Fortnightly, 21 September 2015

Fortnightly, 21 September 2015

September 20, 2015





1.1  Finance Ministry Forecasts Israeli Economic Growth at 2.6% in 2015
1.2  The Beer Tax in Israel to Fall by 46%
1.3  Israel and Australia to Negotiate Tax Treaty


2.1  IMF Says Israel Growth Just 2.5% in 2015
2.2  Comverse Changes Name to Xura
2.3  Israel & India Strike $400 Million Drone Deal
2.4  Optimal+ Raises $42 Million Growth Round Led By KKR
2.5  Freightos Raises $14 Million
2.6  Hola Raises $17 Million to Finally Make Video Viewable
2.7  OriginGPS Secures $1.75 Million Funding Round


3.1  Old Navy Opens Its First Store in UAE
3.2  Dubai Retailer to Invest $272 Million in Major Expansion Plan
3.3  Lockheed Martin and Roketsan to Develop Mid-Range Cruise Missile for the F-35


4.1  Netanyahu Government Approves 25% Cut in Gas Emissions
4.2  Jordan Gearing Up for Global Summit on Sustainable Development


5.1  Fears Grow as Middle East Food Import Bill Set to Double by 2035
5.2  Lebanon’s Trade Deficit Continues to Show Contraction by July
5.3  Number of Registered Cars in Lebanon Increased 1.72% by August
5.4  Jordan & China Sign Agreements Worth $7 Billion, Including National Railway Deal
5.5  Iraqi 2016 Budget Proposal Sees Deficit of $25.8 Billion

♦♦Arabian Gulf

5.6  UAE Ranks 47th on Global Innovation Index 2015

♦♦North Africa

5.7  Subsidies & Gulf Aid to Egypt to Drop if Oil Price Drops to $20/barrel
5.8  336 Ships Transited Suez Canal Last Week
5.9  Morocco Ranks 74th in the 2015 Open Budget Survey: Report
5.10  Morocco to Return to GMT on 25 October


6.1  Number of Turkish Jobless Nears 3 Million in June
6.2  Turkish Food Prices See Another Rise As Lira Falls Hard
6.3  Greeks Vote Once More in Early Elections –Syriza Victory



7.1  Israel’s Population Reaches 8.4 Million on Rosh Hashanah
7.2  Yom Kippur – Holiest Day in the Jewish Calendar – Falls on 22/23 September
7.3  Sukkot Holiday Celebrated
7.4  Shemini Atzeret/ Simchat Torah Celebrated
7.5  Eid Al-Adha – Feast of the Sacrifice to Begin on 23 September


7.6  Three-Day Period of Mourning in UAE for Sheikh Rashid
7.7  Egypt’s Sisi Swears in New Government – Including 33 Ministries, 16 New Ministers
7.8  Saudi Rules Eid al-Adha to Start on 24 September
7.9  Qatar Appoints First Ambassador to Iraq in 25 Years


8.1  Compugen’s CGEN-15052 as Novel Immune Checkpoint for Cancer Treatment
8.2  FDA Accepts Teva’s ProAir RespiClick Inhalation Powder for Review
8.3  Can-Fite BioPharma Announces $9 Million Registered Direct Offering
8.4  Valtech Cardio Receives CE Marking for Cardioband Mitral Reconstruction System
8.5  US FDA Grants Fast Track Designation to Can-Fite’s CF102 Liver Cancer Treatment


9.1  Water Quality Test Company Lishtot Wins Jerusalem Contest
9.2  Radisys & EZchip Partner to Solve Mobile Operators’ Service Scalability Challenges
9.3  SoftWheel Provides New Mobility to US Wounded Warriors
9.4  Celeno Announces DOCSIS 3.0 Wi-Fi 802.11ac Gateway Reference Design
9.5  Content Discovery Platform Curiyo Goes Mobile with New App and Video My2¢ Feature
9.6  Continuity Software Launches AvailabilityGuard 7


10.1  Negative Inflation Returns to Israel
10.2  Tel Aviv is Middle East’s Most Expensive City
10.3  Aliyah Rises As 29,500 Immigrants Arrived in Israel in 5775
10.4  Building Starts in Israel Reach 18-Year High


11.1  ISRAEL: IMF Executive Board Concludes 2015 Article IV Consultation
11.2  LEBANON: Outlook Revised To Negative on Weakening Economic Prospects
11.3  QATAR: ‘AA/A-1+’ Ratings Affirmed; Outlook Stable
11.4  EGYPT: IMF Staff Concludes Visit to Egypt
11.5  EGYPT: Egyptians’ Views on the Egyptian Economy
11.6  EGYPT: Egypt’s New Gas Discovery – Opportunities & Challenges
11.7  EGYPT: How Feminist Groups Are Taking On Post-Revolution Egypt
11.8  EGYPT: Egypt’s Mosque Minders – The Rise of Surveillance Cameras in Places of Worship
11.9  MOROCCO: Elections A Crucial Step Towards Democracy
11.10  TURKEY: Fitch Affirms Turkey’s Investment Grade Rating, Outlook Stable


1.1  Finance Ministry Forecasts Israeli Economic Growth at 2.6% in 2015

On 17 September, the Ministry of Finance announced that the Israeli economy will grow by 2.6% in 2015, similar to the growth rate in 2014.  The figure, which includes the effects of expected natural gas production, is lower than the medium-term potential, according to the ministry.  The growth rate is expected to rise to 2.9% in 2016.

The aggregate labor market is expected to remain at close to full employment levels, with the labor force growing by 2.2% and 1.7% in 2015 and 2016, respectively; the unemployment rate for those years is expected to be 5.1%, compared with 5.9% in 2014.  Wages are expected to continue their rise, and will be affected partially by renewals of public sector labor contracts and an increase in the minimum wage.

The Ministry of Finance said that according to an updated revenue forecast, the Israeli government will collect some NIS 270.2 billion in taxes for 2015 not including the effect of the lowered VAT rate.  In 2016, the state is expected to collect some NIS 280.7 billion in taxes, not including the effect of the lowered VAT rate and lower corporate taxes.  State revenues from taxes and fees in 2015 and 2016 will rise by 5.1% and 3.5%, respectively, (not including one-time revenue and legislative changes) compared with the previous year.  If all of the planned changes are implemented, state revenues for 2015 and 2016 will rise to NIS 297.6 billion and NIS 312.3 billion, respectively.  (Globes 17.09)

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1.2  The Beer Tax in Israel to Fall by 46%

On 8 September, Finance Minister Kahlon decided to lower the recently raised beer tax by 46% and the tax on spirits by 21%.  Kahlon adopted the recommendations of a team headed by Finance Ministry Director General Babad that he do away with the increase to taxes on alcoholic beverages, in particular beer, vodka and arak.  This marks the second time this week that Kahlon has eliminated sales tax hikes instituted by his predecessor at the Finance Ministry, Yesh Atid leader Yair Lapid.  The decision will mean forgoing some NIS 250 million ($64.5 million) in tax revenue annually.

In actual numbers, the tax on beer will drop from NIS 4.53 ($1.17) per liter to 2.63 ($0.68).  The tax on other alcoholic beverages will drop from NIS 106.90 ($27.55) to NIS 85 ($21.90) per liter.  The tax on vodka will drop from NIS 42.50 ($10.95) to NIS 34 ($8.76) per bottle, the tax on arak will drop from NIS 42.70 ($11) to NIS 34 ($8.76) per bottle, and sales taxes on other spirits will decrease by a similar rate.

Raising sales tax on alcoholic beverages encouraged the manufacture of ersatz branded drinks as well as increased theft of beer and spirits and cheap, poorly made drinks, which have made many teenagers and young people ill.  Illegal drinks made with medical alcohol, which is not safe to drink, also found their way into the market.  (Various 10.09)

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1.3  Israel and Australia to Negotiate Tax Treaty

There is no tax treaty between Australia and Israel, but this will soon be remedied, according to an announcement by Joe Hockey, Treasurer in the Australian government.  Canberra announced that as part of the Government’s ongoing efforts to strengthen its relationship with Israel, it announced its intention to begin negotiations on a new bi-lateral Double Taxation Agreement.  Lack of this agreement holds back closer economic and financial links between the two countries.  A tax treaty with Israel would reduce the incidence of double taxation, provide greater tax certainty for businesses and enhance the integrity of both countries’ tax systems.  According to the Australian Department of Foreign Affairs and Trade, two-way trade between Australia and Israel was worth A$919 million in 2013.  Newly installed Australian Prime Minister Malcolm Turnbull is noted for his pro-Israel stance.  (Globes 17.09)

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2.1  IMF Says Israel Growth Just 2.5% in 2015

The International Monetary Fund (IMF) predicts that the Israeli economy will grow by only 2.5% in 2015, and hints that the budget deficit target is actually much higher than the official target in the Ministry of Finance’s forecasts.  The IMF’s growth forecast is substantially lower than the Ministry of Finance’s 3.1% growth forecast, but is consistent with the negligible growth shown by figures recently published by the Central Bureau of Statistics.

In its biennial report on the Israeli economy, the IMF criticizes the Ministry of Finance, saying that the 2.9% budget deficit target set for the next two years is too high, “almost 4% of GDP based on international accounting standards.”  The IMF warns that for the first time since 2009, the ratio of debt to GDP is expected to rise.  It recommends that the government make a sharp cut in spending in order to reduce the deficit target, and to continue lowering debt to GDP ratio.  The IMF does not address the Minister of Finance’s recent cut in VAT and corporate taxation, which was announced when the report was already in the advanced editing stages.  At the same time, the IMF refrained from calling for higher taxes or eliminating tax exemptions, as recommended by Governor of the Bank of Israel Dr. Karnit Flug.

Together with praise for the Israeli economy’s performance to date, the IMF recommends that the government finally appoint a Financial Stability Council, increase the supply of apartments in order to lower residential real estate prices, and act to boost productivity by enhancing competition and increasing investment in infrastructure and education. In the dispute between the Ministry of Finance and the Governor of the Bank of Israel over increasing competition in the banking system, the IMF adopts a position close to that of Flug, saying that measure to bolster competition in the sector “should remain mindful of financial stability concerns.”  The IMF also states that even though the banking sector in Israel features a high degree of concentration, the extent of competition between the banks is no less than in other advanced economies around the world.  (Globes 16.09)

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2.2  Comverse Changes Name to Xura

Digital technology company Comverse has changed its name to Xura and will now trade on Nasdaq under the MESG ticker.  In 2013, Comverse separated from security, surveillance and business intelligence unit Verint Systems Inc.  In April, Comverse sold its billing division to Amdocs for $272 million and transferred much of its digital services to Tech Mahindra in India.  In June, Comverse acquired UK secure mobile messaging and engagement services company Acision.  The name change will be linked to major organizational changes in the company, which will affect Xura’s Israel workforce.

Xura offers a portfolio of digital services solutions that enable global communications across a variety of mobile devices and platforms. We help communication service providers (CSPs) and enterprises navigate and monetize the digital ecosystem to create innovative, new experiences through our cloud-based offerings.  Their solutions touch more than three billion people through 350+ service providers and enterprises in 140+ countries.  (Globes 09.09)

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2.3  Israel & India Strike $400 Million Drone Deal

India and Israel’s military relationship grew further recently following Delhi’s purchase of ten armed Heron TP drones in a $400 million deal.   The drones will be operated by the Indian Air Force and are due to join its ranks within a year.  Regional concerns have accelerated a years-long negotiating process over the purchase, which has been on the table since as far back as 2012.  Herons are used for precision strikes and can carry over 1,000 kg (2,200 lbs.).  The ones being supplied to India will be equipped with air-to-ground missiles for destroying terror targets.

India has a long history of buying military equipment from Israel.  In 2013, India bought 15 unmanned Harpy UAVs from Israel, in a deal worth just under $2 million.  In 2009, India bought the Phalcon tactical and surveillance system from Israel, as part of a $1.1 billion deal signed between India, Russia and Israel in January 2004.  Israel’s military industry firm also announced plans at the time to establish five factories in India for the production of artillery shells.  (INN 12.09)

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2.4  Optimal+ Raises $42 Million Growth Round Led By KKR

KKR, a leading global investment firm, announced that it is leading a $42 million growth equity investment in Optimal+, a big data analytics company that provides highly actionable insights to the semiconductor industry.  KKR makes its investment alongside the existing lead investors Carmel Ventures and Pitango, two of Israel’s most preeminent venture capital funds. KKR will support the global expansion plans of Optimal+ with primary capital as well as access to its global network of companies and technology experts.

Holon’s Optimal+ provides an end-to-end solution that delivers actionable business intelligence to the semiconductor industry through a cutting-edge big data solution that analyzes and processes more than 25 billion chips per year.  The enterprise software solution collects, cleans and aggregates large amounts of data from multiple manufacturing locations and delivers insights that allow customers to significantly improve their product quality, output yields and processing times with complete supply chain visibility.  The product thereby delivers significant cost savings and a high return on investment to its end users.

KKR has a long-established track record of supporting technology companies, having invested more than $13 billion of equity in more than 49 companies across software, internet, media and IT-infrastructure since 2000.

The investment in Optimal+ is part of KKR’s growth equity effort, which focuses on selective investments in fast-growing, technology-enabled companies that sell differentiated products with global market potential and which are led by outstanding founders. Recent growth equity investments by KKR include ClickTale (behavioral big data analytics business for web & mobile), Ping Identity (identity security software), arago (AI-based IT automation software), Next Issue Media (digital magazine subscription marketplace) and others.  (KKR 10.09)

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2.5  Freightos Raises $14 Million

Israeli startup global online freight network Freightos announced the completion of a $14 million Series B funding round.  Existing investors Aleph, Annox Capital, ICV and OurCrowd were joined by MSR and Sadara Ventures.  This brings the total Freightos has raised to date to $23.3 million, as it continues the industry trend of increased venture investments in logistics.  Over one billion dollars has been invested in the industry since the beginning of 2014.

Freightos identified the massive opportunity for a more automated global freight network, with B2B e-commerce having grown nearly 40% since 2013 and anticipated to be worth $6.7 trillion annually by 2020.  However, the lack of instant, transparent international freight pricing causes millions of companies to overpay for logistics today.  Freightos has spent three years automating freight sales for some of the world’s largest logistics providers.  Combining this extensive network with patent-pending big data pricing and routing, Freightos now enables real-time global freight pricing and booking for import/export companies on an international freight marketplace, currently in beta.

Freightos has developed technology that powers an extensive logistics network, including forwarders like CEVA Logistics, Nippon Express, Hellmann Worldwide Logistics and dozens of others, as well as Fortune 100 import/export companies.  Without Freightos, international freight quoting takes an average of three days.  Managing tens of millions of price points, the Freightos Network has already generated 1.5 million instant freight quotes.  (Globes 09.09)

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2.6  Hola Raises $17 Million to Finally Make Video Viewable

Hola announced the closing of its $17m Series C round of funding to accelerate video delivery.  Iris Capital (an Orange and Publicis Group strategic partnership) led the round, joined by Hola’s existing investors and key industry figures.  The latest funding will enable Hola to cut video publishers’ costs for delivering video by 90%, while increasing reliability and speed.

The Hola CDN – a video distribution network for publishers – aims to make the video viewing experience on all sites be as good as it is on YouTube, and for a dramatically lower cost than today’s video delivery alternatives.  Hola CDN consists of a global network of dedicated servers running Hola’s P2P technology coupled with code running on the viewer’s side that utilizes that network.  Unlike traditional CDNs, Hola CDN streams video to the viewers from multiple sources (servers) in parallel, at high utilization levels, and leverages servers in lower-cost regions.  This slashes prices for video distribution in any geographic location, while increasing speeds and reliability.  With the latest round of funding, Hola will grow its engineering and product teams to build out the network’s robustness as it goes to the mainstream market after several years of development.

Netanya’s Hola was founded to dramatically improve the internet’s infrastructure by building an overlay P2P network for HTTP.  Much like Skype used P2P technologies to make phone calls cheaper and at higher quality, Hola is using P2P to make the internet better – faster, more open and cheaper to operate.  Hola is fundamentally changing three markets: consumer VPN, online business intelligence and video CDN networks.  (Hola 16.09)

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2.7  OriginGPS Secures $1.75 Million Funding Round

OriginGPS announced that it has closed $1.75 million of funding from existing shareholders and the technology accelerator, Lab IX, which is a part of Flex, a leading sketch-to-scale solutions company that designs and builds intelligent products for a connected world.  Drawing on its decade of experience, OriginGPS has developed innovative solutions to address the growing sector of wearables by creating GNSS modules with ultra-small form factors and low power consumption, which are ideal for many of the next generation devices that Flex designs and manufactures.

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 17.09)

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3.1  Old Navy Opens Its First Store in UAE

American apparel brand Old Navy said on 20 September it is opening its first store in the UAE in November this year, at the Dubai Festival City.  This is the fifth franchise market expansion for Old Navy. In March 2014, it opened its first franchise-operated stores in the Philippines and has since opened stores in Qatar, Kuwait and Saudi Arabia.  Old Navy is part of the Gap Inc portfolio of brands, which also includes Gap, Banana Republic, Athleta and Intermix.  The brand’s move into the Middle East builds on the success that Gap and Banana Republic have experienced since entering the market in 2007, the company stated.  It added that the brand’s entry into the UAE marks its continued global growth strategy.  (Various 20.09)

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3.2  Dubai Retailer to Invest $272 Million in Major Expansion Plan

Home Centre, the largest home retailer in the Middle East, announced plans to open more than 50 new stores over the next five years.  The company plans to invest more than AED1 billion ($272 million) over the next five years to strengthen its presence across the Middle East, North Africa and Asia.  Home Centre will also remodel over 40 existing stores in the region.  The Dubai-headquartered brand, which is celebrating its 20th anniversary, has grown from a single store opened in Sharjah in 1995 into an international network of nearly 90 stores spread across 10 countries and occupying a total space of 4 million sq. ft.  While continuing to strengthen its existing market presence, Home Centre said it will also explore expansion opportunities in countries such as Kazakhstan, Morocco, Kenya, Algeria and Angola, both through organic growth and new franchise operations.  The company launched an online platform on 20 September to enable customers across the UAE to browse and shop for more than 2,500 products from the comfort of their homes.  (AB 16.09)

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3.3  Lockheed Martin and Roketsan to Develop Mid-Range Cruise Missile for the F-35

Lockheed Martin and Turkey’s Roketsan signed a contract to cooperatively develop the SOM-J missile for integration into the F-35 internal weapons bay.  SOM-J is a new generation air-to-surface standoff cruise missile.  The contract enables the companies to move forward with their Technical Assistance Agreement, making the SOM-J missile available to international customers. SOM-J integration into the F-35 is scheduled for Block 4.  Early live flight testing will be conducted on Turkish F-16s.  SOM missile development began in 2006 and entered service with the Turkish Air Force in 2011.  SOM-J is a smaller version of the subsonic SOM missile, which employs a 500-pound warhead and has a required range of more than 100 nautical miles.  The SOM-J missile uses Global Positioning System as its primary guidance and is aided by inertial, terrain-referenced and image-based navigation systems, as well as an imaging infrared seeker.  Lockheed Martin has been an industrial partner of Turkey since 1984 and is committed to continued partnerships with Turkish industry to offer affordable defense systems.

Roketsan, Turkey’s leader in national missile and rocket programs, is one of the strategic and technology production centers of Turkey’s defense industry.  Roketsan is engaged in the field of artillery rocket/missile systems, anti-tank missiles, air defense missiles and precision guided munitions specializing in design, development and production of rockets, missiles and weapon systems, and their guidance-control, seeker, propulsion systems and warhead technologies.

Headquartered in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that employs approximately 112,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.  (Lockheed Martin 16.09)

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4.1  Netanyahu Government Approves 25% Cut in Gas Emissions

On 20 September, the Netanyahu government approved the plan formulated by the Ministry of Environmental Protection to slash emissions of greenhouse gases by 25% by 2030.  The estimated cost of the plan is NIS 500 million to be provided by the Ministry of Finance, plus NIS 300 million to be invested over the next four years on energy conservation in the economy.  As part of the plan, the volume of greenhouse gas emissions will be reduced, while electricity production from renewable energy sources will be expanded substantially, and the use of private vehicles will be cut by 20% by encouraging the transition to mass transit systems based on buses and railways. Israel will present its plan for reducing emissions to the UN by the end of the month, ahead of the climate conference scheduled in November in Paris.  The Ministry of Environmental Protection said that implementation of the plan would save the economy NIS 100 billion, while reducing costs for the state, saving on consumption of electricity and fuel, developing the clean-tech industry, reducing disease caused by the public’s exposure to pollution, etc.  (Globes 20.09)

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4.2  Jordan Gearing Up for Global Summit on Sustainable Development

Jordan will send an official delegation headed by Planning and International Cooperation Minister Imad Fakhoury to take part in the UN Sustainable Development Summit 2015 to be held in New York from 25-27 September, where Fakhoury will deliver Jordan’s speech.  Fakhoury, who is also president of the Higher National Committee for Sustainable Development, will be taking part in several sessions to be held in New York as part of the meeting of the UN General Assembly.

During a committee meeting in preparation for the summit, Fakhoury discussed suggestions on main topics to be included in Jordan’s speech at the summit, which will adopt the post-2015 global development agenda and sustainable development goals (SDGs). During the preparatory meeting, attended by Environment Minister Taher Shakhshir who is vice president of the committee, and all the panel’s members, top priority issues were decided, foremost of which was the impact of regional challenges on Jordan’s effort to achieve sustainable development and the Syrian refugee burden on the Kingdom’s infrastructure, limited natural resources and all production sectors.  In spite of regional and international challenges, the scarcity of natural and financial resources, the effect on the economy because of regional issues, and the influx of Syrian refugees, Fakhoury noted, Jordan has met the goals set in international conferences and pushed the issue of refugees on the agendas of key gatherings.  Fakhoury also stressed the role of the committee in coordinating national efforts and preparing for Jordan’s participation in regional and international meetings on sustainable development.  (JT 19.09)

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5.1  Fears Grow as Middle East Food Import Bill Set to Double by 2035

The cost of food imports to Arab states is expected to double over the next 20 years, potentially spurring more violence and waves of refugees, if the region’s farms do not become more efficient.  The Middle East currently imports about $35 billion of food annually and this looks set to rise to $70 billion in two decades as climate change impacts crop yields and the population rises, said Mahmoud Solh, of the International Center for Agricultural Research in the Dry Areas (ICARDA).  Increased dependence on food imports will likely mean higher prices for poor consumers, and thus more hunger and increased levels of strife and migration.

A drought that began in 2006, coupled with rising food prices and rural farmers migrating into cities, helped spark Syria’s civil war, he said.  He was forced to flee Syria in 2012 because of rising violence, and left behind a large research station.  Before the war, Syria was largely self-sufficient in grain, and could export in good years, but production has dropped by more than 60% since fighting began in 2011, he said.  The broader Middle East should be able to meet its own food needs, but per capita yields for key grains and other staple crops are low across the much of the region.  In some areas, yields are as low as 1 metric ton per hectare when they should be five times higher.  There are some notable exceptions, he said, where improved technology and better management have helped boost production.

In parts of Egypt’s Nile River Delta, farmers have increased yields while decreasing water intensity by using special drills to plant grain on beds, rather than in traditional rows, he said.  Improved seeds bred specially for dry climates are also helping farmers, he said.  Still, productivity gains from new technologies or climate smart agriculture have not raised yields fast enough to keep pace with population growth across several Middle Eastern countries with worrying implications for future stability, he said.  (Reuters 12.09)

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5.2  Lebanon’s Trade Deficit Continues to Show Contraction by July

Lebanon’s trade deficit dropped by 16.90% year-on-year (y-o-y) by July, to record  $8.31B due to a 15.53% decrease in overall imports outpacing the 8.44% decline in total exports.  The prominent trend of both the depreciating Euro and falling international oil prices are the main factors behind the contractionary trade deficit drift being registered since the start of the year.  Total imports, in the first seven months of the year, amounted to $10.08B compared to $11.94B during the same period last year.

In more details, the three major product categories that were imported to Lebanon by July were mineral products (16.2% share of total imports), “machinery and electrical instruments” (12.4% share of total imports) and  “products of the chemical or allied industries” (11.4% share of total imports).  The yearly change in the value of imported mineral products displayed a substantial drop of 42.12% from July 2014 to $1.63B.  This decline goes hand in hand with the average 45% decrease in the price of international oil since July of last year, noting that demand for this essential commodity is inelastic.

In addition, the value of “machinery and electrical instruments” imported went down by 4.38% y-o-y by July.  Worth mentioning that the overall tonnage imported increased from 137,417 tons by July 2014 to 400,888 tons this year.  Notably, in the month of April alone, 279,862 tons were brought into Lebanon, as electrical transformers were the bulk of those imports.  With that in mind, the 4.38% decline came about from a price fall possibly on the back of deteriorating Chinese prices and the depreciating Euro since China and Europe sell about 40% of electrical appliances to Lebanon.

Total worth of “Products of the chemical or allied industries” entering Lebanon also downturned by an annual 4.99% while volume steadied at a level of 290,000 tons.  The latter decline was possibly associated with a decline in the overall price of chemical products.  Notably, the three major countries that Lebanon imported goods from were China, Germany and France with respective weights of 11.73%, 7.05% and 6.36%.

Similarly, total exports fell yearly from $1.93B by July 2014 to $1.77B by July 2015.  Specifically, the value of exported “prepared foodstuffs, beverages, and tobacco” (16.37% share of total exports) experienced a yearly detraction of 4.94% by July despite the 7.04% rise in exported volume to 212,795 tons.  It seems that the Lebanese fast moving consumer goods’ (FMCGs) market is following the global bearish price trend of over-the-counter commodities.

Exported “pearls, precious stones, and metals”, constituting 15.31% of total exports, went down by 22.74% y-o-y by July.  This was mainly due to the 28.89% plunge in the volume exported to 32 tons this year compared to a higher level of 45 tons recorded over the same period last year.  In addition, “Machinery and electrical instruments” (14.53% share of total exports) underwent an annual 1.64% shrinkage on the back of the 16.89% fall in tonnage exported to 33,132 tons which was partially offset by rise in export prices. In terms of the major destinations of the Lebanese exports, Saudi Arabia, United Arab Emirates and Iraq grasped corresponding weights of 12.83%, 10.32% and 7.42%.

In July alone, total exports dropped by 21.07% from July 2014 to $218.03M this year. In parallel, overall imports down ticked by 7.86% to $1.53B.  In turn, the trade deficit narrowed from $1.389B to $1.31B in June.  (Blom Invest 08.09)

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5.3  Number of Registered Cars in Lebanon Increased 1.72% by August

According to the Association of Lebanese Car Importers, the number of newly registered commercial and passenger cars during the first 8 months of 2015 expanded  by a mere 1.72% year-on-year (y-o-y) up to August to reach 27,363 cars.  This might have been on the back of decreasing oil prices and the depreciating euro and yen.  The improvement was attributed to the yearly 2.11% increase to 25,891 by August in newly registered passenger cars, which was partially offset by the 4.54% annual fall in newly registered commercial cars to 1,473.  A possible explanation for the weakening demand for commercial cars is the hesitance of the commercial sector amid the presidential vacuum and political uncertainty in Lebanon.

Notably, there was a change in the market share of car exporting-countries, due to the average 13% and 15% y-o-y depreciation of both the Euro and the Japanese Yen against the US dollar to respective levels of Euro/Dollar 1.16545 and Dollar/Yen 120.605, by End-August.  For instance, Japanese cars were the most demanded cars in Lebanon in the first 8 months, with their share improving from 34.18% in 2014, to 39.55% in 2015.  Meanwhile Korean cars lost their hold on the number one spot, going down from 40.69% to 32.95% in 2015.  European cars maintained their third rank, however with a higher market share of 21.12%, compared to 18.82% in 2014.

Looking at the car brand breakdown, Kia held the largest share of 17.74% of the total, followed by 16.44% for Toyota. Furthermore, Hyundai and Nissan respectively grasped shares of 15.16% and 10.44%.  In terms of sales per importer, NATCO SAL (imports Korean manufactured Kia) maintained its holding as top performer, grasping a 17.74% share, while BUMC (imports Japanese made Toyota and Lexus) and Century Motor Co (imports Korean produced Hyundai) captured 16.57% and 15.15% of the market, respectively.  It’s not surprising, that in this day and age, consumers have become more environmentally aware which illustrates why “green” investments are in the forefront of mainstream media.  (BlomInvest 10.09)

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5.4  Jordan & China Sign Agreements Worth $7 Billion, Including National Railway Deal

Jordan and China on 10 September announced the signing of a number of investment agreements worth over $7 billion.  The agreements were signed on the sidelines of the 2015 China-Arab States Expo in Yinchuan.  The agreements include $1.7 billion project to build Jordan’s first oil shale-fired power plant in the Attarat area, in the south of the Kingdom, to produce around 900 MW of electricity.  Another major agreement was a $2.8 billion investment to construct the national railway network, in addition to an accord with China’s giant Hanergy to build a 1,000 MW renewable energy power plant at a cost of nearly $1 billion.   An agreement between the ICT Ministry and telecom giant Huawei was also announced, but details of the accord were not made available.

Aqaba Special Economic Zone Authority (ASEZA) also signed a major investment agreement with China’s Shenzhen Chamber of Investment to develop an industrial and logistics estate in the port city on an area of about one-million square meters.  According to ASEZA officials, the project will be completed within the next five years.  It is the first Shenzhen-based project of its kind outside China.  The value of all the investment accords is about $7 billion.

Trade exchange between China and Arab states has seen a tangible growth over the past years to reach $240 billion in 2014, compared to $25 billion when the Arab-Chinese Cooperation forum was launched in 2004.  In 2014, the trade volume between Jordan and China reached $3.6 billion and while the trade balance is tilted in favor of China, the country’s exports to China went up by 200% from the previous year.  These were mainly potash and phosphate, valued at around $300 million while the Kingdom’s imports from China stood at $3.3 billion.  (JT 11.09)

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5.5  Iraqi 2016 Budget Proposal Sees Deficit of $25.8 Billion

Iraq’s Finance Ministry has proposed a 2016 government budget worth 113.5 trillion Iraqi dinars ($99.65 billion) with a budget deficit of 29.4 trillion Iraqi dinars ($25.81 billion), according to a draft posted on 16 September.  The budget forecasts oil at $45 a barrel and presumes the continuation of a 2014 deal with the semi-autonomous Kurdistan region over oil revenues, Deputy Finance Minister Fathil Nabi said.  The government has projected a fiscal deficit of about $25 billion this year, in a budget of roughly $100 billion.  (Reuters 16.09)

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►►Arabian Gulf

5.6  UAE Ranks 47th on Global Innovation Index 2015

The UAE has been ranked 47th on the Global Innovation Index (GII) 2015, according to a report released on 20 September, co-published by Cornell University, Insead and the World Intellectual Property Organization.  The country’s ranking dropped from 36th last year.  Saudi Arabia, meanwhile, topped the charts in the Gulf Cooperation Council (GCC) countries index at 43rd position (from 38th in 2014), followed by the UAE, Qatar (50), Bahrain (59), Oman (69) and Kuwait (77). Qatar and Kuwait dropped from 47 and 69 a year ago respectively, while Bahrain and Oman rose from 62 and 75, respectively.  The UAE, Saudi Arabia, Bahrain, Oman, Kuwait, Qatar, Lebanon, Azerbaijan, Yemen and Algeria, show below-par performances when compared to their income levels, according to the report.  However, the authors expect the GCC countries to do better in the coming years, as many of them have been diversifying towards innovation-rich sectors.

The GII report surveys 141 economies around the world using 79 indicators.  Globally, Switzerland topped the charts, followed by the United Kingdom, Sweden (all three having maintained their positions from last year), the Netherlands, the United Sates, Finland, Singapore, Ireland, Luxembourg and Denmark.  Israel was ranked 22nd.  The eight low-income countries outperforming others in their income group include Malawi, Mozambique, Rwanda, Kenya, Mali, Burkina Faso, Cambodia and Uganda.  (Various 20.09)

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►►North Africa

5.7  Subsidies & Gulf Aid to Egypt to Drop if Oil Price Drops to $20/barrel

A drop in oil prices to $20 per barrel could decrease financial and in-kind aid Egypt receives from Arabian Gulf countries, encouraging it to also slash energy subsidies.  According to the Egyptian Center for Economic Studies, if petroleum prices fall to as low as $20 per barrel, Egypt will enjoy a boom in investment flows and expatriate remittances.  Energy subsidies, encouraged by such a decline, would also be cut to save the budget LE34 billion that could be directed to the health and education sectors.  Consequent savings could also “lower government arrears” and reduce the price for petroleum imports, thereby “improving the trade balance”, according to the center.  If the price remains at $45 per barrel, Gulf aid will continue and energy subsidies will remain high, raising the cost of production and widening budget and trade gaps.  (Egypt Independent 20.09)

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5.8  336 Ships Transited Suez Canal Last Week

New data from the Suez Canal has revealed that a total 336 ships transited the canal last week, carrying a total cargo of 19.5m metric tons.  The average number of ships transiting the canal daily reached 48 throughout last week, with average cargos amounting to 2.8m metric tons per day, whereas the average cargo per ship reached 58,000 metric tons.  The largest cargo held within one ship transiting Suez Canal last week reached 200,000 metric tons.  A total of five other separate container ships belonging to Danish company, Maersk, carried the same tonnage.  The tonnage of cargo is the main criterion in calculating the growth of marine traffic in the Suez Canal, where transit fees are calculated according to cargo size.  The number of ships transiting the canal from the northern direction reached 147 ships, representing a daily average of 21 ships, totaling 8.1m metric tons in cargo, or a daily average of 1.2m metric tons.  (DNE 19.09)

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5.9  Morocco Ranks 74th in the 2015 Open Budget Survey: Report

The International Budget Partnership released a report that ranks Morocco in the 74th position in effective governance and transparency.  IBP aims at “advancing budget transparency, participation and accountability based its rankings on the work of 102 research institutions and civil society organizations around the world.”  The average Open Budget Index (OBI) score, which explores the factors that are associated with different levels of transparency, is 45 out of 100, and the median is 46.

Morocco scored 38, “falling into the weak performing category.”  According to the report, this category includes Algeria, Angola, Equatorial Guinea, Fiji, Liberia, Myanmar, Qatar, Saudi Arabia, Sudan, Yemen, and Zimbabwe. The report shows that there is a lack of budget transparency, weak legislature, weak auditors, and few or no opportunities for public participation in Morocco.  The report also points out that the budget accountability ecosystem is deficient in Algeria, Angola, Equatorial Guinea, Fiji, Liberia, Morocco, Myanmar, Qatar, Saudi Arabia, Sudan, Yemen, and Zimbabwe, creating opportunities for mismanagement of funds and corruption.

In the Arab World, Jordan leads the raking with a score of 55 followed by Tunisia (42), Morocco (38), Yemen (34), Algeria (19), Egypt (16), Sudan (10), Iraq (3) and Lebanon (2).  Qatar and Saudi Arabia appear at the bottom of the list with no available score.  (MWN 20.09)

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5.10  Morocco to Return to GMT on 25 October

Morocco will go back to standard time (GMT) on Sunday, 25 October at 03:00, according to a statement by the Ministry of Public Service and Modernization of Administration.  At that time, Moroccans will have to switch their watches an hour back, as Morocco will return to standard time (GMT).

In 2008, Morocco used daylight saving time to alleviate energy costs and to align itself timewise with neighboring European countries, by moving the clock one hour forward (UTC+1).  Ever since, Morocco has been enforcing daylight saving time during summer, though with an interruption in the month of Ramadan.  Morocco observed daylight saving time, for the first time, during the 1970s but discontinued it after 1978, due to its unpopularity among the Moroccan population at the time.  (MWN 17.09)

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6.1  Number of Turkish Jobless Nears 3 Million in June

The number of unemployed people (above the age of 15) in Turkey surged to 2.88 million in June, a 226,000 increase year-on-year, official data revealed on 16 September.  Turkish unemployment edged up towards 10% in June, data showed, a headache for the government as it prepares for a November election where latest polls show the ruling AK Party will fall short of a parliamentary majority.

Political uncertainty has risen since a 7 June vote in which the AKP failed to secure single-party rule for the first time since coming to power in 2002.  There was no sign of improvement in employment despite a package of government measures to boost jobs in April and better-than-expected first half growth.  The June unemployment rate, based on an average of the May-July period, rose to 9.6% from 9.3% a month earlier and 9.1% a year earlier, the Turkish Statistics Institute said.  The non-farm unemployment rate rose to 11.7% from 11.2% a year earlier. Turkish gross domestic product grew a greater-than-expected 3.8% in the second quarter, data showed last week, but full-year growth is seen around 3%, well below a government target of 4%.  (Zaman 15.09)

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6.2  Turkish Food Prices See Another Rise As Lira Falls Hard

One of last year’s most inflated consumer goods, food products are gearing up for another surge in prices as the Turkish lira continues to fall against the US dollar.  Turkish consumers suffered a staggering financial burden last year when the prices of food products, the main spending item, skyrocketed amid an unusually long drought and subsequent heavy precipitation that damaged the remaining fruits and vegetables in the field.

With the currency dipping to its all-time low, however, consumers’ plight has taken a new twist as the prices of main inputs in agricultural production are expected to climb, sounding alarms for a rise in the overall inflation rate as well.  According to the most recent Turkish Statistics Institute (TurkStat) data, the inflation rate was 7.14% for the month of August, when the prices of food and non-alcoholic beverages edged slightly below two-digit figures and rose to 9.71%, compared to a year ago.

Turkey spent $143 million on seed imports in 2014 while the country imported plant fertilizers worth $700 million.  The number of tractors used in Turkish farming surged by nearly 300,000 between 2008 and 2015, meaning an increase in the demand for gasoline.  Figures show Turkish farmers had to use 500,000 liters more gasoline for tractors this year than in 2008.  The list of increased financial burdens is not limited to these.  As regards Turkey’s agricultural products trade balance, the country’s imports are still higher than its exports.  In 2014, Turkey imported agricultural products worth $8.9 billion while the exports of such goods remained at $5.3 billion, data from the Turkish Union of Chambers and Commodity Exchanges (TOBB) show.

Turkey’s dependence on imported materials (fertilizer, seeds, fodder) for agricultural production continues to rise.  Government subsidies for Turkish agricultural producers fail to offset the growing input costs due to the US dollar’s rise against the Turkish lira.  Every 1% drop in the Turkish lira means a 0.9% hike in overall food prices.  This calculation refers to a 27% hike in Turkish food prices since the lira lost 30% versus the greenback since January of this year.  This will surely instigate an upward trend in annualized consumer prices.  Turkey’s annual inflation was 6.81% in July. The rise was driven by the prices of food and non-alcoholic drinks.  (Zaman 19.09)

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6.3  Greeks Vote Once More in Early Elections –Syriza Victory

On Sunday, 20 September, Greeks voted in their third national polls this year, called on to choose who they trust to steer the country into its new international bailout.  Former Prime Minister Alexis Tsipras’ left-wing Syriza party, which made pledges to implement austerity measures in return for billions of euros in rescue loans, scored a convincing electoral win that allowed the prime-minister-in-waiting to renew the alliance with Independent Greeks and its leader Panos Kammenos.

With 70% of the votes counted, SYRIZA had 35.43%.  This would give the leftist party 144 seats in Parliament.  New Democracy followed with 28.29%, despite the fact that opinion polls had indicated the conservatives would challenge SYRIZA for first spot.  Golden Dawn was in third with just over 7%, followed by other smaller parties.  The alliance between SYRIZA and Independent Greeks was expected to have 154 out of the 300 seats in Parliament.

Tsipras, 41, triggered the election by resigning barely seven months into his four-year term, after facing a rebellion within Syriza over his policy U-turn in accepting the spending cuts and tax hikes stipulated by the bailout.  Tsipras had won January elections on pledges of abolishing such measures, tied to Greece’s first two bailouts.  He has argued he had no choice but to accept the demands of European creditors for more tax hikes and spending cuts in return for Greece’s third rescue, a three-year package worth €86 billion ($97 billion).  He had vowed to repeal the measures imposed in return for the country’s first two bailouts – and despite winning a referendum he hastily called 5 July urging Greeks to reject creditor reform proposals.  But without the third bailout, Greece – which has relied on international rescue loans since 2010 – faced bankruptcy and a potentially disastrous exit from Europe’s joint currency.

The campaign has been lackluster and somewhat muted – a far cry from the frenetic, high-stakes January campaign, which pitted the anti-bailout Tsipras against centrist parties that argued the deal with other Eurozone countries was the country’s best chance for an eventual return to some form of economic normalcy in a country ravaged by recession and with unemployment at around 25%.  Syriza’s campaign has focused on doing away with the staid and often corrupt politics of the past.

The government that emerges will have little time to waste.  Creditors are expected to review progress of reforms as part of the bailout next month, while the government will also have to draft the 2016 state budget, overhaul the pension system, raise a series of taxes, including on farmers, carry out privatizations and merge social security funds.  It must also oversee a critical bank recapitalization program, without which depositors with over €100,000 ($113,000) in their accounts will be forced to contribute.

Nine parties have a chance of reaching the 3% threshold needed to enter parliament. The total number of parties getting in will affect seat distribution – the more parties, the fewer seats for the winner, increasing the need for one or more coalition partners.  (AP 20.09)

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7.1  Israel’s Population Reaches 8.4 Million on Rosh Hashanah

The Central Bureau of Statistics has released its annual population statistics, which show that Israel’s population has reached a record of about 8,412,000 people.  According to the bureau, since Rosh Hashanah last year, the country’s population has grown by 1.9%, or some 158,000 people.

The Jewish population in Israel stands at about 6.3 million people, 74.9% of the general population.  Since the re-establishment of the state, the number of Jews has grown 10-fold.  Israel’s Arab population is about 1,746,000 (20.7% of the population).  Another group, mainly comprising those who immigrated to Israel under the Law of Return but are not recognized by the Chief Rabbinate as Jewish, stands at around 366,000, 4.4% of the general population.

Over the past year, some 168,000 babies were born in Israel, an all-time high, while about 42,000 people died.  According to population forecasts, between the years 2025 and 2035 the number of people living in Israel is expected to surpass the 10 million mark, with the number of Jews expected to approach 7.5 million.  The figures also show that 90% of the country’s residents live in 76 cities, with the remainder residing in small towns, kibbutzim and moshavim.  About a third of the population lives in the Gush Dan metropolis in central Israel, and around 7% lives in Haifa and its suburbs in the north.  (CBS 09.09)

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7.2  Yom Kippur – Holiest Day in the Jewish Calendar – Falls on 22/23 September

On the eve of 22 September and until after sunset on 23 September, Israel and world Jewry will observe Yom Kippur, or the Day of Atonement.  The holiest day on the Jewish calendar, falling on the tenth of Tishri, it is a day marked by fasting, prayer and penitence for one’s sins against their fellow man and G-d.  Yom Kippur atones only for sins between man and G-d, not for sins against another person.  To atone for sins against another person, you must first seek reconciliation with that person, righting the wrongs you committed against them if possible.  That must all be done before Yom Kippur.

Yom Kippur is a complete Sabbath; no work can be performed on that day.  It is a complete, 25-hour fast beginning before sunset on the evening before Yom Kippur and ending after nightfall on the day of Yom Kippur.  The Talmud also specifies additional restrictions that are less well-known: washing and bathing, anointing one’s body (with cosmetics, deodorants, etc.), wearing leather shoes and engaging in sexual relations are all prohibited on Yom Kippur.  As always, any of these restrictions can be lifted where a threat to life or health is involved.  In fact, children under the age of nine and women in childbirth (from the time labor begins until three days after birth) are not permitted to fast, even if they want to.  It is customary to wear white on the holiday, which symbolizes purity and calls to mind the promise that our sins shall be made as white as snow.  The day long fast is widely observed even among Israel’s secular public and most of the country’s Jewish population attend all or part of the day’s synagogue services.  The fast is concluded with a shofar blast and rejoicing.

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7.3  Sukkot Holiday Celebrated

The Jewish festival of Sukkot begins at sunset on Sunday, 27 September until nightfall on 4 October (in Israel).  The festival ends on day later outside of Israel.  The holiday begins on the Hebrew date of 15 Tishrei, the fifth day after Yom Kippur.  The word “Sukkot” means “booths” and refers to the temporary dwellings that Jews are commanded to live in during this holiday.  The commandment to “dwell” in a sukkah can be fulfilled by simply eating all of one’s meals there or by actually living in the sukkah as much as possible, including sleeping in it.  The holiday commemorates the forty-year period during which the children of Israel were wandering in the desert, living in temporary shelters.  There are intermediate days during the week, which begins and ends with a holiday, referred to as Chol Ha-Mo’ed.

Another observance related to Sukkot involves what are known as the Four Species (arba minim in Hebrew) or the lulav and etrog.  Jews are commanded to take these four plants and use them to “rejoice before the L-rd.”  The four species in question are an etrog (a citrus fruit native to Israel), a palm branch (in Hebrew, lulav), two willow branches (arava) and three myrtle branches (hadas).  The six branches are bound together and referred to collectively as the lulav.  The etrog is held separately.  With these four species in hand, one recites a blessing and waves the species in all six directions (east, south, west, north, up and down, symbolizing the fact that G-d is everywhere).

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7.4  Shemini Atzeret/ Simchat Torah Celebrated

On 5 October, or 22 Tishri, the day after the seventh day of Sukkot, is the holiday Shemini Atzeret.  In Israel, Shemini Atzeret is also the holiday of Simchat Torah.  Outside of Israel, where extra days of holidays are held, only the second day of Shemini Atzeret is Simchat Torah.

These two holidays are commonly thought of as part of Sukkot, but that is technically incorrect; Shemini Atzeret is a holiday in its own right and does not involve some of the special observances of Sukkot.  Shemini Atzeret literally means “the assembly of the eighth (day).”  Rabbinic literature explains the holiday this way: our Creator is like a host, who invites us as visitors for a limited time, but when the time comes for us to leave, He has enjoyed himself so much that He asks us to stay another day.  Another related explanation: Sukkot is a holiday intended for all of mankind, but when Sukkot is over, the Creator invites the Jewish people to stay for an extra day, for a more intimate celebration.

Simchat Torah means “Rejoicing in the Torah.”  This holiday marks the completion of the annual cycle of weekly Torah readings.  Each week in synagogue we publicly read a few chapters from the Torah, starting with Genesis Ch. 1 and working around to Deuteronomy 34.  On Simchat Torah, the last Torah portion is read, then proceeds immediately to the first chapter of Genesis, reminding us that the Torah is a circle, and never ends.

This completion of the readings is a time of great celebration.  There are processions around the synagogue carrying Torah scrolls and plenty of high-spirited singing and dancing in the synagogue with the Torahs.  As many people as possible are given the honor of an aliyah (reciting a blessing over the Torah reading); in fact, even children are called for an aliyah blessing on Simchat Torah.  In addition, as many people as possible are given the honor of carrying a Torah scroll in these processions.  Children do not carry the scrolls (they are much too heavy!), but often follow the procession around the synagogue, sometimes carrying small toy Torahs (stuffed plush toys or paper scrolls).  Shemini Atzeret and Simchat Torah are holidays on which work is not permitted.

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7.5  Eid Al-Adha – Feast of the Sacrifice to Begin on 23 September

The first day of the Islamic holiday Eid al-Adha will fall on 23 September.  Eid al-Adha is a religious festival celebrated by Muslims worldwide as a commemoration of Ibrahim’s willingness to sacrifice his son Ishmael for Allah.  It is one of two Eid festivals that Muslims celebrate.  Like Eid al-Fitr, Eid al-Adha begins with a short prayer followed by a sermon.  Eid al-Adha is three days long and starts on the 10th day of the month of Dhul Hijja of the lunar Islamic calendar.  This is the day after the pilgrims in Hajj, the annual pilgrimage to Mecca in Saudi Arabia by Muslims worldwide, descend from Mount Arafat.  It happens to be approximately 70 days after the end of the month of Ramadan.

Men, women and children are expected to dress in their finest clothing and perform the Eid prayer in any mosque.  Muslims who can afford to do so sacrifice their best domestic animals (usually sheep, but also camels, cows, and goats) as a symbol of Ibrahim’s sacrifice.  The sacrificed animals, called udhiya, also known as qurbani, have to meet certain age and quality standards or else the animal is considered an unacceptable sacrifice.  Generally, these must be at least 4 years old.  At the time of sacrifice, Allah’s name is recited along with the offering statement and a supplication as Muhammad said.  According to the Quran a large portion of the meat has to be given towards the poor and hungry people so they can all join in the feast which is held on Eid-al-Adha.  The remainder is cooked for the family celebration meal in which relatives and friends are invited to share.

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7.6  Three-Day Period of Mourning in UAE for Sheikh Rashid

Sheikh Rashid bin Mohammed bin Rashid Al Maktoum, the eldest son of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, died of a heart attack on the morning of 19 September.  The Ruler’s court declared three days of mourning in Dubai beginning on 19 September and flags were flown at half-mast at government departments and institutions.  Government departments and institutions in the emirate of Dubai continued as normal during the mourning period.  Funeral prayers for Sheikh Rashid were offered at Zabeel Mosque and the burial took place at Umm Hurair cemetery at Al Fahidi in Bur Dubai.

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7.7  Egypt’s Sisi Swears in New Government – Including 33 Ministries, 16 New Ministers

Egyptian President Abdel Fattah al-Sisi swore in a new government on 19 September that included 16 new ministers, a week after the previous administration resigned following a corruption scandal.  Sharif Ismail, a former petroleum minister seen as a veteran technocrat, will serve as prime minister.  Sisi named former head of the state oil company Tarek al-Mullah as petroleum minister, charged with easing the country’s energy crisis and attracting more foreign investment in a strategic sector.

Former premier Ibrahim Mahlab’s government resigned on 12 September, days after the arrest of agriculture minister Salah Helal as part of a corruption probe.  The ministers of foreign affairs, defense, interior, justice and finance have kept their positions in the new cabinet.

The Islamic State has gained the backing of the most active militant group in Egypt, the recently renamed Sinai Province.  Militants have stepped up attacks on Egyptian soldiers and police since the army toppled Islamist President Mohamed Mursi in 2013 after mass protests against his rule. Hundreds have been killed in bombing and shooting attacks.  Egypt is struggling to get large volumes of foreign investment after years of political turmoil triggered by the 2011 uprising that toppled autocrat Hosni Mubarak, even though Sisi’s economic reforms have won praise.  (Al Arabiya 19.09)

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7.8  Saudi Rules Eid al-Adha to Start on 24 September

Saudi Arabia announced on that Eid al-Adha, one of two important religious holidays observed by Muslims around the world, will start on Thursday, 24 September, a day earlier than expected.  The announcement was made after the kingdom’s official moon-sighting body watched for the Dhul Hijjah crescent, which is the twelfth and final month in the Islamic calendar.  The Islamic lunar calendar depends on sightings of the moon – a practice which can at times prove difficult.  (AB 14.09)

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7.9  Qatar Appoints First Ambassador to Iraq in 25 Years

Qatar’s emir has appointed an ambassador to Iraq, the first since the embassy was closed 25 years ago, in the latest sign of a thaw in relations between Gulf Arab countries and Iraq.  Sheikh Tamim bin Hamad al-Thani had issued a decree appointing Zayed al-Khayareen as Qatar’s “ambassador extraordinary and plenipotentiary to Iraq”.  Tensions between the Sunni Muslim-ruled states of the Gulf and Iraq, which has a Shi’ite majority, have eased since Prime Minister Haider Abadi took office last year.  A rapprochement could help strengthen a regional alliance against Islamic State militants who have seized vast areas in both Iraq and neighboring Syria.  Saudi Arabia also signaled its intention to reopen an embassy in Baghdad earlier this year and has invited Abadi to visit the kingdom.  Some Gulf states have viewed Iraq as being too close to their main regional rival, Shi’ite power Iran.  Abadi’s predecessor, Nouri al-Maliki, had accused both Qatar and Saudi Arabia of funding Islamic State insurgents, allegations denied by both countries.  (AB 11.09)

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8.1  Compugen’s CGEN-15052 as Novel Immune Checkpoint for Cancer Treatment

Compugen presented the predictive discovery and experimental validation of certain Compugen-discovered novel drug targets for cancer immunotherapy, and disclosed new target validation results for one of these candidates, CGEN-15052.  Certain immune checkpoints present in the tumor microenvironment have been shown to inhibit T cells, which are a critical component of the anti-tumor immune response, and therefore suppress the immune system’s ability to destroy malignant cells, thus allowing tumor growth.  The new target validation data presented at the conference demonstrate, as expected from an immune checkpoint target candidate, that the expression of CGEN-15052 on cancer cells in a syngeneic mouse animal model enhances tumor growth compared with control cancer cells.  In addition, CGEN-15052 was previously shown to bind to activated T cells and inhibit human and mouse T cell activation.  Combined with the high expression of CGEN-15052 found in the tumor microenvironment of multiple cancers, such as lung and breast cancers, these results suggest that this Compugen-discovered protein has the potential to serve as a highly promising immunotherapeutic target for multiple cancer types.

Immune checkpoints are inhibitory receptors and their ligands, which are crucial for the maintenance of self-tolerance (that is, the prevention of autoimmunity) and for the protection of tissues from damage when the immune system is responding to pathogenic infection or other injuries.

Tel Aviv’s Compugen is a leading drug discovery company utilizing its broadly applicable predictive discovery infrastructure to identify novel drug targets and develop first-in-class biologics. The Company’s current pipeline focus is on immune checkpoint target candidates discovered by the Company, potentially providing the basis for a next wave of therapeutics for cancer immunotherapy. Compugen’s business model is based on selectively entering into collaborations for its novel targets and drug product candidates at various stages of research and development under revenue-sharing agreements.  (Compugen 16.09)

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8.2  FDA Accepts Teva’s ProAir RespiClick Inhalation Powder for Review

Teva Pharmaceutical Industries announced that the U.S. FDA accepted for review the company’s supplemental new drug application (sNDA) for ProAir RespiClick (albuterol sulfate) Inhalation Powder for the treatment or prevention of bronchospasm in patients 4 to 11 years of age with reversible obstructive airway disease and for the prevention of exercise-induced bronchospasm (EIB).  ProAir RespiClick was approved by the FDA in March 2015 for the treatment or prevention of bronchospasm in patients 12 years of age and older with reversible obstructive airway disease and for the prevention of EIB.  ProAir RespiClick is the only multi-dose, breath-activated short-acting beta-agonist (SABA) inhaler available to patients in the U.S. It differs from other currently available rescue inhalers as it utilizes breath-activated technology that enables patients to breathe in to receive a measured dose of the medicine, eliminating the need for hand-breath coordination during inhalation.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day.  Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 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 10.09)

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8.3  Can-Fite BioPharma Announces $9 Million Registered Direct Offering

Can-Fite BioPharma announced that it has entered into definitive agreements with institutional investors to receive gross proceeds of $9 million.  In connection with the offering, the Company will issue 2,068,966 registered American Depository Shares (ADSs) of Can-Fite at a purchase price of $4.35 per ADS in a registered direct offering.  Additionally, for each ADS purchased by investors, the investors will receive an unregistered warrant to purchase one-half of an ADS.  The closing of the offering is expected to take place on or about September 23, 2015, subject to the satisfaction of customary closing conditions.  H.C. Wainwright & Co. acted as the exclusive placement agent in connection with this offering.

Petah Tikva’s Can-Fite BioPharma is an advanced clinical stage drug development Company with a platform technology that is designed to address multi-billion dollar markets in the treatment of cancer, inflammatory disease and sexual dysfunction.  The Company is preparing for a Phase III CF101 trial for rheumatoid arthritis and is preparing its protocol for its next advanced psoriasis clinical trial.  Can-Fite’s liver cancer drug CF102 is in Phase II trials and has been granted Orphan Drug Designation and Fast Track Designation by the U.S. FDA.  CF102 has also shown proof of concept to potentially treat other cancers including colon, prostate, and melanoma.  (Can-Fite 19.09)

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8.4  Valtech Cardio Receives CE Marking for Cardioband Mitral Reconstruction System

Valtech Cardio has received Conformité Européenne (CE) marking for its Cardioband Mitral Reconstruction System, (Cardioband), a proprietary implantable mitral reconstruction device with a transfemoral transseptal delivery system for mitral valve repair.  The designation was based on the results of a multicenter feasibility trial that demonstrated the safety and effectiveness of Cardioband in mitral valve repair and will allow Valtech to market and sell Cardioband in the European Union.  The Cardioband Mitral Reconstruction System enables surgical-like repair of the mitral valve annulus via a transfemoral, transseptal delivery system, allowing for real-time adjustment on a beating heart.  The transcatheter, supra-annular approach does not interfere with the mitral valve leaflets or chordae and does not preclude subsequent treatment options if they become necessary.

The Cardioband System combines a reconstruction implant, similar to the surgical annuloplasty devices, with a transfemoral transseptal delivery system.  Connection of the implant to the mitral annulus is suture less using specially designed anchors.  Reshaping of the mitral annulus to eliminate Mitral Regurgitation (MR) is done under physiological conditions and echocardiographic guidance for optimal results.  Cardioband received CE Mark approval after clinical trial results demonstrated the device is a safe and efficacious intervention option for patients with functional mitral regurgitation (FMR).

Or Yehuda’s Valtech Cardio, founded in 2005, is a privately held company specializing in the development of devices for mitral and tricuspid valve repair and replacement.  Valtech Cardio has full in-house development, manufacturing, and clinical research capabilities, and over 130 patents and patent applications.  The company, comprised of multidisciplinary development teams, works in close collaboration with world-renowned heart specialists to provide the best possible therapy for mitral patients.  (Valtech Cardio 19.09)

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8.5  US FDA Grants Fast Track Designation to Can-Fite’s CF102 Liver Cancer Treatment

Can-Fite BioPharma the U.S. FDA has granted the Company’s drug candidate CF102 Fast Track designation as a second line treatment for hepatocellular carcinoma (HCC), the most common form of liver cancer. CF102 had already received the FDA’s Orphan Drug designation.  Can-Fite is currently conducting a Phase II study for this indication in the U.S., Europe and Israel.  The randomized, double blind, placebo controlled study is expected to complete enrollment by the end of the first half of 2016 in 78 patients with Child-Pugh Class B cirrhosis who failed the only FDA approved drug on the market, Nexavar® (sorafenib).  Patients are treated twice daily with 25 mg of oral CF102, which has been found to be the most efficacious dose in Can-Fite’s earlier Phase I/II study resulting in the longest overall survival time, with excellent safety results.  Fast Track, aimed at getting important new drugs that meet an unmet need to patients earlier, is expected to expedite the development of CF102.  Drugs that receive Fast Track designation benefit from more frequent meetings and communications with the FDA to review the drug’s development plan to support approval. It also allows the Company to submit parts of the New Drug Application (NDA) on a rolling basis for review as data becomes available.  Since the Fast Track Program started, from March 1998 through June 30, 2015 a total of 318 Fast Track applications have been received by the FDA.  The FDA has granted 202 of them, and denied 110, with 6 more pending.

Petah Tikva’s Can-Fite BioPharma is an advanced clinical stage drug development Company with a platform technology that is designed to address multi-billion dollar markets in the treatment of cancer, inflammatory disease and sexual dysfunction.  The Company is preparing for a Phase III CF101 trial for rheumatoid arthritis and is preparing its protocol for its next advanced psoriasis clinical trial.  Can-Fite’s liver cancer drug CF102 is in Phase II trials and has been granted Orphan Drug Designation and Fast Track Designation by the U.S. FDA.  CF102 has also shown proof of concept to potentially treat other cancers including colon, prostate, and melanoma.  (Can-Fite 17.09)

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9.1  Water Quality Test Company Lishtot Wins Jerusalem Contest

Lishtot won the StartUp Open 2015 competition held in Jerusalem by the Global Entrepreneurship Network.  The company will represent Israel in the global contest to be held in November. The local event’s sponsors included the Prime Minister’s Office, the Jerusalem Municipality, the Jerusalem Development Authority, JNext, law firm Barnea & Co, and MIT Enterprise Forum Israel.  Lishtot was founded this year by CEO Netanel Raisch and Dr. Alan Bauer.  The startup has raised some $400,000 since its inception from private investors and the Office of the Chief Scientist.  The company’s product is based on extensive research by Dr. Bauer on the electromagnetic properties of water.

StartUpOpen was held in Israel for the second time; the previous winner, BreezoMeter, works in a related field, monitoring air pollution.

Jerusalem’s Lishtot (“to drink” in Hebrew) has developed a technology for water testing that detects contamination in water in less than 4 seconds based on changes in water electronic characteristics.  Lishtot’s mission is to connect through the Internet via a dedicated smartphone application many water testing devices in order to build worldwide and local water quality maps that provide the answer to any person in real time whether “to drink or not to drink?”.  Lishtot’s technology, based on 15 years of research, detects many contamination types (including bacteria, heavy metals and organic pesticides) and is reusable, requires no added reagents and costs cents per test.  (Globes 09.09)

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9.2  Radisys & EZchip Partner to Solve Mobile Operators’ Service Scalability Challenges

Hillsboro, Oregon’s Radisys Corporation and EZchip Semiconductor announced the integration path towards EZchip’s next-generation NPS network processor with Radisys’ FlowEngine intelligent traffic distribution solutions for Communications Service Providers (CSPs).  The telco-centric, carrier-grade solution provides CSPs with a service-aware integrated solution of hardware, software and professional services, enabling CSPs to guarantee services and roll-out new services in an SDN environment – at the scale required for millions of subscribers around the world.  As network traffic continues to explode, CSPs require a scalable solution that can support millions of subscribers and flows.  SDN allows for the separation of the control plane and data plane, supporting CSPs scalability requirements, while reducing ongoing OpEx and CapEx costs.  However, these CSPs require a pre-integrated solution combining hardware, software and professional services support so they can focus resources on service deployment, not system integration.  The integrated solution from Radisys and EZchip enables key functional capabilities to deliver this scalability in a small, but powerful footprint.

Yokneam’s EZchip is a fabless semiconductor company that provides high-performance processing solutions for a wide range of applications for the carrier, cloud and data center networks.  EZchip’s broad portfolio of solutions scales from a few to hundreds of Gigabits-per-second, and includes network processors, multi-core processors, intelligent network adapters, high-performance appliances and a comprehensive software ecosystem.  (Radisys 10.09)

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9.3  SoftWheel Provides New Mobility to US Wounded Warriors

Wheelchair-bound US army veterans will be among the first users of the revolutionary Acrobat Wheel created by Israeli company SoftWheel to increase their mobility significantly.  SoftWheel literally reinvented the wheel by incorporating a patented selective suspension mechanism that kicks in when impacted above a certain threshold.  Riders can go over a rocky or uneven terrain, get down a curb or down stairs, while the shock is absorbed by the wheel rather than by the chair or the user’s body.  SoftWheel CEO Daniel Barel told ISRAEL21c that the company is “very veteran-oriented in Israel and abroad,” and therefore contacted the US Veterans Administration (VA) to initiate a working relationship.  Human Engineering Research Laboratories, run by the VA and the University of Pittsburgh Medical Center, has tested and approved the Acrobat wheel.  (ISRAEL21c  16.09)

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9.4  Celeno Announces DOCSIS 3.0 Wi-Fi 802.11ac Gateway Reference Design

Celeno Communications announced a reference design developed together with STMicroelectronics, where Celeno’s Wi-Fi 802.11ac and 802.11n chips are fully integrated with ST’s Alicante DOCSIS 3.0 CableLabs certified chip.  The combined solution employs a cost-effective architecture based on PCIe Wi-Fi connectivity that enables cable MSOs and OEMs to deliver high-performing concurrent dual-band Wi-Fi 802.11ac gateways that meet both the cost and demanding performance challenges of an ever growing and highly complex Wi-Fi home-networking market.  Powered by Celeno’s industry-first Wi-Fi Airtime Management technology – OptimizAIR 2.0 – these gateways can dynamically and intelligently allocate Wi-Fi capacity between multiple managed virtual networks (SSIDs).  The technology enables service providers to offer innovative managed services with new monetization opportunities, such as multiple home-spot services, cellular offload, 4K/UHD and HD video on Set-Top-Boxes and portable devices, smart home apps and more, while ensuring superlative QoS and QoE and reducing churn, service calls and operating expenses.

Ra’anana’s Celeno provides high performance Wi-Fi chips and software for demanding home networking applications.  Celeno’s extensive chip portfolio and OptimizAIR technology enable the wireless distribution of multiple and simultaneous HD video and data streams throughout the home with the highest levels of performance and reliability while ensuring a superlative quality of service and user experience.  Celeno’s OptimizAIR 2.0 technology provides unprecedented capabilities to provision and manage both Wi-Fi capacity and radio spectrum. It enables seamless deployment of rich Wi-Fi services such as home hotspots, community Wi-Fi, multicast video and over-the-top to the home user.  (Celeno 11.09)

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9.5  Content Discovery Platform Curiyo Goes Mobile with New App and Video My2¢ Feature

Curiyo announced the launch of a mobile app with new My2¢ Videos.  My2¢ lets users share insights by commenting via short videos, audio clips, or text on any topic that interests them.  Just like Curiyo on the web, the new mobile app allows users to follow their topics of interest to view content from multiple sources, including news, photos, videos, Wikipedia, Twitter and Reddit, without having to search through multiple websites.  Content is seamlessly and cleanly displayed and easy to scroll through.  The new Curiyo works on iOS, Android and all browsers (desktop and mobile). It is also available as a simple JavaScript widget for publishers and bloggers who want to deliver quality background content to their readers while keeping them on their pages longer. It works internationally in 15 languages.

Jerusalem’s Curiyo was founded by Bob Rosenschein, the founder and former CEO of, a top-20 U.S. website.  Curiyo’s mission is to help people stay on top of and chime in on stories about anyone or anything they care about.  Curiyo’s angel investors include OurCrowd, Cedar Fund, Morton Meyerson, Kima Ventures, Magic, Gigi Levy, JumpSpeed, Tom Glocer and Techra Networks.  (Curiyo 17.09)

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9.6  Continuity Software Launches AvailabilityGuard 7

Continuity Software announced the release of version 7 of its award winning AvailabilityGuard software, providing enterprise IT teams with advanced predictive analytics, risk detection, and outage prevention capabilities across their software-defined datacenters.  AvailabilityGuard provides infrastructure teams with predictive IT Operations Analytics capabilities that ensure resiliency, high availability, and operational excellence in the highly dynamic environment of the software-defined datacenter.  AvailabilityGuard allows IT organizations to proactively identify and mitigate hidden design and deployment flaws that may introduce downtime risks, single-points-of-failure, and deviations from best practices across the entire infrastructure.  Additionally, AvailabilityGuard helps IT organizations realize the benefits of the Software-Defined Datacenter with greater confidence, providing a blueprint for safer transition towards automation by verifying the existing environment to ensure a clean start, validating that automation scripts are programmed correctly, and ensuring ongoing automated validation following the transition.

Tel Aviv’s Continuity Software is helping the world’s leading organizations prevent unplanned IT outages.  The award-winning AvailabilityGuard software enables IT teams to proactively identify and mitigate downtime and data-loss risks across the entire infrastructure-including high availability, cloud, and disaster recovery environments (DR).  Using AvailabilityGuard’s advanced IT operations analytics to pinpoint and eliminate potential failures before they impact the business, organizations are able to deliver the highest levels of IT service availability while improving operational efficiency.  (Continuity Software 17.09)

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10.1  Negative Inflation Returns to Israel

On 13 September, the Central Bureau of Statistics announced that Israel’s Consumer Price Index fell by 0.2% in August and has fallen by 0.4% in the past 12 months.  When excluding energy prices over the past year, the CPI would have risen 0.4%.  The CPI has fallen 0.2% since the start of 2015.  August ends a run of four straight months in which the CPI rose.  There were significant price falls in August in fresh fruit (0.6%), clothing and footwear (3.7%), transport and communications (1.7%) and fuel (4%).  There were significant price rises in culture and entertainment (1.8%), fresh vegetables (1.3%) and housing costs (0.7%).  (CBS 13.09)

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10.2  Tel Aviv is Middle East’s Most Expensive City

Tel Aviv is the most expensive city in the Middle East in terms of price levels, the 2015 edition of the Prices and Earnings report from Swiss bank UBS confirmed on 17 September.  Israel’s second largest city is closely followed by Dubai in the United Arab Emirates, which actually ranks higher when including rent prices into the calculation.  Tel Aviv ranks 22nd overall in terms of price levels but places only 33rd when it comes to earning power.  Workers in the first Hebrew city, however, have the highest wages in the Middle East.  According to the survey, employees in Tel Aviv must work 21 minutes to buy a Big Mac hamburger and 12 minutes apiece to buy a kilogram of bread, or of rice.

The world’s most expensive cities – according to the survey which examines the price levels, wage levels and purchasing power of 71 cities worldwide – are Zurich, Geneva and New York.  In most major cities around the world, people work more than 2,000 hours a year, mainly in Asia and the Middle East.  The shortest number of working hours can be found in most of Western Europe.  (Various 17.09)

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10.3  Aliyah Rises As 29,500 Immigrants Arrived in Israel in 5775

According to The Jewish Agency for Israel and the Ministry of Aliyah and Immigrant Absorption, some 29,500 immigrants arrived in Israel in the Jewish year 5775, representing a 13% increase over the 26,000 who came in 5774.  Most of this year’s immigrants came from the former Soviet Union (some 14,100, compared to 10,800 last year) and Europe (more than 9,000, compared to 8,400 last year).  Some 3.600 immigrants came to Israel from North America (similar to last year’s number) and 1,200 came from South America (a modest increase compared to last year).  The two largest sources of aliyah were France, with 7,350 immigrants compared to 6,700 in 5774 (a 10% increase), and Ukraine, with 6,900 immigrants compared to 4,600 last year (a 50% increase).

Also in Europe, some 690 immigrants arrived in Israel from the UK (a 13% increase when compared to the 612 who came last year), some 400 from Italy (a 30% increase, compared to 300 last year), and 290 from Belgium (similar to last year’s figure).  Immigrants to Israel came from 97 countries across the world.  One immigrant each came from Andorra, Angola, Namibia, Paraguay, the Philippines and Slovakia.

The three most popular destinations in Israel were Tel Aviv-Yafo, which welcomed some 3,500 new immigrants, the coastal city of Netanya with 3,400, and Jerusalem, which some 3,000 new immigrants made their home in 5775.  (Arutz Sheva 09.09)

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10.4  Building Starts in Israel Reach 18-Year High

Israel’s Central Bureau of Statistics announced that there were 25,100 building starts in the first half of 2015, 27% of which were either single-family or two-family houses, 7.9% more than in the corresponding period last year.  The figures are from a survey of building starts and completions.  Trend data show an average increase in building starts of 3.2% per quarter in the October 2014-June 2015, compared with a 3.2% average decrease in January-September 2014.  Some 97,300 apartments were under active construction at the end of June 2015, the highest figure since the end of September 1997.

Construction of 21,470 apartments was completed in H1/15, 6.9% more than in the corresponding period last year.  The largest number of housing completions was in the central district, which accounted for 29% of the nationwide total, while Jerusalem accounted for only 10%.  Housing completions in the first half of the year were up by 25% in the Jerusalem district and 22% in the Haifa district, compared with the first half of 2014, while housing completions in the first half fell by 9% in the northern district and 2% in the central district.  (Globes 09.09)

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11.1  ISRAEL:  IMF Executive Board Concludes 2015 Article IV Consultation

On September 4, 2015, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Israel.

Israel’s economy has been doing well and near-term growth prospects are favorable.  Following growth of 2.6% last year, the economy is expected to expand by around 2.5% this year and 3 – 3.3% each year in the medium term.  Employment creation has been remarkable, growing by 3.5% annually, and unemployment is at multi-decade lows.  Inflation has been negative, but this reflects temporary external factors and not domestic weakness.  Risks are balanced, and the real exchange rate is broadly in line with fundamentals.

The central government met the original deficit target of 2.8% of GDP in 2014.  However, the government raised the deficit targets for 2015 and 2016 to 2.9% of GDP for both years (almost 4% of GDP based on international accounting standards), compared with 2.5 and 2.0% of GDP previously.  Debt has declined to 67% of GDP from a peak of 94% of GDP in 2003 but is expected to increase for the first time since 2009, following the upward revisions to the deficit targets.

The central bank kept interest rates on hold in August, as inflation is expected to return to the target band next year.  Housing prices continue to increase by around 4% year-on-year, owing largely to supply constraints.  In response, the government has announced a variety of initiatives to boost housing supply. Macro-prudential measures have been successful in containing the increase in household leverage and household credit to GDP has remained low at around 40% of GDP compared to other advanced economies.

Labor productivity growth and levels are low, weighing on growth prospects, and income inequality is among the highest in advanced countries.  Acknowledging the challenges to medium-term growth and poverty, the new government has prioritized boosting competition in several sectors and better integrating the rapidly growing Arab-Israeli and Ultra-Orthodox Jewish (Haredi) populations into the labor force.

Executive Board Assessment

Executive Directors welcomed Israel’s recent strong economic performance and the favorable near-term outlook.  Directors agreed that the main policy challenges ahead relate to reinforcing the foundations for lasting and inclusive growth by bolstering fiscal buffers, mitigating housing market risks, increasing labor productivity, and reducing income inequality.

Directors emphasized the importance of strengthening the fiscal framework.  Most Directors noted that sustained budgetary consolidation, consistent with the Deficit Reduction Law, is needed to place the debt-to-GDP ratio on a downward path and broaden fiscal space.  At the same time, a number of Directors considered appropriate a path of fiscal adjustment not unduly frontloaded.  To achieve the deficit targets, Directors encouraged the authorities to consider a mix of revenue and expenditure measures, emphasizing particularly the need for stronger commitment control of multi-year projects.

Directors noted that headline inflation is currently below the Bank of Israel’s target, but agreed that no monetary easing is needed at this point, as low inflation is largely imported and likely to be temporary.

Directors noted the social and financial risks arising from the continued rise in housing prices.  They welcomed the government’s intention to boost supply through various measures, and encouraged continued use of macro-prudential policies to contain household leverage.  Close monitoring of the financial sector’s exposure to the housing market is also warranted.  In this regard, Directors recommended the prompt establishment of the Financial Stability Council to help coordinate macro-prudential policies across sectors.  Timely adoption of the amendment to the Banking Ordinance to enhance the crisis resolution framework would also be important.

Directors concurred that increasing labor productivity growth remains a policy priority. In this context, they welcomed the authorities’ plans to boost competition in several sectors, although they highlighted that banking sector reforms should remain mindful of financial stability concerns.  Directors also called for efforts to address infrastructure gaps, reform the product market, improve education and ease business constraints.

Directors noted that reducing inequality will require concerted efforts from government agencies, stakeholders, and communities.  They agreed that boosting labor force participation rates of the Haredi and Arab-Israeli populations is essential—both to reduce poverty rates and safeguard Israel’s long-run growth potential.  (IMF 04.09)

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11.2  LEBANON:  Outlook Revised To Negative on Weakening Economic Prospects

On 11 September 2015, Standard & Poor’s Ratings Services revised its outlook on the Republic of Lebanon to negative from stable.  At the same time, we affirmed our ‘B-/B’ long- and short-term foreign and local currency sovereign credit ratings.


The outlook revision stems from our view that political uncertainty in Lebanon and regional tensions will continue to weigh on economic growth in the medium term.  In our view, the proper functioning of the Lebanese government is impaired.  The parliament, whose term was due to end in June 2013, has voted for a second time to extend its term of office to 2017.  It has also failed to elect a president since May 2014, and has not passed a budget since 2005.

We expect private consumption and investment to be constrained, with tourism, financial services, trade and foreign direct investment subdued.  However, we believe that higher disposable income, due to lower oil prices, will continue to support modest real GDP growth of about 3% in 2015-2018, as will a third Banque du Liban (BdL) stimulus package of $1 billion for 2015, aimed at supporting private-sector growth and small and midsize enterprises.

In our view, there are substantial shortcomings and material gaps in the dissemination of macroeconomic data and reporting delays.  Official national accounts data for 2013 are the latest available and were published in December 2014.

The national unity government consists of two political alliances, one formed on March 14, 2005, led by former Prime Minister Hariri, who opposes the Assad regime in Syria; and the other created March 8, 2005, by Hezbollah, whose military arm is actively supporting the Assad regime.  The sectarian divides in Lebanon hamper policymaking, in our view.  We do not expect the government will use lower oil prices and the fiscal space this allows to pursue structural reforms that might promote sustainable economic activity.

We understand that a constitutional crisis would develop if Lebanon’s prime minister, Tammam Salam, were to resign as he has recently suggested.  It is unclear how a new prime minister could be appointed without a sitting president.

We expect the general government deficit to widen in 2015 to close to 10% of GDP, despite expected savings of about 1.5%-2% of GDP as low oil prices reduce transfers to the electricity company Electricite du Liban (EdL), which have averaged over 4% of GDP in recent years.  Lower transfers to EdL will be somewhat offset by lower value-added tax and customs duties.  The Syrian crisis, now in its fifth year, and the flow of refugees to Lebanon (1.1 million registered as of August 2015) continue to impose a heavy burden on Lebanon’s public finances and infrastructure.  We expect that Lebanon’s 2015 revenues will show a shortfall compared with those in 2014, which benefitted from one-time developments, and we project that net general government debt will increase to 127% of GDP by 2018.

In our view, public finances and fiscal flexibility will remain constrained by structural expenditure pressures, including transfers to EdL, as well as by high interest payments, which account for about 40% of general government revenue.  We do not expect any major progress on structural reforms that would lead to a sustained fiscal adjustment.  The Ministry of Finance is targeting longer debt maturities and higher foreign currency borrowing as part of its public debt strategy.

The Lebanese government’s debt servicing capacity is to a significant extent determined by the domestic financial sector’s willingness and ability to continue buying government debt, which in turn is heavily influenced by the strength of deposit flows into the financial system.  As of June 2015, 61% of the government’s gross debt was denominated in local currency.  Domestic banks support the government debt market by buying instruments directly or by purchasing the BdL’s certificates of deposit.  In turn, the BdL buys government debt instruments.  The banking sector’s claims on the public sector accounted for 21% of total banking system assets, and bank creditors held 48% of the government’s outstanding local currency debt.  We view the concentration of government financing from these sources as a structural weakness that increases Lebanon’s vulnerability to adverse business, financial, and economic conditions.

In our view, confidence in Lebanon’s financial system remains strong, supported by the BdL’s policy of maintaining high foreign currency reserves that cover about 80% of the local currency money supply, as well as a favorable interest rate differential versus the U.S.  The BdL has amassed important foreign-exchange reserves in recent years, which help maintain confidence in the financial system and could provide a cushion against a slowdown in foreign currency financial flows.  The central bank’s foreign assets reached $39 billion at the end of August 2015 and total foreign assets, including gold, totaled $49 billion.  The banking system’s funding features a high proportion of retail deposits that have shown resilience through various crises.  Resident and nonresident private-sector deposit growth was 6% in 2014, and we expect similar levels in 2015. In our view, this should be sufficient to enable Lebanon’s financial sector to fund the large government deficit and meet the demand for private-sector credit.

We understand that, after a $2.2 billion Eurobond issued in February 2015, the Ministry of Finance has obtained approval for another $1.3 billion Eurobond issue later this year, which is the amount remaining under a $3.5 billion program.  We also understand that sufficient legislative leeway is available for the government to issue foreign currency debt to refinance upcoming debt maturities until the first quarter of 2016.  However, the government will need to pass new legislation to allow for further foreign currency debt issuance after that time.

There are limited available external trade, balance of payments and international investment position data on Lebanon.  We forecast that the current account deficit will approach 25% of GDP in 2015 and narrow gradually over the medium term, primarily due to a smaller import bill stemming from lower oil prices.  The strengthening U.S. dollar will also reduce the cost of imports from the eurozone, which accounts for 34% of Lebanon’s imports.  We note that sizable positive net errors and omissions, averaging 10% of GDP in 2015-2018, could mean that the current deficit is overstated.  The last official balance of payments data were published in 2013.  Lebanon’s foreign currency inflows are highly dependent on remittances.  A significant portion reportedly comes from the Gulf Cooperation Council (GCC), but we do not expect the inflow to decrease significantly in the near term because of the slowdown in the GCC.  Stock-flow discrepancies between the country’s balance of payments and its international investment position continue to make the analysis of Lebanon’s external position difficult, in our view.


The negative outlook reflects our view that protracted political instability could further dampen economic growth in Lebanon and limit policymakers’ ability to address medium- and long-term macroeconomic reforms.  We could lower the ratings over the next 12 months if economic growth is slower than we anticipate or if the current political upheaval were to escalate, resulting in domestic conflict or acute risks to institutional stability.

We could revise the outlook to stable if Lebanon’s economic growth prospects improved, along with more sustainable public finances and a stable, more predictable policymaking framework.  (S&P 11.09)

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11.3  QATAR:  ‘AA/A-1+’ Ratings Affirmed; Outlook Stable

On 18 September, Standard & Poor’s Ratings Services affirmed its ‘AA’ long-term and ‘A-1+’ short-term foreign and local currency sovereign credit ratings on the State of Qatar.  The outlook is stable.

We also affirmed the ‘AA’ long-term issue ratings on the bonds issued by Qatari Diar Finance Q.S.C. and SoQ Sukuk A Q.S.C.


Qatar is a wealthy economy; we estimate its GDP per capita at $81,000 in 2015.  The hydrocarbons sector creates about 55% of Qatar’s GDP, 90% of government revenues (oil and gas taxes and royalties, plus dividends from Qatar Petroleum), and 85% of exports.  We view Qatar’s economy as undiversified.

Qatar’s economy grew by about 6% over the last three years, but we expect growth to slow to about 4% during 2015-2018.  The hydrocarbon sector will likely continue to stagnate.  The non-oil sector, on the other hand, should remain buoyant, thanks to public investment and supported by the growing population.  We understand that the government is committed to the large public infrastructure program and its efforts to diversify the economy, while maintaining its strategic position in the global natural gas market.

In our view, medium- to long-term challenges to Qatar’s competitive position in the liquefied natural gas (LNG) market are likely to come from new shale production, Russia’s gas pipeline to China, and increased pressure to delink LNG contracts from the price of oil.  Nevertheless, Qatar’s strategy has been to diversify into all major markets, adjusting the mix of destinations and contract types according to market needs.  Moreover, the majority of its gas exports are under long-term contracts, which provides some certainty regarding the volumes sold.  We also expect that Qatar will maintain its cost advantage over many new projects in other countries.  Since Qatar produces and exports significant quantities of condensate and natural gas liquids associated with natural gas, its effective average cost of producing LNG is much lower.

We assume that Qatar’s oil production will decline as output from maturing fields’ contracts.  We expect an average annual decline in crude oil production of about 5% over 2015-2018.  We project largely flat gas output (LNG and natural gas), given Qatar’s moratorium on new investments in the sector, while condensate volumes will likely increase by about 5% per year over the same period.

The large drop in oil and natural gas prices and the government’s public investment program have led to a deterioration of the fiscal balance beginning in 2014.  We expect the general government balance to fall into a deficit of 4.5% of GDP in 2016, from a modest fiscal surplus in 2015.  Our outlook assumes that public spending will continue as the investment program advances.  We also project a decline in hydrocarbon income, namely the financial transfers from Qatar Petroleum to the budget, which come to the government budget with a lag.  The government intends to rationalize and outsource part of its operations and to award more projects to the private sector, though whether the desired level of private sector participation can be achieved remains to be seen, in our view.

In the context of lower hydrocarbon revenues and increasing capital spending, the government is prioritizing existing projects, focusing funding on the highest-priority and strategic investments.  We expect national development strategy projects to improve the economy’s productive capacity and strengthen Qatar’s competitive position.  We understand that the government plans to award about $220 billion of large-scale investment projects over the next 10 years.  The program will focus on infrastructure, education, and health, and we expect the majority of these projects to be completed ahead of the football World Cup in 2022, which Qatar is hosting.

Alongside government investments funded through the budget, public-enterprise and private-sector spending on the national development strategy is likely to be largely funded by borrowing from domestic financial institutions.  This may cause banks’ net external liability positions to widen and their loan-to-deposit ratios to rise, as we expect deposit growth in the Qatari banking system to gradually decelerate due to low oil prices.  The ratio of domestic credit to total deposits in the Qatari banking system was 107% as of June 2015, slightly up from 106% at end-2014.  Public sector deposits represented about 37% of the resident deposit base in June 2015, down from 39% at year-end 2014.

We project Qatar’s external surpluses to narrow substantially in the medium term as export receipts fall sharply between now and the end of 2016, while import demand remains strong.  The transfers and income accounts of the current account will remain in deficit, the former due to remittance outflows as a result of the expatriate population and the latter due to payments to the foreign firms that partner with Qatari companies in the oil and gas industry.  Qatar’s net external asset position will remain strong at about 250% of current account receipts in 2015-2018.  Qatar has accumulated considerable foreign assets over the past decade, as a result of its development of its natural resources.  We forecast that the general government net asset position will also stay robust, estimated at about 100% of GDP in 2015.  Qatar has the third-largest proved reserves of natural gas in the world.  We expect Qatar’s reserves to provide many decades of production at the current levels.

Domestic political and social stability prevails, despite what we view as only gradual political modernization and a highly centralized decision-making process.  In our view, the country’s public institutions are still relatively undeveloped compared with those of most ‘AA’ rated sovereigns.  Executive power remains in the hands of the emir.  In our view, the predictability of future policy responses is tempered by weak political institutions, although in our base case we assume that policy will continue to focus on prudent development of the hydrocarbon sector, alongside further economic diversification.  In addition, material data gaps exist and transparency is limited, by international standards.  In particular, the government neither discloses nor reports earnings on its fiscal assets.  In our view, monetary policy flexibility is limited because the exchange rate is fixed to the U.S. dollar.


The stable outlook reflects our view of balanced risks to the ratings over the next two years.  We believe that Qatar’s economy will remain resilient, supported by strong macroeconomic fundamentals, but we also anticipate continued institutional weaknesses and limited monetary flexibility over the next two years.

We could lower the ratings on Qatar if developments in hydrocarbon production and prices, or in the banking sector, were to significantly weaken the country’s external or fiscal positions; for example, if the government’s gross liquid assets fall significantly below 100% of GDP by our estimates.

We could raise the ratings on Qatar if we saw domestic institutions mature faster than expected, alongside significant improvements in transparency regarding government assets and external data quality.  (S&P 18.09)

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11.4  EGYPT:  IMF Staff Concludes Visit to Egypt

An International Monetary Fund (IMF) team visited Cairo during 13 – 17 September to review recent economic developments since the Article IV Consultation mission in November 2014 and discuss with the authorities their planned economic policies for the remainder of the fiscal year.

At the end of the visit, Mr. Jarvis issued the following statement:

“There have been positive economic developments since the mission’s last visit in Egypt.  Some of the pledges made at the Egypt Economic Development Conference in March are already in the implementation phase; in August, the parallel Suez Canal was opened after just one year of work; and a major gas find in Egyptian waters bodes well for the countries’ outlook in the medium term.  The country’s return to international markets was marked by the successful issuance of a $1.5 billion Eurobond.  Macroeconomic figures also point to some improvement, with growth rebounding to 4.2% in 2014/15, and inflation has declined.  Financial soundness indicators point to the continued resilience of the banking sector, and the authorities are making efforts to deepen financial inclusion.  The authorities succeeded in significantly reducing the underlying budget deficit despite a decline in foreign grants, thanks to a wide-ranging set of reforms including energy subsidy reforms, and progress in containing the wage bill and increasing tax revenues.  The government’s plan is designed to balance fiscal consolidation with increased spending on social programs and infrastructure investment.

“At the same time, unemployment remains high notably among the youth.  The fiscal deficit is still large and domestic public debt high.  Reserves are about three months of imports, and foreign exchange is in short supply.  The authorities recognize that the recent positive developments need to be secured through strong policies, and intend to continue a much-needed fiscal consolidation while preserving growth-friendly investment.  The mission welcomes the authorities’ plans to pursue fiscal and structural reforms in order to put public debt on a downward-trending path and encourage private sector credit, thereby supporting growth and employment.  Lower fuel and electricity subsidies, combined with the implementation of the VAT, would go a long way toward improving the strength of the budget.

“The Central Bank of Egypt is making efforts to curb the parallel exchange market.  It has also allowed movement in the official exchange rate and widened the exchange-rate margin earlier this year.  We consider that a gradual move toward a more flexible exchange rate policy focused on achieving a market-clearing rate would serve Egypt’s interests.  Such a move would improve the availability of foreign exchange, strengthen competitiveness, support exports and tourism, and attract foreign direct investment.  This, together with the pursuit of structural reforms, should also foster growth and jobs, and reduce financing needs.

“During their visit, the mission met with Central Bank Governor Hisham Ramez, Minister of Finance Hany Dimian, members of the banking sector, representatives of the private sector and multilateral institutions, diplomats and members of civil society organizations.  The team would like to thank the authorities for the high quality and openness of the discussions and for their hospitality.  The IMF will be ready to support Egypt and its people in any way that is useful.”  (IMF 17.09)

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11.5  EGYPT:  Egyptians’ Views on the Egyptian Economy

On 11 September Salma Abdallah posted in Fikra Forum            that since President Abdul Fattah al-Sisi came to power in June 2014, he has repeatedly promised to pull Egypt out of the stifling economic situation that has plagued the country for years.  Egyptians, longing for stability since the fall of Mubarak in 2011, have applauded Sisi’s promises to revitalize Egypt’s struggling economy, but their responses to Sisi’s efforts in this sector more than a year later prove more ambivalent.

In the past year, Sisi has announced several mega-projects to jumpstart the Egyptian economy, including the new capital, an international economic summit in March and above all the opening of the new Suez Canal.  Sisi coupled his major undertakings with extensive international visits to countries such as Russia and Germany in order to discuss potential bilateral economic opportunities.  Gulf powerhouses are concurrently pumping billions of dollars into Egypt’s economy in an effort to support their strategic ally, with aid exceeding $20 billion.

Due to these efforts, Sisi has demonstrated that he understands the Egyptian people’s longing for stability.  Sisi has taken advantage of the deep support that the majority of the Egyptians hold for him to push forward politically-sensitive economic reforms as well.  These have included austerity measures on basic needs such as the decision to lift energy, tobacco and alcohol subsidies to reduce the country’s budget deficit.

These measures have created some positive change for the economy, reflected in the World Bank report “Global Economic Outlook 2015.”  This report showed an improvement in the Egyptian economy since Sisi’s reforms came into action, projecting economic growth at 4.3% by the end of 2015 due to increased political, social and security stability.  The report also presented the 5.6% economic growth for the first half of the 2015 fiscal year as a significant increase from 1.2% of the same period in 2014.

Although news headlines and official reports seem promising, the average citizen can’t quite see these improvements or changes materializing on the street, especially since prices are still skyrocketing and unemployment rates have not decreased.  Consequently, Egyptians have mixed opinions on Sisi’s progress on the economic sector.

Despite the lack of improvement in the lives of average Egyptian citizens under Sisi’s tenure, some of his supporters believe that expecting the president to provide quick progress for Egypt’s economic situation is unrealistic, especially in a country where corruption and turmoil have been the norm for years.  Some Egyptians also believe that the country’s economic situation is improving, especially after the economic conference.  They tend to believe that current problems and the slow rate of reform are temporary glitches along the road to progress.

On the other hand, there is a significant mass of Egyptians who remain unhappy with the state of the economy.  Their anger doesn’t necessarily originate from a general opposition to Sisi—some are avid supporters—but instead develops from the economic hardships they face in their everyday lives.  Yet this group is often subjected to major criticism when they express their dissatisfaction.  Portrayed as selfish and unrealistic, these Egyptians face repeated blame for failing to prioritize the country’s security situation over their personal needs.

Naturally, Egypt’s current security situation plays an important role in the economy and Egyptians’ perception of economic progress.  With terrorist attacks hitting North Sinai and even reaching the capital, many Egyptians are willing to overlook the country’s economic situation.  Instead, they are ready to accept some economic setbacks as part of what they believe to be their social responsibility towards the government to help fight a greater evil – terrorism.

Despite the majority of citizens’ patience towards Egypt’s slowly improving economic situation, the current methods of developing the government could lead to major setbacks.  The government’s current economic plan heavily relies on mega-projects that rely on foreign investors and billions of dollars in aid from the Gulf.  These methods of growing the economy may fail to deliver the social equality that many of the Egyptians hope for and will delay their participation in Egypt’s projected growth.

For now at least, the political implications of this issue seem to be limited.  People are either overwhelmed by news headlines of mega-projects and foreign aid or focus their concerns on the increasing risk of stronger terrorist threats.  Still others either hope for stability after years of turmoil or are too afraid to voice up their concerns, knowing that their opinion will only open them up for censure.  The Egyptian government understands that these variables prevent major criticism of the Egyptian government and is currently relying on these issues as defensive shields to prevent backlash from any shortcoming or failure in the economic sector.

Salma Abdallah is an Egyptian editor and journalist.  (Fikra 11.09)

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11.6  EGYPT:  Egypt’s New Gas Discovery – Opportunities & Challenges

Adel Abdel Ghafar posted in Brookings that after a tough year, the Egyptian government recently received some good news.  Italy’s ENI announced that it has discovered the “largest ever” offshore natural gas field in the Mediterranean off the Egyptian coast.  Dubbed a “supergiant” field, ENI suggested that the Zohr project would be able to meet Egypt’s own natural gas demands for decades to come.

This is welcome news for the government of Abdel-Fattah a-Sisi as it enters its second year and it is likely to resonate locally and regionally.  Once the field comes online it will go a long way toward satisfying local demand, thus allowing Egypt to spend significantly less on energy.  It would be prudent for the government to use these savings to improve people’s livelihoods and invest in infrastructure, health, and education.

From Exporting to Importing: An Unpleasant Journey

In 2003, after the discovery of sizable reserves and the establishment of pipelines and Liquefied Natural Gas (LNG) facilities, Egypt began exporting gas to Jordan, Israel and Syria.  In addition, the government had ambitious plans to export to Lebanon and Turkey.

This coincided with an increased thirst for gas locally.  According to a report by the German Marshal Fund, between 2000 and 2012 overall energy consumption in Egypt rose by 5.6%, but demand for gas grew by 8.7%.  By 2012, gas was providing more than 50% of the total energy needs of the country compared with 35% in 2000.  Even though production had risen, nonetheless it was inevitable that in the long run demand would outstrip supply as gas was being used for industrial, commercial and residential purposes at subsidized prices, as well as exporting.

By 2015, the party was over.  Due to this exponentially increasing local demand for energy, Egypt was no longer a net exporter of gas.  After initial denials by the government , Egypt began importing gas from Israel via a US company early in the year, causing local controversy as Egypt had until then been exporting to Israel for more than a decade.  Adding insult to injury, Egypt imported Israeli gas at global prices despite having exported theirs to Israel at much lower prices during the previous decade.

For Egyptian energy policy makers, importing from Israel made sense as some of the existing infrastructure used for gas exports could now be used to import, despite the damage inflicted by militant groups operating in the Sinai who blow up pipelines on a regular basis.

In addition to imports from Israel, in February 2015 Egypt signed an MOU with Cyprus for a feasibility study to assess an underwater pipeline for exporting gas to Egypt.  The initial findings of the report are being assessed by the government to determine whether to proceed.  Overall, Egyptian policy makers had been preparing for the eventual decline of local supply of gas.

Enter the Zohr

While it will take years to produce gas from the field commercially, this is nonetheless an undeniably good story for the Egyptian government as it tries to shore up its economic credentials.  In a country where acute energy shortages peak in the summer months, energy supply is high on the agenda.  Before ex-President Morsi was overthrown in 2013, he was being blamed for a series of power outages that had swept the country, leaving the population increasingly frustrated.  The Egyptian government understands the importance of providing cheap energy for stability.  Even the army has gotten involved and is currently building a series of power stations to support the ever-strained electrical supply.

The new discovery has alarmed Israeli policy makers.  The Israeli energy minister Yuval Steinitz said that the Egyptian discovery is “a painful reminder that while Israel sleepwalks and dallies with the final approval for the gas road map, and delays future prospecting, the world is changing in front of us, including ramifications for [Israeli] export options.”  Indeed, despite sizable fields discovered in Israeli waters, the deal between Noble Energy and the Delek group have been facing regulatory issues in Israel.  The news of the discovery led to a heavy selloff of gas producers on the Israeli stock exchange.

It is likely that the new discovery in Egyptian waters will provide impetus for Israel to hasten its production, as once the Zohr field comes online, it will have direct ramifications for Israeli gas exports not only to Egypt, but regionally as well, including any potential gas deals with Cyprus and Turkey.

Now What?

The key issue now is how fast can this field become operational, and at what cost.  The government has yet to publish a detailed costing of the project, including who will bear the investment cost, and more importantly, how exactly the revenues from the field will be distributed. It remains to be seen if it will become a “game-changer” as ENI CEO Claudio Descalzi suggested.

In addition to these concerns, LNG prices have been dropping due to a variety of factors globally.  First, Japan, which had become one of the world’s largest LNG consumers after its Fukushima disaster, recently began restarting its nuclear reactors, thereby reducing demand.  Second, there is also increased supply capacity coming online around the world that is likely to put further pressure on prices.  As prices become lower, the prospective returns from the new discovery would already be under pressure.

Finally, with the Iranian nuclear deal being completed, Iran will be likely to increase investment in its LNG capabilities to become a larger regional gas producer.  India has already signaled its interest in reviving a decade-old $22 billion LNG deal with Iran that was on hold due to the sanctions.  Descalzi was bullish and shrugged off these concerns, arguing that the field is “another positive response to this kind of low price environment.”

Exporting aside, if this discovery is able to satisfy local demand for gas for some decades to come, then this is undeniably good news for Egypt as it will free up much needed funds for other sectors of the economy, such as health and education.  Overall, August has been a good month for Egypt’s energy prospects.  In addition to the Zohr gas discovery, President Sisi during his recent visit to Moscow signed an MOU to build a Russian nuclear reactor as Cairo continues to deepen its relationship with Moscow.

Neither the nuclear reactor nor the gas field will become operational anytime soon.  Nonetheless they both provide a positive story for foreign investors who are weary of investing in Egypt after five years of domestic turmoil.  Additionally, earlier this year, Moody’s upgraded Egypt’s credit rating to B3 with a stable outlook, which should also help entice existing and prospective investors.

All of these developments show great promise, but are yet to improve people’s lives.  The government should now spend less time talking up its prospects and performance, and focus instead on actually improving people’s livelihoods.  The proceeds from this new field need to be invested wisely in key areas, not squandered.  The expectations of everyday Egyptians continue to rise with each positive news story, so the government must now produce some tangible results or it will risk further upheaval down the line as ever-increasing expectations remain unmet.  (Brookings 10.09)

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11.7  EGYPT:  How Feminist Groups Are Taking On Post-Revolution Egypt

Florence Massena posted on 17 September in Al-Monitor that in 2012, international media talked about collective rapes targeting women in the protests in Tahrir Square for the first time.  In reaction, several civil groups, such as Tahrir Bodyguard, OpAntiSH and Basma, were created to protect women and establish actions to prevent rape during the protests.  Three years later, they had to change their way of action, from emergency to sustainability, with more or less success.

The Egyptian revolution, from 2011 to 2014, seems to have brought together and strengthened civil initiatives against sexual harassment and for gender equality.  “The feminist group called Nazra exists since 2005 and was working mainly on helping women to represent themselves in the 2010 parliamentary elections.  But it became more active in 2011 as women started to be more involved in the public sphere,” Mahy Hassan, who is in charge of the Women Human Rights Defender Program in Nazra, told Al-Monitor.  “So we started a program based on human rights, gender and feminism, as well as coordinating with other anti-harassment groups to provide medical and legal assistance to the women who have been raped during protests,” she said.

Nazra activists documented around 500 sexual assaults and rapes — which were kept anonymous — in downtown Cairo between 2012 and 2014, and initiated a “feminist school” in 2013 and a 10-day workshop for the public and activists to learn about feminism, gender, stereotypes and violence.  “All of this was made possible because more people got involved in these issues during the revolution,” Hassan said.  She added, “We had a bigger team and started more programs, and I don’t feel that motivation has decreased since then.”

One of the groups created in 2012 that Nazra was coordinating with is OpAntiSH, Operation Anti-Sexual Harassment/Assault.  In November 2012, a group of young people — both politicized internationals and Egyptians who participated in the revolution — started activities of direct intervention to get victims of aggression out of the crowd at Tahrir Square.  “We would take them [women] to safe places close to the square thanks to friends making their apartment available to us, and bring them to their friends or family, and sometimes to the hospital if necessary,” Leslie Piquemal, in charge of logistics at OpAntiSH, told Al-Monitor.

Piquemal added, “Some women tried to file complaints at police stations in 2013, but no trial was successful.  The police are not trained to deal with this kind of situation, so most victims don’t even try.”

With the end of the protests a few weeks after Abdel Fattah al-Sisi’s electoral victory in June 2014, the group didn’t need to intervene in protests anymore, so it became gradually inactive.  “It was hard to keep in touch with all the volunteers.  Around 300 people participated [in our activities] for two years, and the 2013 policies restricting the registration of associations to avoid the creation of Muslim Brotherhood organizations made it very hard for us to gather.  In 2014, a lot of people got arrested, not only Muslim Brotherhood [members], and activists were just exhausted.  The police came back to Tahrir Square [after Sisi’s election]; there was a lot of violence and clashes in the streets, so it was impossible to keep going,” Piquemal said.

With new security threats and the breathlessness of the revolution in Egypt, the activists never got to move to new kinds of activities.  She added, “We got together in a time of emergency, and our friends were getting raped.  But after working so hard for two years, I guess it became too hard to convert ourselves to an awareness group; we were not specialized in that matter.”

Launched at the same time as OpAntiSH and Tahrir Bodyguard, Basma also started out as an emergency action group to protect women in crowds, but managed to evolve with around 10 permanent members working full time to develop new and sustainable activities of anti-harassment and female political representation.  “We started reading and analyzing gender and social issues to help create a safe space for everyone,” Nihal Saad Zaghloul, one of the founders of Basma, told Al-Monitor.

She said, “Revolution makes you feel you want to do more to change this unfair system; we channeled our anger for a positive change. Of course some lost motivation so we separated from 40 people in the process, but we still have many volunteers we work with.”

Basma decided to focus on awareness about sexual harassment through campaigns targeting universities across Egypt, as well as a program called “Safe cities project,” training local people from targeted cities to know more about sexual harassment and be able to talk to people about it.  The group also works with the government through the Ministry of Youth, which gathered feminist organizations to organize a clear plan to fight the issue, “but it was not really efficient,” Mohanad Sangary, Basma’s communications officer, told Al-Monitor.

“We also kept patrolling in the metro and in the streets, but it’s more of a way of approaching and sensitizing people to the issue than fixing it,” he said.  He added, “For now, we don’t want to expand at a big level because it is not sustainable, so we make calculated moves.”

Slow but steady, the Basma organization tries to be more efficient “through baby steps, because we think that education to gender-biased issues is the only way for a long-term solution,” Zaghloul insisted.  The focus these groups had on sexual harassment seems to have pushed younger people to involve themselves in different ways to change the social system, such as the Students’ Scientific Society, Cairo’s local branch of the International Federation of Medical Students’ Association.  Through Cairo’s medical university campus at Cairo University, students established an anti-sexual harassment unit supervised by the president of the university in 2015.

“The aim of our project was to raise awareness about the types of sexual harassment, what is harassment and how to report an incident,” Nourane Aref Khoweiled, the local officer of sexual and reproductive health at Cairo University, told Al-Monitor.  “On campus, we are trying to cover all aspects of the topic and announcing that we are here to help students report any incident and assure that the university will carry out an investigation and take adequate actions, while reassuring victims that the process is confidential, even if the harassers are their professors,” Khoweiled said.

Before launching the campaign, the unit received special training with HarassMap, which encourages people to report cases of harassment in the streets through mobile applications and a hotline, therefore building a map showing areas with different rates of incidents and then training people in this area to fight against harassment.  “Throughout our training session, we concluded that it’s really hard to know what is the actual cause of such a disturbing phenomenon, but it’s unacceptable and inexcusable under any circumstances,” Khoweiled insisted.  She added, “And whatever the reason, we should take action and help limit it.”

As young people like Khoweiled started their own initiatives and leftist feminist organizations developed their own actions, the future seems brighter for Egyptian women.  A law against harassment was even launched in June 2014, but it is still too soon to determine the effect it will have on a long-term perspective.  (AL-Monitor 17.09)

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11.8  EGYPT:  Egypt’s Mosque Minders – The Rise of Surveillance Cameras in Places of Worship

Mohamed Saied posted on 17 September in Al-Monitor that Egypt is adding mosque surveillance, private security and book bans to its efforts to control extremism and support moderate religious thought.  Since the overthrow of Mohammed Morsi, the Egyptian Ministry of Religious Endowments has been trying to quell the spread of extremism in mosques, but critics warn these steps could threaten basic rights.

On 13 August, Minister of Endowments Mohamed Mokhtar Jumaa decided to install surveillance cameras in mosques across the republic to protect them from terrorism and bombing attempts and to monitor the preaching of extremist ideas.  The ministry began distributing surveillance cameras to the mosques in three stages, starting with the major mosques, followed by the main mosques that hold Friday prayers in provinces and then the mosques that are most frequented.

In this context, Sheikh Mohammed Abdel-Razeq, head of the ministry’s religious department, said 13 August in remarks to Egyptian newspaper Al-Masry Al-Youm, “The surveillance cameras will be installed outside and at the forefront of mosques in a bid to monitor terrorist and bombing operations.  There will also be surveillance cameras inside mosques and corridors to monitor the work of imams and workers and the spread of ideas, religious lessons and Friday sermons.  The cameras will also help control the mosque’s level of commitment to the ministry’s statements.”

Al-Monitor tried to contact Abdel-Razeq, but at deadline, he had not responded.

Also, private security companies have been contracted for three main reasons: to respond to advocates of militancy and extremism inside mosques, to ensure imams are fully dedicated to preaching, and to keep out books that incite violence, Jumaa said during a joint anti-terrorism coordinating conference held 21 August by the Ministries of Endowments and Culture.

Hafez Abu Saada, a member of the National Council for Human Rights and head of the Egyptian Organization for Human Rights, said, “Installing cameras inside mosques is an abuse of citizens’ privacy and of the sanctity of prayers, especially.”  He told Al-Monitor, “If the Ministry of Endowments was serious about monitoring mosques to prevent any abuse of mosques or prayers, it could have installed the cameras outside rather than inside [the mosques].”

Abu Saada added, “The repercussions of this step will prevent citizens from going to mosques, as they will feel they are being watched inside God’s house on Earth.”  He added that if the ministry is really concerned about the spread of extremist thought inside mosques, it should fight this phenomenon through its employees appointed to mosques.  “This experience will definitely fail.  We cannot monitor 108,000 mosques with cameras.  This is financially burdensome for the ministry.  It would need around half a million employees to watch the cameras and empty them daily, which is impossible.”

Another measure, imposed earlier this year, came with the threat of interrogation.  During a Ministry of Endowments meeting chaired by Jumaa in March, a form was distributed to undersecretaries of ministers and directors of departments.  The forms were to be filled out by all employees in the departments of endowments across Egypt, and especially imams.  Anyone who failed to complete the form — which called for the repudiation of terrorist organizations and the Muslim Brotherhood and the rejection of all bombings and terrorist acts — would be referred to the Legal Affairs Ministry for questioning.

The government has been fighting extremism in mosques for years.  Last year alone, the Endowments Ministry decided that only Al-Azhar affiliates who hold a permit from the Ministry of Endowments can deliver sermons and teach religious lessons.  Mahfouz Saber, then an adviser to the Ministry of Justice, granted the Ministry of Endowments’ 100 inspectors the status of law officers, enabling them to follow up and monitor religious oration and lessons in mosques.

Also last year, the ministry issued a decision stipulating that Friday prayers shall only be held in main mosques, not in corners or oratories, unless prior written permission is granted.  The same decision stipulated that no money can be collected in mosques except without certified official receipts to be handed over to the Ministry of Endowments.  The ministry also granted itself the right to unify the Friday sermon across the mosques of Egypt.

In September 2014, the Ministry of Endowments annexed the mosques of the Principal Shari’a Society for the Cooperation Between Quran and Sunnah Scholars, one of the largest charitable associations operating in Egypt through weekly and monthly sermons, lessons and seminars in its mosques.  The ministry accused the society of spreading extremist ideas through its imams and mosque platforms — estimated at around 6,000 across Egypt.

Khaled Salah, editor-in-chief of Youm7 newspaper, said Aug. 17 during his TV show “Akher al-Nahar” that the issue of controlling and monitoring sermons in mosques is blurry.  “The Ministry of Endowments has not issued a new religious sermon yet, despite the issued statements from Al-Azhar and others for such a sermon.  It hasn’t trained charismatic preachers who can attract people to the righteous sermon either,” he said.  He asked, “Why is the Ministry of Endowments doing this?  Why does it want to apply this logic using a security mindset?”

Salah expressed his concerns that just imposing security, without innovating new ideas, would be a lazy way of trying to solve problems.  “We cannot think with a security mindset all the time.  We must focus on the religious affairs. Extremism inside mosques is a major issue, but it is being addressed miserably,” he said.

As for the new restrictions on books, the ministry decided on 22 June to inspect all mosque libraries to rid them of any extremist books and prevent the return of such books to these mosques, especially books written by Muslim Brotherhood leaders or extremist sheikhs.  It should be noted that books of Muslim Brotherhood founder Hassan al-Banna and Muslim Brotherhood philosopher Sayyid Qutb were found in the libraries, along with booklets by members of Gamaa Islamiya about jihad and taxes on non-Muslims.

Abdel-Razeq said during the 22 June news conference that only books authorized by the ministry and Al-Azhar will be allowed in mosque libraries.  Whoever does not abide by this rule will face severe punishment, he added.  That same day, Jumaa ordered that each directorate be provided with a library list of content from the mosques and that no new books are to be added without the consent of the public administration of religious guidance and libraries in the ministry’s General Bureau.

Islam Nawawi, a member of the Ministry of Endowments technical office and the ministry’s youth committee for the renewal of religious discourse, told Al-Monitor, “The status quo imposes an urgent need for the renewal of the religious discourse.  This does not infer the modification of religion, as we will adopt an approach that is commensurate with the current era.  Renewing the religious discourse is no magical work that can be accomplished overnight.  It is rather a cultural and societal work that requires concerted efforts on the part of state institutions.

“We are not seeking to ban ideas and beliefs, but we want everyone to belong to the nation, knowing that every human being can carry out their practices individually.”  He concluded, “We are in the process of forming a defense system in this regard, namely the preventive trinity: the house, the mosque and the school.”  (Al-Monitor 17.09)

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11.9  MOROCCO:  Elections A Crucial Step Towards Democracy

On 11 September Rachid Lazrak posted in Fikra Forum that unlike other countries in the region, when the February 20 youth movement emerged demanding freedom, dignity, and social justice in 2011, the Moroccan King sympathized with this movement, and moved towards reforming the country’s political environment.  In his 9 March address, the King laid the foundations for Morocco’s constitution and the first legislative elections, which occurred on 25 November of that year.  After nearly four years under the elected government, led by the Justice and Development Party (PJD), Morocco held local and regional elections recently, suggesting a new chapter in Moroccan democracy.  However, those following developments in Morocco held conflicting views on the election’s effectiveness in the weeks before the voting took place.  These opposing views on the significance of Moroccan elections have accompanied the country’s voting process since the first elections in 1963.  Some argue for a boycott of Moroccan elections, while other argue that participation is the most effective means of advancing Moroccan democratization.

These two views, pessimistic and optimistic, demonstrate the differing analyses of Morocco’s path in establishing democracy and its potential future as a democratic state.

Those who call for a boycott of the elections argue that participation does not produce change in Morocco.  Instead, they believe that the country’s elections perpetuate oppression and autocracy by providing the government with a veneer of democracy.  These pessimists view recent movements towards democratization as based on a constitution ineffective against the essence of authoritarianism and as a superficial response to the domestic movements for greater freedoms and the accompanying international pressure.  Accordingly, they characterize the elections as an attempt to market a version of democracy without free choice, impartiality, or accountability to Moroccan voters.  Thus, those holding this view believe that voting supports a pseudo-democracy while abstaining reveals the system’s flaws.

Those who advocate participation in the elections believe that the institution of the monarchy has expressed a true desire for democratic change at all levels—social, economic, and political—through its reaction to recent regional events.  In particular, optimists note the monarchy’s positive and flexible response to the youth movement’s demands in 2011, when it adopted the current Moroccan constitution.  In contrast to pessimists, optimists characterize the constitution as built on an underlying logic of participation, establishing separation of powers, and recognizing the importance of power sharing, linguistic diversity, and integrating recommendations on equality and reconciliation into the constitution.

These optimists are convinced that current political changes in Morocco should not be considered the end of the country’s reform period.  Rather, democratization requires continuing collective struggle and concerted efforts toward achieving a parliamentary monarchy.  This process is one of slowly accumulating democratic norms that will eventually alter the region’s political makeup as a whole.  In light of this need for measured steps towards full reformation, Morocco’s present constitution serves as a major step towards democracy but should not be expected to produce full-fledged democracy in and of itself.  To achieve this final goal requires a series of realistic aspirations and measured developments within the political community.  This kind of measured democratic transition is for example visible through the entrance of the bloc called the Democratic Left Federation—including the United Socialist Party (united left) the Socialist Democratic Vanguard Party, and the National Ittihadi Congress Party—into the recent Moroccan regional and local elections.  Although this bloc previously refused to participate in legislative elections, their decision to participate implies that these parties have decided that pursuing their political goals, namely the uncovering of corruption, can be better achieved within the governmental institutions of Morocco than outside of it.

Ultimately, calls to boycott Moroccan elections are influenced by an ideology that fails to realize that democracy is a cumulative process rather than a static state of being, subject to accountability and evaluation.  The true meaning of democracy is now in question even in countries long classified as democratic because of the new waves of democratic governments that do not fall into democracy’s traditional definitions.  Democracy cannot be established by simply transporting a set of values from one geographical region to another or importing them from abroad.  Instead, each new candidate for democracy must pass through transitional stages to dismantle the structure hindering democratic action, form the infrastructure for modern democracy, and accumulate democratic trends that build into a securely democratic tradition.  In order for the democratic process to be a serious and nuanced endeavor, certain social, economic, and cultural conditions must be met. In the elections that followed the youth movement, Moroccans placed the PJD—a party that had not participated in the youth movement—in a position of leadership, reflecting the depth of the conservative foundation of Moroccan society.  This election highlighted that while the shock of modernization transforming traditional ways of life, conduct, and social, cultural, and economic relationships, especially among broad segments of the youth in city suburbs.

To achieve democracy, Moroccans must continue to contribute to a vibrant political life that precludes boycotts.  Political actors must be bound together by a minimum base level of consensus: that elections be important occasions that promote modern approaches to government and ensure the tradition of peaceful transfer of power.  Decision-makers in Morocco believe that this stability will in turn lead to economic vitalization and many other benefits throughout Moroccan society. In contrast, failure would create a backslide into instability and reform failure.  Morocco is in great need of an efficient political decision-making body that protects the rights of its citizens and the security of the country during this period of regional transformation, and participation in elections is vital to ensure that Morocco emerges from this turbulent era better, not worse off.

Rachid Lazrak obtained his doctorate in political science and constitutional law. He specializes in electoral systems, has written extensively on Morocco’s democratic transition, and has participated in various international conferences.  (Fikra 11.09)

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11.10  TURKEY:  Fitch Affirms Turkey’s Investment Grade Rating, Outlook Stable

Fitch Ratings has affirmed Turkey’s long-term foreign and local currency Issuer Default Ratings (IDR) at ‘BBB-‘ and ‘BBB’, respectively, with a stable outlook on 18 September.  BBB rating indicates that expectations of default risk are currently low.  The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

The rating agency cited the general government balance sheet is strong, fiscal discipline has been maintained through the electoral period and the commitment to fiscal discipline appears to benefit from consensus across the political spectrum.

However, Fitch said that there is significant uncertainty around the outcome of legislative elections set for Nov. 1, citing opinion polls that expected a similar result at the polls alongside the recent surge in terror attacks in the country as well as the ongoing conflict in Syria.  “Momentum in structural reform has slowed and prospects for revitalization are uncertain,” it added.

According to Fitch, notwithstanding the slow pace of reform, real GDP growth was 3.1% in first half of the year, driven by consumption. “The falling Turkish lira has pulled down consumer confidence, which hit its lowest level since March 2009 in August,” the agency said.

The lira has lost around 30% of its value against the dollar since the end of January.  “External vulnerabilities remain a feature of Turkey’s sovereign credit profile but have not weakened materially since our last review,” it said.

Fitch expects the current account deficit to narrow to 4.6% of GDP in the year from 5.8% of GDP in 2014, driven by lower oil prices.  The agency said banks in the country are well regulated, profitable and non-performing loans were just 2.9% at end-June 2015.  “The banking system is consistent with Turkey’s investment grade rating, with a ‘BBB’ on Fitch’s Banking System Indicator.”  (AA 19.09)

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