Fortnightly, 15 May 2019

Fortnightly, 15 May 2019

May 17, 2019


15 May 2019
10 Iyar 5779
10 Ramadan 1440




1.1  Israel to Allocate $5.5 Million to SpaceIL for Beresheet 2 Spacecraft
1.2  Personal Imports to Israel Become Easier


2.1 Raises $25 Million for Community Creation & Moderation Tools
2.2  Israeli Startups Raised $750 Million in April
2.3  SAM Seamless Networks Joins Prpl Foundation to Develop Joint IoT Security Standards
2.4  Proofpoint Enters into Definitive Agreement to Acquire Meta Networks
2.5  ServiceNow to Acquire Appsee’s In-App Mobile Analytics Platform and R&D Talent
2.6  EL AL Israel Airlines & Alaska Airlines Celebrate Expanded Global Partnership


3.1  ‘Investor Day’ Connects MENA’s Rising Tech Startups with Potential Investors
3.2 Becomes
3.3  Dubai Science Park & 1792 Partners to Attract American Science Companies to Dubai
3.4  UAE Lubricants Market Outlook to 2022 –
3.5  eMushrif Raises $1 Million Pre-Series A for its IoT-Based School Bus Tracking Solution
3.6  ACI Worldwide Ready for Saudi Arabia’s Real-Time Payments Launch
3.7  Cairo’s Odiggo Raises $180,000 in Seed Funding
3.8  Tunisia’s InstaDeep Raises $7 Million in Funding to Expand AI in Africa


4.1  Maan’s Second Solar Complex is 60% Complete


5.1  Lebanon’s Balance of Payments Registered a $2 Billion Deficit in First Quarter
5.2  Jordan’s Inflation Rate Rises by 0.6% During First 4 Months of 2019
5.3  Jordan in Talks with the IMF Concerning a New Development Program
5.4  Jordan & US Sign $329 Million Economic Aid Agreement
5.5  Jordan Announces the First Ministry of Digital Economy & Entrepreneurship in the Region
5.6  Amman Economic Team Reviews Policies to Spur Growth
5.7  Libya Fails to Pay $350 Million Debt to Private Hospitals in Jordan
5.8  Iraqi Oil Exports Rise to 3.46 Million Bpd in April, But Kirkuk Shipments Drop

♦♦Arabian Gulf

5.9  Kuwait Revives Debate Over 5% Expat Tax on Remittances
5.10  Abu Dhabi Investment Office Opens $145 Million Fund to Boost Abu Dhabi’s VC Ecosystem
5.11  Abu Dhabi Intensifies Cancer Battle with New Oncology Center
5.12  Mecca Revamp Set to Drive New Era for Tourism

♦♦North Africa

5.13  World Bank to Extend Current Strategy in Egypt for Additional Two Years
5.14  Egypt’s Ready-Made Garments Exports Record $406 Million in 2019’s First Quarter


6.1  Turkey’s Annual Inflation Rate Falls to 19.5% in April
6.2  Turkey’s Exports Total Nearly $60 Billion for January to April
6.3  Cyprus Foresees First Gas Output from Aphrodite Field by 2025
6.4  Cyprus’ Cars Sales Take Off in April after Recent Slump
6.5  Greece Unveils Bill to Help Millions Who Owe Tax and Pension Arrears



7.1  Israel’s Population Crosses the 9 Million Mark‎
7.2  U.S. Mayors Visiting Israel & Exploring Areas for Bilateral Cooperation
7.3  Tel Aviv to Host ‘World’s Largest Vegan Festival’ in June


7.4  Egypt to Open Five New Japanese-Style Schools as School Registration Begins


8.1  The Gene Editing Institute Licenses CRISPR Technology to NovellusDx
8.2  Teva Launches Generic Version of Letairis Tablets in the United States
8.3  Panaxia & Rafa Join with PlantEXT for Medical Cannabis Suppositories for Bowel Disease
8.4  Lumenis New Evidence for BPH Using its Patent-Protected MOSES Technology
8.5  Phytech Commercializes Plant-Based Irrigation Application for Industrial Hemp
8.6  Rapid Medical Gets FDA Approval of Novel Temporary Aneurysm Embolization Assist Device
8.7  Teva Launches Generic Version of Delzicol Delayed-Release Capsules in the US
8.8  Cannassure Completes Medical Cannabis Analytical Method Development and Validation
8.9  Nucleai Partnership With Protean BioDiagnostics to Enhance Cancer Diagnosis With AI
8.10  Zebra Receives FDA Approval for World’s First AI Chest X-Ray Triage Product
8.11  BGU Introduces Novel Combination Therapy for Treating Neurological Disorders
8.12  FDA Grants Orphan Drug Designation to Ayala’s AL101 for Adenoid Cystic Carcinoma (ACC)
8.13  Aleph Farms Secures $12 Million


9.1  GetSAT & SatixFy Deliver Advanced Efficient Space Segment Management MCPC System
9.2  Snyk Secures Open Source Development on Microsoft Azure
9.3  PlainID Announces Partnership with SAP
9.4  HISPASAT and hiSky to Offer IoT and MSS in Mexico Through Small Portable Terminals
9.5  GetSAT and Inmarsat Introduce Market’s Smallest Ruggedized Terminal for Global Xpress
9.6  Cellebrite Adds AI-Driven Digital Evidence Capabilities to Its Analytics Solution
9.7  King Wai Insurance Selects Sapiens P&C Suite
9.8  Magal Introduces its New Access Control Product: Symphony Access Control
9.9  Walabot DIY Plus Uses ‘Superman Vision’ to See Through Plaster, Drywall and Concrete
9.10  Curv Partners with Munich Re to Commodify Digital Asset Insurance
9.11  Presenso Announces Strategic Partnership with Siemens
9.12  ECI and Cherry & White Bring Future-Proof Networking Technology to Critical Industries
9.13  Silicom Launches New Edge Computing Platform Target for Cloud Service Providers
9.14  SolarEdge Unveils New Smart StorEdge Solutions
9.15  vHive Demonstrates AI for Cell Tower Equipment ID
9.16  Hailo Releases Industry-leading Deep Learning Processor


10.1  Israel’s Budget Deficit Increases to 3.8%
10.2  April’s Foreign Exchange Reserves at $118,743 Million


11.1  ISRAEL: Over 500 Global Corporations from 35 Countries Operate In Israel
11.2  ARAB WORLD: Five Arab Cities Vie to Become the New Startup Hub of the Arab World
11.3  JORDAN: IMF Executive Board Completes Second Review Under the EFF for Jordan
11.4  IRAQ: IMF Staff Completes 2019 Article IV Mission on Iraq
11.5  KUWAIT: Moody’s Affirms Kuwait’s Aa2 Rating; Maintains Stable Outlook
11.6  KUWAIT: Kuwait Pharmaceuticals Market Analysis & Outlook 2012-2022
11.7  BAHRAIN: IMF Executive Board Concludes 2019 Article IV Consultations
11.8  UAE: IMF Staff Concludes Visit to the United Arab Emirates
11.9  UAE: The Rise of the Emirati Defense Industry
11.10  UAE: Used Car & Auto Classified Market Outlook to 2022
11.11  SAUDI ARABIA: Fitch Affirms Saudi Arabia at ‘A+’; Outlook Stable
11.12  SAUDI ARABIA: Credit Profile Supported By Very High Fiscal & Economic Strength
11.13  SAUDI ARABIA: Saudi Arabia Takes Steps to Assure Foreign Investors
11.14  SAUDI ARABIA: Saudi Arabia’s Moment in the Sun
11.15  EGYPT: Egypt’s Iron Tariffs Threaten Some of Its Own Companies
11.16  TURKEY: Fitch Affirms Turkey at ‘BB’; Outlook Negative
11.17  TURKEY: Brain Drain Saps Turkey’s Defense Industry
11.18  CYPRUS: European Commission Forecasts Strong Economic Growth Momentum


1.1  Israel to Allocate $5.5 Million to SpaceIL for Beresheet 2 Spacecraft

On 5 May, Israel’s Ministry of Science and Technology announced it would allocate NIS 20 million (some $5.5 million) to Israeli non-profit SpaceIL for the construction of a second unmanned spacecraft, Beresheet 2, set for the moon sometime in the next few years.  The announcement came weeks after lunar lander Beresheet (the Hebrew word for “Genesis”) crashed into the moon’s surface on 11 April, dashing Israel’s dreams of becoming the fourth country in the world to complete a controlled lunar landing (after the US, Russia and China).

But 48 hours after the failed attempt, SpaceIL announced that it would launch a fresh moon mission, with estimates it would take two to three years.  SpaceIL was largely privately funded by philanthropists, but received some government funding including $2 million from the Ministry of Science and Technology.  The whole project cost an estimated $100 million.  The Ministry said it would also ask NASA, which provided communication services and other assistance to SpaceIL, to widen its involvement in the next moon mission.  (NoCamels 06.05)

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1.2  Personal Imports to Israel Become Easier

Minister of the Economy Cohen has signed a personal imports ordinance that provides relaxations for the import of consumer goods and sets out regulations designed to make the process easier.  Over the past few weeks, Amazon has started to set up a local online trading platform in Israel, but many Israelis do their shopping on foreign websites, an area that up to now has not been fully regulated.  The new ordinance shortens the time it will take to obtain the necessary permits, setting a maximum time limit, and sets out the quantities of goods that can be brought into Israel as personal imports.

Under the ordinance, goods for personal use may be imported up to a limit of five units or $1,000.  The goods in question are nutrition supplements, personal care and cosmetic products, vehicle parts and accessories such as an infant car seat, vacuum cleaners, refrigerators, irons, dishwashers, ovens, computers, televisions, printers and similar items.  In the case of goods for which a permit is required, the maximum time for issuing it will be two days, except for telecommunications and transportation products, for which the maximum time will be fourteen days, falling to five days after two years.  Imports for the purposes of building or renovating a home will be permitted in greater quantities, provided that the importer proves that the imports are for one of these purposes.

The Ministry of the Economy presented statistics based on a 2017 report by the Bank of Israel showing that in sectors exposed to personal imports, prices in Israel fell substantially in the period 2011-2017.  In personal care products and cosmetics, prices fell by nearly 20%; in audio and video systems the decline was more than 50%; in clothing and footwear it was 10%; and in furniture and domestic appliances it was nearly 15%.  According to the ministry, the report shows that, despite the substantial effect of personal imports on prices, they represent only a small proportion of monthly household spending, amounting to an average of NIS 104, even after growth of 16% between 2011 and 2015.  (Globes 13.05)

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2.1 Raises $25 Million for Community Creation & Moderation Tools announced that it has secured $25 million in series D financing led by Insight Venture Partners, with contributions from Millhouse Capital, AltaIR Capital, Cerca, and Jonah Goodhart.  The fresh capital brings the company’s war chest to $63 million, following a $13 million series A round in August 2016 and a $25 million series C round in November 2017.’s software-as-a-service (SaaS) solution can be deployed on a website in just a few lines of code, or integrated with a smartphone app with a bespoke software development kit.’s embeddable comments boast bubble awareness indicators that encourage live chats and support rich media like photos, videos, and personalized feeds, and its moderation tools tap machine learning algorithms to automatically detect and remove offending replies and spam. additionally provides products that recycle sites’ most popular content, monetize advertising within user-generated content, and host community and product review pages.  On the reporter side of the equation, offers a social live-blogging tool that enables writers to cover real-time updates with layered posts from “anywhere,” including third-party apps like Slack, and to respond to reader comments inline., which was founded in Tel Aviv, has offices in New York.  ( 30.04)

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2.2  Israeli Startups Raised $750 Million in April

Israeli startups raised nearly $750 million during April.  This is a particularly impressive amount considering that the country shut down for the Passover holiday in the second half of April.  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 have now raised $2.3 billion in the first four months of 2019.

This figure is well 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 last month, was in large financing rounds by a small number of companies.  Nearly $600 million was raised by just nine companies.

In April, online insurance company Lemonade led with a whopping $300 million financing round.  Security platform Armis raised $65 million and cybersecurity company Aqua Sec raised $62 million. Chip health company Proteantecs raised $35 million, IoT security company VDOO raised $32 million, digital health company AIDoc raised $27 million, events cloud company Bizzabo raised $27 million, fintech company Pagaya raised $25 million and media reader engagement platform Spot.IM raised $25 million.  (Globes 01.05)

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2.3  SAM Seamless Networks Joins Prpl Foundation to Develop Joint IoT Security Standards

SAM Seamless Network has joined Massachusetts’ Prpl Foundation, an open-source community-driven consortium with a focus on enabling the security and interoperability of embedded devices for the IoT and smart society of the future.  The membership in Prpl is in addition to SAM’s participation in RDK-B, which standardizes software functionalities for broadband devices.

SAM Seamless Network was founded by former cyber specialists in the Israeli army, who served in the most elite units, including 8200.  The Company completed a $12m Series A financing round in November 2018 led by Intel Capital, with participation from ADT, Dave Dewalt’s NightDragon and Blumberg Capital.  SAM’s cybersecurity software is the first-field proven solution to protect local area networks and all of their connected devices directly at the source of entry at the ISPs via the router.

Tel Aviv’s SAM provides a software-based security solution that integrates seamlessly with any platform and protects local area networks by securing the gateway and all of its connected devices.  Installed remotely on existing gateways, SAM doesn’t require any additional hardware or a technician to provide comprehensive network security.  The solution is offered as a service, allowing users to have the enterprise-grade protection including virtually patching vulnerabilities such as KRACK and other high-level, targeted attacks.  SAM works with leading chipset manufacturers, including Intel, to provide network security from the source.  (SAM 08.05)

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2.4  Proofpoint Enters into Definitive Agreement to Acquire Meta Networks

Sunnyvale, California’s Proofpoint, a leading next-generation cybersecurity and compliance company, has entered into a definitive agreement to acquire Meta Networks.  With this acquisition, Proofpoint will strengthen its cloud-based architecture and people-centric security platform, enabling customers to better protect their people and the applications and data they access beyond the traditional perimeter.  The agreement is subject to customary closing conditions and is expected to close in the second quarter of 2019.

Proofpoint intends to integrate Meta Networks’ ZTNA technology with its cloud access security broker (CASB) and web isolation product lines to offer customers a comprehensive cloud access and security platform.  The acquisition of Meta Networks will add approximately 20 technical contributors to Proofpoint’s growing presence and team in Israel.  The purchase price for the transaction is approximately $111 million in cash and approximately $9 million in Proofpoint common stock and options.

Tel Aviv’s Meta Networks, the technology leader in zero trust network access (ZTNA), is reinventing the enterprise network for the cloud age.  With Meta Networks’ Network-as-a-Service (Naas), enterprises can rapidly connect people, applications, clouds, data centers and offices, and secure them with a software-defined perimeter.  The Meta Networks NaaS is user-centric, leveraging a cloud-native global backbone to deliver high-performance, anytime/anywhere connectivity with always-on security. It replaces site-centric network security with granular, zero trust access control, packet-level, auditable user/device identity, and best-of-breed internet security solutions.  (Proofpoint 06.05)

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2.5  ServiceNow to Acquire Appsee’s In-App Mobile Analytics Platform and R&D Talent

Santa Clara, California’s ServiceNow, Forbes’ No. 1 World’s Most Innovative Company in 2018, signed an agreement to acquire the in-app mobile analytics platform and R&D talent of Appsee, an Israel-based application analytics platform company.  With the acquisition of Appsee’s intellectual property and key Appsee talent, ServiceNow will further its mobile application and web browser strategy by adding deep user analytics to the Now Platform®.  This deal is expected to further enable the company to deliver out-of-the-box, consumer-grade mobile experiences at scale to enterprises.

Appsee will provide ServiceNow, and ServiceNow customers, with insights into user behavior when interacting with the Now Platform.  With this added level of analytics, ServiceNow plans to provide more intuitive user experiences and further improve digital workflows to reduce routine work and free workers up to do more strategic work.  Upon the close of the transaction, Appsee’s intellectual property, its co-founders, and R&D employees will join ServiceNow and help advance ServiceNow’s mobile platform strategy.  With the addition of Appsee, ServiceNow will extend its footprint in Israel by establishing a presence in central Tel Aviv.  ServiceNow expects to complete the acquisition by the end of Q2/19.  Financial terms of the deal were not disclosed.  (ServiceNow 13.05)

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2.6  EL AL Israel Airlines & Alaska Airlines Celebrate Expanded Global Partnership

EL AL Israel Airlines and Alaska Airlines expanded their commercial relationship to include a reciprocal frequent flyer agreement.  The agreement was signed by the CEOs of each airline at a ceremony soon after the arrival of the first EL AL flight from Tel Aviv to San Francisco.  This agreement is in addition to the codeshare agreement that recently came into effect between the airlines allowing EL AL to place its “LY” code on various Alaska Airlines “AS” flights in the U.S.

With the EL AL and Alaska Airlines partnership, customers will be able to continue their journey to and from North America and Israel with connections on both airlines, in either direction.  Both airlines will offer the opportunity for their members to earn miles while flying with the partner airline.  Base miles flown on EL AL will also count toward elite status in Alaska’s Mileage Plan program.  Additionally, EL AL travelers will be able to redeem their EL AL Matmid miles to book on Alaska flights in the future.

The EL AL flights will operate three times weekly flying a state-of-the-art 787 Dreamliner, offering Business, Premium and Economy service.  The flights from Tel Aviv will depart on Monday, Wednesday and Friday at 0105 and arrive in San Francisco on the same day at 0600 for a flight time just under 15 hours.  The flights from San Francisco to Tel Aviv will operate on Monday and Wednesday departing at 2000 for arrival the next day at 1940 and on Saturday night with a 2245 departure arriving in Tel Aviv at 2225 the next day for a flying time of just over 13 and a half hours.  (Alaska Airlines 13.05)

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3.1  ‘Investor Day’ Connects MENA’s Rising Tech Startups with Potential Investors

The third edition of the MENA Dojo Series A Program in Kuwait has concluded with ‘Investor Day’, an opportunity for promising tech-based startup participants to pitch their business ideas to a global audience of industry leaders and potential investors from across the Arab world.  The regional spin-off of the internationally-coveted 500 Startups Series A Program was organized by global venture capital firm 500 Startups in partnership with Qatar Science & Technology Park (QSTP) – part of Qatar Foundation Research, Development, and Innovation (QF RDI).

During the five-week accelerator growth program, 14 technology startups from the MENA region, including two from Qatar, worked with internationally renowned growth mentors who helped them track their company’s key metrics and progress, uncover new marketing channels and identify untapped opportunities.  Through intensive training and mentorship, the startups learned to execute highly effective marketing techniques designed to rapidly grow their customer base, thereby increasing their likelihood of securing Series A investments and ensuring the success of their businesses.  (QS&TP 08.05)

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3.2 Becomes

On 1 May, Amazon the world’s biggest online retailer from Seattle announced the launch of a new marketplace in the Middle East.  Until now, customers in the Middle East were only able to purchase items from the Dubai-based, a marketplace which offered a small selection of Amazon’s giant catalogue as well as items from third-party sellers. was bought for $580 million by Amazon in 2017 and will now be rebranded as will remain available in Saudi Arabia and Egypt.

Before the rebranding, was one of the largest online retailers from the Middle East, with around 41 million visits to its website and 8.5 million products in 35 different categories.  Now that the websites have merged, Middle Eastern users can browse through five million items at competitive prices and get them delivered as fast as a traditional Amazon product.  The website and mobile app are also available in Arabic to support local customers and will also feature regional specific offers and deals, such as flash sales for Ramadan or Eid celebration day.

According to consulting firm Bain & Company, the online shopping industry in the region was worth $8.3 billion in 2017, and is expected to more than triple to $28.5 billion by 2022.  E-commerce in the Middle East and North Africa is poised for continued growth and success.  (Souq 01.05)

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3.3  Dubai Science Park & 1792 Partners to Attract American Science Companies to Dubai

Dubai Science Park (DSP), a business community that is home to SMEs and international companies active in the science, energy and environment sectors, has signed a partnership agreement with California’s 1792 Partners, a global advisory and venture firm focused on bridging the gap between health technology innovators in the UAE and the US.  The memorandum of understanding (MoU) aims to enable collaboration opportunities between DSP and North American business ventures.  It will also make it easier for American companies to gain a foothold in the Middle East and North Africa (MENA) region.

The agreement was signed during a high-level business mission to the state of California led by Dubai Investment Development Agency (Dubai FDI) and Dubai Exports aimed to strengthen trade relations between the UAE and the US, and raise awareness about the benefits of doing business in Dubai among foreign companies in line with the goals of Dubai Plan 2021.

Founded in 2005, Dubai Science Park (DSP) is a community dedicated to supporting entrepreneurs, SMEs and MNEs active in the sciences, energy and environmental sectors.  With its ample office and laboratory space and robust infrastructure, DSP has created an enabling science-focused ecosystem that is home to more than 350 companies, employing over 3,700 professionals.  (DSP 06.05)

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3.4  UAE Lubricants Market Outlook to 2022 –

The “UAE Lubricants Market Outlook to 2022 – By Automotive (Heavy Duty Diesel Engine Oils, Passenger Car Motor Oils, Hydraulic Oils, Gear Oils, Greases and Transmission Fluids) and Industrial Lubricants” report has been added to‘s offering.

The UAE lubricant market is at a mature stage.  Domestic and international players have catered to the demand of lubricants that led to an increase in market revenue.  Synthetic lubricants have witnessed an increase in demand as they provide better protection to engines and machinery and augment engine performance in varying conditions.  The growth in exports till the year 2015 was largely attributed to an increase in demand for lubricants from importing countries accompanied by a rise in crude oil prices.  However, post 2015, the market has considerably declined owing to the effects of an oil slump which led to a decline in the prices of lubricants.

The UAE Lubricants market is expected to grow positively from 2017 to 2022 in terms of production volume.  An increase in service station network will strengthen the distribution channel in UAE so as to increase market share of key players such as ADNOC.  Automotive lubricants will dominate the market and demand of synthetic lubricants will increase as these lubricants provide enhanced engine protection and augment car performance.  (R&M 03.05)

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3.5  eMushrif Raises $1 Million Pre-Series A for its IoT-Based School Bus Tracking Solution

Muscat-based eMushrif has raised $1 million in a Pre-Series A funding round, the first time this has been achieved by an Omani startup.  The investment came from Oman-based Phaze Ventures, Oman Technology Fund’s Wadi Accelerator (eMushrif was part of Wadi’s first cycle), Sparklabs Energy, Myrad Holding, and Bahrain’s Dividend Gate Capital.  Some angels also participated in the round.

Founded in 2016, eMushrif uses Internet of Things (IoT) to turn regular school buses into smart buses.  The startup apparently installs an IoT device on the buses that enables automatic attendance marking of the students.  The solution comes with a visual child check and detection system to ensure no child ends up staying inside the bus.  eMushrif’s solution also comes with two apps for the school administrators and parents to track the location of bus in real-time and receive important notifications.  In addition to school buses, eMushrif has also built commuting management solutions for some other verticals.  eMushrif currently has over 350 buses using its services.  eMushrif will use the investment for mass production of its IoT devices, R&D, sales & marketing, and for expanding to other markets in the region.  (MB 06.05)

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3.6  ACI Worldwide Ready for Saudi Arabia’s Real-Time Payments Launch

Naples, Florida’s ACI Worldwide, a leading global provider of bank real-time electronic payment solutions, is aiding fast bank adoption of real-time payments in Saudi Arabia with its UP Real-Time Payments solution.  ACI’s solution offers participating Saudi banks faster and lower-risk onboarding to the new real-time services through its global partnership with Vocalink, a Mastercard company and a leading technology provider, which announced last week that it has partnered with the Saudi Arabian Monetary Authority (SAMA) to launch real-time payments in the Kingdom.

The partnership between ACI Worldwide and Vocalink combines Vocalink’s IPS solution for central payment infrastructures and ACI’s UP Real-Time Payments solution for financial institutions.  Leveraging success from the US market, the combined offering will accelerate the availability of real-time payments in Saudi Arabia by re-using existing, proven product level integration, thus helping banks to quickly join the SAMA scheme using ACI’s solution.

ACI Worldwide currently supports real-time payments around the world, including live customers in Australia, Singapore, Thailand, Malaysia, Europe and throughout North America.  (ACI Worldwide 07.05)

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3.7  Cairo’s Odiggo Raises $180,000 in Seed Funding

Odiggo, a Cairo-based ecommerce marketplace for auto spare parts has raised $180,000 as seed funding at the valuation of $1.25 million from Saeed Al Jaberi, a Saudi angel investor.  Founded in 2017, Odiggo sells auto spare parts all over Egypt (and beyond) through its bi-lingual website and mobile apps.  The startup said that it wants to make buying car parts and services as simple as buying a t-shirt online.

Launched in January 2018, Odiggo has to date processed over 14,000 transactions and tickets, with their sales crossing $170,000 (EGP 3 million) in these fifteen months.  Odiggo claims to have the largest catalog of auto spare parts in the region with over 290,000 products in their database.  The startup makes money by charging 7 to 22% commission on every order made through their website or mobile app.  Oddigo said that they’re exclusive online sales partner of Valeo, a French global automotive supplier.  Valeo has over 30,000 of their products listed on Oddigo that are being shipped directly from their warehouse in Turkey to anywhere in the world, for the orders placed through Oddigo’s website and mobile apps.  (MenaBytes 08.05)

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3.8  Tunisia’s InstaDeep Raises $7 Million in Funding to Expand AI in Africa

Enterprise artificial intelligence (AI) startup InstaDeep has raised $7 million in Series A funding from AfricInvest and Endeavor Capital to expand AI opportunities in Africa.  Founded in Tunisia in 2014 but now headquartered in London having gone global, InstaDeep delivers AI products and solutions for the enterprise sector, and also has offices in Paris, Tunis, Nairobi and Lagos.

Powered by high-performance computing and outstanding research and development breakthroughs, InstaDeep utilizes deep reinforcement learning and other advanced machine learning techniques to create AI systems that can optimize decision-making processes in real-life industrial environments.  The funding supports the development of a new scalable product platform aimed at empowering enterprises with better decision-making using AI, leveraging deep reinforcement learning and other advanced machine learning technologies to bring AI to applications within an enterprise environment, allowing companies to optimize decisions and improve efficiency.  (InstaDeep 03.05)

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4.1  Maan’s Second Solar Complex is 60% Complete

On 11 may, Maan Development Company (MDC) said that the construction of Maan’s second solar complex is 60% complete.  The project, founded by the MDC, will be fully completed by November.  The MDC had floated a tender for the establishment of the complex’s infrastructure earlier this year, which comprised of the construction of a fence surrounding an area of 800,000 dunams, administrative buildings, entrances for train tracks and a main road that provides access to the surrounding lands.  The complex will utilize photovoltaic solar panels to reach a capacity of 150 megawatts.

The solar energy projects in Maan contribute to the implementation of King Abdullah’s vision to diversify energy sources for different regions that comply with international standards.  It is part of MDC’s vision to invigorate economic activity by attracting investment to Maan and to the province’s elements of development.  The new solar complex will provide a minimum of 1,000 temporary jobs during the construction phase and between 100 to 150 permanent jobs once the project is complete.  (JT 12.05)

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5.1  Lebanon’s Balance of Payments Registered a $2 Billion Deficit in First Quarter

According to the Central Bank of Lebanon, Lebanon’s Balance of Payments (BoP) witnessed a deficit of $2B by March 2019 as compared to the $198.2M deficit recorded during the same period in 2018.  In details, the Net Foreign Assets (NFA) of BDL and commercial banks slipped by $1.10B and $899M, respectively in Q1/19.  Moreover, the BoP recorded a monthly deficit of $75.1M in March 2019 alone, down from $550.1M in the previous month.  In fact, the NFAs of BDL displayed a monthly downturn of $319.7M, while the commercial banks’ NFAs rose by $244.6M in March 2019.  (CBL 12.05)

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5.2  Jordan’s Inflation Rate Rises by 0.6% During First 4 Months of 2019

Jordan’s inflation rate of the first 4 months of 2019 rose by 0.6%, compared with the same period of last year.  The main categories that led to the increase were vegetables and legumes (0.5%), cereals and their products (0.32%), education (0.12%) and fuel (0.08%).  The decreases in price were seen in meat and poultry by 0.45%, dairy by 0.12% and clothes 0.06%.  (Petra 14.05)

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5.3  Jordan in Talks with the IMF Concerning a New Development Program

Jordan is in discussions with the International Monetary Fund (IMF) to start a new program for development purposes.  Jordan requested a new program with the IMF that will mainly focus on development.  Jordan also asked the IMF to extend the current $700 million Extended Fund Facility (EFF) for six more months until a decision is reached regarding the new program with the fund.  Jordan and the IMF signed the 36-month program in 2016, under which the two sides agreed on six conditions that aim at reducing public debt to safe levels and stimulating the economy.

The Income Tax Law, which went into effect at the beginning of this year, is part of fiscal reforms under the program.  Earlier this year, an IMF mission visited the Kingdom to conduct the second review of the national economy’s performance under the EFF and, after its completion of the review, it issued a statement concluding that its outlook “brings renewed momentum despite persistent challenges”.  (JT 06.05)

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5.4  Jordan & US Sign $329 Million Economic Aid Agreement

On 1 May, Jordan and the United States signed an economic assistance deal worth $329 million, Jordan’s Ministry of Planning and International Cooperation said.  Jordanian Minister of Planning and International Cooperation Mary Kawar signed the agreement with US officials.  Kawar said the deal, part of a US aid package to Jordan, will enhance the kingdom’s economic development and ensure its economic stability.  Under the deal, several projects in the fields of health, education, water, women support and youth will be implemented.  The US pledged in 2018 to provide $1 billion in economic aid to Jordan, with an aim to promote trade, investment and increase the competitiveness of Jordan’s private sector.  (AMMONNEWS 01.05)

5.5  Jordan Announces the First Ministry of Digital Economy & Entrepreneurship in the Region

A Royal Decree was issued in Jordan on 9 May to launch the Ministry of Digital Economy and Entrepreneurship, the first ministry of its kind in the region.  The newly announced Ministry will be focused on the digital infrastructure, skills, leadership, financial services and platforms, embracing digitization in the Kingdom.  The formation of this Ministry comes after three meetings between King Abdullah II and a group of Jordanian innovative startups that are part of the recently launched Jordan Innovation and Entrepreneurship Association – JEIA.  The first meeting took place during the World Economic Forum held at the Dead Sea last month, followed by two other meetings in the same month with the King to discuss the need for a leading authority to support entrepreneurship and in the Kingdom.

Twenty-seven of the 100 startup companies that participated in the World Economic Forum this year were Jordanian companies, with the participation of about 1,000 government leaders, heads of companies and civil society as well as leaders from the GCC, Levant and North Africa.  (MAGNiTT 11.05)

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5.6  Amman Economic Team Reviews Policies to Spur Growth

Jordanian Prime Minister Razzaz chaired on 11 May a meeting of the government’s economic team to discuss economic and investment policies to spur growth and attract investments that would create jobs and alleviate unemployment, particularly in the governorates.  The economic team reviewed the stimulus measures adopted in the last few weeks targeting a host of sectors, including real estate that grew by 12% in the first quarter, compared to the same period last year.  They said the exemptions from fees levied on land ownership transfer and the parceling out of land, which would facilitate the process of transferring land ownership from the deceased to their inheritors, would largely boost the sector and facilitate procedures for the citizens.

The economic team also outlined other measures adopted recently, including tax refunds, where JOD 37 million have so far been disbursed, in addition to the disbursement of amounts owed to contractors and medical centers.  The economic team also discussed the dairy industry in the Kingdom, and will meet with representatives of the sector in the coming days to find solutions to challenges facing producers and enhance the competitiveness of the sector in the local market and its export capacity.  (AMMONNEWS 11.05)

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5.7  Libya Fails to Pay $350 Million Debt to Private Hospitals in Jordan

According to president of Jordan’s Private Hospitals Association, the Libyan government has been delaying the payments since 2013, continuously making promises to pay but not fulfilling them.  Medical bills accumulated by Libyans in the Hashemite Kingdom had reached nearly $350 million after the Libyan crisis broke out in 2011.  The medical bills, accumulated by Libyans at 30 different private Jordanian hospitals, were to be paid back in three phases this year, per an agreement signed in November 2018.  Under the agreement, $125 million was to be paid in December, $62.5 million in February and the remaining $62.5 million in April.

The Central Bank of Jordan received $125 million from the Libyan government, but that Libya did not make an order as to whom the money should be paid to.  Not only is the payment four months late, but it has also been stuck in the bank for two weeks.  (AMMONNEWS 06.05)

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5.8  Iraqi Oil Exports Rise to 3.46 Million Bpd in April, But Kirkuk Shipments Drop

Iraq’s Oil Ministry announced that national oil exports had risen to 3.466 million barrels of per day (bpd) in April compared to the month before.  Exports in April increased by about 89,000 bpd from the 3.377 million recorded in March, with fields in the country’s south, namely in Basra, seeing a jump of about 100,000 bpd in April exports compared to the previous month.  Poor weather in March, mostly heavy rains, led to the halt in the loading of crude oil, Iraqi oil officials had said.

In the province of Kirkuk, however, exports from oil fields to Turkey’s Ceyhan port dropped to 86,000 bpd from the 99,000 in March.  The Oil Ministry did not provide a reason for the decrease in its statement.  The disputed province, claimed by both the Kurdistan Regional Government (KRG) and the Federal Government of Iraq, has some of the oldest and largest oilfields in the Middle East.  The Iraqi Oil Minister announced that a delegation from Baghdad would meet with officials from the autonomous Kurdistan Region soon to discuss ongoing disagreements related to oil exports and various budget issues.

Since 2014, Kirkuk’s oil was exported through the Kurdistan Region to Turkey, but shipments were halted after the military takeover by Iraqi forces and Shia militias in the province on 16 October 2017.  On 16 November 2018, Baghdad restarted exports of Kirkuk oil to Turkey through the Kurdistan Region’s oil pipeline at a rate of around 50,000 bpd.

Iraq is the Organization of the Petroleum Exporting Countries’ (OPEC) second-largest producer just after Saudi Arabia and currently has an output below its maximum capacity of nearly five million bpd.  In early January, Baghdad reaffirmed its commitment to cut annual oil production as per an agreement between OPEC and additional non-member states such as Russia – known together as OPEC+ – to curtail global supply and bolster prices.  (Kurdistan 24 01.05)

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►►Arabian Gulf

5.9  Kuwait Revives Debate Over 5% Expat Tax on Remittances

Talks in Kuwait to introduce a 5% tax on expat remittances have been revived, according to several media reports.  A member of parliament (MP) has started collecting signatures in a bid to table a motion on the issue before the National Assembly.  The proposal is aiming to implement the 5% tax on expat remittances of over 500 Kuwait dinars ($1,640).  Kuwait’s Central Bank and Finance Ministry have opposed similar proposals in the past.

Last summer Arabian Business reported that remittances sent home by expatriates in Kuwait rose 3.5% in the first quarter of 2018, to around $3.4 billion, according to figures from the Central Bank of Kuwait.  In 2017, total expat remittances from Kuwait fell 9.2% to 4.14 billion Kuwait Dinars ($13.69 billion), down from KD 4.56 billion ($15.08 billion) in 2016.  In April last year, the state-run Kuwait News Agency (KUNA) quoted a Kuwaiti MP, chairperson Salah Khorshed, as saying the tax on remittances could generate as much as $233 million each year for the government.  (AB 12.05)

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5.10  Abu Dhabi Investment Office Opens $145 Million Fund to Boost Abu Dhabi’s VC Ecosystem

The Abu Dhabi Investment Office (ADIO) has opened the AED535 million ($145.6 million) Ghadan Ventures Fund to support the emirate’s growing venture capital and start-up ecosystem.  Managed by ADIO, the new fund is part of the government’s Ghadan 21 program that is working to accelerate Abu Dhabi’s economy.

The Ghadan Ventures Fund has two key programs that have been designed to increase the availability of capital for Abu Dhabi based start-ups, as well as serve as a catalyst for new fund managers seeking to establish themselves in the capital.  The Start-up Matching Fund will work to stimulate Abu Dhabi’s entrepreneurial landscape by increasing the amount of capital available for seed and early stage companies.  As part of the initiative, ADIO will match a start-up’s lead VC investment dirham for dirham, up to AED10 million for seed rounds, and AED50 million for Series ‘A’ per round.

To help grow the number of VC funds operating in the emirate, ADIO has also launched the New Managers Fund under which newly formed Abu Dhabi-based VCs can apply for fund matching, based on the amount they raise in the private market.  The fund was recently announced in conjunction with the launch of Abu Dhabi’s Hub71 to help the development of the start-up ecosystem.  (AB 07.05)

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5.11  Abu Dhabi Intensifies Cancer Battle with New Oncology Center

Cleveland Clinic Abu Dhabi has broken ground on a new oncology center‎, boosting the UAE’s approach to diagnosing and treating cancer.  Modelled on Cleveland Clinic’s Taussig Cancer Center‎, ranked number five in the United States, the hospital’s new 17,000 square meter purpose-built center‎ will provide patients with comprehensive, personalized care at a single location, as well as expand the range of cancer treatments available.  The new facility will have dedicated clinical practice areas for advanced imaging, infusion, radiation, and chemotherapy, as well as a connection to the main hospital’s surgical areas.  The practice areas will have space for sub-specialized nurses, social workers, and other key team members.

The company said the layout of each floor unites a range of complementary specialties, enhancing collaboration and enabling patients to receive most of their treatment in one area.  It added that the center‎ will have 24 exam rooms, 24 infusion rooms, two procedure rooms, and an area devoted to specialty women’s services.  (AB 03.05)

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5.12  Mecca Revamp Set to Drive New Era for Tourism

 Progress on major infrastructure enhancements and increased connectivity are expected to boost Mecca’s tourism capacity and create a wave of development opportunities, according to real estate firm JLL.  In a new report on the Saudi holy city, JLL said Mecca is undergoing major transformation under Vision 2030, with several government initiatives paving the way for the Holy City to increase its capacity to 30 million pilgrims annually by 2030.  It added that 2018 witnessed progress with the megaproject Rou’a Al Haram Al Makki announcement, the inauguration of Al Haramain High Speed Railway and soft opening of the new King Abdulaziz International Airport in Jeddah.  The focus on driving connectivity is a kingdom-wide focus to tap into Saudi Arabia’s potential as a global transport hub with the development of major infrastructure projects providing private and foreign investment opportunities.

The report said the city’s retail sector pipeline is expanding and diversifying to accommodate future tourist demands with major projects in their final phases accounting for a significant share of Mecca’s future supply.  Operators are under pressure to create a greater mix of competitive shop-entertainment to cater for the new influx of visitors.  The report added that Mecca is expected to witness the delivery of 12,300 hotel keys in 2019 and 34,700 keys in 2020 as tourism demand grows.  While 2018 was challenging, the city remains a hot spot for hotel operators looking to enter the market for the first time, it noted.  (AB 03.05)

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►►North Africa

5.13  World Bank to Extend Current Strategy in Egypt for Additional Two Years

The World Bank Group (WBG) announced a two-year year extension to its 2015-2019 Country Partnership Framework (CPF), according to a statement of the WBG office in Cairo, adding that the decision was announced following a formal review of the results of the current framework by the WBG’s board of executive directors, in a process known as a Performance and Learning Review.  The extension aims to maintain the momentum on reforms, to ensure continued progress toward inclusive growth, job creation, and more and better opportunities for all Egyptians.

The Egypt 2015-2019 CPF focuses on improving opportunities for private sector led job creation, social inclusion and improving governance, explained the statement, asserting that the three focus areas remain highly relevant to the country’s long-term development strategy.  The government’s reform efforts, supported under the CPF, have helped stabilize the economy.  Growth has rebounded, the external and fiscal deficits have narrowed, inflation has declined, and foreign reserves have increased, affirmed the statement.

Almost 77% of the original CPF objectives have already been achieved or are on track to be achieved by the end of the original framework period, said the statement, noting that stronger macroeconomic management has made the business environment more conducive for the private sector, and key fiscal reforms have allowed the government to improve its debt sustainability outlook and redirect scarce budget resources to new social programs targeted at poor and vulnerable Egyptians.

Important legislation to support the business-enabling environment has been enacted, and automated government processes have reduced the bureaucratic hurdles to doing business.  As such, Egypt’s ease of doing business ranking climbed from 131st out of 189 economies in 2016 to 120th out of 190 economies in 2018.

Despite the significant results achieved across all three focus areas, gaps remain.  More efforts are needed to accelerate economic inclusion and absorb a growing labor force.  About 60% of Egypt’s population is either poor or vulnerable, and inequality is on the rise.  The national poverty rate was close to 30% in 2015, up from 24.3% in 2010, as reported in the CPF.  The extension will allow for further support to enable private sector-driven growth by addressing sector-specific reforms and local economic development in less developed regions.  (WBG 01.05)

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5.14  Egypt’s Ready-Made Garments Exports Record $406 Million in 2019’s First Quarter

Egypt’s ready-made garments exports have increased 2% in the first quarter of 2019 to reach $406 million compared to $397 million in the same period of 2018, the Textile Export Council said.  The sector’s exports declined 0.4% in March 2019 to reach $129 million compared to $130 million in the same month of 2018.

The United States topped importing countries of the Egyptian ready-made garments in 2019’s first quarter, recording $224 million, compared to $193 million in the same period of 2018.  Exports to the UAE increased 334% to reach $7 million in the first three months of 2019 compared to $2 million in the same period in 2018.  Canada’s imports from the Egyptian textiles rose 84% to reach $5 million.  (MENA 06.05)

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6.1  Turkey’s Annual Inflation Rate Falls to 19.5% in April

The annual inflation rate in April was down from 19.71% the previous month, the country’s statistical authority TUIK announced on 3 May.  The highest price increase last month was seen in food and non-alcoholic beverages, up 31.86% on a yearly basis.  It was also forecast that Turkey’s year-end annual inflation would be 16.13% on average – with the lowest estimate at 14.50%, and the highest at 19.70%.

Annual core inflation rate slipped to 16.30% in April, from 17.53%.  The 12-month average was 19.39%.  On a monthly basis, consumer prices rose 1.69% in April.  The highest monthly increase month-on-month was seen in alcoholic beverages and tobacco with 6.77% while the only monthly decrease was 0.30% in communication, according to the data.

Over the last decade, annual inflation saw its lowest level at 3.99% in March 2011, while it peaked at 25.24% in October 2018.  As laid out in Turkey’s new economic program announced last September, the country’s inflation rate target is 15.9% this year, 9.8% in 2020, and 6.0% in 2021.  (TUIK 03.05)

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6.2  Turkey’s Exports Total Nearly $60 Billion for January to April

Turkey’s exports totaled $59.8 billion in January-April this year, the country’s Trade Ministry announced on 3 May.  According to the general trade system, the ministry said exports surged 3.77% on a yearly basis.  The country’s imports amounted to some $68.6 billion, marking an annual decrease of 19.82% over the same period.  The ministry stated that the four-month exports-to-imports coverage ratio was 87.2%.  Pointing out the monthly data, the ministry said Turkey’s exports rose by 5.38% year-on-year to nearly $15.3 billion in April.

Imports in April posted a 14.62% annual decline to $18.1 billion, according to general trade system.  Preliminary figures revealed that the country’s foreign trade balance in April showed a deficit of $2.8 billion, improving from $6.7 billion deficit a year ago.  In the calculation of foreign trade statistics, two different methods are used- the special trade system and the general trade system.  Calculations based on the special trade system do not include free zones and customs warehouses.  (AA 04.05)

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6.3  Cyprus Foresees First Gas Output from Aphrodite Field by 2025

Cyprus expects initial natural gas production from the Aphrodite field will begin between 2024 and 2025, Energy Minister Lakkotrypis announced.  Cyprus’ Aphrodite was first discovered in 2011, but production has been delayed since as stakeholders Noble Energy, Israel’s Delek Drilling and Royal Dutch Shell renegotiate a production-sharing agreement with the government.

There has been a flurry of successful exploration efforts in recent years that identified natural gas plays in the eastern Mediterranean, where gas output has begun to soar.  Eastern Mediterranean countries including Cyprus, Israel, Egypt and Italy have formed a partnership to deliver more natural gas to Europe and transform the region into a major energy hub.  Lakkotrypis said he will meet with Aphrodite’s stakeholders next week to discuss the revenue sharing mechanisms between the government and the companies, infrastructure plans and the price at which companies will sell the gas.

He said they will likely transport the gas from the Aphrodite field via pipeline to Egypt, where it will be liquefied and exported.  The field is estimated to produce about 800 million cubic feet per day in the first production phase, according to Delek.  Egypt, Cyprus, Greece, Israel, Italy, Jordan and the Palestinian Authority recently formed the Eastern Mediterranean Gas Forum in an effort to create a regional gas market, cut infrastructure costs and offer competitive prices.  (FM 04.05)

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6.4  Cyprus’ Cars Sales Take Off in April after Recent Slump

According to Cyprus Statistical Services data, car registrations in April reached 3,673, recording a 13.6% rise following a 37.8% decline in March.  New vehicle registrations made the biggest splash, spiking 40.2% to 1,503 in April from 1,072 the year before, while sales of used cars recorded an increase of just 0.5%, reaching 2,170 from 2,160 in April 2018.  It is believed that the increase in the sales of cars was facilitated by the implementation of recently approved legislation which sees changes in the way road tax and consumer tax on cars is calculated.

Parliament on 15 March approved legislation which introduced a new way of calculating road tax according to the amount of pollutants a car emits into the atmosphere, while the consumer tax on new cars was essentially abolished as it was brought down to almost zero.  Road tax is now calculated on the principle of “pay as you pollute”, calculation of road tax owed is based on the ‘EURO’ emission standards introduced by the EU.  However, new car importers are cautious as May did not get off to a good start.  Overall, the first four months of 2019, saw saloon passenger car registrations decrease by 11.4% to 12,629, compared with 14,256 in the same period of 2018.  (FM 09.05)

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6.5  Greece Unveils Bill to Help Millions Who Owe Tax and Pension Arrears

On 5 May, Greece unveiled draft legislation intended to provide relief to millions of Greeks with tax and pension contribution arrears, offering discounts to amounts owed and stretching out payment plans by up to 120 monthly installments.  The country’s leftist government, trailing the conservative opposition in opinion polls before national elections due in the autumn, is keen to show its social sensitivity to those facing difficulty paying their accumulated dues.  Finance Minister Tsakalotos told reporters that about 4.2 million people have unsettled arrears with the tax office, state pension funds and municipalities, including about 80,000 eligible for retirement pensions but unable to receive benefits because of their arrears.  The bill offers discounts of 65% of arrears including surcharges, plus minimum monthly repayments of €50, depending on annual income and other criteria.

Greece, which emerged from its third international bailout in August last year, has been outperforming fiscal targets agreed with its international lenders.  Last year it achieved a primary budget surplus of 4.3% of economic output, beating its 3.5% target – the fourth consecutive year of outperformance.  Athens has committed to deliver primary budget surpluses, excluding debt servicing, of 3.5% of annual economic output up to 2022.  The larger than targeted surplus gives the government leeway to proceed with handouts in an election year and possibly negotiate with lenders to trim targets for budget cuts in the coming years.  (Reuters 06.05)

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7.1  Israel’s Population Crosses the 9 Million Mark

On the eve of Israel’s celebration of its 71st anniversary, new figures show the number of Jews and overall population have reached a record high.  According to a report issued by the Central Bureau of Statistics, the number of residents in Israel stood at roughly 9,009,000 in March, the largest since its rebirth in 1948.  Likewise, the number of Jews stood at a record 6,738,500, or 74.8%.  In 1948, Israel had 850,000 residents, of which an estimated 650,000 were Jewish.  (CBS 02.05)

The population has grown by 2% or 177,000 since last Independence Day.  Over the year, 188,000 babies were born, 31,000 people immigrated to Israel and 47,000 people died.  The Central Bureau of Statistics projects that Israel’s population will reach 10 million by 2024, 15 million by 2048 and 20 million by 2065.  Some 6,697,000 Israelis are Jewish (74.3%), 1,890,000 are Arabs (20.9%), while 434,000 (4.8%) belong other religions and communities.  45% of World Jewry lives in Israel.  (Globes 06.05)

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7.2  U.S. Mayors Visiting Israel & Exploring Areas for Bilateral Cooperation

A bipartisan delegation of U.S. mayors is visiting Israel with AJC (American Jewish Committee) Project Interchange for intensive dialogue and briefings.  The week-long educational seminar marks the first delegation under the auspices of a Memorandum of Understanding (MoU) between the U.S. Conference of Mayors and AJC, the highlight of which is an annual mayors’ delegation to Israel.  Organized by AJC Project Interchange, the seminar is designed to further enhance U.S.-Israel relations at the important municipal level.  This delegation is chaired by Los Angeles, California Mayor Eric Garcetti.

The seminar is intended to provide these policymakers with a first-hand understanding of Israel.  The mayors will learn about Israel’s vibrant democracy, diverse society, and regional challenges.  They will meet with influential figures across the political and social spectrum, including Israel President Rivlin, U.S. Ambassador to Israel Friedman, high-ranking government officials, leaders of Israel’s minority communities, and Jewish and Arab civil society leaders.  Importantly, the mayors will meet with their Israeli counterparts to discuss best practices for their home communities on smart city development, economic growth technology start-ups, urban revitalization, and city administration.  The delegation also will observe how Israel balances the preservation of its heritage with modern municipal management and the provision of social services.

In 2017 and 2018, bipartisan delegations of U.S. mayors, also organized by AJC Project Interchange, visited Israel.  The new MoU, signed in January, formalizes and expands this cooperation.  (AJC 12.05)

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7.3  Tel Aviv to Host ‘World’s Largest Vegan Festival’ in June

Vegan Fest, the world’s largest vegan festival, will be held at the Sarona complex in Tel Aviv from 6 – 7 June.  More than 50,000 attendees are expected to whet their taste buds with vegan and vegetarian options from 26 local restaurants and 37 vegan stalls.  The free event will feature more than 100 delicious food and product stands.  It will also have live performances, holistic workshops, lifestyle lectures, a children’s entertainment area, and cooking workshops with famous chefs.

Israel has become a popular destination for vegans due to its numerous vegetarian and vegan-friendly restaurants located around the country, but mainly in Tel Aviv. Tel Aviv is currently home to at least 400 vegan and vegan-friendly kitchens.  In November 2017, British online newspaper The Independent crowned Tel Aviv the “vegan capital of the world.”  (NoCamels 13.05)

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7.4  Egypt to Open Five New Japanese-Style Schools as School Registration Begins

Egypt’s education ministry has said that five new Japanese schools will open their doors to students in the coming school year, bringing the total number of Japanese schools operating in Egypt to 40.  The new schools are part of an ambitious plan to build 100 Japanese-style state schools which will teach the same Arabic-language curriculum as other state schools, while adopting the Japanese “whole child education” system known as Tokkatsu.  Thirty-five Japanese schools opened their doors to students in the 2018-2019 school year.  Only Egyptian students can be accepted in the Japanese schools.

The project was agreed on during Egyptian President Abdel-Fattah El-Sisi’s visit to Japan in February 2016.  Under a cooperation protocol signed between Egypt and Japan in 2017, Japan is providing the necessary technical support for the project.  Observers, teachers and parents argue that Egypt’s education system is in need of a massive overhaul.  Critics say that the system, which is based on rote learning, does not give students the necessary practical skills, leaving them unqualified for college and hindering their transition to the workplace.  The ministry says the new schools will focus on enhancing children’s personalities, rather than scientific content, by introducing a special system that is meant to improve students’ cognitive skills and behavior while encouraging innovation and creativity.  The fees for the Japanese schools are EGP 10,800 ($630) per year, according to the education ministry.  (Ahram Online 02.05)

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8.1  The Gene Editing Institute Licenses CRISPR Technology to NovellusDx

Scientists at Delaware’s Christiana Care Health System’s Gene Editing Institute and Jerusalem’s NovellusDx, an Israeli biotechnology company, have deployed a breakthrough CRISPR gene-editing tool to successfully engineer multiple edits simultaneously to fragments of DNA extracted from a human cell, according to a new study published in The CRISPR Journal.  The tool can rapidly reproduce, in a human DNA sample, the unique and complex genetic features of an individual patient’s cancer tumor.  The findings are the result of a collaboration between the Gene Editing Institute and NovellusDx, supported by the U.S.-Israeli Binational Industrial Research and Development (BIRD) Foundation, to develop new approaches to personalized cancer care.  NovellusDx plans to integrate these CRISPR-edited DNA samples into its proprietary cancer diagnostic technology as part of a diagnostic test that aims to improve treatment decisions.  The company believes DNA samples that have been edited to present the precise genetic make-up of a patient’s cancer tumor can be used to rapidly screen multiple cancer drugs and identify the course of treatment likely to produce the best outcome for the patient.

The NovellusDx technology uses computer algorithms and live cells to probe the genetic mutations in a patient’s cancer tumor to identify so-called “driver mutations,” which are the ones most closely involved in cancer progression.  These mutations can vary widely from patient to patient, even patients with the same type of cancer.  The technology also can screen a series of cancer drugs to determine which treatments are likely to be most effective at shutting down particular driver mutations.  But for the technology to be of optimal use, physicians need insights quickly, as cancer patients can rapidly deteriorate without the right treatment.

In 2016 the Gene Editing Institute and NovellusDx received a $900,000 grant from the BIRD Foundation to advance genomic cancer research toward clinical applications.  The grant was integral in the development of this new breakthrough diagnostic test.  (GEI 18.04)

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8.2  Teva Launches Generic Version of Letairis Tablets in the United States

Teva Pharmaceutical Industries announced the launch of a generic version of Letairis®1 (ambrisentan) Tablets, 5 mg and 10 mg, in the U.S.  Ambrisentan is an endothelin receptor antagonist indicated for the treatment of pulmonary arterial hypertension (PAH) (WHO Group 1) to improve exercise ability and delay clinical worsening.  In combination with tadalafil, ambrisentan is indicated to reduce the risks of disease progression and hospitalization for worsening PAH, and to improve exercise ability.

With nearly 500 generic medicines available, Teva has the largest portfolio of FDA-approved generic products on the market and holds the leading position in first-to-file opportunities, with over 100 pending first-to-files in the U.S.

Israel’s Teva Pharmaceutical Industries has been developing and producing medicines to improve people’s lives for more than a century and is 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.  (Teva 01.05)

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8.3  Panaxia & Rafa Join with PlantEXT for Medical Cannabis Suppositories for Bowel Disease

Lod’s Panaxia Pharmaceutical Industries Israel and Jerusalem’s Rafa announced the signing of a collaboration agreement with PlantEXT, an Israeli-Canadian medical cannabis company.  According to the agreement, the parties will co-develop the next generation of medical cannabis products intended for patients suffering from Inflammatory Bowel Disease, and who are authorized to receive treatment with medical cannabis.  The treatment consists of medical cannabis suppositories, which contain a proprietary composition based on a combination of defined and precise active ingredients from the cannabis plant.  The novelty lies in the fact that for the first time, a medical cannabis product will be developed in order to offer a targeted solution to patients suffering from Crohn’s disease and Colitis, in order to decrease the level of inflammation in the intestine.

Inflammatory bowel disease (Crohn’s or Ulcerative Colitis) are chronic diseases that can appear at any age.  Now for the first time, treatment with medical cannabis for these patients will be delivered utilizing an accepted, conventional pharmaceutical delivery system, and which is based on clinical research. This will offer a potential solution and increase accessibility of the treatment to a greater number of patients who need it and are eligible to receive it.

The active ingredients in the rectal cannabis suppositories are absorbed at a relatively fast rate through the many blood vessels and are not first metabolized by the liver, unlike medications that are taken orally.  As a result, the biological availability of the active ingredients rises on the one hand, and a speedy physical response occurs on the other hand.  (Panaxia 01.05)

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8.4  Lumenis New Evidence for BPH Using its Patent-Protected MOSES Technology

Lumenis announced the release of new clinical evidence of the advantages of lithotripsy treatment of benign prostatic hyperplasia (BPH) using MOSES™ Technology.  Released by Lumenis two years ago, MOSES Technology is a revolutionary, patent-protected technology that optimizes holmium energy transmission using a unique pulse modulation.  Significant clinical evidence highlighting the benefits of MOSES in lithotripsy has demonstrated a 20% reduction in procedure time, 25% improvement in fragmentation efficiency and 60% reduction in stone retropulsion1.

For BPH, MOSES Technology has recently been added to Holmium Laser Enucleation of the Prostate (HoLEP), a procedure long recognized as the gold standard treatment for any prostate size, with exceptional long-term durability compared to other minimally invasive options.  With the addition of MOSES to HoLEP, this superior treatment technique has already demonstrated advantages of shorter procedure time, better hemostasis and improved tissue separation – all of which could potentially shorten the physician learning curve and enable better patient care.

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 has successfully created solutions for previously untreatable conditions, as well as designed advanced technologies that have revolutionized existing treatment methods.  (Lumenis 03.05)

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8.5  Phytech Commercializes Plant-Based Irrigation Application for Industrial Hemp

Phytech announced the commercialization of its Industrial Hemp Plant-Based irrigation application, following successful development of optimal growth, stress and yield outcomes, conducted by Phytech’s R&D teams in Israel and Colorado, with collaboration of leading breeders, nurseries and growers in Colorado.  The application, as in all Phytech Plant-Based applications, comprises direct, in-season, continuous monitoring of plant growth parameters and applied irrigation (by proprietary sensors), micro-climate conditions, forecasts and imagery analysis, delivering real-time Plant status push notifications and Plant AI- based irrigation demands (when and how much to irrigate).

The unique Hemp application will assist growers to optimize yields by reducing over-irrigation and stress events that may lead to an increase in THC levels (>0.3%) leading to total loss of crop.  The Phytech Hemp application service is commercially available and supported in Colorado & California for the 2019 season.  Phytech is thankful for the trust of leading growers in Colorado who have signed agreements to implement the Phytech service across their Hemp sites during the coming 2019 season.

Kibbutz Yad Mordecai’s Phytech is a Digital Ag company that develops Plant-based farming applications.  Powered by direct plant sensing, advanced data analytics, machine learning, and artificial plant intelligence, Phytech provides growers easy-to-use applications to achieve better yields, healthier crops and higher profits.  Phytech’s revolutionary irrigation solution is deployed by leading growers worldwide.  (Phytech 06.05)

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8.6  Rapid Medical Gets FDA Approval of Novel Temporary Aneurysm Embolization Assist Device

Rapid Medical announced that its Comaneci device received FDA clearance as a Temporary Coil Embolization Assist Device.  The Comaneci is the first and only device in a new category of temporary coil embolization assist devices.  The Comaneci is the first-ever adjustable, fully-visible aneurysm remodeling device.  It acts as a temporary bridge used to aid in the coiling processes while minimizing the risk of coil protrusion or prolapse.  Once the coiling procedure is completed the device is removed from the parent artery.  It is the only temporary coiling assist device that does not require parent vessel occlusion during coiling procedure or the need for long-term antiplatelet medication in case of permanent stenting.  Until now the Comaneci have been successfully used in about 3,000 procedures outside the US.

Yokneam’s Rapid Medical is developing game-changing devices for endovascular treatments.  Rapid Medical is the maker of TIGERTRIEVER, the first-ever controllable, fully visible stentriever that is designed to treat ischemic stroke patients, and, COMANECI, the first-ever controllable aneurysm neck-bridging device. TIGERTRIEVER and COMANECI are CE marked for use in Europe.  (Rapid Medical 06.05)

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8.7  Teva Launches Generic Version of Delzicol Delayed-Release Capsules in the US

Teva Pharmaceutical Industries announced the launch of a generic version of Delzicol1 (mesalamine) delayed-release capsules, 400 mg, in the U.S.  Mesalamine Delayed-Release Capsules are an aminosalicylate indicated for the treatment of mildly to moderately active ulcerative colitis in patients 5 years of age and older, and for the maintenance of remission of ulcerative colitis in adults.

Mesalamine Delayed-Release Capsules further enhance Teva’s already-comprehensive portfolio of medicines to treat gastrointestinal disorders.  With nearly 500 generic medicines available, Teva has the largest portfolio of FDA-approved generic products on the market and holds the leading position in first-to-file opportunities, with over 100 pending first-to-files in the U.S.  Currently, one in eight generic prescriptions dispensed in the U.S. is filled with a Teva generic product.

Israel’s 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.  (Teva 10.05)

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8.8  Cannassure Completes Medical Cannabis Analytical Method Development and Validation

Cannassure Therapeutics announced they successfully completed their medical cannabis analytical method development and validation, in accordance with IMCA requirements.  The activity was conducted in the company’s laboratory and performed by the highly skilled Cannassure R&D and QA teams, accompanied by a GSAP regulatory consulting team.  The analysis and validation methods developed, identify seven cannabinoids-THC and CBD and their derivatives THCA and CBDA, as well as CBN, CBC and CBG.  The cannabinoids can be detected in cannabis flowers, extracts, and tinctures to ensure quality, stability and consistency of Cannassure’s products and meet GMP and other regulatory requirements and specifications for the pharmaceutical industry.

Ashdod’s Cannassure Therapeutics was founded in order to become a leading, world-class, trusted developer and provider of top-quality-grade medical cannabis and medical cannabis combination products at a pharmaceutical level.  Cannassure is launching a holistic and integrated medical cannabis value chain operation to ensure consistent, uniform and stable medical cannabis products that address a broad range of unmet medical needs.  (Cannassure Therapeutics 07.05)

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8.9  Nucleai Partnership With Protean BioDiagnostics to Enhance Cancer Diagnosis With AI

Nucleai announced its partnership with Tampa, Florida’s Protean BioDiagnostics, a biotech company commercializing advanced cancer diagnostic technology.  Nucleai and Protean BioDiagnostics are launching a co-branded campaign, Protean QA Service Enhancement powered by Nucleai, which will pair Nucleai’s unique AI services with Protean BioDiagnostic laboratories’ advanced diagnostic tools.  This optimal quality assurance service enhancement will be deployed in labs, hospitals, and urology centers across the US.

Nucleai is a clinically oriented AI company for pathologists to improve diagnosis and is a breakthrough leader in this space, being the only company to provide a comprehensive suite of AI-based solutions for cancer biopsies relating to gastrointestinal, breast and prostate tissue analysis and an effective pipeline for supporting additional indications.  Protean BioDiagnostics will now have access to the most advanced AI technology on the market, backed by over 20 million slides and a team that boasts over 100 years of cumulative experience in AI, machine learning and machine vision.

Founded in 2017, Tel Aviv’s Nucleai is a precision medicine AI company in the pathology domain making biopsy diagnoses accurate, efficient and accessible to improve the current standard of care in the field of oncology and to expedite the development of novel cancer treatments. Led by a highly skilled team of artificial intelligence experts and leading clinicians, Nucleai improves cancer diagnostics using machine learning, deep learning and machine vision technologies. Nucleai is the only company to provide a comprehensive suite of solutions for biopsies relating to gastrointestinal, breast and prostate analysis. Nucleai is supported by leading pathologists in Israel and in the US and is backed by leading VC funds.  (Nucleai 07.05)

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8.10  Zebra Receives FDA Approval for World’s First AI Chest X-Ray Triage Product

Kibbutz Shefayim’s Zebra Medical Vision received FDA 510(k) clearance for HealthPNX – an AI alert for pneumothorax (PNX), based on chest X-rays.  The latest FDA approval, received in May 2019, focuses on an AI alert for “stat” (urgent) findings of pneumothorax and demonstrates a promising potential to substantially reduce turnaround time and increase the radiologist’s confidence in making this diagnosis.

Pneumothorax is a condition in which there is an accumulation of gas within the pleural space between the lung and the chest wall.  Without prompt management, pneumothorax can lead to total lung collapse and other potentially fatal complications.  The patent pending technology automatically detects findings suggestive of Pneumothorax based on CXR or digital radiography (DR) scans and alerts the medical team.  In hospitals where Zebra-med’s “All in one” (AI1) solution is integrated into the radiologist’s worklist, the scan is flagged so that radiologist can address it in a timely manner.  This first of its kind FDA cleared solution can save physicians more than 80% of the time taken to reach the acute condition, compared to the traditional First In First Out (FIFO) methodology.

The Pneumotorax product is a result of the extensive work accomplished by the Zebra-med’s research lab.  The chest x-ray AI network was trained using millions of images to identify over 40 common clinical findings.  The results of the Textray study establish a new bar for AI research in medical imaging, demonstrating high rates of agreement between the algorithm and human radiologist experts.  (Zebra-Med 13.05)

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8.11  BGU Introduces Novel Combination Therapy for Treating Neurological Disorders

BGN Technologies, the technology transfer company of Ben-Gurion University (BGU), introduced a novel drug combination therapy, based on two FDA approved drugs, for protecting the blood-brain-barrier, and therefore preventing the development of various neurological diseases that are affected by brain vasculature pathologies.  The combination therapy was invented at the Faculty of Health Sciences, Ben-Gurion University of the Negev, Israel.

The blood-brain-barrier (BBB) is a highly specialized interface that separates the circulating blood from the brain’s extracellular fluid in the CNS and only allows selected molecules to enter into the brain tissue.  Disruption of the BBB plays an important role in cellular damage in neurological diseases, including stroke, neurodegenerative diseases, brain tumors, and brain infections.  BBB breakdown allows entry of neurotoxic blood products resulting in inflammatory response and a major damage to the brain.  Therefore the integrity of the BBB and the ability to repair damages caused to its integrity are crucial.

Currently, the ability to treat such conditions is limited, and is usually initiated only after symptoms are apparent and brain damage is substantial. However, the team discovered that treating the BBB at early stages can protect the brain and prevent disease development and therefore the novel treatment focusses on early diagnosis and prevention.  The suggested treatment is comprised of a combination therapy of two FDA approved drugs, Memantine and Losartan, which have been shown in preclinical studies to protect the integrity of the BBB, when administered together.  Moreover, the research team has also developed an early diagnostic tool based on permeability analysis which enables early diagnosis and thus early treatment.

BGN Technologies is the technology company of Ben-Gurion University, Israel.  The company brings technological innovations from the lab to the market and fosters research collaborations and entrepreneurship among researchers and students.  To date, BGN Technologies has established over 100 startup companies in the fields of biotech, hi-tech and cleantech as well as initiating leading technology hubs, incubators, and accelerators.  (BGN Technologies 13.05)

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8.12  FDA Grants Orphan Drug Designation to Ayala’s AL101 for Adenoid Cystic Carcinoma (ACC)

Ayala Pharmaceuticals has been granted Orphan Drug Designation from the U.S. FDA Office of Orphan Products Development (OOPD) for AL101, a potent and selective inhibitor of gamma secretase-mediated Notch signaling for the treatment of ACC.  Orphan Drug Designation is granted to drug therapies intended to treat diseases or conditions that affect fewer than 200,000 people in the United States.  Orphan Drug Designation by the FDA entitles Ayala to seven years of market exclusivity for the use of AL101 for the treatment of ACC, if approved, plus significant development incentives, including tax credits related to clinical trial expenses, an exemption from the FDA-user fee, and FDA assistance in clinical trial design.

ACC is a rare form of cancer. In the U.S., there are approximately 566,000 people diagnosed with cancer each year, and only about 1,224 of them are diagnosed with ACC. According to the Adenoid Cystic Carcinoma Organization International, there are approximately 14,873 Americans alive today living with this disease. Current treatment options include surgery, chemotherapy and/or radiation therapy; however, there is no approved drug for the treatment of ACC.

Rehovot’s Ayala Pharmaceuticals is a clinical-stage biopharmaceutical company dedicated to developing targeted cancer therapies for people living with genetically defined cancers.  Ayala is broadly developing its product candidates, AL101 and AL102, best-in-class gamma secretase inhibitors, with clinical and preclinical studies underway in both solid tumors (AL101) and hematologic malignancies (AL102).  (Ayala Pharmaceuticals 13.05)

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8.13  Aleph Farms Secures $12 Million

Aleph Farms has raised $12 million in series A investments.  This new influx of support includes a blend of classic venture capitalists and strategic partners.  It is led by VisVires New Protein (VVNP), Singapore; with Cargill Protein, USA; and M-Industry – the industrial group of Migros, Switzerland, as new investors.  Existing investors also joining this round include Strauss Group, Israel; Peregrine Ventures, Israel; CPT Capital, UK; Jesselson investments, Israel; New Crop Capital, USA and Technion Investment Opportunity Fund, Israel.

Aleph Farms’ unique non-GMO technology relies on a natural process occurring in cows to regenerate and build muscle tissues.  The company discovered a way to isolate the cells responsible for that process and grow them outside of the animal to form the same muscle tissue typical to steaks.  Consumers are not willing to compromise on taste, which is the driving force behind this startup’s goal to create, juicy, delicious steaks without harm to animals or the environment.

The injection of capital will allow Aleph Farms to accelerate product development of its slaughter-free meat and to transform Aleph’s prototype (released last December) into a commercial product. Its cultured meat will grow in large, clean bio-farm facilities similar to a dairy facility.

Ashdod’s Aleph Farms was co-founded in 2017 by Israeli food-tech incubator The Kitchen, a part of the Strauss Group, and the Technion.  The startup is shaping the future of meat by producing real meat  cut from cow-cells, providing the same meat – same experience, same taste – but without killing animals, without using antibiotics, and potentially causing less foodborne illness risk.  (Aleph Farms 14.05)

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9.1  GetSAT & SatixFy Deliver Advanced Efficient Space Segment Management MCPC System

SatixFy and GetSAT are together offering an advanced MCPC system for more highly efficient network optimization to improve ground-satellite link conditions and data throughput.  The collaboration will enable SatixFy platform to operate and manage GetSAT micronized antenna and modem products.

Existing and future GetSAT customers will be able to upgrade their SCPC terminals to operate inside an MCPC network with a shared DVB-S2X up-to 500 MHz forward channel carrier at 1 Gbps of data and on-demand allocation of DVB-S2X 50 MHz return channel at 200 Mbps.  The solution will be monitored and configured by an easy to use network management system controlling the terminals and the space segment allocation.  The MCPC system is based on SatixFy’s Software Defined Radio ASIC technology, ensuring state-of-the-art DVB-S2X capabilities from VLSNR to 256APSK and data performance.

Rehovot’s SatixFy designs next-generation satellite communication systems based on in-house developed chipsets.  SatixFy’s advanced modems radically increase system performance and reduce the weight and power requirements of terminals, payloads and gateway equipment with full support of advanced standards, such as DVB-S2X.  The company delivers among others the industry’s smallest VSAT as well as Electronically Steered Multibeam Antennas (ESMA) for a variety of mobility applications and services such as Connected Car, IoT, consumer broadband, in-flight connectivity, communication payloads and more.

Rehovot’s GetSAT Communications supplies antennas and highly efficient portable terminals, which offer high-speed communications for terrestrial, aerial and maritime applications.  GetSAT provides services for government and military use, companies, emergency equipment, non-governmental organizations (NGOs) and humanitarian groups.  (SatixFy 01.05)

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9.2  Snyk Secures Open Source Development on Microsoft Azure

Snyk announced it will protect and secure the development of applications and containers using open source and running on Microsoft Azure.  Snyk is announcing its native integrations with Azure providing security throughout the software development life cycle (SDLC), enabling customers to secure their payloads and adopt open source and cloud more quickly and safely.  Through this integration, Snyk simplifies and secures cloud migration for Azure customers, empowering developers to prevent vulnerabilities from being deployed and quickly closing new threat exposure by automating remediation.

Cloud migration continues to explode in 2019, and old security practices and tools undermine the benefits of collaboration and speed that Azure provides.  As cloud developers accelerate software delivery, it is critical they have security streamlined into their existing workflows and processes to prevent it from slowing them down.  With the growing usage of open source across modern software development, there is rapidly increasing risk of vulnerabilities within open source libraries that must be addressed earlier in the SDLC.  Snyk enables the complete team of developers, devops and security to collaborate to secure their applications and containers while running quickly and deploying continuously.

Snyk’s developer-first solution offers tightly integrated vulnerability management and remediation across the Azure SDLC – from code release to runtime.  The Snyk integration enables DevSecOps, empowering developers to continue to release fast, while ensuring the security of their projects and assuring overall control and governance.

Tel Aviv’s Snyk is a developer-first security solution that helps organizations use open source and stay secure.  Snyk is the only solution that seamlessly and proactively finds and fixes vulnerabilities and license violations in open source dependencies and Docker images.  Snyk’s solution is built on a comprehensive, proprietary vulnerability database.  With tight integration into existing developer workflows, source control (including GitHub, Bitbucket, GitLab), and CI/CD pipelines, Snyk enables efficient security workflows and reduces mean-time-to-fix.  (Snyk 01.05)

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9.3  PlainID Announces Partnership with SAP

PlainID has signed a partnership agreement with SAP to offer SmartAuthorization as an OEM component to be featured in the SAP Customer Data Cloud portfolio.

PlainID provides business and admin teams with a simple and intuitive means to control their organization’s entire authorization process.  The platform allows users to implement any kind of rules, all without coding, and all in fine-grained detail.  PlainID simplifies authorization so that thousands of roles, attributes and even environmental factors can be converted into a few logical SmartAuthorization policies, using the Graph Database Decision Engine.  PlainID offers a policy-based access control solution that simplifies authorization to one point of decision, one point of control, and one point of view across cloud, mobile and legacy applications.  An intuitive policy-based decision solution, policy-based access control is quickly replacing the traditional role based and attribute based authorization solutions.  Companies that use PlainID benefit from a scalable, graph database authorization platform that meets the demands of enterprise growth without worry.

Founded in 2015, Tel Aviv’s PlainID offers an advanced Authorization Platform, the first policy-based access control solution that simplifies authorization to one point of decision, one point of control and one point of view across cloud, mobile and legacy applications.  This intuitive policy-based decision solution is quickly replacing traditional role based and attribute based authorization solutions.  Companies that use PlainID benefit from a scalable, graph database authorization platform that meets the demands of enterprise growth without worry.  Recently raising an $11 Million Series A Venture Capital round lead by Viola Ventures, PlainID is The Authorization Company.  (PlainID 30.04)

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9.4  HISPASAT and hiSky to Offer IoT and MSS in Mexico Through Small Portable Terminals

Spanish satellite telecommunications operator HISPASAT, has completed the successful installation of a hub at its gateway in Ixtlahuaca del Rayon (Mexico) to manage the Smartellites, hiSky terminals that offer MSS (Mobile-satellite services) and IoT solutions through Amazonas 5 satellite Ka band, which covers 79% of Mexican population.  Both companies signed an Agreement in 2017 to jointly commercialize this solution in Spain, Portugal, Latin America and North Africa.

hiSky Smartellite, a small portable easy-to-use terminal, includes a small, flat antenna based on phased-array technology to provide low-capacity MSS (Mobile Satellite Services) and IoT by using the Ka band of HISPASAT satellites.  With the new HUB installed in Mexico, hiSky’s unique NMS (Network Management System) is capable to control thousands of terminals in the Amazonas 5 Ka band footprint, by that providing hiSky’s services to all, and in low prices to areas with no or low connectivity.

Rosh HaAyin’s hiSky‘s was established in 2015 as a Satellite VNO (Satellite Virtual Network Operator), providing a comprehensive solution for voice/data and IoT/M2M applications, at a fraction of existing market rates.  These are delivered through a suite of Smartellite terminals and a proprietary Network Management System.  (hiSky 30.04)

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9.5  GetSAT and Inmarsat Introduce Market’s Smallest Ruggedized Terminal for Global Xpress

GetSAT and Inmarsat, the world leader in global, mobile satellite communications, announced that Inmarsat has approved GetSAT’s MilliSAT-H-GX and MilliSAT-W-GX for use on its Global Xpress service.  These new terminals are the lightest and most compact all-in-one, on-the-move solutions serving the Global Xpress network, the world’s first and only globally available, high-throughput wideband network.

Leveraging GetSAT’s highly efficient, patented InterFLAT miniaturized flat panel antenna technologies, MilliSAT-H-GX and MilliSAT-W-GX are the first communications-on-the-move terminals for ground vehicles using the worldwide Global Xpress network.  These ruggedized terminals have been proven to operate in some of the toughest environmental conditions.  Their combination of size, weight, and fast-tracking technology allows for operation on land-mobile and maritime platforms with aggressive vehicle dynamics.  Size and weight limitations have traditionally been a challenging requirement for land-mobile SATCOM applications. The size and weight of the MiliSAT-H-GX and MilliSAT-W-GX make them well suited for widespread adoption in the land mobile market.

A privately held company located in Rehovot, GetSAT Communications provides portable and extremely efficient antenna and terminals that offer high-data-rate communications for ground, air and maritime applications.  GetSAT provides services for government and military use, enterprises, first responders, non-governmental organizations (NGOs) and humanitarian groups.  (GetSAT 02.05)

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9.6  Cellebrite Adds AI-Driven Digital Evidence Capabilities to Its Analytics Solution

Petah Tikva’s Cellebrite, the leading provider of digital intelligence solutions, announced a new artificial intelligence (AI)-driven customization capability as part of the Cellebrite Analytics Solution.  This first-of-its-kind technology enables investigators and lab practitioners to create customized digital media categories to find and surface video and image evidence related to a specific topic relevant for their current investigations.  This new capability complements the 13 pre-defined electronic media categories, such as weapons, drugs, suspected child exploitation and money, already available as part of the Cellebrite Analytics Solution.  With this machine learning capability built into Cellebrite’s Analytics Solution, law enforcement can quickly create new categories and then train the system in just a few clicks to find pertinent images that can be key to generating leads and solving cases.

Today, in case that the investigation is not related to the 13 pre-defined categorize, the investigator must wade through hundreds, in some cases thousands, of images to find relevant evidence to their cases.  With this new capability, Cellebrite is breaking ground in the use of AI and machine learning to identify key digital evidence and train systems customized to each case to find that evidence more quickly even.  Cellebrite’s all new AI-powered Analytics Desktop solution adds powerful analysis capabilities to investigations and eliminates time-consuming, manual review of digital data to resolve investigations faster.

Digital data plays an increasingly important role in investigations and operations of all kinds. Making data accessible, collaborative and actionable is what Cellebrite does best. As the global leader in digital intelligence deployed in 150 countries, Cellebrite provides law enforcement, military, intelligence, and enterprise customers with the most complete, industry-proven range of solutions for digital forensics, triage and analytics.  (Cellebrite 02.05)

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9.7  King Wai Insurance Selects Sapiens P&C Suite

Sapiens International Corporation announced that King Wai Insurance (KWI) – a major provider of business, personal and professional insurance solutions – has selected Sapiens IDITSuite for Property & Casualty.  Following the acquisition of QBE Insurance Thailand, KWI is focused on becoming a leading insurance provider in Thailand by replacing its outdated legacy core system with the Sapiens IDITSuite.

Sapiens IDITSuite for Property & Casualty was selected by KWI as its core platform after rigorous evaluations and bids from various core vendors.  The innovative solution was selected for its ability to support the launch of both personal and commercial product lines, and omni-channel capabilities that will help establish KWI as a trusted digital insurance brand in the Thai market.

Sapiens IDITSuite for Property & Casualty is a component-based platform.  This pre-integrated, fully digital suite was designed with growth and change in mind, and offers a flexible, user-friendly workflow interface.  Sapiens’ core systems are expected to speed time to market via flexible product configuration and business rules engines, provide a superior claims experience for KWI customers and optimize operational costs for the KWI team.

Holon’s Sapiens International Corporation empowers insurers to succeed in an evolving industry.  The company offers digital software platforms, solutions and services for the property and casualty, life, pension and annuity, reinsurance, financial and compliance, workers’ compensation and financial markets.  With more than 35 years of experience delivering to over 450 organizations globally, Sapiens has a proven ability to satisfy customers’ core, data and digital requirements.  (Sapiens 02.05)

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9.8  Magal Introduces its New Access Control Product: Symphony Access Control

Magal Security Systems released its new access control product, which is a module incorporated into its Symphony product: Symphony by Senstar (Magal’s wholly owned North American subsidiary).  The access control capabilities added to Symphony is an open software solution, designed to support the security industry’s most trusted brands of access control and intrusion hardware.  Available as an extension to the Symphony Analytics and Video Management Software (VMS), the module provides a full set of access control functions, including enrollment, scheduling, monitoring, and reporting.

Yehud’s Magal is a leading international provider of solutions and products for physical and cyber security, as well as safety and site management.  Since 1969, Magal has delivered tailor-made security solutions and turnkey projects to hundreds of satisfied customers in over 100 countries – under some of the most challenging conditions.  (Magal Security Systems 06.05)

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9.9  Walabot DIY Plus Uses ‘Superman Vision’ to See Through Plaster, Drywall and Concrete

Vayyar Imaging announced Walabot DIY Plus, the world’s most powerful wall scanner and the company’s latest innovation in its Walabot product line.  Walabot DIY Plus expands on the functionality of its predecessor to see through even the densest materials, such as lath and plaster, as well as drywall and concrete.  With Walabot DIY Plus, Vayyar brings its famous “Superman vision” to every homeowner, providing a visual map of everything inside the wall, including metal and wooden studs, pipes, wires and even rodents.

Walabot DIY Plus brings professional-grade capabilities to consumers and is the only all-in-one tool capable of seeing through the most difficult materials.  Until now, traditional wall scanners were unable to see through dense materials like lath and plaster, which is found in 1 in 5 U.S. homes.  Both affordable and easy-to use, Walabot DIY Plus easily attaches to an Android phone (with OS 6.0 and above and OTG) and is controlled via the free app in the Google Play Store.  The device features a new product casing with easy slide strips that allow for smooth scanning of your walls, no matter the surface type, and a software upgrade that includes enhanced wall scanning accuracy.

Yehud’s Vayyar Imaging is a global leader in 3D imaging technology, providing highly advanced sensors to a wide variety of industries including automotive, smart home, robotics, retail and medical.  The company’s sensors can see through walls and objects and track and map everything happening in an environment in real-time, all while maintaining privacy.  Utilizing a state-of-the-art embedded chip and advanced imaging algorithms, Vayyar’s mission is to help people worldwide improve their health, safety and quality of life using mobile, low-cost 3D imaging sensors.  (Vayyar Imaging 07.05)

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9.10  Curv Partners with Munich Re to Commodify Digital Asset Insurance

Curv announced a new partnership with Munich Re, one of the world’s leading providers of reinsurance, to provide insurance protection of up to $50m for digital assets in Curv’s Institutional Digital Asset Wallet Service.  Munich Re diligently audited Curv’s cryptography, implementation, quality assurance, deployment and security procedures.  The simple opt-in solution will provide comfort to Curv’s customers because Curv will have the financial capability to pay for losses of crypto assets.  The insurance for Curv is underwritten by a primary insurance carrier of Munich Re Group, which is an S&P AA-rated international insurance company, eligible to write surplus lines insurance in all US states.

Coverage for digital assets held in wallets connected to the Internet has been limited and expensive, with the risks associated with securing private keys spread across different insurance policies.  Curv developed multi-party computation (MPC) protocols to sign blockchain transactions in a mathematically secure, distributed way, eliminating the single point of failure introduced by private keys.  As a result, digital assets cannot be stolen from Curv’s Wallet Service with a single cyber breach or even through insider collusion.

Tel Aviv’s Curv is setting a new institutional standard for digital asset security, using revolutionary cryptography to deliver the industry’s first cloud-based Institutional Digital Asset Wallet Service that makes it easy to manage and secure all digital assets.  Curv’s unique, mathematically-secure, distributed approach gives organizations bulletproof protection, instant access, and total autonomy over digital assets, so they can embrace the digital economy.  (Curv 10.05)

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9.11  Presenso Announces Strategic Partnership with Siemens

Presenso announced that Siemens has selected the company as its strategic partner in Artificial Intelligence and Machine Learning for Predictive Asset Maintenance.  Presenso will support Siemens’ Operations & Maintenance (O&M) services with its real-time Industrial Analytics Solution integrated into the Siemens Remote Diagnostic Services portfolio of tools.  This creates the necessary synergy between OEM and data knowledge to deliver superior outcomes to Siemens’ customers.

Presenso’s Machine Learning based solution will be applied to data generated from Siemens’ machines and newly deployed Smart Field Sensors. Presenso applies Automated Machine Learning or AutoML to Big Data in order to detect subtle abnormal behavior patterns, indicative of evolving asset failure.  The two companies are currently deploying the solution in large scale in power plants and oil and gas facilities around the world.  Together they are aiming to achieve a holistic approach for the overall plant.

Haifa’s Presenso provides AI driven Industrial Analytics tools for Predictive Maintenance using data science innovations such as Automated Machine Learning (AutoML). These tools are accessible to maintenance and reliability professionals without the need to hire Big Data experts. Presenso solution is available today for both OEM’s which are now developing their Industry 4.0 offerings and to end users operating their own equipment.  (Presenso 08.05)

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9.12  ECI and Cherry & White Bring Future-Proof Networking Technology to Critical Industries

ECI has partnered with England’s Cherry & White, a supplier of telecommunications products, services and solutions to Utility, Transport, Defense and Government sectors around the world.  The partnership will leverage synergies between the companies, each of which has extensive expertise in these sectors, to help drive network transformation efforts for critical industries looking to modernize their network infrastructure.

With this partnership, Cherry & White can leverage the complete set of products and systems from across the ECI portfolio. This ensures customers in critical industries can successfully evolve to a modern network that can be upgraded, expanded and enhanced as demands change and new services are added. Cherry & White chose ECI for the company’s versatile, yet complementary technology offerings in optical, packet, cloud and cybersecurity, enhanced by its comprehensive network management platform. “Cherry & White’s partnership with ECI enhances our solution proposition to deliver innovative technology with superlative service support,” said Ian Spindler, Sales Director, Cherry & White Ltd. “Working closely with ECI, we’re now better equipped to offer a comprehensive and flexible solution that our customers in mission-critical industries like defense, utility and transport can rely upon.”

ECI and Cherry & While have already worked together to identify and present commercial proposals to several utility, carrier, government and petrochemical businesses in just a few months of working together.

Petah Tikva’s ECI is a global provider of ELASTIC network solutions to CSPs, critical industries, and data center operators.  With the advent of 5G, IoT and smart everything, traffic demands are increasing dramatically, and network operators must make smart choices as they evolve their infrastructure.  ECI’s Elastic Services Platform leverages our programmable packet and optical networking solutions, along with our service-driven software suite and virtualization capabilities, to provide a robust yet flexible solution for any application.  (ECI Telecom 08.05)

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9.13  Silicom Launches New Edge Computing Platform Target for Cloud Service Providers

Silicom has launched its powerful new Edge Computing platform based on the Intel® Xeon-D (D2100) processor.  Targeted for the needs of Cloud and Communication Service Providers (CoSP), the new platform is optimized for Edge Computing services including uCPE (Universal Customer Premises Equipment), Cloud Edge, 5G Distributed Unit (DU), and IoT Gateways. Intel has verified Silicom’s new platform as an Intel Select Solution for uCPE in both ‘Basic’ and ‘Plus’ configurations and optimized on Ubuntu as the operating system, after rigorous benchmark testing to confirm its features, functionality, security and performance.

Kfar Saba’s Silicom is an industry-leading provider of high-performance networking and data infrastructure solutions.  Designed primarily to improve performance and efficiency in Cloud and Data Center environments, Silicom’s solutions increase throughput, decrease latency and boost the performance of servers and networking appliances, the infrastructure backbone that enables advanced Cloud architectures and leading technologies like NFV, SD-WAN and Cyber Security.  Their innovative solutions for high-density networking, high-speed fabric switching, offloading and acceleration, which utilize a range of cutting-edge silicon technologies as well as FPGA-based solutions, are ideal for scaling-up and scaling-out cloud infrastructures.  (Silicom 07.05)

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9.14  SolarEdge Unveils New Smart StorEdge Solutions

SolarEdge Technologies will be expanding its StorEdge solution with the launch of new inverters optimized for the combined management of solar, storage, and home energy.  The company will also preview its own commercial and residential batteries to complement its smart solar energy portfolio.

The StorEdge expansion will include three new additions to the solution portfolio.  In June of 2019, SolarEdge will introduce to the market a single phase inverter with HD-Wave technology that integrates the management of solar, storage, and home energy into one inverter.  The combination of all of these functions into one inverter will simplify installation, improve system RoI, and increase self-consumption.  A second enhancement to StorEdge is the planned addition of a three phase inverter that can be DC coupled to one or more 48V batteries to support the growing European solar-plus-storage residential market.  The third addition are the SolarEdge commercial and residential batteries, which will be added to the StorEdge offering in order to provide a comprehensive storage solution.

The addition of commercial and residential batteries to its StorEdge offering will allow SolarEdge to offer an end-to-end, compatible storage solution that fully synchronizes PV, battery, and site-level energy management.  The Li-Ion, high-voltage NMC batteries will offer energy management by stacking multiple value streams, including demand management (peak shaving), both site-level and aggregated self-consumption maximization, ancillary services, tariff optimization (ToU), in addition to supporting micro-grid applications.  As the batteries are designed for full compatibility with StorEdge, the planning, design, installation, service and warranty process are designed to be significantly simplified.  The batteries will be able to be either AC or DC coupled with StorEdge, with DC coupling allowing for superior efficiency and PV oversizing.

Herzliya’s SolarEdge is a global leader in smart energy technology.  By leveraging world-class engineering capabilities and with a relentless focus on innovation, SolarEdge creates smart energy solutions that power our lives and drive future progress.  SolarEdge developed an intelligent inverter solution that changed the way power is harvested and managed in photovoltaic (PV) systems.  The SolarEdge DC optimized inverter seeks to maximize power generation while lowering the cost of energy produced by the PV system.  (SolarEdge 13.05)

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9.15  vHive Demonstrates AI for Cell Tower Equipment ID

vHive announced the enhancement of its autonomous cell tower inspection solution to automatically identify equipment installed on surveyed towers.  After working with tower companies around the globe, vHive is in a position to create new, valuable insights from data that is gathered in tower inspection surveys.  vHive’s AI allows a rapid scan through acquired data and identify objects of interest such as telecom equipment for the tower industry.  vHive’s flight and data acquisition AI intelligently orchestrates a hive of drones.

vHive provides solutions to companies in a variety of industries ranging from telecom towers, to rail, construction and insurance.  vHive enables tower companies and mobile network operators to digitize and gain intelligence on their infrastructure by capturing field data in minimal time and generating 2D, 3D and panoramic tower models to visualize, analyze and share.

Herzliya’s vHive is the developer of cloud-based AI that enables enterprises to operate autonomous drone hives for the acquisition, management and processing of field data.  vHive’s Mission AI uniquely enables organizations in a variety of industries such as infrastructure, telecom, rail and civil engineering to scale their drone operations.  (vHive 14.05)

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9.16  Hailo Releases Industry-leading Deep Learning Processor

Hailo released the Hailo-8™, the world’s top performing deep learning processor.  Hailo is now sampling its breakthrough chip with select partners across multiple industries, with a focus on automotive.  The chip is built with an innovative architecture that enables edge devices to run sophisticated deep learning applications that could previously run only on the cloud.

The Hailo-8™ processor, which features up to 26 tera operations per second (TOPS), significantly outperforms all other edge processors with area and power efficiency far superior to other leading solutions by a considerable order of magnitude – all at a size smaller than a penny, including the required memory.  By designing an architecture that relies on the core properties of neural networks, edge devices can now run deep learning applications at full scale more efficiently, effectively, and sustainably than traditional solutions, while significantly lowering costs.

Hailo is working with leading OEMs and tier-1 automotive companies in fields such as advanced driver-assistance systems (ADAS), as well as players in industries like smart cities and smart homes, to empower smarter edge and IoT devices.  These industries often require the use of high-performance cameras to perform tasks such as semantic segmentation and object detection in real time – tasks which Hailo’s chip can perform at full resolution, while consuming only a few Watts.  Hailo’s redesign eliminates untenable heat dissipation issues and removes the need for active cooling systems in the automotive industry. Its advanced structure translates to higher performance, lower power, and minimal latency, enabling more privacy and better reliability for smart devices operating at the edge.

Tel Aviv’s Hailo has developed a specialized deep learning processor that delivers the performance of a data center-class computer to edge devices.  Hailo’s AI processor is the product of a rethinking of traditional computer architecture, enabling smart devices to perform sophisticated deep learning tasks such as object detection and segmentation in real time, with minimal power consumption, size, and cost.  (Hailo 14.05)

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10.1  Israel’s Budget Deficit Increases to 3.8%

Israel’s budget deficit in the past 12 months has risen to 3.8% of the GDP, according to the revised budget performance figures for April published on 6 May by the Ministry of Finance.  The budget deficit amounted to NIS 14.1 billion during this period, compared with NIS 1.5 billion during the preceding 12 months.

Figures for April 2019 were affected by the Passover holiday, which forced the Israel Tax Authority to postpone NIS 1.3 billion in revenue from April to May.  Even without the Passover holiday, however, the deficit in April would have hit a new peak of 3.7% of GDP.  The budget deficit dropped to 3.4% last month as a result of NIS 2 billion in one-time vehicle purchase tax revenue resulting from a change in the tax brackets.  Ministry of Finance budget director Meridor insisted on publishing a revised forecast in January, according to which the budget deficit would reach 3.6% at the end of 2019.  It now appears that this forecast, published despite opposition from Minister of Finance Kahlon and his associates, was an under-estimate.

The cause of the spurt in the deficit is stagnation in tax revenues which posted no substantial growth, and a jump in spending by government ministries, which grew 12.7% in January-April 2019, compared with a planned 5.7% increase.  The problem in spending is in the civilian ministries, whose spending rose by 16.8% in January-April, compared with a planned 6% increase, while spending by the non-civilian ministries was up 0.3%, compared with a planned 1.9% increase.  (Globes 06.05)

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10.2  April’s Foreign Exchange Reserves at $118,743 Million

Israel’s foreign exchange reserves at the end of April 2019 stood at $118,743 million, an increase of $524 million from their level at the end of the previous month.  The reserves ‎represent 32.2% of GDP.  The increase was the result of a revaluation ‎ that increased the reserves by approximately $695 million and private sector transfers of approximately $4 million.  In contrast, the increase was offset by government transfers to abroad totaling ‎approximately $175 million. (BoI 07.05)

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11.1  ISRAEL:  Over 500 Global Corporations from 35 Countries Operate In Israel

On 30 April, Start-Up Nation Central (SNC) and PwC Israel published a report titled “The State of Innovation,” providing a comprehensive ‎look at the status and evolution of multinational activity in Israel as a leading ‎innovation destination and the home of the highest concentration of startups per capita ‎in the world.‎  These multinationals are looking to Israel’s over 6,000 startups for new ideas, quick ‎prototyping ability and entrepreneurial culture.  This is based on a survey based on collected data from more than 90 ‎multinationals and interviewed 73 executives and innovation leaders from 22 countries.‎

Of the 536 multinationals in Israel, according to the report, 55% are headquartered ‎in the US, with 27% in Europe and 15% from Asia-Pacific.  Technology ‎companies account for 38% of the MNCs in Israel, pharmaceuticals and ‎healthcare companies make up 11%, financial services 10%, industry ‎products 10% and telecommunications and media firms 8%.‎

Open innovation, according to the report, includes “any activity involving collaboration ‎with idea-rich, technology enabling third parties – often, but not necessarily, start-ups,” ‎alongside innovation centers, accelerators, incubators, research programs, co-working ‎spaces and corporate ventures funds.  Some 77% of the multinationals ‎surveyed in the report said they set up shop in Israel to tap into this openness as well as ‎benefit from other factors such as Israel’s mindset of challenging known processes, ‎decisions, and notions, and its positive approach to risk-taking and failure.‎

Multinational companies from across industries have been operating in Israel for ‎decades, flocking to the country to invest in or acquire Israeli startups and recruit ‎locally.  Most have an R&D-led focus on engineering talent or IP assets, but a strong ‎shift has been noted starting in 2014 “to more investment-led and partnership-led open ‎innovation operating models,” the report reads.  This shift has been accelerating, as ‎more MNCs with operations in Israel choose to engage in diverse ways with more ‎stakeholders, making innovation costs variable and on-demand.

The report also shows that foreign companies tend to increase and diversify their ‎innovation activity with time in market, for example, going from tech-led R&D centers ‎to operating startup accelerators and engaging in joint ventures” with local VCs and ‎other groups.‎

Global companies operating R&D centers in Israel still employ over 70,000 people (including in manufacturing facilities) as of January 2017, according to the survey, but ‎there is growing traction globally around open innovation, supply constraints around ‎local engineering talent, and the growing popularity of Corporate Venture Capital.

An R&D firm entering the Israeli market through an “acquihire” (acquisition of a ‎local company to tap into its talent) “will realize over time the need to open innovation ‎activities to local innovators, primarily start-ups.”  These innovation activities allow ‎MNCs “to tap into the wide range of Israeli innovation, developing solutions with early ‎and more mature start-ups, hiring and retaining local talent, or supporting and ‎partnering with leading research institutions.”‎

Of the multinationals surveyed, 40% cited Israel as a distinctive location for their global activities, distinct from any other innovation locations. “Israel often offers faster results and requires smaller teams owing to the more concentrated, networked market and the distinctive execution pace of local teams,” the report reads.

Kai Beckmann, CEO of Performance Materials at German pharmaceutical and chemicals firm Merck told the report’s authors that “roughly almost half of [our] healthcare revenue is based on innovation stemming from Israel […]  This tells us a lot of the story of how important Israel is to Merck.”

Multinationals in Israel are also increasingly displaying “some of the characteristics of the startups they’re working with, including regular pivots to new technology focus areas, faster execution of projects, and a higher tolerance for failure.”

“The Israeli way of approaching risk and failure, and the importance of giving startups independence and space to innovate – these core characteristics of the Israeli ecosystem allow MNCs to step outside of their comfort zone, re-think their approach to innovation and effectively tap into Israeli innovation,” the report states.

Pivots take many forms, the survey notes, including changing the portfolio of innovation activities maintained, shifting the focus of the technology categories, and interacting with stakeholders at different maturity levels.

Deutsche Telekom, for example, hosts management teams in Israel to “absorb” startup thinking, according to the authors, while Pfizer, Genpact, Flex and Johnson Controls all have senior executives located in Israel who manage their companies’ global scope of technology scouting, product development, or open collaboration activities.  Siemens’ Dynamo and the Innogy Innovation Hub are unique innovation vehicles, not replicated anywhere in those groups’ global innovation portfolios, the report’s accompanying release notes.

It further adds that the multinational innovation activity in Israel has “spurred growth in the number of third-party innovation facilitators, often within an industry, noting The Shelf accelerator in the retail sector and The Dock in the shipping and logistics sector as examples.

“Coca Cola, Turner, Walmart, and Mercedes Benz work with The Bridge Builders to source and develop commercialized partnerships.  These groups and others like them leverage industry contacts to host MNC delegations, scout for bespoke profiles, and coach startups in navigating MNC collaborations,” the release reads.  (SNC 30.04)

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11.2  ARAB WORLD:  Five Arab Cities Vie to Become the New Startup Hub of the Arab World

Wamda reported that five Arab cities are competing with Dubai to become the new startup hub of the Arab Middle East: they promise more competitive real estate prices and cheaper visa, license and telecommunications costs.

For several years, Dubai, with its strategic location and stability, has been able to establish itself as the hub for the private sector across the Middle East and North Africa (MENA).  Boasting superior infrastructure, vibrant cultural and entertainment lifestyle sector, the emirate has been able to attract expatriates from across the world to its manmade islands and glittering skyscrapers.  The latest stakeholders for this destination are startups and the government is working hard to maintain their presence.

At the World Economic Forum (WEF) that took place in Jordan at the beginning of April this year, Dubai announced that it would grant the top 100 Arab startups (picked by WEF) five-year visas.  The UAE is already home to 20 of them and Abdullah Bin Touq, secretary general of the UAE cabinet said the move “reflects our commitment to facilitate businesses, create an attractive and encouraging environment for growth, and underline the UAE’s position as a global destination for talents”.

But Dubai is expensive, the most expensive city in Mena for startups due to the high real estate prices, visas, licenses and telecommunications costs.  A recent report by Google and Strategy& identified Dubai as one of the most expensive cities in the world to launch a startup, accounting for 13.4% of income per capita, compared with 6.8% in Saudi Arabia and just 1.1% in the US.

As a result, several other cities across the region are attempting to position themselves as an alternative destination hub for startups in MENA.

Abu Dhabi

The latest is Abu Dhabi, which will be providing a Dh1 billion ($272 million) package for startups as part of a new entrepreneurship space called Hub71 launched in partnership with sovereign wealth fund Mubadala Investment Company and Japan-based investment bank Softbank as well as Microsoft and Abu Dhabi Global Market (ADGM).  Half of this investment plan will be used to provide subsidies for housing, office space, health insurance and the remaining Dh535 million for an investment fund for both startups and venture capital (VC) firms which will be deployed over the next three to five years.

The government is encouraging VCs to set up base at Hub71 by co-investing with them through a government matching scheme.  It hopes to attract startups from around the world by promising them a network that includes Softbank and Mubadala’s portfolio companies which includes Uber, China’s Didi and India’s OYO.

Saudi Arabia

Networking, while beneficial is not enough to guarantee success.  Most startups would prefer easy access to market and Saudi Arabia, for many, is the most lucrative market in the region.  Saudi Arabia’s Vision 2030 has repositioned the small to medium sized enterprise (SME) sector as one of the most important for the kingdom’s economic prosperity.  The government launched the General Authority for SMEs known as Monshaat, whose sole mandate is to help, aid and enable them, a one-stop shop for SMEs.

Over the past few months Monshaat has announced a roster of new initiatives which has included launching a government-owned VC firm – the Saudi Venture Capital Company (SVC) with a fund worth SAR 5 billion ($1.33 billion) which it will invest directly in the country’s startups as well as VC funds.  It has also signed agreements with 20 global and regional VCs, including with Wamda Capital to facilitate the visa and licensing process for their portfolio companies.

Saudi Arabia is the Middle East’s biggest economy with a gross domestic product (GDP) of more than $680 billion and a population of 33 million of which 70% are below the age of 30.  This demographic is technologically savvy with strong purchasing power and for startups, cracking the Saudi Arabian market is one way to ensure growth.  But the country’s restrictive social and cultural requirements make it difficult to attract talent.  Riyadh-based logistics company Salasa has considered relocating to Dubai in a bid to attract the talent that is lacking in Saudi.

Amman & Cairo

However, two countries that do boast talent are Jordan and Egypt.  During the opening plenary session at WEF, Jordan’s King Abdullah II told a room of the region’s top businessmen and policymakers that his country was ripe for investment and a destination for startups.  Amman provides many of the engineers for the back offices of many startups and technology companies in the region, including Amazon.  But they tend to be more expensive than engineers in Cairo, where the region’s most populous city is re-establishing its entrepreneurial flair amid a flurry of activity.  Kuwait-based Boutiqaat is currently considering opening a back office in Cairo.

But cost alone is not enough to attract startups to establish headquarters in Egypt, or Jordan, which lack the same living standards as the Gulf.  They are likely to remain as the backend offices for the rest of the region.


The country making the strongest effort take replace Dubai as the region’s hub is Bahrain.  The small Gulf state enjoys easy access to Saudi Arabia, a bankruptcy law that allows startups to fail and restart and Al Waha’s $100 million fund of funds of which half has already been invested.  Bahrain has also adopted a “cloud first” policy and is home to the Middle East’s Amazon Web Services (AWS) infrastructure which will go live this year and will create thousands of jobs according to Amazon.  (Wamda 05.05)

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11.3  JORDAN:  IMF Executive Board Completes Second Review Under the EFF for Jordan

On 6 May, the Executive Board of the International Monetary Fund (IMF) completed the second review of Jordan’s economic performance under the Extended Arrangement under the Extended Fund Facility (EFF).  The completion of the second review enables the disbursement of SDR 120.085 million (about $166.4 million), bringing total disbursements under the program to SDR 223.015 million (about $309. million).

The Executive Board also approved the authorities’ request for waiver of non-observance of performance criterion on the Net International Reserves of the Central Bank of Jordan (CBJ), an extension of the arrangement to March 2020, and the rephasing of access.

On 24 August 2016, the Executive Board approved a three-year extended arrangement under the EFF for Jordan for an amount equivalent to SDR 514.65 million (about $723 million at the time of approval of the arrangement, or 150% of Jordan’s quota) to support the country’s economic financial reform program.  This program aims at advancing fiscal consolidation to gradually lower public debt and broad structural reforms to enhance the conditions for more social-friendly inclusive growth.

Executive Board Assessment

The authorities are to be commended for preserving macroeconomic stability, maintaining a prudent monetary policy, and ensuring a sound financial system.  Jordan faces a challenging environment—including low economic growth, high unemployment, and elevated public debt—underscoring the importance of swiftly implementing policies and reforms to bring public debt on a downward path, boost investment and productivity, and enhance inclusive growth.

In this regard the recent London Initiative has been most timely, and has demonstrated the international community’s ongoing determination to support Jordan.  Continued donor assistance is key to help Jordan cope with the refugee crisis and support the authorities’ policy and reform efforts.

The authorities should continue on a path of gradual and steady fiscal consolidation, with due regard to social protection needs.  Although a number of key fiscal reforms have been delayed, recent amendments to the income-tax law are encouraging and will be key in helping Jordan secure a fairer and more sustainable fiscal framework.  Resolute implementation of the new law is needed, as well as ongoing measures to enhance tax administration and reduce tax evasion.  These reforms are crucial to preserve macroeconomic and external stability, place public finances on a sounder foundation and lessen risks to debt sustainability.

Jordan’s monetary policy stance is appropriate, and the authorities should remain ready to adjust interest rates as needed to continue to maintain an adequate reserve buffer.  Banks remain sound and well-capitalized, and steps taken to improve financial sector oversight and supervision are welcome.

The enactment of long needed growth-enhancing reforms is encouraging, including the secured-transactions law, the bankruptcy law, and the business-inspections law.  Together with reforms to promote labor-market flexibility, particularly for the youth and women, and publication of a financial-inclusion action plan along with measures to support credit to SMEs, much has been done to set the stage for high-quality, inclusive growth.  These efforts should continue, including measures to improve labor market conditions and strengthen the social safety net. Steadfast implementation of these reforms will be vital.

Finally, priority should be given to measures to reduce business costs and boost employment.  The authorities’ roadmap to restructure the energy company to reduce high electricity costs for businesses is welcome.  Measures under the plan—including elimination of large cross subsidies and implementation of the new tariff-adjustment mechanism—should be implemented as swiftly as possible, and complemented by a well-targeted social protection scheme to safeguard low-income and vulnerable households.  (IMF 06.05)

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11.4  IRAQ:  IMF Staff Completes 2019 Article IV Mission on Iraq

An International Monetary Fund (IMF) team visited Amman from 26 April to 2 May to hold discussions with the Iraqi authorities in the context of the 2019 Article IV Consultation.  At the end of the visit, the IMF made the following statement:

“The end of the war with the Islamic State and a rebound in oil prices provide an opportunity to rebuild the country and address long-standing socio-economic needs.  However, the challenges to achieving these objectives are formidable.  The economic recovery has been sluggish, post-war reconstruction is limited, and large current spending increases risk placing the public finances and central bank reserves on an unsustainable path.  Moreover, combatting corruption is critical to promote the effectiveness of public institutions and to support private-sector investment and job creation.

“Near-term vulnerabilities subsided in 2018, with the budget in surplus and a build-up in central bank reserves.  Non-oil growth is expected to increase to 5.4% in 2019 on the back of higher investment spending.  However, fiscal deficits are projected to rise over the medium term, requiring financing that may crowd out the private sector or erode central bank reserves.  In these circumstances, it would be hard to sustain capital spending, and growth would slow markedly.

“Policy changes and structural reforms – including to improve governance – are therefore essential to maintain medium-term sustainability and lay the foundations for inclusive growth.

“Fiscal policy should aim to scale up public investment gradually while building fiscal buffers.  To make space for this, staff recommends budgetary savings of around 9% of GDP over the medium term through tight control of current spending, particularly public-sector wages, and phased measures to boost non-oil revenue.  Setting ceilings on current expenditure in the 2020 budget onwards would strengthen the fiscal framework’s capacity to support higher capital spending and to adapt to oil price shocks.  Key reforms should include:

Containing public-sector wages. Spending pressures could be dampened in the short run through compensation measures such as capping allowances, bonuses and other non‑base wage payments, and by not fully replacing retirees. Structural measures will be required over the medium term, based on a functional workforce review as well as deeper civil service reform once new HR management and information systems are in place.

Electricity reforms are key to addressing the weak quality of service and reducing the high budgetary costs, due to modest tariff rates, chronic non-payment of electricity bills, poor maintenance and over-reliance on expensive generation sources, coupled with losses throughout the generation, transmission, and distribution process. It would be important to ensure that the poor and most vulnerable are protected throughout this reform.

Bolstering public financial management. Enhancing the legal framework and improving commitment and other control systems are key to minimizing misuse of public resources and restoring budgetary discipline.

“In the financial sector, a robust plan to restructure the large public banks coupled with enhanced supervision is essential to secure financial stability and will help promote financial development and inclusion.  Strengthening anti-money laundering and countering financing terrorism (AML/CFT) controls and oversight will help prevent Iraq’s financial sector from being misused for the laundering of criminal proceeds and terrorist financing.

“Addressing governance weaknesses and corruption vulnerabilities is critical to achieving the described policy objectives.  As a first step, the authorities need to develop a comprehensive understanding of the corruption risks present in Iraq and then implement policies to tackle these risks in a coherent and coordinated manner.  The legislative framework needs to be strengthened to effectively prevent officials from abusing their position or misusing state resources.  To this end, laws strengthening the asset declaration regime and criminalizing illicit gains should be rapidly adopted.  Furthermore, the independence and integrity of bodies involved in combatting corruption should be ensured and the AML/CFT regime should be mobilized to support anti-corruption efforts.

“The team will prepare a report that, subject to management approval, is tentatively scheduled to be considered by the IMF’s Executive Board in July 2019.  (IMF 07.05)

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11.5  KUWAIT:  Moody’s Affirms Kuwait’s Aa2 Rating; Maintains Stable Outlook

On 2 May 2019, Moody’s Investors Service affirmed the Government of Kuwait’s long-term issuer ratings at Aa2, the outlook is stable.  The rating affirmation is underpinned by Moody’s view that Kuwait’s exceptionally large wealth, with sovereign wealth fund assets estimated at around 370% of GDP and vast hydrocarbon reserves, will continue to support the sovereign’s fiscal strength and creditworthiness.

The stable outlook reflects Moody’s expectation that Kuwait’s extremely high fiscal strength will be largely preserved through oil price fluctuations and long-term demographic pressure. In particular, it assumes that the authorities overcome the current legislative hurdles and pass a debt law that allows the government to finance its deficit without depleting its most liquid assets.

Kuwait’s long-term and short-term foreign-currency bond and deposit ceilings remain unchanged at Aa2 and Prime-1, respectively. Kuwait’s long-term local-currency bond and deposit ceilings also remains unchanged at Aa2.

Ratings Rationale

Rationale for the Affirmation of the Rating At Aa2:  Exceptionally Large Wealth In Sovereign Wealth Fund, Hydrocarbon Reserves

The decision to affirm Kuwait’s Aa2 rating is underpinned by the government’s and country’s exceptionally large wealth, which Moody’s expects to be maintained despite very slow fiscal and economic reforms and persistent large budget deficits.

Kuwait’s fiscal position is one of the strongest among the sovereigns rated by Moody’s.  Moody’s estimates that the sovereign wealth fund (SWF) assets amounted to around 370% of GDP at the end of fiscal year 2018/19, 27 times the government’s debt.  Although the government will likely continue to run large fiscal deficits, under Moody’s assumptions that oil prices fluctuate between $50-70/barrel in the medium term and that these deficits will lead to a gradual increase in the debt burden, it will be from a very low base.  While, in the near term at least, the deficits will be financed by drawdowns from the General Reserve Fund (GRF), the country will continue to accumulate wealth in the Future Generations Fund (FGF) which forms the majority of the country’s SWF assets, reflected in broadly stable SWF assets relative to GDP at extremely high levels.

Moody’s estimates that the budget deficit (post-FGF transfers, excluding investment income) narrowed to 5.2% of GDP in the fiscal year 2018/19 due to windfall oil revenues from higher than budgeted oil prices, which averaged $71/barrel in 2018. In the last two years, higher oil prices coincided with diminished reform momentum.  Moody’s expects only a few fiscal consolidation measures to be implemented in the next few years, possibly an introduction of Value-Added Tax as implemented in the Government of United Arab Emirates (Aa2 stable), Government of Saudi Arabia (A1 stable) and Government of Bahrain (B2 stable), and higher excise taxes on tobacco and sugary drinks.  More significant measures including steps to contain the increase in the public sector wage bill (payrolls account for around 41% of government expenditure) are unlikely and not part of Moody’s baseline assumptions. Instead, the track-record of the last two years indicates that, unless significantly lower oil prices raise pressure on parliament to agree to meaningful reforms, progress will be very slow, materially slower than elsewhere in the region.  As a result, the budget deficit will widen again with lower oil prices on average this year.  Moody’s expects the deficits to average around 9% of GDP in the next few years.

At the moment, the deficits are fully financed through drawdowns of the GRF, which Moody’s estimates has been reduced to 54% of GDP as of March 2019, compared to 70% of GDP in March 2018, with the liquid portion of the GRF comprising around two-thirds of total assets.  Without legal authorization to issue new debt, the deficits will continue to be financed from the GRF which will shrink further.  Moody’s expects that the fund will decline to 26% of GDP by the end of fiscal year 2020/21.

However, Moody’s assumes that, as the GRF’s size diminishes rapidly, Kuwait will pass a debt law allowing the issuance of new debt.  As a result, Moody’s projects gross government debt to rise 38.8% of GDP by fiscal year 2023/24, from 13.8% at the end of fiscal year 2018/19.  Still, at these levels, Kuwait’s government debt burden would remain below the Aa-rated median, and its debt affordability would remain significantly stronger than that of most Aa-rated peers.

Moreover, while the GRF is eroded and gross government debt will rise if legislation is passed, Kuwait continues to accumulate 10% of its government revenue and all investment income in the FGF, whose assets are estimated at $442 billion, maintaining the overall SWF assets broadly stable in relation to GDP.

Additionally, Kuwait’s low external breakeven, which Moody’s estimates at around $51/barrel, will ensure that the country continues to accrue wealth through sustained current account surpluses under our $50-70/barrel oil price range assumption.  The country’s hydrocarbon reserves are plentiful and at the current rate of production, proven reserves of oil and gas would last around 90 years, providing a significant source of wealth for the foreseeable future.

Rationale for the Stable Outlook

The stable outlook reflects Moody’s expectation that Kuwait’s extremely high fiscal strength will be largely preserved through most plausible scenarios.  This wealth provides ample capacity and time to absorb potential shocks, in the short to medium term related to oil price fluctuations and, in the longer term, related to demographic pressure on demand for employment.

In particular, Moody’s assumes that the Kuwaiti authorities will overcome the hurdles to passing legislation from a very fractious parliament and be able to agree on a debt law in the next couple of years and before depletion of the liquid assets in the GRF and/or mobilize more of their vast resources in order to finance the fiscal deficits.

For the foreseeable future, Kuwait’s fiscal exposure to lower oil prices will remain very high.  However, the net credit implications of a potential fall in oil prices will be mitigated by the country’s large wealth which Moody’s expects to be made accessible in case of need and sizeable current account surpluses.  While oil production is currently constrained by the OPEC production cuts, Moody’s expects that output will increase slightly towards current production capacity of 3.15 million barrels per day (mbpd) once these are lifted.  A resumption of Neutral Zone production could add an additional 0.25 mbpd in capacity, although the sovereignty issues with Saudi Arabia that halted production remain unresolved.  Together with oil prices in a $50-70/barrel range, this will maintain very large current account surpluses at around 8% of GDP.

Longer term, Kuwait faces a large and sustained increase in demand for jobs from its young and fast-growing population, which under a system that favors entry into the public sector will inflate the government’s wage bill.  Moody’s estimates that the demographic pressure will be intense, only somewhat less intense than for Saudi Arabia and Government of Oman (Ba1 negative) in the region.  However, the government’s much stronger fiscal position gives Kuwait more time to implement reforms that very gradually rebalance the incentives between public and private sector employment.

What Could Move the Rating Up/Down

Over the long term, positive rating pressures would arise from measures that reduce the direct exposure of the government’s finances to oil price declines.  Such measures would involve a diversification of government revenue and a reduction and improvement in the flexibility of government expenditure.

Conversely, signs that the ongoing political gridlock is not resolved, and in particular that the sources of financing of the budget deficits become increasingly uncertain as the GRF shrinks, would likely lead to a negative rating action.  More generally, evidence of a weakening in Kuwait’s institutional strength so that the government’s fiscal strength would become less resilient to a fall in oil prices would put negative pressure on the rating.  Finally, a sustained drop in oil prices below Moody’s medium-term forecast range and/or a significant fall in oil production levels would also be credit negative.  (Moody’s 02.05)

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11.6  KUWAIT:  Kuwait Pharmaceuticals Market Analysis & Outlook 2012-2022

The “Kuwait Pharmaceuticals Market Outlook to 2022 – By Type of Drugs; By Channel of Distribution and By Therapeutic Class” report has been added to‘s offering.

The Kuwait Pharmaceuticals market is in the growing stage and is primarily driven by government’s healthcare initiatives.  A booming oil and gas industry and limited diversification into other sectors have significantly constrained the manufacturing activities in Kuwait.  As a result, domestic production of medicines in the country continued to be low and majority of the pharmaceuticals consumed were imported in this period, including branded and generic drugs.

Future Outlook

The future outlook of the industry is positive and the industry growth will be led by the widespread prevalence of chronic diseases, growing population and the high per capita income of the people in the country.  The limited indigenous manufacturing capabilities also present a number of growth opportunities for multinational and regional pharmaceutical companies to enter the Kuwait pharmaceuticals industry.

The large investments which have been undertaken for development of the healthcare sector through the public-private partnership (PPP) route is expected to grow the pharmaceuticals market too in the coming years.  The availability of generic products is anticipated to increase as private health insurance schemes are encouraging prescribers to adopt more rational prescription patterns.  As Kuwait accelerates its healthcare development strategy as part of the Kuwait Vision 2035, both Kuwait’s pharmaceutical and healthcare markets have been noted as high-priority sectors, with many projects set to be carried out under public-private partnerships (PPPs).

Furthermore, chronic diseases such as cardiovascular, diabetes, obesity, cancer and respiratory conditions are rising dramatically in Kuwait primarily due to less physical activity and dietary habits such as increased fast food consumption linked to high-income generation.  Thus the market shares of anti-infective, gastrointestinal, cardiovascular and musculoskeletal are expected to increase in the Kuwait pharmaceuticals market by 2022.

Market Segmentation

In 2017, patented drugs dominated the Pharmaceuticals market of Kuwait as compared to generic drugs in terms of revenue.  This is because branded and patented drugs are more popular in the country due to the relative wealth of the population and expatriate workers.  The high price of patented drugs when compared to generic drugs has also resulted in the higher market share of patented drugs in terms of revenue share in the market.  Prescription drugs sales had a major revenue share in Kuwait Pharmaceuticals Market while OTC drugs had a smaller share.

The demand for prescription drugs is driven by the increased number of patients at hospitals and clinics who mainly prefer prescribed drugs.  The growth in spending can be attributed to new brands, high prices for existing drugs and fewer patent expirations.  In 2017, Institutional sales have accounted for a much larger revenue share as compared to retail sales.

Analgesics and Anti Inflammatory drugs had the largest market share in the Pharmaceuticals market in Kuwait in terms of revenue.  This is because of the wide range of applications such as treatment of fever, headaches, flu, colds, musculoskeletal injuries and disorders, arthritis, toothaches, and menstrual cramps increases the revenue share of this segment.  This was followed by respiratory, cardiovascular, gastrointestinal, anti infectives, CNS and musculoskeletal.

Competitive Landscape

The Kuwait Pharmaceuticals market is highly fragmented.  It is dominated by foreign corporations in Kuwait and the only indigenous manufacturer of Kuwait operating in the pharmaceuticals market is Kuwait Saudi Pharmaceutical Industries Company (KSPICO).

The regional/local players of the Middle East operating in Kuwait comprised of companies such as Julpar, Spimaco, Tabuk, Hikma Pharmaceuticals etc.  In 2017, Pfizer had the highest market share in the Pharmaceuticals market in Kuwait followed by AstraZeneca, Abbvie, Novartis, GSK, Roche, MSD, Sanofi, Johnson & Johnson, Abbott, Julphar, Tabuk and Hikma Pharmaceuticals on the basis of revenue.  (R&M 02.05)

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11.7  BAHRAIN:  IMF Executive Board Concludes 2019 Article IV Consultations

On 29 April 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Kingdom of Bahrain.

Lower oil prices since 2014 had widened fiscal and external imbalances and intensified macroeconomic vulnerabilities.  The authorities responded with the announcement of the Fiscal Balance Program (FBP) in late 2018, which provided a roadmap for addressing Bahrain’s fiscal challenges over the medium term.  The announcement, and the accompanying $10 billion in regional support, have led to a decline in borrowing costs.  The authorities have begun implementing elements of the FBP, including the introduction of a value-added tax, the voluntary retirement scheme for public-sector employees and various efficiency measures to reduce expenditure.

Growth decelerated to 1.8% in 2018, due to the decline in oil production and slowdowns in retail, hospitality, and financial services sectors.  The overall deficit improved to 11.7% of GDP, though public debt continued to increase, to 93% of GDP by end 2018, with overall financing needs over 30% of GDP.  The current account deficit widened to 5.8%, while reserves remained low, covering only about one month of prospective non-oil imports at end 2018.  The banking system remains stable with large capital buffers and central bank’s continued efforts at supervisory and regulatory vigilance.  Under baseline policies, fiscal and external deficits are projected to continue over the medium term, with public debt approaching 114% of GDP, and reserves are expected to remain low.  Delays in fiscal adjustment, a sharp tightening of global financing conditions, and lower oil prices present downside risks to the baseline.

Executive Board Assessment

Executive Directors commended the authorities for their recent efforts to address Bahrain’s fiscal and external vulnerabilities and acknowledged the medium-term budget support received from regional partners to assist in this adjustment.  Nevertheless, macroeconomic challenges persist and risks, including from potential tightening in global financial conditions and delays in fiscal adjustment, remain tilted to the downside.  Directors called for additional fiscal and structural reform efforts to strengthen the fiscal and external positions and to promote inclusive and sustainable growth, while preserving financial stability.

Directors welcomed the authorities’ Fiscal Balance Program that aims to reduce the fiscal deficit by increasing non-oil revenue and improving spending efficiency.  They commended the introduction of the value-added tax (VAT) and welcomed the Voluntary Retirement Scheme as a tool to help contain the wage bill, but noted the need to monitor possible contingent liabilities.  To further ensure fiscal and external sustainability, Directors saw merit in additional fiscal consolidation measures, including introducing direct taxes, reducing VAT exemptions and phasing out untargeted subsidies, while protecting the vulnerable.  They welcomed the ongoing efforts to strengthen debt management and institutionalize the fiscal framework and encouraged the authorities to promote greater data transparency to enhance the credibility of their fiscal reform plans.

Directors agreed that the exchange rate peg has served Bahrain well and has delivered low and stable inflation.  They emphasized that gradually unwinding central bank lending to the government and continued fiscal adjustment will be instrumental in supporting the peg.  Directors underscored the need to rebuild international reserves amid external sector pressure.

Directors welcomed continued progress in implementing the 2017 FSAP recommendations.  They commended recent measures to enhance the supervision and regulation of banks, ongoing efforts to develop a macro-prudential framework and Bahrain’s leadership in promoting fintech.  Directors encouraged the authorities to monitor banks’ profitability and exposure to the real estate sector and highlighted the need for a clearly-defined emergency liquidity assistance framework.  They also emphasized the need to address the remaining gaps in the AML/CFT framework.

Directors encouraged further structural reforms to support diversification and private sector-led inclusive growth.  They welcomed the announced plans to increase female labor participation, ease the cost of doing business, and enhance SMEs’ contribution to the economy.  Directors also called for a more active privatization plan and overarching public-private partnership legislation to further encourage private investment.  They emphasized that targeted education and labor market reforms will be important to promote opportunities and improve productivity.  (IMF 07.05)

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11.8  UAE:  IMF Staff Concludes Visit to the United Arab Emirates

An International Monetary Fund (IMF) mission visited the United Arab Emirates (UAE) from 23 April to 1 May 2019, to update itself on recent developments and the economic outlook and to discuss macroeconomic policies.  Upon conclusion of the visit, the IMF issued the following statement:

“The UAE economy continued to adjust last year.  Corporate consolidation and structural reforms, including in large government-related entities (GREs) and commercial banks, as well as the fiscal position, weighed on aggregate demand.  Given the dollar peg, the dirham appreciated against currencies of major trading partners and interest rates rose in general.  All this occurred against the backdrop of weaker external demand and intensified geopolitical tensions.  Non-oil growth slowed to 1.3% in 2018, while the overall economy grew at 1.7%, benefiting from increased oil production.

“Some green shoots are now emerging, with domestic credit growth, employment, and tourist arrivals showing improvement recently, though the real estate sector continues to face an overhang of supply.  The economy may now be at a turning point, supported by public spending—a substantial amount of Expo 2020 investment should be completed by end-year, some GREs are embarking on new investment plans, and implementation of emirate-level stimulus is expected to accelerate—as well as by external tailwinds (higher oil prices and the pause in Fed tightening).  Against this background, growth could exceed 2% this year and approach 3% in 2020-21.

“The UAE economy has gone a long way toward diversification, but government spending and some sectors are still affected by oil price fluctuations.  Sustaining strong growth after Expo 2020 and the fiscal stimulus will require capitalizing on new growth drivers that are decoupled from oil prices, and this in turn will require the authorities to build on their ongoing structural reform momentum.  Some key areas of focus include the following:

Reducing the footprint of the public sector. Leveling the playing field between GREs and private-sector participants will be key to boosting productivity growth and fostering diversification.  Strengthening the enabling environment for SMEs and building on recent reforms to encourage foreign direct investment (FDI) are additional priorities.

Modernizing the labor market. Achieving sustainable, private-sector-led growth, while meeting the authorities’ objective of employing more nationals in the private sector, will require a more competitive and less fragmented labor market to ensure that talent is directed to its most productive uses.  At the same time, the authorities should build on their existing efforts to ensure that the UAE continues to attract and retain expatriate talent.

Strengthening the financial markets. The recent adoption of the federal debt law is welcome. Issuance of local-currency government securities should proceed in order to establish a benchmark yield curve.  The central bank law was another major accomplishment, and the Central Bank of the UAE (CBUAE) should be commended for its efforts to strengthen the financial system, including by moving toward Basel III and adopting International Financial Reporting Standards (IFRS) 9.

Fostering policy coordination and transparency. Improving information sharing among federal and emirate-level authorities and coordinating their decisions will lead to improved policy outcomes.  A more explicit medium-term fiscal framework, involving rules guiding the balance between economic stabilization and saving for future generations, would also be beneficial.  Sharing additional information on policymaking with the public could boost consumer and business confidence and help UAE fulfill its aspirations to be one of the world’s leading nations.

The mission met H.E. Mubarak Al Mansoori, Governor of the Central Bank of the UAE; H.E. Younis Haji Al-Khoori, Undersecretary of the Ministry of Finance; H.E. Mohamed Al Hameli, Acting Undersecretary of the Abu Dhabi Department of Finance; H.E. Khalid Al Bustani, Director General of the Federal Tax Authority; and H.E. Huda Al Hashimi, Assistant to the Director General for Strategy and Innovation at the Prime Minister’s Office; along with other senior officials and private sector representatives.  (IMF 02.05)

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11.9  UAE:  The Rise of the Emirati Defense Industry

Jean-Loup Samaan posted in Sada on 14 May that the UAE’s focus on developing a local defense industry highlights its goals of becoming a global arms supplier for niche markets.

During Abu Dhabi’s International Defense Exhibition (IDEX) on 17 February, the Emirati company Calidus signed a memorandum of understanding with Saudi-based aerospace and defense company GDC Middle East to export its new B-250 light attack aircraft to other countries in the region.  The project signaled the ostentatious resolve of the United Arab Emirates (UAE) and Saudi Arabia to strengthen their domestic defense industries.  Foreign arms sales to Gulf countries have traditionally come with requirements, known as “offset clauses,” to ensure that the contractors support the local economy through joint ventures with domestic companies, investments, and employment of the local labor force.  Yet to date, their economic output has been modest.  Gulf defense industries are still barely on the radar of global arms markets, a strikingly low visibility compared to the size of the GCC military budgets.

Over the past couple of years, the UAE and Saudi Arabia have ramped up efforts to increase indigenous military capabilities.  Two regional factors drive this new impetus.  First, the 2014 fall of oil prices revived government efforts to reform national economies and diversify their sources of income.  In this context, building an indigenous military industry not only creates jobs but can also support long-term economic development, for instance in the field of education and research.  This is why strengthening local defense companies features prominently in documents such as Saudi Vision 2030 or Abu Dhabi Economic Vision 2030.  Second, sustaining a domestic defense industrial base enables small states to build their own strategic autonomy, as it decreases their reliance on foreign arms.

Against that backdrop, the UAE – and to a lesser extent Saudi Arabia – provides a useful case study as the GCC country farthest along in developing a domestic defense industry.  In the last decade, Abu Dhabi launched major reforms to reorganize the Emirati defense ecosystem.  In 2014, the government integrated sixteen small firms into the Emirates Defense Industries Company (EDIC), the largest arms manufacturing and services provider in the country. Along with the EDIC, the Tawazun Economic Council (TEC) – formerly known as the UAE Offset Program Bureau – plays a key role in financing local industrial initiatives.  In February, it announced the creation of a Defense and Security Development Fund, which has a starting capital of $680 million.

It is through the investments of the TEC that the most significant successes of the Emirati defense industry were achieved, such as the formation of the Advanced Military Maintenance Repair and Overhaul Center (AMMROC).  A joint venture between the EDIC, Lockheed Martin and Sikorsky Aerospace, AMMROC focused initially on military maintenance and repair services, primarily for the Emirates Air Force.  Since then, AMMROC has steadily elevated its ambitions.  In January, it showcased a new weaponized version of the Sikorsky UH-60 Black Hawk helicopter.  At the technical level, this modified helicopter is not unique, and other countries operate similar versions, but AMMROC used the event to underline both its growing technical capacity and its key role in supporting the localization of defense industries.

The trajectory of AMMROC is indicative of a pattern among domestic companies.  Abu Dhabi Ship Building (ADSB), created in 1996, likewise initially focused on naval repairs and refits.  Since then, the company broadened its expertise in shipbuilding.  In the mid-2000s, the UAE Navy chose ADSB to build six Baynunah-class corvettes.  While not all of the construction was local, as the first ship was developed in France by Constructions Mécaniques de Normandie, the other five were then manufactured inside the UAE.  In recent years, ADSB has even exported landing craft to Oman, Bahrain and Kuwait.

For the Emirati government, the success of companies such as ADSB or AMMROC is not only a way to build indigenous platforms but to compete regionally on major bids.  Beyond the commercial prospects, this trend shows the extent to which the defense industry has become an instrument of the UAE foreign policy.  The February announcement at IDEX regarding Saudi–Emirati projects helps institutionalize their official bilateral alliance announced on 5 December 2017 on the eve of the annual GCC summit.  Similarly, in 2017 the UAE announced a joint project with Russia to build a fighter jet.  The decision signaled Abu Dhabi’s ambition to develop a military platform that is both technologically complex and a symbol of military power.  It also demonstrated improved relations with Russia, which until recently was only modestly involved in Gulf arms markets.

These achievements, however, remain limited in scope.  The Emirates’ overarching goal is not to replace Western major companies, which will likely remain the primary source of Gulf military purchases for the near future through either arms exports or joint ventures.  For the UAE, the objective is to develop specific skills that would put the local companies on the global market for niche commodities such as naval ships, armored vehicles, or unmanned aerial vehicles (UAVs) – another sector in which the UAE has demonstrated its industrial ambitions.  One relevant comparison is Turkey’s defense industry: following the 1974 arms embargo, Ankara invested in building a local defense industry to make its national armed forces self-sufficient.  It achieved this partly through research and development, and partly with niche strategies.

The extent to which other GCC defense industries can follow the UAE’s example remains unclear.  The UAE is ahead of other GCC countries in building a local defense industrial base. Saudi Arabia, the biggest consumer of military services and products in the region, has embarked on a similar path.  Saudi Vision 2030 sets an ambitious goal to “localize 50 percent of military and security spending” by 2030, but reaching this milestone on time might prove challenging for Saudi Arabia’s existing industrial base.  Other GCC countries such as Kuwait, Oman and Bahrain have not prioritized building a defense industrial base.  While Qatar invested massively in its military apparatus in past few years, the investment has not significantly localized its defense industry.  It appears the rise of the Emirati defense industry might end up an isolated phenomenon.

Jean-Loup Samaan is Associate Professor in Strategic Studies attached to the UAE National Defense College.  (Sada 14.05)

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11.10  UAE:  Used Car & Auto Classified Market Outlook to 2022

The “UAE Used Car and Auto Classified Market Outlook to 2022” report has been added to‘s offering.

The market for used cars in UAE is in the maturity stage and has grown constantly in the last few years.  The market size by transaction value has registered a single digit growth in the last 5 year with an increase in the volume and average price of the pre-owned cars and reduction in average car ownership period.

The market has slowed down after 2015 as the fall in oil prices had an adverse effect on the overall economy of UAE resulting in decrease in demand for cars. Improving quality of used cars, large number of expatriates, demand for new and luxury cars along with improving economic condition are some key growth drivers in the market.  There are a number of challenges that exist in the market that needs to be addressed including price discrepancy, lack of standardization and others.  The passion for cars in the country is one of the biggest reasons that more dealers are entering the market.  Manufactured certified cars are gaining foothold in the market as they provide reliable quality of cars.

Future Outlook

The market size by transaction value is expected to grow at a faster pace at double digit growth rate as compared to volume growth in next 5 years.  Rise in demand for high value cars or super cars is the key reason for higher rise in revenue as compared to volume.  Revival of the country’s economy, improving quality of cars, increasing competition and declining age of used cars are some of the factors which will help the market to grow in the future both in terms of value and volume.

A number of operational and marketing changes are expected to happen in the market as the companies are becoming more customers centric.  The domestic market sales are expected to grow at a high rate as compared to export sales between 2017 and 2022.  Sharjah is expected to register highest growth in volume sales followed by Dubai and Abu Dhabi, the demand in other emirates is expected remain constant.

Market Segmentation

Majority of the pre-owned cars are exported outside UAE to nearby GCC and African nations.  Domestically, B2B and B2C dealers contributed majority to the sales channel apart from sales via classified and C2C word of mouth channel.

Out of pre-owned car sales volume, Crossover contributed to the majority sales followed by luxury SUV, full size sedan and premium sedans.  SUV are one of the most common types of cars that are sold in the market.  Luxury SUV, Full Size Sedan, Premium Sedan, Luxury Sedan, Full Size SUV, Convertible, Super Car, Coupe, Entry Level Sedan, HatchBack, Luxury Hatchback, Pick-Up Trucks are some other popular segments.

The Japanese manufactured cars enjoy the market leadership in used car sales volume followed by German manufactured cars and American manufactured cars.  Demand for cars from other parts of the world is much lower.

Competition Scenario

The competition in the market is highly fragmented as there are many players in the market.  Most of the big dealerships use both classified portals and Word of mouth channels for promotion.  There are more than 400 dealerships in the market.  Al-Futtaim, Al- Naboodah, Gargash motors and Elite cars are some of the biggest players in the market.

Classified portals have grown in number and currently there are more than 40 classified portals in the market.  Dubizzle, Carmudi and Yalla motors are some of the biggest classified players in the market.  Sellanycar and Al Futtaim are the market leaders with majority of the market share in the region.

Most car dealership exist in clusters, albeit the big players in the market have expanded outside their clusters in order to reach out to the customers easily.  The companies compete with each other on the basis of prices; value added service, brand reputation and others.  Many companies are trying to attract the customers through sales promotion offering discounts, inspection reports and value added services.  The car dealers generate revenue by buying a car at low price, refurbishing the car and selling the car at markup prices.  The dealerships are expanding their retail space as the aesthetics and decorum of the retail outlet are few parameters which the dealerships are expected to use to differentiate themselves from the competitors.  ( 01.05)

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11.11  SAUDI ARABIA:  Fitch Affirms Saudi Arabia at ‘A+’; Outlook Stable

On 30 April, Fitch Ratings affirmed Saudi Arabia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘A+’ with a Stable Outlook.

Key Rating Drivers

Saudi Arabia’s ratings are supported by strong fiscal and external balance sheets, including exceptionally high international reserves, low government debt and significant government assets.  These strengths are balanced by oil dependence, weak World Bank governance indicators and high geopolitical risks.  The balance sheet strengths are gradually eroding and our estimate for the fiscal break-even Brent price, averaging $87/bbl in 2018-2020, is above our oil price forecasts and higher than for many regional peers.

Saudi Arabia’s budget deficit narrowed to 5.9% of GDP in 2018 from 9.2% in 2017, but was still much higher than the historical ‘A’ median of 2% of GDP.  Strong growth in oil revenue (up 40%) and non-oil revenue (up 15%) was partly offset by a sharp jump in expenditure (up 16%).  Spending was 10% over the government’s initial budget, a degree of over-spending lower than historically but above 2016-2017 levels.  The increase in non-oil revenue overwhelmingly reflected structural improvements such as the introduction of VAT and hikes to domestic petrol prices and electricity tariffs, but much of the increase in current spending reflects social considerations (such as an additional allowance to government employees) and could prove difficult to roll back.

Fitch’s forecast of lower oil prices (Brent to average $65/bbl in 2019 and $62.5/bbl in 2020) together with the underlying loosening of fiscal policy in 2018 will create headwinds for fiscal consolidation and the government’s goal of balancing the budget by 2023, as set out in the revised Fiscal Balance Program (FBP).  So far, better-than-expected oil revenue has been the primary factor allowing the government to meet and exceed the FBP targets for the deficit, debt and government reserve levels even as the expenditure trajectory has been revised upwards.  In a less supportive oil price environment, sticking to these targets will be tougher, although the government stresses its intention to do so.

A larger-than-usual $33 billion (4.2% of GDP) dividend from Saudi Aramco in Q1/19 will support oil revenue this year even at lower average oil prices, resulting in further but temporary narrowing of the fiscal deficit to 5.4% of GDP (SAR158 billion) in our forecast.  We see the deficit widening to 6.6% of GDP (SAR198 billion) in 2020 as oil prices weaken further, and as Aramco’s need to use part of its free cash flow for the $69 billion acquisition of a stake in Saudi Basic Industries Corporation (SABIC) may limit further upside for dividends to the government.  We estimate that a $10/bbl increase in oil prices could improve the fiscal balance by over 3% of GDP, all else being equal, although in practice we expect this would be partly offset by higher spending.

The government’s balance sheet is forecast to deteriorate amid continued deficits.  We forecast general government debt will be 22% of GDP in 2020 from 16% in 2018 and 14% in 2017, when we last downgraded Saudi Arabia’s ratings.  Although this will still be well below the ‘A’ category median (historically about 42% of GDP), we view Saudi Arabia’s debt tolerance as lower than that of most rating peers due to weak structural features, including the undiversified nature of the economy.  We also assume SAR145 billion of deposit drawdowns in 2019-2020 (more than the SAR110 billion specified in the FBP), bringing general government debt net of deposits at SAMA to about 8% of GDP, from -3% of GDP in 2018 and -13% in 2017.

In addition to a worsening of the central government’s net asset position, there is a build-up of leverage in the broader public sector, albeit this is from a relatively low starting point and many state-owned entities remain unlevered compared with international peers.  We estimate the level of state-owned and government-related enterprise debt (including banks) in Saudi Arabia at about 20% of GDP in 2018.  The Public Investment Fund (PIF) signed an $11 billion loan facility in September 2018, the first time it has borrowed at the parent level, and we expect further PIF borrowing to support domestic projects and international investments.  Saudi Aramco raised $12 billion through the Eurobond market in April 2019 and will likely borrow more in order to help fund its acquisition of a stake in SABIC from the PIF.

Saudi Arabia’s estimated sovereign net foreign asset (SNFA) position has also deteriorated, but will remain one of the highest among Fitch-rated sovereigns.  SNFA fell to 74% of GDP in 2018 from 87% of GDP in 2017 mainly on the back of government external debt issuance, and is expected to decline to 70% of GDP by 2020.  Saudi Arabia’s SNFA position mainly reflects exceptionally large SAMA reserves of 64% of GDP (or 24 months of current external payments).

The current account surplus widened to 9.2% of GDP in 2018, from 1.5% of GDP in 2017 and was well above the historical ‘A’ median of about 1% of GDP.  Nevertheless, SAMA reserves, including gold, were largely flat amid continued acquisition of assets abroad by residents.  According to SAMA, about 60%-70% of financial outflows in 2017 and 2018 could be attributed to public sector entities.  We expect SAMA reserves to decline slightly but remain at a high level in 2019-2020, amid a narrowing of the current account surplus and continued resident investment abroad, mainly by the PIF.  The fall in reserves will be mitigated by external borrowing, portfolio inflows into the equity market related to Saudi Arabia’s inclusion in major indices and a gradual pick-up in inward FDI from the historically very low level of 0.4% of GDP in 2018.

Real GDP growth is likely to remain well below the historical ‘A’ median of about 4%.  The economy expanded by 2.2% in 2018 after a 0.7% contraction in 2017 (reflecting oil production restraint and relatively tight fiscal policy).  Stronger 2018 performance was driven both by a recovery in the oil sector, with average crude production up 3.6% in 2018, and a pick-up in non-oil activity to 2.1%.  We expect oil output to remain constrained by the OPEC agreement, although the launch of the Jazan refinery later in 2019 will allow for higher refining volumes.  The fiscal policy stance overall supports an acceleration of non-oil growth to 2.5% in 2019-2020, despite the contractionary effect of an ongoing government program of increasing fees on expatriates and their dependents (this has contributed to a fall in the number of non-Saudis employed by 1.4 million or 13% since end-2016).  Structural reforms under the Vision 2030 program could boost growth over the medium term.

Most structural features are weaker than the ‘A’ category median, including World Bank indicators of Governance and Doing Business.  Hydrocarbons accounted for 67% of fiscal revenue and external receipts and 34% of GDP in 2018. In our view, political risks are high compared with peers and historical norms, due to Saudi Arabia’s prominent role in a volatile region, its recently assertive stance in foreign affairs, and the rapid pace of political and social change domestically.  At 12.8% in 2018, the Saudi unemployment remains relatively high, in our view, creating economic and social pressure.  The banking sector is well capitalized and well regulated, although the ratio of nonperforming loans to total gross loans has risen from low levels in an environment of slow private credit growth.

Rating Sensitivities

The following factors could, individually or collectively, trigger positive rating action:

-Fiscal consolidation or an extended rise in oil revenues that generate a sustainable fiscal surplus and reverse the decline in the government’s net creditor position.

The following factors could, individually or collectively, trigger negative rating action:

-Failure to reduce the budget deficit and halt the deterioration of the public sector balance sheet.

-Spill-over from regional conflicts or a domestic political shock that threatens stability or affects key economic policies or activities.

Key Assumptions

Fitch assumes that Brent crude oil prices will average $65/bbl in 2019 and $62.5/bbl in 2020, in line with its Global Economic Outlook – March 2019.  (Fitch 30.04)

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11.12  SAUDI ARABIA:  Credit Profile Supported By Very High Fiscal & Economic Strength

Saudi Arabia’s (A1 stable) credit strengths include a robust but deteriorating fiscal position, substantial external liquidity buffers, large oil reserves with low extraction costs, and prudent financial system regulation, Moody’s Investors Service said in a report on 1 May.

The government’s balance sheet remains strong, despite the decline in oil prices since 2014 that has pushed the budget balance into deficit, eroded government reserves and prompted large issuance of debt.

“Saudi Arabia’s credit challenges include its economic and fiscal exposures to oil price volatility, and socio-economic issues posed by strong population growth and elevated unemployment,” said Alexander Perjessy, a Moody’s Vice President – Senior Analyst and the report’s author.  “Although the government has made some progress on ambitious and comprehensive reform plans, their implementation will be challenging and their positive impact will only be felt over the longer term.”

Over the next five years, Moody’s expects that Saudi Arabia’s economy will grow at a rate of 2% – 2.5% per year.  This is markedly lower than the 4.6% growth rate recorded during 2011-16.  However, progress on the government’s plans to diversify Saudi Arabia’s economy away from oil could lift the country’s longer-term growth potential.

The country’s very high fiscal strength stems from the government’s large financial buffers, relatively low but rising debt levels, and high debt affordability.

The stable outlook on the sovereign rating reflects Moody’s view that risks to Saudi Arabia’s credit profile are broadly balanced.  Positive developments could stem from the implementation of reforms that enhance competitiveness and private-sector employment while moving the budget towards balance, independent of fluctuations in oil prices.

Pressure on the rating could stem from a material slowing or a reversal of fiscal consolidation. Increased geopolitical and domestic political risks that would jeopardize reform progress or rising evidence that reform efforts are likely to fall substantially short of meeting the government’s economic and fiscal objectives would also be negative for Saudi Arabia’s credit profile.  (Moody’s 01.05)

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11.13  SAUDI ARABIA: Saudi Arabia Takes Steps to Assure Foreign Investors

Robert Mogielnicki posted on 10 May in the Arab Gulf States Institute in Washington that the economic components of Saudi Arabia’s ambitious transformation, in which local and foreign investments play a pivotal role, ultimately hinge on the government’s ability to improve the transparency of commercial processes.

Three years after the launch of Saudi Vision 2030, global investor confidence in the country ‎remains mixed.  Google, Blackstone, HSBC and AMC Theatres are ramping up projects in ‎Saudi Arabia, but the country is grappling with historically low levels of foreign direct ‎investment.  The frenzy over a $12 billion bond sale by Saudi Aramco was tempered by the ‎subsequent news that the prices of all five slices of the bond issue dropped below their initial ‎sale prices.  Prominent businesspeople withdrew from the second Future Investment Initiative in ‎October 2018 in the aftermath of the murder of Saudi journalist Jamal Khashoggi, fearing the ‎reputational costs of conducting business inside Saudi Arabia or with its government.  Yet a ‎renewed vote of confidence in April by the chief executive of HSBC, John Flint, who said, “It’s a ‎privilege to be back in Saudi Arabia,” at a conference in Riyadh, seems to reflect diminished ‎anxieties on the part of the global business community.‎

Bond issuances and the Saudi stock exchange’s inclusion in major international indexes have ‎boosted capital inflows to Saudi Arabia.  However, many of these investments represent “hot ‎money,” or capital that moves regularly and quickly between financial markets.  Long-term ‎government initiatives intended to symbolize the country’s economic transformation – such as ‎the $200 billion privatization program and the Neom megaproject – depend on sustained ‎financing from local and international investors, and it is not clear this level of support will be ‎forthcoming.  The “build it and they will come” strategy is not sufficient to attract the sustainable, ‎long-term investments desperately needed in the kingdom.  Such an approach did not produce ‎commercially viable economic city megaprojects in the early 2000s, which the Vision 2030 ‎program aims to address.‎

Rather, the economic components of Saudi Arabia’s ambitious transformation, in which local ‎and foreign investments play a pivotal role, ultimately hinge on the government’s ability to ‎improve the transparency of commercial processes.  Focusing on three policy priorities can help ‎in this effort: implementing clear and consistent commercial regulations; instituting safeguards ‎against irresponsible business practices; and limiting state intervention in the economy.  On ‎these fronts, the government’s track record has been mixed.‎

Saudi government officials understand that some change is required to create a “thriving ‎economy open for business” – one of the key themes of Vision 2030.  Yet Saudi Arabia ranked ‎‎92 out of 190 countries in the World Bank’s ease of doing business index for 2018; the country ‎ranked even lower, at 144, for starting a business.  Saudi Arabia’s growth trajectory has not ‎been a source for optimism: Annual real gross domestic product growth swung from a ‎contraction of 0.7% in 2017 to growth of 2.2% in 2018.  The International Monetary ‎Fund predicts growth will hover around 2% in 2019. If Saudi Arabia hopes to diversify its ‎economy, boost new strategic sectors, and privatize specific government services, the country ‎will need the support of local and international investors.‎

Indeed, Saudi Arabia aims to boost foreign direct investment to 5.7% of GDP by 2030.  For ‎a sense of scale, achieving this target in 2018, when GDP reached $782.48 billion, would have ‎required attracting around $44.6 billion in FDI.  While historic FDI figures approached $40 billion ‎earlier in the 2000s owing to rising oil prices and foreign investment reforms, FDI inflows ‎decreased substantially after the 2008 financial crisis.  Saudi Minister of Economy and Planning ‎Mohammed Al-Tuwaijri noted that the kingdom’s FDI reached a mere $3.5 billion in 2018.  This ‎figure exceeds the 14 year low of $1.4 billion for 2017 but falls far short of the targets set by ‎Vision 2030.  The investment figures also place Saudi Arabia well behind its neighbor, the United ‎Arab Emirates, which attracted $10.35 billion in FDI in 2017, as a regional investment hub.‎

Saudi Arabia: Foreign Direct Investment Flows (in billions of U.S. dollars)

Source: The World Bank

Stronger regulatory frameworks in the commercial sphere are needed to attract hesitant ‎investors.  The Saudi government issued a royal decree in January promoting seven investment ‎principles that stress the importance of incorporating transparency and equality into investment ‎policies.  The government also implemented a new bankruptcy law in August 2018 – a step ‎toward clarifying the rights and obligations of investors when they encounter financial ‎difficulties.  The new law differentiates between bankruptcy and insolvency, details provisions for ‎preventative settlements and financial restructuring, and establishes circumstances and ‎procedures for liquidation.‎

The utility of the bankruptcy law, though, remains untested.  Maan al-Sanea, the founder of debt-‎ridden Saad Group, is in the process of settling claims from bank creditors through the ‎country’s new bankruptcy law.  The Saad Group defaulted together with Ahmad Hamad al-‎Gosaibi and Brothers on nearly $22 billion of loans in 2009.  However, a Saudi court rejected ‎Ahmad Hamad al-Gosaibi and Brothers’ applications for both a protective settlement and ‎financial restructuring, each of which is provided for under the new bankruptcy legislation.  ‎Without access to this relief, the available options for defaults in the kingdom involve liquidation, ‎cash injections, or seeking new jurisdictions for a given case.‎

In February, the Saudi government launched a financial reporting office within the General ‎Auditing Bureau to combat corruption.  Supported by the Public Prosecutor, the new office will ‎monitor both state spending and the finances of major companies in the kingdom.  In the same ‎vein, the General Auditing Bureau aims to establish an electronic auditing system and provide ‎free audits for a hundred government agencies.  Efforts to create a more transparent, equitable ‎and rules-based economic environment will be welcomed by prospective investors.  Many were ‎rattled by an anti-corruption campaign led by the crown prince in November 2017, which led to ‎the detention of many of Saudi Arabia’s most prominent businesspeople and royal family ‎members, who surrendered a reported $107 billion in cash, real estate, and other assets to the ‎state.‎

Public offerings of state-run and private firms create another avenue for foreign investment in ‎the kingdom.  This process requires firms to subject their financial information to public scrutiny. ‎ Although the sale of 5% of Saudi Aramco has been delayed, regulations surrounding ‎Aramco’s bond issuance provided a first glimpse into the company’s accounts.  Similar offerings ‎are taking place in the private sector. Arabia Centres Company, Saudi Arabia’s largest owner ‎and operator of shopping malls, plans to raise approximately $747 million after pricing its initial ‎public offering at 26 riyals (approximately $6.93) per share.  The company will float around 20% of its shares on the Tadawul stock exchange.  This share sale is the first offering in ‎Saudi Arabia under Regulation S and Rule 144A, which permits the sale of securities to qualified ‎institutional buyers in the United States.  A tech-focused company, Al Moammar Information ‎Systems, raised around $58 million in another offering this year.  To further increase foreign ‎ownership of Saudi equities, the country’s Capital Markets Authority is mulling a relaxation in ‎the 49% limit for foreign strategic investors in shares of listed companies.‎

However, other private companies have been pushed in the opposite direction by the ‎government.  Istidama, a subsidiary of the Ministry of Finance, assumed 36.22% of the ‎Saudi Binladin Group following the anti-corruption probe led by the crown prince.  Istidama’s ‎stake in the company reflects the ownership relinquished by family members implicated in the ‎probe.  Only two Binladin family members remain on the company’s board, and the company is ‎now chaired by Khaled Nahas, a prominent Saudi businessman and board member of Saudi ‎Basic Industries Corporation.‎

The roles of the government and private sector are intertwined in every economy.  Yet, if the ‎Saudi government is to reduce its share of distributive responsibilities within society, it must ‎focus on playing a regulatory, catalytic, and coordinating role.  This role shift requires both the ‎institutionalization of greater transparency in commercial processes and the implementation of ‎mechanisms needed to stimulate greater private sector involvement in the country’s economy.‎

Robert Mogielnicki is a resident scholar at the Arab Gulf States Institute in Washington.  ‎‎(AGSIW 10.05)‎

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11.14  SAUDI ARABIA:  Saudi Arabia’s Moment in the Sun

Juergen Braunstein posted in Sada on 7 May that although cooperation with China can help Saudi Arabia boost production of solar power, global trade dynamics may complicate the kingdom’s renewable energy goals.

As part of a high profile tour of China in February, Saudi Arabia’s Crown Prince Mohammed Bin Salman (MBS) has overseen a range of multi-billion dollar pledges and MOUs with Beijing.  This partly reflects Riyadh’s desire to diversify sources for investments and technology following the mass withdrawal of major Western business leaders from the Future Investment Initiative in October 2018, after the murder of Saudi Journalist Jamal Kashoggi in the Saudi Embassy in Istanbul.  Yet cooperation with China on renewable energy, if successful, would realize a significant first step towards Saudi Arabia’s lofty ambitions for solar and wind power.

These MOUs follow Saudi Energy Minister Khalid al-Falih’s confirmation in January that the kingdom aims to develop 60 gigawatts of renewable energy capacity over the next decade – plans that would multiply the Gulf Council Cooperation’s solar capacity tenfold.  However, global trade dynamics and the inherent volatility of the solar market may complicate Saudi Arabia’s goals.

Saudi Arabia hopes that developing a new industry would help create jobs for Saudi nationals.  The country’s policymakers are concerned that massive youth unemployment – standing at 35% among jobseekers aged 15-24 and with the potential to increase to over 42% by 2030 – can otherwise become a major source of instability.  Promoting employment, particularly in the private sector, is a key goal of Vision 2030, which seeks to fundamentally reshape the kingdom’s economy and society.  As part of the overhaul, Vision 2030 furthermore aims to improve the domestic business environment, localize domestic military manufacturing, and revitalize plans for industrial cities.

As one of the world’s largest fossil fuel consumers, Saudi Arabia hopes to use the grand programs to help expand renewable energy sources to meet domestic demand.  In summer months, Saudi Arabia burns around 700,000 barrels of oil per day solely for electricity generation, particularly for air conditioning and water desalination.  This counts for around one-fifth of Saudi Arabia’s daily total oil consumption – after transportation and the petrochemical and refining sector – but this share is expected to grow as the population does.  Providing alternative sources of energy for domestic consumption would also free up more oil and gas for export.  With oil prices between $50 and $70, the 700,000 barrels of oil per day currently used for electricity could be exported for between $13 billion and $18 billion per year.

With an abundance of both sunlight and land, Saudi Arabia has a geographic advantage in developing solar power generation at scale.  According to a 2016 report by the International Renewable Energy Agency, developing even 1% of the suitable area in Gulf Cooperation Council (GCC) countries could create the capacity to generate 470 gigawatts of photovoltaic power and create over 100,000 jobs.  Within Saudi Arabia specifically, the report estimated this would reduce the use of oil and gas for electrical production by 25%.

Introducing renewables at a large scale would allow Saudi Arabia to free up spare oil production capacity, which it has usually kept between 1.5 and 2 million barrels.  This gives it greater geopolitical leverage to affect oil prices by increasing or decreasing exports.  Furthermore, renewable energy investments are critical if the country is to meet the commitments it made in Paris as part of the United Nations Framework Convention on Climate Change in 2015.  Through renewable investments, Saudi Arabia has suggested it could avoid emitting 130 million tons of carbon dioxide by 2030.  That is a an ambitious goal, given that over the period between 2007-2017 Saudi Arabia’s carbon dioxide emissions increased by an average of 4.7% per year, from 392.5 million tons in 2007 to 594.7 million tons in 2017.  By comparison, over the same period, France decreased its carbon dioxide emissions by 1.9%, or 44 million tons of carbon dioxide.

Furthermore, situated between the economic bulwarks of Europe, Asia, and Africa, the kingdom is able to serve as an export platform for solar technology from places such as China to other countries in the region seeking to expand their solar capacity.  For example, in May 2018 major Chinese photovoltaic manufacturer LONGi signed an agreement with El Seif Group, a major commercial and industrial trading company in Saudi Arabia, to establish a large-scale solar manufacturing infrastructure in the kingdom.

As part of a broader push to establish itself as a logistics hub, Saudi Arabia has already streamlined its once-byzantine trade documentation requirements as part of Vision 2030 and established a special economic zone (SEZ) near the Riyadh airport to serve as a hub for importing, assembling, and re-exporting goods to three continents.  Moreover, rather than simply purchasing foreign-made components and assembling them in Saudi Arabia, domestic demand for renewable energy could fuel the growth of local manufacturing of solar components.  Riyadh’s commitment to such an import substitution policy is evident in Vision 2030, which calls for the localization of manufacturing for both renewable energy projects and industrial equipment.  Similarly, Saudi Aramco’s In-Kingdom Total Value Add (IKTVA) program, launched in December 2015, aims to have all businesses in the kingdom—including renewable energy companies – rely on Saudi suppliers for at least 70% of the goods and services they need to operate by 2021.

Saudi Arabia is poised to become a leader in renewables.  Notably, it is entering the global solar market late, and therefore has a clearer idea about the costs and benefits.  Saudi Arabia is able to draw on the experience of other countries and take advantage of falling costs of photovoltaic cells, thanks to China’s advances on this front.  Furthermore, the relative absence of renewables in Saudi Arabia suggests more room for growth to spur the economy.

Yet the extent to which Saudi Arabia has a comparative advantage in setting up a new industry such as renewable energy production remains unknown.  One of the greatest challenges to the country’s renewable energy ambitions is the lack the technological expertise, trained workforce, or manufacturing capabilities to compete on a global scale.

In addition, as long as China is able to produce and export cheap panels to the whole world, there is little incentive for Chinese firms to relocate their production, except where it think it can avoid high tariffs.  A closer alliance with China could also pit Saudi Arabia against the Trump administration.  According to the Office of the United States Trade Representative, the willingness of Chinese firms to move their production facilities out of China to avoid tariffs was the driving force for the most recent bout of penalties in Donald Trump’s trade war with Beijing.  Although Trump has highlighted Washington’s close relationship with Riyadh, the administration has demonstrated a willingness to impose trade protection policies even on its closest political allies.  For instance, in February 2018, the Trump administration introduced a 20% tariff on washing machines following accusations that South Korean manufacturers were flooding the U.S. market.  Similarly, Washington has threatened to raise tariffs on European car imports, given that the U.S. tariff of 2.5% is noticeably unequal to the European Union’s 10% tariff on U.S. cars.  Efforts by Riyadh to increase its domestic solar power manufacturing industry through cooperation with China risk prompting Washington to extend the most recent tariffs to include Saudi Arabia.

With geography on its side, Saudi Arabia could engineer a smooth economic pivot toward renewables and maintain its key role in the global energy industry.  However, Riyadh has a delicate balancing act to play if it continues relying on China to develop its solar energy sector without becoming collateral damage in the ongoing U.S.–Chinese trade war.

Juergen Braunstein is a postdoctoral fellow at Harvard Kennedy School Geopolitics of Energy Project. Oliver McPherson-Smith is a Master’s student at Harvard’s Center for Middle Eastern Studies.  (Sada 07.05)

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11.15  EGYPT:  Egypt’s Iron Tariffs Threaten Some of Its Own Companies

Mohamed Saied posted in Al-Monitor on 3 May that the Egyptian government’s new temporary import fees have sparked controversy among Egypt’s steel rerolling factories, which rely on imported iron billet to produce rebar.

Some of Egypt’s steel industry rerollers have halted production and sales in the face of protectionist duties the country recently began levying on some imports.  One industrial organization says the tariffs could lead to the loss of thousands of jobs.

The tariffs aim to protect domestic iron billet makers from foreign competitors.  Large steel processors make their own billets and therefore don’t rely on imports, but local steel rerollers and small factories are caught in the middle.

As of 23 April, at least eight rerollers had stopped production after the Egyptian Ministry of Finance on 15 April started collecting duties of as much as 15% on iron billets and 25% on steel rebar.  The tariffs are to be imposed for 180 days but could be renewed.

Egypt produces an estimated 7 million to 7.5 million tonnes (7.1 million to 8.27 million tons) of steel per year.  In a 13 January interview, Reuters quoted the Al-Marakby Steel Co. CEO Hassan Al-Marakby as saying that Egypt’s steel industry makes up about 3.2%, or 84 billion Egyptian pounds ($4.9 billion as of April 29), of the country’s gross domestic product.

The Ministry of Finance said in a 15 April statement, “The proceeds of these duties will revert to the account of the Export Development Fund with the Central Bank, which helps to consolidate the activity of the Egyptian export sector and thus provides more jobs for young people.”  The tariffs are intended to increase the growth rate of domestic production and sales.

Billet manufacturers recently demanded the anti-dumping duties in reaction to a global oversupply resulting from US duties on steel imports in March 2018.  They also lobbied for fees on rebar imports.

In December 2017, Egypt had imposed five-year anti-dumping duties on rebar imports from China (at 29%), Turkey (7% to 22.8%) and Ukraine (17.2% to 27.0%).  Iron billet manufacturers sought duties on imported iron ore as well.  Now, China, Turkey and Ukraine will be subject to the duty imposed in late 2017 in addition to the 25% fee imposed on 15 April on imports of rebar, said Mohamed Hanafi, director general of the Chamber of Metallurgical Industries, which is part of the Federation of Egyptian Industries.  “When it comes to billets, these three countries will only be subject to the 15% imposed on 15 April,” Hanafi told Al-Monitor.

Marakby had warned in his January interview that Egyptian factories would close without protectionist measures.  “The coming period [will be] very difficult for the steel industry,” he said, citing the global overproduction and stagnant local demand.  He also stressed the need to boost Egypt’s national industry and increase its value-added products rather than relying on imports.

Jamal al-Jarhi, chairman of the Chamber of Metallurgical Industries, told Al-Monitor, “Egypt’s billet production ranges between 3 million and 4 million tonnes annually, compared with 8 million tonnes needed by the Egyptian market.  Some 1.7 million tonnes of steel were imported in 2017, but [that amount] almost doubled in 2018 to nearly 3 million tonnes.”  He added, “In the first 10 months of 2018, billet imports accounted for about $1.4 billion compared with around $804 million in 2017.”

For Mohamed Magdi, associate vice president at Beltone Financial, the measure is in the best interests of manufacturers that are part of the complete steel cycle — those who produce iron ore and manufacture it to be supplied in its final form to traders and then to the end consumer.  However, he noted in a 15 April interview with CNBC Arabia that the temporary duties are hard on rerollers, which rely on imported iron billets to produce steel rebar.

He explained that Egypt’s major steel manufacturers suffered losses recently despite the decline in iron prices worldwide.  The Egyptian government had lifted subsidies on petroleum products and electricity as part of its economic reform program with the International Monetary Fund, which reduced some iron companies’ profitability.

At a Chamber of Metallurgical Industries press conference on 14 April, rerollers asked the government to stop implementation of the 15% duty on iron billets, demanding the Council of Ministers and the relevant authorities form a committee to analyze the balance sheets and profits of rerollers.  Jarhi, who owns a rolling mill in Suez, said at the news conference, “The situation is difficult now.  About 22 rerollers could be forced to close. This would lead to the discharge of thousands of workers.”

Ahmed al-Zinni, head of the Construction Materials Division of the Chamber of Commerce of Cairo, told Reuters on 15 April that the production halt at factories so far has “caused iron prices to rise by about 500 Egyptian pounds [$29] per tonne.”  He added to Reuters, “The commercial sale price of iron in the Egyptian market currently ranges between 11,500 Egyptian pounds [$670] and 11,900 Egyptian pounds [$693] per tonne.”  Zinni also told Vetogate news that a 15% rise in iron prices would further increase the price of a tonne to a minimum average of 1,000 Egyptian pounds (about $58).

Hanafi — of the Chamber of Metallurgical Industries — explained to Al-Monitor that rerollers are currently considering whether to keep production stopped or increase prices. He believes an increase is the most likely option.  Hanafi added, “The government decided to impose a 25% duty on rebar imports to give small factories an opportunity to increase the prices of their products so as to achieve a profit margin.”

Jarhi affirmed that some plants have stopped production until further notice, and sooner or later, all factories that don’t produce their own iron billets would be “forced to halt production.”  He told Al-Monitor, “The Chamber of Metallurgical Industries has been in constant session ever since the Ministry of Finance decided to introduce the import fees.  We are considering all options and measures to reverse this decision, which opens the way for integrated factories to monopolize the iron market.  We might file a lawsuit before the administrative judiciary.”

Mohamed Saied is an Egyptian journalist based in Cairo and a graduate of Cairo University’s Faculty of Mass Communication.  (Al-Monitor 03.05)

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11.16  TURKEY:  Fitch Affirms Turkey at ‘BB’; Outlook Negative

On 03 May, Fitch Ratings affirmed Turkey’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BB’ with a Negative Outlook.

Key Rating Drivers

Turkey’s rating and Negative Outlook reflect weak external finances, manifest in a large external financing requirement, low foreign reserves and high net external debt, high inflation, a track record of economic volatility and political and geopolitical risks.  The rating is supported by strong public finances, a large and diversified economy with a vibrant private sector and GNI per capita and human development indicators above the peer group medians.

The economy is adjusting to a sharp depreciation of the lira in 2018, which stemmed from the materialization of external financing vulnerabilities, aggravated by political and geopolitical developments.  The rapid correction in the current account deficit is a necessary step on the path towards rebalancing and stabilization.  However, significant uncertainties remain around the outlook for economic recovery and inflation, economic policy implementation and the impact on the public finances and banking sector.

The external sector remains a major credit weakness.  There has been a significant adjustment of the current account, driven by import compression and supported by services exports and underpinned by the floating exchange rate.  On a rolling six-month basis, the current account posted a surplus of $2.7 billion at end-February, compared with a deficit of $32 billion a year earlier.  Gross foreign exchange reserves (including gold) rose by $7 billion in the first two months of 2019, but fell to $96.3 billion in March ahead of elections, with the decline particularly sharp in net terms (to around $28 billion), possibly reflecting efforts to keep the exchange rate stable ahead of the polls.  Market concerns about the reserves position appear to have contributed to a renewed fall in the lira, which could add to dollarization pressures.

Weak domestic demand and a further improvement in services exports are forecast to underpin a current account deficit of 0.7% of GDP in 2019 (the smallest since 2002), less than projected net FDI inflows (1.2% of GDP).  Gradual private sector deleveraging should also continue; at end-February, external debt rollover by banks was 80% and 93% for the non-bank private sector on a rolling six-month basis, reflecting reduced demand for FX as well as higher borrowing costs.

Nonetheless, the external financing requirement will remain large due to private sector debt repayments.  Fitch estimates the total external financial requirement (including short-term debt) at $173 billion in 2019, down from $212 billion in 2018.  The financing requirement means Turkey will remain vulnerable to global investor sentiment and financial conditions, domestic political and economic policy uncertainty and a pronounced deterioration in relations with the US.

Fiscal performance has been hit by the weak economy.  In Q1/19 the central government deficit was TRY36.2 billion (0.8% of projected full-year GDP) up from TRY20.4 billion in Q1/18, despite a TRY42.9 billion jump in non-tax revenues due to the early payment of the central bank dividend.  Pre-election stimulus measures affected both tax revenues (up only 5.8%) and primary expenditure (up 33.5%).  The government did not revise its fiscal targets (notably a 2019 deficit of 1.8% of GDP) or include new measures in its updated economic reform plan, despite the tough first quarter and an optimistic growth assumption of 2.3%.  Fitch assumes policy will be tightened as election-related stimulus rolls off and other consolidation measures are implemented, but forecasts the targets are missed with a central government deficit of 2.4% of GDP in 2019 (general government deficit of 3.1%).  A rebound in the economy will lift revenues in 2020, narrowing the general government deficit to a forecast 2.7% of GDP.

The moderate level of gross general government debt (GGGD) is forecast to remain a key rating strength. Fitch expects GGGD/GDP to rise to 31% at end-2019 from 30.4% at end-2018 owing to the widening of the fiscal deficit and assuming 0.5% of GDP support for state banks.  This is well below the forecast median for ‘BB’ peers of 45.1%. GGGD/GDP is expected to decline to 30.2% in 2020.  Fitch’s projections do not include further sovereign support for the banks.  Exchange rate volatility poses a risk to debt dynamics; 47% of central government debt was FX-denominated at end-February.

Various discretionary policy measures were implemented ahead of local elections in March.  While the government has fiscal space for counter-cyclical policies, the nature of some measures, notably interventions in the food retail market and ramped-up lending by state banks and reported pressure on private sector pricing policy risk creating distortions if maintained and raise questions over the broader policy stance.  The new economic reform plan published shortly after the elections did not refer to these policy measures and lacked detail, but did provide approximate timelines for individual initiatives.  Some of the structural measures in the plan have been welcomed by the private sector, particularly reforms to the insolvency process and politically difficult pension and severance pay reform.  The post-election period could be more conducive to economic reform that would begin to tackle long-standing structural weaknesses, although Fitch remains cautious about the prospect of meaningful progress.

Tough operating conditions continue to put pressure on the banking sector.  NPLs (loans overdue by 90+ days, solo basis) were 4.1% in April, up from 3% at end-2017; Stage 2 loans – which could migrate to NPLs as the loans season – rose to 11.7% in February from 4.4% at end-2017, albeit partly reflecting IFRS9 implementation.  Downside risks to asset quality remain significant given operating environment pressures.

Capital adequacy remains above the regulatory requirement, at 16.4% at end-March and Fitch’s stress tests show that pre-impairment profit and capital buffers provide a significant cushion against a potential marked deterioration in asset quality, a weakening in profitability and potential Turkish lira depreciation.  In April, the government injected TRY24 billion of euro-denominated additional Tier 1 capital (equal to around 0.5% of GDP) into the state banks.  This followed fairly rapid growth at these banks – in contrast to the rest of the sector – in Q1/19.  Some private banks have also raised new capital.

Refinancing risks for Turkish banks remain high following recent heightened market volatility and given the large stock of short-term external debt on banks’ balance sheets (end-2018: $90 billion on a remaining maturity basis).  However, Fitch estimates banks’ total external FC debt due within 12 months, net of more stable sources of funding, to be $40 – $45 billion compared with available foreign currency liquidity of $75 – $80 billion.

Turkey is undergoing a deep economic recession, but the economy seems to have bottomed after contracting 4% (non-annualized) in 2H18, with net trade the main source of sequential growth.  Election-related temporary stimulus and rapid credit growth from state-owned banks have also contributed to the nascent Q1/19 recovery, pointing to a likely easing of momentum in Q2, particularly if accompanied by tighter fiscal policy.  Base effects mean that y-o-y growth rates will remain negative until Q4 and the economy is forecast to contract by 1.1% this year.  The unemployment rate has risen rapidly.  Growth should revive in 2020, but at a forecast 3.1% will be below Fitch’s estimate of trend growth (4.3%, recently revised down from 4.8%).  Average growth for 2018-2020 of 1.5% compares with an average for 2010-2017 of 6.8%.

Inflation has dipped from its peak, but remained elevated at 19.7% in March.  Weak domestic demand and base effects should put inflation on a downward path, but the PPI remains high (29.6%) and the impact of unwinding temporary tax and other price control measures is unclear.  Fitch forecasts inflation to average 14.2% in 2019, the highest of any sovereign rated above the ‘B’ category.  The policy rate was kept at 24% in April and is rising in real terms.  High dollarization and the increased role of state bank lending and informal pressure on bank interest rates may be undermining transmission channels.  In Fitch’s view, monetary policy credibility is weak and potential mis-steps are a downside risk to the economic adjustment path.

Political and geopolitical risks weigh on Turkey’s ratings and World Bank governance indicators are below the ‘BB’ median.  Tolerance of dissenting political views has reduced in the opinion of independent observers.  The opposition alliance won several key cities in local elections in March (the ruling AKP is contesting a narrow defeat in Istanbul), benefiting from the weak economy and a disciplined approach to the campaign.  The elections completed a prolonged electoral cycle and the next polls are not scheduled for more than four years.  Domestic security conditions have improved recently.

In Fitch’s view, geopolitical risks arise from Turkey’s complex and at times volatile international relations.  There are a number of pressure points in relations with the US, most prominently the government’s planned purchase of S400 missiles from Russia; sanctions would be triggered by the arrival of missile components in the country.

Rating Sensitivities

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

-Failure to rebalance and stabilize the economy consistent with lower inflation and external vulnerabilities.

-Heightened stresses in the corporate or banking sectors potentially stemming from a sudden stop to capital inflows or a more severe recession.

-A marked increase in the government debt/GDP ratio to a level closer to the peer median.

-A serious deterioration in the domestic political or security situation or international relations.

The main factors that, individually, or collectively, could lead to a stabilization of the Outlook are:

-A sustainable rebalancing of the economy evidenced by a reduction in the current account deficit and inflation that reduces external vulnerabilities.

-A political and security environment that supports a pronounced improvement in key macroeconomic data

Key Assumptions

Fitch forecasts Brent Crude to average $65/b in 2019 and $62.5/b in 2020.  (Fitch 03.05)

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11.17  TURKEY:  Brain Drain Saps Turkey’s Defense Industry

Metin Gurcan posted in Al-Monitor on 1 May that while Turkey is preparing for mammoth defense industry fair, looking to boost its exports and counter a saturated domestic market, the sector is suffering from a serious lack of manpower.

Turkey has high hopes for its future in the defense field, but brain drain is depriving its industry of qualified human capital.  Of all people working in the sector, only 24% are qualified engineers.

Turkey’s defense industry has been growing since 2014, pushing companies to focus on exports to sustain their growth.  In addition to its traditional customers the United States and Germany, Turkey is looking for new clients in a slew of markets: Poland, Qatar, Oman, Ukraine, Malaysia, Indonesia, Pakistan, Bangladesh, Chad, the Philippines, Vietnam, Cambodia, Azerbaijan and Uzbekistan.

According to the management of Turkey’s Defense Industries, a target of $3 billion in exports set for 2019 does not include the MILGEM (National Ship) warship project and ATAK attack helicopter platform of Pakistan, or the T129 ATAK helicopter gunships for the Philippines.

This will be an important year in terms of Turkey’s defense industry objectives.  TCG Kinaliada, another MILGEM corvette (small warship), will be delivered to the Turkish navy while TCG Anadolu, Turkey’s first multipurpose landing helicopter dock ship, is expected to hit the waves late this year.  Turkey’s first indigenously built new-generation submarine, Piri Reis, is also expected to be operational in late 2019.

According to the Turkish Exporters Assembly (TIM), Turkey’s overall exports hit an all-time high of $168.1 billion in 2018, a 7.1% year-over-year increase compared with around $157 billion in 2017.  The Turkish defense and aerospace sector showed the best performance in 2018 in terms of export growth (20%), though the sector remains comparatively small, with exports of $2.188 billion for 2018.  Turkey’s top exporting industries during 2018 were automotive, textile and chemicals at almost $31.6 billion, $17.6 billion and almost $17.4 billion, respectively.

According to a 2018 performance report issued by Turkey’s Defense and Aerospace Industry Manufacturers Association, the Turkish defense industry in 2018 had total revenues of $8.761 billion, an increase of 31% compared with 2017. Exports rose $350 million.  The highest sales were from land force platforms and systems, at $2.428 billion, followed by $1.81 billion in civil and military aviation.  Revenues of $63 million in informatics and software and $22 million in the space sector were far below expectations.  While informatics, software and space technologies are the top sellers in global markets, Turkey’s lagging numbers attract attention.

The domestic defense market, which has reached $6.573 billion, is satiated and Turkish defense industry firms have to look for new markets abroad, especially in the Middle East, Asia-Pacific, Central Asia, Africa and Latin America.  The report says 68% of Turkish business owners are optimistic for their sectors for 2019 and 2020 and anticipate a 20% increase in revenues, while 21% business owners predict a slowdown and 11% anticipate a shrinking market because of the declining value of Turkish currency and economic vacillations.

The report says the most serious impediment to developing Turkey’s defense sector is a lack of qualified workers.  Of 67,239 workers, only 16,000 (24%) are qualified engineers, which is inadequate to achieve stated targets.

The Turkish government has been offering major incentives to the defense industry, trying to develop indigenous production, national identity and strategic autonomy.  Ankara defines successful indigenous production as a country meeting its defense needs with its own resources and capability, thus minimizing its dependence on external sources.  National identity pertains to developing integrated models that combine critical technologies based purely on national designs that could compete in international markets.  Strategic autonomy means totally eliminating foreign dependence in the sector in the next 10 years.  But Ankara will have to add the principle of curtailing brain drain as well.

Merve Seren, an academic researcher in the defense field, lists the reasons for a diminishing workforce in a recent article.  Workers leave, she said, because of undesirable work conditions, low pay and inadequate benefits.  Also, more advanced facilities are available abroad for them to develop their knowledge and skills.  There are more opportunities and alternatives, especially for engineers who want to specialize in product development and research and development.  Some workers also leave because they lack confidence in the country’s stability.

It’s obvious that Turkey will have to open up foreign markets if it wants to sustain development of this sector.

Turkey’s ability to compete at regional and global levels depends on political and economic stability, financing and investments, technological capacity, support from decision-makers and qualified personnel.  Although the government frequently declares “employment mobilization” programs to solve the qualified personnel dilemma, these efforts have not produced lasting institutional solutions.

Another risk for the Turkish defense industry is the possibility that budget allocations will be reduced as the economic crisis worsens and Turkey’s currency loses value. Large-scale projects could be delayed.  Deteriorating relations with other countries could hurt Turkey’s access to export markets, and therefore its growth potential.

If Turkey can’t come up with sustainable solutions to these problems, developing its defense industry’s potential won’t be its biggest challenge.  Ankara may well have to cope with millions of dollars’ worth of defense projects collecting dust on shelves.

Metin Gurcan is a columnist for Al-Monitor’s Turkey Pulse.  He served in Afghanistan, Kazakhstan, Kyrgyzstan and Iraq as a Turkish military adviser from 2002 to 2008. After resigning from the military, he became an Istanbul-based independent security analyst. Gurcan obtained his PhD in 2016 with a dissertation on changes in the Turkish military over the preceding decade.  (Al-Monitor 01.05)

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11.18  CYPRUS:  European Commission Forecasts Strong Economic Growth Momentum

Cyprus’ economic growth is expected to remain strong, driven by domestic demand, but downside risks are on the rise, according to the European Commission’s Spring Economic Forecast.  According to the forecast, Cyprus GDP will continue to grow at 3.9% in 2018, 3.1% in 2019 and 2.7% in 2020, while unemployment will drop from 8.4% 2018 to 6.7% in 2019 and 5.9% in 2020.  Debt will drop from 102.5% of GDP in 2018 to 96.4% in 2019 and 98.9% in 2020 while the -4.8% deficit in 2018 will turn into a surplus of 3.0% in 2019 and 2.8% in 2020 without a policy change.

The Commission warns against negative risks related to “uncertainties about the macroeconomic outlook, the effects of court decisions on past measures on public sector wages and the potential shortage of public healthcare providers first years of the national health insurance scheme “.

Inflation is forecast to remain subdued.  The budget is expected to return to surplus and public debt to steadily decline from 2019 onwards.  Risks to the fiscal outlook are also mainly on the downside.  “Cyprus continues to enjoy a remarkable post-crisis rebound with real GDP growth of 3.9% in 2018. Growth is forecast to ease to 3.1% this year and 2.7% in 2020 as the external environment turns less favorable and the private sector continues to deleverage,” said the report.

Private consumption remains a key growth driver due to rapid employment growth. Employment in 2018 rose by 4% and more recent labor market indicators remain favorable.

The unemployment rate fell to 7.1% in February 2019, with a significant reduction in long-term unemployment.  Wages increased moderately over the previous year and are set to continue rising, with employers in several sectors scheduled to renegotiate wages with unions amid tightening labor market conditions.  Public consumption is also set to provide support to growth, driven by the automatic indexation of public wages, wage increments and the unfreezing of promotions.


Investment is forecast to be robust, growing more strongly than the overall economic activity.  An important part of investment comes from ongoing tourism-related projects.  Other investment projects relate to residential construction, with half of all transactions in the sector driven by foreign demand, which in turn is supported by the Citizenship by Investment program.  “A large share of investment in Cyprus is associated with ship registrations.  These are inherently volatile but more likely to increase following efforts to strengthen the shipping sector in the country,” the report said.

Net exports are projected to be a drag on economic growth.  Imports are set to increase reflecting the large import content of domestic demand.  Meanwhile, exports in Cyprus are dominated by services and the largest share of services is linked to tourism.  “The outlook of tourism-linked services is clouded by the recent bankruptcies of several airlines servicing Cyprus, slowing global demand, fierce competition, and high Brexit-related uncertainty (UK citizens account for more than a third of all tourists).”

The Commission said risks to the outlook are tilted to the downside.  “As a small open economy, Cyprus would be exposed to strong headwinds from slowing global growth.  The economy’s heavy reliance on foreign funding also leaves it vulnerable to external developments.”

Headline HICP inflation in 2018 was 0.8%, almost the same as it was in 2017 (0.7%).  Inflationary pressures came mainly from energy and unprocessed food categories, while core inflation fluctuated around zero.  Two factors seem to provide some explanation for this.  First, the increasing competition among wholesalers, retailers and internet platforms, as well as the absence of legislation on when shops can offer sales, is weighing on prices.

Second, although the unemployment rate has fallen sharply in recent years, the fastest job creation occurred in low-paid sectors and there is still significant slack in the labor market to be absorbed. Inflationary pressures are thus expected to remain subdued.

The general government headline balance is expected to return to surpluses of around 3% of GDP in 2019 and 2020, after posting a temporary deficit of 4.8% of GDP in 2018.  “This was entirely due to the one-off support measures related to the Cyprus Cooperative Bank sale.  The underlying fiscal performance is projected to remain strong, on the back of the supportive macroeconomic environment and the improving labor market.”

General Surplus

The general government surplus is forecast to reach 3.0% of GDP in 2019.  Revenue is forecast to continue increasing, mainly as a result of a sizable rise in social security contributions, partly offset by a reduction in the excise duties on fuel and the revision of vehicle taxation.

Compared to public expenditure net of one-offs in 2018, expenditure is forecast to rise at a higher rate than revenue.  This is mostly due to deficit-increasing measures, such as the gradual increase in public wages to reverse wage cuts implemented after the crisis, the Estia scheme to support non-performing loan repayment and the government’s support for low-income pensioners.

The forecast takes into account the start of contributions to the national health insurance system as of March 2019 and the inclusion of the two entities resulting from the sale of the Cyprus Cooperative Bank within the general government sector.  “Under a no-policy-change assumption, the general government surplus is forecast to narrow slightly to 2.8% of GDP in 2020.  The structural budget surplus is set to decline over the forecast period from 2% of GDP in 2018 to around 3⁄4% in 2020, mainly due to the positive output gap.”

The main downside risks to the fiscal outlook relate to uncertainties surrounding the macroeconomic outlook, the outcome of court rulings on past measures concerning the public sector wage bill and the potential deficit of public healthcare providers during the first years of the national health insurance system. Positive cash balances from the resulting CCB entities constitute an upside risk.

After increasing considerably to 102.5% of GDP in 2018, due to the government’s one-off support for the Cyprus Cooperative Bank sale, public gross debt is forecast to steadily decline to below 90% of GDP by 2020.  “The decrease is mainly due to projected primary budget surpluses and strong nominal GDP growth.”  (FM 08.05)

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