Fortnightly, 13 January 2016

The Knesset has passed its second and third readings to legislation to reduce the corporate tax rate by 1.5% to 25%. The tax reduction amendment applies from 1 January 2016. The Israel Tax Authority said the reduction in corporate tax is aimed at strengthening and encouraging growth in Israeli industry, making the Israeli economy more competitive and attractive in relation to other markets around the world, and providing incentives for investment in local production. The Ministry of Finance sees the corporate tax rate reduction as complementing the reduction in the rate of VAT from 18% to 17% last October, part of a government policy of a reduction in direct taxation in an attempt to boost the rate of economic growth in Israel. (Globes 05.01)

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1.2 Israel Approves New Tax Incentives For Startup Investors

The Knesset Finance Committee approved an amendment to the Angel Law on 29 December, granting significant tax benefits to startup investors. Under the revised legislation, a new course will be added to the angel investor law which incentivizes investment in young startups to assure the angels of these benefits at the time of the investment. The changes further determined that startups from Israel’s periphery will be legally recognized as startups for five years, unlike those from the country’s center, which receive the designation for four years.

The revision was intended to maintain Israel’s comparative advantage in knowledge-intensive industries. The Office of the Chief Scientist within the Ministry of Economy and Industry claimed the tax incentives for startup investors will allow these companies to carve out a space in the market. (Globes 31.12)

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1.3 Minister of Finance Permits Duty-Free Vegetable Imports

On 6 January, Minister of Finance Kahlon signed an order permitting the importing of a variety of vegetables in the framework of a 60,000 ton customs duty exempt quota for vegetable imports. The purpose of the order, which was coordinated with the Ministry of Agriculture, is to do as much as possible to prevent an increase in fresh vegetable prices. The shortage of fresh agricultural produce resulting from extreme weather conditions has had a negative impact on domestic crops, and the order is aimed at preventing prices from soaring in the wake of burgeoning demand during holidays.

Under the order, potatoes, onions, carrots, horse radish, cabbage, lettuce, cucumbers, celery, tomatoes, parsley and peppers can be imported all year without paying customs duties. Imports under this quota will be allowed according to the crop conditions and consumption in the domestic market during the year. During the holiday periods (from 22 March until 5 May, and from 2 September until 2 November), imports of specific crops will be permitted (lettuce, cucumbers, celery, tomatoes, parsley, and peppers) will be allowed under the quota regardless of the supply in the domestic market. (Globes 06.01)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 BIRD Foundation to Invest $7.5 Million in 9 New Projects

During its meeting on 16 December 2015, held in Tel Aviv, the Board of Governors of the Israel-U.S. Binational Industrial Research and Development (BIRD) Foundation approved $7.5 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 $21 million.

The nine projects approved by the Board of Governors are in addition to the 926 projects which the BIRD Foundation has approved for funding during its 38 year history. To date, BIRD’s total investment in joint projects has been over $300 million, helping to generate direct and indirect sales of more than $10 billion. The projects approved include:

BDR Technologies (Ness Ziona, Israel) and MagBioSense (St. Louis, MO): Ultra-sensitive Point-of-Care device for rapid detection of biomarkers.
ECOncrete Tech (Tel Aviv, Israel) and Besser Company (Alpena, MI): Bio-enhanced drycast concrete products that mitigate climate.
Elbit Systems (Haifa, Israel) and Tyvak Nano-Satellite Systems (Irvine, CA): Small-sat search and rescue application.
Forrest Innovations (Caesarea, Israel) and U.S. Company: Solutions to control diseases in potatoes.
Groundwork BioAg (Lod, Israel) and Marrone Bio Innovations (Davis, CA): Biological stacked seed treatment.
Kramer Electronics (Jerusalem, Israel) and iRule (Detroit, MI): Distributed advanced commercial control solution.
Screenovate (Ra’anana, Israel) and U.S. Company: Wireless display project.
VocalZoom (Yokneam, Israel) and Vixar: (Plymouth, MN): VCSEL Module for sensing applications.
WSC Sports Technologies (Bnei Brak, Israel) and Krossover Intelligence (New York, NY): Custom highlights for amateur athletes.

The deadline for submission of Executive Summaries for the next BIRD cycle is 9 March 2016. Approval of projects will take place in June 2016.

The BIRD Foundation promotes collaboration between U.S. and Israeli companies in various technological fields for the purpose of joint product development. In addition to providing conditional grants of up to $1 million for approved projects, the Foundation assists by working with companies to identify potential strategic partners and facilitate introductions. (BIRDF 30.12)

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2.2 Ninety Israeli Companies Attend Investor Conference in China

An unprecedented 150 Israeli businessmen representing 90 companies left Israel to attend an investors’ conference in Beijing. As part of the efforts to persuade Chinese investors to expand their cooperation with Israeli companies, the Ministry of Economy and Industry has launched a new Mandarin Chinese language website explaining the business opportunities available and the business environment in Israel.

The two-day conference took place in Beijing with the participation of Minister of National Infrastructure, Energy, and Water Resources Steinitz, Ministry of Economy and Industry director general Lang and Ministry of Economy and Industry Division for Foreign Investment and Industrial Cooperation director Eger. The Israeli companies that took part in the conference include Mobileye, which deals in technologies for assisting drivers; Cortica, which deals in visual search technologies; Stratasys, which operates in the 3D printing sector; Water-Gen, a water sector company; and more.

The Ministry of Economy and Industry said that the effort to convince Chinese investors was part of the implementation of a 2013 cabinet resolution to strengthen economic cooperation between Israel and China. Figures from the Ministry of Economy and Industry show that Israel’s bilateral trade with China totaled $11 billion in 2014 and $8 billion in the first two quarters of 2015: $2 billion in exports to China and $5.8 billion in imports from China. (Globes 01.01)

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2.3 TopSpin Security Receives $7 Million Series A Funding

TopSpin Security has secured $7 million in Series A funding from a group of accomplished private investors who stand behind Israel’s most successful cyber security companies. The funding will help the company accelerate its sales efforts in key markets. Leading security investors have teamed up together to back up TopSpin Security as it accelerates its growth. Investors include Shlomo Kramer, Mickey Boodaei, Zohar Zisapel, and Rakesh Loonkar, who have founded and seeded cyber security successes including Check Point, Imperva, Trusteer, Palo Alto Networks, Aorato, Adallom, Lacoon, in addition to many others.

Herzliya’s TopSpin Security designs and markets DECOYnet, an advanced active cyber defense system that engages attackers once they have bypassed perimeter-based security solutions. Already in deployment and used by organizations across the United States, DECOYnet offers a unique combination of detection, deception and extensive traffic analysis and visibility, allowing organizations to receive an accurate view of how data flows in, out and within their networks; assess risks; and set preemptive measures for detecting and dealing with cyber threats. (TopSpin 04.01)

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2.4 ZIM to Expand Its Refrigerated Container Fleet

Haifa’s ZIM Integrated Shipping Services announced the expansion of its refrigerated container fleet in order to answer the demand for its innovative ZIMonitor service. Launched in early 2015, ZIMonitor allows customers to track, monitor and remotely control sensitive, high-value cargo stowed in refrigerated, or reefer, containers. Customers can opt to receive alerts regarding their shipment via text message or email, closely monitor their cargo’s status and intervene to prevent damages through ZIM’s 24/7 dedicated global response team. An order of approximately 1,900×40-Feet High-Cube refrigerated containers is planned to be deployed during 2016. The new advanced and environmentally friendly containers were specifically designed to accommodate the ZIMonitor service and received a special prefix: ZMOU.

ZIM has partnered with Teva Pharmaceutical Industries, a leading global pharmaceutical company, on a successful pilot of the ZIMonitor service that addressed Teva’s uncompromising commitment to the quality of its products and its dedication to meet the requirements of its customers. Upon the successful completion of the pilot, the ZIMonitor service quickly gained popularity among ZIM’s customer base. (ZIM 05.01)

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2.5 Israel Aerospace Teams with India’s Premier Explosives

Indian defense manufacturer Premier Explosives has signed a memorandum of understanding (MOU) with Israel Aerospace Industries for exploring potential business opportunities. Headquartered in Hyderabad, Premier Explosives designs, develops and manufactures solid propellants for Indian missiles such as the Akash and Astra. The company also operates a state-of-art chemical manufacturing facility of Indian Space Research Organisation (ISRO) at Sriharikota and a solid fuel complex of advanced systems laboratory at Jagdalpur.

This latest collaboration comes as Israel and India tighten cooperation on defense projects. These projects include: joint Israeli-Indian development of the Barak 8 defense missile for protecting offshore gas rigs; a joint venture between Israel’s Rafael Advanced Defense Systems and India’s Kalyani Group to produce missile systems, remotely controlled weapons positions and advanced systems for the protection of tanks and APCs; and cooperation between IAI and India’s Alpha Design Technologies on the production of mini-drones. (Globes 06.01)

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2.6 First F-35A “Adir” for Israel Taking Shape in Fort Worth, Texas

Lockheed Martin and the Israeli Ministry of Defense officials marked the beginning of the first F-35A “Adir” (meaning “mighty one” in Hebrew) manufactured for Israel in Fort Worth, Texas on 7 January.

The aircraft, designated as F-35A aircraft AS-1, officially began its mate process, where the four major components of the 5th Generation fighter aircraft are joined together in the Electronic Mate and Assembly Station to form the aircraft’s structure. AS-1 will continue its assembly here and is expected to roll out of the factory in June and be delivered to the Israeli Air Force (IAF) later this year.

Israel has contracted for 33 F-35A Adir Conventional Take Off and Landing (CTOL) aircraft through the U.S. government’s Foreign Military Sales program. Israel’s contribution to the F-35 program includes Israel Aerospace Industries F-35A wing production; Elbit Systems work on the Generation III helmet-mounted display system, which all F-35 pilots fleet-wide will wear; and Elbit Systems-Cyclone F-35 center fuselage composite components production. (Lockheed Martin 11.01)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Saudi Dairy Firm Pays $31 Million for California Plot to Grow Fodder

Saudi Arabia’s Almarai Co, the largest dairy company in the Arabian Gulf, has spent $31.8 million to buy land in California to supply its business with alfalfa hay. The 1,790 acres of land, acquired through Almarai’s Fondomonte California operation was financed through its own resources. Almarai, which already owns land in Arizona, said the purchase was part of efforts to secure high-quality hay from outside Saudi Arabia, in line with Saudi government policy.

Saudi Arabia is phasing out the growing of crops and fodder because of the strain such cultivation places on scarce water resources in the desert kingdom. The cultivation of green fodder will end in the next three years. Almarai’s costs will increase by 200 million riyals ($53 million) this year because of the ban on green fodder, with the amount rising each year until the company imports all its green fodder by 2019. (AB 10.01)

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3.2 Saudi FDA Approves Gamma Medica’s Breast Imaging Solution

Salem, New Hampshire’s Gamma Medica, a breast imaging medical device company, announced the Saudi Food and Drug Authority (SFDA) has issued a Medical Device Marketing Authorization (MDMA) for their LumaGEM breast imaging product. This MDMA allows Gamma Medica to market the LumaGEM using Molecular Breast Imaging (MBI) technology in the Kingdom of Saudi Arabia (KSA). Integrated Business Ventures Co. (IBV) based in Riyadh, Saudi Arabia is Gamma Medica’s Authorized Representative and strategic partner for the KSA and the Middle East markets.

According to the National Cancer Registry and leading cancer care centers, there are an estimated 8,000 to 12,000 new cases of breast cancer discovered each year in KSA. It has been reported that up to 60% of these cases are diagnosed at later symptomatic stages, which significantly reduces the five-year survival rate from over 90% at an early detection stage to about 22% in later symptomatic stages. According to the King Faisal Specialist Hospital and Research Center in Riyadh, breast cancer represents 24% of all cancer cases, making it the most common form of cancer in women in KSA. Coupled with the extreme shortages of radiologists, LumaGEM will likely reduce the clinical burden and enable more women to be screened. (Gamma Medica 08.01)

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3.3 Varian ProBeam Proton Therapy Receives Saudi FDA Authorization

Palo Alto, California’s Varian Medical Systems announced its ProBeam proton therapy system is the first such system to receive Saudi FDA medical devices marketing authorization. Varian Medical Systems focuses energy on saving lives by equipping the world with advanced technology for fighting cancer and for x-ray imaging. The company is the world’s leading manufacturer of medical devices and software for treating cancer and other medical conditions with radiation. The company provides comprehensive solutions for radiotherapy, radiosurgery, proton therapy and brachytherapy. The company supplies informatics software for managing comprehensive cancer clinics, radiotherapy centers and medical oncology practices. Varian is also a premier supplier of x-ray imaging components, including tubes, digital detectors, and image processing software and workstations for use in medical, scientific, and industrial settings, as well as for security and non-destructive testing. (Varian Medical Systems 11.01)

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3.4 Ferro Further Strengthens Its Position in Turkish Market

Cleveland, Ohio’s Ferro Corporation purchased 100% of the equity of privately held Istanbul-based Ferer Dis Ticaret Ve Kimyasallar Anonim Sirketi (Ferer) for approximately $9 million in cash, on a cash-free and debt-free basis, subject to working capital and other adjustments. The acquisition of Ferer is the third step Ferro has taken in the past 18 months to strengthen its position in the fast-growing Turkey market. In July 2014, Ferro acquired assets of a reseller of Ferro porcelain enamel products in Turkey, providing a commercial base for direct marketing and sales opportunities. In November 2015, Ferro completed the acquisition of Egypt-based tile coatings manufacturer Al Salomi for Frit and Glazes, adding production capacity to meet current and future demand in Turkey as well as other markets in the Middle East and North Africa. Now, the Ferer acquisition brings Ferro an operational presence in Turkey focused on the glass market. (Ferro Corporation 05.01)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Israel’s First Bio-Waste Power Plant to Be Built

Doral Energy and Kibbutz Lahav are to build a facility to generate energy from organic waste and animal waste, the first of its kind in Israel. The installation will be constructed on Kibbutz Lahav property and will accept the organic waste of nearby kibbutzim. The investment in the installation will cost NIS 15 million. The facility will first generate 0.63 MW to flow to the electric grid. Israel’s Public Utilities Authority (Electricity) set a rate of NIS 0.60 per kilowatt/hour, to be raised to NIS 1 per kilowatt/hour. Locally, there are 14 projects at varying stages to generate electricity from waste, but in the agricultural sector there are only 3 such projects. (Globes 31.12)

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5: ARAB STATE DEVELOPMENTS

►►Arabian Gulf

5.1 Saudi Budget Marks End of Era for Lavish Arabian Gulf Handouts

Arabian Gulf countries are introducing reforms to subsidies including energy in a bid to bolster under-pressure state finances. An austere state budget recently released by Saudi Arabia is likely to mark the end of an era for the Gulf’s lavish cradle-to-grave welfare systems, encouraging governments around the region to roll back costly handouts to their populations. Struggling to narrow a huge budget deficit created by low oil prices, Riyadh on 28 December announced government spending cuts, reforms to energy subsidies and a drive to raise revenues from taxes and privatization in 2016.

Gulf governments have tightened their belts in the past during periods of slumping oil prices. But the Saudi budget went further than usual by including steps that will directly hit the purchasing power of citizens – in particular, raising domestic gasoline, kerosene, water and electricity prices.

Because of Saudi Arabia’s role as the political leader of the Gulf Arab states and the biggest Arab economy, other Gulf governments are now expected to follow suit as they impose their own austerity programs in response to the prospect of years of shrunken oil and gas revenues.

Bigger changes are on the way. Governments in Bahrain, Kuwait, Qatar and Oman, which face financial squeezes of varying intensity, have all said they are conducting broad reviews of their subsidy systems, though they have not yet committed to specific reforms. Because of political sensitivities, governments are likely to move cautiously; Saudi officials stressed this week that they wanted to minimize the impact on the living standards of lower- and middle-income people. (Reuters 30.12)

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5.2 UAE Signs MOU with China for Space Science Cooperation

The UAE has signed a memorandum of understanding (MoU) with the People’s Republic of China concerning defining a framework for collaboration in studies and development in space science, as well as the peaceful exploration of outer space. The signing came during the visit of Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, to China. The visit aimed at exploring collaboration opportunities in various sectors including energy, space, financial services, commerce, transportation and education.

According to the new MoU, the UAE Space Agency and China National Space Agency will represent the two countries in exchanging information, studies and scientific data in the field of space exploration and peaceful exploitation. The data exchange will include scientific and research expertise, as well as training, capacity building, lectures, conferences and other space related domains. The MoU also covers collaboration in research and development of satellites for scientific, testing, remote sensing, and communications purposes. The collaboration will include services such as launching, follow up, control, as well as developing and controlling ground satellite systems. (bq 30.12)

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5.3 Dubai’s Nine Month Non-Oil Foreign Trade Falls Slightly to $263 Billion

Dubai’s non-oil foreign trade fell marginally to AED966 billion ($262.9 billion) during the first nine months of 2015, according to official data. Figures show that trade between January and September 2014 fell from AED988 billion during the same period last year. Dubai has managed to contain the impact of the instability of the global economic environment, marked by a decline in commodity prices and currency rates, to maintain a strong economic performance in 2015.

Imports had the biggest share of the overall trade with a value of AED597 billion while exports and re-exports totaled AED100 billion and AED269 billion respectively. From January to September 2015, direct trade contributed AED603 billion of Dubai’s total foreign trade value; while free zones contributed AED340 billion and customs warehouses AED23 billion. According to the figures, Dubai has seen a “substantial upsurge” in the total volume of goods imported, exported or re-exported via the emirate.

China was once again Dubai’s top trading partner worldwide, with a total bilateral trade value of AED132 billion in the first nine months of 2015, which represents a growth of 5.1% compared to the same period of 2014. India was the second biggest trading partner at AED74 billion, while the US came third with AED60 billion worth of trade. (WAM 02.01)

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5.4 Oman Approves Spending Cuts & Tax Rises as Cheap Oil Bites

Oman’s cabinet approved in principle spending cuts, tax rises and fuel subsidy reforms to cope with the damage to state finances from low oil prices. The most important of these actions include a reduction in government spending, and the development of non-oil revenues by raising tax rates on profits of corporations, reviewing and raising fees on some government services, and adjusting prices of petroleum products in line with global prices of these products starting from mid-January 2016.

Oman, a small oil exporter, has been hit hard by low oil prices; the government posted a budget deficit of 3.26 billion rials ($8.5 billion) in the first 10 months of this year, swinging from a 189.6 million rial surplus a year earlier. Recently, the Shura Council, a top advisory body to the government, voted to raise the 12% corporate tax rate to 15%. Expensive state subsidies keep Omani gasoline and other fuel prices among the lowest in the world. Oman and other Gulf states have been reluctant to cut fuel subsidies because that could be unpopular among the public and raise inflation. (Reuters 30.12)

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5.5 Saudi Arabia Plans to Introduce VAT in Two Years

Saudi Arabian finance minister Alassaf said the kingdom expects to introduce value-added tax in two years, aiming for a tax rate of around 5%. In its 2016 state budget announcement, the ministry said it planned to introduce VAT in coordination with other countries in the region. Younis Haji al-Khouri, undersecretary at the United Arab Emirates ministry of finance, told reporters in December that the target for introducing the tax in the region was three years. The IMF has suggested the UAE consider imposing VAT at a 5% rate. (Reuters 30.12)

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5.6 Saudi Arabia Calls For Stricter Fast Food Rules to Combat Obesity Problem

The Scientific and Educational Committee of the Saudi Diabetes and Endocrine Association (SDEA) has called for the introduction of 10 amendments to the ingredients and specifications of fast foods in the Kingdom. The World Health Organization (WHO) recently placed Saudi Arabia in third position, after Qatar and Kuwait, in its list of countries around the world with the highest rates of obesity. About 71% of deaths in the Saudi Kingdom are caused by diabetes, obesity and heart ailments. In addition, these diseases also cause disability.

The requested changes include the reduction of meat fats to 20% in all fast foods; chicken burgers to be made only after removing the skin and without added salt; reducing the fat content of cheese to 10-20%, using grilling and baking instead of frying; and offering salads with meals and fresh juices instead of sodas. The committee also called for a reduction in the use of hydrogenated fats and the inclusion of calorie counts on the packaging of fast food meals. The committee has also urged hotels introduce low-fat meals on their menus. (AB 09.01)

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►►North Africa

5.7 World Bank Expects Strong Libyan Recovery

The World Bank expects the Libyan economy to recover rapidly in 2016, growing by 35.7%, according its Global Economic Prospects report released on 6 January. This follows an estimated fall of 5.2% last year and of nearly 50% over the past three years. Growth rates of 27.6% and 8.4% are predicted for 2017 and 2018 respectively. This contrasts dramatically with the gloomy prediction from the Economist Intelligence Unit, which showed a further contraction in the economy. (World Bank 09.01)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Turkish Inflation Hits 4 Year High

Turkey’s consumer prices rose by an annualized 8.81% in December, the highest hike since December 2011 and nearly 1% higher than the central bank estimate of 7.9%, according to data released by Turkish Statistics Institute (TurkStat) on 4 January. The surge in inflation was led by food and clothing which roses by 10.87% and 8.99% respectively. Turkey’s central bank left interest rates unchanged on 22 December, a surprise move that put fresh pressure on the struggling lira and inflation. Analysts and investors have repeatedly called for a rate hike to rein in inflation and put a floor under the lira. (Zaman 05.01)

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6.2 Turkey’s National Income Per Capita to Drop Below $10,000

Turkey’s national income per capita has been forecasted to decrease below $10,000 for the next two years, projected to drop to $9,286 in 2015 and $9,364 in 2016 on the dollar-basis rather than purchasing power in the government’s new medium-term economic program. The national income per capita was $10,390 in 2014.

The government aims to increase this amount above the $10,000 threshold again by 2017, according to goals outlined in the medium-term economic program, which was released on 11 January. Ankara has renewed its program after a short period of time, as it had already announced another just ahead of the November elections in 2015.

According to the new program, the national income forecast was announced as $722 billion in 2015, as $736 billion in 2016, as $796 billion in 2017 and as $854 billion in 2018. The country’s national income was announced as $799 billion in 2014.

The government, however, revised its national income per capita from dollar terms to one that was income-based on purchasing power parity, after dramatic losses in the Turkish Lira’s value against the dollar during its prior program. With the change, the government’s national income per capita target rose to $19,506 from the previous target of $10,936, which was set on the dollar basis formula. If this change had not been made, the country’s national income per capita would have decreased below $10,000 during the last year as well, with a loss of around 25% in the lira’s value to the dollar.

Sharp effects of the rise in the dollar are quite visible in the new program, as the mentioned forecasts, which are based on the lira, are higher than the previous years, but lower on the dollar basis. (HDN 12.01)

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6.3 Ankara Expects $1.2 Billion of Income From Recent Tax & Price Hikes

The Turkish government hopes to gain around TL3.6 billion ($1.2 billion) of income from recent tax hikes in alcohol, cigarettes and mobile phones, and hikes in bridge and highway tolls. Around TL3 billion of income is expected from the tax hikes in alcohol and cigarettes, which came into effect 1 January, while an additional TL300 million of income is expected from the recent hike on special taxes for mobile phones.

The minimum fixed tax rate on tobacco products increased by 5.1% to TL4.42, while the fixed rate increased by 25% to TL 0.25 to mark the new year. The minimum fixed tax rate for beer has been increased by TL 0.18 to TL 1.03. The minimum fixed tax rate for two liters of raki has increased by TL 23 to TL 130.68. Price hikes have followed these tax raises in the country. Electricity prices also increased by 6.8% as of 1 January, just two days after the minimum wage saw a 30% increase. A special tax added to mobile phone sales has also been hiked up by 30% to TL 160. (HDN 05.01)

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6.4 Turkish Military Announces Personnel Figures

The Turkish General Staff has announced the number of its military and civil personnel on duty under the umbrella of the Turkish Army. According to the information, there were a total of 626,004 military and civil personnel working in the Turkish Army as of the beginning of 2016. There were a total of 358 generals and admirals in the army as well as 39,782 officers and 97,110 non-commissioned officers.

The Turkish Army was also home to 21,978 specialist gendarmes, 73,975 specialized sergeants and 8,611 contracted privates. The number of specialized personnel was given as 241,814. The army added that a total of 332,509 soldiers were currently under arms in barracks. The number of civil personnel in institutions linked to the General Staff was given as 51,681. (Dogan 05.01)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Statistics Show Jewish & Arab Israeli Fertility Rates Now Even

According to estimates by the Central Bureau of Statistics, as of 31 December, the population of Israel stood at 8.462 million people. An approximate 6.335 million people are Jews, making up 74.9% of the population. Non-Jewish Arabs make up 20.7%% of the population, with an estimated 1.757 million people. Another 370,000 Israeli citizens do not fall into either of these two groupings.

Israel’s population grew by 2% in 2015. Approximately 176,700 babies were born – 74% of them Jewish, 23% of them Arab and another 4.4% other. In addition to births, some 28,000 new olim arrived in Israel throughout the past year. Israel’s newest citizens arrived mainly from France with 25% of all total new immigrants, Ukraine with 24%, Russia with 23% and the United States with 9%.

The added that the fertility rates of Jewish and Arab women in Israel have leveled out over years. That statistic echoes similar findings earlier this year, which showed a steady decline in Muslim population growth in Israel. (CBS 31.12)

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*REGIONAL:

7.2 Non-Jordanians Constitute Third of Jordan’s Population

Initial results of the national census conducted in late November showed that of the Hashemite’s Kingdom’s 9.5 million residents, nearly one third are non-Jordanians. According to the results, the number of Jordanians is around 6.6 million, while the number of non-Jordanians who reside in the country is around 2.9 million, representing 30.6% of overall population, including Syrians, Egyptians and Iraqis. The results showed that Amman’s population more than doubled between 2004 and 2015, rising from 1.9 million to over 4 million, constituting around 42% of the Kingdom’s inhabitants. In regards to governorates, the results showed that Irbid came second with a population of 1.7 million, followed by Zarqa at 1.3 million. Official results of the national census will be revealed in February. (JT 12.01)

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7.3 Moroccan Amazigh Push to Make Amazigh New Year a Public Holiday

January twelfth marks the first day of year 2966, according to the Amazigh calendar. To gain recognition for this New Year, Amazigh have been orchestrating inclusive cultural festivities on the streets of Rabat. Although anthropologists say it is difficult to confirm the historical roots of the Amazigh New Year, known as Yennayer, the holiday’s roots have been linked back to 950 BCE. The New Year began as a celebration after Amazigh (Berber) King Chachnaq won the war against the Pharaohs, defeating Ramses III. Ever since, his descendants celebrate this historic victory annually.

But for the past few years, Amazigh have been attempting to claim a new victory with this holiday. In recent years, they have succeeded in making their Amazigh language the official language of the state along with Arabic in the 2011 Moroccan Constitution. Now, they are pushing for more recognition, trying to make their New Year a national public holiday.

Morocco has two New Year’s marked as public holidays. These include 1 January, according to the Gregorian calendar and the first day of the Islamic calendar, which changes every year depending on the moon. Most Moroccan citizens celebrate the Gregorian New Year, with media coverage focusing on 1 January festivities. Meanwhile, the Islamic calendar falls under the radar. The Amazigh New Year has fallen even further, being relegated as a cultural observation, although it is still an integral part of Berber identity. To many Amazigh, the New Year marks the reaffirmation of some important aspects of agrarian society. Last year, the youth wing of Amazigh Network for Citizenship (Azetta) launched a petition for the holiday. There has been no government response ever since. (MWN 11.01)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Phytech Closes Series A Round

Phytech announced the closing of an investment led by existing investors, Syngenta Ventures and Mitsui & Co Europe. Phytech’s PlantBeat technology is a simplified, alert-driven mobile platform which combines predictive algorithms and data analysis tools that integrate continuous crop health and supportive environmental data, distilled into real-time recommendations. Phytech is helping growers in their day-to-day farming decisions impacting both the quality and yield of their crops, while reducing water usage. Phytech’s technology is deployed by world leading growers in the U.S, Brazil, Australia and other markets and in a large variety of specialty crops and row crops, directly and through partnerships with global leading CP partners. The investment will fund the expansion of Phytech’s technology platform and support the company’s continuing commercialization globally.

Kibbutz Yad Mordechai’s Phytech is a leading Precision Ag analytics company, focused on helping farmers to optimize yields by transforming real-time plant data into actionable, yield-enhancing recommendations. Phytechs’ proprietary PlantBeat platform combines continuous plant monitoring hardware, spatial imaging, hyper-local climate information, agronomic modeling, data analysis and web and mobile software applications that help farmers improve profitability by making better informed in-season operating decisions. (Phytech 28.12)

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8.2 Kamada Receives Positive Data from Alpha-1 Antitrypsin to Treat GvHD

Kamada reported further positive interim results from a Phase 1/2 clinical trial of its proprietary alpha-1 antitrypsin (AAT) to treat steroid-refractory Graft Versus Host Disease (GvHD) which is being conducted in collaboration with Baxalta US and the Fred Hutchinson Cancer Research Center in Seattle.

The interim results showed that plasma AAT levels increased in both cohorts and remained stable for the duration of treatment. Treatment responses were evaluated as “peak” response and at Day 28. Eight of the twelve subjects showed an overall response to treatment, four of which were complete responses and four were partial responses.

Nass Ziona’s Kamada is focused on plasma-derived protein therapeutics for orphan indications, and has a commercial product portfolio and a robust late-stage product pipeline. The Company uses its proprietary platform technology and know-how for the extraction and purification of proteins from human plasma to produce Alpha-1 Antitrypsin (AAT) in a highly-purified, liquid form, as well as other plasma-derived Immune globulins. AAT is a protein derived from human plasma with known and newly-discovered therapeutic roles given its immunomodulatory, anti-inflammatory, tissue-protective and antimicrobial properties. The Company’s flagship product is Glassia, the first and only liquid, ready-to-use, intravenous plasma-derived AAT product approved by the U.S. FDA. (Kamada 06.01)

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8.3 Teva Launches Generic Ortho Tri-Cyclen Lo in the United States

Teva Pharmaceutical Industries announced the launch of a generic equivalent of Ortho Tri-Cyclen Lo (norgestimate/ethinyl estradiol) tablets in the United States. Teva’s Tri-Lo-Sprintec (norgestimate and ethinyl estradiol tablets, USP) is an oral contraceptive, available in a 28-day blister pack dispenser, used by women to prevent pregnancy. As a leading global pharmaceutical company, Teva is committed to care in women’s health with a portfolio including contraceptive products and other therapies.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products. (Teva 05.01)

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8.4 Teva & Checkpoint Announce Agreement for Oral PARP Inhibitor

Teva Pharmaceutical Industries and New York’s Checkpoint Therapeutics announced a license agreement in which Checkpoint will obtain the exclusive worldwide rights to develop and commercialize CEP-8983 and its small molecule prodrug, CEP-9722, an oral poly (ADP-ribose) polymerase (PARP) inhibitor in early clinical development for solid tumors. CEP-9722 is a novel, orally active, small molecule selective inhibitor of PARP-1 and PARP-2 enzymes that will be developed by Checkpoint as both a monotherapy and in combination with other anti-cancer agents, including Checkpoint’s novel immuno-oncology and checkpoint inhibitor antibodies currently in development.

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8.5 Psagot Winery is Challenging the Best Kosher Wines

It is less than a 20 minute drive from the center of Jerusalem, but yet Psagot Winery’s near 50 acre vineyards produces nearly 220,000 bottles of some of the world’s best kosher wines. The terrain, which is 900 meters above sea level, is what creates the amazing vintage that competes favorably with some of the best European wines. The venture began in 2003, producing a mere 3000 bottles; today they make 220,000. 60% of the wines are destined for export, most of it imported by Royal Wines.

Nearly $48 million of Israeli wines are exported to the US, a significant percentage by Royal. In 2012, both Psagot’s Cabernet Sauvignon and its Merlot received a 90+ rating from the prestigious Wine Enthusiast. More than 100,000 Psagot bottles are sold in the US. The Psagot wines feature a replica of an ancient coin found in the area on the face of the bottle, just another reminder that Psagot (literally translated as peaks) is about more than simply great wine. (KT 10.01)

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8.6 BioLineRx Collaborates with MSD to Investigate Pancreatic Cancer

BioLineRx announced a collaboration with MSD, known as Merck in the US and Canada, to support a Phase 2 study investigating BioLineRx’s BL-8040 in combination with KEYTRUDA (pembrolizumab), MSD’s anti-PD-1 therapy, in patients with metastatic pancreatic cancer. The study is an open-label, multicenter, single-arm trial designed to evaluate the safety and efficacy of this combination in patients with metastatic pancreatic adenocarcinoma.

BL-8040, BioLineRx’s lead oncology platform, is a CXCR4 antagonist that has been shown in several clinical trials to be a robust mobilizer of immune cells and to be effective at inducing direct tumor cell death. Additional findings in the field of immuno-oncology suggest that CXCR4 antagonists may be effective in inducing the migration of anti-tumor T cells into the tumor micro-environment. KEYTRUDA is a humanized monoclonal antibody that works by increasing the ability of the body’s immune system to help detect and fight tumor cells. KEYTRUDA blocks the interaction between PD-1 and its ligands, PD-L1 and PD-L2, thereby activating T- lymphocytes, which may affect both tumor cells and healthy cells. The Phase 2 study will evaluate the clinical response, safety and tolerability of the combination of these therapies as well as multiple pharmacodynamic parameters, including the ability to improve infiltration of T cells into the tumor and their reactivity.

Jerusalem’s BioLineRx is a clinical-stage biopharmaceutical company dedicated to identifying, in-licensing and developing promising therapeutic candidates. The Company in-licenses novel compounds primarily from academic institutions and biotech companies based in Israel, develops them through pre-clinical and/or clinical stages, and then partners with pharmaceutical companies for advanced clinical development and/or commercialization. (BioLineRx 12.01)

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8.7 BrainStorm’s NurOwn for ALS Treatment Published in JAMA Neurology

BrainStorm Cell Therapeutics announced the publication of a paper in the January 2016 edition of JAMA Neurology discussing the outcome of the first in man Phase 1/2 study and Phase 2 dose escalation study with NurOwn in ALS. The data provide indication of clinically meaningful benefit as reflected by a slower rate of disease progression in the period post treatment. There was also a positive trend on two novel biomarkers, rate of decline of muscle volume and of compound motor axon potential (CMAPs). These are the first published clinical data with stem cells that have been induced under culture conditions to produce NTFs, with the potential to achieve a neuroprotective effect in ALS and modify the course of disease.

NurOwn was found to be safe and well tolerated over the study follow up period in the twenty six patients treated across the two clinical trials. Most of the adverse events were mild and transient and there were no treatment related adverse events.

Petah Tikva’s BrainStorm Cell Therapeutics is a biotechnology company engaged in the development of first-of-its-kind adult stem cell therapies derived from autologous bone marrow cells for the treatment of neurodegenerative diseases. The Company holds the rights to develop and commercialize its NurOwn technology through an exclusive, worldwide licensing agreement with Ramot, the technology transfer company of Tel Aviv University. (BrainStorm 11.01)

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8.8 XTL Submits Protocol for Trial of hCDR1 in Lupus Treatment

XTL Biopharmaceuticals has submitted the full protocol for its advanced stage clinical trial of hCDR1 for the treatment of systemic lupus erythematosus (SLE) to Yeda Research and Development Company. XTL previously announced that it has submitted a Pre-IND meeting package to the US FDA and expects to receive written responses regarding its proposed clinical study in the coming weeks. A Phase 2b clinical trial of hCDR1 was previously completed and the compound has shown a favorable safety profile in over 400 patients and efficacy in at least one clinically relevant endpoint. Submission of this clinical trial protocol marks a milestone for XTL in its development of hCDR1, which the Company is developing under license from Yeda, the technology transfer arm of the world-renowned Weizmann Institute of Science.

Yeda Research and Development Company is the commercial arm of the Weizmann Institute of Science, one of the world’s leading multidisciplinary research institutions. Ra’anana’s XTL Biopharmaceuticals, a biopharmaceutical company, focuses on the acquisition, development, and commercialization of pharmaceutical products for the treatment of unmet clinical needs with a focus on treatments for autoimmune diseases. (XTL 11.01)

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8.9 V-Wave Announces $28 Million Series B Financing

Caesarea’s V-Wave, a medical device company that is developing a proprietary implantable, interatrial shunt for the treatment of heart failure (HF), completed a Series B financing of $28m. New investors included Johnson & Johnson Innovation – JJDC Inc., TriVentures, Pura Vida Investments and BioStar Ventures. Also participating in the round are existing investors BRM Group, Pontifax and Edwards Lifesciences. The funds will support clinical evaluation and development, addition of senior management and manufacturing scale-up of V-Wave’s proprietary minimally invasive device for use in patients with chronic symptomatic HF. The shunt is implanted trans-venously and placed in the atrial septum where it remains. Within the shunt is a porcine tissue valve to assure only left to right shunting of blood and to reduce the probability of paradoxical embolus. The device regulates left atrial pressure (LAP) by shunting excess blood volume away from the left ventricle – the heart’s main pumping chamber. Elevated LAP is the direct cause of worsening symptoms and hospitalization in over 90% of HF patients. The Shunt is intended to relieve symptoms, improve quality of life, and to reduce the need for acute hospitalization due to worsening episodes of HF in patients who become symptomatic at minimal levels of activity. To date, more than thirty patients have been successfully treated. The V-Wave Unidirectional Shunt System is not available for sale in the United States or other countries. (V-Wave 11.01)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 SuperCom Introduces Enhanced PureHealth Solution Suite

SuperCom announced that its M2M(IoT) division has launched its enhanced PureHealth Suite – a hybrid of products and applications which will be available for the HealthCare, Senior living and e-Hospitals sectors, starting January 2016.

The PureHealth Suite provides a wide array of solutions including: Staff Safety, Patient Safety, Patient and Staff Flow, Residence Safety, Wander Management and Asset/Inventory Management. These solutions are all aimed at improving efficiency and safety, in addition to providing valuable operational insights to healthcare and senior living facilities. PureHealth solutions are all accessed, managed, and controlled from SuperCom´s secure, cloud based software, creating an easy-to-use and cost effective platform that allows healthcare and senior living facilities to pick and choose the solutions they need, when they need them.

Since 1988, Herzliya’s SuperCom has been a leading global provider of traditional and digital identity solutions, providing advanced safety, identification and security solutions to governments and organizations, both private and public, throughout the world. Through its proprietary e-Government platforms and innovative solutions for traditional and biometrics enrollment, personalization, issuance and border control services, SuperCom has inspired governments and national agencies to design and issue secured Multi-ID documents and robust digital identity solutions to its citizens and visitors. (SuperCom 30.12)

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9.2 Locust-Inspired Robot for Reconnaissance and Rescue

Israeli researchers have built a locust-inspired robot that is just 5 inches (13 cm) long and weighs 23 grams, but despite its small size can jump 11 feet (3.35 m) high and cover a horizontal distance of 4.5 feet (1.37 m). This jump height is more than twice the height of similar-sized jumping robots and is 25 times higher than its own length. The robot could have applications in search-and-rescue missions, reconnaissance, and environmental monitoring in rough terrain.

The team of researchers that developed the miniature jumping robot is from Tel Aviv University and Ort Braude College, both in Israel, which inspired the name of the robot: TAUB (Tel Aviv University and Braude College).

As the researchers explained, the main reason why TAUB can jump so much higher than previous robots is because of its ability to store significantly more energy in the torsion springs in its “leg joints.” It does this by using a simple lever mechanism inspired by the way that the desert locust jumps by using its strong hind legs to catapult itself into the air. Instead of attempting to produce an exact imitation of the entire locust body and jumping procedure, the researchers focused on some of the specific biomechanical features of the locust’s highly successful jump mechanism.

The researchers are currently working on a gliding mechanism that will enable the robot to extend its jumping range, lower its landing impact, execute multiple steered jumps, and stabilize the robot while airborne. Stability is particularly important because when the robot’s center of mass deviates by even a few millimeters, the robot can roll in the air. Rolling makes it difficult to steer the robot, wastes energy and makes landing more complicated.

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9.3 SolarEdge’s StorEdge Solution is Now Internationally Available

SolarEdge Technologies announced the immediate international availability of its StorEdge solution. At the end of 2015, the company already completed a number of StorEdge installations in select locations around the world.

Compatible with Tesla’s home battery, the Powerwall, StorEdge is a DC coupled storage solution that allows home owners to reduce electric bills and gain energy independence. With StorEdge, unused solar energy is stored in a battery and used when needed to maximize self-consumption and for power backup. StorEdge also supports Time-of-Use management, which promotes energy consumption when electric demand from the grid is low (off-peak rates) and lower consumption when demand is high (peak rates). The backup function allows homeowners to store solar energy and use it during electric outages. The solution is based on a single inverter that manages and monitors solar energy generation, consumption, and storage. With the complete SolarEdge DC optimized StorEdge system, homeowners benefit from higher generation, higher efficiency, simple design, enhanced safety, full monitoring, and easy maintenance.

Herzliya Pituah’s SolarEdge provides an intelligent inverter solution that has changed the way power is harvested and managed in solar photovoltaic systems. The SolarEdge DC optimized inverter system maximizes power generation at the individual PV module-level while lowering the cost of energy produced by the solar PV system. The SolarEdge system consists of power optimizers, inverters and a cloud-based monitoring platform and addresses a broad range of solar market segments, from residential solar installations to commercial and small utility-scale solar installations. (SolarEdge 12.01)

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9.4 LightCyber Expands Behavioral Attack Detection

LightCyber announced the general availability of a new release of its Magna platform for detecting attack behaviors within an enterprise network with significantly expanded User-oriented attack detection capabilities. The new User-based detection features complement the existing Network and Endpoint Device capabilities, resulting in the broadest behavioral anomaly detection platform in the industry with the highest alert accuracy and operational efficiency for security analysts. With this expanded analytical detection capability, the LightCyber Magna Behavioral Attack Detection platform now provides even broader security visibility use cases, including detection of malware, risky behaviors of internal users, insider attacks and targeted external attacks that could lead to data breaches and other kinds of damage.

Ramat Gan’s LightCyber is a leading provider of Behavioral Attack Detection solutions that provide accurate and efficient security visibility into attacks that have slipped through the cracks of traditional security controls. The LightCyber Magna platform is the first security product to integrated user, network and endpoint context to provide security visibility into a range of attack activity. Founded in 2012 and led by world-class cyber security experts, the company’s products have been successfully deployed by top-tier customers around the world in the financial, legal, telecom, government, media and technology sectors. (LightCyber 12.01)

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9.5 SolidRun & nemetris GmbH Bring IoT Technology to Automotive Manufacturing

SolidRun and Germany’s nemetris GmbH, a leading provider of Industry 4.0 manufacturing technologies, announced the deployment of SolidRun’s IoT gateway as part of nemetris’ Smart Industry Apps; an advanced manufacturing solution for automotive and discrete manufacturing. The solution integrates the CuBox, a miniature, 2-inch cube computer for the purpose of production line data collection and aggregation from automotive production floors.

Established in 2010, Tel Aviv’s SolidRun is a global leading developer and manufacturer of powerful energy efficient System on Modules (SOMs) and mini computers. SolidRun’s innovative embedded solutions are ARM processor architecture based and compact, and include comprehensive software packages, drivers and support for major operating systems. (SolidRun 12.01)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Impressive Reduction in Israel’s Debt-to-GDP Ratio

Israel’s ratio of public debt to GDP fell by no less than 1.8% in 2015, the Ministry of Finance reported on 12 January. Ministry of Finance Accountant General Abadi-Boiangiu published an initial estimate for the ratio of public and governmental debt to GDP for 2015. According to the estimate, a 64.9% public debt-to-GDP ratio, including the local authorities, is projected, 1.8% less than the ratio in the preceding year. An even steeper drop in the government debt-to-GDP ratio is projected: from 65.5% to 63.4%, a 2.2% decrease.

The debt-to-GDP ratio constitutes one of the main indicators of Israel’s economic soundness, and is a material consideration in determining its credit rating. The 2015 figures establish Israel as a country that has managed to lower its debt ratio more than any other Western country since 2008. The fall in the debt ratio is also expected to lower financing costs on the debt, which totaled NIS 38 billion in 2014, in the current budget, thereby freeing up money for spending by the civilian ministries.

This year’s decrease in the debt ratio is attributable to the lower-than-expected budget deficit (only 2.1%) and market factors, primarily the decrease in the Consumer Price Index (49% of the public debt is linked to this index), the lower interest rate on the debt, and the steep fall in the shekel-euro exchange rate. (Globes 12.01)

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10.2 Israel’s Third Quarter Growth Rate Revised Down to 2%

The Central Bureau of Statistics announced on 31 December that Israel’s annualized economic growth, excluding seasonal factors, totaled 2% for Q3/15. The previous growth estimate published for the quarter was 2.5%. GDP rose by annualized rates of 0.2% and 2.3% in the third and second quarters, respectively. The figures indicate that private consumption increased by an annualized 4.5 (2.4% per capita) during the first three quarters of 2015, compared with 3.7% in 2014. (CBS 31.01)

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10.3 Israeli Exports Drop By 7% During 2015

The Israel Export and International Cooperation Institute announced on 29 December that Israel’s diamond exports fell 25% in 2015, while exports of goods were down 7.5% and exports of services dipped 3%. Israeli exports totaled $45.7 billion in 2015, down 7%, compared with 2014. The Export Institute predicts a 2% rise in exports in 2016.

In a breakdown by geographic region, Israel exports to the European Union totaled $13.6 billion in 2015, compared with $15.3 billion in 2014, and accounted for 30% of Israeli exports. According to the Export Institute, the dollar value of exports to this destination was affected last year by declines in the euro-dollar exchange rate and plummeting global oil prices. The Export Institute stressed that exports of chemicals and refined oil products account for one quarter of all goods exported to this trading bloc, and were greatly affected by oil prices on global markets.

Israel’s next largest export destination in 2015 was Asia with a total of $11.4 billion, amounting to 25% of Israeli exports. A substantial proportion of the rise in exports to Asia can be attributed to US chip giant Intel, which does its manufacturing in Israel, among other places. Economists said that accelerated exports of components, mainly to China and Vietnam, strongly affected exports to Asia.

Israeli exports to the US rose slightly to $10.8 billion. Exports to Africa, on the other hand, fell from $1.3 billion in 2014 to $1 billion in 2015. Exports to Latin America were also down, totaling $1.8 billion, 28% less than in 2014. The Export Institute attributes the steep decline in exports to the continent to a 20% slide in exports to Brazil, which is suffering from a prolonged economic crisis; the steep devaluation of the local currency; and a similar decrease in exports to Mexico. (IEICI 29.12)

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10.4 Tourism to Israel Declines By 3% in 2015

Israel welcomed 3.1 million tourists from abroad in 2015, a 3% decrease from 2014, the Ministry of Tourism and Central Bureau of Statistics announced. Tourism sources feel that these figures were encouraging considering the shadow cast by Operation Protective Edge in the summer of 2014 and the upswing in terrorist attacks in the final four months of the year. Overseas tourists generated revenue of NIS 9.9 billion in 2015.

The largest number of tourists, 20% or 586,000 came from the US, followed by Russia and France. Some 77% of tourists spent time in Jerusalem and 69% visited Tel Aviv. The lower incoming tourism figures were balanced out by Israelis who spent 5.9 million overnight stays in Israeli hotels and guesthouses, up 8% from 2014. Israelis also traveled abroad more last year. There was a record 5.16 million Israeli exits abroad, up 13% compared with 4.55 million in 2014. (Various 03.01)

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10.5 Record Israeli Car Deliveries During 2015

A new record of 254,748 vehicle deliveries was set in Israel in 2015, up 6.2% from 2014, which was in itself a record year. An additional 4,834 vehicles were sold for use as taxis. Nevertheless, December was a weak month with only 9,793 new vehicles delivered, down 7% from 2014.

Korea’s two largest carmakers led the Israeli market in 2015. Kia finished in first place with 33,703 vehicles delivered, a 28% increase over 2014, followed by Hyundai with 31,250 vehicles delivered, down less than 1% from 2014. In third place, was Toyota with 29,280 deliveries, up 7% from 2014 and in fourth place was Mazda with 17,057 deliveries, down less than 1%. In fifth place was Mitsubishi with 16,121 deliveries, up 22% from 2014. (Globes 04.01)

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11: IN DEPTH

11.1 ISRAEL: Israeli VC 2015 Fund Raising Increases to $1.5 Billion

Israeli venture capital fundraising activity was prolific in 2015, opening the seventh Israeli venture capital cycle with 18 new venture capital funds in the 2015 vintage year, IVC Research Center – KPMG Somekh Chaikin reports. So far, fund-raising efforts reached $1.02 billion in 2015, with 13 funds and 43% of the capital from funds at first closing, which are expected to raise an additional nearly $500 million, to be added to the 2015 vintage year, up from $1.2 billion in 2014.

IVC research manager Marianna Shapira said, “In the venture capital world, a vintage year is the year the fund starts investing after making a first closing, and in many cases, funds continue raising capital in the following year to reach their targets. 2015 is the first vintage year in the seventh VC capital raising cycle in Israel, which already looks promising with a number of new players entering the local VC market and 13 VC funds at first closing expected to continue capital raising efforts throughout 2016. We believe they will reach their target amounts, which will bring in an additional $500 million dedicated to Israeli investments for 2015 vintage funds. Furthermore, the 2016 vintage is already on its way, with seven VC funds currently engaged in a capital raising process, targeting more than $1 billion in total.”

The seventh venture capital raising cycle that started early in 2015 – with 83North’s $204 million closing announcement – followed a successful sixth cycle between 2011 and 2014, concluding with a total of $3.6 billion raised by 61 funds. The sixth cycle had been the strongest one since the early 2000s, ending with $1.2 billion for vintage 2014 funds, the strongest vintage year in the past decade. The sixth cycle’s most evident trend was the increase in the number of micro-venture capital funds, with 33 micro funds raising capital during this period, more than three times the number of such funds in the previous two cycles.

2015 vintage was marked by the emergence of six new growth funds, an outstanding number of funds dedicated to growth stage companies. While it may be a bit early to tell, it seems this might be a new trend for the seventh cycle. The average 2015 vintage fund currently stands at $57 million and may increase to as much as $82 million when targets are reached by the funds still raising further capital.

KPMG Somekh Chaikin Technology group partner Ofer Sela points to another interesting trend: “Over the past year we’ve seen a change in the LP mix in Israeli VC funds. While Israeli institutional investors have expanded their involvement then what it had been in the past, they still leave the arena mostly to investors from the US, and increasingly, from China. We can also see Israeli high net worth individuals going into VC investments. We hope this changing trend will get even more institutional investors involved in the industry, either as LPs in funds or co-investors in financing deals.”

In 2015, four seasoned Israeli venture capital funds raised a cumulative 59% of the total fund capital, with more than $100 million each. 83North stood out with its quick closing of $204 million, a third fund for the team, but the first under the 83North rebranding of Greylock Israel. Pontifax’s fourth fund attracted a noticeable $150 million, in addition to another $40 million at first closing for the management company’s AgTech fund. Pitango Growth, which is dedicated to growth stage companies, followed with a first closing of $125 million out of a targeted $250 million. Vintage’s eighth fund closed $125 million for late stage investments, after having closed its $144 million seventh fund only a year earlier, of which 50% are allocated to investments in Israeli funds.

Sela added, “The local VC industry’s viability is affirmed by two complementary trends. On the one hand we see veteran Israeli VC funds last longer than the average ten years, choosing to reinvest some of their returns, effectively increasing available capital. On the other hand, the VC funding cycles shorten as successful 2014 vintage VCs intend to start raising new funds during the last quarter of 2016, allowing them rapid cycles of first investments.”

At the beginning of 2016, over $2 billion is available for investments by Israeli venture capital funds. Of this amount, a little over $500 million is earmarked for first investments. The remainder is reserved for follow-on investments. With nearly $1 billion expected to be raised in 2016, IVC and KPMG believe that more than $700 million may be available for first investments over the coming year. (IVC-KPMG 05.01)

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11.2 SAUDI ARABIA: Fitch Says Budget Looks Positive But Deficit Will Stay Large

Saudi Arabia’s 2016 budget contains significant reforms and follows notable expenditure restraint during the second half of 2015, but the fall in oil prices means that the deficit/GDP ratio will again be in double-digits, Fitch Ratings said on 5 January.

The 2016 budget outlines measures to rationalize expenditure, increase non-oil revenues, and improve the fiscal policy framework. Petrol and utility price hikes were announced, and subsidy reform will proceed “gradually over the next five years.” The authorities aim to slow the growth of recurring expenditure, especially wages, salaries and allowances. Privatizations are planned. Adopting a medium-term expenditure framework with a budget ceiling and creating a debt management office should strengthen management of the public finances.

The commitment to reform was shown on 28 December with a hike in petrol prices of 66% (91 octane) and 50% (95 octane). Water prices for industrial, government and large corporate users more than doubled and electricity, and gas and diesel prices were raised. The direct cost of subsidies to the budget is less than 2% of GDP, but indirect subsidies (i.e. foregone revenue from oil that could be sold on international markets) are large. Taxes on tobacco and soft drinks will be raised, and support for a GCC-wide value-added tax appears firmer.

The full impact on the deficit will depend on the pace and extent of implementation and the size of offsetting measures to allay the effect on low- and middle-income families.

Nevertheless, the magnitude of the oil price decline means that the 2016 budget forecasts total revenues of SR513.8b, down from an estimated SR608b last year. Budgeted spending at SR840b is below estimated actual spending for 2015 (SR975b), but this leaves a projected deficit of SR326.2b ($86.9b), around 13.5% of GDP. This is by far the largest fiscal deficit that the Saudi authorities have budgeted for, and suggests an oil price assumption in the low $40 p/b.

This would be a second successive double-digit budget deficit, after the Ministry of Finance said that the 2015 deficit was expected to reach SR367b, or 15% of GDP – the largest ever Saudi deficit, albeit below our forecast of 16.8%.

The lower-than-expected 2015 deficit mainly reflects measures to contain spending introduced during the year – including greater scrutiny of capex. Overspend was the lowest since 1999, with actual spending exceeding the budgeted level by 13.4% (compared with a 10-year average of 24%). Without the one-off cost of royal decrees after the accession of King Salman and additional military and security spending (likely due to the war in Yemen), spending would have been almost on budget.

The 2016 budget for the first time includes an unallocated contingency reserve worth 22% of budgeted spending to cover unforeseen expenditure. We assume that, without a significant rebound in oil prices, this will not be fully drawn down, making a further reduction in the gap between budgeted and actual spending plausible. It is unclear whether heightened tension with Iran will increase security costs.

Concrete deficit financing plans were not in the budget, but Fitch assumes these will remain a combination of drawing down government assets held at the central bank and debt issuance, potentially including international issuance. Net foreign assets held by the central bank fell by $96b over the first 11 months of 2015.

The fiscal policy response to lower oil prices and evolution of fiscal and external buffers are key to resolving the Negative Outlook on Saudi Arabia’s ‘AA’ sovereign rating. (Fitch 05.01)

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11.3 SAUDI ARABIA: Is the Saudi Monarchy on Its Last Legs?

David P. Goldman posted on the Middle East Forum on 3 January that the recent mass executions in Saudi Arabia suggest panic at the highest level of the monarchy. The action is without precedent, even by the grim standards of Saudi repression. In 1980, Riyadh killed 63 jihadists who had attacked the Grand Mosque of Mecca, but that was fresh after the event. Most of the 47 prisoners shot and beheaded on 2 January had sat in Saudi jails for a decade. The decision to kill the prominent Shia cleric Nimr al-Nimr, the most prominent spokesman for restive Saudi Shia Muslims in Eastern Province, betrays fear of subversion with Iranian sponsorship.

Why kill them all now? It is very hard to evaluate the scale of internal threats to the Saudi monarchy, but the broader context for its concern is clear: Saudi Arabia finds itself isolated, abandoned by its longstanding American ally, at odds with China, and pressured by Russia’s sudden preeminence in the region. The Saudi-backed Army of Conquest in Syria seems to be crumbling under Russian attack. The Saudi intervention in Yemen against Iran-backed Houthi rebels has gone poorly. Its Turkish ally-of-convenience is consumed by a low-level civil war. Nothing has gone right for Riyadh.

Worst of all, the collapse of Saudi oil revenues threatens to exhaust the kingdom’s $700 billion in financial reserves within five years, according to an October estimate by the International Monetary Fund. The House of Saud relies on subsidies to buy the loyalty of the vast majority of its subjects, and its reduced spending power is the biggest threat to its rule. At the end of 2015, Riyadh cut subsidies for water, electricity and gasoline. The timing of the executions may be more than coincidence: the royal family’s capacity to buy popular support is eroding just as its regional security policy has fallen apart.

For decades, Riyadh has presented itself as an ally of the West and a force for stability in the region, while providing financial support for Wahhabi fundamentalism around the world.

Saudi Arabia’s proxies in Syria are in trouble. Early in 2015, the Army of Conquest (Jaish al-Fateh), a coalition of al-Qaida and other Sunni Islamists backed by the Saudis, Turks and Qataris, had driven the Syrian army out of several key positions in Northwest Syria, threatening the Assad regime’s core Alawite heartland. The coalition began breaking up in November, however, and the Syrian Army recently retook several villages it had lost to the Army of Conquest. One of the Army of Conquest’s constituent militias, Failaq al-Sham, announced 3 January that it was leaving the coalition to defend Aleppo against regime forces reinforced by Russia.

Everything seems to have gone wrong at once for Riyadh. The only consolation the monarchy has under the circumstances is that its nemesis Iran also is suffering from the collapse of oil revenues and the attrition of war. Iran began withdrawing its Revolutionary Guard forces from Syria in December, largely due to high casualties. The high cost of maintaining the war effort as Iran’s finances implode also may have been a factor. Iran’s Lebanese Shia proxy, Hezbollah, has suffered extremely high casualties, virtually neutralizing its whole first echelon of combat troops. Russia has shown no interest in interfering with Israeli air strikes against Hezbollah.

The oil price collapse turns the competition between Saudi Arabia and Iran into a race to the bottom. But the monarchy’s panicked response to its many setbacks of the past several months raises a difficult question.

In the past, the West did what it could to prop up the Saudi royal family as a pillar of stability in the region, despite the Saudis’ support for jihadi terrorism. Soon the West may not be able to keep the House of Saud in power whether it wants to or not.

David P. Goldman is a senior fellow at the London Center for Policy Research and the Wax Family Fellow at the Middle East Forum. (MEF 03.01)

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11.4 EGYPT: Will Saudi Agricultural Investments in Sudan Leave Egypt High and Dry?

Saudi Arabia has been steadily boosting its agricultural investments in Sudan in recent years, raising concerns in Cairo that any increase in Sudan’s use of Nile River water will come at the expense of Egypt’s share.

Walaa Hussein posted on 6 January in Al-Monitor that Riyadh has been encouraging Saudi investors to pump more money into Sudan in conjunction with Sudan’s participation in the Saudi-led intervention against the Houthis in Yemen. Yet internal reports prepared by Egypt’s Water Resources and Irrigation Ministry, along with the Agriculture and Land Reclamation Ministry, confirm that Sudan is already using its entire allotment of Nile water, according to a government official briefed on the issue who spoke to Al-Monitor on condition of anonymity.

The investments, which include building dams on the Nile in Sudan, threaten Egypt’s water security, an Egyptian government source confirmed to Al-Monitor.

On 3 November, Saudi Arabia agreed to provide $1.7 billion to construct three dams in northern Sudan. The Kajbar, Dal and Al-Shiraik dams should be completed in five years. That amount comes in addition to $500 million Riyadh has provided for other water and electricity projects and the cultivation of a new 1 million acre area on the banks of the Atbara and Setit rivers in eastern Sudan.

The total amount of arable land in Sudan is estimated at almost 208 million acres, which is equivalent to 45% of the Arab world’s arable land, out of which only 30 million acres are being used. At the Summit of Arab Leaders in Sharm el-Sheikh, Egypt, in March 2015, Sudanese President Omar al-Bashir announced that Sudan had taken a series of measures to implement an initiative on Arab food security and was ready to receive Arab investments. The summit nearly coincided with the second Saudi-Sudanese investment forum in Riyadh in late February 2015, which confirmed the increase of Saudi investments in Sudan, currently pegged at more than $13 billion. Then at the Sudanese-United Arab Emirates forum in Abu Dhabi in May 2015, investment projects worth $16 billion were discussed. The UAE’s current investments in Sudan amount to $6 billion.

Water experts in Egypt have repeatedly warned against expanding agricultural areas in Sudan, saying it will be disastrous for Egypt. Moreover, the Egyptian government has faced a wave of opposition to its paradoxical announcement that Cairo will participate in agricultural projects in Sudan. Egyptian Water Minister Hossam el-Moghazy’s confirmed to Al-Monitor last year that Egypt’s agriculture projects in Sudan will depend on alternatives for the Nile water, be they groundwater or rainwater.

Former Egyptian Minister of Water Resources and Irrigation Mohamed Nasr Eldin Allam told Al-Monitor that Sudan is currently using its entire share of Nile water, although Khartoum has repeatedly claimed otherwise. He noted, “Before I left the ministry in 2011, I was supervising the establishment of a water scale to determine Sudan’s use of the Nile water. It showed that Sudan was using its total 18.5 billion cubic meter [almost 5 trillion gallon] share of the water, as stipulated in the Nile Water Agreement of 1959.” Allam stressed that any new agricultural investments in Sudan using Nile water would be deducted from Egypt’s share and would be a violation of that agreement.

Allam said Egypt must fast-track meetings of the Egyptian-Sudanese joint body tasked with Nile water management, “express Cairo’s fears regarding those new investments and make things perfectly clear with Sudan.” He warned that the Sudanese investment plan that is currently on the table and involves Saudi Arabia, some Gulf states, Iran and Turkey confirms that Sudan needs much more than its current share of water, but the plan is unclear about where the water will come from.

Allam said it will be no easy matter for Egypt to arrange discussions with the Arab investors — most notably Saudi Arabia — to guarantee an alternative water source and to take into account Egypt’s share. He added, “Sudan may consider it an act hostile to development on its soil, and we need to talk to Sudan directly before resorting to such a step.”

Haitham Awad, head of the Irrigation and Water Hydraulics Department at Alexandria University, told Al-Monitor, “Sudan has the right to develop its territory and improve the people’s standard of living, while taking into account Egypt’s right to the water. The plan focusing on the new dams, which is on the table, will undoubtedly increase its water consumption. In addition, the evaporated water [from the new dams] will cause the amount of water reaching Egypt to decrease, which poses a threat to Cairo’s share of water.”

Awad added, “Any expansion of Sudan’s agricultural areas by 10,000 [acres], without taking into account its share of the water, will cause the destruction of 7,000 [acres] of agricultural land in Egypt.” He said, “Talk about the possibility of resorting to groundwater for agriculture in Sudan is illogical” because of the cost of drilling wells. Awad criticized Cairo’s policies that encourage Egyptian agricultural investment in Sudan. He said, “Any extra use of the water in Sudan will be at the expense of the Egyptian share.”

Cairo has remained silent about the escalating boundary dispute with Sudan over the Hala’ib Triangle, as well as the Sudanese position favoring Ethiopia in the construction of the Grand Renaissance Dam, which violates the 1959 agreement. It will probably take the same approach to its concerns about the suggested increased agricultural investments in Sudan, particularly since the investors are Saudis and since Cairo is keen not to further complicate the current Egyptian-Saudi ties. (Al-Monitor 06.01)

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The Fortnightly newsletter is a free service of Atid, EDI. We are a team of economic and trade development consultants, headquartered in Jerusalem, but active throughout the region and beyond. EDI works with an international clientele interested in identifying and researching business opportunities in the region. We also serve as the regional representative offices for a number of U.S. states and bilateral Chambers of Commerce, as well as European clients.

Fortnightly, 13 January 2016

Fortnightly, 13 January 2016

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