Fortnightly, 2 November 2016

Fortnightly, 2 November 2016

November 2, 2016


2 November 2016
1 Cheshvan 5777
2 Safar 1438




1.1  Israel’s Budget Slated to Pass First Reading on 2 November
1.2  Bank of Israel Adopts Federal Reserve’s Interest Setting System
1.3  Israeli Government Selects 6 Foreign Building Companies


2.1  Israel Falls to 52nd Place in Ease of Doing Business Index
2.2  Proofpoint Signs Definitive Agreement to Acquire FireLayers
2.3  Oryx Vision Raises $17 Million to Create Ultimate Depth Sensing Solution
2.4 Raises $6.3 Million & Launches AI Platform That Learns What Works Across Sales
2.5  Work Begins on Drilling New Well For Tamar Gas Field
2.6  PointGrab’s Sensing Solution for Smart Buildings Gets $7 Million Strategic Investment
2.7  CrowdFlower Expands into Israel
2.8  Cathay Pacific to Launch Tel Aviv – Hong Kong Route
2.9  Fox to Operate Foot Locker Sportswear Stores in Israel
2.10  Air India to Launch Tel Aviv Flights
2.11  Medallia Acquires Digital “Voice of Customer” Leader Kampyle
2.12  Gauzy Raises $7 Million in US & Asia Rounds


3.1  Disruptive Restaurant Group Announces Expansion of its Cleo Restaurant Brand
3.2  Wendy’s to Debut in Kuwait Amid Gulf Expansion
3.3  Dubai’s Careem Said to Launch Driverless Pod Tests Within A Year
3.4  Telepizza Opens its First Three Stores in Saudi Arabia
3.5  US House to Vote on Iran Sanctions Act Renewal as Soon as November


4.1  Stanford Says Morocco Could See 100% Green Energy Use by 2050


5.1  Lebanon’s Average Consumer Prices Dropped 1.71% by Third Quarter
5.2  Foreign Aid Pledged to Jordan Totals $1.458 Billion Since Year’s Start

♦♦Arabian Gulf

5.3  UAE Keeps Spending Flat in 2017 Federal Budget
5.4  UAE’s First Half Non-Oil Foreign Trade Exceeds $150 Billion
5.5  Oman Plans to Cover Majority of Budget Deficit With Foreign Borrowing
5.6  Saudi Inflation Rate Falls to 2016 Low in September
5.7  Saudi Arabia Sets Record With Mammoth $17.5 Billion Bond Issue

♦♦North Africa

5.8  Egypt Ranks 122 Out of 189 Countries in Doing Business Report for 2017
5.9  Egypt’s Exports Increase by $1 Billion, Imports Decrease by $7 Billion
5.10  Egypt Rises 56 Ranks in World Bank Electricity Production List
5.11  Suez Canal Zone Authority to Stipulate Use of Foreign Currency for Utility Contracts
5.12  Suez Canal Sees Revenue Up 4% in August
5.13  Morocco’s Revenues from Alcohol, Cigarettes & Gambling Surpass MAD10 Billion
5.14  Morocco Produces Record 128,000 Tons of Dates in 2016


6.1  Turkey Drops 14 Places in World Bank’s Doing Business Study
6.2  Greece Finally Completes First Bailout Review


7.1  Michel Aoun Elected President of Lebanon
7.2  Lebanon Ranked 135th on the Global Gender Gap Index 2016
7.3  Almost 20% of Jordanian Brides in 2015 Were Minors
7.4  Saudi Government Workers to be Paid According to Hijri Calendar’
7.5  88% of Moroccan Children Use Internet on a Daily Basis
7.6  Turkey Languishes in 130th Place in Latest WEF Gender Gap Report


8.1  Evogene & IMAmt Sign Collaboration for Genomic Promoter Discovery Effort in Cotton
8.2  Teva’s SD-809 for Treatment of Chorea Associated with Huntington Disease Accepted by FDA
8.3  Sight Diagnostics & the United States Army Announce a Joint Collaboration
8.4  Teva & IBM Expand Partnership in Drug Development & Chronic Disease Management
8.5  Mazor Robotics Commercially Launches Mazor X at NASS Annual Meeting


9.1  Humavox & Starkey Bring Wireless Charging to Hearing Devices
9.2  Change Labs Uses AI to Control Personal Overdrafts
9.3  Inokim Reveals Cutting Edge Electric Scooter
9.4  OriginGPS Elevates Drone Navigation with Module+Software Integration
9.5  Vayyar Announces Smart Home Solutions using Its Powerful 3D Imaging Sensor Technology
9.6  IntactPhone Takes Mobile Security to the Next Level


10.1  Israel’s Tax on Fuel Among World’s Highest
10.2  Unemployment in Israel Rises in October


11.1  ISRAEL: High-Tech Capital Raising Counters Global Downturn
11.2  LEBANON: A New President for Lebanon
11.3  JORDAN: Jordan ‘BB-/B’ Ratings Affirmed; Outlook Remains Negative
11.4  GCC: Fitch Says Bank Assets; Saudi, Qatar Most Resilient to Oil Shock
11.5  GCC: Qatar’s Succession Model Could Be a Way Forward
11.6  MOROCCO: Fitch Affirms Morocco at ‘BBB-‘; Outlook Stable
11.7  TURKEY: The Brewing Battle Over Coffee in Turkey
11.8  CYPRUS: Fitch Upgrades Cyprus to ‘BB-‘; Outlook Positive


1.1  Israel’s Budget Slated to Pass First Reading on 2 November

Knesset Finance Committee chairman MK Moshe Gafni (United Torah Judaism) estimated that the 2017-2018 state budget will pass its first reading this week, probably on 2 November.  The 2017 budget will be NIS 359.7 billion and the 2018 budget will be NIS 376.7.  Real growth in the state budget between 2016 and 2018 is forecast to be 8.3%, while real growth for 2017 is forecast to be 5.2%, compared with 2016.  The deficit target for 2017-8 is expected to be 2.9% of GDP.

The Ministry of Finance says that the principles of the budget are based on a just division of national resources, tackling the housing crisis, lowering the cost of living, encouraging growth, and improving productivity.  Some of the measures presented by Kahlon included: the direct employment of contract workers, infrastructure development in the Arab sector and Buyer Fixed Price, which Kahlon said is expected to reach 12,000 apartments by the end of the year.

Kahlon presented figures indicating that the health budget will grow by NIS 5 billion this year, including a permanent NIS 500 million addition to the health services basket, which will be added to the budget base; the education budget will increase from NIS 55.2 billion to NIS 55.8 billion in 2018; the welfare budget will increase from NIS 6.5 billion to NIS 7.4 billion in 2018; Project Renewal urban renewal program budget will grow from NIS 90 million to NIS 160 million.

In terms of growth encouragement measures, Kahlon mentioned the lowering of corporate income tax to 23% and income tax decrease for the middle class.  The overall annual budget for R&D and investment encouragement will be NIS 3 billion over the next two years and will also include a NIS 40 million addition for the encouragement of small and medium-sized businesses, a NIS 500 million addition in 2017 and a NIS 750 million addition in 2018 to the higher education system; an addition of NIS 70 million in 2017 and NIS 125 million in 2018 for beefed-up qualifications of engineers for the high tech sector; and an NIS 100 million addition to the firefighting services’ budget, which will enable the cancellation of fees for the Israel Fire and Rescue Services in the licensing of businesses.  (Globes 31.10)

Back to Table of Contents

1.2  Bank of Israel Adopts Federal Reserve’s Interest Setting System

The Bank of Israel announced on 19 October that it will be changing the frequency with which it announces key interest rates, saying that in 2017 it will announce the rates eight times a year, instead of monthly.  The change means the Bank of Israel has essentially adopted the U.S. Federal Reserve’s interest setting system.  The central bank will be able to make exceptions to the rule, but “that would only follow a highly unusual event,” a source privy to the decision said.  The move stems from the low interest rates Israel has been able to maintain.  Economists expect November’s and December’s interest rates to remain unchanged, at 0.1%.  The Monetary Committee has set its interest announcement dates for 2017 to Jan. 23, Feb. 27, April 6, May 29, July 10, Aug. 29, Oct. 19, and Nov. 27.  (IH 20.10)

Back to Table of Contents

1.3  Government Selects 6 Foreign Building Companies to Work in Israel

Israel’s Ministries of Finance and Construction and Housing announced that they had selected six foreign companies to perform construction work in Israel.  The six were selected out of 50 that submitted their candidacy in a call for offers by the Israeli government.  The winning companies will be entitled to build residences in Israel and to manage residential construction projects as the party responsible for all the engineering and performance aspects of the project.  They will be obligated to perform residential construction amounting to hundreds of thousands of sq. m. during their stay in Israel.

This measure will bring 6,000 more foreign workers to the Israeli building industry.  Under the agreement, each company will receive a permit to employ up to 1,000 foreign workers in wet jobs (building frames and construction work).  The Ministry of Construction and Housing says that this will increase the number of construction jobs in other professions, such as electricians, plumbers, plasterers, glaziers, infrastructure work, etc., in which Israelis are employed.

The foreign companies will be registered for only five years, with a possible three-year extension at the discretion of the Ministry of Housing and Construction agencies authorized for this purpose.  The purpose of the measure is to supply the great demand for housing and enhance the use of industrialized construction.  The six winning companies are:

  • Beijing Construction Engineering Group
  • Jiangsu First Construction (Beijing)
  • Everbright International Construction Engineering (Beijing)
  • JiangSu Nantong No. 2 Construction Engineering (Group)
  • China Haushi Enterprise
  • Mota Engil Engenharie E Construction (Portugal) (Globes 26.10)

Back to Table of Contents


2.1  Israel Falls to 52nd Place in Ease of Doing Business Index

The World Bank’s annual Doing Business report ranked Israel at 52, down from 49 in 2015.  The report ranked Israel 126 in the time required to register property.  In terms of tax payments, Israel is rated 96; the country with the easiest tax obligations is South Korea.  Protection of minority investors offers some encouraging news, with Israel ranked 9 of all the countries reviewed.  (Globes 26.10)

Back to Table of Contents

2.2  Proofpoint Signs Definitive Agreement to Acquire FireLayers

Sunnyvale, California’s Proofpoint, a leading next-generation cybersecurity company, has entered into a definitive agreement to acquire Herzliya Pituah’s FireLayers, an innovator in cloud security.  With this acquisition, Proofpoint will extend Targeted Attack Protection (TAP) to SaaS applications, enabling customers to protect their employees using SaaS applications from advanced malware.  In addition, the threat intelligence extracted from SaaS applications will enhance the Proofpoint Nexus security and compliance platform, expanding Proofpoint’s ability to deliver protection for the way people work today.

As users increasingly click links and access files in cloud services, SaaS applications have become an important and often invisible threat vector for malware.  The combination of Proofpoint TAP and FireLayers will enable enterprises to detect and block both malicious files and links shared via SaaS applications.  As with other modules of TAP, this will be sold separately and will be available in the first half of 2017.  The new FireLayers-powered SaaS application threat intelligence will feed the Proofpoint Nexus platform to amplify Proofpoint’s correlated threat intelligence across its global ecosystem.  With today’s announcement, enterprises will be able to protect themselves against a variety of targeted attacks.

The purchase price for the transaction is approximately $55 million, with approximately $46 million in cash and the remaining approximately $9 million in Proofpoint stock subject to continued vesting.  (Proofpoint 20.10)

Back to Table of Contents

2.3  Oryx Vision Raises $17 Million to Create Ultimate Depth Sensing Solution

Oryx Vision announced it has emerged from stealth with a veteran team from the Israeli high-tech industry to build a radically different depth sensing solution for autonomous vehicles.  Oryx has raised $17 million in Series A funding led by Bessemer Venture Partners (BVP), with additional participation from Maniv Mobility and Trucks VC.  Based on nano antennas that receive light waves like radio waves, Oryx’s depth-sensing solution seeks to be the first to meet the demanding depth sensing requirements of autonomous vehicles – at a mass market price point.  The company has already demonstrated the technology and discusses its implementation with some of the world’s leading car manufacturers and Tier-1 suppliers.

The Oryx depth sensor is poised to achieve a range of 150 meters and mega-pixel resolution, 50x better performance than LiDAR.  With a much clearer view, the autonomous vehicle’s computer will require simpler algorithms and less processing power to make the right driving decisions.  Unlike LiDAR, the Oryx system will operate in direct sunlight and severe weather conditions. Its design also has no moving parts, resulting in greater reliability and durability.

Petah Tikva’s Oryx Vision develops solid state depth sensing solutions for autonomous vehicles.  Based on a radically innovative depth-sensing technology, it is the first and only answer to the range and resolution vision requirements of fully autonomous driving. Oryx Vision is backed by Bessemer Venture Partners, Maniv Mobility and Trucks VC.  (Oryx Vision 19.10)

Back to Table of Contents

2.4 Raises $6.3 Million & Launches AI Platform That Learns What Works Across Sales

Chorus, a San Francisco and Tel Aviv based startup that adds AI to sales conversations and learns what works to close more deals, announced it raised $6.3 million in its first round of funding, led by Emergence Capital, and is launching its flagship platform out of stealth mode after a year in development.  Chorus’ software is the first to successfully combine artificial intelligence (AI), data analytics, and natural language processing (NLP) to unite sales conversations into a single dashboard, helping companies learn what works, and multiply successes across their sales teams.

Chorus is like Waze for sales conversations, boosted with Natural Language Processing and AI: it helps sales teams learn what to say and what to avoid to route them more quickly to a closed deal.  Chorus unites all your sales team’s conversations into a single view on its dashboard , and then adds intelligence to surface key moments around what works (or doesn’t) in your team’s calls.  Chorus integrates with CRM systems, freeing reps from having to take copious notes, and scaling a manager’s ability to coach their team to move deals forward without having to sit in on every single call.

Chorus’ founders believe that organizations that capture and act on the insights surfaced from their sales conversations will out-execute their competitors by elevating their entire sales teams, reducing ramp times, and improving decisions based on what customers actually tell the front-line.  (Chorus 18.10)

Back to Table of Contents

2.5  Work Begins on Drilling New Well For Tamar Gas Field

The floating drilling rig Atwood Advantage began work on the drilling for Tamar 8 gas field off Israel’s coast on 24 October.  The Tamar 8 well will be drilled offshore 100 kilometers west of Haifa at a cost of $265 million.  The work will take four months and when completed the Atwood Advantage may move on the drill the Leviathan 5 well.  The Atwood Advantage has a crew of 100 sailors and technical staff and is positioned precisely above the required location for drilling by special satellite equipment.  The floating rig is also assisted by an unmanned submarine placed near the head of the well at a depth of 1.7 kilometers.  The gas field itself is 3.5 kilometers from the seabed.  Tamar 8 will be the prospect’s sixth gas field.  (Globes 25.10)

Back to Table of Contents

2.6  PointGrab’s Sensing Solution for Smart Buildings Gets $7 Million Strategic Investment

PointGrab announced a $7 million strategic investment to support its advanced sensor technology for smart buildings.  The investors include new partners – Philips Lighting, the global leader in lighting, Mitsubishi UFJ Capital Co. Ltd (MUCAP), a venture capital arm of MUFG, Japan’s largest financial group, in addition to existing investors ABB Technology Ventures (ATV) and others.

PointGrab’s edge-analytics smart sensing solution, CogniPoint, provides industry-leading occupant activity analytics to enable effective building space management and enhance buildings’ operational efficiency.  By embedding state-of–the-art deep learning neural networks technology into cost-effective, miniature and connected optical sensing devices, PointGrab’s CogniPoint sensing solution provides unprecedented analytics precision in the detection of occupants’ locations, count, and movements.  This technology improves energy efficiency, optimizes the use of space and improves safety and security.  PointGrab has installed CogniPoint smart sensors in numerous customer sites as part of ongoing collaboration projects.  The CogniPoint solution will be available in early 2017.

Hod HaSharon’s PointGrab is a leading machine learning and computer vision company that provides smart sensing solution to the building automation industry.  The company applies its superior deep-learning technology to the building automation ecosystem, where opportunities to gather data are abundant, but efficient, real-time analytics are lacking.  (PointGrab 25.100

Back to Table of Contents

2.7  CrowdFlower Expands into Israel

San Francisco’s CrowdFlower, the human-in-the-loop platform for data science and machine learning teams, announced its expansion into Israel with the opening of an office in Ra’anana.  With over 100 companies listed on NASDAQ and a higher concentration of data scientists per capita than the U.S., Israel is a hotbed of data science and machine learning activity.  The common thread between all machine learning teams is their need for large scale, high quality customized training data. CrowdFlower’s human-in-the-loop platform already delivers on this requirement for both startups and enterprises in the US, so the next natural step was to expand into Israel and meet the demand for local machine learning teams.  With the recent launch of CrowdFlower AI powered by Microsoft Azure Machine Learning, CrowdFlower is helping data science teams by delivering high quality customized training data, easily deployable machine learning models, and human-in-the-loop workflows in a single platform.  (CrowdFlower 25.10)

Back to Table of Contents

2.8  Cathay Pacific to Launch Tel Aviv – Hong Kong Route

Hong Kong-based airline Cathay Pacific, considered one of the best in the world, will begin operating direct flights from Hong Kong to Tel Aviv as of March 2017.  The route is awaiting government approval, but once the license is granted, it will begin with four weekly flights from Ben-Gurion International Airport to Hong Kong International Airport, using the advanced Airbus 350-900 planes recently purchased by the airline.

Direct flights to Hong Kong are currently operated exclusively by Israel’s El Al and introducing a new line is expected to increase competition over flights to the Far East, especially as China’s Hainan Airlines recently launched direct flights from Israel to Beijing.  The new Cathay Pacific line will also provide easy and fast access to connection flights to numerous Far East countries, such as China and Japan, but also Australia, New Zealand and the Pacific Islands.  (Cathay Pacific 27.10)

Back to Table of Contents

2.9  Fox to Operate Foot Locker Sportswear Stores in Israel

Two years after obtaining a partial franchise for NIKE stores in Israel, Fox-Wizel is taking a major step forward towards becoming a major player in the local sportswear market by signing an agreement with global company Foot Locker for the development and operation of a chain of stores in Israel selling footwear and clothing items from the world’s leading brands.  The agreement was signed through Fox subsidiary Retailors, through which Fox owns NIKE stores in Israel.  The agreement between the parties is for 10 years. The first store in Israel is slated for opening in the second quarter of 2017.  (Globes 27.10)

Back to Table of Contents

2.10  Air India to Launch Tel Aviv Flights

Air India announced it would launch flights to Tel Aviv, the new route playing a part in the carrier’s expansion plans.  The announcement comes as no surprise as earlier this year the company met with Ministry of Tourism director general Avi Halevy to discuss direct flight to Israel by Air India.  The new route would be more competition for El Al Israel Airlines, which operates weekly flights between Tel Aviv and Mumbai.  (Globes 27.10)

Back to Table of Contents

2.11  Medallia Acquires Digital “Voice of Customer” Leader Kampyle

Palo Alto, California’s Medallia, the global Customer Experience Management leader, today announced that it has acquired Israel’s Kampyle, the best-of-breed software platform for capturing customer feedback on digital and mobile channels.  Effective today, Medallia will offer a new product solution, Medallia Digital, which combines Medallia’s powerful data analytics platform with Kampyle’s state-of-the-art web and mobile feedback capture capabilities.  The new solution, which brings together customer experience data from online, offline, and mobile channels, not only delivers a true omnichannel view of the customer experience but also enables companies to take action on the data in real time across all touchpoints.

Medallia Digital offers many flexible ways to capture customer feedback across web and mobile channels.  It natively integrates into the Medallia enterprise platform, providing companies with a complete view of customers across their entire journey.  Medallia will offer Medallia Digital as both a stand-alone product and an integrated product. Terms of the acquisition were not disclosed.

Ramat Gan’s Kampyle enables brands and enterprises to effectively and thoughtfully engage with users across digital touchpoints and listen to the Voice of the Customer.  They have created the most advanced, user-friendly digital VoC solution enabling companies to listen to customers across web and mobile, get actionable insights and act to improve customer experience.  (Medallia 20.10)

Back to Table of Contents

2.12  Gauzy Raises $7 Million in US & Asia Rounds

Gauzy recently completed its third funding round with Asian and American investors, raising $7 million.  Tel Aviv-based Gauzy developed liquid crystal glass laminates that create “smart glass” for a variety of markets, including construction, automotive and consumer electronics.  The company secured $5 million from Britain’s Sollange Investments during its second fund-raising round.  The third investment round was led by the Alabama-based Lazarus Fund.  The funds will be used to double the company’s research and development resources, as well as boost its marketing efforts worldwide.

The startup was recently selected by Mercedes-Benz to participate in its Autobahn Plug and Play accelerator, which aims to apply innovative technologies to the automotive industry.  Gauzy was the first to be chosen out of hundreds of startups.  Gauzy’s customers include Mercedes-Benz, AT&T, Porsche, the Ritz Carlton, Crowne Plaza, Westfield and Fendi. The company recently opened offices in Los Angeles, Dallas and Stuttgart.  (Various 01.11)

Back to Table of Contents


3.1  Disruptive Restaurant Group Announces Expansion of its Cleo Restaurant Brand

Disruptive Restaurant Group, a subsidiary of sbe, the Los Angeles-based leading lifestyle hospitality company, announced the international expansion of its award-winning Mediterranean restaurant, Cleo, to the Middle East in partnership with leading international franchise operator M.H. Alshaya.  Fifteen Cleo locations will come to market starting 2017 in sought-after Middle East destinations including the UAE, Qatar, Saudi Arabia, Egypt, Bahrain and Kuwait.  The global plans follow Disruptive Restaurant Group’s successful partnership with M.H. Alshaya on the expansion of Los Angeles-based Katsuya in the Middle East, another award-winning Disruptive Restaurant Group brand.  Katsuya opened two locations in Kuwait in 2014. Six more Katsuya locations are scheduled to open by 2017 in Doha, Dubai and Cairo.  (sbe 25.10)

Back to Table of Contents

3.2  Wendy’s to Debut in Kuwait Amid Gulf Expansion

Alghanim Industries has announced plans to open the first Wendy’s restaurant in Kuwait, following the signing of a strategic collaboration to expand the US brand across the MENA region.  The restaurant will open by mid-December in Salmiya and will be a stand-alone location, able to seat up to 68 inside and 60 outside with a drive-through and delivery service.  While this will be Alghanim Industries’ first Wendy’s store in Kuwait, the brand is well established in the UAE, with 17 restaurants in Abu Dhabi, Dubai and Sharjah.  In June, Alghanim Industries also announced plans to expand the brand into Saudi Arabia in 2017.  The Wendy’s Company is a key part of Alghanim Industries’ food and beverage portfolio, which launched in 2013 with the acquisition of Costa Coffee in Kuwait.  (AB 21.10)

Back to Table of Contents

3.3  Dubai’s Careem Said to Launch Driverless Pod Tests Within A Year

Careem, the region’s app based car booking service, has announced that it plans to launch tests on its driverless pods system which is being developed in partnership with NEXT Future Transportation.  The pods are electric, driverless and can move individually or by attaching themselves to other pods, to form a bus-like structure allowing passengers to move freely from one pod to another.  The pods are designed to operate as a mass transportation system whereby passengers can conveniently be picked up on demand and dropped off to different locations, as the pods link and detach accordingly, “creating an efficient, safe and environmentally friendly mode of transportation.”

The partnership was announced after Dubai ruler Mohammed Bin Rashid Al Maktoum’s announcement of the launch of the Dubai Autonomous Transportation Strategy – a new initiative aimed at making 25 percent of all transportation trips in Dubai, smart and driverless by 2030.   Careem recently partnered with the RTA to make public transportation such as taxis, more accessible by eventually making it available on their apps.

In July, Careem announced a new research and development (R&D) strategy and plans for global expansion.  Over the next five years, Careem said it will invest $100 million in R&D, which includes growing its team in the UAE and Pakistan, and opening new R&D centers in Egypt and Germany.  (AB 18.10)

Back to Table of Contents

3.4  Telepizza Opens its First Three Stores in Saudi Arabia

Spain’s Telepizza announces the opening of its first three stores in Saudi Arabia, located in Riyadh.  The stores are the first of the hundred the company expects to open up in the country over the next ten years and are three of the five that will serve the public in Riyadh in the coming months.  Subsequently, the brand will be present in the west (Jeddah) and the eastern areas of the country.  Telepizza’s expansion into Saudi Arabia is the result of the master franchise agreement with its strategic partner in the region, Emtyaz Catering Company, the subsidiary company of the Al Bayan Holding Group and one of the country’s principal business groups.  It holds interests in a number of companies in sectors like food and drinks as well as the property development and construction market.  Telepizza’s international strategy is focused on growth in markets where it is currently operating, exploring new business opportunities, and entering new markets, either organically, through acquisitions of local companies or via master franchises.  (Telepizza 27.10)

Back to Table of Contents

3.5  US House to Vote on Iran Sanctions Act Renewal as Soon as November

The Republican leaders of the U.S. House of Representatives plan a vote as soon as mid-November on a 10-year reauthorization of the Iran Sanctions Act.  The act, which expires on 31 December, is one of the major pieces of unfinished business facing lawmakers when they return to Washington after the 8 November election.  Aides said the reauthorization of a “clean” bill, unchanged from the current legislation, was likely to pass the House, but its fate in the Senate was less certain, given administration concerns about the bill.  (Reuters 25.10)

Back to Table of Contents


4.1  Stanford Says Morocco Could See 100% Green Energy Use by 2050

Morocco could run on 100% green energy by the year 2050, according to new research on the matter from Stanford University.  The California-based institution studied the energy prospects of 139 countries to develop a feasible and hypothetical green energy scenario for each nation.

An optimal energy portfolio for Morocco would be composed of 65.6% solar energy, 29.7% offshore and onshore wind energy, 2.5% hydroelectric power and 2.1% additional marine energy.  Going green would add 88,806 permanent full-time jobs to the workforce, adding $3.53 billion to the Moroccan economy every year.  Deserting fossil fuels would also save citizens from over MAD 420 billion in healthcare costs related to pollution.

The report comes as the North African kingdom prepares to host the United Nations Climate Change Summit COP22 in the tourist city of Marrakech next month.  The team’s scenario aligns closely with the kingdom’s plan to become fossil fuel independent in the coming decades.

Morocco currently hosts the world’s largest solar complex, Noor 1, in the desert city of Ouarzazate, where it generates 580 MW of electricity.  The National Energy Strategy calls for the development of 2000 MW of renewable energy by the year 2020 by installing new solar facilities in Beni Mathar, Foum El Oued, Boujdour and Tah Sebkhat.  Wind power’s share will increase to 14% to 2020, if the strategy’s implementation proceeds as scheduled.  By 2030, the government plans to derive 52% of the nation’s energy from renewable sources.  (Reuters 25.10)

Back to Table of Contents


5.1  Lebanon’s Average Consumer Prices Dropped 1.71% by Third Quarter

According to the Lebanon’s Central Administration of Statistics (CAS), average consumer prices dropped by 1.71% y-o-y by September 2016, as reflected by the average Consumer Price Index (CPI) which decreased from 97.23 points during the first three quarters of 2015 to an average of 95.57 points in the same period of 2016.  Specifically, average prices of food and non-alcoholic beverages (20.6% of CPI) fell 1.40% y-o-y by September 2016.  Moreover, as oil prices are still decreasing, transportation (13.1% of CPI) and water, electricity, gas & other fuels (11.9% of CPI) registered average yearly decreases of 5.40% and 11.44%, respectively.  Health (7.8% of CPI) and communication (4.6% of CPI) recorded respective average falls of 2.40% and 0.27% y-o-y.  However, the education sub-index, which grasps 5.9% of the CPI, rose by 1.49% y-o-y on average by Q3/16.  Moreover, as tourism activity started to recover during the first three quarters of 2016, average restaurant & hotel prices (2.6% of CPI) increased by 2.58% y-o-y by September 2016.  The actual rent sub-index for households (old and new rent), with a weight of 3.4% of the CPI, grew by an average of 3.23%.  (CAS 25.10)

Back to Table of Contents

5.2  Foreign Aid Pledged to Jordan Totals $1.458 Billion Since Year’s Start

The total value of financial assistance (grants and soft loans) donors pledged to Jordan since the beginning of 2016 has reached $1.458 billion, according to data released by the Ministry of Planning and International Cooperation.  According to the figures, the Kuwaiti Fund for Arab Economic Development pledged $40 million to provide financing to the Jordan Response Plan (2016-2018) for road construction and equipping healthcare centers and support municipalities and the health and education sectors.

Canada pledged $38.2 million to support sustainable development through renewable energy and enterprise development in the Jordan Valley in addition to financing women empowerment projects among others.  The USAID provided $470 million in the form of cash transfer grant and another $316.8 million to support economic development and democracy and improve life quality.  Japan pledged an amount of $16.4 million to supply equipment and machinery to the Water Authority of and the Ministry of Municipal Affairs to be used in Syrian refugee-host communities.  Tokyo has also pledged another $9.3 million to enhance border security.

Germany has provided, through the German Reconstruction Bank (KfW), an amount of $8.6 million for irrigation projects in the Jordan Valley and another $22.3 million to finance teachers’ salaries in support of the accelerating access for Syrian refugee children to formal education.  It also extended $11.2 million for employment-intensive infrastructure investment.  The German GIZ also pledged $13.4 for a waste-to-positive-energy project.  Other pledges were made by France and the UNDP.  (AMMONNEWS 31.10)

Back to Table of Contents

►►Arabian Gulf

5.3  UAE Keeps Spending Flat in 2017 Federal Budget

The cabinet of the United Arab Emirates approved a AED48.7 billion ($13.3 billion) federal budget for 2017, almost level with the original budget of AED48.56 billion for 2016.  The UAE federal budget traditionally accounts for only around 14% of total fiscal spending in the country; the seven individual emirates, mainly oil-producing Abu Dhabi, provide the rest.  But the decision to keep federal spending flat suggests UAE authorities remain cautious about spending as low oil prices pressure state finances.  The International Monetary Fund projects the UAE will post a consolidated fiscal deficit, including the federal government and all the emirates, of 3.86% of GDP this year.  The cabinet also approved a AED248 billion federal budget for the five years through 2021.  (AB 31.10)

Back to Table of Contents

5.4  UAE’s First Half Non-Oil Foreign Trade Exceeds $150 Billion

The UAE’s non-oil direct trade increased by 3% in the first half of 2016, reaching AED553.4 billion ($150.6 billion), according to official figures.  The AED17.7 billion increase was registered as Asia, Australia, and the Pacific regions retained their place as top trading partners with a share of AED211.3 billion accounting for 39% of the total non-oil trade.  Europe ranked second, with a share of AED139.9 billion (26%), and the Middle East and North Africa region came next with a share of AED92.9 billion (17%).  America and the Caribbean contributed a share of AED55.1 billion (10%), while East and South Africa made up AED16.8 billion (3%).

Saudi Arabia was the UAE top GCC non-oil trade partner with a share of AED18.4 billion, representing 36% of the UAE non-oil trade with GCC countries, followed by Oman, Qatar, Kuwait and Bahrain.  The statistics showed that raw gold was ranked top in imported goods valued at AED55.6 billion, followed by unmounted diamonds and cars.  Exports were also topped by raw gold followed by raw aluminum and precious stones jewelry during the first half of 2016.  (AB 24.10)

Back to Table of Contents

5.5  Oman Plans to Cover Majority of Budget Deficit With Foreign Borrowing

Oman’s government is covering between 60 and 70% of this year’s budget deficit via international borrowing such as Eurobond issues, direct placements of debt and other instruments.  The rest of the deficit will be financed locally by drawing down financial reserves, such as money held by the State General Reserve Fund, a sovereign fund, and issues of bonds.

The reliance on international financing is a big shift for Oman, which has seen its state finances severely damaged by low oil prices.  Earlier this year, the government returned to the international bond market for the first time in two decades.  The budget deficit almost doubled to 4.02 billion rials ($10.5 billion) in the first seven months of this year from a deficit of 2.39 billion rials ($6.2b) a year earlier, as low oil export prices slashed state revenues.  The original 2016 budget plan envisaged state expenditure of 11.9 billion rials ($30.9b) and revenues at 8.6 billion rials ($22.3b).  Officials said their 2016 economic plans assumed an average oil price of $45 a barrel.  (AB 24.10)

Back to Table of Contents

5.6  Saudi Inflation Rate Falls to 2016 Low in September

Saudi Arabia’s inflation rate fell to its lowest mark this year in September, according to figures released by the country’s Central Department of Statistics.  Consumer price data showed that inflation dropped to 3% last month, down from 3.3% the previous month but up from 2.3% in September 2015.  Transport costs rose 7.8% from a year earlier after the government raised gasoline prices in December as an austerity measure.  Prices of housing and utilities climbed 6.7% after utility fees were raised in December, but food and beverage prices fell 1.3%.

Spending cuts designed to bring the Gulf kingdom’s budget deficit under control are weighing on consumer spending.  Saudi Arabia’s consumer confidence score remained flat in the second quarter of 2016 at 104 but remained one of just 12 countries globally to reach or exceed a score of 100, which is the optimism benchmark, according to a recent Nielsen report.  The latest Nielsen Consumer Confidence Index said that job prospect sentiment improved two% (50%), personal finance sentiment remained bright (64% favorable) while immediate spending intentions reduced by four% (45%).  (AB 29.10)

Back to Table of Contents

5.7  Saudi Arabia Sets Record With Mammoth $17.5 Billion Bond Issue

Saudi Arabia conducted the largest-ever emerging market bond sale on 19 October, selling $17.5 billion of debt in the government’s first international offer while attracting investor orders totaling almost four times that amount.  The huge demand, larger than many market participants had expected, was partly due to ultra-low global interest rates and funds’ frustration with a lack of high-yielding assets around the world.  But the sale was also a success for the world’s top oil exporter in its efforts to convince investors that it can cope with an era of low crude prices and ultimately reduce its dependence on oil.

London-based Capital Economics estimated the US dollar issue would finance around a third of next year’s state budget deficit and almost all of the kingdom’s current account gap, meaning its foreign exchange reserves were unlikely to fall much further in coming years.  The issue eclipsed the previous record for an emerging market sovereign bond sale, a $16.5 billion issue by Argentina in April.

The successful bond sale may be a good omen for another part of the reform plan; an initial public offer of shares in state oil giant Saudi Aramco.  Expected to take place in 2018, that offer could raise tens of billions of dollars.  The bond sale was also helped by a rebound of oil prices above $50 a barrel in recent weeks from around $30 early this year, after Saudi Arabia changed course and decided to support output cuts by OPEC.  It had refused to do this for two years in order to win market share back from US shale producers.  (Reuters 20.10)

Back to Table of Contents

►►North Africa

5.8  Egypt Ranks 122 Out of 189 Countries in Doing Business Report for 2017

Egypt ranked 122 out of 189 countries in the World Bank Group’s Doing Business report for 2017.  This is an improvement from last year when Egypt was ranked 131 out of 189.  The report attributed the improvement to two reforms.  First, starting businesses in the country became easier as one-stop shops were introduced as a follow-up unit to liaise with the tax and labor authorities on behalf of the entrepreneur.  This is besides enhanced protection for minority investors.  Second, there have been changes in the methodology of the Doing Business Indicator, which impacted Egypt’s ranking positively.  The report noted that Egypt’s ranking depends on four indicators: dealing with construction permits, obtaining electricity, registering property, and resolving insolvency.  (WB 24.10)

Back to Table of Contents

5.9  Egypt’s Exports Increase by $1 Billion, Imports Decrease by $7 Billion

Egypt increased its exports by $ 1 billion and decreased imports by $ 7 billion during the first nine months of 2016, Egypt’s Minister of Trade & Industry Tarek Kabil said.  According to the minister, the sectors that saw the greatest increase in exports were construction materials, food products and furniture.  Kabil said that the trade ministry is currently working on a strategy to double Egyptian exports during the coming five years and will do so in coordination and cooperation with various export sectors.

The minister also said that the decline in imports represents an opportunity for local production to fill the void and further reduce Egypt’s reliance on imported goods.  Kabil said that Egypt is looking to decrease its trade deficit by $ 11-12 billion in 2016 in order to reduce the dollar shortage that has plagued the economy.

In August, Kabil announced the launch of the “Proudly Made in Egypt” campaign aiming to increase Egyptians’ reliance on locally manufactured, high-quality products.  The campaign is aimed at “introducing” Egyptian consumers to such products that adhere to the quality standards put forth by Egyptian or international bodies, while protecting consumers from products from the informal sector that do not adhere to the same standards.  (Egyptian Streets 24.10)

Back to Table of Contents

5.10  Egypt Rises 56 Ranks in World Bank Electricity Production List

Egypt ranks 88 for electricity production in the World Bank’s 2017 Doing Business report, progressing 56 places up the rankings from last year’s report.  The Electricity and Renewable Energy Ministry said that the improvement results from a number of measures taken to improve its ranking on the Getting Electricity list.  The World Bank praised the support provided to the electricity and renewable energy sector by the nation’s political leadership, as well as the ministries of defense, petroleum, and finance, in overcoming power outages since the summer of 2015.  The ministry has succeeded in adding 6,882 megawatts by 2015, of which about 3,632 megawatts were in accordance with an urgent plan.  The ministry also completed electricity production projects totaling 3,250 megawatts as part of a Five-Year Plan to construct power stations.  (Al-Masry Al-Youm 27.10)

Back to Table of Contents

5.11  Suez Canal Zone Authority to Stipulate Use of Foreign Currency for Utility Contracts

The Suez Canal Economic Zone Authority will start stipulating the use of foreign currency in its utility contracts with investors.  The head of the canal authority said during a press conference at the AmCham in Cairo that it is highly likely the utility contracts in 2017 will be in dollars after the Central Bank of Egypt (CBE) granted permission to the Canal Authority.  Egypt is struggling with an acute dollar shortage that is hampering trade and its financing needs.

The statements come as a delegation of US businessmen headed by US Ambassador Thorne, the senior advisor to the secretary of state for economic issues, visited Egypt to discuss strategic and economic cooperation between the two countries.  The US delegation included nearly 50 representatives from major US corporations.  (Various 25.10)

Back to Table of Contents

5.12  Suez Canal Sees Revenue Up 4% in August

The Suez Canal Authority is considering a new initiative that would require the world’s top container shippers to pay tolls in advance, an official from the authority said recently.  Negotiations are currently underway between the authority and three of the world’s biggest shipping groups, the Danish-based Maersk, the French CMA CGM Group, and the Swiss-based Mediterranean Shipping Co (MSC), on the details of the deal.  According to the official, the carriers would receive discounts in return for being charged in advance.  The payments would likely be made three years in advance.  The vital Egyptian waterway generated $429 million in July.  (Ahram Online 25.10)

Back to Table of Contents

5.13  Morocco’s Revenues from Alcohol, Cigarettes & Gambling Surpass MAD10 Billion

Morocco’s revenues from the domestic consumption tax on cigarettes, alcoholic drinks and gambling is expected to generate over MAD 10 billion.  In a new report the 2017 Finance Law Project (PFL 2017) revenue from domestic consumption tax on cigarettes, alcohol and gambling prove that this religiously prohibited industry is, in fact, an important source of revenue for the government.

The government is expected to collect MAD 1.26 billion from the domestic tax imposed on the consumption of all sorts of alcoholic beverages.  Added to this, the tax revenue on the sale of cigarettes is estimated at MAD 9.1 billion, while another MAD 160 million will be collected from the tax on gambling.  Interestingly, the 2017 revenue estimations of alcoholic drinks are higher than those of 2016.  Perhaps not surprisingly, they are 400% higher than those of non-alcoholic drinks.  (MWN 25.10)

Back to Table of Contents

5.14  Morocco Produces Record 128,000 Tons of Dates in 2016

Morocco produced record 128,000 tons of dates in 2016, a 16% increase compared to 2015, according to the Ministry of Agriculture and Fisheries.  This record production was achieved on an area of 50,000 ha of palm groves, compared to an average annual production of 90,000 tons until 2009.  The date sector contributes 40 – 60% to the agricultural income for more than 2 million people, creates 1.6 million working days per year for the rural population in the most fragile regions of Morocco, and represents nearly 40% of the national territory.  (MWN 26.10)

Back to Table of Contents


6.1  Turkey Drops 14 Places in World Bank’s Doing Business Study

Turkey has fallen 14 places to 69th in the World Bank’s latest Doing Business report, published on 25 October.  In the breakdown of the report, Turkey fell 22 spots in the access to electricity category, while it also dropped in the protecting minority businesses category.  It remained stable in paying taxes and trading across borders.  The period since June 2016 has also seen hundreds of Turkish companies expropriated in state of emergency measures in the aftermath of the failed July 15 coup attempt, which is expected to further damage Turkey’s rating in next year’s report.  On a positive note, Turkey improved 11 spots in the starting a new business category.   (TDN 26.10)

Back to Table of Contents

6.2  Greece Finally Completes First Bailout Review

The board of the European Stability Mechanism has finally approved the disbursement of a €2.8 billion sub tranche to Greece that completes the first review of the country’s third bailout.  The European commissioner for economic affairs expressed his satisfaction, sending a message to Athens that it pays to implement the commitments it has made toward reforms.  The disbursement consists of two parts, with €1.1 billion to go toward servicing the national debt, while €1.7 billion will go into a special account that will exclusively be used for the repayment of debts to third parties.  This sub tranche takes the total funds the country has received from the third bailout to €31.7 billion.  (Various 25.10)

Back to Table of Contents


7.1  Michel Aoun Elected President of Lebanon

Michel Aoun, the former Lebanese army chief, has been elected president of Lebanon, ending a two-and-a-half-year power vacuum.  Aoun, 81, secured the presidency by winning the support of 83 MPs, well above the absolute majority of 65 needed to win, according to a tally of votes read out in a televised broadcast from parliament on 31 October.  Aoun took the constitutional oath, promising to prioritize political stability to the country.  Lebanon had been without a head of state for 29 months after Michel Suleiman stepped down as president at the end of his term in May 2014.

Back to Table of Contents

7.2  Lebanon Ranked 135th on the Global Gender Gap Index 2016

According to the 2016 World Economic Forum’s Global Gender Gap Index Report, Lebanon ranked 135th out of 144 countries.  With this rank, Lebanon earned a score of 0.598, where 0 represents complete gender inequality and 1 represents complete equality.  Lebanon scored one of the lowest in terms of political empowerment, where it ranked 137th in the “women in parliament” sub index.  The gender gap is also very pronounced in Lebanon in the fields of economic participation and opportunity, where the country ranked 136 on the Labor Force Participation sub-index and 135 on the estimated earned income sub-index.  However, the narrowest gender gap in Lebanon is in terms of education as the country ranked first on enrolment in secondary and tertiary education.  (WEF 26.10)

Back to Table of Contents

7.3  Almost 20% of Jordanian Brides in 2015 Were Minors

Nearly 20% of marriages registered in Jordanian courts in 2015 involved brides aged between 15 and 18, the Sisterhood Is Global Institute (SIGI) said on 26 October.  Citing a report by the Department of Statistics, SIGI said 16,019 young brides were married in 2015, amounting to 19.7% of the 81,373 marriages recorded in the Kingdom.  Meanwhile, 49.5% of the brides were aged between 19 and 24, and 17.9% were aged from 25 to 29.  In 807 marriages, both the bride and groom were minors, SIGI said, adding that such families could not exercise their civil or political rights.  SIGI calls for a ban on all marriages in which either partner is under 18, the institute reiterated.

In 2015, there were 162 marriages involving an underage bride and a groom more than 22 years her senior, SIGI noted.  In eight of these marriages, the age gap was 37 years, the institute said, while in one case the groom was 47 years older than his underage bride.  There were also additional marriages involving adult brides with age gaps of over 20 years, SIGI said.  (AMMONNEWS 27.10)

Back to Table of Contents

7.4  Saudi Government Workers to be Paid According to Hijri Calendar’

State workers in Saudi Arabia are to be paid according to the Solar Hijiri calendar – the calendar most commonly used in Iran and Afghanistan – rather than the Gregorian calendar as was done previously.  The news creates some confusion over the exact dates on which Saudi civil servants will receive their pay.  It was reported only two weeks ago that the kingdom had adopted the Western Gregorian calendar for paying state employees as part of its austerity measures policy.  The decision to use the Gregorian rather than Islamic Hijiri calendar made the working month longer for Saudi government workers and also included the loss of 11 salary days.

Saudi Arabia had actually banned use of this calendar system for government departments and private companies back in 2012 because of the implications.  The decision is intended to unify the dates between sector paydays, including those private sector firms using the Gregorian calendar, a source at the Ministry of Finance was quoted as saying.  The first six months of the Solar Hijri calendar have 31 days, the next five months of the calendar have 30 days and the last month of the calendar has 29 days in regular years and 30 days in leap years.  (AB 18.10)

Back to Table of Contents

7.5  88% of Moroccan Children Use Internet on a Daily Basis

Around 88% of Moroccan children are using internet every day, according to a survey conducted by the opinion research firm Averty in partnership with Kaspersky Lab.  This survey shows that children’s use of the internet exceeds the average internet users in Morocco set at 60%.  This study was conducted last July among 1,444 people in 42 cities.

According to the study, about 60% of children have been affected by computer security threats during the past 12 months.  The most cited threats are viruses and malware (18.5%), privacy violation (8.6%), data loss (5.8%) and spyware (4.8%), sows the same study which provides valuable information on the perception of parents to information security and their familiarity with solutions available on the market.  (MWN 25.10)

Back to Table of Contents

7.6  Turkey Languishes in 130th Place in Latest WEF Gender Gap Report

Turkey continues to plummet in terms of gender equality, coming in 130th of 144 countries in the latest World Economic Forum Gender Gap Report.  While the country’s overall rating remained unchanged, it fell on some indicators, dropping from 105th to 109th in women’s education rates, while also falling from 105th to 113th in women’s political participation rates.  Still, women’s employment rates did rise slightly, going from 32 to 33%.

Despite the fact women have made major gains in educational achievement – catching or surpassing men in 95 countries – women still earn less in exchange for longer hours, are less likely to have a job and are far less likely to have a senior or managerial post, the report said.  The Geneva-based WEF has tracked the disparities between the sexes since 2006 in four areas: education, health, economic opportunity and political empowerment.  (TDN 27.100

Back to Table of Contents


8.1  Evogene & IMAmt Sign Collaboration for Genomic Promoter Discovery Effort in Cotton

Evogene and Brazil’s Instituto Mato-grossense do Algodao (IMAmt), a leading developer and marketer of cotton seeds, announced a collaboration for the discovery and validation of novel genomic promoters to support IMAmt’s product development of insect-resistant cotton varieties.  The multi-year collaboration agreement between the companies provides for R&D fees and royalty payments from any future products developed as a result of the collaboration, to be paid to Evogene.  As part of the collaboration, Evogene will apply its biology-driven, predictive computational technology to identify novel genomic promoters.  The two companies will then work jointly to validate the candidate promoters in cotton.  The resulting validated promoters will support IMAmt’s product development pipeline of cotton varieties based on Bt toxins, a family of bacterial genes toxic to insects, and featuring resistance to Boll Weevil, a beetle-like pest which feeds on cotton buds and flowers.

Rehovot’s Evogene is a leading biotechnology company for the improvement of crop productivity for the food, feed and fuel industries.  The Company operates in three key market segments: improved seed traits (addressing yield and resistance to diseases and environmental stresses); innovative ag-chemicals (developing novel herbicide solutions for weed control); and ag-biologicals.  (Evogene 19.10)

Back to Table of Contents

8.2  Teva’s SD-809 for Treatment of Chorea Associated with Huntington Disease Accepted by FDA

Teva Pharmaceutical Industries announced that the U.S. FDA has accepted the resubmission of the New Drug Application (NDA) for SD-809 (deutetrabenazine) for the treatment of chorea associated with Huntington disease (HD).  The FDA has assigned a Prescription Drug User Fee Act (PDUFA) goal date of 3 April 2017.  SD-809 was granted Orphan Drug Designation for the treatment of HD by the FDA in November 2014.  The NDA filing is based on results from two Phase-III studies, FIRST-HD and ARC-HD.  The resubmission of the NDA follows the receipt of a Complete Response Letter (CRL) from the FDA in May 2016.

SD-809 (deutetrabenazine) is an investigational, oral, small molecule inhibitor of vesicular monoamine 2 transporter, or VMAT2, that is designed to regulate the levels of a specific neurotransmitter, dopamine, in the brain.  SD-809 is being developed for the treatment of chorea associated with Huntington disease, a neurodegenerative movement disorder that impacts cognition, behavior, and movements.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions used by millions of patients every day.  Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,800 molecules to produce a wide range of generic products in nearly every therapeutic area.  In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products.  (Teva 20.10)

Back to Table of Contents

8.3  Sight Diagnostics & the United States Army Announce a Joint Collaboration

Sight Diagnostics (SightDx) announced a collaboration with the United States Army Medical Research Directorate Kenya (USAMRD-K) to develop and test the next generation of the SightDx malaria diagnostic technology.  Sight Diagnostics will be developing and producing a portable malaria and complete blood count (CBC) reader that will be calibrated and tested in clinical trials at the USAMRD-K Field Station in Kisumu, Kenya.

SightDx currently markets the Parasight device, a high-throughput malaria detection platform that uses computer vision technology to analyze blood samples for malaria parasites.  The state-of-the-art digital cytometry technology combines cutting-edge computer vision algorithms, custom optics, and proprietary disposable cartridges, which allows for analyzing blood samples in a rapid, reliable and a completely automated fashion.  The platform has shown ~98% sensitivity and ~98% specificity in clinical trials performed in Africa and India.  The device is currently marketed throughout Europe, Africa and India with over 60 units having been placed in pathology laboratories and hospitals.

SightDx aims to develop and test a portable version of the malaria diagnostic technology which will also perform complete blood count, providing additional diagnostic information critical to health care providers operating in remote locations.  In contrast to the current device that can hold 30 tests and features automated loading and scanning, the next generation device will scan a single cartridge of five tests and have significantly smaller dimensions, making it appropriate for smaller clinics in rural areas.

Founded in 2011 and based in central Tel Aviv and Jerusalem, Sight Diagnostics has developed a groundbreaking platform for blood analysis and infectious disease diagnostics based on its innovations in Computer Vision technology. Sight Diagnostics’ platform builds on breakthroughs in sample preparation, biological staining, machine-vision algorithms, and clinical instrumentation, to provide a complete diagnostic solution that is suitable for point-of-care use.  (Sight Diagnostics 25.10)

Back to Table of Contents

8.4  Teva & IBM Expand Partnership in Drug Development & Chronic Disease Management

IBM and Teva Pharmaceutical Industries announced a significant expansion of their existing global e-Health alliance with a focus on two key healthcare challenges: the discovery of new treatment options and improving chronic disease management.  Both projects will run on the IBM Watson Health Cloud.

The expanded partnership features a new, three-year research collaboration to develop cognitive technologies that can enable a systematic approach to the emerging field of drug repurposing and deliver unprecedented scale in the discovery of new uses for existing drugs.  The companies also announced that respiratory and central nervous system (CNS) diseases will be the first targets for their chronic disease management initiative, which will be the first project to integrate data from The Weather Company (an IBM Business) into the analysis.  The joint work in chronic disease management emerges from Teva’s existing alliance with IBM as a Foundational Life Sciences Partner for the IBM Watson Health Cloud.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions used by millions of patients every day.  Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,800 molecules to produce a wide range of generic products in nearly every therapeutic area.  (Teva 26.10)

Back to Table of Contents

8.5  Mazor Robotics Commercially Launches Mazor X at NASS Annual Meeting

Mazor Robotics launched Mazor X, a transformative platform for spine surgeries at the North American Spine Society (NASS) annual meeting.  The Mazor X system represents a new surgical assurance platform for predictable surgery and patient benefit.  The commercial release of the Mazor X is a significant milestone for Mazor as well as for the Company’s strategic partnership with Medtronic that was announced in May 2016.  Since signing the agreement in May, Mazor and Medtronic have invested in co-marketing, promotion, and training efforts towards commercialization of the Mazor X.  The two companies, between them, now have hundreds of highly experienced capital and clinical specialists who are trained on Mazor X, who will be responsible for raising the awareness of, selling and supporting the Mazor X system.  In response to the pre-launch activity by Mazor and Medtronic, dozens of surgeons have attended Mazor’s labs and been introduced to the Mazor X.

In July 2016, Mazor first unveiled the Mazor X.  Due to this rising interest, the Company established an exchange (post-sale) program for existing U.S. Renaissance users to expand to the Mazor X system.  Since the July unveiling, the Company has received three pre-launch orders prior to today’s commercial launch, with scheduled deliveries by the end of the 2017 first quarter.  Additionally, the Company also received a purchase order from Medtronic for 15 Mazor X systems.

Caesarea’s Mazor Robotics believes in healing through innovation by developing and introducing revolutionary technologies and products aimed at redefining the gold standard of quality care.  Mazor Robotics Guidance Systems enable surgeons to conduct spine and brain procedures in an accurate and secure manner.  (Mazor Robotics 26.10)

Back to Table of Contents


9.1  Humavox & Starkey Bring Wireless Charging to Hearing Devices

Humavox is partnering with a global leader in state-of-the-art hearing technology, Eden Prairie, Minnesota’s Starkey Hearing Technologies, in order to advance the next generation of audio devices with the introduction of wireless charging.  Together, they will simplify the lives of hearing technology consumers by allowing users to bypass the often impossible task of changing very small disposable batteries within tiny devices.

Next generation hearing technologies are becoming much smaller and more sophisticated, providing plenty of benefits to those suffering from hearing loss, most importantly, smaller and more discrete devices.  However, changing the batteries in these tiny audio devices can be difficult, especially for a portion of hearing technology users, some of whom are elderly and may lack the dexterity to change these small batteries sometimes several times a week.

By integrating Humavox’s wireless charging into Starkey’s advanced hearing devices, the companies are enabling the transition from disposable batteries to rechargeable batteries, which will redefine the user experience.  No longer will users have to fumble with their devices in order to change the disposable batteries.  Instead, users will be able to simply drop their hearing device in its case and, regardless of its orientation in that case, the device will be recharged seamlessly.  As part of their collaboration, Starkey Hearing Technologies will integrate Humavox’s wireless charging technology within a variety of devices from its family of wireless hearing technology brands, including the most advanced and comprehensive hearing solutions available.

Kfar Saba’s Humavox is an innovative developer of groundbreaking technology in the field of wireless power. With its ETERNA platform, Humavox uses near-field radio frequency (RF) technology, and provides users with a simple and intuitive charging experience (“drop & charge”). The technology can be implemented in the smallest of devices, such as hearables, wearables and IoT devices.  (Humavox 18.10)

Back to Table of Contents

9.2  Change Labs Uses AI to Control Personal Overdrafts

Change Labs announced the launch of their platform and savings product, along with their latest pilot service that they are calling Predictive Overdraft Protection.  So far the company has succeeded in raising $1.3 million in seed capital to reach their alpha testing round from various unidentified backers.  While targeting the North American market, they maintain their HQ and R&D offices in Caesarea.

Recognizing that people have developed bad fiscal habits, the team has turned to machine learning and artificial intelligence to figure out how a user spends their money and identify where they could be making smarter decisions.  Initially, the service will be available exclusively in the US and Canada.  The founders believe that their product has the potential to give users significant visibility over their finances. It learns how a person spends by syncing the service through an API with their bank account and credit cards.  (Change 25.10)

Back to Table of Contents

9.3  Inokim Reveals Cutting Edge Electric Scooter

This October, Inokim launched the Quick 3 – a new electric scooter developed in Israel, which can be folded in 3 seconds and taken on a bus or a train.  The new model has a stronger engine, which makes it easier to overcome steep slopes, large headlights improving the poor visibility during the winter and tires with improved traction.  After a full recharge, the scooter could travel 30 kilometers without charging, at a speed of 25 kilometers per hour, adjusted to Ministry of Transport regulations and with no worries about breaking the law.  The Quick 3 comes with an application enabling activation using the mobile phone, with the possibility of shutting down the engine, as a precaution against theft.  This model will be sold in Israel for NIS 7,500 and will also be marketed in the US, Europe and the Far East.

Moshav Avihail’s MYWAY/INOKIM is a pioneering company which created the ‘last mile solution’ for commuting: the concept of dividing commuting into two stages, whereby long distances are covered by traditional transportation such as trains and cars, and crowded urban environments are navigated via personal mobility tools such as electric scooters.  MYWAY annually invests 30% of its profits on research and development to bring cutting edge technology into its designs, making our products the leaders in the market.  (Globes 25.10)

Back to Table of Contents

9.4  OriginGPS Elevates Drone Navigation with Module+Software Integration

OriginGPS launched three new products built on the flash-based SiRFstar V from Qualcomm Technologies.  This latest trio of modules is now boasting key drone features like low-latency velocity and position outputs and 5 Hz position updates to their already industry leading Multi Hornet, Multi Micro Hornet and Multi Micro Spider.

The Multi Hornet and Multi Micro Hornet offer drone OEMs a choice between 10×10 mm or 18×18 mm integrated, high-performance patch antennas, with benefits that extend to OBDII and under-dash telematics when utilizing the larger Multi Hornet.  The Multi Micro Spider brings all of these benefits into a compact 7×7 mm package suitable for use with a variety of external antennas.  All of OriginGPS’ modules are designed with patented Noise Free Zone technology which minimizes noise, producing the maximum signal-to-noise ratio.

Airport City’s OriginGPS is a world-leading designer, manufacturer and supplier of miniaturized GNSS modules (“Spider” family), antenna modules (“Hornet” family) and antenna solutions. OriginGPS introduces unparalleled sensitivity and noise immunity by incorporating its proprietary Noise Free Zone technology for faster position fix and navigation stability even under challenging satellite signal conditions.  (OriginGPS 24.10)

Back to Table of Contents

9.5  Vayyar Announces Smart Home Solutions using Its Powerful 3D Imaging Sensor Technology

Vayyar Imaging announced the availability of its award-winning 3D sensor technology for the Smart Home market.  Vayyar’s powerful 3D sensors see through known barriers to precisely detect, identify and track multiple individuals’ motion, falls and vital signs and deliver unparalleled 3D imaging optimized for the home environment.  Vayyar’s 3D sensors also ensure greater privacy through camera-free monitoring, making them ideal for home healthcare, security, sophisticated home automation and entertainment delivery.  Vayyar’s Smart Home sensor was recently awarded Best New Technology by an audience of more than 350 cable company executives during the Innovation Showcase at the CableLabs conference.

Vayyar’s 3D sensors are compact, cost-effective and powerful.  They require minimal installation and cover large areas, which reduces the need for multiple sensors throughout a home and minimizes the cost of installation for the end customer.  The patented 3D sensor technology uses radio frequency (RF) to deliver unprecedented Smart Home capabilities.

Yehud’s Vayyar Imaging is changing the imaging and sensing market with its breakthrough 3D imaging technology.  Vayyar’s exclusive sensors quickly and easily look into objects, analyze the makeup of materials and track changes and movements – bringing highly sophisticated imaging capabilities to your fingertips.  Their goal is to help people worldwide improve their health, safety, and quality of life using mobile, low-cost, and safe 3D imaging sensors.  (Vayyar Imaging 25.10)

Back to Table of Contents

9.6  IntactPhone Takes Mobile Security to the Next Level

CommuniTake Technologies announced that its Intact Mobile Security platform is the first and only to incorporate five unique security and privacy technology components: mobile device resources camouflage; proprietary push-notifications; highly encrypted device disk; use of countermeasures against cyber-attacks; and crowd-analysis for threat detection.  The mobile protection-built platform already consolidates key security elements: these include specially-manufactured smartphone; custom security-rich operating system; encrypted communications; virtual private network across devices; fused command and control center; built-in antimalware; comprehensive mobile devices and applications management; and remote control technology.  The new functions were identified by customers as unique empowerment methods to block sophisticated mobile cyber-crime attacks while assuring users privacy and device performance.  They form a robust mobile security and productivity platform fulfilling a complete protection framework: Identify, Protect, Detect, Respond, and Recover.

CommuniTake is offering enterprises a simple and extremely powerful solution to address mobile endpoint risk. With the Intact Mobile Security platform, organizations can prevent cyber-breaches via granular security and control over networks, devices, applications, and users.  The new advancements further strengthen the exploit prevention capabilities of the mobile endpoint protection platform.

Yokneam’s CommuniTake delivers a game-changing mobile security and productivity platform.  It natively integrates a specially-manufactured mobile phone, custom-built security-rich OS, encrypted communications, virtual private network, command and control center, and remote takeover technology to provide organizations with powerful in-depth protection against mobile cyber-crime.  CommuniTake personnel are a combination of developers from elite military cyber units, as well as hacking experts, ensuring cutting-edge technology.  (CommuniTake 25.10)

Back to Table of Contents


10.1  Israel’s Tax on Fuel Among World’s Highest

The tax rate on the consumer price of a liter of fuel is 65%, amounting to NIS 3.90 per liter, according to the November index compiled by the Israel Institute of Energy and Environment.  The Institute found that Israel had the fifth highest gasoline taxes among the developed countries, with only the Netherlands, Italy, Finland and Greece having the same or higher fuel taxes.  The Institute also found that the tax rate on fuel had risen 10%, from 55% to 65%, in four years.  State tax revenue from excise tax on gasoline currently totals NIS 13 billion a year.

How much does it cost us a month?  According to the results of the Institute’s study, the average monthly cost of energy taxes for a household totaled NIS 850 in November: NIS 620 in gasoline excise taxes, NIS 180 in VAT on gasoline, and NIS 50 in the electricity bill.  The maximum per-liter self-service consumer price for 95 octane gasoline rose by NIS 0.14 to NIS 6.03, following an increase in global oil prices.  The global price of black gold jumped from $46 to $50 a barrel last month, while the shekel-dollar exchange rate was up 1.8% to NIS 3.849/$.

This rise in the global price of oil resulted from the decision by the Organization of Petroleum Exporting Countries (OPEC) to cut production, which affected energy prices all over the world, but had an even greater effect in Israel, given the heavy taxes imposed on fuel prices.  (Globes 01.11)

Back to Table of Contents

10.2  Unemployment in Israel Rises in October

 Unemployment in Israel rose from an historic low of 4.6% in August to 4.9% in September, the Central Bureau of Statistics reported on 1 November.  The percentage of Israelis aged 15 and over in the workforce rose 0.2% in August to 64.3% while the level of employment for Israelis aged 15 and over fell 0.1% in August to 61.1%.  There are 3,948,000 Israelis aged 15 and over in the workforce of whom 3,756,000 have work and 192,000 are unemployed.  The number of Israelis working 35 hours per week or more fell 3% in the third quarter of 2016 compared with the second quarter.  At the same time, the number of Israelis working part-time, 35 hours or less, rose 5% in the third quarter of 2016 compared with the second quarter of 2016.  (Globes 31.10)

Back to Table of Contents


11.1  ISRAEL:  High-Tech Capital Raising Counters Global Downturn

IVC-KPMG found that Israeli high-tech companies have raised $4 billion so far this year, up 27% from the first nine months of 2015.

Israeli high-tech companies raised $1.19 billion in the third quarter of 2016, the second highest quarterly amount in 10 years, the latest IVC-KPMG survey reports.  The amount was significantly affected by the exceptional Ormat PIPE deal of $204 million, which amounted to 17% of total capital raised.  Excluding the Ormat transaction, the quarterly results stand at $982 million, similar to the $1 billion quarterly average raised in the past three years.

IVC-KPMG Survey findings presented only 142 funding deals closed in the third quarter of 2016, a 26% drop from the 193 deals in the preceding quarter and 17% below the three-year quarterly average of 171 rounds per quarter.

KPMG Somekh Chaikin’s Technology group partner Ofer Sela said, “While we observe a decline in the number of investments, we don’t believe that the local ecosystem is going to be dramatically impacted by the global downtrend in the long run, since the flow of quality deals continues to be strong and new growth investors are investing in these deals, providing a wider horizon to such companies, both in terms of the type of potential exit and valuation.”

Sela added: “We expect the IPO market in the US to be much stronger at the beginning of 2017, which will keep pushing both investors and VC-backed companies to continue nourishing the local ecosystem, alongside more traditional industries that are looking to reinvent themselves through innovative solutions.”

Since the beginning of 2016, Israeli high-tech companies raised a total of $4 billion in 510 deals, 27% above the $3.15 billion raised in 491 deals in the first nine months of 2015, and only 7% below 2015’s record of $4.3 billion.  The average transaction reached $7.8 million, a noticeable increase, compared with the $6.4 million average in Q1-Q3/2015.  In the third quarter of 2016, the average company financing round stood at $8.4 million, or – controlling for the Ormat deal – $7 million, far above the three-year average.

IVC Research Center CEO Koby Simana said that IVC had noticed a drop in foreign investor participation in Israeli technology capital raising, particularly by foreign VC funds, in rounds closed during the third quarter.  “This is a reflection of the global downtrend in VC investment that has been going on for over a year.  Venture capital investors have put on the brakes in nearly every country, with US capital raising, for example, declining for the fifth quarter in a row.  In Israel, we have so far been going against this trend, exceeding former capital raising records.  Thus, this drop in the number of deals involving foreign VC funds is not entirely unforeseen.  However, we need to wait for the fourth quarter results in order to determine that Israeli market is indeed following the global tendency.  In any case, we expect 2016 to close as a record year in terms of capital raising, so short of a dramatic surprise in the coming months, we are still far from declaring that the global VC crisis has hit Israel.”

In the third quarter of 2016, 75 VC-backed deals attracted $662 million, or 56% of total capital.  This reflects a 41% decrease from the $1.1 billion invested in 119 deals in the previous quarter, and a 24% year-on-year decrease ($869 million was invested in 101 deals in the corresponding quarter of 2015).  The number of VC-backed deals this quarter was the lowest in the past three years, 23% below a quarterly average of 97 VC-backed deals.

The survey editors believe the decline in VC-backed deals reflects a global downtrend in VC investments, as foreign and Israeli VC funds adjust their investment strategies and models, focusing on later stage investments and strengthening existing portfolios.  Concurrently, new early stage investment models are being developed and expanded, with accelerators and private investments including angels, investment clubs, family offices and crowdfunding platforms growing in prominence as seed and early stage funding sources – offering alternatives to Israeli high-tech companies.

Israeli Venture Capital Fund Investment Activity

In the third quarter of 2016, $130 million was invested by Israeli venture capital funds in local high-tech companies, 11% of total capital proceeds.  The amount demonstrated a 45% fall from the $238 million (14%) in the previous quarter, back to third quarter 2015 levels of $131 million (13%).

First investments by Israeli venture capital funds directed into new portfolio companies captured 38% of their total capital investments in the third quarter of 2016, a 46% decrease in amount compared to the preceding quarter, when their investments comprised 39% of total capital.

Capital raised by stage and deal size

The survey revealed a continued fall in seed investments, with 30 seed deals in the third quarter of 2016, closing $35 million (3%), down 15% from $41 million (2%) raised in 44 deals in the preceding quarter, and 60% below the $88 million (8%) raised in 53 seed deals in the corresponding quarter of 2015.

Moreover, while the number of deals (89 transactions) below $5 million still comprised the majority of deals (63%) in the third quarter of 2016, it was 25% down from the past three-year quarterly average of 116 deals.

The IVC-KPMG Survey found that larger deals are the running trend this year, with the third quarter keeping up the lively pace, featuring 20 deals above the $20 million closed at a total of $771 million, a 65% of total capital raised in the third quarter of 2016.  This explains how the quarter placed second in 10 years in terms of dollar volumes despite a decrease in the number of deals.  (IVC-KPMG 26.10)

Back to Table of Contents

11.2  LEBANON:  A New President for Lebanon

David Schenker wrote in the The Washington Institute PolicyWatch 2719 on 31 October that although filling the long-vacant office could help pull the country out of its political stagnation, Hezbollah and Iran will continue undermining Lebanese state institutions unless the situation next door in Syria changes significantly.

After more than two years without a president in Lebanon, the parliament convened on 31 October and elected Maronite Christian figure Michel Aoun.  The previous president, former Lebanese Armed Forces (LAF) chief of staff Michel Suleiman, finished his six-year term in May 2014, but the legislature was unable to reach consensus on his successor due to sectarian divisions (mostly between Sunnis, Shiites, and Christians) and competing foreign alignments (whether with Sunni Saudi Arabia or Shiite Iran).

Aoun has long been a controversial figure in Lebanon.  Once the country’s most anti-Syrian political figure, since 2005 he has been aligned with the Assad regime and its principal ally in Lebanon, the Iranian-backed Shiite militia Hezbollah.  This decision represents a significant victory for the ambitious octogenarian general, but it also suggests new pragmatism among his political opponents – the so-called March 14 coalition, which had opposed his candidacy for a decade.  While many welcome the potential end of political stagnation produced by the presidential vacuum, the key question is whether the agreement to elect Aoun also implies increased Iranian control.

Into Syria’s Arms

As LAF chief of staff at the end of Lebanon’s civil war, General Aoun militarily opposed both Syrian hegemony and the Taif Accord, which ended the conflict but diminished Christian political power.  In 1990, as the Syrians occupied Lebanon, Aoun sought refuge in France; he later returned home in 2005 when the Syrians withdrew, aspiring to be president.  Yet his hopes were dashed when the Sunni, Christian and Druze leaders who made up the pro-West/anti-Syrian March 14 coalition opposed his candidacy.

With his path to office blocked, Aoun’s party – the Free Patriotic Movement (FPM) – signed a memorandum of understanding with Hezbollah in February 2006 establishing a political counterweight to March 14.  The resultant coalition between Aoun’s Christian constituents and Hezbollah is called the March 8 alliance; the general has been reliably aligned with the Shiite group and its Iranian patron ever since.

Once the FPM claimed the most seats among Christian parties in the 2005 and 2009 parliamentary elections, it consistently backed Tehran’s agenda in Lebanon, supported the Assad regime, and became widely viewed as a sectarian actor hostile toward Lebanon’s Sunni community, which comprises approximately 35% of the population.  Yet after two years without a president, the Sunni leader of March 14, Saad Hariri, faced an unpalatable choice between pro-Syrian parliamentarian Sleiman Frangieh and Aoun.  Hariri initially chose Frangieh, but that decision was blocked by his coalition partner Samir Geagea of the Christian party Lebanese Forces, who surprisingly backed his own Christian political rival, Aoun.  Given Geagea’s move and the fallout from the May municipal elections, in which former coalition partner Ashraf Rifi won an insurgent local campaign against his erstwhile allies, Hariri convinced most of his bloc to accept Aoun in a bid to keep March 14 from falling apart.

Hezbollah’s Calculus

While Hezbollah ostensibly backed its political partner Aoun for the post, its behavior toward his candidacy has suggested ambivalence.  Indeed, the militia initially balked at supporting him, and it did not change its mind until weeks after Aoun became a viable candidate.

This indecision was not surprising because Hezbollah benefitted greatly from the political vacuum, which weakened March 14 and gave the militia a freer hand in its military deployments to Syria.  Moreover, now that he has won office, Aoun — who is known for his stubbornness and his maverick, even megalomaniac tendencies — could be hard for Hezbollah to control.  The organization had a bad experience with former president Suleiman, whose candidacy it backed in 2008.  At first, Suleiman proved a reliably pro-Hezbollah president, but he tilted against the militia in his last two years in office.

Hezbollah’s smaller Shiite rival, Amal, has been more openly opposed to Aoun.  The party’s leader, Speaker of the Parliament Nabih Berri, has made his distaste clear – last week he told Aoun, “I am against you and will vote against you,” and he ordered his thirteen-member bloc not to choose the general in today’s balloting.  Perhaps reflecting differences in Shiite opinion, Amal engaged in violent clashes with Hezbollah in recent weeks as Aoun’s candidacy gained steam.


To become the president and – in theory at least – national symbol of Lebanon, Aoun had to resign his membership in and leadership of the FPM.  That position has since been awarded to his son-in-law, Gebran Bassil, another controversial figure long mired in corruption scandals and allegations of sectarian incitement.  In the lead-up to the presidential election, Bassil extended an olive branch of sorts, improbably tweeting of his newfound admiration for Lebanon’s “moderate Sunnis.”  Yet Lebanon’s political realities and electoral map remain the same, and Aoun’s election in no way implies dissolution of the FPM’s political alliance with Hezbollah.

For his part, Hariri’s task of convincing his political allies to accept an Aoun presidency was not easy.  Six members of his 33-seat Future Movement bloc in Lebanon’s 128-seat parliament did not support the deal.  More complicated, however, will be the negotiations that lie ahead to determine the composition of the new government.  Hariri consented to Aoun as the least bad among terrible options; in exchange, he anticipates serving as prime minister, and his coalition supports this goal.

Assuming this scenario comes to pass, Hariri will face other challenges as premier.  It will be quite difficult, for example, to accommodate all the competing demands for ministries to be chosen by various players, including Aoun (who will likely insist on naming about a third of the approximately thirty-member cabinet), Hezbollah, the FPM and Hariri’s own ten-party bloc.  Even if he becomes prime minister, there is no guarantee Hariri will serve for long; last time he won the post, he was ousted by March 8 after just two years.

More consequential than the politics, however, will be the new dynamics created by an Aoun presidency.  As mentioned previously, he has been a remarkably divisive figure over the past decade.  After waiting nearly three decades to be president, will he become a unifying national actor, or will he remain a partisan, sectarian nationalist who is sympathetic to Iran’s increasingly influential position in Lebanon?  Precedent suggests little reason for optimism, though there are some within the March 14 camp who believe that Aoun’s advanced age will lead him to avoid fights with his former rivals and instead focus on securing his legacy.  In their view, this could mean helping to solve some of Lebanon’s more vexing economic and environmental problems, particularly the crisis caused by Syrian refugees, who now comprise nearly one-third of the population.

Policy Implications

Thus far, Washington has publicly applauded Aoun’s election and called on the new government to “uphold” its obligations, “including those contained in UN Security Council Resolutions 1559 and 1701,” which emphasize Lebanon’s sovereignty and the need to disarm Hezbollah.  But these admonishments are likely to fall on deaf ears.  Given current realities, Hezbollah will continue to possess a massive arsenal of weapons outside the government’s authority for the foreseeable future.  It will also continue deploying into Syria at will to fight on the Assad regime’s behalf, with or without Beirut’s consent.  To wit, even if Hariri becomes premier, the ministerial statement issued by his government will likely legitimize Hezbollah’s weapons.

For these and other reasons, many in the United States and the region are declaring Aoun’s election a victory for Hezbollah and Iran.  Yet Hariri and his coalition had few alternatives, and it is difficult to imagine an Aoun presidency being worse for March 14 – and U.S. interests – than the ongoing vacuum. Aoun may even surpass the extremely low expectations for his presidency.  Likewise, a Hariri government, if adeptly managed, could revitalize the moribund March 14 coalition, making it a more potent and popular political force.  In any event, Aoun’s departure from the FPM will all but certainly exacerbate the party’s internal divisions and dilute its popular support – a development that over time will benefit March 14.  Most important, the agreement to elect him apparently received Saudi Arabia’s blessing, perhaps spurring Riyadh to reengage in Lebanese politics as a useful counterbalance to Iran.

Finally, while this decision may have ended Lebanon’s prolonged political impasse, significant national challenges remain.  The presidency has limited powers, so filling the office is no panacea.  With or without Aoun, Hezbollah and Iran remain the country’s dominant political actors.  Absent an effective U.S. policy that deals Tehran and its proxies a setback in Syria, Lebanon will remain on the precipice of crisis.

David Schenker is the Aufzien Fellow and director of the Program on Arab Politics at The Washington Institute.  (TWI 31.10)

Back to Table of Contents

11.3  JORDAN:  Jordan ‘BB-/B’ Ratings Affirmed; Outlook Remains Negative

On 21 October, S&P Global Ratings affirmed its ‘BB-/B’ long- and short-term foreign and local currency sovereign credit ratings on the Hashemite Kingdom of Jordan.  The outlook is negative.


Jordan continues to face enormous pressures from ongoing regional conflicts.  The refugee influx since 2011 has markedly pushed up government expenditures and contributed to rising government debt.  According to the Office of the United Nations High Commissioner for Refugees about 630,000 Syrian refugees have registered in Jordan, including approximately 80,000 living in the large Zaatari refugee camp.  Still, most estimates suggest that there is a much larger refugee population in Jordan generally, including refugees from Iraq and Libya.  Furthermore, with slower regional growth because of lower oil prices, the outlook for foreign direct investment (FDI), remittances and other transfers remains uncertain.  In our opinion, the government’s ability to respond to further shocks, absent external support, is tenuous because of its elevated debt burden.  However, we continue to expect that international support for Jordan – for instance through budgetary and non-budgetary grants, concessional lending and donor flows, among other channels – will remain strong, helping to offset these pressures.

Despite its challenging environment, Jordan has preserved relative economic stability.  Real GDP grew on average by 2.7% over 2011-2015.  However, given the 45% increase in Jordan’s population – to 9.5 million in 2015 from 6.7 million in 2011 – we estimate that GDP per capita decreased to $4,000 in 2016 from $4,500 in 2011.  This represents a cumulative reduction of 30% in real terms.

Real GDP growth decelerated to 2.4% in 2015 from 3.1% in 2014, prompted by the closure of a major border with Iraq about halfway through the year.  Jordan exports 16% of its total goods to Iraq.  In the first half of 2016, the economy grew by 2.6% in real terms, supported by the construction, electricity, water, transport and communications sectors, as well as financial services.  We project real GDP growth of 2.8% in 2016 and 3.4% on average in 2016-2019, underpinned by steady consumption growth, new infrastructure developments, and the implementation of projects financed by foreign funds and a relatively resilient financial services sector.  We also expect growth will be supported by reforms aimed at the business sector, developed alongside a fresh program from the International Monetary Fund (IMF).  One possible upside to export growth could come in the form of greater exports to the EU following an agreement in recent months between Jordan and the trade bloc on simplified rules of origin, and another could follow the re-opening of the Iraqi border crossing.  We do not include either of these scenarios in our projections, however.

After the conclusion of the previous standby arrangement in 2015, the IMF executive board approved an extended fund facility (EFF or program) for Jordan in August of this year.  The program will make $723 million (1.8% of estimated 2016 GDP) available to Jordan over three years and aims to support the authorities’ economic and financial reforms under the Vision 2025 program.  One important goal under this program is to reduce public debt while minimizing the fiscal drag of the consolidation effort on the economy and on social spending.  The program aims to achieve this through a mix of revenue- and expenditure-side measures.  On the revenue side, measures include reducing tax exemptions, changing the income tax code, raising corporate tax rates, and lowering the personal income tax exemption, alongside efforts to improve tax administration.  The program also envisages better management of current expenditures, mainly by curbing growth of the public sector wage bill.

Other main reforms relate to restoring NEPCO, the national electricity company, to operational balance.  The legislation and implementation from January 2017 of an automatic tariff adjustment mechanism is one of the preconditions for the completion of the next review under the program and the receipt of the next tranche of funds.  NEPCO has sustained heavy losses – around 5% of GDP annually – since 2011, when disruptions to the supply of relatively cheap gas from Egypt began.  NEPCO borrowed to fund its purchase of costlier diesel fuel supplies in 2012-2013, with a sovereign guarantee.  The government also subsidized the difference between NEPCO’s buying and selling price.  In mid-2013, the government began directly paying NEPCO’s debt-servicing costs.  More recently, NEPCO’s operational losses have dropped substantially after switching back to cheaper liquefied natural gas.  Therefore, pressures on general government finances from this front have abated, for the time being.

We include NEPCO’s debt (nearly 10% of GDP) as part of the general government debt stock, which we estimate at nearly 80% of GDP in 2016.  At the central government level, however, we now estimate gross debt at 92% of GDP.  The difference between the two amounts is explained by the social security sector’s holdings of government paper.  We view this level of debt as a vulnerability in the event of additional shocks.  With the implementation of fiscal reforms under the EFF, we project that the central government deficit will gradually reduce to 4.7% of GDP in 2019 from 6% in 2015, with central government debt decreasing to 88% of GDP in 2019.

Jordan’s current account deficit (CAD) widened to 9.2% of GDP in 2015 from 7.3% in 2014, despite a substantial price reduction in fuel imports.  This was in part due to the closure of a key trade channel with Iraq, which offset these gains, in addition to a reduction in grants.  In the first half of 2016, these factors, alongside falling tourism receipts, contributed to a further widening of the CAD to about 12% of GDP.  Over the rest of the year, we expect that additional official transfers will lower the gap to about 9% of GDP.   However, we anticipate that the CAD will remain elevated in 2016-2019.  We expect the main financing items will likely remain FDI, debt inflows, grants and project lending.  We note that positive errors and omissions (on average 3% over 2013-2015) could well represent unreported FDI and cash inflows, with inflows potentially also including refugees’ assets.

External financing needs remain high (above 100% of current account receipts [CARs]), owing to the large CAD and the high proportion of short-term debt.  Nonresident deposits in the financial sector make up most of the short-term debt.  Although these deposits have continued to increase, and we understand that they mainly relate to the Jordanian diaspora, we view a reversal as a potential risk.  We also note that remittance flows could decline as a result of weaker growth in the Gulf, consequently weighing more negatively on Jordan’s balance of payments.

The Jordanian dinar’s peg to the U.S. dollar supports price stability, although it also limits the central bank’s room for policy maneuver.  Deflation since 2015 mainly relates to lower fuel prices rather than to weak consumption demand.  We expect headline inflation will trend upward over the forecast horizon through 2019.

The September parliamentary elections, the first following electoral reforms in 2015, were largely seen as free and absent government interference.  The elections were based on a system of proportional representation and saw the participation of the Islamic Action Front (IAF), the political arm of the Muslim Brotherhood, which has boycotted the last two elections.  A cabinet has been formed and largely comprises pro-royalists.  We expect no major shifts in the government’s economic or fiscal policy direction.

Given the regional instability affecting Syria and Iraq, and now increasingly affecting Lebanon, we expect international support will remain strong in Jordan because we believe that maintaining its relative stability is an important foreign policy objective for the U.S. and the Gulf Cooperation Council (GCC; Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates). Illustrating this is the level of grants from the U.S. and the $5 billion GCC Fund (13% of estimated 2016 GDP) intended for project financing, as well as the U.S. guarantee of U.S.-dollar Eurobonds issued in 2013-2015.  We view these commitments to Jordan as an important rating strength.


The negative outlook reflects the risks that exogenous factors, such as regional instability, will continue to pose to Jordan’s public and external finances over the next six months.

We could consider lowering the ratings if fiscal or external balances diverge significantly from our expectations, growth is lower than we currently expect, foreign and official funding becomes less forthcoming, or financing needs widen beyond the scope of available external assistance.

We could revise the outlook to stable if Jordan implements key political and structural reforms that support more sustainable economic growth and further ease fiscal and external vulnerabilities, for example, through the IMF program.  We could also consider revising the outlook to stable if we observe a significant improvement in the regional security environment, which could diminish the threat of further shocks.  (S&P 21.10)

Back to Table of Contents

11.4  GCC:  Fitch Says Bank Assets; Saudi, Qatar Most Resilient to Oil Shock

On 19 October 2016, Fitch Ratings said banks in Saudi Arabia and Qatar are better placed than Gulf Cooperation Council (GCC) peers to cope with an eventual deterioration in asset quality brought about by a prolonged period of weak oil prices.

Our base case is that GDP will continue to grow in 2017 and 2018 across all GCC countries and we forecast a gradual rise in oil prices to $55 a barrel by 2018.  Nevertheless, we examined the impact of lower for longer oil prices on asset quality across the region and concluded that loss-absorption capacity in the Saudi banking sector ranks highest among GCC countries and that both Saudi Arabia and Qatar would continue to offer the soundest lending opportunities under that scenario, suggesting impaired loan ratios should increase more slowly in these countries than their peers.

The operating environment is a positive ratings factor for banks in Saudi Arabia, Qatar and the UAE.  In our view, business opportunities are strongest in Saudi Arabia and the UAE, reflecting the countries’ larger and more diversified economies.  In Qatar, we are not expecting any significant cuts to government spending and numerous government-sponsored projects continue to provide profitable, low-risk, lending opportunities for banks.

Relative to GCC peers, the operating environment has a neutral impact on bank asset quality in Kuwait, where we expect little change to government spending patterns, while in Oman and Bahrain, it weighs negatively on asset quality reflecting the smaller scale of public-sector spending and indirectly fewer lending opportunities in those countries.

Our loss-absorption capacity assessments hinge on three components.  In the first instance, we analyze existing loan-loss reserve coverage across GCC banking sectors to determine the extent to which excess reserves could be used to cover unexpected losses.  Loan-loss reserves at Kuwaiti banks, for example, represented 260% of impaired loans at end-2015, the highest GCC coverage ratio, and the sector’s excess reserves, which we define as all reserves exceeding 100% of existing impaired loans, were equivalent to 2.5% of total loans on a weighted average basis.  This means that banks could maintain full coverage of impaired loans if impairments grew by this amount.

Secondly, we analyze the ability of banks to build up capital internally from retained earnings. GCC banks are profitable, reflecting high interest margins and low costs, and are capable of generating pre-impairment profits equivalent to at least 2.5% of gross loans each year.  This ratio is a high 3.8% for Saudi banks, followed by 3.6% for UAE peers, signaling a strong ability to write new provisions, if required.

Lastly, we look at the existing amount of excess regulatory capital held by GCC banks. Saudi, UAE and Bahraini banks report regulatory capital ratios far higher than the minimum prudential requirements, with excess amounts respectively equivalent to 8.5% (Saudi Arabia) and 7% (the UAE and Bahrain) of gross loans.  Regulators generally ask banks to hold extra capital buffers and we are not suggesting that GCC banks would operate at minimum capital levels, but we think some of the excess capital could be used to absorb unexpected credit losses if required.

Fitch’s assessment of the resilience of GCC banks’ asset quality also considers concentration risk, exposure to government-related entities and business mix.  (Fitch 19.10)

Back to Table of Contents

11.5  GCC:  Qatar’s Succession Model Could Be a Way Forward

Simon Henderson wrote in TWI PolicyWatch 2716 on 25 October that with most of the leaders of the conservative Arab Gulf states old or in poor health, abdication in favor of a younger generation may invigorate moribund hereditary leaderships, though a one-size-fits-all solution is not feasible.

On 23 October, former Qatari emir Sheikh Khalifa bin Hamad al-Thani died at age eighty-four, closing a chapter of Gulf history.  Back in 1972, Sheikh Khalifa pushed his cousin from power, but was later usurped by his son Hamad in 1995.  This prompted outrage in Qatar’s neighbors, who hated the precedent of a son overthrowing a father.  Then, in 2013, Emir Hamad abdicated in favor of his third-oldest son, Tamim, the first apparently uncontested transition of power in Qatar in a hundred years.  Just thirty-six years old, Tamim has four sons from his three wives, but for now the designated heir apparent is his half-brother, Abdullah.  Additionally, Tamim’s predecessor remains an advisor as “Father Emir,” though the extent of his influence is unclear — some Gulf officials assert that he is still very much in charge.

Whatever the true scope of Qatar’s generational handoff, the country’s succession-by-abdication approach could serve as a template for its neighbors.  Yet historical rivalries between the other members of the Gulf Cooperation Council – Saudi Arabia, Kuwait, Bahrain, the United Arab Emirates, and Oman – may compel them to pursue other paths, or just put off any decision indefinitely.

Saudi Arabia:  Increasingly, the kingdom’s crucial decision maker is seen as thirty-one-year-old Deputy Crown Prince Muhammad bin Salman (aka MbS) rather than eighty-year-old King Salman or fifty-seven-year-old Crown Prince Muhammad bin Nayef (aka MbN).  The king, described by the New York Times as suffering from “memory lapses,” is believed to favor MbS, the eldest son of his favorite wife, as his successor.

Making that happen anytime soon would be a challenge, however.  For one thing, Saudi kings traditionally keep going until they drop – King Abdullah died in 2015 at ninety-two and King Fahd was eighty-four when he eventually passed away in 2005, ten years after suffering a debilitating stroke.  Palace politics and rivalries may pose a formidable obstacle as well.  King Salman has already exercised his royal authority to change the crown prince, naming MbN three months after taking the throne, so he could do so again at any time.  Yet whether MbN and the wider royal family would accept MbS being made crown prince or the king abdicating in his favor is debatable, since support for the young prince’s forceful policies as defense minister and economic “visionary” is hardly universal.

Kuwait:  The current emir, Sheikh Sabah al-Ahmed al-Sabah, is eighty-seven, and the crown prince is his half-brother Sheikh Nawaf al-Ahmed al-Jaber al-Sabah (age 79).  Traditionally, succession has flip-flopped between the al-Ahmed and al-Salem branches of the al-Sabah family, but the al-Salem branch is being skipped in the current lineup.  Moreover, Kuwait is unique among Arab Gulf states in that any prospective emir must first win approval from the national assembly, an elected body.  Sheikh Sabah has just dissolved the assembly, and elections will be held in November, reopening the question of whether Sheikh Nawaf will one day win approval.

Bahrain:  Sixty-six-year-old King Hamad’s designated successor is his eldest son, Crown Prince Salman (age 47), but there is speculation that Salman would prefer to be replaced by a younger son, Royal Guard commander Sheikh Nasser (29).  The more crucial impending decision concerns the king’s uncle Sheikh Khalifa bin Salman (80), the long-serving prime minister and manipulator of palace politics. Khalifa and his allies in the Sunni royal family have taken a hardline stance against Bahrain’s Shiite majority population, in contrast with Crown Prince Salman’s embrace of political concessions, so they may see the young Sheikh Nasser as a more pliable future king.

The UAE:  Founded in 1971 by Sheikh Zayed al-Nahyan of Abu Dhabi, the post of president of the confederation is technically elected every five years by the heads of the seven emirates.  When Zayed died in 2004, his son Sheikh Khalifa was “chosen,” but he effectively inherited the role given Abu Dhabi’s oil wealth.  Khalifa has been unwell for many years, however, and suffered a stroke in January 2014.  While decrees are still formally announced in his name, de facto leadership of both Abu Dhabi and the UAE has passed to his half-brother Crown Prince Muhammad bin Zayed (age 55).

Yet it is unclear what will happen once Muhammad bin Zayed becomes the formal ruler — will he want power to go to his sons (Khalid bin Muhammad, the recently appointed chairman of state security, has been mentioned as a possibility) or to his brothers?  Whatever happens, the ruler of Dubai, Sheikh Muhammad bin Rashid al-Maktoum (67), who is notionally the confederation’s vice president, will continue to be sidelined, along with his sons.  Dubai may have the glitz, but Abu Dhabi is the center of power; the other five emirates don’t count.

Oman:  Sultan Qaboos (age 75) is rarely seen in public, and when he appeared at a military parade in November 2015, he was noticeably gaunt and remained seated.  Previously, he spent eight months at a German clinic for treatment of what was believed to be colon cancer.

On 14 October, Foreign Minister Yusuf bin Alawi unconvincingly declared that the sultan was “well” and “in good health.”  He also told a Saudi newspaper that Omani succession was “arranged in a clear way,” and that “people are more worried outside the country than inside.”  Qaboos is no longer married and has no children, so his successor will be decided by the extended royal family.  Three cousins are judged the most likely candidates at present; if the family cannot agree, the sultan has apparently written a letter naming his choice in the event of a deadlock.


Washington’s hopes for strong, accountable leadership in its Gulf allies must be balanced against local preferences, and must avoid any appearance of interference in domestic affairs.  The Qatari example holds promise, although it is just one way forward and cannot apply in all circumstances, it shows that Gulf leaders may be seeking new approaches to historical challenges.

Simon Henderson is the Baker Fellow and director of the Gulf and Energy Policy Program at The Washington Institute.  (TWI 25.10)

Back to Table of Contents

11.6  MOROCCO:  Fitch Affirms Morocco at ‘BBB-‘; Outlook Stable

On 21 October 2016, Fitch Ratings affirmed Morocco’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘BBB-‘.  The issue ratings on Morocco’s senior unsecured foreign- and local-currency bonds are also affirmed at ‘BBB-‘. The Outlooks on the Long-Term IDRs are Stable.  The Country Ceiling is affirmed at ‘BBB’ and the Short-Term Foreign- and Local-Currency IDR at ‘F3’.

Key Rating Drivers

Morocco’s ratings reflect economic performance, public finance and external finance metrics in line ‘BBB’ medians and structural features (as reflected in development and governance indicators) that are weaker than peer medians.  The IDRs reflect the following key rating drivers:

External finances have strengthened since 2012, due to a combination of lower oil prices, rising manufactured exports, and resilient remittance inflows.  While Fitch assumes that the current account deficit remains exposed to the oil price recovery, we only expect a moderate widening over the forecast horizon, to 2.6% of GDP in 2018 from 2.2% in 2015, as phosphate and manufactured exports gather pace.

With foreign direct investments (FDI) expected to remain steady at around 2.5% of GDP, net external debt is likely to continue declining gradually while still remaining slightly above peers (9.7% of GDP versus BBB median of 5.4% in 2016).  FX reserves, which are expected to cover more than 6.5 months of current external payments at end-2016, provide a valuable buffer to swings in external accounts, reinforced by the recently renewed precautionary line with the IMF worth $3.5b.

We expect the central government to broadly achieve its fiscal deficit target of 3.5% of GDP in 2016 (down from 4.3% in 2015), driven by a recovery in grants from GCC countries and a decline in the subsidy bill.  This will likely maintain the general government (GG) deficit below 2% of GDP.  Fitch assumes that the authorities’ commitment to further consolidation over our forecast horizon would keep the fiscal deficit below the ‘BBB’ median of 2.7%.

GG debt declined slightly in 2015 to 49.5% of GDP, and is expected to fall further to around 48% by end-2018.  While still above the ‘BBB’ median of 40%, we expect the gap to narrow gradually.  Public debt composition is favorable in Morocco, with a lower interest bill than ‘BBB’ medians and 71% of GG debt issued in local currency.

Despite some volatility in agricultural output, GDP growth has been higher than ‘BBB’ medians over the past five years.  In 2016, real GDP growth is expected to slow to 1.6%, despite stability in non-agricultural output growth (forecast at 3.5%), as drought-affected agricultural output is expected to decline around 10%.  GDP growth will, however, recover to above 3% in 2017.  Medium-term prospects are supported by the development of industrial output and the modest recovery in traditional export markets.

Macro stability has prevailed in Morocco. Inflation, at an expected 1.2% in 2016, is structurally lower and less volatile than ‘BBB’ peers, while the exchange rate has proven stable.  The authorities’ intention to gradually increase exchange rate flexibility could help the country absorb future shocks, and we do not expect significant depreciation of the dirham over the forecast horizon given its current alignment with fundamentals, and the recent strengthening in FX reserves

The recent legislative elections have proceeded smoothly, with the PJD (Parti de la Justice et du Developpement) winning the elections and likely to continue ruling the country in a new coalition.  We expect economic policies to remain stable and predictable, focusing on maintaining macro-stability and consolidating public finances.  Morocco is exposed to terrorist risk though; any terrorist attack could affect macroeconomic performance through the tourism channel.

Development and governance indicators are structurally weaker than ‘BBB’ medians, illustrating weaker debt tolerance than peers and reducing rating upside.  In particular, GDP per capita and human development indicators are lower than ‘BB’ medians.  Exposure to financial shocks is moderate, due to a developed and broadly sound banking sector.

Rating Sensitivities

The Stable Outlook reflects Fitch’s assessment that upside and downside risks to the rating are currently balanced.

The main factors that may, individually or collectively, lead to positive rating action are:

  • -Continued fiscal consolidation and reduction in public debt-to-GDP closer to the ‘BBB’ median
  • -Structural improvement in the current account balance consistent with declining net external debt to GDP
  • -Over the medium term, improvement in development indicators illustrating rising debt tolerance

The main factors that may, individually or collectively, lead to negative rating action are:

  • -A widening of twin deficits, leading to rising public and external debt burdens
  • -A weakening of medium-term growth prospects
  • -Political and security developments that affect macroeconomic performance (Fitch 21.10)

Back to Table of Contents

11.7  TURKEY:  The Brewing Battle Over Coffee in Turkey

Tulay Cetingulec posted in Al-Monitor on 26 October 2016 that Turkish coffee is one of Turkey’s best-known hallmarks abroad.  The coffee beans are not homegrown, but the slow brewing technique, taste, aroma and a history of about 500 years make Turkish coffee special on the world coffee scene.  While it is served in small cups of only several sips, Turkish coffee opens the door to conversations stretching over hours.  It is also a central element in a premarital ceremony, in which the family of the groom-to-be visits the family of the bride-to-be to ask for her hand.  The bride-to-be makes Turkish coffee for the occasion as a first treat for her future in-laws.  To pass the test with flying colors, the coffee has to be brewed on a low flame and have plenty of foam.  Yet if the girl is reluctant to marry her suitor, her coffee may not taste that good, and even salt could replace sugar in the brew!

Turkish coffee is also the first thing served when neighbors visit each other.  After drinking the coffee, they turn the cups upside down onto the saucers to read the residual coffee grounds.  After a while, the cups are opened and imagination begins to speak — upcoming trips, lucky events, money, love or anything about life.

The casual coffee-reading sessions at home have now become a professional sector at coffee shops.  There are even online coffee readers — all you need to do is send a photo of the shapes the coffee residue has formed inside the cup.

In Turkey, there are now plenty of other options for coffee.  Leading international brands such as Starbucks, Gloria Jean’s, Illy, Robert’s, Caffe Nero, Barnie’s, John’s, Lavazza and Schiller’s have opened hundreds of shops across the country since 1999.  A total of 31 local and foreign brands ran 1,178 shops in 2015, and the number is estimated to have exceeded 1,200 this year.  Starbucks alone has more than 200 shops.  A famous coffee brand can be found on almost every big avenue and in every shopping mall.  The coffee shops offer internet connections and often have special tables suitable for studying, which has made them the new meeting place for the young.

Against the well-deserved fame of Turkish coffee, the foreign brands offer various types of filter coffee, often flavored with creams and syrups, such as macchiato, Frappuccino, latte, cappuccino, mocha and Americano, which the young Turks have readily embraced.

According to various sources, the coffee market in Turkey is worth TL 500 million ($162 million), with Turkish coffee accounting for TL 125 million ($40.5 million).  Though the market is growing, coffee consumption remains low compared to Western markets.  In the European Union, for instance, annual coffee consumption is 600 grams per capita, six times bigger than in Turkey.  Yet consumption appears bound to increase, with the coffee market growing an impressive 15% per year.

Encouraged by this outlook, Semih Kurumlu has become one of the latest entrepreneurs to join the Gloria Jean’s chain, which has 60 shops across Turkey.  Kurumlu, whose shop is located in Ankara, told Al-Monitor, “We bring the best-quality coffee from seven regions across the world, brew it and sell it for affordable prices.  We don’t have waiters here.  The clients take their coffee and sit down, and then no one comes to their tables to annoy, asking whether they would like something else.”  Kurumlu said young people prefer the foreign coffee types, while their elders go for Turkish coffee, especially after lunch and dinner.  In Kurumlu’s shop, foreign coffee types account for 80-90% of total sales.  The figures are similar at Starbucks.

In both chains, the shops play only foreign music.  Kurumlu is happy with that.  “I wouldn’t have played local music, even if I was free to do so,” he said.  “Polarization has reached such a level that local music would have been a problem.  Some local musicians are seen as rightists, others as leftists and yet others as Gulenists.  So the best is to play foreign music.”

As the coffee market grew, some entrepreneurial coffee enthusiasts found a practical solution for the arduous brewing technique of Turkish coffee — Turkish coffee machines.  Local companies manufactured the machines, boosting the market share of the local brew.  Plenty of Turkish companies like Beko, Arcelik, Arzum, Vestel and Oztiryakiler are manufacturing Turkish coffee machines today, and foreign manufacturers like Bosch and Conti are said to be gearing up to enter the market.

At Kahve Dunyasi (Coffee World), the largest local chain that boasts more than 200 shops both at home and abroad, the breakdown of consumer preferences is different.  Mehmet Uysal, the manager of a Kahve Dunyasi shop in central Ankara, told Al-Monitor, “In terms of packaged coffee, we sell about 10 kilograms [22 pounds] of filter and instant coffee per day and a similar amount of Turkish coffee.”  He added that about one-third of sit-down clients ask for Turkish coffee.  At Kahve Dunyasi, buyers of the traditional brew are treated with free chocolate and water, which is an important factor boosting the sales.

And what are the consumers saying?  Fahrettin Asik, a sexagenarian, told Al-Monitor he turned to filter coffee upon advice that it was reduces the risk of Alzheimer’s disease.  Sahin Aldanmaz said he got accustomed to Colombian coffee because he liked its aroma and strength.  Coffee is now an “indispensable” part of his daily life, he added.

The boom in the coffee sector has attracted local chains to the market, as well.  Turkish brands such as Kahve Diyari, Cafe Crown and Coffeemania have followed in the steps of local leader Kahve Dunyasi, whose supply of coffee beans comes from a special Brazilian farm catering only to the Turkish company’s needs.  Kahve Dunyasi founder Birol Altinkilic noted that consumption in the Turkish coffee market has grown from 6 tons to 38,000 tons per year in a matter of years.

Traveling in Europe about 15 years ago, I was surprised to discover that homeless people asked for money for “a cup of coffee” rather than for “a piece of bread,” as they would do in my country.  Today, I can relate to them, having become a “coffee addict” who hardly goes a day without the drink.  Given that 78% of Turks have become coffee drinkers, similar entreaties could be soon heard in the Turkish streets as well.  (Al Monitor 26.10)

Back to Table of Contents

11.8  CYPRUS:  Fitch Upgrades Cyprus to ‘BB-‘; Outlook Positive

On 21 October 2016, Fitch Ratings upgraded Cyprus’s Long-term foreign and local currency Issue Default Ratings (IDRs) by one notch to ‘BB-‘ from ‘B+’.  The issue ratings on Cyprus’s senior unsecured foreign and local-currency bonds have also been upgraded to ‘BB-‘ from ‘B+’.  The Outlooks on the long-term IDRs are Positive.  The Country Ceiling has been upgraded to ‘BBB-‘ from ‘BB+’ and the short-term foreign and local currency IDRs have been affirmed at ‘B’.

Key Rating Drivers

The upgrade of Cyprus’s IDRs reflects the following key rating drivers and their relative weights:

Medium:  Cyprus is continuing to make strong progress in its adjustment following the 2013 banking crisis. Its exit from the EU and IMF program in March took place in a context of outperformance of fiscal and economic program targets, success at lifting capital controls, and steps taken to restructure the banking sector.

The economic recovery, now into its second year, is supporting employment, bank asset quality adjustment, and public finances.  Fitch is projecting GDP growth of 2.9% in 2016 (from 1.9% projected a year earlier).  A strong H1/16 outturn was supported by private consumption and investment, and reflected broad based growth across industries, most notably in tourism.  Unemployment reached 12.1% in Q2/16, from 14.9% in 2015.  For 2017-2018, GDP growth of around 2.5% will benefit from an expected increase in foreign direct investment.  Downside risks to the outlook stem from banking sector deleveraging and the weak external environment.

The banking sector is gradually strengthening, evident in the pick-up in deposits and stable capitalization.  Deleveraging is ongoing, with overall sector assets down to 3.7x GDP in June 2016 from almost 6x in 2009.  The Bank of Cyprus (placed into resolution in 2013 and recapitalized partly through a bail-in of depositors) has reduced its reliance on emergency liquidity assistance, to €1.5b by August 2016 from over €11b in April 2013.  The property sector remains illiquid but prices seem to be stabilizing at around 30% below their 2008 peak.

Strengthened supervision, management and regulations are helping to slowly reduce the exceptionally large stock of non-performing exposures (NPEs) at 48% of total loans.  The new foreclosure framework is in the initial phases of implementation.  The stock of NPEs has declined slightly to €25b as of August 2016 from €28.4b a year earlier.  The volume of new restructurings is also increasing, albeit from a low level.  In April 2016, Fitch upgraded the IDRs of Bank of Cyprus (48% share of gross lending) to ‘B-‘ from ‘CCC’ and Hellenic Bank to ‘B’ from ‘B-‘, with stable outlooks for the two banks.

A strong track record of fiscal policy management provides confidence that authorities will remain committed to government debt reduction in line with fiscal targets.  The budget is close to balance, although the 2017 budget includes tax relief measures that will widen the deficit, based on government projections, to 0.6% of GDP in 2017 from 0.3% in 2016 (vs. modest surpluses previously projected).  Fitch projects government debt to decline to just over 100% of GDP by 2018 (still more than twice the projected ‘BB’ peer median) from a peak of 108.9% in 2015.

The financing position and outlook are favorable.  Debt financing operations have contributed to the government’s cash position, expected by authorities at end 2016 to exceed financing needs until 2017.  Cyprus’s first post-program market issuance in July (representing the fourth issuance since entering the bailout program in 2013) was priced at the lowest coupon rate achieved by Cyprus for a euro benchmark bond.  The seven-year 3.75% €1b bond was realized without support from the European Central Bank’s bond-buying scheme.

Cyprus’ ‘BB-‘ IDRs also reflect the following key rating drivers:

Banks remain fundamentally weak and pose an ongoing risk to economic stability.  Despite a fall in the stock of NPEs, the ratio of NPEs to total loans stood at 48% in August 2016, still the highest of all Fitch-rated sovereigns and up from 45% at end-2015.  Excluding overseas branches and subsidiaries, the ratio is even higher, at 57%.  With provisioning coverage of NPEs at 38.5%, unreserved problem loans, represented by gross NPEs minus system-wide reserves, stood at €15.4b (87% of GDP) from €16.8b (97% of GDP) at end 2015.

Net external debt (NXD) is exceptionally high at 139% of GDP at end-2015 compared with the ‘BB’ range median of 16%, reflecting a highly indebted private as well as public sector.  The NXD figure has been revised up by over 70%age points of GDP following the shift of external statistics compilation to the BPM6 framework in June 2014, owing to the inclusion of capital-intensive ship-owners as Cypriot economic units irrespective of the location of their activities.

Cyprus is still running a sizeable current account deficit, which implies that further economic rebalancing may be required over the medium term.  It was 3.7% of GDP in 2015, albeit down from over 15% in 2008.  Fitch has revised up its current account deficit projections to around 4.3% of GDP for the period of 2016-2018, reflecting an increase in consumption led imports registered in H1/16 and expected to continue in the forecast period.

Negotiations for a deal between Greek and Turkish Cypriots to reunify the island are underway.  The likelihood of success and the terms of a potential deal remain uncertain.  A deal would benefit both sides in the long term by boosting the economy, but would entail short-term costs and uncertainties.

Focus on reaching an agreement could divert political capital away from structural reform implementation, where progress to-date has been mixed.  The improved economy and exit from bailout program could reduce the urgency for reform.  Additionally, municipal elections in December, and presidential elections in 2018, could further delay progress in politically sensitive areas, including public administration reform and the telecom company privatization.

Fitch judges the impact of Brexit on Cyprus, which is most directly exposed to the UK through tourism (39% share of arrivals), to be moderated by positive developments in the sector including diversification into other markets and the extension of the tourism season.  Advance bookings from the UK suggest no slowdown for 2017.

Cyprus’s rating is supported by a high level of GDP per capita, strong governance indicators and a favorable business climate relative to BB range peers.

Rating Sensitivities

Future developments that may, individually or collectively, lead to an upgrade include:

– Marked improvement in overall asset quality of the banking sector

– Further track record of economic recovery and reduction in private sector indebtedness

– Decline in the government debt to GDP ratio

– Narrowing of the current account deficit and reduction in external indebtedness

– A sustained track record of capital market access at affordable rates

The Outlook is Positive. Consequently, Fitch does not currently anticipate developments with a high likelihood of leading to a downgrade. However, future developments that may, individually or collectively, lead to a negative rating action include:

– Failure to improve asset quality in the banking sector

– Deterioration of budget balances or materialization of contingent liabilities resulting in a stalling in the decline in government debt to GDP

– A return to recession or deflation

– A loss of capital market access.

Key Assumptions

In its debt sensitivity analysis, Fitch assumes a primary surplus averaging 2% of GDP, trend real GDP growth averaging 2%, an average effective interest rate of 3.4% and GDP deflator inflation of 1.2%.  On the basis of these assumptions, the debt-to-GDP ratio would have peaked at almost 109% in 2015, and will edge down slowly to around 90% by 2025.

Gross debt-reducing operations such as future privatizations are not considered in the Fitch debt dynamics.  Our projections also do not include the impact on growth of potential future gas reserves off the southern shores of Cyprus, the benefits from which are several years into the future, although now less speculative.  (Fitch 21.10)

Back to Table of Contents

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