Fortnightly, 10 July 2019

Fortnightly, 10 July 2019

July 10, 2019


10 July 2019
7 Tammuz 5779
7 Dhul Qadah 1440




1.1  Prime Minister Netanyahu Introduces Plan to Ease Regulatory Burden
1.2  US State Department Says Israel Leads in Combating Human Trafficking
1.3  Financial Regulators of New York and Israel Agreement on Fintech Cooperation
1.4  Israel’s Budget Deficit Approaches 4% of GDP in June


2.1  Israel Railways Boosts Passenger Safety and Efficiency with Motorola Solutions
2.2  Israeli-Founded Businesses Contributed Significantly to New York State Economy
2.3  BrightWay Vision Raises $25 Million Investment
2.4  Surgical Theater Received Approval to Market in Israel
2.5  Vulcan Cyber Raises Additional $10 Million to Combat Breaches from Vulnerabilities
2.6  United States Court Affirms Patent Infringement Judgment in Favor of Elbit Systems
2.7  ELSE Nutrition Closes C$7.5 Million Financing Round on the TSX Venture Exchange
2.8  NeuroBlade Raises $23 Million to Develop AI Chip
2.9  Foresight Signs Agreement with Chinese Tier One Automotive Supplier
2.10  NY Governor and IIA $2 Million Partnership Agreement to Foster New Economic Development
2.11  Exabeam Acquires SkyFormation as it Continues to Invest in Cloud Security Solutions
2.12  TrapX Secures $18 Million in Series C Financing Round
2.13  Froneri Enters Israel with Acquisition of Nestlé Ice Cream Business
2.14  BIRD to Invest $8.2 Million in 9 New Projects
2.15  SimilarWeb Opens New Office in Burlington, Massachusetts
2.16  AppLovin Acquires SafeDK to Automate App Security & Brand Safety
2.17  Google to Acquire Elastifile


3.1  ECOMZ Gets $4 Million Series-A Round to Expand Their Ecommerce Management Platform
3.2  Faylasof Raises $500,000 Pre-Series A Funding to Digitize the Book World
3.3  Costa Coffee and Alghanim Industries Expand Middle East Partnership
3.4  The Andersen Name Premieres in Kuwait
3.5  Tenmou Introduces New Strategies Focused on Investing in Scalable Startups
3.6  Darigold Opens Sales Office in Dubai
3.7  Washmen Announces a $6.2 Million Series-B Round to Solidify and Expand Its Operations
3.8  Freddy’s Frozen Custard & Steakburgers Opens Its First International Location in the UAE
3.9  UAE Firm Planning to Tow Icebergs from Antarctica to Start Testing This Year
3.10  Foodics Secures $4 Million Funding of Payment Solution and a Retail Dedicated PoS
3.11  Saudi Budget Carrier Flyadeal Drops $5.9 Billion Boeing 737 Max Deal
3.12  Noon Academy Raises $8.6 Million in Series A Round
3.13  New Moroccan Accelerator Aims to Take Local Startups to the Next Level


4.1  World’s Largest Single Solar Project Begins Commercial Operations in Abu Dhabi
4.2  Egypt Launches EGP 1.2 Billion Plan to Renovate Water Networks in Aswan
4.3  Nabrawind to Build Africa’s Tallest Wind Farm Tower in Morocco
4.4  Cyprus Airports Pledge to Achieve Net Zero Emissions by 2050


5.1  Lebanon’s Fiscal Deficit Rises by 66% to $6.25 Billion at the End of 2018
5.2  Lebanese Tourist Arrivals Reach an 8-Year High of 692,704 in May 2019
5.3  Jordan Enjoys 2.0% GDP Growth Rate in the First Quarter of 2019
5.4  Jordanian Exports Increase by 5.9% & Imports Decrease by 1.3% During First Third of 2019
5.5  In-Coming Tourism to Jordan Surges in June by 26.5%
5.6  Jordanian Start-Ups to be Exempt from Capital Tax as of this Year
5.7  Non-Jordanian Investors Own 51.1% of the Shares on the Amman Exchange

♦♦Arabian Gulf

5.8  How Arabian Gulf Cities Compare Globally for Expat Cost of Living
5.9  Kuwait Parliament Passes Budget with $22 Billion Deficit
5.10  UAE Defines Industry Sectors Eligible for Up to 100% Foreign Ownership
5.11  UAE’s VAT Revenues Exceeded Expectations in 2018
5.12  Ethiopia to Send 50,000 Workers to the UAE
5.13  Abu Dhabi Creates $1 Billion Fund to Boost R&D Business
5.14  More Than 6 Million Tourists Visit Dubai and Abu Dhabi in First Quarter
5.15  OPEC Oil Output Cuts Curb Saudi Arabia’s Economic Growth

♦♦North Africa

5.16  Egypt’s Domestic Liquidity Rises by 7.8% Over 9 Months
5.17  Egypt Reports 6.6% Rise in Exports to International Trading Groups in 2018
5.18  Egypt Moves Towards Universal Healthcare System
5.19  Morocco and Sustainment for its F-16 Fighter Fleet


6.1  Turkey Breaks its Exports Record in First Half
6.2  Turkey Produces 3.1 Million Tons of Crude Steel in May
6.3  Cyprus’ Central Bank Lowers GDP Growth Forecast for 2019 to 3.5%
6.4  Cyprus’ Average Monthly Earnings Increase by 2.5% in First Quarter
6.5  Cyprus has Second Highest NPL Ratio in the EU



7.1  17th of Tammuz Fast Observed on 21 July, Begins the Three Weeks Mourning Period‎
7.2  Israeli Foreign Minister Attends Climate Summit in UAE


7.3  Tobacco Costs Jordan 6% of GDP and Took Over 9,000 Lives in 2015
7.4  Fifth of October will be Main Federal National Council Voting Day in UAE
7.5  Egypt to Legalize Status of 120 Unlicensed Churches
7.6  Greece’s New Prime Minister Sworn in After Landslide Victory


8.1  2019 IATI Israeli Life Sciences Industry Report Shows Local Industry Kept Growing In 2018
8.2  Minovia First Mitochondrial Cell Therapy Trial for Treatment of Pearson Syndrome
8.3  MOSES Laser Technology Wins 2019 Medical Design Excellence Award
8.4  Konica Partners with DiA Imaging Analysis in Advanced AI-based Cardiac Ultrasound Analysis
8.5  Wize Pharma Completes Milestone for Joint Venture with Cannabics Pharmaceuticals
8.6  DayTwo Secures $31 Million in Series B Financing to Address Chronic Health Conditions
8.7  Teva Announces Launch of 1% Sodium Hyaluronate in the United States
8.8  ProArc Medical Awarded $2.2 Million European Union Grant
8.9  MeMed Named “Technology Pioneer” by World Economic Forum
8.10  Neurolief Receives CE Mark for Relivion – Digital Treatment for Migraine
8.11  ConTIPI Medical Receives FDA Approval for Treatment of Pelvic Organ Prolapse in Women


9.1  Syte-Powered Visual Search Boosts Home Design Product Discovery for Conforama
9.2  infiniDome Live Demonstration of Its GPS Jamming Protection for Autonomous Car
9.3  Mmuze Lets Grocers Compete by Leveraging Voice Commerce Technology
9.4  EPM Selects TaKaDu’s Central Event Management (CEM) for Operational Excellence
9.5  Guardicore Achieves AWS Security Competency Status for Micro-Segmentation & Zero Trust
9.6  Argus Fleet Protection Now Operational in Both Automotive and Commercial Aircraft Fleets
9.7  Polyrize Emerges from Stealth to Automate Authorization Security in the Cloud
9.8  RavenDB Launches Managed Cloud Database Service
9.9  Viziblezone’s Breakthrough “Hidden Pedestrian” Detection System for Self-driving Cars
9.10  Foresight Successfully Demonstrates for Leading Vehicle Manufacturers in United States
9.11  Cupertino Electric Integrates ZutaCore Waterless Liquid Cooling to Densify Data Centers


10.1  Israel’s Tax Revenues Fall by NIS 4.5 Billion in 2018
10.2  State Tax Yields in 2018 on Vehicles and Fuel Nearly NIS 30 Billion
10.3  Tourism to Israel Rises by 10% in First Half
10.4  Record Number of Israelis Fly Overseas in First Half of 2019
10.5  Foreign Exchange Reserves at the Bank of Israel Total $120 Billion in June
10.6  Israeli Startups Raised Nearly $600 Million in June


11.1  ISRAEL: IVC–Meitar Exit Report for First Half of 2019
11.2  ISRAEL: Research Department Staff Forecast, July 2019
11.3  ISRAEL: US Department of State 2019 Trafficking in Persons Report
11.4  LEBANON: Staff Concluding Statement of the 2019 Article IV Mission
11.5  LEBANON: Lebanon Targets Deficit Reduction; Financing Pressures Continue
11.6  OMAN: IMF Executive Board Concludes 2019 Article IV Consultation with Oman
11.7  TUNISIA: Fitch Affirms Tunisia at ‘B+’; Outlook Negative
11.8  TURKEY: The Value of Positive Campaigning: Imamoglu’s Victory in Istanbul
11.9  TURKEY: Ankara’s Economic Tasks Grow Tougher after Election Rout


1.1  Prime Minister Netanyahu Introduces Plan to Ease Regulatory Burden

On 7 July, Prime Minister Benjamin Netanyahu submitted a plan to the cabinet that aims to save the economy a further NIS 1.5 billion ($420 million) annually and countless days waiting for permits by reducing the regulatory burden.  The plan from 12 ministries and the Tax Authority aims to cancel or reduce more than 50 regulatory requirements.  For example, it cancels the demand for a license and test to be a real estate broker and cancels the requirement for a minimum number of vehicles to receive a license to operate a vehicle leasing company.  In addition, over 50 digitized government processes, such as the transition to online licensing examinations, were enacted.

The proposals are part of the government’s five-year plan to reduce the regulatory burden that seeks to lead to annual cumulative savings of more than NIS 4 billion ($1 billion), the prime minister’s office said.  Israel is ranked 49th out of 190 countries in the World Bank’s ease of doing business index.  That’s down from 51 last year, but well above a ranking of 29 a decade ago.  (Israel Hayom 07.07)

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1.2  US State Department Says Israel Leads in Combating Human Trafficking

Israel won the highest rating for its efforts in the battle against human trafficking for the eighth straight year.  A report by the US Department of State for 2018 confirms that this struggle appears to be working, placing Israel in the top rank of countries.

Israel was first rated in the top group of countries meeting minimal standards in the battle against human trafficking and making efforts to counter the phenomenon in 2012.  Israel has since maintained this achievement, even though several western countries lost their top ranking this year, including Germany, Italy, and Denmark.  The top group contains only 33 countries.

The US report also states that Israel recently filed three indictments against employers for violation of children’s rights, and investigated two cases of involvement by state employees in crimes relating to trafficking and exploitation.  (Globes 30.06)

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1.3  Financial Regulators of New York and Israel Agreement on Fintech Cooperation

On 9 July, New York Governor Cuomo and the Bank of Israel’s three financial regulators announced an agreement between the New York State Department of Financial Services and Israel’s regulators to encourage and enable cross-border innovation in financial services technology (FinTech).  The purpose of the agreement is to encourage FinTech innovation in New York and Israel by providing support to FinTech companies, and to enable information sharing regarding this fast-developing domain.  The Memorandum of Understanding encourages initiatives in FinTech that promote competitiveness and innovation in financial services through the following:

-Innovation Referrals. Regulators will refer FinTech innovators to each other, which can improve speed to market.

-Information Sharing. New York and Israel will exchange information about FinTech innovation, including:

Regulatory and policy issues on innovation in financial services; and

Emerging market trends and developments.

-Innovation Support. New York and Israel will work to ensure that FinTech innovators in each other’s jurisdiction receive equivalent levels of support.  Each jurisdiction shall:  support FinTech innovators operating in each other’s jurisdiction an equivalent level of support including:

Provide a lead point of contact; and

Information, assistance and support regarding the relevant regulatory framework and authorization process.

-Dialogue on FinTech and Innovative Financial Services. New York and Israeli regulatory staff will confer to discuss areas of common interest regarding FinTech innovation, share expertise and coordinate training sessions.

-Expertise Sharing. New York and Israeli regulatory staff will give presentations and conduct training sessions to share expertise and knowledge.

The MOU demonstrates New York’s continuing commitment to supporting the growth of financial innovation and recognizes the importance of partnering with Israel, a leader in FinTech regulation.  (BoI 09.07)

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1.4  Israel’s Budget Deficit Approaches 4% of GDP in June

Israel’s current budget deficit continues to swell towards the 4% of GDP danger line.  The state budget performance figures for June published by the Ministry of Finance illustrate that the budget deficit for the 12 months to the end of June was 3.9% of the GDP, compared with 3.8% for the twelve months to the end of May.  The cause of the deficit is a jump in spending by government ministries, while state tax revenues are staying at the same level.

The Ministry of Finance’s forecast is a NIS 50 billion budget deficit at the end of the year, 3.6% of GDP, while the budget deficit so far this year is NIS 21.9 billion.  The budget deficit target for 2019 is 2.9% of GDP.  As of June, government spending was 10.4% higher than in the corresponding period last year, compared with a planned increase of 5.1%.

The Israel Tax Authority explained that state tax revenues in June were NIS 300 million lower because of a revision in the “green” formula for calculating purchase tax cars, cutting the tax benefit for buying environmentally less harmful hybrid vehicles.  The revision took effect on 1 April.  The announcement of the move led to higher car imports in March at the expense of the following months.  Bringing imports forward added an estimated NIS 2.1 billion to tax revenues in March at the expense of NIS 700 million in April, NIS 600 million in May, and NIS 300 million in June.

In June, the government approved the Ministry of Finance’s emergency plan, including an across-the-board cut in ministries’ budgets.  This cut, however, is designed to pay for additional defense spending and subsidizing daycare centers.  Its effect on the budget will be felt only in 2020, when the budget deficit is projected to be even worse than this year, unless steps are taken to reduce it.  (Globes 04.07)

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2.1  Israel Railways Boosts Passenger Safety and Efficiency with Motorola Solutions

Motorola Solutions has been awarded a tender for supplying Israel Railways with a new push-to-talk over cellular (POC) communication solution to improve efficiency and safety of operations.  The company will supply up to 3,000 devices powered with WAVE, Motorola Solutions’ work group communication service, allowing operational communication across the railway’s lines, offices and maintenance and logistical compounds.  The solution is set to replace the railway company’s previous communication service ‘Mirs’, based on Integrated Digital Enhanced Network (iDEN) technology.

According to the contract, Motorola Solutions will supply, install, operate and maintain the POC-based wireless communications system for Israel Railways for three years, with an optional extended period of five years. Hot Mobile will serve as the mobile network carrier.  WAVE will allow the railway company to benefit from a variety of key features and services for smooth and efficient operations.  The solution eliminates the barriers between devices, networks and locations, and lets the right team members be part of the conversation.  It will enable those on radios, smartphones, tablets and laptops to communicate seamlessly with one another.  It will also allow users to easily share voice, text, photos, video and more with a group or individual at the push of a button – all from one PTT application.  (Motorola Solutions 24.06)

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2.2  Israeli-Founded Businesses Contributed Significantly to New York State Economy

Israeli-founded companies are making a substantial impact on the New York State economy by generating significant revenue and hiring New Yorkers, according to the findings of a study released by the New York – Israel Business Alliance.  The independent study determined that Israeli-founded companies in New York directly contributed $18.6 billion in revenue in 2018.  The economic benefit to New York jumped to $33.8 billion when factoring in additional spending on goods and services in the local economy, representing 2.02% of the state’s Gross Domestic Product.

The 506 Israel-founded companies in New York State directly employed 24,850 New Yorkers and indirectly employed 27,502 when accounting for the additional demand for local goods and services.

The study focused on recent growth trends and found that from 2014 to 2016, Israeli companies secured $3.5 billion in venture capital funding and, in 2016 alone, were responsible for more than 20% of the total capital raised in New York State.  From 2016 to 2018, the growth continued.  During those years, Israeli-founded businesses had a 9.5% year-over-year growth for direct revenue generated, while the rest of the state grew by 4.2%.  Further, Israeli-founded businesses added new jobs at double the state’s rate: Israeli companies saw 2.5% job growth while the rest of the state had 1.2%.

From 2009 to 2018, 436 Israeli-founded companies opened and maintained offices in New York State.  Including the standard multiplier effect on the local economy, from 2016 to 2018, the overall revenue and employment impact of Israeli-founded businesses in New York increased by 8.7% and 3.0% per year, respectively.  (NYIBA 25.06)

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2.3  BrightWay Vision Raises $25 Million Investment

Elbit Systems announced that its subsidiary, Tirat HaCarmel’s BrightWay Vision, raised a $25 million investment from Japan’s Koito Manufacturing Co. and Magenta Venture Partners, following which they will hold approximately 38.5% of BWV’s shares, on a fully diluted basis.

BWVs’ patented system, BrightEye, uniquely combines sensing and laser illumination technologies for the automobile industry, to generate a clear long-range image of the road ahead at night and in low visibility conditions while also detecting objects in the vehicle path thus enabling effective hazard alerts, collision and other safety warnings.

Haifa’s Elbit Systems is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world.  The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios, cyber-based systems and munitions.  (Elbit Systems 25.06)

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2.4  Surgical Theater Received Approval to Market in Israel

Ohio’s Surgical Theater announced that the Medical Device Division of the Israeli Ministry of Health approved marketing of the Surgical Navigation Advanced Platform (SNAP) and SuRgical Planner (SRP) systems.  Tzamal Medical was selected as the local agent and importer for Israel.

Precision VR is a novel visualization platform that allows patients and their surgeons to step into the patient’s complex diagnosis and to walk together in a 360-degree, Virtual Reality reconstruction of the patient’s anatomy.  When wearing the VR headset, a VR-empowered physician and patient can tour a patient’s pathology.  By simply turning their head from side to side, the patient can further explore their anatomy as the surgeon explains and demonstrates the planned surgical path, which the medical team will utilize during the procedure.  This shared “walk-in” through the pathology is proven to increase patient satisfaction, improve patient engagement and improve a hospital’s financial performance.  (Surgical Theater 24.06)

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2.5  Vulcan Cyber Raises Additional $10 Million to Combat Breaches from Vulnerabilities

Vulcan Cyber announced raising $10 million in Series A funding, enabling the company to continue its mission to help enterprises close the cybersecurity vulnerability remediation gap.  The company will use the funds from Silicon Valley-based Ten Eleven Ventures and original seed backer YL Ventures to expand commercial operations in North America and grow development and support capabilities.  Vulcan Cyber has raised a total of $14 million since exiting stealth a year ago.

The Vulcan Cyber Platform controls and orchestrates Security, DevOps, and IT tasks and tools, allowing enterprises to automate and scale their vulnerability remediation processes.  Vulcan Cyber’s Contextual Prioritization Engine ranks vulnerabilities based on true and unique risk to the enterprise by correlating asset technical attributes and configurations, security assessment results and threat intelligence.  This approach allows teams to focus on the most critical vulnerabilities predicted to be most likely exploited in their digital networks.

Tel Aviv’s Vulcan Cyber provides a continuous vulnerability remediation solution. Vulcan integrates, automates and orchestrates existing tools and processes, eliminating the most critical risks caused by vulnerabilities while avoiding impact to business operations.  Vulcan closes the vulnerability remediation gap, reducing exposure time from weeks and months to hours.  (Vulcan 26.06)

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2.6  United States Court Affirms Patent Infringement Judgment in Favor of Elbit Systems

Elbit Systems announced that on 25 June 2019, the United States Court of Appeals for the Federal Circuit in Washington, DC ruled completely in Elbit Systems’ favor against Hughes Network Systems for infringing an Elbit Systems patent relating to high-speed satellite communications, U.S. Patent No. 6,240,073.

The Court of Appeals’ judgment affirmed the judgment of the United States District Court for the Eastern District of Texas, which had also ruled in Elbit Systems’ favor.  The amount of damages awarded to Elbit Systems, and interest to which Elbit Systems is entitled, (including a $21.1 million jury award, pre-verdict and post-verdict royalties and costs) totals approximately $30 million.  The trial court has yet to rule on the extent to which it will grant Elbit Systems’ request for $13.8 million in attorneys’ fees due to Hughes’ “bad faith litigation misconduct,” which the Court found to be “exceptional.”  Any eventual award of attorney’s fees would be subject to a separate potential appeal by Hughes.

Haifa’s Elbit Systems is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world.  The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land, and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems and munitions.  (Elbit Systems 26.06)

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2.7  ELSE Nutrition Closes C$7.5 Million Financing Round on the TSX Venture Exchange

A-Labs Advisory & Finance announced the successful closing of the round of finance in collaboration with Canaccord Genuity for ELSE Nutrition Holdings.  The transaction was performed via an RTO (Reverse Take Over) into a capital pool company CPC (formerly ASB Capital Inc.) traded on the TSX Venture Exchange (TSXv).

ELSE Nutrition Holdings has developed a novel plant-based baby food formula as an alternative to dairy based products that take up the vast majority of the $83 billion-dollar global market.  The offering was 100% oversubscribed and ended raising 25% above the original requested financing.  Aftermarket performance was positive with a 176% rise on the first day of trading and additional 8.70% rise on the second day completing a total of 250% increase in share price from the issue day on 18 June.

Israel’s Else Nutrition is a food and nutrition company focused on research, development, manufacturing, marketing, sale and/or license of innovative plant-based food and nutrition products to the infant, toddler, children and adult markets.  (A-Labs 27.06)

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2.8  NeuroBlade Raises $23 Million to Develop AI Chip

NeuroBlade completed a $23 million early funding round, led by Marius Nacht, co-founder of Check Point Software Technologies, with the participation of new investor Intel Capital.  Existing investors StageOne Ventures and Grove Ventures, headed by USB flash drive inventor Dov Moran, also participated.  In addition to $4.5 million previously raised, the funds will be used by NeuroBlade to scale its workforce and ramp up efforts to bring its artificial intelligence chip to market.

AI chips are used in various applications, including autonomous driving, image and speech recognition and video analysis.  The deployment and use of AI is still limited by size, price, and performance of these chips.  NeuroBlade said its chip maintains a strong performance level despite being smaller and less expensive to make.

Founded in 2017 and backed by top-tier VCs, Hod HaSharon’s NeuroBlade set out on a mission to redefine computer architecture for AI and other memory intensive tasks.  They build high performance solutions for the rapidly growing AI market while lowering costs and power consumption.  NeuroBlade’s unique chip solution paired with a complete end-to-end SW stack, enables businesses to take the next leap forward by increasing the efficiency and affordability of their devices from edge to datacenters.  (Reuters 26.06)

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2.9  Foresight Signs Agreement with Chinese Tier One Automotive Supplier

Foresight Autonomous Holdings announced the signing of a multi-phase technological cooperation agreement with a Chinese Tier One supplier to develop smart mobility solutions for the Chinese automotive industry, and specifically for two Chinese vehicle manufacturers (OEMs).  According to the agreement, Foresight will collaborate with the Tier One supplier to design, develop and commercialize automatic safety solutions to be implemented in the vehicles of the Chinese OEMs.  The Tier One supplier is currently involved in several projects with the Chinese OEMs for integration of autonomous functions.  The cooperation agreement may enable Foresight to integrate its QuadSight vision system into these existing projects.

The Tier One supplier will purchase a prototype of the QuadSight system for evaluation of the system’s capabilities and suitability for the projects.  Revenue from the prototype system sale is expected to total tens of thousands of dollars.  Based on the results of the evaluation of the system and technology, as well as the specific requirements of the Chinese OEMs, the Tier One supplier will formulate a detailed scope of work for development of a specific project integrating the QuadSight vision system.  Following the completion of the scope of work, the parties may negotiate a commercial agreement for their cooperation in connection with the specific project.

Ness Ziona’s Foresight Autonomous Holdings, founded in 2015, is a technology company engaged in the design, development and commercialization of sensors systems for the automotive industry.  Through the company’s wholly owned subsidiaries, Foresight Automotive Ltd. and Eye-Net Mobile Ltd., Foresight develops both “in-line-of-sight” vision systems and “beyond-line-of-sight” cellular-based applications. Foresight’s vision sensor is a four-camera system based on 3D video analysis, advanced algorithms for image processing and sensor fusion.  (Foresight 28.06)

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2.10  NY Governor and IIA $2 Million Partnership Agreement to Foster New Economic Development

On 27 June, NY Governor Cuomo announced a $2 million partnership agreement with the Israel Innovation Authority for two new programs that will further strengthen economic development ties between New York State and Israel.  Empire State Development will sign a Declaration of Intent with the Israel Innovation Authority to cooperate on the co-development and commercialization of innovative solutions in the fields of cybersecurity, supply chain, smart cities, energy, unmanned aerial vehicles, life sciences and other areas.  As part of the agreement, New York State and Israel will establish a Smart Cities Innovation Partnership, a new initiative that will share innovative technologies, research, talent and business resources between cities in New York and Israel.  The Governor also announced that New York State’s Hot Spot and Incubator programs will now implement a new focus on Israeli companies who want to invest in the Empire State.

The Declaration of Intent (DOI) builds upon a 2018 MOU signed by the New York State Energy Research and Development Authority and the Israel Innovation Authority to support partnerships between New York and Israel focusing on emerging clean energy projects that will accelerate the pace of innovation in the global marketplace.  The joint Smart Cities Innovation Partnership will issue a grant to establish five Smart Cities in Regional Economic Development Council (REDC) regions in New York and test bed sites in Israel.  The sites in New York and Israel will partner to provide opportunities for companies to explore new markets and resources to assist with business development, technology acceleration and mentorship.  Empire State Development, in conjunction with the Israel Innovation Authority, will issue a $2 million grant to support the Smart Cities Innovation Partnership, with each agency contributing a 1:1 grant match.  Cities participating in the Partnership should have similar concerns and strategic goals.  (ESD 27.06)

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2.11  Exabeam Acquires SkyFormation as it Continues to Invest in Cloud Security Solutions

San Mateo, California’s Exabeam announced the acquisition of Givat Shmuel’s SkyFormation, a leading cloud application security business and the first company to collect cloud logs from over 30 cloud services into any security information and event management (SIEM) tool.  As Exabeam’s first acquisition and following its recent $75 million Series E funding round, the investment will enable Exabeam to establish an office in Israel, provide access to talent and help more customers move their businesses, and their security, to the cloud.

Founded in 2014, SkyFormation makes updates automatically, whenever there are API changes, so security teams don’t need coding skills or costly professional services engagements to ensure the right data is being collected.  Security teams can extend the use of behavioral analytics to detect attacker tactics, techniques and procedures and maintain regulatory compliance in the cloud.  Logs can be collected from AWS, GitHub, Google, Microsoft Office 365, Salesforce and many other security, identity and access management, infrastructure and business applications.

By establishing an office in Israel based around the SkyFormation team, Exabeam will gain access to talent in a premier location for cybersecurity expertise.  Exabeam’s expansion to Israel builds on its opening of other offices in Atlanta, London and Singapore earlier this year.  (Exabeam 02.07)

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2.12  TrapX Secures $18 Million in Series C Financing Round

TrapX Security has completed an $18 million financing round led by Ibex Investors to expand the company’s global footprint to additional countries and verticals.  Existing TrapX investors, such as BRM, Opus Capital, Intel Capital, Liberty Technology Venture Capital and Strategic Cyber Ventures also participated in the round, which will accelerate the company’s ability to meet the demand for its award-winning deception technology.

Incorporated in 2012, TrapX Security has disrupted the Cyber Threat Detection and Response market by pioneering a new game-changing approach coined “Deception Technology”.  TrapX has a unique approach to threat detection as a “right data” problem, rather than a “big data” problem allowing security teams to change the economics of cyber-attacks.

Tel Aviv’s TrapX Security is the pioneer and global leader in cyber deception technology.  Their DeceptionGrid solution rapidly detects, deceives, and defeats advanced cyber-attacks and human attackers in real-time.  DeceptionGrid also provides automated, highly accurate insight into malicious activity unseen by other types of cyber defenses.  By deploying DeceptionGrid, you can create a proactive security posture, fundamentally halting the progression of an attack while changing the economics of cyber-attacks by shifting the cost to the attacker.  The TrapX Security customer-base includes Forbes Fortune 500 commercial and government customers worldwide in sectors that include defense, healthcare, finance, energy, consumer products, and other key industries.  (TrapX Security 01.07)

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2.13  Froneri Enters Israel with Acquisition of Nestlé Ice Cream Business

England’s Froneri has agreed to acquire the Noga Ice Creams Limited Partnership, subject to regulatory approval.  Noga is part of the Nestlé-owned business Osem Group and means Froneri will be entering the Israeli market for the first time.  This milestone deal will now bring all of the Nestlé Europe, Middle East & North Africa ice cream businesses into the Froneri group.  Froneri has confirmed that the existing management team will continue to lead the business.

Froneri intends to invest in the local brands, products and flavours that Nestlé has been maintained in the market Israeli for over 20 years.  This milestone deal marks the final stage of the transition of their EMENA ice cream businesses into Froneri, further strengthening its presence in the region.  Leading Noga brands including La Cremeria, Extreme, Cookilida, Crunch and Gumigum will continue to be available.  (Froneri 04.07)

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2.14  BIRD to Invest $8.2 Million in 9 New Projects

During its meeting on June 18, 2019, held in Washington D.C., the Board of Governors of the Israel-U.S. Binational Industrial Research and Development (BIRD) Foundation approved $8.2 million in funding for nine new projects between U.S. and Israeli companies.  In addition to the grants from BIRD, the projects will access private sector funding, boosting the total value of all projects to approximately $20 million.

The nine projects approved by the Board of Governors are in addition to the 982 projects which the BIRD Foundation has approved for funding during its 42-year history.  To date, BIRD’s total investment in joint projects is nearly $350 million, helping to generate direct and indirect sales of more than $10 billion. The projects approved include:

3PLW (Netanya, Israel) and Corumat (Albany, CA) to develop food waste derived high performance compostable packaging.

Igentify (Haifa, Israel) and Thermo Fisher Scientific (Waltham, MA) to develop genomic data interpretation & reporting software platform for next-generation sequencing (NGS)-based expanded preconception carrier screening test.

Israel Aerospace Industries (Lod, Israel) and Headwall Photonics (Bolton, MA) to develop precision agriculture decision support system for large scale areas utilizing wide area hyper-spectral imager and fixed wing mobile UAV.

MyndYou (Tel Aviv, Israel) and Cosan Group ( Cherry Hill, NJ) to develop an innovative clinical network for optimized, in-home care with AI-based patient engagement.

Netafim Irrigation (Tel Aviv, Israel) and Onvector (Somerville, MA) to develop a filter based on pulse electric fields for advanced disinfection of irrigation water.

NovelSat (Ra’anana, Israel) and iGolgi (Rocky Hill, NJ) to develop fusion- end to end, joint encoding-modulation techniques to improve satellite broadcast efficiency for carrying multi-channel audio-video programs carried over satellite.

Shamaym Social Business (Tel Aviv, Israel) and Karyopharm Therapeutics (Newton, MA) to develop a drug development operations and execution debrief checklists platform.

Snappers (Or Yehuda, Israel) and Turner Studios (Atlanta, GA) to develop the affiliate crowdsourced video platform.

WizeCare (Or Yehuda, Israel) and The Cleveland Clinic Foundation (Cleveland, OH) to develop tele-rehabilitation, monitoring and detection platform for Parkinson disease patients.

The BIRD (Binational Industrial Research and Development) Foundation works to encourage and facilitate cooperation between U.S. and Israeli companies in a wide range of technology sectors and offers funding to selected projects.  The BIRD Foundation supports projects without receiving any equity or intellectual property rights in the participating companies or in the projects, themselves.  BIRD funding is repaid as royalties from sales of products that were commercialized as a result of BIRD support.  (BIRD 07.07)

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2.15  SimilarWeb Opens New Office in Burlington, Massachusetts

SimilarWeb announced the opening of a new office located in Burlington, Massachusetts, to accelerate inside sales activities and fuel the company’s international growth across key markets.  The new Burlington office operations will join SimilarWeb’s two other locations across the US, in New York and San Francisco.

Tel Aviv’s SimilarWeb provides the measure of the digital world.  With the largest international online panel consisting of hundreds of millions of devices, SimilarWeb provides granular insights about any website or app across a wide array of industries.  Global brands such as Google, eBay and Adidas rely on SimilarWeb to understand, track and grow their digital market share.  (SimilarWeb 08.07)

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2.16  AppLovin Acquires SafeDK to Automate App Security & Brand Safety

Palo Alto, California’s AppLovin, a comprehensive mobile gaming platform, acquired SafeDK.  The move will further AppLovin’s mission to help mobile game developers grow and protect their businesses.  Herzliya’s SafeDK allows mobile app publishers to build faster and safer apps by analyzing, monitoring, and optimizing third-party SDKs in their apps. SafeDK’s Ad Intelligence solution helps publishers get a clear view of their ad inventory and campaign performance.  Its In-App Protection solution helps monitor and control SDKs in real-time.  SafeDK will help publishers on AppLovin’s platform secure and control third-party SDKs to ensure brand safety.

AppLovin is headquartered in Palo Alto with offices in San Francisco, Dublin, Beijing, Tokyo, Seoul, Toronto and Berlin.  SafeDK employees will work with the AppLovin team to continue to provide a tool that protects brand safety in mobile apps and integrates with AppLovin’s tools for mobile game developers.  SafeDK will continue supporting existing customers.  (SafeDK 09.07)

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2.17  Google to Acquire Elastifile

Google has entered into a definitive agreement to acquire Herzliya’s Elastifile, a provider of scalable, enterprise file storage for the cloud.  The acquisition of Elastifile is expected to be completed later this year and is subject to customary closing conditions, including the receipt of regulatory approvals.  Upon the close of the acquisition, Elastifile will join Google Cloud.  Elastifile is a pioneer in solving the challenges associated with file storage for enterprise-grade applications running at scale in the cloud.  They’ve built a unique software-defined approach to managed Network Attached Storage (NAS), enabling organizations to scale performance or capacity without cumbersome overhead.

The combination of Elastifile and Google Cloud will support bringing traditional workloads into GCP faster and simplify the management and scaling of data and compute intensive workloads.  Furthermore, Google believes this combination will empower businesses to build industry-specific, high performance applications that need petabyte-scale file storage more quickly and easily.  This is critical for industries like media and entertainment, where collaborative artists need shared file storage and the ability to burst compute for image rendering; and life sciences, where genomics processing and ML training need speed and consistency; and manufacturing, where jobs like semiconductor design verification can be accelerated by parallelizing the simulation models.  The acquisition of Elastifile extends Google’s current file storage offering, Cloud Filestore, and their robust third party partner offerings to support applications from website hosting to computer chip design.  (Google 09.07)

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3.1  ECOMZ Gets $4 Million Series-A Round to Expand Their Ecommerce Management Platform

Created in Beirut, Lebanon in 2015, Ecomz is an ecommerce management platform that helps merchants sell and grow online.  Ecomz announced a Series-A round of $4 million to expand the platform’s reach and build their MENA region lead.  This funding round will allow Ecomz to further enhance the platform with Artificial Intelligence (AI) and machine learning capabilities, hence enabling the merchants to efficiently build and manage their stores, and create limitless opportunities to sell.

While the past 4 years were focused on research and development, the funding round, led by Cedar Mundi Ventures, a leading VC firm based in Beirut, with the joint participation from iSME (Lebanon) and BLC Bank (Lebanon), aims to scale-up the company and to evangelize the merchants in the region, by promoting the utility of building and running an online business by themselves, without requiring any technical skills or marketing and sales expertise.

Ecomz accompanies merchants throughout their business journey to maximize their profitability and enhance their customers’ shopping experiences.  First, it guides them to create their online store in a few clicks, thanks to advanced store builder capabilities, and easily personalize their storefront without requiring technical skills.  Secondly, it empowers them to efficiently run their business using built-in store management applications, powered by a personalized insights engine to identify weaknesses and optimize store performance.  Thirdly, it enables them to grow in new markets through new sales and distribution channels, such as product sourcing and drop-shipping, multi-vendor marketplace, and multi-channel integration.  (MAGNiTT 03.07)

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3.2  Faylasof Raises $500,000 Pre-Series A Funding to Digitize the Book World

Jordan’s online bookstore Faylasof has just raised a financing round of $500,000 as Pre-Series A funding from Saudi-based Wise Ventures.  The startup before this round had raised capital from Amman-based Adam Tech Ventures, a VC firm founded by founders of leading Arabic encyclopedia Mawdoo3, and a UAE-based angel investor.  Faylasof has sold over 50,000 books in the past 12 months and shipped them over 72+ countries.  The startup will be using this opportunity to further build out their platform and digitize the relationship between authors, publishers, and stores.

Faylasof was founded in 2015 and over time became one of the largest online bookstores in the Middle East.  They allow ordinary users to conveniently easy find books, offering more than 1 million titles of Arabic and English books with home delivery and customized payment methods that suit the Arab region.  The platform has offices across 7 MENA countries including UAE, Saudi Arabia, Egypt, Lebanon, Jordan, Kuwait and Qatar.

Amman’s Faylasof is one of the largest online bookstore in the Middle East.  That allows ordinary users to conveniently easy find books, offering more than 1 million titles of Arabic and English books with home delivery and customized payment methods that suit the Arab region.  (Faylasof 07.07)

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3.3  Costa Coffee and Alghanim Industries Expand Middle East Partnership

Costa Coffee, the UK-based coffee shop company with nearly 4,000 locations in more than 32 global markets, and Alghanim Industries, one of the largest privately-owned companies in the Arabian Gulf region, announced an expansion of their successful partnership.  Moving forward, Alghanim Industries will have development rights to Costa Coffee not just in Kuwait but also in Saudi Arabia, Oman and Qatar, making Alghanim the largest franchisee by territory.

The Costa Coffee-Alghanim partnership has flourished since its 2013 formation, growing to more than 75 stores today.  Some 35 of these shops opened in less than a year, including in top-tier locations such as Al Hamra Tower and Kuwait International Airport.  The growth is driven by the companies’ shared commitments to delivering outstanding handcrafted coffee, credible healthy menu choices and exceptional customer service.  Costa Coffee and Alghanim Industries have revamped the Kuwait menu to reflect local tastes and preferences, including local specialties, such as the sweet and rich Spanish Latte, in addition to the cardamom–infused Turkish latte, a Middle-Eastern twist on a classic drink.

Together both companies have recently introduced a number of sustainability initiatives, switching from plastic to paper straws and offering discounts to those customers who bring a reusable cup into the store.  In addition, they established a barista training center, arranged pastry collaborations with celebrity chefs, upgraded store design and interiors, and opened a concept store at Al Hamra Tower, where customers can enjoy specialty coffees and an expanded food offering.  Put together, these forward-looking strategies will power Costa-Alghanim’s expansion efforts in Saudi Arabia, Oman and Qatar.

Alongside Costa Coffee, Alghanim Industries has forged successful partnerships with American quick-service restaurant brands Wendy’s (2015) and Slim Chickens (2017).  Alghanim Industries expects to open its first store outside Kuwait in Saudi Arabia by the fourth quarter of 2019.  (Alghanim Industries 02.07)

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3.4  The Andersen Name Premieres in Kuwait

San Francisco’s Andersen Global announced that one of the premier accounting firms in Kuwait will debut the Andersen name there, furthering the presence of Andersen Global in the Middle East.  Causeway Company for Financial Management Consulting W.L.L. in Kuwait will now become Andersen Tax in Kuwait.  The firm joined Andersen Global as a collaborating firm last year and will now become a full member firm of the international association.  Andersen Tax in Kuwait will continue providing accounting and corporate secretarial services to individuals and corporations in a wide range of industries.  Andersen Global is an international association of legally separate, independent member firms comprised of tax and legal professionals around the world.  (Andersen Global 27.06)

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3.5  Tenmou Introduces New Strategies Focused on Investing in Scalable Startups

Tenmou, Bahrain’s first business angels company that provides mentorship and capital to high potential and innovative Bahraini startup founders, has introduced new strategies focused on investing in scalable startups.  The new strategy will focus on revamping and expanding the team, and to incorporate more programs that facilitate more investments in earlier stage startups.  Tenmou is also looking to collaborate with other investors and create more opportunities to network with other startup founders and investors.  Moreover, Tenmou is open to investing in startups across all sectors, not focusing specifically in one area.  They are planning to invest in seed-stage startups with early signs of traction in their product, market, or revenue.  (ArabNet 26.06)

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3.6  Darigold Opens Sales Office in Dubai

Seattle, Washington’s Darigold opened its office in Dubai through the addition of an in-market sales leader in Dubai, United Arab Emirates.  Darigold is doing business in Dubai as Darigold FZE.  The new office will enhance customer service and integration with customers across the Middle East and Africa.  Darigold’s presence in Dubai furthers its commitment to customer excellence and helps address the increasing worldwide demand for healthy sources of protein for infants, adults and aging populations.

In 2018, the Middle East region imported $4.8 billion in dairy products.  The U.S. dairy industry’s market share is about 3%. In addition, nearby North Africa is a major market for skim milk powder, butter and cheese, with Algeria and Morocco having imported $1.5 billion in dairy products in 2018.  This provides an opportunity to serve customers of Northwest Dairy Association (NDA) member farms in the Middle East and Africa.

Darigold is the marketing and processing subsidiary of Northwest Dairy Association (NDA), which is owned by more than 430 dairy farm families in Washington, Oregon, Idaho and Montana.  Darigold handles approximately 10 billion pounds of milk annually.  Darigold produces a full line of dairy-based products for retail, foodservice, commodity and specialty markets, and is one of the largest U.S. dairy processors.  (Darigold 09.07)

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3.7  Washmen Announces a $6.2 Million Series-B Round to Solidify and Expand Its Operations

Washmen, the Dubai-based mobile-native dry cleaning and laundry service, has closed a Series-B round of $6.2 million.  The total fund raise to date since their inception in May 2015 is $7.8 million.  The latest round was led by AddVenture (Russia) as a returning investor, with the participation from new strategic investors, Henkel (Germany) and Cedar Mundi Ventures (Lebanon).  B&Y Venture Partners (Lebanon) and Clara Ventures (UAE) also participated in the round.

When Washmen started, its business model was focused on being asset-light, by connecting logistics partners to existing laundromats under the brand of Washmen.  Today, Washmen has shifted to fully owning the supply chain with the launch of its 30,000 sq. ft. laundry and dry cleaning facility in this June 2019.  The startup explains that its strategy to vertically integrate across the supply chain was gradual over the last 4 years.  This strategy has helped improve unit economics and customer retention, allowing Washmen to become the largest retail laundry and dry clean operator in the UAE.

Washmen has partnered with Miele to introduce its commercial hand wash programs, through its wet cleaning machines.  In addition, the startup has moved to hang-drying clothes, as opposed to using high-temperature driers, which extends the longevity of customer clothes.  Global consumer goods company Henkel joins as an additional strategic investor.  Through its corporate venture capital engagement, Henkel Ventures, the company will contribute its experience in laundry detergents, which include Persil in the region.  (MAGNiTT 08.07)

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3.8  Freddy’s Frozen Custard & Steakburgers Opens Its First International Location in the UAE

Fast-casual restaurant concept Freddy’s Frozen Custard & Steakburgers of Wichita, Kansas opened its first international location in the Dubai Mall.  The brand’s second international location is slated to open at the Mall of the Emirates in the coming weeks.  The restaurants are owned and operated by Tastebuds Group, who will continue to drive Freddy’s growth throughout the Middle East, with plans to open locations in the UAE, Saudi Arabia, Bahrain, Jordan, Kuwait, Lebanon, Oman and Qatar.

Freddy’s has worked to ensure a seamless transition as the concept entered a new country by adapting to the local culture in various aspects including training protocols, hours of operation, menu items offered and portion size, among others.  The Dubai locations will serve the same Meadowvale frozen custard, Vienna Beef hot dogs and USDA beef as their U.S. counterparts.  (Freddy’s 09.07)

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3.9  UAE Firm Planning to Tow Icebergs from Antarctica to Start Testing This Year

National Advisor Bureau Limited, the UAE company behind plans to tow icebergs from Antarctica to the Fujairah coast, is planning to carry out its first test later this year, at a cost of up to $80 million.  The National Advisor Bureau Limited said in 2017 its ambitious plans could cause a significant climate change in the region as cold air gushing out from an iceberg close to the shores of the Arabian Sea would cause a trough and rainstorms all year round.  The company’s managing director said the first preliminary test, where a smaller iceberg will be towed by tug boat to Cape Town in South Africa or Perth in Australia for water harvesting, will happen later this year.  The test will cost around $60 – 80 million, while the full project to tow an iceberg to the UAE will cost $100-150 million.  (AB 07.07)

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3.10  Foodics Secures $4 Million Funding of Payment Solution and a Retail Dedicated PoS

Riyadh’s Foodics raised a Pre-Series B financing round of $4 million from existing and new institutional investors to develop an all-in-one POS system with a Payment Processing device optimized specifically for retailers.  The Company also plans to offer its current iOS software on the Web-Version and Android too, evolve its software and hardware portfolio and invite new types of sellers to join the Foodics’ ecosystem.  The new funding now doubles Foodics’ original investment to $8 million.  The newly received capital from institutional investors Riyad TAQNIA Fund (RTF), Faith Capital, Tech Invest Com and Naseel Holding, will allow Foodics to expand its omni-channel ecosystems to a wide array of businesses.

For the first time in Saudi Arabia and the GCC, a local company will provide a full POS solution with Payment terminal, which is designed to be fully integrated with every type of business.  Foodics plans to make the innovative device fast, simple and secure in order to help corporate users better focus on their businesses.

Foodics’ new strategy towards Fintech will continuously deliver a new level of innovation to its clients, as well as aligns with the Saudi Government’s Vision2030 to encourage digital transformation in all sectors and to support achieving a cashless society.  The Company’s initiative with the payment solution will be targeting the Saudi market, GCC and beyond.  Foodics received acceptance to the SAMA Sandbox and is eligible to provide an all-in-one POS solution, facilitating the payment service to Foodics clients.  (MAGNiTT 27.06)

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3.11  Saudi Budget Carrier Flyadeal Drops $5.9 Billion Boeing 737 Max Deal

Saudi Arabian budget carrier Flyadeal reversed a commitment to buy as many as 50 Boeing 737 Max jets, becoming the first airline to officially drop the plane since its grounding following two deadly crashes.  Flyadeal will operate an entirely Airbus SE fleet, the company said in a statement, buying as many as 50 A320neo-family planes from Boeing’s European rival.  The order was booked last month at the Paris Air Show by the discounter’s parent, Saudi Arabian Airlines.  That announcement had sparked speculation about whether the planes would be allocated to Flyadeal, which said in December it would spend up to $5.9 billion on Boeing Max jets.

Flyadeal will take delivery starting 2021 of 30 Airbus A320neo aircraft, with an option for a further 20 planes from the A320neo family.  The decision marks a commercial setback for Boeing, which is under pressure to prove the Max is safe and get it flying again after two disasters five months apart killed a combined 346 people.  The narrow-body workhorse has been grounded globally since March.

Boeing won Flyadeal as a customer in December when the airline committed to buying 30 737 Max aircraft with an option for another 20.  The deal, while subject to final terms and conditions, was considered a major victory for Boeing at the time, given Flyadeal has operated an Airbus fleet.  But the airline began to waver following a second fatal crash involving the plane.  If the process of finding a fix for the safety problems took too long, the airline was open to other options.  (AB 07.07)

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3.12  Noon Academy Raises $8.6 Million in Series A Round

Riyadh’s Noon Academy, an online learning platform that operates throughout the Middle East, raised $8.6 million in series A funding.  The round was co-led by Raed Ventures and STV with participation from institutional investor Alisamiah Investment in addition to a number of private investors including Careem co-founder Abdulla Elyas, Dr. Abdulrahman Aljadhai, CEO of Elm, and Mazen Aljubai, with support from Saudi Venture Capital company (SVC). This round represents the company’s first institutional capital raise, and the largest capital raise in MENA’s EdTech industry. The company will use the funding to continue building its engineering and product teams, double down on growth in its existing markets, and launch into new markets.

Noon Academy was founded in 2013 as a simple test prep website capitalizing on the regional opportunity in private tutoring.  Six years later, Noon Academy has transformed into a full-fledged social learning platform that allows students to study with friends in groups, compete with one another, and request top tutors on demand.  On average an active student spends over 55 minutes on the app per each day using the platform, almost four times the EdTech industry average of 14 minutes per day.

The unique platform offers tutoring and free educational content through a ‘freemium’ revenue model that allows all users free access to basic content, and charges users for access to private tutors and more advanced content.  The app has attracted 2 million students, and 1,500 certified tutors to date. Noon Academy also focuses on helping students pass the Saudi general aptitude test and the achievement test, and unlike competitors, is accredited from the Saudi National Centre of Assessment (QIYAS).  Recently, Noon Academy began serving students in Egypt, a key market for the platform in the Arab region.  (MAGNiTT 27.06)

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3.13  New Moroccan Accelerator Aims to Take Local Startups to the Next Level

Impulse has been launched by the Mohammed VI Polytechnic University (UM6P), with the support of OCP Group and its subsidiary OCP Africa.  Designed by MassChallenge, the non-profit, zero equity and impact-focused accelerator is aimed at entrepreneurs in the fields of agri-tech, biotech, nanotech and mining tech, and will help selected participants to take their startups to the next level over a period of 12 weeks.  Founders will be connected with the networks of OCP Group, UM6P and MassChallenge, and be given access to UM6P’s infrastructure and laboratories.  They will also go on study trips to Boston and Lausanne, and have access to a 430 m² co-working space.  A cash prize of $250,000 to be shared between winning startups on demo day, while the program also aims to connect entrepreneurs with access to financing through a set of national and international investment funds and business angels.  (MAGNiTT 03.07)

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4.1  World’s Largest Single Solar Project Begins Commercial Operations in Abu Dhabi

Emirates Water and Electricity Company (EWEC) has announced that Noor Abu Dhabi, the world’s largest single solar project with a capacity of 1,177MW, has started commercial operations.  The project will enable Abu Dhabi to increase its production of renewable energy and reduce the use of natural gas in electricity generation, reducing the emirate’s carbon dioxide emissions by 1 million metric tonnes per year, the equivalent of removing 200,000 cars off the roads.  The AED3.2 billion ($870 million) solar plant, located at Sweihan in Abu Dhabi, is a joint venture between the Abu Dhabi Government and a consortium of Japan’s Marubeni Corp and China’s Jinko Solar Holding.  Providing enough capacity for 90,000 people, the plant features more than 3.2 million solar panels, installed across an 8 sq. km site.  (AB 29.06)

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4.2  Egypt Launches EGP 1.2 Billion Plan to Renovate Water Networks in Aswan

The Egyptian governorate of Aswan has announced the launching of a major operation to renovate the sanitation and drinking water networks in the Upper Egyptian governorate at a cost of EGP 1.2 billion.  Aswan’s Governor Ahmed Ibrahim recently explained that the integrated project, which has been mandated to the governorate by Prime Minister Madbouly, will involve the Engineering Authority and various ministries.  The renovation plan was first considered during a check-up done to evaluate the technical status of sanitation stations in the governorate and power generators in Abu El-Reesh.

Residents in the towns of Abu El-Reesh, Koum Ombou and Aqaba in the governorate complained earlier this month about the limited access to drinking water, blockages in major drainage systems and power blackouts that cause interruptions in water supply.  The EGP 1 billion plan includes an estimated cost of EGP 25 million for raising the capacities of power stations, power generators and potable water infrastructure.  The population of Aswan governorate is estimated at 1.5 million, according to recent government statistics.  (Ahram Online 30.06)

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4.3  Nabrawind to Build Africa’s Tallest Wind Farm Tower in Morocco

Spanish renewables group Nabrawind Technologies has signed the sale of its first “Self-erecting Nabralift Tower,” which will be installed in Morocco.  The tower will have a hub height of 144 meters, the tallest on the African continent, and a rated power of 3.6 MW.

Morocco is a leader in renewable energy infrastructure projects.  The country has ambitious targets to bring national electricity production to 52% by 2030 and is well on track to reaching its 2020 goal of 42% renewable energy production.  The deal for the Nabralift tower shows Morocco’s willingness to invest in state-of-the-art technologies.  Under Morocco’s Integrated Wind Energy Project, the country aims to bring the installed capacity of wind farms to 2000MW by 2020.  Launched in 2010, the strategy has a total investment value of MAD 31.5 billion (approximately $3.2 billion).

Nabralift is a new wind turbine technology, and the Moroccan contract is the first order of the design.  Unlike other designs, the Nabralift tower can be installed without using large-size cranes, thanks to a new self-erecting system at the base of the tower pylon.  This lowers the need for special installation equipment costs and allows the tower to be installed on difficult terrain.  The Nabralift design also has a lower-cost foundation.  Other towers with a gravitational foundation can require 500 meters cubed of concrete and 60 tons of steel for installation into the ground.  (MWN 04.07)

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4.4  Cyprus Airports Pledge to Achieve Net Zero Emissions by 2050

Cyprus airports operator Hermes Airports signed a landmark commitment to become net zero for their carbon emissions by 2050.  The resolution was signed at the 29th ACI EUROPE Annual Congress in Cyprus – the annual gathering for airport CEOs and senior level airline representatives across Europe.  This commitment was undertaken as part of ACI EUROPE, the trade association for the European airport industry, announcing a Resolution formally committing the industry to achieve net zero by 2050, at the latest.  The collective pledge – further undersigned by 194 airports, operated by 40 airport operators across 24 countries – marks a significant step change in the climate action ambitions for the airport industry.  (FM 28.06)

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5.1  Lebanon’s Fiscal Deficit Rises by 66% to $6.25 Billion at the End of 2018

Lebanon’s fiscal deficit expanded from $3.75B by December 2017 to $6.25B (10.87% of GDP) by December 2018 the highest since 2010 according to the records of the Ministry of Finance.  This was attributed to a 16.21% yearly increase in government expenditures to hit $16.36B (28.44% of GDP), while the fiscal revenues recorded a yearly downtick by 0.36% to stand at $10.74B (18.67% of GDP).  The primary balance which excludes debt service posted a deficit of $635.64M, compared to a surplus of $1.43B by December 2017.

Tax revenues (constituting 78.85% of total revenues) increased by an annual 3.11% to $8.47B by December 2018.  Revenues from VAT (30.09% of total tax receipts) climbed by 10.51% y-o-y to $2.55B, and this can be largely attributed to the new VAT rate of 11%, increasing  from 10% beginning  January 2018.  Meanwhile, “customs’ revenues” (15.9% of tax receipts) dropped by 6.38% year-on-year (y-o-y) to $1.34b.  As for non-tax revenues (21.1% of total revenues), they witnessed a drop of 11.46 % to stand at $2.27B by the end of 2018.  This can be linked to the yearly decrease of 16.60% in telecom revenues (constituting 47.2% of total non-tax revenues) to reach $1.07B by December 2018.

On the expenditures’ side, total government spending increased by a yearly 16.21% to hit $16.36B by December 2018. In details, transfers to Electricity du Liban (EDL) alone rose by 32.26% to reach $1.76B which followed the 28.34% annual rise in average oil prices to $71.69/barrel over the period.

Moreover, total debt servicing (including the interest payments and principal repayment) reached $5.61B by December 2018, up by a yearly 8.30% such that interest payments alone rose by 8.44% y-o-y to $5.41B.  Interest payments on domestic debt retreated by 1.88% y-o-y to $3.17B.  In details, the total amount of local currency debt rose by 5.10% y-o-y to $51.64B by the end of 2018.  Moreover, the swap agreement between the Mof and BDL consisted that the latter subscribed in LBP8,250 billion of treasury bills at 1% coupon.  The operation took place during 2018 in June, August, September and November.

Meanwhile, interest payments on foreign debt rose by an annual 27.36% to $2.24B noting that the total amount of foreign currency grew yearly by 10.23% to reach $33.49B in 2018.  In fact the other part of the swap included the Central Bank buying $5.5B of Eurobonds from the Ministry of Finance. $2.5B of the total were used to pay maturing Eurobonds.  Worth mentioning that some of the Eurobonds were issued at longer maturities and therefore bearing higher interest rates.  Treasury transactions posted (includes revenues and spending that are of temporary nature) deficit of $624M, compared to $455.11M by December 2017.  In fact, treasury expenses of which municipalities climbed from $412.3M to $570.40M over the same period.  (MoF 25.06)

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5.2  Lebanese Tourist Arrivals Reach an 8-Year High of 692,704 in May 2019

The latest figures released by Lebanon’s Ministry of Tourism revealed a remarkable growth in the tourism sector in the first five months of 2019, foreshadowing a promising summer season which is usually the country’s most attractive period.  The number of tourist arrivals grew 5.5% year-on-year (y-o-y) to hit an 8 year high of 692,704 tourists by May 2019, although behind the record-figure of 732,855 tourist arrivals by May 2010, albeit 2010 was Lebanon’s golden year on the tourism sector.  It is interesting to also note that by May 2010, Arab tourists constituted the bulk of total travelers (41.5%), followed by Europeans (24.6%), 19.4% from Asia, 10% from the Americas and 4.5% from others.  However, by May 2019, the tourism canvas began to slowly shift such that number of European tourists gained thrust (comprising 37% of total arrivals to Lebanon), followed by 33.2% of total from the Arab countries, 15.4% from the Americas, 7.9% from Asia and the remaining tranche from other regions.

Total European tourists grew 8.7% y-o-y to 256,122 travelers by May 2019.  The number of French, German and British visitors recorded annual growth of 5.8%, 2.2%, and 6.1% to hit 66,514 and 31,065 and 27,399 travelers, respectively.  Meanwhile, Arab tourists added 16.2% y-o-y to reach 229,941 such that Lebanon welcomed 83,761 Iraqi tourists over the period (equivalent to 36.4% of total tourists from the Arab countries), up by 1.2% y-o-y.  Egyptian tourists followed (16.8% of total Arabs) climbing by 14% y-o-y to 38,715 tourists by May 2019. In turn, travelers from Jordan (14.1% of total Arabs) gained an annual 4.2% to stand at 32,482 tourists.  Meanwhile, Lebanon continued to reap the benefits of the KSA lifting its travel ban from February 2019 and recorded the arrival of 31,069 Saudi tourists by May 2019, up from 16,874 Saudi nationals in the same period last year.  As for tourists from the Americas, they registered a 3.9% annual rise to 106,471 visitors by May 2019, of which 51.5% (or 54,828 travelers) were US nationals, compared to 52,001 arriving to Lebanon by May 2018.  Moreover, 31.8% of total tourists from the Americas were Canadian nationals.  These last hit 33,876 tourists by May 2019 compared to 33,609 in the same period last year.  There was a 10.8% yearly surge recorded in the number of tourists coming from Brazil, amounting to 8,774 tourists (or 8.2% of total tourists from the Americas) by May 2019.  (MoT 26.06)

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5.3  Jordan Enjoys 2.0% GDP Growth Rate in the First Quarter of 2019

Jordan’s Department of Statistics issued the results of the preliminary estimates of the GDP at market fixed prices for the first quarter of 2019.  The results show that growth reached 2% compared with the first quarter of 2018, when growth reached 1.9%.  The general gross rate for the GDP reached 1.9% for 2018 compared with 2017.  The estimates of GDP at the level of production sectors, most sectors have shown positive growth during the first quarter of 2019 compared with the first quarter of 2018.  According to the report, the Transport, Storage and Communications sectors have achieved the highest growth rate at 3.7%, followed by agricultural sector by 3.6%, then followed by Social & Personal Services Sector at 3.4%, followed by Finance, Insurance & Real Estate’s Sector by 3.0% and finally Electricity Water Sector by 1.7%.  (DoS 01.07)

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5.4  Jordanian Exports Increase by 5.9% & Imports Decrease by 1.3% During First Third of 2019

The statistical data issued by Jordan’s Department of Statistics indicate that the value of total exports reached JOD1.752 billion during the first third of 2019, marking an increase by 5.3% compared with the same period of 2018.  National exports value reached JOD 1.455 billion during the first third of 2019, showing an increase by 5.9% compared with the same period of 2018.  The value of re-exports reached JOD 296.3 million during the first third 2019 which indicates an increase by 2.3% as compared with the same period of 2018.  The imports value reached JOD 4.54 billion during the first third of 2019, thus decreasing by 1.3% compared with the same period of 2018.

The deficit in the trade balance, which is calculated by deducting the value of imports from the value of total exports, has reached JOD 2.788 billion therefore; the deficit has decreased during the first third of 2019 by 5.0% compared with the same period of 2018.  The imports coverage by total exports has become 38.6% during the first third of 2019 while it was 36.2% for the same period of 2018, which means an increase by 2.4%.  (DoS 26.06)

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5.5  In-Coming Tourism to Jordan Surges in June by 26.5%

The number of visitors arriving in Jordan during June rose by 26.5% to some 455,383 people, whereas the number of overnight visitors reached 393,761 people, rising by 26.4% compared with the same period last year.  Minister of Tourism and Antiquities Shweikeh said that monthly statistical indicators showed an improvement in the tourism sector’s performance, which she attributed to expanded marketing in traditional and promising markets and new low-cost flights.  The minister noted that statistical indicators for the year have been positive so far, with the total number of visitors to the Kingdom between January and June of this year standing at 2,438,584 people; an increase of 5.6%.

The number of overnight visitors during the first sixth months of the year stood at 2,031,268 people, climbing 5.2% compared with the same period last year.  Visitors from European countries grew by 36.8%, followed by North and South American countries by 19.1%, Asian and Pacific countries by 8.2% and African countries by 2.9%.  (JT 04.07)

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5.6  Jordanian Start-Ups to be Exempt from Capital Tax as of this Year

Jordanian start-ups will be exempted from capital tax starting this year, Minister of Digital Economy and Entrepreneurship Gharaibeh announced during a World Bank forum on digital economy and infrastructure in the region.  The new exemption for start-ups is an addition to a growing list of government incentives for the ICT-sector, which includes a zero-per cent tax on IT services as well as a zero-per cent income tax on exports, no customs duties on IT-related products and a 5-per cent income tax rate on business done in Jordan.

The government also plans to introduce 40 tech incubators in 2019 to “unleash more of Jordanians’ innovation”, a video displayed during the “Digital Mashreq Forum” revealed.  Jordan, according to the video, has moved up 20 places in the Global Tech Competitiveness Index in the last two years, and 24 ranks in the Entrepreneurship Index during the last four years.

At the first-of-its-kind event in the region, Prime Minister Razzaz said that Jordan’s biggest challenge is empowering the youth and closing the digital divide, stressing that such improvement can only be carried out through digital disruption and improvement.  During a discussion panel at the event, ICT ministers from Jordan, Iraq and Lebanon discussed their countries’ challenges and future plans for development.  Speaking on behalf of Jordan, Gharaibeh said that from 2013 to 2019, Jordan has increased its Internet infrastructure by 60% year over year.  He noted that the sector’s development is “so rapid that just one decision increased digital payments by 37%”, referring to the National Aid Fund’s decision to transfer money to beneficiaries’ bank accounts rather than pay them with cash.  A total of 22% of graduates also now get their degrees in fields related to ICT, according to the ministry.  (JT 30.06)

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5.7  Non-Jordanian Investors Own 51.1% of the Shares on the Amman Exchange

The value of shares bought by non-Jordanian investors in the Amman Stock Exchange (ASE) in June reached JOD17.3 million, constituting 17.3% of the total trade value, ASE figures have shown.  The value of shares sold by non-Jordanians in June stood at JOD17 million, marking a JOD 300,000 increase in the net non-Jordanian investment at ASE compared with a JOD1.7 million decline in the same month of 2018.  In the January-June period, non-Jordanians bought shares worth JOD171.2 million, equivalent to 25.2% of the total trade volume, while they sold shares worth JOD211.8 million.  Non-Jordanian investors’ ownership in companies listed at the ASE by the end of June constituted 51.1% of the total market value, 36.5% for Arab investors and 14.6% for non-Arab investors.  (Petra 02.07)

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►►Arabian Gulf

5.8  How Arabian Gulf Cities Compare Globally for Expat Cost of Living

Dubai has been named as the most expensive cities for expatriates in the Middle East in the 2019 Cost of Living survey published by consultants Mercer.  Dubai (21), Abu Dhabi (33) and Riyadh (35) ranked among the most expensive cities regionally, with the results reflecting the continued success of the UAE’s drive to diversify and mature its economy.  Due to the strong performance of the US Dollar versus the Euro, the countries with currencies which are pegged to the USD, like the UAE dirham, have risen in the ranking compared to most of the European cities.

Globally, the costliest city in the world for the second consecutive year was Hong Kong, with eight out of the top 10 being Asian cities.  Tokyo (2), Singapore (3) and Seoul (4) were followed by Zurich (5), Shanghai (6), Ashgabat (7), Beijing (8), New York City (9), and Shenzhen (10).  The world’s least expensive cities for expatriates are Tunis (209), Tashkent (208), and Karachi (207), according to the report.  Mercer’s survey includes 209 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods and entertainment.  (AB 26.06)

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5.9  Kuwait Parliament Passes Budget with $22 Billion Deficit

Kuwait’s parliament on 3 July passed an annual budget projecting a deficit of $22 billion, as lawmakers opposed government plans to impose taxes or reduce subsidies.  The expected shortfall in the 2019/20 budget is equivalent to 15.7% of Gross Domestic Product and amounts to a fifth year in a row that the oil-rich Gulf state has run a deficit.

Public revenues are estimated at $51.8 billion, while spending is projected at $73.8 billion, both slightly higher than last year’s projections.  Revenues from oil are estimated at $45.4 billion and comprise some 88% of expected total public revenues.  Projections for oil income were predicated on a price of $55 a barrel.

Kuwaiti lawmakers have persistently opposed any plans by the government to impose taxes or raise the cost of public services.  The economy shrank by 3.5% in 2017, before growing by just 1.7% last year.  It is projected to grow by 2.5% this year.  The emirate, with a native population of just 1.4 million, has a sovereign wealth fund worth more than $600 billion, providing a cushion for state finances.  Around 3.3 million foreigners live and work in Kuwait.  (AB 03.07)

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5.10  UAE Defines Industry Sectors Eligible for Up to 100% Foreign Ownership

On 2 July, the UAE Cabinet announced business activities eligible for up to 100% foreign ownership under a law ratified last November, as the country seeks to increase investment from overseas and create jobs for nationals.  The list of 122 economic activities across 13 sectors includes renewable energy, space, agriculture, manufacturing, transport, logistics, hospitality, food services, information and communications and a host of others.  Local governments [across the seven emirates of the UAE will determine the percentage of ownership in each activity according to their circumstances.  In certain emirates, some activities could still require an Emirati shareholder, even if the foreign ownership threshold increases.

Previously, foreign investors could hold up to 49% of a company registered in the UAE, unless it was in a designated free trade zone, and would have to partner with an Emirati investor who would hold the remaining 51%.

Like other GCC countries, which have traditionally relied upon hydrocarbons to empower their economies, the UAE has implemented reforms to strengthen and diversify amid a period of lower oil prices.  Reforms include lowering business registration fees to grow the non-oil private sector and introducing a 5% VAT in January last year, under a GCC-wide agreement.  The Emirates has also started issuing long-term residency visas to few expatriates to encourage them to stay longer and invest in the country.  Special “gold card” permanent visas have been granted to expatriates who have contributed substantially to the UAE economy.

The inclusion of logistics and storage activities in the list will allow investors to own projects in e-commerce transport, supply chain, logistics and cold storage for pharmaceutical products.  Professional, scientific and technical activities are also eligible – which enable ownership of laboratories for research and development in biotechnology.  The list also includes administrative services, support services, educational activities, health care, arts and entertainment and construction.  (AB 02.07)

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5.11  UAE’s VAT Revenues Exceeded Expectations in 2018

The UAE’s collection of value-added tax exceeded original estimates, according to a report from Moody’s credit rating agency.  Moody’s said the government’s 2018 and 2019 VAT revenue forecasts had included conservative assumptions regarding the level of compliance in the initial years of implementation.  Nonetheless, the robust level of compliance in the first year of the tax framework is a positive reinforcement of the UAE’s high institutional strength.  According to government data, VAT collections totaled AED 27 billion ($7.4 billion) in 2018, compared to an anticipated AED 12 billion ($3.3 billion).  The amount was also higher than the government’s projection for this year of AED 20 billion ($5.5 billion).

Moody’s noted that the UAE’s federal government will retain 30% – AED 8.1 billion – with the remaining AED 18.9 billion divided among the UAE’s seven emirates.  The Moody’s report noted that the largest beneficiary of VAT was Dubai, which it estimated received approximately a 60% share of the revenue attributed to the emirates and 42% of total revenue.  Additionally, the federal government’s share of VAT revenues is equivalent to slightly less than 50% of the $19 billion in direct budget grants it receives from Abu Dhabi and Dubai.

The VAT revenues – which were bolstered by strong compliance – are likely to be the second most significant source of non-grant revenues for the government in 2019, following the combined royalties and dividend’s from the government’s holdings in the telecommunications sector.  Given this high level of compliance in the first year, Moody’s does not expect a significant increase in VAT collections in 2019.  Implementation of the VAT had a small and short-lived impact on inflation.  (AB 26.06)

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5.12  Ethiopia to Send 50,000 Workers to the UAE

Ethiopia will send 50,000 people to work in the United Arab Emirates, Ethiopian Prime Minister Abiy Ahmed announced on 8 July, as the Gulf country looks to expand its influence in the Horn of Africa.  Ethiopia is planning short-term measures to reduce local unemployment and to cope with the increasing job demands by its people.  One short-term program is sending their skilled labor to foreign countries.

The Prime Minister said that under the deal 50,000 workers would be sent to UAE in the 2019/2020 fiscal year, and discussions were being held to send 200,000 over the next three years.  The workers would receive training in various sectors, including driving and nursing, earn higher wages and boost their capacity.  Discussions are underway about similar agreements with Japan as well as European nations, Abiy said.

The UAE has recently pressed for closer ties with countries in the Horn of Africa, helping to mediate along with Saudi Arabia a historic peace accord between former enemies Ethiopia and Eritrea last year.  Last year, the UAE pledged to invest $3 billion in aid and investment in Ethiopia.  (AB 09.07)

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5.13  Abu Dhabi Creates $1 Billion Fund to Boost R&D Business

The Abu Dhabi Government has created an AED4 billion ($1.09 billion) fund to boost research and development in the emirate as part of widespread measures to increase business in the capital.  The fund is dedicated to provide rebates on R&D spend and costs of new activities in Abu Dhabi.  It was included in a raft of initiatives announced as part of the Abu Dhabi Development Accelerator Programme “Ghadan 21”, which was launched at the start of 2019.

In a move to increase growth and diversify its economy away from a dependence on hydrocarbons, the program will provide large energy discounts for businesses and give easier access government services and financial assistance from banks.  The Abu Dhabi Instant Licence will help open doors to doing business and investing in the emirate.  Approvals are processed instantly online and license holders in most cases can begin conducting business activities immediately.

As well as a reduction in tariffs for businesses and new licenses for technology businesses, there was also good news for SMEs with the launch of the SME Credit Guarantee.  The SME Growth Loan will provide more accessible financing opportunities for SMEs in the emirate, with a guarantee of up to 75% of the loan value provided by the government to Abu Dhabi banks, in case of default.  Further steps to boost the economy include an open data program for investors and traders, improvement in ease of doing business with the Tamm program and the development of Ecotourism Incentive Packages to drive tourism in the Western region of Abu Dhabi.

The three-year Ghadan 21 program, from 2019 to 2021, includes an AED50 billion fund that is being spread across four strategic pillars: economic, knowledge, liveability and social.  (AB 25.06)

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5.14  More Than 6 Million Tourists Visit Dubai and Abu Dhabi in First Quarter

 A total of 6.04 million international tourists visited Abu Dhabi and Dubai during the first three months of the year, a growth of 1.8% year on year, according to new figures from the Central Bank of the UAE.  Dubai received 4.75 million from January to March against 4.65 million in the same period last year, while tourist arrivals to Abu Dhabi increased from 1.28 million to 1.29 million.  Despite the increase in the number of tourist arrivals in Dubai, hotel revenues declined per room as a result of the constant discounts and offers provided by the emirate’s hotels.

Tourists coming from some source markets increased, with Omanis showing a 27.1% growth, France (17.5%), China (13.2%), Germany (5.2%) and US (3.3%) while arrivals from Russia, India, Saudi Arabia, Kuwait and Pakistan decreased.

According to the figures, most of Dubai-bound tourists are coming from GCC states, Middle East and North Africa, accounting for 27%, 17%, and 10% respectively of the emirate’s total foreign arrivals, with West Europe and North America, comprising 23% and 7% respectively while South Asian visitors represent 16% of the total.  US tourists who came to Abu Dhabi in the monitored period rose by 13.8%, followed by Egyptians (9.7%), Jordanians (8.2%), and Pakistanis (6.5%) against the same period last year.  (AB 25.06)

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5.15  OPEC Oil Output Cuts Curb Saudi Arabia’s Economic Growth

Saudi Arabia’s economy is feeling the sting of oil output cuts just as it looks to extend the OPEC+ agreement at current production levels for the rest of this year and possibly beyond.  Gross domestic product expanded an annual 1.7% in the first quarter, the Saudi statistics authority said on 30 June, down from 3.6% in the previous three months.  Growth in the oil sector stood at 1%, compared with 6% in the fourth quarter of 2018.

Saudi Arabia has led efforts to stabilize the oil market by ending years of animosity with Russia in 2016 and joining forces to prop up prices.  When it comes to the economy, the world’s largest crude exporter is paying the price despite efforts by Prince Mohammed to reduce reliance on oil through a sweeping plan dubbed “Vision 2030.” Analysts surveyed by Bloomberg expect the Saudi economy to expand 1.7% this year, compared with 2.2% in 2018.

Still, the non-oil GDP fared better than the oil economy, with an annual gain of 2.1%.  Growth in the private sector – a key measure of the economy’s health – reached 2.3%, the highest level since 2015.  One positive surprise was the increase in construction after years of struggling.  The turnaround could be a result of progress being made on mega-projects like Prince Mohammed’s futuristic $500 billion city on the Red Sea, Neom.  (AB 30.06)

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►►North Africa

5.16  Egypt’s Domestic Liquidity Rises by 7.8% Over 9 Months

Egypt’s domestic liquidity increased by 7.8% in the first three quarters of the 2018/2019 fiscal year, increasing by EGP 270.4 billion to reach EGP 3.724 trillion, the Central Bank of Egypt said in a report.  The report stated that the increase in domestic liquidity was reflected in the growth of quasi-money, which increased 8.7% to EGP 228.4 billion, and the rise in the money supply of 5.1%, an increase of EGP 42 billion.  The surge in quasi-money came as a result of the rise in non-current deposits in local currency by EGP 203.7 billion, and in deposits in foreign currency by EGP 24.7 billion.  Current deposits in local currency increased by EGP 29.9 billion.  (CBE 27.06)

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5.17  Egypt Reports 6.6% Rise in Exports to International Trading Groups in 2018

Egyptian exports to international groups in which Egypt is a member hit $28.7 billion in 2018 against $26.9 billion in 2017, marking a 6.6% rise.  The Central Agency for Public Mobilization and Statistics (CAPMAS) said that these international groups are the United Nations Economic and Social Commission for Western Asia (ESCWA), the Sahel and Sahara Group, the Common Market for Eastern and Southern Africa (COMESA), the Group of 15 and the Arab free trade zone.

Egypt’s exports to the Arab free trade zone topped the list at $9.4 billion in 2018.  Exports to ESCWA came in second, recording $7.9 billion in 2018, while COMESA came in last with exports registering $1.9 billion.

Exports to groups which do not include Egypt as a member stood at $12 billion in 2018, an 18.6% rise.  These groups are the European Union, the European Free Trade Association (EFTA), the North American Free Trade Agreement (NAFTA), the Association of Southeast Asian Nations (ASEAN) and MERCOSUR.  Egypt’s exports to the EU ranked number one, standing at $9 billion in 2018 at a 17.8% rise.  Exports to NAFTA came in the second position at $1.8 billion, while EFTA came at the end of the list with $0.2 billion.  (CAPMAS 03.07)

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5.18  Egypt Moves Towards Universal Healthcare System

The first phase of implementing Egypt’s new universal healthcare system began on 1 July in Port Said.  During the pilot phase, quality medical services will be provided in accordance with Egyptian national standards.  The first phase will also involve the completion of the data infrastructure of the new healthcare system in addition to the completion of user registration.

Starting on 1 July, patients in Port Said will be admitted to hospital after referrals from family medical units, as the hospitals will receive only emergencies and accidents without referrals.  Egyptians need to ensure that they are registered with the units and conduct a medical examination.

Egypt’s older health-insurance system, which dates to the 1960s, has been criticized as substandard.  The new healthcare system aims to overcome the shortcomings of the old one.  Under the old healthcare system, an employee paid 1% of the insured salary as a premium.  Under the new system, the same percentage will be deducted from total income.

A set of new taxes will also go towards financing the new system.  Public and private companies of any size will have to pay a 0.25% tax on their revenues to help fund the system, and food and pharmaceutical companies will need to pay a tax of 0.5%.  Another means of funding will be fees on issuing and renewing drivers’ licenses, toll fees on highways, and a tax of LE 0.75 on cigarette packs and a 10% tax on tobacco products.  People will pay a nominal fee for medical services, such as 10% of the price of radiography and 20% of the price of medical tests.

The new system is scheduled to be rolled out in six stages.  The first phase started in June 2018 as a preliminary stage, while the actual implementation started with the governorate of Port Said.  The first phase, which lasts until 2020, also includes Suez, Ismailia, North Sinai and South Sinai.  In the second phase, from 2021 to 2023, the system will be implemented in the governorates of Aswan, Matrouh, Qena, Luxor and the Red Sea.  The third phase runs from 2024 until 2026 and covers Beheira, Alexandria, Sohag, Kafr Al-Sheikh and Damietta.  The fourth phase extends from 2027 to 2028 and includes Assiut, the New Valley, Minya, Beni Sweif and Fayoum.  The fifth phase goes from 2029 to 2030 and covers Daqahliya, Gharbiya, Sharqiya and Menoufiya.  The sixth and final phase covers Cairo, Giza and Qalioubiya and will be between 2031 and 2032.  (Al-Ahram 27.06)

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5.19  Morocco and Sustainment for its F-16 Fighter Fleet

On 27 June, the State Department has made a determination approving a possible Foreign Military Sale to Morocco of continuation of sustainment support to its current F-16 fleet for an estimated cost of $250.4 million.  The Defense Security Cooperation Agency delivered the required certification notifying Congress of this possible sale.

The Government of Morocco has requested a continuation of sustainment support to its current F-16 fleet to include the following non-MDE components:  F-16 support equipment, spares and repair parts; personnel training and training equipment; publications and technical documentation; munitions support equipment (for AMRAAM, CMBRE, JDAM, PAVEWAY), support and test equipment; integration and test; U.S. Government and contractor engineering, technical and logistical support services; and other related elements of logistics and program support.  The total estimated program cost is $250.4 million.

This proposed sale will support the foreign policy and national security of the United States by helping to improve the security of a major Non-NATO ally that is an important force for political stability and economic progress in North Africa.  The proposed sale will improve Morocco’s self-defense capability.  Additionally, the continuation of sustainment for their F-16 fleet strengthens the interoperability with the United States and other regional allies.  Morocco already operates an F-16 fleet and this sustainment case will ensure that they can continue operating their fleet in the future.  Morocco will have no difficulty absorbing this support into its armed forces.  (DoS 27.06)

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6.1  Turkey Breaks its Exports Record in First Half

Recording $88.2 billion in the first half of 2019, Turkey’s exports hit the highest figure in its history.  Turkish exports rose 2.18% to $88.2 billion in the first six months of this year.  Turkey’s foreign trade gap narrowed to $13.96 billion in the first half of this year.  The country’s foreign trade volume fell by 11.3% to $190.4 billion from January to June.  Exports coverage ratio to imports reached 86.3% in the January-June period, up from 67.3% in the same period last year.  (AA 02.07)

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6.2  Turkey Produces 3.1 Million Tons of Crude Steel in May

Turkey’s crude steel production totaled 3.1 million tons in May.  The figure showed an 8% drop from the same month of last year, the Turkish Steel Producers’ Association (TCUD) announced. The country’s steel export volume surged 30.3% year-on-year to 2.1 million tons in May.  The value of steel exports also jumped 12.2% to $1.6 billion during the same period.

Meanwhile, Turkey’s steel imports declined by 45.4% to 974,000 tons.  The report showed that Turkey paid $865 million for imports, up 40.9% on an annual basis in the month.

In the first five months of 2019, Turkey produced 14.3 million tons of crude steel, posting a 10% annual decrease.  Turkish crude steel export volume rose 20.4% to 9.8 million tons in the January-May period.  The country earned $7.2 billion from the export in the same period.  The country’s steel import between January and May amounted to 4.9 million tons, down 34.5% year-on-year.  The value of imports also dropped by 33.4% to $4.2 billion in the first five months of this year.  (AA 02.07)

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6.3  Cyprus’ Central Bank Lowers GDP Growth Forecast for 2019 to 3.5%

The Central Bank of Cyprus (CBC) has revised its forecast for GDP growth for 2019 downward to 3.5% from 3.7% it estimated in December.  For 2020 and 2021 it expects economic growth to be driven by the continuous growth of domestic demand and forecasts further recovery over the next few years, however at a slower pace of 3.2% in 2021 (from 3.3% it previously forecast).

According to its updated macroeconomic projections, Cyprus’ GDP recorded an annual increase of 3.5% (seasonally adjusted) in Q1/19, with the contribution of almost all the main productive sectors.  This reflects the slowdown in economic activity due to the imposition of restrictive measures on international trade and the growing uncertainty over external demand.

CBC said the expected growth rate for 2019 is based on domestic demand and notes that private consumption is expected to decelerate to 2.8%, despite wage growth, from 3.1% it expected in December.  This is primarily due to the increase in the contributions to the Social Insurance Fund and the introduction of contributions to the National Health System.  It also cited the projected acceleration of loan repayments due to the expected introduction of the “Estia” scheme, aiming to assist borrowers with non-performing loans collateralized with primary residences to repay their loans.  In addition, the CBC expects a slowdown of public consumption, which is expected to grow by 3.7%.

On employment, CBC predicts a slowdown to 2.9% this year, while in 2020 and 2021 it expects further deceleration to 2.4%.  The unemployment rate is expected to drop to 6.9% in 2019, from 8.4% in 2018, to 6% in 2020 and to 5.6% in 2021.  (CBC 27.06)

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6.4  Cyprus’ Average Monthly Earnings Increase by 2.5% in First Quarter

Average gross monthly earnings of employees in Cyprus during Q1/19 increased 2.5% to €1,898 from €1,852 in Q1/18.  When seasonally adjusted average gross monthly earnings during Q1/19 are estimated at €1,956 from €1,945 in Q4/18, an increase of 0.5%.  There is also a gender pay gap as average gross monthly earnings of male employees during Q1/19 are estimated at €2,031 while female employees receive a lower €1,735.

Compared to Q1/18, the average gross monthly earnings of male employees recorded an increase of 2.3% while that of female employees went up 2.6%.  Average monthly earnings of employees include the basic salary, the cost of living allowance, earnings for overtime and any other allowances received by employees during the reference period and payments in arrears.  The average is calculated by dividing the total gross earnings before any deductions for compulsory social security contributions, by the total number of employees who received remuneration.  (FM 02.07)

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6.5  Cyprus has Second Highest NPL Ratio in the EU

Cypriot banks are burdened with the second highest Non-Performing Loan (NPL) ratio in the European Union after Greece, according to the European Banking Authority (EBA).  The EBA’s risk dashboard for Q1/19 shows that NPLs (90 days past due definition) in Cyprus’ three systemic banks amounted to 34.1% compared with the EU average of just 3.1% of total loans.  In absolute terms, bad loans amounted to €6.9 billion. Greece holds the top spot with an NPL ratio of 41.4% or €84.3 billion.  Portugal posted the third highest NPL rate with just 9.57% and Italy the fourth highest with 8.25%.

Cyprus NPL coverage ratio was however slightly above the EU average with 45.9% compared with 45.1%.  Cyprus banking system capital ratios were below the EU average in Q1/19.  The CET1 capital ratio for the Cypriot banks amounted to 13.7%, compared with the EU average of 14.7%, while total capital ratio reached 17.4% compared with the EU average of 18.9%.

According to EBA data, Cyprus posted the fifth highest cost-to-income ratio which amounted to 70.8% compared with the EU average of just 6.63%.  Cyprus’ loan to deposit ratio amounted to 60.1% compared with the EU average of 116%.  Moreover, Cyprus continues to post high liquidity ratios, recording the third highest Liquidity Coverage Ratio (LCR) with 326% compared with the EU average of 153%.  (FM 07.07)

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7.1  17th of Tammuz Fast Observed on 21 July, Begins the Three Weeks Mourning Period

The Jewish fast day of the 17th of Tammuz will be observed this year from sunup to evening on Sunday, 21 July.  The fast day itself commemorates five tragedies:  1. Moses descended from meeting G-d and receiving the Torah on Mount Sinai, saw the Jews celebrating with the Golden Calf and broke the two tablets G-d had given him.  2. The daily offering, which had been brought regularly in Temple in Jerusalem, was halted during the Babylonian siege before the Temple was destroyed.  3. The Romans breached the walls of Jerusalem, prior to destroying the second Temple, in 70 CE.  4. A Greek or Roman official named Apostemos held a public burning of the Torah.  5. Idols were set up in the Temple itself; it is not clear what year this happened.  The 17th of Tammuz is the second of the four fasts commemorating the destruction of the Temple and the Jewish exile.

In later years this day continued to be a dark one for Jews.  In 1391, more than 4,000 Jews were killed in Toledo and Jaen, Spain and in 1559 the Jewish Quarter of Prague was burned and looted.  The Kovno ghetto was liquidated on this day in 1944 and in 1970 Libya ordered the confiscation of Jewish property.

The 17th of Tammuz also marks the beginning of the “Three Weeks,” which ends with the fast of the 9th of Av.  Some customs of mourning, which commemorate the destruction of Jerusalem, are observed from the start of the Three Weeks.  Jewish mourning customs restricts the extent to which one may take a haircut, shave or listen to music, though communities and individuals vary their levels of observance of these customs.  No Jewish marriages or other major celebrations are allowed during the Three Weeks, since the joy of such an event would conflict with the expected mood of mourning during this time.  The Three Weeks can be thought of as having a variety of increasing levels of mourning.  Some restrictions begin on the 17th of Tammuz, some from the beginning of the month of Av, and some only come into effect the week in which Tisha B’Av occurs.

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7.2  Israeli Foreign Minister Attends Climate Summit in UAE

In late June, Israel’s Foreign Minister Yisrael Katz visited Abu Dhabi, taking part in a UN climate conference and discussing “the Iranian threat” with an Emirati official.  While in the United Arab Emirates, Katz met with a senior UAE official and UN Secretary-General Guterres.

Israel and the UAE do not have formal diplomatic relations, but the two have developed increasingly close ties over shared concerns about Iran.  Visits by senior Israeli officials to Gulf states are rare, but growing in frequency.  Prime Minister Netanyahu visited Oman last year, but Katz’s visit was the first to the Gulf since the Mideast peace conference in Bahrain.

The Foreign Ministry said that Katz’s meeting with the senior UAE official focused on “regional issues and relations between the countries,” and also addressed “the need to deal with the Iranian threat related to the nuclear issue, missile development, Iran’s support for terrorism in the region and the violence employed by Iran against the interests of the region.”  The visit came as the International Atomic Energy Agency announced that Iran exceeded the uranium enrichment limit under the 2015 nuclear deal.  (IH 02.07)

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7.3  Tobacco Costs Jordan 6% of GDP and Took Over 9,000 Lives in 2015

Widespread tobacco use cost the Hashemite Kingdom JOD1.6 billion in 2015, a World Health Organization (WHO) study has found.  The figure was recently announced during a high-level political dialogue held by Prime Minister Razzaz to discuss the findings of an international study titled “Economic Investment Case of Tobacco Control in Jordan”.   The study was the first systematic analysis of the combined health and economic burden of tobacco use in Jordan, providing estimates on potential health benefits and economic gains from effective tobacco control measures.

These measures are envisaged under the WHO Framework Convention on Tobacco Control, a legal international treaty ratified by the Jordan in 2004.  The analysis was requested by the Ministry of Health and initiated in 2017 by the WHO and the United Nations Development Program (UNDP).

The economic analysis found Jordanian incurred losses of JOD1.6 billion in 2015, representing 6% of overall GDP, due to widespread consumption of tobacco.  Studies conducted in other countries show a global average loss of 1.8% of GDP, meaning Jordan suffers by far the highest economic burden out of all countries studied so far.  In addition to economic loss due to decreased productivity and increased health expenditure, the study also estimates more than 9,000 deaths occurred during the 2015 study year as a direct result of tobacco consumption.

Based on a 2016 study, the average poorest adult male cigarette smoker with an income of JOD 100 to JOD 250 per month spends approximately 25 times more on cigarettes than on health, approximately 10 times more on cigarettes than on education, approximately 2.5 times more on cigarettes than on housing and approximately 1.5 times more on cigarettes than on food.  (JT 09.07)

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7.4  Fifth of October will be Main Federal National Council Voting Day in UAE

The UAE’s National Elections Committee announced the timeline of the upcoming fourth Federal National Council election, with 5 October selected as the main voting day.  The opening of registration for applications at application centers will be on 7 August, candidate’s registration at polling stations will start on 18 August and the announcement of the preliminary list of candidates will be on 25 August.  The NEC will receive objections against candidates over the following three days, and will respond to these objections by 1 September.  The final list of candidates will be announced on 3 September, while the names of the candidate representatives should be presented the following day, according to the terms set out in the executive regulations.

According to the timeline, overseas voting will run on 22-23 September, while early voting takes place from 1-3 October.  The timeline has set October 5 as the main election day, during which the results of the preliminary count will be announced.  Appeals will start on 6 October and continue for two days, with the final list of elected candidates announced on 13 October.

More than 330,000 Emiratis will be eligible to vote in what will be the largest ever Federal National Council elections.  Names of the 337,738 UAE citizens were released recently by the National Election Committee. According to a report on the Abu Dhabi Government website, the Electoral College list represented a 50% increase in voters compared to the previous election in 2015.  The FNC is the federal authority of the UAE formed to represent the general Emirati people.  It consists of 40 members with advisory tasks in the house of legislative council.  (AB 01.07)

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7.5  Egypt to Legalize Status of 120 Unlicensed Churches

The legal status of 127 churches and service buildings that used to operate without permit was legalized by Egyptian authorities.  A presidential committee, headed by Prime Minister Madbouly, was tasked with legalizing the status of unlicensed Christian places of worship.  With the newly legalized churches, the total number of unlicensed Christian places of worship and service buildings that have been granted legal status will reach 1,021.  Meanwhile, the cabinet issued strict instructions to all governors to take all measures necessary to ensure that the newly legalized churches and service buildings are only used for performing religious rituals.

In August 2016, the Egyptian Parliament passed a new law on the construction of churches in an effort to ease the process of obtaining a license to build a church.  In January 2017, the cabinet decided to form a committee for church conciliation to work according to the new law.  Before the approval of church construction in 2016, the law of the Ottoman Empire governed the process of church building in Egypt, which required complex approvals to build a new church.  However, the recent law reportedly solved all these obstacles, and attempts to license churches built years ago, in coordination between the two sides, security and churches were finally possible.  (DNE 02.07)

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7.6  Greece’s New Prime Minister Sworn in After Landslide Victory

Following a landslide victory, Greece’s new prime minister, Kyriakos Mitsotakis of the center-right New Democracy party, was sworn in on 8 July as many hope his win will signal an end to austerity.  With youth unemployment nearly double the EU average, the new premier will have an uphill struggle to turnaround Greece’s fortunes.  There will be no honeymoon period for him as EU leaders were due to meet to review how Greece risks missing its budget targets after his predecessor’s spending spree.  PM Mitsotakis vowed that his party would be “rolling up its sleeves” and that parliament won’t close for summer “because the future cannot wait.”  He will now be under the international spotlight as many hope he can meet his election promises of lower taxes, jobs and investment.

In his first address as the country’s new leader, the 51-year-old Harvard-educated former banker said he welcomed the result with a sense of “modesty and respect” seeing it as a victory for all, irrespective of political persuasion.  The results of the election were announced on 7 July as Prime Minister Alexis Tsipras’s left wing Syriza party was toppled.  They had led the country since 2015 but despite promises things would change under their leadership the nation was forced to take a third bail out loan.

The country’s interior ministry said the conservatives had gained 39.7% compared with 31.5% for Syriza, but the snap election saw just over half of the nation turnout to vote.  The win saw Mitsotakis’s New Democracy party hold 158 seats in the 300 member parliament, a comfortable governing majority.  (Various 08.07)

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8.1  2019 IATI Israeli Life Sciences Industry Report Shows Local Industry Kept Growing In 2018

The Israeli life sciences industry is going stronger every year with an increasing number of Israeli life sciences companies.  Approximately 1,600 life sciences companies are active in Israel, employing over 83,000 people. In terms of investments, the life science industry attracted a record $1.5 billion in 2018, an increase of 25% over 2017.  These findings are presented in the IATI’s 2019 Israeli Life Sciences Report.  Israel Advanced Technology Industries (IATI) is the umbrella organization of the high-tech and life sciences industry in Israel.

The report shows that the trend of increase in the share of investments coming from Israeli investors continues in 2018.  More trends which continue in 2018 are the increase in the amounts invested in deals of over $20 million, with an all-time annual high of $920 million; and the increase in investments made in later stages companies.

Of the total $1.5 billion that was invested in life sciences companies in 2018, as much as $619 million (41%) came from local investors.  This is a significantly higher than the 5 years average of $435 million in 2013-2017.  According to the report, interest in the Israeli life sciences sector by both local and foreign investors has reached the highest level ever.

Israeli VC investments in life sciences companies in 2018 was $190 million, 13% of the total investments in Israeli life sciences companies.  Total VC-backed investments remained stable, reaching $977 million, or 65% of total investments.  Over the last five years, Israeli life sciences companies raised over $2.7 billion on NASDAQ.  Some 16 of 38 Israeli life sciences companies traded on NASDAQ raised $568 million in initial and follow on offerings in 2018; investors on the Tel Aviv Stock Exchange (TASE) remained cautions, with only four companies raising $7 million.

2018 was another remarkable year in M&A for the Sector.  Four out of the 10 largest high-tech deals made in Israel in 2018 were life sciences companies.  Mazor Robotics, acquired in 2018, was the first to reach the $1.5 billion milestone, surpassing the previous largest exit by NeuroDerm in 2017.  (IATI 01.07)

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8.2  Minovia First Mitochondrial Cell Therapy Trial for Treatment of Pearson Syndrome

Minovia Therapeutics announced dosing of the first patient in a Phase I/II clinical trial of the company’s Mitochondrial Augmentation Therapy (MAT) for the treatment of Pearson syndrome.  The first patient in the clinical trial for this pediatric mitochondrial disease was dosed at the Sheba Medical Center Hospital in Tel Aviv, Israel.  The Pearson syndrome clinical study is the first ever mitochondrial cell therapy trial undertaken to treat a mitochondrial disease.  This investigational treatment has been granted Fast-Track, Orphan Drug and Rare Pediatric Disease designations by the U.S. Food and Drug Administration.  Under the study protocol, autologous CD34+ cells enriched with blood-derived mitochondria manufactured by Minovia’s proprietary MAT platform will be transplanted via a single dose into pediatric patients with Pearson syndrome to increase the levels of normal mitochondrial DNA.

Minovia is opening a U.S. operation in Cambridge, Massachusetts.  The company will use its U.S. presence to expand its clinical and research collaborations with leading medical and academic institutions across North America, as well as with biotech and pharmaceutical companies focused on improving care for patients living with mitochondrial diseases.

Haifa’s Minovia Therapeutics, a clinical-stage international biotechnology research company, is the first company to use mitochondrial cell therapy to treat mitochondrial diseases through our Mitochondrial Augmentation Therapy (MAT) platform.  MAT increases the level of normal mitochondrial DNA by using autologous stem cells enriched with blood-derived mitochondria, with the goal of extending and enhancing human lives.  Their initial clinical focus is on rare mitochondrial diseases for which there are no approved treatments, such as Pearson syndrome, a fatal pediatric disease, as well as Kearns Sayre syndrome, MELAS and Leigh syndrome.  (Minovia 26.06)

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8.3  MOSES Laser Technology Wins 2019 Medical Design Excellence Award

Lumenis’ proprietary patented MOSES Urology Laser Technology has been selected the Silver Winner in the Operating Room Medical Device category of the 21st Annual Medical Design Excellence Awards (MDEA) competition.  The 2019 winning products were announced at the MDEA Ceremony on 11 June in conjunction with Medical Design & Manufacturing (MD&M) East at the Jacob K. Javits Convention Center in New York.

Released by Lumenis two years ago, MOSES is a revolutionary, patent-protected technology that optimizes holmium energy transmission using a unique pulse modulation.  The benefits of MOSES for urinary stones treatment have demonstrated a 20% reduction in procedure time, 25% improvement in fragmentation efficiency and 60% reduction in stone retropulsion.  MOSES has also been proven to improve BPH procedures by providing improved enucleation efficiency and bleeding control.

Yokneam’s Lumenis is the world’s largest energy-based medical device company for surgical, aesthetic and ophthalmic applications in the area of minimally invasive clinical solutions.  Regarded as a world-renowned expert in developing and commercializing innovative energy-based technologies, including Laser, Intense Pulsed Light (IPL) and Radio-Frequency (RF).  For nearly 50 years, Lumenis’ ground-breaking products have redefined medical treatments and have set numerous technological and clinical gold-standards.  (Lumenis 27.06)

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8.4  Konica Partners with DiA Imaging Analysis in Advanced AI-based Cardiac Ultrasound Analysis

DiA Imaging Analysis has partnered with Konica Minolta Healthcare Americas, a market leader in medical diagnostic imaging and healthcare IT, to expand analysis capabilities of Konica Minolta’s Exa Cardio PACS Platform (Cardiovascular Information System) with DiA’s cardiac analysis, “LVivo Toolbox.”

The LVivo Cardiac Toolbox is designed to analyze cardiac ultrasound images automatically and objectively, to reduce the subjectivity of manual or visual analysis methods used today.  DiA’s LVivo Cardiac Toolbox uses novel pattern recognition, deep-learning and machine learning algorithms that automatically imitate how the human eye detects borders and motion.  DiA’s automated solution generates fast and accurate image analysis to support the clinician’s decision-making process.  LVivo Cardiac Toolbox is vendor-neutral, supporting DICOM clips of various ultrasound systems.  Konica Minolta will offer the LVivo Toolbox as a part of Exa’s diagnostic-quality Zero Footprint, Server Side Rendering Universal Viewer for DICOM and non-DICOM images.  The integration has been designed according to Exa’s user interface to assure the most efficient workflow and accessibility to all Exa® Cardio PACS users.

Beer Sheva’s DiA Imaging Analysis makes ultrasound analysis accessible to all by using its advanced AI-based technology which assists clinicians, at all experience levels, analyze ultrasound images – objectively and accurately.  The technology is based on advanced pattern recognition, deep learning and machine learning algorithms which imitate the way the human eye detects borders and identifies motion.  DiA’s automated tools deliver fast and accurate clinical indications to support the decision-making process, ultimately improving patient care.  (DiA 27.06)

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8.5  Wize Pharma Completes Milestone for Joint Venture with Cannabics Pharmaceuticals

Wize Pharma and Cannabics Pharmaceuticals have together created and adopted a business plan for their joint venture (JV), a new entity focused on the research and development of cannabinoid formulations to treat ophthalmic conditions.  Creation and approval of a business plan for the JV was a condition for the planned venture to move forward.

This plan will support a significant opportunity to create ophthalmic treatments that leverage the therapeutic power of cannabis.  Having assessed the regulatory pathway for eye drops containing cannabinoids or cannabinoid strings, they are engaging in technology development and clinical advancement.  Caesarea’s Cannabics, a world leader in the development of cannabinoid-based therapies for cancer, and with a state of the art laboratory that has received approval from the Israeli Ministry of Health to conduct research with Cannabinoids and Cancer is an ideal partner for Wize.

Hod HaSharon’s Wize Pharma is a clinical-stage biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including DES.  Wize has in-licensed certain rights to purchase, market, sell and distribute a formula known as LO2A, a drug developed for the treatment of DES and other ophthalmological illnesses.  (Wize Pharma 28.06)

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8.6  DayTwo Secures $31 Million in Series B Financing to Address Chronic Health Conditions

DayTwo announced $31 Million in Series B financing.  DayTwo will use the funding to accelerate go-to-market initiatives in the United States where the company partners with payers, providers, and employers, and to continue to develop a new generation of products and services for metabolic and gastrointestinal conditions.  The round was co-led by aMoon, the leading life sciences venture fund, together with Ofek Ventures, a new venture fund focused on disruptive ICT technologies.  Existing investors Seventure Partners and Johnson & Johnson continued their participation in the round.  Previous funding rounds included contributions from the Mayo Clinic for the company’s validation trial, recently published in JAMA.  The financing brings DayTwo’s total funding to $48 Million.

DayTwo’s glycemic control solution uses gut profiling and other clinical parameters to provide a food-as-medicine solution to enable glycemic control.  DayTwo’s personalized approach provides actionable insights into how the body metabolizes food and allows individuals to navigate what specific foods and meals to choose to balance their blood sugar levels.  DayTwo’s glycemic control solution is more effective than existing protocols for prediabetes and more impactful than leading diabetes pharmaceuticals.  DayTwo’s food-as-medicine approach is based on the original research conducted at the Weizmann Institute of Science, published in the journal, Cell, in 2015.

Founded in 2015, Adanim’s DayTwo completed Q1/19 with tens of thousands of individual customers, and hundreds of providers in the DayTwo clinician network.  DayTwo also launched a strategic partnership with the world’s second largest HMO, Clalit which now offers the DayTwo glycemic control solution to its 4.5 million members.

DayTwo’s individualized nutrition profile predicts how a person will respond to different foods and food combinations based on their unique gut microbe composition and other clinical parameters.  DayTwo is the only food-as-medicine solution that helps people with diet-related chronic illnesses to balance their blood glucose, including type 2 diabetes and prediabetes.  By unlocking the intelligence found in the microbiome, DayTwo addresses how people process the same food differently, and can significantly improve predictive and individualized glycemic response.  (DayTwo 26.06)

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8.7  Teva Announces Launch of 1% Sodium Hyaluronate in the United States

Teva Pharmaceutical Industries announced the launch of 1% Sodium Hyaluronate.  The product received approval from the Center for Devices and Radiological Health of the U.S. FDA.  The 1% Sodium Hyaluronate is indicated for the treatment of pain in osteoarthritis (OA) of the knee in patients who have failed to respond adequately to conservative non-pharmacologic therapy and simple analgesics (e.g., acetaminophen).

The safety and effectiveness of 1% Sodium Hyaluronate was evaluated in a double-blind, prospective, multi-site, randomized, three-arm, parallel group, pivotal trial in adults.  The primary objective of the trial was to evaluate the effectiveness of three weekly intra-articular injections of 2 mL of 1% Sodium Hyaluronate into the knee as compared to placebo for the treatment of pain in subjects with OA.  The safety and effectiveness of 1% Sodium Hyaluronate was also compared with Euflexxa®1 (1% sodium hyaluronate).

Teva Pharmaceutical Industries has been developing and producing medicines to improve people’s lives for more than a century.  They are a global leader in generic and specialty medicines with a portfolio consisting of over 35,000 products in nearly every therapeutic area.  Around 200 million people around the world take a Teva medicine every day, and are served by one of the largest and most complex supply chains in the pharmaceutical industry.  Along with Teva’s established presence in generics, they have significant innovative research and operations supporting a growing portfolio of specialty and biopharmaceutical products.  (Teva 01.07)

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8.8  ProArc Medical Awarded $2.2 Million European Union Grant

ProArc Medical received a $2.2 million grant from the prestigious Horizon 2020 program as a part of the European Innovation Council pilot.  The two-year grant supports further scientific studies and commercialization of ProArc’s ClearRing BPH implant.  Benign Prostatic Hyperplasia (BPH), or enlarged prostate, is one of the most common urological diseases among men.  ProArc’s ClearRing implant is a minimally invasive prostatic reshaping implant designed to treat lower urinary tract symptoms due to BPH.  Prostatic support is provided by a proprietary pre-shaped nitinol implant positioned inside the prostate tissue just under the urethral surface.  The ClearRing procedure allows patients to resume their normal lifestyles and preserves patients’ sexual function through a procedure that is up to twice as fast as the current standard surgical procedure.

Founded in 2010, Misgav’s ProArc develops minimally invasive solutions to alleviate symptoms caused by BPH or enlarged prostate and improve the quality of life of men suffering from BPH.  (ProArc Medical 02.07)

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8.9  MeMed Named “Technology Pioneer” by World Economic Forum

MeMed announced its recognition as a 2019 World Economic Forum Technology Pioneer, one of 56 companies selected worldwide.   The Technology Pioneers are a global community of early- to growth-stage companies poised to transform a wide range of industries and have a significant impact on business and society.  The World Economic Forum selected MeMed for its ground-breaking approach to helping doctors avoid prescribing ineffective medicines and treatments, thus combating the rise of drug-resistant pathogens.

MeMed’s mission is to translate the immune system’s complex signals into simple diagnostic insights that can be used to transform the way infectious diseases and inflammatory disorders are diagnosed and treated, profoundly benefiting patients at both the individual and societal level.  The company’s breakthrough immune-based protein signature MeMed BV quickly and reliably determines whether an infection is caused by bacteria that will respond to an antibiotic, or by a virus which antibiotics cannot treat.  MeMed BV has been validated by an unprecedented level of high-quality data from double-blinded clinical studies conducted worldwide.

Tirat HaCarmel’s MeMed is the developer of a cutting-edge immune system-based diagnostic that distinguishes between bacterial and viral infections at the point of care.  Their mission is to translate the immune system’s complex signals into simple diagnostic insights that can be used to transform the way infectious diseases and inflammatory disorders are diagnosed and treated, profoundly benefiting patients at both the individual and population levels.  MeMed developed and validated MeMed BV, their pioneering immune-based protein signature, over the course of decade-long collaborations with leading academic and commercial partners, providing physicians with an indispensable tool in the fight against resistant strains of bacteria – one of the biggest healthcare challenges today.  (MeMed 01.07)

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8.10  Neurolief Receives CE Mark for Relivion – Digital Treatment for Migraine

Neurolief has received the CE mark for its Relivion non-invasive, adaptive digital treatment for migraine.  The CE mark allows Neurolief to market, sell and distribute the Relivion device as an over-the-counter therapy within the European Union and countries that participate with Agreements on Mutual Recognition of Conformity Assessment.

The Relivion is the first non-invasive, adaptive multi-channel brain neuromodulation technology that offers a highly effective therapy, without the risks and costs associated with invasive procedures and without the side effects related to medications.  This type of therapy was previously possible only with implanted devices.  The Relivion system is simple and safe for patients to self-administer at home at a fraction of the cost of surgical implants.

Netanya’s Neurolief develops proprietary digital therapeutics brain neuromodulation technology to treat neurological and neuropsychiatric disorders such as migraine and depression.  The company’s devices either complement or provide an alternative to pharmaceutical therapies, which are often associated with potential short- and long-term adverse effects.  Neurolief’s products are groundbreaking electronic headsets designed to concurrently neuro-modulate major neural pathways in the head and thereby affect brain regions that are involved in control and modulation of pain and mood.  (Neurolief 09.07)

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8.11  ConTIPI Medical Receives FDA Approval for Treatment of Pelvic Organ Prolapse in Women

ConTIPI Medical received US Food and Drug Administration (FDA) approval to market its new product, the first of its kind, designed to treat pelvic prolapse in women (such as the uterus and bladder).

Caesarea’s ConTIPI Medical is an Israeli biotechnology company that develops disposable and non-invasive devices for the treatment of pelvic floor dysfunctions in women, and has so far developed 2 major products from its patent portfolio.  The first product designed to treat stress urinary incontinence was sold in 2013 to Kimberly Clark Worldwide and is now available for sale off the shelf in North America.  The second product, which has been under development for more than four years, is intended for the treatment of pelvic organ prolapse, received two years ago a European sales permit (CE) and now has also received FDA clearance in the United States.

The Company’s developments are a major breakthrough in a market that has been largely neglected in recent years and has lacked any significant clinical innovations in the last 20 years.  The Company’s products are a social “revolution”, since they enable the transfer of control over the medical problem to women, in a completely discreet manner, with only limited involvement of the medical system.  It is the patient who decides on the treatment and its availability, and uses the device (similar to the insertion of a tampon) at a convenient time and place.  (ConTIPI Medical 09.07)

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9.1  Syte-Powered Visual Search Boosts Home Design Product Discovery for Conforama

Syte is now powering Conforama’s online visual search, making the French home equipment retail chain which operates in Europe, one of the first retailers within the global home decor and furnishings industry to offer this technology.  The feature is now live on Conforama’s desktop and mobile websites allowing shoppers to upload any image and find similar products within Conforama’s catalog.

Bridging the gap between product discovery and purchase, the visual search tool delivers a more intuitive and seamless shopping experience for customers.  By simply uploading a photo from a catalog, screenshot, or real-world image through the camera app, customers can easily be directed to the products they are interested in, without the need for textual search or filtering.  The visual search implementation across Conforama’s online assets comes at a time when large retailers such as Amazon are launching their own image search capabilities.  Syte has one of the most accurate visual search technologies, providing Conforama with a strong competitive advantage in customer experience.

Tel Aviv’s Syte is a visual AI technology provider that improves retailers’ site navigation, product discovery, and user experience by powering solutions that engage and convert shoppers.  With Syte, retailers can leverage shoppers’ inspiration and existing product interest to ensure they present the right products at the right time.  Partnerships with technology innovators such as Microsoft, SAP, Naver, and Oracle have established Syte as a leader in the market.  Powering the visual search within Samsung and other leading phone manufacturers allows Syte to increase the reach of their retail clients.  Brands currently using Syte’s technology include Farfetch, Marks & Spencer and boohoo.  (Syte 24.06)

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9.2  infiniDome Live Demonstration of Its GPS Jamming Protection for Autonomous Car

infiniDome performed a live field demonstration of GPS jamming/spoofing protection of a self-driving autonomous car at the EcoMotion Main Event on 11 June, which was the heart of the international future mobility conference, EcoMotion Week 2019.  In the demonstration, BWR self-driving car was operated in the conference demo center, when a nearby GPS jammer was activated and disabled the autonomous car’s navigation capabilities.  Then, infiniDome CTO easily connected GPSdome protection solution, and the same autonomous car with the same GPS system was able not only to detect the jamming attack but also to retain the GPS signal and the navigation capabilities under the jamming attack.

Caesarea’s infiniDome provides front-end cyber solutions protecting wireless communications from jamming and spoofing attacks.  The company’s first product, GPSdome, protects against jamming and spoofing of GPS-based systems, which are critical for autonomous vehicles, drones and connected fleets.  GPSdome has been successfully proven in the field and sold to customers globally.  (InifiniDome 25.06)

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9.3  Mmuze Lets Grocers Compete by Leveraging Voice Commerce Technology

Mmuze has expanded its voice shopping offering to the grocery industry.  The technology will enable online grocery retailers to offer consumers a natural shopping experience through voice or text and gives customers the ability to easily manage carts and make changes to orders, shop according to dietary restrictions, “browse by recipe” and to easily compare brands, ingredients and pricing.

While other voice commerce platforms do not provide a natural conversational experience and have a significant barrier to entry for end users that requires installation of specific functionalities to access voice capabilities, Mmuze requires no set-up process for shoppers, as it is offered directly by the retailer through any platform they choose.

Mmuze powers natural language understanding via text and voice as a tool for online grocery retailers to strengthen their relationship with customers and guide them to purchase.  Using conversational AI technology that understands a user’s intent, Mmuze interchangeably supports both mobile and desktop usage, as well as conversation through text messages and smart speakers, meaning a user can begin by using the voice functionality one on one platform and then switch to a different device to continue that same experience through text functionality.

Tel Aviv’s Mmuze supports natural, human-like conversations with retail customers, providing automated personalized assistance that mimics the in-store experience, and guides customers seamlessly through a personalized shopping journey.  Whether a shopper turns to voice search to find the right dress for their next event, chats with an “Mmuze Associate” to outline the right beauty routine, or orders ingredients for an upcoming dinner party with Google Home – Mmuze ensures their intents and desires are consistently understood and fulfilled with two-way natural-language conversation.  (Mmuze 26.06)

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9.4  EPM Selects TaKaDu’s Central Event Management (CEM) for Operational Excellence

EPM, the Medellin, Colombia based public utilities service company has chosen TaKaDu as their Central Event Management software provider, being the first customer for TaKaDu in Colombia.  Owned by the Municipality of Medellin, EPM (Empresas Publicas de Medellin) brings the highest international quality standards to the services it provides: electric power, gas, water and sanitation.  EPM reaches 123 municipalities in the area and serves 3.6 million inhabitants.

Yehud’s TaKaDu is the leading CEM solution for water utilities, enabling a single dashboard for all network events and incidents.  Based on big data analytics and machine learning, TaKaDu’s cloud-based service detect, analyze and manage network events and incidents such as leaks, bursts, faulty assets, telemetry and data issues, operational failures and more.  TaKaDu seamlessly integrates with other enterprise IT systems (GIS, asset management, work order management, CRM, etc.) and detection technologies (e.g. acoustic sensors), delivering a central hub for quicker response times and the fast resolution of events.

Converting raw data into knowledge using big data analytics and algorithms, TaKaDu provides visibility and actionable insights for increased efficiency, water loss reduction and improved customer service.  A cloud-based SaaS platform, TaKaDu brings together huge amounts of information in an easy-to-use, flexible and scalable solution.  (TaKaDu 26.06)

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9.5  Guardicore Achieves AWS Security Competency Status for Micro-Segmentation & Zero Trust

Guardicore announced that its Centra Security platform is one of the first cloud and data center micro-segmentation solutions in the market to achieve Amazon Web Service (AWS) Security Competency status.  This designation recognizes that Guardicore has demonstrated proven technology and deep expertise that helps customers achieve their cloud security goals.

Achieving the AWS Security Competency differentiates Guardicore as an AWS Partner Network(APN) member that provides specialized software designed to help enterprises adopt, develop and deploy complex security projects on AWS.  To receive the designation, APN Partners must possess deep AWS expertise and deliver solutions seamlessly on AWS.  AWS is enabling scalable, flexible, and cost-effective solutions from startups to global enterprises.  To support the seamless integration and deployment of these solutions, AWS established the AWS Competency Program to help customers identify Consulting and Technology APN Partners with deep industry experience and expertise.

Tel Aviv’s Guardicore is a data center and cloud security company that protects your organization’s core assets using flexible, quickly deployed, and easy to understand micro-segmentation controls.  Their solutions provide a simpler, faster way to guarantee persistent and consistent security — for any application, in any IT environment.  (GuardiCore 28.06)

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9.6  Argus Fleet Protection Now Operational in Both Automotive and Commercial Aircraft Fleets

Argus Cyber Security upgraded its stand-alone Fleet Protection backend platform and is now providing continuous live monitoring of both automotive and commercial aircraft fleets.  Argus Fleet Protection, an Automotive and Aviation Security Incident and Event Management (SIEM) system for automotive OEMs, fleet managers and commercial airlines, detects cyber-attacks and enables deep investigation into various cyber threat scenarios for rapid incident mitigation.

Argus Fleet Protection was built from the ground up to address this challenge.  Rated first in customer evaluations, and powered by patent-pending engines built on Argus’ five years of experience in penetrating and developing automotive cyber security solutions, Argus Fleet Protection provides visibility into cyber events of commercial aircraft and vehicles on the road.  Working off-board, the solution correlates and aggregates data from multiple data sources and performs cross-fleet analysis to unearth suspicious patterns and emerging threats that would otherwise go amiss.

An out-of-the-box solution, Argus Fleet Protection works stand-alone or can be easily integrated and operated with existing Security Operations Center (SOC) solutions to provide the backbone to automotive and aviation incident management with domain focused feeds.  Alternatively, Argus Automotive SIEM can be integrated with Argus world-class Managed Security Service Provider (MSSP) partners, including T-Systems, Singtel, Ericsson, as well as technology partner Check Point Software Technologies to provide a fully functional global automotive security operations center (ASOC).

Tel Aviv’s Argus, a global leader in automotive cybersecurity, delivers multi-layered, end-to-end solutions and services to protect connected cars and commercial vehicles against cyber-attacks.  Argus also provides OEMs an over-the-air (OTA) software update solution that enables them to quickly and cost-effectively improve performance and security as well as deploy new features throughout the vehicle lifespan.  Ranked number one in third-party evaluations, Argus technologies are built on dozens of granted and pending automotive patents and rely on decades of experience in both cyber security and the automotive industry.  (Argus Cyber Security 02.07)

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9.7  Polyrize Emerges from Stealth to Automate Authorization Security in the Cloud

Polyrize officially launched its cybersecurity platform to help enterprise security teams automate the authorization security process across native and non-native cloud environments.  Leveraging a proxyless approach and a machine learning engine, Polyrize continuously authorizes identities and gives security teams centralized control over permissions and actions — across any IaaS and SaaS environments — to prevent unauthorized access from internal or external threats.  The company is also announcing it has raised a $4 million seed round led by Glilot Capital Partners.

Built by experts in cyber intelligence from Israel’s Defense Forces, Polyrize is the first and only system able to correlate user permissions with actual identity behavior across any cloud.  It’s also the only platform able to break down any service terminology to its fundamental building blocks.  Leveraging the company’s proprietary identity graph technology and advanced AI capabilities, Polyrize provides security teams with a centralized view of internal and external user identities, access privileges and behavior.

Tel Aviv’s Polyrize is a cybersecurity platform that helps enterprise security teams understand, control and secure user identities, privileges and access behavior in the cloud.  Polyrize continuously authorizes identities across any cloud service — even after the employee has logged in — and provides security teams with centralized visibility into assigned privileges and the way they are being used in order to prevent access abuse or misuse of business-critical information.  (Polyrize 02.07)

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9.8  RavenDB Launches Managed Cloud Database Service

RavenDB has launched its new RavenDB Cloud managed database service.  RavenDB Cloud performs all the daily tasks such as maintaining hardware servers, installation, configuration, monitoring internals and security for its users worldwide.  RavenDB Cloud’s database cluster provides high availability and fault tolerance with nodes in different availability zones using an assignment failover feature.  RavenDB Cloud includes metrics for measuring each step of indexes and aggregations to deliver cost optimization at every level. Features like pull replication enable a hybrid on premise-cloud architecture.  RavenDB Cloud runs on smaller machines, enabling top level performance provisioning less expensive hardware.

RavenDB Cloud is currently available on Amazon Web Services and Microsoft Azure throughout all regions.  The service is expected to be available on the Google Cloud Platform in the fourth quarter of this year.  RavenHQ has been providing managed services for RavenDB since 2012.  It will continue offering RavenDB hosting for versions 3.5 and earlier, but RavenDB Cloud will manage clusters for versions 4.0 and up.

Caesarea’s RavenDB is a global provider of database infrastructure solutions that empowers Fortune 500 companies and enterprises across the globe to process online transactions through an open source platform.  Recognized by the world’s most influential analyst firms as an excellent and cost-effective choice for companies looking to modernize their data management strategy, RavenDB is the industry’s first fully-transactional, NoSQL ACID database that combines scalability, high-availability and performance.  (RavenDB 02.07)

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9.9  Viziblezone’s Breakthrough “Hidden Pedestrian” Detection System for Self-driving Cars

Jerusalem’s Viziblezone announced that its patent-protected pedestrian detector technology successfully completed a major development milestone.  The company reported that its prototype system has now proved that it can detect pedestrians even hidden behind objects at distances of up to 150 meters.  While many technologies to mitigate vehicle-to-vehicle accidents have been developed in recent years, there remains a significant lack of vehicle-to-pedestrian accident prevention systems.  Meanwhile, with the growth of autonomously driven vehicles, and the expansion of technologies such as robo-taxis, the risks to pedestrians are increasing exponentially at a rate that existing vehicle sensor systems can’t effectively address.

Viziblezone offers a cost-effective, software-based ‘pedestrian detector’ that effectively turns in-vehicle and mobile phone RF facilities into a kind of an “Iron Dome” for people on the streets and sidewalks.  By utilizing the wide distribution of mobile devices among pedestrians, it transforms them into “smart beacons” that cars can see and then avoid.  The solution is designed to operate and save lives under any weather and visibility conditions, with the ability to detect pedestrians at up to 150 meters, even when located behind obstacles and outside the vehicle’s line-of-sight.

Part of the Jerusalem based OurCrowd Labs/02 innovation incubator, Viziblezone is now preparing for the mass deployment of its lifesaving solution for application in both conventional, and autonomous vehicles.  The incubator provides hands on support for startups in a range of fields including AI, deep learning, autonomous transportation and smart cities, and works in partnership with Motorola Solutions, Reliance Industries and the Hebrew University’s technology transfer program ‘Yissum.’  (Viziblezone 02.07)

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9.10  Foresight Successfully Demonstrates for Leading Vehicle Manufacturers in United States

Foresight Autonomous Holdings announced that recently the company successfully completed a series of technological demonstrations of its QuadSight vision system in the United States for five leading vehicle manufacturers (OEMs) and six Tier One suppliers.  The current series of technological demonstrations was carried out in the Silicon Valley area and in Detroit, with the assistance and support of FLIR Systems, a world-leading industrial technology company focused on intelligent sensing solutions.  During the Silicon Valley roadshow, Foresight also presented its QuadSight vision system at FLIR’s booth in the Autonomous Vehicle Sensors Conference in San Jose, California.

Foresight’s technological roadshows offer potential customers the chance to experience the company’s unique solution firsthand.  The QuadSight system is tested in different predefined scenarios on the customer’s premises.  To date, the system has successfully achieved 100% obstacle detection in all simulated scenarios including fog, rain and extreme lighting conditions.  After witnessing the outstanding demonstrated performance of the QuadSight system, multiple American OEMs and Tier One suppliers expressed interest in purchasing prototypes of the QuadSight system for further evaluation.

Ness Ziona’s Foresight Autonomous Holdings is engaged in the design, development and commercialization of sensors systems for the automotive industry.  Through the company’s wholly owned subsidiaries, Foresight Automotive and Eye-Net Mobile, Foresight develops both “in-line-of-sight” vision systems and “beyond-line-of-sight” cellular-based applications.  Foresight’s vision sensor is a four-camera system based on 3D video analysis, advanced algorithms for image processing, and sensor fusion.  (Foresight 08.07)

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9.11  Cupertino Electric Integrates ZutaCore Waterless Liquid Cooling to Densify Data Centers

 CEI Modular, a division of Cupertino Electric (CEI), a leading construction and data center infrastructure provider, and ZutaCore announced a partnership to deliver modular data center solutions with ZutaCore’s HyperCool2 direct-on-chip, two-phase change liquid cooling system.  Applying insights to anticipate operational needs and planning for the entire product life cycle, CEI Modular vets technologies, then designs, builds, tests and delivers complete solutions through to the commissioning and maintenance phases.  With the HyperCool2 inside, CEI Modular is revolutionizing the data center by shrinking its footprint up to 40%, simplifying design, streamlining installation and densifying computing. ZutaCore’s liquid cooling solution is the latest technology in CEI Modular’s portfolio of modular data center designs.

Ashkelon’s ZutaCore is a waterless, two-phase change, liquid cooling technology company, unlocking the power of cooling and revolutionizing data centers.  The HyperCool2 technology platform alleviates cooling boundaries at the chip, server, rack, POD and data center levels.  The HyperCool2 solution is a complete hardware system, enhanced by a software-defined-cooling platform, yields unparalleled heat dissipation at the chip level, triples computing densities on a fraction of the footprint and halves costs.  (ZutaCore 08.07)

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10.1  Israel’s Tax Revenues Fall by NIS 4.5 Billion in 2018

State tax revenues in Israel fell NIS 4.5 billion in 2018, compared with 2017, while spending by government ministries rose NIS 18 billion, according to the state’s financial statements published by the Accountant General on 2 July.  The report uses figures to show the reasons for the deficit in 2018, which is expected to increase this year and next year.

The report states that state tax revenues began a clear descent starting in May.  Much of the decrease is attributable to tax refunds caused by the tax cuts by Minister of Finance Kahlon in 2015-2017.  As of the end of 2018, the ratio of tax revenues to GDP reverted to its level in 2014.  Spending set a new record of 28.5% of GDP in 2018 as a result of a sharp rise in spending by the civilian government ministries and a moderate increase in spending by the Ministry of Defense, accompanied by a slight fall in interest payments.

Another reason for the drop in revenues in 2018 was exceptional revenues in the preceding year.  However, it is clear that government spending grew at a rapid rate, while revenues failed to keep pace, resulting in a growing hole in the state budget.  The 2018 budget deficit was NIS 38.7 billion, slightly more than the target set for the budget. The projected deficits for 2019 and 2020 are NIS 45-50 billion in each year.

The reason for the increase in the deficit lies in tax revenues, not spending.  The low deficits in 2015-2017 led certain parties to mistakenly believe that the reason for the relatively high deficit in 2018 was exceptional spending, while the actual reason was the very high revenues in the preceding years – one-time revenues that were not repeated in 2018, while spending remained more or less at the level of 100.4% of the budget.

The growth in government spending was not uniform.  For example, spending on health has growth 81.7% since 2013, but quite a bit of this resulted from wage hikes for doctors and nurses.  Spending on education increased by 35% in the past five years and spending on wages for stage employees was up 23.5%, while spending on higher education increased by only 18.3% and spending by administrative ministries such as the Ministry of Foreign Affairs increased by 5.6%.  The rise in spending by the Ministry of Defense was also fairly moderate at 20.6%, while spending by other ministries went up 35.8%.  (Globes 02.07)

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10.2  State Tax Yields in 2018 on Vehicles and Fuel Nearly NIS 30 Billion

Israel’s revenues from taxes on vehicles and fuel totaled nearly NIS 30 billion in 2018, according to initial figures in the State Revenues Report for 2017-2018 released by the chief economist in the Ministry of Finance.  The report shows that taxes on fuels yielded NIS 19.1 billion, and purchase taxes on vehicles yielded NIS 10.5 billion.  Purchase taxes on tobacco and alcohol yielded NIS 7.1 billion.  The sum of NIS 30 billion does not include VAT, license fees, and income tax on the imputed value of private use of company cars, which altogether amount to approximately NIS 10 billion more.

In 2018, purchase tax was abolished on mobile telephones and electronic products, cutting an estimated NIS 425 million from state revenues last year.  In comparison with 2017, after discounting for inflation, state revenues from purchase taxes grew 1.9% last year.  Excluding fuels, the rise was 7.2%.

The main cause of the rise actually came in 2016.  An announced purchase tax hike led to a surge in purchases of vehicles towards the end of that year to beat the hike, thus transferring NIS 1.8 billion of tax revenues from 2017 to 2016.  A similar phenomenon can be expected this year: the rise in purchase tax rates on hybrid vehicles will lead to purchases of such vehicles being brought forward.

Cigarettes were the state’s main source of purchase tax revenue after vehicles and fuels.  In 2018, taxation of cigarettes yielded NIS 5.158 billion, while sales of other tobacco products yielded just NIS 397 million.  Tax collection on tobacco products other than cigarettes is expected rise this year following the ruling by the High Court of Justice that taxation of rolling tobacco should be made equal to taxation of cigarettes.  Purchase tax collection on alcoholic beverages in 2018 totaled NIS 660 million.  (Globes 01.07)

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10.3  Tourism to Israel Rises by 10% in First Half

Israel hosted a record 2.265 million overseas tourists in January-June 2019, the Ministry of Tourism announced.  This was 10% more than the 2.063 million tourists in the corresponding period last year, which was itself a record.  Some 365,000 tourists entered Israel in June 2019, 18% more than in June 2018.  The Ministry of Tourism estimates revenue from incoming tourism at NIS 1.9 billion in June and NIS 11.7 billion in January-June.

European tourists numbered 177,500 in June, 19% more than in June 2018.  Countries from which tourism greatly increased in comparison with last year were Germany with 21,200 tourists visiting Israel, 47% more than in the corresponding month last year, and Portugal with 2,000, double the number in June 2018, after local airline TAP began direct flights to Israel, boosting traffic on the route.  The leading European country in June in the number of tourists visiting Israel was France with 27,300.  All European countries posted increases in the number of tourists coming to Israel, in comparison with last year.

132,000 tourists visited Israel from North America in June, 11% more than in June 2018.  Most of them were from the US.  The flight schedule from the US was reinforced with directly routes to and from San Francisco and Las Vegas, while United Airline introduced a direct flight to Washington.  According to the Israel Hotels Association, most tourists stayed in Jerusalem and Tel Aviv.  (Globes 03.07)

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10.4  Record Number of Israelis Fly Overseas in First Half of 2019

A record-breaking number of Israelis traveled overseas in the first half of 2019.  Some 3.8 million traveled, in what was a 7.4% increase from the 3.5 million Israelis who traveled overseas during the same period last year, according to the Central Bureau of Statistics.  Some 185,900 of them also traveled to Egypt’s Sinai Peninsula, a 34.2% increase over the last year.  No fewer than 123,900 Israelis flew to Saudi Arabia and the Gulf Arab states via Jordan, an increase of 10.1%.  Another 30,600 Israelis boarded cruise ships to reach their destinations, a 26.6% increase compared to the number who took cruises from Israel in the same period in 2018.  (CBS 03.07)

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10.5  Foreign Exchange Reserves at the Bank of Israel Total $120 Billion in June

Israel’s foreign exchange reserves at the end of June 2019 stood at $120 Billion, an increase of $1.984 billion from their level at the end of the previous month.  The reserves represent 32.5% of the GDP.  The increase was the result of a revaluation that increased the reserves by approximately $2.235 billion, as well as foreign exchange purchases by the Bank of Israel totaling $4 million.  In contrast, the increase was offset by private sector transfers of approximately $16 million and government transfers to abroad totaling approximately $239 million.  (BoI 07.07)

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10.6  Israeli Startups Raised Nearly $600 Million in June

Globes reported that Israeli startups raised nearly $600 million in June, according to press releases issued by companies that have completed financing rounds.  The figure may be more as some companies prefer not to publicize the investments they have received.  After raising $1.55 billion in the first quarter of the year, according to IVC, Israeli startups raised $1.25 billion in April and May and nearly $600 million last month for a total of $3.4 billion in the first six months of 2019.  This figure is on course to beat last year’s record startup fund raising, when according to IVC-ZAG, Israeli startups raised $6.4 billion, up from $5.24 billion in 2017.

As usual, most of the money raised in June, was in large financing rounds by a small number of companies.  Some $376 million was raised by just nine companies.  In June, cybersecurity company SentinelOne led with a $120 million financing round. Media platform company Minute Media raised $40 million, shared neighborhood company Venn raised $40 million and LiDAR car sensor company Innoviz raised $38 million.  Personalized medicine company DayTwo raised $31 million and facial recognition company AnyVision raised $31 million.  Fintech company Sunbit raised $26 million, API marketplace company RapidAPI raised $25 million and night vision technology developer Brightway Vision raised $25 million.  (Globes 30.06)

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11.1  ISRAEL:  IVC–Meitar Exit Report for First Half of 2019

In the first half of 2019, exit activity reached $14.48 billion in 66 deals, including one mega-deal – Mellanox Technologies, which was acquired by Nvidia for $6.9 billion (subject to closing).  Excluding the Mellanox deal, total exit value reached $7.58 billion in H1/19.

Despite a slight decrease in the number of exits (which include: IPOs, M&As and buyouts), from 73 exits in H1/18 to 66 exits in H1/19, the total exit value in H1/19 increased significantly from $6.49 billion in H1/18 to $14.48 billion in H1/19.

The average exit value in H1/19 set a five-year record, reaching $116.6 million, almost double compared with $63 million in 2015 annually.

Exits 2015 – H1/19:  Comparing H1/2019 to Annual 2015-2018

Source: IVC-Meitar Exit Report

Adv. Shira Azran, Partner at Meitar Liquornik Geva Leshem Tal Law Firm: “In the first half of 2019, we witnessed a significant increase in the total volume of exits, particularly those with a value exceeding $100 million.  We identify a similar trend in transactions that are currently under negotiation.  There is a large variety of buyers, and, in some cases, the purchase price is not only a function of an assessment of the value of the acquired technology, but also a determination of value based on revenue and profitability levels of the acquired company as a reflection of the maturity of the acquired companies.”

Azran also referred to the increase in the number of growth companies raising large amounts of capital in recent years, and the high expectation of investors for a significant return: “Therefore, the increase in the value of exits is also consistent with the expansion of the backlog of mature companies.  On the other hand, due to the constant increase in the volume of investments, it is too early to assess whether these companies will succeed in fulfilling investor expectation.”

The report states that four IPOs were completed in H1/19, with two sizable companies (Fiverr and Tufin) listed in the United States and having raised significant amounts.

Adv. Itay Frishman, Partner at Meitar Liquornik Geva Leshem Tal Law Firm, referred to the IPOs: “The two successful IPOs in the US are likely to generate interest among more Israeli companies that will want to examine initial public offerings as a path to exit and liquidity.  Naturally, an examination of these trends in a semi-annual period is limited, but we feel that a significant number of the exits in H1/19 accomplished the investment model of investors and founders. We will need to wait for the full year’s results to evaluate this period compared with previous years.”

 Number of Exits by Deal Size, 2015 – H1/2019

Excluding exits of $5 billion and above; public companies; and exits of companies with prior exits*

Source: IVC-Meitar Exit Report

In H1/19, the number of deals between $100 million and $1 billion climbed to a record of 23 (16, excluding public companies and companies with a prior exit) compared with 18 deals in 2018 (or 16, excluding public companies and companies with prior exit).

An analysis of private companies with first-time exits shows that in H1/19, the value of exits in the range of $100–$250 million soared to $1.89 billion.  Exit values in the range of $250–$500 million increased to $1.06 billion in H1/19 compared with $1.04 billion in 2018 annually.

Exits Ratio*

Analysis of exit value versus amount invested in H1/19 showed the average ratio recovered to 3.9 compared with 2.91 in 2018 annually.  According to IVC-Meitar Exit Report, the average exit ratio of non-VC-backed companies increased to 13.65 while the VC-backed exit-ratio average increased to 3.7 compared with the annual benchmark since 2015.  On average, the ratio in H1/19 increased, representing higher efficiency of investments in the industry.

*The Exit Ratio is calculated by dividing the total exit value (per year) by the total capital raised by all companies that have completed exit transactions in each year.

IVC Research Center is the leading online provider of data and analyses on Israel’s high-tech & venture capital ecosystem. Its information is used by all key decision-makers, strategic and financial investors, government agencies, and academic and research institutions in Israel.  IVC-Online Database showcases over 8,500 active Israeli high-tech startups, and includes information on private companies, investors, venture capital and private equity funds, angel groups, incubators, accelerators, investment firms, professional service providers, investments, financings, exits, acquisitions, founders, key executives and multinational companies.

Meitar Liquornik Geva Leshem Tal is Israel’s leading international law firm and leader in the technology sector.  The firm’s Technology Group numbers over 120 seasoned professionals who specialize in representing technology companies, cooperating with attorneys from complementary practice areas, such as taxation, intellectual property, and labor law and dozens of attorneys from other practice areas.  Meitar has played a significant role in the majority of the largest and most prominent transactions recorded in the Israeli technology sector, including mergers and acquisitions and public offerings on foreign stock exchanges.  (IVC-Meitar 04.07)

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11.2  ISRAEL:  Research Department Staff Forecast, July 2019


This paper presents the forecast of macroeconomic developments compiled by the Bank of Israel Research Department in July 2019 regarding the main macroeconomic variables—GDP, inflation and the interest rate.  According to the staff forecast, gross domestic product (GDP) is projected to increase by 3.1% in 2019, slightly lower than the previous forecast, and by 3.5% in 2020.  The inflation rate in the four quarters ending in the second quarter of 2020 is expected to be 1.4%, similar to the previous forecast, and inflation in 2020 is expected to be 1.6%.  The Bank of Israel interest rate is expected to increase to 0.5% in the third quarter of 2019, and to continue increasing gradually to 1.0% by the end of 2020.


The Bank of Israel Research Department compiles a staff forecast of macroeconomic developments on a quarterly basis.  The staff forecast is based on several models, various data sources, and assessments based on economists’ judgment.  The Bank’s DSGE (Dynamic Stochastic General Equilibrium) model developed in the Research Department—a structural model based on microeconomic foundations—plays a primary role in formulating the macroeconomic forecast.  The model provides a framework for analyzing the forces that have an effect on the economy, and allows information from various sources to be combined into a macroeconomic forecast of real and nominal variables, with an internally consistent “economic story”.

The Global Environment

Our assessments of expected developments in the global economy are based mainly on projections by international institutions (the International Monetary Fund and the OECD) and by foreign investment houses.  These institutions’ forecasts for interest rates in advanced economies, and imports to those economies, were revised downward.  Accordingly, we assume that growth in advanced economies will be about 1.9% in 2019 and 1.6% in 2020, and that the advanced economies’ imports will increase by 3.0% in 2019 and by 3.2% in 2020.  Our assumption is that inflation in the advanced economies will total 1.6% in 2019 and 2.0% 2020.  According to the average of investment houses’ most recent assessments before the forecast was prepared, the US federal funds rate is expected to decline, to 2.1% at the end of 2019, and to remain at that level during 2020.  The declared interest rate in the Eurozone is expected to be 0% at the end of 2019 and during 2020.  The average price of Brent crude oil was about $68 per barrel in the second quarter of 2019.

Real Activity in Israel

GDP is expected to grow by 3.1% in 2019 and by 3.5% in 2020.  There is no change in our general assessment that the economy is in a full employment environment, and GDP is growing at around its potential rate.  The activity of a number of large companies will contribute to a slightly higher GDP growth rate.

The forecast of GDP growth in 2019 is slightly lower than the previous forecast, influenced by the decline in world trade that has led to a decline in the expected growth rate of exports for 2019.  The export forecast was revised downward by 0.5%, to 3.5% in 2019.  There is no change in the export forecast for 2020, with exports expected to grow by 6% in that year.  Private consumption is expected to grow by 3% each year in 2019 and 2020.  Fixed capital formation is expected to increase by 3% in 2019, but is expected to contract by 2% in 2020 as a result of the conclusion of a number of large investments in the economy.  Since these investments are import-intensive, their completion is expected to make a negative contribution to imports such that imports are expected to grow at the relatively moderate rate of just 0.5% in 2020.

Inflation and Interest Rate Estimates

According to the staff forecast, the inflation rate in the next four quarters is expected to be 1.4%, inflation at the end of 2019 is expected to be 1.6%, and inflation at the end of 2020 is expected to be 1.6%, similar to the previous forecast.  The expected path of inflation remains unchanged relative to the previous forecast.  Our assessment is that the tight labor market will continue to support wage increases and the continued convergence of inflation to the midpoint of the target range.  However, the increase in inflation is expected to remain gradual, in view of processes that have apparently not been exhausted: the continued increase in competition, and the development of e-commerce.

According to the Research Department’s assessment, the Bank of Israel interest rate is expected to increase to 0.5% in the third quarter of 2019, similar to the previous forecast.  Two further increases are expected in 2020, such that the interest rate is expected to be 1% at the end of 2020.  The increase in the interest rate is expected to be gradual, thereby supporting the continued increase of inflation and GDP growth in accordance with the long-term rate.

Main Risks to the Forecast

Several factors may lead to economic developments that differ from those in the forecast.

Regarding the global environment, the IMF and the OECD noted in their recent publications that the downward risks to growth and world trade have increased.  The main risks include the possibility that trade tensions between the US and China may worsen, uncertainty regarding the UK’s departure from the European Union, and fiscal pressures in the US and in a number of European countries.

In the domestic environment, the dispersal of the Knesset and the calling of new elections in September led to a delay in the government’s decision over measures that would return the deficit to the target set by the government, and there is uncertainty regarding the measures that will be taken and their effects on growth and inflation.  (BoI 08.07)

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11.3  ISRAEL:  US Department of State 2019 Trafficking in Persons Report

In its annual report on human trafficking, the United States Department of State praised Israel as a Tier One country in the fight against this abuse.

The Government of Israel fully meets the minimum standards for the elimination of trafficking.  The government continued to demonstrate serious and sustained efforts during the reporting period; therefore Israel remained on Tier 1.  The government demonstrated serious and sustained efforts by prosecuting and convicting more traffickers overall and investigating, prosecuting and convicting more perpetrators of forced labor crimes.  For the first time in several years, it identified five forced labor victims and it continued to operate shelters and other facilities that provided victims a wide variety of immediate and long-term care and rehabilitative services.  Although the government met the minimum standards, it penalized some identified and unidentified trafficking victims among the irregular African migrant population for immigration and prostitution violations.  The government also continued to implement policies that exacerbated this population’s vulnerability to trafficking, especially among Eritrean women.  Additionally, the government’s victim identification procedures delayed or prevented some victims from receiving appropriate protection services.


The government increased efforts to prosecute and convict traffickers.  The 2006 anti-trafficking law criminalized sex trafficking and labor trafficking and prescribed penalties of up to 16 years’ imprisonment for the trafficking of an adult, and up to 20 years’ imprisonment for the trafficking of a child.  These penalties were sufficiently stringent and, with respect to sex trafficking, commensurate with those prescribed for other serious crimes, such as rape.  Inconsistent with the definition of trafficking under international law, the law did not establish the use of force, fraud or coercion as an essential element of the crime.  Under 376A of the Penal Law 5737-1977, holding a person’s passport against their will carried a penalty of three to five years’ imprisonment.

In 2018, police initiated 139 total investigations, including 114 investigations of potential sex trafficking crimes, eight potential forced labor crimes, and 17 potential child sex trafficking crimes; this compared with 231 sex trafficking investigations and zero forced labor investigations in 2017.  In 2018, the government initiated 22 prosecutions (13 for adult sex trafficking, two for forced labor, and seven for child sex trafficking); this compared with 10 sex trafficking and zero forced labor prosecutions in 2017.  In 2018, the government convicted five traffickers (one for forced labor and four for child sex trafficking) but zero for adult sex trafficking; this compared with three convictions for adult and child sex trafficking and zero for forced labor in 2017.  Additionally, authorities opened 1,271 criminal investigations and filed 175 indictments for suspected violations of labor laws, leading to 35 sentences, with sanctions and compensation totaling approximately NIS 8.46 million ($2.27 million), as well as administrative fines of approximately NIS 8.01 million ($2.14 million); authorities also filed three indictments against employers for violating the rights of children.  The government also reported it initiated an investigation into two government officials allegedly complicit in trafficking and trafficking-related offenses. It reported a case of a police officer, alleged to have solicited sex from trafficking victims whom he was assigned to protect in a transition apartment while the victims waited to testify against their traffickers; this case was ongoing at the end of the reporting period.  The government also reported an ongoing investigation into a Ministry of Agricultural and Rural Development official, who facilitated the entry of Georgian citizens into Israel through the use of his employee pass in exchange for money from the Georgian nationals or their traffickers.

As in previous years, the government provided extensive anti-trafficking training, awareness-raising workshops, and seminars, which reached more than 925 officials.  The government increased training to ensure that all judges hearing criminal cases participated in a mandatory training on sex crimes and trafficking in persons.


The government maintained overall strong protection efforts; however, victim identification policies and procedures prevented some trafficking victims, especially among the African migrant population, from receiving appropriate protection services.  The government continued to circulate trafficking victim identification guidelines widely to relevant ministries.  In 2018, the government reported receiving 105 victim referrals from NGOs and government sources, 30 of which remained pending at the end of the reporting period.  Of the 105 referrals, the government granted official trafficking victim status to 59 individuals—including 41 women and 18 men—which was a decrease from the 73 victims identified in 2017.  Among the identified victims were five male victims of forced labor—the first forced labor victims identified by the government in eight years.  The Israeli National Police (INP) Anti-Trafficking Coordinating Unit—which consisted of two police officers—was the only government entity with the authority to grant individuals official trafficking victim status, which allowed a victim full access to protection services.  Because only two INP officers were authorized to review victim applications throughout the country, the process significantly delayed victims’ access to much-needed protection services.  Furthermore, NGOs reported that the government’s strict evidentiary standard for granting official victim status, which required eyewitness accounts, dates and details from the victims, prevented at least 18 victims referred by NGOs from receiving status and thus, appropriate care in 2018.  Furthermore, some NGOs did not submit cases of trafficking among the Eritrean and Sudanese irregular migrant community due to this high standard and the risk that the application process would re-traumatize victims but not result in recognition.  To address some of these concerns, the National Anti-Trafficking Unit (NATU), in coordination with the Ministry of Justice Legal Aid Administration (LAA) and NGOs, continued a fast-track procedure to more efficiently grant trafficking victim status.

The government continued to provide a wide range of protective services for victims of all forms of trafficking and to encourage victims to assist in the investigation and prosecution of their traffickers, but did not require their participation in court cases as a condition for receiving visas and protective assistance; victims could also opt to leave the country pending trial proceedings.  The government continued to operate a 35-bed shelter for female trafficking victims, a 35-bed shelter for male trafficking victims and transitional apartments with 18 beds for female victims and six beds for male victims.  Shelter residents were allowed to leave freely and, by law, all victims residing in the shelters were provided B1 visas—unrestricted work visas.  These shelters offered one year of rehabilitation services, including job training, psycho-social support, medical treatment, language training, and legal assistance.  The INP referred all 59 identified victims to shelters, but some declined to enter a shelter and instead utilized rehabilitative services at a government-run day center.  In 2018, the women’s shelter assisted 52 victims, in addition to six children of victims; the men’s shelter assisted 45 victims; and the transitional apartments assisted 35 men and women, including 17 children.  The majority of victims at the men’s shelter were Ethiopian and Eritrean.  In response to an increase in the number of children of trafficking victims staying at shelters in 2018, the government increased child-specific rehabilitation services at the shelters.  The Ministry of Social Affairs continued to operate a day center in Tel Aviv for male and female trafficking victims who were waiting for a space at a shelter, chose not to reside at a shelter, or had completed one year at a shelter.  The day center provided psycho-social services and food aid, and social workers at the center were trained to identify individuals at risk of re-victimization in trafficking.  In 2018, the center provided services to 236 male and female victims, all of whom were irregular African migrants primarily from Eritrea, as well as to 100 children of victims.  Additionally, for identified trafficking victims who opted not to stay in shelters, the government continued to provide an official letter that protected them from potential arrest for immigration violations and emergency contact numbers for shelters and relevant ministries.  Identified trafficking victims living outside of shelters were previously not entitled to receive free medical coverage at various government-funded health facilities.  However, in 2018 the Ministry of Health approved provision of limited medical treatments at one facility for these victims.  The government also expanded gynecological and dental care for recognized trafficking victims in shelters. In 2018, the government provided medical care to 94 male and female trafficking victims.

The LAA continued to provide free legal aid to trafficking victims, and staff regularly visited shelters and detention facilities to provide consultations.  In 2018, the branch received 109 legal aid requests to assist potential trafficking victims, including 52 irregular migrants who may have been subjected to trafficking in the Sinai.  In 2018, the government issued 15 initial B1 visas and 36 visa extensions to sex and labor trafficking victims.  It also issued 28 visas preventing the deportation of trafficking victims and two extensions of such visas in 2018.  The government allowed trafficking victims to work during the investigation and prosecution of their traffickers.  The government forfeiture fund, which used property and money confiscated from traffickers to assist victims, accepted no new requests to fund assistance in 2018.

The government maintained guidelines discouraging the prosecution of trafficking victims for unlawful acts traffickers compelled them to commit during their exploitation.  However, the government did not systematically screen for trafficking among the irregular African migrant population and as a result authorities may have penalized unidentified and some identified victims for immigration violations.  For example, the government continued to implement the “Deposit Law” (article 4 of the Prevention of Infiltration Law), which required employers to deposit a certain percentage of irregular migrants’ wages—including those of identified trafficking victims—into a fund that migrants could not access until they departed from the country.  The government could also add penalties to the fund for each day a migrant remained in the country without a visa.

NGOs reported that some employers withheld but never deposited wages into the fund.  Furthermore, NGOs reported this law pushed migrants—particularly Eritrean women—into the black market, including prostitution, which exacerbated their vulnerability to trafficking.  In March 2018, the government closed the Holot detention center and released all detained irregular migrants, but it did not forcibly deport them as it had previously declared.  In addition, in April 2018, the government—per a Supreme Court order—released all Eritrean migrants from Saharonim prison, except those suspected of criminal offenses.  The government did not proactively screen released detainees for trafficking indicators, but an NGO reported identifying at least five trafficking victims among those released.  The government continued to incentivize irregular African migrants to voluntarily depart Israel to third countries in Africa, by providing migrants with a $3,500 stipend and a paid plane ticket to Uganda or Rwanda.  However, NGOs and UNHCR confirmed that migrants who arrived in Uganda or Rwanda did not receive residency or employment rights.  An international organization reported that as of June 2018 “voluntary” transfers continued, but coercive measures to induce deportations were reduced, as those who refused to leave “voluntarily” could not be detained by Israeli authorities and had their permits renewed.


The government maintained strong efforts to prevent and raise awareness of human trafficking among the public and government officials.  NATU continued to coordinate anti-trafficking efforts effectively among relevant ministries and NGOs during the reporting period, and NATU officials continued to appear regularly in the media to raise awareness of trafficking.  In January 2019, the government approved a new five-year national action plan, replacing its 2007 plan; the new plan included an emphasis on forced labor, victim identification mechanisms, enforcement of businesses and supply chains that facilitate trafficking and new tools to combat online trafficking activities.  However, the government did not allocate additional funds for full implementation of the new plan.  The Knesset Subcommittee on Trafficking in Women and Prostitution met regularly, held 11 hearings and discussions, and conducted two field visits to NGO-run support centers during the reporting period.  The Knesset held no hearings on labor trafficking.

In the first nine months of 2018, the Ministry of Labor, Social Affairs and Social Services, which employed 261 labor inspectors and contracted translators during routine inspections, issued 681 administrative warnings, imposed 60 fines, and processed one criminal complaint involving two individuals that resulted in fines for labor violations.  NGOs continued to report there were not enough labor inspectors, especially in the construction and agricultural sectors, to sufficiently monitor and enforce labor laws.  Additionally, NGOs reported the government did not effectively regulate work force companies, nor combat criminal networks that recruited foreigners for the construction and caregiving fields and for prostitution.  In 2018, the government signed two bilateral work agreements (BWA) with the Philippines to allow for employment of Filipino workers in the caregiving sector and in hotels.  The new agreement did not apply to thousands of Filipino caregivers already working in the country, although it allowed them to access a complaint hotline.  The government maintained BWAs with six other countries for agricultural and construction work.  In 2018, 11,114 of the 25,358 foreign migrant workers who arrived in Israel did so through these agreements.  In December 2018, the government stated that as of February 2019, foreign workers could only be recruited via BWAs.  NGOs reported that Israel’s agreements with private Chinese employer associations required workers in the construction industry to pay licensed employment recruiters up to $30,000 in recruitment fees and costs, which could increase their debt and vulnerability to forced labor.  The government did not complete a plan to prevent exploitation of students from developing countries who experienced forced labor in the agricultural industry.  In accordance with Population, Immigration and Border Authority (PIBA) procedures for recruitment agencies in the caregiving sector, it continued to require every agency to hire a licensed social worker responsible for supervising the conditions of foreign caregivers, including home visits, and for informing relevant authorities about labor violations.

The government, in collaboration with an NGO, continued to operate a 24-hour hotline to assist foreign workers who were in Israel under bilateral agreements.  The hotline employed 11 interpreters in nine languages: Chinese, Thai, Bulgarian, Russian, Nepalese, Sinhalese, Romanian, Ukrainian and Turkish.  In 2017, the hotline received 2,332 calls, the majority from Thai agricultural workers and Chinese construction workers.  There was no comparable hotline for the approximately 74,000 documented migrant workers who worked in Israel through private recruitment, nor for the approximately 131,000 Palestinian workers in Israel and Israeli settlements in the West Bank.  In November 2018, the Child Protection Bureau launched a toll-free hotline for online offenses against children, but the government did not maintain a separate hotline for potential child victims of all forms of trafficking.  The government also maintained an emergency hotline for women and girls in prostitution, but it did not provide data on its operations in 2018.  The government continued efforts to reduce the demand for commercial sex acts, including sex tourism.

Trafficking Profile

As reported over the past five years, human traffickers exploit domestic and foreign victims in Israel.  Foreign workers, primarily from South and Southeast Asia, Eastern Europe and the former Soviet Union, and the West Bank and Gaza migrate to Israel for temporary work in construction, agriculture and caregiving; some of these workers are subjected to forced labor.  As of October 2018, data from the Israeli government, Palestinian Authority, UN, NGOs and media indicated there were 215,000 legal foreign workers and 129,000 illegal foreign workers, including Palestinian workers, in Israel and Israeli settlements in the West Bank.  Foreign workers, particularly Turkish, Chinese, Palestinian, Russian and Ukrainian men, in the construction sector suffer from labor rights abuses and violations and labor trafficking.  Some employers in the construction sector illegally charge Palestinian workers monthly commissions and fees, and in many cases employers illegally hire out Palestinian workers to other workplaces; these workers are vulnerable to forced labor.  Traffickers subject some Thai men and women to forced labor in Israel’s agricultural sector where they face conditions of long working hours, no breaks or rest days, withheld passports and difficulty changing employers due to limitations on work permits.  Some traffickers in the agricultural sector recruit students from developing countries to take part in an agricultural study program on student visas, and force them to work in the industry upon arrival, effectively circumventing the BWA process.  Caregivers are highly vulnerable to forced labor due to their isolation inside private residences and their lack of protection under the labor law; local NGOs report that traffickers subject caregivers to excessive recruitment fees, fraudulent work contracts, long work hours, confiscation of passports, underpayment of wages, physical violence, sexual harassment and abuse, denial of severance pay and poor housing including—in some cases—living in the same room as their employer.  Foreign caregivers constitute the largest share of all legal foreign workers in the country; the vast majority of these workers are women.  The government’s policy of refusing fast-track asylum claims has resulted in fewer claims from Ukrainian and Georgian applications; however, they were replaced by increased numbers of Russian and Moldovan workers following the same pattern: networks of workforce agencies recruit workers to Israel through a fraudulent asylum-claim process and charge workers high mediation fees and sell them fake documents; these workers are vulnerable to exploitation.  Some Bedouin Israeli children are reportedly vulnerable to forced labor, experiencing long working hours and physical violence.

Eritrean and Sudanese male and female migrants and asylum seekers are highly vulnerable to sex and labor trafficking in Israel.  As of October 2018, 31,000 African migrants and asylum seekers were present in Israel, nearly all of whom were from Eritrea or Sudan. According to NGOs, these migrants and asylum-seekers became increasingly vulnerable to trafficking following the government’s implementation of the Deposit Law that reduced net wages for this population.  Economic distress among women in this population, especially Eritrean women, greatly increases their vulnerability to sex trafficking.  Since 2007, thousands of African migrants entered Israel via the Sinai Peninsula.  The flow of these migrants arriving in Israel, peaking at more than 17,000 in 2011, dramatically decreased to zero in 2017.  Many of these migrants were kidnapped in the Sinai and subjected to severe abuse, including forced labor and sex trafficking, at the hands of criminal groups in the Sinai before reaching Israel.

Israeli children, Israeli Bedouin and Palestinian women and girls, and foreign women are vulnerable to sex trafficking in Israel.  Traffickers use social media websites, including dating apps, online forums and chat rooms and Facebook groups to exploit girls in prostitution.  An NGO reported in 2018 that there are approximately 3,000 Israeli child sex trafficking victims in Israel.  Israeli Bedouin and West Bank Palestinian women and girls are vulnerable to sex and labor trafficking after family members force them into marriages with older men.  These women and girls experience physical and sexual abuse, threats of violence, and restricted movement.  NGOs report some Palestinian LGBTI men and boys in Israel are vulnerable to abuse and sexual exploitation, due to their lack of legal status and restrictions on work eligibility for Palestinian nationals in Israel.  Some Israeli transgender women and girls are sexually exploited in prostitution in order to be able to afford gender-affirming care.  Transgender women in prostitution sexually exploit some transgender children as young as 13 years old, some of whom run away from home.  Traffickers subject women from Eastern Europe and the former Soviet Union, China, and Ghana, as well as Eritrean men and women, to sex trafficking in Israel; some women arrive on tourist visas to work willingly in prostitution—particularly in the southern coastal resort city of Eilat—but sex traffickers subsequently exploit them.  Some traffickers reportedly recruit sex trafficking victims with false, fraudulent, or misleading job offers on the internet, sometimes through legitimate employment websites.  (USDoS 20.06)

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11.4  LEBANON: Staff Concluding Statement of the 2019 Article IV Mission

On 2 July, the International Monetary Fund (IMF) announced the preliminary findings of IMF staff at the end of an official visit to Lebanon.  The authorities have consented to the publication of this statement.

The new government has an opportunity to implement fundamental reforms to rebalance Lebanon’s economy. Its starting position is difficult, including high twin deficits, a large public debt, and low growth.  The authorities have already passed a crucial plan to reform the electricity sector and are now working on a budget that will reduce the fiscal deficit.  These are very welcome first steps on a long road towards sustainability and growth that will have to involve further substantial fiscal adjustment and structural reforms to improve Lebanon’s business environment and governance.

This statement highlights key findings and recommendations of the recent Article IV Consultation mission to Lebanon (19 June – 2 July 2019), based on our discussions with a broad range of stakeholders.  A more complete analysis of policy issues will be included in the forthcoming staff report.

Key Messages

Strengthening the Lebanese economy requires action in three areas:

-A credible medium-term fiscal plan aiming for a substantial and sustained primary fiscal surplus that would steadily reduce the public debt-to-GDP ratio over time.

-Fundamental structural reforms to boost growth and external competitiveness, starting with improving governance as well as implementation of the electricity sector reform plan and recommendations of the Lebanon Economic Vision.

-Measures to increase the resilience of the financial sector through a stronger BdL balance sheet and continuing to build bank capital buffers.


This is an important moment for Lebanon. The country has long suffered from large fiscal deficits which have left public debt at over 150% of GDP. The current account deficit is over 25% of GDP and growth has been low since the start of the Syrian crisis.  The Banque du Liban (BdL) has skillfully maintained financial stability in difficult circumstances for some years, but the challenges it faces in doing so have grown.  It is critical that Lebanon begin a process of significant fiscal adjustment and structural reforms to contain public debt and raise growth.  Adjustment and reforms are the only path out of Lebanon’s current situation.

The government now has an opportunity to implement reforms and turn the tide. It has approved a new plan, now approved by the parliament, to reform the electricity sector and reduce its fiscal cost. It has also submitted to parliament a budget proposal that aims to reduce the overall fiscal deficit in 2019.  The electricity reform and the budget are the first steps on a long path to re-equilibrate the economy that will need to involve further fiscal adjustment and radical structural reforms.

Reforms would encourage donors to disburse $11 billion in pledged concessional funding the authorities have secured for their Capital Investment Plan (CIP) at the CEDRE conference in April 2018. The CIP aims to upgrade Lebanon’s infrastructure while providing employment opportunities for host communities and Syrian refugees. The associated short-term growth boost can counteract the contractionary effect of the planned fiscal adjustment, especially if the authorities improve the public investment management framework early on in the CIP.

A Difficult Economic Environment

Economic activity slowed further in 2018. Low confidence, high uncertainty, tight monetary policy, and a substantial contraction in the real estate sector are estimated to have reduced growth to 0.3% last year. Average inflation reached over 6% in 2018 partly due to high prices of imported fuel but slowed down in the second half of the year and into 2019.

The budget deficit reached 11% of GDP in 2018, up from 8.6% in 2017. The primary balance deteriorated to ‑1.4% of GDP due to an unexpectedly costly salary scale increase implemented in late 2017 as well as new hiring. Tax revenues were also weaker than forecast.  Given the large public debt (151% of GDP in 2018), interest payments now exceed 9% of GDP.

The external imbalance widened further. The current account deficit increased to over 25% of GDP in 2018, due to a combination of low export growth, higher fuel imports and weakening net remittances to Lebanon. The REER continued to appreciate and its estimated overvaluation remains significant.

Deposit inflows virtually stopped and BdL’s foreign reserves dropped. Deposit growth in 2018 was the lowest since 2005 and the BdL reserves have now decreased by around $6 billion since early 2018 despite BdL’s continued financial operations, in part because of the Eurobond principal and coupon payments it made over the same period. Bank lending to the private sector declined, non-performing loans (NPLs) increased and deposit dollarization rose to over 70%.

Reflecting these challenges, credit rating agencies downgraded Lebanon again this year. Developments in fiscal performance, deposit flows and sovereign yields led to a sovereign downgrade by Moody’s to Caa1 and a change of outlook to negative on the B- ratings of Standard and Poor’s and Fitch.

The economic outlook depends on progress in reform and on developments outside Lebanon. Strong implementation of the government’s fiscal adjustment efforts in 2019–20 and planned structural reforms have the potential to shore up confidence, give breathing space to the economy, and encourage donor disbursements of concessional financing for the CIP committed at CEDRE. But risks and vulnerabilities remain.  The government’s failure to achieve its targets and advance reforms or a breakdown in political and social consensus could erode confidence.  On the other hand, there are upside risks, which, if realized, could help the government’s adjustment effort.  Resolution of the Syrian conflict and normalization of relations would benefit Lebanon through involvement in Syrian reconstruction.  Also, the potential discovery of a natural gas field in Lebanon’s territorial waters, where exploration is expected to start by the end of the year, would boost growth and improve the country’s external balance.

Policy Priorities

Decisive implementation of a strong and coherent reform program is critical to maintain confidence. Rebalancing the economy in the current framework of an exchange rate peg requires strong implementation of a large and credible fiscal adjustment and ambitious structural reforms. Only a significant improvement of Lebanon’s business climate and governance can boost investment, growth and exports.

Front-Loaded and Sustained Fiscal Consolidation

The 2019 budget aims for a large adjustment. The budget submitted to parliament targets a deficit of 7.6% of GDP, aiming to reverse last year’s slippages and catch up with the path committed to under CEDRE. It relies on a large number of revenue and expenditure measures, the most important of which are for three years only, including: (i) increasing the tax on interest income from 7 to 10%; (ii) a 2% tax on imported goods; (iii) a freeze of public sector hiring and early retirement.  Other measures include a tax on taxi license plates and license plates with three or four digits and increased general security fees (on work permits, visas, etc.).

IMF staff preliminary estimate is that the budget measures will reduce the cash-basis fiscal deficit to around 9¾% of GDP. Although the budget has not yet been approved and there is uncertainty about what form the approved budget will take, on the basis of current information, the projected deficit is likely to be well above the authorities’ stated target. There remains also uncertainty about the stock of outstanding payment orders and the process for their clearance which will affect the cash deficit for 2019.  The projected deficit nonetheless benefits from temporary savings on interest payments due to the delay in Eurobond issuance.

The measures proposed in the budget together with savings from electricity sector reforms are projected to reduce the primary deficit in 2020-22 but leave debt on a rising path. The full-year effect of measures for which IMF staff has details is estimated at 2.3% of GDP, which will help turn the primary balance slightly positive in 2020. In the medium term, the large projected savings from the electricity sector reform plan, if fully implemented, will replace lost revenues from the expiration of the temporary measures in the 2019 budget and result in a small primary deficit.  However, without additional measures, the primary deficit will remain above its debt stabilizing level, and the already unsustainable public debt-to-GDP ratio will remain on an increasing path.

It is therefore critically important for debt sustainability that a medium-term fiscal plan is announced based on credible and permanent measures that will yield a substantial primary fiscal surplus over the medium-term. IMF staff projects that a primary surplus of around 4.5% of GDP would be needed to noticeably reduce the debt-to-GDP ratio over the medium to long run. Identifying and agreeing on the measures upfront to support such a plan could provide a lasting boost to confidence. On current plans about 0.5% of the 2019 revenue measures will be permanent, and the authorities’ current electricity plan can yield a further 2%age points of GDP in savings over the medium term.  The authorities will need to identify and implement additional permanent fiscal measures to achieve the necessary primary surplus.

Revenue measures should include raising the value-added tax (VAT) and increasing fuel excises as well as efforts to increase tax compliance. The temporary increase of interest income tax in the 2019 budget could also be made permanent. Further raising revenue reliably and rapidly will require measures based on existing tax collection infrastructure, such as the VAT and fuel excises.  Significant further revenue could also be raised by broadening the VAT base through the removal of exemptions on items such as foreign-registered yachts, diesel used for electricity generation and road vehicles.  The authorities should also improve tax administration, which could deliver meaningful additional revenue, including from those who currently evade taxes.  Better tax collection will, however, require concrete action.  Requiring businesses to only use financial statements certified by the Ministry of Finance (as part of their tax return filing process) to obtain loans from banks, is one such option.  Successful improvement in the collection of existing taxes may reduce the need to increase tax rates.

Eliminating electricity subsidies is the most significant potential expenditure saving. The government electricity sector plan aims to switch fuel to natural gas to reduce production costs at existing plants, increase EdL’s capacity to meet demand and subsequently raise tariff to eliminate electricity subsidies. The authorities need to ensure that the plan incorporates a tariff increase that is sufficient to close EdL’s deficit in the medium term under robust and realistic assumptions about the reduction of technical and non-technical losses.  It is crucial to start increasing tariffs as soon as possible to generate fiscal savings, possibly targeting the largest consumers first.

The authorities should also conduct a thorough public expenditure review to identify other potential areas for savings. This can build on their ongoing efforts to study reform options for the wage bill and pensions. Overall expenditures on capital and education are low and may need to increase over the medium run to enable higher growth.  Yet spending on wages and benefits in the public sector, including in education, is often inefficient and presents opportunities for savings.

Fiscal tightening should be complemented with scaled-up targeted transfers to the poor and vulnerable. Lebanon’s current social safety net (SSN) is limited. In order to cushion the impact of the needed fiscal adjustment, the authorities should allow for an additional 0.5%age points of GDP in SSN spending. Most of it could be channeled through a scaled-up version of an existing National Poverty Targeting Program.

Growth- and Export-Enhancing Structural Reforms

Fundamental structural reforms are key to boosting growth and improving external competitiveness. Lebanon has witnessed years of low growth and large current account deficits, both of which reflect a significant erosion of external competitiveness as well as the adverse effects of regional developments. The cost of doing business in Lebanon must be lowered to raise potential growth.  Likewise, given the currency peg, deep export-enhancing structural reforms will be essential for external adjustment.  Two priority areas for reforms are electricity provision, where the authorities have already approved a plan and improving governance.  In addition, the government’s own CEDRE vision provides specific ideas for reforms which need to be implemented.  All these efforts are needed to resolve external imbalances even if some upside events are realized over the long run, including development of gas fields and a resolution to the Syria conflict.

The authorities should approve and implement legislation of key growth-enhancing reforms identified in its CEDRE vision. This includes accelerating implementation of already-approved reform laws such as the code of commerce and the law on judicial intermediation as well as the approval of a new customs law, regulation on closing a business, bankruptcy law, insolvency practitioner law and law on secured lending. The authorities should also resolve regulatory obstacles to development of industrial zones that could benefit from a possible Syria reconstruction.

In addition, the recommendations of the Public Investment Management Assessment technical assistance should be implemented ahead of execution of most of the CIP. It is crucial that the most important improvements to the country’s public investment management framework are in place before the execution of most of the CIP projects to maximize the growth benefits of the planned investments. Key reforms include incorporating Council for Development and Reconstruction (CDR) spending in the budget and passing a public procurement law.

The electricity sector plan should be advanced without delay. Increasing electricity supply by the EdL to 24/7 would eliminate one of the biggest constraints to doing business in Lebanon.

Further concrete steps must also be urgently taken to reduce corruption. The authorities have passed public information transparency and anti-corruption legislation, including the access-to-information law, whistleblower protection law, law establishing a national anti-corruption commission and law on oil and gas sector transparency. This legislation should be promptly and effectively implemented, including by the appointment of an independent, sufficiently empowered and resourced anti-corruption commission, and supplemented by the adoption of the pending illicit enrichment and asset declaration legislation.  Other priorities include the adoption of an anti-corruption strategy and undertaking corruption investigations and prosecutions to obtain a number of corruption convictions and confiscations commensurate with risks.

Monetary Policy and Financial Stability

The BdL has been the linchpin of financial stability and the guardian of the peg, but at the cost of intensifying sovereign-bank linkages and weighing down its balance sheet. Over the past few years BdL’s financial operations have provided high marginal returns in Lebanese pounds on new bank U.S. dollar deposits at the BdL. These have boosted the BdL’s dollar holdings without affecting rates on older deposits at the BdL and on government debt. They have also allowed banks to offer high interest rates to their own depositors to attract new or retain existing funding while maintaining their profitability. On the other hand, as a consequence, government securities and deposits at BdL now account for 14 and 55% of bank assets, respectively, for a total exposure to the sovereign of 68.5% of assets (more than 8 times Tier 1 capital).

The BdL was forced to adopt a tight monetary stance to offset loose fiscal policy, and this has contributed to a decline in productive lending to the economy. The BdL’s operations enabled banks to offer high deposit rates to retain and attract deposits that have long financed Lebanon’s twin deficits. Yet they have also produced high lending rates, with the USD reference rate rising from 6.8% in November 2017 to 9.7% by June 2019.  These have in turn exacerbated a decline in lending to the private sector and a rise in NPLs stemming from a challenging economic environment.  These developments underline the urgency of fiscal adjustment that will allow for lower interest rates.

BdL should gradually step back from quasi-fiscal operations and strengthen its balance sheet. It should step back from government bond purchases and let the market determine yields on government debt. Buying the proposed low-interest government debt would worsen the BdL’s balance sheet and undermine its credibility.  There should also not be any pressure on private banks to purchase the low-interest debt instead.  The BdL should gradually phase out its financial operations once fiscal adjustment and the subsequent decline in yields demanded by investors allow it to do so.

Action should be taken to continue building up banks’ capital buffers and strengthen deposit insurance. Fully aligning risk weights placed on the banks’ holdings of BdL instruments with Basel III requirements represents a good mechanism to raise effective capital requirements. In line with the 2016 Financial Sector Assessment Program (FSAP) advice, the authorities should also increase deposit insurance coverage levels and provide for insured depositors’ preference under the creditor hierarchy rules applicable in resolution and liquidation of failed banks. (IMF 02.07)

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11.5  LEBANON: Lebanon Targets Deficit Reduction; Financing Pressures Continue

Fitch Ratings announced on 26 June that Lebanon’s draft 2019 budget targets fiscal consolidation, but we do not expect full implementation, and additional fiscal and structural reforms would be required to stabilize government debt/GDP.  Proposals to issue T bonds at below-market rates, most likely to the central bank, reflect the difficulty of cutting spending and tight liquidity in the financial system.  Lebanon’s external finances also remain under pressure, illustrated by declines in foreign reserves and bank deposits in the four months to April.

The budget agreed by the cabinet in May month targets a deficit of 7.6% of GDP, from 11.1% in 2018.  However, revenue projections for tax measures may be optimistic given minimal economic growth and inefficient tax collection.  Expenditure controls relating to new hiring and bonuses may prove difficult to enact.  We will reduce our deficit forecast for 2019 by about 1.5pp, to around 9% of GDP. Even if the budget plan were fully realized, it would only be a first step towards stabilizing government debt/GDP (151% at end-2018), which would require the deficit to narrow to at least 5.5%.

Half the budget’s expenditure effort, or 0.6% of GDP of the overall planned consolidation, involves the government issuing T bonds at 1%, well below market rates (currently 7% on a two-year T bond).  Details of how this will happen remain unclear, but it seems that Banque Du Liban (BdL) will buy these bonds and will attempt to structure the transaction in a way that minimizes the hit to its balance sheet.  In 2018, the government issued LBP8.3 trillion (9.7% of GDP) of T bonds to BdL at 1% as part of a wider transaction.

Lebanon’s finance minister, Ali Hassan Khalil, initially suggested that commercial banks would be involved, but banks have said that they will not buy such low-interest-rate T bonds, which would be negative for their profitability.  While borrowing at an artificially low rate would save the government money (interest costs are 30% of total government spending), it also indicates a degree of financial stress and raises questions about the government’s debt sustainability, especially given the greater reliance on the central bank for financing.

Deteriorating public finances and rising pressure on Lebanon’s financing model were among the reasons for our December revision of the Outlook on Lebanon’s ‘B-‘ rating to Negative.  The formation of a government in January has failed to buoy key indicators such as bank deposit growth and foreign reserves.  It remains to be seen whether the government’s budget, or its electricity sector reforms announced in April, will bolster confidence among depositors or foreign investors.  Prospects for the authorities’ ability to execute plans to reduce financing and external vulnerabilities without further damaging confidence and undermining the government’s funding model will be key to resolving the Negative Outlook.

Total private-sector commercial bank deposits have declined since end-2018 and in y-o-y terms were just 0.7% higher in April, while FX deposit growth (4%-5%) partly reflects conversion of LBP deposits to dollars.  Furthermore, given that the average interest rate on LBP deposits was 8.6% and on FX deposits 5.7%, April data suggests that net of reinvested interest earnings, the stock of deposits has fallen considerably, even in y-o-y terms.

Monthly BdL balance-of-payments numbers show a deficit of $3.3 billion in 4M19.  At end-April, BdL’s gross FX reserves totaled $31.5 billion – still a large stock although down by $1 billion since end-2018.  BdL also holds $6.4 billion of less liquid FX assets and $11.9 billion in gold.  But it has large FX liabilities to banks, which we estimate at around $60 billion, although a significant proportion have long maturities.

Reserves will likely have decreased in May following a $650 million Eurobond repayment.  Lebanon’s next Eurobond maturities are $1.5 billion in November and $2.5 billion in H1/20.  BdL has the gross reserves to meet these repayments if Lebanon cannot issue fresh Eurobonds.  But continuing reserve declines could further erode confidence in the financial system.  (Fitch 26.06)

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11.6  OMAN:  IMF Executive Board Concludes 2019 Article IV Consultation with Oman

On 7 June 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Oman.

Since the 2014 oil price shock, Oman’s policy efforts have aimed at strengthening the fiscal position, enhancing private sector-led growth and employment, and encouraging diversification.  Economic activity started to recover last year, and the overall fiscal and current account deficits improved somewhat, reflecting mainly higher oil prices.  However, macroeconomic vulnerabilities continued to rise, with government and external debt increasing further, while some fiscal reforms were delayed.  Higher vulnerabilities have led to new sovereign credit rating downgrades and increases in sovereign risk premia.

Economic activity is gradually recovering.  Staff estimates that, after reaching a low of ½% in 2017, real non-hydrocarbon GDP growth has increased to about 1½% last year, reflecting higher confidence driven by the rebound in oil prices.  Furthermore, oil and gas production increases boosted hydrocarbon GDP growth in 2018 to an estimated 3.1%.  These developments brought overall real GDP growth to 2.2%.  Non-hydrocarbon growth is projected to increase gradually over the medium term, reaching about 4%, assuming efforts to diversify the economy continue.

Preliminary budget execution data indicate an improvement in the overall fiscal balance last year.  The fiscal deficit is estimated to have declined to about 9% of GDP from 13.9% of GDP in 2017, reflecting higher oil revenues.  However, gross government debt increased by 7% of GDP last year (to 53.5% of GDP).

Preliminary data indicate that a substantial pickup in exports, primarily hydrocarbons, combined with an estimated decline in imports, helped reduce the current account deficit by about 10½% of GDP (to 4.7% of GDP).  External buffers have remained broadly stable, with an increase in central bank reserves broadly offsetting a decrease in the value of external assets in the State General Reserve Fund, Oman’s sovereign wealth fund.

Private sector credit growth has somewhat moderated, and interest rates have increased due to U.S. monetary policy normalization.  Banks benefit from high capitalization, low non-performing loans, and strong liquidity buffers.

Executive Board Assessment

Executive Directors welcomed steps taken over the past few years to enhance private sector growth, reduce spending growth, diversify government revenue, and improve the business environment.  They noted that economic activity had started to recover last year and that the fiscal and current account deficits improved.  Notwithstanding these efforts and the recovery in oil prices, Directors indicated that Oman’s public and external vulnerabilities have continued to grow.  Given the challenging external environment and regional uncertainty, Directors thus called for a deeper fiscal adjustment to maintain confidence and ensure fiscal and external sustainability, coupled with continued structural reforms to diversify the economy, improve productivity and enhance private‑sector‑led growth.

While welcoming the authorities’ plans to continue with fiscal consolidation, they called for an expeditious introduction of VAT and measures to adjust government expenditure.  They also encouraged the authorities to lay out and implement an ambitious medium‑term fiscal adjustment plan, based on reforms to tackle current spending rigidities, streamline public investment and raise non‑hydrocarbon revenue, while prioritizing measures that limit the impact on growth and place more of the adjustment on those who can best shoulder it.

Noting the importance of enhancing fiscal governance and transparency, Directors also suggested that a formal medium‑term fiscal framework would help anchor fiscal consolidation and limit implementation risks. In that context, the authorities’ plan to carry out a Public Expenditure Review with the support of the World Bank would be useful.

Directors concurred that the exchange rate peg to the US dollar had delivered low and stable inflation and remained appropriate.  With external buffers, albeit currently adequate, projected to continue to decline, Directors noted that the recommended fiscal adjustment would be key to bring the external position more in line with fundamentals, bolster external sustainability, and support the currency peg.

Notwithstanding strong financial sector soundness indicators and ongoing efforts to further strengthen its resilience, Directors called for continued attention to regulation and supervision and further efforts in enhancing the AML/CFT framework, which would help support correspondent banking relationships.

Directors commended the ongoing implementation of the Tanfeedh Program with a focus on economic diversification and job creation.  They encouraged further reforms to address labor market rigidities including by better aligning public‑sector compensation with that of the private sector and by addressing skills mismatches through higher quality education and training.  They also encouraged further SME development including through better access to finance, to raise productivity.  (IMF 03.07)

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11.7  TUNISIA:  Fitch Affirms Tunisia at ‘B+’; Outlook Negative

On 27 June 2019, Fitch Ratings affirmed Tunisia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a Negative Outlook.

Key Rating Drivers

Tunisia’s ratings are weighed down by wide twin deficits leading to high and rising public and external debt, a challenging political environment and tepid economic growth.  This is balanced against strong governance indicators, diversified economic structure and continued support from official creditors.  The Negative Outlook reflects ongoing pressures on external liquidity and weak external and fiscal buffers and uncertainty about further progress on reforms, particularly in the context of upcoming general elections.

Tunisia’s high external financing requirements present considerable liquidity risks and could lead to abrupt adjustment through disorderly depreciation and demand contraction.  Fitch estimates average external funding needs at 17% of GDP per year in 2019-2021, reflecting a large current account deficit (CAD) averaging 10% of GDP and increasing maturities coming due on external public debt.  Net FDI inflows will average 2.5% of GDP meaning the bulk of external financing needs will have to be covered by borrowing.  Sovereign external financing needs are likely to be met as long as the government continues to retain creditor confidence by making continued progress on reforms.

Fitch projects net external debt will rise from 70.5% of GDP in 2018 to 91.4% in 2021, significantly above the current ‘B’ median of 28%.  The CAD will gradually narrow from 11.2% of GDP in 2018 to a still large level of 9.3% of GDP in 2021.  The improvement in the CAD will be driven by dinar depreciation, a tighter policy mix, the recovery in phosphate extraction and the coming online of the Nawwara gas field.  Tunisia’s international reserves are low, at 2.6 months of current account payments at-end-2018, raising vulnerability to shocks including a rise in oil prices, tighter external funding conditions or slower Eurozone growth.

External liquidity risks are mitigated by strong official creditor support, which is partly driven by Tunisia’s geopolitical significance amid an immigration crisis in the Mediterranean basin and instability in neighboring Libya, in Fitch’s view.  Official loans account for nearly half of the general government’s (GG) debt and will cover 60% of its funding needs in 2019 and 2020.

However, Tunisia’s mixed performance under its ongoing arrangement with the IMF raises risks of weakening creditor support.  A civil service salary increase agreed in February in breach of Tunisia’s previous commitment to a nominal wage bill freeze led to a six-month delay in the approval of the IMF program’s fifth review and disbursement of official support.  However, despite social constraints, over the past two years the government has enacted significant tax increases, achieved progress on raising energy prices and approved pension reform.  The IMF program runs through April 2020 but Fitch believes that an extension and/or a follow-up arrangement are highly likely.

The dinar has remained relatively stable year-to-date but Fitch expects further significant depreciation of the currency to materialize over the coming two years.  The transition to a more flexible exchange rate regime starting August 2018, with a drop of the dinar by 17% against the US dollar in 2018, helped reduce the over-valuation of the currency.  This brought the cumulative depreciation of the real effective exchange rate to 14% in two years after it had remained broadly stable over the previous five years, despite the significant shocks faced by the Tunisian economy.  However, a large inflation differential with main trading partners could still amplify the dinar’s overvaluation.

The central bank hiked its policy rate by a cumulative 275bp since February 2018, taking it to positive territory in real terms for the first time in three years, while introducing quantitative tightening measures. However, inflation remains elevated, and will average close to 7% in 2019-2021 under Fitch’s projections, lifted by a combination of demand and supply factors, including strong wage dynamics and the pass-through of the dinar’s depreciation.

The main political parties appear to support the current government’s macroeconomic adjustment policies but the increasing fragmentation of the political landscape raises risks of policy paralysis following the October parliamentary elections.  Tunisia’s proportional electoral system means that no party is likely to secure an absolute majority in the legislature.  The Islamist Ennahda party, which established the current ruling coalition along with the liberal Nidaa Tounes party, is likely to emerge again as a major force in parliament.  However, the splintering of Nidaa Tounes into three rival forces could hinder a prompt formation of a stable government coalition and lead to policy paralysis after the elections.

Fitch expects the central government (CG) deficit including grants to narrow from 4.5% in 2018 to 4% in 2019, versus an official target of 3.7%.  The government plans to offset the impact of unplanned civil service wage increases of 0.6% of GDP in 2019 through tax windfall gains from higher salaries in the private and public sectors, stronger tax collections and spending reallocation.  The budget gap will further shrink to 3.3% of GDP in 2021 under the agency’s forecasts, driven by a continued restrictive hiring policy and further energy subsidy reform which will more than offset the impact of rising debt interest costs.  Parliamentary approval of a pension reform law in April will reduce short-term budget pressures from transfers to the public provident fund, CNRPS.

Under Fitch’s baseline, the GG debt will peak at 82% of GDP in 2020, well above the current ‘B’ median of 56% and up from 55% in 2015, driven by high deficits and dinar depreciation.  Debt in foreign currencies accounts for 75% of the total, exposing the debt trajectory to fluctuations in the exchange rate.  Downside risks around our baseline for public finances are substantial and stem from fluctuations in oil prices, social grievances, and the electoral agenda.

Significant contingent liabilities for the sovereign arise from government guarantees on debt of state-owned enterprises (SOEs) of 15.6% of GDP at-end 2018, nearly half of which are on loans contracted by the ailing electricity company, STEG.  The financial health of several major SOEs is undermined by governance shortcomings and their quasi-fiscal role.  Additional contingent liability risks stem from the banking sector, including public banks.  Despite some progress on strengthening banks’ balance sheets, the ongoing monetary tightening and a challenging operating environment could compound persistent vulnerabilities in the sector.

The Tunisian economy is undergoing a mild recovery.  Fitch expects GDP growth to average 3% in 2019-2021, up from 1.8% over the previous three years.  Private consumption has likely contracted in 2018 and will remain subdued over the projection horizon, held back by fiscal consolidation, a more restrictive credit supply, rising interest rates and high inflation.  Investment and exports will be underpinned by the dinar depreciation, buoyant tourism, strong crop production and the pick-up in extractive industries.  The medium-term growth outlook is supported by Tunisia’s robust human development standards and solid potential in agriculture, mining, tourism and manufacturing.

Rating Sensitivities

The main factors that may individually, or collectively, lead to a downgrade:

-Increased external liquidity pressures, for example from a widening of the current account deficit or further drawdown in international reserves.

-Political developments or social unrest undermining prospects for progress on macroeconomic adjustment policies and reforms.

-Failure to narrow the fiscal deficit or materialization of contingent liabilities, leading to a faster rise in government debt/GDP than our current projections.

The current Outlook is Negative.  Consequently, Fitch does not currently anticipate developments with a material likelihood of leading to an upgrade.  However, the main factors that may individually, or collectively, result in the Outlook being revised to Stable include:

-A sustainable improvement in Tunisia’s current account deficit, leading to lower external financing needs and stronger international liquidity buffers.

-Implementation of adjustment policies and reforms supporting macroeconomic stability and reducing downside risks for the economy.

-Reduction in budget deficits consistent with stabilizing the public debt/GDP ratio over the medium term.  (Fitch 27.06)

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11.8  TURKEY:  The Value of Positive Campaigning: Imamoglu’s Victory in Istanbul

Gallia Lindenstrauss and Remi Daniel posted in INSS Insight No. 1181 on 27 June 2019 that the sweeping victory of opposition candidate Ekrem Imamoglu of the Republican People’s Party (CHP) over Binali Yildrim of the Justice and Development Party (AKP) in the repeat election forced on Istanbul voters was impressive in terms of the percentage of votes won by Imamoglu, compared to percentages in previous municipal elections in Istanbul in recent decades.  Whereas the gap between Imamoglu and Yildrim was below 1% in the March 2019 election, in the June election it was more than 9%.  The decision to force a repeat election proved to be a significant mistake on the part of Turkish President Recep Tayyip Erdogan and his camp, after a long period in which most of their political maneuvers had succeeded.  Beyond being an opposition victory, this election may suggest that the Turkish government’s capability to assess the domestic situational has declined.

The sweeping victory of opposition candidate Ekrem Imamoglu of the Republican People’s Party (CHP) over Binali Yildrim of the Justice and Development Party (AKP) in the repeat election forced upon Istanbul was impressive in terms of the percentage of votes won by Imamoglu, compared to elections held in the city in recent decades.  Whereas the gap between Imamoglu and Yildrim was below 1% in the March 2019 election, in the June election it was more than 9% – despite approximately the same voter turnout.

The election campaign did not focus on the specific platforms of the two candidates, who limited themselves to general or isolated pledges.  Imamoglu’s success apparently stemmed from his ability to win over voters with positive rhetoric that stressed what brings people together, in an effort toward reconciliation among the city’s different communities.  With the slogan “Everything Will Be Fine,” he presented himself to the Turkish public as a new kind of politician who sought to end incitement, corruption and partisan interests so as to unite the entire city around change and new hope.  This strategy was a major success and Imamoglu significantly expanded his support-base.

Yildrim, by contrast, ran a campaign with less direct public outreach, and focused more on his achievements during a long political career and the successes of the AKP since it took power in 2002.  Nor did Yildrim and his senior associates hesitate to attack Imamoglu directly.  Moreover, as with the March local elections, it was categorically apparent that the importance of the Istanbul election went far beyond the city itself.  Thus, Turkish President Recep Tayyip Erdogan played an active part in the campaign’s final days, albeit on a smaller scale than in the previous rounds of elections, and outside political figures on both sides were heavily involved (for Yildrim, the President and cabinet ministers; for Imamoglu, party heads and the mayors of other cities, including the new mayor of the capital, Ankara).

The campaign also incorporated matters touching on national politics, particularly the running of the country by the President and his party.  In this context, two issues are noteworthy; first, the state of democracy in Turkey.  The widespread feeling was that holding a repeat election was unjust and that Imamoglu’s first victory had been “stolen.”  Second, there was also a heightened sense of helplessness among the Turkish public in the face of the country’s economic crisis.  It is hard to believe that Imamoglu’s electoral success would have been so impressive had the government’s economic conduct been perceived as leading to an improved situation.

Two main events lent the campaign an added special dimension.  First, a live debate between the two candidates was televised, the first of its kind since 2002.  Second, amid various attempts to win over voters of Kurdish origin, jailed PKK leader Abdullah Ocalan issued a call to the Kurds for neutrality, in stark contrast to the former co-chairman of the pro-Kurdish People’s Democratic Party, Selahattin Demirtas, himself also jailed, who urged voting for Imamoglu.  Imamoglu’s success stems in part from his ability to rally Kurdish voters as well as from the fact that Ocalan’s call evidently did not affect the political conduct of the Kurdish minority in the election.

Three foreign affairs issues were particularly prominent during the repeat election.  First was the issue of Turkish-US relations. President Erdogan and other government officials made unequivocal statements about proceeding with the S-400 deal with Moscow, despite American opposition.  In a 7 June letter sent by the acting American defense secretary to his Turkish counterpart, the United States made clear that if Turkey implements the deal with Russia it will not be able to remain a partner in the F-35 project.  This letter was interpreted in Turkey as a modern version of the historic Johnson letter of 1964, that was once presented as a “diplomatic atom bomb,’” in which President Lyndon Johnson threatened that were Turkey to intervene militarily in Cyprus, NATO would not necessarily come to its aid in the event of a response by Moscow.

A second significant issue was Turkey’s controversial conduct vis-à-vis Greece and Cyprus in the eastern Mediterranean.  While such steps were not without precedent, Turkey still saw fit, as the election neared, to dispatch a second gas drilling ship to disputed waters near Northern Cyprus – a move that drew condemnation from the European Union, which is even considering imposing EU sanctions on Turkey in response.  The Americans also condemned the Turkish action.  The widening of the rift with the United States and the European Union, and the economic cost of this rift, increased the Turkish public’s sense that the government is essentially rudderless in dealing with economic problems, and is even worsening them.

A third issue was the tension between Turkey and Egypt, which grew over the death of Egypt’s former president Mohamed Morsi.  Erdogan disputed that Morsi had died of natural causes, called him a martyr, and framed the Istanbul election as a choice between “Sisi and Yildrim.”  He even called for a UN commission of inquiry into Morsi’s death.  The lack of a satisfactory response in the West to Morsi’s death amplified what in his eyes has been protracted Western hypocrisy manifested by the non-recognition of Morsi’s toppling as a military coup.  For Erdogan, as for his followers, unwillingness to label what happened in Egypt a military coup is inextricably linked to the fact that when Turkey experienced a failed coup in July 2016, Western countries were slow in condemning it.  However, Istanbul voters apparently did not buy into the Imamoglu-Sisi equation.

Perhaps surprisingly, few Israel-related statements have been heard from Ankara of late, with the exception of Erdogan’s remark at a conference in Tajikistan that Turkey “rejects efforts to create a new fait accompli in Jerusalem.”  This relative quiet should not be interpreted as an improvement in bilateral relations between Israel and Turkey, but as a sign that there are many other issues preoccupying Ankara.

While it is difficult to project the outcome of the local elections in Turkey on to future general elections, the success of inclusive rhetoric over threat-based rhetoric may contribute in the long run to a degree of moderation in Turkish internal and foreign policy, especially if Imamoglu succeeds in his role and becomes the opposition representative in the next presidential election.  However, despite his impressive electoral achievement, the new mayor will need to struggle against the AKP-controlled government institutions as well as the City Council, where a majority backs Erdogan, and thus he will necessarily enjoy limited latitude.  Furthermore, the Istanbul defeat will not impact immediately on Erdogan’s future, as he has four years remaining in his term, during which he can count on a parliament where AKP and its coalition partner, the Nationalist Movement Party (MHP), wield a majority.  At the same time, there is no doubt that the stinging loss in Istanbul will force Erdogan and the AKP to rethink their future modes of action.  Imamoglu’s victory is also good news for the Turkish opposition.  The opposition has now perhaps created rhetoric that can beat Erdogan’s threatening narrative, and perhaps has also found a rival to the President who has ruled the country for more than 16 years.  The decision to hold a repeat election proved to be a significant mistake on the part of Erdogan and his camp, after a long period in which most of the President’s political maneuvers were successful.  It is therefore possible that beyond the opposition victory, the election points to a reduced ability of the Turkish government to read the domestic situation correctly.  (INSS 27.06)

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11.9  TURKEY:  Ankara’s Economic Tasks Grow Tougher after Election Rout

Mustafa Sonmez posted in Al-Monitor on 27 June that Turkey’s government faces an uphill track in efforts to fix the economy, littered with major political risks, both at home and abroad.

The 23 June rerun of the mayoral election in Istanbul ended in a big debacle for the ruling Justice and Development Party (AKP).  Ekrem Imamoglu of the main opposition Republican People’s Party (CHP), who ran for the CHP-led Nation’s Alliance, beat the AKP’s Binali Yildirim by more than 800,000 votes, a huge increase from his original winning margin of some 13,000 votes.  Analysts said many AKP supporters irked by their party’s refusal to recognize Imamoglu’s 31 March victory switched sides, contributed to his resounding victory in the rerun.

The contest for local dominance in Istanbul, Turkey’s biggest city and economic hub, became also a vote of confidence in the AKP in a sense; hence, the defeat is widely seen as a sign that the party’s political might is on a general decline.

24 June, the day after the Istanbul vote, marked the first anniversary of President Recep Tayyip Erdogan’s election as Turkey’s first head of state under a new governance system concentrating power in the president’s hands.  The one-year record of his executive presidency, which many see as a “one-man regime,” is hardly flattering, especially in economic terms.

The 31 March local polls, coupled with the rerun vote in Istanbul, have only increased pressure on Erdogan’s government, which has been grappling with economic recession and then crisis since last summer, when it assumed its new powers.

Erdogan failed to deliver on his pledges to pull down inflation, interest rates and foreign-exchange prices, which he made in his campaign in the June 2018 presidential and parliamentary elections.  As a result, the local elections took place amid economic gloom, marked by an inflation hovering around 20%, a joblessness rate approaching 15%, a Turkish lira that has lost nearly 30% of its value and steep declines in purchasing power.  Voters in big urban centers, in particular, penalized Erdogan, with the CHP winning the key mayoral races in 21 provinces that account for 63% of Turkey’s gross domestic product (GDP).

Unable to stomach the 31 March defeat in Istanbul, which alone contributes 31% of the country’s GDP, the AKP and its ally, the Nationalist Movement Party (MHP), piled pressure on the election board and eventually had the result canceled only to fare far worse.  The AKP’s debacle in the rerun was delivered by voters whose grievances over the government’s failure to resolve economic problems were compounded by a sense of injustice over the denial of Imamoglu’s win.

What challenges will the executive presidency system face following a dismal performance in its first year and especially after the Istanbul rout?

In his first postelection speech at the AKP’s parliamentary group on 25 June, Erdogan stressed that the next elections were four years away, meaning that the government has ample time to work free of electoral strains. Yet those four years could prove difficult to complete amid the groundswell of pressure building up among an increasingly frustrated electorate.  Can Erdogan’s government fix the economy, given its declining political might and lackluster record over the past year?

Economic indicators remain gloomy.  The economy contracted 2.6% in the first quarter and is expected to close the second one with a similar result.  Leading indicators suggest that the crisis continues. Unemployment remains the primary social problem, standing at more than 14%, with 4.5 million people jobless.

The Turkish economy is desperate for foreign funds, which had been abundant in previous years and served as the linchpin of economic growth.  As a result, however, the economy is saddled with $450 billion in foreign debt accumulated under 17 years of AKP rule.  According to April figures, nearly $18 billion in foreign funds fled Turkey over a year, in a sharp reversal from the previous 12-month period, which saw the inflow of $45 billion in foreign funds.

The scarcity of foreign funds means that hard currency becomes more expensive and the Turkish lira depreciates.  The average price of the dollar stands at nearly 5.9 liras in June, up by more than 27% from 4.64 liras in June 2018.  Efforts to prop up the lira, in turn, have pushed interest rates up to about 25%.

The figures have gone up and down under the impact of global economic trends.  Rate cuts and expansionary monetary policies in global powerhouses are good for emerging economies such as Turkey by boosting their prospects of attracting foreign funds.  Such capital inflows have a curbing effect on foreign-exchange and interest rates.  Turkey, however, has come to benefit less from such external tailwinds because of a whopping increase in its risk premium.

Turkey’s credit default swaps, which indicate the country’s risk premium, have long decoupled from those of other emerging economies such as Brazil, India, Mexico, Russia and South Africa.  On 24 June 2018, Turkey’s risk premium stood at 275 basis points.  It shot up to 575 basis points in August amid a spike in political tensions with the United States.  Since then, the risk premium has eased, but still hit as high as 440 basis points this week. In contrast, Russia’s risk premium stood at 112 basis points in the same period.

The factors pushing Turkey’s risk premium up are not only economic, but also political and geopolitical.  Standing out among them are ongoing tensions with Washington over Ankara’s resolve to acquire S-400 air defense systems from Russia.  Despite Washington’s threats to slap sanctions on Ankara in the coming weeks, Erdogan has maintained the deal with Russia will go through, stoking the prospect of a crisis with uncertain consequences for the economy.

A damaging showdown with the United States, hot on the heels of the Istanbul rout, could further weaken the AKP government.  Moreover, the AKP faces the risk of fracture, with Erdogan’s former economy supremo Ali Babacan bracing to form a new party, backed by former President Abdullah Gul.  Meanwhile, some observers believe that the MHP, emboldened by its success in winning over some of the AKP’s disgruntled voters in the local polls, might eventually undo its alliance with the ruling party under a strategy focused on forcing early elections.

In sum, Erdogan’s government is under mounting strains on multiple fronts, while the CHP and its allies are highly energized, boosted by their victories in the local polls.  The mounting pressure, reinforced by other possible setbacks down the road, could well boil down to early elections in 2020.

Mustafa Sonmez is a Turkish economist and writer. He has worked as an economic commentator and editor for more than 30 years and authored some 30 books on the Turkish economy, media and the Kurdish question.  (Al-Monitor 27.06)

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