Fortnightly, 17 October 2018

Fortnightly, 17 October 2018

October 17, 2018


17 October 2018
8 Cheshvan 5779
8 Safar 1440




1.1  Israeli Government Spending Increased 50% Since 2010
1.2  NASA & Israel Space Agency Sign Agreement for Commercial Lunar Cooperation
1.3  Amir Yaron Named New Governor of the Bank of Israel
1.4  Jerusalem to Begin Strict Enforcement of Electric Bike Laws


2.1  PureSec Raises $7 Million in Series A Funding to Secure Serverless Applications
2.2  The Technion and Intel to Inaugurate Joint Center for Artificial Intelligence
2.3  Glassbox Raises $25 Million to Strengthen its Leading Digital Customer Management Platform
2.4  Hysolate Secures $18M Series B Round for Disruptive Cybersecurity Isolation Platform
2.5  El Al Ranks 39th Out of 41 Airlines in Punctuality
2.6  Broadridge Expands its Digital Center of Excellence with New Office in Tel Aviv
2.7  Wasteless Raises $2 Million to Eliminate Food Waste with Dynamic Pricing
2.8  Clearlake Capital-Backed Perforce Software to Acquire Perfecto Mobile
2.9  Yissum Launches NanoTech Fund
2.10  JFrog Secures $165 Million Investment to Lead Universal DevOps in the Enterprise
2.11  SolarEdge to Acquire Kokam, Korean Provider of Batteries and Energy Storage Solutions
2.12  Kitov Systems Raises $10 Million in Series A – led by HAHN Group
2.13  Demisto Secures $43 Million Series C Financing Led by Greylock Partners
2.14  Walmart & Eko Joint Venture to Create Interactive Storytelling for Entertainment and Retail
2.15  Kindite Raises $4 Million
2.16  Sygnia to Be Acquired by Temasek


3.1  Snapbook Raises $1.5 Million in Funding
3.2  Skiplino Raises Series A Round from KISP Ventures
3.3  Hamad Bin Khalifa University’s Qatar Biomedical Research Institute Partners With Harvard
3.4  Dubai Becomes World’s First City to Enable Investors to Start Business from Remote Locations
3.5  Smart Crowd Closes Seed Funding Round of $600,000
3.6  Mumzworld Secures $20 Million in New Funding Round
3.7  Dubai Investment Firm Launches $100 Million Fintech Fund
3.8  UAE’s Lulu Group to Invest $500 Million in Egyptian Expansion
3.9  FreeConferenceCall Announces Expansion into the UAE
3.10  Enstoa Seeks Saudi Tech Talent for Qiddiya Project
3.11  Zenoss Announces Expansion Into Kingdom of Saudi Arabia
3.12  iCommunity Raises $600,000 in Series A Funding from Algebra Ventures
3.13  Turkish Health Care Tourism Generated $4.4 Billion Over the Past Five Years


4.1  Israel Aims For Zero Purchase of New Gasoline or Diesel-Powered Vehicles by 2030
4.2  One Hundred Applications Received to Launch Solar Energy Plants Connected to Egypt’s Grid


5.1  World Bank Revises Lebanon’s GDP Growth Down to 1%
5.2  Lebanon’s Balance of Payments Registered a $1.17 Billion Deficit in August 2018
5.3  Jordan Sees 2.1% GDP Growth Rate in Second Quarter of 2018
5.4  Jordan’s King Abdullah Vows to Fight Corruption After Protests
5.5  World Economic Forum to Return to Jordan in 2019 for Summit

♦♦Arabian Gulf

5.6  Bahrain’s King Issues New Laws to Boost Investment Eco-System
5.7  Moody’s Says Omani Banking System’s Outlook is Negative on Weaker Government Support

♦♦North Africa

5.8  Egypt Stops Gas Imports – On Its Way to Becoming Self-Sufficient
5.9  World Bank Foresees 6.8% Growth for Libya
5.10  Sudan to Set Daily Exchange Rate and Cancel Import Restrictions
5.11  Morocco’s Economy to Grow by 2.9% in Fourth Quarter of 2018
5.12  Morocco’s Thriving Aeronautic Industry Attracts International Interest


6.1  Turkey’s Annual Inflation Jumps to 24.5% in September
6.2  Turkey’s Budget Sees $12.3 Billion Deficit Over First Nine Months of 2018
6.3  Turkey’s Unemployment Rate at 10.8% in July
6.4  EU Parliament Cancels €70 Million Earmarked For Turkey Over Rule of Law Conditions
6.5  IMF Revises Greece’s 2019 Growth Rate Upwards
6.6  Greece to Scrap Controversial Wine Tax
6.7  Greece’s Demographic Problem Threatening Economic Recovery



7.1  Study Ranks Israel High Among World’s Most Democratic Countries
7.2  Over 4 Years, the Number of Israelis Studying Abroad Rises by 26%


7.3  Lebanon’s Parliament Speaker Says Government Formation Back To Zero
7.4  Lebanon Ranked 80 out 189 Countries on the Human Development Indices
7.5  Jordan’s PM Revokes Exceptional State University Admissions
7.6  Morocco to Introduce Holocaust Studies into State Education System
7.7  US University Fair Held in Athens on 9 October


8.1  V-Wave Announces First Patients in RELIEVE-HF Pivotal Trial of its Heart Failure Therapy
8.2  First-ever Opium Poppy Genome Assembled
8.3  Eximo Medical Receives FDA Clearance for B-Laser Atherectomy System
8.4  Check-Cap Announces IDE Submission to FDA for Its C-Scan System
8.5  Atlanta and Israel Launch New Medtech Accelerator
8.6  BMS and Compugen Collaborate to Evaluate Therapeutic Regimen in Advanced Solid Tumors
8.7  Celmatix Announces Partnership to Bring the Fertilome Genetic Test to Israel
8.8  Transseptal Solutions Announces FDA Clearance of Its Novel Transseptal Access System
8.9  MEDX Xelerator Broadens International Collaboration
8.10  Hebrew University Establishes Cannabis Research Laboratory
8.11  PolyPid Begins Phase 2 Study to Prevent Abdominal Surgical Site Infections
8.12  CytoReason Findings Uncover New Cellular Players in Tumor Microenvironment
8.13  Cannabics Pharmaceuticals Positive Results in Treatment of Cancer Anorexia Syndrome


9.1  Telrad Networks Announces Successful Trial of New MU-MIMO Technology
9.2  Department of Homeland Security Cites Morphisec for Enhanced Moving Target Defense for Virtual Systems
9.3  Spain Selects Attenti for Multi-Purpose Electronic Monitoring Program
9.4  Magal Awarded $7.7 Million Extension for Systems Protecting Critical Infrastructure in the Americas
9.5  Nano Dimension Strengthens in Defense Sector via U.S. Armed Forces Sale
9.6  Sapiens DECISION Expands Insurance Technology Offering
9.7  MTI Wireless Edge Supports Riverbed Xirrus With Multi-band Antenna Solutions
9.8  ERM Advanced Telematics Launches Improved Driving Using Human Voice Warnings
9.9  Cymulate Announces Technology Integration with Tenable
9.10  Autonomous Investigation App from SecBI
9.11  Sense Wins First Double Award At Worldwide South Summit in Madrid
9.12  CyberArk Launches Advanced Privileged Session Management for Cloud


10.1  Israel’s CPI Rises by 0.1% and Home Price Index Falls in September
10.2  Upward Revision for Israel’s Growth During First Half of 2018
10.3  IMF Raises Israel Growth Forecast
10.4  Israel’s Unemployment Drops to 4% in August
10.5  Tourism to Israel Increase by 15% in 2018


11.1  ISRAEL: Bank of Israel Research Department Staff Forecast, October 2018
11.2  JORDAN: Jordanians Fed up With More of the Same
11.3  SAUDI ARABIA: Saudi Arabia ‘A-/A-2’ Ratings Affirmed; Outlook Stable
11.4  EGYPT: Growing Pains
11.5  EGYPT: Egypt to Sell Valuable Cotton Land to Bolster the Textile Industry
11.6  MOROCCO: Outlook Revised to Negative on Budgetary Pressures; ‘BBB-/A-3’ Ratings Affirmed
11.7  TURKEY: Ankara Pins Electoral Hopes on Ignoring Economic Realities
11.8  CYPRUS: IMF Staff Concluding Statement of the 2018 Article IV Mission


1.1  Israeli Government Spending Increased 50% Since 2010

The Accountant General’s financial report published on 3 October shows government spending rising at an increasing place.  In 2017 alone, spending rose by 1% of GDP.  State tax revenue also jumped in 2017, but this was the result of NIS 20 billion in one-time revenue, much of which was at the expense of future tax revenue.  Total government spending rose by over 50% in 2010-2017, from NIS 202 billion to NIS 310 billion.  Most of the growth was in spending by civilian ministries: the Ministry of Health’s budget has grown by 77% since 2010, the Ministry of Labor, Social Affairs and Social Services’ budget by 68% and the Ministry of Education’s budget by 65%.

Obviously, this increase in government spending would have been impossible without a consistent and substantial rise in GNP and tax payments to the government on the one hand and responsible economic management on the other, which has made it possible in recent years to lower the debt burden and interest payments and divert more resources to the welfare of the people, the report states.  The report shows that spending by civilian ministries reached a peak of 19.3% of GDP in 2017, 1% higher than in 2016.  Defense spending remained steady at 5.2% of GDP, while interest payments on the government debt dropped to from 2.5% of GDP in 2016 to 2.3% in 2017.

State revenue increased from 25.4% of GDP in 2016 to 26.4% of GDP in 2016, but most of the increase is attributable to the opportunity given to pay a lower tax on dividends, which increased current government revenues at the expense of future revenues.  One-time revenue from this concession amounted to NIS 11 billion, while the state received NIS 4 billion in one-time revenue from taxes on profits from Intel’s acquisition of Mobileye.  One-time revenue totaled NIS 20 billion in 2017, but the state reduced this sum by NIS 4.2 billion deposited in a property tax fund.  (Globes 03.10)

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1.2  NASA & Israel Space Agency Sign Agreement for Commercial Lunar Cooperation

NASA has signed an agreement with the Israel Space Agency (ISA) to cooperatively utilize the Israeli nonprofit SpaceIL’s commercial lunar mission, expected to land on the Moon in 2019.  NASA will contribute a laser retroreflector array to aid with ground tracking and Deep Space Network support to aid in mission communication.  ISA and SpaceIL will share data with NASA from the SpaceIL lunar magnetometer installed aboard the spacecraft.  The instrument, which was developed in collaboration with the Weizmann Institute of Science, will measure the magnetic field on and above the landing site. The data will be made publicly available through NASA’s Planetary Data System.  In addition, NASA’s Lunar Reconnaissance Orbiter will attempt to take scientific measurements of the SpaceIL lander as it lands on the Moon.

SpaceIL competed in the Google Lunar X Prize and continues to work toward landing the first Israeli spacecraft on the Moon.  Together, NASA and SpaceIL will collaborate on analyzing the scientific data returned from the mission.  The agreement exemplifies the innovative approach that NASA and its international partners are taking to team up with commercial partners to advance important science and exploration objectives on and around the Moon.  (NASA 03.10)

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1.3  Amir Yaron Named New Governor of the Bank of Israel

Prime Minister Benjamin Netanyahu has nominated Amir Yaron, a finance professor at the University of Pennsylvania’s Wharton School of Business, as the next Bank of Israel governor.  Yaron, 54, will succeed Karnit Flug, whose five-year tenure draws to a close next month.  The nomination must be reviewed by a government committee.

Professor Yaron’s academic work focuses on asset pricing, macro-finance and applied time series econometrics.  Prof. Yaron received his doctorate in economics at the University of Chicago, where he also earned his second master’s in economics.  He has a master’s degree in economics from Tel Aviv University, where he also earned his bachelor’s degree in economics and sociology.  (Various 09.10)

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1.4  Jerusalem to Begin Strict Enforcement of Electric Bike Laws

Following the large number of accidents involving electric bicycles, Israel’s Ministry of Transport announced a new enforcement plan for these vehicles.  Among other things, the plan includes approving fitness to ride bicycles, heavy fines for those increasing the speed of electric bicycles and confiscation of bicycles for those under 16 caught driving them.  Minister of Transport Katz announced the measures at his office on 3 October.  If the plan is approved, it will become effective in January 2019.

The Ministry of Transport said that the plan, which is aimed at stricter enforcement and punishment for electric bicycle riders, is designed to regulate bicycle riding and riders’ safety, in addition to extensive public relations among the riders and their parents.

There are currently two categories of electric bicycle riders.  The first includes people with licenses for two-wheel vehicles or private vehicles and students aged over 16 studying driving theory at school.  Under the new plan, starting on 1 January 2019, these students will have to take a special short course including a final exam in order to obtain certification of fitness to ride bicycles.  The Ministry of Transport National Road Safety Authority will arrange training for high school students.

As part of the plan, severe sanctions will be applied to riders of electric bicycles under 16, including having to wait a year longer to obtain a driver’s license.  In addition, anyone involved in changing the structure of electric bicycles or enabling them to travel faster than the maximum permitted speed of 25 kilometers per hour will be fined NIS 10,000.  The local authorities will be authorized to invalidate the business license of anyone selling or supplying illegal electric bicycles and to fine them NIS 10,000 per bicycle.  Fines for persons illegally riding electric bicycles or electric scooters will be increased significantly. This includes riding without a helmet, riders under age 16, making telephone calls while riding an electric bicycle, riding while wearing headphones, and other offenses.  (Globes 14.10)

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2.1  PureSec Raises $7 Million in Series A Funding to Secure Serverless Applications

PureSec announced a $7 million series A round, led by Square Peg Capital, with participation from previous investors including TLV Partners (investor in Next Insurance and container security company Aqua) and Entrée Capital (Meerkat, Monday and Prospa); this round brings PureSec’s capital raised to a total of $10 million.

PureSec was the first company to identify the need for a unique security solution tailored for serverless applications.  Following its $3M seed round back in 2017, PureSec developed the world’s only end-to-end Serverless Security Platform enabling organizations to build secure serverless applications and protecting them in real-time.  PureSec is the only AWS Lambda security advanced technology partner and has also recently partnered with Microsoft as part of the exclusive Microsoft ScaleUp program.  PureSec now offers an early sign-up for its free-tier plan. Early joiners will also receive an exclusive advisory session from the serverless security professionals of the PureSec team, tailored to their specific serverless environment.  The free-tier plan helps bridge the gap between developers and security professionals by providing a mutual language and a clear standard for securing serverless applications.

Serverless computing is a cloud-computing execution model in which the cloud provider effectively acts as the server, running code directly and dynamically managing the allocation of machine resources. Organizations no longer have to worry about the infrastructure required to run their applications.  Due to its superiority over traditional architectures in every aspect, serverless is considered to be the future of cloud computing.  PureSec solves these problems through its holistic approach to serverless security.  The PureSec platform integrates into existing CI/CD process, providing static analysis of serverless code and cloud configurations, detecting misconfigurations and vulnerabilities while providing best-practices based mitigation.

PureSec launched in 2016 and currently has 12 employees.  Their main office is in Tel Aviv. Customers include numerous Fortune 1000 companies, alongside emerging startups in the US, Canada, the United Kingdom, Australia and Israel.  (PureSec 03.10)

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2.2  The Technion and Intel to Inaugurate Joint Center for Artificial Intelligence

The Technion – Israel Institute of Technology and Intel Corporation inaugurated a new Center for Artificial Intelligence (AI) on 8 October.  The Center is chartered with advancing research in AI fields and collaboration between Technion and Intel researchers.

The Technion is the leading university in Israel in the field of artificial intelligence and is one of the top ten universities in the world in the field.  In 2018 the Technion ranked 7th in the CS Rankings: Computer Science Rankings.  The Technion has about 20 faculty members whose main field of research is computational learning and another 40 [researchers] are working in related fields. The majority of the researchers come from the Faculty of Computer Science, the Faculty of Electrical Engineering, and the Faculty of Industrial Engineering and Management and some of them are from other faculties such as Medicine and Biology.

As part of this collaboration with Intel, the company will support research projects of Technion faculty members engaged in computational learning and artificial intelligence together with Intel researchers. The research will cover a variety of areas, including natural language processing, deep learning and hardware optimization for different learning algorithms.”

Intel and The Technion have maintained close ties for many years.  In 2009, Intel awarded The Technion the “Intel Award” in recognition of the university, whose graduates were the founding nucleus of the company’s branch which was established in Haifa in 1974.  To date, Intel supports some Technion’s labs and funds many scholarships for students at the Technion, including specifically supporting outstanding students in electrical engineering and computer science.  (Technion 09.10)

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2.3  Glassbox Raises $25 Million to Strengthen its Leading Digital Customer Management Platform

Glassbox announced the closing of a $25 million round of financing led by Updata Partners, a leading software-focused growth equity firm based in Washington, D.C., and joined by Ibex Investors, CEIIF, the venture arm of CreditEase, and Gefen Capital.  This takes its total capital raised since inception to $32.5 million.  The investment will fuel Glassbox’s hyper growth globally while accelerating product development efforts related to its automatic insight capabilities.

From the beginning, Glassbox architected its technology platform to capture all activity in real time, an approach that today allows for Digital Customer Management use cases and needs that others in the market struggle to address.  For example, Glassbox’s platform is a single collaborative solution for business and IT teams to optimize digital customer experiences across web, mobile web, and mobile app.  This approach, coupled with an advanced application of machine learning in the digital analytics space, enables Glassbox to surface automatic insights, resulting in unmatched ROI for customers.  Leading enterprises are leveraging the Glassbox platform to optimize web and mobile customer experiences, identify and fix IT performance issues, address risk management and compliance use cases, and guide real-time customer support in contact centers.

Petah Tikva’s Glassbox is the first Enterprise analytics platform that analyses every digital customer interaction.  Glassbox is the only enterprise digital analytics platform to automatically record and index 100% of every visit to your site – on both web and mobile applications.  Originally known as Clarisite, Glassbox is working with leading enterprise businesses within the Financial, Insurance, Telecoms, Retail and Aviation sectors.  (Glassbox 04.10)

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2.4  Hysolate Secures $18M Series B Round for Disruptive Cybersecurity Isolation Platform

Hysolate has closed $18 million in Series B funding.  The round, led by notable investment firms Bessemer Venture Partners and Innovation Endeavors, and including NGP Capital, will help accelerate adoption of the Hysolate Platform, a breakthrough solution that fully protects endpoints from cyberattacks while boosting end-user productivity.  The investment will be used to expand Hysolate’s market presence and continue building its global customer base.

The Hysolate Platform turns end-user devices into software-defined endpoints, in which each endpoint has multiple isolated virtual machines.  Endpoints are built on top of a slim hypervisor layer that sits below the operating system.  They’re highly flexible, compatible and secure by design. Everything an end-user does happens in virtualized desktops, running locally, side-by-side with full isolation.  The entire Hysolate experience is seamless for users, who are free to access, install and work with whatever websites, apps, external devices and cloud services they need, without being constrained by security restrictions and without exposing corporate assets.  Applications automatically launch in the correct, designated virtual environment.  To users, everything looks and acts like their familiar Windows desktop.

Tel Aviv’s Hysolate pioneered software-defined endpoints, the most innovative way to secure user devices and boost user productivity.  The solution seamlessly splits devices into segregated environments by leveraging virtualization and provides protection below the operating system.  Customers include leading financial, technology and services enterprises worldwide.  Hysolate’s team includes IT and cybersecurity experts who are veterans of VMware, Microsoft, CyberArk and Unit 8200 (Israel’s NSA).  (Hysolate 03.10)

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2.5  El Al Ranks 39th Out of 41 Airlines in Punctuality

According to flightstats, 34.5% of El Al’s flights landed late with an average delay of 51.3 minutes.  Conversely, the most on-time airline in September 2018 was SriLankan Airlines and the second promptest airline was Delta Airline, 87% of whose flights landed on time.  Flightstats counts a flight as late if it lands more than 15 minutes after the originally scheduled landing according to the flight schedule.  In third place was Japanese airline ANA with 86.6%. El Al Israel Airlines was near the bottom of the list in 39th place of the 41 airlines rated.

According to flightstats, 65.5% of El Al’s flights landed on time and 34.5% landed late.  The average delay of its flights that were not on time was 51.3 minutes, about the same at the global average for delayed flights.  The global average of flights on time was 79.4%.  The only rated airlines with higher rates of delay than El Al were Ethiopian Airlines (a 36% rate of late flights) and EgyptAir (36.6% late flights).

Flightstats also rates promptness of airports.  Ben Gurion Airport was near the bottom in 351st place, based on 6,000 flights that took off in the September flight schedule (crowded because of the Jewish holidays).  According to flightstats, 66% of flights took off on time from Ben Gurion Airport and the average delay for late flights was 48.3 minutes (a late flight is one taking off more than 15 minutes after the scheduled time).  (Globes 03.10)

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2.6  Broadridge Expands its Digital Center of Excellence with New Office in Tel Aviv

New York’s Broadridge Financial Solutions, an S&P 500 company and global Fintech leader with $4 billion in revenue, announced the expansion of its Digital Center of Excellence (CoE) with a new office located in Tel Aviv, Israel.  The expansion of the Digital CoE broadens Broadridge’s access to industry-leading talent and technology in Israel focused on the development of innovative digital communications management platforms and user experience (UX) tools to drive and facilitate consumer engagement.

Broadridge said its Digital Center of Excellence in Tel Aviv not only demonstrates its commitment to investing in the Israeli market, but also enables Broadridge to be more responsive to the rapidly evolving needs of their clients and helps transform Broadridge’s regulatory and customer communications.  The expansion of Broadridge’s Digital CoE follows the company’s acquisition of ActivePath, an Israeli-based company whose digital technology enhances the customer experience associated with consumer statements, bills and regulatory communications.  (Broadridge Financial Solutions 03.10)

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2.7  Wasteless Raises $2 Million to Eliminate Food Waste with Dynamic Pricing

Wasteless has completed a $2 million funding round, which was led by the Amsterdam-based venture capital fund Slingshot Ventures.  The Wasteless solution offers consumers differentiated pricing for grocery foods based on their expiration date.  The system operates based on the inventory, orders, and sales, and executes pricing decisions that are then delivered to the end-consumer via Electronic Shelf Labels on the supermarket shelf or online via the digital store checkout process.  Supermarkets stand to gain from improving their bottom line, and consumers can enjoy cheaper prices, while the world benefits from a reduction in food waste.

Wasteless will use its recent capital injection to expand its current team, increase investments further to develop its proprietary dynamic pricing algorithm and manage its rollouts with food retailers.

Just earlier this year, Wasteless successfully implemented its process at a leading Spanish food retailer.  Wasteless managed to slash one-third of food waste from the supermarkets, while producing a 6.3% increase in revenue.  The pilot program, which achieved highly conclusive results, was summarized in detail in a recent case study published by Wasteless.  The pilot itself was part of a scientific study conducted at the University of San Diego.  The company is currently in talks with several leading food retailers worldwide to introduce Wasteless’ dynamic pricing solution to their stores.

Founded in June 2016, Tel Aviv’s Wasteless developed a proprietary dynamic pricing algorithm for products with a limited expiration date, allowing retailers to mark off prices across the demand curve.  (Wasteless 09.10)

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2.8  Clearlake Capital-Backed Perforce Software to Acquire Perfecto Mobile

Minneapolis, Minnesota’s Perforce Software, a global provider of enterprise-grade DevOps-focused software solutions, backed by Clearlake Capital Group, has reached a definitive agreement to acquire Perfecto Mobile, a market leader in cloud-based automated mobile and web application test software solutions.  The acquisition augments Perforce’s software portfolio with additional capabilities for enterprise DevOps teams to achieve continuous testing at scale across web, mobile and IoT applications.  The acquisition is expected to close this year.

Perfecto is the industry pioneer delivering the only true enterprise-grade mobile & web automation testing software platform through its globally accessible Continuous Quality Lab.  The company is the go-to provider for large organizations that need to accelerate their digital transformation and provide their customers with the best online mobile and web experiences.  Leading enterprises in banking, retail, telecommunications, and insurance rely on Perfecto’s robust automated testing software to deliver quality experiences faster and retain users in highly competitive markets.

Perforce continues to add capabilities to its software portfolio that uniquely meet the needs of technology development teams that are challenged with multiple dimensions of scale but still must deliver products at a rapid pace.  The acquisition of Perfecto will represent Perforce’s fifth acquisition in the past two years.

Petah Tikva’s Perfecto is the leader in continuous testing and monitoring for today’s dynamic DevOps environments.  Their Continuous Quality Lab enables DevOps teams to accelerate development, achieve continuous testing and monitoring, and drive fast feedback through actionable analytics for web, mobile, and IoT applications. More than 3,000 customers rely on their cloud-based Continuous Quality Lab as their digital application test environment and for authoring test automation executed on real browsers, smartphones, and devices under real end-user conditions.  (Perforce 08.10)

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2.9  Yissum Launches NanoTech Fund

Yissum, The Technology Transfer Company of The Hebrew University of Jerusalem, launched its new NanoTech Fund, which will focus exclusively on promising innovations emerging from Hebrew University’s elite nanotech research.  The Fund has already secured $6 million from top international strategic and institutional investors, and will raise up to $9 million.

The NanoTech Fund will focus on smart materials and nanotechnologies, funding deep technologies offering integrated solutions in the areas of 3D printing, quantum science, and renewable energy.  As the global nanomaterials and nanotech markets continue to grow, the fund will ensure the continued leadership of Hebrew University researchers in nanotech research with significant commercial potential.

Yissum’s NanoTech fund is the third investment vehicle created by Yissum in the last six years, with more than $50M raised by these funds to date.  It joins Integra Holdings, founded in 2012, focused on Hebrew University biotech technologies including therapeutics, medical devices and diagnostics, and Agrinnovation, founded in 2015, focused on agricultural and food innovations originating from The Hebrew University’s Robert H. Smith Faculty of Agriculture Food and Environment.

Yissum is the technology transfer company of The Hebrew University of Jerusalem.  Founded in 1964, it is the third company of its kind to be established and serves as a bridge between cutting-edge academic research and a global community of entrepreneurs, investors, and industry.  Yissum’s mission is to benefit society by converting extraordinary innovations and transformational technologies into commercial solutions that address our most urgent global challenges.  (Yissum 09.10)

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2.10  JFrog Secures $165 Million Investment to Lead Universal DevOps in the Enterprise 

JFrog announced a $165 million Series D funding round led by Insight Venture Partners.  The secured funding will drive JFrog product innovation, support rapid expansion into new markets and accelerate both organic and inorganic growth.

JFrog transforms the way software is updated by offering an end-to-end, universal, highly-available software release platform for storing, securing, monitoring and distributing binaries for all technologies, including Docker, Go, Helm, Maven, npm, Nuget, PyPi and more.  This enables a continuous software release flow from code to production with zero downtime.  More than 5 million developers use JFrog Artifactory as their system of record when they build and release software. Developers deserve the freedom of choice throughout the DevOps lifecycle, from code to production, to avoid vendor lock-in.  JFrog’s seamlessly integrated ecosystem of partners is radically universal, providing enterprise-grade technology integrations.  JFrog further supports multiple deployment options, with its products available in a hybrid model; on-premise; and across the major cloud platforms: Amazon Web Services [AWS], Google Cloud Platform [GCP] and Microsoft Azure.

Netanya’s JFrog is on a mission to enable Continuous Updates through Liquid Software, empowering developers to code high-quality applications that securely flow to end-users with zero downtime.  JFrog is the creator of Artifactory, the heart of the end-to-end Universal platform for automating, managing, securing, distributing, and monitoring all type of binaries.  JFrog products are available as open-source, on-premise, and in the cloud on AWS, Microsoft Azure, and Google Cloud.  As the leading universal, highly available enterprise DevOps Solution, the JFrog platform empowers customers with trusted and expedited software releases from Code-to-Production. Trusted by more than 4,500 customers, the world’s top brands.  (JFrog 04.10)

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2.11  SolarEdge to Acquire Kokam, Korean Provider of Batteries and Energy Storage Solutions

SolarEdge Technologies has entered into definitive agreements to acquire a major stake in Kokam Co.  Headquartered in South Korea, Kokam is a provider of Lithium-ion battery cells, batteries and energy storage solutions.  Founded in 1989, Kokam has been manufacturing Lithium-ion cells and providing reliable, safe, high-performance battery solutions for the past twenty-nine years.  Kokam provides battery solutions for a wide-variety of industries, including ESS (energy storage systems), UPS, electric vehicles (EV), aerospace, marine and more.

The acquisition of approximately 75% of outstanding equity shares of Kokam reflects an aggregate investment of approximately $88 million, including related transaction expenses.  The transaction is subject to customary closing conditions and is expected to close in the coming weeks.  Over time, the Company intends to purchase the remaining outstanding equity shares of Kokam that are currently listed on the Korean over the counter exchange through open-market purchases and otherwise, eventually resulting in Kokam becoming a wholly-owned subsidiary of SolarEdge.

Herzliya’s SolarEdge is a global leader in smart energy technology.  By leveraging world-class engineering capabilities and with a relentless focus on innovation, SolarEdge creates smart energy solutions that power our lives and drive future progress.  SolarEdge developed an intelligent inverter solution that changed the way power is harvested and managed in photovoltaic (PV) systems.  The SolarEdge DC optimized inverter seeks to maximize power generation while lowering the cost of energy produced by the PV system.  (SolarEdge 11.10)

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2.12  Kitov Systems Raises $10 Million in Series A – led by HAHN Group

RSBG, a leading industry holding and investment company invested through HAHN Group in Kitov Systems, a technology company based in Israel, which specializes in universal solutions for visual inspection.  Kitov Systems develops AI-based solutions for visual inspection in industrial manufacturing.  The systems developed by Kitov reduce manufacturing costs, eliminate inefficiencies and improve quality without the need for any programming or automation expertise.  Kitov Systems technology is leveraging Computer Vision, Artificial Intelligence capabilities including Deep Learning, advanced Robotics and Big Data Analytics.

The investment led by HAHN Group, with the participation of Global IOT Technology Venture (GiTV) at total of $10M is a genuine vote of confidence in Kitov Systems’ innovative technology and its unique value proposition for manufacturers.

Petah Tikva’s Kitov Systems is a developer of innovative automated visual inspection solutions for a broad range of production lines and markets.  (KITOV 10.10)

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2.13  Demisto Secures $43 Million Series C Financing Led by Greylock Partners

Demisto announced the closing of a $43 million Series C funding round led by Greylock Partners.  Demisto will leverage these funds to drive global go-to-market expansion, accelerate adoption and deployment of its industry-leading SOAR platform, and take SOAR well beyond Security Operations Center (SOC) use cases.  Additional investors participating in this funding round include early investors Accel Partners, ClearSky Security and others, bringing total funding to date to $69 million.

Amidst fast-growing adoption of SOAR technologies, this latest investment underscores Demisto’s leadership in enabling security teams to automate incident response across disparate security environments.  Demisto’s security orchestration and automation enables standardized, automated, and coordinated response across an organization’s security product stack.  Playbooks powered by thousands of security actions make scalable, accelerated incident response a reality.

Demisto recently launched v4.0 of its product, expanding the platform into advanced threat hunting, cloud security and more. New features not available in any other SOAR product include: an Investigation Canvas that improves security analysts’ visualization of attack campaigns, end-to-end automation of Amazon Web Services (AWS) cloud security processes and hundreds of other enhancements suggested by existing customers and partners.

Tel Aviv’s Demisto is the only Security Orchestration, Automation and Response (SOAR) Platform that combines orchestration, incident management and interactive investigation into a seamless experience.  Demisto’s orchestration engine automates security product tasks and weaves in human analyst tasks and workflows.  Demisto Enterprise, powered by its machine learning technology, acquires knowledge from the real-life analyst interactions and past investigations to help SOC teams with analyst assignment suggestions, playbook enhancements and best next steps for investigations.  (Demisto 10.10)

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2.14  Walmart & Eko Joint Venture to Create Interactive Storytelling for Entertainment and Retail

Walmart announced a strategic entertainment joint venture with Eko, including plans to develop original, interactive content that will enable Walmart to connect with customers in new and more meaningful ways, with the goal of driving deeper and more frequent engagement.  The joint venture expands Walmart’s entertainment ecosystem. The retailer already has a strong physical and digital video presence, through stores, websites, the digital platform VUDU and the recently launched eBook platform, Walmart eBooks, with Rakuten Kobo.  This joint venture strengthens Walmart’s continued presence in the evolving entertainment landscape.  The joint venture, known as W*E Interactive Ventures, will be led by several industry experts.

Tel Aviv’s Eko is a pioneering interactive entertainment company that lets audiences shape stories as they unfold.  Eko’s technology allows participants to affect, control, and influence interactive entertainment like never before.  The company provides a platform for creating, distributing and monetizing interactive stories, and partners with media companies, independent creators and top brands to create deeply engaging experiences for audiences.  Stories are distributed through, affiliate partners, and social networks; available on desktop, mobile and connected devices.  The company has over 15 patents for its technology, including its proprietary player, authoring tools and high-efficiency interactive streaming technology.  Eko Studio, the company’s suite of authoring tools, is also offered for free to creators, enabling them to craft their own interactive experiences using Eko’s platform.  (Walmart 11.10)

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2.15  Kindite Raises $4 Million

Kindite has raised $4 million in a seed round led by RDC (owned by Rafael Advanced Defense Systems and Elron Electronic Industries), with the participation of investment fund CE Ventures, which is supported by CreditEase, a leading financial services provider in Asia.  The round will enable Kindite to progress with what it claims is a breakthrough product for encrypting sensitive enterprise information in the cloud age.  The technology that forms the basis of Kindite’s solution facilitates the analysis and processing of encrypted information without the content being seen, and in fact with no decryption at all.  Kindite says that the solution paves the way to the transfer of sensitive enterprise data to a cloud environment without it being visible to the service provider and without detracting from the advanced capabilities available on the cloud.

Tel Aviv’s Kindite opens up the cloud for enterprises and regulated organizations, overcoming risks of privacy, compliance and control using disruptive encryption technology.  (Globes 16.10)

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2.16  Sygnia to Be Acquired by Temasek

Sygnia will be acquired by Temasek, the global investment company headquartered in Singapore.  The transaction is subject to customary signing and closing conditions.  Sygnia will maintain its operational independence while pursuing collaborations with Temasek and its portfolio companies.  With the acquisition, Sygnia will grow its resources and expand its global reach as it continues building its capabilities as a world-class provider of cyber consulting and incident response services.

Sygnia works with companies worldwide to proactively build their cyber resilience and defeat attacks within their networks.  Since it was founded it has managed numerous heavyweight cyberattacks and has become the trusted advisor of executive managements, boards, and technology teams of top organizations worldwide, including Fortune 100 companies.  The company works with organizations across a variety of industries, including financial, legal, retail and consumer goods products, information technology, media and entertainment, pharmaceutical, telecommunication, logistics and manufacturing.

Tel Aviv’s Sygnia was launched in 2015 by Team8, the leading cybersecurity think-tank and company creation platform. It had not received any funding beyond its original seed investment by Team8.  Sygnia is the third of four companies launched by Team8.

Sygnia is a cyber technology and services company, providing high-end consulting and incident response support for organizations worldwide.  Sygnia works with companies to proactively build their cyber resilience and to respond and defeat attacks within their networks.  It is the trusted advisor and cyber security service provider for IT and security teams, senior managements, and boards of top organizations worldwide.  The company applies technological supremacy, digital combat experience and a business-driven mindset to cybersecurity, enabling organizations to excel in the age of cyber.  (Temasek 16.10)

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3.1  Snapbook Raises $1.5 Million in Funding

Snapbook, a Kuwaiti photo printing startup, has announced a $1.5 million seed round of funding by Faith Capital, a Kuwaiti Venture Capital firm specializing in early stage technology startups.  Founded in 2016, Snapbook has dominated the GCC photo printing market with clients around the globe.  Its platform covers a wide range of products such as photo books, photo prints, phone cases, gift items, home decor, apparel, and wall art customized with users’ pictures.  With this investment, Snapbook aims at strengthening its ongoing operations and impressive growth with the aid of the Faith Capital team’s expansive professional resources and regional expertise.  (ArabNet 03.10)

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3.2  Skiplino Raises Series A Round from KISP Ventures

Skiplino, a Bahrain-based cloud-based queue management system, concluded an investment towards their Series A fund raise from KISP Ventures, a Kuwaiti Venture Capital Firm.  The amount of the funding is undisclosed for now, but will be disclosed soon.  This news brings the total number of KISP Ventures’ investments to 4, placing Skiplino alongside Aqarmap, POSRocket and Magnitt.

On average, people waste about six months of their lives standing in queues.  Skiplino came as a solution to this problem by helping users queue in advance or avoid them altogether.  Launched in January 2016, Skiplino offers users a cloud-based queue management system that allows businesses to handle customer queues at their facilities by monitoring real-time data and staff performance, collecting live customer feedback, and assessing valuable data to speed up processes and improve services.

While the Skiplino team is not the first to come up with a queuing solution, it is the first of its kind in the region and only costs between $99 and $149 per month for companies compared to the higher rates of other solution providers.  Additionally, it provides companies that handle fewer than 50 customers per day with a free plan.  With this investment, Skiplino will have access to KFH’s various retail branches and subsidiaries regionally as well as globally.  (ArabNet 10.10)

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3.3  Hamad Bin Khalifa University’s Qatar Biomedical Research Institute Partners With Harvard

Qatar Biomedical Research Institute (QBRI), a premier research institute under Hamad Bin Khalifa University (HBKU), has signed a collaborative research and training agreement with the Harvard Stem Cell Institute (HSCI) in Boston, USA.  The five-year initiative includes technical training and research in stem cell biology, which are essential for discovering viable treatments for diabetes.

In this new collaboration, QBRI scientists will work closely with HSCI researchers to exchange knowledge and best practice, and to accelerate the translation of discoveries into clinical applications.  In addition to building scientific capacity in the region, the partnership will support ground-breaking research in stem cell biology.  Clinical trials that arise from these endeavors will be conducted in collaboration with QBRI’s major stakeholders, including Qatar-based Hamad Medical Corporation and Sidra Medicine.

QBRI aims to address major health challenges over the long term by supporting scientific research into the molecular basis of various diseases, and biomedical research that seeks to translate those insights into solutions for diabetes, neurological disorders, and cancer.  The partnership with HSCI will facilitate progress in these areas.  (HBKU 08.10)

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3.4  Dubai Becomes World’s First City to Enable Investors to Start Business from Remote Locations

In another world’s first, investors globally will now be able to start their business in Dubai without having to be in the UAE, following an agreement between Dubai Investment Development Agency (Dubai FDI), an agency of the Dubai Economic Development (DED) in Dubai, and the US-based Alliance Business Centers Network (ABCN).  The partnership will enable investors overseas to use a network of 650 business centers in 45 countries to start a business in Dubai.

Through the agreement, Dubai FDI seeks to attract international companies to Dubai and enable them grow and expand their business by leveraging a full range of professional services provided by ABCN.  The partnership comes at a time when global investors and major multinationals are looking to capitalize on the prospects in Dubai, including its vibrant lifestyle, facilities, cultural diversity and openness, in addition to the highly competitive business environment.  The largest global network of serviced offices, ABCN is also one of the leading providers of investor and corporate services for more than 50,000 clients and manages 15 million square-foot of serviced offices worldwide.  ABCN operates its businesses in the Middle East, Africa and Russia through its Dubai headquarters.  (AETOSWire 14.10)

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3.5  Smart Crowd Closes Seed Funding Round of $600,000

The UAE’s Smart Crowd, the innovative new real estate crowd funding investment platform, is celebrating the successful completion of its Seed funding round – having attracted major financing from one of the region’s leading investment firms – Abu Dhabi based Shorooq Investments – along with backing from cutting-edge DLT firm Abaxx Technologies; early-stage venture fund and seed accelerator, 500 Start-ups, Sheraa, and other high-level strategic individual investors.

Smart Crowd provides the opportunity to buy and sell shares in properties, reducing the barriers to entry to low-middle income households to build financial assets and generate investment income.  Unlike the current real estate investment vehicles, Smart Crowd provides users with active management of their shares, transparency on what properties they are actually investing in, low costs of investment and very low minimum investment levels.

Smart Crowd currently operates under an Innovation Testing License (ITL) from Dubai’s Financial Services Authority (DFSA) but plans to pursue a full license.  Its current license only allows UAE residents to invest in Dubai properties but the full license would allow citizens ‘around the world’ to invest in other parts of the world from the convenience of Smart Crowd’s platform.  (ArabNet 08.10)

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3.6  Mumzworld Secures $20 Million in New Funding Round

Mumzworld, the online shopping platform for mothers based in Dubai, has recently announced its success in securing $20M in its Series B funding round from Gulf Islamic Investment (GII).  This investment makes GII the largest stakeholder in Mumzworld.  The $20M follows investments from Tamer Group, Wamda Capital, and Swicorp, together with six additional investors earlier this year.  The company added that the financing will be used to disrupt the under-served e-commerce market in Saudi Arabia.  It will also be used to boost automation and launch vertical specific consumer offerings as well as to continue to grow the brand’s footprint.  Ever since Mumzworld was founded in 2011, it has undergone tremendous growth providing over 200,000 products, 25,000 of which are exclusive to the platform.  Over 2 million mothers benefit from its services with products being shipped to 20 countries in the MENA region.  (ArabNet 03.10)

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3.7  Dubai Investment Firm Launches $100 Million Fintech Fund

Dubai-based Alcazar Capital Limited (ACL) and Fintech Consortium’s investment arm, InQvest Partners (IQP) have partnered to launch a $100 million global fintech fund.  Alcazar, an investment firm based in the Dubai International Financial Centre, said that it has also committed to anchor the fund with 10% of total capital.  The fund partnership will allow IQP to combine its expertise, knowledge and network in FinTech with ACL’s investment experience and track record to jointly build a successful dedicated Fintech venture capital fund.  (AB 15.10)

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3.8  UAE’s Lulu Group to Invest $500 Million in Egyptian Expansion

UAE-based retail giant Lulu Group on Monday said it is planning to invest $500 million in Egypt over the next two years.  The company said it intends to build four new hypermarkets in 6 October City, New Cairo and Obour.  The company added that it will also build two logistics centers from which it will be targeting exports, particularly frozen fish, to markets in the GCC and Europe.  The fish processing and export center will likely be established in East Port Said area, where the largest fish farms are located.

Lulu has recently launched operations in the Philippines and in July announced it plans to invest SR1 billion in Saudi Arabia by 2020.  The retailer said it will open another 15 hypermarkets in the next 18 months in the Gulf kingdom, of which five will open by the end of this year.  (AB 15.10)

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3.9  FreeConferenceCall Announces Expansion into the UAE, the US-based conferencing and collaboration brand, has announced that it is expanding its coverage to include the UAE.  The company said its latest expansion reflects its mission to provide a platform that “bridges countries and collaborators, creating a space where everyone can freely connect, share and innovate without borders and without limits”., the second largest conferencing provider in the world based on minute volume, is a one-of-a-kind player in the retail communications space.

Users need to create an account at and then distribute their dial-in number and access code to participants.  Users dial in using a phone, mobile device or desktop application and can host HD audio, video or screen sharing conferences with up to 1,000 participants for free. said it enables organizations of all kinds to expand their reach internationally, establish a sizeable local presence and tackle communications in new markets with ease., which has users in more than 800,000 businesses, including nearly all Fortune 500, is based in Long Beach, California.  (AB 15.10)

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3.10  Enstoa Seeks Saudi Tech Talent for Qiddiya Project

New York’s Enstoa, a leading systems integrator for capital projects worldwide, has been selected by the Qiddiya Investment Company (QIC) to provide a fully integrated program management information system for the Qiddiya project – set to become the epicenter of entertainment, sports, culture and the arts in Saudi Arabia.  Enstoa is currently recruiting talented Saudi nationals passionate about technology and effectuating change, with a background in digital transformations, to support the project.

Qiddiya aims to provide world-class entertainment options inside the Kingdom, allowing the domestic economy to recapture a market share of the $13 billion spent annually by Saudis on entertainment and leisure outside the country. Located 40 kilometers from downtown Riyadh, the Saudi capital, Qiddiya has five cornerstones that frame content, offerings and the overall development strategy for the project: Nature & Environment; Sports & Wellness; Parks & Attractions; Motion & Mobility; and Arts & Culture.

Qiddiya – a Giga-project established to support Vision 2030, is set to become a prominent cultural landmark and an important hub to satisfy and meet the recreational, social, and cultural needs of the current and next generation in the Kingdom.  The project will enable economic diversification while enhancing quality of life for all segments of Saudi society.  The entertainment destination, which broke ground in April 2018, is set to open its first phase in 2022.   (Enstoa 08.10)

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3.11  Zenoss Announces Expansion Into Kingdom of Saudi Arabia

Austin, Texas’s Zenoss, a leader in software-defined IT operations, announced a strategic expansion into the infrastructure operations management market in the Kingdom of Saudi Arabia through its first system integrator partnership with Saudi Telecom Solutions (STCS).  STCS guides organizations on their journey to the cloud, through the path of digital transformation, and into the infinite capacity and scope of true empowerment.  Zenoss will work with STCS to deploy a software-defined IT operations platform for the STCS Cloud — which delivers software solutions, infrastructure and development platforms as a service — and will provide service assurance to the company’s managed telephony services customers.  The partnership with Saudi Telecom Solutions will serve as the springboard to becoming a leading provider of innovation in the Kingdom of Saudi Arabia.  (Zenoss 07.10)

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3.12  iCommunity Raises $600,000 in Series A Funding from Algebra Ventures

iCommunity, Egypt’s first mobile community platform for the real estate industry, has announced $600K in Series A funding from Algebra Ventures, Egypt’s largest venture capital fund.  Founded in 2016, iCommunity is a community management platform and private social network that connects residents, real estate developers, and facility management all in a single, unified, extensible solution.  With a focus on top-tier gated communities, iCommunity has been growing fast and helping transform customer engagement and service provisioning for developers and residents.  The company now captures a significant market share of the gated community in Egypt.

The company plans to use the acquired investment in two key areas, to grow faster in Egypt and internationally, as well as to invest in their organization in terms of manpower and technology.  (ArabNet 02.10)

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3.13  Turkish Health Care Tourism Generated $4.4 Billion Over the Past Five Years

Revenues from health care tourism over the last five years has reached $4.4 billion while a total of 1.8 million people visited Turkey for health purposes between 2013 – 2017.  Data released by the Turkish Statistical Institute (TurkStat) showed that 433,292 people came to Turkey last year for health care tourism.  The figure pointed to a 62% increase compared to 2013 when the country welcomed 267,461 visitors for healthcare tourism.  In the first half of the year, a total of 274,062 tourists visited Turkey for medical purposes.  Moreover, the revenues of health care tourism have also recorded a significant increase over the last five years.  Last year, Turkey generated $1 billion in healthcare tourism, while the figure was recorded at $747.6 million in 2013.  The revenues of healthcare tourism reached $590.1 million in the first half of the year.  (DS 14.10)

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4.1  Israel Aims For Zero Purchase of New Gasoline or Diesel-Powered Vehicles by 2030

The Energy Ministry announced on 9 October that Israelis will no longer be able to buy new gasoline or diesel-powered vehicles after 2030, as part of a plan to replace them with electric cars and trucks that run on natural gas.  The challenge will be creating an initial “critical mass” of cars that will move the local industry away from gasoline and diesel engines, Energy Minister Steinitz said.  He noted that the state is already encouraging this by funding charging stations, more than 2,000 new charging stations around the country.  The government, he said, will also “reduce taxation on electric cars to almost zero, so they are going to be much cheaper.”  The electric vehicle campaign is part of a broader plan to completely wean Israel off gasoline, diesel and coal. Israel in recent years discovered huge deposits of natural gas, a cleaner-burning fossil fuel, and it is converting its power stations accordingly.

The tipping point is expected around 2025, when, according to the ministry’s target, there will be about 177,000 electric cars on the road in Israel.  Today there are just a few dozen.  After that, it will become easier and cheaper to own electric cars, so the ministry expects the number should jump to nearly 1.5 million by 2030.  All new cars will be electric.  Buses and trucks will be either electric or run on compressed natural gas.  The government, the minister said, is expected to approve the plan by the end of the year.  (IH 11.10)

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4.2  One Hundred Applications Received to Launch Solar Energy Plants Connected to Egypt’s Grid

Egypt’s National Solar Cell Project has received over 100 applications to launch solar energy plants connected to the electricity grid.  There are some 38 companies approved to implement the plants, coming from the industrial, commercial, residential and tourism sectors.  The project is funded with investments of up to $3.5m.  It is a grant from the Global Environment Facility (GEF), which is one of the UN funds to finance environmental projects.  It implements the projects of the UN development program in cooperation with the Industry Development Centre.

Some 15 agreements were signed to implement solar energy projects connected to the grid, with the majority having a capacity of 150kW.  The contracting companies include Ceramica Art, Ragab Faheem, Cairo Petroleum, and others.  The agreement is also under way with other factories and companies.  The first projects to be contracted in each sector will gain extra support up to $45,000, and several agreements will be signed to launch solar energy plants at hotels and schools.  Notably, an agreement was signed with the General Authority for Educational Buildings to install a solar power plant with a 27kW capacity at schools established by the authority.  A training course is being prepared in cooperation with the Federation of Egyptian Banks to facilitate the process of lending small solar projects to finance SMEs with 5% interest, highlighted the project director.   (DNE 09.10)

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5.1  World Bank Revises Lebanon’s GDP Growth Down to 1%

In its October publication, the World Bank has downgraded Lebanon’s 2018 real GDP growth by 1% from a previous forecast of 2%.  In fact, Lebanon is witnessing a contraction in its main sectors.  First, the tourist arrivals increased annually by 3.3% in H1/18 compared to 14.2% growth last year in the same period.  Second, in the real estate sector, cement deliveries declined by 3.4% year-on-year (y-o-y) in H1/18.  Moreover, the BDL’s cut for subsidized loans has had an important impact on lending activity.  In fact, commercial banks’ total credit to private sector increased (y-o-y) by only 1.9% in June 2018, compared to a growth(y-o-y) of 8.4% last year.  The World Bank projects a drive up of fiscal deficit by 8.3% of GDP compared to 6.6% of GDP in 2017.  The rise comes mainly from the approval of higher salaries for public sector employees in addition to more debt interest payments.  The environment of low growth is accompanied by rising inflationary pressures; with the 12-month headline inflation rate averaging a 6.2% (y-o-y) over 7 months in 2018.  The formation of a government is the first turning point for the country with the adoption and implementation of a structural reform program, including a debt management strategy that aims to lower the public debt-to-GDP.  Furthermore, the reforms pledged by the government in CEDRE would boost the economy, attract much needed capital inflows, and create job opportunities.  (WB 03.10)

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5.2  Lebanon’s Balance of Payments Registered a $1.17 Billion Deficit in August 2018

According to the Central Bank of Lebanon, Lebanon’s Balance of Payments (BoP) witnessed a deficit of $1.17 billion in August 2018 compared to $647.1 million deficit recorded during the same period in 2017.  In details, the Net Foreign Assets (NFA) of BDL rose by $1.59B while those of commercial banks slipped by $2.76B by August 2018.  Moreover, the BoP recorded a monthly deficit of $408.1M in August 2018 alone, compared to a surplus of $368.3M in August 2017.  In fact, the NFAs of BDL recorded a drop of $863.3M, while the commercial banks’ NFAs increased by $461.2M in August 2018.  (CBL 04.10)

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5.3  Jordan Sees 2.1% GDP Growth Rate in Second Quarter of 2018

Jordan’s Department of Statistics issued new series of the quarterly estimates of the GDP using 2016 as a base year.  This series was developed according to the System of National Accounts 2008 which includes the improvement of the coverage level and the used methodologies, the results show that growth reached 2.1% during the second quarter of 2018 compared with the same quarter of 2017.

At the level of production sectors, most sectors have shown positive growth during the second quarter of 2018 compared with the same quarter of 2017.  According to the report, the Social & Personal Services Sector has achieved the highest growth rate at 4.0%, followed by Transport, Storage & Communications Sector by 3.3%, then Agricultural Sector and Finance, Insurance & Real Estate’s Sector by 3.2% for each, then Electricity& Water Sector by 2.1% and manufacturing sector by 2.0%.

At the level of sectors contribution to the achieved growth rate during the second quarter of 2018, 78% comes from four sectors, the Finance, Insurance & Real Estate’s Sector has contributed by 0.71% and the manufacturing sector by 0.37% of total achieved growth, Transport, Storage & Communications Sector contribution was 0.28%, then Social & Personal Services Sector at 0.27% of total achieved growth.  (DoS 01.10)

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5.4  Jordan’s King Abdullah Vows to Fight Corruption After Protests

On 14 October, Jordan’s King Abdullah II vowed authorities would crack down on corruption in the country, following mass protests against graft and price rises earlier this year.  Thousands of Jordanians went into the streets at the start of June to protest against corruption, price rises and austerity measures.  The week of mass demonstrations forced the prime minister’s resignation and the withdrawal of a controversial income tax bill.

With a lack of natural resources to boost state coffers, Jordan relies heavily on foreign aid and faces an unemployment rate of 18.5%.  In 2016, Amman secured a $723 million loan from the International Monetary Fund, but the resultant economic reforms led to price hikes.  King Abdullah put the current situation down to “a weakening (of) public trust in government institutions, as well as an atmosphere of skepticism”.

Stability in Jordan is seen as fundamental to the region and in the wake of protests Amman was offered a $2.5 billion aid package from three Gulf backers.  More than $1 billion has already been deposited in the central bank by Saudi Arabia, the UAE and Kuwait.  (AB 14.10)

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5.5  World Economic Forum to Return to Jordan in 2019 for Summit

The World Economic Forum on the Middle East and North Africa will be held at the Dead Sea in Jordan on 5 – 6 April 2019 in partnership with the King Abdullah II Fund for Development (KAFD).  This will be the 10th meeting in Jordan and 17th meeting in the region.  The meeting will convene over 1,000 government, business and civil society leaders from more than 50 countries.

With first results starting to emerge from social and economic reform efforts launched in several of the region’s economies, the meeting will be a key opportunity to collaborate on scaling up such efforts, with a focus on creating sustainable entrepreneurship and innovation ecosystems.  The forum will pay particular attention to women entrepreneurs and key intergenerational issues such as transparency, accountability and sustainability and the protection of the environment.  In addition, the meeting will host dialogues with key decision-makers from the region, the United States, Europe and Asia on addressing geopolitical challenges, including in Syria and Libya.  The World Economic Forum on the Middle East and North Africa was last held in Jordan in 2017 in partnership with KAFD.  (Various 07.10)

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►►Arabian Gulf

5.6  Bahrain’s King Issues New Laws to Boost Investment Eco-System

Bahrain’s King Hamad bin Isa Al Khalifa has issued orders for new laws to enhance the country’s investment eco-system.  The four laws are set to be implemented in the coming months and include a Personal Data Protection Law, Bankruptcy Law, Competition Law and Health Insurance Law.  The laws come as part of a wider development effort, designed to create new opportunities for investors looking to access the $1.5 trillion GCC economy.  The announcement comes as Bahrain Economic Development Board attracted a record $810 million of investment during the first nine months of the year compared to $733 million in 2017 as a whole.  It also comes just days after reports suggested Bahrain’s Gulf Arab allies are weighing plans for a five-year aid package to steady its finances and protect a currency peg seen as vital to regional economic stability.  The amount under negotiation is $10 billion, though a final agreement has yet to be reached.

Bahrain will introduce a nationwide data protection law, supporting the development of the kingdom’s digital economy.  The law promotes the efficient and secure processing of big data for commercial use and provides guidelines for the effective transfer of data across borders.  The competition law aims to will make it easier for new businesses to enter existing markets and compete with significant players while the bankruptcy law introduces reorganization, whereby a company’s management is allowed to remain in place and continue business operations during the administration of a case, as in the United States’ Chapter 11 law.  The health insurance law will be rolled out by the Supreme Council of Health and a Health Insurance Fund will be set up to assure improved pooling under a new national umbrella and coverage for beneficiaries related to benefits and service provision.  (AB 03.10)

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5.7  Moody’s Says Omani Banking System’s Outlook is Negative on Weaker Government Support

Moody’s has maintained its negative outlook for Oman’s banking system, reflecting the diminishing capacity of Oman’s government to support the country’s banks in case need.  The negative outlook also reflects banks’ softening asset quality and relatively tight funding.  “The government’s capacity to provide support to banks is weakening as its fiscal position deteriorates” said Mik Kabeya, an Assistant Vice President at Moody’s.  Moody’s expects the government to continue to show a high willingness to extend support to its banking sector in a crisis, but the rating agency points out that the authorities may become more selective in providing support to banks as the sovereign’s credit strength reduces.

While Oman’s economy will rebound from the sluggish growth rates experienced last year, growth will still remain below the historical average.  Moody’s forecasts the Oman’s real GDP will increase by 2.5% in 2018 and 2.6% in 2016, compared with 0.2% in 2017.  However, the average growth rate from 2007 to 2016 was close to 5%.

However, Moody’s expects capital to remain sound, providing loss absorbency. Moody’s forecasts system-wide tangible common equity to range between 13%-15% of risk-weighted assets over the next 12 to 18 months, from 14.0% in 2017.  Omani banks’ high reliance on government deposits remains a risk, because the government’s ability to finance its rising debt burden is becoming increasingly vulnerable to a change in foreign investors’ risk appetite.  This increases the risk of deposit withdrawals from banks should the sovereign face reduced market access.  Bank profitability will soften as funding costs rise as higher US rates outweigh rising lending rates from banks’ loan re-pricing. Loan-loss provisioning will increase as problem loans rise.  Operating expenses will remain stable, however.  (Moody’s 08.10)

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►►North Africa

5.8  Egypt Stops Gas Imports – On Its Way to Becoming Self-Sufficient

Petroleum Minister Al-Molla announced in early October that Egypt will no longer import liquefied natural gas (LNG), saving the government the LE3 billion it earmarked annually to meet local demands.  The savings are due, in large measure, to the Zohr gas field which began output in December 2017.  Zohr, with reserves of more than 30 trillion cubic feet (tcf), is among the largest gas fields discovered so far in the Mediterranean.  Its output is central to the government’s plans not only to become self-sufficient but to transform Egypt into a regional energy hub.

Three years ago Egypt imported up to 1.2 billion cubic feet per day (bcfd).  Eni, the Italian multinational oil and gas company which discovered Zohr, announced in early September that the gas field is now producing two bcfd.  Zohr’s discovery in 2015 offered the Egyptian government more than a breathing space to save on imports.  The field will bring in much needed hard currency when Egypt starts exporting gas, which it is slated to do by 2019 when output from other gas fields comes online.  Two months ago Eni announced a new gas discovery in the Western Desert.  Other explorations are ongoing in the Red Sea and the Mediterranean.

Cairo is not only focusing on the gas sector.  The long-term National Energy Strategy, approved by the Supreme Energy Council, targets an energy mix which includes nuclear and renewable energy sources.  An important part of the strategy is for the government to pay off its debts to foreign partners in order to encourage further explorations.  The government has succeeded in cutting its debt to foreign oil exploration companies to $1.2 billion in fiscal year 2017-2018, down from $6.3 billion in 2012, the Petroleum Ministry announced in July, and will pay the remaining sum by the end of 2019.  The debt accumulated following the January 2011 Revolution when a slowdown in the economy caused a fall in oil and gas investments.  By 2014 Egypt had become a net importer, rather than exporter, of natural gas.  Egypt now aims to become a regional energy hub, receiving natural gas through underwater pipelines from countries around the Mediterranean to liquefy and then re-export.

One link connecting Israel’s grid to Egypt’s at Arish already exists.  The pipeline, built and operated by East Mediterranean Gas (EMG) was previously used to transport Egyptian natural gas to Israel but will be re-engineered to reverse the flow.  It is expected to start its new operations in 2019, carrying an estimated 64 billion cubic meters of gas over a 10-year period.  A $15 billion agreement was signed in February between the Egyptian private firm Dolphinus Holdings and Delek Drilling LP and Noble Energy Inc, operators of Israel’s Leviathan and Tamar gas fields.  Noble Energy and Delek have finalized agreements with an Egyptian partner to acquire a 39% stake in the pipeline operator EMG, paving the way for Israeli natural gas exports to Egypt.  (Al-Ahram 04.10)

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5.9  World Bank Foresees 6.8% Growth for Libya

In its latest Economic Outlook, the World Bank has forecast GDP growth in Libya of 6.8% in 2019.  Given its high reliance on hydrocarbon activities, the performance of the Libyan economy remains strongly affected by security conditions, especially around the main oil fields and terminals.  Improved political and security arrangements reached during H2/17 allowed Libya to more than double its production of oil and to register record growth last year (up 26.7%) after four years of recession.  The status quo scenario determined by delayed resolution of the political strife and the persistence of the internal division makes sustained stabilization unlikely.  This situation is characterized by recurring clashes around oil terminals and in large cities, with the result that any nascent recovery triggers further resource competition.

In this context, Libya can only manage to resume oil production to a daily average of 1 million barrel per day (bpd) by the end of this year and keep production around this level over the next few years, which will represent only 2/3rd of potential.  GDP will grow at 6.8% in 2019 (a catch-up effect) and an average 2% over 2020-21, resulting in a GDP per capita at 62.5% of its 2010 level.  (World Bank 09.10)

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5.10  Sudan to Set Daily Exchange Rate and Cancel Import Restrictions

On 7 October, Sudan began using a body comprised of bankers and exchange bureaus to set its daily currency exchange rate as part of a package of measures designed to tackle an economic crisis, the central bank governor said.  Sudan is also cancelling import restrictions imposed last year on 19 selected foods and other items.  The currency measures mean the Sudanese pound is likely to lose value against the dollar initially before later stabilizing.  The new exchange body will also set purchase price of gold to counter smuggling, he said.

Sudan’s economy has been struggling since the south of the sprawling northeast African country seceded in 2011, taking with it three-quarters of oil output and depriving Khartoum of a crucial source of foreign currency.  Worsening hard currency shortages have led to strict withdrawal limits and a booming foreign exchange black market, where dollars have been trading for a premium of about 40%.  The official exchange rate on 4 October was around 29 pounds to the dollar.  Sudan’s inflation climbed to a record 66% in August, one of the highest rates globally.  Though gold mining has boomed, officials say most gold is smuggled out of the country.  (Reuters 04.10)

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5.11  Morocco’s Economy to Grow by 2.9% in Fourth Quarter of 2018

Morocco’s High Commissioner for Planning (HCP) predicts a 2.9% rise in Morocco’s economic growth in the fourth quarter, down from 4.4% in the same period last year.  In its quarterly summary of October 2018, the HCP predicted that the national economy will continue to increase during the fourth quarter of 2018, supported by an increase of 3.6% in agricultural value-added products.  Value-added products, excluding agriculture, is expected to improve by 2.8% during the fourth quarter of 2018, almost the same pace in comparison to the same period in 2017.

The HCP attributed the improvement in plant production to the increase in the production of autumn crops, which will benefit from the improvement of dam reserves.  Livestock production is expected to improve slightly, affected by reduced poultry production.  Non-agricultural value-added production is expected to develop under global trends of increased trade and financial pressures as well as social, economic and political turmoil that some emerging countries are experiencing.  Overall, global trade is expected to grow by 4.6% and external demand for Morocco will rise by 4.5%.

The HCP noted that while pending the results of the forecasted economic budget for January 2019, economic growth is likely to remain within 3% in 2018, the same increase announced in the forecasted economic budget in January 2018.  (MWN 08.10)

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5.12  Morocco’s Thriving Aeronautic Industry Attracts International Interest

Morocco’s aeronautic industry is growing exponentially thanks to its proximity to Europe, low labor costs, and political stability.  Since 2001, the Moroccan aeronautics sector has seen a remarkable and considerable growth.  From 2001 to 2011, the number of companies active in the aeronautics industry increased from 10 to more than 100.  Total employees increased from only 300 to more than 10,000 with a total sales of over $1 billion, according to the Moroccan Agency of Investment and Development (AMDI).

Morocco’s strategic location has made the North African country a favorite destination for big international aircraft manufacturers, such as Bombardier, Boeing and Safran.  In September 2016, Boeing announced plans to create a “Boeing industrial ecosystem” in Morocco to attract 120 suppliers for Morocco’s aeronautics exports, generating $1 billion and creating more than 8,200 jobs.  The Seattle-based aerospace company has been in Morocco since 2001.  Boeing also has a joint venture with France’s Safran in Casablanca to build aerospace parts such as wire bundles and harnesses for aircraft makers like Boeing and Airbus.

Safran has been operating in Morocco for more than 15 years with more than 2,700 employees in seven companies and joint ventures.  Safran’s companies in Morocco involved in activities such as aeronautical cabling, thrust reversers and nacelles, engineering, and engineering maintenance.  The company’s employees are primarily young people in their 20s, of which 70% are young women. Women make up 40% of the managing staff.  Bombardier has plans to invest $200 million in Morocco by 2020 and create 850 direct jobs and 4,400 indirect jobs.  In 2014, Bombardier built an aerospace-manufacturing facility in Morocco.  In July 2014, US-based Alcoa Aerospace also announced that it would invest €4.6m in a production unit in Midparc, specializing in fastening systems for the aerospace industry.

In the World Bank’s most recent Doing Business report for 2018, Morocco ranked 69th worldwide. Morocco scored 67.91 points with a more favorable business climate than that of neighboring countries in North Africa, such as Tunisia (88th), Egypt (128th), and Algeria (166th).  The report also stated that Morocco’s scoring enabled it to rise to the third position in the MENA region behind the UAE (21st) and Bahrain (66th).  Among African countries, Morocco also took third place, behind Mauritius (25th) and Rwanda (41st).  (MWN 06.10)

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6.1  Turkey’s Annual Inflation Jumps to 24.5% in September

Turkey’s annual inflation reached 24.52%, its highest level in the last 15 years, according to the Turkish Statistical Institute (TSI).  The TSI revealed 3 October that the consumer price index (CPI) reached 24.5% in September, compared to 17.9% in August.  The Turkish lira has lost about 40% of its value against the United States (US) dollar since the beginning of the year, over concerns about President Erdogan’s economic policies, and the diplomatic dispute with US President Trump.  Moreover, the Central Bank of Turkey decided last month, to increase the interest rate to 24%, in line with the hike in inflation, and the decline of the local currency.  According to the TSI, the most affected sectors with the inflation are domestic appliances and furniture, whose prices rose by 11.4%, while transport prices increased by 9.15% in September.  (DNE 04.10)

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6.2  Turkey’s Budget Sees $12.3 Billion Deficit Over First Nine Months of 2018

Turkey’s central government budget balance posted a deficit of TL 56.7 billion ($12.35 billion) from January to September with a 79.4% year-on-year increase, the Treasury and Finance Ministry announced on 15 October.  The country’s budget revenues totaled TL 546.8 billion ($119 billion) in the first nine months of this year, up nearly 20% year-on-year, data showed.  During the same period, budget expenditures rose 23.6% to TL 603.5 billion ($131.5 billion) – marking a TL 56.7 billion ($12.35 billion) deficit.  The budget balance, excluding interest payments, saw a surplus of TL 3.7 billion ($800 million) from January to September.

Official figures showed tax revenues rose 19.2% to reach nearly TL 459.4 billion (around $100 billion), while interest payments were TL 60.4 billion ($13.2 billion) over the same period.  The New Economic Program estimates a TL 72.1 billion budget deficit in 2018, or 1.9% to the country’s GDP.  The average United States dollar/lira exchange rate in September was TL 6.38, while one dollar traded for TL 4.59 on average in the first nine months of this year.  (DSA 14.10)

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6.3  Turkey’s Unemployment Rate at 10.8% in July

The annual unemployment rate in Turkey hit 10.8, TUIK announced on 15 October.  The number of unemployed persons aged 15 years old and over increased by 88,000 to 3,531 million persons in July 2018, compared with the same period of the previous year.  The unemployment rate stood at 10.8% with a 0.1% increase.  In the same period, non-agricultural unemployment rate was 12.9% with 0.1% decrease.  While youth unemployment rate including persons aged 15-24 was 19.9% with a 1.2% decrease, the unemployment rate for persons aged 15-64 was 11% with 0.1%.

The number of employed persons rose by 507,000 to 29.2 million persons in the period of July 2018 compared with the same period of the previous year.  The employment rate was 48.2% with a 0.2% increase.  According to the distribution of employment by sector; 19.7% was employed in agriculture, 19.5% was in industry, 6.9% was in construction and 53.9% was in services.  (TUIK 15.10)

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6.4  EU Parliament Cancels €70 Million Earmarked For Turkey Over Rule of Law Conditions

On 2 October, the European Parliament decided to cancel €70 million in pre-accession funds earmarked for Turkey, as conditions to improve the rule of law were not met.  Last November, during the budgetary negotiations, Parliament and Council decided to place in reserve €70 million in pre-accession funds for Turkey (€70m in commitments and €35m in payments), under the condition that Turkey makes sufficient improvements in the fields of rule of law, democracy, human rights and press freedom, according to the annual report of the Commission.

However, the European Commission’s annual report on Turkey, published on 17 April 2018, concluded that “Turkey has been significantly moving away from the European Union, in particular in the areas of the rule of law and fundamental rights and through the weakening of effective checks and balances in the political system”.  The condition set by the budgetary authority has therefore not been met, MEPs underline.  Accordingly, they support the draft amending budget, in which the Commission will transfer the €70 million earmarked for Turkey to reinforce the European Neighbourhood Instrument.  This would be done through commitments– to cover actions linked to the Central Mediterranean migratory route and to fulfil part of the EU pledge for Syria – and to boost Humanitarian Aid by €35 million.  The report was been adopted with 544 votes for, 28 against and 74 abstentions.  (Various 03.10)

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6.5  IMF Revises Greece’s 2019 Growth Rate Upwards

The International Monetary Fund has revised Greece’s short-term growth forecasts upward while lowering medium-term forecasts in its October 2018 World Economic Outlook.  The new IMF report expects next year’s growth rate to come to 2.4%, against 1.8% in April. It is closer to the Greek government’s forecast for 2.5% growth, and the latest projection by the European Commission for 2.3%.  However, the medium-term forecast is lower than previously. Specifically, the economic growth forecast for 2023 is now 1.2%, from 1.9% in its previous report.

For Greece’s current account deficit, the IMF predicts that it will be 0.8% of GDP this year, while for 2019 it predicts it will be 0.4% of GDP.  In addition, the Fund’s report provides for an ongoing, gradual reduction in unemployment. In particular, the IMF estimates that this year, the unemployment rate will drop by 1.6% from 2017 (21.5%) to 19.9%, while in 2019 the figure will drop to 18.1%.  Regarding inflation, the IMF estimates it will fluctuate to 0.7% in 2018, while for the year 2019 an increase of 1.2% is expected.  (GN 09.10)

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6.6  Greece to Scrap Controversial Wine Tax

The Greek government reportedly intends to exclude from next year’s draft budget revenues from an excise tax on wine that was introduced in 2016.  The tax was initially received by the Greek wine market with suspicion as it could cause damage to Greece’s wine production.  The “special consumption tax” as it was called, adds €0.15 ($0.17) to the cost of a 750ml bottle of wine or €0.20 ($0.23) to a 1-liter bottle.  The Greek Wine Federation along with the National Interprofessional Organization of Vine and other associations challenged legally this tax and won the case as Greece’s Council of State has now said that its implementation is unconstitutional.  (eKathimerini 04.10)

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6.7  Greece’s Demographic Problem Threatening Economic Recovery

Greece’s aging population is seriously undermining the long-term growth prospects of the country’s economy, official data suggest amid warnings by prominent economists.  At the outset of the financial crisis in 2010, Greece’s active population – those aged between 20 and 64 – stood at 7.045 million people. Today that number stands at 6.8 million.  People aged 20-40 years account for 40% of the population now compared to 46% in 2010.  According to the United Nations, by 2025 the proportion of the active population in Greece will have dropped below 6.5 million, with only 2.3 million people forming the 20-40 age group.  Moreover, the number of people aged 65 and over is expected to soar to 2.535 million by 2025 from 2.1 million in 2010 and 2.237 million in 2015.

Greece’s falling birth rate has been highlighted as a serious problem by international organizations and prominent economists.  Tellingly, the number of children up to the age of 4 is already on the slide, dropping from 585,000 to 503,000 in the period stretching from 2010 to 2015, while this figure is expected to plummet to 404,000 by 2025, according to projections by the UN.

In Greece, the fertility rate – children per couple – stands at 1.26 compared to 1.49 in the European Union.  According to the EU’s statistics agency Eurostat, Greece and Italy have the third lowest fertility rates in the EU, behind Germany and Portugal.  The country’s protracted economic crisis has resulted in a faster demographic slowdown than previously expected.  It could take a full generation for the Greek population to stabilize from the impact of the “economic shock.  (eKathimerini 07.10)

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7.1  Study Ranks Israel High Among World’s Most Democratic Countries

The Jerusalem-based Institute for Zionist Strategies released a new comparative study, challenging the assertion by some that Israel’s democracy is eroding, saying that in terms of balancing between granting state rights and imposing civil obligations, Israel is in line with the world’s leading democracies and sometimes even takes a more liberal approach.  The study focused on three issues that have been attacked as undemocratic: the demand for a pledge of loyalty as a condition for citizenship; asking minorities to perform military or national service; and restricting prisoners’ right to vote.

The study compared Israel and 15 of the world’s leading democracies – as ranked by the prestigious Freedom House Index – including the Scandinavian countries, Canada, Austria and others – and found that Israel demands fewer obligations of its citizens than the rights it grants them.

In terms of a pledge of loyalty as a prerequisite for citizenship, the study found that only five of the 15 democracies reviewed require no such pledge at all, while the other 10 did.  Israel does not demand those seeking citizenship under the Law of Return to pledge loyalty to the state, but does demand it from individuals who apply for citizenship through other avenues.  As for the minorities performing military or national service, the study found that seven other democracies that enact conscription offer minorities exemption from service, but six of them condition give exemption on performance of national service, which is usually longer than the mandatory military service.

Among the seven, none were found to offer minorities a blanket exemption from military service on ethnic or national grounds, as Israel does for its Arab minority; and unlike Israel, all seven impose sanctions on individuals refusing to enlist unless they have been recognized as conscientious objectors.  When it comes to restricting prisoners’ right to vote, the study found that like Israel, seven of the 15 democracies reviewed do not place any such limitation on inmates.  (IH 04.10)

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7.2  Over 4 Years, the Number of Israelis Studying Abroad Rises by 26%

Within the span of four years, the number of Israeli university students pursuing degrees at mostly prestigious schools outside Israel has risen drastically.  According to official figures issued by the Central Bureau of Statistics, 2017 saw a 26.2% increase in the number of Israelis studying abroad, amounting to a record-breaking 33,073 students who left Israel to pursue higher education.  For the sake of comparison, in 2013, 26,215 Israelis were enrolled in foreign universities.

Of the students pursuing degrees abroad, 11% are working toward doctorates; 9.4% are in medical school; 4.6% are in graduate schools and 5.8% are undergraduates.  The percentage of Israeli academics living abroad for a period of three years or more is particularly high among those seeking degrees in the exact sciences and engineering in relation to those working toward degrees in the humanities and social sciences.

The Israeli students abroad are pursuing degrees in mathematics, statistics and computer science (11.7%); medicine (9.6%); languages and literature (8.6%); engineering and architecture (7.6%); agriculture (6.7%); economics and business management (4.2%); and law (3.6%).  Meanwhile, 24.2% of doctoral students are pursuing a degree in mathematics; 20.6% in physiology; and 19.3% in computer science. Among graduate students, 22% are working toward a music degree; 15.7% toward a mathematics degree; and 15.5% toward a computer science degree.  (CBS 11.10)

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7.3  Lebanon’s Parliament Speaker Says Government Formation Back To Zero

Lebanese Parliament Speaker Nabih Berri on 6 October said the process of forming a government more than five months after a national election had returned “to zero”, after saying earlier there had been a “glimmer of hope”.  In the five months since the parliamentary election, there has been no sign of the concessions sought by Prime Minister-designate Saad Al Hariri that would enable the formation of a unity government that can get to work on badly needed economic reforms.  Politicians are warning that Lebanon faces an economic crisis.

The main sticking point in negotiations has been seen as how to satisfy the competing demands of Maronite Christian President Michel Aoun and his Free Patriotic Movement (FPM) on the one hand, and their Maronite rival Samir Geagea and his Lebanese Forces Party on the other.  The Christian parties have clashed over how power should be divided in the government, casting doubt over Hariri’s prediction on that an agreement would be reached soon.  (Reuters 07.10)

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7.4  Lebanon Ranked 80 out 189 Countries on the Human Development Indices

The UNDP released its new report concerning the updated Human Development Indices and Indicators in more than 189 countries.  The HDI is a summary measure for assessing long-term progress in three basic dimensions of human development: A long and healthy life (measured by life expectancy), Access to knowledge level (measured by mean years of education among the adult and children population), and a decent standard of living (measured by Gross National Income (GNI) per capita).

Lebanon’s HDI value for 2017 is 0.757 putting the country in the high human development category – positioning it at 80 out of 189 countries and territories.  Between 2005 and 2017, Lebanon’s HDI value increased by 3.4%.  In fact, between 2005 and 2017, life expectancy grew by 3.91% to reach 79.8, while GNI per capita recorded an uptick of 10.12% to $13,378.  Lebanon’s HDI 0.757 is above the average of 0.699 for countries in Arab States.

In the 2014, Human Development Report Office (UN) (HDRO) introduced a new measure, the GDI, based on the sex-disaggregated Human Development Index, defined as a ratio of the female to the male HDI.  The GDI measures gender inequalities in achievement in three basic dimensions of human development: health (measured by female and male life expectancy at birth), education (measured by female and male expected years of schooling for children and mean years for adults aged 25 years and older); and command over economic resources (measured by female and male estimated GNI per capita).

In Lebanon, the 2017 female HDI value is 0.701 in contrast with 0.788 for males, resulting in a GDI value of 0.889 compared to 0.857 for Jordan and 0.990 for Kuwait.  In 2010, HDR introduced the GII, which reflects gender-based inequalities and give an idea about the loss in human development due to inequality between female and male achievements.  In 2017, Lebanon had a GII value of 0.381, ranking it 85 out of 160 countries while Jordan and Kuwait are ranked at 108 and 57, respectively.  In fact, women held 3.1% of parliamentary seats in Lebanon.  The female participation in the labor market is 23.2% compared to 71.1% for men.  Moreover, 53% of women have done at least a secondary level of education compared to 55.4 % of their male counterparts.  (BLOMInvest 09.10)

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7.5  Jordan’s PM Revokes Exceptional State University Admissions

On 8 October, Jordanian Prime Minister Razzaz decided to cancel the admission of students at universities accepted outside the unified admission system.  Razzaz called on Higher Education Minister Tweisi to revoke a decision to admit students in medicine, pharmacology and other specializations, which had been issued a few days earlier upon a decision by the minister.  The premier highlighted the importance of following regulations of the unified admission, so as to achieve justice and equality among all students.

Tweisi had sent an official letter to several university presidents to accept several students in various medical specializations, following a decision by the Higher Education Council.  The council authorized the minister to address any cases that may arise and require making immediate decisions pertaining to the unified admission at public universities.  The number of students admitted at official universities increased from 29,713 in the academic year of 2017-2018 to 32,174 in this academic year.  (JT 09.10)

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7.6  Morocco to Introduce Holocaust Studies into State Education System

King Mohammed VI of Morocco has ordered to incorporate Holocaust studies into the country’s education system.  The decision was made while the monarch was attending the 73rd U.N. General Assembly in New York recently, adding that King Mohammed sent word to Education Minister Amzazi, saying Holocaust studies must be included in the country’s high school curriculum.  “Education has the power to fight against discrimination and racism, as well as the ugly phenomenon of anti-Semitism,” he said.  It is unclear at this time what form Holocaust studies would take in Morocco and what language the country’s textbooks would opt for.  (Various 04.10)

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7.7  US University Fair Held in Athens on 9 October

The Fulbright Foundation in Greece inaugurated on 9 October the 24th US University Fair, where representatives and alumni from 32 American universities and colleges were in attendance providing information on courses, entry requirements, cost of living and other useful tips for students wishing to study in the United States.  According to the Fulbright Foundation and data from the Institute for International Education, there were 2,199 Greek students at American universities in the 2015-2016 academic year, 1,000 of which were in postgraduate or doctoral programs.  Foundation representatives were also on hand at the event, which is being held at the Crowne Plaza hotel, to talks about its scholarship program.  (GN 09.10)

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8.1  V-Wave Announces First Patients in RELIEVE-HF Pivotal Trial of its Heart Failure Therapy

V-Wave has enrolled the first patients in its global, 500 patient pivotal study of its proprietary, minimally invasive implanted interatrial shunt device for treating patients with NHYA Class III and ambulatory Class IV symptomatic heart failure (HF).  This randomized, controlled, double-blinded multicenter clinical trial – the RELIEVE-HF study – will evaluate the safety and effectiveness of V-Wave’s novel device therapy in severe HF patients with either preserved or reduced ejection fraction.  The study is funded by V-Wave’s $70M early 2018 C-Round financing.

The first two patients in the RELIEVE-HF study were successfully implanted and discharged home the following morning from The Ohio State University Wexner Medical Center.  Approximately 50 major North American hospitals are expected to participate in the pivotal study with up to another 25 centers in the EU and Israel.  The study protocol allows inclusion of a broad pool of patients who are expected to have the best chance of benefitting from the treatment.  The primary effectiveness outcome measure includes a hierarchical composite of mortality, heart transplant or ventricular assist device implantation, HF hospitalizations, and change in six-minute walk test distance.

Caesarea’s V-Wave has developed a proprietary, minimally invasive implanted interatrial shunt device for treating patients with severe symptomatic heart failure with either preserved or reduced ejection fraction.  (V-Wave 03.10)

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8.2  First-ever Opium Poppy Genome Assembled

Xi’an Jiaotong University, The Wellcome Sanger Institute, The University of York and NRGene have recently completed the world’s first assembly of the opium poppy genome.  NRGene’s DeNovoMAGIC provided comprehensive results only a few weeks after receiving the raw material from the University of York.  DeNovoMAGIC assembles Illumina reads into long sequences, delivering accurate assembly results to provide researchers with a complete picture of their varieties for in-depth research.  The opium poppy genome project team supplemented NRGene’s data with analysis from PacBio and a linkage map to further improve the result from NRGene’s scaffold N50 at 15.6Mb, contig N50 at 121kb to the final product of scaffold N50 at 205Mb and contig N50 1.77Mb.

The final assembly allows the teams to understand the species evolution and how metabolic pathways are constructed, providing a more in-depth picture of the plant’s properties as a natural pharmaceutical.  Opium has long been used as a natural pain killer; the poppy plant is the basis of the extracts used to create hydrocodone and codeine.

Researchers around the world are leveraging NRGene’s technologies to accelerate agricultural research on animals and food and biofuel crops, such as wheat, soy, potato and maize.  GenoMAGIC enables researchers to easily relate genomic sequences with beneficial traits to accelerate and enhance genetic discovery and breeding.  PanMAGIC produces an accurate genome-to-genome mapping and displays all types of sequence differences within the studied population including SNPs, InDels of any size, inversions, translocations, gene PAVs, and gene CNVs.  ArrayMAGIC maximizes the data found in microarrays/GBS to obtain high resolution genomic information by imputing back from SNPs to full genomic sequences.

Ness Ziona’s NRGene is a genomic, big data company delivering cutting-edge software and algorithms to their clients to facilitate the modern genomics-based research that is revealing the function, complexity, and diversity of human, plant, and animal genomes that supports the most advanced medical research and sophisticated breeding programs.  (NRGene 03.10)

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8.3  Eximo Medical Receives FDA Clearance for B-Laser Atherectomy System

Eximo Medical has received 510(k) clearance from the U. S. Food & Drug Administration (FDA) for its B-Laser Atherectomy System for Peripheral Artery Disease (PAD).  B-Laser is a transformative 355nm wavelength laser technology designed to address unmet clinical needs for treating multiple vascular indications.  The specific indication cleared by the FDA is: “The B-Laser Atherectomy System is intended for use in the treatment, including atherectomy, of infrainguinal stenoses and occlusion, including in-stent restenosis (ISR).”

Clinical evaluation of the B-Laser device in the intended population was performed in a prospective, single-arm, multi-center, open-label, non-randomized pilot clinical study in 50 subjects in Europe, as well as in a pivotal, prospective, single-arm, multi-center, open-label, non-randomized IDE clinical study in 97 subjects in U.S. and Europe.  In the pilot clinical study, the results presented 100% success in crossing the target with no device related perioperative clinically significant adverse events and no complications requiring intervention.  There were no major adverse events (MAE) at one month and six months post procedure, and only two cases (4.3%) of TLRs among 46 subjects who completed the 1-year post procedure follow-up.  In the pivotal study, the safety and efficacy primary endpoints were achieved with high margins and the 6-months data was consistent with the pilot study results.

Rehovot’s Eximo Medical is a startup Israeli company with a novel hybrid technology for superior tissue resection in various vascular and gastrointestinal endoluminal applications.  B-Laser, Eximo’s proprietary single-use catheter, combines the best of the leading technology solutions: optical fibers that deliver short laser pulses, aspiration, and other innovative solutions.  (Eximo 08.10)

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8.4  Check-Cap Announces IDE Submission to FDA for Its C-Scan System

Check-Cap, a clinical-stage medical diagnostics company engaged in the development of C-Scan, a preparation free screening method for the prevention of colorectal cancer through the detection of precancerous polyps, announced that it has submitted an Investigational Device Exemption (IDE) to the U.S. FDA to advance studies of C-Scan®. If approved, the Company plans to initiate a U.S. pilot study during the fourth quarter of 2018.

Usfiya’s Check-Cap is a clinical-stage medical diagnostics company developing C-Scan, an ingestible capsule-based device for preparation-free colorectal cancer screening.  Utilizing innovative ultra-low dose X-ray and wireless communication technologies, the capsule generates information on the contours of the inside of the colon as it passes naturally.  This information is used to create a 3D map of the colon, which allows physicians to look for polyps and other abnormalities.  Designed to improve the patient experience and increase the willingness of individuals to participate in recommended colorectal cancer screening, C-Scan removes many frequently-cited barriers, such as laxative bowel preparation, invasiveness and sedation.  (Check-Cap 09.10)

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8.5  Atlanta and Israel Launch New Medtech Accelerator

The Global Center for Medical Innovation (GCMI) and the Rambam Health Care Campus, the largest medical center in northern Israel, announce the establishment of a medical technologies accelerator for Israeli-based companies in Atlanta.  The agreement, which calls for joint funding, was formally announced on 10 October at Metro Atlanta Chamber.  The accelerator intends to provide promising Israeli medtech startups a source of funding and U.S. commercialization pathway expertise including market assessment, design, prototyping, preclinical trials, FDA submission requirements, investor readiness and market access.  In addition to GCMI and Rambam, the new venture was fostered by the Consulate General of Israel to the Southeast, Conexx: America Israel Business Connector and the Metro Atlanta Chamber of Commerce.

In addition to its share of funding responsibilities and commercialization pathway support GCMI will also maintain a presence at the Rambam Healthcare Campus in Haifa, Israel, to assist in the evaluation, selection and early support of prospective accelerator matriculants.  Selected companies will be hosted within the new accelerator for 6-12 months, depending on milestones agreed upon prior to admission.  Launched in 2017, GCMI’s “A1” accelerator is currently host to 3 early stage medtech companies and shares relationships with the American Cancer Society, Piedmont Healthcare, Georgia Tech, Children’s Healthcare of Atlanta and other private and public entities.

The GCMI-Rambam program also provides opportunities for U.S.-based companies to access Rambam Health Care Campus resources including a large, diverse patient population, innovative Key Opinion Leaders and access to early-stage clinical research and rich digital health capabilities.  (GCMI 10.10)

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8.6  BMS and Compugen Collaborate to Evaluate Therapeutic Regimen in Advanced Solid Tumors

Bristol-Myers Squibb Company and Compugen have entered into a clinical trial collaboration to evaluate the safety and tolerability of Compugen’s COM701, an investigational anti-PVRIG antibody, in combination with Bristol-Myers Squibb’s programmed death-1 (PD-1) immune checkpoint inhibitor Opdivo (nivolumab), in patients with advanced solid tumors.  In conjunction with this collaboration, Bristol-Myers Squibb will make a $12 million equity investment in Compugen.

Compugen will sponsor the ongoing two-part Phase 1 trial, which includes the evaluation of the combination of COM701 and Opdivo in four tumor types, including non-small cell lung, ovarian, breast and endometrial cancer.  The collaboration is also designed to address potential future combinations, including trials sponsored by Bristol-Myers Squibb to investigate combined inhibition of checkpoint mechanisms, such as PVRIG and TIGIT.  The clinical combination of multiple immune checkpoint inhibition is designed to test the biological rationale of the PVRIG pathway and the synergistic activity demonstrated in preclinical models.

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.  (BMS 11.10)

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8.7  Celmatix Announces Partnership to Bring the Fertilome Genetic Test to Israel

New York’s Celmatix, a next-generation women’s health company, announced a commercial agreement with Oncotest-Teva, a subsidiary of Teva Pharmaceutical Industries to bring the Fertilome test, the world’s first multigene panel test for a woman’s reproductive health and fertility, to the Israeli market.  This partnership, which brings together two pioneers in the field of personalized medicine, represents the first strategic international collaboration for Celmatix and will make the Fertilome genetic test widely available to women through their doctors in Israel.

Among developed nations across the globe, women are waiting longer to start building their families, leading to a worldwide surge in the use of assisted reproductive technologies including in vitro fertilization (IVF) and cryopreservation.  In Israel, a country with 1.7 million women of reproductive age, the impact of this demographic shift is stark:  Today, more than 4% of babies born to Israeli mothers each year result from IVF treatments, compared to approximately 1% in the U.S.  (Celmatix 09.10)

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8.8  Transseptal Solutions Announces FDA Clearance of Its Novel Transseptal Access System

Transseptal Solutions, developer of an innovative Transseptal Access System with a novel approach of transseptal puncture and left atrial navigation to introduce various cardiovascular catheters into the left heart chambers, announced that the company has received FDA 510(k) clearance for the TSP Crosser[TM] Transseptal Access System.  With the increased availability of transcatheter left atrium procedures, there is a growing need to provide physicians with tools that allow accurate, quick and safe access to the left atrium.  TSP Crosser is an advanced transseptal puncture system with a built-in steering mechanism, indicated for use in procedures where access to the left atrium via transseptal technique is desired.

The TSP Crosser Transseptal Access System combines a sheath, dilator and a flexible puncturing needle in a single integrated system for controlled LA access and enhanced performance during transseptal catheterization procedures.  A radiopaque loop wire is positioned at the distal end of the steerable sheath to aid in the localization of the fossa ovalis.  The flexible puncturing needle and the steerable sheath allows pre-puncture deflection and orientation, positioning the needle in the desired puncturing location of the fossa ovalis for transseptal access.  The sheath is steerable up to 180° bidirectionally after crossing the fossa ovalis.

Netanya’s Transseptal Solutions, founded in 2013, brings to the market a new steerable sheath with a novel approach of transseptal puncture and left atrial navigation.  By addressing significant unmet market needs, Transseptal Solutions seeks to improve the LA access procedure and generate a novel approach to serve the expanding indications of left heart treatment.  (Transseptal Solutions 11.10)

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8.9  MEDX Xelerator Broadens International Collaboration

Israeli medical-device incubator MEDX Xelerator is broadening international collaboration with innovation hubs in the EU and the US to advance medical technologies.  In the EU, MEDX Xelerator will collaborate with Health Hub Vienna (HHV), a healthcare-innovation acceleration program managed by INiTS, a Vienna-based incubator developing life-sciences start-ups for over 15 years.  In the US, MEDX Xelerator will collaborate with Parvizi Surgical Innovation (PSI), a private, Philadelphia-based accelerator founded by key opinion leaders in orthopedics from Thomas Jefferson University’s Rothman Institute, an institution considered a world leader in orthopedics.

MEDX Xelerator has also launched collaboration with an academic institution – the University of Navarra (UN), a prominent innovation center in Spain.  Through these collaborations, MEDX Xelerator, HHV, PSI and UN will facilitate exchange in fields that are essential to innovation infrastructure, such as exposure to investors, mentors and industry leaders, as well as leverage their extensive networks of strategic partners, hospitals and universities.

The collaborations with HHV, PSI and UN are a part of MEDX Xelerator’s proactive strategy that leverages the incubator and its partners’ infrastructure in business, technology, intellectual property, regulation and finance to address significant unmet medical needs.  Among other programs, the incubator developed the unique “X Lab” program, which supports inventors and entrepreneurs with very early-stage ideas in defining their project and arriving at proof-of-concept in order to become an incubator company.  The X Lab program’s first graduate is Exero Medical, which had entered its next phase of development as a matured incubator company in September.

MEDX Xelerator is a MedTech incubator located in Or Yehuda, Israel, specializing in seed-stage medical technologies for minimally invasive procedures, medical robotics and implantables.  Its partners are MEDX Ventures Group, Boston Scientific, Intellectual Ventures and Sheba Medical Center.  (Globes 14.10)

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8.10  Hebrew University Establishes Cannabis Research Laboratory

The Hebrew University of Jerusalem received a $2.3 million investment to establish a cannabinoid research lab, to be called Lumir Lab.  The investment came from Asana Bio Group, an Israeli holding company specializing in medical cannabis ventures.  Set up in 2017 but only very recently licensed by the Israeli health ministry, the lab will provide clinical validation, analyses, and solutions to companies operating in the medical cannabis industry, as well as custom product formulations, cannabinoids and terpenes profiling, and product compliance services.  The lab is headed by analytic chemist Lumír Ondřej Hanuš, one of the world’s leading cannabinoids researchers and the first one to identify and isolate the first endocannabinoid in the human brain, Anandamide.

The lab’s first research and development collaboration, announced in June, is with Gynica, a company specializing in cannabis-based solutions in the field of women’s health.  The two will collaborate on a treatment for endometriosis, a condition where tissue from the uterine lining migrates to other organs inside the body.  The lab aims to set an international standard for clinically backed cannabis treatments.  Asana, which is licensed to manufacture active cannabis in Malta under the brand Terrapeutics, intends to use the intellectual property created in the lab for manufacturing and marketing in the European market.  (Various 15.10)

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8.11  PolyPid Begins Phase 2 Study to Prevent Abdominal Surgical Site Infections

PolyPid announced that the first patient has been enrolled in a Phase 2 clinical study evaluating D-PLEX100 for the prevention of abdominal surgery incisional site infections.  The Phase 2 clinical trial is a prospective, multicenter, randomized, controlled, two arm single-blind study to assess safety and efficacy of D-PLEX100 administered concomitantly with the standard of care in the prevention of abdominal surgical site infections.  The study is expected to be conducted in up to 300 patients undergoing elective colorectal surgery.  Top-line results are anticipated in H2/19.

PolyPid’s lead product candidate, D-PLEX100, is a novel product designed to provide local anti-bacterial activity directly at the surgical site to prevent surgical site infections.  Following D-PLEX100 administration into the surgical site, the drug reservoir constantly releases the entrapped broad spectrum antibiotic in a controlled manner over a predetermined period of four weeks, thus allowing prolonged infection management with increased potential to eradicate antibiotic resistant bacteria.

Petah Tikva’s PolyPid is a clinical stage, biopharmaceutical company focused on developing and commercializing novel, locally administered therapies using its transformational PLEX (Polymer-Lipid Encapsulation Matrix) technology to treat a wide variety of localized medical conditions with an initial focus on the management of surgical site infections.  PLEX-based products have demonstrated an excellent efficacy and safety profile during extended clinical trials, with more than 100 patients treated in clinical trials to date.  (PolyPid 15.10)

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8.12  CytoReason Findings Uncover New Cellular Players in Tumor Microenvironment

New findings presented by CytoReason reveal possible new cellular players in the tumor microenvironment that could impact the treatment process for the most in-need patients – those who have already failed to respond to ipilimumab (anti-CTLA4) immunotherapy.  Once validated, the findings could point the way to improved strategies for the staging and ordering of key immunotherapies in refractory melanoma.

Analysis of data from melanoma biopsies, using CytoReason’s proprietary machine learning-based approach, identified cells and genes that distinguish between nivolumab responders and non-responders in a cohort of ipilimumab resistant patients.  The analysis revealed that adipocyte abundance is significantly higher in ipilimumab resistant nivolumab responders compared to non-responders (p-value = 2×10-7). It also revealed several undisclosed potential new targets that may be valuable in the quest for improved therapy in the future.

In this study, using a single published data set, CytoReason was able to apply its knowledge base and technologies to rebuild cellular composition and cell specific expression.  This enabled CytoReason to undertake a cell level analysis, uncovering hidden cellular activity that was mapped back to specific genes that can be shown to emerge only when therapy is showing and effect.

Tel Aviv’s CytoReason is one of the largest systems immunology groups in the world.  At the core of its capabilities is a unique and singular focus on re-defining understanding of the immune system at a cellular level.  The immune system is implicated in a vast array of diseases (and treatments), that go far beyond those diseases clearly defined as immune-related.  CytoReason has spent more than a decade building up its Cell-Centered Model, through development of the most accurate machine-learning technologies trained on the most extensive and inaccessible data.  (CytoReason 16.08)

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8.13  Cannabics Pharmaceuticals Positive Results in Treatment of Cancer Anorexia Syndrome

Cannabics Pharmaceuticals announced the results of its pilot study to test the efficacy of Cannabics capsules for the treatment of cancer anorexia-cachexia syndrome (CACS) in advanced cancer patients.   Held at Rambam Hospital in Israel, the study is aimed at evaluating the effect of dosage-controlled cannabis capsules on CACS, and more specifically, on weight variations in advanced cancer patients.

Preliminary findings showed that all patients who were involved in the study for the first four and a half months reported an increase in appetite, as well as 83% of all those that completed the study.  Results also demonstrated a weight increase of over 10% for 60% of the patients who completed the study.  The remaining patients had a stable weight.  50% of the patients who completed the study reported pain reduction and sleep improvement.

Tel Aviv’s Cannabics Pharmaceuticals is developing a platform which leverages novel drug-screening tools and artificial intelligence to create cannabinoid-based therapies for cancer that are more precise to a patient’s profile.  By developing tools to assess effectiveness on a personalized basis, Cannabics is helping to move cannabinoids into the future of cancer therapy.  The company’s R&D is based in Israel, where it is licensed by the Ministry of Health to conduct scientific and clinical research on cannabinoid formulations and Cancer.  (Cannabics Pharmaceuticals 16.10)

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9.1  Telrad Networks Announces Successful Trial of New MU-MIMO Technology

Telrad Networks announced the launch of their MU-MIMO (Multi-user, multiple-input, multiple-output) technology, enabling operators to increase capacity in a network by up to 70%, and thereby increasing subscriber connectivity rates.  The new feature has been tested in a successful trial by long-term customer Seaside Wireless Communications, a Canadian Wireless Internet Service Provider located in Nova Scotia.

The new feature falls into an overall strategy by the Company to increase capacity and coverage for customers.  The MU-MIMO technology announcement follows two feature announcements earlier in the year for the Dual Sector/Carrier feature and Carrier Aggregation solution, both of which are now generally available.  MU-MIMO will help improve network reliability and provide higher spectral efficiency for operators around the world. The technology allows for more users to use the same spectrum without self-interference and without degrading the overall network performance.  The value of increased sector capacity without the addition of new spectrum or additional hardware greatly reduces operational costs to operators and creates faster return on investment (ROI).

Lod’s Telrad Networks is a global provider of innovative LTE telecom solutions, boasting over 300 4G-deployments in 100 countries. Telrad stands at the forefront of the technology evolution of next-generation TD-LTE solutions in the sub-6 GHz market.  Since 1951, the company’s been a recognized pioneer in the telecom industry, facilitating the connectivity needs of millions of end-users through operators, ISPs and enterprises globally. (Telrad Networks 04.10)

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9.2  Department of Homeland Security Cites Morphisec for Enhanced Moving Target Defense for Virtual Systems

Morphisec has received an award from the Department of Homeland Security (DHS) Science and Technology Directorate (S&T) to extend, deploy, test and evaluate a Moving Target Defense (MTD)-based cybersecurity solution for virtual desktop infrastructure (VDI) environments.  The project objective is the development of a product that will prevent attacks to financial institutions without reducing the overall performance of VDI environments.  The award is part of the DHS S&T’s Silicon Valley Innovation Program (SVIP) and the first award in the Financial Services Cyber Security Active Defense Technologies category to an international company.

VDI use has grown significantly over the past two years, across enterprise, government and mid-market environments.  Morphisec’s objective is to deliver a radically enhanced, never-seen-before preventative solution against targeted, zero-days and advanced attacks across VDI environments.  The company will develop an MTD-based solution that randomly changes different areas of a VDI environment’s memory, including locations and layouts.  This will increase the uncertainty and complexity of attacking the system, thus reducing the window of opportunity and increasing the cost of attack efforts.  The proposed solution will use negligible resources and will not require a single signature, indicator of compromise (IOC) or any prior knowledge of the attack it’s facing to comprehensively prevent the threat from executing.

Beer Sheva’s Morphisec offers an entirely new level of innovation to customers in its Endpoint Threat Prevention platform, delivering protection against the most advanced cyberattacks.  The company’s patented Moving Target Defense technology prevents threats others can’t, including APTs, zero-days, ransomware, evasive fileless attacks and web-borne exploits.  Morphisec provides a crucial, small-footprint memory-defense layer that easily deploys into a company’s existing security infrastructure to form a simple, highly effective, cost-efficient prevention stack that is truly disruptive to today’s existing cybersecurity model.  (Morphisec 03.10)

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9.3  Spain Selects Attenti for Multi-Purpose Electronic Monitoring Program

Attenti’s electronic monitoring solutions were selected for an additional three-year term by the Spanish General Secretary of Penitentiary Institutions.  The new contract includes a vast range of electronic monitoring solutions for the thousands of individuals currently on different levels of imprisonment in Spain.    The contracted solutions include home curfew monitoring, which provides continuous presence monitoring within a defined perimeter; substance abuse monitoring, which supports rehabilitation programs; as well as GPS supervised release monitoring solutions for temporary and post-release programs, which provides on-going supervision of offenders upon completion of their prison term and supports their reintegration into society.  This multi-purpose electronic monitoring program is one of the first and one of the largest electronic monitoring programs in Europe.

As one of the largest global electronic monitoring companies in the industry, Tel Aviv’s Attenti tracks more than 70,000 offenders simultaneously in around 40 countries for criminal justice agencies.  With twenty-five years of designing, engineering, developing, manufacturing, and implementing electronic monitoring equipment and system solutions. Attenti pioneered the offender tracking industry by being the first company to integrate the multiple technologies of RF, GPS, landline and cellular communications, alcohol detection and voice verification into a comprehensive offender tracking solution.  From alternatives to incarceration, to inmate tracking and substance abuse monitoring, Attenti provides a full spectrum of electronic monitoring solutions tailored to each client’s unique requirements.  (Attenti 04.10)

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9.4  Magal Awarded $7.7 Million Extension for Systems Protecting Critical Infrastructure in the Americas

Magal Security Systems has been awarded, through one of the subsidiaries, a $7.7 million extension to an ongoing project providing integrated security solutions for critical energy infrastructures protection in the Americas.  Most of this order is scheduled to be delivered during the remainder of 2018.

Yehud’s Magal is a leading international provider of solutions and products for physical and video security solutions, as well as site management.  Over the past 45 years, Magal has delivered its products as well as tailor-made security solutions and turnkey projects to hundreds of satisfied customers in over 80 countries – under some of the most challenging conditions.  Magal offers comprehensive integrated solutions for critical sites, managed by Fortis4G – our 4th generation, cutting-edge physical security information management system (PSIM).  The solutions leverage our broad portfolio of home-grown PIDS (Perimeter Intrusion Detection Systems), Symphony – our advanced VMS (Video Management Software) with native IVA (Intelligent Video Analytics) security solutions.  (Magal 03.10)

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9.5  Nano Dimension Strengthens in Defense Sector via U.S. Armed Forces Sale

Nano Dimension has sold two additional DragonFly Pro systems to different branches of the United States Armed Forces.  This brings the total number of U.S. Armed Forces customers to four since Nano Dimension received a Commercial and Government Entity (CAGE) Code from the U.S. Department of Defense’s Defense Logistics Agency in June 2018.

Sending confidential intellectual property to an external supplier is a major security concern for defense industry companies.  The multi-material DragonFly Pro precision additive manufacturing system allows electronics designers and electrical engineers to 3D print conductive metal and dielectric polymer simultaneously, and in-house, to meet stringent security requirements.  This capability significantly shortens electronics developers’ project turnaround times. PCB prototypes and other functional circuitry, including antennas and sensors, can be additively manufactured in a matter of hours instead of weeks.  This helps businesses achieve greater value by leveraging more agile workflows and adopting new design opportunities within shorter development cycles.

The DragonFly Pro additive manufacturing system transforms electronics development by enabling companies to reinvent their development processes as well as their products.  Furthermore, the DragonFly Pro makes it possible to manufacture customized and low-volume parts without requiring with an outside vendor.  This technology enables IP-secure in-house prototyping or manufacturing of functional electronics such as sensors, antennas, molded interconnect devices, printed circuit boards and other innovative circuitry.

Ness Ziona’s Nano Dimension is a leading additive manufacturing technology company focused on precision 3D printed electronics that is disrupting, reshaping, and defining the future of how functional and connected products are made.  With its unique additive manufacturing technologies, Nano Dimension targets the growing demand for electronic devices that require sophisticated features.  Demand for circuitry, including PCBs, sensors and antennas – which are the heart of electronic devices – cover a diverse range of industries, including consumer electronics, medical devices, defense, aerospace, automotive, IoT and telecom.  These sectors can all benefit greatly from Nano Dimension’s products and services for short-run manufacturing and rapid prototyping.  (Nano Dimension 03.10)

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9.6  Sapiens DECISION Expands Insurance Technology Offering

Sapiens International Corporation announced that a top tier insurer has selected Sapiens DECISION Manager, a business decision management solution, to modernize its insurance applications.  Expanding the industry-leading business management system to include underwriting and product creation capabilities is expected to help insurers offer a unique customer experience.  The Sapiens DECISION solution is a strategic component that enables insurance companies to continuously improve their technology and provide the highest level of service to clients.

Holon’s Sapiens International Corporation is a leading global provider of software solutions for the insurance industry, with a 35-year track record of delivering to more than 400 organizations.  The company offers software platforms, solutions and services, including a full digital suite, to satisfy the needs of property and casualty/general insurers, and life, pension and annuity providers.  Sapiens also services the reinsurance, workers’ compensation, financial and compliance, and decision management markets.  (Sapiens 09.10)

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9.7  MTI Wireless Edge Supports Riverbed Xirrus With Multi-band Antenna Solutions

Riverbed Technology, The Digital Performance Company, is implementing MTI Wireless Edge’s antenna solutions to provide flexible Wi-Fi services to its customers.  Riverbed Xirrus leads the way in delivering high-performance wireless networks for enterprises working to keep up with the ever growing demand for mobile connectivity.  Their solutions provide consistent, ‘wired-like’ performance, plus superior coverage and security, to meet any customer’s requirements-from single small offices to global, multi-site enterprise networks.

Tel Aviv’s MTI Wireless Edge Limited is engaged in the development, production and marketing of High Quality, Cost Effective, Flat Panel Antennas for Commercial and Military applications.  Commercial applications include: 4G, LTE, WiMAX, Wi-Fi, Point-to-Multipoint (PtMP),Point-to-Point (PtP), and Broadband Wireless Access (BWA) applications as well as for Public Safety, Utilities and general Wireless Networking.  With over 40 years of experience, MTI supplies antennas up to 90GHz including directional antennas for base stations, subscribers and omni-directional antennas for outdoor and indoor deployments as well as Smart Antennas. For the RFID market, MTI offers antennas for RFID readers and terminals.  Military applications include a wide range of broadband, tactical and specialized communications antennas, antenna systems and DF arrays installed on numerous ground, airborne, naval and submarine platforms worldwide.  (MTI 08.10)

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9.8  ERM Advanced Telematics Launches Improved Driving Using Human Voice Warnings

ERM Advanced Telematics is launching two new products aimed at improving driving quality with the use of human voice warnings and visual signals to the driver.  The development of the two products, eVoice and eFlash SF, was completed, and both are now being implemented by a number of clients and are available to their partners and customers in the 68 countries where ERM is active. The main target markets for the products are car fleets, automakers and auto importers.  The eVoice and eFlash SF join the company’s mature eSafe product for identifying and analyzing driver behavior.  The latest products represent expansion of the existing solutions for safety and communications solutions launched by ERM in recent years for connected vehicles.

The eVoice product is based on a speaker installed in a vehicle that utilizes a processor and a memory chip for supplying the driver with human voice warnings designed to help him or her identify dangerous situations they made while driving.  This service enables personalized learning by the driver with the aim of improving habits and behavior while driving.  The device allows a fleet manager or the operator of the platform to record in advance up to 100 warnings in the mother tongue of the driver that are adapted to various dangerous patterns on the road or based on various situations of the vehicle, and to define with a user-friendly software program which warning will be played for each type of event.

The eFlash SF product serves as a warning system for the driver and includes 6 icons with LED lighting installed on the dashboard.  It warns the driver, through the use of flashing icons and a series of beeps, of various situations that he or she needs to be informed of or require attention.  For example, icons can be defined for problematic behavior such as dangerous maneuvering, accelerations, excessive breaking and sharp turns.  In addition, the fleet manager, the automaker or the operator of the system can define in advance actions for which visual warnings using lighting and icons can be given.  These could include sections of roads with speed limits, speed cameras, holes in the road, dangerous intersections, designated areas for cargo collection, bus stops etc.

Rishon LeZion’s ERM Advanced Telematics is an international automotive technology vendor, whose technologies and products are installed in more than 5 million vehicles worldwide.  The company’s solutions are based on a range of wireless technologies, including all available cellular communications, RF, Bluetooth and Wi-Fi. ERM offers a wide range of modular solutions that improve the protection, management, and diagnostics of vehicles, vehicle fleets, and valuable assets, reducing operating costs for both the service provider and the end customer.  (ERM 10.10)

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9.9  Cymulate Announces Technology Integration with Tenable

Cymulate announced that it has achieved technical integration with Tenable, Inc., the Cyber Exposure company.® will now seamlessly integrate into Cymulate’s BAS platform.

Cymulate’s BAS platform enables organizations to launch simulations of multi-vector cyberattacks against their networks, immediately exposing vulnerabilities and providing remediation steps.  This integration enables security teams to seamlessly view data from within Cymulate’s platform.  This allows for improved insight into current exposures and risks, vulnerabilities and infiltration patterns within the corporate network to provide a more comprehensive view of the organization’s cybersecurity posture.  By taking vulnerability data and insight from and correlating them with Cymulate’s findings, organizations are able to better prioritize mitigation steps based on where they are most exposed.

Rishon LeZion’s Cymulate helps companies to stay one step ahead of cyber attackers with a unique breach and attack simulation platform that empowers organizations with complex security solutions to safeguard their business-critical assets.  By mimicking the myriad of strategies hackers deploy, the system allows businesses to assess their true preparedness to handle cyber security threats effectively.  An on-demand SaaS-based platform lets users run simulations 24/7 from anywhere, shortening the usual testing cycle, and speeding up time to remediation.  (Cymulate 11.10)

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9.10  Autonomous Investigation App from SecBI

SecBI announced the availability of the Autonomous Investigation app for the Palo Alto Networks Application Framework.  The Application Framework is a cloud-based framework that extends the capabilities of the Palo Alto Networks Security Operating Platform, which allows organizations to rapidly consume and implement a variety of innovative cloud-based security applications from any provider, large or small.

SecBI’s Autonomous Investigation technology uses network traffic analysis (NTA) based on unsupervised machine learning to detect complex and stealthy cybersecurity threats without the need to deploy special sensors or agents.  Security analysts are presented with the full scope of the suspicious incident’s kill chain, including visibility to all affected users and devices, as well as infection points and malicious communications, enabling fast and complete remediation.  As part of the Application Framework, the Autonomous Investigation app will enable customers to easily and quickly deploy SecBI Autonomous Investigation without friction and respond to malicious threats.

Tel Aviv’s SecBI has developed a revolutionary approach to network traffic analysis (NTA) to deliver automated threat detection and investigation for security operations centers (SOCs) and managed security service providers (MSSPs).  Their value is best understood in contrast to solutions that generate sporadic alerts and anomalies requiring manual correlation and investigation.  Their Autonomous Investigation™ technology incorporates machine learning to uncover the full scope on every suspicious incident, including all affected entities (e.g. users, domains, devices) within minutes.  (SecBI 10.10)

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9.11  Sense Wins First Double Award At Worldwide South Summit in Madrid

Sense Education has been chosen as the number one EdTech Startup at South Summit’s 2018 enlightED competition.  Sense identifies how people solve problems, allowing instructors to provide personalized feedback at scale.  Sense works on many types of open-ended questions in FEAST (Finance, Engineering, Accounting, Science and Technology) courses at scale.  Sense makes providing grading and feedback faster, fairer, and more personalized, all at a greater scale than has ever been possible before.  The system was first deployed at Tel Aviv University, Bar-Ilan University and is also being used at many other schools in Israel and the United States.  Sense is generating tens of thousands of AI-generated personalized responsive hints, tips, and grades.

Sense Education has raised its initial capital from well-known angel investors and OurCrowd, Israel’s most active Venture investor.  Sense utilized OurCrowd Connect, a strategic business development engine, to make contact with IE University, one of Spain’s most innovative and influential educational institutions.  This contact resulted in Sense being invited to apply to compete against 600 other startups in the enlightED competition at this year’s South Summit in Madrid, Spain.

Tel Aviv’s Sense Education is the world’s first Artificial Intelligence solution that helps instructors provide personalized education feedback to massive amounts of open ended assignments.  Personally tailored educational feedback is an essential component for learning. However, it is virtually impossible to provide personalized feedback to large numbers of students in courses with high-enrollment.  Sense Education is the missing link that enables instructors, schools, and e-learning companies to provide students with feedback that is both personalized and scalable.  (Sense Education 15.10)

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9.12  CyberArk Launches Advanced Privileged Session Management for Cloud

CyberArk announced CyberArk Privileged Session Manager for Cloud.  Through a transparent user experience, this new offering extends privileged access session isolation, monitoring and control to the most common web applications, cloud and social media platforms.  As part of an integrated solution, Privileged Session Manager for Cloud also leverages industry-leading risk scoring capabilities to detect and alert on suspicious privilege-related activity.

Cloud administrators and privileged business users often have elevated rights to sensitive cloud platforms and web applications, yet this access is not always managed by the IT team.  This allows users to operate outside of corporate security, potentially exposing the entire organization to unknown risks.  An external attacker or malicious insider who is able to hijack these types of user credentials could shut down cloud environments, execute a total compromise of web applications or DevOps tool consoles, steal sensitive customer data or post inflammatory comments on social media.  Innovative CyberArk Privileged Session Manager for Cloud capabilities are based on technology acquired from Vaultive.

Petah Tikva’s CyberArk is the global leader in privileged access security, a critical layer of IT security to protect data, infrastructure and assets across the enterprise, in the cloud and throughout the DevOps pipeline.  CyberArk delivers the industry’s most complete solution to reduce risk created by privileged credentials and secrets.  The company is trusted by the world’s leading organizations, including more than 50% of the Fortune 100, to protect against external attackers and malicious insiders.  (CyberArk 15.10)

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10.1  Israel’s CPI Rises by 0.1% and Home Price Index Falls in September

Israel’s Home Price Index fell 0.3% in July-August after rising 0.3% in June-July, and 0.9% in May-June, according to the Central Bureau of Statistics.  This latest fall will be good news for the Ministry of Finance, which has pledged to halt the rise in home prices over the past decade, which has made it difficult for young people to afford their own home.  The Ministry of Finance will be able to take further comfort from the fact that home prices have fallen 1.1% over the past 12 months.  Housing prices in July fell 1.4% in the North, but rose 0.2% in Jerusalem.

The Consumer Price Index (CPI) for September rose 0.1%, as expected.  This means prices have risen by 1.2% over the past 12 months.  Prices of fresh vegetables rose 5.8% in September while prices of culture and entertainment fell by 2.1% and fresh fruit prices fell by 1.3%.  (CBS 15.10)

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10.2  Upward Revision for Israel’s Growth During First Half of 2018

The Central Bureau of Statistics announced that figures for Israel’s annualized GDP growth during the first half of 2018 were revised upwardly, from 4.1% to 4.2%, following 4.3% and 2.4% growth in the second half of 2017 and first half of 2017, respectively.  The Central Bureau of Statistics left its 1.8% estimate for second quarter growth unchanged, following 5.2% growth in the first quarter.  The difference between these two figures is attributable to a wave of vehicle purchases.  Excluding vehicle purchases, growth was 4.0% in the first quarter and 2.8% in the second quarter.

Changes in GDP in the second quarter included annual decreases of 2.4% in private consumption (a 2.3% rise excluding durable goods), 4.3% in public spending, and 1.8% in investments in fixed assets, combined with an annualized 1.7% rise in exports of goods and services. Imports of goods and services were up 1.3%.  Business product jumped by an annualized 4.5% in the second quarter, following increases of 4.8% and 2.2% in the second and first halves of 2017, respectively.

The most dramatic development in the accounting figures was the increase in the trade deficit, a result primarily of imports of goods and services, which rose 10.5% in H1/18, following a 14.3% increase in the H2/17.  Annualized exports of goods and services, excluding startups and diamonds, were up 5.7% in H1/18.  Industrial exports, excluding diamonds, rose 5.6%, exports of tourist services 8.5%, and exports of other services 7.6%, while agricultural exports were down 12.3%.  (CBS 16.10)

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10.3  IMF Raises Israel Growth Forecast

The International Monetary Fund (IMF) has revised Israel’s 2018 GDP growth forecast upwards from 3.3% to 3.6%.  Since its last forecast in March, the IMF has also revised upwards Israel’s expected inflation this year from 0.7% to 0.9%.  The IMF sees 3.5% growth in Israel in 2019, 3.3% in 2020 and 3% in 2021-2023.  This is slightly lower than the IMF’s forecast for world growth of about 3.6%-3.7% per year but considerably higher than growth in Western developed countries, which the IMF sees falling from 2.4% this year to 1.5% between 2021 and 2023.  The rate of growth in the developing world will be an average of 4.6%-4.8% in the years to 2023.  (Globes 09.10)

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10.4  Israel’s Unemployment Drops to 4% in August

On 8 October, the Central Bureau of Statistics announced that Israel’s unemployment rate in August was 4%, down slightly from the 4.1% rate in July and equal to the rate in June.  The Central Bureau of Statistics measures each month the proportion of unemployed people in the labor force among those in the +15 age bracket.  The rate in the 25 – 64 age bracket was 3.4%, the same as in July 2018.

The employment rate in the +15 age bracket rose slightly from 61.2% in July to 61.5% in August.  Figures that remained unchanged from July 2018 included the proportion of those in the labor force in the 25-64 age bracket (80.4%).  Together with the increase in the number of available jobs in June-August and continued growth in the average monthly wage posted in June, which now stands at NIS 10,884, all the indicators point to the strength of the Israeli labor market.  (CBS 08.10)

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10.5  Tourism to Israel Increase by 15% in 2018

A record 3.1 million tourists entered Israel in the first nine months of 2018, 15% up from the corresponding period of 2017, the Central Bureau of Statistics announced.  The number included 2.9 million tourists and 200,000 day visitors who entered Israel for less than 24 hours.  Of the 2.9 million tourists, 2.6 million flew into Israel and 324,000 came by land.  In September, Israel had 300,000 tourists.  2018 looks set to be a record year for tourism.  Israel had 3.836 million tourists last year and 3.069 million tourists in 2016.  Since the start of 2018, 1.6 million tourists have come to Israel from Europe and 704,700 from North America. 300,000 tourists have come from Asia and 93,200 from South America.  (CBS 04.10)

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11.1  ISRAEL:  Bank of Israel Research Department Staff Forecast, October 2018

Below is the forecast of macroeconomic developments compiled by the Bank of Israel Research Department in October 2018 regarding the main macroeconomic variables – GDP, inflation and the interest rate.  According to the staff forecast, gross domestic product (GDP) is projected to increase by 3.7% in 2018, similar to the previous forecast, and by 3.6% in 2019, slightly higher than the previous forecast.  The inflation rate over the next year is expected to be 1.4%, similar to the previous forecast.  The Bank of Israel interest rate is expected to increase to 0.25% in the first quarter of 2019, and to increase again, to 0.5%, in the third quarter of 2019.


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

The Global Environment

Our assessments of expected developments in the global economy are based mainly on projections by international institutions (the International Monetary Fund and the OECD) and by foreign investment houses.  These institutions’ forecasts for growth and inflation in advanced economies were revised only slightly since the previous forecast, but their projections for world trade declined markedly.  We assume that growth in advanced economies will be about 2.4% in 2018 and 2.0% in 2019, and that the advanced economies’ imports will increase by 4.3% in 2018 and by 4.0% in 2019, compared with the previous forecast of 5.0% in 2018 and 4.7% in 2019.  According to the assessments of investment houses, the US federal funds rate is expected to be 2.5% at the end of 2018 and 3.1% at the end of 2019.  The declared interest rate in the Eurozone is expected to be 0.0% at the end of 2018, and 0.2% at the end of 2019.  Additionally, our assumption is that inflation in the advanced economies will be 2.1% in 2018 and 2.0% in 2019.  The average price of Brent crude oil was about $76 per barrel in the third quarter of 2018, essentially unchanged from its second quarter average, though there was an upward trend toward the end of the quarter.

Real Activity in Israel

GDP is expected to grow by 3.7% in 2018 and by 3.6% in 2019 (Table 1). The expected growth rate for 2018 is similar to the previous forecast, while the expected growth rate for 2019 is 0.1% higher.  Although National Accounts data that became available since the publication of the previous forecast (in July) indicated notable moderation in the second quarter growth rate, our assessment regarding the full-year growth rate did not change, due to two reasons.  First, the moderation was already reflected in the previous forecast, as we had mostly expected it.  Second, current indicators strengthen our assessment that this moderation reflects volatility of the quarterly data and that in the third quarter the growth rate is expected to return to higher levels.  The forecast for 2019 was revised slightly upward, due to an upward revision in the expected growth rates of public consumption and of exports.

Regarding the uses, in 2018 exports are expected to grow at a slightly slower pace than assessed in the previous forecast, due to the downward revision in the world trade forecast, while in 2019 they are expected to grow at a slightly faster pace, with the culmination of several investments in various industries.  The growth rate of public consumption was revised slightly upward, among other things due to the development of actual public consumption to date, which was higher than our previous assessment.  The forecast for private consumption and for investments remained unchanged.


Table 1:  Economic Indicators, Research Department Staff Forecast for 2018–2019  (rates of change,%, unless stated otherwise)






Bank of Israel forecast for 2018 Change from the previous forecast Bank of Israel forecast for 2019 Change from the previous forecast
GDP 3.5 3.7 3.6 0.1
Private consumption 3.4 4.0 3.5
Fixed capital formation (excluding ships and aircraft) 3.2  




Public sector consumption (excluding defense imports) 4.4  






Exports (excluding diamonds and start-ups) 7.3  






Civilian imports (excluding diamonds, ships, and aircraft) 6.4  




Unemployment ratea 3.7 3.4 0.1 3.4
Inflation rateb 0.3 0.8 -0.4 1.5
Bank of Israel interest ratec 0.1 0.1 -0.15 0.5
a) Annual average of unemployment in the primary working ages (25–64).

b) Average CPI reading in the final quarter of the year compared with the final-quarter average in the previous year.

c) End of the year.

Inflation and Interest Rate Estimates

According to the staff forecast, the inflation rate in the four quarters ending in the third quarter of 2019 will be 1.4%.  Inflation at the end of 2018 will be 0.8%, and at the end of 2019 it will be 1.5%.  The Consumer Price Index readings published since the publication of the previous forecast indicated a lower inflation rate than we had assessed, and the inflation rate in the third quarter is expected to be lower than preceding quarters.  This development, as well as the appreciated level of the effective exchange rate relative to our assessment in the previous forecast, led to a downward revision in the forecast for annual inflation (previous four quarters) for the coming quarters.  In contrast, the increase in oil prices from the middle of August is expected to make a positive contribution to inflation.  Overall, we assess that the moderate inflation in recent months is a transitory phenomenon, and our baseline assessment remains in place – inflation is expected to continue rising gradually toward the midpoint of the target range, and the inflation rate over the coming four quarters will be 1.4%, similar to our assessment in the forecast published in July.  The main contribution to this process is expected to derive from the tight labor market, which in our assessment will support a continued increase in wages, and as a result in an increase in manufacturing costs.  The inflation in prices of imported goods is expected to rise gradually, after being low in recent years due to the appreciation of the shekel and the moderate inflation worldwide.  This is in light of the rise in inflation worldwide, and assuming relative stability in the representative exchange rate.

The rise in inflation is expected to be gradual, as various factors are expected to moderate the process – continued growth in competition in the economy, steps that the government is taking to reduce the cost of living, and the development of e-commerce.

According to the Research Department’s assessment, the Bank of Israel interest rate will begin rising in the first quarter of 2019, to a level of 0.25%.  As inflation was more moderate than we assessed in July, we slightly deferred the timing of the expected interest rate increase.  The deferral is slight because we assess that the moderate inflation of recent months is only transitory, and that the inflation rate will continue to increase at a pace similar to our assessment in July.  In accordance with our assessment of the continued increase in inflation, the interest rate is expected to be raised another time, to 0.5%, in the third quarter of 2019.

Table 2:  Inflation and interest rate forecasts for the coming year  (percent)
Bank of Israel Research Department Capital Marketsa Private Forecasts
Inflation ratec 1.4 1.3 1.1
(range of forecasts) (0.6–2.2)
Interest rated 0.5 0.5 0.35
(range of forecasts) (0.10–0.75)
a) Average following publication of the Consumer Price Index for August. Inflation expectations are seasonally adjusted.

b) The forecasts published following the publication of the Consumer Price Index for August.

c) Inflation rate in the coming year. Research Department: average CPI reading in the third quarter of 2019 compared with the average in the third quarter of 2018.

d) The interest rate one year from now. (Research Department: in the third quarter of 2019.) Expectations from the capital market are based on the Telbor market.

SOURCE: Bank of Israel.


Table 2 indicates that the forecast compiled by the Research Department regarding inflation is slightly higher than the average of private forecasters’ projections, and close to expectations derived from the capital market.  The Research Department’s forecast regarding the interest rate in one year is similar to the projections derived from the capital market and slightly higher than the average of the private forecasters.

Main Risks to the Forecast

Several factors may lead to economic developments that differ from those in the forecast.  These include uncertainty concerning the future development of the shekel exchange rate; uncertainty concerning the extent to which government measures to reduce the cost of living will roll over to prices and regarding the strength of further measures of this kind that the government may take in the future; uncertainty regarding the magnitude of the impact of the increase in competition in the economy; and uncertainty regarding the future development of the housing market.

Regarding the global environment, the recent developments in the world trade environment are liable to worsen to the point of a broad trade war, which could impact on the Israeli economy, though there is also uncertainty regarding the extent of such impact.  There is also marked uncertainty regarding the future development of oil prices.  (BoI 08.10)

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11.2  JORDAN:  Jordanians Fed up With More of the Same

Aaron Magid observed on 3 October in Sada that many Jordanians are unwilling to give the new Razzaz government a chance on its reintroduced tax bill unless accompanied by other reforms.

Confronting a spiraling debt and a bloated public sector, Jordanian Prime Minister Omar al-Razzaz publicly introduced a new tax bill on 11 September, having promised significant action by 100 days in office.  Yet his signature tax law faces heated opposition.  On 15 September, activists angrily shut down a session of government ministers trying to explain the legislation in the southern city of Tafileh.  “We will never accept any version of any income tax law,” one Tafileh resident insisted.  The next day, citizens expelled an official delegation from Ma’an from a panel discussion presenting the tax law.  A 1 October poll showed that approximately 75% of citizens urge parliament to reject the legislation.  This opposition to Razzaz’s bill echoes frustration that peaked only four months ago.

In June, fierce protests had erupted against former Jordanian Prime Minister Hani al-Mulki’s income tax law, endorsed by the cabinet on 21 May.  Facing intense demonstrations far larger than the ones in December 2017 against the U.S. Embassy transfer to Jerusalem, King Abdullah replaced the prime minister, citing “unjust taxes”—a familiar trick to defuse protests through nominal change while remaining the same.  Soon after Razzaz became the new prime minister on 7 June, he withdrew the despised tax bill.  But the Jordanian government still understood that an updated tax bill was key to the nation’s fiscal health, since only approximately 4% of citizens pay income tax, and annual growth (its traditional source of revenue) has fallen to about two% in recent years.  The state thought it would be easier to advance a tax law when protests seemed to have died down.

Yet Razzaz’s new tax legislation is eerily similar to the shelved bill.  Starting in 2019, the Razzaz version will require individuals earning over 9,000 Jordanian dinars ($12,700) per year to pay income tax compared to 8,000 dinars ($11,300) in the Mulki version – and double for families under both bills.  The tax rates for banks dropped slightly from 40% under Mulki’s bill to 37% in the updated Razzaz version.  The legislation aims to gain 280 million dinars ($395 million) in additional revenue in 2019, 180 million dinars ($254 million) of which will come from increased taxes and the rest by cracking down on an estimated 132,000 Jordanian companies committing tax evasion.  On 24 September, the Jordanian cabinet approved an updated version of the tax bill before sending the legislation to parliament on the following day.

The government faces a dire budget crunch.  Jordan’s debt-to-GDP ratio soared to 96.1% in 2018 and Amman made almost zero progress toward the International Monetary Fund’s (IMF) 2016 proposal to reduce this ratio to 77% by 2021.  If the Razzaz administration were to disregard the IMF’s call for a fiscally sound tax law, it would likely lead outside investors to flee the kingdom and rating agencies to downgrade Jordan’s credit rating, plunging the country into a deeper economic crisis.

With Jordan’s spiraling debt of $37 billion, Amman is further stretched by hosting such a large Palestinian and Syrian refugee population, strains that will be exacerbated since Washington announced on 30 August that the United States would cut aid to the UN Palestinian refugee agency (UNRWA).  UNRWA, which received $364 million from the United States in 2017, oversees health clinics serving 1.1 million Palestinian refugees and provides education for 120,000 children in Jordan.  The country’s public schools are already overburdened by a “mass shift” of 50,000 students from private to public schools, with parents unable to afford high tuition fees, and by accepting approximately 130,000 Syrian children in Jordanian schools as of the 2017-2018 academic year.  While Jordan announced on 28 September that donor countries raised an additional $120 million in response to the U.S. decision, the overall reduced assistance to so-called Palestinian refugees will still strain Jordan’s ability to provide educational services.

Recognizing that this necessary bill would be unpopular, the government unveiled a slick website explaining the law and is actively promoting the bill on social media.  Razzaz also sent ministers to advocate for the bill in cities far from the capital on 17 September, after unveiling it but before submitting it to parliament, trying to show the public that he was interested in their input and valued their perspectives prior to finalizing the law.  However, despite these efforts, Razzaz faces unfair misinterpretations of his tax bill by many citizens, just as Mulki did.  Many Jordanians worry they will be unable to pay taxes because they cannot find work – disregarding the fact that no one unemployed will be forced to pay a single dinar and that both bills would still have exempted about 90% of the population from paying income tax.

Husam Abu Ali, head of Jordan’s Income Tax Department, also appeared to go too far in attempting to promote the bill, saying, “This law is specifically designed to achieve social justice and to help the poor” by giving the government funds to expand services, particularly healthcare, transportation and education.  However, additional government revenue does not necessarily improve this dearth of services – which combined with a rising unemployment rate, currently at 18%, has provoked the wrath of many across the kingdom.  Significantly, few trust the government to use increased taxes to improve conditions given longstanding corruption.  After being ranked 45 out of 167 countries in Transparency International’s 2015 Corruption Perceptions Index, Jordan dropped 14 slots in the 2017 index, ranking 59 out of 180 countries.

Jordanians fear the government will collect more of citizens’ limited fiscal resources while still maintaining the status quo of inadequate public transportation, crumbling government infrastructure and endemic corruption.  Citizens are therefore demanding better social services prior to bearing the brunt of a tax hike. Jordanians launched a social media campaign using the hashtag al-islah qabla al-driba or “reform before the tax.”  For instance, on 17 September, one activist called out the government for preventing Jordanian women from passing along citizenship to their children when they marry foreigners, but considering these children sufficiently Jordanian for taxation.  Other citizens demanded that the government combat corruption more aggressively and redirect illegally spent sums to improve welfare programs.

Healthcare inequality also remains a longstanding concern for activists, with one Amman hospital so overcrowded that multiple children were placed on a single bed.  Many Jordanians are still feeling the pain from the government’s January decision to nearly double bread prices.  Frustration with the education sector is high, since in recent years not a single student in hundreds of Jordanian high schools has been able to pass the General Secondary Educational Certification exam, known as the tawjihi.

In a bid to address activists’ grievances, Razzaz noted on 21 September that funds from the additional taxes would be used to improve transportation and healthcare in addition to fiscal issues, and that to address ongoing political stagnation, he would work to make Jordan a parliamentary government within two years.  But, since citizens have heard promises of reform for many years but seen little tangible change, activists are skeptical of Razzaz’s rhetoric.

Razzaz so quickly recycling the tax law that was shelved just four months ago reinforces the monarchy’s support for the bill.  With the June protests leading to such significant instability and Mulki’s downfall, it would be unimaginable for King Abdullah not to play a key role in backing this critical legislation.  If the king were opposed to the bill, he could force Razzaz to resign in a similar manner to Mulki’s recent departure, yet he has not shown any indications of doing so.  Jordanians who frequently back the king’s policies have escalated attacks on social media against critics of the tax bill.

Amman has similarly attempted to shield King Abdullah from backlash against the unpopular law by assigning blame to Mulki.  By contrast, official state media depicted the king as intervening on behalf of the people by freezing a separate fuel tax on 1 June, winning the praise of regime loyalists.  Once again, the king has delegated to Prime Minister Razzaz the challenge of promoting the tax bill in local media interviews while the king, despite his more influential position, focuses his attention on more comfortable political subjects for his domestic audience, especially Palestinian issues.

Even so, there has been mounting criticism even from among the political elite.  “Perhaps the beginning should be correcting the public sector’s failed management approach, taking serious action to combat rampant corruption and rebuild trust between the citizen and the state,” tweeted Prince Hamza bin al-Hussein, the half-brother of King Abdullah, on 25 September.  Member of Parliament Saddah Habashneh warned Razzaz on 26 September that he should “withdraw the [tax] law or fall like Hani al-Mulki.”

Paradoxically, the king’s frequent dismissal of prime ministers has only reinforced the status quo.  Firing Mulki and withdrawing the initial tax bill cleared protesters from the streets, offering the next government another chance.  Although Razzaz’s tax law is important to cut the climbing national debt, citizens frustrated with longstanding corruption appear unwilling to give the government this chance.  In the absence of the government providing tangible economic improvements, many citizens have vowed to fight Razzaz’s tax bill or other fiscal austerity measures, making it more difficult for Amman to tackle its debt crisis.  This time, demonstrators’ ire may no longer be pacified with the king’s musical chairs game, shuffling out premiers while keeping the same despised tax policies largely intact.

Aaron Magid is a Middle East analyst at Tesla Government, a U.S. government contractor providing open source research.  (Sada 03.10)

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11.3  SAUDI ARABIA:  Saudi Arabia ‘A-/A-2’ Ratings Affirmed; Outlook Stable

On 5 October 2018, S&P Global Ratings affirmed its ‘A-/A-2’ unsolicited long- and short-term foreign and local currency sovereign credit ratings on Saudi Arabia.  The outlook is stable.


The stable outlook is based on our expectation that moderate economic growth will continue through 2021, supported by rising government investment.  At the same time, we expect that the Saudi authorities will continue to take steps to consolidate public finances over the next two years, while maintaining the government’s large stocks of liquid external assets.

We could raise the ratings if Saudi Arabia’s economic growth prospects improved markedly beyond our current assumptions.

We could lower our ratings if we observed a reversal in the trend of fiscal consolidation, or a sharp deterioration of the sovereign’s external position.  An unexpected materialization of contingent liabilities or a build-up of arrears could also place additional pressure on expenditures.  The ratings could also come under pressure if we observed a significant increase in domestic or regional political instability, which we thought would have fiscal consequences.


The ratings on Saudi Arabia are supported by its strong external and fiscal stock positions, which we expect it will maintain despite ongoing central government deficits.  Since our last review in April, we have raised our oil price assumptions; but we do not expect any material change to the overall pace of fiscal consolidation.  We expect the additional revenues from higher oil prices will be spent as is suggested in the recent 2019 Pre-Budget Statement.  The ratings are constrained by the limitations on the transparency of government assets and limited monetary policy flexibility.

While decision-making structures are centralized and, in our view, relatively opaque, we do not expect any major deviation from the stated domestic policy course of fiscal consolidation, economic diversification, and gradual socioeconomic liberalization.

Institutional and Economic Profile: An era of change brings both risks and opportunities

-Saudi Arabia has articulated an ambitious strategy to reduce the economy’s dependency on oil and on imported labor, to transform the domestic education and job market, and to consolidate the budget.

-Policy decision-making is centralized, with limited institutional checks and balances.

-The increasingly centralized decision-making could lead to more uncertain policy implementation, but we don’t expect any major deviation from the stated policy course.

We expect that the key parameters of Saudi Arabia’s institutional framework will remain steady through the 2018-2021 forecast period.  The country will partly fund its ambitious economic reform program using the large fiscal and external buffers that it amassed during the pre-2015 era of twin balance of payments and budgetary surpluses.  The government is implementing a series of reforms that include social measures that aim to increase labor participation (particularly of women), to improve levels of educational attainment and to raise the private sector’s role in the economy, while achieving a balanced budget by 2023. Although the country’s decision-making process remains highly centralized, we do not expect any major deviation from the goal to broaden the economy beyond its traditional reliance on hydrocarbons.

Higher-than-expected oil prices throughout 2018 have led to an increase in expenditures that include employee bonuses and reinstated allowances.  We do not see these measures as indicative of a weakening of the overall target of balancing the general government budget by 2023, given the fiscal effort implemented to date and recent announcements regarding the 2019 budget.

However, they do indicate that higher-than-budgeted revenues are more likely to be spent than saved as the government attempts to shore up support for its social liberalization plans.  We continue to anticipate that public investment will increase under a four-year stimulus plan whose goal is to stabilize private-sector demand, even as the government moves on other fiscal consolidation measures, such as energy tariff hikes.  Higher oil prices, higher volumes of production, higher government expenditures and positive high-frequency data support our projection of gradual economic recovery, following last year’s contraction.  Nevertheless, given that oil production makes up a significant portion of Saudi Arabia’s GDP, forecasting growth in the country continues to be highly sensitive to assumptions of OPEC production targets, not least because Saudi Arabia maintains the world’s largest installed crude oil production capacity at around 12 million barrels per day, and is the key marginal producer.  Our GDP per capita estimate is just over $23,000 in 2018, and we expect that, on a trend basis, growth will remain somewhat below that of peers.

We expect the longstanding tension with Iran to remain high. Saudi Arabia’s war in Yemen contributes to military and security services being the single largest spending item, at about 30% of total government expenditures.  We do not expect any of these foreign policy challenges to significantly impact the domestic economy. Rather, we believe that they add to the government’s already heavy policy program, which could weaken its commitment to its fiscal adjustment plans.

Flexibility and Performance Profile: Strong external and fiscal positions from a stock perspective

-Despite the country’s rising fiscal expenditures, we expect continued consolidation as oil prices increase in 2018 and as other revenue-raising items come online.

-We forecast an improved current account surplus and an accumulation of foreign currency reserves, but we note a continued increase in external debt that somewhat moderates Saudi Arabia’s strong external stock position.

-Monetary policy effectiveness is limited by the fixed exchange rate, which requires Saudi Arabia to follow the movements in the U.S. federal funds rate, even when they may not be appropriate for Saudi Arabian economic conditions.

We’ve marginally improved our fiscal consolidation expectations for 2018 and 2019 as a result of our higher oil price assumptions, but we expect that the pace of consolidation will slow in 2020 and 2021 as prices fall again.  Over the first half of 2018, a 43% increase in revenues (including an almost 50% increase in non-oil revenues following the introduction of a 5% value-added tax) has been offset by a 26% increase in expenditures, mainly through public sector compensation.  We factor in our expectation that Saudi Arabia’s oil production will remain around current levels (10.4 million barrels per day).

In addition to the budget, we understand that a separate plan focusing on domestic capital expenditures is being implemented by the Public Investment Fund and the National Development Fund, with expenditures totaling some 5% of GDP in 2018.  Compared with most rated sovereigns, the Saudi authorities spend far more on investment, and this could raise growth potential toward the end of our ratings horizon.

We forecast an average annual increase of net general government debt of about 2% of GDP over 2018-2021, down from 3% in our previous review (this is our preferred fiscal metric, because in most cases it is more comprehensive than the reported headline deficit), and we expect that the pace of net debt growth will slow over the forecast horizon.  In Saudi Arabia’s case, we assume that the central government deficit is financed 30% by asset draw-downs and 70% by debt issuance.  This split implies that Saudi Arabia would report gross liquid financial assets of about 95% of GDP by 2021.  These fiscal assets include the central government’s deposits and reserves on the liabilities side of the balance sheet of the Saudi Arabia Monetary Authority, government institutions’ deposits, and an estimate of investment income.  We also include in our calculation an estimate of government pension funds’ liquid assets.

We acknowledge both upside potential and downside risk to these forecasts.  Upside potential stems from oil prices.  Downside potential depends on the scale of fiscal consolidation and the broader impact it will have on the economy.  Our general government balance consolidates the central government and the social security system.  It also includes our estimate of investment income from sovereign wealth fund assets, which largely accounts for the difference between our central government and general government deficit projections.

Although Saudi Arabia’s fiscal profile has been weak on a flow basis in recent years, we believe it has remained strong on a stock basis.  We expect net general government assets (the excess of liquid fiscal financial assets over government debt) to remain at about 65% of GDP through 2021.

We continue to view Saudi Arabia’s external position as a strength and note a substantial improvement in projected current account surpluses.  We expect that Saudi Arabia’s liquid external assets, net of external debt, will average about 200% of current account payments over 2018-2021.  This figure has weakened somewhat, because we expect an increase in public sector external debt (following the Public Investment Fund’s raising of an $11 billion syndicated loan in September 2018).  Gross external financing needs will likely remain below 40% of the sum of usable reserves and current account receipts over the same period, suggesting ample external liquidity (and higher foreign currency reserves than we had previously projected).  We expect usable reserves to grow over the forecast period, following higher current account surpluses.  Our calculation of usable reserves subtracts the monetary base from gross foreign currency reserves for sovereigns that have a long-standing fixed peg with another currency (because the reserve coverage of the base is critical to maintaining confidence in the exchange-rate link).

Given the Saudi riyal’s peg to the U.S. dollar, we view monetary policy flexibility as limited.  The longstanding currency peg helps to anchor the population’s inflation expectations, but binds Saudi Arabia’s monetary policy to that of the U.S. Federal Reserve.  We expect that the peg will be maintained.  (S&P 05.10)

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11.4  EGYPT:  Growing Pains

Wael Gamal observed in Diwan on 3 October that Egypt’s economy may be improving, but this is neither inclusive nor sustainable.

In fiscal year 2017–2018, ending in June, Egypt’s GDP grew by 5.3%.  This was the highest growth rate since 2007–2008, when the economy grew by 7.2%, just before it was hit by the global economic crisis and political instability starting in early 2011.

However, despite such improvement, growth in Egypt is neither inclusive nor sustainable.  Indeed, most Egyptians are feeling the burden of soaring prices and low incomes.  That is because in November 2016 the government introduced an austerity program and devalued the Egyptian pound within the framework of a $12 billion loan agreement with the International Monetary Fund (IMF).

In a statement on 23 September, the managing director of the IMF, Christine Lagarde, said that the Egyptian economy was showing signs of recovery as one of the highest growing economies in the Middle East.  She promised that the measures agreed with the IMF would bring inclusive growth and help create jobs, while also ensuring that adequate resources would be available for social protection.

Egypt has a history of high economic growth rates alongside the poor distribution of the fruits of growth, as was illustrated during first decade of the millennium. Indeed, this was one of the factors that led to the uprising in January 2011.  In 2018 economic growth returned, accompanied by a reduction in unemployment, which the government considers a sign of inclusive growth.  Unemployment fell to 9.9% by the end of June 2018, the lowest level in years, as the economy created new jobs, mainly in the fishing, agriculture, education, and retail-wholesale sectors.  However, the new jobs have tended to be seasonal, while the number of sustainable jobs in sectors such as industry grew much more slowly.

Most importantly, economic growth was mainly driven by the extractions sector, which grew by 8.6% during the 2017–2018 fiscal year and contributed 15.8% to the annual overall growth rate.  The gas sector attracted most foreign direct investment in Egypt, a pattern that is expected to continue.  However, in terms of job creation it is important to underline that the sector is not labor intensive, again qualifying the inclusiveness of growth.

A better performance in the tourism sector might have helped restore some of the jobs lost during the years of political instability.  The sector recorded an annual growth rate of 36% in the first nine months of the fiscal year and was responsible for 0.7% of the GDP growth rate.  However, the job numbers in real economy sectors, including industry and agriculture, told a different story.  The sectors showed some quarter on quarter slowdowns during the fiscal year, according to available official data.

Inclusive growth, sometimes referred to as pro-poor growth, is not exclusively about creating jobs, regardless of how decent and sustainable these are.  Rather, it is the pace and pattern of growth that are critical for achieving a high, sustainable record of growth, as well as a reduction in the poverty level. Inclusiveness also refers to equity, equality of opportunity, and protection in the market.

As a percentage of GDP, Egypt’s expenditures on social protection and safety nets were below regional and global averages in 2016, while the severe inflation shocks that accompanied the IMF program may have pushed millions of Egyptians below the poverty line.  The expansion of a conditional cash transfer program to the poor in the previous two years failed to bridge the gap.  The situation was made worse by the increasing cost of public services, including transportation, water and electricity.

Moreover, experts at CAPMAS, the government’s official statistical agency, suggest that poverty may have risen to 35% in 2017, from 27.8% in 2015, before the IMF program began, even after updating the national poverty line for inflation.  However, because the assessment was preliminary, the poverty level could be even higher.  More austerity measures are yet to come, according to phase four of the program, threatening to make things worse for vulnerable and low-income Egyptians.  The government is expected to raise energy prices at least once more in 2019, slashing subsidies to meet the IMF targets for narrowing the budget deficit.

The austerity package has also hit different aspects of social spending, including education and health.  Public expenditure on both sectors declined as a percentage of GDP to only 1.34% and 2.6%, respectively.  The Egyptian government and the IMF consider education and health to be crucial pillars of inclusive growth and equality of opportunity.

In October 2011, Massood Ahmed, who was then the director of the IMF’s Middle East and Central Asia Department, concluded that the clearest lesson of the Arab uprisings was that the sustainability of growth was conditioned by how broadly its gains were shared and to what extent this was accompanied by social policies for the most vulnerable.  Now, Egypt, has to fulfill such a requirement while facing very substantial and expanding domestic and external debts, as well as low levels of investment.  The Egyptian government has made its choice by wholeheartedly adopting a package of policies pushing hard in the opposite direction of sustainable growth.  (Diwan 03.10)

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11.5  EGYPT:  Egypt to Sell Valuable Cotton Land to Bolster the Textile Industry

Abdulla Kadry posted in Al-Monitor on 4 October that Egypt announced that it will sell 14 tracts of land where it stores its industrial cotton gins to compensate for the heavy losses suffered by the textile industry.

Egypt’s Minister of Public Business Hisham Tawfik said on 17 September that Egypt will sell 14 tracts of land where it stores its industrial cotton gins in a bid to overhaul and develop the textile manufacturing industry.  The land is worth EGP 27 billion ($1.51 billion).  The industry suffered losses of EGP 2.7 billion from 2016-2017.

Tawfik said the plan to bolster the Holding Company for Spinning and Weaving will be funded from the proceeds of selling the cotton gin lands.  He added that the development project will cost an estimated EGP 25 billion.  Though there is no prospective buyer for the land, the government plans to change the land’s purpose from industrial to real estate.

Egypt is home to a distinguished and diversified textile industry.  The sector plays a major role in the Egyptian economy, starting from the cultivation of cotton all the way to the production of textiles.  In 2011, the textile industry made up 3% of the GDP, 30% of the industrial product and 13% of nonpetroleum exports, according to the Central Bank of Egypt.

The state-owned Holding Company for Cotton, Spinning and Weaving handles the textile industry in Egypt.  It comprises 32 companies distributed across Egypt’s governorates.  The holding company is divided into different businesses dealing in cotton trades and the spinning and weaving industry.  The holding company has suffered since late Egyptian President Sadat initiated a policy of economic liberalization.  Egypt began to import more cotton instead of focusing on cultivating Egyptian cotton. Textile manufacturing equipment has aged since then, and economic policies have not been renewed.

The textile industry in Egypt continued its downhill trajectory following the decrease in the price of cotton, to the dismay of farmers.  Cotton production has since waned and the government has reduced customs on imported seeds, leading to poor government marketing plans for long-staple cotton.  High energy prices have also prompted Egyptian companies and factories to import cotton.

Cotton acreage decreased in early 1990.  This decline was further exacerbated by the liberalization of Egypt’s cotton sector in 1994, which ended the state oversight of cotton cultivation and opened the door for the private sector.  Cotton acreage fell dramatically, reaching 270,000 feddans (280,000 acres) in 2017, as opposed to the heyday of 1991, when Egypt cultivated up to 1 million feddans.

The Egyptian government seeks to increase cotton acreage in 2018.  The Ministry of Agriculture announced earlier this year that it aims to cultivate 500,000 feddans of cotton this year, setting the price of 2,700 Egyptian pounds per quintar (approximately 143 kilograms or 315 pounds) of high-quality cotton.

Prior to the 1994 liberalization, which dealt a severe blow to the cotton industry, the price of one quintar stood at EGP 100.  After 1994, prices rose to EGP 500 per quintar, reaching EGP 1,600 in 2010, a year before the January 25 Revolution.

Following the outbreak of the revolution, the successive government cared little about the cultivation of cotton, until the government began setting policies to increase cotton acreage and encourage farmers, setting the price of one quintar at EGP 2,700.

In 2009, Egypt exported cotton to more than 20 countries.  That year, Qatar ranked first in terms of cotton imports from Egypt, with 38% of imports, China 16% and Turkey 15%.  According to the 2009 Egypt cotton crop statement, Egypt made $37 million in cotton exports, amounting to 12 million quintars.  In 2017, 86,000 quintars of cotton were exported for $139,000, according to the Central Agency for Public Mobilization and Statistics.

Yomn al-Hamaki, a professor of economics at Ain Shams University, told Al-Monitor via phone that private businesses’ control over the textile industry, as well as the absence of a government vision and the lack of coordination between its institutions, have taken a heavy toll on the industry.  Hamaki said the sale of cotton gin land is part of a Ministry of Business strategy to overhaul the textile industry, whereby new cotton acreage will be determined in Upper Egypt to encourage farmers to cultivate short-staple cotton in a bid to meet the needs of local cotton factories.

This is in addition to the development of the cotton gin manufacturers, which will be funded from the revenues from the sale of the high-priced cotton gin lands — a step that the government believes is the best option to overhaul this sector.

She believes that the state’s strategy to promote the textile industry is viable so long as there is close monitoring, administrative control over cotton sales, encouragement of competition among companies and support for small textile projects.  “The sale of the cotton gins is the best way to overhaul the sector.  It is the only option in the absence of the necessary resources, especially since the government budget cannot be burdened and the weaving and textile companies are suffering great losses,” Hamaki said.

The Ministry of Business announced in 2018 its strategy to overhaul the textile industry.  The strategy relies on the cultivation of small-staple cotton in Upper Egypt; changing the curricula in technical schools to meet the needs of factories; having the factories take on students’ scientific research costs; and setting up colleges to award advanced technology degrees.

Economist Rashad Abdo criticized the state’s plan to sell the cotton gins.  “This brings to mind the popular saying that goes, sacrificing the mother so the child lives. It does not make sense to me to sell the land to promote the factories,” Abdo told Al-Monitor during a phone interview.  He believes the government’s plan is a result of incompetence and confusion within the Ministry of Business.  Abdo believes the government should take into consideration alternative plans, such as involving the private sector in the textile industry or using the holding company’s land instead of selling it.  “The government said the sale deal is worth EGP 25 billion,” he said.  “Why don’t we keep the lands and opt for better alternatives?”

Raif Tamraz, undersecretary of parliament’s agriculture and irrigation committee, concurred with Abdo.  “This plan has made things worse. This decision is totally unacceptable.  Had this government been able to properly run the textile industry, we would not have reached this point in the first place,” Tamraz told Al-Monitor via phone.  “I am all for the participation of the private sector and foreign investors and developers, even if through borrowing. Selling is a big no,” he added.  Tamraz believes these alternatives would ensure the continuous production of textiles and circumvent the failure of public sector companies.  “The government did not address this plan with parliament,” he said. Tamraz said that when parliament next convenes in October, he will issue a request to meet with Tawfik and the minister of agriculture.

Egyptians will not likely welcome the government’s plan to sell state assets.  According to economists, the best way to promote industry is through the participation of the private sector.

Abdulla Kadry is an Egyptian journalist and programmer. He works as a political and government editor for Masrawy.  (Al-Monitor 04.10)

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11.6  MOROCCO: Outlook Revised to Negative on Budgetary Pressures; ‘BBB-/A-3’ Ratings Affirmed

On 5 October 2018, S&P Global Ratings revised its outlook on Morocco to negative from stable.  At the same time, we affirmed our long- and short-term foreign and local currency sovereign credit ratings at ‘BBB-/A-3’.


The negative outlook signifies that we could lower our ratings on Morocco within the next 24 months if the government fails to improve its budgetary position, pushing net government debt levels beyond our forecasts; if real GDP growth rates materially undershoot our expectations; or if external imbalances widen further, causing a substantial increase in the economy’s gross financing needs.

We could revise the outlook to stable if the budgetary consolidation prospects materially improve, or the ongoing transition toward a more flexible exchange rate regime that targets inflation significantly bolsters Morocco’s external competitiveness and ability to withstand macroeconomic external shocks.  An outlook revision to stable could also arise if Morocco’s ongoing economic diversification strategy results in less volatile economic growth.


After meeting its 2017 budget deficit target of 3.5% of GDP, the Moroccan government will, in our opinion, likely deviate significantly from its 2018 target of 3.0%, posting a budget deficit of about 3.8% of GDP.  We base our expectations on the weak performance on the revenue side so far this year, particularly given the adverse impact of lower grants from the Gulf Cooperation Council (GCC).  During the same period, government spending has increased due to higher expenditures, in particular on transfers to lower levels of government and increased cost of energy subsidies for liquefied petroleum gas.  We believe that, if unchecked, persistently wide budget deficits will push government debt to higher levels that reduce the government’s fiscal space when the economic growth of its trading partners, especially in Europe, decelerates.

The ratings on Morocco continue to be supported by a moderate level of government debt and manageable current account deficits, amid relatively stable policymaking.  The ratings remain constrained by GDP per capita lower than that of similarly rated sovereigns, significant economic reliance on agriculture, high social needs, and a relatively slow approach toward budgetary consolidation.

Institutional and Economic Profile: Economic growth will likely slow down, while economic diversification is set to continue:

-Morocco’s GDP per capita remains one of the lowest of sovereigns rated in our ‘BBB’ category.

-We forecast real GDP growth will average about 3.2% in 2018-2019, absent any significant shocks in the external and domestic business environments.

-Economic growth remains vulnerable to the volatility of agricultural output and the ongoing economic slowdown in Europe, and it excludes parts of the Moroccan population.

We expect real GDP growth in Morocco to decelerate to about 3.2% in 2018-2019 from 4.1% in 2017.  We assume that agricultural and nonagricultural output will continue to expand moderately, in line with the past trend.  The main sources of growth are the expanding automotive and tourism sectors, combined with additional demand for phosphates and their derivatives.  We expect that all the aforementioned sectors will post solid improvements in their performance this year.  We forecast real GDP growth will average close to 4% in 2020-2021, backed by increasing resilience in the agricultural sector, and that the business environment and external demand will remain broadly supportive of a gradual pick-up in nonagricultural output.  Unless Morocco suffers external economic shocks – for example, due to the heightened risk of global protectionism or a faster slowdown in European economies, which currently represent about 70% of its export markets – we believe that the expansion of its export capacity and its rise up the value-added ladder will contribute positively to economic growth over 2018-2021.

The government aims to reduce the economy’s vulnerability to weather shocks by investing in more efficient technologies in the agricultural sector via the Green Morocco Plan.  The Moroccan authorities are also putting significant effort into industrializing the economy.  We expect Morocco to diversify its economy further by continuing to develop its automotive, aeronautics, electronics and renewable energy sectors.  Morocco has built comprehensive industry-specific clusters to develop its emerging automotive industry.  It has successfully attracted a number of foreign car manufacturers, first from France and most recently from China.  In addition, in September 2016 Boeing announced its intention to establish a new industrial hub in the country, and in March 2017 the Chinese group HAITE invested $1 billion in a new industrial city.  Together, car manufacturing and aeronautics-related exports will likely account for about 30% of total goods exports in 2018, versus 13% in 2007.  We expect the industrialization plan, which enjoys broad political support, to attract additional foreign direct investment – despite this year’s dip in performance from levels in 2017 – helping Morocco enhance its economic diversification and the resilience of its economic growth.

That said, in our view, the country’s pronounced development potential may materialize only slowly, unless the government makes progress in removing the structural impediments affecting the country’s economy, such as administrative hurdles. In order to attract investments, the authorities introduced a five-year tax break on newly established industrial companies in 24 different sectors.  Moreover, in our view, corporate sector activity would benefit from measures that reduce the accumulation of arrears among corporate sector firms to improve their liquidity.  The government has contributed by proposing measures aimed at simplifying the existing taxation framework, including the 2018 finance law introducing a system based on progressive marginal tax rates, and with respect to the value-added tax (VAT) system.  Tackling these weaknesses, in our opinion, could support the country’s economic growth potential.

Additional steps to ease the economy’s dependence on external sources of energy are positive, in our opinion, and the ongoing initiative to raise the share of domestically generated renewable energy in total energy consumption would support a further reduction in current account imbalances.  Moreover, several gas field exploration projects have been promoted.  Even though they are unlikely to come on stream over the coming two years, if successful, they could further reduce Morocco’s energy imports and benefit its trade balance.

We believe that Morocco has largely demonstrated political and social stability, especially in the context of the Arab Spring.  It has achieved this through constitutional reforms, a rise in spending by the government aimed at economic development and reducing economic inequality in less developed regions, and broad support from King Mohammed VI.  The king chairs the Council of Ministers, which deliberates on strategic laws and state policy orientations.  The king’s role in policymaking has held greater importance since 2017, when he intervened in curbing social tensions in the regions of Rif and Jerada.  In addition, the king mandated the prime minister to appoint new ministers of education, planning, housing, health, and African relations, as well as more recently, of finance, to revamp the country’s development plans.

Although ethnic, tribal, religious, and regional divisions are less pronounced in Morocco than in much of the Middle East and North Africa, there are rising demands from some parts of the Moroccan population for more inclusive economic growth.  In our view, this partly stems from high unemployment among youths and the income disparities between more- and less-developed areas of the country.  The government has expressed its willingness to accelerate the implementation of regional development programs to improve income disparities, including by tackling high unemployment.  We believe that these demands will continue to persist and constrain Morocco’s budgetary position, delaying a faster reduction in the country’s budget deficit over our projection horizon.

Flexibility and Performance Profile: Budgetary consolidation expected to slow down:

-We now expect the government to post a budget deficit of about 3.8% of GDP – a pronounced deviation from its 2018 budget deficit target of 3.0% of GDP.

-Stronger export performance should eventually enable a reduction in the current account deficit over the projection horizon, despite the increase in oil prices, but external liabilities will remain large.

-We anticipate that the authorities will inch toward a more flexible exchange rate regime over the medium term.

After meeting its 2017 budget deficit target of 3.5% of GDP, we now expect the government will deviate from its 2018 target of 3.0% and instead post a budget deficit of about 3.8% of GDP.  We base our projection on the weak performance on the revenue side, with only receipts from VAT and personal income tax recording growth during the first half of 2018, given the repercussions of lower grants from the GCC.  The decline in corporate income tax receipts is in part related to the above-mentioned corporate tax reform, which introduced the progressive marginal tax rates.  During the first half of this year, government spending jumped by about 4% compared with the same period in 2017, mainly due to transfers to other levels of government and increased cost of energy subsidies for liquefied petroleum gas, with the public wage bill increasing only slightly.  Eventual reintroduction of fuel price ceilings to cushion the impact of the rise in oil prices would imply an additional climb in government spending.

The reduced GCC grants will continue to weigh on revenues, complicating further spending cuts, especially given the government’s plans to address the rising social demands for better living standards, including education and health care, and tackling high unemployment rates in poorer parts of the country.  Morocco provides socially sensitive subsidies on basic goods (flour, sugar and liquefied petroleum gas) and faces an expected increase in capital spending given its large investment projects.  Nevertheless, a renewed agreement with the GCC partners, which would support revenues, cannot be excluded.

In 2019, the budget balance is expected to slightly improve, despite the aforementioned corporate tax reform and, potentially, fiscal costs related to the reinstatement of military service.  However, we believe that the government is unlikely to meet its budget deficit target of 3% of GDP.  That said, we view favorably the government’s plans to broaden the tax base in order to improve tax collection and as an attempt to address the sizable tax avoidance and evasion.

We forecast that, on the basis of our projected fiscal trajectory, gross government debt-to-GDP ratios will stabilize at about 54% of GDP over the medium term.  We expect net general government debt to average about 53% of GDP during 2018-2021.  Our gross general government debt data consolidate the holdings of central government debt by other branches of state, such as public pension funds, while net general government debt excludes from gross debt the government’s liquid assets.  As such, according to our sovereign rating methodology, our preferred variable of fiscal flow performance, i.e. change in net government debt, reflects all the components affecting the government debt position and not only the central government balance.  The general government debt stock has risen significantly over the past eight years (32% at year-end 2010, before the Arab Spring) due to consistently large budget deficits, which we believe points to structural weaknesses of the Moroccan economy, relative to other sovereigns at this rating level.  The government’s debt profile appears favorable: At year-end 2017, the average life on outstanding debt stood at six years and nine months, and the average cost of debt was 4%.

The Moroccan dirham is currently pegged to a currency basket comprising 60% euros and 40% U.S. dollars.  The foreign exchange (FX) peg regime limits monetary policy flexibility, in our view.  In January 2018, the Moroccan authorities and the central bank, Bank Al Maghrib (BAM), decided to increase flexibility in the exchange rate regime by widening the band of fluctuation between the dirham and the basket of currencies to 2.5% in each direction from the previous +/- 0.3%.  In our view, the measure was implemented smoothly, especially considering earlier attempts in mid-2017, when BAM’s FX reserves shrank by more than 15% in the two months before the reform was rolled out.  We attribute the decline in FX, in part, to pressure from domestic market participants due to increasing demand for hedging instruments.  As a result, a sizable portion of these reserves was transferred onto domestic banks’ balance sheets, leading to a substantial increase in foreign-currency assets, and the banking system as a whole did not lose its FX reserves.  After the related tensions subsided, BAM restored its reserve position; reserve coverage is now back at more than six months of current account payments, from about five months following the episode of stress.

If widening the fluctuation bands continues to go well, we would view further widening as positive for our overall monetary assessment on Morocco.  It would likely bolster Morocco’s external competitiveness and ability to withstand macroeconomic external shocks.  However, we anticipate that the authorities will first allow the current fluctuation bands to be tested by external financial developments, and for other parameters like budget and current account balance to improve before moving toward further widening of the bands.  Finally, although they are moving toward a more flexible exchange rate regime, we expect the Moroccan authorities will maintain restrictions on capital accounts in the near term. Such restrictions will be eased gradually, to avoid any potential large-scale capital outflows.

The banking sector appears to be appropriately capitalized and unlikely to pose a significant risk to the wider economy, given its current relatively high regulatory capital ratio of almost 14%.  Although nonperforming loans comprise a relatively high proportion of the total, at 7.5% in mid-2018, they appear to be well provisioned.  Nonetheless, the banking sector remains vulnerable to credit concentration risks.  The banks’ expansion into Sub-Saharan Africa has been so far highly profitable, but it opens new channels of risk transmission to Morocco’s banking system.

We expect Morocco’s current account deficit to widen this year to about 4.2% of GDP in 2018, mainly due to an increase in global oil prices.  In the absence of a significant decline in external demand, such as one due to the rise in global protectionism or the ongoing economic slowdown in Europe, we expect the current account deficit to narrow by 2021, as rising export capacity materializes in higher value-added industries, like the automotive sector.  Importantly, cars have become the country’s leading export product, accounting for almost 24% of total goods exports and more than 5% of GDP in 2017.  Automotive exports have grown by almost 17% during January-July of this year compared with the same period last year, with an even larger increase recorded in aeronautics (19.8%).  Furthermore, the export of phosphate and its derivatives bottomed out and will grow in line with external demand (15.1% growth so far this year).  We anticipate that increased phosphate production, coupled with further growth in tourism receipts, should support exports in the future.  Meanwhile, the development of domestic energy sources should curb growth in Morocco’s still-low energy bill, although we do not incorporate this development into our forecast yet, since it is likely to emerge only at the end of our projection horizon.  Moreover, Morocco benefits from strong remittances.  These factors will likely more than offset the impact of the increase in capital goods as part of Morocco’s strategy for industrialization.

The external liabilities position will remain large over the next three years, and we forecast narrow net external debt as a proportion of current account receipts (CARs) to be about 30% in 2018-2021. We also forecast that external financing requirements will remain covered by CARs and usable reserves over this period.  (S&P 05.10)

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11.7  TURKEY:  Ankara Pins Electoral Hopes on Ignoring Economic Realities

On 12 October, Mustafa Sonmez wrote in Al-Monitor that the Turkish government’s vacillations and zigzagging in the face of the country’s economic woes reflect how squeezed it has become economically and politically and how concerned it is about it with elections scheduled for March.

Turkish President Recep Tayyip Erdogan has quickly returned to anti-American ranting after conciliatory messages to Washington and Berlin two weeks ago that seemed to herald a bid to mend fences with the West.  In a 6 October speech heavily peppered with anti-American rhetoric, Erdogan nixed a consultancy deal with the US company McKinsey that Finance Minister Berat Albayrak had recently announced as part of efforts to fix the ailing economy.  Turkey can manage it by itself, Erdogan asserted, only days after Albayrak, who happens to be his son-in-law, said that those opposed to collaboration with McKinsey were “either ignorant or traitors.”

Such zigzagging in Ankara reflects how economically and politically squeezed Erdogan’s government has become.  On the economic front, it faces a hefty debt stock, a badly weakened currency, an inflation rate of nearly 25%, a serious unemployment problem and stagnation, which are causing loud grumbling among the electorate, including long-time voters for Erdogan’s Justice and Development Party (AKP). With municipal elections looming in March, the circle around Ankara tightens by the day.

The International Monetary Fund (IMF) appears to be the only source of much-needed recovery funds — in return for an austerity program, of course — but Erdogan has bluntly rejected that option, maligning past IMF-backed programs as an “IMF yoke.”

All in all, Ankara seems bent on deferring the bitter pills the crisis calls for, which involves enacting serious measures.  Instead, its course of action until elections appears to be based on buying time by distracting the electorate, sweeping the dirt under the rug of the Treasury and foisting corporate debt woes onto banks, especially when it comes to companies in the good graces of the AKP.

Erdogan is averse to calling the turmoil a “crisis,” instead often describing it as “manipulations” or a foreign conspiracy against Turkey.  The IMF, however, sees a Turkey in the grips of crisis.  The IMF’s “World Economic Outlook 2018,” released on 8 October prescribes tighter monetary policies for Turkey to curb “unanchored inflation expectations” amid the lira’s sharp depreciation.  Pointing to “significant stress … emerging in bank and corporate balance sheets,” the fund calls for “strengthening bank supervision and enhancing the crisis management framework.”

The IMF expects a sharp decline in Turkey’s economic growth, projecting the rate to drop to 0.4% in 2019, from 3.5% this year.  By implication, this means that the economy would shrink by 1-2% between the last quarter of 2018 and the third quarter of 2019.  High inflation and economic contraction, coupled with increasing unemployment, make for the particularly vicious type of crisis called stagflation.  Instead of acknowledging reality, however, Ankara is pursuing measures that deny the crisis while producing little in terms of results.

In mid-2018, Turkey’s external debt stock stood at $457 billion.  Over the next 12 months, the country will need $181 billion to roll over maturing debts.  The financing of the current account deficit requires another $40 billion, at the least, though the gap has begun to decrease under the impact of the economic downturn.

In total, Turkey needs a minimum of $220 billion over the next 12 months, or roughly $18 billion a month, but it has become a high-risk country for creditors.  Its risk premium, reflected in credit default swaps, has decoupled from those of other emerging economies, hovering above 400 basis points despite occasional drops.  In sum, borrowing has become more expensive for Turkey.

Under pressure from Erdogan, the central bank had dragged its feet in hiking interest rates to prop up the melting lira before announcing a massive hike of 625 basis points in mid-September.  With inflation hitting 24.52% last month, however, the hike has quickly become irrelevant.  Anticipation is now building for another hike of up to 300 basis points at the bank’s next meeting, on 25 October.  Increased interest rates on the Turkish lira have had limited effect in shoring up the currency.  The price of a dollar remains at about 6 liras, and although the lira’s free fall has stopped, the exchange rate appears prone to fluctuation.

Ankara’s zigzagging on economic policies is fueling the perception of risk.  Albayrak’s deal with McKinsey was aimed at providing some international credibility to Ankara’s economic management and restoring confidence among fleeing foreign investors.  In less than a week, Erdogan rebuffed the deal.  This flip-flopping has of course stoked foreign creditors’ and investors’ mistrust.

Consumer inflation is widely expected to climb further in the coming months under the pressure of producer inflation, which stood at a staggering 46% in September. In the eyes of the AKP, however, malicious forces are again to be blamed.

Ankara is telling the nation that opportunists, speculators and hoarders are fueling the inflation.  In an unprecedented move, it has mobilized municipal police to inspect supermarkets to hunt for price gougers.  Furthermore, Albayrak asked businesses this week to grant customers 10% discounts by the end of the year as part of an “all-out struggle” against inflation.

Fighting inflation with discount pledges from sellers is nothing but fantasy, yet Ankara’s efforts appear aimed at producing an argument against inflation-indexed pay rises at the end of the year.  When the time comes for pay and pension hikes in December, Ankara is likely to argue that its measures will bring inflation down to 16-17% next year, so the hikes should be fixed accordingly, not in line with the current rate.  Such a fiat would affect some 19 million working people and about 10 million pensioners, threatening political fallout for the AKP in the March polls.

The problem does not end with the real income loss caused by inflation.  Unemployment is on the rise as well, and no measures are being discussed to stem layoffs.  Moreover, the assets of the Unemployment Insurance Fund, amounting to TL 125 billion (about $21 billion), have been put in use to shore up the gaps of public banks, adding to popular discontent.  Many among the electorate are also struggling to repay bank debts.  Hundreds of indebted companies, big and small alike, are in a financial bottleneck and pressing banks to make sacrifices.  The banking system itself needs safeguarding.

In sum, the challenges are many, but Ankara’s means are limited.  As the government scrambles for solutions, budget deficits and other, less visible gaps in public finances are widening, and Ankara’s room to maneuver is shrinking.

Mustafa Sonmez is a Turkish economist and writer. He has worked as an economic commentator and editor for more than 30 years and authored some 30 books on the Turkish economy, media and the Kurdish question.  (Al-Monitor 12.10)

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11.8  CYPRUS: IMF Staff Concluding Statement of the 2018 Article IV Mission

In the Concluding Statement by the IMF following consultations under Article IV of the IMF’s Articles of Agreement, it was noted that five years after the financial crisis, the Cypriot economy has turned the page on its recovery path.  The growth momentum is strong.  Fiscal performance is robust.  A set of legislative reforms aimed at addressing the crisis legacy of non-performing loans (NPLs) has been approved, catalyzing the cleanup of bank balance sheets.  Nevertheless, challenges remain.  Risks have partially been transferred to the public sector as part of the bank clean-up strategy, but high debt will remain a burden on the private sector until NPLs, which constrain investor confidence and growth prospects, are resolved.

The key policy priorities are therefore to achieve further private and public balance sheet repair by steadfastly implementing the recently amended legal tools to lower NPLs and the private debt overhang; safeguarding fiscal space and reducing risks to public debt sustainability by maintaining strict spending discipline; and enacting structural reforms, especially in the judiciary and public administration, to attract further investment and enhance productivity.  These policies are critical to reduce vulnerabilities and reinvigorate medium-term growth potential.  The current phase in the electoral and economic cycle provides an opportunity to advance this policy agenda.

Outlook and Risks

The Cypriot economy continues its rapid recovery from the 2012–13 financial crisis.  The growth momentum has been strong over the past three years, bringing real GDP back to its pre-crisis level.  The economy grew by over 4% in 2017 and the first half of 2018, supported by tourism, professional services, and construction.  Consumption picked up further amidst a sharp decline in unemployment.  After an extended period of stagnation, wages and property market prices are rising, although the pace remains very gradual, contributing to low underlying inflationary pressures.  Increased domestic demand has boosted imports, widening the underlying current account deficit.  With the banking sector hamstrung by weak balance sheets, economic growth has been largely supported by external financing.

Important strides were made in addressing key vulnerabilities in the banking sector.  Notwithstanding the strong economic recovery, the Cypriot economy is weighed down by very high private and public debt. NPL ratios, while declining, are among the highest in Europe.  The recent resolution of the government-owned Cyprus Cooperative Bank (CCB), the second-largest bank, and the passage of a long-delayed legislative package to strengthen the insolvency and foreclosure frameworks, have mitigated near-term risks to financial stability.  While the resolution of the CCB has come at a high cost to the public purse, it marks a decisive step in dealing with the crisis legacy of a large NPL overhang and achieving consolidation in the banking system, which in turn has boosted confidence and earned Cyprus a sovereign ratings upgrade to investment grade status.

The near-term outlook remains favorable, although challenges remain on the horizon.  Growth is expected to exceed 4% in 2018–19, driven by domestic demand.  While private consumption growth is expected to decelerate as borrowers step up debt servicing, investment is expected to pick up further, as reflected in the pipeline of ongoing and new construction projects in residential properties, education, health and tourism infrastructure.  These import-intensive projects, coupled with slowing tourism growth owing to the recent depreciation in some competitor and source markets, will somewhat widen the current account deficit.  Over the medium term, as the transitory effects of the investment boom and the euro area cyclical growth gradually dissipate, growth is expected to slow towards a potential growth rate of around 2½%.  Sustaining this medium-term growth will require progress in structural reforms, which are crucial for lowering systemic financial risks and catalyzing productivity-enhancing investments.

Risks to the outlook are tilted to the downside.  While NPLs have now partially shifted from the banking system to the public balance sheet as a result of bank cleanup operations, progress in resolving NPLs and in strengthening payment discipline is still limited.  In this context, delays in NPL resolution will continue to weigh on investor sentiment and growth potential until they are adequately addressed.  An increase in moral hazard and realization of contingent liabilities from publicly supported schemes could weaken the fiscal position and raise risk premiums, particularly under tightening global financial conditions.  High dependence on Citizenship-by-Investment (CbI) financed investments to propel growth could pose risks for its sustainability.  External risks arising from escalating trade tensions, a sharper-than-expected slowdown in euro area growth or a hard Brexit could also affect export revenues and FDI.  Upside risks to growth include the prospect of offshore hydrocarbon development.  Faster progress in dealing with NPLs could attract additional FDI, increase credit flows, and strengthen economic growth.

Policy Priorities

Financial Sector Policy: Lowering NPL and private debt overhang

Steady reduction of NPLs and high corporate and household debt remains a priority.  The recent amendments to the foreclosure and insolvency legislation, the sales of loans law, and the adoption of a law on securitization all enhance the toolkit available to borrowers and creditors to address NPLs on a durable basis.  By acting as a credible threat against strategic default, the strengthened foreclosure framework should also help to improve payment discipline and incentivize borrowers to engage with banks in reaching sustainable restructuring solutions.  Steadfast implementation of the enhanced frameworks will be key to facilitate this process and ensure timely enforcement.  The new frameworks should be supplemented by structural reforms aimed at strengthening institutions, in particular the court system, and removing uncertainties related to title deeds.

The supervisory and governance framework for credit-acquiring companies – which includes the newly-established Cyprus Asset Management Company (CAMC) – needs strengthening.  Sales of NPLs to credit-acquiring companies have already begun, making it urgent for the central bank to develop a regulatory and supervisory framework for these institutions: key elements include reporting requirements, on-site inspections and off-site monitoring.  To maximize recovery and contain fiscal costs, the governance framework for the government-owned CAMC needs to adequately balance operational independence with public accountability and transparency, with a clear mandate accompanied by operational targets, an independent board, and skilled management compensated based on performance.

The proposed subsidy scheme (Estia) to encourage distressed borrowers to begin servicing their loans should be better targeted to those most in need of assistance.  Tighter eligibility criteria and clearer communication would help avoid moral hazard that would further erode payment discipline by extending benefits to those already capable of servicing their obligations.  In addition, appropriate assessment of borrower’s capacity to repay the restructured debt on a sustained basis will be important to be sure that those in need of assistance emerge from the process able to make good on their new obligations.  Banks should maintain provision coverage at adequate levels and promptly utilize the foreclosure and insolvency framework to address re-defaults.  The design of the scheme and an assessment of its impact should be informed by a detailed analysis of borrower data.

More broadly, efforts to strengthen bank balance sheets should continue.  In particular, diversifying income sources and consolidating operations would improve cost-income ratios.  Better positioning of banks in anticipation of regulatory changes and in the face of competitive pressures would also be prudent.  Furthermore, a focus on bank lending policies, sustainability of restructurings, adequacy of provisioning coverage and debt-to-asset swap policies would encourage sound bank risk management practices.

Fiscal policy: Safeguarding fiscal space and reducing risks to public debt sustainability

While fiscal performance is expected to remain robust, caution is needed against pro-cyclical fiscal pressures.  Cyprus is projected to maintain large primary fiscal surpluses that should reduce public debt going forward (despite a large one-off increase this year due to the CCB transaction).  Although revenues remain buoyant, the reversal of crisis-era wage cuts and interest levy, the introduction of the Estia scheme, and likely increases in health expenditures following the rollout of the National Health System starting next year imply a modest structural loosening.  With the output gap closed, a pro-cyclical fiscal stance could in turn increase wage pressures and weigh on competitiveness.

With public debt already elevated, strict spending discipline should be maintained.  Debt dynamics could be adversely affected if some of the large banking sector contingent liabilities were to materialize and growth were to slow more than expected.  To mitigate these risks, transitory revenues arising from cyclical gains and one-off measures should not be relied upon to finance permanent spending initiatives, while expenditure rises should be capped by medium-term GDP growth (adjusted for permanent revenue changes).  Keeping the public wage bill envelope within the nominal GDP growth will be especially crucial. The transition to public insurance in the health sector will need to be carefully managed, bearing in mind that the phasing in and fine tuning of the regulatory framework for service provision and the reimbursement mechanism that keeps incentives for over-provision under control may take time.  Complementary fiscal structural reforms for spending reviews, public administration, local government and governance of state-owned enterprises (see below) should be implemented to minimize risks.

Structural reforms: Improving the investment climate and achieving sustainable and inclusive growth

Institutional reforms are needed to further enhance the investment climate, and bolster productivity and medium-term growth potential.  Although Cyprus has maintained its external competitiveness, investment in more productive sectors is needed to sustain high economic growth.  Key challenges remain in enforcing contracts owing to lengthy judicial processes and weaknesses in government effectiveness reflecting administrative inefficiencies.

Advancing judicial reform and strengthening commercial claims enforcement

Reforms to increase the efficiency of courts, clear the backlog of cases, and speed up enforcement of commercial claims should be pursued to reduce cost of capital and improve access to financing and investment.  The addition of judges should be supported by reform of the civil procedure code and introduction of the e-justice system to help reduce the length of court procedures.  Persistent delays with issuance and transfer of title deeds should be addressed expeditiously, focusing on clearing the backlog but also on avoiding a recurrence of similar problems in the future.

Strengthening public sector governance and public administration effectiveness

Fiscal structural reforms are needed to lower risks and strengthen service delivery.  Public financial management could be strengthened through better internal controls for financial management and monitoring of risks from local government and public bodies. In particular, improving corporate governance of commercial state-owned enterprises, including through strengthening financial oversight, implementing a more effective planning and reporting framework with greater disclosure and transparency and introducing a code of conduct consistent with OECD principles are key to improve the efficiency of the state-owned sector.  The legislation to reform the assessment and promotion of the civil service would facilitate greater mobility and enhance efficiency in public administration.  Local government reform would also help improve service delivery.  Legislative efforts to strengthen the governance and autonomy of the Central Bank of Cyprus should also be expedited.

Ensuring More Inclusive Growth

Ensuring inclusive growth is crucial not just to equity but also to the sustainability of the recovery.  Youth unemployment remains high and the employment rate for recent tertiary graduates remains below the EU average, mainly due to skills mismatch.  Promoting Active Labor Market Policies (ALMPs) targeting the youth as well as other vulnerable groups, strengthening the education system to better link work-based and school-based programs, and encouraging investments in high value-added sectors would help address these challenges.  (IMF 05.10)

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