deficit is welcome, but external imbalances persist. Much of the improvement can be traced to lower oil prices, and the non-energy balance has barely changed. The economy’s external position remains moderately weaker than the level consistent with medium-term fundamentals.  The current domestic demand-based growth does not help rebalancing and the low private saving rate, if unaddressed, will perpetuate accumulation of external imbalances.  Moreover, financing of the deficit remains a concern, with some of it coming from reserves. In addition, net errors & omissions are playing an increasing role in the balance of payments.

  1. Although the economy has shown resilience in the face of large exchange rate depreciations and capital outflows, buffers have decreased. The large foreign currency debt of the nonfinancial corporate sector and the dependence of banks on foreign financing expose Turkey to the risk of accelerating capital outflows. While fiscal buffers remain strong, policy space to react to shocks has decreased over time, as international reserves have declined somewhat, and the negative international investment position remains large.  The main avenue to diminish vulnerabilities is through limiting external imbalances.

The Policy Agenda

  1. The main challenges facing policymakers are to reduce the external imbalance and to boost the potential growth rate of the economy. In the short run, a reduction of external imbalances can be achieved through tighter fiscal and monetary stances. Macro-prudential policies may also have a further role to play, but are not a substitute for these macroeconomic policies.  If such policies are implemented, slower domestic demand and increased savings would lower external imbalances.  This would provide a window of opportunity to implement far-reaching structural reforms to raise the private sector saving rate and potential output, delivering stronger and more sustainable long-term growth.

Monetary and Fiscal Policies

  1. A tighter fiscal stance would contribute to reducing external imbalances and lowering inflation. With public debt at 32% of GDP, debt sustainability is not a concern. To help alleviate some of the increasing pressure on monetary policy in combating inflation, fiscal policy consolidation could be slightly more ambitious than envisaged in the MTP.  On the expenditure side, the consolidation should focus on current spending, including containing the public sector wage bill, rather than reducing capital spending.  There is also scope to raise revenues, including through reducing informality and broadening the tax base.

  1. A stronger public sector budget position would create additional policy space to react to shocks. Private sector balance sheets have become more stretched in recent years. In addition, the increasing use of guarantees and PPPs to finance investment entails contingent liabilities that may materialize during a downturn. Their rapid growth requires stronger central oversight, approval and disclosure.  A more comprehensive overview of the public sector fiscal position, transactions and risks, could also be supported by enhancing the coverage of fiscal reporting, including on pension and PPP liabilities, and publishing a fiscal risk statement.

  1. A tighter monetary policy stance is needed to bring inflation back to the 5-percent target in the medium term. Inflation remains well above target and has started to increase recently. As a consequence, inflation expectations have remained unanchored. The real policy rate should be increased into decisively positive territory.  This would also alleviate the depreciation pressure on the lira.

  1. The monetary policy framework needs to be improved to strengthen the effectiveness of monetary policy. Narrowing the interest rate band and providing all liquidity demanded by the market at a single policy rate will provide a clear signal on the policy stance and strengthen the monetary transmission mechanism.

  1. Reserves should also be boosted. Given the improvement in the current account balance, the CBRT should embark on policies to increase its net reserves. Interventions should be restricted to periods of disorderly market conditions.

Financial Sector Policies

  1. Banks remain adequately capitalized. While on a long-term declining trend, capital adequacy ratios remain above regulatory minima and are mostly based on high-quality capital. Still, the gradual introduction of Basel III may increase the need for banks to raise capital in an environment of decreasing profitability.  Nonperforming loans are low and well provisioned.  However, banks remain very reliant on external wholesale funding.  In tandem, foreign currency exposures in the economy remains high, as the non-financial sector’s net open foreign exchange position stands at $174 billion.

  1. Macro-prudential policies have lengthened the maturities of banks’ wholesale FX external financing, adding some resilience. Longer maturities imply lower annual rollover, and thus lower external financing needs. Increasing the remuneration differential between TL and FX required reserves could help to slow overall FX wholesale borrowing. Prudential policies should be adjusted to reflect increased risks associated with foreign exchange lending.  The recent adjustment of consumer loan risk weights that will take effect in April should be reviewed if consumer credit growth rebounds too sharply.  Other macro-prudential measures focused on overall indebtedness would also be useful.

Structural Reforms

  1. The authorities’ appropriately ambitious structural reform agenda is central to the goal of successful economic rebalancing. Specifically, reforms aimed at increasing funding of the private pension and the severance pay systems could significantly raise the private saving rate. Addressing the lack of flexibility in the labor market and further developing local capital markets would boost growth and improve competitiveness.  The authorities’ reform plans should be implemented swiftly and fully.

  1. The increase in the minimum wage could bring potential benefits, but also poses challenges. While the higher wage may improve income distribution and provide a short-term economic boost, it has consequences for labor markets, competitiveness, and the fiscal balance. In the context of rigid labor markets, efforts to improve labor market flexibility would help avoid a surge in informal sector employment, and would diminish the negative consequences of higher wages for competitiveness.

  1. The mission welcomes the initiative to integrate refugees. Turkey’s refugee population of more than 2 million is among the highest in the world. While a safe return of refugees to their home countries is always desirable, efforts should be made to help integration in the meantime.  In this respect, Turkey is enacting legislation to allow registered refugees to work.  This is an important step in effective integration.  (IMF 02.02)

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