The FORTNIGHTLY
A Review of Middle East Regional Economic & Cultural News & Developments
19 February 2020
24 Shvat 5780
25 Jumada Al-Akhirah 1441
Written & Edited by Seth J. Vogelman*
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Bank of Israel Purchased $3 Billion in Foreign Currency in January
1.2 Tel Aviv Launches its First Tourism Master Plan Following a Record Year for Tourism
1.3 Government of Israel Natural Gas Revenues Forecast to Rise in 2020
1.4 Over-the-Counter Drug Prices are Much Higher in Israel Than Overseas
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Sapiens Complete Its Acquisition of sum.cumo
2.2 Forescout to be Acquired by Advent International for $1.9 Billion
2.3 TLVP Raises $210 Million of New Funds for TLV Partners III
2.4 WishTrip Joins the List of Top 500 Fastest Growing Companies in Israel
2.5 Sixgill Raises $15 Million to Advance its Cyber Threat Intelligence Solution
2.6 Liquidity Capital Plans to Invest Over $500 Million in Tech Startups in 2020
2.7 Police Order Tel Aviv Strip Clubs to be Closed
2.8 Seagate Technology’s Lyve Labs Opens Doors in Tel Aviv to Enable Innovations
2.9 BioCatch Expands Digital Identity Position with AimBrain Acquisition
2.10 Intuition Robotics Raises $36 Million to Create Digital Companions
2.11 Grove Ventures Closes Second Fund with $120 Million in Commitments
2.12 Celigo Announces Partnership with SangIT Israel to Resolve Data Integration Needs
2.13 Strauss Buys Brazilian Coffee Company Mitsui Alimentos
3: REGIONAL PRIVATE SECTOR NEWS
3.1 Wamda Leads $3.5 Million Round for Mobile Games Publisher Tamatem
3.2 Eat App Raises $5 Million in Series B funding
3.3 Dubai’s Operation: Falafel to Expand to New York, London and Paris
3.4 Seez Raises $6 Million in a Series A Funding Round from VCs and Strategic Investors
3.5 Sellanycar.com Raises $35 Million Investment to Accelerate Regional Growth
3.6 Okadoc Closes $10 Million in Series A Funding
3.7 Vezeeta Announces $40 Million Series D Round by Gulf Capital and STV
3.8 Andersen Global Enters Morocco & Expands Presence in Northern Africa
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 UAE’s First Floating Solar Plant Set to Start Power Production
4.2 Saudi’s Eastern Province Unveils Major Recycling Push
4.3 Solaire Expo Maroc 2020 in Casablanca Promotes Solar Energy
5: ARAB STATE DEVELOPMENTS
5.1 Lebanon’s Balance of Payments Deficit at $4.35 Billion by the End of 2019
5.2 Lebanon’s Trade Deficit at $15.50 Billion for 2019, Down by 8.95%
5.3 Lebanese Customers Feel Currency Squeeze as Dollar Crisis Worsens
5.4 Amman Announces 5th Incentive Package to Enhance e-Services
►►Arabian Gulf
5.5 IMF Says Arabian Gulf Oil Wealth Could Vanish by 2034 Without Reforms
5.6 UAE’s Nuclear Regulator Issues Operating License for Barakah Plant
5.7 UAE Launches $500 Million Initiative to Support Growth of ‘New Africa’
5.8 Saudi Inflation Set to Rise on Higher Consumer Spending in 2020
5.9 First Saudi Government-Owned Healthcare Entity Privatized Under Vision 2030
►►North Africa
5.10 Egypt’s Power Subsidy Falls to Zero in Second Half of 20195.11 Egyptian Expat Remittances Up by 12.1% in First Five Months of FY2019/20
5.12 Algeria’s Public Debt Rises to 45% of GDP
6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
6.1 Cyprus GDP Growth Will Slow to 2.8% in 2020
6.2 Cyprus Enjoys Strong Growth but Liabilities Persist
7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Ben & Jerry’s Whips Up Enthusiasm Over Its Upcoming Purim Costume Contest
*REGIONAL:
7.2 Egypt’s Population Surpasses 100 Million People8: ISRAEL LIFE SCIENCE NEWS
8.1 Nanox Agreement with USARAD to Deploy 3,000 Nanox Systems in the U.S.
8.2 NeuroSense Receives Orphan Drug Designation for Amyotrophic Lateral Sclerosis (ALS) Drug
8.3 Breakthrough Device Designation Received From the FDA for EndoArt®
8.4 Researchers at Ben-Gurion University Introduce Platform for the Design of New Antibiotics
8.5 Cannabics & RCKMC Develop Cannabis Targeting Gastrointestinal Cancers
8.6 Intuitive Acquires Orpheus Medical to Expand Informatics Platform for Hospitals
8.7 MDClone Expands to Canada
8.8 Teva Generic Medicines Saved US Healthcare System $41.9 Billion
8.9 Isotopia Molecular Imaging and Eckert & Ziegler Partner for Prostate Cancer Imaging
8.10 Else Nutrition Signs Production MOU with a Leading U.S. Organic Baby Formula Producer
8.11 Biobeat Wearable Wristwatch and Patch Receive CE Mark Approval
8.12 CollPlant Biotechnologies Raising $4.45 Million in U.S. Private Placement
8.13 Else Nutrition Launches Plant-Based Toddler Formula
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 TransEurope Marinas Announces Partnership With Marina Tech Innovator Pick a Pier
9.2 Elbit Systems Awarded $43 Million Contract to Equip Korean Fighters With TF/TA Systems
9.3 Tier 1 South African Bank Goes Live With Sapiens P&C Suite
9.4 Elbit Wins Contracts Worth $136 Million to Supply Laser DIRCM Systems in Asia-Pacific
9.5 Innoviz Technologies Selected for Autonomous Truck Project at Chinese Port
9.6 New Self-learning Algorithm “Facio” Immunizes Against Insurance Disruptors
9.7 PenTera Selected by the Israel Electric Corporation to Validate its Cyber Security Controls
9.8 Perception Point Launches Advanced Protection for Salesforce
9.9 CyberArk Delivers Blueprint for Privileged Access Management Success
9.10 Ethernity Networks and TietoEVRY to Boost 5G Performance with UPF/VPP Acceleration
9.11 Waterfall Security Solutions & Cylus Strengthen Cybersecurity for Rail Systems
9.12 AudioDots Automatic Text-to-Speech Solution Turns Print Publications into Mobile Audio
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel’s Budget Deficit Narrows Sharply After January Surplus
10.2 Housing Sales in Israel Hit a 4 Year High
10.3 Low-Cost Carriers Increase Market Share at Ben Gurion Airport
11: IN DEPTH
11.1 LEBANON: Crisis Exits Still Possible, Should the Will to Reform be There
11.2 LEBANON: Lebanon Forms a New Government, but Popular Protests Persist
11.3 QATAR: Fitch Affirms Qatar at ‘AA-‘; Outlook Stable
11.4 UAE: Massive Gas Find Spurs UAE’s Pursuit of Self-Sufficiency
11.5 OMAN: Oman’s New Sultan Unlikely to Pursue Qaboos’ Monopoly of Power
11.6 TUNISIA: Moody’s Changes Outlook to Stable from Negative, Affirms B2 Rating
11.7 TURKEY: Turkey’s AKP Stumbles in Efforts to Restore Economic Confidence
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Bank of Israel Purchased $3 Billion in Foreign Currency in January
The Bank of Israel announced that it purchased almost $3 billion in foreign currency in January in an attempt to halt the shekel’s appreciation. These purchases, in addition to transfers from overseas by the government, increased the reserves by $3.95 billion, bringing them close to exceeding $130 billion for the first time. The Bank of Israel added that market players would realize that Israel’s central bank would continue acting in the foreign currency market as needed in order to achieve the goals of its policy. Since the Bank of Israel began intervening in foreign currency trading last November, Israel’s foreign currency reserves have risen by $8 billion.
Governor of the Bank of Israel Prof. Yaron said that the Bank of Israel would continue using foreign currency intervention as a tool for neutralizing shekel appreciation, because it was a focused tool with a direct impact on the shekel exchange rate. On the other hand, Yaron made it clear that he would not use the interest rate tool, the effect of which would be broader, unless a severe downturn in economic activity in Israel occurs.
As of the end of January, the foreign currency reserves managed by Bank of Israel totaled $129.965 billion, amounting to 33.8% of Israel’s GDP. The increase in the foreign currency reserves is attributable to the Bank of Israel’s purchases of $2.951 billion in foreign currency in January, $1.166 billion government transfers from overseas, and $5 million transferred by the private sector. The increase was partially offset by revaluation of foreign currency balances amounting to $171 million. (BoI 05.02)
1.2 Tel Aviv Launches its First Tourism Master Plan Following a Record Year for Tourism
This year, the Tel Aviv-Yafo Municipality has launched a strategic plan that looks at the entire tourism industry; identifying relevant target audiences, envisioning the tourist attractions yet to be established in the city, assessing the existing tourism complexes plus those to be opened, and lastly, planning the moves that must be initiated in order for the tourism industry to continue to flourish. The vision is that by 2030 Tel Aviv-Yafo will be one of the most popular urban destinations in the world.
2019 was a formative year for tourism in Tel Aviv; the year the city hosted the Eurovision Song Contest, which was the largest international event ever held in the city in its 110 years of existence. In 2019, Israel also welcomed a record number of 4.9 million tourists, which was an increase of 12% compared to 2018. In order to accommodate these tourists, 783 hotel rooms were added in Tel Aviv in 2019, amounting to a total of 11,170 rooms in the city, which caused Tel Aviv to experience a hotel boom.
Moreover, in 2019, the Tel Aviv Ben Gurion Airport welcomed 24 million international passengers, which was an increase of 1.6 million compared to 2018. Ten new airlines added flights to Israel, which amounts to a total of 140 airlines with direct flights to Tel Aviv, and 6 new destinations were added to the list of 180 destinations in 56 countries. The main countries that flew into Israel, comprising over 50% of the passengers, were from Turkey, United States, Italy, France, Greece, Germany, Russia, UK, Spain and Ukraine. (Tel Aviv-Yafo Municipality 13.02)
1.3 Government of Israel Natural Gas Revenues Forecast to Rise in 2020
The Ministry of Energy expects a major jump in gas revenues in 2020 as the Leviathan field has begun producing gas. Fees and royalties from Israel’s natural gas, oil, and minerals totaled NIS 864 million in 2019, slightly down from NIS 878 million in 2018, the Ministry of National Infrastructure, Energy and Water Resources reported. Most of the revenue came from royalties on natural gas and oil, which totaled NIS 842 million in 2018, including NIS 836 million in royalties from the Tamar gas field, down 2.5% from 2018. The Ministry of National Infrastructure, Energy and Water Resources said the fall was due to the strengthening of the shekel in 2019 as well as a breakdown in the Tamar well in April. Since the Tamar gas field came on stream in 2013, the government’s take has totaled NIS 5.18 billion. NIS 2.7 million more came from the Meged (Givat Olam) license and another NIS 2.7 million from the small Yam Thetis gas field off Ashkelon. The Leviathan Partners, which began extracting gas at the end of December, paid NIS 327,000.
In addition to royalties on natural gas and oil, royalties on minerals totaled NIS 10.7 million and fees totaled NIS 5.6 million. The Ministry of National Infrastructure, Energy and Water Resources projects a major rise in revenue from royalties in 2020 to NIS 1.5 billion as a result of production from the Leviathan field. (Globes 17.02)
1.4 Over-the-Counter Drug Prices are Much Higher in Israel Than Overseas
The Israeli Ministries of Health and Economy recently announced that they have summoned OTC drug manufacturers and distributors for a clarification meeting after a study commissioned from business intelligence company Adkit found that OTC drugs in Israel are priced 37% higher on average. Each company is set to meet with the regulators shortly. The health and economy ministries first looked into the high prices of OTC drugs some 18 months ago. Some two weeks ago, both ministries notified relevant companies of Adkit’s results, asking for a written response to the findings prior to making them public.
The OTC drug companies, however, claim prices in Israel have not gone up over the past decade. The study was based on the list price, and only looked at prices on the private market,in private pharmacies, and at Israeli drugstore chain Super-Pharm. Adkit did not look at the pharmacies of Israel’s four health maintenance organizations, which account for 50% of drug consumption in Israel.
In Israel, unlike most of the world, OTC drug prices are regulated by the health ministry. The ministry sets maximum prices and the final price is set by the various sellers. While the companies all treat the ministries’ inquiries with the proper respect, an initial look at the study and the data it is based on points to significant failings. In recent weeks, the ministries of health and economy worked to obtain a clear picture of the OTC drug pricing situation in Israel, and the findings are currently being discussed with the relevant bodies. (Calcalist 17.02)
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Sapiens Complete Its Acquisition of sum.cumo
Sapiens International Corporation announced that Germany’s antitrust authority has approved Sapiens’ acquisition of sum.cumo without restriction. All necessary regulatory approvals for the acquisition have now been received and the transaction is completed. sum.cumo is a German-based technology provider that offers disruptive, digital, innovative and consumer-centric solutions mainly to the insurance sector. Announced on 7 January 2020, the acquisition is expected to enable Sapiens to expand its footprint by offering Sapiens’ complete product and services portfolio in the DACH region, alongside sum.cumo’s offerings. Sapiens will continue to invest in and support sum.cumo’s offerings, and enhance Sapiens’ digital offerings worldwide via sum.cumo’s solutions and expertise.
Holon’s Sapiens International Corporation empowers insurers to succeed in an evolving industry. The company offers digital software platforms, solutions and services for the property and casualty, life, pension and annuity, reinsurance, financial and compliance, workers’ compensation and financial markets. With more than 35 years of experience delivering to over 500 organizations globally, Sapiens has a proven ability to satisfy customers’ core, data and digital requirements. (Sapiens 06.02)
2.2 Forescout to be Acquired by Advent International for $1.9 Billion
Forescout Technologies has entered into a definitive agreement under which Advent International (Advent), one of the largest and most experienced global private equity investors, will acquire all outstanding shares of Forescout common stock for $33.00 per share in an all-cash transaction valued at $1.9 billion. Advent will be joined by Crosspoint Capital Partners, a private equity investment firm focused on the cybersecurity and privacy industries, as a co-investor and advisor.
Under the terms of the agreement, which has been unanimously approved by the Forescout Board of Directors, Forescout shareholders will receive $33.00 in cash for each share of common stock they own. The transaction is expected to close in the second calendar quarter of 2020, subject to customary closing conditions, including approval by Forescout shareholders and receipt of regulatory approvals. Upon completion of the transaction, Forescout common stock will no longer be listed on any public market.
Tel Aviv’s Forescout Technologies provides security at first sight. Our company delivers device visibility and control to enable enterprises and government agencies to gain complete situational awareness of their environment and orchestrate action. (Forescout 06.02)
2.3 TLVP Raises $210 Million of New Funds for TLV Partners III
Four and a half years after raising their first fund and two years after raising their second fund,TLV Partners announced raising their third fund, TLV Partners III. The third fund is the same size, $150 million, as the second fund and continuing the strategy from the previous two funds: backing visionary Israeli entrepreneurs at the Seed and Series A stages. In addition to TLV Partners III, TLV Partners also announced $60 million opportunity fund — TLV Opportunity I. This fund, which is dedicated solely to their portfolio companies, will enable support as long-term partners from the outset. Today TLV Partners manages $490 million across all their funds. (TLV Partners 09.02)
2.4 WishTrip Joins the List of Top 500 Fastest Growing Companies in Israel
The digital impact agency, Metropolis Digital just released their newest list of the top 500 fastest growing companies in Israel, which included WishTrip. WishTrip joins the ranks of Wix, Armis, Appsflyer, Syte and IMGN Media who are also included on the list. Metropolis Digital releases a new list twice a year using data on workforce expansion harvested from LinkedIn. As expected, the list is dominated by some of the biggest growth sectors in Israel like Auto-tech, cyber-security and fintech.
WishTrip’s inclusion on this important list is further evidence of the company’s amazing growth and the impact it is having in the travel-tech field. The past 18 months have seen the company almost double its staff taking on new employees in almost every department from app development to sales and customer success. The increased staff is to accommodate WishTrip’s global growth and its penetrating new markets by adding attractions like zoos and amusement parks to its existing client base of tourism destinations.
Jerusalem’s WishTrip is a SaaS-based tourism experience management platform that enables tourist destinations to play a more active role in shaping visitors’ travel experiences. WishTrip helps destinations learn more about their visitors, personalize their experiences and improve their online reputations. For visitors, WishTrip is a smartphone application that helps travelers seamlessly navigate customer sites, find information and record their memories. (WishTrip 10.02)
2.5 Sixgill Raises $15 Million to Advance its Cyber Threat Intelligence Solution
Sixgill raised $15 million in a second funding round. The new capital will be used to significantly scale global operations and strengthen core products in support of its growing portfolio. The round was led by Sonae IM and REV Venture Partners with participation by Our Crowd. Previous investors Elron and Terra Venture Partners also participated in the round.
The funding will be used to increase Sixgill’s presence in North America, EMEA and APAC by expanding its growing customer base of large organizations, law enforcement, government agencies and MSSPs. In addition, the company will strengthen its unique Automated, Actionable Intelligence (A2I) solution, as well as offerings such as its patent-pending Dynamic CVE Rating.
Tel Aviv’s Sixgill is a market leader in deep and dark web cyber threat intelligence. Sixgill helps Fortune 500 companies, financial institutions, governments, and law enforcement agencies protect their finances, networks and reputations from cyber threats that lurk in the deep, dark and surface webs. The advanced cyber threat intelligence platform automates all phases of the intelligence cycle — collection, analysis and dissemination of data — providing organizations with unparalleled information and actionable insights to protect their various assets in the ever evolving cyber threat-scape. (Sixgill 11.02)
2.6 Liquidity Capital Plans to Invest Over $500 Million in Tech Startups in 2020
Liquidity Capital announced their plan to fund over $500 million of growth capital to technology startups throughout 2020. Liquidity Capital offers startups a one-of-a-kind funding alternative, allowing them to raise capital without giving up equity. 2019 was a breakthrough year for Liquidity, funding over $200 million to startups across the Cloud, E-commerce, and SaaS sectors, including two unicorn startups,Infinidat and Le Tote.
Powered by machine learning algorithms, Liquidity Capital’s proprietary data integration tool, Liquidity Dynamics, enables smarter investing by forecasting the future business trends of its investments. Utilizing verified historical data sets and industry recognized predictive methodologies, Liquidity Dynamics is able to asses both opportunities and risks to serve its investments. This allows Liquidity Capital to work with startups side-by-side, taking on all financial risk.
Founded by career entrepreneurs with offices in New York, Miami and Tel Aviv, Liquidity Capital is backed by Mitsubishi UFJ Fund Services and is part of Meitav Dash Ltd., the leading Israeli institutional investment house. Tel Aviv’s Liquidity Capital offers unlimited unsecured, non-recourse, no dilution growth capital funding to growth stage startups. Liquidity Capital’s revenue-based financing model is designed to help fast-growing startup entrepreneurs succeed without giving up company equity. (Liquidity Capital 11.02)
2.7 Police Order Tel Aviv Strip Clubs to be Closed
On 11 February, Israel Police issued closure orders against all of the strip clubs in Tel Aviv. The Go Go Girls, Shendu and Baby Dolls clubs were closed. Following these closures and two others last month, and the closure of the Pussycat club in July 2019, there are now no strip clubs in Tel Aviv.
The campaign to close strip clubs in Israel began with a petition by the Task Force on Human Trafficking and Prostitution in 2016 for the closure of the Pussycat club. Under the influence of this public campaign, the state authorities’ attitude towards strip clubs in Israel changed. In April 2019, when the campaign reached a peak, the State Attorney’s Office’s instruction on enforcement policy for prostitution-related offenses changed. Conditions were specified under which lap dancing would be considered prostitution. Following this police action, Israel has only one strip club – in the north.
The Go Go Girls and Baby Dolls clubs had business licenses, with the latter having been issued its license only six months ago under very stringent terms, after having been previously deprived of a license. The clubs have now been closed, but the Tel Aviv municipality has no clear policy on the matter, and it cannot be ruled out that similar clubs will appear in the near future. The municipality has begun an initial hearing, led by Deputy Mayor Zipi Brand-Frank, but there has been no clear progress to date on the matter. (Globes 11.02)
2.8 Seagate Technology’s Lyve Labs Opens Doors in Tel Aviv to Enable Innovations
On 13 February, Seagate Technology, a world leader in data storage and management solutions, officially opened its Lyve™ Labs Israel. Lyve Labs’ mission is to form partnerships with businesses in order to enable innovations by providing simple, secure, and efficient ways to work with exabytes of data. The initiative empowers the seamless movement of data, optimizing its business value both in flight and at rest.
The companies partnering with Lyve Labs Israel take on data challenges as relevant as survival during an earthquake. Among other projects, the innovation center in Tel Aviv conducted a successful trial run of the Lyve™ Drive Shuttle. The project, which involved collaboration with UPS, proved that moving data physically in shuttles via its reliable global shipping network instead of uploading can be more cost-effective and faster at scale. The Lyve Drive Shuttle was launched at the 2020 CES in Las Vegas as a part of the Lyve Drive Mobile Systems family.
In addition to proofs of concept, solutions offered by Lyve Labs Israel will include consultations with experts who can help solve data challenges, design and qualification services, playbooks for scaling efficiently, reference architectures, services that can optimize data management flows, and infrastructure and test-bench facilities. In the spirit of open innovation, reference architectures and case studies will be published publicly online so that other companies can easily implement similar solutions.
Based in Tel Aviv’s Lyve Labs Israel will be Seagate’s flagship innovation center. Seagate Technology’s Lyve Labs is a collaborative platform through which Seagate partners with innovators, startups, and enterprises to create solutions that ha+rness the power of data. (Seagate 13.02)
2.9 BioCatch Expands Digital Identity Position with AimBrain Acquisition
BioCatch has acquired AimBrain’s multi modal biometric authentication platform for an undisclosed amount of cash. The UK’s AimBrain’s platform combines several distinct methods to detect potential fraud, including behavioral biometrics, anomaly detection and other biometric modalities, to support various use cases in the digital identity lifecycle, including step-up user authentication to comply with KYC, AML, PSD2 and other regulatory requirements. The AimBrain technology complements and deepens BioCatch’s solution as the company extends its leadership in digital identity, where enhanced fraud detection and better user experience are critical to meeting the evolving needs of banks and other financial institutions seeking to protect their clients’ assets.
As part of the acquisition agreement, the AimBrain team will join the highly-regarded BioCatch team, accelerating the company’s ability to execute on its ambitious growth plan. BioCatch owns more than 40 patents and has another 25 pending. AimBrain’s intellectual property will add another 4 patents to its holdings.
Tel Aviv’s BioCatch is a digital identity company that delivers behavioral biometrics analyzing human-device interactions to protect users and data. Banks and other enterprises use BioCatch to significantly reduce online fraud and protect against a variety of cyber threats, without compromising the user experience. With an unparalleled patent portfolio and deployments at major financial institutions and global enterprises around the world that cover 90 million users to date, BioCatch has established itself as the industry leader. (BioCatch 10.02)
2.10 Intuition Robotics Raises $36 Million to Create Digital Companions
Intuition Robotics has raised $36 million in Series B funding co-led by SPARX Group and OurCrowd, bringing the company’s total funding to $58 million. Additional investors in the round include: Toyota AI Ventures, Sompo Holdings, iRobot, Union Tech Ventures, Happiness Capital, Samsung Next, Capital Point and Bloomberg Beta.
Intuition Robotics will use the new funding to fuel its mission to create enduring relationships between humans and machines through digital companion agents that influence users’ behaviors and emotions, starting with improving the lives of older adults. The company will invest in advancing its technology, cognitive AI capabilities and tools, and plans to expand the availability of its digital companion into domains beyond longevity and automotive.
Intuition Robotics defines a digital companion agent as the natural evolution of the digital assistant, replacing utilitarian voice command with a bi-directional relationship that is based on empathy, trust and anticipation of needs. This relationship is possible through the cognitive agent technology developed by Intuition Robotics allowing proactive, multi-modal, personalized interactions, expressed through a distinct character, handcrafted per agent implementation and customer.
In addition, Intuition Robotics is collaborating with leading automotive customers such as Toyota Research Institute (TRI). The automotive industry is going through discontinuity. On one hand, sophisticated sensors and the beginning of autonomy are rapidly burgeoning, yet on the other, the in-car experience hasn’t drastically changed, while automakers face fierce competition from large tech companies to take ownership of the future in-car experience. A revolutionized human machine interface (HMI) in the car is on the horizon, providing automakers the unique opportunity to become early adopters of digital companion agent technology.
Ramat Gan’s Intuition Robotics enables the creation of relationships between humans and machines that influence behaviors and emotions through digital companion agents, powered by the company’s cognitive AI engine, Q. The company offers Q to 3rd parties, starting with automakers, to transform their products into dynamic, white labeled digital companions. Q also powers ElliQ®, the company’s internal product aimed at improving the lives of older adults. (Intuition Robotics 13.02)
2.11 Grove Ventures Closes Second Fund with $120 Million in Commitments
Grove Ventures announced the final closing of Grove Ventures II (Grove II) with total commitments of $120 million. Grove II was oversubscribed. Grove Ventures invests in leading startups developing hard-to-replicate solutions at the intersection of technology, science and applicable market needs. Grove Ventures’ investment thesis is based on the premise that the combination of IoT, AI and cloud computing technology advancements creates a new set of investment opportunities in multiple industries soon to undergo revolutionary digitalization processes, such as manufacturing, mobility and healthcare. Grove therefore invests in a range of sectors including semiconductors, Industry 4.0 and digital health, among others. Grove Ventures has been Israel’s most active VC investor in semiconductors in recent years, is the creator of Israel’s largest Industry 4.0 conference, and the organizer of one of the country’s leading Deep Tech events, consistently using its global network to help grow the local tech ecosystem and connect innovative Israeli companies to the European and US markets.
Founded in 2016, Tel Aviv’s Grove Ventures is devoted to early-stage investments and to building tomorrow’s market leaders. Grove places significant emphasis on deep technology, as well as on its core principle of putting people first, close cooperation and value-creation. Grove’s team, built of experienced investors, veteran entrepreneurs and company builders, provides early-stage startups with the needed support to become great companies that shape the future of the world through deep technology. (Grove 18.02)
2.12 Celigo Announces Partnership with SangIT Israel to Resolve Data Integration Needs
San Mateo, California’s Celigo, the leading integration Platform-as-a-Service (iPaaS) provider for both business and technical users, announced its partnership with Ramat Gan’s SangIT Israel . SangIT Israel is a leading iPaaS consulting firm in the Israeli market. By partnering with Celigo, SangIT Israel will be able to provide clients with pre-packaged integration solutions that will connect hundreds of cloud and on-Prem applications such as Salesforce, Concur, Microsoft, Jira, Zuora, Zendesk, Shopify and many more, seamlessly and automatically.
SangIT provides global B2B and B2C integration solutions either on Cloud or On-Premises environments. SangIT will leverage the integration flows of Celigo’s Integration templates to jump-start integrations between the core tools their customers use within their workflow.
The Celigo Integrator.io iPaaS enables partners and customers to expand using functional consultants and tech-savvy business users, without having to spin up developer-led, long, expensive integration projects. Celigo offers a guided approach to application integration by offering an intuitive step-by-step wizard and integration assistants and templates for hundreds of applications. (Celigo 17.02)
2.13 Strauss Buys Brazilian Coffee Company Mitsui Alimentos
On 18 February, the Strauss Group notified the Tel Aviv Stock Exchange today its 3C (Tres Coracoes) joint venture in Brazil, which it owns through its Strauss Coffee unit together with Sao Miguel FIP, signed a deal for the acquisition of 100% of the quotas of Mitsui Alimentos in Brazil from Mitsui & Co., Ltd. in Japan and Mitsui & Co. (Brasil) S.A. 3C has agreed to pay 210 million Brazilian reals for Mitsui Alimentos’s domestic coffee business in Brazil. Mitsui Alimentos’s roast and ground (R&G) coffee business in Brazil has operated as part the company Mitsui Alimentos since 1974. It holds a 3.8% share of the Brazilian coffee market and is the fifth largest coffee company in the country. Based on the data disclosed, Strauss says that 2019 revenue of Mitsui Alimentos totaled 270 million reals (about NIS 245 million). (Globes 18.02)
3: REGIONAL PRIVATE SECTOR NEWS
3.1 Wamda Leads $3.5 Million Round for Mobile Games Publisher Tamatem
Wamda lead a $3.5 million round in Tamatem. The round also included Saudi Arabia’s Modern Electronics and the UK’s North Base Media. Founded in 2013, Jordan-based Tamatem initially focused on developing mobile games. The company pivoted to a publishing platform in 2015, working with developers from various countries and has grown to become the leading mobile games publisher in the Arabic-speaking market.
The Middle East and North Africa (MENA) region is home to the world’s most active gaming community, with the region hosting some 587 million online gamers in 2017. Additionally, the size of the mobile games market across the Middle East and North Africa is poised to reach $2.3 billion in 2020, according to Statista, a 238% increase from $680 million in 2015. Yet, MENA’s mobile gaming market remains severely underserved, creating a major opportunity for Tamatem to invest in culturally relevant mobile games.
Tamatem will also be launching an investment and acquisitions fund, targeted at supporting independent developers and studios. The fund will allow the developers to grow their titles and operations while maintaining their independence. In addition to launching its own fund, Tamatem will use the round to expand its reach to new markets and increase marketing on current titles. The company will also publish titles in Turkey, South East Asia, Latin America and Eastern Europe. To date, Tamatem has published over 40 different games on iOS and Android. Tamatem previously raised a $2.5 million Series A round in 2018. (Wamda 16.02)
3.2 Eat App Raises $5 Million in Series B funding
Bahrain based Eat App has raised a $5 million Series B funding round, led by 500 Startups and Derayah VC with follow on investment from MEVP, FA Holdings, and a number of international VC’s and regional angel investors. Eat App is the number #1 restaurant reservation platform in the Arab World, currently powering over 1000 restaurants, hospitality groups and hotels, and has processed over 10 million diners to date. Eat App has also built the largest partnership network, powering reservations for Google, TripAdvisor, Zomato and Time Out, amongst 30+ other consumer facing platforms. This network represents over 46 million monthly active users. In 2019 alone, Eat App has generated over $32million in revenue for its restaurant partners.
Eat App will utilize the funding to expand and solidify its presence across the region, especially in the fast-growing Saudi market. Eat App will also scale its sales and engineering teams, and invest heavily in R&D, unique IP and technology. The Saudi restaurant sector has witnessed massive growth over the last years, with 8% CAGR and total sales exceeding SAR 80 billion. In addition, restaurants employ 30% of the Saudi workforce, which is the largest employment sector in the country. Growth in this huge market can be facilitated with the adoption of efficient software solutions like Eat App. (Eat App 13.02)
3.3 Dubai’s Operation: Falafel to Expand to New York, London and Paris
Dubai brand Operation: Falafel is set to expand to New York, London and Paris, with the first brand in the Big Apple expected to open in Q2/20, according AWJ Investments, which runs eight F&B concepts across 24 outlets in the Middle East. Operation: Falafel, which is known for its modern twist on casual Middle Eastern street food, will roll out 400 shops around the world with selected franchise partnerships by 2022.
The original ‘Street Food’ experience, Operation: Falafel is a Dubai-born fresh casual chain of restaurants that operate on the concept of ‘Revival & Survival’ of Arabic cuisine. Balancing old-street flavors with Twenty-First Century trends, it is a combination of fresh experiences that promises its customers a surprising integration of the past with the present. In a contemporary space, Operation: Falafel creates a mood common to the old street marketplace. Organizing its service model into individual food stations that mimic food carts on the street. (AB 10.02)
3.4 Seez Raises $6 Million in a Series A Funding Round From VCs and Strategic Investors
Dubai-based startup Seez has raised $6 million from strategic partners and VCs in a Series A funding round. The 3-year old tech startup facilitates the car shopping journey with its Seez App, which offers a smart search engine for car listings and proprietary, AI-powered pricing and negotiation tools. The new funding will go towards several verticals, among them, an online buying service that will allow users to purchase cars via the app, and Seez Cross-Border Car Shopping, a fully-digital car import/export service allowing people in any country to buy a car from the UAE with a few clicks.
The alliances forged between Seez and its strategic partners — regional automotive heavyweights who distribute a total of 9 top global car brands — fuels the startup’s product development while supporting the industry in its digital transformation, which means more disruptive and unique offerings for consumers. Seez has had strong, symbiotic relationships with the region’s auto industry for almost two years, providing leading OEMs and dealerships with a SaaS product, that uses AI and big data to optimize businesses operations, as well as predictive analytics to plan inventory and pricing.
Other investors in the funding round include German VC Crealize, regional VCs Wamda, B&Y, and Phoenician Funds, as well as several angels. Seez had previously raised $3.2 million over two rounds, bringing its total funding to date to $9.2 million. (Seez 17.02)
3.5 Sellanycar.com Raises $35 Million Investment to Accelerate Regional Growth
The UAE’s SellAnyCar.com has secured funding of $35 million, bringing the total funding amount raised since inception to approximately $50 million, led by Saudi Arabia’s Sanabil Investments, a subsidiary of the Public Investment Fund (PIF); Gulf Investment Corporation (GIC), a sovereign financial institution owned equally by the six GCC states; and Olayan Financing Company. Sanabil Investments, GIC and Olayan join earlier regional investors such as iMENA Group, a venture capital investment company which backs innovative start-ups to support their growth to becoming regional champions. In 2019, SellAnyCar.com crossed a new milestone in surpassing AED1 billion ($272.2 million) in total gross merchandising value (GMV).
The new capital will be used to accelerate growth throughout the GCC and SellAnyCar.com is now expanding into Saudi Arabia with plans to employ more than 300 Saudi nationals and open 100 branches throughout the Kingdom.
Dubai’s SellAnyCar.com was launched in 2013 and quickly disrupted the traditional methods of selling privately owned vehicles in the country. With world-class technology powering the platform and software which enables fast decisions for consumers online, the marketplace can sell most cars within 15 minutes, with guaranteed accuracy and 100% of vehicles being sold to dealers without the buyer physically seeing the car. Within one 30-minute appointment, individuals selling their car have access to more than 10,000 dealers who compete to be the highest bidder, ensuring a fair price is secured. (Zawya 11.02)
3.6 Okadoc Closes $10 Million in Series A Funding
Okadoc closed its $10 million Series A round, following a $2.3 million seed round in 2018. The latest fundraising round is the largest heathtech Series A in MENA. A diversified mix of institutional and private investors participated in the Series A, including Abu Dhabi Investment Office (ADIO) and Ithmar Capital Partners. With this investment, Okadoc will launch telemedicine, enabling doctors to offer remote virtual consultations to their patients. This upcoming service will greatly enhance the patient experience by offering much-needed flexibility and convenience for patients to see their own doctors through a video consultation for follow-up appointments, pre-consultations and second opinions. The offering will also greatly benefit underserved populations with limited access to healthcare.
Okadoc has entered into a strategic partnership with Dubai Healthcare City (DHCC) and has further on-boarded some of the UAE’s leading healthcare providers, such as Medcare, Aster Hospitals, Emirates Healthcare Group, and more. Further, after this rapid expansion in the UAE during the last two years, Okadoc will also expand operations into Saudi Arabia and is planning to enter more GCC countries next year.
Okadoc’s cloud-based platform is designed to help patients find a doctor according to various parameters including insurance network, location, specialty, language spoken, or gender. Patients can then view real-time doctor availabilities, instantly book appointments, receive reminders, reschedule, cancel or even request earlier availability. Okadoc also helps doctors, clinics, and hospitals reduce ‘no-shows’, optimize their bookings, reduce administrative costs, increase operational efficiency and attract and engage new patients.
Founded in 2018, Dubai’s Okadoc aims to improve the healthcare experience by seamlessly connecting patients with healthcare providers and doctors. In 2019, Okadoc was named ‘Start-up of the Year’ by Arabian Business and ‘Healthcare Innovator of the Year’ at the Entrepreneur Magazine’s Agility Awards. Also last year, Okadoc was chosen to participate in Hub71’s Incentive Program, a Mubadala-led initiative. (Okadoc 12.02)
3.7 Vezeeta Announces $40 Million Series D Round by Gulf Capital and STV
Egypt’s Vezeeta, the Arab world’s leading digital healthcare platform secured $40 million in its Series D round led by Gulf Capital, the Middle East’s largest and most active alternative asset management firm. The round had strong support from existing investor, Saudi Technology Ventures (STV), who led Vezeeta’s Series C round in September 2018. The fundraising supports Vezeeta’s mission to empower patients in Middle Eastern and African markets with its integrated digital healthcare platform. Vezeeta has grown to become a mainstream digital leader of healthtech solutions, enabling patients to search, book and review the best doctors and medical services in just one minute. Currently operating in 50 cities across Egypt, Saudi Arabia, Jordan and Lebanon, the platform generates 4 million annual appointments, tripling year over year.
With the support of STV in 2018, Vezeeta was able to bolster its expansion plans primarily in Saudi Arabia. Raising more than $63 million in funds since its founding in 2012, Vezeeta’s cohort of other high-profile investors also includes BECO Capital, Silicon Badia, Vostok New Ventures, Crescent Enterprises’ CE-Ventures and Endeavour Catalyst.
In 2020, Vezeeta’s growth plans include rolling out its new digital capabilities of ePharmacy and Tele-health across its existing footprint and new markets. These growth plans underline the company’s commitment to creating value for patients and healthcare providers in emerging markets, by empowering them with data, ease of access and affordable solutions in healthcare. (Vezeeta 11.02)
3.8 Andersen Global Enters Morocco & Expands Presence in Northern Africa
San Francisco’s Andersen Global strengthens its presence in Northern Africa via a Collaboration Agreement with Morocco-based advisory firm M.A. Global Consulting (MAGC). MAGC was founded in 2005 and has grown to include three partners and nearly 30 professionals. The firm provides tax and legal services including bookkeeping, accounting supervision, legal advice, tax advice, management consulting, and information system assistance and organization.
Andersen Global is an international association of legally separate, independent member firms comprised of tax and legal professionals around the world. Established in 2013 by U.S. member firm Andersen Tax LLC, Andersen Global now has more than 5,000 professionals worldwide and a presence in over 167 locations through its member firms and collaborating firms. (Andersen Global 18.02)
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 UAE’s First Floating Solar Plant Set to Start Power Production
The UAE’s first floating solar power plant will start producing electricity off the tiny resort island of Nurai within days. The performance of the pilot facility, which has a capacity of just 80 kilowatts, will be an important test case for similar projects in the region, which has historically been heavily reliant on revenue from oil and gas production.
Dubai’s man-made islands and parts of the Maldives could also benefit from floating solar power as a way to generate low-carbon electricity without sacrificing precious beach land, according to the chief executive of the company that built the project. Installing and maintaining solar power panels at sea is expensive, costing around three times more than land-based projects.
The project will also provide useful information on the benefits of locating solar panels at sea. Reflected light from the surface of the sea and the cooling effect of the water washing over the panels could improve their efficiency. This is a particular bonus in the Middle East where photo-voltaic solar projects often suffer from over-heating.
UAE state-run energy agencies have shown some interest in developing floating solar technology. Last year, Dubai’s government-run utility awarded a consultant contract to Germany’s Fichtner Group for a planned floating solar project at an unspecified location. Clean-energy developer Masdar, which is owned by Abu Dhabi’s government, is building Indonesia’s first floating solar project. However, the country’s largest solar projects will continue to be built on the empty desert land found in plentiful supply just beyond its high-rise cities. (AB 14.02)
4.2 Saudi’s Eastern Province Unveils Major Recycling Push
A memorandum of understanding to start integrated waste management and waste recycling activities in Saudi Arabia’s Eastern Province was signed by the National Waste Management Centre, the Governor of the Eastern Province and the Saudi Investment Recycling Company.
Saudi Arabia’s Eastern Province has unveiled plans to build new facilities to recycle 81% of the 2 million tons of annually produced municipal solid waste by 2035. About 60% of the 1.5 million tons of construction and demolition waste per year will also be recycled. Under the MoU, the three parties will jointly work on the execution of the overall waste management strategy for the Eastern Province to achieve a set of strategic objectives for recycling by 2035. The National Waste Management Centre and the Saudi Investment Recycling Company will build recycling facilities in the Eastern Province to recycle all types of waste. This includes recycling of municipal waste into recyclables such as fertilizer, paper, plastics and metals. The economic growth and continuous increase in population and urbanization have increased the amount of waste and factory waste, requiring a sophisticated technical approach in dealing with them. (AB 08.02)
4.3 Solaire Expo Maroc 2020 in Casablanca Promotes Solar Energy
The ninth Solaire Expo Maroc exhibition is set to take place from 25 to 27 February in Casablanca. Solaire Expo Maroc is a Moroccan business to business platform specializing in solar energy development. The exhibition, first launched in Marrakech in 2012, aims to gather international markets in order to invest in Morocco and Africa more widely. Last year’s exhibition, also in Casablanca, counted 7,843 visitors and 104 exhibitors from Europe, North and South America, Asia, and Africa. In addition to the exhibitors presenting the latest innovations of solar technology, the exhibition also hosts conferences, scientific workshops, and a contest for Masters and PhD students.
The University Contest of Research and Innovation (CURI) aims to give value to innovation in the field of solar energy and encourage students to carry out research. The 2020 exhibition will be the seventh time Solaire Expo Maroc has handed out the awards. According to the organizers, the candidates for CURI need to present innovative projects that bring new solutions for energy issues in Africa.
Morocco is home to one of the world’s largest concentrated solar power plant complexes, Noor Midelt. The plant is located in the Sahara Desert and has a 580-megawatt capacity. The massive solar station is expected to provide 1 million people with electricity. The Noor Midelt complex, with four other solar plants across the kingdom and 11 wind power plants, are all part of Morocco’s Green Plan. The country is working towards 52% renewable energy by 2030. (MWN 18.02)
5: ARAB STATE DEVELOPMENTS
5.1 Lebanon’s Balance of Payments Deficit at $4.35 Billion by the End of 2019
According to Banque du Liban (BDL), Lebanon’s Balance of Payments (BoP) registered a deficit of $4.35B by the end of 2019, compared to a deficit of $4.82B deficit recorded during the same period in 2018. In details, BDL’s Net Foreign Assets (NFA) dropped by $2.4B while NFAs of commercial banks fell by $1.95B in Q4 2019. On a monthly basis, the BoP recorded an $840.8M deficit in December 2019, compared to a deficit of $747.5M in December last year. In fact, NFAs of BDL and commercial banks retreated by $826.8M and $14M in December 2019, respectively. Also, the slump in NFAs of BDL can be related to the Central Bank covering the imports of essential goods, including fuel, wheat and medicine. As for the commercial banks, their NFAs are the difference between Foreign Assets (Claims on nonresident customers, Claims on nonresident financial sector and non-resident securities portfolio) and Foreign Liabilities (nonresident customers’ deposits and nonresident financial sector liabilities). Specifically, the foreign assets and liabilities of commercial banks witnessed approximately an equal monthly decrease of $1.85B, which explains the small change in the NFAs of commercial bank. (BdL 04.02)
5.2 Lebanon’s Trade Deficit at $15.50 Billion for 2019, Down by 8.95%
Lebanon’s trade deficit narrowed in 2019 to reach $15.50B, down by 8.95% compared to the same period in 2018. The total value of imports lost an annual 3.70% to stand at $19.24B. Also, the value of exports rose by 26.57%to stand at $3.74B in Q4 2019. Mineral products is the only category to witness an increase in its imported value. In terms of value, Mineral products were the leading imports to Lebanon in 2019, grasping a 34.35% stake of total imported goods. Products of the chemical or allied industries followed, constituting 10.35% of the total, while machinery and electrical instruments grasped 8.66% of the total. Specifically, Lebanon imported $6.61B worth of Mineral Products, compared to a value of 4.17B in the same period last year and increasing by 58.55%. The net weight of imported mineral fuels, oils and their products witnessed a yearly rise from 6,560,952 tons in 2018 to reach 11,795,218 tons in 2019. Meanwhile, the value of chemical or allied industries recorded a decrease of 10% y-o-y to settle at $22B and that of machinery and electrical instruments also declined by 28.27% over the same period to $1.66B.
In terms of top trade partners, Lebanon primarily imported from US, China, and Greece with shares of 8.86%, 8.45% and 7.28%, respectively in Q4/19. As for exports, the top category of products exported from Lebanon were pearls, precious stones and metals, which grasped a share of 38.93% of total exports, followed by a share of 10.21% for Machinery; electrical instruments and 9.94% for Prepared foodstuffs; beverages, tobacco over the same period. In details, the value of pearls, precious stones, & metals surged from 648M by December 2018 to reach $1.45B by December 2019. As for the value of Machinery; electrical instruments, it recorded an increase of 18.64% year-on-year to $381.57M. Meanwhile, the value of Prepared foodstuffs; beverages, tobacco, it declined by 2.91% y-o-y to $371.59M. In 2019, Switzerland followed by the UAE and Saudi Arabia were Lebanon’s top three export destinations, respectively constituting 28.46%, 11.75%, and 6.59% of total exports. During the month of December alone, total deficit amounted to $1B which is 22.76% lower when compared to the same month last year. This can be related to the shortage of foreign currency and the different restrictions on transactions imposed by local bank in 2019. In fact, the central bank has been covering imports of essential goods, including fuel, wheat and medicine. (BLOM 12.02)
5.3 Lebanese Customers Feel Currency Squeeze as Dollar Crisis Worsens
Despite efforts by the union of exchange dealers last month to place a cap on the price of Lebanese pounds at currency exchanges, exchange dealers in Lebanon are continuing to sell at well above the officially mandated rate of 2,000 pounds to the dollar. To make matters worse, many currency exchanges are now also running low on dollars as banks impose newly-tightened restrictions on withdrawals, meaning that they are selling less greenbacks than previously and are eager to charge high prices for what they have. Worsening monetary realities in Lebanon are increasingly leaving citizens with fewer and fewer options to guarantee liquidity, and are making it even more difficult for importers to bring in goods for sale from abroad.
Shortly after the formation of Lebanon’s cabinet on 21 January, Finance Minister Ghazni stated that it would likely be impossible to bring the exchange rate of the Lebanese pound back down to the previous peg of around 1,500 pounds to the dollar, apparently indicating that a rate of around 2,000 might be the new normal. But rates to buy dollars at currency exchanges range from 2,100 to 2,270, and half of these currency exchanges stated they had no dollars to sell at all. The banks are increasingly rationing dollars because the outflow of US currency is greater than its inflow in Lebanon. The practical effect of such rising scarcity falls largely on the lower class. (Al Arabiya 07.02)
5.4 Amman Announces 5th Incentive Package to Enhance e-Services
Jordan’s government announced on 17 February the fifth executive package that aims at improving the business environment and simplifying measures for citizens and investors. Unveiling the incentives bundle, Prime Minister Razzaz said that the fifth package aims at improving the e-Government tools thus saving “time and effort” for the user of the service. The package will contribute to reducing time and efforts by digitalizing information and online transaction services to citizens, Razzaz said. As per the fifth package, specialized committees will be formed to look into citizens’ grievances within a limited timeframe before referring them to the judiciary.
Last October, the government announced its comprehensive program comprising four packages: Stimulating the economy and investments, management and financial reform, improving citizens’ livelihoods and improving services comprehensively. The first package provided incentives in the real-estate sector, focused on boosting exports and production and introduced measures to improve labor and employment for Jordanians. The second package lowered taxes on electric cars, removed the vehicle weight tax, reduced and controlled government purchases and resolved bureaucracy issues while the third one increased the salaries of employees and retirees in the public sector and the military. The government’s fourth executive bundle aimed at developing the education, health and transport sectors. (JT 17.02)
►►Arabian Gulf
5.5 IMF Says Arabian Gulf Oil Wealth Could Vanish by 2034 Without Reforms
The International Monetary Fund said on 6 February that the Arabian Gulf states must undertake much deeper reforms or risk seeing their wealth drain away in 15 years as global demand for oil slides. The Arabian Gulf states, which heavily depend on oil that has enriched them for decades, have no choice but to accelerate and widen economic reforms to avoid becoming net borrowers. The Gulf Cooperation Council (GCC), which groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates, accounts for a fifth of the world’s crude supplies and oil income makes up 70-90% of public revenues. Banking on hefty oil revenues over nearly two decades through 2014, the six nations controlled by ruling dynasties accumulated some $2.5 trillion of financial assets invested mostly overseas through sovereign wealth funds. But the oil price shock of mid-2014 has battered the finances of GCC nations, drastically reducing their revenues and forcing them to borrow and draw down on their assets to plug persistent budget deficits.
GCC gross domestic product plummeted as a result, with the IMF estimating the economies grew by just 0.7% last year from an already meagre 2.0% in 2018 — far from rates of above 4.0% before the oil crash. The global energy market is undergoing fundamental change as new technologies are increasing supply, while concerns over climate change see the world moving towards renewable sources.
A legacy of sharply rising expenditure during 2007-14 thanks to high oil prices, followed by a steep decline in hydrocarbon revenues, has weakened fiscal positions in the region. The resulting deficits lowered the region’s net financial wealth during 2014-18 by around $300 billion to $2 trillion, according to IMF estimates. The drop now is believed to be even deeper. GCC government debt rose from around $100 billion in 2014 to nearly $400 billion in 2018. As a result, net financial wealth is on track to turn negative by 2034 or even faster, turning the region into a net borrower, the report said. Most GCC states have embarked on economic diversification and reform programs that include subsidy cuts, raising power prices and even imposing value-added tax and other forms of taxation.
Rapid diversification of economies will not be enough, the IMF warned, saying the process should be accompanied by reductions in government expenditure and the introduction of broad-based taxes. GCC nations must also rationalize spending, reform their large civil service sectors, and reduce public wage bills which are high by international standards. Most Gulf states see these measures as highly sensitive and a political risk because of the potential adverse effect on citizens who have grown accustomed to subsidies and low taxes. The proposed measures “would have a multitude of socioeconomic consequences affecting employment, household incomes, and business confidence and investment. (IMF 06.02)
5.6 UAE’s Nuclear Regulator Issues Operating License for Barakah Plant
The UAE’s nuclear regulator has issued an operating license for the first reactor at Barakah in the final step before the power plant to begin operations. The license was granted to Nawah Energy Company, the plant’s operator, will be for 60 years. Barakah, near the oil town of Ruwais in the far west of Abu Dhabi, is the first nuclear power plant in the Gulf region and the first commercial station in the Arab world.
When completed, the plant will have four reactors with total capacity of 5,600 megawatts and will be able provide up to 25% of the UAE’s energy needs. The licensing assessment included reviewing the plant’s layout design and an analysis of the site’s location in terms of geography and demography. It also included the reactor’s design, cooling systems, security arrangements, emergency preparedness and radioactive waste management.
Now the license has been issued, Nawah will undertake a period of commissioning to prepare for commercial operations. As of this month, Unit 2 of the Barakah plant was 95% ready to operate. Unit 3 was 92% ready and Unit 4 83%. Every 18 months the reactors will be re-fuelled and the used fuel will be cooled in special pools at Barakah for 20 years. After the nuclear waste has been adequately cooled, it will be transferred to dry storage, where it will stay for 40 more years. Afterwards, other disposal methods will be considered. (FM 18.02)
5.7 UAE Launches $500 Million Initiative to Support Growth of ‘New Africa’
A new initiative with a committed investment of $500 million has been unveiled by the UAE to help fulfil the vision of a connected new Africa. Launched at the African Union, the UAE’S Consortium for Africa will be a long-term builder of human capital on the continent with two immediate priorities – digitization and youth, according to the UAE Minister for International Cooperation, Reem Al Hashimy. She said the consortium would align the UAE government and its private sector’s commitment to Africa, combining ambition for progress, and resource to support it, into one focused entity to assist development and investment. (AB 10.02)
5.8 Saudi Inflation Set to Rise on Higher Consumer Spending in 2020
A new research note from Jadwa Investment analyzing latest General Authority for Statistics (GaStat) data for December, showed that prices were up by 0.2% year-on-year, and by 0.1% month-on-month. It added that the annual inflation rate for 2019 averaged 1.2% year-on-year, in line with Jadwa’s forecast. During 2019, the highest price rises was seen in restaurants and hotels at 1.7%, followed by education at 1.6% year-on-year. Jadwa said price rises in restaurants and hotels were a result of increasing demand in entertainment and tourism in the kingdom, following the emerging activities associated with the Saudi Seasons in different regions during 2019. The largest decline in prices came in housing and utilities, down by 6.5% year-on-year, mainly as a result of rentals for housing, which declined by 7.4% year-on-year in 2019. (Jadwa 05.02)
5.9 First Saudi Government-Owned Healthcare Entity Privatized Under Vision 2030
Jadwa Investment has announced the successful completion of its advisory mandate for the privatization of Saudia Medical Services Company (SMS), a subsidiary of Saudi Arabian Airlines. The privatization transaction, for which Jadwa acted as the exclusive financial advisor, was completed through the sale of a majority stake to Dr Soliman Abdel Kader Fakeeh Hospital Company, and constitutes the first privatization of a government-owned healthcare entity under Vision 2030.
Saudia Medical Services provides healthcare services to over 140,000 employees and dependents of Saudi Arabian Airlines and its subsidiaries. It is also the largest provider of aviation and occupational medicine in Saudi Arabia and serves over 15,000 pilots and cabin crew in the kingdom. (Jadwa Investment 04.02)
►►North Africa
5.10 Egypt’s Power Subsidy Falls to Zero in Second Half of 2019
Egypt spent nothing on electricity subsidies in the second half of 2019, down from EGP 7.992 billion ($510.02 million) the same period a year earlier, a finance ministry semi-annual report showed. Scaling back energy subsidies that have been a strain on the budget for decades was a central part of a three-year, $12 billion reform package signed with the International Monetary Fund in 2016. The North African country has increased electricity prices for both households and industry by an average of about 15% over the 2019-2020 fiscal year that began in July. It said its goal is to cut electricity subsidy spending to EGP 4 billion for the full fiscal year.
The report showed Egypt also cut its spending on energy subsidies, excluding power, to EGP 9.88 billion in the second half of 2019 from EGP 30.17 billion in the second half of 2018. The government, however, has said it was working to limit the impact on the poor and its subsidies of commodities, such as sugar, grains and vegetable oils, rose slightly to EGP 24.93 billion in the second half of calendar year 2019, up from EGP 24.37 billion in the same period the year before. (Reuters 11.02)
5.11 Egyptian Expat Remittances Up by 12.1% in First Five Months of FY2019/20
On 16 February, the Central Bank of Egypt (CBE) announced that remittances from Egyptian expats rose by 12.1% during first five months of FY2019/20, from July to November 2019, recording $11.1 billion. This was up from the $9.9 billion reported during the same months of 2018. Remittances from Egyptians abroad increased to $128.9 billion, a year-on-year increase of 6.8%. In November, remittances increased to $2 billion, up from $1.9 billion in November 2018. In October 2019, remittances from Egyptian expats jumped by 12.7%, recording $2.3 billion, compared to $2.1 billion in October 2018. Egyptian expat remittances are considered one of the key sources of hard currency along with the Suez Canal and the tourism sector. (DNE 18.02)
5.12 Algeria’s Public Debt Rises to 45% of GDP
Algeria’s public debt rose to 45% of gross domestic product at the end of last year from a level of 26% in 2017, and the country’s economic situation is “delicate”, Prime Minister Abdelaziz Djerad said on 11 February. Addressing lawmakers, Djerad blamed mismanagement and corruption during the past years for worsening financial problems in the OPEC-member nation, pledging to overcome the situation through reforms. Algeria has been under financial pressure after a fall in energy earnings and foreign exchange reserves amid growing demands from the country’s 43 million people to improve living standards.
Djerad was named prime minister in December and Abdelmadjid Tebboune was elected president in a vote largely rejected by protesters demanding the departure of the entire ruling elite and the prosecution of people involved in corruption. Several senior officials and prominent businessmen have been jailed on corruption charges since the eruption of mass protests that ousted veteran president Abdelaziz Bouteflika who sought a fifth term in office. The government plan includes boosting dialogue with the opposition and seeking alternative funding sources for the economy such as issuing sukuk and developing the country’s tiny stock exchange. (Reuters 12.02)
6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
6.1 Cyprus GDP Growth Will Slow to 2.8% in 2020
Cyprus’ economy will grow by 2.8% GDP in 2020 down from 3.2% last year, according to the European Commission’s Winter Economic Forecast. Inflation will be 0.8% in 2020 and 1.2% in 2021 while “downside risks are primarily external notably a potential slowdown in foreign demand for residences and tourism services”. According to the European Commission, “Cyprus’ real GDP grew strongly in the third quarter of 2019 (3.4% y-o-y), driven by buoyant domestic demand”. But “net exports, by contrast, were a drag on growth”.
The report said economic sentiment stabilized in 2019 and it even improved in early 2020. Business sentiment remained strong in services and manufacturing but deteriorated in construction while consumer sentiment and business sentiment in retail trade stabilized suggesting that growth might moderate in the months to come.
EU experts predict private consumption is nevertheless expected to remain resilient, given positive labor market expectations and rising wages. Unemployment fell rapidly to 7.2% in the third quarter of 2019, the lowest level since 2011. Public spending is also set to boost growth, driven by increasing public wages and government expenditure in relation to the newly established National Health System.
Investment in residential buildings is a key driver of activity and is expected to continue in the medium term, as suggested by improved order books and increasing building permits, the forecast said. New bank lending to domestic non-financial companies and households is only slightly picking up. Net exports, however, contributed negatively in the first three quarters of 2019. Overall, real GDP is projected to grow by 3.2% in 2019, 2.8% in 2020 and 2.5% in 2021. Headline inflation is projected to reach 0.8% in 2020 and 1.2% in 2021. (FM 13.02)
6.2 Cyprus Enjoys Strong Growth but Liabilities Persist
Financial Mirror cited that strong growth prospects and sustained fiscal discipline places Cyprus on a firm declining path, but contingent liabilities, healthcare and public sector wage-related costs, as well as weaker external conditions, pose risks to the outlook, based on observations form the Scope rating agency. Scope noted that Cyprus is set once again to outperform its budgetary targets for 2019, with the government primary surplus recorded at 6.9% of GDP in the 11 months to November, above the 6.2% target set out in its 2019 draft budget.
Cyprus’ average primary surplus, excluding the one-off impact of the sale of Cyprus Cooperative Bank, amounted to 4.5% of GDP over the period of 2015-19, by far the highest in the euro area, Scope said. The fiscal performance of Cyprus over the past five years has been remarkable and reflects the substantial consolidation policies pursued by the government following the crisis. Scope views the government’s commitment to maintaining this strong fiscal trajectory positively as high public debt levels remain a key credit constraint for the country. The Cypriot public debt amounted to 98% of GDP in Q3/19, which, on top of private debt equivalent to 261% of GDP, leaves the economy vulnerable to shocks.
Scope expects the country to continue posting strong primary surpluses in view of current budgetary plans, which should result in a significant deleveraging of the public sector, with public debt-to-GDP ratio estimated to drop to around 65% of GDP by 2024, the strongest reduction among euro area countries. However, the fiscal outlook for Cyprus – a small, open economy – faces multiple downside risks that could slow the pace of consolidation, namely the contingent liabilities stemming from the banking sector present a considerable risk to public finances. The government’s commitment to cover any deficits arising from the newly-installed General Health System could result in some fiscal slippage. (FM 18.02)
7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Ben & Jerry’s Whips Up Enthusiasm Over Its Upcoming Purim Costume Contest
Ben and Jerry’s Israel’s upcoming Purim costume contest is getting noticed. Celebrated this year in on 10/11 March, Purim is one of the most joyous and fun holidays on the Jewish calendar. It commemorates a time when the Jewish people living in Persia were saved from extermination. Jews are also commanded to eat, drink and be merry on that day, while many (mostly children) dress in various festive costumes.
Ben and Jerry’s recently posted photos of previous years’ costume contest participants on its Instagram account and urged dessert lovers to prepare for this year’s competition. Many dressed as pints of Ben & Jerry’s ice cream. Ben & Jerry’s Purim costume contest winner will get the prize: a half-year supply of Ben & Jerry’s. The contest details will be posted soon, the ice cream company promised. Ben and Jerry’s has been made in Israel since 1989. (JP 18.02)
*REGIONAL:
7.2 Egypt’s Population Surpasses 100 Million People
At 14:30 on 11 February, Egypt’s population passed 100,000,000, according to the Central Agency for Public Mobilisation and Statistics (CAPMAS). CAPMAS Chairperson Barakat said that 201 people were born every hour in 2019, which is 2.9% lower than the average rate in 2018. However, the decrease is not as hoped or expected, he said. Egypt is currently the largest Arab country in population, the third in Africa, and the 14th globally. Cairo is the fastest growing governorate in 2019, Giza is the second most, while Assuit comes as the slowest.
Khairat explained that if Egypt continues with such a population increase, the Egyptian population will reach 192,000,000 by 2052. The current birth rate is 3.4 children per woman, and governmental efforts seek to reduce it to 2.1 by 2052. Cairo is currently working on reducing the population growth through educating women and doing away mainstream misconceptions, especially in rural areas. (DNE 12.02)
8: ISRAEL LIFE SCIENCE NEWS
8.1 Nanox Agreement with USARAD to Deploy 3,000 Nanox Systems in the U.S.
Nano-X Imaging (Nanox) announced its partnership with Siemens Healthineers-backed USARAD, of Fort Lauderdale, Florida, which leverages a radiology marketplace platform to offer radiology services by over 300 board certified radiologists to over 500 medical facilities in all 50 U.S. states and 15 countries. As part of the agreement, USARAD will utilize existing radiologists and recruit additional professionals to become service providers using the Nanox.ARC and the Nanox.CLOUD for imaging diagnostics. The companies will collaborate on the deployment of 3,000 Nanox Systems in the U.S., under Nanox’s MSaaS (Medical Screening as a Service) pay-per-scan business model, which the Company expects will make medical imaging more accessible to patients at affordable costs.
The Nanox System is composed of the Nanox.ARC, a medical imaging system incorporating a novel digital X-ray source, and the Nanox.CLOUD, a companion cloud-based software that is designed to provide an end-to-end medical imaging service expected to include image repository, radiologist matching, online and offline diagnostics review and annotation, connectivity to diagnostic assistive artificial intelligence systems, billing and reporting.
Neve Ilan’s Nanox is an Israeli corporation that is developing a commercial-grade digital X-ray source designed to be used in real-world medical imaging applications. Nanox believes that its novel technology could significantly reduce the costs of medical imaging systems and plans to seek collaborations with world-leading healthcare organizations and companies, to provide affordable, early detection imaging service for all. (Nanox 06.02)
8.2 NeuroSense Receives Orphan Drug Designation for Amyotrophic Lateral Sclerosis (ALS) Drug
NeuroSense Therapeutics announced the initiation of two clinical studies to evaluate the benefit of PrimeC for ALS patients. A Phase IIa study is being conducted in Israel at Tel-Aviv Sourasky Medical Center (TASMC). A similar study is being conducted in the USA at two sites: BNI (The Barrow Neurological Institute) in Phoenix Arizona and Columbia University in NYC. The studies plan to enroll 45 patients, 15 at each site. In addition to safety and tolerability, the company will evaluate the drug’s efficacy and ability to slow disease progression and to improve quality of life.
PrimeC targets two fundamental mechanisms underlying the pathogenesis of ALS. The two clinical studies were initiated following exceptional results PrimeC achieved in pre-clinical models of ALS. In these studies, conducted on two different zebra-fish models, each with a different ALS-causing mutation, the transgenic fish were treated either with PrimeC or left untreated. The swimming abilities of the PrimeC treated ALS fish increased drastically compared to the controls, and significantly more than with any other compound previously tested in these models. Furthermore, the analysis of motor neurons, neuromuscular junctions and aspects of the immune system in the ALS treated fish, indicated that PrimeC is neuroprotective.
NeuroSense has recently received an orphan drug designation from the FDA for the use of PrimeC to treat ALS. The designation grants PrimeC seven years of market exclusivity in the US.
Herzliya’s NeuroSense Therapeutics is a drug development company founded in 2016, developing ground-breaking treatment for ALS patients, as well as for patients suffering from other neurodegenerative diseases. The rationale behind the novel pathological targets of NeuroSense’s drug, PrimeC, is supported by world renowned ALS experts and global Key Opinion Leaders. In pre-clinical studies, PrimeC showed outstanding results, significantly superior to any other outcome seen in this model before. (NeuroSense 06.02)
8.3 Breakthrough Device Designation Received From the FDA for EndoArt®
Ness Ziona’s EyeYon Medical is a start-up company developing a variety of ophthalmic products for vision-threatening conditions. EyeYon’s new product, now on an accelerated path as a Breakthrough Device, is an Artificial Endothelial Layer – EndoArt® – a polymer film implant, attached to the posterior corneal surface, to treat chronic corneal edema secondary to endothelial dysfunction. A nonfunctioning endothelium results in corneal homeostasis loss due to excess fluid flowing into the cornea, resulting in severe vision loss. The minimally invasive, suture-free EndoArt® is designed to replace dysfunctional endothelium in those patients where human donor tissue, which is the current standard of care, has failed to resolve the edema. Both preclinical and early human clinical studies have demonstrated a significant reduction in edema in affected eyes.
The goal of the Breakthrough Devices Program is to provide patients and healthcare providers with timely access to important breakthrough medical devices by accelerating their development, assessment, and review, while preserving the statutory standards for approval. (EyeYon Medical 05.02)
8.4 Researchers at Ben-Gurion University Introduce Platform for the Design of New Antibiotics
BGN Technologies, the technology transfer company of Ben-Gurion University of the Negev, introduced a novel method developed by researchers at Ben-Gurion University for screening and detecting new antibiotics. The technology combines empirical screening of small molecular fragments that bind the PTC using Nuclear Magnetic Resonance (NMR), with machine learning algorithms that enable the computational design of novel drugs based on the small molecular fragments. The researchers screened a collection of 1000 molecule fragments to find a subset that binds the PTC RNA. Then, using the characteristics of the fragment subset and computational methods they screened a library of 230 million molecules in order to select larger molecules that contain these fragments and are still predicted to bind the PTC and inhibit ribosome function. Two molecules were eventually identified and their ability to inhibit ribosome function was experimentally validated.
BGN Technologies is the technology company of Ben-Gurion University, Israel. The company brings technological innovations from the lab to the market and fosters research collaborations and entrepreneurship among researchers and students. To date, BGN Technologies has established over 100 startup companies in the fields of biotech, hi-tech, and cleantech as well as initiating leading technology hubs, incubators, and accelerators. (BGN Technologies 10.02)
8.5 Cannabics & RCKMC Develop Cannabis Targeting Gastrointestinal Cancers
Cannabics Pharmaceuticals signed a Memorandum of Understanding with RCK Medical Cannabis to develop cannabis chemovars targeted to treat gastro intestinal cancers. RCKMC is focused on breeding stable cannabis hybrid-seeds, tailor-made cannabis strains and genetic research, and a provider of a host of technologies, expertise and know-how throughout the entire medical cannabis grow cycle. Cannabics and RCKMC plan to develop cannabis chemovars with cannabinoid profiles previously found to have antitumor properties in preclinical studies on Gastrointestinal cancers. These strains of the cannabis will be the source genetics for the development of botanically derived active pharmaceutical ingredients (API’s).
Shaar HaNegev’s RCK is breeding tailor-made medical strains and repeatable & stable cannabis hybrid-seeds, being the first company to operate a methodological marker-assisted-breeding of cannabis, having cutting-edge proprietary technologies and led by professional team. RCKMC opens the gate to a new era of cannabis agriculture.
Cannabics Pharmaceuticals is a U.S. public company that 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 11.02)
8.6 Intuitive Acquires Orpheus Medical to Expand Informatics Platform for Hospitals
Sunnyvale, California’s Intuitive, a global technology leader in minimally invasive care and the pioneer of robotic-assisted surgery, announced it has acquired privately held Haifa based Orpheus Medical to deepen and expand its integrated informatics platform. Orpheus Medical provides hospitals with information technology connectivity, as well as expertise in processing and archiving surgical video.
Orpheus develops and distributes its clinical video management and analytics platform, which hospitals use across surgical disciplines. The platform offers the ability to capture and share clinical video and imaging from many sources, which may help improve physician and OR care team workflow and enable analysis of their interventions. Orpheus will be a wholly owned subsidiary of Intuitive. Terms of the acquisition were not disclosed. (Intuitive Surgical 10.02)
8.7 MDClone Expands to Canada
MDClone and The Ottawa Hospital jointly announced a collaboration to unlock healthcare data to define 21st century data driven decision making in service of those outcomes. This marks the third country that MDClone operates in, after the United States and Israel.
MDClone’s platform democratizes data across the healthcare ecosystem, making it easier for healthcare professionals and researchers to identify and leverage the potentially lifesaving data within them into actionable information that can transform patient care and outcomes. The innovation behind MDClone’s technology lies in its flexible yet powerful infrastructure. All patient data become events on individual timelines. The platform then seamlessly connects data points across many patients and many sources, which helps healthcare professionals gain more meaningful insights that will define 21st century healthcare.
Additionally, the platform can gather, use and share the insights while fully protecting patient privacy. MDClone’s technology can create a synthetic data set from health system data that is statistically comparable to the original but contains no actual patient information. With MDClone, The Ottawa Hospital healthcare professionals and researchers can analyze data and discover new healthcare breakthroughs without compromising patient privacy.
Beer Sheva’s MDClone democratizes data, empowering exploration, discovery and collaboration to improve patients’ health. With MDClone, any user can ask and answer any question in real time. This dramatic paradigm shift is made possible by MDClone’s unique technology for organizing, accessing and protecting the privacy of patient data, enabling healthcare knowledge workers to turn ideas into actionable insights in rapid cycles. (MDClone 14.02)
8.8 Teva Generic Medicines Saved US Healthcare System $41.9 Billion
Teva Pharmaceutical Industries released a new economic impact report detailing the billions of dollars saved by Teva’s generic medicines and the company’s impact on the US and global economies in 2018. Teva’s US Economic Impact Report, based on an independent analysis by economic policy experts at Matrix Global Advisors (MGA), shows Teva saved the US healthcare system $41.9 billion in 2018 – of an estimated $292.6 billion saved by generic medicines overall. The report also captures Teva’s broader impact on the US economy in 2018, including supporting more than 57,000 jobs, contributing $15 billion to GDP and generating $4.8 billion in labor income.
Generic medicines drive access to quality treatments and support the sustainability of healthcare systems across the globe. These findings are part of the larger analysis MGA conducted, which finds Teva generic medicines saved more than $54.6 billion across healthcare systems around the world in 2018. MGA also finds Teva’s economic activity in 2018 supported 229,000 jobs, contributed $50.7 billion to GDP and generated $10.0 billion in labor income across 19 countries, including the US.
Israel’s Teva Pharmaceutical Industries has been developing and producing medicines to improve people’s lives for more than a century. They are a global leader in generic and specialty medicines with a portfolio consisting of over 3,500 products in nearly every therapeutic area. Around 200 million people around the world take a Teva medicine every day, and are served by one of the largest and most complex supply chains in the pharmaceutical industry. (Teva 12.02)
8.9 Isotopia Molecular Imaging and Eckert & Ziegler Partner for Prostate Cancer Imaging
Isotopia Molecular Imaging has entered into a development partnership with Eckert & Ziegler for the development of its PSMA-11-Kit for prostate cancer imaging. Eckert & Ziegler (E&Z), is a Berlin-based company specializing in isotope technology for medical, scientific and industrial applications. Under the terms of the agreement, E&Z and Isotopia will partner to finalize the development of Isotopia’s 68Ga-HBED-CC-PSMA (68Ga-PSMA-11) kit (Kit), a technology for imaging and staging of prostate cancer. The agreement includes the collaboration to make operation of the Kit feasible on E&Z´s KitLab, having E&Z´s GalliaPharm® (68Ge/68Ga generator) in the Drug Master File (DMF) of the Kit, and completion of the necessary steps to obtain marketing authorization in the EU.
PSMA-11 is a small molecule that binds to prostate-specific membrane antigen (PSMA), a well-validated target that is highly expressed in both localized and metastatic prostate cancer. PSMA-11 radiolabeled with 68Ga (gallium) is a convenient and clinically efficient approach to imaging prostate cancer with Positron Emission Tomography (PET).
Petah Tikva’s Isotopia Molecular Imaging is a collaboration between The Metrontario Group and some of Israel’s leading scientists in the field of radiopharmaceuticals. The Isotopia development team is a multidisciplinary team consisting of nuclear pharmacists, radiochemists, nuclear engineers and physicists. The experienced Isotopia team, together with its radio-nuclear pharmacy, cyclotron facility, Lu177 production site and sterile manufacturing, are a well-established platform for development. Isotopia creates collaborations between the scientific and medical community to further develop and experiment with new markers for imaging applications and molecular therapy. (Isotopia Molecular Imaging 13.02)
8.10 Else Nutrition Signs Production MOU with a Leading U.S. Organic Baby Formula Producer
Else Nutrition Holdings announced that it has signed a 5-year production Memorandum of Understanding (MOU) with a leading U.S. based organic baby formula producer. Else Nutrition plans to produce its proprietary powder for infant, toddler formula and children’s nutritional drinks at a new, state-of-the-art, infant nutrition facility. Else Nutrition will invest approximately $500,000 for a dedicated packaging and manufacturing line for its products. Else Nutrition and the Manufacturing Partner expect to complete and sign a definitive production agreement in Q1/20. Else Nutrition’s first products: plant-based, non-dairy, non-soy toddler formula and children’s nutritional drinks, are expected to launch in the U.S. in Q2/20.
Tel Aviv’s Else Nutrition is a food and nutrition company focused on research, development, manufacturing, marketing, sale and/or license of innovative plant-based food and nutrition products for the infant, toddler, children and adult markets. Its revolutionary 100% plant-based non-soy alternative to dairy-based baby formula received the “Best Health and Diet Solutions” award in the Global Food Innovation Summit in Milan in May 2017. (Else Nutrition 04.02)
8.11 Biobeat Wearable Wristwatch and Patch Receive CE Mark Approval
Biobeat received CE Mark approval for its patch and wristwatch for measurement of blood pressure, cardiac output, stroke volume, blood oxygenation and heart rate in hospitals, clinics, long-term care and at home. Biobeat’s products enable cloud-based healthcare with connectivity either through a smartphone or a dedicated gateway. The Biobeat smartwatch and patch connect to the cloud through either a smartphone or a dedicated gateway. Each device is intended for use in different use cases, where the user must wear only one of the two devices. The watch is to be worn on the wrist while the patch is to be placed anywhere on the upper torso.
Petah Tikva’s Biobeat is a revenue-stage company located in Israel. The company employs 15 employees and has initiated sales in Israel and Europe. Biobeat’s sensors are based on the company’s exceptional proprietary technologies in the field of reflective Plethysmography (PPG), developed by a team of world-renowned experts in this arena. The company is focusing on wireless medical-grade products that allow health providers to care as efficiently for patients outside of their facility as on-site. (Biobeat 18.02)
8.12 CollPlant Biotechnologies Raising $4.45 Million in U.S. Private Placement
CollPlant has entered into definitive agreements for up to $4.45 million. The capital raise is by way of a non-brokered private placement with U.S. accredited investors who have many years of deep experience in medical and 3D printing. In connection with the offering, the Company will issue 445,000 American Depositary Shares (ADSs) of the Company at a price of $10.00 per ADS. The transaction does not include any warrants. The closing of the offering is expected to take place within seven business days, subject to the satisfaction of customary closing conditions.
Rehovot’s CollPlant is a regenerative and aesthetic medicine company focused on 3D bioprinting of tissues and organs, and medical aesthetics. Our products are based on our rhCollagen (recombinant human collagen) that is produced with CollPlant’s proprietary plant based genetic engineering technology. Their products address indications for the diverse fields of organ and tissue repair, and are ushering in a new era in regenerative medicine. (CollPlant 14.02)
8.13 Else Nutrition Launches Plant-Based Toddler Formula
Else Nutrition is launching its first commercial product this spring in the U.S. – following nearly seven years of research and development. It’s a next-generation, 100% plant-based, organic toddler formula made with a proprietary formulation of almonds, buckwheat and tapioca. The globally-patented formula tastes great, contains zero dairy or soy, and is free of gluten, hormones, antibiotics, palm oil, and corn syrups. The startup, founded by infant nutrition veterans, fills a market gap, with a plant-based toddler formula (for ages 12-36 months) made with clean, whole ingredients from whole foods. The simple-to-use powdered formula is the first in a planned line of whole-meal nutrition products from Else for children of ages ranging from infant to teens.
For nearly 120 years, the infant and toddler formula markets have been based on dairy and soy protein sources. Else prides itself on offering a real alternative. Else formula provides complete nutrition made from simple ingredients and a clean process. Else is plant-based, sustainable, organic, and vegan. The toddler formula offers a full amino acid profile, and is a clean non-GMO source of protein, fully meeting the strictest regulatory requirements. Else’s ‘beyond organic’ disruptive manufacturing processes, include the transformation of whole plants, without using highly-processed extracts or derivatives, chemicals or high-fructose corn syrup. Else’s toddler formula will be sold initially in powder form, ready to drink in just second, with official sales beginning later in Q2/20.
Tel Aviv’s Else Nutrition is an Israel-based food and nutrition company focused on developing innovative, clean and plant-based food and nutrition products for infants, toddlers, children, and adults. Its revolutionary, 100% plant-based, non-soy, formula is a clean-ingredient alternative to dairy-based formula. Else Nutrition won the “2017 Best Health and Diet Solutions” award at the Global Food Innovation Summit in Milan. (Else 17.02)
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 TransEurope Marinas Announces Partnership With Marina Tech Innovator Pick a Pier
TransEurope Marinas and Pick a Pier will be working to create the new industry standard for marina customer service in the digital era. The partnership brings together TransEurope Marinas, Europe’s most extensive marina group, and Israel’s Pick a Pier. Pick a Pier is providing a digital platform to support TransEurope’s cross-border membership network that will simplify processes for marinas and for customers. The platform will optimize berth supply management and inspire more boaters to get out on the water and discover new destinations. Pick a Pier’s patent-pending platform takes a sustainability approach to industry growth while raising the standard of marina innovation and services.
Tel Aviv’s Pick a Pier utilizes Machine Learning and Artificial Intelligence to design the technological future of marinas. Pick a Pier promotes sustainable sailing, maritime tourism and innovative new strategies to increase the profitability and environmental practices of the marina industry. (Pick A Pier 06.02)
9.2 Elbit Systems Awarded $43 Million Contract to Equip Korean Fighters With TF/TA Systems
Elbit Systems was awarded a $43 million contract from Hanwha Systems Co. to equip the Next Generation Korean fighter jets in development, with embedded Terrain Following-Terrain Avoidance (TF/TA) systems. The contract will be performed over a six-year period. Embedding Elbit Systems’ TF/TA solution enables fighter jets to fly and maneuver safely at low-altitudes, in zero visibility and harsh weather conditions (Instrument Meteorological Conditions), thereby enhancing their capability to operate undetected in hostile territory. Interfacing with the autopilot system, the TF/TA system to be supplied fuses data from a range of onboard sensors and a digital terrain elevation data base, together with flight performance characteristics, enabling the aircraft to maintain optimal altitude throughout the mission.
Haifa’s Elbit Systems is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land, and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance, unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems and munitions. The Company also focuses on the upgrading of existing platforms, developing new technologies for defense, homeland security and commercial applications and providing a range of support services, including training and simulation systems. (Elbit Systems 06.02)
9.3 Tier 1 South African Bank Goes Live With Sapiens P&C Suite
Sapiens International Corporation announced that a tier-1 South African bank has launched Sapiens IDITSuite for Property & Casualty to become a more comprehensive and integrated financial services provider. Sapiens IDITSuite for Property & Casualty was originally selected due to the excellent cultural fit between the organizations, highlighted by the shared values of customer-centricity and fast delivery, as well as the suite’s ability to meet the technical and functional requirements. The implementation was completed within ten months. Sapiens’ head office in South Africa was instrumental in providing support to the bank during the implementation process. The bank had previously gone live with Sapiens CoreSuite for Life & Pension,
Sapiens IDITSuite for Property & Casualty is a component-based, standalone software solution comprised of policy, billing and claims solutions. This pre-integrated, fully digital offering was designed with growth and change in mind and offers a flexible, user-friendly workflow interface.
Holon’s Sapiens International Corporation empowers insurers to succeed in an evolving industry. The company offers digital software platforms, solutions and services for the property and casualty, life, pension and annuity, reinsurance, financial and compliance, workers’ compensation and financial markets. With more than 35 years of experience delivering to over 500 organizations globally, Sapiens has a proven ability to satisfy customers’ core, data and digital requirements. (Sapiens 10.02)
9.4 Elbit Wins Contracts Worth $136 Million to Supply Laser DIRCM Systems in Asia-Pacific
Elbit Systems was awarded contracts worth approximately $136 million to provide customers in Asia-Pacific with airborne laser Direct Infra-Red Counter Measure (DIRCM) systems. The contracts will be performed over a four-year period. Under the contracts, Elbit Systems will equip fleets of Airbus and Boeing aircraft with DIRCM systems from the MUSIC family, including the Company’s infra-red missile warning systems. These contract awards follow recent awards to install DIRCM systems onboard Airbus A400 aircraft of the German Air Force and onboard NATO’s Airbus A330 Multinational Multi-Role Tanker Transport (MRTT) fleet.
Haifa’s Elbit Systems is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land, and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance, unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems and munitions. (Elbit Systems 10.02)
9.5 Innoviz Technologies Selected for Autonomous Truck Project at Chinese Port
Innoviz Technologies announced cooperation with Shaanxi Heavy Duty Automobile Co. in Xi’an, China to deploy autonomous trucks for an upcoming project in one of the biggest ports in China. Shaanxi Heavy Duty Automobile Co., better known as Shacman Trucks outside China, is one of the largest truck manufacturers in China. Shaanxi consists of four truck companies, delivering over 150,000 new trucks worldwide each year, including 10,000 trucks per year for the mining sector. The company is also one of the leaders in China in the field of autonomous driving research and development.
At the first stage of the project, InnovizPro LiDAR is being utilized in Shaanxi Truck’s autonomous proof of concept project at the Chinese port, with Shaanxi’s ultimate goal being the deployment of up to 600 trucks at this site. The Innoviz LiDAR used in this proof of concept project provides sensing, mapping and location functions for autonomous driving at speeds of under 30 kilometers per hour in the harbor area. The LiDAR is used to create detailed maps, as well as provide software to compare the point cloud image created by the LiDAR in real time to the location provided via preloaded maps generated by LiDAR. This includes real-time identification of “free space” or “drivable space”, as well as object detection. Chinese legislation stipulates that by May 2020, all trucks are required to have at least two Advanced Driving Assistance Systems (ADAS): a mandatory camera and either a radar or LiDAR system.
Rosh HaAyin’s Innoviz is a leading manufacturer of high-performance, solid-state LiDAR sensors and perception software that brings vision to the automotive, drone, robotics, mapping and other industries. Innoviz’s offerings include InnovizOne, for automotive-grade applications, InnovizPro, which brings vision to various industries, and its perception software, designed to complement the hardware offerings with advanced AI and machine learning-based classification, detection and tracking features. (Innoviz Technologies 12.02)
9.6 New Self-learning Algorithm “Facio” Immunizes Against Insurance Disruptors
Facio released its self-learning algorithm metrics which outperform any other technology that calculates insurance. More than 100 insurance carriers have engaged with Facio, an insurance BigData start-up, aiming to beat Lemonade’s artificial intelligence technology, recently evaluated at $2 billion. Lemonade states it collects 100 times more data than traditional carriers, enabling the company to generate highly predictive data and improve its underwriting and pricing.
To put the numbers in perspective, consider that average traditional insurance carriers have about 900 policies per employee. Lemonade breaks the numbers with more than 2,500 policies per employee. Insurers have been using BigData and AI for years, implementing operation automation and predictions designed by software developers and data scientists in concert with knowledgeable human actuaries and underwriters. Yet, the numbers are far away from Lemonade’s efficiency.
Like Google AlphaZero’s self-learning algorithm, with no domain knowledge except for the business rules and the insurance carrier’s historical data, such as policies, claims, and any available data, Facio algorithm achieved tabula rasa, and in less than an hour, a superhuman performance level of insurance predictive capabilities and convincingly underwritten insurance policies, far better than any model or method being used to date.
While investors’ $480 million boosted Lemonade’s innovative technology, in one insurance company, Ramat Gan’s Facio offers more than 40,000 carriers an end-to-end insurance SaaS starting at $1 per policy. Take State Farm’s 83 million policies and more than $20 Billion annual expenditure on underwriting and policy management operations, for example, as by 2021 Facio algorithm may allow State Farm to offer its customers smart insurance products, while cutting expenses by more than 90%, which can be used for lowering premiums, giving back to the community or other opportunities. (Facio 11.02)
9.7 PenTera Selected by the Israel Electric Corporation to Validate its Cyber Security Controls
Pcysys announced that the Israel Electric Corporation has chosen PenTera, the company’s Automated Penetration Testing platform, to automate its cyber security validation efforts. The PenTera platform scans and ethically penetrates the network with the latest hacking techniques, prioritizing remediation efforts with a business impact perspective. With PenTera, organizations can maintain the highest resilience posture by performing penetration tests on-demand in alignment with the MITRE ATT&CK framework. The PenTera platform covers the scope of what is nowadays managed by several separate tools, including vulnerability assessment, security control validation, credential strength validation, segmentation integrity, sensitive data hygiene, network equipment testing and privileged access audits.
Petah Tikva’s Pcysys delivers PenTera, an automated penetration-testing platform, which assesses and reduces corporate cybersecurity risk. By applying the hacker’s perspective, the software identifies, analyzes and prioritizes remediation of cyber defense vulnerabilities. Hundreds of security professionals and service providers around the world use PenTera to perform continuous machine-based penetration tests that improve their immunity against cyber attacks across their organization networks. (Pcysys 11.02)
9.8 Perception Point Launches Advanced Protection for Salesforce
Perception Point announced its newest product – Advanced Salesforce Security – which will be added to its multi-channel advanced threat prevention offering. The increase in enterprise communication and collaboration (EC&C) apps, among them CRM apps like Salesforce, has caught the attention of sophisticated attackers who are continuously seeking new ways to obtain sensitive information and financial gains. According to a survey conducted by Perception Point in 2018, two out of three companies experienced an EC&C-born attack. Leveraging techniques such as impersonation, phishing, malware, and even APTs, which were previously common only in the email domain, attackers are able to bypass existing security measures, causing severe damage to their targets. Perception Point has developed a one-of-a-kind solution that intercepts any attempt to attack an organization via Salesforce.
Tel Aviv’s Perception Point is powered by several decades’ experience successfully developing and implementing innovative cybersecurity solutions for organizations worldwide. With its proven R&D leadership formerly playing key roles within the elite Israeli Intelligence Corps, Perception Point is committed to building agile cybersecurity solutions for the digital-first enterprise, with a mission to protect all content exchanges across the enterprise, through any channel, with one extremely easy to deploy cloud solution. (Perception Point 12.02)
9.9 CyberArk Delivers Blueprint for Privileged Access Management Success
CyberArk announced the CyberArk Blueprint for Privileged Access Management Success. The most comprehensive program of its kind, CyberArk Blueprint is designed to help customers take a future-proof, phased and measurable approach to reducing privilege-related risk. Based on the experience of the CyberArk Labs, Red Team and incident response engagements, nearly every targeted attack follows a similar pattern of privileged credential compromise. Those patterns influenced CyberArk Blueprint’s three guiding principles, which are foundational to the program: prevent credential theft; stop lateral and vertical movement; and limit privilege escalation and abuse.
The CyberArk Blueprint uses a simple, prescriptive approach based on these guiding principles to reduce risk across five stages of privileged access management maturity. Customers adopting cloud, migrating to SaaS, leveraging DevOps and automating with RPA benefit from being able to prioritize quick wins, progressively address advanced use cases, and align security controls to digital transformation efforts across hybrid environments. CyberArk Blueprint offers templates and custom roadmap design sessions so organizations of all sizes, including those in both regulated and non-regulated industries, can progressively expand privileged access controls and strategy.
Petah Tikva’s CyberArk is the global leader in privileged access management, a critical layer of IT security to protect data, infrastructure and assets across cloud and hybrid environments and throughout the DevOps pipeline. CyberArk delivers the industry’s most complete solution to reduce risk created by privileged credentials and secrets. (CyberArk 13.02)
9.10 Ethernity Networks and TietoEVRY to Boost 5G Performance with UPF/VPP Acceleration
Ethernity Networks and Finland’s TietoEVRY, a leading digital services and software company, announced that they are jointly offering an open source concept based on VPP for 5G User Plane Functionality (UPF) to accelerate 5G packet processing at the network edge, where high bandwidth and low latency are of key importance. TietoEVRY has developed UPF software components for packet processing and control that makes use of the Virtual Packet Processing (VPP) open source project to enable high flexibility in 5G networking. By offloading the data plane to Ethernity’s FPGA-based ACE-NIC100 SmartNIC, the integrated offering provides extremely high bandwidth and low latency while saving CPU cores. The integration uses industry-standard Data Plane Development Kit (DPDK) APIs to offload VPP/UPF to the ACE-NIC100.
The concept and joint offering follows the trend of network disaggregation, in which service providers are seeking to complement and enhance their 5G networks by deploying Open UPF, in combination with edge connectivity. Several carriers and vendors have already decided to move their UPF to the edge, usually by choosing FPGA SmartNICs for acceleration. With the ACE-NIC100’s small footprint and low power dissipation, the integrated reference software from Ethernity and TietoEVRY is truly optimized for edge deployment, being fully containerized and using the VPP data plane. This allows service providers to boost performance, reduce networking overhead, and lower Total Cost of Ownership, as well as collocate the UPF with other services.
Lod’s Ethernity Networks provides innovative, comprehensive networking and security solutions on programmable hardware for accelerating telco/cloud networks. Ethernity’s FPGA logic offers complete Carrier Ethernet Switch Router data plane processing and control software with a rich set of networking features, robust security, and a wide range of virtual function accelerations to optimize telecommunications networks. Ethernity’s complete solutions quickly adapt to customers’ changing needs, improving time-to-market and facilitating the deployment of 5G, edge computing and NFV. (Ethernity Networks 13.02)
9.11 Waterfall Security Solutions & Cylus Strengthen Cybersecurity for Rail Systems
Waterfall Security Solutions and Cylus announced a partnership providing a joint security solution for rail signaling and rolling stock systems, ensuring that safety-critical rail network infrastructure is inaccessible to hackers. The optimized security solution integrates Waterfall’s Unidirectional Security Gateways with the CylusOne continuous monitoring solution, eliminating operational network blind spots without adding risk to railway system operations.
Waterfall’s reliable, ruggedized gateways replace firewalls in industrial network environments. By ensuring unidirectional data flows from operational technology (OT) to information technology (IT) networks, Unidirectional Gateways guarantee control networks’ highest Safety Integrity Level, blocking attacks originating in external networks. Integrated with Cylus’ vendor-agnostic rail cybersecurity solution, the joint offering allows rail operators to continuously monitor safety-critical networks, providing visibility, threat detection and response as well as a secure flow of information through Waterfall’s security hardware.
CylusOne is the first cybersecurity solution designed specifically for rail and metro environments. Utilizing deep packet inspection, CylusOne monitors the dataflow within specific safety-critical rail network protocols. The joint solution allows rail operators to safely and reliably eliminate blind spots, reveal asset connections, uncover safety requirement breaches, and diagnose impending service availability issues, all while reducing exposure to external cyber-attacks. Together, Waterfall and Cylus deliver safe IT/OT integration with deep, enterprise-wide IT and OT network monitoring and intrusion detection to protect rail equipment and service availability.
Tel Aviv’s Cylus, the global leader in rail cybersecurity, helps mainline and urban railway companies avoid safety incidents and service disruptions caused by cyber-attacks. CylusOne is the first-to-market solution designed to meet the unique cybersecurity needs of the rail industry. CylusOne detects cyber threats on signaling and control networks, trackside and onboard, facilitating a timely and effective response. Led by veterans from the Israel Defense Forces’ Elite Technological Unit together with top executives from the railway industry, Cylus combines deep expertise in cybersecurity and rail.
Waterfall Security Solutions is the OT security company, producing a family of Unidirectional Gateway technologies and products that enable safe IT/OT integration, enterprise-wide visibility into operations, and disciplined control. The company’s growing list of customers includes national infrastructures, power plants, nuclear plants, off-shore and on-shore oil and gas facilities, manufacturing plants, power, gas and water utilities, and many more. (Waterfall 18.02)
9.12 AudioDots Automatic Text-to-Speech Solution Turns Print Publications into Mobile Audio
AudioDots is a game-changing text-to-speech solution that instantly and seamlessly turns any story on any website into an engaging digital audio experience. Once publishers add the AudioDots widget to their website, the solution automatically translates text-based news items into audio streams and adds them to a constantly updated audio reel. At the same time, a “Read for me” button will be added to each story header in the mobile browser, enabling users to instantly switch to audio mode. For users, the result is an easy way to stay in touch with the latest news and opinions, right from their mobile devices, anytime and everywhere – while driving, cooking, or walking. For online publishers, this is a game-changer.
As audio listeners remain engaged three times longer than readers, AudioDots offers publishers a compelling new space in which to sell adverts, be it pre-roll, mid-roll, or post-roll ad spots. Advertisers themselves stand to benefit just as much as publishers and readers. The sheer amount of textual content produced every day makes this an enormous latent market for advertisers. Textual publications still inspire strong brand loyalty, and they represent excellent opportunities for precise market segmentation. Advertisers who have been looking for new inroads to niche markets and huge audiences alike will benefit enormously from AudioDots.
Israel’s 9dots Media is a client-driven, transparent, results-oriented technology company that harnesses the power of artificial intelligence to increase advertising revenue and grow readership for publishers of online content. (9Dots Media 18.02)
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel’s Budget Deficit Narrows Sharply After January Surplus
The Ministry of Finance announced that Israel’s budget deficit over the past 12 months has fallen steeply from 3.8% at the end of December 2019 to 3.2% at the end of January 2020. The sharp decline was due to a budget surplus of NIS 5.9 billion in January 2020, which has been attributed to a temporary budget due to the transition government, which restricts a rise in the budget over January 2019, and government revenues during the month. In January, government expenditure totaled NIS 27.7 billion, while government revenues of NIS 33.6 billion were higher than expected. (MoF 05.02)
10.2 Housing Sales in Israel Hit a 4 Year High
The Ministry of Finance announced that the number of real estate deals in December 2019 was the highest since June 2015 and the third highest monthly total in the past decade. December, which featured an especially large number of homes sold under the Buyer Fixed Price Plan, made 2019 the year with the fourth most home purchases in the past decade.
2019 was a good year for real estate developers, with 32% of all deals involving new homes. Almost half of these new home deals were under the Buyer Fixed Price Plan. The Ministry of Finance chief economist found that the developers’ potential cash flow (proceeds from the homes sold) in the last months of 2019 is closed to the record in May-June 2015 – a figure that goes far in explaining the optimistic periodic reports recently published by listed real estate companies.
2019 was the year of young people, who dominated the market, accounting for 51% of all deals, compared with 40% in ordinary years. Young buyers flocked to purchase new homes under the Buyer Fixed Price Plan, and many who did not win discounted homes under the plan found homes in discount projects on the open market. The result was a poor secondhand housing market that created difficulties for move-up buyers, whose proportion of the overall housing market fell from 40% to 36%. Young people purchased 6,000 homes in December, two thirds of which were on the open market, despite the intensive pace of Buyer Fixed Price Plan deals, which accounted for 28% of all deals, indicating that housing purchases among this population segment were also intensive on the open market in 2019. (Globes 11.02)
10.3 Low-Cost Carriers Increase Market Share at Ben Gurion Airport
The Israel Airport Authority announced that low-cost airlines continued to increase their market share of passengers on international flights to and from Israel at Ben Gurion Airport in January 2020. The number of passengers flown by low-cost airline Ryanair in January totaled 96,500, 128% more than in January 2019. Wizz Air flew 101,000 passengers, 11% more than in the corresponding month last year, and easyJet, the longest operating low-cost airline in Israel, flew 104,500 passengers.
Although January is usually a weak month for tourism, the three leading foreign low-cost airlines jointly accounted for 20% of passenger traffic in January. El Al’s passenger traffic totaled 377,000 in January, 6% more than in January 2019. Low cost airlines and El Al were not the only ones to post gains in January. Turkish Airlines had the fifth most passengers in January, 85,600, and 18% more than in January 2019, followed by United Airlines with 60,000 passengers – 23% more than in January 2019. Israir achieved particularly impressive results: 41,200 passengers, 97% more than in January last year, but Arkia Airlines’ passenger traffic declined 9% to 17,600.
Passenger traffic in January totaled 1.58 million, 10.3% more than in the same month last year. The Israeli airlines had 27.5% of this total: 24% for El Al, 2.6% for Israir, and 1.01% for Arkia.
The leading country from Ben Gurion Airport was Turkey, which was mostly as a stopover for connecting flights. The second most popular destination was the US, with 20% more passengers from Ben Gurion Airport landing there than in January 2019. The US was followed by France, Germany and the UK, where the number of people landing from Ben Gurion Airport grew by 15% in comparison with January last year. Passenger traffic on flights from Ben Gurion Airport to Ramon Airport near Eilat has totaled 74,000 passengers on 1,032 flights since flights were transferred to Ben Gurion Airport after Sde Dov Airport was closed down in July 2019. Arkia accounted for 76.8% of this traffic, and Israir for the rest. (Globes 05.02)
11: IN DEPTH
11.1 LEBANON: Crisis Exits Still Possible, Should the Will to Reform be There
The Group Research Department at Bank Audi released an overview of the current economic situation in Lebanon:
Economy moving to recessionary mode
Lebanon’s economy has moved into a recessionary mode, with net contractions across a number of sectors of economic activity, especially in the aftermath of the October 17 nationwide developments. The so-called defensive sectors of Lebanon’s economy now start to lose steam, while the vulnerable sectors went further in the red. While private consumption is still witnessing somehow positive growth, its performance is way weaker than previous years. But what is weighing most on growth is the weakness in private investment, with delay or cancellation of most private investment decisions.
Trade deficit down amid contracting imports and rising exports
The latest foreign trade statistics for the fourth quarter of 2019 suggest a net contraction in imports by 18.4%, alongside a 22.8% growth in exports, which led to a reduction in the trade deficit by 26.0%. Over the full-year 2019, the external sector witnessed a relative decline in trade deficit by 8.9%, moving from $17 billion to $15.5 billion, a trend that is likely to continue and develop further over the months to come. The aim for the new Cabinet should be to stimulate domestic production at the detriment of imports through providing incentives for sectors that produce import-substitution goods and export-oriented products.
Fiscal deficit derailing from budget target in 2019
While the fiscal deficit managed to decline in 2019 from its record high in 2018, the last few months of the year show circa 40% of revenue forgone amid recent political developments, derailing deficit to GDP from its budgeted target of 7.6%. In parallel, the country’s gross public debt reached $89.5 billion at end-November 2019, up by 7.0% from the level seen at end-November 2018 and up by 5.1% from end-2018. As such, public debt to GDP is estimated at around 153% as at end-November 2019, almost a 10-year high for Lebanon. In parallel, Lebanon’s monetary conditions were marked throughout the past year by noticeable net conversions in favor of foreign currencies, surge in overnight rate to record highs, and a fall in BDL’s foreign currency buffers back to their 2015 level.
Net contraction in banks deposits, loans and bottom lines
The Lebanese banking sector has lately witnessed difficult operating conditions marked by accentuated market concerns. Meanwhile, deposits continued to decline since the start of protests mid-October, registering a cumulative $15.4 billion contraction in 2019, of which 11.4 billion in the last quarter. In parallel, banks pursued their deleveraging policies, seeking to bring their total lending portfolio down, noting that in the aftermath of the recent events, some customers having dues to banks chose to utilize some of their creditor accounts to settle the former. As such, scarce lending opportunities warranted a contraction in banks’ lending portfolios, with private sector loans reaching $49.8 billion at end-December, i.e. a $9.6 billion contraction over the year. In parallel, banks profitability almost halved in 2019 due to tax increases and provisioning requirements.
Chatic year for Lebanon’s capital markets
The past year was a chaotic year for Lebanon’s capital markets amid nationwide civic protests, political uncertainties and credit rating downgrades by all international rating agencies. Lebanese bond prices reached unprecedented low levels and equities continued to register double-digit price contractions for the second consecutive year. While stock prices dropped by 17% in 2019, the weighted average bond yield reached 30.0% at end-2019 and continued to trace an upward trajectory in January 2020 to cross the 40% threshold on growing debt settlement concerns.
Five macro priority issues facing the New Cabinet looking ahead
The newly formed Cabinet actually has to deal with five main macro priority issues looking forward, namely (1) External Adjustment, with the rise in external imbalances amplified by a significant drop in inflows especially within the context of the informal capital controls (2) The Adjustment of public finances which represent the most significant vulnerability of the Lebanese economy of nowadays (3) Monetary adjustment with the foreseen drop in Central Bank reserves amid the significant annual financing needs in FX (4) Banking adjustment with the needed harmonization of banking measures and further cut in interest rates (5) Growth and job creation, with the economy now moving from low growth to a recessionary mode impacting all sectors of economic activity. (Bank Audi 05.02)
11.2 LEBANON: Lebanon Forms a New Government, but Popular Protests Persist
Orna Mizrahi posted in INSS Insight on 9 February that despite the 21 January 2020 formation of a government of technocrats in Lebanon, presumably in response to demonstrators’ demands, protests have persisted throughout the country. In addition, there is marked popular dissatisfaction with the composition of the government and a lack of confidence in its ability to advance reforms necessary to alleviate the country’s dire situation. Nor is it clear that how long this government can survive.
Since the 17 October 2019 launch of the protest, demonstrators have demanded the formation of a government composed of professionals who are not members of the corrupt, ruling political elite, in the hope they might properly address Lebanon’s deep-set problems. However, the demands met with only a partial response; although most of the 20 members of the government – including Prime Minister Hassan Diab – are academics without formal political affiliation, they are perceived as a “Hezbollah government,” because the list was effectively decided, behind the scenes, by Hezbollah and the parties in the March 8 camp. The Sunni party of former Prime Minister Saad al-Hariri, along with other parties from the rival March 14 alliance, did not support the new Prime Minister and opted not to join the government. Thus while only two ministers are officially Hezbollah members, the rest represent the organization’s partners. As such, the new government in fact reflects Hezbollah’s strengthened influence over the political system in Lebanon and challenges Western countries, chief among them the United States and the Gulf States with a dilemma regarding their economic aid to Lebanon, which is crucial for the struggling state.
On 21 January 2020, one month after he was named Lebanon’s new Prime Minister, Hassan Diab formed a new government, composed of 20 ministers, including six women, the most senior of whom serves as defense minister and deputy prime minister (in the Arab world, this political representation is unprecedented for women). Hassan Diab and his Hezbollah supporters who pushed for his nomination and voted for it in parliament have stressed that this government is made up of technocrats not under any political sway and is led by a Sunni, as required by the Lebanese constitution. The Prime Minister has declared that it is a “salvation government” meant to meet the demands of demonstrators who sought to replace those in power and advance reforms that might help improve Lebanon’s weak economic situation. Accordingly, he took immediate measures designed to prove his intention to deliver on promises. The 2020 budget was passed within the first week of the government, and the publication of a financial “rescue plan” was approved. Nevertheless, this has not been enough to placate the protestors, who are now directing their criticism at the new government, viewing its members as representatives of the corrupt elite that they sought to replace.
These ministers are, in fact, professionals, many of them with advanced academic degrees, and indeed do not have political affiliation. But the composition of the government was decided by parties in Hezbollah’s camp – the March 8 camp – which spent a long time wrangling over the ministerial appointments while taking care to distribute portfolios to their favored candidates in accordance with sectarian-partisan priorities. Only two ministers are identified with Hezbollah and two with its Shiite partner, the Amal movement. However ten ministers represent Hezbollah’s Christian partners, the Free Patriotic Movement (FPM) led by Gebran Bassil, the unpopular former foreign minister and son-in-law of President Michel Aoun; and the Marada Movement. This government also includes two Druze ministers who are identified with a pro-Syrian party that supports Syrian President Bashar al-Assad. Alongside them are four Sunni cabinet members (the Prime Minister and three other ministers) who are ostensibly independent. The government has yet to receive parliamentary ratification, but approval seems assured given the influence of the March 8 camp in parliament.
The new Prime Minister is not supported by the Sunni al-Mustaqbal party of former Prime Minister Saad al-Hariri, or by the other parties in the pro-Western camp that opposes Hezbollah – the March 14 camp. Hezbollah used the majority its camp earned in the 2018 elections to choose Lebanon’s Sunni Prime Minister, and thus, de facto, created a precedent of disrupting the delicate balance struck in recent years between the various confessional groups in the country, requiring that the Prime Minister be a senior leader acceptable to the Sunni sect alongside a Christian president and a Shiite speaker of parliament. However, the Prime Minister and President are keeping their roles for now, despite demonstrators’ demands to replace “everyone.” This means, essentially, that although Hezbollah remains behind the scenes, this government will in effect operate under its aegis, and the government’s formation marks another step in the deepening of the group’s grip on the Lebanese political system and its ability to influence decision making processes at the main power junctions.
The new government was announced against the background of noticeably heightened protests in mid-January. At the outset the wave of protests was non-violent and brought together broad swathes of all sectors of the public and recalled a festive national holiday. For their part, the security forces took care to preserve order and not be drawn into confrontations with the demonstrators. However, in the week before the government was formed the protest assumed a new direction and grew far more violent. The young demonstrators resorted to violence, mainly against banks (which are blamed for the difficult economic situation) and against symbols of the state, the parliament building in particular. They threw Molotov cocktails and rocks, smashed storefront windows, and destroyed ATMs. In parallel there has also been an escalation in violence on the part of the security forces, which used rubber bullets, truncheons, water cannons, and tear gas to disrupt the demonstrations. These confrontations caused hundreds of casualties, ruin on the streets, and led to arrests numbering dozens if not hundreds of demonstrators.
Although the violence has ebbed since the government was formed, the demonstrations have persisted, albeit on a reduced scale, given the fatigue and despair felt on the streets. The frustrated public does not believe the government has the ability to resolve the country’s deep-set problems, which have only been exacerbated by the recent months of political and economic paralysis. During this time, limits have been placed on cash withdrawals due to capital flight from Lebanon (according to the central bank governor, since the protest began around $1 billion has been taken out of Lebanon), many businesses have closed, unemployment has risen, the Lebanese lira has dropped in value, and Lebanon is finding it hard to settle state debts that amount to as much as $90 billion.
The new government thus faces a double challenge: a need to calm the protest while urgently addressing burning problems, chief among them the economic crisis. In addition, the new government, which is a perceived as a “Hezbollah government,” will find it even harder than its predecessor to persuade Western countries – led by the United States – and the Gulf states that are potential candidates for helping Lebanon out of the economic crisis, to agree to transfer funds that might serve Hezbollah’s interests. Furthermore, in tandem, there has been a rise in the number of countries designating Hezbollah as a terrorist group – (including, over the last year, Britain, Germany, Argentina, Paraguay, Venezuela, Guatemala and Honduras) – which enables the broadening of sanctions. Thus far the international community has not voiced support for the new government, with the exception of UN Secretary-General Antonio Guterres, who announced he would cooperate with it to advance reforms. In contrast, US Secretary of State Mike Pompeo, in his first statement about the government (22 January), refused to support it, declaring that the administration would not help a government that does not meet the people’s demands for a war against corruption and progress with reforms.
Hezbollah’s rising influence in Lebanon, manifested inter alia in its control over the new government formed in Lebanon, poses a dilemma, including for Israel. Are the Lebanese state and Hezbollah identical? This is a question of much significance, not just regarding Israel’s position on international aid for Lebanon and international contacts with the new government, but also, when the time comes, vis-à-vis the scenario of a military confrontation with Hezbollah. (INSS 09.02)
11.3 QATAR: Fitch Affirms Qatar at ‘AA-‘; Outlook Stable
On 13 February, Fitch Ratings affirmed Qatar’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘AA-‘ with a Stable Outlook.
Key Rating Drivers
Qatar’s ‘AA-‘ ratings reflect continued fiscal and external surpluses, a strong sovereign net foreign asset position and one of the world’s highest ratios of GDP per capita. At $55/bbl, Qatar’s fiscal breakeven Brent price of oil is one of the lowest among Fitch-rated energy exporters. These strengths are balanced against a high level of debt and contingent liabilities compared with rated peers, heavy hydrocarbon dependence and mediocre scores on measures of governance and doing business.
We estimate that Qatar’s general government budget was in a surplus of 3.7% of GDP in 2019, after a surplus of 4.4% of GDP in 2018, including the estimated investment income on government external assets. We expect a budget surplus of 3% in 2020. Over the medium to long term, declines in capital spending from exceptionally high levels (more than 40% of the total) and the introduction of VAT (which we assume in 2021) could partly offset continued growth in current spending, a moderation in hydrocarbon prices, and lower transfers from Qatar Petroleum (QP) as QP invests in the expansion of liquefied natural gas (LNG) production.
We estimate that sovereign net foreign assets (reserves plus other government assets less external debt) rose to 138% of GDP ($256 billion) in 2019 from 112% of GDP in 2018, largely reflecting the estimated assets of the Qatar Investment Authority (QIA), which were buoyed by strong asset market returns. The reserves of the Qatar Central Bank (QCB) also rose to nearly $40 billion or five months of current external payments in 2019, from over $30 billion in 2018. The current account posted another surplus of an estimated 6.4% of GDP in 2019.
Government debt rose to 68% of GDP in 2019, from 59% of GDP a year ago, including around 1% of GDP of domestic T-bills and 9% of GDP of government overdrafts with local banks. In 2020, we expect debt to stay at this level, well above the ‘AA’ median of around 38% of GDP. Much of last year’s $12 billion bond issuance was used to replenish the government reserve account. The increase in government debt also reflects the drawdown of export credit facilities for the purchase of military equipment, which we expect to continue (announced purchases since June 2017 total at least $28 billion, according to our calculations).
The size of the government reserve account is undisclosed. It consists of funds placed abroad (separate from the QIA), funds at the QCB and funds at local banks. The government has indicated that it may use some of this reserve to repay maturing debt, depending on market conditions (our forecasts assume that most maturities are refinanced).
Expansion of LNG production could deliver sizeable improvements to Qatar’s public finances in the long term. QP has further up-sized its plans to expand LNG production from the North Field and now expects to add 49 million tonnes per year of capacity by 2027, a 64% increase over current capacity of 77 million tonnes and an addition of nearly 1.9 million barrels of oil equivalent per day including additional volumes of condensate and other by-products. While we conservatively assume that the project will reduce QP’s cash flow to the state by around $25 billion spread over 2022-2028, the additional LNG production could ultimately result in more than $20 billion per year of additional hydrocarbon revenue to the government (after wind-down of QP capital spending).
The country’s banking sector (with assets of over 200% of GDP), is a source of contingent liabilities for the sovereign. The sector relies heavily on non-resident funding and has concentrated exposures, including to a weakening domestic real-estate sector. Profitability is currently sufficient to absorb some worsening of asset quality, and capitalization levels remain adequate. Non-performing loans were only 1.9% of total loans in 2018 (up from 1.6% in 2017). However, the increased prevalence of loan restructurings indicates worsening underlying asset quality.
Contingent liabilities from the non-bank sector are also significant. We estimate the debt of non-bank government-related entities at 28% of GDP. QP and the globally diversified telecoms operator Ooredoo (A-/Stable, with a Standalone Credit Profile of bbb) account for nearly half of this. The third biggest exposure is Qatar Airways Group. In our view, the airline’s expansion strategy may yet require future support from the shareholder (the QIA), despite a manageable net debt burden, and plans to return to profitability through operating efficiencies and a maturing route network. Facing the full-year impact of higher fuel costs and the loss of its more profitable regional routes, the group reported a loss of more than $600 million in the reporting year ending March 2019 (FY19), after a loss of nearly $70 million in FY18.
Qatar and Saudi Arabia held talks in late 2019 aimed at resolving the dispute that began in mid-2017 between Qatar and the Quartet consisting of the UAE, Saudi Arabia, Bahrain and Egypt and resulted in the rupture of mutual trade, financial and diplomatic relations. This was accompanied by some conciliatory statements and the participation of the Quartet in the Gulf football cup in Qatar. Qatar’s Prime Minister later attended the 40th GCC summit in Riyadh, but there was no tangible breakthrough in relations. An end to the dispute (which is not part of our forecast) could bolster Qatar’s non-hydrocarbon GDP growth and reduce the need for the government to support the non-oil economy (for example, through capital injections in banks or Qatar Airways).
In our view, Qatar is exposed to potential escalation of geopolitical tensions in the region. Particular points of vulnerability include the banking sector’s reliance on non-resident funding, Qatar Airways’ dependence on the airspace of Iraq and Iran for many of its routes, and Qatar’s exports of hydrocarbons through the Strait of Hormuz. Although Qatar hosts a large US military presence, its constructive relations with Iran mitigate its likelihood of being targeted by Iran or its proxies in the event of a conflict.
We forecast real GDP growth at around 0.9% in 2020, after an estimated 0.6% in 2019. We expect the fading growth impulse from high government capital spending to continue to put pressure on non-hydrocarbon growth. We also assume a mild decline in oil production, which will drag down hydrocarbon GDP growth despite the gradual ramp-up of production of gas for local consumption at the Barzan field. The non-hydrocarbon economy stagnated in H1/19 (compared with H1/18), as declines in construction, trade and manufacturing offset gains elsewhere. Hydrocarbon sector growth averaged -0.6% yoy in 1H19.
Rating Sensitivities
The main factors that could, individually or collectively, lead to positive rating action are:The main factors that could, individually or collectively, lead to negative rating action are:
Fitch forecasts Brent crude to average $ 62.5/bbl in 2020 and $60/bbl in 2021. (Fitch 13.02)
11.4 UAE: Massive Gas Find Spurs UAE’s Pursuit of Self-Sufficiency
Robin Mills posted in the Arab Gulf States Institute in Washington on 6 February that the Jebel Ali find promises reduced import bills, improved security of supply, and more gas to boost the economy but will require some clever technical and commercial work to make full use of it.
Over a decade ago, Dubai’s domestic gas production dwindled effectively to zero, leading to total dependence on imports for its large demand and a major overhaul of the emirate’s energy strategy. Yet it has just announced a massive gas find jointly with the neighboring emirate of Abu Dhabi. The discovery could be transformational – if the emirates can overcome the challenges of producing and marketing the gas.
The announcement came on 3 February, with the signing of an agreement between the Abu Dhabi National Oil Company and the Dubai Supply Authority, Dubai’s monopoly gas supplier. They reported the discovery of 80 trillion cubic feet of gas in place in the area south of Jebel Ali port in Dubai, extending into Abu Dhabi territory. Before making the announcement, ADNOC drilled at least 10 appraisal wells, indicative of the field’s complexity. It constitutes a mixed conventional-unconventional reservoir, likely to require hydraulic fracturing for commercial production rates.
The field was quickly hailed by analysts as the third-largest in the Gulf (after the joint Qatari-Iranian North Field/South Pars, the world’s largest field, and Bab in Abu Dhabi), and the biggest worldwide gas find since 2005. However, this assessment is probably overoptimistic: It depends on the assumed recovery factor – how much of the gas in the reservoir can be commercially produced.
The Jebel Ali find is of shallow gas, which appears to be biogenic – i.e., formed by the bacterial decomposition of organic matter at low temperatures, not the more usual thermal maturation of hot and deeply buried source rocks. Biogenic gas is usually dry and sweet, consisting almost entirely of methane with no natural gas liquids or sulfur.
The reservoir seems to be the Gachsaran Formation of Miocene age, a thick sequence of shales, carbonate and evaporite rocks, which is found throughout the Gulf region and considered as a seal to petroleum accumulations rather than a reservoir. Yet in eastern Abu Dhabi and Dubai, it has been newly assessed to contain gas resources. At its thickest in northeastern Abu Dhabi, it exceeds 1,000 meters in thickness, and ranges from 600 to 1,000 meters deep, shallower than the country’s traditional petroleum reservoirs at 3,000 meters or more. The find extends over 1,930 square miles, larger than the entire area of the emirate of Dubai, implying about 40 billion cubic feet of gas in place per square mile, comparable to the lower-quality parts of the famous Marcellus shale of the Northeastern United States. It has low permeability, meaning gas will flow from it only at low rates, unless techniques such as hydraulic fracturing are used.
Recovery factors from shale gas reservoirs – the amount of the gas in place that can be economically extracted – may be around 10% to 15%. That would allow 8 trillion to 12 trillion cubic feet to be recovered from the Jebel Ali find – not in the class of the Gulf’s biggest fields but still very significant. As a rough comparison, it equates to about 17 years of all Dubai’s gas consumption. It has the economic advantages of being onshore, shallow (lowering drilling costs), close to infrastructure, and proximal to major sites of gas consumption – the power generation and aluminum smelting complexes near Dubai’s Jebel Ali port and at Taweelah in Abu Dhabi.
Overall, despite having the world’s sixth-largest gas reserves (nearly all in Abu Dhabi), the United Arab Emirates is still a net importer because of high energy use per person and delays in developing its own, technically challenging fields.
Any Jebel Ali production would displace some imports into Dubai, although the details of how it is split between the two emirates need to be seen. Imports from Qatar have continued despite the UAE’s boycott, along with Saudi Arabia, Bahrain and Egypt, of its neighbor since June 2017. The emirate also imports liquefied natural gas.
Concerns over security of supply, the high cost of imported LNG (until recent price declines), and lack of diversity in sources encouraged Dubai to unveil its Integrated Energy Strategy in 2011 and Clean Energy Strategy in November 2015. These target a 30% reduction in energy use versus “business as usual,” and a 2030 electricity generation mix of: 61% gas, 7% “clean” coal, 7% nuclear (imported from Abu Dhabi’s new reactors at Barakah) and 25% solar, derived mostly from the 5,000 megawatt Mohammed bin Rashid Al Maktoum Solar Park, intended to be the world’s largest single-site solar park. Dubai’s Hassyan coal plant should also begin operations this year.
In November 2018, ADNOC released its integrated gas strategy and has updated it since. The intention is for the UAE to become self-sufficient in gas, with Abu Dhabi developing: sour gas in partnership with Occidental, OMV, Eni, Wintershall and Lukoil; gas caps on oil fields; and unconventional gas in a venture with Total. The use of carbon capture and storage will replace gas currently reinjected for enhanced oil recovery. The UAE’s first nuclear reactor, at Barakah in western Abu Dhabi, is set to start up imminently, and the newly reorganized Emirates Water and Electricity Company is tendering for its second large solar power plant. Finally, the neighboring emirate of Sharjah announced a new gas field in January, its first for three decades, which might eliminate its own need for planned LNG imports. All these initiatives are likely to lead to a significant drop in UAE gas import demand in the medium term.
The Jebel Ali gas has to compete economically with imported LNG, which has recently hit record low prices, although this will probably rebound somewhat. In 2032, the Dolphin pipeline contract will expire, and the new gas find gives the UAE leverage to negotiate with Qatar for a renewal at reasonable (though likely higher) prices or to end imports from its neighbor entirely. Even cheap gas supplies will struggle to compete in power generation with the extremely low cost of new solar – Dubai’s latest 900 megawatt installation was awarded in October 2019 at a near-world record 1.69 cents per kilowatt-hour.
Beyond that, the UAE faces the question of what to do with all this gas. Expansion of industry is planned, but the new unconventional and sour gas is not likely to be particularly cheap to produce. Major expansions of LNG exports are unlikely given relatively costly feedstock and the current depressed world market. The Jebel Ali find promises reduced import bills, improved security of supply, and more gas to boost the economy – but it will require some clever technical and commercial work to make full use of it.
Robin Mills is a non-resident fellow at the Arab Gulf States Institute in Washington. He is CEO of Qamar Energy and author of “The Myth of the Oil Crisis.” (AGSIW 06.02)
11.5 OMAN: Oman’s New Sultan Unlikely to Pursue Qaboos’ Monopoly of Power
Kristin Smith Diwan posted on 10 February in the Arab Gulf States Institute in Washington that Oman’s Sultan Haitham will need to balance powerful interests while engaging all parties, especially as he tackles economic policy.
Most of the analysis considering Oman’s future following the death of Sultan Qaboos bin Said has focused on Oman’s foreign policy and the probability that the sultanate will maintain the same degree of independence from regional rivalries. Internally, the change in leadership likely will also impact the balance among domestic power centers in the sultanate. Qaboos wielded an exceptional degree of autonomy and authority within the Omani power structure, grounded in his historic role as the unifier and builder of the modern Omani state. It is doubtful that the new sultan, Haitham bin Tariq al-Said, will be able to monopolize power to the same degree, especially given Oman’s economic challenges, which will require buy-in and collaboration to be met successfully. Yet in constructing a viable governing coalition, there are several options at his disposal, all with differing implications for Oman’s economic and political direction.
A Ruling House in Transition
The rule of Qaboos was unique. In the rest of the Gulf monarchies, the establishment of the modern bureaucratic state was accompanied by the formation of dynastic rule, as members of the ruling house were integrated into the governing structure as ministers holding key portfolios. This power sharing didn’t happen in Oman, or not to the same extent. At the time of his passing, Qaboos not only ruled, but ran the government as prime minister, maintaining almost all of the sovereign portfolios – defense minister, foreign minister, and supreme commander of the armed forces – while also holding the reins of the economy as finance minister and head of the board of governors of the central bank. The main theorist of dynastic monarchy, Michael Herb, has stated: “While the Al Saud rule Saudi Arabia, and the Al Sabah Kuwait, Qabus rules Oman.”
The recent transition of power was expertly choreographed to preserve this unitary rule and envelop Qaboos’ chosen successor in the mantle of his authority. It is particularly noteworthy that the ruling family council declined to exercise its constitutional power to select the next ruler, instead deferring to the will of Qaboos as expressed in a letter opened before the public. This implies that the new sultan is not indebted to his family for his position. In his first speech, Sultan Haitham pledged to follow the path laid out by the late sultan in foreign policy. He has since issued a directive to preserve the portrait of Qaboos next to his own in official meetings and offices, symbolically conveying the continuance of Qaboos’ legacy.
Still, while the family council didn’t intervene in the succession, there are new dynamics that may bring the Al Said family more to the fore. Unlike Qaboos, who was childless and without a male sibling, Haitham has close male relatives. These include two half-brothers, Assad and Shihab bin Tariq, both once viewed as potential successors to Qaboos. Assad’s eldest son, Taimur, has been touted as a leading figure in the next generation of royals. Haitham himself has two sons. The eldest, Theyazin – who studied at Oxford, joined the Ministry of Foreign Affairs in 2013, and has served at the Omani Embassy in London since 2018 – has returned to Muscat and has been attending key diplomatic functions since his father’s assumption.
The transition to Haitham was orchestrated to demonstrate an impressive unity within the royal house, including a gracious role for presumed rival Assad. In other Gulf ruling families, competition among family members has fueled the expansion of royal control over government, as family demands are accommodated through government sinecures. Even if this competitive dynamic does not take hold in Oman, the royal presence may be felt in other ways. In recent years members of the Al Said family, including the new sultan and his siblings, have been increasing their involvement in business. How this is managed – or not – will affect the critical issue of Oman’s economic growth.
The Business-Government Nexus
The lack of reliance on the Al Said family freed Qaboos to take a broader view of governing coalitions in pursuit of nation building. In addition to drawing upon the extended family of the Busaidi, Qaboos incorporated many minorities into the ruling structures, within a strong narrative of interfaith and interethnic tolerance. Yet one clearly favored group emerged from within the leadership: Oman’s merchant families.
This political reliance on merchants offered both advantages and risks. Bringing in this class offered a powerful constituency in support of the government and its extensive national development ambitions. But in times of economic downturn, it also left the government susceptible to accusations of conflicts of interests and self-dealing. This is indeed what played out in 2011 as protesters based in the industrial port of Sohar demanded reform of the government with complaints centered on corruption.
Qaboos weathered that domestic crisis through a forceful resolve against dissent but also a mix of concessions. He nearly doubled the private sector minimum wage and created 50,000 new government jobs, mostly in the security services. He also further developed Oman’s participatory institutions through the establishment of elected municipal councils and granting more powers to the elected Shura Council. A number of the most publicly criticized ministers were removed from office amid a broader campaign of corruption prosecutions that resulted in convictions of some government officials and businessmen over the next few years.
This response established a new reality for wrestling with the sultanate’s current economic predicament. In 2019, the Omani deficit rose to $50 billion contributing to a steep rise in public debt from below 5% of gross domestic product to nearly 50% in just four years. This limits the new sultan’s ability to curry more favor through a repetition of government spending and populist solutions. There is a desperate need to create more jobs for young Omanis. But there is also the need to create conditions favorable to business to attract Omani capital back into the country. Expectations are high for Haitham to act quickly and decisively after years in which decision-making on the economy has been methodically paced in a strategy of “slow and go”: pushing forward on large scale infrastructure development, particularly in ports and logistics, while approaching structural reforms with caution
Solutions that will create a path to greater prosperity while preserving Oman’s economic independence are not easy to reach. Haitham will need to balance competing interests and productively engage all parties with a degree of policy sophistication similar to that demonstrated by his predecessor. In generating buy-in from the Omani public, he may turn to Oman’s participatory institutions.
Popular Consultation
Oman has created a means of formal public input through elections for municipal councils and the lower house of Parliament, the Shura Council. While the role of the municipal councils is advisory, the Shura Council can propose and amend legislation drafted by the Council of Ministers and interpolate service ministers regarding violations of the law; this privilege does not extend to the ministers of defense and foreign affairs.
Yet in practice, these institutions have not demonstrated the ability to impose meaningful accountability. The questioning of ministers happens only rarely, and the Shura Council lacks mechanisms to enforce government responsiveness. There has been very little professionalization, which is apparent in the very low rates of incumbency; since 2011, the turnover in Parliament in each election has been more than two-thirds of members. Popular disinterest is a problem: Despite some successful efforts to engage youth, voting participation has been uneven and declining since the very high turnout of 76% in 2011.
Part of the challenge lies in creating a body that can represent the diverse and changing interests of Omani society as it deals with socioeconomic change. As was demonstrated yet again in the Shura Council elections of October 2019, voting and representation continues to reflect very traditional family and tribal ties that thrive on state patronage. Money in elections continues to be a problem so that those with either wealth or social capital are overly represented in the council.
It is a real question whether this representation will be adequate to address challenges facing industrializing areas like Sohar or the complexities of job creation. It is especially striking that turnout for elections is wildly uneven, with more traditional interior regions and Dhofar displaying high voter engagement, while participation from the population centers of Muscat and the north is quite low. Conversations with Omanis reinforced the sense that the political culture, absent civic education, has not yet developed in a way that can sustain effective political engagement, especially in urban areas that embody more social heterogeneity.
Status Quo or Change?
The passage of authority from Qaboos to Haitham emphasized the unity of the ruling house and continuity from the ruler to his successor. This projection of constancy was profoundly reassuring to Omanis. Yet the status quo – especially regarding the economy – is not sustainable and will press the new leadership to make immediate changes. How Haitham chooses to balance the involvement and interests of family, business elites, and the institutions representing the broader public will illustrate much about how he is likely to reign.
Kristin Smith Diwan is a senior resident scholar at the Arab Gulf States Institute in Washington. (AGSIW 10.02)
11.6 TUNISIA: Moody’s Changes Outlook to Stable from Negative, Affirms B2 Rating
On 14 February, Moody’s Investors Service changed the outlook to stable from negative on the Government of Tunisia’s issuer rating and affirmed the rating at B2.
Moody’s has also changed the outlook on the Central Bank of Tunisia’s ratings to stable from negative, and affirmed the B2 senior unsecured rating and the (P)B2 senior unsecured MTN program and senior unsecured shelf ratings. The Central Bank of Tunisia is legally responsible for the payments on all of the government’s bonds. These debt instruments are issued on behalf of the government.
The stable outlook reflects the stabilization in the balance of payments and the debt burden that Moody’s expects to be maintained as tighter monetary policy stabilizes the currency and fiscal policy prudence is likely to remain, despite significant constraints to rapid consolidation.
The affirmation of the B2 rating reflects external vulnerability risk that remains elevated in light of large external financing needs, and a high debt burden still vulnerable to potential currency and financing shocks. It also takes into account the relative strength of Tunisia’s institutions and governance and the potential for the economy to return to stronger growth rates, given a diversified economic base and educated labor force.
Tunisia’s local currency and foreign currency long-term bond and deposit ceilings remain unchanged: the long-term local currency bond and bank deposit ceilings at Ba2, long-term foreign currency bank deposit ceiling at B3, and the foreign currency bond ceiling at Ba3. The short-term foreign currency bond and bank deposit ceilings remain unchanged at Not Prime.
Ratings Rationale
Rationale For The Change In Outlook To Stable From Negative: Improving Balance of Payments Dynamics, Reducing Macroeconomic Stability Risks
Moody’s expects the stabilization in the current account and foreign exchange reserves that started last year to be maintained. After a period of significant balance of payments pressure, with reserves adequacy declining to very low levels, a reduction in the current account deficit and tighter monetary policy during 2019 allowed a build-up of reserves buffers.
The current account deficit narrowed to 8.8% of GDP in 2019 from over 11% in 2018 on account of a narrowing non-energy trade balance, a significant recovery in tourism revenues and higher current transfers. Tighter monetary policy contributed to restrain imports. On the funding side, a broadening of the government’s official funding sources and capital market issuances in October 2018 and July 2019 contributed to the build-up of foreign exchange reserves to $7 billion at the end of 2019 from $5.2 billion one year earlier. While, at three months of import cover, reserves adequacy remains fragile, it has improved markedly in the course of the past year.
Looking forward, Moody’s expects the energy trade deficit to narrow as well owing to the inauguration of the Nawara natural gas field which started in February 2020. The government estimates that production from the field will reduce the energy import bill by about 20% and result in annual savings of about $500 million (1.3% of GDP per year). While the current account deficit will remain wide, in high single digits as a ratio to GDP, assuming continued access to external funding sources, Moody’s expects foreign exchange reserve coverage to remain in the 3-3.5 months range. The shoring up of reserves reduces the macroeconomic instability risks and the likelihood of a sharp depreciation of the currency.
Debt Burden Stabilization
In turn, Moody’s expects a relatively stable currency, combined with a gradual further fiscal consolidation, to facilitate a stabilization of the government’s debt burden around the current levels. The tighter monetary policy stance adopted by the Central Bank of Tunisia over the past two years has contributed to exchange rate stability, helping to arrest the upward trajectory in the debt/GDP ratio that peaked at over 77% of GDP in 2018. In 2019, Moody’s estimates that government debt declined to 72.5% of GDP mainly as a result of the appreciation of the dinar.
Over the next three years, Moody’s expects spending cuts, especially in the energy subsidy bill, to reduce the fiscal deficit to 3.0% of GDP in 2020, from 3.5% in 2019, 4.8% in 2018 and around 6% in 2016 and 2017, with the deficit narrowing slightly further in subsequent years. Faster fiscal consolidation will likely be prevented by social considerations, the government’s focus on supporting the economy and a rigid structure of government expenditure with public sector wages and interest payments accounting for over 50% and almost 9% of total spending, respectively.
Rationale for the Rating Affirmation at B2
While the downside risks to Tunisia’s external position and its fiscal strength have diminished, both factors remain credit constraints.
Moody’s external vulnerability indicator (EVI) for Tunisia, the ratio of foreign exchange reserves to forthcoming external debt payments and non-resident deposits, has arrested its upward trajectory but remains elevated at 175%. Even taking into account mitigating factors such as the high share of non-resident deposits that have proven resilient over the past decade, reserves coverage of external debt payments remains fragile while the government continues to rely on external funding sources.
Continued access to official and market financing at affordable terms is key for Tunisia’s B2 rating. The government relies to a large degree on external official funding sources to meet its gross financing needs at about 10-15% of GDP, with significant debt refinancing needs every year for the next several years. The expiration of the four-year IMF program in June 2020 raises the possibility of extended program renewal negotiations which could lead to delays in disbursements from other official funding sources and potentially jeopardize market access at moderate costs.
With a government not having been formed yet, after the presidential and parliamentary elections in September/October 2019, Moody’s political risk assessment includes the possibility that new elections take place and raise uncertainty about the orientation of macroeconomic and fiscal policy in Tunisia. Political risk for Tunisia’s sovereign rating also includes lingering social tensions in light of the subdued growth outlook at an average 2.5% over the next four years which remains too weak to significantly improve labor market conditions, especially for youth with a tertiary degree.
Nevertheless, Tunisia’s strength of institutions and governance support its creditworthiness relative to B-rated peers. The strength of civil society supports transparent and predictable policymaking. Moreover, policymakers have shown their capacity to adjust the design of policies to meet their objectives under significant constraints. In particular, on the fiscal side, the government has been able to compensate for delays in spending cuts, State-Owned Enterprise reform or comprehensive pension reform with higher revenue generation, although this option is in Moody’s assessment now largely exhausted.
Finally, while the economy’s competitiveness has declined significantly over the past decade, its diversification and an educated workforce set the stage for a broad-based recovery if accompanied by business environment reforms that incentivize non-energy foreign direct investments.
Environmental, Social and Governance Considerations
Environmental considerations are relevant for Tunisia’s credit profile because the effects of climate change can significantly impair economic growth and development. Coastal regions account for 80% of total output, the majority of which are exposed to rising sea levels. Climate variability, erratic precipitation patterns, and severe droughts pose significant threats to Tunisia’s agricultural sector, which accounts for more than 15% of total employment.
Social considerations are material for Tunisia’s credit profile. In recent years, social tensions have increased in response to fiscal adjustments made under the current program with the IMF and in response to persistently slow growth and employment trends. The threat of social unrest can impact the capacity of the government to implement necessary reforms.
Governance considerations are material for Tunisia’s credit profile and relate to the administration’s demonstrated capacity to function even during times of social unrest. The country’s consensus-building governance orientation has been instrumental in securing the successful democratic transition with all stakeholders involved, but it can slow down the policy decision making process.
Factors That Could Lead to an Upgrade
A significant and sustained reduction in external and fiscal imbalances would likely lead to an upgrade. High confidence in Tunisia’s ability to secure funding to meet its upcoming debt service payments over the next decade at favorable terms would also be credit supportive.
Factors That Could Lead to a Downgrade
Conversely, a downgrade would be likely if there were delays in the availability, or a marked increase in the costs, of external funding, fiscal overruns or the materialization of sizeable contingent liabilities, that would weaken Tunisia’s fiscal strength and foreign exchange reserves adequacy. This could be the result of protracted policy paralysis or the inability to form a government that delays the implementation of outlined fiscal and business environment reforms. (Moody’s Investors Service 14.02)
11.7 TURKEY: Turkey’s AKP Stumbles in Efforts to Restore Economic Confidence
Mustafa Sonmez posted on 6 February in Al-Monitor that Turkey’s economic confidence indicators show the government has a long way to go in overcoming the credibility erosion it has suffered over the past two years.
Turkey’s ruling Justice and Development Party (AKP) has made little headway in restoring economic confidence among consumers and investors since economic turmoil hit in 2018, a setback that will inevitably bear on its political fortunes as it marks its 18th year in power. Indicators reflecting domestic and foreign confidence in the country’s economy remain lackluster even after drastic government moves to sway central bank policies in a bid to jumpstart economic revival.
The electorate’s economic grievances bore heavily on the AKP’s defeats in the local polls in spring 2019 amid a sharp downtick in consumer and sectoral confidence indices since 2018, when a severe currency shock fueled economic recession in the second half of the year. Soon after the elections, the government replaced the central bank’s governor and senior managers, moving to directly influence the bank’s decisions and stimulate economic recovery through rate cuts.
Consumers and economic actors, however, remain largely unconvinced, according to key indicators.
The consumer confidence index stood at only 58.8 in January amid ongoing touting of relative economic recovery. The index measures how consumers view their current and prospective financial situations and the general state of the economy. The more the reading slumps below 100, the more pessimism it indicates. Although the January reading signifies improvement from 55.3 in May 2019, the lowest level in the past 17 years, it remains a far cry from 72.7 in July 2018, when President Erdogan assumed sweeping executive powers after winning landmark elections. In other words, the index has declined 24% since the confidence erosion began at the outset of the new executive presidency system.
The meager progress in consumer confidence is observed partially among entrepreneurs as well. According to the survey, the retail trade sector lacks satisfactory optimism in terms of business volumes, sales and destocking. Pessimism continues to haunt the construction sector, which took the first and hardest blows from the crisis after being the engine of economic growth in previous years.
The economic confidence index — a composite measurement derived from 20 indices reflecting both consumer and entrepreneur appraisals, expectations and tendencies on the general state of the economy — stood at 97 in January, better than 82 in May 2019 but still below 106 in January 2018.
Another way to appraise confidence is to look at how willing people are to keep their savings in local currency accounts. In times of high confidence in the government, the rate of hard currency deposits is lower, but when mistrust sets in, hard currencies become a safe haven. As of Jan. 24, 51% of deposits were kept in foreign currency accounts, according to central bank data. The rate has fluctuated in the region of 30% in the AKP’s heydays, shooting above 40% when confidence weakens. Though Erdogan has repeatedly called on citizens to trust the Turkish lira, his appeals have failed to reverse the flight to hard currency, which is another indication of Ankara’s failure to restore confidence.
In addition to forcing rate cuts, the government has used backdoor means to prop up the lira and rein in foreign currency prices. Such interventions have relied largely on nonmarket methods, involving foreign exchange sales to state banks from central bank reserves. Ankara seems to have been successful in controlling prices via this method thus far, but this has come at the expense of shaking confidence among money holders, both local and foreign.
In terms of credibility in the eyes of foreign investors, the country risk premium reflected in credit default swaps (CDS) is another key indicator. For quite some time, Turkey’s risk premium has been the highest by far among emerging economies. Its best CDS was 256 basis points (bps) in January, well above that of South Africa, which had the second-highest risk premium — 169 bps, amounting to 66% of Turkey’s. The risk premiums of other peers such as Brazil and Indonesia stood at 99 bps and 63 bps respectively. Of note, Turkey’s risk premium had shot up to nearly 500 bps in May 2019. Despite the downtick since then, Turkey remains significantly decoupled as the riskiest country among emerging economies, with highly questionable credibility.
The failure to restore the confidence of consumers, savers, investors and entrepreneurs is delaying a meaningful recovery in the economy, including the overcoming of inflation and joblessness problems, which are the most hard-pressing for the people.
In this context, the economic indicators explained above are not without political messages. Their ups and downs have affected election results in the past. In 2007, for instance, when the consumer confidence index was about 80, the country’s risk premium was in the region of 170 bps and about 30% of deposits were in foreign currency accounts, the AKP won the general elections with 47% of the vote. The party’s support declined to 38% in the local polls in 2009, when the consumer confidence index dropped to about 61. The AKP clinched another election victory in 2011, as the consumer confidence index rose to 83, only 32% of deposits were in hard currency accounts and the country’s risk premium was at 206 bps.
In June 2015, when the consumer confidence index declined to 65, foreign exchange deposits rose to 42% and the risk premium hit 233 bps, the AKP could garner only 41% of the vote, losing its parliamentary majority and forcing snap elections later in the year. In March 2019, when the AKP lost the local administrations in Turkey’s main urban centers, the consumer confidence index was down at 59, foreign currency deposits had reached 53% and the country’s risk premium had hit 350 bps.
Though confidence indicators are not a literal reflection of voter sentiment, they are clearly a significant parameter. Current indicators suggest the AKP has thus far failed to restore the credibility it has lost since the big economic turbulence in mid-2018.
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 06.02)
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