Fortnightly, 15 November 2017

Minister of Justice Ayelet Shaked announced on 13 November that her ministry was close to an agreement with the US authorities that will enable Israelis to enter the US without the need for a visa, which is currently required. Israel should shortly complete the final paperwork and in two weeks’ time Minister Shaked will visit the US, during which she is due to sign an agreement in principle enabling Israelis to enter the US without the need for a visa, in the same way as they currently travel to Europe. It was clarified, however, that implementation of the agreement will require two legislative amendments by the Knesset, and that this process could take two years or more.

The first condition for implementation of the agreement is that the Knesset should amend the law in such a way as to allow criminal information to be transferred to the US on any Israeli citizen concerning whom the US requires it. To this end, a further amendment to the law will be necessary, enabling the Israeli government to reproduce its database of fingerprints of Israeli citizens and to set up a database of fingerprints of citizens who have committed serious crimes. (Globes 13.11)

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1.2 New Netanyahu – Kahlon Economic Plan in the Making

A new economic plan, set to enter into force on 1 January 2018, is in the final stages of planning, but can be said to include income tax reductions for persons making NIS 11,000 or less, decreasing import taxes on non-luxury items, tax breaks for companies and small businesses and reducing the country’s debts. The plan will be financed using unexpected tax overcharges, totaling NIS 17 billion this year alone.

The original intent was to implement a new and far-reaching plan to reduce taxes due to the tax collection surcharge this year. The Israel Tax Authority is expected to collect a much higher sum than the one appearing in the collection estimate article in the country’s 2017 budget. While calculating the collection forecast, according to which the Israeli budget was constructed at the end of 2016, the significantly high NIS4 billion revenue brought in as a result of the Mobileye sale was not yet known.

Finance Minister Moshe Kahlon, as well as Prime Minister Benjamin Netanyahu, consider the scenario of a surplus in the country’s treasury to be an opportunity to benefit the public. The finance minister’s plan wishes to reduce income taxes rates starting with incomes of NIS 11,000. The reason is similar to the prime minister’s reasoning of reducing the relatively high taxes levied on persons of non-modest incomes to prevent them leaving the country and to benefit those perceived to be providing great contributions to Israel’s economy. The prime minister and finance minister also intended to make life easier for small businesses, partially by forgoing tax collection on small businesses for a set duration after their founding. The prime minister also intends to reduce corporate taxes within a year or two to 20%, in order to encourage international firms to invest in Israel. The Finance Ministry and Prime Minister’s Office teams are expected to meet soon and hold talks on putting together the joint economic plan. (Ynetnews 05.11)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Trendlines Incubator Raises $10.3 Million in Singapore Offering

The Trendlines incubator announced that it raised $10.3 million on the Singapore stock exchange. The company’s existing investors took part in the round, including German company B. Braun, which maintained the proportion of its stake. The other investors were mainly institutions and corporations from Singapore. The company’s share rose after the offering and is now 21% higher than the share price in the offering, reflecting a market cap of $63 million. Since Trendlines’ IPO in Singapore in 2015, the company’s share price has fallen 44%. Most of this decline occurred shortly after the IPO, and the share has remained stable ever since. Trendlines said that the proceeds from the offering would be used to participate in later investment rounds in its main holdings and for investment in new companies. Trendlines will also focus its business, streamline, and enhance its value, and is considering the distribution of a dividend. The company’s revenue totaled $6.6 million in the first half of 2017, mainly from the sale of BioSight. Trendlines had $13.4 million in cash as of the end of the second quarter of 2017 (before the offering).

Misgav’s Trendlines is an innovation commercialization company. Trendlines invents, discovers, invests in, and incubates innovation-based medical and agricultural technologies. As intensely hands-on investors, they are involved in all aspects of our portfolio companies from technology development to business building. (Trendlines 01.11)

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2.2 Hyundai Motor Targets Israel’s Most Innovative Start-ups with Extensive Investment

Hyundai Motor has outlined plans to invest extensively in prominent Israeli start-ups to accelerate developments in advanced future automotive technologies. Moving the business toward a Fourth Industrial Revolution, a new investment office in Israel will lead the operation and identify newly established businesses that focus on ‘Disruptive Innovations’, including artificial intelligence, autonomous driving, and cyber security.

Hyundai Motor announced its vision at the 2017 Fuel Choices and Smart Mobility Summit in Israel, detailing its expectation for synergies with the newly-launched HTK Consortium for Future Mobility Research. The Korean car maker recently entered into a memorandum of understanding with Technion – Israel Institute of Technology and Korea Advanced Institute of Science and Technology (KAIST) to conduct joint R&D projects globally, around future mobility technologies.

Furthermore, Hyundai Motor established a Strategy & Technology Division in February to gain new momentum for future technological innovation. The division oversees the company’s research in future technology from AI, advanced materials, energy, and robotics, to the next generation of information communication technologies. The organization largely is composed of two divisions; one with engineers in charge of R&D and one with strategists devising business models based upon the new technologies.

Established in 1967, Korea’s Hyundai Motor Company is committed to becoming a lifetime partner in automobiles and beyond. The company leads the Hyundai Motor Group, an innovative business structure capable of circulating resources from molten iron to finished cars. Hyundai Motor has manufacturing bases in eight countries as well as a global network of eight technical centers and four design centers. Hyundai Motor Hyundai Motor sold 4.86 million vehicles globally in 2016 and employs more than 110,000 employees worldwide. The company continues to enhance its product line-up with localized models and strives to strengthen its leadership in clean technology, starting with the world’s first mass-produced hydrogen-powered vehicle, ix35 Fuel Cell and IONIQ, the world’s first model with three electrified powertrains in a single body type. (Hyundai Motor 02.11)

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2.3 BIRD Energy Approves Five US-Israel Clean Energy Projects

The US Department of Energy and Israel’s Ministry of National Infrastructures, Energy and Water Resources, along with the Israel Innovation Authority, have announced the allocation of $4.8 million for five newly selected clean energy projects as part of the Binational Industrial Research and Development (BIRD) Energy program.

BIRD Energy began in 2009 as a result of the Energy Independence and Security Act of 2007 in the US. Since then, BIRD Energy has funded 37 projects, with a total investment of about $30 million, including the five selected projects announced today, which will leverage cost-share for a total project value of $10.5 million. Selected projects address energy challenges and opportunities of interest to both countries, while focusing on commercializing clean energy technologies that improve economic competitiveness, create jobs and support innovative companies. The five approved projects are:

-Brenmiller Energy (Rosh HaAyin, Israel) and Power Authority of the State of New York (White Plains, New York) will develop a high temperature storage based CHP system.

-CelDezyner (Rehovot, Israel) and AdvanceBio (Milford, Ohio) will develop a process for production of ethanol from lignocellulosic feedstocks.

-QDM (Rehovot, Israel) and ALD NanoSolutions (Broomfield, Colorado) will develop 3rd generation HTS cables.

-SoftWheel (Tel Aviv, Israel) and Detroit Bikes (Detroit, Michigan) will develop an energy- efficient, low-maintenance, high-performance bicycle.

-TerraGenic (Kadima, Israel) and Triton Systems (Chelmsford, Massachusetts) will develop a safe hydrogen transport and storage system.

BIRD Energy is the implementation of a cooperation agreement between the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE) and the Israel Ministry of National Infrastructure, Energy and Water Resources (MIEW) and the BIRD Foundation. This cooperation is based on the Energy Independence and Security Act of 2007, which includes cooperation between the U.S. and Israel on renewable energy and energy efficiency industrial research and development. (BIRD 06.11)

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2.4 Waycare Raises $2.3 Million to Provide AI Driven Transportation Management Solutions

Waycare Technologies, with offices in Tel Aviv, Israel and Silicon Valley, has raised $2.3 million in seed funding to help cities and states optimize traffic management systems and improve traffic safety. Silicon Valley-based Spider Capital and German-based energy company, Innogy SE, lead the round of funding with participation from Goldbell Investments, UpWest Labs, janom, Zymestic Solutions and SeedInvest.

Waycare has developed a SaaS-based transportation management platform that leverages a myriad of data sources from vehicles, weather, video cameras, and road sensors to help municipalities proactively manage their roads. Waycare’s AI-based platform enables all municipal agencies to have a full mobility map of their roads, regardless of their existing infrastructure, but also the ability to take action and mitigate traffic flow and improve traffic safety relying on instant access to predictive analytics. Today, cities rely primarily on their own infrastructure to manage their traffic systems, with reactive incident response systems. Waycare’s platform is designed to provide traffic management centers with proactive recommendations, allowing first responders to efficiently deploy resources to patrol dangerous roads and take action before incidents develop into traffic jams. (Waycare 30.10)

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2.5 Innoviz Technologies Extends Series B Funding to $73 Million

Innoviz Technologies announced an extension of its recent Series B funding round. Bringing the round to $73 million in total, the new funding comes from strategic investors Samsung Catalyst, a Samsung Electronics early stage venture capital fund, and from SoftBank Ventures Korea, a SoftBank Group early stage venture capital arm based in Seoul. Innoviz is expected to grow its team significantly filling positions in R&D, Operations, Marketing and Business Development. Innoviz previously announced Series B funding from Delphi Automotive, Magna International, 360 Capital Partners, Glory Ventures, Naver and others, in addition to all Series A investors. The follow-on funding comes as Innoviz’s LiDAR (Light Detection and Ranging) solution begins mass production. This latest financing brings Innoviz’s total funding to $82 million.

Innoviz’s LiDAR technology leverages the company’s proprietary System, MEMS and Detector designs to deliver highly accurate and long ranging autonomous vehicle sensing capabilities. The company’s groundbreaking, solid-state design enables it to deliver LiDAR in a more compact, reliable device that costs significantly less than any LiDAR currently on the market. InnovizPro, a development platform designed to provide auto manufacturers, Tier 1 suppliers and technology companies with the most advanced LiDAR available for testing and development, will be available in Q1/18. Samples of InnovizOne, the company’s automotive grade LiDAR device for levels 3 – 5 autonomous driving, will begin shipping in 2019.

Kfar Saba’s Innoviz is a leading provider of cutting-edge LiDAR remote sensing solutions to enable the mass commercialization of autonomous vehicles. The company’s LiDAR products, InnovizOne and InnovizPro, offer solid-state design that uses proprietary technology to deliver superior performance at the cost and size required for mass market adoption. The company was founded in January 2016 by former members of the elite technological unit of the Israeli Defense Forces with renowned expertise in the fields of electro-optics, computer vision, MEMS design and signal processing. Innoviz is backed by strategic partners and top-tier investors throughout the world. (Innoviz Technologies 31.10)

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2.6 Bank Leumi & NASDAQ Launch a Joint Program to Support Israeli Growth Companies

Nasdaq Stock Exchange President Griggs and Bank Leumi CEO Russak-Aminoach signed a first-of-its-kind strategic cooperation agreement in Israel to support Israeli mid to late growth stage companies that are interested in leveraging the global assets and insights from NASDAQ as well as the platform of LeumiTech to boost future growth and expansion. As part of the agreement, LeumiTech, Leumi Group’s hi-tech banking arm, and NASDAQ will sponsor a series of exclusive meetings for senior executives of private growth companies to discuss business, regulatory, financial and other aspects of growing global companies. Throughout the sessions, the participants will meet thought leaders and executives of Nasdaq-listed companies in addition to other experts in investment banking, IPO legal and accounting, investor relations, communication and more. The program’s closing session will be held in New York.

LeumiTech, the high-tech banking arm of the Leumi Group, was founded in 2014 with the main goal of promoting financing and development in the Israeli high-tech industry. Within a short period of time, LeumiTech has established itself as the financial home for Israeli high-tech by providing companies with a comprehensive package of services, including: credit and financing, investments and partnerships, unique products and services tailored to the industry and an innovative global platform for managing their international financial operations. Out of hundreds of start-ups established in Israel in 2016, over 60% chose to work with LeumiTech. (Bank Leumi 01.11)

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2.7 BigPanda Expands Series B Funding to $49 Million

BigPanda has raised an additional $23 million in Series B funding – expanding the round to a total of $49 million. Leading this round is Greenfield Partners, a partnership backed by TPG Growth, with further participation by existing BigPanda investors Sequoia Capital, Battery Ventures and Mayfield. In the past 12 months BigPanda has more than tripled its bookings, adding large enterprise customers such as Intel, Workday, Turner Broadcasting, Macy’s and Riot Games. BigPanda’s cloud platform employs machine learning to process large volumes of alert traffic from fragmented clouds, applications and IT monitoring tools down to a manageable number of incidents for faster resolution by IT Service Operations teams. BigPanda is targeting the $23B IT Operations Management market. In addition to more than tripling bookings, the company has achieved several other meaningful milestones.

Tel Aviv’s BigPanda enables Enterprise IT to intelligently automate and scale Service Operations to meet the complex demands of the modern datacenter. The company’s Algorithmic Service Operations platform turns IT noise from fragmented clouds, teams, applications and monitoring tools into actionable insights to speed the resolution of IT incidents. Many of the world’s largest enterprises such as Intel, Workday, News Corp, Macy’s, and Cisco rely on BigPanda to power their Service Operations. (BigPanda 01.11)

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2.8 Germany’s Continental Acquires Argus Cyber Security

In order to further strengthen and enhance its capabilities in automotive cyber security, German technology company Continental is acquiring Argus Cyber Security (Argus), one of the global leaders in this domain.

Founded in 2013 by Israeli cyber security experts, Argus is headquartered in Tel Aviv, Israel, has a team of more than 70 people and the most comprehensive, market-ready solution suites in the industry, based on 38 granted and pending patents. To help vehicle manufacturers rapidly respond to the growing need for cyber security solutions, Argus has forged significant collaborations with key industry players and is successfully delivering projects to vehicle manufacturers and suppliers worldwide. Argus also has representations in Japan, Germany and North America (Detroit and West Coast).

Together, the companies will offer multi-layered, end-to-end security solutions and services including intrusion detection and prevention, attack surface protection and fleet cyber security health monitoring and management via a security operations center (SOC) to protect vehicles in the field over their entire lifespan. The companies will also provide software updates over-the-air solutions. Argus’ technology was tested by vehicle manufacturers, their suppliers and independent third parties, and has repeatedly out-performed its competitors.

Argus will become a part of EB, Continental’s stand-alone software company and will continue to engage in commercial relations with all automotive suppliers globally. This combination of Continental’s broad automotive know-how, Argus’ technology, market-ready solutions and expertise in automotive cyber security, and EB’s deep automotive software knowledge, marks a unique cooperation in the automotive industry. (Continental 02.11)

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2.9 Spain’s SEAT & Champion Motors Create XPLORA Innovation Partnership in Israel

SEAT and Champion Motors, the Spanish brand’s importer in Israel, have reached an agreement to create XPLORA, a transversal team of specialists focused on technological innovation projects aimed at the connected car and smart mobility services. The goal of the initiative is to encourage relations with local mobility-related startups and players and identify innovative projects that could lead to future solutions and business models for the brand.

In order to develop the project, XPLORA, which is headquartered in Tel Aviv and will carry out its activity around the country, will have an initial team made up of four professionals. Where SEAT is concerned, the company is going to arrange a one year transfer for three members of its transversal Easy Mobility Team, specializing in UX Design, Electric Development and Business Development, which is spearheading the company’s digital transformation, to cover the needs of the initiative and identify and develop the most relevant solutions for SEAT and the sector. Furthermore, Champion Motors will assign a Project Manager responsible for coordinating and carrying out the project since its initial stage. This team of professionals, who will begin by scouting startups and projects that might be of interest, will select the most outstanding innovations and carry out concept tests in close collaboration with SEAT specialist teams in Martorell. These first steps will be used to analyze the feasibility of pilot testing on a larger scale in Israel and at European level. (Champion Motors 02.11)

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2.10 Arbe Robotics Raises $9 Million

Israeli autonomous car radar company Arbe Robotics has raised $9 million in a financing round led by Eyal Ofer’s O.G. Tech Ventures and equity crowdfunding platform OurCrowd, with the participation of previous investors Canaan Partners, iAngels and Taya Ventures. The Tel Aviv based company will use the investment to bring the company’s high-resolution radar system into full production, and enable its technology to be installed in autonomous cars within the coming year. High resolution radar gives autonomous cars the ability to sense, or “see”, their surroundings. Since radar is the only sensor that can reach high range in any weather, reflection and lighting conditions, it’s key for Level 3 automation (Conditional Driving Automation) and for full autonomous driving. However, radar faces two main problems today: low resolution and high false alarm rates, and Arbe’s patented technology solves them both. The funds raised will also be used to open Arbe’s first customer service and support center, based in Silicon Valley, to increase accessibility and availability for future car owners. (TechCrunch 02.11)

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2.11 Venture Capitalists Investing in Wiliot to Scale IoT with Battery-Free Bluetooth

Wiliot has closed an investment round with Qualcomm Ventures, the investment arm of Qualcomm Incorporated, and M Ventures, the strategic, corporate venture capital arm of Merck KGaA, Darmstadt, Germany a leading science and technology company. The latest investment round comes on the heels of a Series A Round financing effort that yielded $14m with forward-thinking strategic technology investors Grove Ventures, Norwest Venture Partners and 83North Venture Capital. This first round closed in January, the month Wiliot was founded. In all, Wiliot has raised a total of $19m in its first 10 months as a semiconductor company.

Wiliot is on course to develop a wireless technology that will eliminate a reliance on batteries or wired power to vastly accelerate the Internet of Things with the vision of creating a world of “Smart Everything.” The new technology, which powers itself by harvesting energy from radio waves, enables a sensor as small as a fingernail, as thin as a sheet of paper, and an order of magnitude reduction in price and cost of maintenance.

Wiliot is a fabless semiconductor company whose mission is to scale the Internet of Things with Battery Free Bluetooth. The company was founded by the leadership of the Gigabit Wi-Fi pioneer Wilocity, a group of wireless engineers experienced in building new products and the ecosystems required for their success. Wiliot has a research and development team based in Caesarea, Israel and a business development headquarters in San Diego, California. (Wiliot 02.11)

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2.12 Optibus Raises $12 Million

Optibus, an Tel Aviv based startup, has raised a Series A funding round totaling $12 million. The round was led by Israel-based Pitango Venture Capital, Verizon Ventures and venture capitalist Sir Ronald Cohen from UK. Optibus enables public transportation companies to offer the dynamic, flexible, and efficient service that is needed to compete in the new era of mobility. Optibus develops and implements the Optibize technology, a super-fast proprietary optimization engine, which powers the first ever real-time interactive scheduling solution for public transportation operators, improving the public transportation services, savings millions of dollars to the public purse and reducing the air pollution. Optibus is being used successfully by large operators in North America, Europe and Asia. The solution is offered on the cloud and the business model is a monthly fee per vehicle, what gives our clients a very fast ROI and a very convenient financial structure.

The funding will be used to develop Optibus’ operating system designed to power the smart cities of the future and to accelerate worldwide growth. Optibus provides its services to 200 cities on five continents including Los Angeles, Las Vegas and Washington D.C. (Various 07.11)

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2.13 Excelero Secures Strategic Investment from Qualcomm Ventures

Excelero received a strategic investment from Qualcomm Ventures, the investment arm of Qualcomm, Incorporated. Qualcomm becomes the third strategic player to invest in Excelero – bringing its CPU expertise to help guide Excelero’s expansion, in concert with two earlier strategic investors. The new investment brings the total of VC funds invested in Excelero to $30 million, including the $25 million Series B round, starting with Battery Ventures which led the round, and ending with 3 strategic investors, including Qualcomm. Total VC funds also include participation from Series A investor Square Peg Capital, angel investor David Flynn, the founder of Fusion-io, and several angel investors.

Qualcomm’s funds will help Excelero expand its sales, marketing and product development teams to more rapidly meet the demand for the hyperscale data center of tomorrow. An estimated 70 – 80% of enterprises say they intend to adopt a web-scale IT architectural approach by 2027 (Intel data) – enterprises for whom Excelero’s 100% software-only server SAN solution is a perfect fit.

Excelero enables customers to build distributed, high-performance Server SAN with standard hardware for applications at any scale. Excelero’s NVMesh is a truly converged Software-Defined Block Storage solution designed to meet storage requirements for applications of any scale, without compromise. The solution features an intelligent management layer that abstracts underlying hardware with CPU offload, creates logical volumes with redundancy, and provides centralized management and monitoring. Customers benefit from the performance of local flash, with the convenience of centralized storage and the cost savings of standard hardware. The solution has been deployed for Industrial IoT services, machine learning applications and simulation visualization.

Tel Aviv’s Excelero enables enterprises and service providers to design scale-out storage infrastructures leveraging standard servers and high-performance flash storage. Founded in 2014 by a team of storage veterans and inspired by the tech giants’ shared-nothing architectures for web-scale applications, the company has designed a software-defined block storage solution that meets performance and scalability requirements of the largest web-scale and enterprise applications. (Excelero 07.11)

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2.14 Yotpo’s Latest Funding Round – $51 Million

Yotpo has raised $51 million in Series D, the company announced, bringing the company’s total equity funding to $101 million. The round was led by Claltech, the tech investment arm of privately-held holding company Access Industries. New investor Vertex Ventures participated in the rounds, as did existing investors Bessemer Venture Partners, Marker LLC, Vintage Partners, Blumberg Capital, Rhodium and 2B Angels.

Tel Aviv’s Yotpo helps brands collect and leverage reviews and photos throughout the buyer journey to increase trust, social proof, and sales. Yotpo will use the funding to continue product development, and also to open a second U.S. office in Salt Lake City. Founded in 2011, the company employs 170 people in its offices in its Tel Aviv offices. The company plans to add around 150 employees over the next 18 months. (Yotpo 09.11)

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2.15 Aquant Raises $2.6 Million

Israeli artificial intelligence (AI) and machine learning company Aquant announced that it has raised $2.6 million in seed financing round from World Trade Ventures, SilverTech Ventures, AngeList Syndicate and a group of private investors. The funds will be used to expand the company’s customer base and speed up development of its technology’s capabilities. With its development offices in Tel Aviv and headquarters in New York, Aquant has developed AI and machine learning technology to address the multi-billion-dollar problem of machinery downtime that troubles service companies. The unique aspect of Aquant’s technology is its ability to locate potential failures at levels that are difficult to be predicted. Aquant says that companies in the service industry are used to paying heavily for machinery downtime and recurring technicians’ visits, due to lack of technicians’ skills and wrong stocking of parts. Aquant provides service companies with a permanent solution for this problem. Engineered with predictive AI and machine learning, Aquant’s algorithms are able to forecast the servicing needs long before they occur and save precious downtime, all based on the analysis of existing historical structured and unstructured data. (Globes 08.11)

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2.16 LTTS Expands in Israel with a Center of Excellence (CoE) and a Sales Office

L&T Technology Services Limited (LTTS), a leading global pure-play engineering services company headquartered in India, announced the establishment of LTTS’ Center of Excellence (CoE) in Jerusalem, Israel, thereby marking another key milestone in the firm’s global presence. The CoE will be dedicated to developing and delivering end to end ASIC solutions, hardware and software based security solutions as well as next generation video solutions for global customers in the following market segments – Media, Entertainment, Telecom, Automotive and IIoT. This will further complement LTTS’ efforts to offer innovative solutions and services and consolidate its leadership position across these market segments.

In addition to the CoE in Jerusalem, LTTS has launched a sales office in Tel-Aviv, which will be expanding the company’s business in Israel and offer the full scope of engineering services in the areas of Telecom, Semiconductors, Medical Devices, Automotive, IoT and Plant Engineering.

The establishment of the Israeli CoE is part of LTTS’ investments in next generation engineering and disruptive technologies. These include advanced capabilities in the fields of Embedded Applications, Semiconductors, Machine Learning, Security and Video. (LTTS 14.11)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 New Healthcare Firm Launched in Abu Dhabi

Capital Health said it plans to create specialized hospitals and medical centers to serve the needs of UAE residents and medical tourists. In line with UAE Vision 2021 and Plan Abu Dhabi 2030, the company said it will “pioneer new healthcare models and offer breakthrough technologies to provide patients with best in class care”. Capital Health added that it currently has two flagship facilities in Abu Dhabi under development.

The 166-bed Specialised Rehabilitation Hospital (SRH) will provide acute and long-term rehabilitation care, along with in-patient, out-patient and home care capabilities while the Health Shield Medical Centre (HSMC) will be a multi-specialty healthcare facility located in the Al Qurm district. The company said SRH will be the UAE’s first fully acute, sub-acute and long-term rehabilitation facility with outpatient capabilities, which will bring the latest bionics and robotics to the region. (AB 04.11)

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3.2 UAE’s NIMR to Supply Turkmenistan with Military Vehicles

NIMR Automotive, a subsidiary of the UAE’s Emirates Defence Industries Company, announced its first international contract. NIMR said it will export its vehicles outside of the MENA region through an agreement with the Ministry of Defence and Armed Forces of Turkmenistan. The agreement covers an initial order of NIMR’s AJBAN Long-range Special Operations Vehicles. Previously, a number of NIMR AJBAN 440A vehicles, provided to Turkmenistan through a government to government arrangement, underwent extensive trials before being operationally deployed in a border security role. NIMR formally delivered the vehicles last month, where they were featured at the Turkmenistan Independence Day Parade. (GN 06.11)

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3.3 Cole Haan Unveils New Interior Design Concept at UAE Flagship Store

Cole Haan, the iconic American lifestyle accessories brand and retailer of premium men’s and women’s footwear and accessories, unveiled their newly refurbished flagship store at Dubai Mall, a premier shopping mall in the United Arab Emirates. This location is the second largest Cole Haan store worldwide. The innovative interior features a series of rooms, which are inspired by a residential layout that showcases the brand’s new innovative lifestyle products. The new design also allows for a wider range of footwear and accessories to be elegantly displayed.

Cole Haan, with its Global Headquarters in Greenland, New Hampshire and Creative Center in New York City, is an iconic American lifestyle accessories brand and retailer of premium men’s and women’s footwear, handbags, leather accessories, outerwear and eyewear.

Alyasra Fashion is a regional fashion retail leader, with a world-class portfolio of over 60 high-end fashion, footwear and accessories brands. Alyasra Fashion operates more than 270 stores, with operations in eight markets across the Middle East. (Cole Haan 06.11)

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3.4 International Medical Group Opens Office in Dubai

Indianapolis’ International Medical Group (IMG), a leader in international private medical insurance (IPMI) and global assistance since 1990, has obtained its consultancy license and opened an office in Dubai, demonstrating its commitment to the UAE. IMG has been active in the region since 2007, and has worked with RAK Insurance for the previous two years to offer innovative and customized IPMI solutions. IMG’s work in the UAE has led the company to further invest in the region. Now operating as IMG Insurance Consultancy LLC, IMG is one of few IPMI companies in the UAE to have obtained a consultancy license with LLC status.

The program is designed to provide top-of-the-line service to both individuals and employers for nearly all of their health care needs. Combined with IMG’s top-tier IPMI benefits, the program offers a comprehensive international health care solution for the UAE. (IMG 07.11)

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3.5 Emirates Places $15 Billion Order for 40 Boeing Dreamliners

Dubai’s Emirates airline signed a $15.1 billion commitment to purchase 40 Boeing 787-10 Dreamliners, it was announced at the Dubai Airshow on 12 November. The firm order for the 40 787-10s takes Emirates total wide-body orders with Boeing to 204 aircraft, which Emirates CEO Sheikh Ahmed estimated are collectively worth more than $90 billion. Deliveries of the aircraft included in the deal will begin in 2022.

When asked why Emirates chose the 787-10 over the rival Airbus A350, Sheikh Ahmed said Emirates planning staff examined both aircraft and concluded that the 787-10 “was the best option” for Emirates from 2022 onwards. Sheikh Ahmed added that Emirates is currently evaluating engine options for the Dreamliner, which would be announced sometime in the near future. The 787-10 order comes on top of a 2013 order for 150 777X aircraft equipped with GE9X engines, which are slated for delivery from 2020 onwards. (AB 13.11)

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3.6 Driverless Dubai Buses Pass Strict Climate Tests Ahead of 2020 Launch

Dutch technology firm 2getthere has announced that its automated vehicle system that will link Bluewaters Island in Dubai with the city’s network of metro stations has passed its first operational test in simulated desert climate conditions. The new transport system, which will have a capacity of 5,000 people per hour per direction, was subjected to three tests in weather conditions such as ‘hot dry’ and ‘hot humid’, with a focus on the performance of the air conditioning system at the vehicles’ maximum 24 passenger capacity. The extreme climate test is one in a long line of tests regarding the order the Utrecht-based company received from Dubai earlier this year.

From 2020, 25 vehicles will perform fully autonomous shuttle services to and from Bluewaters Island in Dubai. Home to Ain Dubai, the world’s tallest and largest observation wheel in the world, Bluewaters is a destination under construction 500 meters off the Jumeirah Beach Residence (JBR) coastline. It will feature a collection of townhouses, penthouses and apartments; retail and dining experiences and two hotels, linked to the shore by a multi-modal transport system ensuring easy access to the island. The automatic transport system will fit into Dubai’s objective to have 25% of all trips completed by automated systems by 2035. According to 2getthere, the successful climate test marks yet another step towards the operational deployment of the system, which has been scheduled for 2019/2020. (AB 04.11)

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3.7 Comtech Awarded $1.1 Million Order for Infrastructure Equipment in Saudi Arabia

Melville, N.Y’s Comtech Telecommunications Corp. announced that its Tempe, Arizona-based subsidiary, Comtech EF Data Corp. was awarded a $1.1 million order for infrastructure equipment from NOVAsat, a leading systems integrator in Saudi Arabia. The equipment will be utilized by a large mobile network operator to expand its existing Comtech EF Data-based mobile backhaul network to support both fixed and mobile users. The mobile operator will leverage innovations within these products to support different end user applications, including the high-speed backhaul of 2G and 3G traffic of up to 70 Mbps to fixed remote sites and to temporary 3G installations. Additionally, the solution suite will provide on-demand support for customers and high-speed connectivity to Mobile-on-Wheels vehicles that provide bandwidth when and where needed on a temporary basis, whether for scheduled events or unexpected purposes such as for disaster recovery communications.

NOVAsat is a Saudi Arabian company specialized in providing Communication and Information Technology services & solutions. NOVAsat is one of the leading satellite communication and systems integrators in the Saudi Arabia, with over 14 years of experience. NOVAsat has extensive experience in the implementation and customization of services targeted at developing, promoting, stimulating and supporting clients in setting up and running their ICT environment. (Comtech 08.11)

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3.8 Hyatt House Brand Debuts in Turkey with Opening of Hyatt House Gebze

Hyatt Hotels Corporation announced the entry of the Hyatt House brand into the Turkish market with the opening of Hyatt House Gebze. The opening of the hotel is an important step towards increasing Hyatt’s brand presence throughout Europe and is the fifth Hyatt House branded hotel to open outside the U.S. in 2017. Located just 10 miles from Sabiha Gokcen International Airport and less than 40 miles from Istanbul, the 158 room upscale extended stay hotel features fully equipped kitchens, comfortable living rooms, spacious bedrooms and stylish bathrooms, making it a place for guests to relax and pause before beginning the next part of their journey. The H BAR provides a relaxing space for guests to unwind in the evening, whilst the H Market is designed to meet the everyday needs of guests, offering snacks and freshly prepared salads and sandwiches.

There are four Hyatt-branded hotels currently open in Turkey, including Grand Hyatt Istanbul, Hyatt Centric Levent Istanbul, Hyatt Regency Istanbul Atakoy and Park Hyatt Istanbul – Macka Palas. (Hyatt House 02.11)

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3.9 Vector Aerospace Restores Sea King Helicopters for Pakistan

Toronto’s Vector Aerospace will soon deliver three refurbished Sea King – i.e. two HC.4 and one HAR3A – helicopters to the Pakistan Navy (PN). Pakistan bought seven ex-Royal Navy and ex-Royal Air Force Sea King helicopters in May of this year. Three of them have been restored and two were stripped for spare parts, with the remaining two will be sent to Pakistan as-is, likely to serve for spare parts (currently unclear). The Sea King helicopters will join the PN’s No. 111 Squadron, which operates six Sea King Mk45 and Mk45B in troop transport, search-and-rescue (SAR), anti-ship warfare (AShW) and anti-submarine warfare (ASW). Although a modest acquisition, it is reflective of Pakistan and the U.K.’s push to strengthen defense ties.

Toronto’s Vector Aerospace is an industry-leading provider of maintenance, repair and overhaul (MRO) services for fixed- and rotary-wing aircraft operators around the globe, offering responsive, high quality and value-for-money support for engines, airframes and components. (Quwa 09.11)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Haifa Introduces Car2Go Electric Carsharing Project

On 7 November, the Haifa municipality and the Car2Go company launched the first shared transportation project of its kind in Israel, based on electric vehicles and charging stations. One hundred Renault Zoe cars will begin operating in the city in the framework of the project – 40 vehicles will start operating, 40 more at the beginning of December 2017 and 20 at the beginning of January 2018. Another 100 vehicles are to be added at a later stage, depending on the results.

The shared electric vehicle project is designed mostly for short and medium-length trips within the city. The payment model is based on payment exclusively for travel time, with no commitment to an extended period. The price for the service is more than the cost of a bus ride, but less than the cost of a taxi – NIS 1.20 per minute on the route, 35-40% cheaper than traveling in a taxi. Rides will be free of charge for the first two months. According to the municipality’s figures, over 2,000 subscribers have already registered for the service. The venture is planned to expand to the region north of Haifa, which will affect the entire Haifa metropolitan area.

Over NIS 20 million has been invested in the project, which is part of the “Easy to Breathe” joint project of the Ministry of Environmental Protection and the Jewish National Fund designed to reduce air pollution in Israel. The Haifa part of this project, which is being funded jointly by the Haifa municipality and the Cities Association for Environmental Protection – Haifa Bay Region, will be run by Car2Go. After using the car, the user presses a button for concluding the order, and the system automatically bills the user’s credit card according to the number of minutes he used the card. Some 300 reserved parking spaces in the city have been allocated for the project. (Globes 07.11)

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4.2 World’s Largest Solar Plant Built in a Refugee Camp Launched in Zaatari

After six months of construction that saw the sprawling of some 40,000 solar panels over the size of 33 football fields in southern Mafraq, the world’s largest solar power plant built in a refugee settlement was inaugurated on 13 November. The 12.9 MW solar facility will bring free and clean electricity to over 80,000 residents at Zaatari refugee camp, extending their current 8 hours of access to power to 14, thereby allowing children longer hours for homework, better storage for refrigerated foods and enhanced street lighting for maintaining safety and security.

Since the Zaatari’s inception in 2012, access to electricity has been one of the main challenges faced by its residents, making daily lives difficult with intermittent cuts due to lack of power. The plant, with help of UNHCR, saves an average of €5 million per year in electricity bills, an amount that could be redirected to expand other activities that improve the lives of refugees in Jordan. Additionally, the construction of the plant benefitted many refugees economically and professionally.

The €15 million solar project, which has a lifespan of 25 years, was funded by the government of Germany through the German Development Bank (KfW), and later implemented with close cooperation with Jordan’s Ministry of Energy and United Nations High Commissioner for Refugees (UNCHR). (Petra 13.11)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanon’s Trade Deficit Narrowed to $11.77 Billion by Third Quarter

According to the Lebanese Customs, Lebanon’s trade deficit narrowed by 2.04 % to $11.77B by September 2017, as exports increased by a yearly 4.86% to $2.12B, and imports fell by 2.48% y-o-y to $13.89B. On the imports’ side, value of total imported mineral products fell by 13.71% y-o-y to $2.67B, on the back of a drop in volume from 7.14M tons by Q3/16 to 6.49M tons this year. Moreover, products of the chemical or allied industries, which grasped 12.40% of the total value of imported goods increased by a yearly 1.97% to $1.56B. As for machinery and electrical instruments, they grasped a share of 11.39% of the total value and increased by 2.71% from Jan- Sept 2016 to stand at $1.43B by September 2017.

The top countries Lebanon imported from during the first nine months of the year were China, Italy and Greece with respective shares of 10%, 9%, and 7%. As for exports, “pearls, precious stones and metals” products, grasping the largest share of exported goods (21.79%), plunged by 30% by Q3 to reach $460.85M. As for prepared foodstuffs, beverages and tobacco, they constituted 15.81% of the exported goods’ value amounting to $334.32M by September 2017, compared to $325.92M by September 2016. Moreover, exports of machinery and electrical instruments, that take up to 11.11% of the total exports, fell by 5.21% y-o-y to $234.93M by September 2017. The top export destinations for the same period were South Africa, United Arab Emirates, and Saudi Arabia, with respective shares of 12%, 9%, and 8%. (LC 14.11)

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5.2 Beirut’s Hotel Occupancy Climbed to 74.1% in September 2017

According to Ernest and Young’s Hotel Benchmark Survey, some regional hospitality markets dipped by Sept.2017, compared to the same period last year. However, four and five-star hotels mainly in Beirut and Kuwait were amongst the best performers.

In Lebanon, Beirut’s hotel occupancy rate increased from 58.9% by Sept. 2016 to 65.2% by Sept. 2017. As such, room yields in Beirut rose from $83 by Sept. 2016 to $99 by Sept.2017, while the average room rate increased from $141 to $152, over the same period. The positive performance in Beirut continued during summer 2017, on the back of Eid El Adha falling by end-August to September 2nd 2017, and the removing of the travel ban set by the GCC countries since Q1/17.

In Kuwait, the improvement was mainly recorded in the rise of the hotel occupancy rate by an annual 6.1% to stand at 47.4%. Many works are underway in the country to expand the national airport and new hotels were launched as the government expects more tourists over the next few years. As such, room yields jumped by 8.6% to $107, while the average room rate retreated from $238 to $225 by Sept.2017. (E&Y 03.11)

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5.3 ERBD Forecasts Slow Yet Steady Growth for Jordan

The European Bank for Reconstruction and Development (ERBD) forecasts Jordan’s economy to grow by 2.3% in 2017 and by 2.5% for 2018, according to its latest Regional Economic Prospects report. For the EBRD’s southern and eastern Mediterranean (SEMED) region, the report expects a growth of 3.8% in 2017 and of 4% the year after, supported by the reform implementation and continued recovery in the tourism sector. This is in addition to export rebounds in Egypt and Jordan.

Jordan’s economic performance remains weak amid continued regional turmoil. The report also indicated that conflicts in Syria and Iraq have disrupted trade routes, and strained public infrastructure, service provision and public finances. Tourism arrivals picked up by 11% in H1/17 after falling for six consecutive years until 2016 and unemployment increased to 17.9% in Q2/17. It showed a modest pick-up in 2017/2018 is expected and reflects a slow recovery in exports and a rebalancing towards new markets and some reform progress. (JT 08.11)

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5.4 Future of Jordan’s Defense Industry Report to 2022 Issued

The “Future of the Jordan Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2022” report has been added to Research and Markets’ offering. Jordan’s defense expenditure rose from $1.5 billion in 2013 to $2.1 billion in 2017, at a CAGR of 8.28%, primarily due to the country’s precarious security environment aggravated by the responsibility of hosting a large refugee population. Attempts to modernize its military equipment will therefore drive its defense expenditure over the forecast period, which is projected to grow at a CAGR of 5.30% through to 2022. Jordan will maintain its budget allocation for capital expenditure at an average of 4% over the forecast period, with the US providing military aid.

Jordan has a fairly limited capital expenditure on defense with its capital budget outlay for 2017 standing at $62.2 million. However, the country is a recipient of US military aid, which augments the country’s defense capital spending to $534.3 million for 2017. Despite receiving US military aid, its limited defense capital expenditure does not equip the government with the bargaining power to impose offsets on procurement deals and acts as a barrier to the entry for foreign multinationals.

During 2013-2017, the country’s defense expenditure averaged $1.8 billion and included $418.6 million in foreign military aid annually. Jordan’s homeland security expenditure declined from $1.3 billion in 2013 to $957.3 million in 2017, as these funds were diverted to curb internal conflicts and control the overspill of refugees. During this period, Jordan focused on importing armored vehicles, aircraft, missiles and artillery, which will continue to be primary weapon categories over the forecast period. (R&M 08.11)

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5.5 Three- Quarters of Jordanians Have No Bank Accounts

Around 75% of Jordanians above the age of 15 still don’t have bank accounts, according to a new report from the Jordan Strategy Forum (JSF). The report from the economic think tank, which examined the state of financial inclusion in the Kingdom, also revealed that approximately 85% of women don’t have bank accounts. Jordan’s figures were still higher than the region’s average. According to the World Bank’s “Global Financial Inclusion Index,” in developed countries financial inclusion was close to 100%, compared to 69% in East Asia and the Pacific and only 14% in the Middle East. The JSF report said that having more banked individuals is a win-win situation for the individuals and the country. Access to financial services enhances the wellbeing of families, reduces income inequality, promotes entrepreneurship and real economic growth. It also helps banks’ bottom lines that rely heavily on retail banking.

To encourage more Jordanians to set up bank accounts, the JSF suggested simplifying the requirements for opening an account, reducing the age of those allowed to open a bank account to 15 from 18, promoting pre-paid banking, discouraging employers from giving the wages in cash, and encouraging banks to widen their geographical reach to include rural areas. (Venture 23.10)

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5.6 Amman Approves Electricity Project with Saudi Arabia

The Jordanian government approved on 8 November an MoU to implement an electricity interconnection project between Jordan and Saudi Arabia. In a meeting chaired by Prime Minister al-Mulki, the cabinet said the memorandum to be signed between the National Electric Power Company and the Saudi Electricity Company will enable both parties to prepare technical and economic feasibility studies for the project, which will strengthen electrical networks, exchange electricity, and enhance the stability and reliability of electrical transmission networks between the two countries. The cabinet also approved the 3rd amendment to the European Union Grant Agreement for the Promoting Financial Inclusion Program through developing governance and microfinance in Jordan. (Petra 08.11)

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►►Arabian Gulf

5.7 UAE Approves $13.9 Billion Budget for 2018 with No Deficit

The UAE Cabinet on 8 November approved the federal budget of AED201.1 billion ($54.7 billion) for the years 2018-2021, of which AED51.4 billion ($13.9 billion) is for next year, with no deficit forecast. The largest portion of the 2018 budget has been earmarked for social development and social benefits (AED26.3 billion or 43.5% of the total budget). Of this, AED10.4 billion has been allocated for general education and higher education and AED4.5 billion allocated to the health sector. The government affairs sector was allocated AED22.1 billion, 36.5% of the total budget. The budget approval came during the first extraordinary session of the Cabinet to be held after the recent restructuring of the government. The Cabinet also adopted Federal Decree-Law No. 08 of 2017 on Value Added Tax to be implemented at the beginning of January 2018. (WAM 08.11)

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5.8 Oman Allocates $260 Million to Offset Fuel Subsidy Cut

Oman is allocating $260 million in next year’s budget to help needy citizens hurt by a fuel subsidies cut after oil revenue dropped. A special committee will decide the details and mechanism of the payouts. Oman, among the weakest economies in the Gulf Cooperation Council, was forced to slash subsidies for fuel, water, electricity and gas. It also plans to introduce a value-added tax to raise additional revenue after the slump in oil prices left it with one of the widest budget deficits in the Gulf. The gap is estimated to reach 13% of gross domestic product in 2017, according to the IMF. S&P Global Ratings downgraded Oman’s debt, already at junk, to BB from BB+. The rating company said large government and current-account deficits, financed predominantly through external borrowing, are eroding the sultanate’s traditional net asset positions. (AB 13.11)

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5.9 Saudi Unemployment Rises as Fees Pressure Expat Workers

Unemployment rose slightly in Saudi Arabia to 12.8% in the second quarter of 2017, according to new research. Jadwa Investment said that between Q1 and Q2, the Saudization ratio in the local economy increased from 42.5% to 43.1%, although this was mainly due to more non-Saudis leaving the local labor market rather than higher employment of Saudis. Looking ahead, Jadwa said it expects to see more declines in net employment of non-Saudis during the second half of 2017 and 2018 due to a combination of both a gradual increase in the expat dependent fees and the implementation of the expat levy. Jadwa added that it also expects the lifting of the ban on women driving, from June 2018 onwards, will help raise female participation and employment rates and create a number of new jobs.

Last month, data on Q2 real GDP showed the Saudi economy contracting by 1%, year-on-year. Growth continues to be dragged down by the oil sector (-1.8%), as a result of the kingdom’s compliance with OPEC cuts. (Jadwa 12.11)

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►►North Africa

5.10 Remittances from Egyptians Abroad Rises 24.4% in September

The Central Bank of Egypt (CBE) announced on 2 November that remittances from Egyptian abroad increased 24.4% in September, compared to the same month last year. According to the CBE’s statement, Egyptians abroad transferred about $1.166 billion home compared to $937.3 million in September 2016. The CBE added that in the period following the 3 November 2016 decision to float the Egyptian pound, the total remittances from Egyptians abroad registered $17.4 billion from November 2016 to September 2017 compared to $14.8 billion in the same period of the previous year.

In November 2016, the central bank floated the currency as part of securing a $12 billion loan with the International Monetary Fund to support its reform program. Egypt’s foreign reserves registered $36.535 billion at the end of September 2017. Around 9.4 million Egyptians live abroad, out of a total Egyptian population of 104.2 million. Egyptians working abroad send back billions of dollars a year in remittances, an important source of hard currency. (CBE 02.11)

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5.11 Morocco Continues to Improve in Key Metrics in World Bank “Doing Business” Report

In the World Bank’s 2018 “Doing Business – Reforming to Create Jobs” report, Morocco again ranked number one in North Africa and third overall in the Middle East and North Africa region. Morocco’s overall score (67.91) placed it over 10 points above the regional average (56.72) and a strong performer in comparison to Tunisia (63.58) and Algeria (46.71).

The World Bank report noted a number of noticeable improvements in Morocco and highlighted the country’s progress in starting a business and paying taxes, with improvements stemming from better use of technology for registration and filing. According to the analysis, the focus on building a supportive business environment to attract foreign and domestic direct investment is directly linked to Morocco’s capacity for sustainable growth.

Morocco is moving steadily towards classification as a “Frontier” market, increasing the country’s attractiveness to investors, and the World Bank is not alone in recognizing Morocco’s progress. Ernst and Young earlier this year ranked Morocco as one of the best business destinations on the continent and Credit Suisse named it one of the top ten countries for investors in frontier markets. (MACP 02.11)

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5.12 Morocco’s First High-Resolution Surveillance Satellite Launched Aboard Vega Rocket

A reconnaissance satellite built in secrecy in France for the Moroccan government launched on 7 November top of a Vega rocket from the Guiana Space Center in South America. The Mohammed VI-A optical imaging craft, named for the Moroccan king, lifted off at from the European-run spaceport in Kourou, French Guiana. The high-resolution surveillance satellite rode a 98-foot-tall (30-meter) Vega rocket into a roughly 385-mile-high (620-kilometer) polar orbit. The Mohammed VI-A satellite is designed for civilian and military uses, but little information about the spacecraft’s capabilities has been released. It was only know by the codename MN35-13 and the satellite’s end user was undisclosed until an official announcement of the impending launch.

The Moroccan government ordered two high-resolution Earth observation satellites from Thales Alenia Space and Airbus Defense and Space in 2013 after an intergovernmental agreement between Morocco and France. The two European aerospace contractors, normally competitors, teamed up on the program, with Thales taking lead as prime contractor and supplier of the satellites’ optical imaging equipment, and Airbus responsible for constructing the spacecraft platforms in Toulouse, France.

Moroccan security forces will use the satellites to help combat insurgent militants in the Sahel, such as al-Qaeda in the Islamic Maghreb, piracy in the Gulf of Guinea, and for border enforcement. The entire program, including two satellites, launch services and ground support, reportedly cost around $580 million. (Various 08.11)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Turkey’s Consumer Price Index (CPI) Increased by 2% in October 2017

A rise in Turkey’s general index was realized in CPI (2003=100) on the previous month by 2.08%, on December of the previous year by 9.52%, on same month of the previous year by 11.90% and on the twelve months moving averages basis by 10.37% in October 2017. The highest monthly increase was 11.51% in clothing and footwear. In October 2017, the indices rose for furnishing and household equipment 2.96%, for transportation 2.61%, for food and non-alcoholic beverages 1.97% and for housing 0.94%. The highest monthly decrease was 1.75% in recreation and culture

In October 2017, the other group that indicated a decrease was communication by 0.01% amongst the main groups. The highest annual increase was 16.79% in transportation. Food and non-alcoholic beverages with 12.74%, miscellaneous goods and services with 12.63%, health with 12.21% and furnishing and household equipment with 11.65% were the other main groups where high annual increases realized. In October 2017 within average prices of 414 items in the index, average prices of 51 items remained unchanged while average prices of 298 items increased and average prices of 65 items decreased. (TurkStat 09.11)

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6.2 European Commission Says Economic Growth in Cyprus has Exceeded Expectations

The European Commission Autumn forecast said on 8 November that Cypriot growth in 2017 is forecast to reach 3.5% of GDP and to ease but remain robust both in 2018 and 2019. A similar projection was also made recently by the European Bank of Reconstruction and Development. The Economic Research Center of the University of Cyprus Economics Department said that real economic activity is projected to grow by 3.6% this year, compared to an original estimate of a growth closer to 3%, after a strong show in both the third and final quarters this year. In 2018, real GDP growth is forecast to remain robust at 3.3%.

The European Commission said that economic growth in Cyprus “has exceeded expectations in recent quarters.” It also said that domestic demand is expected to continue to be the main driver of expansion, which will contribute to the further reduction of unemployment.

In a more detailed analysis, the Economic Research Center said that factors driving the solid growth rates forecast for the following quarters include the robust activity and employment growth rates registered in Cyprus in H1/17. On the downside, all analysts cited as factors adversely affecting the Cypriot economy, the still very high rate of non-performing loans, currently standing at €21.2 billion ($24.6 billion), following the 2013 crisis and the resolving of the banking system. They also said that other negative factors are the high ratio of public debt to GDP, incomplete structural reforms and the introduction of permanent expenditures with longer-term budget effects.

Downside risks stemming from the external economic environment relate to slower-than-expected growth in Britain, one of the key trading partners of Cyprus and its main source of tourism, and further depreciation of the pound against the euro. (GR 10.11)

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6.3 EU Commission Revises 2017 Greek Economic Growth Downwards at 1.6%

At its latest economic forecast for Greece, the European Commission revised its estimate for the country’s 2017 economic growth from 1.8% to 1.6%. This is the third consecutive downwards revision of Greece’s growth estimate from 2.7% early this year, to 2.1% last quarter, to 1.6% today. Compared to estimates by both the Greek government and the IMF, this is the most pessimistic prediction so far.

Real GDP is expected to grow by 1.6% in 2017 and 2.5% in both 2018 and 2019. The forecast revision for 2017 reflects mainly the weaker-than-expected performance of private consumption in the first half of the year, the Commission says. Both private consumption and investment activity are forecast to be robust in the second half of the year, and to continue to perform well in 2018. This positive outlook is expected to benefit the current-account balance, with moderate surpluses forecast for the coming years.

The labor market performed better than expected, with the unemployment rate falling to 21% in July, down from an annual average of 23.6% in 2016, the Commission notes. According to quarterly national accounts data, employment rose by 1.5% in the first half of 2017; suggesting that the labor market continues to improve faster than the economy as a whole. According to the estimates so far, in order for the country to reach its agreed upon targets, growth in the last two quarters of the year must reach a staggering 3%. (GR 09.11)

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6.4 Declared Incomes in Greece Tumbled By €2.5 Billion in a Year

Greeks’ declared incomes shrank by over €2.5 billion in a year from 2015 to 2016, as the earnings that salary workers, pensioners, freelance professionals and property owners declared in June for the 2016 financial year amounted to €72.5 billion, against €75.01 billion for the previous year, the processing of this year’s tax statements has shown.

Over-taxation has evidently sent tax evasion soaring, as well as leading to the termination of activity for tens of thousands of freelance professionals. The fear of high social security contributions has resulted in many freelancers and the self-employed hiding incomes to avoid having to pay more to the tax authorities and social security funds. It is no coincidence that the number of freelancers declined by about 58,000 last year compared to 2015, while another 20,000 salary workers and pensioners vanished. The reduction of the tax-free threshold and the increase in the burden from the new solidarity levy rates and property taxation rates have led to a drastic contraction of incomes.

Furthermore, the new method of calculating social security contributions, which was already known from 2016, has made things worse, as taxpayers with business activities tried to conceal takings in an effort to be spared having to pay additional taxes and contributions. Data show that the category of freelance professionals declared incomes for 2016 that lagged those of 2015 by a remarkable 18.9%: Their stated earnings added up to €3.78 billion against €4.67 billion a year earlier.

This development has prevented the further growth of state revenues, following the processing of declarations in June; despite the considerable increase in taxation, state takings were below the level of 2015, at €3.41 billion from €3.46 billion. The problem is that the income statements freelancers and the self-employed have made this year have formed a low starting point that is set to affect state revenues and fiscal figures in the next few years too. (eKathimerini 04.110

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israel Boasts Highest Fertility Rate Among OECD Nations

Some 186,000 babies were born in Israel over the course of 2016, including 7,676 twins and 261 triplets, data from the country’s maternity wards shows. On average, a baby is born in Israel every three minutes and a cesarean section is performed every 20 minutes.

These figures, and many others, were presented at the annual conference of the Israeli Society for Maternal and Fetal Medicine, which looked at the country’s 26 hospitals and discovered that the average fertility rate in Israel is 3.1 children per woman, the highest among Organization for Economic Cooperation and Development (OECD) member-nations. Mexico placed a distant second with an average fertility rate of 2.2 children per woman, and the average fertility rate for countries like France, the U.S., Britain, the Netherlands, and Spain is less than two.

The average age at which women in Israel have their first child is rising and for 2016 stood at 28.3. Births by mothers under the age of 19 are uncommon in Israel, comprising only 0.5% of births, whereas mothers over age 45 accounted for 3.52% of births.

A total of 4.5% of births were multiples (twins and triplets). Among women age 45 and older, most of whom used donor eggs to become pregnant, the rate of twins is four times higher, accounting for 17.8% of births among women in that age group, which also has a higher than average rate of premature births, before the 33rd week of pregnancy. Nearly 7% of mothers in that age group gave birth prematurely, compared to an average premature birth rate of 1.25%.

Meanwhile, efforts to reduce the number of cesarean sections performed in Israel are bearing fruit. In the past five years, the number of cesarean births has been on the decline, and in 2016 only 17.8% of births (28,589) were performed through cesarean sections, compared to 27% in the OECD.

Slightly over 6% of births in 2016 required the use of medical tools and of these some 95% were vacuum births. Labor was induced in 15.6% of mothers and 18.3% of mothers underwent episiotomies. In one hospital, 48% of mothers underwent episiotomies, while in other hospitals fewer than 10% of mothers did. Fewer mothers were receiving epidurals during birth, with 46% of mothers who gave birth in 2016 using this pain control method, a drop of 5% in the space of a decade, although the rates of epidural use vary from hospital to hospital.

In 2016, the miscarriage rate in Israel stood at 3.28 cases per 1,000, and the number of infants who die in birth stood at 0.14 per 1,000 births. Israel has a lower miscarriage rate than the average in OECD nations, where the number stands at 4 per 1,000. (IH 13.11)

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*REGIONAL:

7.2 Lebanese PM Hariri Resigns

Lebanese Prime Minister Saad Al Hariri resigned on 4 November, saying he believed there was an assassination plot against him and accusing Iran and its Lebanese ally Hezbollah of sowing strife in the Arab world. His resignation thrusts Lebanon back into the frontline of Saudi-Iranian regional rivalry and seems likely to exacerbate sectarian tensions between Lebanese Sunni and Shiite Muslims. It also shatters a coalition government formed last year after years of political deadlock, and which was seen as representing a victory for Shiite Hezbollah and Iran.

Hariri’s coalition, which took office last year, grouped nearly all of Lebanon’s main parties, including Hezbollah. It took office in a political deal that made Michel Aoun, a Hezbollah ally, president. The post of prime minister is reserved for a Sunni Muslim in Lebanon’s sectarian power sharing system. The constitution requires Aoun to nominate the candidate with the greatest support among MPs. Rafik Al Hariri was killed in a 2005 Beirut bomb attack that pushed his son Saad into politics and set off years of turmoil. (Reuters 04.11)

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7.3 Report Says 2,312 Jordanian Students Currently Studying in U.S

The number of Jordanian students currently studying at institutions across the United States hasn’t changed in 2017, which is almost the same number recorded last year, according to an annual report released by the Institute of International Education (IIE) and the U.S. Department of State Bureau of Educational and Cultural Affairs. The 2017 Open Doors Report data showed that there are currently 2,312 Jordanian students in the United States. Jordan now ranks 8th in the Middle East/North Africa region for number of students in the U.S. The total number of international students at U.S. colleges and universities surpassed one million for the second time ever during the 2015-16 academic year; an increase of 3% from the previous year. Conversely, there are around 970 American students at institutions in Jordan this year, a slightly down from the previous year. (Petra 14.11)

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7.4 Sharjah Unfurls World’s Largest Flag

The Flag Island, Sharjah’s iconic tourist destination, has entered the Guinness World Records after raising the world’s largest flag. The successful attempt formed part of the spectacular national festivities the island organized as part of the nationwide Flag Day celebrations. Measuring 70 meters in length and 35 meters in width, the flag broke the Guinness World Record for the largest flag hoisted on a fixed flagpole. The Flag Island had awarded Trident Flagpoles, a leading company specialized in designing and making banners and flags, to manufacture the huge red, green, black and white standard for the attempt. The day also featured the largest gathering of flag raising in the UAE, which was organized in cooperation with The Higher Committee of National Day Celebrations in Sharjah. (AB 05.11)

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7.5 Riyadh Says 201 People Held in Anti-Graft Swoop

Saudi Arabia said on 9 November that 201 people are being held for questioning over an estimated $100 billion in embezzlement and corruption, after the biggest purge of the kingdom’s elite in its modern history. Princes, ministers and a billionaire business tycoon were among dozens of high-profile figures arrested or sacked as Crown Prince Mohammed Bin Salman consolidates power. The purge comes amid heightened regional tensions, with Saudi Arabia and Iran facing off over a missile attack from Yemen and a potential political crisis in Lebanon after Prime Minister Saad Hariri’s shock resignation announced from Riyadh.

Authorities have frozen the bank accounts of the accused and warned that assets related to the alleged corruption cases would be seized as state property, as the government appears set to widen the crackdown. High-profile figures, including billionaire tycoon Prince Alwaleed Bin Talal, were arrested or sacked in the weekend crackdown — just after an anti-graft commission headed by the crown prince was established.

Prince Mohammed, the son of 81-year-old King Salman, is already seen as the country’s de facto ruler controlling all the major levers of government. With the purge, which analysts describe as a bold but risky power play, the crown prince has centralized power to a degree that is unprecedented in recent Saudi history. The crackdown comes as he moves to accelerate his Vision 2030 program to modernize the conservative kingdom, but also as Riyadh takes a more aggressive stance in its wider region. (AFP 10.11)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Medial EarlySign Algorithm Predicts Risk for Prediabetics Becoming Diabetic

Medial EarlySign announced the results of its clinical data study on identifying and stratifying prediabetic patients at high risk for progressing to diabetes within one year. This research has been completed at a period with no existing standards to identify prediabetic patients at risk of progressing to diabetes within a given timeframe, and offers care managers new opportunities to allocate diabetes prevention-focused resources and plan for care accordingly. The study, based on a database of 645,000 prediabetics, found that by isolating less than 20% of the prediabetic population, EarlySign’s artificial intelligence (AI)-based algorithm platform successfully identified 64% of patients who became diabetic within 12 months. The algorithm utilizes more than 25 parameters derived from routine medical data stored in Electronic Health Records (EHR). It also ranks the 20% based on risk prioritization.

Medial EarlySign is currently developing a number of AlgoMarkers, which are clinical-risk predictors designed to flag patients with a high probability for either harboring or developing specific illnesses. Using machine learning-based AI, each condition-specific AlgoMarker analyzes routine EHR data, and delivers patient risk assessment scores for healthcare professionals. This information can help healthcare organizations target care as early as possible by identifying and stratifying which of their patients are at greatest risk. Medial EarlySign’s research and development work will also address diabetes-related complications, including diabetic nephropathy and cardiovascular disease.

Medial EarlySign’s advanced AI-based algorithm platform helps healthcare organizations accurately predict and stratify individuals at high risk for developing serious health conditions, by leveraging routine blood test results and EHR data. The technology can create actionable opportunities for early intervention to delay progression of illness, improve patient outcomes, focus financial resources, and reduce overall costs. Founded in 2009, Medial EarlySign is headquartered in Kfar Malal, Israel. (Medial EarlySign 01.11)

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8.2 Compugen Collaboration with Mount Sinai’s School of Medicine (New York) on Novel Myeloid Immuno-Oncology Targets

Compugen announced the initiation of a multi-year cancer immunotherapy research collaboration with Mount Sinai Icahn School of Medicine in New York. The collaboration will focus on the research and target validation of selected myeloid candidates discovered by Compugen for their potential to serve as a basis for cancer immunotherapy treatments, including the validation of their role in innate immunity and involvement in tumor biology.

Myeloid cells are a critical component of the immunosuppressive tumor microenvironment (TME), preventing T cells from entering the tumor and eliciting an immune response against the tumor. Targeting tumor myeloid cells may create an immune response towards the cancer, which has emerged as a complimentary strategy of multiple cancer immunotherapy approaches. This method can potentially elucidate a strong anti-tumor effect transforming a cold, or uninflamed tumor into a hot, or inflamed tumor. Therefore, it can potentially provide a solution for non-responsive patients or serve as a combination therapy with existing immune checkpoint therapies in order to increase their response rate.

Holon’s Compugen is a therapeutic discovery and development company utilizing its broadly applicable predictive discovery infrastructure to identify novel drug targets and develop first-in-class therapeutics in the field of cancer immunotherapy. The Company’s therapeutic pipeline consists of immuno-oncology programs against novel drug targets it has discovered, including T cell immune checkpoints and myeloid target programs. Compugen’s business model is to selectively enter into collaborations for its novel targets and related drug product candidates at various stages of research and development. (Compugen 02.11)

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8.3 SynVaccine Raises $1.7 Million

SynVaccine, which develops vaccines based on synthetic biology, has raised $1.7 million. The Tel Aviv-based company has developed a proprietary technology that identifies significant parts of viruses and develops vaccines for them containing the significant components for arousing a response from the immune system and excluding any hazardous elements. The company was founded on the basis of commercialized research from Tel Aviv University and Weizmann Institute of Science led by Prof. Tamir Tuller, who mapped 3,000 different viruses. The researchers analyzed the DNA areas that have been preserved throughout evolution in all the viruses, or at least in most of them. They concluded from this that these were important areas for the virus’s activity. The researchers believe that it is worthwhile making the changes in these areas. The company has already developed an initial product, which it will soon use in animal trials. SynVaccine sees its future in building “positive viruses” that not only cause the creation of antibodies against one family of viruses similar to them, but also generally strengthen the immune system’s activity, so that it can more successfully attack both a variety of entities penetrating the body and dangers inside the body, such as cancer. (SynVaccine 06.11)

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8.4 STK’s Timorex Gold Biofungicide Receives 1st Place ‘Best-In-Class: Provider of Choice’ Award

STK (Stockton) was recognized by AgroPages, receiving its 1st Place BEST-IN-CLASS: Provider of Choice Award for its bio fungicide, Timorex Gold. Timorex Gold is a botanical broad-spectrum fungicide with preventative and curative activity based on a plant extract. It has earned an international reputation as a reliable broad spectrum bio fungicide which controls a wide range of fungal diseases on many fruits, vegetables and specialty crops.

AgroPages hosted the “Top 10 Global Leading Biopesticide & Biocontrol Brands” Award for 2017, aimed at screening well-known brands with a high reputation, high performance and high technologies. Following a three-month global vote and expert reviews, 10 products were awarded the 2017 Top 10 Global Leading Biopesticide & Biocontrol Brands, with Timorex Gold bio fungicide rated #1.

Petah Tikva’s STK creates breakthrough botanical-based solutions (BBS) that effectively protect agricultural and aquacultural produce. Their bio-ag food protection solutions, a synergy of cutting-edge scientific research and technology, enhance the efficacy, safety, yield and quality of multiple crops. STK helps growers, food companies and supermarket chains to deliver healthier and safer food products to market. Their botanical-based and hybrid solutions are easily integrated into conventional spraying programs, helping to advance the IPM (Integrated Pest Management) approach to food production. They enable everyone in the ecosystem, from growers to food companies and supermarkets, to adhere to regulatory standards and support the transition to sustainable agriculture. (STK 08.11)

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8.5 Cannabics Files Patent Application on Cannabinoid Modulation of the Microbiome

Cannabics Pharmaceuticals announced that it has filed the first of a cluster of patent applications with the US Patent & Trademark Office (USPTO) which covers their ongoing work on the use of cannabinoid products for adjusting the varied microbial populations that live on and in the body. The pioneering work based on profiling and modulating patient-derived microbiota, personalizes and profiles individual health status. This will make possible the optimization of pharmacological treatments for patients.

Cannabics Pharmaceuticals, a U.S based public company, is dedicated to the development of Personalized Anti-Cancer and Palliative treatments. The Company’s R&D is based in Israel, where it is licensed by the Ministry of Health for its work in both scientific and clinical research. The Company’s focus is on harnessing the therapeutic properties of natural Cannabinoid formulations and diagnostics. Cannabics engages in developing individually tailored natural therapies for cancer patients, utilizing advanced screening systems and personalized bioinformatics tools. (Cannabics Pharmaceuticals 08.11)

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8.6 Compugen to Initiate Manufacturing of COM902, its Lead Anti-TIGIT Monoclonal Antibody

Compugen is advancing COM902, its lead anti-TIGIT antibody, into manufacturing in anticipation of filing an investigational new drug (IND) application in 2019. As part of these activities, Compugen has entered into a process development and manufacturing service agreement with Bayer HealthCare LLC (Bayer) to produce COM902 for future use in clinical trials. This program follows COM701, an anti-PVRIG antibody, for which the submission of an IND application is anticipated towards the end of the first quarter of 2018.

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8.7 Zebra Medical Vision & Google Cloud Bring a Transparent All-in-One Model to Healthcare

Zebra Medical Vision is announcing that all its current and future radiology algorithms will be enabled on the Google Cloud as part of its new AI1 offering to global health providers. A pioneer in the field of machine and deep learning for medical imaging, Zebra-Med is driving transparency in its business model to encourage faster global adoption of advanced tools that can improve health. With over 450 new petabytes per year in imaging data, based on IDC’s health insights 2017, the amount of imaging storage is expected to double in the next 5 years and substantially challenge health providers to keep track of scaling their storage and IT infrastructure , hence the cloud opportunity.

Using millions of longitudinal high quality imaging scans, Zebra-Med has been developing a deep learning engine that can automatically detect various medical findings in imaging scans. Current capabilities include automatic detection of liver, lung, cardiovascular, and bone disease all while new capabilities are constantly being released – covering breast cancer, lung cancer, brain trauma, hypertension and other clinical areas. Zebra-Med’s findings are integrated into the PACS system running on Google Cloud Platform, allowing radiologists to include them in their reading and reporting workflow. This automated assistance contributes to more comprehensive, quantitative, and consistent reporting, improving the output of radiologists and contributing to overall improved patient care.

Kibbutz Shefayim’s Zebra Medical Vision uses artificial intelligence and deep learning to create and provide next generation products and services to the healthcare industry. Its Imaging Analytics Platform allows healthcare institutions to identify patients at risk of disease, and offer improved, preventative treatment pathways to improve patient care. AI1 is the company’s commitment to make AI-enabled healthcare solutions affordable globally, including its current and future algorithms available for a low flat price per scan. (Zebra Medical Vision 08.11)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 PacketLight Networks & NRBN Improve Connectivity for Businesses in the Niagara Region

PacketLight Networks announced a partnership with Niagara Regional Broadband Network (NRBN) to build a high capacity, high speed network that will support all municipalities, universities, schools, hospitals and businesses in the Niagara region. NRBN was able to increase existing network capacity from 10G to 100G by deploying PacketLight’s PL-2000AD 200G muxponder/transponder with onboard encryption alongside the PL-1000TN 10G transponder solution, and PL-300 passive optical solution, to upgrade their existing network by nearly ten-fold, keeping up with ever-increasing data demands for the 600+ businesses in the surrounding area. PacketLight’s alien wavelength solution creates more capacity and improved spectral efficiency over fibre lines and transports additional wavelengths over any existing OTN/DWDM network infrastructure, without infrastructure replacement or change. At a time where network security has become a global concern, PacketLight DWDM and OTN solutions have the most advanced cryptography solution, which performs Layer-1 encryption to ensure that nefarious elements cannot intercept any data sent across the fibre network.

Tel Aviv’s PacketLight Networks offers a suite of leading 1U metro and long haul CWDM/DWDM and OTN solutions, as well as Layer-1 optical encryption for transport of data, storage, voice and video applications over dark fiber and WDM networks. PacketLight provides the entire optical layer transport solution within a highly integrated compact platform, designed for high capacity, maximum flexibility, easy maintenance and operation, with real pay-as-you-grow architecture, while maintaining a high level of reliability and low cost. (PacketLight 01.11)

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9.2 Safe-T New Software-Defined Access Solution

Safe-T is taking the software-defined perimeter (SDP) to the next step with the launch of its Software-Defined Access solution. The new offering – which is built from Safe-T’s Secure Data Access (SDA) and Secure Data Exchange (SDE) – reduces cyber-attacks by masking mission-critical data at the perimeter, limiting access to authorized and intended entities, on premise or in the cloud. With cyber attacks growing in number and sophistication, enterprise applications, services and sensitive data are constantly at risk of being compromised. SDPs emerged in the last few years to address shortcomings of fixed perimeter technologies. The technology surpasses current authentication and encryption strategies by unifying and streamlining all systems while consolidating data exchange and connectivity.

Herzliya’s Safe-T, a wholly owned subsidiary of Safe-T Group, is a leading provider of software-defined access solutions which mitigate attacks on enterprises’ business-critical services and sensitive data. Safe-T solves the data access challenge by masking data at the perimeter, keeping information assets safe and limiting access only to authorized and intended entities in hybrid cloud environments. Safe-T enhances operational productivity, efficiency, security, and compliance by protecting organizations from data exfiltration, leakage, malware, ransomware and fraud. (Safe-T 01.11)

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9.3 Sapiens Announces RLI’s Selection of the StoneRiver Stream Billing System

Sapiens International Corporation announced that its fully owned subsidiary StoneRiver, Inc. entered into an agreement with RLI Corp., a Peoria, Illinois-based specialty insurer serving diverse, niche property, casualty and surety markets, for the StoneRiver Stream Billing system to consolidate its current billing systems. The billing system will be deployed in the cloud for even greater efficiency. With Stream Billing, RLI will be able to provide a consistent customer billing experience across its diverse products; operate more efficiently with a rules-based payment application feature; provide online inquiry for information on billing, premium, and cash activities; and support various payment options, including credit card and electronic funds transfer.

Stream Billing is a component of Stream Suite, a scalable, highly configurable property-casualty set of processing solutions for policy administration, billing, claims management, customer management and distribution management that enables ongoing evolution. Carriers can address emerging business needs more easily because of the underlying Insurance Integration Platform, which enables easier interfaces while still allowing software upgrades.

Holon’s Sapiens is a leading global provider of software solutions for the insurance industry, with a growing presence in the financial services sector. Sapiens offers integrated core software solutions and business services, and a full digital suite for the property and casualty/general insurance; life, pension and annuities; and reinsurance markets. Sapiens also services the workers’ compensation and financial and compliance markets. (Sapiens 01.11)

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9.4 Leading Fintech Company Selects Silicom’s Ultra-Low-Latency FPGA-Based Interface Cards

Silicom announced that it has been awarded a design win from a leading Fintech player for its most advanced FPGA (Field Programmable Gate Array)-based networking card, confirming the positioning of the Company’s FPGA technology as a platform for a variety of emerging new “FPGA in the Cloud” applications. The customer plans to use the Silicom solution in all of its deployments moving forward, with resulting revenues expected to ramp up to approximately $1 million per year. The Design Win is for Silicom’s highest-end FPGA-based card to date: an ultra-low-latency solution featuring high-speed host connectivity and four 10-100gbps ports interconnected by an extremely advanced FPGA. The FPGA itself integrates proprietary technologies developed separately by Silicom and the customer. The adapters will be deployed in FPGA cards clusters managed by a single server, thus maximizing functionality while conserving both space and power.

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 01.11)

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9.5 IAI Announces Launch Customer for SATCOM Terminal for Fighter Aircraft

Israel Aerospace Industries (IAI) announced it has received first order for its revolutionary SATCOM (Satellite Communication) terminal with a conformal electronic-steered antenna for fighter jets. ELTA’s ELK-1882T SATCOM network system will be installed for the first time, on tens of very advanced Western fighters, with first deliveries planned for 2021. This network system is the latest technology developed by ELTA Systems Ltd., a group and subsidiary of IAI (IAI/ELTA). The customer has selected the innovative ELK-1882T Ku-band phased array SATCOM network for its ease of installation and integration, which boasts minimal impact on aircraft performance due to the conformal installation. This conformal flush installation generates negligible drag, as opposed to conventional high profile SATCOM dish antennas. In addition, the new system has no moving parts, which greatly enhances reliability and robustness, especially on board modern high maneuvering fighters. The onboard system (terminal) includes a conformal phased antenna installed on the jet’s fuselage, comprising the transceiver, modem and High Power Amplifier (HPA) in a single LRU, with an IP LAN connection to the aircraft avionics. (IAI 31.10)

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9.6 Augury Unveils ‘Halo’ to Diagnose & Predict Mechanical Failures in Smart Facilities

Augury announced Augury Halo, a continuous diagnostics platform for industrial and commercial facilities. This cloud-based diagnostics solution monitors mechanical equipment and predicts failures before they happen. The system’s ability to provide actionable insights from machine data leads to increased equipment life, improved machine reliability and more efficient operations. Augury Halo is already deployed at several Fortune 500 companies, providing actionable insights into their production machines. With the rise of connected sensors and artificial intelligence, facilities are able to mitigate downtime, lower maintenance costs and maximize energy usage to reduce environmental impact. Augury Halo provides continuous, automated analysis of equipment performance to avoid catastrophic equipment failures.

Augury Halo uses vibration, ultrasound and other types of sensing technologies to detect equipment malfunctions and provide detailed, actionable recommendations for maintaining the health status of any machine. The algorithms use vast amounts of collected data from a variety of different machines to build a model of how malfunctioning equipment behaves. With collected data from over 40,000 machines, Augury’s malfunction dictionary continues to expand at an exponential rate.

Haifa’s Augury is bringing predictive maintenance technology to new markets. The technology combines two key shifts in the industry: artificial intelligence and the Industrial Internet of Things. The intersection of these trends allows Augury to provide machines with a mechanical nervous system and the awareness to optimize their own health, thereby accelerating human productivity and safety. (Augury 07.11)

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9.7 Mellanox Innova-2 FPGA-Based Programmable Adapter Family

Mellanox Technologies announced the Innova-2 product family of FPGA-based smart network adapters. Innova-2 is the industry leading programmable adapter designed for a wide range of applications, including security, cloud, Big Data, deep learning, NFV and high performance computing. Innova-2 is available in multiple configurations, either open for customers’ specific applications or pre-programmed for security applications with encryption acceleration such as IPsec, TLS/SSL and more. For security applications, Innova-2 delivers 6X higher performance while reducing total cost of ownership by 10X when compared to alternative options. For Cloud infrastructures, Innova-2 enables SDN and virtualized acceleration and offloads. Deep learning training and inferencing applications will be able to achieve higher performance and better system utilization by offloading algorithms into Innova-2 FPGA and the ConnectX acceleration engines.

Innova-2 is based on an efficient combination of the state-of-the-art ConnectX-5 25/40/50/100Gb/s Ethernet and InfiniBand network adapter with Xilinx UltraScale FPGA accelerator. Innova-2 adapters deliver best-of-breed network and storage capabilities as well as hardware offloads to CPU-intensive applications.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end InfiniBand and Ethernet smart interconnect solutions and services for servers and storage. Mellanox interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance capability. (Mellanox 06.11)

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9.8 General Robotics Introduces the DOGO LLW

General Robotics launches a Less-Lethal Weapon (LLW) module attached to the DOGO robot for special units and police forces. The Less-lethal module was designed to allow intervention forces to neutralize the threats by remote control while reducing the risk of inadvertent lethal injuries to a target or bystanders. The demand for a Less-Lethal solution against terrorism is a derivative of changes in the world of terrorism in recent years, especially since the rise of Islamic State in Syria and Iraq.

With the DOGO LLW module, the system enables the Special Forces full discretion of the lethality level which is to be used under the circumstances, as activating an accurate lethal or less lethal weapon can be done by a push of a button. From an operational point of view, the use of less-lethal enables the attacker to be neutralized with minimum collateral damage, and with the functional capability of being able to interrogate the attacker. The DOGO is a 10 Kg Ultra-Light Hand-Held Anti-Terror Robot managed by remote control. The variety of tasks in which the DOGO LLW takes part include Anti-terror, Hostage rescue, Close quarter combat, Fatal funnel clearance, Urban warfare, Tunnels, ISR and Target detection.

Beit Nehemia’s General Robotics is engaged in the research, development, and manufacturing of advanced robotic platforms for the Defense and Homeland Security markets. Their products are designed to meet the operational needs of infantry, SWAT and Special Operation teams, Law Enforcement agencies, and First Responders. They deliver high-end technologies at an affordable cost to increase the survivability of all operational units. (General Robotics 08.11)

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9.9 My Size Registers Its Third Patent – This Time in the U.S.

My Size announced today that after approval of its patent in Russia and Japan, it obtained similar approval in the U.S. The patent relates to My Size’s “Measurement of a Body Part” technology. The U.S. patent will expire 20 years from the date the patent was initially filed, or 20 January 2033.

The Measurement of a Body Part application was designed for the online apparel market. It enables shoppers to always choose the right size garment on a retailer’s website using the accurate measurements taken with their smart phone of an area of their body. The application first analyzes the recorded information using big data, then recommends the appropriate size of an article of clothing the shopper has selected for consideration on a retailer’s website. All of My Size’s technology applications use algorithms within a smartphone, rather than the smart phone camera, to record and document body measurements. This method is not only more accurate, but it also maintains and ensures customer privacy.

Airport City’s My Size has developed a unique measurement technology based on sophisticated algorithms and cutting-edge technology with broad applications including the apparel, e-commerce, DIY, shipping and parcel delivery industries. This proprietary technology is driven by several algorithms which are able to calculate and record measurements in a variety of novel ways. (My Size 08.11)

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9.10 Vaica Medical Launches Capsuled, Personally-Customized Medication Adherence Solution

Vaica announced the launch of Capsuled, a personally-customized medication adherence solution, supporting any medication modality, for the use of pharmaceutical companies. The novel device is designed to create an accessible gateway to all patient-related digital information, along with timed encouragement messaging. Capsuled makes use of auditory and visual alerts to remind patients to take medication while integrating educational videos and closing the patient-caregiver-Patient Support Program (PSP) loop to enhance care outcomes. These features were especially designed in order to assist pharmaceutical companies to improve the patient journey and beyond the pill initiatives.

Vaica’s technology will be immediately implemented in two extensive clinical studies conducted by one of the largest private hospital chains in Italy that chose to partner with Vaica and Telecare H24, a provider of telemedicine services. Patients with chronic diseases such as Cardiac Heart Disease (CHD), Diabetes Mellitus (DM) and Chronic Obstructive Pulmonary Disease (COPD) will participate in these studies that are aimed to improve medication adherence in chronically ill patient populations characterized by suboptimal medication adherence.

Tel Aviv’s Vaica provides medication adherence customized solutions in order to address the wide spread phenomena of medication non-compliance and improve the life quality of chronically-ill patients. (Vaica 18.11)

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9.11 Mellanox Interconnect Solutions Boost Qualcomm Arm-Based Data Center Platforms

Mellanox Technologies announced that the company’s Ethernet and InfiniBand network adapters are being used to accelerate throughput speeds on Qualcomm Datacenter Technologies’ new Arm-based Qualcomm Centriq 2400 platforms. Qualcomm Datacenter Technologies is a subsidiary of Qualcomm Technologies. Mellanox’s leading 25, 50 and 100Gb/s Ethernet and EDR InfiniBand interconnect solutions, paired with the Qualcomm Centriq 2400, the world’s first 10nm server processor, represent a sea change in terms of performance and innovation, offering a cost-effective platform for the most demanding compute and storage workloads. The combined solution delivers unprecedented DPDK forwarding scalable performance, while leaving the Arm-based cores mostly available for applications.

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9.12 RADWIN Smart-Node – World’s 1st All-In-One Communication Smart Cities Solution

RADWIN announced the release of Smart-Node, an outdoor communications and power solution that reduces costs and accelerates the roll-out of smart-city, IoT and telecom projects. The all-in-one Smart-Node solution offers a wide variety of power and networking interfaces including fiber and an array of radio technologies to connect multiple devices such as CCTV cameras, Wi-Fi access points and IoT sensors. Bridging the gap between broadband and IoT applications, Smart-Node enables easy integration with 3rd party devices to support multiple applications ranging from city surveillance, smart-lighting, smart-metering, waste management and more. Smart-Node is a remarkably compact, IP-67 protection-grade solution that guarantees low visual impact for street-level deployments and high reliability to withstand extreme temperatures and tough environments.

Tel Aviv’s RADWIN is a leading provider of broadband wireless solutions. Deployed in over 170 countries, RADWIN’s solutions power applications including backhaul, broadband access, private network connectivity, video surveillance transmission as well as delivering broadband on the move for trains, vehicles and vessels. (RADWIN 09.11)

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9.13 CN Utilizes FST Biometrics’ In Motion Identification for Access Control

FST Biometrics announced that it has successfully deployed the In Motion Identification (IMID) solution, integrated with Automatic Systems’ SmartLane turnstiles, at CN’s Montréal headquarters. FST’s contactless system is installed at all perimeter access points of the company’s headquarters, as well as at the entrance of the corporate child daycare center.

Leading Canadian integrator Infynia Security directed the implementation and integration process at CN’s headquarters, installing FST’s award-winning IMID software and Automatic Systems’ cutting-edge SmartLane turnstiles to provide access to its 3,000 employees, contractors and in specific cases, for visitors entering the company’s headquarters. Once users are registered, FST’s IMID Access identifies each of them almost instantaneously, allowing users to enter and exit the facility without waiting, swiping a card, punching a code or presenting any documentation.

Holon’s FST Biometrics is a leading In Motion Identification (IMID) solutions provider. FST’s Visual Identification technology offers speed and accuracy for a highly convenient user experience. IMID is ideal for a diverse range of applications, including access control and retail shopper experience personalization. IMID solutions are a fusion of advanced Visual Identification biometrics technologies. (FST Biometrics 14.11)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israeli Shekel Emerges as World’s 2nd Strongest Currency

The Israeli shekel is currently the world’s second-strongest currency, according to a new report by German global banking and financial services company Deutsche Bank. The report ranked China’s yuan as the world’s strongest currency. Deutsche Bank reported that over the past 12 months, the shekel has appreciated 6.1% against the basket of currencies of Israel’s main trading partners, such as the U.S. dollar, the British pound, the euro and the yen. The report recommended short positions for shekel investors – a technique used when investors predict the value of a stock or currency will decrease in the short term – saying the Israeli currency is nearing historically high levels.

The firm issued a similar recommendation in late June, inspiring a depreciation in shekel rates, mostly over foreign currency purchases by the Bank of Israel. This move is common whenever it appears the shekel may become so strong it could undermine exports. The shekel bounced back despite continued purchases by the central Bank of Israel, whose foreign currency reserves have already crossed the $110 billion mark. The bank has sharply cut its foreign currency purchases in recent months, but Deutsche Bank believes it will most likely resume its intervention in the forex markets in the next few weeks. (Various 08.11)

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10.2 Three Millionth Tourist for 2017 Lands in Israel to a First Class Welcome

On 7 November, Israel’s incoming tourism broke records when Wizz Air Flight No. 3257 landed in Israel, carrying Romanian tourist Ioana Isac, the 3 millionth tourist to arrive in Israel this year, and her partner Mihai Georgescu. The pair were met at the airport by Tourism Minister Yariv Levin and ministry Director General Amir Halevi. After a brief welcome ceremony, in which Isac and Georgescu were presented with commemorative certificates, the couple were taken by limousine to the David’s Citadel Hotel in Jerusalem, where they are staying in a luxury suite. Prime Minister Benjamin Netanyahu met the visitors at the Tower of David Museum in the Old City and posed for a selfie with them. The couple, who decided to visit Israel to celebrate Georgescu’s birthday, were treated to a dream vacation courtesy of the Tourism Ministry, which will be publicizing the visit as part of its campaign to promote the Israeli tourism industry.

Between January and October 2017, 63,000 tourists from Romania visited Israel, compared to 40,100 in the same period in 2016, a 57% increase. In 2015, 37,400 Romanian tourists arrived in the same 10 month period. Continued efforts to expand Israel’s open skies policy have allowed for more weekly flights to Israel from Romania, peaking at 64 flights per week, most from Bucharest. This month, a new route between Bucharest and Ovda Airport near Eilat commenced operations. On average, tourists from Romania spend seven nights in Israel. (Various 08.11)

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10.3 Israel’s Tax Collection Sets New Record in October

State tax revenues set a new record in October for the second straight month, reaching NIS 30.1 billion, mostly attributable to NIS 11-12 billion in unexpected revenue from the taxation discount for beneficiary dividends granted by the state to controlling shareholders in private companies. These shareholders are being allowed to pay 25% tax on income classed as dividends, compared with 30-33% previously. As a result of the exceptional surplus revenue, the budget deficit has reached a new low. The cumulative deficit over the past 12 months (November 2016-October 2017) is 1.4% of GDP, less than half of the 2.9% 2017 deficit target.

Government spending since the beginning of the year totaled NIS 245.1 billion, 9.2% more than in the corresponding period last year (in the same measurement terms). These figures include an 8.8% rise in spending by civilian ministries and an unplanned 7.3% increase in defense spending. Some of the NIS 6.5 billion tax revenue surplus will be deferred to 2018.

Tax revenue from dividends totaled NIS 17.5 billion, compared with an original forecast of NIS 6.5 billion. The state also received NIS 4.1 billion in unanticipated one-time tax revenues from capital gains by Israeli shareholders in Mobileye, sold to Intel for $15.3 billion. (Globes 08.11)

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10.4 Ben Gurion Passenger Traffic Rises by 16% in 2017

Passenger traffic at Ben Gurion Airport exceeded two million in October, 18% more than in October 2017. The Sukkot holiday, during which many Israelis travel overseas, occurred during October. Passenger traffic at Ben Gurion Airport totaled 17.4 million in January – October, 16% more than in the corresponding period last year. The 517,000 passengers flown by El Al Israel Airlines was 16% more than last year. Turkish Airlines, the leading foreign airline in Israel, carried 110,000 passengers, 20% more than last year, and Israir was in third place with 90,500 passengers, followed by Aeroflot and Arkia Airlines.

Aeroflot and Turkish Air fly passengers mainly to other destinations, with stopovers at their home airports. The leading destination of Israeli passengers in October, from which many continued to other destinations, was therefore Turkey, followed by Greece, the US (20% more than in October 2016), Russia and Germany. Passenger traffic to France rose 27%. (Globes 07.11)

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10.5 New Car Deliveries in Israel for 2017 Near Record Levels

New car deliveries in Israel in October 2017 rose 45.6% to 19,829 vehicles compared with October 2016. The reason for the sharp rise was due to the way the holidays fell this year. Between January and October 2017, 257,977 new vehicles were delivered in Israel, down 2% from last year, which was a record year.

Hyundai is Israel’s most sold new car with 34,973 deliveries in the first ten months of the year, down 4.3% on the corresponding period of last year. Kia (a Hyundai subsidiary) was in second place with 32,952 deliveries, down 4.2% from last year. Toyota was in third place with 26,968 deliveries, up 6.4% from last year and Skoda was in fourth place with 18,230 deliveries, up 9.2% from last year. Fifth was Suzuki with 11,107 deliveries, up 34.2% from last year, and sixth was Nissan with 10,360 deliveries, up 24.2% from last year. The sector expects November and December to be weak for new car deliveries, as they were last year, as people wait for the new 2018 models. (Globes 05.11)

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11: IN DEPTH

11.1 ISRAEL: Israel’s Foreign Trade, Export & Import of Goods in October 2017

In October 2017, imports of goods totaled NIS 21.8 billion, exports of goods totaled NIS 13.7 billion and the trade deficit of goods totaled NIS 8.1 billion. This is the largest trade deficit in goods since October 2012.

Exports of goods in January – October 2017, as a percentage of imports (excluding ships, aircraft and diamonds), constituted 73.1%, compared with 75.3% in the same months in 2016.

The trade deficit (of goods only) in January-October 2017 totaled NIS 45.6 billion, compared with NIS 42.6 billion in January – October 2016.

Imports of goods (excluding ship, aircraft, diamonds and fuels) decreased by 0.9% at an annual rate in August – October 2017, according to trend data, after an increase of 1.4% at an annual rate in May – July 2017.

Exports of goods (excluding ships, aircraft and diamonds) decreased by 14.3% at an annual rate in August – October 2017, according to trend data, following a decrease of 18.6% at an annual rate in May – July 2017.

Trade in goods in October 2017 was influenced by changes in the value of the NIS relative to the other currencies in which import and export transactions were conducted. In October 2017 the NIS strengthened relative to most of the currencies; by 0.7% relative to the US Dollar, by 2.1% relative to the Euro, by 1.2% relative to the Pound Sterling, by 3.1% relative to the Japanese Yen, and by 2.9% relative to the Swiss Franc.

Imports of Goods

Imports of goods in October 2017 totaled, as mentioned above, NIS 21.8 billion. 40% of total imports were imports of raw materials (excluding diamonds and fuels); 19% were imports of consumer goods; 17% were imports of machinery, equipment and land vehicles for investment; and 24% were imports of diamonds, fuels, ships and aircraft.

*The last points are subject to substantial revisions

Trend data point to an increase in imports of raw materials (excluding diamonds and fuels) of 2.4% at an annual rate in August – October 2017, after a decrease of 1.7% at an annual rate in May – July 2017. A breakdown by groups shows that imports of inputs for paper industries increased by 19.4% at an annual rate and imports of rubber and plastics increased by 11.1%.

Trend data point to an increase in imports of investment goods (excluding ships and aircraft) of 4.2% at an annual rate in August – October 2017, following an increase of 4.3% at an annual rate in May – July 2017. A breakdown by groups shows that imports of machinery and equipment (66% of investment imports) increased by 20.5% at an annual rate.

Imports of consumer goods (based on trend data) decrease by 6.1% at an annual rate in August – October 2017, following a decrease of 0.4% at an annual rate in May – July 2017. Imports of durable goods (furniture, electrical equipment and transport equipment) decreased by 8.0% at an annual rate in August – October 2017. Imports of non-durable goods (medicines, food and beverages, and clothing and footwear) decreased by 6.3% at an annual rate in August – October 2017.

Imports of diamonds (net, rough and polished) in January- October 2017 totaled NIS 16.5 billion, compared with NIS 20.1 billion in the same period of 2016.

Imports of fuels (crude oil, distillates and coal) in January- October 2017 totaled NIS 22.5 billion; an increase of 23.5% compared with January – October 2016.

Exports of Goods

Exports of goods totaled, as mentioned above, NIS 13.7 billion in October 2017. Manufacturing, mining and quarrying exports (excluding diamonds) constituted 86% of all exports of goods, exports of diamonds constituted 13%, and the remaining 1% was exports of agriculture, forestry and fishing exports.

* The last points are subject to substantial revisions

Trend data point to a decrease in manufacturing, mining and quarrying exports (excluding diamonds) of 15.2% at an annual rate in August – October 2017, following a decrease of 18.2% at an annual rate in May – July 2017.

Trend data of manufacture exports, by technological intensity

Trend data point to a decrease in exports by high technology industries (47% of total manufactured exports excluding diamonds) of 21.3% at an annual rate in August – October 2017 (-2.0% monthly average), following a decrease of 21.7% at an annual rate in May – July 2017 (-2.0% monthly average). A breakdown by economic activity shows that exports of the manufacture of pharmaceutical products industry decreased by 25.3% at an annual rate (-2.4% monthly average).

Trend data point to a decrease in exports by medium-high technology industries (32% of total manufactured exports) of 10.7% at an annual rate in August – October 2017, following a decrease of 6.9% at an annual rate in May – July 2017. A breakdown by economic activity shows that exports of the manufacture of motor vehicles and other transport equipment industry decreased by 41.8% at an annual rate (-4.4% monthly average).

Diagram 4 – Manufacturing Exports by Technological Intensity

* The last points are subject to substantial revisions

Trend data point to a decrease in exports by medium-low technology industries (14% of total manufactured exports) of 5.3% at an annual rate in the last three months, following a decrease of 29.8% at an annual rate in May – July 2017 (-2.9% monthly average).

Trend data point to a decrease in exports by low technology industries (7% of total manufacture exports) of 10.1% an annual rate in August – October 2017, following a decrease of 13.8% at an annual rate in May – July 2017. A breakdown by economic activity shows that exports of the manufacture of food products, beverages and tobacco products industry decreased by 8.7% at an annual rate.

Exports of diamonds (net, polished and rough) in January – October 2017 totaled NIS 20.9 billion (original data), compared with NIS 24.5 billion in the same period of 2016.

Agricultural, forestry and fishing exports in January – October 2017 totaled NIS 3.6 billion (original data), a 2.6% decrease compared with the same period in 2016. Exports of flowers decreased by 10.5% in the same period. (CBS 13.11)

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11.2 JORDAN: Jordan Considering Recipe for Revolt – Lifting Bread Subsidies

Mohammad Ersan posted in Al-Monitor on 6 November that budget-cutters in Amman have bread subsidies in their crosshairs once again, as the government tries to satisfy the conditions of an International Monetary Fund (IMF) agreement designed to help the economically strapped kingdom. The subsidies have come under government fire numerous times over the years, with each episode sparking protests and riots. This time around, authorities are trying to justify their intentions by claiming that 3 million non-Jordanian residents benefit from subsidized bread, in addition to 7 million Jordanian citizens.

On a talk show that aired 28 October on the Roya satellite channel, government spokesman Mohammad al-Moumani said, “A total of 140 million dinars [around $197 million] is spent to subsidize bread consumed by 3 million non-Jordanian residents.” He also alleged that some bread is wasted and some of it is smuggled into other countries to take advantage of the price difference.

With Jordan struggling under an economic crisis, the country’s leadership is striving to meet the requirements of the IMF agreement signed in August 2016 to extend Amman $723 million in loans over three years to support the country’s economic and financial reform program. The requirements include removing budget distortions and lifting subsidies on goods within the scope of the economic adjustment programs developed by the IMF since 1989. Jordanian economists and opposition figures say such programs have dictated the economic policies of successive Jordanian governments.

“The IMF is imposing its policy on debtor countries, including Jordan,” the economist Fahmi al-Ktout told Al-Monitor. “It requires these countries, in exchange for obtaining new loans, to lift subsidies on goods, liberalize markets and trade, and raise direct and indirect taxes.” According to Moumani’s statements on Roya TV, however, the IMF is just an adviser, while the government has the final say on lifting and distributing subsidies.

Previous Jordanian governments led by Prime Minister Fayez al-Tarawneh in 2012 and by Abdullah al-Nisour during 2014-16 attempted to lift subsidies on bread, a critical staple for Jordanians. Ultimately, the high political and social costs of those efforts thwarted their plans, amid the emergence of a nationwide protest movement after the outbreak of the Arab Spring in 2011.

“The IMF is asking the government to raise its revenues by certain percentages and the government is thinking about the measures it can take to do so,” Salama al-Derawi, an editor and columnist with the Maqar news website, told Al-Monitor. Derawi estimates that lifting the bread subsidy would add about $100 million to the treasury. He also believes that revenue generated by raising the sales tax to 16% on some items currently taxed at 4% and 8% and some that are not taxed at all could produce an additional 500 million dinars ($705 million) toward the 2018 budget.

Derawi added, “The middle and poor classes will be harmed if the government doesn’t find an appropriate mechanism to deliver cash subsidies to citizens, who no longer trust the cash subsidies system after the government stopped making cash disbursements just months after lifting oil subsidies in 2014.” In 2014, the Jordanian government decided to remove oil subsidies and provide cash disbursements to people instead. After global oil prices plummeted, however, the cash payments stopped and as prices recovered, the government failed to resume the disbursements as it had pledged.

The Ministry of Finance expects the 2018 budget to total 9 billion dinars (about $12.7 billion), of which 7.5 billion dinars (about $10.6 billion) are current expenses, mostly allocated to pay public servant salaries. The indicative budget was estimated for next year amid unemployment rates that jumped in the first quarter of 2017 to 18.2%, up from 14.6% for the same period last year, according to the Department of Statistics.

In an interview with Al-Monitor, Jordanian political activists warned that the government’s economic measures, including the removal of bread subsidies, will ignite popular protests like those in April 1989 and the bread price protests of 1996 against poor economic and political conditions.

Basil al-Bashabsheh, a political activist in Karak, told Al-Monitor, “Lifting subsidies on bread would harm Jordan’s middle and poor classes,” warning of “social protests and chaos,” especially in the south, where the economy is reeling. He accused the government of “resorting to intimidation maneuvers, in light of the violence in neighboring countries, forcing the Jordanian citizen to choose between security” and bread.

Trade union activist Mohammed al-Snaid also fears the repercussions if bread subsidies are removed. “This government decision could ignite popular protests and a revolution of the hungry,” he asserted to Al-Monitor. “The citizens’ economic and living conditions are going from bad to worse because of the economically fruitless government policies that further increase the burdens on the broadest and poorest class. The government ought to address the causes of indebtedness and not hold the society liable for its debts.”

Tamer Bino, spokesman for the National Alliance for Reform, a 15-member parliamentary bloc, doubts the government will raise fees and taxes to generate revenue for the treasury, opting instead for other economic alternatives. “The government should take into account the [public] reaction to the decision of lifting bread subsidies,” he told Al-Monitor. Bino said the public probably cannot rely on parliament to keep bread subsidies in place, while also speaking of “official interventions” in the work of parliament members, some of whom might succumb to pressure or bribes or be “manipulated by the government and act as its executive arms.” Meanwhile, Moumani asserted to Al-Monitor, “The government has not yet decided whether it will lift subsidies on bread or provide cash subsidies to Jordanian citizens.”

By one account, Jordanians are estimated to consume 10 million pita-sized loaves of bread per day, with their per capita annual consumption of bread estimated at 90 kilograms.

Mohammad Ersan is editor in chief of Ammannet.net and Radio al-Balad. He also reports for Arabi21 from Jordan, trains future broadcast journalists at regional symposia and has contributed to establishing independent broadcast stations in Istanbul and Syria. Ersan focuses on covering Islamist groups and political parties. He completed his bachelor’s degree in journalism and media with a minor in political science at Yarmouk University. (Al-Monitor 06.11)

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

On 2 November 2017: Fitch Ratings has 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, significant government assets and strong commitment to an ambitious reform agenda. These strengths are balanced by high oil dependence, the prospect of slow non-oil growth, weak World Bank governance and business environment indicators and large fiscal deficits.

The central government deficit is expected to narrow to 8.7% of GDP in 2017, from 17.2% in 2016, largely as a result of higher oil prices and because clearance of arrears that widened the 2016 deficit by 4.4% of GDP will no longer be necessary. The deficit will shrink more moderately in subsequent years to 5.4% of GDP in 2019. The government has indicated that expenditure may rise 4% next year, but a number of revenue measures should still lead to a significant improvement of the fiscal position. The government increased excise duties in June and expat levies in July and is still expected to raise energy costs before the end of the year. A 5% value added tax will be introduced at the beginning of 2018 and further energy price reforms and expat levies are also planned.

The measures are part of the government’s ambitious reform agenda, the Vision 2030, which seeks to put public finances on a sustainable basis but also aims to reduce the dependence of the government on oil revenue. The planned sale of a 5% stake in Saudi Aramco will primarily be used to fund domestic investments to diversify the economy. As such it is likely to have a limited impact on the government’s balance sheet. The government is also pursuing the privatization of other state entities and seeks to attract private financing for a wide range of projects. There is a risk that the government may need to step in if private sector financing fails to materialize for some projects or revenue assumptions for public private partnership projects prove optimistic.

The government has financed its deficits by a combination of running down its deposits at the Saudi Arabian Monetary Authority (SAMA, the central bank) and by issuing domestic and external debt. As a result, general government deposits with SAMA are expected to continue declining, albeit at a slower pace, to 20.7% of GDP by 2019 from a peak of 57.7% in 2013 and 35.2% at end-2016. Meanwhile, central government debt is expected to rise to 24.9% of GDP in 2019, from 1.6% in 2014 and 13.1% in 2016. But at 19.1% of GDP in 2019, general government debt (excluding debt held by government entities) will still be well below the ‘A’ category median of 44.3%.

The recovery of oil prices has led to a sharp improvement in the current account balance, which is expected to be broadly balanced in 2017 and 2018 after a deficit of 4.3% of GDP in 2016. Nonetheless, international reserves have continued to decline, by $51 billion during the first nine months of 2017, partly reflecting large errors and omissions. However, at 23 months of current external payments, SAMA reserves are well above the ‘A’ category median of five months.

Fitch expects GDP to contract 0.4% in 2017 as a whole, as OPEC oil production cuts outweigh a recovery in non-oil GDP induced by less tight fiscal policy, the stimulus from the payment of arrears at end-2016 and improved confidence. GDP should increase 0.8% in 2018, held back by non-oil revenue measures, and 1.3% in 2019. Inflation has remained negative during the first three quarters of 2017, but is likely to rise substantially as a result of energy price hikes and the new VAT. Fitch assigns Saudi Arabia’s banking sector a Bank System Indicator of ‘a’, with only four jurisdictions receiving a higher rating. This reflects stable profitability, which has allowed the sector to build sizeable capital buffers against any downturn in the operating environment. The sector Tier 1 regulatory capital ratio was 17.2% at end-June 2017.

A change in the royal succession announced in June has put Mohammed bin Salman, the main driver behind the Vision 2030, next in line for the throne. This has reduced risks to the implementation of the reform agenda. However, risks that the line of succession is challenged remain and the ambition for wider social reform could also lead to increased resistance from conservatives. The boycott of Qatar by Saudi Arabia and several other countries in the region are unlikely to have a significant economic impact on Saudi Arabia. However, the drastic measure increases risks that tensions with Iran could escalate suddenly.

Rating Sensitivities

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

-Extended erosion of the fiscal or external positions, for example as a result of a failure to implement fiscal reforms or due to a renewed fall in oil prices; and

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

The following could, individually or collectively, trigger positive rating action – Fiscal reforms or an extended improvement in oil prices that are sufficient to put the budget on a path to a surplus and to reverse the decline in the government’s net creditor position.

Key Assumptions: Fitch forecasts Brent crude oil prices to average $52.5/b in 2017 and 2018 and $55/b in 2019. (Fitch Ratings 02.11)

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11.4 SAUDI ARABIA: Saudi Arabia’s ‘Anti-Corruption’ Purge

Simon Henderson wrote in TWI‘s 6 November Policy Alert that the shocking spate of high-profile arrests will strengthen the crown prince’s political position, but the shakeup raises new concerns about the speed and style of change in the kingdom.

On 4 November, news emerged out of Saudi Arabia regarding the unprecedented arrest of eleven princes and dozens of former ministers and business tycoons on charges of corruption. The headliner is billionaire international businessman Prince Alwaleed bin Talal, accused of unspecified money-laundering charges, but the most important political change was the arrest of Prince Mitab bin Abdullah, son of the late king and head of the Saudi Arabian National Guard. Both are nephews of King Salman and older cousins of thirty-two-year-old Crown Prince Muhammad bin Salman, known as MbS.

Mitab’s demise had been widely anticipated – King Abdullah once tried to position him for the throne, and the National Guard is a well-placed and significant military force for either preventing or orchestrating coups, so he was always a perceived threat to MbS’s ascension. Predicting when and how the crown prince would use his father’s authority to marginalize his cousin was difficult, but the ruthlessness of the move is typical of his style.

Full details on the arrests have not been released, but other significant royals detained in the luxurious Riyadh Ritz-Carlton hotel, which has been requisitioned by the Saudi government, apparently include:

-Prince Turki bin Abdullah, a younger brother of Mitab, former governor of Riyadh, and former air force pilot.

-Prince Turki bin Nasser, former head of the General Authority of Meteorology and Environmental Protection.

-Prince Fahd bin Abdullah bin Muhammad, former deputy defense minister.

Non-royals include the following:

-Khaled al-Tuwaijiri, former head of King Abdullah’s court and his closest confidant during the last months of his life.

-Adel Fakeih, minister of economy and planning, closely associated with MbS’s economic reforms.

-Ibrahim al-Assaf, a former finance minister who advised King Salman during last month’s meeting with Russian president Vladimir Putin.

-Walid al-Ibrahim, business tycoon, related by marriage to the late King Fahd.

The Business of Corruption

Defining corruption in Saudi Arabia is a challenge because royal family members have used their positions to facilitate business for decades. Foreign companies need a Saudi partner to operate in the kingdom, and partners with royal connections are often more useful than those without, even when the former take a percentage at every turn.

Indeed, the challenge for many foreign companies is to ensure that extra contract payments to senior princes percolate down to lower-level officials to keep relationships working smoothly. Technically, foreign laws can impede this practice, but there are ways around them. As it is, the Saudi side pays for what may be termed “bribes.” The size of these payments is not decisive in awarding an official contract – the deal is won, and the amount set aside for facilitating payments is included in the final figure, which is paid by the Saudi government. If such payments are restricted on the headline contract, they can come via related service agreements. A revealing U.S. State Department cable on royals in the Saudi military indicated that princes often declined promotion in order to retain command of bases at which they could receive extra funds.

On top of this, a portion of all Saudi oil income is directed toward the royal family’s thousands of members. Complicated formulas based on proximity to the ruling line and numbers of offspring result in generous monthly stipends. Meanwhile, financial lapses that would not be overlooked among ordinary citizens (e.g., delinquent utility bills) seldom have bad consequences for royals.

Explaining the Uncertainties

The recent developments in Riyadh will likely be followed by further administrative changes, perhaps with MbS replacing his eighty-one-year-old father as prime minister or even as king. Whatever the case, the government needs to provide a detailed official explanation of what is happening. The powers of the new Supreme Anti-Corruption Committee – which is headed by MbS and includes the attorney-general and head of state security, among others – appear very broad, so the international business community needs to know the procedures for dealing with those detained. Will their assets be frozen or placed under the control of Saudi authorities? Prince Alwaleed is a significant shareholder in Citicorp, so who controls his interest now? Will there be trials of the accused? What will the range of punishments be? King Salman held a telephone call with President Trump on 4 November regarding a weekend missile strike from Yemen and other matters, but it is unclear whether they discussed the anti-corruption moves.

Riyadh has issued a great deal of rhetoric about creating a more conducive environment for new foreign investment per MbS’s “Vision 2030” economic plan, but the weekend purge may dampen investor enthusiasm, at least until the anti-corruption cases are resolved. Foreign business contacts of those arrested will likely be reluctant to visit the kingdom anytime soon – ironically, the Ritz-Carlton where the detainees are being held hosted a huge investment conference just last month.

The abruptness of the action may also cast a shadow over the plan to hold an initial public offering for 5% of Saudi Aramco’s shares, which are wholly owned by the Saudi government. The New York Stock remains an obvious location for that move, but MbS’s apparent unpredictability may deter investors.

Finally, the arrests are further evidence that the pace of planned change in the kingdom is extraordinary. New investment projects, including the $500 billion plan to build a megacity called NEOM in the northwest, envisage a high-tech country at the leading edge of robotic technology. On social issues, MbS has announced plans to allow women to drive beginning next year. Although launching an anti-corruption campaign may help him outflank some of his rivals and continue implementing such plans as he sees fit, he must still produce results in order to show the nation that his style and leadership is the best way forward.

Simon Henderson is the Baker Fellow and director of the Gulf and Energy Policy Program at The Washington Institute. (TWI 06.11)

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11.5 EGYPT: More Funding in the Pipeline as Egypt’s Economic Reforms Yield Results

On 31 Oct 2017, the Oxford Business Group reported that Egypt is continuing its program of fiscal consolidation, exchange rate liberalization and pro-investment reform, with the country expected to receive another multibillion-dollar tranche of funds from creditors following a year-end review.

In September, the IMF released a report stating that Egypt had made a “good start” to its $12 billion loan deal, with the fund noting that reforms had helped boost growth, rein in the budget deficit and eliminate foreign currency shortages that were previously putting pressure on many businesses. The three-year program, signed in November last year, includes a series of tax increases and spending cuts, and is designed to help stimulate the economy, which has suffered from a shortage of foreign currency and investment since the 2011 revolution.

The IMF has already disbursed $4 billion of the package, with another $2 billion tranche to be released following a year-end assessment of the economy. “The Egyptian authorities have embarked on an ambitious reform program and have taken decisive measures aimed at restoring macroeconomic stability and sustainable public finances,” Subir Lall, IMF mission director in Egypt, said. “We have seen that economic activity has been gathering strength and efforts at reining in the budget deficit have begun to bear fruit.”

Reforms to improve foreign capital and investor confidence

The deal with the IMF has been tied to a series of fiscal reforms from the government, which has prioritized reducing the deficit and attracting more foreign capital into the country. Chief among these reforms was the floating of the Egyptian pound by the Central Bank of Egypt (CBE) in November last year, ending years of CBE management of the exchange rate. The float is designed to strengthen the economy’s competitiveness in the long term.

While the decision resulted in the currency roughly halving in value and interest rates rising, the subsequent stabilization of the new exchange rate led to a sharp increase in Egyptian Treasury Bill interest, representing the largest influx of money into the country since 2011. In addition, the government has introduced a value-added tax and cut energy subsidies, part of efforts to reign in its deficit and promote investor activity.

This growing confidence is one reason why Egypt is gearing up for its first euro-denominated bond issue before the end of the year – although high local borrowing rates in excess of 15% and concerns over a “crowding out” effect in the domestic banking sector have limited the government’s options to seek financing at home.

In September Amr El Garhy, the minister of finance, told international and local media that Egypt would issue a €1.5 billion Eurobond by the end of November, to be followed by a €10 billion Eurobond program next year. El Garhy said the government planned to sell euro-denominated bonds worth between $3 billion and $4 billion in the first quarter of next year, which comes after Egypt raised $7 billion in five-, 10- and 15-year bonds in the 2016/17 fiscal year ending in June.

Inflation Represents Challenge to Economic Stability

Despite the positive signs, some challenges to the economy remain, with inflation a primary concern. While exports have become more competitive following the float of the pound, inflation rates hit three-decade highs, with annual urban consumer price inflation jumping to 33% in July, the highest level since 1986.

While the CBE has tightened monetary policy to counter surging prices – the IMF forecasts inflation to drop to just over 10% by the end of the 2017/18 fiscal year – the developments have driven up import costs, placing a strain on many domestic consumers and businesses.

The IMF has cited this as a potential challenge to the country’s economic stability, along with a lack of growth in trade partners, and the political and social difficulty of implementing the planned reforms. Nevertheless, institutional partners and the markets alike have been largely positive about the economic progress; the IMF accepted a waiver request after Egypt missed primary fiscal balance and fuel subsidy bill requirements for end-June, with the waiver granted in part due to the scope of planned fiscal adjustments over the next two years.

Credit agency Fitch expects Egypt’s fiscal deficit to drop to 9.3% of GDP in FY 2017/18, down from 10.9% a year earlier, while it also forecasts the government’s debt-to-GDP ratio, which is predicted to have risen over 100% throughout 2017, to drop to 87.9% in FY 2018/19. The government projects GDP growth of between 5-5.25% by the end of the current fiscal year, with IMF predicting slightly lower growth at 4.5%. (OBG 31.10)

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11.6 EGYPT: IMF Staff Completes 2017 Article IV & Extended Fund Facility Review Mission

An International Monetary Fund (IMF) team visited Cairo from 25 October to 9 November 2017 to hold discussions on the 2017 Article IV Consultation with Egypt and the second review of Egypt’s economic reform program supported by a three-year IMF Extended Fund Facility. At the end of the mission the IMF issued the following statement:

“The IMF staff team and the Egyptian authorities have reached a staff-level agreement on the second review of Egypt’s economic reform program, which is supported by the IMF’s SDR 8.597 billion (about $12 billion) arrangement. The staff-level agreement is subject to approval by the IMF’s Executive Board. Completion of the review would make available SDR 1.433 billion (about $2 billion), bringing total disbursements under the program to about $6 billion.

“The staff-level agreement on the second review reaffirms the authorities’ commitment to their reform program supported by the IMF. Egypt’s economy continues to perform strongly and reforms that have already been implemented are beginning to pay off in terms of macroeconomic stabilization and the return of confidence. While the reform process has required sacrifices in the short term, seizing the current moment of opportunity to transform Egypt into a dynamic, modern, and fast-growing economy will improve the living standards and increase prosperity for all Egyptians.

“Egypt’s growth picked up during fiscal year 2016/17, with GDP rising by 4.2% compared to the projected 3.5%. Meanwhile, the current account deficit narrowed in dollar terms, supported by the increase in non-oil exports and tourism receipts while non-oil imports declined. Reflecting increased investor confidence, portfolio investments into Egypt reached $16 billion this year and foreign direct investment rose by 13%. Headline inflation appears to have peaked in July and has been declining since then, supported by the Central Bank of Egypt’s (CBE) prudent monetary policy stance. The budget performance was broadly in line with program projections with a primary deficit of 1.8% of GDP. However, the overall deficit exceeded projections by 0.4% of GDP and reached 10.9% of GDP, mainly on account of higher than expected interest payments. Reflecting the overall strong policy framework and credibility of the authorities’ program, foreign exchange reserves increased significantly to record levels.

“The CBE remains committed to achieve its goal of reigning in inflation which is expected to decline to about 13% in the quarter ending December of 2018. Its monetary policy framework is underpinned by a flexible exchange rate regime which has eliminated chronic foreign exchange shortages and the parallel market.

“The government’s aim to achieve a primary surplus in the current fiscal year will help achieve Egypt’s program objective of putting government debt on a firmly downward trajectory over the medium term. This will reduce interest expenditures and create budgetary space for public infrastructure and well-targeted social spending. The mission also strongly supports the authorities’ plans to strengthen public financial management and fiscal transparency, including through enhanced monitoring of state-owned enterprises and publication of financial statements.

“The government is spearheading a comprehensive and ambitious agenda of structural reforms to unlock Egypt’s growth potential. The reform plan aims to create well-paying jobs to meet the rapidly growing population by paving the way for increased private sector-led investment, productivity growth and enhanced competition.

“Reducing unemployment, specifically among Egypt’s youth, and integrating more women into the labor force are key to Egypt’s economic liftoff and are the strongest and most sustainable form of social protection. We strongly welcome the authorities’ commitment to continue its efforts to expand childcare services to promote women participation in the labor market. Meanwhile, we also support the authorities’ efforts to strengthen social measures through the expansion of the “Takafol and Karama” programs which now reach 2 million families, and enhancing data collection to improve targeting and ensure that the subsidies reach the most vulnerable.

“Egypt’s banking sector continues to remain liquid, profitable, and well capitalized. The CBE continues to strengthen the regulatory and supervisory framework for the banking sector including through implementing Basel rules. We also support the authorities’ aim to promote financial inclusion. (IMF 10.11)

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11.7 MOROCCO: IMF Staff Completes 2017 Article IV Consultation and Third Review of PLL

An International Monetary Fund (IMF) staff team visited Morocco from 25 October to 7 November 2017 to conduct discussions with the Moroccan authorities on the 2017 Article IV consultation, as well as on the third review under the Precautionary and Liquidity Line (PLL) arrangement approved in July 2016. At the conclusion of the visit the IMF issued the following statement:

“In recent years, the Moroccan economy has benefited from the continuation of prudent macroeconomic policies and structural reforms. Improved fiscal management and diversification of the economy have strengthened its resilience. Much remains to be done, however, to achieve higher, sustainable, and more inclusive growth. Unemployment, particularly among young people, is close to 10%. Significant structural reforms have been initiated, and it is necessary to accelerate their implementation in order to increase productivity gains and job creation, and to raise growth potential, in line with the government’s medium term objectives. Key priorities include improving the quality of the education system, the functioning of the labor market, increasing female labor force participation, and strengthen efforts to further improve the business environment.

Following last year’s drought, economic growth has picked up in 2017 and is expected to reach 4.4% mostly driven by a significant rebound in agricultural activity while non-agricultural activity remains subdued. Inflation has declined further and credit growth is recovering. After the marked deterioration in 2016, the current account deficit is projected to improve in 2017 to 3.9% of GDP, driven by strong export growth that will offset higher oil prices and sustained capital goods imports. International reserves are expected to remain comfortable, at about six months of imports. In 2018, growth is projected to slow due to a negative base effect of the agricultural sector and to reach 4.5% over the medium term with the implementation of structural reforms. However, the outlook remains subject to significant domestic and external risks, including delays in implementing key reforms, weaker-than-expected growth in advanced and emerging market economies, world energy prices, geopolitical tensions in the region, and volatility in global financial markets.

On the fiscal side, the consolidation process continues. Developments as of end-September were broadly positive and in line with the authorities’ objective to reduce the fiscal deficit to 3.5% of GDP in 2017. For 2018, the team welcomes the objective to further reduce the fiscal deficit to 3% of GDP through revenue enhance measures and expenditure containment as indicated in the budget law submitted to Parliament. Over the medium term, a comprehensive tax reforms should continue to make the tax system more efficient and equitable and to support the authorities’ objective to place public debt firmly on a downward path and bring it to 60% of GDP by 2021 compared to 64.3% in 2017. These efforts would also provide more room to investment in infrastructure and human capital in support of growth and social programs. The team supports ongoing efforts in fiscal decentralization and emphasizes the needs to ensure good governance, transparency, and fiscal discipline at the local level.

Staff supports the authorities’ intention to gradually transition to a more flexible exchange rate regime, which should support the economy’s ability to absorb external shocks, and raise competitiveness. With current conditions that continue to offer a window of opportunity to implement the transition in a gradual and orderly manner, starting the process as soon as possible would be appropriate.

The Moroccan financial sector is well capitalized, and the risks to financial stability remain limited. Nonperforming loans remain relatively high but they are closely monitored and are well provisioned. Staff welcomes the continued strengthening of regulatory limits to reduce credit concentration and the ongoing collaboration with cross-border supervisory bodies to contain risks related to Moroccan banks’ expansion in Africa. The team commends the authorities for the progress made in implementing the 2015 FSAP recommendations, and supports efforts aimed at increasing access to finance, in particular for small- and medium-sized enterprises. Furthermore, the team recommends the adoption, as soon as possible, of the new central bank law, which will strengthen its independence and its role in financial stability and financial inclusion.

The team would like to thank the Moroccan authorities and representatives of the private sector and the civil society with whom it had the opportunity to meet, for their cooperation and productive discussions.”

Background information: The IMF Executive Board approved a 24-month arrangement under the Precautionary Liquidity Line (PLL) in an amount equivalent to around $3.5 billion (280% of Morocco’s quota) in July 2016. (IMF 07.11)

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11.8 TURKEY: Turkey Foreign & Local Currency Ratings Affirmed; Outlook Remains Negative

On 3 November 2017, S&P Global Ratings affirmed its unsolicited ‘BB/B’ foreign currency long- and short-term sovereign credit ratings and its unsolicited ‘BB+/B’ local currency long- and short-term sovereign credit ratings on the Republic of Turkey. The outlook remains negative.

At the same time, we affirmed our unsolicited Turkey national scale ‘trAA+/trA-1’ long- and short-term ratings.

Outlook

The negative outlook reflects risks that Turkey’s government will increasingly rely on budgetary measures, including credit guarantees, to support the economy in the absence of restored confidence in the private sector following the failed military coup in July 2016. Moreover, ratings downside could arise should monetary policy prove inadequate to curb inflation and currency pressures, which could intensify due to Turkey’s reliance on volatile portfolio inflows to finance its sizable current account deficit. Currency weakness could, in our view, lead to a deterioration of asset quality in Turkey’s financial sector, given the substantial share of foreign currency claims on residents by Turkish banks.

In our view, Turkey may find it hard to meet its high external financing needs under these scenarios. We expect to assess these risks over the next 12 months.

We could revise the outlook to stable if Turkey’s fiscal position remained in line with a moderating government debt-to-GDP ratio and if inflationary pressures abate, likely reflecting a stabilization in the Turkish lira exchange rate and a gradually improving and more balanced external and domestic growth scenario.

Rationale

Our ratings on Turkey are supported by the government’s moderate debt burden and our base-case projection of an only modest accumulation of further liabilities on the government’s balance sheet, relative to GDP.

We expect Turkey’s flexible exchange rate regime will enable the economy to adjust to external shocks, although high dollarization, especially in the corporate sector, limits the benefits of a weaker lira to the economy as a whole. Turkey’s persistent current account deficit and its high external financing needs constrain its creditworthiness, because they make economic growth vulnerable to external refinancing risks. We also consider Turkey’s institutional settings to be weak. In our view, this is characterized by increasingly centralized decision-making processes with dwindling checks and balances and impaired transparency, owing to significant interference by political institutions in the free dissemination of information.

Institutional and Economic Profile: State of emergency rule continues, but the economy appears to be unaffected

-In October 2017, the Turkish government extended the state of emergency rule by another three months, until January 2018, for the fifth consecutive time.

-Supported by a material fiscal stimulus and low-cost credit, the economy has grown strongly in 2017, despite lingering political uncertainties.

-Although tourist arrivals have picked up somewhat from the lows in 2016, revenues remain 36% below the highs reported in 2014.

The Turkish government’s recent move to extend the state of emergency rule for a fifth consecutive time points to a still-challenging political environment in the wake of the failed military coup in July 2016. Under the 16-month-long emergency rule, more than 50,000 people have been arrested and about 150,000 were suspended or released from their jobs. This has debilitated an already-fragile business environment and consumer confidence, as confirmed by sluggish private investments. At the same time, preparations for the move toward a presidential system are progressing ahead of the next presidential election in November 2019, at which time we expect the transition to an executive presidency will occur. We anticipate that the constitutional reform will limit parliamentary–and potentially judicial–oversight of government decisions. Furthermore, Turkey’s international relations with key allies in the economic or military sphere, such as Germany or the U.S., have deteriorated over 2017. In addition, there is increasing talk about potentially suspending Turkey’s accession to the EU as a result of concerns over the rule of law in Turkey. We assume that many of these domestic and international political uncertainties will prevail over our forecast horizon.

Nevertheless, headline economic growth figures suggest that lingering political uncertainties and deteriorating international relations have yet to impact the economy. However, we think that the uncertainties have been masked by an expansionary fiscal stance and ample support for credit growth through the Credit Guarantee Fund. Following revisions of national accounts data in December 2016, the slowdown of the economy appears much shallower than initially stated, despite drastic declines in tourism numbers and heighted uncertainty following the failed military coup. Data for the first half of 2017 also suggests that investments are increasing rapidly. However, much of this investment comes from public-sector construction, since the revised national accounts data also includes, in particular, public-private partnership (PPP) projects in the construction sector.

One bright spot in the Turkish economy is exports, which are recovering strongly across almost all categories, leading to a positive contribution of net exports to GDP in the first half of the year. Exports in terms of volume rose by over 10% in the first half of 2017 with exporters benefiting from the weak Turkish lira, more specifically a weak Turkish real effective exchange rate that remains at its lowest since 2003. Moreover, exports are supported by a nascent recovery in tourism. As a result, we expect real economic growth of 5% in 2017. Our growth forecast is lower than the government’s forecast of 5.5% on average through 2020, as stated in its updated medium-term program. We think that the Turkish government’s projection is optimistic, given declining fiscal space, an already externally leveraged banking system, high dependency on capital inflows, and the recent reversal of business conditions that has also affected property rights. Positively, the government’s efforts to increase women’s participation in the workforce have been successful and should benefit growth.

Our forecast that growth will weaken next year also factors in the following:

-Fiscal: The government has used its fiscal space to support the economy this year, for instance, by reducing the 6.7% special consumption tax on white goods to zero and lowering the 18% value-added tax on furniture to 8% until year-end 2017. We expect budgetary constraints will not allow the government to pursue such stimulating measures sustainably over the coming years, though we acknowledge that, given the centralization of decision-making, our base-case projections that the fiscal stance will begin to tighten early next year could be overshadowed by political considerations.

-Credit: Part of the strong economic performance was driven by the government providing low-cost credit to the economy through the Credit Guarantee Fund, which has almost been fully utilized by now. While the fund still has some buffers that could increase through repayment of loans, we do not expect that the government will be able to provide support of a similar magnitude on an ongoing basis without creating significant risks for contingent liabilities in case of a downturn in asset quality. The Credit Guarantee Fund amounts to 8.4% of GDP.

-Tourism: While tourist arrivals and overnight stays have increased by 8% and 15%, respectively, in the first half of 2017, tourism revenues are still 3% lower than last year and 36% lower than in 2014. Anecdotal evidence suggests that the tepid recovery in the tourism sector was mostly driven by package tourism from Russia and other countries in the Commonwealth of Independent States. Given remaining bilateral tensions, we do not expect a strong recovery of Western European or American tourists next year.

That said, we expect the Turkish economy will grow by 3.7% on average through 2020. Turkey’s economy benefits from a young and growing working-age population. Moreover, relatively cheap labor costs and improving infrastructure provide attractive backdrops for foreign direct investment, which is currently overshadowed by Turkey’s political environment. External demand could also continue to spur economic growth, but tighter global liquidity conditions could prove challenging for Turkey’s external profile.

Flexibility and Performance Profile: Although fiscal buffers have helped support the economy, external risks are increasing

-Tax cuts, for instance on white goods, and a strong increase in capital expenditures are causing an uptick in the fiscal deficit in 2017.

-Turkey’s current account deficit is widening and increasingly financed by portfolio inflows while foreign direct investments have yet to recover.

-Bank credit is growing strongly, thanks to the support of the Credit Guarantee Fund, increasing potential contingent liabilities for the Turkish government in the future.

-Inflation remains stubbornly high while Turkey’s central bank has yet to more aggressively raise interest rates to fight inflation decisively.

In 2017, we expect further deterioration of Turkey’s general government deficit to 2.4% of GDP from 1.5% in 2016. As mentioned before, the Turkish government has heavily used its own balance sheet to support the economy so far this year. Besides tax cuts on white goods and furniture, the government launched the national employment campaign, in which the government subsidizes employment costs of new hires by 30% in the first year. We expect Turkey’s fiscal stance will remain accommodative, considering the heavy election calendar in 2019, when presidential, general and location elections should take place. As a result, we forecast that Turkey’s general government deficit will average 2.4% of GDP over our forecast horizon through 2020.

With the government focused on the move to an executive presidency, implementation of important structural reforms–including labor, educational, severance pay and energy reforms – could face further delays. Should some of the structural constraints, especially Turkey’s reliance on foreign capital inflows, lead to a slowdown of economic growth and leveling off of Turkey’s relatively high unemployment rate, we expect the government would continue using its balance sheet to support the economy, leading to a potentially sharper deterioration of Turkey’s fiscal position than we currently project.

That said, government debt remains low, in part thanks to strong nominal GDP growth. We forecast that general government debt will peak at almost 29% of GDP in 2018, one of the lowest ratios among emerging market issuers after resource-rich Russia and Saudi Arabia. However, we see an increasing trend of using off-balance-sheet vehicles to support the economy without adversely affecting Turkey’s general government debt ratio. For instance, the government has underwritten loans for about Turkish lira (TRY) 219 billion ($58 billion), or 7.5% of GDP, through the Credit Guarantee Fund, which has a total capacity of TRY250 billion (8.5% of GDP). In addition, the Turkish government is involved in over 200 PPP projects while debt assumption commitments worth 1.0% of GDP were provided to three large-scale projects. Lastly, Turkey’s sovereign wealth fund, which reportedly is seeking up to $5 billion (0.6% of GDP) in external funding, may increasingly be used to finance large-scale public investment projects outside the government’s own balance sheet.

Nevertheless, Turkey’s main credit weakness remains external. Because of strong domestic demand and rising import prices, including energy and weak service exports, we forecast a current account deficit of 4.5% of GDP in 2017. Over our forecast horizon through 2020, we expect the current account will remain elevated at an average of 4.4% of GDP, though it may start declining toward the end of our forecast horizon. Domestic demand, especially due to potentially higher imports of machinery and equipment, and continuously rising import prices, especially oil prices, will keep the current account deficit elevated, notwithstanding potentially increasing tourism inflows, should the political situation stabilize. We anticipate that oil prices will gradually rise to $55 per barrel by 2019. However, the Turkish government is trying to reduce the country’s reliance on energy from abroad by diversifying its own production of renewable energy. In the near term, though, we note that Turkey’s growing current account deficit is increasingly financed with less stable funding sources, primarily portfolio inflows into the government bond market. With the expectation of higher interest rates in the U.S. and continued bouts of volatility for the Turkish lira, these portfolio flows could reverse easily, underlining the risk of a marked deterioration in the availability of external financing. In addition, foreign direct investment inflows, traditionally an important current account financing item in the financial account, remain 36% below their 2015 peak of $17.5 billion in nominal terms.

As a result, we forecast Turkey’s external debt ratios will continue deteriorating and remain weak over our forecast horizon. Turkey’s net foreign exchange reserves–which we estimate at $41 billion in 2017–provide coverage for about two months of current account payments, suggesting relatively limited buffers to offset external pressures. We estimate Turkey’s gross external financing requirement will average 168% of current account receipts (CARs) plus usable reserves for 2017-2020. We expect the country’s external debt will exceed liquid external assets held by the public and banking sectors by about 141% of CARs, on average over 2017-2020. The large net open foreign currency position of corporate borrowers (26% of GDP) indirectly exposes banking system asset quality to risks related to a steep depreciation of the lira. Although the banking sector hedges against foreign currency risk, its foreign currency funding could represent a risk for banks if their hedges do not hold, due to counterparty risk.

Turkey’s weak external profile could be exacerbated by potentially mounting risks in the country’s banking sector – the largest intermediators of the country’s external deficit. Turkey’s rapid credit expansion, which lately has been further fueled through the government’s Credit Guarantee Fund, could eventually lead to a hard landing with deteriorating asset quality, external refinancing pressures, and ultimately fiscal cost for the Turkish government. We note that, over the past 10 years, the loan-to-deposit ratio in the Turkish banking sector has grown by 47% to 118% in August 2017 and remains on an upward trajectory.

That said, near-term risks are somewhat mitigated because Turkey’s domestic banks remain well regulated and amply capitalized. Our Banking Industry Country Risk Assessment for Turkey is ‘6’, with ’10’ being the lowest assessment on our 1-10 scale, although we see negative trends for both economic and industry risk. We note the size of state-owned banks is relatively large, representing about one-third of total banking system assets. Still, we expect banks’ asset quality will gradually deteriorate. Their stock of outstanding nonperforming loans (NPLs) is at about 3.3%. We expect the sharp decline in tourism receipts in 2016 and the lira’s depreciation will result in higher NPLs for the banks. We understand that system wide NPLs could be about 2% higher, when including large Turkish banks’ sales of NPLs and large restructurings of closely monitored credits that are not included in NPLs.

We expect inflation will moderate over 2017-2020. But given the lira’s volatility, risks remain that the Turkish central bank’s monetary policy response may prove insufficient to anchor its inflation-targeting regime, particularly if domestic or geopolitical instability were to flare up in the coming months. Inflation was 11.2% in September 2017, well above the Central Bank of the Republic of Turkey’s inflation target of 5%. A large contributor to Turkey’s elevated inflation data is the relatively high pass-through impact of the exchange rate, which could amount to 15% according to central bank estimates. (S&P 03.11)

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Fortnightly, 15 November 2017

Fortnightly, 15 November 2017

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