22 March 2017
24 Adar 5777
23 Jumada Al-Akhirah 1438
TOP STORIES
- Israel to Invest NIS 100 Million for Small Gas Fields
- Mississippi Trade Mission to the UAE & Jordan
- Lebanon Approves First Batch of Controversial Tax Hikes
- Morocco & the ‘Floating Dirham’
- Israel’s Economy Grew by 4% in 2016
- OMAN: The Middle East’s Most Surprising Country
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Netanyahu & Kahlon to Formulate Tax Cut Plan
1.2 Israel to Invest NIS 100 Million for Small Gas Fields
1.3 Israel & China Sign Building Workers Agreement
1.4 With New Law, Israelis Over 80 No Longer Have to Wait in Line
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Intel to Acquire Mobileye
2.2 BC’s Health & Technology District Signs MOU with Israel’s Center for Digital Innovation Negev
2.3 Foresight Raises an Additional NIS 14.7 Million
2.4 Bringg Raises Additional $10 Million as Enterprise Demand Grows
2.5 Dyadic Security Raises $12 Million to Help Enterprises Virtualize Crypto
2.6 New Global Post-Seed VC Fund to Raise $50 Million
2.7 Karmiel – Akko Railway Line Completed
2.8 Endor Raises $5 Million
3: REGIONAL PRIVATE SECTOR NEWS
3.1 Mississippi Trade Mission to the UAE & Jordan
3.2 UAE Leads Middle East Wellness Tourism Market, Valued at $2.7 Billion
3.3 DataPath Expands International Presence with New Office in Dubai
3.4 UAE Theme Park Spending Forecast to Reach $637 Million by 2020
3.5 French Firm Delivers First Train for Riyadh Metro
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 ET Energy Starts Construction of a 60.9MW Solar Power Project in Jordan
4.2 Dubai Solar Park to Power 50,000 Homes Unveiled
4.3 ECOSLOPS Signs a Letter of Intent with the Egyptian Authorities for the Suez Canal Region
5: ARAB STATE DEVELOPMENTS
5.1 Lebanon Approves First Batch of Controversial Tax Hikes
5.2 Number of Registered Cars in Lebanon Down by 4.82% by February 2017
5.3 Jordan & Kenya to Sign FTA Before Year-End
5.4 Jordan & France Sign €10 Million Water Resilience Agreement
♦♦Arabian Gulf
5.5 UAE Opens Its First Banknote Printing Facility
5.6 Dubai’s Non-Oil Foreign Trade Dips to $350 Billion in 2016
5.7 Saudi Arabia’s Budget Deficit Forecast to Fall to $86 Billion in 2017
5.8 Saudi Arabia to Tighten Restriction on Foreign Workers
♦♦North Africa
5.9 Egypt’s Annual Core Inflation Accelerates to 33% in February
5.10 Egypt Targets Less Than 10% Deficit in Draft Budget 2017/18
5.11 Egyptian Parliamentary Committee Approves $12 Billion IMF Loan
5.12 World Bank Disburses Another $1 Billion Loan to Egypt
5.13 China Grants Egypt $71 Million for Satellite Project at Suez Canal Economic Zone
5.14 Morocco & the ‘Floating Dirham’
5.15 World Bank Approves $150 Million Loan to Support Entrepreneurship in Morocco
5.16 US News & World Report Names Morocco Among 50 Best Countries
5.17 Moroccan King Concludes Five-Country Africa Tour on Heels of African Union Decision
6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
6.1 Moody’s Revises Outlook of 14 Turkish Banks to Negative
6.2 Greek Exports Start Year on a High, Rising by 24%
6.3 Greece’s Jobless Rate Rises to 23.6% in Fourth Quarter
7: GENERAL NEWS AND INTEREST
♦♦ISRAEL
7.1 Summer Time in Israel Begins on Friday, 24 March
7.2 Kinneret Levels Lowest in a Century
7.3 Israel Ranked as Best Country for Women in Middle East
7.4 Israel Ranked 11th Happiest Country for Fourth Year in a Row
7.5 Tel Aviv 100-Story Tower Planned to be Israel’s Tallest Building
7.6 Morocco World’s 84th Happiest Country
7.7 Elderly Population in Turkey Increases by 17% Over Five Years
8: ISRAEL LIFE SCIENCE NEWS
8.1 CincyTech Announces Investment in Xact Medical
8.2 Teva Announces Launch of Authorized Generic of Minastrin 24 Fe in the United States
8.3 Intermountain Healthcare Chooses Zebra Medical Vision to Deploy Enterprise Imaging Analytics
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Zadara Storage and Trio Announce New Storage-as-a-Service (STaaS) Offering in Israel
9.2 Mellanox OCP-Based ConnectX-5 Adapters for Qualcomm Platforms
9.3 Barkid Helps Parents Track Children
9.4 Netkom Leverages Stratoscale’s Cloud Infrastructure to Onboard New Customers within Hours
9.5 Sodyo Enables TV Broadcasters to Capture Leads in Real-Time
9.6 OriginGPS Launches World’s Smallest GNSS Module
9.7 Insert Integrates With Adobe to Bring the Power of Marketing Cloud to Mobile Apps
9.8 Secret Double Octopus Introduces Multi-shield User Authentication for Enterprises
9.9 IAI Unveils Radar That Detects Targets in Dense Forests
9.10 SodaStream Unveils New Brand Dedicated To Creating Sparkling Water At Home
9.11 Magal-S3 RoboGuard System First Serial Order from Israeli Governmental Customer
9.12 Breakthrough Success for Silicom: Major New Design Win With $17 Million in Orders
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel’s CPI Unchanged in February as Home Prices Resume Rise
10.2 Israel’s Economy Grew by 4% in 2016
10.3 Number of Israeli Jobseekers Hits 10 Year Low
10.4 Finance Minister Says 2016 was One of Israeli Economy’s Best Years
11: IN DEPTH
11.1 ISRAEL: Israeli Startups Raise $800 Million This Year
11.2 ISRAEL: The Quiet Advance of Eastern Mediterranean Gas
11.3 ISRAEL: Israel and China – Toward a Comprehensive Innovative Partnership
11.4 JORDAN: IMF Staff Concludes Visit to Jordan
11.5 IRAQ: Statement at the End of an IMF Mission on Iraq
11.6 GCC: Economic Nationalism at the Expense of GCC Integration
11.7 OMAN: The Middle East’s Most Surprising Country
11.8 EGYPT: Egypt Economic Report – 2017
11.9 TUNISIA: Bond Bolsters Tunisia Liquidity as IMF Delay Shows Risks
11.10 ALGERIA: IMF Staff Completes 2017 Article IV Mission to Algeria
11.11 TURKEY: What Does Double-Digit Inflation Mean for Turkey?
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Netanyahu & Kahlon to Formulate Tax Cut Plan
Following a substantial rise in tax revenues and repeated promises by Minister of Finance Kahlon, on 13 March Prime Minister Netanyahu and Kahlon agreed that in view of Israel’s economic achievements over the past year and their wish to continue encouraging economic activity for the benefit of Israelis, they would devise a joint plan for cutting taxes. The announcement of the tax cut plan following the release of figures published by the Ministry of Finance showing that state tax revenues jumped 10% in February, compared with February 2016. State tax revenues totaled NIS 51.8 billion in January-February, 6.4% more than in the corresponding period last year.
Minister of Finance Kahlon promised at the beginning of the year that he would lower taxes again if tax revenue figures continue to exceed the forecasts. Ministry of Finance sources predicted that Kahlon will decide the matter according to the figures for the first quarter (as he did last year), and it therefore only remains to wait for the March figures. Kahlon plans to tackle income tax and VAT this time, after having cut VAT by 1% two years ago. (Globes 13.03)
1.2 Israel to Invest NIS 100 Million for Small Gas Fields
Two months after the announcement by Greek company Energean of its plans for development of the Karish and Tanin natural gas reservoirs, Minister of National Infrastructure, Energy and Water Resources Dr. Steinitz is unveiling his plan to encourage the development of small and medium-sized gas reservoirs. The plan will be brought to the cabinet for approval towards the end of March. The Ministry of National Infrastructure, Energy, and Water Resources, Ministry of Justice, Antitrust Authority, Israel Tax Authority, and Ministry of Internal Affairs Planning Administration prepared the plans.
Under the plan, the government will invest NIS 100 million in infrastructure for connecting the gas pipeline of the small and medium-sized reservoirs to the national gas transportation system, including aid in the necessary planning processes. This involves laying an undersea pipeline 10 kilometers off the Hadera shore to the area in which the National Outline Plan for building gas handling platforms has been approved. In addition, the Public Utilities Authority (electricity) will recognize 50% of the costs of the gas purchased by private electricity producers from the small and medium-sized gas reservoirs, compared with 25% of the costs of gas purchased from Tamar and Leviathan. The Public Utilities Authority (electricity) thereby hopes to encourage the electricity producers to buy gas from Tanin and Karish.
Another part of the plan is NIS 10 million in subsidies for the purchase of gas-powered trucks and buses. The Ministry of National Infrastructure, Energy, and Water Resources says that the subsidy is likely to be provided for dozens of vehicles. Assuming that the prices of gas-powered buses and trucks are around NIS 500,000, and given the fact that the cost of gas-powered vehicles is 10-15% higher than that of gasoline-powered vehicles, an average subsidy of NIS 100,000 is likely to cover the excess cost and assist the purchase of 100 buses and trucks. (Globes 14.03)
1.3 Israel & China Sign Building Workers Agreement
After months of discussions, an Israel-China bilateral agreement has been officially signed. One result is that thousands of Chinese construction workers can now come to work in Israel. Ministry of Finance Housing Committee chairman Yitzhaki negotiated the completion of the agreement with the Chinese government. On 21 March, during Prime Minister Netanyahu’s visit to China, which included Minister of Economy and Industry Cohen, the official agreement was signed. Under the agreement, 6,000 construction workers from China will come to Israel in the first stage during the first six months of the agreement. Thousands more will follow later, bringing the total to 20,000 workers.
Various bilateral agreements have been promoted in recent years, following the government decision taken in 2011, which stated that employment of workers under control and supervision would make it possible to preserve their rights. This decision stated that workers would be brought to Israel only in the framework of a bilateral agreement that could eliminate the mediation fees and human trafficking that had previously prevailed in this area, both in Israel and overseas. Because of this decision, no new visas were issued for construction workers from China until the agreement was signed. Meanwhile, demand from Israeli contractors for the few Chinese workers remaining in Israel has increased, and the price of employing them has risen accordingly.
The real estate sector now hopes that following the signing of the agreement, the number of Chinese workers on projects will increase. Both the contractors and the Ministry of Finance and its housing committee agree that these workers can help increase the construction industry’s output and reduce prices. (Globes 20.03)
1.4 With New Law, Israelis Over 80 No Longer Have to Wait in Line
Israelis aged 80 and older will no longer have to wait in line in stores and for most services. The Knesset passed a bill on 14 march that will allow the elderly to receive public services without waiting in line at places such as the post office, bank, supermarket, movie theaters and cultural events. The measure passed on its second and third reading by a vote of 37-0. Disabled individuals will still get priority over the elderly. (Various 15.03)
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Intel to Acquire Mobileye
Intel Corporation and Mobileye announced a definitive agreement under which Intel would acquire Mobileye, a global leader in the development of computer vision and machine learning, data analysis, localization and mapping for advanced driver assistance systems and autonomous driving. Pursuant to the agreement, a subsidiary of Intel will commence a tender offer to acquire all of the issued and outstanding ordinary shares of Mobileye for $63.54 per share in cash, representing an equity value of approximately $15.3 billion and an enterprise value of $14.7 billion.
The acquisition shatters the previous Israeli record of $6 billion paid by Berkshire Hathaway for Iscar. Iscar was purchased in two stages – 80% for $4 billion in 2006, and the remaining 20% for $2 billion in 2013. The next biggest deal was the $5 billion Cisco paid for NDS in 2012. In 2000, the Israeli company Chromatis Networks was sold to Lucent Technologies for $4.8 billion.
The combination is expected to accelerate innovation for the automotive industry and position Intel as a leading technology provider in the fast-growing market for highly and fully autonomous vehicles. Intel estimates the vehicle systems, data and services market opportunity to be up to $70 billion by 2030. This transaction extends Intel’s strategy to invest in data-intensive market opportunities that build on the company’s strengths in computing and connectivity from the cloud, through the network, to the device.
This acquisition will combine the best-in-class technologies from both companies, spanning connectivity, computer vision, data center, sensor fusion, high-performance computing, localization and mapping, machine learning and artificial intelligence. Together with partners and customers, Intel and Mobileye expect to deliver driving solutions that will transform the automotive industry. The combined global autonomous driving organization, which will consist of Mobileye and Intel’s Automated Driving Group, will be headquartered in Israel. The organization will support both companies’ existing production programs and build upon relationships with automotive OEMs, Tier-1 suppliers and semiconductor partners to develop advanced driving assist, highly autonomous and fully autonomous driving programs.
The transaction is expected to close within the next nine months. It has been approved by the Intel and Mobileye Boards of Directors and is subject to the receipt of certain regulatory approvals and other closing conditions. The offer is not subject to any financing conditions.
Jerusalem’s Mobileye is the global leader in the development of computer vision and machine learning, data analysis, localization and mapping for Advanced Driver Assistance Systems and autonomous driving. The Company’s technology keeps passengers safer on the roads, reduces the risks of traffic accidents, saves lives and has the potential to revolutionize the driving experience by enabling autonomous driving. The Company’s products are or will be integrated into car models from more than 25 global automakers and are also available in the aftermarket. (Intel 13.03)
2.2 BC’s Health & Technology District Signs MOU with Israel’s Center for Digital Innovation Negev
The Health and Technology District in Surrey, British Columbia announced an international partnership with the Center for Digital Innovation in Israel, to formalize a number of action oriented collaborations on health related technologies, creating an international network between partners to support health-tech innovations in Israel and across North America.
The Memorandum of Understanding (MOU) between the Health and Technology District and CDI will co-create and share respective solutions to global healthcare challenges by expediting the implementation of innovations in critical healthcare improvements for both countries.
The Center for Digital Innovation (CDI) is located in the Advanced Technology Park in Beer Sheba (Israel), the growing ‘Silicon Valley’ of the Middle East. CDI is a leading-edge, non-profit innovation center created through the collaborative efforts of some of Israel’s most outstanding entrepreneurs and Ben-Gurion University of the Negev. CDI operate in the areas of digital healthcare, healthy aging, education and smart cities and converges experienced entrepreneurs, start-up companies, innovators, researchers, industry leaders, academics, the public sector and investors to generate a high Return on Innovation (ROI), for the mega challenges of the 21st century, such as the cost of healthcare and chronic diseases to provide solutions.
The partnership was finalized during a recent trade mission organized by the Conference Board of Canada where participants studied the culture and key success factors that have led to Israel’s groundbreaking developments in innovation and commercialization, helping to secure Israel’s position as the global high-tech pioneer. (Health & Technology District 21.03)
2.3 Foresight Raises an Additional NIS 14.7 Million
Foresight announced that it had raised NIS 14.7 million in private capital, in addition to the NIS 23.5 million it raised two weeks ago through an offering of 17% of its shares, making a total of NIS 38.5 million in two weeks. The current round was at a price of NIS 2.10 per share, 20% below yesterday’s closing price. The preceding round was conducted at NIS 1.90 per share. The company said that the money raised would enable it to continue development of its advanced systems for preventing traffic accidents.
Participants in the current financing round included investors from the auto industry, including the Dayan family, co-owners of the Trade Mobile company; Hamizrach Holding, a controlling shareholder in Universal Motors Israel (UMI) and Dan Vehicle and Transportation (Avis Israel) and the Alpha Value Investment fund. The Shrem Zilberman Group led the round. Investors in the offering also received an option to buy an additional share at a $0.80 (NIS 2.90) strike price. Foresight launched an alpha version of its flagship product in January 2017.
Ness Ziona’s Foresight is a technology company engaged in the design, development and commercialization of 3D multi-camera-based Advanced Driver Assistance Systems (ADAS). Their mission is to revolutionize ADAS by providing an automotive grade, cost-effective platform, enabling highly accurate and reliable detection while ensuring the lowest rates of false alerts. (Globes 15.03)
2.4 Bringg Raises Additional $10 Million as Enterprise Demand Grows
Bringg has raised a $10 million funding round led by Aleph VC and joined by Coca-Cola and previous investor Pereg Ventures. This follows earlier investments from Ituran and Cambridge Capital. Bringg’s products are used by retail, ecommerce, CPG, food and 3PL/4PL (third/fourth-party logistics providers) customers in more than 50 countries, including some of the world’s leading brands.
Every company that delivers goods and services is facing a set of serious logistical challenges these days. On the one hand, customer expectations are higher than ever in terms of speed and convenience, which means they must restructure their last-mile models in order to create the seamless experience their customers expect. On the other hand, to preserve their cost structure they must establish a leaner supply chain that is elastic enough to accommodate a variety of delivery models and providers, in order to cost-effectively and rapidly scale their fleet across in-house resources, outsourced drivers and third-party providers. The Bringg platform offers companies a powerful yet flexible solution that enables them to streamline their entire delivery ecosystem – from the headquarters to the field and all the way to the customer. Bringg’s solution solves their dual challenge – how to create the optimal customer experience on the front end while ramping up operational efficiencies on the backend through real-time visibility, elastic logistics and integrated processes.
Bringg is the leading customer-centric logistics platform for enterprises. With offices in NYC, Chicago and Tel Aviv, the company has customers in more than 50 countries including some of the world’s best-known brands. Bringg’s solution enables companies to quickly streamline the way they deliver goods and services, creating both operational efficiencies and optimal experiences for their entire ecosystem – from the headquarters to the field and all the way to the customer. (Bringg 14.03)
2.5 Dyadic Security Raises $12 Million to Help Enterprises Virtualize Crypto
Dyadic Security (Dyadic) announced the completion of a $12 million Series B funding round led by Goldman Sachs Principal Strategic Investments, Citi Ventures and Eric Schmidt’s Innovation Endeavors. The funding round will be used to expand Dyadic’s sales and marketing operations in North America. As part of the investment, Innovation Endeavors’ Yuval Shachar has been named Chairman of the Dyadic Board of Directors. Dyadic provides enterprise customers and financial institutions both security and usability in managing their cryptographic keys, rather than the traditional tradeoff. Founded by world-renowned cryptography experts and a strong team of applied crypto software engineers, Dyadic has created the world’s first SDC technology, called Dyadic vHSM (virtual Hardware Security Module).
Dyadic vHSM enables enterprises to shift away from their reliance on dedicated secure hardware such as Hardware Security Modules (HSM), smartcards and hardware tokens, which are physical devices in which digital keys are stored, to virtual modules that allow them to securely store, manage and use their cryptographic keys on any platform, from servers and laptops to smartphones and IoT devices – on premises or in the cloud. Today, Dyadic’s products are deployed around the world in several leading Fortune 500 companies.
Petah Tikva’s Dyadic Security, the world leader in software defined cryptography, delivers a pure-software platform that is reinventing identity and data protection for the digital age. Merging seamlessly with existing environments and applications, Dyadic provides a solid, yet flexible platform that creates a secure foundation for enterprises to innovate and grow digital. Dyadic is a funding recipient of the European Union’s Horizon 2020 research and innovation program. (Dyadic 14.03)
2.6 New Global Post-Seed VC Fund to Raise $50 Million
Follow (the) Seed, a new Chinese-Israeli-US-Australian global venture capital fund, has been formed and is planning to raise $50 million for funding companies between their seed and A financing rounds. The fund has already obtained commitments for $30 million, 60% of this amount, and will invest from $500,000 to $2 million per company. The fund, which calls itself global, will invest mainly in Israeli, Chinese, US and Australian startups. Globes reported that the fund has already made eight investments, two of them in Israeli companies. Follow (the) Seed has already raised money for its first Australian fund (which invested in US company WorkSpot and Australian company ClassCover), and is now raising money for its global fund.
How will the fund attempt to find the next Facebook or Waze? It has developed an algorithm named RavingFans that analyzes the usage patterns of people using a product and searches for usage patterns that indicate out of the ordinary usage. The fund calls this irrational use, meaning that the user has really fallen in love with the product and uses it every day, such as a game app, instant messaging, ecommerce, fintech and so forth. According to the company, this could be any product that can be categorized as habit forming. Most companies checked by the fund will therefore be those developing consumer web and cellular apps that provide a service that is part of every user’s daily experience. According to a study by the L2 company, over the past five years, most of the companies that came out well ahead of the S&P 500 Index, based on their revenue growth rate, were ‘algorithm companies’ – companies whose product becomes better the more it is used, such as Facebook, Google, Amazon and Netflix. (Globes 16.03)
2.7 Karmiel – Akko Railway Line Completed
The Karmiel – Akko railway line has been completed, the Ministry of Transportation has announced. From 26 March, there will be trial runs on the line with services to the public scheduled to commence in the summer. The project, which was built by the Netivei Israel National Transport Infrastructure Co., cost NIS 2.8 billion and involves a double track along 23 kilometers with stations at Karmiel and Ahihud. For the most part running parallel to Road 85, the new line includes the 4.6 kilometer Gillon Tunnels. The line links up with the Haifa – Nahariya line, south of Akko station and north of Kiryat Motzkin station. Israel Railways plans services direct from Karmiel to Tel Aviv. Two more stations are planned along the new line at the towns of Jadeidi-Makr and Majd al-Krum. In the future the Karmiel line will be extended northeast to Kiryat Shmona.
The Karmiel line is part of the massive expansion of Israel Railways. In recent years, new lines have been built to the Negev development towns of Sderot, Netivot and Ofakim as well as between Haifa, Afula and Beit Shean in the north. Next year, the Tel Aviv – Jerusalem fast rail link is scheduled to open. (Globes 16.03)
2.8 Endor Raises $5 Million
Endor has closed a $5 million seed financing round led by Eric Schmidt’s Innovation Endeavors and Marker LLC. Endor has developed a predictive software platform that lets business users ask any predictive question and get high-quality results in minutes. It requires no coding, data cleaning, knowledge of machine learning, or PhDs, and far less data history than standard machine learning methods. Endor’s predictive platform is based on Social Physics: A new science that uses big data to build a predictive, computational theory of human behavior. Social Science originated in MIT through years of groundbreaking research by Prof. Pentland, creator of the MIT Media Lab and one of the world’s most cited scientists, and Dr. Altshuler. Endor extended Social Physics using proprietary technology into a powerful engine that is able to explain and predict any human behavior.
Endor is a new spin off company from MIT Media Lab that uses the groundbreaking new science of Social Physics to predict human behavior with unmatched accuracy and speed, in any domain – finance, healthcare, communication, security and retail. Headquartered in New York and Tel Aviv, Endor is backed by Innovation Endeavors. (Globes 10.03)
3: REGIONAL PRIVATE SECTOR NEWS
3.1 Mississippi Trade Mission to the UAE & Jordan
On 25 March, the Mississippi Development Authority will commence its week long trade mission to the UAE and Jordan. The multi-sector trade delegation will spend several days in Dubai, UAE, followed by an additional period in Amman, Jordan. Companies span from a manufacturer of pre-fab concrete housing and a logistics firm to a manufacturer of industrial compressors. The meetings were arranged by Middle East trade consultant Atid, EDI, who previously arranged several visits by Mississippi trade delegations, led by Governor Bryant, to Israel.
3.2 UAE Leads Middle East Wellness Tourism Market, Valued at $2.7 Billion
The UAE leads the Middle Eastern wellness tourism market, with an average of 1.7 million wellness trips generating $2.7 billion annually, according to new research. Colliers Experiential Travel Series said the UAE accounts for 14% of the MENA spa market. The report added that Morocco, Tunisia and Jordan were also prominent players in the regional market. It said wellness trips in the UAE have grown by 17.9% over the past five years, while overall tourism has grown 8.1%. The Dubai hotel spa market experienced a 9% increase in the average number of treatments sold per day in the first half of 2016 compared to the same period in 2015 and 25 new hotel spas are expected to open this year, making a total of over 200 spas. (AB 10.03)
3.3 DataPath Expands International Presence with New Office in Dubai
Duluth, Georgia’s DataPath, a leading provider of remote field communications and information technology solutions to the aerospace, broadcast, government and infrastructure markets announced that it has opened an office in Dubai. The company already serves customers in the area but identified greater interest and requirements for DataPath’s critical communications solutions than previously supported. The Dubai office opening is part of an extended DataPath initiative to invest in infrastructure expansion. To enhance customer and partner relationships, the company has also recently opened offices in New Delhi, India; Washington, D.C.; and Singapore.
DataPath solutions include a range of both custom and commercial off-the-shelf field communications and information technology products, including satellite communication systems, network management software, and cybersecurity services. (DataPath 20.03)
3.4 UAE Theme Park Spending Forecast to Reach $637 Million by 2020
UAE theme park visitor spending is set to grow six-fold from $105 million in 2016 to $637 million by 2020 as the country opens several new parks as it chases ambitious tourism targets, according to a new report. The International Association of Amusement Parks and Attractions said the UAE is the dominant market in the Middle East and North Africa, the world’s fastest growing region for theme park visitor spending. Market research firm PwC predicts that the UAE’s theme park visitors could provide nearly two-thirds of the UAE’s projected total visitors by 2021. The figures comes ahead of the Dubai Entertainment, Amusement, and Leisure Show and industry experts says UAE theme parks are dialing up the “smart” visitor experience to ensure the country remains one of the world’s fastest-growing markets. Experts agree the UAE’s theme parks are serving as ideal test cases for the advanced technology that will fuel the premier mega-event of as Expo 2020 Dubai.
The UAE has embarked on a major theme park building program, with two parks recently opened in Dubai and more planned across the country including Al Ahli Holding Group’s Fox-branded complex which will be based on various Fox-owned creations like Rio, Predator and The Simpsons and is slated to open in 2020. Abu Dhabi is also getting in on the theme park act with plans including Warner Bros and Seaworld. (AB 11.03)
3.5 French Firm Delivers First Train for Riyadh Metro
Alstom has announced that it has delivered the first train which will operate on the $23 billion Riyadh Metro rail project. The trains, which have been built at the company’s Katowice plant in Poland, will circulate on lines 4, 5 and 6 and are part of a 69 train package. As part of the contract awarded in 2013 by Arriyadh Development Authority (ADA) to the FAST consortium, which includes Alstom, the production of the rest of the metro trains are “well on track” to be delivered by the end of 2018. All six lines and 85 stations are scheduled to be operational in 2019 and will be served by electric, driverless trains in what officials describe as the world’s largest public transport system currently under development. Alstom, as part of the Fast consortium, is in charge of supplying a full integrated metro system for lines 4, 5 and 6 (or Yellow, Green, and Purple lines).
The trains are designed to run on standard-gauge track at a top speed of 90 km/h and have been designed with the region’s climate in mind. One such feature is a more powerful air conditioning system, capable of delivering sufficient cooling capacity even in extreme heat. (AB 11.
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 ET Energy Starts Construction of a 60.9MW Solar Power Project in Jordan
ET Solutions AG, a subsidiary of ET Energy, a global leading energy solutions provider, announced that it has started the construction of a 60.9 MW solar power project in Jordan for ACWA Power, a Saudi-based independent power producer. The project will become one of the largest 1500VDC PV plants in Europe, the Middle East and Africa after completion.
The project is situated in Mafraq, Jordan, 50 km north-east of Amman. ACWA Power is the developer and the owner of this project. After the project is completed, it will deliver power to National Electric Power Company (NEPCO) at a tariff of 0.043 JD per kWh (equal to 6.13 $c/kWh). This project was awarded in the Round II of the Photovoltaic Procurement program of the Ministry of Energy and Mineral Resources of Jordan. Acting as the full turn-key EPC provider, ET Solutions, along with its consortium partner, Northwest Power Design Institute (NWPDI) of China Power Engineering Consulting Group, started construction at the beginning of this month. The construction is expected to be completed within 10 months. (ET Solutions 15.03)
4.2 Dubai Solar Park to Power 50,000 Homes Unveiled
The second phase of the Mohammad Bin Rashid Al Maktoum Solar Park that will generate 200megawatts of clean energy — enough to power 50,000 homes annually — was opened on 20 March. Shaikh Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, inaugurated the world’s largest single-site solar park off Al Qudra in Dubai. The solar park is one of the major projects of the Dubai Electricity and Water Authority (Dewa).
With more 2.3 million thin-film photovoltaic panels, the second phase can save annual carbon emissions of up to 214,000 tonnes. The second phase was implemented in partnership with the consortium led by the main developer, ACWA Power from Saudi Arabia and the main contractor, Spain’s TSK, with an investment of Dh1.2 billion. The solar park is a multi-phase project that’s expected to generate 1,000MW by 2020 and 5,000MW by 2030 for a total investment of Dh50 billion. Once completed, the solar park will produce clean energy that could reduce carbon emissions by more than 6.5 million tonnes annually. (AB 20.03)
4.3 ECOSLOPS Signs a Letter of Intent with the Egyptian Authorities for the Suez Canal Region
France’s Ecoslops, an innovative technology company that upgrades ship-generated hydrocarbon residues, or “slops”, into valuable new fuels and light bitumen, has signed a Letter of Intent with EGPC (Egyptian General Petroleum Corporation), through one of its subsidiaries, SSCO, in order to explore the feasibility of creating an oil residue collection and recycling plant in the Suez Canal region. The objective of the agreement is to identify the slops collection and recovery services that could be installed and then used by ships passing through the Suez Canal. This falls within the framework laid out by the Egyptian authorities, whose aim is to improve the services provided to ships during their passage through the Suez Canal. Given that the handling and sustainable disposal of oily residues is a recurring need for ships, ECOSLOPS and EGPC/SSCO have decided to join forces to conduct this feasibility study.
Following the feasibility study, it has been agreed that the two partners will invest together in the joint venture that would be eventually created, with ECOSLOPS as a major shareholder, and overseeing the management of the project. (Ecoslops 15.03)
5: ARAB STATE DEVELOPMENTS
5.1 Lebanon Approves First Batch of Controversial Tax Hikes
As Lebanon continues to grapple over ways to balance country’s ballooning budget deficit, the parliament approved a 1% increase (from 10 to 11%) in VAT on 15 March, along with five other taxes, including levies on financial transactions, along with a 6,000 Lebanese pounds ($4) tax on the production of each ton of cement. Proponents of the tax hikes say these steps are necessary to fund a long-stalled new pay scales for government employees which include judges, teachers and military personnel. The hikes in taxes were opposed by the Phalange and Future parties, which belong to the anti-Syrian March 14 coalition bloc.
While Lebanese have decried the new financial burden being put on their shoulders, they also understand the urgency and importance of increasing the government employees’ wages. There are 22 other tax hikes being considered by the parliament including levies on company profits from 15 to 17%, a 15% duty on profits from real estate transactions and a 4% fee on the import of kerosene. The most exuberant tariff, however, is a 500% tax on alcohol, on top of existing rates, which will translate into an increase from 200 Lebanese pounds ($0.13) to 1,000 Lebanese pounds ($0.66) for a liter of wine and champagne, and from 400 Lebanese pounds ($0.26) to 2,000 Lebanese pounds ($1.32) on a liter of hard liquors. Cigarettes and shisha have not included in this tax raise proposal.
Liberals worry that taxes on alcohol could infringe on the country’s liberal policies, which they feel have come under increasing attack. The biggest worry, however, comes from contemplated hikes on bank deposit fees, which could dissuade investors and Lebanese expatriate workers from sending roughly $7-8 billion in remittances to Lebanon each year. These tax proposals have been severely criticized by economists, bankers and businesses, all of whom warned that such measures would slow the already-struggling economy that is heavily dependent on the tourism and entertainment industries. (GN 16.03)
5.2 Number of Registered Cars in Lebanon Down by 4.82% by February 2017
According to the Association of Lebanese Car Importers (AIA), the number of newly registered commercial and passenger cars deteriorated during the first 2 months of 2017 by 4.82% year-on-year (y-o-y) to 5,317 cars. This was triggered by the 4.27% yearly drop in the number of newly registered passenger cars to 4,982 and the 12.30% fall in newly registered commercial vehicles to 335. In terms of brands, Kia kept on holding the largest share of the total newly registered cars (18.97%), followed by a 13.25% stake for Toyota. Hyundai came next in the ranking, as it grasped 12.77% of newly registered cars and was followed by Nissan that took 7.93% of the total. (AIA 15.03)
5.3 Jordan & Kenya to Sign FTA Before Year-End
Jordan and Kenya are expected to sign a free trade agreement (FTA) before the end of the year, Minister of Industry, Trade and Supply Qudah said on 11 March. At a ceremony marking the launch of the Jordanian-African Business Association, Qudah said that both countries are scheduled to start negotiations over the FTA next month. The agreement would facilitate the penetration of Jordanian products into the Kenyan market. The deal would also provide incentives to help Jordanian items compete in Kenya’s market. The difficult regional circumstances, such as the Syrian and Iraqi crises, affected the national products’ traditional markets, making it necessary to search for new export markets, Qudah said, adding that the “promising” African market was one of the choices. During the King’s visit, Jordan inaugurated an embassy in Nairobi to help boost bilateral ties. (JT 11.03)
5.4 Jordan & France Sign €10 Million Water Resilience Agreement
On 20 March, Jordan and France signed a €10 million project agreement to boost the water sector’s resilience in northern Jordan. Jordanian Water Minister Nasser and French Minister of State for Development and Francophonie Le Guen signed the agreement detailing the project to be implemented by non-governmental organization Action Against Hunger. The project will be implemented as part of the European funding program in partnership with the EU through the Neighbourhood Investment Facility, the German government’s KfW Development Bank and the French Development Agency (AFD) at a total value of €152 million to support the Jordan Response Plan to the Syrian crisis.
The water sector’s resilience project began with support from the French Crisis Centre, affiliated with France’s foreign ministry. The project aims to support 10,000 families over the next three years. The Jordanian water minister commended the French government’s support to the Kingdom, noting that, in the past few years, the support had reached more than €400 million. He added that the total of French investments in the water sector during the past 15 years equaled more than $1 billion. (JT 21.03)
►►Arabian Gulf
5.5 UAE Opens Its First Banknote Printing Facility
The UAE opened its first banknote printing company, with Dubai Ruler Sheikh Mohammed receiving the first AED1,000 note printed by the company, bearing the “number 1”. The “Oumolat Security Printing” company, which is located in Khalifa Industrial Zone Abu Dhabi (KIZAD). The Dubai ruler was briefed by the UAE Central Bank governor, Mubarak Rashed Al Mansoori, about the facility’s production machinery featuring the latest technology and fully integrated state-of-the-art security and protection systems. Currently, the dirham is printed overseas in countries such as the UK and France. (AB 12.03)
5.6 Dubai’s Non-Oil Foreign Trade Dips to $350 Billion in 2016
Dubai’s non-oil foreign trade fell marginally to AED1.276 trillion ($350 billion) in 2016. Dubai Crown Prince Sheikh Hamdan revealed the figure in a tweet which was down from AED1.283 trillion in 2015. Sheikh Hamdan said fluctuations in global markets has not impacted the emirate’s performance “since we were able to transform challenges into opportunities”. He added in another tweet: “Trade is not only important for economic diversification; it is also an important part of our heritage.” The data showed that telecommunications, gold and diamonds were the three most traded commodities last year.
The official trade figures follow a report last week that showed Dubai’s private sector companies continued to remain optimistic in February although growth momentum. The seasonally adjusted Dubai economy tracker index for incoming new work category rose to a 24-month high as companies reported a rise in new job orders. Wholesale and retail was the best performing category for the first time in six months, followed by travel and tourism. However, construction companies recorded a slowdown in growth momentum. (AB 15.03)
5.7 Saudi Arabia’s Budget Deficit Forecast to Fall to $86 Billion in 2017
The Bank of America Merrill Lynch announced that Saudi Arabia’s deficit is set to narrow during 2017 on the back of higher oil prices, discipline in spending and non-oil revenue measures. BofA Merrill Lynch said it sees the 2017 budget deficit at SR316 billion ($85 billion), about 12% of the Gulf kingdom’s GDP, compared to a deficit of SR402 billion in 2016, which represented 16.9% of GDP. The research note said underlying spending discipline kept the 2016 fiscal deficit in line with budget targets. However, the repayment of contractor arrears (SR80 billion) and spending related to surplus projects (SR25 billion) drove the 2016 fiscal deficit wider. BofA Merrill Lynch also noted that the Saudi US dollar peg will hold in 2017 given sizeable foreign assets and the experience with implementing multi-year fiscal adjustments.
The research note said the country’s budget statement and medium-term program imply three Saudi policy priorities this year – easing near-term austerity, supporting higher oil prices and introducing non-oil revenue reforms. The 2017 budget suggests flattish real spending, along with further repayment of government arrears in the first quarter of 2017. BofA Merrill Lynch said it sees the budget being consistent with oil prices of $55 per barrel and a fiscal breakeven of $98 per barrel. (AB 10.03)
5.8 Saudi Arabia to Tighten Restriction on Foreign Workers
Saudi Arabia plans to tighten restrictions on foreign workers to pressure companies into hiring more Saudi citizens and reduce unemployment among Saudis. The new policy could help the conservative kingdom achieve one goal of economic reforms launched last year to ease joblessness among Saudis from the current 12.1% to 9% by 2020. But by making it harder for firms to employ low-paid foreign workers, thereby raising costs, the policy may complicate other aspects of the reform drive such as developing private sector businesses and diversifying the economy beyond oil.
The new rules could potentially affect large numbers of people since about 12 million foreigners work in Saudi Arabia, doing many of the strenuous, dangerous and lower-paid jobs shunned by 20 million Saudi citizens. About two-thirds of Saudi workers are employed by the public sector.
Under a program launched in 2011 and known as Nitaqat, the Labor Ministry grades firms according to the ratios of Saudis in their workforces. Companies with higher ratios get preferential treatment when obtaining visas for foreign workers or licenses; those in lower categories face penalties. Under the new policy, construction firms with between 500 and 2,999 workers would have to employ 100% Saudis to be in the top “platinum” category; if they employ 10%, they are rated “lower green”. This compares to current levels of 16% for platinum and 6% for lower green. In the retail sector, a large company’s current percentages are 35% for platinum and 24% for lower green. This would rise to 100% for platinum and 35% for lower green. The policy will also tighten in many other sectors, according to the document, which lists more than 60 industries in which restrictions will be applied. (Reuters 21.03)
►►North Africa
5.9 Egypt’s Annual Core Inflation Accelerates to 33% in February
Egypt’s annual core inflation jumped to 33.10% in February from 30.86% in January, the central bank (CBE) said on 11 March. On a monthly basis, core inflation eased to register 2.61%, down from 5% the month before. The rising inflation rate follows the government’s decision to devalue the Egyptian pound and reduce fuel subsidies as part of an austerity program implemented alongside the three year $12 billion IMF loan deal signed last November.
The monthly national inflation rate decreased from 4.3% in January to 2.7% in February, but food prices increased by 4.1% during this time. Prices rose by 5.5% for meat and poultry, 4.5% for vegetables, 6.3% for dairy, 8.3% fish and seafood and 6.6% for fruits. The price of ready meals rose by 1.4%, furniture by 1.9% and healthcare by 1.9%.
The core consumer price index that the CBE uses to measure the level of prices – which excludes essential commodities such as fruits and vegetables – started to hit double digits in May 2016, when it reached a seven-year-high of 12.2%. Egypt’s annual headline inflation hit a record high of 31.7% in February, up from 29.6% in January, state statistics body CAPMAS announced. (CAPMAS 09.03)
5.10 Egypt Targets Less Than 10% Deficit in Draft Budget 2017/18
Egypt’s Minister of Finance Amr El-Garhy has said the deficit in the draft budget for the coming fiscal year 2017/18 is expected to be lower than 10% of GDP, citing tax revenues from both income and real estate in addition to planned investments as sources of funding. The minister said on 15 March that subsidy allocations for petroleum products in the draft budget would depend on foreign currency rates and international prices, pointing out that indicators are moving toward a range of $50 to $55 per barrel.
Egypt’s budget deficit registered 5.1% in the first half of this fiscal year relative to GDP, down from 6.2% in the first half of the last fiscal year. The government is targeting a budget deficit of 10.1% by the end of the current fiscal year 2016/17. Egypt freely floated its currency against the dollar in November, as part of a fiscal reform program implemented in mid-2014 to curb a growing state budget deficit, which amounted to 12.2% in 2015/16, and revive the flagging economy. The reform program also included cutting subsidies and implementing new taxes including a value added tax. (Al Ahram 16.03)
5.11 Egyptian Parliamentary Committee Approves $12 Billion IMF Loan
An Egyptian parliamentary committee on 15 March approved the country’s three-year $12 billion loan agreement with the International Monetary Fund, which will next be voted on by the whole legislature. The constitutional and legal affairs committee approved the agreement after 31 members voted in favor, five against and one abstained. The Central Bank of Egypt received an initial $2.75 billion tranche of the loan in November, following the IMF board’s approval of the agreement.
During the 15 March parliamentary session, Minister of Finance Amr El-Garhy said that all the documents related to the agreement are available for review by MPs. El-Garhy said that a delegation from the IMF will visit Egypt from 28 April to 8 May. The IMF said last month it planned to complete its first review of Egypt’s economic reform program around June this year. Parliamentary speaker Ali Abdel-Aal described the agreement as a part of a comprehensive economic reform program, highlighting Egypt’s right to borrow from international monetary organizations like any other country in the world.
In mid-August 2016, Egypt reached a staff-level agreement with the IMF over the $12 billion loan to endorse the country’s fiscal reform program, which the government embarked on in 2014 in an attempt to curb the growing state budget deficit, estimated at 12.2% of GDP in 2015/16. The fiscal reform program included the floatation of the Egyptian pound. The government hopes the loan will jumpstart the Egyptian economy, which has been battered by years of turmoil that have driven away investors and tourists. Egypt’s foreign reserves reached $26.54 billion by the end of February 2017, up from around $26.36 billion in January, the CBE said. (Reuters 15.03)
5.12 World Bank Disburses Another $1 Billion Loan to Egypt
The World Bank (WB) has disbursed another $1 billion in financial assistance to Egypt out of its $3 billion loan program with the country. Egypt has been negotiating billions of dollars in aid from various lenders to help revive an economy hit by political upheaval since a 2011 revolt, and to ease a dollar shortage that has crippled imports and hampered its recovery.
The World Bank issued the first $1 billion tranche of the loan in 2015, with two more instalments of the same size to follow, linked to additional reforms that the government planned. Faced with a gaping budget deficit, Egypt began a series of painful economic reforms and has taken steps to lower fuel subsidies, introduced a new value-added tax and let its currency float freely in the foreign exchange market in November to attract foreign inflows. Hafez Ghanem, the World Bank’s vice president for the Middle East and North Africa, said that Cairo’s next set of economic reforms should focus on making its bureaucracy more transparent for investors. Egypt expects to receive the second tranche of a $12 billion International Monetary Fund loan in May or June, Finance Minister El Garhy said. (Reuters 20.03)
5.13 China Grants Egypt $71 Million for Satellite Project at Suez Canal Economic Zone
On 20 March, Egypt and China agreed on a $71 million Chinese grant to Cairo for a feasibility study for the Egyptian satellite SATII project, as well as the establishing of a vocational training center at the Suez Canal Economic Zone. Some $64 million will be dedicated to the feasibility studies for the second phase of the Second Egyptian Satellite for Remote Sensing (Egypt SATII) and $7 million for the Suez Canal vocational center. The grant is the latest in Chinese grants provided to Egypt over the last five years totaling $267 million.
In January 2016, Egyptian President El-Sisi and Chinese President Xi Jinping signed a number of cooperation deals worth around $15 billion, including China’s participation in the construction of Egypt’s new administrative capital as well as the development of an industrial and commercial hub around Egypt’s Suez Canal. China is also involved in power generation projects in Egypt. However, the Egyptian government said in early February that it could not reach a final deal with the China Construction Company, which was to be tasked with building parts of the administrative capital. Egyptian construction companies were given the contract instead. (Ahram Online 21.03)
5.14 Morocco & the ‘Floating Dirham’
Morocco’s central bank governor, Abdellatif Jouahri, announced in 2016 that Morocco is aiming to introduce a flexible exchange rate system in the midst of 2017. Indeed, the International Monetary Fund (IMF) had identified the reform of the exchange rate regime as an important milestone to increase the resilience of the Moroccan economy. The IMF’s de facto classification of Morocco’s current exchange rate regime is referred to as “Conventional fixed peg arrangements”. Indeed, Morocco pegs its currency within margins of ±0.3% or less vis-à-vis a basket of currencies: The dirham’s exchange rate is currently fixed via a peg that is 60% weighted to the euro and 40% to the dollar (prior to April 2015, it was fixed via a peg that was 80% weighted to the euro and 20% to the dollar).
In case of a shock, under the current exchange rate regime, significant pressure is put on foreign exchange reserves. Furthermore, a shock could also lead to a forced transition to a floating regime. These weaknesses could be significantly mitigated by a floating exchange-rate regime.
Unlike Egypt who was unprepared to take the dramatic step of allowing its currency to trade freely, Morocco’s reform will be gradual allowing for a smooth transition. Indeed, Morocco’s foreign exchange reserves currently cover more than seven months of imports; and the central bank has said it expects that to rise to eight months by the end of 2017. Moreover, the macroeconomic environment is overall very favorable to this reform thanks the country’s efforts to curb its deficits and to decrease its public debt. According to the IMF, because Morocco has the proper prerequisites for the intended reform, the scenario under which the Moroccan dirham will plummet after gradual floating can be safely discarded.
The reform implies that the exchange rate will not be used as the nominal anchor of the system anymore. Instead, Morocco will operate an inflation targeting regime. Also, the prices of other currencies vis-à-vis the Moroccan dirham will be fully determined by the market’s supply and demand; and the only interventions in the foreign exchange market will be undertaken to ensure proper liquidity. (MWN 10.03)
5.15 World Bank Approves $150 Million Loan to Support Entrepreneurship in Morocco
The World Bank’s Board of Executive Directors approved a total of $150 million in funding on 10 March to support the Moroccan authorities’ plan to modernize the national identification system and support innovative start-ups and job creation. The two operations, aimed at strengthening social and economic inclusion, will improve social programs through a better personal identification system and, on the other hand, remove barriers which prevent start-ups and small businesses from accessing financing, says the World Bank.
According to the World Bank, “almost 5.3 million Moroccans, of which two-thirds from rural areas, live under the threat of falling back into poverty due to their socio-economic conditions.” With an envelope of $100 million, the Identity and Targeting for Social Protection Project is designed to help the most vulnerable by developing systems to ensure that social programs are better targeted and reach the most vulnerable Moroccans. The development objective of this project is to expand coverage of a unique identifying number for the Moroccan population and foreign residents, and to improve targeting of social safety nets in the Project Area.
The other project approved is a $50 million operation to improve financing opportunities for start-ups and innovative SMEs. The Financing Innovative Startups and small and medium enterprises (SMEs) project is to facilitate the increase of private equity and quasi-equity finance for innovative startups and small and medium enterprises. The project will support a financing program that will invest, along with private funders, in innovative start-ups and SMEs, as well as a selection of promising investments constituting “the highest contribution to net job creation in the Mena region,” according to the bank. (WB 11.03)
5.16 US News & World Report Names Morocco Among 50 Best Countries
For the second year in a row Morocco was ranked among the top 50 best countries by US News & World Report’s Best Countries listing. Produced in partnership with Y&R’s BAV Consulting group and the Wharton School of Pennsylvania, the listing evaluates 80 countries based on a survey of more than 21,000 respondents worldwide in nine sub-categories: Adventure, Citizenship, Cultural Influence, Entrepreneurship, Heritage, Movers, Open for Business, Power and Quality of Life.
Ranking at 48th overall, Morocco showed especially strong performances in the Movers sub-category, which identifies “up-and-coming economies,” coming in at 14th; the Heritage sub-category, which identifies those countries “most readily associated with a unique identity,” ranking 16th; and the Adventure sub-category, signaling destinations most likely “to fulfill your wanderlust,” ranking 24th. Of the remaining nine sub-categories, Morocco also placed in the top 50 in the categories of Open for Business (“market-oriented” countries that are “a haven for capitalists and corporations”), ranking 40th; and Cultural Influence (countries that serve as “cutting-edge centers of art, entertainment and fashion”), ranking 41st.
In many categories, Morocco emerged as a leader in Africa and the Middle East. Morocco was number one in the Open for Business and Best Countries for a Comfortable Retirement categories among African and Middle Eastern countries; number one in North Africa for Forward-Looking Countries; and second in Africa in the Movers category. (MACP 11.03)
5.17 Moroccan King Concludes Five-Country Africa Tour on Heels of African Union Decision
Morocco’s King Mohammed VI has concluded a five-country tour of Africa that took him to South Sudan, Ghana, Zambia, Guinea, and Côte d’Ivoire. The tour immediately followed the African Union’s (AU) decision to readmit Morocco to the continental bloc after a 33-year hiatus. Since ascending the throne in 1999, the King has made Africa a foreign policy priority, making over 50 visits to nearly 30 African countries and signing approximately one thousand bilateral agreements on economic, political, security, religious, and educational issues.
From 1-2 February, the King visited South Sudan, overseeing the signing of nine bilateral agreements with President Mayardit in the areas of urban development, investment promotion, agriculture, industrial cooperation, mines, and vocational training. The King also committed funds to a feasibility study for the building of a new capital city in Ramciel; as well as to a field hospital in Juba operated by Morocco’s Royal Armed Forces.
From 16-19 February, the King visited Ghana, where he and President of Ghana Akufo-Addo oversaw the signing of 25 governmental and public-private partnership agreements. The agreements center on investment, industrial cooperation, electricity, insurance, banking, agriculture, renewable energy, mining, tourism, and partnerships to promote business and engage the private sector in favor of climate action.
From 19-23 February, the King visited Zambia, where he and Zambian President Chagwa Lungu chaired a signing ceremony for 19 political and economic partnership agreements covering air services, investment promotion and protection, finance and banking, insurance, education, tourism, agriculture, technology, industry, and mining and renewable energy.
Morocco is the second largest African investor in the continent, and its trade with the rest of Africa increased by 12% annually between 2003 and 2013. In late 2013, the King established a program to train imams from across the continent in Morocco’s open, moderate form of Islam; and in June 2016, he inaugurated the Mohammed VI Foundation for African Oulema, with a mission of strengthening age-old historical and religious ties between Morocco and its African neighbors. With Morocco serving as the host country, the King also ensured that Africa’s interests on climate change policy were represented at the 22nd Conference of the Parties to the United Nations Framework Convention on Climate Change summit in Marrakesh in November 2016, hosting a special meeting for African leaders at the event. (MACP 14.03)
6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
6.1 Moody’s Revises Outlook of 14 Turkish Banks to Negative
On 17 March, Moody’s changed Turkey’s rating outlook from stable to negative. Moody’s also affirmed Turkey’s government debt and issuer ratings at Ba1. Moody’s said its decision to affirm and change the outlook from stable to negative on the long-term deposit and debt ratings of 14 banks reflects Moody’s expectation that these banks’ ratings would come under pressure from a combination of the weakening capacity of the government of Turkey to provide support in case of need, as implied by the negative outlook on the sovereign rating; and the increasingly adverse macroeconomic environment in Turkey.
The affected institutions include Akbank, Alternatifbank, HSBC Turkey, ING Turkey, Finansbank, Ziraat Bank, Halk Bank, Vakiflar Bank, Turk Ekonomi Bankasi, Garanti Bank, Yapi Kredi Bank, IS Bank, TSKB and the GRI Export Credit Bank of Turkey. Moody’s also downgraded Sekerbank long-term deposit ratings from B1 to B2 and standalone Baseline Credit Assessment (BCA) from b1 to b2 and assigned a negative outlook to the long-term deposit ratings. The action captures Moody’s expectations that the financial fundamentals of the bank will deteriorate more in the adverse operating environment than other rated Turkish peers.
Moody’s affirmed Burgan Bank’s local and foreign currency deposit ratings at Ba3 and its BCA at b2. The outlook on the long-term deposit ratings remains stable, given the expected resilience of the bank’s financial fundamentals despite the challenging environment. Moody’s also affirmed Denizbank’s local and foreign currency deposit ratings at Ba2 and its BCA at ba3. The long-term deposit ratings continue to have a negative outlook. The outlook reflects Moody’s expectation that while the bank’s fundamentals remain compatible with the current rating level, Denizbank shows some vulnerability to further deterioration amid the current operating environment. (HDN 21.03)
6.2 Greek Exports Start Year on a High, Rising by 24%
Greece’s external trade has started the year with a rise, and the balance remains positive even when certain factors that distort the real picture of exports and imports are excluded. The total value of exports in January 2017 came to €2.12 billion, against €1.71 billion in January 2016, posting an increase of 23.9%. According to the Panhellenic Exporters Association, most of that massive increase was due to the delivery of new ships from Asian shipyards, while the valuations of fuel imports and exports at considerably higher rates in the first month of the year also played a role. Excluding fuel products, the increase amounted to 6.3%, while excluding the ships it came to 4.4%.
The impact of the ship transactions was even greater on imports. This sent the total value of imports soaring 52.1% year-on-year to €4.46 billion, from €2.93 billion in January 2016. Excluding fuel, the rise reached 44.4%, while when ships are taken out of the equation the increase came to 11.4%. It therefore appears the omens are good for 2017, although no one can predict what will happen in the coming months. (eKathimerini 12.03)
6.3 Greece’s Jobless Rate Rises to 23.6% in Fourth Quarter
The Hellenic Statistical Authority (ELSTAT) announced on 16 March that Greece’s jobless rate rose to 23.6% in October-to-December from 22.6% in the third quarter. About 71.8% of Greece’s 1.12 million jobless are long-term unemployed, meaning they have been out of work for at least 12 months. Young people aged 15 to 24 faced a jobless rate of 45.2% in the fourth quarter compared to 48.6% in the same quarter a year ago. The highest unemployment rate was recorded in Q1/14, when joblessness hit 27.8%.
Greece’s economy contracted at an annual 1.1% pace in the fourth quarter due to weak public consumption and net exports. The European Commission and Greece’s central bank project the economy will recover this year with GDP seen growing by 2.5-2.7%. (Reuters 16.03)
7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Summer Time in Israel Begins on Friday, 24 March
Daylight savings time in Israel for 2017 will begin at 02:00 on Friday, 24 March and ends at 2:00 on Sunday, 29 October. In 2013, the Knesset passed legislation extending daylight savings time from the last Sunday in March to the last Sunday in October. Before that, daylight savings would end the Saturday night before Yom Kippur, so that the day’s fast, which is pegged to nightfall, would seem to end an hour earlier.
7.2 Kinneret Levels Lowest in a Century
After registering a drought for the fourth consecutive year in the north, the Water Authority is reporting a record low for precipitation in the month of February since measurements began in the 1920s. Water levels in the Kinneret rose only 22 cm last month, which is decidedly lower than the multi-year average of 60 cm. As of the beginning of March, current water levels in the Kinneret are standing at 16cm below the red line. These measurements, which are recorded now at the end of the rainy season, present a dire picture that has not been seen in a decade. The upper red line, the line marking the Kinneret water level as full, is down 4.36 meters.
Due to low levels of precipitation in the western Galilee over the last four years, the lack of available water volume in the Kinneret is the largest it has been in 100 years. The available water volume in the Kinneret last month amounted to 35 cubic meters, compared to the multi-year average of 86 cubic meters in the month of February. These worrying data were still recorded despite Water Authority policy that stopped Kinneret pumping nearly entirely. Exacerbating matters, the water shortage in the north is expected to worsen this summer.
The Water Authority is working to complete a desalination system to stabilize the water market in Israel, half of which is already made up of 50% recycled water. According to the Water Authority, a desalination plant was planned in the western Galilee, but ultimately did not materialize due to objections from local residents. (Ynet 20.03)
7.3 Israel Ranked as Best Country for Women in Middle East
Israel is the best country in the Middle East for women’s rights and freedoms, the World Economic Forum’s Global Gender Gap survey recently concluded. The survey, which has been conducted since 2006, ranks 110 countries in terms of gender equality and inequality, using a variety of factors including demographic data, socioeconomic figures, and a close look at women in the legal system.
In 2013, Israel ranked #53 for women’s rights worldwide – up two places since 2012 – but top for the Middle East overall. Middle Eastern and Muslim countries ranked lower on the list, possibly due to their lower human rights records overall. Thomson-Reuters noted recently that several Middle Eastern countries – Egypt, Iraq, Saudi Arabia, and others – have a poor track record for violence against women, reproductive rights, as well as the treatment and role of women. Egypt bottomed out the list.
The report noted that the Comoros Islands have the best track record for treatment of women in the Arab world; while the tiny nation did not appear on the WEF list, Oman – which ranked second for the Arab world in the Reuters poll – ranked 122nd in this survey. Kuwait, which ranked third on the Reuters list, stands at just 118. The survey’s results were published in honor of International Women’s Day, which was on March 8, and surfaces within days of reports that the Saudi Arabian royal family has been holding princesses captive against their will for several years. Israel received the Reducing the Gender Gap prize in 2013 from the European Parliament for its efforts in championing women’s rights. (Arutz7 14.03)
7.4 Israel Ranked 11th Happiest Country for Fourth Year in a Row
According to this year’s World Happiness Report, prepared by the Sustainable Development Solutions Network (SDSN) for the United Nations, Israel is the 11th happiest country in the world – for the fourth year in a row. Although Israel ranks behind countries like Norway (1st), Denmark (2nd), Iceland (3rd), Switzerland (4th) and Canada (7th) on the list, it placed ahead of the US (14th), Germany (16th) and the UK (19th). When the report first launched in 2012, Israel was ranked at number 14 out of the countries surveyed, but has held firm on 11th place since then. According to the survey, people in Tanzania (153), Syria (152) and Rwanda (151) are unhappiest with their lives.
The report is based on an annual survey of 1,000 people in more than 150 countries that simply asks them to rank, on a scale of 0 to 10, whether they are living their best life. Researchers then use six measures to try to understand the results: gross domestic product per capita, social support, healthy life expectancy, freedom to make life choices, generosity/charitable giving, and perceived levels of government and corporate corruption. (Various 21.03)
7.5 Tel Aviv 100-Story Tower Planned to be Israel’s Tallest Building
Plans for a 100-story tower to be constructed on the border between Tel Aviv and Ramat Gan have been submitted to the Tel Aviv Regional Planning and Building Committee. If approved and built, the so-called “Tower Between Cities” will be Israel’s tallest building, reaching a height of 400 meters (1,300 feet). The plans, by Guy Miloslavsky and Amnon Shwartz from Miloslavsky Architects, call for the tower to be built between Shefa Tal and Jabotinsky streets next to Tel Aviv’s Savidor Central Railway Station and a light rail station currently under construction. It is designed to contain private apartments as well as offices, shops, and a hotel. The adjacent lot will be able to accommodate two additional six-story buildings. The plans will have to overcome a number of hurdles before being approved.
Since 2001, the 235 meter (771-foot) Moshe Aviv Tower in Ramat Gan has been the tallest building in Israel. It was recently overtaken by the Azrieli Sarona Tower in Tel Aviv, which is still under construction and currently reaches 238.5 meters (782.5 feet). Construction also recently ended on the 57-story “low” Shachar Tower in Givatayim, east of where the new project would go up, which topped out at 195 meters (640 feet). (Various 21.03)
*REGIONAL:
7.6 Morocco World’s 84th Happiest Country
Morocco was ranked the 84th happiest country out of 155 total, according to World Happiness Report released by the Sustainable Development Solutions Network (SDSN). Despite the relative rise in Morocco’s rate of happiness from last year’s ranking of 90th happiest country, the kingdom is still below the average of the overall international standings. At the level of North Africa, Algeria landed at the 53th position, making it the happiest country in North Africa, followed by Libya at 68th place, Morocco at 84th, Tunisia at 102th, Egypt at 104th, and lastly Sudan at 147th place.
The report noted that key factors that lead to misery are not solely economic variables (such as income and employment), but also social factors (education and family life), as well as mental and physical health. Though African countries dominated the list of unhappiest countries, researcher explained that Africans demonstrate “ingenuity that makes life bearable even under less than perfect circumstances.” (MWN 21.03)
7.7 Elderly Population in Turkey Increases by 17% Over Five Years
Turkey’s elderly population has risen by 17.1% over the past five years, according to statistics released by the Turkish Statistical Institute (TUIK) on 16 March. TUIK stated that the population of people over 65 years old in Turkey had risen to 6,651,503 in 2016, up from 5,682,003 in 2012. The proportion of the elderly population in terms of the total population was 8.3% in 2016, up from 7.5% in 2012. Some 43.9% of the elderly population was made up of men and 56.1% was made up of women. The elderly dependency ratio, made up of the number of elderly people per hundred people of working age, was 12.3% in 2016, up from 11.1% in 2012. Meanwhile, in 2016 there were 5,232 centenarians in Turkey.
On average, for people aged 65 years old in Turkey, the average remaining life span is 17.8 years, 16.1 years for men and 19.4 years for women. In other words, women are expected to live 3.3 years longer than men on average. (TUIK 16.03)
8: ISRAEL LIFE SCIENCE NEWS
8.1 CincyTech Announces Investment in Xact Medical
CincyTech announced its investment in Xact Medical. The company’s Fast Intelligent Needle Delivery (FIND) system would give clinicians a device to more precisely, quickly and conveniently place an object such as a needle tip in the body, reducing uncomfortable and time consuming trial and error. Based on technology from Cincinnati Children’s and Ben Gurion University in Israel, the FIND system uses robotics and ultrasound to guide a needle. Xact Medical will initially focus on central line placements in pediatric and adult populations, with plans to expand into additional markets such as biopsy. The company is currently testing its prototype and working toward FDA approval.
Xact Medical is developing the FIND system to enhance clinician capabilities to quickly and precisely place an object, such as a needle tip, into the body. Based on technology from Cincinnati Children’s Hospital Medical Center and Ben Gurion University in Israel, FIND is bringing practical, affordable, point of care robotics to the patient bedside. (CincyTech 08.03)
8.2 Teva Announces Launch of Authorized Generic of Minastrin 24 Fe in the United States
Teva Pharmaceutical Industries announced the launch of the Authorized Generic of Minastrin 24 Fe1 (norethindrone acetate and ethinyl estradiol tablets and ferrous fumarate tablets) 1 mg/20 mcg in the U.S. The Authorized Generic of Minastrin 24 Fe is an estrogen/progestin combined oral contraceptive indicated for use by women to prevent pregnancy. It adds to Teva’s existing portfolio of more than 50 oral contraceptives. In the U.S., one of every two oral contraceptive prescriptions is filled with a product marketed by Teva.
Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions used by approximately 200 million patients in 100 markets every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,800 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has the world-leading innovative treatment for multiple sclerosis as well as late-stage development programs for other disorders of the central nervous system, including movement disorders, migraine, pain and neurodegenerative conditions, as well as a broad portfolio of respiratory products. (Teva 16.03)
8.3 Intermountain Healthcare Chooses Zebra Medical Vision to Deploy Enterprise Imaging Analytics
Salt Lake City, Utah’s Intermountain Healthcare, one of the premier healthcare providers in the U.S., and Zebra Medical Vision are announcing that for the first time ever, machine learning will be integrated into the medical imaging analysis of a premier healthcare provider, in order to enhance patient care. Zebra-Med’s Analytics Engine receives imaging data and analyzes it for findings indicative of cardiovascular, pulmonary, metabolic and bone health. Those findings will be used by Intermountain to identify patients at risk and optimize care. As Zebra-Med’s Engine grows with new insights it will be able to provide increasingly comprehensive reports that will allow more accurate, cost effective patient treatment.
In addition to empowering physicians with clinical insights, Zebra-Med’s analytics engine can scan across large imaging archives past and present, to assist at-risk organizations in understanding the underlying risk profile of their patients. These population-level insights on long term, chronic diseases can then be translated to early detection and intervention, with significant positive effects on the quality and cost of patient care.
Ranked #5 by FastCompany for Global AI \ Machine Learning, Kibbutz Shefayim’s med.com/”>Zebra Medical Vision uses machine and deep learning to create and provide next generation products and services to the healthcare industry. Its Imaging Analytics Platform allows healthcare institutions to identify patients at risk of disease, and offer improved, preventative treatment pathways to improve patient care. (ZMV 19.03)
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Zadara Storage and Trio Announce New Storage-as-a-Service (STaaS) Offering in Israel
Zadara Storage and Trio announced that Zadara’s VPSA Storage Array platform is now being offered by Trio as part of their new storage-as-a-service portfolio. The new offering is intended for Israeli-based companies who are interested in migrating their existing CapEx storage to an OpEx-based cloud environment and International companies who are interested in hosting or replicating their data in Israel. The new Trio service will provide local Israeli businesses a full-service offering, including Storage-as-a-Service (STaaS), Disaster Recovery-as-a-Service (DRaaS), Backup as-a-Service (BaaS), as well as server and virtualization services. Customers will have the option to replicate their data to remote Zadara Storage locations worldwide.
Yokneam’s Zadara Storage offers enterprise Storage-as-a-Service (STaaS) through the award-winning Zadara Storage Cloud. It can be deployed at any location (cloud, on-premise or hybrid), supporting any data type (block, file and object) and connecting to any protocol (FC, iSCSI, iSER, NFS, CIFS, S3, Swift). The VPSA Storage Array service provides enterprise SAN and NAS while the ZIOS service delivers private object storage. Zadara provides resource isolation, exceptional data security, and management control.
Azor’s Trio specializes in cloud-based business computer services. For over a decade, the company has provided cloud services based on private servers hosted in Tier 3 and Tier 4 data centers. The company provides a variety of advanced services including online backup and disaster recovery (DR), virtual servers for any use and cloud-based development environments for high tech companies. (Zadara 07.03)
9.2 Mellanox OCP-Based ConnectX-5 Adapters for Qualcomm Platforms
Mellanox Technologies announced availability of industry leading OCP-based 10, 25, 40, 50, and 100Gb/s ConnectX-5 network adapters for the Qualcomm Centriq 2400 processor-based platforms. ConnectX-5’s advanced performance and efficiency paired with the Qualcomm Centriq 2400, the world’s first 10-nanometer server processor, offer a complete ARM-based infrastructure for hyperscale and cloud data centers. ConnectX-5 is the world’s leading 10, 25, 40, 50, 56 and 100Gb/s InfiniBand and Ethernet intelligent adapter. Delivering message rates of up to 200 million messages per second, and latency as low as 0.7us, ConnectX-5 supports the most advanced offloads to accelerate high-performance computing and machine learning algorithms, virtualized infrastructures, and storage workloads. Together with native RDMA and RDMA over Converged Ethernet (RoCE), ConnectX-5 dramatically improves storage and compute platform efficiency.
Yokneam’s Mellanox Technologies is a leading supplier of end-to-end Ethernet and InfiniBand intelligent interconnect solutions and services for servers, storage and hyper-converged infrastructure. Mellanox intelligent interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance. Mellanox offers a choice of high performance solutions: network and multicore processors, network adapters, switches, cables, software and silicon, that accelerate application runtime and maximize business results for a wide range of markets including high performance computing, enterprise data centers, Web 2.0, cloud, storage, network security, telecom and financial services. (Mellanox 07.03)
9.3 Barkid Helps Parents Track Children
Globes reported that Barkid, a startup based in Beer Sheva, where the high-tech scene is gaining momentum, has launched a smart bracelet that enables parents to supervise their children. The company’s product is composed of a physical bracelet worn by the child and an app installed in the cellphone of the adult keeping track of the child. Barkid’s product is not GPS-based and therefore emits little radiation – the company says the radiation is negligible. In addition, the bracelet does not require the use of a SIM card, which should make it cheaper. The bracelet can help parents when they forget their children in the car, because it beeps when the parent moves away from the child. The company has raised NIS 1 million to date from Maimon Spices CEO Avraham Maimon. He says that the product has already been launched in Israel, the US, and Mexico, and is also ready for launching in Australia. (Globes 15.03)
9.4 Netkom Leverages Stratoscale’s Cloud Infrastructure to Onboard New Customers within Hours
Stratoscale announced that Netkom, a Switzerland-based IT service provider, has implemented Symphony 3 as its cloud infrastructure solution, transforming Netkom’s datacenter into an AWS-compatible cloud region. Driven by its ongoing cloud discussions with customers, Netkom’s focus has shifted toward offering cloud services as a seamless extension of their customers’ existing enterprise datacenter, combining SaaS, IaaS and PaaS solutions. Netkom wanted to build a robust and highly available cluster that would ensure the scalability and performance required to offer public cloud services, while reducing the complexity associated with optimizing and scaling infrastructure.
Stratoscale enables enterprises and MSPs to deploy an AWS region on top of existing hardware by transforming any x86 server into an elastic, highly utilized and consumable cloud that is AWS compatible. Deployed in minutes, Stratoscale enables service providers to align with an AWS-cloud-first strategy. Stratoscale offers sought-after flexibility and simplicity in managing all workloads and resources via a single pane control, decoupled from any hardware vendor constraints. Netkom leveraged existing hardware to deploy Stratoscale. The flexibility in using any server and storage solution was very attractive to Netkom because it eliminated vendor lock-in constraints. Netkom was also able to reduce customer onboarding from a week to just a few hours.
Herzliya’s Stratoscale is the cloud infrastructure company, allowing anyone to deploy an AWS compatible region in the datacenter. Stratoscale Symphony, can be deployed in minutes on commodity x86 servers, creating an AWS region supporting EC2, S3, EBS, VPC RDS and Kubernetes. Stratoscale has raised more than $70M from leading investors, including Battery Ventures, Bessemer Venture Partners, Cisco, Intel, Qualcomm Ventures, SanDisk and Leslie Ventures. (Stratoscale 15.03)
9.5 Sodyo Enables TV Broadcasters to Capture Leads in Real-Time
Binyamina’s Sodyo released a new groundbreaking O2O – offline to online – solution for broadcasters that is poised to forever change the TV advertising business model. Sodyo’s disruptive technology allows viewers to point their smartphone at the TV screen and “scan” a colorful marker that broadcasters place within the content or commercials. Until now, TV relied on “Dial 1-800” and “Visit our website” for lead capturing. TV leads are worth a lot more than web leads – TV will always be the biggest screen in the house, with the highest quality content and commercials. With Sodyo, broadcasters are sitting on an untapped gold mine.” Sodyo is the first technology that enables O2O – offline to online – interaction at any distance. (Sodyo 13.03)
9.6 OriginGPS Launches World’s Smallest GNSS Module
OriginGPS released its new ORG 4500 series, a cutting edge, fully-integrated product that supports ultra-compact applications for both GPS and GLONASS. This newest GNSS product perfects the industry’s most comprehensive GNSS/GPS family of solutions. The ORG 4500, kin to the lean and mean ORG 4400 series introduced last year, addresses the ever-increasing demand for high precision with the smallest possible footprint, and takes the company’s ground-breaking ultra-small form factor to a new level.
OriginGPS offers a range of fully-integrated GNSS/GPS and antenna solutions, encompassing a wide gamut of standard and essential tools for navigation. The small form factor and high sensitivity of OriginGPS’s modules enable new business models like ‘machine as a service’, and are ideally suited for a variety of applications – wearables, like smart watches and pet tracking, and also smart cities and drones. OriginGPS modules are deployed around the globe in key sectors, such as transportation, civil engineering, precision agriculture and time reference.
Airport City’s OriginGPS is a world-leading company for miniaturized GNSS/GPS 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 15.03)
9.7 Insert Integrates With Adobe to Bring the Power of Marketing Cloud to Mobile Apps
Insert announced its integration with Adobe Marketing Cloud. The integration allows marketers to leverage their existing Adobe audiences, digital assets, and analytics to deliver a personalized and seamless experience for every app user. At the same time, the in-app data which Insert feeds to Adobe’s Analytics Dashboard delivers crucial insight into the customer journey, and can be utilized across all marketing channels. Insert helps enterprises and mobile-first brands drive retention, loyalty and lifetime value for their mobile apps. They offer a robust engagement platform that can deliver a wide variety of campaigns into any live app within minutes, without relying on development resources.
Adobe Marketing Cloud offers marketers eight tightly-integrated solutions to effectively reach and engage customers and prospects with personalized marketing content across devices and digital touch points. With Insert, marketers can add native mobile apps to their stack by targeting audiences that have already been segmented in Adobe Marketing Cloud. The Adobe asset library, including images and videos, can be used in campaigns to create a unified brand experience across all channels.
Yakum’s Insert is the world’s first in-app marketing platform that enables businesses to respond quickly to the ever-changing lives of customers. Their unique technology is the only one that allows mobile app owners to independently create and publish in-app campaigns within minutes, without relying on development resources. They offer the widest range of campaign options in the market, and allow full control of campaign design, audiences and triggering. (Insert 15.03)
9.8 Secret Double Octopus Introduces Multi-shield User Authentication for Enterprises
Secret Double Octopus announced the launch of its authenticator app for enterprises, increasing enterprise-level security while eliminating the friction of standard authentication processes. Authentication systems have traditionally relied on a single layer of protection, including SMS, tokens, push notifications and biometrics, resulting in increased instances of hacking. Secret Double Octopus’ app helps enterprises struggling to scale their network security shift away from key-based authenticators to a keyless solution. With one tap, the authenticator app initiates a multi-shield authentication process for users in order to verify or reject the login attempt, payment or transaction.
Based on Secret Sharing algorithms, originally developed to protect nuclear launch codes, Secret Double Octopus has developed the only solution on the market that applies keyless authentication and data-in-motion protection for cloud, mobile, and IoT. The Company’s technology prevents cyber attackers from accessing enough critical information to be useful for attacks such as brute force, man-in-the-middle, PKI manipulation, key theft and certificate authority weaknesses.
Beer Sheva’s Secret Double Octopus has developed the world’s only keyless multi-shield connectivity technology to protect identity and data across cloud, mobile and IoT environments. Based on Secret Sharing algorithms, originally developed to protect nuclear launch codes, Secret Double Octopus’ technology prevents cyber attackers from accessing enough critical information to be useful for attacks, eliminating brute force, man-in-the-middle, PKI manipulation, key theft and certificate authority weaknesses. (Secret Double Octopus 15.03)
9.9 IAI Unveils Radar That Detects Targets in Dense Forests
On 14 March, Israel Aerospace Industries revealed a new radar capable of identifying targets traveling through heavily wooded areas. The radar, known as the ELM-2112FP persistent surveillance foliage penetration radar, was developed by IAI subsidiary ELTA Systems, and will be displayed at the upcoming LAAD Defense & Security conference in Brazil.
The ELM-2112FP is being marketed as a border security solution with all-weather infrastructure protection applications on land and sea. According to IAI, the system provides previously unavailable capabilities, and has already been successfully deployed. This radar is a technological breakthrough that takes the family of persistent radars a step further by providing a viable solution for securing borders and facilities. This unique and proven capability offers a real and immediate operational solution to the full area persistent surveillance, and we are confident that there will be a strong demand for such a system.
The ELM-2112FP’s forest-penetrating abilities are supported by Frequency Modulated Continuous Wave technology, or FMCW, which allows operators to track personnel and vehicle movements in congested regions of interest in real-time regardless of a clear line-of-sight. IAI maintains the technology will help eliminate “intelligence gaps” in compromised areas. (IAI 14.03)
9.10 SodaStream Unveils New Brand Dedicated To Creating Sparkling Water At Home
SodaStream International announced the launch of the Aqua Fizz Sparkling Water Maker at the 2017 International Home + Housewares Show in Chicago. The new brand is a US initiative and will be available at retail starting June 2017. Aqua Fizz provides consumers with a brand that is purely focused on a premium sparkling water experience in a glass carafe. The brand Aqua Fizz is designed to attract water seekers while the SodaStream brand is designed to attract soda users who seek a smart alternative to ready-to-drink soda beverages. In distinction, the SodaStream brand provides a full range of flavor offerings in addition to sparkling water in a reusable plastic bottle. The launch of Aqua Fizz complements the SodaStream brand to create a more complete brand portfolio, which better represents consumer needs in the United States. That’s because, as recently reported, American’s now consume nearly equal amounts of sugary sodas and water.
Aqua Fizz was designed and developed to be a world leader in premium sparkling water, seamlessly combining elegance and functionality. Great for those who love to host, the machine allows you to effortlessly carbonate and serve up fresh sparkling water in a stylish glass carafe. The glass carafe system has already proven to be among the most popular of all kitchen appliances sold in Europe where SodaStream sold nearly one million glass carafe machines in 2016. The Aqua Fizz is an upgrade to the Crystal machine currently sold in Europe.
Airport City’s SodaStream is the No. 1 sparkling water brand in volume in the world and the leading manufacturer and distributor of Sparkling Water Makers. They enable consumers to easily transform ordinary tap water into sparkling water and flavored sparkling water in seconds. By making ordinary water fun and exciting to drink, SodaStream helps consumers drink more water. (SodaStream International 17.03)
9.11 Magal-S3 RoboGuard System First Serial Order from Israeli Governmental Customer
Magal Security Systems received its first serial order for its revolutionary RoboGuard system. The customer, which is an Israeli governmental customer, recently announced the RoboGuard system to be operational. The announcement followed a series of rigorous in-the-field tests and ongoing inspections, conducted by the customer. The RoboGuard system is also being evaluated by other governmental agencies for the perimeter security of various critical sites.
RoboGuard is Magal’s revolutionary agile scout robot, which runs along secured fences, ensuring perimeter integrity and is capable of responding promptly to intrusion alerts. It has already been successfully tested for border security. It consists of an autonomous unit, traveling on a monorail and carrying several sensors. RoboGuard has two operating modes: routine patrol mode, in which it travels autonomously scanning and searching for perimeter anomalies or nearby suspected objects and response mode, in which RoboGuard rushes promptly to home in on a suspected intrusion, acting as a first responder. The RoboGuard provides customers with operational efficiencies by reducing manpower, patrol vehicles and related equipment.
Yehud’s Magal is a leading international provider of solutions and products for physical and video security solutions, as well as site management. Over the past 45 years, Magal has delivered its products as well as tailor-made security solutions and turnkey projects to hundreds of satisfied customers in over 80 countries – under some of the most challenging conditions. Magal-S3 offers comprehensive integrated solutions for critical sites, managed by Fortis4G – our 4th generation, cutting-edge PSIM (Physical Security Information Management system). (MagalS3 21.03)
9.12 Breakthrough Success for Silicom: Major New Design Win With $17 Million in Orders
Silicom has achieved the most significant design win in its history. This design win, from a top-10 Cloud player, is for a highly customized version of Silicom’s 100-Gigabit high bandwidth switch fabric on a NIC cloud solution. Based on this design win, Silicom has received initial purchase orders (POs) in the aggregate amount of $17 million to cover a small-volume Alpha phase, an intensive Beta program and the product’s first commercial deployment. Having completed deliveries for the Alpha phase, Silicom is now in the process of delivering the Beta-program products while completing two additional activities: 1) finalizing the product configuration and validating the solution’s performance within the servers in which the Silicom products will be deployed, in cooperation with a Tier-1 server manufacturer; and 2) ramping up product manufacturing to a full mass-production level. Based on the customer’s guidance, Silicom forecasts that revenues related to the design win will build to more than $30 million per year.
Kfar Sava’s Silicom is an industry-leading provider of high-performance networking and data infrastructure solutions. Designed primarily to increase data center efficiency, Silicom’s solutions dramatically improve the performance and availability of networking appliances and other server-based systems. Silicom’s products are used by a large and growing base of OEM customers, many of whom are market leaders, as performance-boosting solutions for their offerings in the Cyber Security, Network Monitoring and Analytics, Traffic Management, Application Delivery, WAN Optimization, High Frequency Trading and other mission-critical segments within the fast-growing data center, enterprise networking, virtualization, cloud computing and big data markets. (Silicom 21.03)
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel’s CPI Unchanged in February as Home Prices Resume Rise
On 15 March, the Central Bureau of Statistics announced that Israel’s apartment prices rose 0.5% in December and January. This reverses the trend it reported last month when it found that home prices in November and December were 1.2% lower than in the preceding two months – the first such fall in years. The Central Bureau of Statistics has now revised that decline further to 1.5%. However, overall home prices rose by 6.3% over the past 12 months. The price falls in November and December were influenced by the government fixed price buyers program. The Central Bureau of Statistics also published the Consumer Price Index (CPI) for February. The CPI was unchanged and has risen just 0.4% over the past 12 months. (CBS 15.03)
10.2 Israel’s Economy Grew by 4% in 2016
Israel’s economy grew 4% in 2016, according to the second revision of GDP figures published today by the Central Bureau of Statistics. For the sake of comparison, GDP grew 3.2% in 2014 and 2.5% in 2015. Per capita GDP was up 2% in 2016, compared with 1.2% in 2014 and 0.5% in 2015. According to the data, during 2016, the current revision shows that private consumption, which rose 6.3% in 2016, was the main engine in GDP growth. Per capital private consumption was up 4.2% in 2016, after rising 2.3% in the two preceding years. The figures show a clear improvement in investments in fixed assets, which grew 11.3% in 2016, after stagnating in the two preceding years. Exports of goods and services also improved, with 3% growth, primarily as a result of 6% growth in exports of services (excluding exports of startups and tourism). The Central Bureau of Statistics upwardly revised its fourth quarter growth figure to 6.5%, compared with the 6.2% estimate it published in February. (CBS 09.03)
10.3 Number of Israeli Jobseekers Hits 10 Year Low
The Israel National Employment Service (INES) announced that February 2017 recorded the lowest unemployment level in the past 10 years. The seasonally adjusted number of jobseekers fell from 170,000 in January to 168,800 in February, marking a 0.8% decrease. The drop in unemployment is continuing, despite the already low unemployment levels in the economy. The number of jobseekers is unprecedentedly low, both relative to the number of people employed and in absolute figures – the number is extremely low, despite population growth. In comparison with previous years, the average number of jobseekers over the past three months averaged 169,700, down 9.4%, compared with the corresponding period in 2015-2016, when the average was 187,400, and down 18.3%, compared with the corresponding period in 2014-2015. (INES 15.03)
10.4 Finance Minister Says 2016 was One of Israeli Economy’s Best Years
On 9 March, the Central Bureau of Statistics said Israel’s economy grew by 4% annually in 2016, exceeding the growth rate of other Organization for Economic Cooperation and Development member states, which averaged 1.7%. Israel’s gross national product stood at 2.5% in 2015 and 3.2% in 2014. The business sector also performed well in 2016, marking 4.2% annual growth, compared to 2.3% in 2015, the report said. The data further indicated that GDP per capita has also grown: Private consumption of fixed-price goods and services increased by 6.3% in 2016, having grown by 4.3% in both 2015 and 2014. Overall, 2016 saw a 2% rise in fixed prices, which are unaffected by inflation rates, compared to a 0.5% growth the previous year.
Economic growth was also indicated by import and export figures: The import of goods and services in 2016 climbed 9.5%, following a 0.5% drop in 2015; and exports grew by 3%, after a 4.3% slump the previous year. Imports in the diamond industry noted a 21.8% spike in 2016, the report noted. The data also showed that in 2016, the government sector’s deficit came to NIS 13.8 billion ($3.75 billion), or 1.1% of the GDP. (IH 12.03)
11: IN DEPTH
11.1 ISRAEL: Israeli Startups Raise $800 Million This Year
Israeli startups have raised $800 million in 2017 so far, according to IVC and Globes. With three weeks left in March, this is keeping pace with last year when Israeli startups raised $1.09 billion in the first quarter. Thus Israeli startups continue to raise the record amounts seen over the past two years. Israeli startups raised nearly $700 million in January and February and this blistering pace was maintained in the first weeks of March.
Cyber security company Zimperium confirmed that it had raised $15 million from Japan’s Softbank and app building company ScyllaDB raised $16 million from, among others, Samsung and Qualcomm. Among the smaller financing rounds closed since the start of March, contract review company LawGeex raised $7 million, online bra measuring company Brayola raised $5 million, predictive analytics company Endor raised $5 million and cyber security company Cymulate raised $3 million.
However, the medical arena has been strongest since the start of March with non-invasive blood testing company Cnoga leading the way, raising $50 million from China’s BOE. Medication management company Medisafe raised $14.5 million, needle steering company XACT Robotics raised $5 million, and radiation shielding company RadiAction Medical raised $5.7 million.
February had ended with a flurry of financing rounds, the largest of which was drug development company Pharma Two B, which raised $30 million for a Parkinson’s treatment trial. The first major financing closing of 2017 by an Israeli startup was also in the medical sector with smart shirt company Healthwatch raising $20 million.
The trend of Israeli startups closing large financing rounds continues, especially in January when nearly $450 million was raised. Flash storage company Kaminario raised $75 million and mobile ad analytics company Appsflyer raised $56 million. Cyber security, as in 2016, remains the hottest sector with SentinelOne raising $70 million, Transmit Security raising $40 millionDemisto raising $20 million and Intsights Cyber Intelligence raising $15 million, among others.
Other major financing rounds were closed by Valens Semiconductor (raising $20 million), Aquarius Engines (raising $20 million), eCommerce company FeedAdvisor ($20 million), SaaS company Samanage ($20 million), enterprise software company Trax Image Recognition ($19.5 million), artificial intelligence company Chorus.ai ($16 million), co-working space company Mindspace ($15 million), smartphone camera company Corephotonics ($15 million), sports publishing company MinuteMedia ($15 million) and power electronics company visIC ($11.6 million). In fintech, VAT recovery company VATBox raised $20 million, Earnix raised $13.5 million and Credifi raised $13 million. (Globes 10.03)
11.2 ISRAEL: The Quiet Advance of Eastern Mediterranean Gas
Simon Henderson and David Schenker posted on TWI on 8 March that news that Israel has begun exporting gas to Jordan indicates that commercial logic can prevail despite adverse political rhetoric.
In January, without fanfare, natural gas from Israel’s offshore Tamar field began flowing across the border near the southern end of the Dead Sea, where it will provide power for a bromine plant and potash factory in Jordan. Although the quantities of gas involved are relatively small, the development was significant because it came at a time when King Abdullah was profoundly concerned that the new Trump administration intended to move the U.S. embassy in Israel from Tel Aviv to Jerusalem. The palace had ample reason to play down Jordan’s ties with its western neighbor, but carrying out the gas deal was apparently deemed more important. While the king’s sensitivity probably explains why Amman has not publicly agreed to buy gas from Israel’s much larger Leviathan field, the same under-the-table approach to hydrocarbon development seems to be playing out in that case as well.
More Deals Afoot?
The prospect of a major deal with Jordan’s main electricity generator, the National Electric Power Company (NEPCO), is considered a key element in Leviathan’s viability, and observers had expected the go-ahead for that project to be announced at the end of 2016. As the new year came and went, the absence of news seemed to augur badly for the deal, as did Jordan’s tense domestic opposition to buying Israeli gas (though such sentiment should be tempered by the population’s dependence on Israeli drinking water).
On 23 February, however, Houston-based Noble Energy — which leads the consortia for Tamar and Leviathan — suddenly announced that it would move forward with developing the latter. The company made no direct reference to Jordanian involvement, instead obliquely mentioning that the project would provide “affordable energy resources to Israeli citizens and neighboring countries,” and that the gas would reach “regional markets via onshore export pipelines.” Yet the company’s clear insinuation is that King Abdullah has privately agreed to buy Leviathan gas. In Noble’s view, even an unannounced Jordanian commitment is apparently bankable, enabling it to secure financing for the project.
Complex Regional Context
Supplying Israeli gas to Jordan’s Dead Sea factories also confronts a wider Middle Eastern taboo. While Amman and Egypt have peace treaties with Israel allowing for commercial trade, most other Arab countries have continued their perpetual boycott. Indeed, a Saudi bank divested from one of the factories – the Arab Potash Company – at the first sign that Israeli gas would be flowing there. Yet according to APC’s website, the company’s board of directors still appears to include representatives from its Emirati, Iraqi, Libyan and Kuwaiti quasi-governmental shareholders. APC is also a partial owner of the other factory receiving Tamar gas, the Jordan Bromine Company.
Putting Israel’s gas progress with Jordan in a broader commercial and regulatory context is instructive as well. Last month, apparently disappointed by the lack of interest from foreign companies, Energy Minister Steinitz announced a new timeframe for bids to explore in Israel’s exclusive economic zone (EEZ). Bid submission will now start at the end of May and end on 10 July and financial guarantees must be valid until March 2018. This suggests that licenses may not actually be awarded until next year.
One factor in this decision was no doubt the continuing reluctance of international oil and gas companies to risk their commercial interests and future prospects with Arab countries and Iran by doing business with Israel. For instance, despite concerns about Tehran’s troublemaking role in the region, the Islamic Republic is a particularly attractive prospect for energy companies because it has the largest proven gas reserves in the world, some 180 times the size of Israel’s.
Moreover, Israel arguably shot itself in the foot by changing its taxation framework for gas production. Whatever the domestic rationale behind that move, such changes can have consequences when exploration companies are deciding whether to risk their own capital in a search for hydrocarbon reserves that lie far below the seabed, in challenging waters more than a mile deep.
The Nile & Levant Basins
The quantities of hydrocarbons in the region known geologically as the Nile and Levant Basins represent but a fraction of those found in the Arabian Gulf countries. Even so, the current and future prospects in the Eastern Mediterranean (mainly gas but also some oil) could substantially improve the economies of Egypt, Cyprus and Lebanon along with Israel and Jordan. Recent developments in the area support such optimism.
First, Egypt is moving rapidly to bring its Zohr offshore gas field online. Cairo claims that the field is larger than Leviathan, though it suffers from high levels of hydrogen sulfide that needs to be removed at an onshore facility currently under construction. Britain’s BP and Russia’s Rosneft have bought into the field, and Italy’s Eni will develop it. Yet while Egypt hopes to regain its status as a gas exporter, high domestic demand could make this an elusive dream. Currently, all domestic production is directed toward generating electricity, and extra liquefied natural gas must be shipped in weekly from Qatar for this purpose. Egypt’s industrial plants are still suffering shortages, however, and its two LNG export terminals on the Nile Delta are almost idle. Against this backdrop, imports of Israeli gas would seem to be commercially attractive, at least in the interim.
Second, Cyprus – whose own EEZ is tantalizingly close to the Zohr field – is hoping for new discoveries by international companies previously disappointed by local prospects. Its only discovered field, Aphrodite, is yet to be exploited. Given the island’s small population, most if not all of its eventual gas production would be for export, but this would only be achievable through cooperation with Israel and/or Egypt. Turkey’s acquiescence may be required as well.
Third, after years of delay, Lebanon ratified decrees in January that divided its offshore EEZ into ten exploration blocs and established a commercial process for awarding licenses. Yet three of these blocs are located along Lebanon’s self-declared southern maritime border, beyond which lie Israeli waters. Beirut still does not officially recognize Israel and the Lebanese tender document did not incorporate any of the U.S.-brokered proposals for dividing the contentious maritime zone, so the licensing process could run into problems. According to industry experts, one of the three blocks in question is the most likely to contain gas in commercial quantities, but it is difficult to imagine any international exploration company wanting a license in an area that could be legally and even militarily contested. Other potential obstacles include deciding which areas of Lebanon would initially benefit from any new gas flows, and how any eventual export revenues would be divided between the country’s various armed factions.
Fourth, the Hamas-controlled Gaza Strip has an unexploited offshore field known as Gaza Marine, which could be used to generate electricity both there and in the West Bank. Technically, however, the field is owned by the Ramallah-based Palestinian Authority, which is reluctant to invest in a project that could economically and politically bolster its Hamas rivals.
Other Export Options
The Eastern Mediterranean’s most tantalizing gas export option is a proposed undersea pipeline from Israel’s Leviathan field to Turkey, either across Cyprus or skirting the island to the east. The former route could be problematic given the lack of a peace settlement in the divided country, where Turkish troops have occupied the north since a crisis with Greece in 1974. Israel’s relations with Turkey have improved recently, but perhaps not enough to sign a twenty-year gas supply deal with associated heavy investment in an expensive pipeline.
A further possibility (though one that strains credulity) is an undersea pipeline that stretches from Aphrodite and/or Leviathan to Cyprus, the Greek island of Crete, and the Greek mainland. A variation of this would be installing an undersea cable known as a “connector” to link the Israeli, Cypriot, and Greek electric grids.
Economic vs. Political Realities
To be sure, all of these low-key advances are overshadowed somewhat by the region’s latest troubles. Jordan is burdened by Syrian refugees, and Lebanon’s future shape is probably linked to the incumbency of President Bashar al-Assad in Damascus. Meanwhile, Iran is affecting the Eastern Mediterranean situation from afar by supplying hostile actors with cruise missiles capable of hitting offshore drilling rigs and production platforms, among other destabilizing actions.
Yet the February go-ahead on Leviathan means that Israel can now bring gas ashore in the center of the country rather than at Ashkelon, where facilities are within rocket range of Gaza. Similarly, a steady supply of Israeli gas would reduce Jordan’s near-total reliance on supplies arriving by sea at Aqaba, and perhaps end its schemes to import Iraqi gas overland or build Russian nuclear reactors.
Energy security is as much about having alternatives as it is about any notion of energy independence. U.S. diplomacy has played a low-key and not always effective role in encouraging the commercial exploitation of Eastern Mediterranean natural gas. But it is a necessary role that needs to be continued, even if commercial interests remain the main driver of multilateral deal making.
Simon Henderson is the Baker Fellow and director of the Gulf and Energy Policy Program at The Washington Institute. David Schenker is the Institute’s Aufzien Fellow and director of its Program on Arab Politics. (TWI 08.03)
11.3 ISRAEL: Israel and China – Toward a Comprehensive Innovative Partnership
Matan Vilnai, Assaf Orion and Galia Lavi wrote in INSS Insight No. 906, on 19 March that on 20-21 March, 25 years after the establishment of diplomatic relations, Prime Minister Netanyahu visited China, his second visit there during Xi Jinping’s presidency. The visit took place against the backdrop of the growing economic relations between Israel and China; China’s heightened interest in the Middle East and the dynamic developing among the three world powers at the outset of Donald Trump’s presidency. The upcoming visit, therefore, is a good time to examine the growth of Israel-China relations since Netanyahu’s previous visit in 2013 and the direction they may be taking.
This analysis is best made as part of a broader look at China’s interests in the Middle East and its Middle East policy. Given China’s declared policy of non-intervention in the internal matters of other states and its cautious risk-aversion, most Chinese activity in the Middle East is economic in nature: China’s political involvement in the region is minor and its small military presence is limited to peacekeeping missions. More than half of China’s oil imports come from the Middle East, and as part of its One Belt One Road (OBOR) initiative, is investing heavily in transportation infrastructures, such as roads, railroads, and sea ports. The initiative is meant to connect China to European and African markets, and is financed in part by the establishment of the Asian Infrastructure Investment Bank (AIIB), which Israel joined as soon as it was founded. In 2015 alone, China invested close to $5.7 billion in infrastructures in the Middle East and Africa, and in 2016 this sum jumped to $21.5 billion. China is also involved in building infrastructures in Israel, such as digging the Carmel tunnels in Haifa, laying the light rail in Tel Aviv and expanding the Ashdod and Haifa seaports. China is likewise entering the residential construction industry.
Alongside these investments, China’s main declared interest in Israel is in the field of innovation. In China’s view, Israel, despite its small size, stands out for its scientific achievements, its number of startups, and the number of its Nobel Prize laureates. Given China’s critical need for advanced technologies and innovative solutions for its large and aging population, China is investing in Israel’s hi-tech, agriculture, food, water, med-tech and bio-tech industries. According to Economy Ministry estimates, China’s total investment in Israel in 2015 reached more than half a billion dollars. China is also encouraging the establishment of Israeli innovative enterprises in China, such as Shouguang’s Water City, which incorporates Israeli water technologies. The establishment of a technological academic institute in Guangdong by the Technion, financed with a $130 million donation by billionaire Li Ka-shing, is an example of the role Chinese businesspeople are playing in promoting bilateral relations. Indeed, since 2013, Israel has seen a heavy stream of delegations from the Chinese business community interested in innovation in fields prioritized by the Chinese government as of particular interest, and in 2016 alone the Israeli Embassy in Beijing issued more than ten thousand visas to Chinese businesspeople.
China’s focus on the economy is convenient for Israel, whose strategic relationship with the United States forms a cornerstone of its national security policy. Israel’s prior relations with China in the field of security were a source of tension and even crisis with the United States, and thus since the previous decade, Israel has been careful to focus its ties with China on the economic level. Accordingly, with Netanyahu’s previous visit to China, it was decided that the government would make a concerted effort to strengthen economic ties between Israel and China to realize the economic potential inherent in the bilateral relations, and trade in fact rose from $8 billion in 2013 to $11 billion in 2016. As with China’s many trade partners around the globe, Israel trades with China at a deficit: in 2015, Israel’s trade deficit with China’s stood at $3.386 billion, a 12% increase since 2010.
Given the impressive growth of economic relations between the two states, Israel’s relative weakness in academic and applied research about modern China as a knowledge base critical to sound decision making processes is a glaring lapse. To support actual, responsible continued growth based on the formulation of a policy and the development of broad, productive business relationships that have long term potential, the Israeli government and the Israeli market need more experts on modern China in a range of topics, such as the economy and business administration, law, foreign relations and more. The dearth of experts on these issues in government ministries and academia hinders the accelerated development of economic relations.
Ties between Israel and China embody significant growth potential for the Israeli economy that must be maximized while taking every precaution to preserve Israel’s strategic relationship with the United States. The intention during Netanyahu’s upcoming visit is to define the relations between Israel and China as a “comprehensive innovative partnership,” a definition expressing both sides’ understanding of the center of gravity of their relations. The two have clearly agreed to avoid calling the partnership “strategic,” as in the background are Israel’s relationship with the United States and China’s relationship with other Middle East states.
In this context, what follows are recommended goals for the Prime Minister’s upcoming visit to China. On the bilateral level:
- To continue promoting optimal conditions for expanding cooperation in the fields important to China where Israel has a relative advantage, such as hi-tech and innovation, agriculture and food, water technologies, med-tech, and bio-tech.
- To include Israel in OBOR: encourage further Chinese investments in infrastructure projects in Israel, and propose Israeli solutions and involvement in leading areas that are relevant for promoting the initiative, such as security, fighting terrorism, and communications.
- To stress the importance of a senior Chinese leader’s visit to Israel (e.g., the President himself or the Prime Minister), in light of the blatant gap between the level of representatives in China’s state visits to Israel compared with visits to other regional states.
- To expand exchanges of delegations of senior businesspeople and to encourage visits by senior members of the Chinese business community to Israel.
- To promote mutual knowledge and learning to accelerate the development of relations (China studies in Israel, Israel studies in China, expanding the dialogue between research institutes and think tanks) with government encouragement (a joint fund? incentives, budgeting, investments).
On the regional level:
While China has the proven capacity and surplus supply in building economic and transportation infrastructures, and in development, and the Middle East has tremendous demand for precisely these capabilities, the region’s fundamental instability and insecurity are hindrances to Chinese involvement. Israel is an island of stability and security in this region, and as such it is recommended:
- To encourage China to help promote Israeli-Palestinian relations by means of investing and promoting infrastructures in the PA and the Gaza Strip with Israel’s blessing and its guarantee for security, and establishing “economic peace” with the Palestinians. Inter alia, it is possible to build infrastructures that would provide services to Gaza (also on Israeli territory, which could possibly be included in future land swaps), such as renewable energy, naval transportation infrastructures and desalination plants, and – in the West Bank – infrastructures for overland transportation, industrial and business zones (including hi-tech), and so on.
- China’s policy in the Middle East has a proven ability to conduct fruitful ties with a range of players in the region, and even maintain parallel relations with bitter enemies (Iran and Saudi Arabia; Israel). Based on this potential, it would be appropriate to promote joint initiatives for China, Israel and the pragmatic states, so as to maximize existing and developing potential and highlight China as a significant player in advancing regional stability by means of an economic strategy that incurs limited risks.
- To express concern over China’s relations with Iran in the defense field (visits by senior officials, military cooperation, especially Chinese assistance to Iran’s defense industries), when Tehran remains committed to the destruction of Israel, supports terrorism, and still strives to acquire nuclear arms. It should be stressed that Iranian models of Chinese weapon systems, such as the anti-ship C802 missile, find their way to terrorist organizations like Hezbollah and the Houthi rebels in Yemen, and end up harming naval vessels of China’s other partners in the region, including Israel itself, Saudi Arabia, and the UAE.
Finally, China has undoubtedly noticed Prime Minister Netanyahu’s closeness to President Trump and his access to President Putin. While China gropes for channels to the new White House, and while the trio of world powers are engaged in tension-filled processes of re-design, it would be appropriate for Israel to test, delicately, the possibility of making a humble contribution in the transmission of messages and discreet mediation among the powers. (INSS 19.03)
11.4 JORDAN: IMF Staff Concludes Visit to Jordan
A team from the International Monetary Fund (IMF) visited Amman from 5 – 9 March to take stock of recent economic developments and discuss with the authorities their planned economic policies for 2017 and beyond. At the end of the visit, Mr. Cerisola issued the following statement:
“Jordan continues to face a difficult external environment. The conflicts in Syria and Iraq continue to weigh on its economy, with growth expected at around 2.0% in 2016 and unemployment increasing to 15.3%. Inflation has accelerated to 2.5% (year-on- year (y/y) in January and to 4.6% (y/y) in February, reflecting higher global food prices and the one-off impact of the fiscal measures. The overall fiscal deficit is estimated at 3.6% of GDP in 2016 and is projected to decline to less than 3% in 2017 in light of fiscal measures underpinning the 2017 budget.
“The current account deficit is expected to reach 9.5% of GDP in 2016 compared to 9.1% in 2015. Recent data suggest a recovery in remittances and tourism, which could contribute to reduce the current account deficit in 2017. Credit to the private sector accelerated further, increasing by around 10% y-o-y in December 2016. The recent steps by the Central Bank of Jordan in raising key monetary policy rates has helped to preserve the attractiveness of the Jordanian dinar and keeping international reserves at adequate levels. Due to challenging external environment, growth is expected to pick up modestly in 2017, driven by some rebound in exports, tourism, and remittances.
“Against this backdrop, the authorities have reiterated their commitment to sound policies that reduce vulnerabilities and support growth. Discussions with the Jordanian authorities were constructive and focused on taking stock of recent developments and exploring changes to the macroeconomic framework. The discussions also focused on the authorities’ plans for policies and reforms to preserve Jordan’s macroeconomic stability and to enhance growth and employment prospects in a difficult environment, where the pressure from refugees on the economy merits the continued support from the international community. It was agreed that discussions will continue during the Spring Meetings in Washington, DC, with a view to complete the review of the Extended Fund Facility. The IMF is committed to maintaining its dialogue with the authorities and supporting Jordan’s national program of economic reforms.” (IMF 15.03)
11.5 IRAQ: Statement at the End of an IMF Mission on Iraq
The Iraqi authorities and the staff of the International Monetary Fund (IMF) held discussions in Amman from March 5–17, 2017 on the 2017 Article IV Consultation and the second review of Iraq’s 36-month Stand-By Arrangement (SBA) approved by the IMF Executive Board on July 7, 2016 (See Press Release No. 16/321). The SBA aims to restore fiscal and external balance and to improve public financial management while protecting social spending. The first review under the SBA was completed on December 5, 2016.
-In 2016, real GDP growth was sustained at 11% supported by a large increase in oil output that benefitted from past oil investments.
-In 2017, economic activity is expected to remain muted due to a 1.5% contraction in oil production and only a tepid recovery of the non-oil sector.
-Further reforms to create fiscal space for inclusive growth, strengthen the business environment, reduce corruption and repair the banking sector are needed to support private sector-led growth and diversification of the economy.
Mr. Christian Josz, Mission Chief for Iraq, issued the following statement:
“Iraq has been hard hit by the conflict with ISIS and the plunge in global oil prices since 2014. The government has responded to the fiscal and balance of payments crisis with a large but necessary fiscal adjustment supported by financial assistance from the international community. In 2016, real GDP growth was sustained at 11% supported by a large increase in oil output that benefitted from past oil investments. Nevertheless, the non-oil economy experienced an 8% contraction due to the conflict and the fiscal consolidation. In 2017, economic activity is expected to remain muted due to a 1.5% contraction in oil production under the agreement reached by the Organization for Petroleum Exporting Countries, and only a tepid recovery of the non-oil sector.
“The plunge in oil prices has driven the decline of Iraq’s gross international reserves from $53.7 billion at end 2015 to the still comfortable level of $46.5 billion at the end of December, 2016. Fiscal pressures remain significant with the government deficit remaining at 12% of GDP in 2016, due to continuing weak oil prices and rising humanitarian and security spending. Total public debt increased from 32 to 64% of GDP during 2014-16. Credit growth decelerated and non-performing loans in state-owned and private banks increased significantly in 2016.
“The authorities have maintained the exchange rate peg which remains a key nominal anchor. Medium term growth prospects remain modest driven by projected flat oil production and investments in the face of the revenue constraint and modest pickup in non-oil growth supported by the expected improvement in security and implementation of structural reform. Further reforms to create fiscal space for inclusive growth, strengthen the business environment, reduce corruption and repair the banking sector are needed to support private sector-led growth and diversification of the economy once post- ISIS reconstruction is underway. Risks remain high, arising primarily from uncertainty in the oil price outlook, security and political uncertainties, and administrative weaknesses.
“The Iraqi authorities and IMF staff started discussions on the second review of the SBA. These discussions will continue during the upcoming IMF and World Bank Spring Meetings from April 21–23, 2017 in Washington, DC.
“During the visit, the team met with the Acting Minister of Finance Prof. Abdulrazzaq A. Jaleel Essa, Acting Governor of the Central Bank of Iraq (CBI), Dr. Ali Mohsen Ismail Al-Allaq, the Financial Adviser to the Prime Minister Dr. Mudher Saleh, and officials from the ministries of finance, oil, planning, the State Oil Marketing Organization, the Central Statistical Office, the Central Bank of Iraq, and representatives from the Kurdistan Regional Government, and the Board of Supreme Audit. (IMF 17.03)
11.6 GCC: Economic Nationalism at the Expense of GCC Integration
Karen E. Young posted on 13 March at the Arab Gulf States Institute in Washington that there are a number of new tax initiatives unfolding across the Gulf Cooperation Council, the most publicized and cohesive of which is the value-added tax to be introduced collectively in 2018. There are also individual country initiatives that aim to increase government revenue through taxes, but also to better institutionalize and streamline private sector regulation. These initiatives include increasing corporate tax and, in the case of Oman, implementing new taxes on smaller businesses and rules on registering existing businesses. There are also changes underway on border tax regimes, including raising tariffs on imported goods.
Source: International Monetary Fund
As a burgeoning global trend, especially evident in the economic ideology of the administration of U.S. President Donald J. Trump, economic nationalism is also surging in the Gulf. Each GCC state is competing with its neighbors to create a more attractive business environment for foreign investment and squeeze as much revenue as possible from new and existing fee and tax structures. A casualty of these tax reforms could be a weakening of GCC economic integration, especially on agreed upon common tariffs. The GCC secretariat, meanwhile, is interested in ways to streamline the bedrock of foreign investment rules in the region, the agent structure, which each GCC state uses to regulate how foreign businesses must partner with local citizens or entities to create domestic businesses such as retail and restaurant franchises and distributors of consumer products. One complication of the agent structure is the disincentive for intra-GCC trade, as each state seeks to award a franchise or distributor role to its citizens. Finding common ground on tax and tariff policies that directly impact job creation, citizen income, and state revenue is becoming more complex. In effect, while the great economic reform momentum sweeping across the GCC is necessary for shared diversification goals, it also pits states against each other in putting their domestic economic agenda before integration efforts.
The GCC Unified Customs Law is designed to assess equal duties or tax on items entering any member state, and then eliminate any further tax if a good is exported from its first GCC entry point to a second member state. The general rule is a 5% tariff rate, though each GCC state has been able to exclude goods from the rule. The GCC Free Trade Agreement allows duty free transfer of goods produced inside the GCC (as long as the factory is at least 50% owned by a GCC national or entity). The Unified Customs Law came into effect in January 2003, and there have been some benefits for intraregional trade, with a four-fold increase to $100 billion by 2014. The GCC common market, in which citizens (and services) have free movement to travel without visas or tax, came into effect in January 2008. Oil exports continue to dominate GCC trade patterns, dwarfing intraregional trade at $1.6 trillion in 2014, at the height of the last oil price boom.
For Gulf governments, after the hard won negotiations over the customs law and common market over the last decade, there is again temptation to increase tariffs on imports, as a means of revenue generation and to encourage domestic production. Saudi Arabia has struggled with this aspect of GCC economic integration, with import tariffs of as much as 20% in place as late as 2012 on hundreds of items, including matches, plastic bags, textiles and tents, all designed to protect local manufacturing. Those tariffs were lowered as part of a series of GCC negotiations, but as of 1 January, many are back in effect. Some of the new tariff increases are part of expiring government subsidy programs, in which the government subsidized its own import duties, in effect charging the importer but then “covering” the extra cost to consumers on a number of food and beverage products, chemicals, and consumer products. Now, consumers (citizens and foreign residents) will see and pay these costs. Perhaps more importantly, Saudi Arabia is more directly contradicting the GCC Unified Customs Law in its efforts to reduce government spending.
Another area of potential conflict in economic integration efforts will be coordination on monetary and fiscal policy. The monetary union of the GCC is off schedule, but included in past deliberations were terms on fiscal policy to which the GCC states may now find difficult to adhere, or broach again. These included:
-National debt should not exceed 60% of a given state’s gross domestic product.
-The national budget deficit should not exceed 3% of a state’s GDP.
-National inflation should not exceed 1.5% of the average inflation of all member states combined.
-Long-term interest rates should not exceed 2% of the average interest rates of all the GCC member states combined.
The current economic reform agenda, and fiscal crisis affecting the GCC states, will not permit states to meet these shared goals, which a few years ago seemed reasonable as debt to GDP levels were very low and inflation not a very real concern. Now debt issuance is the method of choice for financing deficits and continued government spending. The impact of this debt cycle will vary across the GCC, as some states will be better positioned than others to service the debt and find alternative means of revenue streams through diversification efforts that stimulate private sector growth, sell-offs of state assets, and a willingness to tax. How domestic economies respond, especially to rising costs of utilities, consumer products, and even construction and manufacturing materials, will create different levels and kinds of inflation, or rises in cost of living. Inflation has also varied considerably between 2014 and 2016, as countries have adjusted to changes in government revenue and spending patterns.
For citizens and smaller businesses, there are some important changes underway across the Gulf. There is some misperception that the so-called rentier states of the Gulf are tax free. They are not; and in the current fiscal environment they are on a course (with the full support of the International Monetary Fund) to implement tax and business regulation that will affect every worker and employer. Corporate taxes across the GCC are heavy on oil and gas companies. New corporate taxes in Oman at 15% for large (non-oil) businesses are in line with existing tax rates in Qatar and Kuwait. New municipal taxes on rental properties in Abu Dhabi are evidence of the preference to tax noncitizens first. There are also some potential challenges in the shared collection of tax and dispersal of tax revenue within the United Arab Emirate’s federal structure. The Omani rules to also register small businesses with a tax identification card indicate an improved effort at regulation, which could make additional tax collection easier down the road should the relatively low rate of 3% increase.
The prioritization of fiscal policy that can generate new sources of revenue is understandable and commendable for the breadth of changes moving forward across the GCC. What may be lost is the decade of efforts in economic integration and negotiations to make the GCC work as a common market, with complementary assets. The tradition of competition among the Gulf states in their free zones, as well as port and airline hubs, speak to shared diversification strategies. Strategies of cost saving now are equally competitive and similar in nature, but they may also create missed opportunities in intraregional trade. For most of the GCC states, and most notably Saudi Arabia, the economic reform and diversification agenda takes precedence over regional integration. Meaningful regional integration could be on hold until domestic economies are on a more stable non-oil growth trajectory.
Market Watch is a blog conceived by AGSIW Senior Resident Scholar Karen E. Young seeking to provide insights from the crossroads of Gulf politics and finance. (AGSIW 13.03)
11.7 OMAN: The Middle East’s Most Surprising Country
Daniel Pipes posted in the Washington Times on 15 March about Oman.
Islam has three main branches: Sunni (about 90% of all Muslims), Shiite (about 9%) and Ibadi (about 0.2%). Oman has the only Ibadi-majority population in the world. Being a tiny minority in the larger Muslim context, rulers of Oman have historically kept away from Middle Eastern issues. Part of the country was isolated mountainous desert terrain, part was focused on the seas, especially on India and on East Africa. For two centuries, the Omani empire competed with the Europeans for control of the Indian Ocean; indeed, Oman ruled the African island of Zanzibar until 1964, making it the only non-European state to control African territory.
This unique remoteness from Middle Eastern problems, whether it be the Arab-Israeli conflict or Iranian expansionism, remains in place. At present, with a civil war raging in next-door Yemen and Iran making trouble right by Oman’s Musandam Peninsula, which juts out into the super-strategic Straits of Hormuz, Oman is an oasis of calm. Jihadism has so far been non-existent, with no acts of violence in Oman and no Omanis joining ISIS.
The bifurcated desert-sea nature of Oman has induced a tension between cosmopolitan worldliness and insularity. The ruler from 1932 to 1970, Said bin Taimur, went to school in India and Iraq, then visited Franklin D. Roosevelt in Washington; he also educated his son Qaboos bin Said abroad. Despite this, Said kept Omanis isolated from the outside world, squirreled away oil revenues and perversely thought isolation and backwardness would assure his continued rule. Symbolic of Oman’s standing in 1970, it had a grand total of 2 electricity generators, 2 hospitals, 3 private schools and 6 miles of paved roads. Slavery was legal; smoking in the streets was not. Not a single newspaper or movie house existed. As one visitor put it, “the clock of history was stopped somewhere in the Middle Ages.”
It turns out that poverty and ignorance did not assure his continued rule. In July 1970, the 30-year-old Qaboos overthrew his father in a palace coup d’état; 47 years later, Qaboos remains Oman’s absolute ruler. He turned out to be a relentless modernizer who personally oversaw the building of the country, from oil refineries to an opera house. About a million barrels a day of petroleum sustains the economy without overwhelming it; two and half million Omanis employ about two million expatriates, largely from South Asia.
A once-closed country is now easy of access; $13 buys a visa at the airport and Oman’s natural beauty has made it a destination for high-end Western sun-lovers and eco-tourists. It’s become so chic, Lonely Planet in 2012 listed the capital Muscat as the second “best in travel” city in the world.
As a result, the country has largely caught up, boasting electricity in the most remote villages, an extensive network of excellent highways, 91% literacy, a network of colleges, and the Royal Oman Symphony Orchestra.
A benevolent dictator, Qaboos dominates the country in ways alien to a Westerner. He serves simultaneously as prime minister, minister of defense, foreign affairs and finance, as well as supreme commander of the armed forces and police. Nor is that all: as the Economist has noted, on an average day a resident of Muscat “is likely to drive down Sultan Qaboos road, pass Sultan Qaboos Grand Mosque and perhaps Sultan Qaboos port, too. He or she may be a graduate of Sultan Qaboos University and watch a football match at the Sultan Qaboos sports complex before heading home to a house in Madinat Sultan Qaboos, a neighborhood of the city.”
The Arab insurgency that began in 2011 reached Oman but, as in the case of most of the monarchies, was easily handled with some extra spending.
March 3 saw the country’s biggest news in decades: the 76-year-old Qaboos, sick, frail, and childless, appointed a cousin, Asaad bin Tariq, as deputy prime minister, a step widely interpreted as indicating his choice for successor. After years of speculation, this designation; with luck, will stave off lurking instability.
As a democrat, I rue absolute monarchies. As a Middle East analyst, however, I acknowledge that monarchies govern far better than the region’s alternatives, mainly ideologues and military officers. I therefore join many Omanis in hoping for a smooth transition that keeps the country deftly out of harm’s way.
Mr. Pipes (@DanielPipes) is president of the Middle East Forum. (Daniel Pipes 15.03)
11.8 EGYPT: Egypt Economic Report – 2017
Bank Audi’s just issued Egypt Economic Report – 2017 stated that amid the spillover effects of wide macroeconomic pressures and the prospects of an ambitious adjustment program, it has been a mixed year for the overall Egyptian economy, which is facing both opportunities and challenges. The country is going through large structural reforms which are set to secure sound growth in the economy in the medium term. However, such reforms carry intermediate costs, mainly at the level of monetary and exchange pressures that add to geopolitical and security threats with considerable burden on the real sectors of the economy. The Egyptian economy reported a real GDP growth of 3.8% in 2016, slightly lower than the 4.2% registered in the previous year, but still outpacing overall population growth. The real sector slowdown comes within the context of shrinking foreign demand amid lower touristic receipts and financial inflows, while domestic demand continues to grow satisfactorily.
Widening current account deficit despite contracting trade deficit: Although the pressures on Egypt’s trade deficit lessened last year, the current account deficit widened by 30.3% during the first nine months of 2016 relative to the same period of 2015. The rise in current account deficit was mainly attributed to a significant drop in services balance by 48.3%, on the back of a decline in tourism receipts by 64.2% due to an overall decelerated tourism activity. In addition, current transfers declined by 16.1% as a result of a 15.7% drop in remittances from Egyptian workers abroad to their homeland. As a percentage of GDP, the current account deficit widened from 3.6% in FY 2015 to 5.9% in FY 2016.
Fiscal reforms to materialize into declining public finance deficit: There are signs that the government will consolidate its austerity drive in the current fiscal year. As such, the FY 2017 budget registers ambitious target, the government targeting to collect LE 670 billion of revenues, mainly driven by the impact of higher real GDP growth rates on tax revenue. Public expenditures are expected to reach LE 975 billion in FY 2017, on the back of an expected further rise in interest payments. Accordingly, the fiscal deficit is expected to decrease both in absolute terms and as a percentage of GDP in FY 2017, as it is expected to reach LE 319.5 billion (a decline of 6.0%), and consequently to narrow from 12.3% of GDP in FY 2016 to 9.8% of GDP in FY 2017.
Shift to floating exchange rate regime dictates further monetary policy tightening: The fiscal year 2017 witnessed the historical shift from a fixed exchange rate regime to a flexible one, in a move aimed at removing the significant overvaluation of the Egyptian Pound and rebuilding international reserves, while pursuing an extended monetary tightening policy in order to anchor inflation expectations and contain domestic and external demand pressures. The CBE’s gross official reserves grew by a significant 38.1% during the first half of FY 2017 to reach $24.3 billion at end-December 2016, and extended their upward trajectory to reach $26.4 billion at end-January 2017, their highest level since the eruption of Egypt’s first revolution in January 2011.
Steady banking activity growth along with improving asset quality: The banking sector has weathered well the repercussions of the political and security situation the country witnessed in the last few years. A 26.1% growth in bank assets was recorded in the first ten months of 2016 (+11.1% in US dollar terms) to reach the equivalent of $352 billion at end-October. Total deposits rose by 16.2% in the same period to reach the equivalent of around $250 billion at end-October. Credit facilities surged by 24.0% between December 2015 and October 2016 to reach the equivalent of $110 billion. Banks’ asset quality has improved as well, with the stock of non-performing loans declining to reach 5.9% of total loans as at end-September 2016 (6.8% at end-2015), somewhat in line with international averages.
Adjustment program real opportunity for Egypt looking ahead: The adjustment program followed by Egypt is attempting to tackle three interlinked problems, namely an urgent balance of payments problem, rising public debt and the long term issue of low growth and high unemployment. While domestic and external risks do exist, the program is an opportunity in the meaning that Egypt is apt to move in a new economic direction that will put an end to the economic turbulence of the post-revolution period within the context of the targeted restoration of macroeconomic stability at large. (Bank Audi 08.03)
11.9 TUNISIA: Bond Bolsters Tunisia Liquidity as IMF Delay Shows Risks
The postponed disbursement following an IMF program review highlights reform implementation challenges faced by Tunisia’s government, Fitch Ratings said on 10 March. Near term financing risks have been mitigated by the €850 million bond market issuance in February, further reform delays could increase uncertainty around Tunisia’s financing outlook.
A disbursement under Tunisia’s May 2016 IMF program, equivalent to around $320 million, was due following a program review in November. But the Tunisian authorities have confirmed that the payment was postponed because of delays in a number of areas, including civil service and tax reform. Political opposition in 2016 resulted in the withdrawal of a freeze on public sector wages in the proposed 2017 budget. We now expect the wage bill to be near 15% of GDP by year-end.
The Tunisian authorities have since committed to a voluntary redundancy scheme for civil servants, which the government hopes will remove at least 10,000 employees from the public payroll by 2020. The government is also considering share sales, including in the state-owned banks. A successful review following the IMF’s next visit, expected by the government by the end of March, would result in a disbursement before end-H1/17.
We project a deficit of around 6% for this year, following a 2016 general government deficit we estimate at 6.4% of GDP. We think Tunisia needs to borrow the equivalent of 7% of GDP in foreign currency to meet its 2017 budget and amortization needs. Domestically, we estimate Tunisia will borrow the equivalent of 2.8% of GDP.
The €850 million market issuance last month eases foreign financing needs in the short term. The seven-year Eurobond was priced to yield 5.75%, and represented Tunisia’s first standalone market issuance in over two years. We estimate that net proceeds of €842 million would cover around 60% of 2017 foreign-currency principal amortization and interest payments. This estimate assumes a loan extension from Qatar on $500 million due in April, in line with an agreement with the Qatari authorities.
Tunisia is mainly relying on multilateral funding to cover the remaining financing gap, including from the IMF (around $640 million), World Bank (around $500 million), African Development Bank (around $300 million), and European Union (€500 million). Fitch expects multilateral lenders to remain committed to Tunisia’s ongoing transition. But as the IMF delay shows, financing risks related to disbursement delays (due to non-compliance) cannot be ruled out. This would leave Tunisia reliant on less predictable or more expensive market financing.
Fitch downgraded Tunisia to ‘B+’ from ‘BB-‘ in February due to weaker economic growth performance and prospects in the context of heightened security risks, and the spill-overs to external and public finances. Improvements to the country’s security apparatus could contribute to a normalization of economic conditions. GDP grew by 1.2% in 2016, with Fitch projecting an acceleration to around 2.5% over the next two years, reflecting higher private consumption and a projected pick-up in investments that will be aided by the adoption of a new investment law in September 2016, and the positive momentum generated in last year’s “Tunisia 2020” conference. (Fitch 10.03)
11.10 ALGERIA: IMF Staff Completes 2017 Article IV Mission to Algeria
An International Monetary Fund (IMF) staff team visited Algiers from 7 to 20 March to hold discussions for the 2017 Article IV consultation. Discussions focused on the appropriate mix of policies to adjust to lower oil prices. At the conclusion of the mission, the IMF made the following statement:
“Algeria continues to face important challenges posed by lower oil prices. Overall economic activity was resilient, but growth in the nonhydrocarbon sector slowed under the effects of spending cuts and is estimated at 3.4% in 2016. Inflation increased from 4.8% in 2015 to 6.4% in 2016 and stood at 8.1% year-on-year in January 2017. Unemployment increased to 10.5% in September 2016 and remains particularly high among the youth (26.7%) and women (20.1%). Despite some fiscal consolidation in 2016, the fiscal and current account deficits remained large, and public debt increased. International reserves, while still ample, fell by $30 billion to $113 billion (excluding SDRs).
“Efforts to adjust to the oil price shock are underway. The authorities achieved a notable reduction in the fiscal deficit in 2016 and have adopted an ambitious fiscal consolidation plan for 2017-19. They made progress improving the business environment and are working on a long-term strategy to reshape the country’s growth model to foster greater private sector activity and economic diversification. The central bank is adapting its monetary policy instruments to a tighter liquidity environment. This growing reform momentum is welcome.
“A key challenge at this juncture is choosing a policy mix that will help the economy adjust to the oil price shock in a way that is sustainable and the least costly in terms of growth and employment.
“Fiscal consolidation will need to be sustained as oil prices are expected to remain low and hydrocarbon reserves are exhaustible. At this stage, the consolidation should rely primarily on broadening the tax base, including through better tax enforcement and the rationalization of tax exemptions; containing current spending; gradually replacing costly energy subsidies, which mostly benefit the well-off, by direct support to the population most in need; and improving the efficiency of capital spending and reducing its cost. Investment in health, education, and well-targeted social safety nets should be preserved. These efforts should be supported by further strengthening the budget framework and closely monitoring growing fiscal risks.
“Too abrupt a fiscal deficit reduction, however, should be avoided to reduce the risk of a sharp slowdown in growth. In the mission’s view, given the relatively low level of public debt, Algeria could afford a somewhat more gradual fiscal consolidation than entailed in the current medium-term budget framework if it were to consider a broader range of financing options, including external borrowing and the sale of state assets.
“The mission strongly supports the authorities’ objective to decrease the economy’s dependence on hydrocarbons and unleash the potential of the private sector. This is not only needed to adjust to lower oil prices but also to ensure a sustainable source of job creation even beyond the horizon for proven oil and gas reserves. Achieving this goal will require wide-ranging structural reforms. Measures are needed to improve the business environment and access to finance, strengthen governance and transparency, make the labor market more effective, ensure that skills produced by the education system and sought by students match the needs of employers, foster greater female participation in the labor market, and further open the economy to foreign investment. The overall strategy should be designed and sequenced so that reforms reinforce each other and the burden of economic adjustment is shared equitably. Action should be timely as structural reforms take time to bear fruit.
“Exchange rate, monetary, and financial policies should support the adjustment. Further efforts to bring the dinar in line with fundamentals, combined with steps toward the elimination of the parallel foreign exchange market, would support fiscal and external adjustment. The Bank of Algeria is appropriately introducing open market operations, which should become its main monetary policy tool. The Bank of Algeria will need to stand ready to tighten monetary policy in light of growing inflationary pressures. Based on preliminary data, the banking sector as a whole remains adequately capitalized and profitable, but the oil price shock has increased liquidity, interest rate, and credit risks. It is therefore important to accelerate the transition to a risk-based supervisory framework, enhance the role of macro-prudential policy, strengthen the governance of public banks, and develop a crisis resolution framework.
“The IMF team met with Finance Minister Hadji Baba Ammi; Industry and Mines Minister Abdessalem Bouchouareb; Acting Trade Minister and Housing and Urban Development Minister Abdelmadjid Tebboune; Education Minister Nouria Benghebrit; Labor, Employment, and Social Security Minister Mohamed El Ghazi and the Governor of the Bank of Algeria, Mohamed Loukal. The mission also held discussions with other senior government and central bank officials as well as with representatives of the economic and financial sectors and civil society. (IMF 20.03)
11.11 TURKEY: What Does Double-Digit Inflation Mean for Turkey?
Mustafa Sonmez posted on 13 March in Al-Monitor that the accelerating pace of Turkey’s inflation threatens significant erosion in most forms of income on which the country’s population lives.
Turkish consumer inflation has exceeded 10%, climbing back to double digits after 58 months. The factors pushing prices up are unlikely to subside in the coming months, meaning that a double-digit overall inflation at the end of the year is now a strong prospect for the country.
The Consumer Price Index, which denotes the change in the prices of goods and services that consumers buy, was up 10.1% year on year in February. The increase was higher in some categories and lower in others. In food and housing, which account for 24% and 15% of the consumer basket, respectively, the increase stood at 8.7% and 7.4%. Meanwhile, in the transport and tobacco-alcohol categories, which make up 14% and about 6% of household budgets, respectively, inflation stood at 18% and nearly 22%.
When it comes to the Domestic Produce Price Index, which covers the industrial, mining and energy products that producers sell, the year-on-year price increase exceeded 15%. This is, in fact, the main indicator that consumer inflation is unlikely to climb down from double-digit figures throughout 2017. With producers having hiked their prices 15%, the impact on consumers in the coming months is simply inevitable.
The inflation in certain goods in the producer basket is even more striking. In the textile category, which accounts for about 9% of the basket, the year-on-year price increase was close to 18%. In iron, steel and other metals, it stood at a staggering 44%. Here, the global rise in the prices of ore, scrap iron and coke was, no doubt, influential. On top of it came the Turkish lira’s dramatic depreciation, which meant that importing those goods became much more expensive for Turkish producers, leading to a fast increase in their prices. Electricity and natural gas prices, meanwhile, were kept in check, and even lowered some 6%. In categories such as domestic appliances, electronic goods, chemicals and machinery, which rely the most on imported inputs, the year-on-year price hikes ranged between 16% and 21%. The government had introduced tax cuts for the domestic appliances and furniture sectors, singling them out as the most hard-pressed, but even those measures failed to keep the price increases at single-digit figures.
The fast appreciation of the dollar is the main factor pushing up inflation to double-digit figures for both producers and consumers in Turkey. The renewed uptrend in the global prices of oil and other commodities is another important contributor. In a 6 March assessment of consumer inflation, the Central Bank said, “Annual food inflation maintained its uptrend, and the effects of the exchange rate spilled over into the whole, particularly the core goods and energy groups. Despite temporary tax reductions, the core goods inflation that soared amid the cumulative effects of the depreciation in the Turkish lira pushed both the annual inflation and the underlying trend of core indicators upward.”
With respect to the 15% increase in producer prices, the Central Bank emphasized external factors, namely the exchange rate and international commodity prices. “Annual inflation reached 17.18% in the manufacturing industry and 11.92% in the manufacturing industry excluding petroleum and base metals,” it said. “The seasonally adjusted underlying trend of manufacturing industry prices excluding petroleum and base metals maintained its high level.”
The period from September 2016 to February 2017 is particularly telling in terms of how hard currency prices and inflation grew. The dollar rose 24% against the Turkish lira in said period, outstripping the increases in domestic producer and consumer prices, which stood at 11.5% and 7%, respectively.
It is a widely held view that the Turkish lira will continue to depreciate under the impact of rate hikes by the US Federal Reserve, expected throughout the year, and Turkey’s high-risk premium, which is unlikely to ease. This alone is a strong harbinger of a sustained double-digit inflation throughout the year, fueled by continuing cost inflation.
How do the price increases affect profits, interest rates and wages? Or, put differently, are the increases in these categories able to match the inflation? Who are the winners and the losers?
More than 20% of Turkey’s population lives on agriculture. The annual increase in agricultural prices stood at 7.5%, well below both the producer and consumer inflation. This means that the agricultural sector was on the losing side overall. Price increases were higher than the average in certain industrial crops such as pulses, sunflower and cotton, as well as meat and milk. In some categories, however, the prices rose less than the average and even decreased. Vegetable producers, who saw their exports to Russia shrink, took the heaviest blow. The price increases in wheat, olives and hazelnuts were less than 10%, meaning that their producers, too, ended up with less income in real terms.
In the financial sector, the yields on bank deposits and government bonds barely matched the consumer inflation, while those who kept their savings in dollars and euros profited 14% and 11.5%, respectively, at the end of 2016. Similarly, those who put their money in gold profited 24% in real terms.
When it comes to wage earners, they represent 70% of working people in Turkey, numbering 16 million. Some 60% of them are minimum wage earners. The annual hike for the minimum wage was planned at 8% in the beginning of the year, following a 30% hike last year, a promise made in the 2015 elections. This means the increase in the minimum wage — 1,404 Turkish lira ($375) at present — will fall behind the double-digit inflation expected at the end of the year.
Public servants, meanwhile, number about 3 million and earn TL 2,700 ($720) on average. The government decides pay raises twice a year in line with its inflation target. The hike for the first half of the year has been set at 3%. Unless the second-half hike in July is a double-digit one, public servants, too, will be on the losing side against inflation. Things stand more or less the same for more than 10 million retirees, whose pensions range between $400 and $500. (Al-Monitor 13.03)
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