Fortnightly, 23 August 2017

Fortnightly, 23 August 2017

August 24, 2017


23 August 2017
1 Elul 5777
1 Dhul Hijjah 1438




1.1  Knesset Committee Approves Universal Binary Options Ban


2.1  Netafim Sold for $1.5 Billion to Mexichem
2.2  Intel Completes Tender Offer for Mobileye
2.3  Fiat Chrysler to Join BMW, Intel & Mobileye in Developing Autonomous Driving Platform
2.4  Decathlon to Open First Israeli store
2.5  Signals Analytics Raises $25 Million in Series C Funding Led By Pitango Growth
2.6  Oryx Vision Raises $50 Million to Build Coherent LiDAR for Autonomous Vehicles
2.7  Renault-Nissan to Open Israel Smart Car Incubator
2.8  Ituran to Expand Into the Indian Market
2.9  Camtek and Sun Chemical Establish a Strategic Cooperation
2.10  Fifth Acquisition for Frutarom in 2017 – UK Company Flavours & Essences
2.11  Overwolf Acquires, Making its First Step into Mobile
2.12  CommonSense Robotics Raises $6 Million
2.13  MedAware Raises $8 Million in Series A Funding to Eradicate Catastrophic Prescription Errors
2.14  RescueDose Raises $2.5 Million
2.15  RADA Receives First Breakthrough and Strategic $8 Million Order for US Military
2.16  Amenity Analytics Raises $7.6 Million
2.17  Spaceek Raises $1.4 Million


3.1  Hikma Announces Expanded Licensing Agreement with Takeda for New Products in MENA
3.2  Abu Dhabi Investment Group Acquires Fiber Prime Telecommunications
3.3  Esri and Smart Dubai Sign Enterprise Agreement
3.4  Packers Plus and BP Oman Achieve Unprecedented Operational Efficiencies in HPHT Wells
3.5  Havelsan Signs Contract to Supply Qatar With Joint Warfare Center


4.1  Yellow Door Energy & Elcome Agree to Begin Installation of a 311 kWp Rooftop Solar PV Plant
4.2  Energy Recovery Awarded $2.5 Million for Desalination Projects in Saudi Arabia
4.3  Morocco Recorded Highs in Solar Power Production on 7 – 8 August


5.1  Lebanon’s Annual Trade Deficit Down by 0.92% in 2017’s First Half
5.2  Lebanon’s Average Inflation Rose by 2.92% Annually by July 2017
5.3  Lebanon’s Gross Public Debt Reaches $76.46 Billion in June 2017
5.4  Transportation, Rent & Education Costs Drive Jordan’s Inflation Rate Up by 1.8%
5.5  Jordan Falls to Lower Category of Middle-Income Countries
5.6  Jordan 84th in Mobile Data Speed Worldwide, 90th in Fixed Line Internet
5.7  Debt to Income per Capita Rate in Jordan Stands at 69%
5.8  Jordan & Japan Sign $12.6 Million Grant to Renovate Balqa Water Network

♦♦Arabian Gulf

5.9  Abu Dhabi GDP to Grow by 2.9% During 2018

♦♦North Africa

5.10  Egypt’s Urban Inflation Climbs to Highest Level in Decades in July
5.11  Egypt’s Budget Deficit Drops to 10.9% in 2016/17
5.12  Egypt Enacts Law to Allow Private Gas Imports


6.1  Turkish Unemployment Rate Falls to 10.2% in May
6.2  Turkey Begins Prototype Development of First Indigenous Satellite TÜRKSAT-6A
6.3  Fitch Upgrades Greece as Political Risk Eases
6.4  Greek First Half Government Budget Surplus Beats Target on Lower Spending
6.5  Greek Unemployment Eases to 21.7% in May, Though Still Eurozone’s Highest
6.6  Turnover of e-Commerce in Greece on the Rise



7.1  IDF Names Druze as Chief Medical Officer


7.2  Lebanon Abolishes ‘Marry Your Rapist’ Law, Joining Other Arab States
7.3  Saudi Arabia Approves Four Decisions in 10 Days to ‘Boost Women’s Rights’
7.4  One-Fifth of Moroccan Population Aged 15 – 24


8.1  Can-Fite Successfully Completes Human Cardiodynamic Safety Trial for Piclidenoson
8.2  The ApiFix Spinal Implant Receives TGA Certification
8.3  BiondVax Receives Additional Government Funding
8.4  Expanding Orthopedics Granted Two Additional US Patents in the Expandable Interbody Domain
8.5  Teva Announces Exclusive Launch of Generic Axiron in the United States
8.6  DarioHealth Raises $4.28 Million Through Private Placement Offerings
8.7  TechCare Receives CE Mark Approval for Novokid Lice Treatment Device


9.1  Weizmann Institute Ranks 6th on Nature Innovation Index
9.2  Cellebrite Launches Tool for Forensically Sound Extraction of Public Domain Social Media Data
9.3  Mellanox Announces Availability of BlueField Storage Solutions that Accelerates NVMe over Fabrics
9.4  Orbotech Wins $40 Million Worth of Orders from China’s CEC Panda for New Gen 8.6 LCD Fab
9.5  Dronomy’s SiteAware Integrates with PlanGrid for Better Job Site Intelligence
9.6  Shopicks Rebrands its Fast-Growing Shopping Platform as Thinkover
9.7  Orbit to Expand Multi-Purpose Airborne Satcom Terminal Development to Include Helicopters
9.8  affiliaXe Doubles Growth in Online Sales by Bolstering eCommerce Boom
9.9  Delphi Partners with Innoviz for High-Performance LiDAR Solutions for Autonomous Vehicles
9.10  GuardiCore Honored as Gold Winner in Deception Based Security in 2017 Golden Bridge Awards
9.11  Foresight Completes a Successful System Demonstration with Uniti Sweden


10.1  Israel’s CPI Unexpectedly Fell in July, Home Prices Rising
10.2  Israeli Economy Grew By 2.7% During Second Quarter
10.3  Israel’s National Expenditure on Education Rises by 5% in 2016
10.4  Israel’s Unemployment Rate Falls to New Low of 4.1%
10.5  Israel’s 2016 Budget Deficit Lowest Since 2008
10.6  Israeli Prices Far Higher Than OECD Average
10.7  Israelis’ Tax Debts Are Rising
10.8  Survey Finds Israel’s Gasoline Prices 3rd Highest in the World
10.9  Israel’s Gas Royalty Revenue Down Slightly in First Half 2017


11.1  ISRAEL: Outlook Revised to Positive on Economic Growth Momentum; ‘A+/A-1’ Ratings Affirmed
11.2  LEBANON: No Room for Optimism or Pessimism in an Economy Governed by Cyclicality
11.3  IRAQ: IMF Executive Board Concludes 2017 Article IV Consultation with Iraq
11.4  IRAQ: Iraq & Saudi Arabia to Reopen Border Crossings After 27 Years
11.5  GCC: Self-Imposed Barriers to Economic Integration in the GCC
11.6  KUWAIT: State of Kuwait Ratings Affirmed At ‘AA/A-1+’; Outlook Stable
11.7  BAHRAIN: IMF Executive Board Concludes 2017 Article IV Consultations
11.8  EGYPT: Moody’s Affirms Egypt’s B3 Rating; Maintains Stable Outlook
11.9  EGYPT: Two is Enough – A Fix for Egypt’s Overpopulation
11.10  TUNISIA: Moody’s Downgrades Tunisia’s Rating to B1, Maintains Negative Outlook
11.11  GREECE: Fitch Upgrades Greece to ‘B-‘ from ‘CCC’; Outlook Positive


1.1  Knesset Committee Approves Universal Binary Options Ban

On 7 August, the Knesset Reforms Committee approved a bill submitted by the Ministry of Finance and the Israel Securities Authority (ISA) amending the Securities Law so as to forbid trading arenas operating from Israel from offering trading in binary options to any customers, whether in Israel or abroad.  The amendment bill will now go to the Knesset plenum for second and third readings and will come into force three months from the day it is published in the Official Gazette.

A binary option is a call or put option which pays out a fixed amount of money if the underlying asset that is the subject of the option reaches a certain level at the time the option expires.  The buyer of the option either receives the fixed amount or nothing.  The binary options industry has gradually been exposed in the past few years and what came to light alarmed the ISA.  The scandals include confessions of former workers in this area of their working practices, such as being paid monthly salaries of tens and even hundreds of thousands of shekels to tempt investors to transfer their money to the companies they worked for, when they knew that the customers would lose all.

As the complaints grew, the ISA campaigned to eliminate the binary options industry and forbade the marketing of such options to customers in Israel.  The closure of the Israeli market, however, led the companies involved to focus on customers outside the country.  Complaints started to pile up at the ISA and with local police forces from foreign investors alleging that they had been swindled out of hundreds of thousands of dollars or euros that were transferred to Israeli companies and disappeared.

The new bill gives the ISA certain enforcement powers in relation to trading arenas that operate from Israel but target only customers outside of Israel.  It forbids such arenas to offer overseas customers trading in binary options, and states that to do so will be considered a source offense under the Prohibition of Money Laundering Law.  This is because of the criminal characteristics that tend to be associated with such trading.  (Globes 07.08)

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2.1  Netafim Sold for $1.5 Billion to Mexichem

On 7 August, Mexican manufacturer Mexichem announced that it has reached an agreement to acquire an 80% stake in Israel’s iconic drip irrigation company, Netafim, from the private equity fund Permira Funds and other minority shareholders.  Kibbutz Hatzerim, Netafim’s founder, will retain the remaining 20% stake of the company’s share capital.  The deal values Netafim at $1.895 billion.  Primera Funds acquired its 61.35% stake in Netafim in 2011 at a valuation of $850 million and will receive $1.5 billion from Mexichem, giving it a return of almost 100% in just six years.

Mexichem, which specializes in plastics, chemicals and petrochemicals, had a turnover last year of $5.4 billion.  Under the deal, the two firms agreed to maintain Netafim’s base of operations, production, research and development facilities in Israel for at least 20 years.

Netafim is the world’s largest irrigation company with total sales of $855 million in 2016.  The company pioneered drip irrigation in the 1960s and today holds some 30% of the global market with 17 manufacturing plants, more than 4,000 employees and sales in more than 110 countries worldwide.  Among Hatzerim’s other holdings are Jojoba Israel, which produces Jojoba oil for the cosmetics industry and Negev Ecology, a waste management and recycling company.  (Mexichem 07.08)

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2.2  Intel Completes Tender Offer for Mobileye

Intel Corporation and Mobileye announced the completion of Intel’s tender offer for outstanding ordinary shares of 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.  The acquisition is expected to accelerate innovation for the automotive industry and positions Intel as a leading technology provider in the fast-growing market for highly and fully autonomous vehicles.  The combination of Intel and Mobileye will allow Mobileye’s leading computer vision expertise (the “eyes”) to complement Intel’s high-performance computing and connectivity expertise (the “brains”) to create automated driving solutions from cloud to car.  Intel estimates the vehicle systems, data and services market opportunity to be up to $70 billion by 2030.

Intel’s Automated Driving Group (ADG) will combine its operations with Mobileye, an Intel Company.  The combined Mobileye organization will lead Intel’s autonomous driving efforts, and will have the full support of Intel resources and technology to define and deliver cloud-to-car solutions for the automotive market segment.  Mobileye will remain headquartered in Israel and led by Prof. Amnon Shashua who will serve as Intel senior vice president and Mobileye CEO and chief technology officer.

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.  Mobileye’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.  Mobileye’s proprietary software algorithms and EyeQ chips perform detailed interpretations of the visual field in order to anticipate possible collisions with other vehicles, pedestrians, cyclists, animals, debris and other obstacles.  (Intel 08.08)

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2.3  Fiat Chrysler to Join BMW, Intel & Mobileye in Developing Autonomous Driving Platform

BMW Group, Intel and Mobileye announced they have signed a memorandum of understanding with the intention for Fiat Chrysler Automobiles (FCA) to be the first automaker to join them in developing a world leading, state-of-the-art autonomous driving platform for global deployment.  The development partners intend to leverage each other’s individual strengths, capabilities and resources to enhance the platform’s technology, increase development efficiency and reduce time to market.  One enabler to achieve this will be the co-location of engineers in Germany as well as other locations.  FCA will bring engineering and other technical resources and expertise to the cooperation, as well as its significant sales volumes, geographic reach and long-time experience in North America.

In July 2016, BMW Group, Intel, and Mobileye announced that they were joining forces to make self-driving vehicles a reality by collaborating to bring solutions for highly automated driving (Level 3) and fully automated driving (Level 4/5) into production by 2021.  Since then, they have been designing and developing a scalable architecture that can be used by multiple automakers around the world, while at the same time maintaining each automaker’s unique brand identities.  The cooperation remains on-track to deploy 40 autonomous test vehicles on the road by 2017 year-end.  It also expects to benefit from leveraging data and learnings from the recently announced 100 Level 4 test vehicle fleet of Mobileye, an Intel Company, demonstrating the scale effect of this collaborative approach.

Jerusalem’s Mobileye, an Intel Company 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.  Their 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.  Mobileye’s products are also able to detect roadway markings such as lanes, road boundaries, barriers and similar items; identify and read traffic signs, directional signs and traffic lights; create a RoadBook of localized drivable paths and visual landmarks using REM; and provide mapping for autonomous driving.  (Mobileye 16.08)

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2.4  Decathlon to Open First Israeli store

French sports chain Decathlon will open its first store in Israel on 29 August in the G center in Rishon LeZion.  The 3,000-square meter store will have 60 departments in various sports categories.  Founded in France in 1976, Decathlon expanded to Germany and other countries a decade later.  One of the world’s largest sports chains, Decathlon currently has 78,000 employees in 1,221 stores in 32 countries worldwide.  The company finished 2016 with a €10 billion sales turnover.  Its sales grew 50% in 2006-2010.

What is special about the chain is that its stores cover thousands of square meters, while its prices are competitive.  It sells an especially broad selection of products, including sports shoes and fashion and sports equipment in every branch of sports, among them tennis, diving equipment, and even food supplements for athletes.  The chain also has private brands Toboggan and Decat, which offer products at discount prices.  Decathlon’s attempt in 1999 to enter the US market was unsuccessful and the company shut down its business there after seven years.

Decathlon’s entry into the Israeli market is expected to spark intense competition in the local sports market, which is controlled by a few players, features higher prices than in other Western countries (especially the US), and has an annual turnover of over NIS 2 billion.  Decathlon is the third international sports chain to enter Israel.  The first was Foot Locker, which operates 3,400 stores of 300-400 square meters each in 23 countries.  Foot Locker specializes in sports fashions, and emphasizes fashionable sneakers, rather than professional running shoes.  Foot Locker is slated to open 12 stores in Israel by the end of the year.

Intersport, on the other hand, has 5,400 stores of 500-1,000 square meters each in 43 countries and a sales turnover of over €11 billion, as of 2015.  Intersport plans to open five independent 1,000-square meter stores in Israel, in addition to sports departments in 30 branches of the Hamasbir Lazarchan chain.  (Globes 13.08)

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2.5  Signals Analytics Raises $25 Million in Series C Funding Led By Pitango Growth

Signals Analytics, creators of Signals Playbook, the cloud-based system of insight used by global brands to drive product portfolio optimization, has raised $25 million in Series C funding.  Signals Analytics will utilize the investment to continue its rapid growth and global expansion, as well as further advance its groundbreaking Insights as a Service (IaaS) platform.  The round was led by Pitango Growth with participation by existing investors Sequoia Capital and Qumra Capital.

Co-founded by ex-Israeli military intelligence officers, Signals Analytics utilizes battlefield-tested concepts, processes and technologies to unify disparate data sets, detect signals from the noise and uncover insights that can be acted upon to drive product success.  Armed with a single source of the truth that is fully-aligned with the stages of the product lifecycle, corporate practitioners can easily identify opportunities for growth, profitability and digital transformation.  This disruptive approach provides much needed competitive advantage, enabling business executives to make smarter, quicker commercial decisions than those typically derived by using conventional data analytics tools, business consultants or market research firms.

Netanya’s Signals Analytics enables global brands to continuously experience the “aha moment” through Signals Playbook, a cloud-based system of insight that optimizes product portfolio health and propels breakthrough innovation.  Backed by Sequoia Capital, Pitango Venture Capital, Qumra Capital and TPY Capital, Signals Analytics has been dubbed “The App Store for Innovation” by Forbes, was awarded Cool Vendor of 2016 by Gartner and has been honored the past two years as a Deloitte Fast 50 Technology Company.  (Signals Analytics 08.08)

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2.6  Oryx Vision Raises $50 Million to Build Coherent LiDAR for Autonomous Vehicles

Next-Generation automotive LiDAR innovator Oryx Vision announced a $50 million Series B funding round.  Third Point Ventures and WRV led the round, which was joined by Union Tech Ventures and existing investors Bessemer Venture Partners, Maniv Mobility and Trucks VC.  A mere 15 months after its first funding round, this fundraise brings the total investment in Oryx to $67m.  Oryx builds a game-changing automotive LiDAR (Light Detection and Ranging), based on a radically innovative light sensing technology.  A coherent flash system with no moving parts, it achieves the depth vision performance required for autonomous driving – with the simplicity and robustness of a digital camera.

Autonomous vehicles use LiDAR to create a 3D view of their surroundings by sending laser pulses and detecting their returning signals.  Whereas all other LiDARs do that by tracing the energy of light particles with photodetectors, Oryx uses silicon-made microscopic antennas to detect light wave frequencies.  This enables a low-cost system that’s a million times more sensitive, is resistant to interference from the sun and other LiDARs, and produces both range and velocity data for every point in its field of view.  Such high performance, that will be critical for fully autonomous driving, is impossible with existing technologies.

Oryx will use the new funds to accelerate its development activities and to intensify its commercial engagements with car OEMs, tier-1 supplier and technology players.  Having demonstrated the unique capabilities of its technology over the past year, the company expects to ship units for car-mounted testing in the second half of 2018.

Petah Tikva’s Oryx Vision was founded in 2009 and in 2016 the company was renamed Oryx Vision.  Oryx employs an exceptional team of physicists, optical engineers, antenna designers, software developers and signal processing experts.  The Company uses the nanotechnology lab at Bar Ilan University, the alma mater of several of its leading scientists.  (Oryx 08.08)

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2.7  Renault-Nissan to Open Israel Smart Car Incubator

Renault-Nissan will found a technological innovation laboratory in Israel as an incubator for young companies developing smart car and shared transportation technologies.  The automaker, one of the winners in the Israel Innovation Authority’s tender, will establish the incubator in Tel Aviv’s Kiryat Atidim.  Companies selected for the incubator will receive government funding of up to NIS 1 million at the stage of proving feasibility.  The incubator is designed to connect companies having technologies and ideas in the sector with Renault-Nissan, currently the world’s largest automaker.  In addition to close cooperation with the automaker’s international R&D laboratories, the developers will be able to assess and try out their ideas on real vehicles in the field provided by Renault-Nissan.

The Carasso Motors group, which imports Renault-Nissan cars to Israel, is also participating in the venture, which will be managed by a senior R&D and technology executive from the automaker.  Renault-Nissan’s venture is the latest in a series of similar ventures by major auto manufacturers and suppliers of components of to the auto industry in recent years.  Among others, R&D and investment offices of General Motors, Daimler Group, Volvo, Honda and SAIC Motor are now operating in Israel.  (Globes 08.08)

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2.8  Ituran to Expand Into the Indian Market

Ituran Location and Control, together with Lumax Auto Technologies – part of Lumax DK Jain Group, India, announced the signing of joint venture (JV) agreement for sale of telematics products and services to the Indian automotive industry.  The new JV company will be called Lumax Ituran Telematics Pvt., Ltd.  According to the agreement, Lumax Auto Technologies will own 50% of the joint venture, with Ituran owning the remaining 50%.  The JV will tap into this large market, which currently has low penetration of advanced telematics technology.  The JV will sell Ituran’s telematics products and services, adapted to the Indian automotive industry.

Lumax, DK Jain Group a leading player in the Indian Automotive industry is a provider of a wide range of automotive solutions (Lighting Module, Frame Chassis, Integrated Plastic Modules, Gear Shift Lever, Intake systems, Seat Frames & Mechanisms, etc.).  Lumax Auto Technologies, through its wholly owned subsidiaries and joint ventures, has been a manufacturer of wide range of products (Lighting Module, Frame Chassis, Integrated Plastic Modules, Gear Shift Lever, Intake systems, Seat Frames & Mechanisms, etc.).

Azor’s Ituran is a leader in the emerging mobility technology field, providing value-added location-based services, including a full suite of services for the connected-car.  Ituran offers Stolen Vehicle Recovery, fleet management as well as mobile asset location, management & control services for vehicles, cargo and personal security.  Its products and applications are used by customers in over 20 countries.  (Ituran 14.08)

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2.9  Camtek and Sun Chemical Establish a Strategic Cooperation

Camtek has established a strategic cooperation with Sun Chemical, a leading producer of printing inks, coatings and supplies, pigments, polymers, liquid compounds, solid compounds, and application materials.  In the framework of this cooperation, Sun will develop liquid solder mask ink to be used in Camtek’s inkjet system for PCB applications.  The resulting ink may also target all other end user markets for PCB manufacturing, including the high-end automotive sector, with solder mask technology capable of meeting the most stringent OEM specifications, and the parties will share profits derived from the ink developed.

Migdal HaEmek’s Camtek provides automated and technologically advanced solutions dedicated to enhancing production processes, increasing products yield and reliability, enabling and supporting customer’s latest technologies in the Semiconductors, Printed Circuit Boards (PCB) and IC Substrates industries.  Camtek addresses the specific needs of these interconnected industries with dedicated solutions based on a wide and advanced platform of technologies including intelligent imaging, image processing and functional inkjet printing.  (Camtek 14.08)

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2.10  Fifth Acquisition for Frutarom in 2017 – UK Company Flavours & Essences

Frutarom Industries signed an agreement for the purchase of 100% of the shares of the UK company Flavours and Essences (F&E) for approximately $19.5 million and a mechanism for future consideration based on F&E’s future business performance over the period of three years from the purchase date.  The transaction was completed upon signing and financed through bank debt.  According to F&E management reports, its sales turnover for the 12 months ending in July 2017 totaled approx. $17.4 million and it registered an average annual rate of growth for the past five years of over 20%.

F&E, which was founded in 1998, engages in the development, production and marketing of flavors and natural colors.  F&E operates a production site and R&D center in Blackburn, England, employs 41 people, and has a broad customer base in Europe, particularly in the UK and Ireland.  F&E’s activity is synergetic with Frutarom’s activity in the field of flavors, activity which has grown in recent years by rates considerably higher than the market rate of growth, as well as with Frutarom’s developing activity in the field of natural food colors.

Herzliya’s Frutarom is a leading global company operating in the global flavors and natural fine ingredients markets.  Frutarom has significant production and development centers on all six continents and markets and sells over 60,000 products to more than 30,000 customers in over 150 countries.  Frutarom’s products are intended mainly for the food and beverages, flavor and fragrance extracts, pharmaceutical, nutraceutical, health food, functional food, food additives and cosmetics industries.  (Frutarom 15.08)

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2.11  Overwolf Acquires, Making its First Step into Mobile

Overwolf announced the acquisition of, the largest service for players of the popular mobile game – Clash Royale.  This acquisition is a first step in Overwolf’s strategy to expand its PC offering into the mobile space.  Overwolf offers more than 200 apps for PC gamers, and has an active community of more than 230 developers.  Developers use the Overwolf platform to build in-game apps for the leading PC games, distribute these apps through Overwolf Appstore and monetize with Overwolf’s in-app ads service.  Developers on the platform generate anywhere form tens of dollars to tens of thousands of dollars every month.  Millions of gamers already use various Overwolf apps alongside their favorite games to enhance their experience and improve their gameplay.

The website provides valuable information for the Clash Royale player community.  StatsRoyale aggregates an unimaginable amount of data, and crunches it to provide statistical information about cards, decks and the current game meta.  The website also reveals information about players’ upcoming chests, thus eliminating uncertainty and giving players more motivation to keep playing. has a huge following with more than 20 million monthly active players.

Headquartered in Tel-Aviv, Israel with offices in Seattle, Overwolf enhances competitive gaming experiences with the world’s richest selection of in-game apps.  The Overwolf Client allows players and game publishers to add new functionality to any game, all without touching a line of game code.  Overwolf apps give players tools to compete, communicate, hone their play and socially share highlights.  Overwolf also gives large and small developers alike the power to create and publish in-game apps for the world’s most played games via the Overwolf Appstore, reaching millions of gamers worldwide.  (Overwolf 14.08)

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2.12  CommonSense Robotics Raises $6 Million

CommonSense Robotics announced that it has raised $6 million in seed funding from Aleph VC and Innovation Endeavors.  Using artificial intelligence (AI) and robotics, CommonSense Robotics’ disruptive technology enables retailers of all sizes to offer one-hour delivery and make on-demand fulfillment scalable and profitable.  The company is using the funds to expand the team, drive new product development and build out its operations towards its first deployments.

With Amazon making on-demand delivery an industry standard, brick-and-mortar retailers struggle to offer the service in a way that’s profitable and scalable.  Tel Aviv-based CommonSense Robotics merges the convenience of online purchasing with the immediacy of in-store shopping, empowering retailers to improve speed in the fulfillment and delivery processes and offer economically sustainable on-demand delivery.  (Globes 07.08)

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2.13  MedAware Raises $8 Million in Series A Funding to Eradicate Catastrophic Prescription Errors

MedAware has raised $8 million in Series A funding.  Investors participating in the round included BD (Becton, Dickinson and Company), Yingcheng City Fubon Technology Co., OurCrowd and Gefen Capital.  In addition, MedAware has received grants from Israel’s Innovation Authority and the BIRD Foundation, as well as from the European Commission as part of its Horizon2020 program, bringing the company’s total funding raised to date to $12 million.  The capital will be used to advance the company’s unique approach to identifying the most consequential medication mistakes, thus improving patient safety and saving lives.

MedAware intends to use the Series A funding to enhance its offering, including developing additional machine learning-enabled decision support solutions as well as making ongoing product enhancements to cover more catastrophic types of errors.  Further establishing the company’s North American footprint as well as expanding its number of EMR integrations in the United States are also top corporate priorities for the remainder of 2017.

Each year, hundreds of thousands of Americans are injured or fatally harmed by adverse drug events (ADEs) and erroneous prescriptions.  Ra’anana’s MedAware’s medication surveillance technology identifies ADEs and eradicates catastrophic medication errors by applying advanced machine-learning algorithms, and outlier detection mechanisms similar to fraud detection solutions in use by financial institutions worldwide.  By continuously mining data gathered via millions of electronic health records, the software is able to accurately flag potentially life-threatening prescriptions that are in conflict with the profile of the patient, physician, or institution.  In addition, MedAware actively monitors each patient to identify and warn of situations in which changes in a patient’s diagnostic results renders one of his/her active medications a dangerous outlier.  These difficult or nearly impossible to anticipate errors would otherwise go undetected by current rule-based solutions.  The company’s unique, real-time approach to identifying ADEs and preventing medication errors saves lives, improves patient safety and outcomes, and significantly reduces avoidable risks and costs.  (MedAware 16.08)

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2.14  RescueDose Raises $2.5 Million

RescueDose announced a $2.5 million financing round.  The company has raised a total of $5 million since it was founded.  Founded in the hiCenter Ventures incubator in Haifa, RescueDose latest investment is from ERA Brazil Israel, a company owned by Advocate Eric Ben-Mayor and a group of Brazilian partners.  ERA Brazil Israel has invested in a variety of high-tech companies in Israel, and in medical and dental companies.  Automation of drug dispensing has two main advantages.  The first is more accurate control of the process of preparing drugs and more accurate monitoring of the dosage.  The second is protection of pharmacists against hazardous materials. Syringes with most dangerous drugs are currently prepared manually.  The transition to an automated process enables a pharmacist to oversee the process.  RescueDose’s first line of products is designed for nuclear medicine.  The company has two patents in the US and one being registered in China.

Haifa’s RescueDose is a leader in the field of automated medication dispensers and medicine dosage management.  Rescuedose’s automated liquid medication dispenser is a game changer in medicine.  Designed with patient and medical staff safety in mind, their mission is to automate the process of medication dispensing in order to minimize human error, dispensing risks and ensure accuracy – by making the correct medicine and dosage accessible more easily.  (Various 16.08)

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2.15  RADA Receives First Breakthrough and Strategic $8 Million Order for US Military

RADA Electronic Industries has received a strategic first order for dozens of Multi-Mission Hemispheric Radars (MHR).  The order is highly significant for RADA, totaling over $8 million and will be delivered during 2017.  The radars will be used by a key US military force, providing it with air surveillance with emphasis on counter-UAV with the most advanced on-the-move capabilities.  The radars are expected to be fielded for operational use soon after delivery.

RADA’s Multi-Mission Hemispheric Radars (MHR) are S-band, software-defined, pulse-Doppler, active electronically scanned array (AESA) radars.  The radars introduce sophisticated beam forming capabilities and advanced signal processing, which can provide for various missions on each radar platform and demonstrate an unprecedented performance-to-price ratio.  The radars are compact and mobile, enabling multiple-missions on each radar, and work while on-the-move.  RADA has sold over 300 radar systems to-date, to various global defense customers.

Netanya’s RADA Electronic Industries is a defense electronics contractor.  The Company specializes in the development, production and sales of Tactical Land Radars for Force and Border Protection, Inertial Navigation Systems and Avionics Systems for fighter aircraft and UAVs.  (RADA 16.08)

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2.16  Amenity Analytics Raises $7.6 Million

Amenity Analytics completed its A round, raising $7.6 million in the company’s first substantial financing round.  Amenity Analytics uses artificial intelligence that revises itself to derive insights from any type of text.  Customers use Amenity Analytics’ platform in order to get data from documents submitted to regulators, transcriptions of conference calls, news, social media, research reports, etc.  A number of Fortune 100 companies and major hedge funds are among the companies already using Amenity Analytics’ development.  The company’s technology combines principles of text mining systems and machine learning technology in order to create an even more sophisticated 5G technology.

Founded in 2015, Petah Tikva’s Amenity Analytics has built a leading edge text analytics platform that allows customers to identify actionable signals from unstructured data.  Using our offering business professionals can extract insights from today’s information overload.  (Amenity Analytics 21.08)

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2.17  Spaceek Raises $1.4 Million

Petah Tikva’s Spaceek, which is developing a platform designed to solve parking problems, has completed a $1.4 million financing round.  The company has raised a total of $2 million, including the current round, since it was founded.  Some $270,000 of this amount was raised through the exitvalley crowdfunding platform.  Clear Future, a private investment fund, led the round, with participation from the Central Park chain of parking lots, which operates dozens of parking lots in Israel, and Spaceek’s previous investors.  Spaceek says that it has installed thousands of sensors in parking lots in Israel, the US, and Europe.  Spaceek focuses on the development of parking systems for smart cities and private parking lots.  The company’s product makes it possible to navigate to available parking places, and to reserve a parking space.  In order to collect information about the state of parking, the company is installing various sensors, including cameras.  (Globes 20.08)

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3.1  Hikma Announces Expanded Licensing Agreement with Takeda for New Products in MENA

Amman’s Hikma Pharmaceuticals, through its wholly-owned subsidiary Hikma Pharmaceuticals, has reached an agreement with Japan’s Takeda Pharmaceutical Company to expand its licensing and distribution agreement with the global research and development-driven pharmaceutical company, adding new products to its portfolio in the Middle East and North Africa (MENA).  Hikma will have the right to register, manufacture, market, distribute and sell four of Takeda’s leading primary care products in 17 markets in the MENA region.

Under the terms of the agreement, which is effective immediately for all markets, Hikma has the exclusive rights to manufacture and commercialize three of Takeda’s leading primary care product families – Alogliptin, including Alogliptin/Metformin, Alogliptin/Pioglitazone (anti-diabetic), Azilsartan, including Azilsartan/Chlorothalidone (anti-hypertensive) and Lornoxicam in its rapid form (anti-inflammatory/ pain) – in its MENA markets.  The agreement, however, does not include the Egyptian market for Alogloptin.  Hikma also has exclusive rights to manufacture and commercialise Takeda’s Dexlansoprozole in its MENA markets, with the exception of Saudi Arabia, the UAE and Egypt.  Hikma’s existing license agreement with Takeda in respect of Lornoxicam tablets (anti-inflammatory/ pain), has been expanded beyond Saudi Arabia and Jordan to cover Hikma’s other MENA markets.

The new agreement builds on a long-standing strategic partnership between Hikma and Takeda.  It leverages Hikma’s substantial sales and manufacturing presence in the MENA and extensive experience of building brands in the region.  (Hikma 17.08)

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3.2  Abu Dhabi Investment Group Acquires Fiber Prime Telecommunications

Abu Dhabi Investment Group (ABDIG), a private investment group from Abu Dhabi, announced an investment to acquire 62.5% of Fiber Prime Telecommunication’s (FPT) shares.  ABDIG is planning to invest up to $5 billion in subsea cable projects and will restructure FPT to become a top tier worldwide subsea cable company.  FPT is proven leaders in providing fast, affordable, and reliable data services.  After careful consideration and deliberation, FPT’s board concluded that the sale of FPT to ABDIG was in the best interest of FPT.  The combination between ABDIG and FPT would create a market leader managing more than $10B of subsea, IT and telecom assets worldwide.  The new company would operate under the FPT brand.

Founded in 2015, New York’s Fiber Prime Telecommunications (FPT) is an One-Stop-Shop independent telecommunications carrier, with extensive experience, capable of delivering advanced “tailor-made” data networking solutions.  FPT has direct presence in more than 15 countries and extensive network partnerships covering any location in the Americas and Europe, with expansion plans to extend capabilities to Asia.  (Fiber Prime 08.08)

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3.3  Esri and Smart Dubai Sign Enterprise Agreement

Redlands, California’s Esri, the global leader in spatial analytics, announced that Smart Dubai, the government agency leading Dubai’s smart city transformation, has signed an enterprise agreement (EA) providing ArcGIS technology to 44 entities across the government.  The EA will be used by Smart Dubai for its smart city platform, called Dubai Pulse, to integrate and map data for better decision-making.

The shift toward smart technologies in recording and processing data is the foundation for success in the era of big data.  Dubai Pulse will use Esri’s geographic information system (GIS) technology – clubbed with data accumulated by the Dubai Data Establishment – to offer smart and secure services and tools including dashboards, mobile apps and analytics capabilities.  The platform compiles all government data in one place, where the right information can be provided to the right people whenever they should need it.  Dubai Pulse will empower the government of Dubai to identify issues such as traffic accident hot spots, increase citizen engagement in planning projects through the sharing of realistic 3D models, and assist with sustainability initiatives including solar energy generation.  The adoption of the Dubai Pulse platform will carry the city forward as a world leader in digital transformation.

Smart Dubai is anchored in the vision of Sheikh Mohammed bin Rashid Al Maktoum to make Dubai the happiest city on earth.  Collaborating with private sector and government partners, Smart Dubai is the government office charged with facilitating Dubai’s citywide smart transformation, to empower, deliver and promote an efficient, seamless, safe and impactful city experience for residents and visitors.  (Esri 08.08)

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3.4  Packers Plus and BP Oman Achieve Unprecedented Operational Efficiencies in HPHT Wells

Calgary, Alberta’s Packers Plus Energy Services announced recent developments with BP Oman Exploration (Epsilon).  Collaborations include development of a customized completion system, successful installation and subsequent stimulation of two high pressure/high temperature (HPHT) wells in Oman’s Khazzan field.  The first well showed encouraging results as the target rate was met after pumping only three of the planned six stages.  Other noted benefits include lower fracture initiation pressures and operational efficiency leading to further trials and optimizations for open hole completions going forward.

Having used cased hole plug and perf systems previously, BP Oman wanted to trial an open hole system that would increase near wellbore conductivity, reduce treating pressures and be robust enough to function in temperatures up to 350 °F (176 °C) and working differential pressures of 15,000 psi (103 MPa).  Packers Plus worked on upgrading its field proven StackFRAC Titanium XV open hole ball-drop HPHT system to meet the operator’s requirements.  The engineering design, construction, QA/QC program, testing and procurement were accomplished in just over four months, producing customized, corrosion-resistant tools operational at temperature and pressure specifications exceeding those of the wellbore parameters.

Packers Plus is an industry leader in designing and manufacturing lower completions solutions for a variety of technically challenging applications.  Known for its innovative, high-quality and responsive style, the privately held company has run over 16,000 completion systems, accounting for over 240,000 fracture stages since it started operations in 2000.  (PPES 15.08)

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3.5  Havelsan Signs Contract to Supply Qatar With Joint Warfare Center

On 21 August, Turkish electronics manufacturer Havelsan signed a contract with the Qatar Armed Forces to supply it with a ‘Joint Warfare Center.’  Havelsan is Turkey’s primary supplier of command and control suites, combat management systems (CMS) training centers and training simulators for land, naval and air applications.  Specifics were not provided.  However, the description (i.e. Joint Warfare Center) appears to identify with Havelsan’s command, control, communication and intelligence (C4I) products and services.  The potential scope of the program may involve each of Qatar’s armed services branches.  Earlier this in the month Havelsan opened an office in Doha to steward its business growth in Qatar.

Havelsan has recently supplied Qatar with a Full Mission Simulator for the Leonardo AW139 utility helicopter.  Havelsan had delivered the Cabin Team Training Simulator, Tactical Control Center, Flight and Navigation Procedures Trainer and Debriefing System delivered earlier.

Under the $40 million contract, Havelsan will also provide three years of maintenance support for the system.  Although costly, Havelsan claimed that the savings Qatar will accrue from deferring AW139 training to the simulator (instead of the aircraft) will recover the acquisition cost “within three years.  (Quwa 21.08)

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4.1  Yellow Door Energy & Elcome Agree to Begin Installation of a 311 kWp Rooftop Solar PV Plant

Yellow Door Energy (YDE), a Dubai-based firm that invests in and operates distributed solar and energy efficiency assets, will begin the installation of a 311 kWp solar PV plant at Elcome’s headquarters located in Dubai Investments Park, Dubai, UAE.  Elcome is one of the world’s leading marine technology system integration and services companies and employs a workforce of over 500 people in 11 countries.  Yellow Door Energy will manage the construction, operation and maintenance of the solar PV plant for the next 20 years.  The solar lease structure eliminates the need for Elcome to make a capital investment and take on operational risk, allowing them to focus on their core business.

The solar PV system will generate approximately 503,050 kWh per year and reduce CO2 emissions by 354 tons annually, which is equivalent to planting 9,162 tree seedlings per year.  The EPC contractor for the project will be Enerwhere, a Dubai-based, DEWA-certified solar company specialized in commercial-industrial scale systems.  Construction of the project will commence in September 2017 and the plant is expected to be operational by the end of the year.

The rooftop solar PV installation represents another important success under the ‘Shams Dubai’ initiative, launched by the Dubai Electricity and Water Authority (DEWA) to regulate solar energy generation in buildings, and to move the Emirate closer to achieving its vision of 7% renewable energy by 2020 and 15% by 2030.  (Yellow Door Energy 21.08)

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4.2  Energy Recovery Awarded $2.5 Million for Desalination Projects in Saudi Arabia

San Leandro, California’s Energy Recovery, the leader in pressure energy technology for industrial fluid flows, announced an award of $2.5 million to supply its PX Pressure Exchanger technology for desalination projects in Saudi Arabia.  The orders began shipping in the second quarter of 2017, with expected completion by the third quarter of 2017.  Energy Recovery will supply its PX-Q300 and PX-220 Pressure Exchanger devices for the plants, which will produce a total of up to 103,000 cubic meters of water per day.  Energy Recovery estimates the PX devices will reduce the total power consumption for all projects by 14.4 MW, saving a total of over 124.4 GWh of energy per year and avoiding 74,378 tons of CO2 emissions per year.

Energy Recovery, Inc. (ERII) is an energy solutions provider to industrial fluid flow markets worldwide.  Energy Recovery solutions recycle and convert wasted pressure energy into a usable asset and preserve pumps that are subject to hostile processing environments.  With award-winning technology, Energy Recovery simplifies complex industrial systems while improving productivity, profitability and efficiency within the oil & gas, chemical processing, and water industries.  (ERII 10.08)

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4.3  Morocco Recorded Highs in Solar Power Production on 7 – 8 August

Owing to the scorching temperatures across the kingdom, 7 and 8 August saw record highs across Morocco for solar power production, according to the National Office for Electricity and Potable Water (ONEE).  The national’s solar panels made a “historical record” by generating 6060 MW on 7 August at 13:00, representing an increase of 70 MW.  The ONEE added that the evening production has reached 6180 MWN at 21:00, representing an increase of 130 MW compared to its peak during the same period in 2016.  The ONEE continued that the maximum daily consumption reached 124,190 MWh on August 8, exceeding the maximum daily consumption recorded in 2016 by 2931 MWh.  (MWN 10.08)

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5.1  Lebanon’s Annual Trade Deficit Down by 0.92% in 2017’s First Half

Lebanon’s trade deficit narrowed by 0.92% year-on-year (y-o-y) by June 2017, to reach $7.94B.  As such, total imports shrank by an incremental 0.19% y-o-y to $9.38B, while exports gained a yearly 4.03% to $1.44B on the back of an annual 20.96% increase in the volume of exported goods to 0.97M tons.

The top products imported to Lebanon were Mineral products with a share of 20.19%, followed by 11.05% for products of the Chemical and allied industries, 10.24% for Machinery and electrical instruments, and Vehicles, aircraft, vessels, transport equipment, which grasped a stake of 9.57% of total imports.  The values of imported Mineral products and of Products of the Chemical and allied Industries contracted by yearly 9.93% and 0.44% to settle at $1.89B and $1.04B, respectively, in H1/17.  Meanwhile, each of the values of Machinery and electrical instruments, as well as Vehicles, aircraft, vessels, transport equipment, grew by an annual 2.85%, and 5.37% to $960.8M and $897.83M, respectively over the same period.

China, Italy, Germany and Greece were Lebanon’s top import destinations in H1/17, with the respective shares of 9.76%, 8%, 6.39%, and 7.47%, respectively.  As for exports, the top products exported from Lebanon were Pearls, precious stones and metals with a stake of 23.49% of total exported products, followed by Prepared foodstuffs, beverages and tobacco grasping a share of 16.70% of total exports, Base metals and articles of base metal, as well as Machinery and electrical instruments with respective stakes of 11.04% and 11.01% of the total.  In details, the value of Pearls, precious stones, & metals rose by 11.21% y-o-y to $337.63M in H1/17 owing to the 48.1% increase in volume and the average price of gold in H1 climbing from $1,220.14/ounce in 2016 to $1,239.14/ounce in H1/17.  As for Prepared foodstuffs, beverages and tobacco as well as Base metals and articles of base metal, they recorded upticks of 3.2% and 23.86% y-o-y, to reach $240.03M and $158.72M, respectively, in the same period.  However, the value of Machinery and electrical instruments slipped by a yearly 12.87% to $158.18M by June 2017.

It is worthy to mention that the top three export destinations in H1/17 were: South Africa, Syria, and the UAE, grasping shares of 12.84%, 9.31%, and 8.72% of Lebanon’s total exported goods.  In June alone, the deficit fell from $1.26B in June 2016 to $1.22B this year, as exports declined by 16.26% y-o-y to $229.81M, while imports decreased by an annual 5.16% to $1.45B.  (CAS 10.08)

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5.2  Lebanon’s Average Inflation Rose by 2.92% Annually by July 2017

According to the Central Administration of Statistics (CAS), Lebanon’s average inflation rate rose by 2.92% by July 2017 compared to July 2016.  The average costs of “Housing and utilities” (water, electricity, gas and other fuels) constituting a combined 28.4% of the Consumer Price Index or CPI, rose by 9.88% year-on-year (y-o-y) by July 2017.  Specifically, “Owner-occupied” rental costs, which grasped 13.6% of this category, rose by 10.16% y-o-y.  As for the average prices of “Water, electricity, gas, and other fuels” (11.8% of the Housing & utilities component), they increased by an annual 17.11% by July 2017.  In turn, the average prices for “Food and non-alcoholic beverages” (constituting 20% of the CPI), “Transportation” (taking 13.1% of the CPI), and “Education” costs (6.6% of CPI) registered yearly upticks of 9.69%, 11.96%, and 9.71% by July 2017.  However, average “Health” costs (7.7% of the CPI) grew by 6.34% y-o-y over the same period.  (CAS 22.08)

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5.3  Lebanon’s Gross Public Debt Reaches $76.46 Billion in June 2017

Lebanon’s gross public debt registered a yearly increase of 4.90%, to reach $76.46B in June 2017.  Debt in local currency, LBP, grasping around 61.2% of the total gross public debt, rose by 6.46% y-o-y to $46.80B, and debt in foreign currency increased 2.54% y-o-y to $29.66B by June 2017.  Lebanese commercial banks constituted the largest holders of local currency debt, with a share of 42.9%, while BDL and other non-financial sectors held the remaining shares of 41.6% and 15.5%, respectively.  Moreover, foreign currency debt was mainly comprised in the form of Eurobonds, with a share of 92.3% of foreign currency debt, multilateral loans (4.3%), bilateral loans (3.0%), Paris II loans (0.1%) and others (0.3%)  (BLOM 09.08)

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5.4  Transportation, Rent & Education Costs Drive Jordan’s Inflation Rate Up by 1.8%

The Jordanian Department of Statistics issued the monthly inflation report for July, 2017, indicating the median consumer price index (inflation rate) has increased on the average by 1.8%, compared to July, 2016.  The price index for transportation has increased by 9% in July, as opposed to 2.9% for rent, 3% for education and 6% in the tobacco category.  Commodities that have seen the greatest decline in prices are produce by 17%, meat and poultry by 4.7%, fruits and nuts by 6% and clothes by 2.7%.  (DoS 16.08)

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5.5  Jordan Falls to Lower Category of Middle-Income Countries

The World Bank (WB) Group downgraded Jordan to the lower category of the Middle-Income Countries classification, based on the most recent annual income per capita index, according to the WB’s global review in July, down from the upper-middle category.  Now, Jordan is ranked among the countries where income per capita ranges between $1,006 and $3,955, annually.  The previous review placed Jordan in the range between $3,956 and $12,235, indicating a drastic drop in the individual share of the Kingdom’s GDI.  Some of the reasons factoring Jordan’s declassification include mainly the increase in demographic, the regression of GDP, and deflation; the decline in the inflation index.  Every year, the World Bank group conducts a review of the global income status.  (AlGhad 10.08)

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5.6  Jordan 84th in Mobile Data Speed Worldwide, 90th in Fixed Line Internet

A recently published report on internet speed around the world shows Jordan has fallen 11 ranks in the Mobile Data category, from the 73rd place to 84, and 6 ranks down in the Fixed Line internet category, from the 84th place to the 90th.  The Speed Test Global Index is a global platform that measures internet speeds worldwide based on average download speed in listed countries.  In the Mobile Data category, Jordan’s average internet speed stands at 13.70MB, as opposed to 13.25MB in the Fixed Line category.  Norway and Singapore scored the highest in the Mobile Data and Fixed Line speed categories, respectively.  Qatar, meanwhile, lead the Arab World in both categories.  (AlGhad 19.08)

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5.7  Debt to Income per Capita Rate in Jordan Stands at 69%

The Central Bank of Jordan (CBJ)’s 2016 report on financial stability and performance confirms that the credit facilitation mechanisms have significantly improved throughout the year 2015, whereas the Debt to Income per Capita rate has held steady through the year 2016, at 69.3%.  In the meantime, Jordan has retained the fourth position in comparison to 19 European States, in the Debt to Income per Capita Rates criteria.  Over the years 2015 and 2016, credit facilitation grew by 9.6 and 9%.  (AlGhad 07.08)

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5.8  Jordan & Japan Sign $12.6 Million Grant to Renovate Balqa Water Network

The Jordanian and Japanese governments signed a grant agreement worth $12.6 million, according to a statement from Toyko’s embassy in Amman.  The grant, which was signed by Planning Minister Imad Fakhoury and the Japanese Ambassador Shuichi Skaurai, will finance the second phase of the renovation of the water network in Balqa, 35 km. northwest of Amman, as part of the economic and social development of the Kingdom.  Water Minister Hazem El Naser, Japan International Cooperation Agency Chief Representative in Jordan Tsutomu Kobayashi and a number of officials also attended the signing ceremony.  (JT 15.08)

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►►Arabian Gulf

5.9  Abu Dhabi GDP to Grow by 2.9% During 2018

Abu Dhabi’s economy will reap the benefit in 2018 of ongoing diversification efforts and positive oil production growth, according to new forecasts from BMI Research.  The emirate’s economy is forecast to grow 2.9% next year, as oil production increases following the expiry of a production cut by major producers, and “significant positive signs in the non-oil economy.”  These signs include increased expenditure on infrastructure projects designed to capitalize on Dubai’s hosting of Expo2020, an increase in non-oil industrial spending, and increased foreign direct investment.

However, the emirate’s growth will come under pressure in 2017 on the back of oil production cuts, in spite of heavy investments into new industries.  An agreement, signed by Opec and non-Opec producers in November, subsequently extended to March of next year, has shored up oil prices, but has resulted in lower oil revenues for Abu Dhabi, which has proven oil reserves of 92 billion barrels.  Accounting for around half of Abu Dhabi’s GDP, the oil sector remains the primary determinant of economic expansion in the emirate.  (BMI 17.08)

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►►North Africa

5.10  Egypt’s Urban Inflation Climbs to Highest Level in Decades in July

Egypt’s urban inflation climbed in July to its highest level in decades, after the recent subsidy cuts introduced by the government as part of a series of economic reforms aimed at improving the country’s finances.  Annual consumer price inflation in urban areas rose 33% in July, up from 29.8% in June, according to CAPMAS.  The month-on-month urban inflation rate climbed 3.2% in July, up from 0.8% in June.

In November 2016, Egypt floated its currency, slashing the value of the pound by half and triggering heavy inflation.  Egypt has been pushing ahead with a series of austerity measures including fuel and electricity subsidy cuts to help ease the country’s gaping budget deficit.  Food prices have also spiked, rising by 43% year-on-year in July.  (CAPMAS 10.08)

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5.11  Egypt’s Budget Deficit Drops to 10.9% in 2016/17

Egypt’s budget deficit for the fiscal year 2016/17 stood at 10.9% as opposed to 12.5% the year before, a statement by the presidency said on 8 August.  Egypt is implementing sweeping reforms to curb its crippling budget deficit, including cuts in energy subsidies, the introduction of a value-added tax (VAT) and floating the pound.  Gross domestic product (GDP) growth in the fourth quarter of 2016/17, which ended in June, was at 4.9%, while total GDP growth for the year stood at 4.1%.  Foreign investment in Egypt’s treasuries in 2016/17 surged to $13 billion by the end of June, compared to $1 billion at the start of the year, the statement added.  Egypt’s fiscal year begins in July and ends in June.

The Central Bank of Egypt has raised its key interest rates by 700 basis points since it floated the pound in November, increasing demand for the country’s domestic debts.  Egypt’s commodity exports in 2016/17 rose by 10% and imports declined by 14%, while the country’s trade deficit narrowed by 26%.  Annual growth rate of revenues for the year stood at 28% of GDP while growth rate of expenditure was at 22% of GDP, according to state news agency MENA.  (Ahram Online 08.08)

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5.12  Egypt Enacts Law to Allow Private Gas Imports

Another milestone has been reached on the road to exports of natural gas from Israel to Egypt.  Egyptian President el-Sisi has signed a law allowing private concerns to import natural gas directly, rather than through the Egyptian Natural Gas Holding Company (EGAS), a government company, while using EGAS’s existing infrastructure.  The law, which has been discussed in Egypt since 2012, means that private players will be able to negotiate directly, making it possible to expedite natural gas deals with Egypt.  Up until now, EGAS has been the sole importer of gas to Egypt, and has been marketing it to private concerns.  Market sources say that the law removes one of the barriers preventing implementation of a contract for exporting gas from Israel to Egypt.

The natural gas partnerships developing the Tamar and Leviathan natural gas reservoirs have signed an agreement to export gas to Egypt.  A binding agreement was signed with Tamar enabling Israel to export all of its remaining surpluses, amounting to 1 BCM, for a relatively short 6-7-year period.  An agreement in principle was signed with Leviathan for supplying up to 4 BCM for a 10-year period.  The value of these agreements is estimated at over $15 billion.

In order to implement these two agreements, the gas partnerships must solve two problems: finding suitable infrastructure and getting a green light from the Egyptian government.  When the second problem is solved, the partnerships can proceed with a solution of the infrastructure problem.

Israel is currently connected to the Egyptian gas transportation system through Jordan, but there is another possibility – using the old gas pipeline from the Suez Canal via El Arish to Ashkelon, which was built to import natural gas from Egypt to Israel.  The plan is to reverse the direction of the gas flow in the pipeline in order to transport gas from Israel to Egypt.  It is believed that gas will begin flowing to Egypt in 2019, in addition to the gas currently exported to Jordan.  (Globes 09.08)

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6.1  Turkish Unemployment Rate Falls to 10.2% in May

Turkey’s unemployment rate dropped to 10.2% in May, falling further from a seven-year high at the start of the year but up from 9.4% in the same month last year, data from the Turkish Statistics Institute (TUIK) showed on 15 August.  Turkey’s unemployment figure showed a steady decrease during the first five consecutive months of 2017, with the jobless rate standing at 10.5% in the March-May period.  However, the youth unemployment rate for people aged 15-24 was 19.8%, with a 2.4%age point increase in May compared to the same period of 2016.  The number of jobless people aged 15 and above jumped to 3.2 million in the month, marking an increase of 330,000 from the same month last year, according to TUIK data.  The unemployment rate for people aged 15-64 was 10.4%, with a 0.8% year-on-year increase.

The number of employed people rose by 621,000 to nearly 28.5 million in the period of May 2017 compared with the same period of the previous year.  The employment rate was 47.7% with a 0.2% increase, according to TUIK data.  The TUIK report also revealed that the number of women in the workforce rose by 1%age point from the previous year to 33.9%.  (TUIK 15.08)

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6.2  Turkey Begins Prototype Development of First Indigenous Satellite TÜRKSAT-6A

Turkey has begun the prototype development and production phase of its first indigenously developed communications satellite, the TÜRKSAT-6A.  The announcement was made during a high-level meeting between the Turkish government and the country’s research and defense industry vendors.

Turkey formally began the TÜRKSAT-6A program in December 2014.  TÜRKSAT-6A is envisaged to carry 20 Ku-band and two X-band transponders.  The TÜRKSAT-6A’s qualification tests are scheduled to commence in 2018, with the launch planned for 2020.  The TÜRKSAT-6A will be in orbit for 15 years.  Under the scope of the program, currently valued at $170 million, TAI is responsible for designing and manufacturing the TÜRKSAT-6A’s structural properties, harness, thermal control and chemical propulsion subsystems and mechanical ground support equipment.  The onboard data-handling software, command and control suite, and assembly, integration and testing will be jointly undertaken with TÜBİTAK.

In December 2016, the European Space Centre had launched the Göktürk-1.  Designed and produced by Leonardo and Thales, the Göktürk-1 is serving as an intelligence, surveillance and reconnaissance (ISR) asset for the Turkish Armed Forces’ (TSK).  TAI, Roketsan, TÜBİTAK and TR Teknoloji had contributed to the Göktürk-1 in various capacities.  As per Leonardo, these included sourcing some of the satellite’s payload structure, telecommand and telemetry ciphering devices and constructing a local assembly, integration and test center (AITC).  (Quwa 22.08)

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6.3  Fitch Upgrades Greece as Political Risk Eases

Fitch Ratings upgraded Greece’s long-term foreign-currency issuer default ratings to B- from CCC, citing reduced political risk and sustained GDP growth.  Fitch said on 18 August that it expected the general government debt to steadily improve, cushioned by benefits from the European Stability Mechanism (ESM) program.  Eurozone governments in June threw Greece another 11th hour credit lifeline and sketched new detail on possible debt relief.

The Fitch upgrade comes after Moody’s upgraded Greece’s long-term issuer rating to Caa2 in June saying that it expected to see growth in the Greek economy.  Fitch noted that its confidence in the Greek banking sector remained fragile, although it was improving.  “A key challenge for the banking sector is tackling nonperforming exposures (NPEs), which remain stubbornly high at 45% of gross loans,” Fitch said.  Fitch maintained its positive outlook on the European country and said the risk of any future government reversing policy measures adopted under the European Stability Mechanism program is limited.  (Reuters 19.08)

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6.4  Greek First Half Government Budget Surplus Beats Target on Lower Spending

Greece’s central government attained a primary budget surplus of €3.05 billion in the first seven months of the year, beating its target by €955 million thanks to lower spending, finance ministry data showed on 14 August.  Athens’ surplus excludes the budgets of social security organizations and local administration.  It is different from the figure monitored by Greece’s EU-IMF lenders but indicates the state of the country’s finances.  The government’s target was for a primary budget surplus – which excludes debt-servicing costs – of €2.09 billion for the first seven months of the year.

Net tax revenue came in at €26.3 billion, €656 million below target, while spending reached €27.5 billion, below a target of €28.6 billion.  The government is aiming for a general government primary budget surplus of 1.9% of GDP this year, based on its medium term fiscal strategy plan.  The bailout target is for a primary surplus of 1.75% of GDP.  (Reuters 15.08)

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6.5  Greek Unemployment Eases to 21.7% in May, Though Still Eurozone’s Highest

Greece’s jobless rate dropped slightly to 21.7% in May from an upwardly revised 21.8% in the previous month, statistics agency ELSTAT said on 10 August, but the rate remains the Eurozone’s highest.  The seasonally adjusted data showed that the number of officially unemployed reached 1.03 million people.  Hardest hit were young people aged 15 to 24 years, with their jobless rate dropping to 44.4% from 49.7% in May last year.

Greece’s jobless rate hit a record high of 27.9% in September 2013.  It has come down from record highs but remains more than double the Eurozone’s average.  Unemployment in the 19 countries sharing the euro fell to 9.1% in June from a downwardly revised 9.2% in May, reaching its lowest level since February 2009.  Greece’s economy expanded in the first three months of 2017.  Economic output grew 0.4% compared to the final quarter of 2016.  (Reuters 10.08)

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6.6  Turnover of e-Commerce in Greece on the Rise

Turnover of e-commerce in Greece is on the rise, according to figures from European association Ecommerce Europe.  More specifically, turnover in Greece increased to €4.5 billion last year from €3.8 billion in 2015.  According to the General Secretariat for Trade and Consumer Protection, this rise confirms both Greek consumers’ growing confidence in online markets and the increasing participation of Greek retailers in e-commerce.  The latest figures were presented to Parliament a few days ago by the General Secretariat as part of an audit.  Greece’s government is promoting a draft law that will seek to safeguard the rights and economic interests of consumers.  Among the many goals is the facilitation of e-commerce providers, reducing compliance costs and ensuring a level playing field with foreign providers.  (eKathimerini 17.08)

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7.1  IDF Names Druze as Chief Medical Officer

Brig. Gen. Dr. Tarif Bader was sworn as the Israel Defense Forces chief medical officer, marking the first time in the country’s history that the position is manned by a Druze officer.  Bader replaced Brig. Gen. Dr. David Dagan, who had served in the post for the past three years.  In his previous positions, Bader headed the IDF’s medical mission to treat wounded Syrians on the northern border, and commanded three IDF humanitarian delegations: to Haiti in 2010, Nepal in 2015 and Turkey in 2016.  (IH 18.08)

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7.2  Lebanon Abolishes ‘Marry Your Rapist’ Law, Joining Other Arab States

On 16 August, Lebanon joined other Arab nations in abolishing a law that allows rapists escape punishment if they marry their victims, a move applauded by women’s rights campaigners.  On the heels of Jordan scrapping its law earlier this month, and Tunisia doing so last month, Lebanese lawmakers voted to do away with article 522 in the Lebanese penal code.  The article includes a provision that lets a rapist off the hook if he marries his victim, and its abolition follows a lengthy — and often graphic — campaign by activists.

Local rights group Abaad has campaigned against the country’s law for more than a year, posting billboards of women in bloodied and torn wedding gowns.  The caption reads: “A white dress does not cover the rape.”  In April, campaigners hung white wedding dresses from nooses on Beirut’s popular seafront.  Rights groups hope the momentum now flows to Arab countries with similar provisions such as Bahrain, Iraq, Kuwait and Syria.  Some countries in the region have already closed similar loopholes.  Egypt repealed its law in 1999 and Morocco overhauled its law in 2014 following the suicide of a 16-year-old girl and the attempted suicide of a 15-year-old, both of whom were forced to marry their rapists.  (Reuters 16.08)

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7.3  Saudi Arabia Approves Four Decisions in 10 Days to ‘Boost Women’s Rights’

Saudi Arabia’s Justice Ministry approved four decisions in support of women’s rights over ten days.  The decisions pertain to protecting minors, divorcees, women who have custody of their children and law graduates who have not practiced the profession yet due to male lawyers’ arbitrariness.  Legislative authorities approved 10 proceedings to control the marriage of minors, such as limiting the permission to marry off girls below 17 years old to the relevant court.  The marriage application must be submitted by the girl, her mother or legal guardian in marriage.  The cabinet also approved organizing the Alimony Fund for divorcees and children.  The fund will be directly linked to the justice ministry and it will have its independent budget.  The Fund will pay alimony to beneficiaries before a verdict to cash one is issued.  It will also pay alimony to women whom ex-husbands did not pay on time.  The ex-husband will then pay the Fund later.

Meanwhile, the Supreme Judicial Council approved a decision pertaining to women’s custody of their children.  The decision stipulates that if there are no disputes regarding the custody of children, the woman can prove they are in her custody without having to file a lawsuit in personal status courts.

As for female law graduates who haven’t been able to work and who have been exploited by some lawyers as interns, the Justice Ministry approved a three-year law diploma that concludes with granting the intern – whether male or female – a license to practice the profession.  The diploma will prepare law graduates to practice law as the intern programs which some lawyers provide do not teach interns well as they’re often assigned irrelevant tasks.  (Al Arabiya 15.08)

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7.4  One-Fifth of Moroccan Population Aged 15 – 24

On 12 August, the High Commission for Planning (HCP) published a survey of socio-economic demographics of Moroccans aged 15 to 24, on the basis of the 2014 General Population and Housing Census.  The survey showed that young people aged between 15 and 24 represented one-fifth of the Moroccan population in 2014.  They numbered around 6.03 million in 2004, down from 6.09 million in 2014.  The number of young people who were married increased by 16.6% in 2014, compared to 14% in 2004.  Some 29.2% of 15-24 years-old girls had their first marriage, while only 3.8% of men got married in 2014.

In 2014, the rate of illiteracy among young people in Morocco reached 11.0%.  The HCP noted that young people are globally less exposed to illiteracy, although there are disparities between them in terms of gender and place of residence.  HCP’s survey showed that the difference in illiteracy between young men and women is considerably reduced when one moves from rural to urban areas.  It found that 14.8% of girls are illiterate compared to 7.2% of boys.

The report highlighted that 28.8% of young people aged between 15 and 24 received no education in 2004, compared to only 10.1% in 2014.  Some 24.8% had finished primary education, while 29.6% had completed middle school education in 2014.  The source added that 14.6% of students had access to high school education, while 10% had their higher education in the same year.  In 2014, 69.5% of young men received middle school or tertiary education (compared to 52.1% in 2004).  Young girls’ education increased by 59%, compared with 39% in 2004.  Compared with 6.1% of young boys, 14% of young girls had no education; 22.9% of young boys had finished primary education, compared with 26.8% of girls.

Nearly one-third of urban youths had their high school degrees, compared with 11.8% of rural youth.  Only 3.7% of rural youth reached higher education levels in 2014, compared with 14.3% among urban youth.  (HCP 15.08)

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8.1  Can-Fite Successfully Completes Human Cardiodynamic Safety Trial for Piclidenoson

Can-Fite BioPharma has successfully concluded a cardiodynamic trial for its lead drug candidate Piclidenoson (CF101).  The trial is a regulatory safety requirement of both the U.S. FDA and the European Medicines Agency (EMA) prior to the initiation of Phase III studies.  Based on the favorable safety data from this cardiodynamic trial, Can-Fite is now cleared to initiate two global Phase III studies for Piclidenoson: the ACRobat trial in rheumatoid arthritis; and the Comfort trial in psoriasis.

The cardiodynamic trial was a placebo-controlled crossover study using precise methodology to determine the effect of Piclidenoson on electrocardiograms of healthy volunteers.  Such a study is required by U.S. and European regulatory authorities before, or in parallel with, Phase III to establish cardiac safety in humans prior to registration for marketing approval.  The primary objective of the trial was to assess whether Piclidenoson causes a delay in cardiac repolarization, as manifested by prolongation of the QT interval of the electrocardiogram.  A drug-induced delay in cardiac repolarization creates an electrophysiological environment that can lead to the development of ventricular cardiac arrhythmias.

In this study, Piclidenoson doses were up to 3-fold higher than the highest dose expected to be used in the Company’s registration-directed clinical trials.  In yet another indication that Piclidenoson has a favorable human safety profile, this cardiodynamic trial showed that the Company’s highest projected Piclidenoson dose had no clinically significant adverse electrocardiographic effects, thereby enabling progression into definitive Phase III trials.

Petah Tikva’s Can-Fite BioPharma is an advanced clinical stage drug development company with a platform technology that is designed to address multi-billion dollar markets in the treatment of cancer, inflammatory disease and sexual dysfunction.  The Company’s lead drug candidate, Piclidenoson, is scheduled to enter a Phase III trial for rheumatoid arthritis in 2017 and a Phase III trial for psoriasis in early 2018.  The rheumatoid arthritis Phase III protocol has recently been agreed with the European Medicines Agency.  Can-Fite’s liver cancer drug Namodenoson is in Phase II trials for patients with liver cancer and is slated to enter Phase II for the treatment of non-alcoholic steatohepatitis (NASH).  (Can-Fite 07.08)

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8.2  The ApiFix Spinal Implant Receives TGA Certification

ApiFix, a portfolio company of The Trendlines Group, received TGA certification through its distributor Orthotech Pty. to begin marketing the ApiFix system in Australia for the treatment and correction of Adolescent Idiopathic Scoliosis (AIS) using an innovative, minimally invasive surgical approach.  The ApiFix system represents a breakthrough treatment for Adolescent Idiopathic Scoliosis (AIS) as it is a minimally invasive, non-fusion spinal implant system that dramatically improves the quality of life of patients who undergo scoliosis surgery.  Additionally, it saves hospitalization and OR time, and is considerably more cost-effective than current scoliosis surgery.

Standard scoliosis surgical correction is a highly invasive, lengthy procedure involving a long recovery period, and resulting in a rigid spine due to fusion of the vertebrae.  The ApiFix approach brings an ingenious solution with its minimally invasive, non-fusion spinal implant system, inserted in a short procedure, followed by a brief recovery period, and maintains spine flexibility.

Misgav’s ApiFix is an innovation-driven medical device company focused on providing less invasive solutions for scoliosis patients.  ApiFix’s leading product for non-fusion treatment of adolescent idiopathic scoliosis (AIS) is used today in Europe.  ApiFix is led by a team of highly-regarded spine surgeons and veteran spine specialists. The company has CE clearance and is marketed in Germany, Italy, Greece, The Netherlands, Spain and Israel.  (ApiFix 08.08)

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8.3  BiondVax Receives Additional Government Funding

BiondVax Pharmaceuticals announced that the Israel Innovation Authority (IIA), formerly known as the Office of the Chief Scientist, agreed to fund up to 40% of a NIS 2.7 million (approximately $ 750,000) budget towards ongoing development of M-001, the Company’s Universal Flu Vaccine candidate.  In six previously completed human clinical trials, including the recently completed Phase 2b trial held in Europe, BiondVax’s M-001 was shown to be safe and immunogenic towards multiple flu strains.  Including today’s grant approval, since 2006 the IIA has granted over $ 6 million in funding to BiondVax.  The non-dilutive grants will become repayable from royalties generated from future sales of BiondVax’s vaccine, once commercially available on the market.

Ness Ziona’s BiondVax is a clinical phase biopharmaceutical company developing a universal flu vaccine. The vaccine is designed to provide multi-season protection against most seasonal and pandemic human influenza virus strains.  BiondVax’s proprietary technology utilizes a unique combination of conserved and common peptides from influenza virus proteins, activating both arms of the immune system for a cross-protecting and long-lasting effect.  (BiondVax 14.08)

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8.4  Expanding Orthopedics Granted Two Additional US Patents in the Expandable Interbody Domain

Expanding Orthopedics has been granted two additional US Patents by the USPTO covering its unique and diverse expandable cage technology, strengthening its position in the expandable devices’ fast growing market.  These new patents recognize the innovation of their expandable cage technology and proprietary instruments.  Or Akiva’s Expanding Orthopedics Inc. is medical device company developing and marketing innovative products designed to address unmet clinical needs for spine care and improve long-term patients’ outcome.  The Company is spearheaded by seasoned management team, and is advised by prominent spine surgeons.  EOI owns a broad patent portfolio around anatomically fit, expandable devices for enhanced stability through MIS approach.  (EOI 14.08)

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8.5  Teva Announces Exclusive Launch of Generic Axiron in the United States

Teva Pharmaceutical Industries announced the launch of generic Axiron (testosterone) topical solution CIII, 30 mg/1.5 mL, in the U.S.  Testosterone topical solution CIII is a prescription medicine used to treat adult males who have low or no testosterone due to certain medical conditions.  It is supplied in a metered dose pump with an underarm applicator.  Teva is committed to strengthening its generics business through continued investment in complex, high-quality products.  With nearly 600 generic medicines available, Teva has the largest portfolio of FDA-approved generic products on the market and holds the leading position in first-to-file opportunities, with over 100 pending first-to-files in the U.S. Currently, one in six generic prescriptions dispensed in the U.S. is filled with a Teva product.

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. (Teva 18.08)

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8.6  DarioHealth Raises $4.28 Million Through Private Placement Offerings

DarioHealth Corp. has signed securities purchase agreements with domestic and non-U.S. investors for the sale of shares of the Company’s common stock and shares of the Company’s newly designated Series B Convertible Preferred Stock in concurrent private placement offerings.  The Company expects to conduct a closing with respect to the offerings on or before 22 August 2017.  Current shareholders have executed securities purchase agreements accounting for 54% of the securities to be sold in the offerings.

As a part of these private placement transactions, which totals $4.28 million in the aggregate before expenses and placement agent fees, the Company will issue 483,333 shares of common stock at a price per share of $1.80 and 1,894,446 shares of Series B Convertible Preferred Stock at a price per share of $1.80.

Caesarea’s DarioHealth Corp. is a leading global digital health company serving tens of thousands of users with dynamic mobile health solutions.  With their smart diabetes solution, users have direct access to track and monitor all facets of diabetes, without having the disease slow them down.  The acclaimed Dario Blood Glucose Monitoring System all-in-one blood glucose meter and native smartphone app gives users an unrivaled method for self-diabetes management.  (DarioHealth 17.08)

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8.7  TechCare Receives CE Mark Approval for Novokid Lice Treatment Device

TechCare Corp. announced its Novokid has received CE Mark approval as a CLASS I Medical Device.  The approval is in line with the Company’s projected milestones to obtain CE approval during Q3 and to commence sales in Europe during Q4.  This achievement complements the recently announced strategic partnership with HoMedics for the North and South American markets.

Novokid is the first of its kind home use device, presenting a scientifically proven solution to eliminate lice, super lice and eggs.  Novokid is 100% natural, plant-based and pesticide-free.  Utilizing a proprietary vapor-based delivery platform, Novokid employs a simple 10 minute dry treatment that requires no rinsing or washing.  The treatment is fast, dry, clean and easily administered at home or on the go.  Novokid can also be used as a maintenance and preventative treatment if used regularly.

Rosh HaAyin’s TechCare is a technology company engaged in the design, development and commercialization of an innovative delivery platform utilizing vaporization of various natural, plant-based compounds, to enable a wide variety of treatment solutions.  Inspired by simple, natural treatments that have been used for generations.  TechCare’s renowned scientists combine traditional wisdom with innovative, proprietary technology and years of research to create solutions that answer the needs of today’s consumers.  Additional products are in development and slated for launch in 2018-9.  (TechCare 22.08)

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9.1  Weizmann Institute Ranks 6th on Nature Innovation Index

Israel’s Weizmann Institute of Science was ranked sixth on the 2017 Nature Index for Innovation.  The index, published by the prestigious Nature Journal, a weekly scientific journal based in the U.K., examined the influence of research done at scientific institutes by looking at the registered patents held by third parties and the amount of citations from each institute, instead of patents held by the institutes themselves.  This index specifically points industries to academic institutes “whose ideas may shape tomorrow’s inventions,” according to Nature.

The Weizmann Institute of Science is the only institute located outside of the U.S. in the top 10.  At the top of the list before Weizmann is the Scripps Research Institute in San Diego, followed by the Rockefeller University in New York City, the Massachusetts Institute of Technology, the University of Massachusetts Medical School and the University of Texas Southwestern Medical Center, respectively.  Thirty-eight of the top 50 leading institutes are American.  (Weizmann 09.08)

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9.2  Cellebrite Launches Tool for Forensically Sound Extraction of Public Domain Social Media Data

Cellebrite has introduced a new UFED Cloud Analyzer solution that provides forensically sound, real-time collection, preservation and analysis of data in the public domain including location information, profiles, images, files and communications from the most popular social media applications.  This new offering from Cellebrite saves investigative teams significant time and labor by eliminating the time-consuming, manual process of searching and capturing evidence from multiple sites and cloud sources, including Facebook.  The addition of public domain search to UFED Cloud Analyzer helps investigative teams access and share evidence with easy-to-use dynamic reporting.  When combined with Cellebrite’s recently enhanced analytics solution, investigators can gain access to powerful text and image examination capabilities to analyze public domain social media data with private cloud or social media data, pursuant to a warrant, as well as mobile device, computer and cellular operator data to immediately identify evidence that is critical to an investigation.

Cellebrite is the only company with the capability to provide investigative teams with a comprehensive digital intelligence solution for collection, collaboration and analysis of digital data from a full range of sources.  By partnering with Cellebrite for both UFED Cloud Analyzer and Cellebrite’s powerful Analytics offering, agencies can access an integrated set of tools from a single provider, reducing cost and risk while optimizing workflow and accelerating time to evidence.

Digital data plays an increasingly important role in investigations and operations of all kinds.  Making data accessible, collaborative and actionable is what Petah Tikva’s Cellebrite does best.  As the global leader in digital intelligence with more than 60,000 licenses deployed in 150 countries, we provide law enforcement, military, intelligence and enterprise customers with the most complete, industry-proven range of solutions for digital forensics, triage and analytics.  By enabling access, sharing and analysis of digital data from mobile devices, social media, cloud, computer, cellular operators and other sources, Cellebrite products, solutions, services and training help customers build the strongest cases quickly, even in the most complex situations.  As a result, Cellebrite is the preferred one-stop shop for digital intelligence solutions that make a safer world more possible every day.  (Cellebrite 07.08)

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9.3  Mellanox Announces Availability of BlueField Storage Solutions that Accelerates NVMe over Fabrics

Mellanox Technologies announced the availability of storage reference platforms based on its revolutionary BlueField System-on-Chip (SoC), combining a programmable multicore CPU, networking, storage, security, and virtualization acceleration engines into a single, highly integrated device.  BlueField integrates all the technologies needed to connect NVMe over Fabrics flash arrays, with the fastest performance available in the market.  BlueField provides 200 Gb/s of throughput and more than 10 million IOPS in a single SoC device.  In addition, the powerful on-board multicore ARM processor subsystem enables flexible programmability that allows vendors to differentiate their software-defined storage appliances with advanced capabilities.  This makes BlueField the ideal chip to control and connect All Flash Arrays and Just-a-Bunch-Of-Flash (JBOF) systems to InfiniBand and Ethernet Storage fabrics.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end InfiniBand and Ethernet smart interconnect solutions and services for servers and storage.  Mellanox interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance capability.  Mellanox offers a choice of fast interconnect products: adapters, switches, 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 and financial services.  (Mellanox 08.08)

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9.4  Orbotech Wins $40 Million Worth of Orders from China’s CEC Panda for New Gen 8.6 LCD Fab

Orbotech has received orders totaling approximately $40 million from TFT LCD panel maker, CEC Panda LCD Technology Co., for phase one of CEC Panda’s new Gen 8.6 fab in Chengdu, China.  The orders are for a range of Orbotech’s industry-leading flat panel display (FPD) inspection, testing and repair solutions, including Orbotech Quantum, Orbotech ArrayChecker and Orbotech ProcessSaver, with deliveries expected to begin during the third quarter of 2017.  CEC Panda has indicated that it expects to reach a maximum capacity of 60,000 glasses per month in phase one of mass production.

Orbotech’s Quantum FPD AOI system offers display manufacturers cutting-edge automated inspection solutions for all types of display technologies, including flex and OLED.  Orbotech FPD AOI systems increase production yields using advanced optics for image acquisition, unique image processing technologies, algorithms and data processing capabilities, microscopic video imaging, CD/Overlay measurements and automated macro (Mura) inspection to enable high-sensitivity defect detection and extremely accurate classification.

The Orbotech ArrayChecker test system determines whether individual pixels or lines of pixels are functional.  It also finds more subtle process defects such as variations in individual pixel voltage. Defect data are used for repair and statistical process control to decrease material costs and improve throughput.  The Orbotech ProcessSaver is an advanced repair solution that locates and repairs metal defects and for re-patterning p-Si and photo resist in the high-volume fabrication of flat panel displays (FPDs).  Orbotech repair solution provides advanced laser scanning technology combined with automatic repair features and high throughput.

Yavne’s Orbotech is a leading global supplier of yield-enhancing and process-enabling solutions for the manufacture of electronics products.  Orbotech provides cutting-edge solutions for use in the manufacture of printed circuit boards (PCBs), flat panel displays (FPDs), and semiconductor devices (SDs), designed to enable the production of innovative, next-generation electronic products and improve the cost effectiveness of existing and future electronics production processes.  (Orbotech 08.08)

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9.5  Dronomy’s SiteAware Integrates with PlanGrid for Better Job Site Intelligence

Dronomy has integrated with San Francisco’s PlanGrid, the leader in construction productivity software.  Together, general contractors, project owners, real estate developers and subcontractors can now add current, objective, and contextual views of their project status into their construction management workflow.  Using autonomous drones, SiteAware digitizes the reality of construction projects from all angles.  All data is accessible in the cloud and captured imagery is automatically processed into accurate 2D, 3D and 4D models and analyzed into actionable information, such as Automatic 3D Change Detection.  Now, users can save data captured with SiteAware, including snapshots from 2D, 3D, and 4D models, directly to PlanGrid, and can easily reference them on drawings and in RFIs.  The seamless integration between SiteAware and PlanGrid improves collaboration among project teams and stakeholders.

Tel Aviv’s Dronomy aims at building knowledge into construction through constant innovation.  We build site awareness to enhance construction efficiency by providing actionable insights and continuously capturing the state of construction sites.  With SiteAware, construction companies, project owners and real estate developers can monitor their projects safely and with ease so it becomes a daily routine, reducing costs overruns and project delays.  (Dronomy 10.08)

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9.6  Shopicks Rebrands its Fast-Growing Shopping Platform as Thinkover

Shopicks has rebranded its web extension, site and mobile app as Thinkover.  Launched in December 2015 and rapidly approaching one million users, the successful e-commerce shopping app will continue to allow users to easily find, save and view items from any online retailer.  It will now be offering users new interactive features such as the ability to invite friends and then share, comment on and ‘like’ each other’s items, as well as expanding into additional areas beyond traditional shopping behaviors.

Thinkover enables users to discover, collect, organize and manage online shopping on one easy-to-use platform, solving the largest e-commerce pain point for both consumers and retailers.  Users can drag and drop any item into its proprietary “Thinkover Place” for easy reference, sharing, and to receive merchant alerts such as sale notifications.  Before Thinkover’s creation of this new space between buying and browsing, consumers suffered by having to save items on individual websites and risk losing or forgetting their coveted items.  Additionally, Thinkover enables retailer’s products to remain at the forefront of their customer’s shopping behavior and thus facilitates more bottom-of-the-funnel transactions for merchants.

Bnei Brak’s Thinkover has solved one of the primary frustrations that both consumers and e-commerce retailers face by creating a beautiful, intuitive and consistent location for mobile and web decision-making.  Users can drag and drop any item into Thinkover’s proprietary “Thinkover Place” for easy reference, for sharing and to receive merchant alerts, such as sale notifications.  Thinkover is currently available for Google Chrome, Safari and iOS.  (Thinkover 09.08)

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9.7  Orbit to Expand Multi-Purpose Airborne Satcom Terminal Development to Include Helicopters

Orbit Communications Systems announced that it intends to expand the development of its new Multi-Purpose Terminal (MPT) for airborne satcom to include helicopters.  The company received an order for approximately $3 million from a global provider of defense products and services for the delivery of helicopter systems to a leading air force between 2018 and 2022.  Built to military standard (MIL-STD), the 30-cm antenna (MPT30) will deliver data communications via satellite to a wide range of military helicopters.  The system was designed to overcome the many challenges posed by helicopter installations, such as constant vibration and the need for a self-cooling mechanism when placed behind the exhaust systems.

Orbit’s 30-cm Multi-Purpose Terminal (MPT30) delivers Internet-based data communications via satellite to helicopters. Built to military standard (MIL-STD), the MPT30 features minimal Size, Weight and Power consumption (SWaP).  The ultra-compact and cost-effective terminal has been ruggedized to overcome the many challenges posed by helicopter installations, including constant vibration and the need for a self-cooling mechanism when placed behind the exhaust systems.

Netanya’s Orbit Communications Systems is wholly-focused on precision tracking-based communications – in the areas of satcom, telemetry and remote sensing – and provides an innovative solution for airborne audio management.  With certification by defense, government and commercial agencies, they deliver tailor-made, turnkey solutions at sea, on land and in the air.  (Orbit 14.08)

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9.8  affiliaXe Doubles Growth in Online Sales by Bolstering eCommerce Boom

affiliaXe, the Affiliate Marketing platform that changes the way businesses acquire new customers worldwide – is experiencing a colossal growth, doubling revenue to over $100 million in eCommerce and online sales.  Affiliate marketers (a.k.a affiliates) play a key role in the customer acquisition efforts.  They are responsible for significantly increasing sales & revenue for advertisers and helping them expand into new markets globally in a risk-free approach – affiliates only get paid on sales they bring.  While most marketing services focus on generating leads and/or app installs, which may or may not result in sales, affiliaXe, specializes in acquiring new customers and focuses solely on increasing online sales in any country or region across the globe.  Whether it’s a global brand offering thousands of different products to users from all over the world, a startup selling one product either locally or internationally, or a domestic business marketing products in its own country, collaborating with the right affiliates – those experienced specifically in customer acquisitions (online sales) – makes all the difference for a business’s success.

With a vision of boosting online sales for all brands in mind, affiliaXe has built a vast network of more than 15,000 affiliates & publishers experienced in Native Advertising, Display (banners), SMM, SEM & Email Marketing, both in desktop and mobile.  In order to support the high growth of affiliates & advertisers, affiliaXe developed an advanced technological infrastructure that leverages performance data, provides vital insights and optimizes results.

As a global leader in Affiliate Marketing, Tel Aviv’s affiliaXe helps brands grow revenue in a risk-free environment.  Along with eCommerce, the startup delivers high-quality sales in Fashion, Software, Dating, Gaming, Health & Beauty, and Travel.  (affiliaXe 15.08)

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9.9  Delphi Partners with Innoviz for High-Performance LiDAR Solutions for Autonomous Vehicles

Gillingham, UK’s Delphi Automotive has signed a commercial partnership agreement with Innoviz Technologies, a leading Israeli-based company developing LiDAR technology for the mass commercialization of autonomous vehicles.  Innoviz’s proprietary LiDAR sensing solutions will be integrated into Delphi’s systems to provide automakers with a comprehensive portfolio of autonomous driving technologies.  Innoviz LiDAR technology utilizes a solid-state design to provide longer-range scanning performance and superior object detection and accuracy capabilities.  Long range LiDAR is critical for enabling Level 3 and Level 4 autonomous vehicles to travel at high speeds, as these vehicles will need to identify objects at far distances and in great detail in order to operate safely.  To further support the commercial partnership, Delphi has also made a minority investment in Innoviz.

Kfar Saba’s Innoviz develops cutting-edge LiDAR remote sensing solutions to enable the mass commercialization of autonomous vehicles.  The company’s LiDAR products, InnovizOne and InnovizPro, offer solid-state design that uses Proprietary technology to deliver superior performance at the cost and size required for mass market adoption.  (Delphi Automotive 18.08)

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9.10  GuardiCore Honored as Gold Winner in Deception Based Security in 2017 Golden Bridge Awards

GuardiCore has earned the prestigious Gold status in the Golden Bridge Awards for their GuardiCore Centra Security Platform.  The coveted annual Golden Bridge Awards program encompasses the world’s best in organizational performance, innovations, products and services, executives and management teams, women in business and the professions, innovations, best deployments, product management, public relations, marketing, corporate communications, international business and customer satisfaction programs from every major industry in the world.  Organizations from all over the world are eligible to submit nominations including public and private, for-profit and non-profit, largest to smallest and new start-ups.

GuardiCore uses multiple detection methods including dynamic, distributed deception, analysis of policy-based traffic flows and reputation analysis of domain names, IP address and file hashes to detect breaches inside the data center faster, reduce dwell time and block lateral movements.  GuardiCore’s unique, multi-method breach detection – based on patented dynamic deception, policy-based detection and reputation analysis – quickly identifies, investigates and thwarts confirmed attacks with pinpoint accuracy.  Automatic incident analysis provides security teams with real-time Information and comprehensive intelligence about attack methods so they can quickly prioritize security response actions which would otherwise involve hours of human analysis using traditional tools and techniques.

Tel Aviv’s GuardiCore is a leader in data center and cloud security focused on delivering more accurate and effective ways to stop advanced threats through real-time breach detection and response.  Developed by the top cyber security experts in their field, GuardiCore is changing the way organizations are fighting cyber attacks in their data centers.  (GuardiCore 17.08)

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9.11  Foresight Completes a Successful System Demonstration with Uniti Sweden

Foresight Autonomous Holdings announced that the company has successfully completed a system demonstration performed with Uniti Sweden.  The system’s capabilities were demonstrated in Sweden, under a controlled environment and in open road driving.  The parties intend to negotiate a definitive agreement for commercial cooperation whereby Foresight’s multispectral all-weather conditions system will be developed and integrated into Uniti’s electric vehicles as an advanced driver-assistance system (ADAS), as well as the leading sensor system for the future autonomous capabilities of Uniti’s electric cars.

Ness Ziona’s Foresight, founded in 2015, is a technology company engaged in the design, development and commercialization of Advanced Driver Assistance Systems (ADAS) based on 3D video analysis, advanced algorithms for image processing and artificial intelligence.  The company, through its wholly owned subsidiary, develops advanced systems for accident prevention, which are designed to provide real-time information about the vehicle’s surroundings while in motion.  The systems are designed to alert drivers to threats that might cause accidents, resulting from traffic violations, driver fatigue or lack of concentration, etc., and to enable highly accurate and reliable threat detection while ensuring the lowest rates of false alerts.  (Foresight 21.08)

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10.1  Israel’s CPI Unexpectedly Fell in July, Home Prices Rising

Israel’s Consumer Price Index (CPI) fell by a surprising 0.1% in July, the Central Bureau of Statistics announced on 15 August.  In recent months the inflation rate has again turned negative and the figure for the twelve months to July is minus 0.7%.  Only four months ago, inflation was running at an annual rate of 0.9% and approaching the government target of 1%-3%.

Prices of fresh fruit and produce fell 2% last month, clothing and footwear prices fell 8.1% and furniture and household equipment fell 0.9%.  Prices of fresh fruit rose 1.5% last month, and apartment rents rose 0.9%.

In a comparison between home prices in May-June 2017 with prices in April-May 2017, the index of home prices rose slightly, by 0.1%.  In comparison with the May-June period in 2016, prices rose 4.5%.  However, the average apartment price in Israel in the first quarter of 2017 was NIS 1.432 million, down 3.8% from the first quarter of 2016.  A possible explanation is that more homes are being sold in the periphery and this is pulling the average home price down.  (CBS 15.08)

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10.2  Israeli Economy Grew By 2.7% During Second Quarter

The Central Bureau of Statistics announced that Israel’s GDP grew by 2.7% in the second quarter of 2017.  This is an improvement on the 0.6% growth in the first quarter (heavily influenced by a slump in new car sales) but well below the 4.4% growth in the fourth quarter of 2016.  In the first half of 2017, the economy grew at a sluggish 2.1%, compared with 4.6% in the second quarter of 2016 and 4.7% in the first quarter of 2016.  In the second quarter of 2017, there was a 6.5% jump in private consumption and 5.2% rise in investment in fixed assets.  However, exports of goods and services in the second quarter fell 8.8% on an annualized basis.  These figures are all first estimates and are likely to be significantly revised.  (CBS 16.08)

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10.3  Israel’s National Expenditure on Education Rises by 5% in 2016

Expenditure on education in Israel reached a record high of NIS 94.8 billion ($26 billion) in 2016, the Central Bureau of Statistics announced on 20 August.  The bureau found that education-related expenditures accounted for 7.8% of Israel’s GDP, marking a 5% increase from 2015.  The data included funding of public and private institutions for all levels from pre-primary to post-secondary, as well as household spending on private tutors, textbooks and related expenses.  It also included construction of educational institutions and the purchase of equipment.

Despite Israel supposedly having free public school education, fees paid by Israeli parents accounted for 21.9% of education expenditure in 2016, similar to the 2015 level.  The government paid the remaining 78.1%, also similar to in 2015.  The data also shows that 75% of public spending on education goes to paying teachers and employees of the school system, while only 21% is used for various services and supplies.

The report added that the government sector financed 94% of the 2016 expenditure for primary education and 75% for pre-primary education institutions.  This marked a significant drop since as of 2013, state pre-primary education includes education for children aged 0-3, which increased the participation of household spending.  Data for 2014 showed that the government was responsible for 85% of the funding for secondary schools and 65% of universities, excluding separately budgeted research.  It also supported 47% of funding for colleges, both academic and non-academic, and 9% of the funding for other institutions.  (CBS 20.08)

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10.4  Israel’s Unemployment Rate Falls to New Low of 4.1%

The Central Bureau of Statistics announced that Israel’s unemployment rate fell from 4.3% in June to 4.1% in July.  In total, there were 4 million people in the Israeli workforce aged over 15 in July, of whom 3,836,000 were employed and 164,000 were unemployed.  The rate of participation in the labor force in the 25-64 age bracket rose from 79.8% in June to 80.1% in July.  (CBS 21.08)

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10.5  Israel’s 2016 Budget Deficit Lowest Since 2008

According to the state reports, which combine financial figures from 191 different entities, government ministries, statutory corporation and government companies, the final government deficit for 2016 amounted to 2.1% of GDP (NIS 25 billion).  This is the lowest deficit since the 2008 global credit crisis and NIS 10 billion less than the planned 2016 deficit.

Israel’s 2016 accounting deficit, on the other hand, was NIS 123 billion; the main reason for this was the revision of the mortality tables at the National Insurance Institute (NII).  Due to this change (and other changes, such as the increase in the old age allowance), the NII’s future payments grew NIS 100 billion to NIS 652 billion.  As well, both government spending and government revenue increased in 2016: state revenue was up 5% to NIS 460 billion, while spending by government ministries grew 8%.  Spending by the civilian ministries rose 9% to NIS 225 billion, and the defense establishment’s spending was up 4% to NIS 72.9 billion.

A look at the figures for 2006-2010 shows that spending by the civilian ministries is on an upward trend (from 65.3% to 70.3% of budgetary spending), defense establishment spending fell from 22.6% to 20.2% of budgetary spending and interest expenses on the debt are clearly declining (from 12.1% to 9.4%), thanks to the low interest rate in the capital markets.  (Globes 21.08)

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10.6  Israeli Prices Far Higher Than OECD Average

Israelis would enjoy a far higher standard of living were it not for the high cost of living, a recent survey published by the Ministry of Finance chief economist concludes.  The chief economist stresses that prices in Israel are higher, often by tens of percentage points, that is acceptable in OECD member countries and the problem is especially severe in the transport, hotels and electrical products sectors.  The chief economist said that price differences between Israel and other developed countries can reach 52% with durable goods such as cars and electrical products, 30% in transport and 29% in restaurants and hotels.  The chief economist thinks that exposing sectors to more competition will help lower the cost of living and improve Israel’s ranking in GDP per capita.

Regarding the connection between the standard of living and prices, the chief economist writes, “In a structured way, the more a country is developed, on average, the level of prices in it rises.  The more the standard of living rises, then salaries tend to rise accordingly.”  GDP per capita in Israel is about $3,200 annually – a figure that places Israel 20th among OECD countries, just behind France.

However, when comparing GDP per capita in terms of purchasing power (PPP), Israel slips three places behind Italy, Spain and the Czech Republic.  The explanation for this difference is the level of prices in Israel, which is high by international comparison with prices particularly high in durable goods, transport, restaurants and hotels.  The only prices that are relatively low in Israel are in telecommunications, fruit and vegetables and education.  (Globes 07.08)

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10.7  Israelis Tax Debts Are Rising

The Accountant General has reported that debts to the Israel Tax Authority grew from NIS 12.732 billion in 2015 to NIS 14.684 billion, a NIS 2 billion increase in 2016 alone.  The Tax Authority can collect these debts with relative certainty.  Debts from purchase taxes, which Minister of Finance Kahlon raised to 8 – 10%, increased by an especially steep 37%.

The figures show that the volume of unpaid taxes jumped from NIS 1.747 billion in 2016 to NIS 2.39 billion in 2016.  Another sphere in which uncollected debts rose alarmingly was debtors owing compensation to entitled parties in a criminal proceeding.  In these cases, the courts ordered criminals to pay compensation to their victims as part of their punishment.  The Ministry of Justice Enforcement and Collection Authority is responsible for collecting the compensation.  According to the report, debt in this category increased from NIS 400 million in 2015 to NIS 480 million, a 20% rise.  (Globes 21.08)

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10.8  Survey Finds Israel’s Gasoline Prices 3rd Highest in the World

Israeli drivers pay the third-highest prices in the world to fill their cars with gasoline, according to a survey by the Bloomberg news agency released on 16 August.  The survey, called “Gasoline Prices Around the World: The Real Cost of Filling Up,” found that the average price per gallon of gas in Israel is $6.68.  Only Norway and Hong Kong ranked higher for gas prices.  In Venezuela, which is undergoing political turmoil, gas costs just 1 cent per gallon. In Saudi Arabia, drivers pay 84 cents per gallon, while in Iran the price is $1.25.  In the United States, the average price per gallon is $2.56.

Taxes, namely withholding tax and value-added tax, are the main reason why gas is so expensive in Israel, accounting for 67% of the price at the pump.  With an average daily income of $114.20, it takes 5.85% of a day’s wages to afford a gallon of gas.  The average driver uses 123.55 gallons a year, which eats up 1.98% of the typical salary.  (Israel Hayom 17.08)

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10.9  Israel’s Gas Royalty Revenue Down Slightly in First Half 2017

Israeli government revenues from natural gas, oil and quarrying royalties totaled NIS 403 million in the first half of 2017, the Ministry of National Infrastructures, Energy and Water Resources announced.  Most of these revenues, NIS 391 million derives from natural gas royalties and almost all that amount, NIS 390 million was from the offshore Tamar gas field.  This sum reflects the 4.8 billion cubic meters (BCM) of natural gas that was produced in the first half of 2017 compared with NIS 4.5 BCM in the first half of 2016.

Although gas production rose 7% in the first half of 2017, compared with the corresponding quarter of 2016, revenues from the Tamar field fell slightly by 0.3% due to a 9% appreciation of the shekel against the dollar.

In addition to gas and oil royalties, new legislation meant that the Natural Resources Administration received NIS 5 million from various fees and operations as well as NIS 7 million from quarrying.  (Globes 17.08)

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11.1  ISRAEL:  Outlook Revised to Positive on Economic Growth Momentum; ‘A+/A-1’ Ratings Affirmed

On 4 August 2017, S&P Global Ratings revised its outlook on the State of Israel to positive from stable.  At the same time, we affirmed our ‘A+/A-1’ long and short-term foreign and local currency sovereign credit ratings on Israel.


The positive outlook on Israel reflects our opinion that, despite existing spending pressures, there is a potential for stronger-than-anticipated general government fiscal performance over the next two years.  We expect that Israel’s economic and balance-of-payments dynamics will stay strong while security risks remain contained.

We could raise our ratings in the next 24 months if the government makes further progress in lowering the public debt burden as a percentage of GDP.

We could revise the outlook to stable if, over the next 12-24 months, higher spending on social or security issues, and/or lower revenues, led to weakening budgetary performance of the general government.  This would imply the stabilization of general government debt over 2017-2020 broadly in line with our base-case scenario.  We could also revise the outlook to stable if the economy’s growth or balance-of-payments performance were weaker than our base-case forecasts or if there were a substantial increase in domestic or external security risks.


The rating action reflects our opinion that Israel’s improved fiscal framework and strong economic growth could enable further progress on fiscal consolidation over the next few years.  Although recent fiscal improvements were partly driven by cyclical factors, we believe that institutional measures that restrain future expenditure growth could enable the government to resist ongoing spending pressures and counterbalance potential revenue underperformance due to recent pro-cyclical tax cuts.  This scenario is even more likely if accompanied by stronger economic growth.  Israel’s economic performance since the global financial crisis has been remarkable, with GDP in U.S. dollars now about $100 billion larger than in 2010.  What’s more, the current account is in surplus, and the unemployment rate is the lowest in several years.

Institutional and economic profile:

-Wealthy economy and effective institutions support fiscal adjustment

-A prosperous, modern and diversified economy, benefiting from relatively high growth rates.

-Favorable growth prospects should be conducive to better fiscal outcomes.

-Strong and accountable institutions despite fragmented domestic politics.

-High exposure to external and domestic security risks.

Israel’s economy remains prosperous and diverse, with high-value-added manufacturing and services sectors, especially in the field of information technology.  The information and communication sector contributes almost 10% of the gross value added, and scientific and technical activities around 3%.  This is underpinned by high expenditures in research and development, exceeding 4% of GDP on average, the highest among member countries of the Organization for Economic Co-operation and Development.  We assume Israel’s economy will expand by about 3.2% on average in 2017-2020, which is a relatively high rate compared with that of peers with similar wealth levels.  We note that the projected resilient growth comes on top of Israel’s already remarkable economic performance since the global financial crisis.

Specifically, U.S. dollar GDP has increased by over 45% compared with that in 2010, and the unemployment rate is at historical lows.  We expect growth will stem from private consumption, continued corporate investment activity and health services exports, supported by relaxed monetary policy.  In per capita terms, this equates to somewhat weaker growth rates of around 1.2% per year, reflecting robust population growth.

In our view, strong economic prospects could support Israel’s fiscal performance through higher government revenue intake, despite recent tax cuts.  In addition, we anticipate that, as both the consumer price index and the GDP deflator growth edge toward about 2% on average over our four-year forecast horizon, nominal output growth will be notably stronger than real output growth.  We now believe that the general government’s budgetary performance (including local authorities) could exceed our present forecasts, owing to strong growth and maintenance of fiscal discipline.

Overall, institutional and governance structures in Israel are generally effective, with a satisfactory degree of transparency and accountability.  Despite highly fragmented domestic politics, the ruling coalition, formed in May 2015, passed the biennial budget for 2017-2018 without internal wrangling.  Over the past few years, we have also observed commitment to fiscal prudence and general adherence to existing fiscal rules.  However, the coalition’s structure remains heterogeneous, which – even if there were no early elections – may potentially constrain the government’s capacity to address longer-term structural issues of the economy and society, in our view.  These issues include excessive red tape, infrastructure gaps, weak labor market participation, poor skills of some social groups (mainly Haredi men and Arab-Israeli women), high real estate prices and low availability of housing.  However, these challenges present a longer-term risk that goes well beyond our rating horizon.

That said, the ratings remain constrained by persistent geopolitical risks.  Major outbreaks of violence toward the Palestinians could not only inflict social and economic costs, but also lead to a backlash from the international community.  On the northern border, the conflict in Syria and Iraq, as well as potential tensions with Hezbollah, pose a medium-term security threat.  The new U.S. administration seems committed to supporting Israel in case security risks escalate.  However, any significant armed conflict could have a negative impact on the ratings if it materially deterred investment, weakened the economy’s growth potential or strained fiscal flexibility.

Flexibility and performance profile:

-High debt is reducing, thanks to improved fiscal performance, and the external profile remains very strong

-Increased likelihood the government could cement its recent fiscal outperformance due to cyclical and structural factors.

-External position remains strong on a flow and stock basis.

-Monetary policy effectiveness is high.

Strong tax revenue growth, as well as shrinking interest spending lowered the general government’s fiscal deficit substantially to about 1.6% of GDP on average in 2015-2016 from an average of 2.5% in 2010-2014, while average central government deficits stood at 2.1% and 3.3% for the same periods.  Consumption growth was higher than expected, but cost containment measures have also played a role in stronger fiscal outturns, in our view.  Over the past few years, a multi-year spending agreement has been reached with the defense ministry – the source of previous fiscal slippages.  The government has also instituted and generally complied with fiscal rules, and improved control over spending commitments for line ministries, all of which support fiscal discipline.

For this reason, we now see upside potential for our current fiscal forecasts.  There is an increasing likelihood that solid economic growth could support government’s efforts to lock in the fiscal over-performance reported over the past few years.  This could result from continued cost-containment measures to compensate for recent tax cuts (including on personal and corporate income taxes) and civilian spending hikes.  The visibility on such a scenario will increase after the expenditure review in November 2017 and during the budget cycle for 2019-2020.  Additional revenues from higher-than-planned tax revenues or ongoing efforts to downsize tax benefits and tax evasion could also benefit Israel’s performance.  Under this scenario, general government deficits are likely to be contained to 2.0%-2.1% of GDP, whereas central government deficits will stay below existing fiscal targets.

Such numbers would be stronger than our current base-case forecast, which implies a moderate fiscal decline due to increased spending on health, education and infrastructure, aggravated by a potentially early election.  As a result, average general government deficits will likely approach 3% of GDP in 2017-2020 and net general government debt (that is, gross debt net of liquid government assets, mainly in the form of deposits at the central bank) will stay close to the current level of about 60% of GDP over our forecast period through to year-end 2020.  High nominal GDP growth rates and low inflation (over 50% of Israel’s general government debt is linked to the consumer price index) pushed Israel’s net government debt down to 59.3% of GDP in 2016 compared with 61.3% the previous year.

Strong export performance, in particular, booming high-value-added services exports, and the ongoing development of Israel’s offshore natural gas fields with its significant export capacity, support the country’s strong external profile.  Almost 15 years of current account surpluses have strengthened Israel’s external balance sheet, turning the country into a net creditor versus the rest of the world.  We forecast that Israel’s liquid external assets will continue to outstrip its gross external debt over our entire forecast horizon.  These dynamics are also lowering the country’s gross external financing needs, indicating low dependence on external financing.

In addition, we consider Israel’s monetary policy flexibility to be a credit strength.  The Bank of Israel (BOI; the central bank) has been intervening in foreign exchange markets, over and above its commitment to purchase foreign currency to offset the impact of domestic natural gas production on the balance of payment.  We view the exchange rate regime as a managed float, which somewhat hampers monetary policy flexibility, in our view.

Additionally, the BOI is sticking to accommodative monetary policy, countering the strength of the shekel to maintain the competitiveness of Israel’s exports.  It has maintained the historical low of 0.1% as its key policy rate since March 2015.  Yet, since then, the shekel has continued to appreciate against the currencies of key trading partners, owing to Israel’s strong fundamentals, namely its current account surpluses, strong net foreign direct investment and high GDP growth rates.  Over 2016, the shekel appreciated by 3.5% in terms of the nominal effective exchange rate, which was one of the factors behind a negative consumer price index for the second consecutive year.  We expect the moderate appreciation will continue in the next few years.  The exchange rate poses pricing risk, adding to the need for continued innovation and reduction of regulatory pressures for local businesses to remain competitive in external markets, in our view.

One of the key challenges to monetary policy continues to be rising house prices.  After years of relative stability, real house prices have increased by over 100% since the end of 2007.  The BOI’s past attempts to dampen the housing market by raising interest rates delivered limited results, only pushing up foreign exchange rates.  The government has implemented a comprehensive set of measures to weaken speculative demand and increase housing supply, including freeing up more land for development, changing the tendering criteria, allowing foreign presence in the construction market, and speeding up processes for construction permissions.  Given capacity constraints, relatively low productivity in the construction industry, and continued growth in demand, addressing the supply shortage might take time, however.

Israeli banks’ exposure to the local real estate sector, mainly to residential mortgage loans, has grown in recent years.  The banking sector’s exposure to real estate and construction (including residential and commercial construction and infrastructure credit) is currently close to 20%, which is the BOI’s allowed maximum.  Even though the tightening of macroprudential measures has reduced systemic risks to Israel’s banking industry and the housing market seems to have cooled early this year, any abrupt correction in house prices could still weigh on the economy.  (S&P 04.08)

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11.2  LEBANON:  No Room for Optimism or Pessimism in an Economy Governed by Cyclicality

 The Group Research Department of Beirut’s Bank Audi issued the following review of the Lebanese economy for 2017:

No tangible recovery in real economic activity

Lebanon’s real economy reported a slight improvement in the first few months of 2017, yet still below the requirements for a tangible recovery in the aftermath of a sluggish performance for more than half a decade.  It is worth recalling that Lebanon’s real GDP growth, which had reported an average of 9.2% between 2006 and 2010 during the boom era of Lebanon, declined to a yearly average of 1.7% since 2011.  The slightly improving economic activity this year is driven by consumption rather than investment, with a continuing wait-and-see attitude among investors delaying major investment decisions as actually witnessed by the weak loan growth this year.  Consumption on the other hand is benefitting from a slight improvement in consumption attitude among Lebanese residents and a better incoming of Lebanese non-residents to the homeland, in addition to the relative upward correction in the touristic sector.

Positive growth in financial inflows, though insufficient to reverse the balance of payments deficit

Within the context of a 9% growth in financial inflows to Lebanon over the first half of 2017 relative to the same period of last year, the deficit in the balance of payments declined from $1.8 billion to $1.1 billion.  Having said that, the growth in inflows, which decelerated noticeably in the second quarter of the year, was not able to fully offset the large trade deficit and to reverse the balance of payments deficit.

BDL’s foreign reserves at a new historical high level at end-July

The first half of the year 2017 witnessed an increase in the Central Bank’s FX reserves, mainly supported by the new BDL operation, while the banks’ foreign currency Certificates of Deposits portfolio posted a shy year-to-date growth.  After tracing a downward trajectory over the first five months of 2017, the Central Bank of Lebanon’s foreign assets managed to end the first seven months of the year on a positive note to reach a new historical high level of $42.2 billion at the end of July, which provides a comfortable liquidity cushion to protect the currency peg.

Rising deposit base at a healthy pace feeding banks’ core liquidity positions

Lebanese banks witnessed a fairly good first half-year in 2017, helped by the improving political climate and security stability, especially in the aftermath of the normalization of political institutions’ work and ensuing positive spillovers on depositor mood.  Measured by total assets of banks operating in the country, banking activity progressed by 1.9% or the equivalent of $3.9 billion in the first half of 2017 to reach a new high of $208.2 billion at end-June.  The FX liquidity in foreign banks continued to rise to reach $12.2 billion at end-June 2017 (against $11.2 billion in December 2016), in spite of a noticeable decline during the month of June to engage in the new BDL operation.  As a result, the primary liquidity ratio in FX reached 58.2% at end-June, well above regional and global averages and reflecting banks’ sound liquidity buffers.

Mixed price movements in Lebanon’s capital markets during the first half of 2017

In an environment of extended overall domestic political settlement since October 2016 and driven by the renewal of the Central Bank of Lebanon Governor’s term in May 2017, as well as the agreement on a new electoral law in June 2017, Lebanon’s fixed income market posted healthy price gains during H1/17 that were reflected by significant contractions in bid Z-spreads along with contractions in five-year CDS spreads.  On the other hand, the stock market registered price falls over the covered period along with higher price volatility, as many stocks traded ex-dividend during the second quarter of the year 2017.  (Bank Audi 09.08)

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11.3  IRAQ:  IMF Executive Board Concludes 2017 Article IV Consultation with Iraq

On August 1, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the 2017 Article IV consultation with Iraq.

Iraq is facing a double shock arising from the conflict with IS and the plunge in oil prices.  In 2016, real GDP increased by 11% owing to a 25% increase in oil production, which was little affected by the conflict with ISIS.  This year, economic activity is expected to remain muted due to a 1.5% contraction in oil production owing to the OPEC + agreement to reduce oil production and only a modest recovery of the non-oil sector.

The decline in oil prices has driven the decline of Iraq’s international reserves from $54 billion at end-2015 to $45 billion at end-2016.  Fiscal pressures are ongoing, with the government deficit increasing from 12% of GDP in 2015 to 14% in 2016 despite the ongoing fiscal consolidation, due to weaker oil prices and rising humanitarian and security spending.

The authorities have appropriately maintained the exchange rate peg.  The simplification of documentation requirements implemented by the Central Bank of Iraq led to a decline in the parallel market spread to 6% in June 2017.

Medium-term growth prospects are positive.  Growth will be driven by the projected moderate increase in oil production and the rebound in non-oil growth supported by the expected improvement in security and implementation of structural reform.  Risks remain very high, however, arising primarily from volatile security, political tensions and poor policy implementation.

The Fund is supporting Iraq through a three-year Stand-By Arrangement in the amount of     SDR 3.831 million ($5.380 billion), equivalent to 230% of quota.

Executive Board Assessment

Executive Directors agreed with the thrust of the staff appraisal.  They welcomed the policies put in place by the authorities to deal with the shocks of the armed conflict with IS and the ensuing humanitarian crisis and the plunge in oil prices.  While medium-term growth prospects are positive, the medium-term outlook remains exposed to significant risks, arising primarily from oil price volatility, unstable security, political tensions and weak administrative capacity.  Although performance under the Stand-By Arrangement has been weak in some key areas, understandings on sufficient corrective actions have been reached to keep the program on track.  Against this background, Directors encouraged resolute implementation of the authorities’ program including continued efforts toward fiscal consolidation, strengthening the financial sector, and implementing structural reforms to promote private sector activity and improve the business environment.

Directors noted the fiscal adjustment achieved in 2016, albeit at a slower pace than programmed because of weak control of investment expenditure and spending pressures stemming from the military campaign against ISIS and assistance to internally displaced people and refugees.  They welcomed that this adjustment was achieved mostly through retrenchment of inefficient capital expenditure while protecting social spending.  Directors welcomed passage of a 2017 supplementary budget and the authorities’ commitment to implement further consolidation measures in 2017-18 to keep the program on track and ensure external and debt sustainability.  They stressed that fiscal space needs to be found to enhance human capital and rebuild the physical capital of the country.  Tackling the low level of non-oil tax revenue and very high level of public consumption would help create the fiscal room to finance growth-enhancing investment.

To strengthen financial sector stability, Directors encouraged the authorities to take measures to bolster supervision, and move forward with plans to restructure the state-owned banks that dominate the banking system.  They also encouraged strengthening the legal framework of the Central Bank, eliminating a remaining exchange restriction and a multiple currency practice and accelerating implementation of AML/CFT and anti-corruption measures.  Directors considered that the peg to the U.S. dollar, which provides a key anchor to the economy, remains appropriate.

Directors stressed the importance of implementing structural reforms to improve the investment climate, diversify the economy and achieve sustainable growth.  They urged the authorities to overhaul public financial management, including by completing a regular inventory and paying down any arrears, and strengthening expenditure commitment and cash management to prevent the accumulation of new arrears.  Directors also emphasized the importance of addressing weaknesses in administrative capacity and data provision.  In addition, the implementation of the budget-sharing agreement between the Federal and Kurdistan Regional governments would put both governments in a better position to address shocks.

It is expected that the next Article IV Consultation with Iraq will be held in accordance with the Executive Board decision on consultation cycle for members with Fund arrangements.  (IMF 09.08)

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11.4  IRAQ:  Iraq & Saudi Arabia to Reopen Border Crossings After 27 Years

Mustafa Saadoun posted on 20 August 2017 in Al-Monitor that as Iraq and Saudi are preparing to open land border crossings between them, trade activities are likely to resume in the next few weeks.

Iraq and Saudi Arabia are preparing to reopen their shared border crossings that were closed after the Iraqi invasion of Kuwait 27 years ago.  Following the conclusion of month’s long bilateral talks, both countries reached an agreement on 17 July, during a visit to Riyadh by Interior Minister Qasim al-Araji, to reopen several land crossings along the 505 mile border.

In a sign of support, US envoy Brett McGurk visited the Arar border crossing between Iraq and Saudi Arabia on 16 August and met with Thamer al-Sabhan, Saudi Arabia’s Arab Gulf affairs minister.

This year’s first convoy of Iraqi pilgrims to Mecca arrived in Saudi Arabia on 7 August via the Arar crossing.  Since 2003, the Arar crossing had opened just once a year for pilgrims.  However, this year, Saudi officials warmly welcomed Iraqi pilgrims at border crossings.  Most notably, Prince Faisal bin Khalid bin Sultan, governor of the Northern Borders Region, checked on Iraqi pilgrims in person.

Faleh al-Ziadi, governor of Iraq’s Muthanna province, said, “Hopefully, [the Jamima crossing] will be initially opened to pilgrims and later on for trade, following the Eid al-Adha holiday in early September.”  He also spoke of “an agreement with the Saudi side regarding the use of the crossing for the movement of people and goods between the two countries.”

As Iraq’s security situation deteriorated over the past decade, with the Islamic State taking control of Mosul in 2014, Saudi Arabia intensified its security measures, deploying 30,000 Saudi soldiers along the border with Iraq.

Yet trade activities will be revived once again along the Iraqi-Saudi border and citizens will be able to cross for mutual visits.  This marks a new era of joint coordination between Baghdad and Riyadh along the border.

A source in the Iraqi border guards, who was not authorized to speak to the media, told Al-Monitor, “There is ongoing Iraq-Saudi coordination to reopen border crossings, almost on a daily basis.  Also, the Iraqi Ministry of the Interior has increased security to secure roads leading to these crossings.”

The Iraq-Saudi coordination does not seem to be limited to the reactivation of economic activity at the land crossings.  Joint coordination centers will also be established to prevent smuggling and ensure the exchange of information between the countries.

In an interview with Dubai-based Saudi al-Arabiya TV on 23 July, Araji confirmed that the Iraqi government had reached an agreement with Saudi officials to open the Arar and Jamima crossings, not only for pilgrims but for trade.  “The Iraqi and Saudi sides have the strong will to promote bilateral cooperation,” the Iraqi interior minister said.  “Discussions on the opening of border crossings are now over, and both sides reached the implementation stage, during which new crossings for visitors, tourists and trade will be opened.”

Iraqi Minister of Transportation Kadhim al-Hamami told the press on 25 July that it is possible that the railway between Saudi Arabia and Iraq will be reopened as well.  This development, he said, “would unleash economic activity between the two countries and connect Arab countries through the railway.”  “Work is underway to reopen seven land crossings between Iraq and Saudi Arabia, including the Jamima and Arar crossings,” Hamami said.  “It is important to reopen the crossings, which will improve the movement of goods between the two countries.  Iraq is in dire need of many Saudi-made goods and food products.”

Iraqi economic expert Bassem Jamil told Al-Monitor that the reopening of the crossings “will positively affect the Iraqi economic situation, with the imposition of taxes on goods entering Iraqi territory.  This is true particularly since large quantities of goods will enter Iraq via Saudi territory.”

“New jobs will be created with the opening of crossings,” he said.  “This will also boost the Iraqi state treasury receipts no less than $10 billion per year.  Thus, it is of utmost necessity to gain economic advantages from this step.”

The opening will likely boost the presence of Saudi goods on the Iraqi market.  In turn, this could lead to a decrease in the availability of Iranian products, which have dominated Iraqi shops since 2003.  This move will benefit both Iraq and Saudi Arabia at the economic and political levels.  On the security level, Araji said that “there is joint cooperation to prevent smuggling activities between the two countries.”

Iraqi security expert Hisham al-Hashimi said, “The Iraqi-Saudi border was safe under the worst security circumstances in Iraq.”  He added, “Focus will be more on the economic than the security dossier in the opening of the Iraqi-Saudi border crossings.  Terrorists have not entered Iraq via this border, which was well protected by the Saudi side.  Also, the smuggling activities that took place were rare.”

The opening of border crossings between the neighboring countries will help boost the Iraqi economy.  Yet, more importantly, after years of tepid bilateral relations, the open crossings will create a regional balance of power in Iraq and promote ties between Baghdad and Riyadh.

Mustafa Saadoun is an Iraqi journalist covering human rights and also the founder and director of the Iraqi Observatory for Human Rights.  He formerly worked as a reporter for the Iraqi Council of Representatives.  (Al-Monitor 20.08)

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11.5  GCC:  Self-Imposed Barriers to Economic Integration in the GCC

Karen E. Young posted in AGSIW on 4 August that Qatar has lodged a complaint with the World Trade Organization against the United Arab Emirates, Saudi Arabia and Bahrain for blocking its air traffic and increasing the costs of basic food and medicine imports.  Though intra-Gulf state economic relations continue to suffer as a result of the current crisis, there are long-standing barriers to trade and investment flows that deserve consideration.  Since the inception of the Gulf Cooperation Council, there have been deep tensions on ceding sovereignty and facilitating the free movement of people, finance and ideas.  While trade flows between the GCC states have been increasing in recent years, some of the most important added value of integration has been in the facilitation of investment flows, the free movement of GCC citizens and large shared infrastructure investment, such as the Dolphin pipeline between Qatar, the UAE and Oman.

One can see the glass half empty or half full in terms of the progress of GCC economic integration.  In 1983, the GCC launched its Free Trade Agreement, which reduced trade restrictions between member countries and facilitated trade flows.  In 2003, the GCC marked another step forward with the establishment of a customs union.  The common market, allowing free movement of people and goods, began in 2008.  Intra-GCC trade has grown nearly fortyfold since its establishment and reached more than $90 billion in 2013; yet, it is still a small share of total trade volume, at about 8% of total trade in 2014.

The general trend of increased intra-GCC trade has been upward in the last decade, as the organization has sought to build institutional efforts to increase trade and human capital flows; consider tighter coordination in monetary policy; promote infrastructure investment in a shared rail network; and build linkages to share electricity and create a common energy market.  However, most of these ideas are currently on hold.  The GCC as an institution has attempted to meets its members’ goals of economic cooperation.  The problem isn’t the organization, per se, but rather reticence on the part of members to fully deploy the policy objectives they have devised.  It is the member states that continue to get in the way of their own stated economic development goals.

One prime example of a persistent barrier to economic integration is the protection of local agents in the framework of the GCC customs union.  Commercial agency is the representation of a foreign principal by a local agent for the purposes of distributing, selling, offering or providing merchandise or services inside domestic territory for a commission or profit.  All six GCC states have commercial agency laws, with varying degrees of restrictions.  Some agent protections are exclusive, in that one agent has control over the importation of a single good or brand without competition.  The general principle of these laws has been to help nationals develop independent businesses, transfer expertise and technology, and secure benefits of foreign investment to the national population.  Typical protections under commercial agency laws include: reserving the business of commercial agency for nationals; a registration system for agents; agent exclusivity granted by law; and protection from termination or nonrenewal.  The problem now is that the commercial agency restrictions are in conflict with the 2008 GCC efforts to encourage nationals to invest, work and buy property in neighboring member states.  These restrictions continue to privilege nationals over citizens of other GCC states, while also encouraging monopoly practices in the importation and distribution of goods and services.

The movement (and retention) of human capital in the Gulf is a simmering area of tension, which all GCC members will have to reconcile with their economic integration or isolation policies.  Recent efforts in both Qatar and the UAE to create pathways to permanent residency, if not citizenship, are an example of this policy challenge.  These efforts to attract highly skilled, and wealthy, migrants is meant to leverage growth in the private sector by attracting technology and investment to grow new businesses that would presumably seek a regional platform.  The chilling effect on business and government of deterrents to free movement of GCC citizens within the region, as well as attracting highly skilled migrants, will surely have a measurable impact on economic growth in the near term.

With free movement of human capital comes mobility of financial capital.  In the current dispute with Qatar, capital flight is a serious threat to long-term viability within the local bank system.  According to research by J.P. Morgan and data published by the Qatar Central Bank, capital outflows through the Qatari banking system may have been as much as $20 billion in June.  Nonresident depositors withdrew $3.8 billion from Qatari banks and funding from foreign banks decreased by $11.5 billion in June.  Capital flight is more likely to have been from non-GCC banks and investors, as GCC creditors held less than a quarter of Qatari banks’ foreign funding at the end of 2016.  There could also be a regional cascade effect in capital flight, as investors and lenders steer clear of potential conflicts.

Despite the platform and agreements the GCC provides to stimulate policy coordination, and the efforts individual state ministries make to promote regional trade, there are large gaps in compliance and shared political will to integrate.  There are several other areas of commercial tension that pose barriers to private sector growth and investment, which a more integrated GCC might provide.  The implementation of a shared value added tax is one example that could be the next integration hurdle for member states early in 2018.  The UAE has recently passed legislation to help administer tax collection and pave the way for broadening the state’s ability to access financial information on firms.  Whether the legal framework in one state will encourage integration and information sharing across the GCC looks increasingly unlikely, though each state has its own reasons to move forward with efforts to implement tax collection as a revenue stream.

The GCC states are their own best foreign investment partners, yet the current climate is in some ways a continuation of recurrent institutional and political barriers to economic integration in the region.  Economic integration is a symbolic ideal of possibilities of the GCC and meant to be a bridge to more difficult areas of cooperation in defense and security.  As Jeff Martini and colleagues at the Rand Corporation have argued, “within the sovereignty-sensitive GCC, economic cooperation was judged as more attainable than ceding decision-making over foreign affairs or merging their military capabilities into a truly integrated collective defense capability.”

The GCC’s efforts at economic diversification and economic integration are now at a tipping point.  The shared reform agendas across the region, including efforts to increase private sector productivity and diminish the state’s reliance on hydrocarbon revenue, hang in the balance.  The GCC is a network of six countries that manufacture very little and share an unconventional, resource-dependent model of economic development.  Diversification from oil and gas dependency has relied on infrastructure and real estate investment, largely in state hands, as well as the growth of financial services and an investment climate.  Much of that investment climate has privileged nationals through the commercial agent system that discourages movement and regional expansion.  The nature of GCC trade has changed such that the re-export of goods among Gulf states makes up an important part of their trade patterns.  In areas where there is opportunity, cooperation is essential for open markets to produce and trade electricity, to grow new financial centers with expertise in niche markets such as Islamic finance, and to grow their own equity trading platforms that support and fund local businesses.  The ideas are there and the institutional platform is in place.  What is missing now is the political will to move integration, and shared economic growth, onward.

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 04.08)

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11.6  KUWAIT:  State of Kuwait Ratings Affirmed At ‘AA/A-1+’; Outlook Stable

On 4 August 2017, S&P Global Ratings affirmed its ‘AA/A-1+’ long- and short-term foreign and local currency sovereign credit ratings on Kuwait.  The outlook is stable.


The stable outlook reflects our expectation that Kuwait’s public and external balance sheets will remain strong over the forecast horizon, backed by a significant stock of financial assets.  We expect these strengths to offset risks related to the current low oil price, Kuwait’s undiversified oil economy, and what we assess as its relatively nascent parliamentary system, in addition to geopolitical tensions in the region.

We could lower the ratings if:

-The policy response to low oil prices failed to lift growth over the forecast horizon amid weaker fiscal and external finances;

-Kuwait’s domestic political stability deteriorated; or

-Geopolitical risks were to significantly escalate.

We could raise the ratings if political reforms enhanced institutional effectiveness and improved long-term economic diversification, or if prospects for the oil sector improved significantly, though we think such scenarios are unlikely over the forecast horizon.


The ratings on Kuwait continue to be supported by the sovereign’s high levels of accumulated fiscal, external, and household wealth, despite the subdued – albeit improved – oil price environment.  The ratings are constrained by the concentrated nature of the economy and regional geopolitical tensions.  Kuwait derives about 60% of GDP, more than 90% of exports and about 90% of fiscal receipts from hydrocarbon products.  Given this high reliance on the oil sector, we view Kuwait’s economy as undiversified.

Institutional and Economic Profile: Economic resilience is boosted by public investment spending and gradual fiscal consolidation

-Despite lower oil prices, growth momentum will be maintained thanks to a broad public investment program.

-Decision-making ultimately rests with the Emir.

-The alignment of Kuwait’s foreign policy with the wider Gulf Cooperation Council (GCC) will limit spill-over effects of the Qatari crisis.

The sharp fall in oil prices since 2014 has caused a significant deterioration in Kuwait’s income levels – as measured by GDP per capita – as well as in its fiscal and external metrics, as has happened with other large oil exporters.  However, the creation of large fiscal and external assets via the transfer of past oil windfalls has afforded Kuwaiti policymakers the space to counter slowing growth by increased spending, particularly on infrastructure projects.

As a result, the economy has remained relatively resilient and job losses, particularly in the public sector, have been minimal.  We estimate that real GDP grew by 3% in 2016 supported by public investment growth.  Over 2017-2020, we expect the economy to grow at a similar pace on average supported by public spending on infrastructure projects.

The first public-private partnership (PPP) projects have been completed since the PPP law came into force in 2015.  Over the next few years, other projects in power, infrastructure and housing, currently in various stages of implementation, are likely to be completed.  This will help maintain economic growth, offsetting the effects of low oil prices.

We also expect a boost to growth as increased capacity from investments in gathering centers and upgrades to existing oil fields gradually come on stream, over the forecast horizon.  We expect Kuwait will remain compliant with its commitment to OPEC to cut production to 2.7 million barrels per day (bpd) until the end of 2017.  From then on, we anticipate that Kuwaiti oil output will rise to over 3 million bpd in 2020.  Production could increase further if an ongoing dispute in the shared neutral zone with Saudi Arabia is fully resolved.

We assume oil prices (Brent) will average $50 per barrel (/bbl) in 2017 and 2018, and $55/bbl in 2019 and beyond.  Kuwaiti crude (KEC) trades at about a $5 discount to Brent.

Kuwait’s political system is characterized by a powerful cabinet appointed by the Emir and a democratically elected parliament with limited authority over ministerial decisions.  Decision-making ultimately rests in the hands of the Emir, who can dissolve parliament.  This limits institutional checks and balances, in our view.

Kuwait has been playing the role of mediator after several GCC members boycotted Qatar.  Efforts to broker a solution have not yielded results.  However, we anticipate the risk of negative spillover effects from this crisis on Kuwait to be fairly low.  Kuwait’s foreign policy is aligned to that of the other GCC countries and is based around its strategic alliance with the U.S. and Saudi Arabia.

Geopolitical tensions persist, with the IS militant group in Iraq and Syria, as well as the ongoing war in Yemen, posing a threat to the wider region and Kuwait.

Flexibility and Performance Profile: Kuwait’s sizeable fiscal and external buffers remain key ratings strengths

-We anticipate gradual fiscal consolidation through 2020 and general government financing needs being met via a mix of debt issuance and asset drawdowns.

-We expect the current account deficit to be financed via asset drawdowns and sovereign debt issuance until 2018.

-Kuwait maintains one of the largest pools of liquid external assets of all sovereigns we rate and, in a stress scenario we believe it would be able to defend its currency peg.

In Kuwait’s case, the central government deficit informs the central government’s financing requirement while the overall general government balance includes all levels of government including flows related to the Kuwait Investment Authority (KIA).  At the general government level, we consider mandatory transfers to the Reserve Fund for Future Generations (RFFG) as savings rather than expenditure, and we add investment income earned on the government’s large stock of assets at the KIA.  At the general government level, we estimate that Kuwait ran a small surplus in fiscal year 2016/17 (ended March 31) of 0.1% of GDP (compared to a deficit of nearly 18% of GDP at the central government level).  We anticipate that recurrent investment income will allow the general government to remain in surplus over the forecast horizon, with the surplus widening to 13.5% of GDP in fiscal year 2020/21.

In our calculation of central government fiscal deficits, we treat as expenditure the mandatory transfers to the RFFG (10% of revenues) and do not include investment income earned on the government’s substantial fiscal assets, managed by the Kuwait Investment Authority.  As a result of the fall in oil prices, Kuwait’s central government fiscal surplus narrowed considerably and then turned into a deficit in fiscal year 2014/15.  In fiscal 2016/17, we estimate that the central government deficit widened slightly to 17.66% of GDP from 17.32% in fiscal 2015/16.  While the government has taken measures to cut current expenditures – for instance by cutting subsidies and hiking fuel and electricity prices – it has used its substantial fiscal flexibility to ramp up capital expenditures.  With our revised oil price assumptions and our expectations for oil production, we forecast the central government deficit will narrow to around 7% of GDP by 2020/21.

The central government fiscal deficit is likely to close faster if some of the measures the government is currently considering, such as the introduction of a flat corporate tax and a value-added tax, are implemented.  However, we do not anticipate that these are likely to come into force before 2019 at the earliest.  We therefore anticipate that revenues will continue to be concentrated on oil, a volatile base.  On the expenditure side, the government has tried to restrain spending on goods and services, though the wage bill is estimated to have increased.  The biggest savings have been on fuel subsidies, which automatically fell after the fall in the oil purchase price.  Electricity tariff increases have also been implemented.  Wage freezes and the repricing of public services are being considered, but are likely to face significant opposition.

Over our forecast horizon through 2020, we expect the central government to finance deficits through a mix of KIA asset drawdowns and debt issuance.  Kuwait undertook its first sovereign international bond issuance in March 2017, raising $8 billion (6.5% of estimated 2017 GDP).  We anticipate general government debt to rise to about 22% of GDP in 2020/21 from an estimated 18.61% in 2016/17.  Even then, we project the government will remain in a comfortable net asset position when we account for its assets at the KIA.

The Kuwaiti government, via the KIA, has accumulated substantial assets through savings from oil and gas production over the years.  The size of assets managed by the KIA is available only as a range of unofficial estimates of up to 5x of 2017 GDP.  We take a conservative approach and give the government credit for about 3.5x of GDP in assets.  Kuwait ranks the highest among all the sovereigns rated by S&P Global Ratings in terms of net general government assets.

By law, the Kuwaiti government has to allocate at least 10% of its annual revenues to the RFFG, managed by the KIA.  Therefore, we consider that Kuwait has preserved its oil wealth in what we consider to be a prudent manner and the government’s large net asset position is a significant ratings strength that provides a substantial buffer against lower oil prices.

The government does not publicly disclose the size and structure of the RFFG and information on KIA’s assets is limited.  However, we estimate that about 80% of the assets are in the RFFG and the rest in the General Reserve Fund (GRF).  While the RFFG is designed to assist future generations, ostensibly after oil supplies have run out, the GRF can, and has, been used to meet present-day fiscal needs.  We include both the RFFG and GRF in our estimate of government liquid assets because, if needed, we believe the government may consider authorizing drawdowns from the RFFG.

Weak oil prices prompted Kuwait’s first current account deficit of 4.5% of GDP in 2016 compared to a surplus of 3.5% in 2015 and an average surplus of nearly 40% over 2010-2014.  The deficit was financed by the liquation of assets held abroad.  We project that the current account will return to a surplus in 2019 in line with our assumptions on oil prices and production.  Until then we anticipate deficits will be financed by a mix of external borrowing—primarily via sovereign debt issuance–and the liquidation of external assets.

Even then we estimate that Kuwait’s net external asset position will remain very strong at 7.5x current account receipts (CARs) in 2017.  Moreover, we project that gross external financing needs will remain relatively low, averaging about 100% of CARs plus usable reserves over the next four years.  On its external accounts, Kuwait’s metrics are very strong, and stronger than those of almost all peers, including in the GCC.  We note, however, that Kuwait does not publish an international investment position, restricting our visibility on external risks, for instance on liabilities of the nonbank sector and the foreign exposure of its banking system.

Kuwait’s exchange rate is pegged to an undisclosed basket of currencies; this basket is dominated by the U.S. dollar, the currency in which the majority of Kuwaiti exports are priced and transacted.  We view Kuwait’s regime as slightly more flexible than the foreign exchange regimes in most other GCC countries, which maintain a peg to the dollar alone.  That said, we acknowledge that the exchange rate regimes for all GCC countries are consistent with a reliance on U.S. dollar-based oil export revenues and that Kuwait has sufficient resources to defend the peg.

We view Kuwait’s financial system as stable; its banks are reasonably well capitalized, with ample liquidity as per Basel III standards and operate in a reasonably strong regulatory environment.  Our Banking Industry Country Risk Assessment for Kuwait is ‘4’, on a scale of ‘1’ (strongest) to ’10’ (weakest).  (S&P 04.08).

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11.7  BAHRAIN:  IMF Executive Board Concludes 2017 Article IV Consultations

On 5 June 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Kingdom of Bahrain.

Bahrain’s fiscal and external vulnerabilities have increased in the wake of the oil price decline.  Overall GDP grew 3% in 2016, supported by strong growth of 3.7% in the non-oil sector aided by the implementation of GCC-funded projects.  Average inflation remained moderate at 2.8%.  Bank deposit and private sector credit growth slowed.  The banking sector remains well capitalized and liquid.  Despite the implementation of significant fiscal adjustment, lower oil prices meant that the overall fiscal deficit reached nearly 18% of GDP and government debt rose to 82% of GDP.  The current account deficit widened to 4.7%.  International reserves have declined.

Real GDP growth is expected to slow to 2.3% and 1.6% in 2017 and 2018, reflecting the ongoing fiscal consolidation and weaker investor sentiment.  The fiscal deficit is projected to improve to 12.2% of GDP in 2017 owing to higher oil prices and continued reduction in spending.  Over the medium term, the fiscal deficit is projected to narrow only slightly because of rising interest payments that offset some of the revenues from the planned implementation of the VAT.  The current account deficit is estimated to reach over 3½% of GDP in 2017, and is projected to narrow gradually over the medium-term.

Executive Board Assessment

Executive Directors considered that, although economic activity and financial market conditions have remained positive, fiscal and external vulnerabilities have increased in the wake of the oil price decline.  While welcoming the significant fiscal measures underway, they stressed that an additional sizable and frontloaded fiscal adjustment is urgently needed to restore fiscal sustainability and reduce the large fiscal and external financing needs.  Sustained fiscal efforts will be needed over the medium term to put debt on a downward path and rebuild policy space.

Directors recommended measures to contain current expenditure, including the wage bill and further reducing energy subsidies, while raising non-oil revenue, including through the VAT and exploring other revenue measures.  They stressed the importance of minimizing the adverse impact of these measures on vulnerable groups.  Directors advised strengthening revenue administration and establishing a medium-term fiscal framework to support fiscal consolidation.  They underscored the need for a strong communication campaign to explain the authorities’ adjustment plans to help strengthen public awareness and support and maintain market confidence.  Directors encouraged the authorities to put in place a comprehensive fiscal financing and debt management strategy to mitigate risks, and welcomed recent steps to establish a public debt management office.

Directors agreed that the exchange rate peg remains appropriate for Bahrain, noting that it has delivered monetary policy credibility and low inflation.  Strong fiscal adjustment, sizable external financing, and structural reforms are needed to support the peg and strengthen the international reserve position.  Gradually raising interest rate differentials vis-à-vis the United States through the stepped-up issuance of government securities could also help discourage capital outflows and rebuild reserves.  Directors also stressed the importance of discontinuing central bank lending to the government.

Directors welcomed the FSAP stress test results that the banking sector appears well positioned to face moderate credit and liquidity shocks, although recapitalization needs could be significant under a severe shock scenario.  Liquidity stress tests suggest that most banks’ liquidity positions are relatively robust, but some wholesale banks and foreign branches hold few liquid assets.  Directors welcomed the central bank’s efforts to implement FSAP recommendations to strengthen the regulation and supervision of the financial sector, including steps to introduce quantitative liquidity requirements for banks and to develop a macroprudential framework.  A clear legal mandate for financial stability, stronger risk-based supervision, and enhanced crisis management and resolution framework will also help support the financial sector.

Directors commended the authorities’ recent initiatives to streamline business regulation and improve the legal framework.  They called for additional structural reforms to promote competition and catalyze private investment, including by privatizing state-owned enterprises and promoting greater diversification.  Directors welcomed efforts to remove bottlenecks in the economy to support growth.

Directors welcomed recent improvements in financial sector data, and underscored the need to further strengthen economic statistics to support the decision-making process.  (IMF 21.08)

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11.8  EGYPT:  Moody’s Affirms Egypt’s B3 Rating; Maintains Stable Outlook

On 18 August 2017, Moody’s Investors Service affirmed the Government of Egypt’s long-term issuer and senior unsecured bond ratings at B3.  The outlook remains stable.

The rating affirmation is based on Moody’s view that the B3 rating appropriately captures Egypt’s credit risk profile.  Very weak government finances will continue to constrain the rating pending further clarity on the sustainability and impact of the reform program.  While Egypt’s external liquidity position has significantly improved over the past 12 months, the increase in international reserves has been mainly driven by debt-creating inflows, thus also raising the level of external debt and foreign-currency denominated debt.

The stable rating outlook reflects Moody’s view that upside and downside risks to the rating are balanced.  Reform progress has been impressive.  However, while political stability has improved to some degree, reform momentum may face headwinds, including from the presidential election set to take place by May 2018.  Visibility on the extent to which the reform program will materially improve the sovereign credit profile in the coming years remains limited.

In today’s rating action Moody’s has also affirmed the provisional senior unsecured (P)B3 Medium-Term Note program rating.  Egypt’s country ceilings stay unchanged at B2/Not Prime (NP) for the foreign-currency bond ceiling, Caa1/NP for the foreign currency deposit ceiling, and Ba2/NP for the local-currency country risk ceilings.

Rationale for Affirming the Rating at B3

Moody’s expects Egypt’s credit profile to remain heavily influenced by the government’s very weak government finances for a sustained period, with already high fiscal deficits continuing to grow in nominal terms over the coming years and declining only gradually as a percentage of GDP.  Based on preliminary estimates, the general government fiscal deficit reached around 11% of GDP in fiscal year 2017 (ended 30 June 2017), down from 12.1% in 2016, and will decline to around 10% in the current fiscal year according to the rating agency’s forecast.  Moody’s estimates that the general government’s primary deficit shrank to 1.8% of GDP in fiscal 2017 from 3.7% the year before and will start to show small surpluses from 2019 onwards.

Consequently, Egypt’s government financial strength will remain very weak for the foreseeable future, with debt and debt affordability metrics continuing to exceed by some margin the median for B3-rated sovereigns.  The debt-to-GDP ratio likely peaked at 100% in fiscal 2017 and Moody’s expects that it will decline to about 90% by 2019, still a very high level.

Monetary tightening in response to rapidly rising inflation has driven up the government’s domestic funding costs, with the cumulative 700 basis points rise in the Central Bank’s policy rate having driven one-year T-bill rates to above 20%.  Moody’s expects interest payments to remain very high, accounting for close to 40% of revenues over the coming two to three years.

Set against that negative driver, macroeconomic stability has been broadly maintained despite the negative inflation shock resulting from the credit-positive foreign exchange regime liberalization on 3 November 2016.  Moody’s projects that real GDP growth has held up well, at 4% in fiscal 2017, and that it will continue to pick-up in the coming years.

External liquidity has also improved.  Reduced uncertainty about exchange rate policy, elimination of the parallel market and unlocking of multilateral funding following the exchange-rate liberalization has led to an increase of the Central Bank of Egypt’s net international reserves to $36 billion at the end of July from $15.5 billion a year earlier.  The increase in reserves was largely the result of debt-creating inflows, with external debt almost doubling to an estimated 33% of GDP in fiscal 2017 from around 17% the year before.  However, repatriation of private remittances through the formal banking system, and to a lesser extent foreign investor participation in the stock market and FDI inflows also contributed to the increase.

Rationale for the Stable Outlook

The stable rating outlook signals that upside and downside risks to the rating are balanced.  Reform progress has been impressive and political stability has improved.  Ongoing structural economic reforms should, if implemented as intended, improve the business environment and lift domestic and foreign direct investment.  Moody’s expects Egypt to continue to comply with the program targets under the IMF Extended Fund Facility.  Despite the sharp rise in inflation as result of the currency devaluation and fiscal reforms there were no large-scale protests, and the broadly stable security situation bodes well for the tourism sector.

However, downside risks exist.  The presidential election set to take place by May 2018 could create uncertainties around future reform momentum; while Moody’s expects continued reform commitment by the government, there is a risk that the large, young and growing population, which is facing high unemployment and inequality, could exert pressure that slows or even reverses reforms (e.g. increasing the public sector workforce or re-instating certain subsidies).

Last year’s introduction of a value-added tax (VAT) has been the main revenue side reform.  Further fiscal consolidation is focused on increasing revenue efficiency, keeping spending growth under control and improving the structure of government spending.  Current expenditure items including subsidies & social benefits and compensation to public sector employees, together with interest payments, represent more than 90% of total spending.  Although the government has made progress with regards to energy subsidy reforms, any increases in energy and food prices would likely drive up subsidy spending; in this respect, the government’s plan to move towards an automated, market price-based fuel price adjustment mechanism is credit positive but will take some time before being realized.

Moody’s views the probability of another public uprising as low, though the impact of any such event on the economy and government finances would clearly be very high.

Overall, Moody’s has concluded that further time is needed to assess the implementation of structural reforms, and their impact on economic and financial strength.

Factors That Could Cause the Rating to Move Up/Down

Faster-than-currently expected progress under the reform program would be credit positive.  In particular, more rapid fiscal consolidation and improvements in debt metrics, while preserving social stability, would be a key driver for a potential positive rating action.  In addition, early signs of successful implementation of structural economic reforms would include rising FDI inflows, increasing exports in higher value-added goods, and a meaningful reduction in unemployment.  Continued strengthening of external buffers, including further rebalancing of the net international reserve structure away from deposits in Egyptian banks’ branches abroad, and moving away from reliance on concessional financing and external debt towards FDI and higher value-added goods and services exports as main source of foreign exchange inflows would also support a positive rating action.

Any signs of reform slowdown would jeopardize the stable outlook.  Depending on the form and speed of reversals and the implications for government finances and external liquidity, this could even lead to downward pressure on the rating.  Renewed social and political instability or a material deterioration in the security situation could also lead to a negative rating action.  (Moody’s 18.08)

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11.9  EGYPT:  Two is Enough – A Fix for Egypt’s Overpopulation

Ahmed Aleem posted on 7 August in Al-Monitor that Egypt’s Ministry of Social Solidarity, in coordination with the Ministry of Health, announced the launch of a population control program targeting 1.3 million Egyptian women.

Egyptian Minister of Social Solidarity Ghada Wali announced in her speech at Egypt’s Fourth National Youth Conference on 25 July the launch of a program to curb population growth in Egypt called “Itnein Kifaya” (“Two is Enough”).  At the conference, Wali said the program targets 1.3 million mothers who are younger than 35 years old and have one or two children.  These women are the beneficiaries of the ministry’s income support program Takaful and Karama.

In coordination with the Ministry of Health and Population, the Itnein Kifaya program aims to raise Egyptian women’s awareness on the need to curb population growth through workshops, conferences and door-to-door activities.  The program also includes the distribution of birth control methods to the targeted 1.3 million mothers to encourage them to have only two children.

The Ministry of Social Solidarity posted a video on the program on its official YouTube channel, explaining that implementation would take two years at a cost of EGP 105.3 million (around $5.9 million), financed by the Ministry of Social Solidarity fund to support nongovernmental organizations and the United Nations Population Fund.  The Itnein Kifaya program focuses on 10 of the poorest governorates registering the highest birth rates: Sohag, Assiut, Minya, Giza, Beni Suef, Qena, Fayoum, Luxor, Aswan and Beheira.

President Abdel Fattah al-Sisi addressed population growth during one of the sessions of the Fourth National Youth Conference, saying, “Terrorism and population growth are the two biggest threats in Egypt’s history.”  The head of Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS), Maj. Gen. Abu Bakr al-Gendy, said “the population growth rate in Egypt is 2.3% per year, with 2.7 million births every year and 500,000 deaths; this means that the population is growing by around 2.2 million people every year.”  Egypt, which long saw its fertility rate drop, has seen it rise in recent years.

In his speech at a ceremony celebrating International Population Day at the Ministry of Health on 30 July, the Minister of Health and Population Ahmed Emad el-Din Rady announced the launch of the new population growth control strategy.  The minister said Egypt’s current total fertility rate is 4 and warned that by 2030 the country’s population may reach 128 million if the strategy is not implemented.

Rady said the strategy’s objective is to reach a total fertility rate of 2.4 children per woman in order to limit the population to 112 million people by 2030.  He said the mechanisms of this strategy depend on the need to reduce population growth rates while taking education and literacy issues into consideration in some governorates as well as the economic and educational empowerment of women.

Ayman Zohry, a population and migration studies expert, told Al-Monitor there were various factors behind the increase of population growth rate in Egypt since toward the end of the Hosni Mubarak era and after the 2011 revolution.  Zohry said this is mainly due to the decline in health services, including reproductive health as well as the state’s neglect of family planning methods, including the lack of training of physicians on these methods.  He also said, “Uncontrolled birth was a means of expression [by the people] against the Mubarak regime.  The rise of the Muslim Brotherhood was also one of the reasons explaining the high rate of population growth in light of a reduced age of marriage … and other phenomena such as the prohibition of birth control methods.”

CAPMAS’ official website indicated on 4 August that Egypt’s population has reached around 93 million.

Egypt’s parliament is also seeking to cap population growth.  Member of parliament Ghada Ajami submitted a bill on 1 June linking parents’ rights to receive state benefits to family planning.  The bill is expected to be discussed during the third session, which begins on 5 October.  It aims to deny families who have more than three children the services provided by the government, such as education in government schools and other subsidized goods and public services.

Ajami told Al-Monitor, “The Ministry of Solidarity’s program aimed to limit the number of children to two only is very similar to the bill that I submitted to the government that deprives families with more than three children of government support.  The bill stresses the need for state pressure on families to pay attention to the dangers of population explosion.  Citizens are highly attentive to issues related to government support, which can be an effective pressure tool.”

She added, “It is important that all state agencies join forces with civil society organizations in order to face population growth, which will have serious implications on the country’s development and the future of coming generations.  It is also important to raise awareness on this matter and persuade families to have two or three children at most.”

It appears that the government is seeking to develop solutions to curb population growth in Egypt.  But limiting population growth in Egypt requires more efficient efforts and cooperation between the government and civil society organizations.  (Al-Monitor 07.08)

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11.10  TUNISIA:  Moody’s Downgrades Tunisia’s Rating to B1, Maintains Negative Outlook

On 18 August 2017, Moody’s Investors Service downgraded the long-term issuer rating of the government of Tunisia to B1 from Ba3 and maintained the negative outlook.  Moody’s has also downgraded the foreign currency debt rating of the Central Bank of Tunisia to B1 from Ba3 and maintained the negative outlook, in addition to downgrading the shelf/MTN rating to (P)B1 from (P)Ba3.  The Government of Tunisia is legally responsible for the payments on all of the central bank’s bonds.  These debt instruments are issued on behalf of the government.

The key drivers for the downgrade to B1 are:

1) Continued structural deterioration in Tunisia’s fiscal strength;

2) Persistent external imbalances;

3) Reduced institutional strength and government effectiveness as highlighted by the track record of delays in the agreed reform implementation program with the IMF.

The negative outlook reflects the risk of a more sustained than anticipated decline in foreign exchange reserves with concomitant depreciation pressures which could fuel adverse public debt dynamics.  It also takes into account Tunisia’s increasing funding requirements in view of upcoming international bond redemptions starting 2019 amid reduced visibility about access to external funding sources, in addition to rising contingent liability exposures to the public banking sector, to the pension system and with respect to state-owned enterprises (SOEs).

As part of today’s rating action, Tunisia’s long-term local currency bond and bank deposit ceilings were lowered to Ba1 from Baa2.  The long-term foreign currency bank deposit ceiling was lowered to B2 from B1, and the foreign currency bond ceiling to Ba2 from Ba1.  The short-term foreign currency bond and bank deposit ceilings remain unchanged at NP.

Ratings Rationale

First Driver for the Downgrade: Continued Structural Deterioration in Tunisia’s Fiscal Strength

Tunisia’s fiscal performance has continued to deteriorate since the last rating action in November 2016 in response to higher than anticipated spending pressures and a heavy public sector wage bill amounting to over 14% of GDP, or about 60% of total revenues, which underpins the budget’s structural rigidity.  Wages, interest payments and transfers/subsidies accounted for 93% of total revenues and grants at the end of 2016, thus leaving limited room for expenditure adjustment in case of slower than anticipated growth and revenue collection.  Under the current multi-year wage agreement between the government and the main labor union, the public sector wage share is expected to decline to 12% of GDP by 2020.  In our central scenario, we expect the fiscal cash balance to remain unchanged at 6.1% of GDP in 2017 before declining to 5.4% in 2018.

The higher than anticipated primary deficit in 2016, slower growth and adverse exchange rate movements have combined to drive the debt/GDP to 61.9% of GDP at the end of 2016 from 50.8% in 2014.  We expect the debt/GDP ratio to exceed 70% of GDP in 2018 and to peak at 72.4% of GDP in 2020, entailing a further decline in fiscal strength.  The debt trajectory remains particularly vulnerable to adverse exchange rate dynamics due to the high foreign-currency share at over 65% of total central government debt.

Second Driver for the Downgrade: Persistent External Imbalances

Current account dynamics have continued to deteriorate over the first half of 2017 after assignment of the negative outlook in November 2016 due to structural declines in energy and phosphate balances that partially offset improved mechanic and electric exports.  While the tourism sector has recorded a rebound from low levels, higher tourist arrival numbers will take time to translate into higher current account receipts due to the low value added offering and high share of intra-regional travel.  We expect the current account balance to remain elevated at 9.8% of GDP in 2017, followed by 8.7% in 2018 amid subdued foreign direct investment inflows.

The continued decline of foreign exchange reserves to 90 days of import cover as of August 2017 in conjunction with the high gross external funding requirements at about 25% of GDP per year over the next few years underpin Tunisia’s high external vulnerability assessment.  At over 70% of GDP at the end of 2016, Tunisia’s external debt ratio is at the higher end among Moody’s B and Ba-rated credits, as is the net international investment position at a negative 116% of GDP as of 2016.

Third Driver for the Downgrade: Reduced Institutional Strength as Result of Delayed Reform Implementation

While Tunisia’s consensus-based policy making process has ensured the successful political transition, with the adoption of the new constitution in January 2014, the track record of recurring delays in IMF reform program implementation resulting in disbursement postponements from official lenders points to a decline in government effectiveness and reduces the visibility of medium-term funding access, even as the funding requirements over the next twelve months have been secured.

The stabilization of the public sector wage bill, the implementation of energy subsidy reform and progress with the state-owned bank restructuring process are among the IMF’s long-standing key requirements on which progress has been achieved before the conclusion of the first review in June 2017.  The timeline for the planned parametric pension reform, the restructuring of SOEs and for tax reform is challenged by the local elections planned for December 2017.

Rationale for the B1 Rating

The B1 rating is supported by the nascent economic recovery driven by the mining, tourism and agricultural sectors, and underpinned by fewer instances of social unrest in internal regions.  In our central scenario we expect annual growth at 2.3% in 2017, followed by 2.8% in 2018.  The significant improvement in the security environment in the aftermath of the 2015 terror attacks sets the stage for renewed investment activity in the wake of the “Tunisia 2020 Investor Conference” held in November 2016 and of Tunisia’s participation in the “G20 Compact with Africa” initiative launched in March 2017 to promote private investment in participating countries.  The government’s recently intensified fight on corruption also addresses one of the most problematic factors for doing business cited in executive opinion surveys and which impacts the country’s competitiveness assessment.

Rationale for the Negative Outlook

The negative outlook reflects the risk of renewed fiscal overruns and of a more sustained than anticipated decline in foreign exchange reserves with concomitant depreciation pressures that could fuel adverse public debt dynamics.  It also takes into account Tunisia’s increasing funding requirements in view of upcoming international bond redemptions starting 2019 amid reduced visibility about access to external funding sources.  Rising exposures to contingent liabilities among state-owned banks, in the pension system and with respect to financially challenged state-owned enterprises (SOEs) with guaranteed debts amounting to 12% of GDP that are not included in the central government debt ratio add to the negative risk balance.

Factors That Could Stabilize the Outlook

A sustained economic recovery, supported by reduced social unrest, in addition to the stabilization and reversal of fiscal and external imbalances with improved funding visibility could return the outlook to stable.  A track record of previously agreed reform implementation would also be credit positive.

Factors That Could Lead to a Downgrade

Renewed fiscal overruns, a continued erosion of foreign exchange reserves or the materialization of contingent liabilities represent downside risks.  A weaker than expected economic recovery and further delays with the implementation of the economic reform program agreed with the IMF that would lead to reduced access to official funding sources and deter market appetite, could also lead to a downgrade.  (Moody’s Investors Service 18.08)

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11.11  GREECE:  Fitch Upgrades Greece to ‘B-‘ from ‘CCC’; Outlook Positive

On 18 August, Fitch Ratings upgraded Greece’s Long-Term Foreign-Currency Issuer Default Ratings (IDR) to ‘B-‘ from ‘CCC’.  The Outlooks are Positive.

Key Rating Drivers

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


Fitch believes that general government debt sustainability will steadily improve, underpinned by on-going compliance with the terms of the European Stability Mechanism (ESM) program and reduced political risk, sustained GDP growth and additional fiscal measures legislated to take effect through 2020.  The successful completion of the second review of Greece’s ESM program reduces risks that the economic recovery will be undermined by a hit to confidence or by the government building up arrears with the private sector.

The Positive Outlook reflects Fitch’s expectation that the third review of the adjustment program will be concluded without creating instability and that the Eurogroup will grant substantial debt relief to Greece in 2018.  In its statement on 15 June 2017, the Eurogroup confirmed its commitment to implementing a set of debt relief measures aimed at keeping gross financing needs below 15% of GDP in the medium term and below 20% of GDP thereafter.  This should support market confidence, which will help support post-program market access.  In Fitch’s view, the political backdrop has become more stable and the risk of any future government reversing policy measures adopted under the ESM program is limited.

The debt relief measures include restarting disbursement of profits on Greek bonds held by the ECB, partial early ESM refinancing of relatively expensive IMF loans, and further European Financial Stability Facility relief (interest rate caps, coupon deferrals and maturity extensions).

Fitch notes that the Eurogroup has outlined plans to link debt relief measures to actual growth outcomes over the post-program period.  In our view, this would be an important development as it increases confidence that the general government debt will remain on a sustainable path in the face of adverse growth shocks.  European partners appear to be shifting the focus of Greece’s future conditionality from strict fiscal targets towards restoring medium-term GDP growth.

Public finances are improving.  In 2016, Greece recorded a primary surplus of 3.9% of GDP, well above the ESM program target of 0.5%, owing to higher than budgeted revenues and expenditure restraint.  We expect the government to record an average primary surplus of 2.8% of GDP over 2017-19.  Assuming nominal GDP growth of 3.4%, general government gross debt is forecast to fall to 169.5% of GDP in 2019.  The government has already legislated fiscal measures that are projected to yield 3% of GDP through 2018, of which just above two-thirds will come from pension and income tax reform.  Full implementation may face political constraints, but there is a contingent fiscal mechanism to retrospectively trigger further measures if a fiscal target is missed.

The economy is gradually recovering.  Recent high frequency indicators point to a faster pace of economic activity, following a weak Q1 performance due to the impact of program delays on confidence and payments to the private sector.  The European Commission economic sentiment indicators reached a two-year high in July on the back of rising consumer and business confidence.

The completion of the second review and the subsequent disbursement of €8.5 billion by the ESM have supported confidence and injected liquidity in the economy through clearance of arrears with the private sector.  Fitch forecasts real GDP growth of 1.6% and 2.1% in 2017 and 2018.  Pent-up investment demand, a declining unemployment rate and continued clearance of government arrears are set to support domestic demand.  Growth recovery in the Eurozone should support export performance.

Greece’s IDR also reflect the following key rating drivers:

The ratings are underpinned by high income per capita levels, which far exceed ‘B’ and ‘BB’ medians.  Greece’s financial crisis and recession exposed shortcomings in government effectiveness and put acute pressures on political and social stability.  However, governance is still significantly stronger than in most sub-investment-grade peers.

Over two-thirds of the total economy’s external debt is held by official creditors and the Eurosystem, helping to keep external debt servicing at a manageable 12% of GDP.  The average maturity of debt is favorable at 18 years, among the longest across all Fitch-rated sovereigns.  The maturity profile is also benign.  Central government debt repayments are set to peak in 2019.  We expect repayments per year to remain moderate through to 2030.

The Greek sovereign returned to the capital markets on 25 July after three years.  Greece placed a new benchmark €3 billion five-year bond with a yield of 4.625%.  The issuance has allowed the sovereign to smooth the debt maturity profile: of €`3 billion, around half was swapped in exchange for bonds due to mature in 2019.  We expect the government to continue to issue market debt and use the proceeds to smooth further the maturity profile and build a sizeable deposit buffer before the end of the ESM program.

In Fitch’s view, political risks have partly reduced.  The Tsipras government has legislated a set of politically difficult measures and its parliamentary majority has held up.  We think near-term snap elections are unlikely.  Based on recent polls, Syriza trails by 15 – 20pp the center-right New Democracy party, which has less ideological opposition to a number of the program measures but has been arguing for its renegotiation in particular on the fiscal targets.  Early elections would provide a source of uncertainty that would likely undermine the recent economic recovery.

Confidence in the banking sector remains fragile although it is improving.  On 2 August, the ECB lowered the Emergency Liquidity Assistance (ELA) ceiling for Greek banks to €38.9 billion from its peak of €90 billion in July 2015, reflecting positive development in liquidity conditions.  Moreover, following completion of the second review, the Greek government has announced a further relaxation in capital controls effective from 1 September 2017.

The customer deposit base is prone to volatility, despite the positive developments.  After falling by 27% between September 2014 and July 2015, private sector deposits have barely recovered.  Since the relaxation of capital controls in July 2016, the inflow of deposits has been subdued.  Several delays to the program review may have put additional pressure on investor confidence, although capital controls have limited deterioration in banks’ liquidity position.

A key challenge for the banking sector is tackling non-performing exposures (NPEs), which remain stubbornly high at 45% of gross loans.  Improvements have been made to the legal and institutional framework for resolving loans and banks have stepped up their restructuring efforts but with limited effect on the stock of NPEs so far.  The reform of the out-of-court workout (OCW) is seen by the authorities and the European partners as a key element of the NPL resolution strategy.  The basic infrastructure to have the OCW functioning is now in place.  The expectation is that there will be an increase in voluntary negotiations between creditors and debtors to reach agreements on debt restructuring solutions.

Rating Sensitivities

Future developments that could, individually or collectively, result in positive rating action include:

-Evidence that the recent economic recovery is sustained and a track record of achieving primary surpluses.

-Material debt relief from the official sector.

-Further record of successful implementation of the ESM program, underpinned by an orderly working relationship between Greece and its official sector creditors and a fairly stable political environment.

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

-Deviation from fiscal targets and a reversal of the policies legislated under the ESM program

-A breakdown in relations with creditors, reducing the prospect of debt relief measures from the Eurogroup.

Key Assumptions

Our base case assumes the third program review is completed without creating political and economic instability.

Any debt relief given to Greece under the ESM program will apply to official sector debt only, and would not therefore constitute an event or default under the agency’s criteria.  (Fitch 18.08)

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