Fortnightly, 24 February 2016

Fortnightly, 24 February 2016

February 24, 2016


24 February 2016
15 Adar I 5776
15 Jumada Al-Awwal 1437




1.1  Jerusalem to Abolish Agricultural Production Controls
1.2  FATF Grants Israel Observer Status
1.3  MK Litzman: ‘Life-Saving Medicines Must Enter Healthcare Plan’
1.4  Plan To Lower Hotel Prices Passes First Knesset Reading
1.5  US Foreign Military Funding Talks Key to Israeli Tanker Plan
1.6  Bill Seeks to Let All Employees Refuse to Work on the Sabbath


2.1  Year of the Monkey Rings in First Israel-China Equity Fund
2.2  Finance Ministry Says Hi-Tech No Longer Israel’s Main Growth Engine
2.3  Titanium Investments Unveils $50 Million Israel VC Fund
2.4  Cannabics Pharmaceuticals to Raise $4 Million
2.5  YouAppi Closes $13.1 Million Series B Round for Expansion into Asia
2.6  Israel’s Siemplify Raises $4 Million
2.7  Mellanox Technologies Completes Acquisition of EZchip


3.1  Qatar Airways Threatens to Cancel Pratt & Whitney Engine Order
3.2  Emirates Chief Hails ‘Historic’ Deal with LA Dodgers Baseball Team
3.3  Chinese Officials Asked Aramco to Dual List in Hong Kong
3.4  Morocco Okays Opening of First IKEA Store
3.5  Redknee to Support Turk Telekom with the Launch of New Services


4.1  Solar Tower in Desert Promotes Israel’s Renewable Energy Drive
4.2  SolarEdge Surpasses 10 Million Shipped Power Optimizers


5.1  Lebanon’s Consumer Prices Continues to Drop in the First Month of 2016
5.2  US Signs Law to Increase Military Support to Jordan
5.3  Construction of Jordan’s First Shale Power Plant to Start in June
5.4  Germany to Lend Iraq $566 Million

♦♦Arabian Gulf

5.5  Qatar Tourism Receipts Forecasted to Grow to $7.2 Billion by 2025
5.6  WhatsApp Voice Call Not Banned By Saudi Regulator
5.7  Saudi & Russia Agree to Oil Output Freeze
5.8  Saudi Arabia Suspends $3 Billion Lebanese Army Aid Deal

♦♦North Africa

5.9  Egypt’s Dollar Crisis Continues
5.10  Egypt’s Central Bank Widens Exceptions On Import Restrictions
5.11  EU-Tunisia Commission Proposes Further €500 Million in Assistance
5.12  Nearly One-Third of Moroccans Are Illiterate


6.1  Greece Back In Deflation, January Consumer Prices Drop 0.1%


7.1  Lebanon Justice Minister Resigns Over Hezbollah Domination
7.2  UAE’s Sheikh Mohammed Unveils New Cabinet
7.3  Libya’s Revised Unity Government Announced


8.1  Breakthrough Israeli Cancer Treatment Praised Worldwide
8.2  Israel & California Sign Unique Biotechnology Deal
8.3  BioLight Files Registration Statement for Proposed IPO in the US
8.4  BioLight Reports Positive Results for TeaRx Multi-Assay Test for Dry Eye Syndrome
8.5  Hospitech Respiration Gets Clearance for AnapnoGuard System
8.6  Rosetta Genomics Gets New York State’s Approval for Thyroid Cancer Diagnostic Assay


9.1  IAI Unveils New Civil Aviation Cyber Security Solutions
9.2  IAI’s New UAV Mission Operational & Intelligence Center
9.3  IAI’s Newest Members in its Loitering Munitions Family
9.4  NICE Workforce Management Reduces Costs and Increases Productivity
9.5  Indiana University & Beeper Group Collaborate on C2 solutions
9.6  Thirty Five Billion Chips Analyzed in 2015 Via Optimal+ Big Data Highway
9.7  VocalZoom & Cobalt Partner on Near-Perfect Speech Recognition Solutions
9.8  Allot to integrate Network Data insights into Oracle Communications Analytics
9.9  IAI Receives Additional F-35 Lightning II Contract to Produce 40 Wing Sets
9.10  Opgal Announces NDTherm NDT Based on Thermal Imaging
9.11  Altair IoT-based Low-cost Water Quality Monitoring & Contamination Detection
9.12  WakingApp Launches ENTiTi Creator
9.13  CommuniTake Technologies Announces IntactPhone


10.1  Israel’s Inflation Rate Fell by 0.5% in January
10.2  Israel’s Economy Grew at 3.3% in Fourth Quarter
10.3  Deloitte Says Israel 7th in World for Defense Spending


11.1  ISRAEL: Netanyahu Fights for Israel’s Energy Future
11.2  ISRAEL: ‘A+/A-1’ Ratings Affirmed On Economic Resilience; Outlook Stable
11.3  GCC: Moody’s Says Fuel Subsidy Reforms Offer Only Modest Fiscal Space
11.4  KUWAIT: Ratings Affirmed at ‘AA/A-1+’ Despite Lower Oil Price Assumptions
11.5  QATAR: Qatar Ratings Affirmed At ‘AA/A-1+’; Outlook Stable
11.6  OMAN: Sultanate Ratings Lowered To ‘BBB-/A-3’; Outlook Stable
11.7  SAUDI ARABIA: Ratings Lowered To ‘A-/A-2’; Outlook Stable
11.8  EGYPT: Egypt and China Following Xi’s Visit
11.9  EGYPT: How Egypt Plans to Boost Its Stock Exchange
11.10  EGYPT: How Heavy Metal Music is Causing a Stir in Egypt
11.11  MAURITANIA: IMF Staff Completes 2016 Article IV Mission to Mauritania


1.1  Jerusalem to Abolish Agricultural Production Controls

Globes reported that the Ministry of Agriculture and the Ministry of Finance intend to abolish production quotas on eggs, poultry and milk.  The matter has been discussed between the ministries as part of the general plan to reduce the cost of living in Israel.  In return, the government will compensate the farmers directly, in a similar fashion to the subsidies given to farmers in Europe.  Over the years, wholesalers have claimed that the agricultural marketing boards were to a large extent responsible for the high cost of living, and that they provide cover for coordination between farmers and growers, and behave as a cartel.

The plan under discussion is revolutionary.  Under it, the boards that currently operate by virtue of the law will be abolished, the most important ones being the Israel Dairy Board, the Egg and Poultry Board and the Israel Plants Production and Marketing Board.  These three boards have statutory powers.  The other boards that operate within a legal framework, but that do not have statutory powers, will also be abolished.  So, for example, the Israel Wine and Grapes Board, the Israel Ground Nuts Production and Marketing Board, the Israel Cotton Board, and the Israel Honey Production and Marketing Board, will also be abolished.  The basis of the boards’ activity in the past has been the concept that a planned agricultural economy should be managed so as to ensure regular supply of agricultural produce to consumers on the one hand and on the other hand to prevent dumping on the market.  In practice, these closed markets have become one of the causes of the high cost of living in Israel.

The idea behind the measures planned by the Ministry of Agriculture and the Ministry of Finance is a general opening up of the market and the removal of all barriers with the aim of boosting competition and bringing the cost of living down.  (Globes 22.02)

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1.2  FATF Grants Israel Observer Status

The Financial Action Task Force (FATF) on money laundering has announced that Israel will join the organization as an observer starting June 2016.  The admission marks a significant step in the application process for joining the prestigious group, which sets the global rules for combating money laundering and terror financing.  Joining the organization will allow Israel to participate in shaping global policy and position it as one of the leading countries in the international fight against money laundering and terror financing.  The announcement will also support the Israeli economy by providing the country an unofficial stamp of approval for its financial sector – which will improve ties between Israel and other countries involved in the financial and legal battle.

The FATF is an international taskforce established in 1989 by the G7 countries.  It leads the fight against money laundering and terror financing on a national and international level by setting standards for countries.  The countries that do not meet the standards are included in a “blacklist”.  The organization comprises 34 countries and two regional groups.  Israel has been conducting a diplomatic campaign since 2012 to join the group, in close cooperation with the Ministry of Foreign Affairs and Ministry of Finance.  In 2014, the organization decided – in an unusual step – to allow a limited number of countries into its ranks; after an intense selection process, it agreed to consider Israel as a candidate.  (Globes 22.02)

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1.3  MK Litzman: ‘Life-Saving Medicines Must Enter Healthcare Plan’

Health Minister MK Rabbi Yaakov Litzman (United Torah Judaism) told the Knesset Health Committee on 22 February that he intended to institute a change in regulation by including life-saving medicines in Supplementary Healthcare Services (SHS).  Litzman noted that current SHS plans cover 76% of the population.  He said “The majority will be covered.  The rest are half rich and half poor.  The rich have private insurance at their disposal, but the poor cannot buy SHS plans.  I will make sure they receive life-saving drugs as if they have a SHS.  I am willing to include that in the law,” stated the Health Minister.  Litzman intends to bring a bill changing the law on prescriptions to the Ministerial Law Committee for approval for legislation in the coming weeks.  (Arutz Sheva 22.02)

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1.4  Plan To Lower Hotel Prices Passes First Knesset Reading

On 22 February the Knesset plenum approved the first reading of a plan by Tourism Minister Levin to lower the prices of vacation accommodations in Israel.  Under the plan, hotels would be classified as national infrastructure and the National Infrastructure Committee would streamline approval for the construction of new hotels.  Moreover, independent local planning committees will be able to approve increases of up to 20% in the allocation for apartment hotels, a move which is expected to lower the risk for the project investor.  Levin’s plan is also expected to make the planning process for hotel construction more efficient, dramatically increase the number of hotels rooms available and eventually bring down vacation prices by some 20%.  According to estimates, within approximately five years Israel would gain about 15,000 hotel rooms.  The bill will now be presented to the Knesset Interior and Environmental Protection Committees for discussion and debate prior to undergoing a second and third reading in the Knesset.  (Various 22.02)

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1.5  US Foreign Military Funding Talks Key to Israeli Tanker Plan

Decisions about whether Israel will select Boeing’s KC-46A tanker and ask for additional Lockheed Martin F-35s will depend on the result of current negotiations about the size of the US Foreign Military Funding (FMF) package that the nation will receive over the next 10 years.  Within the next few months, the allies are expected to agree the draft of a memorandum of understanding covering US funding to Israel’s military.  Sources indicate that the Obama administration is likely to increase the FMF package by up to $1 billion for the decade to be covered in the new accord, which would set its contribution at about $4.1 billion a year.

With sufficient funding, the Israeli air force could select the KC-46A – which is now in advanced testing for the US Air Force and also on order for Japan – and abandon an alternative plan to purchase converted 767s.  The acquisition of additional F-35I Adir fighters is also a priority for the Israeli air force, which later this year will take delivery of its first of example out of a total currently requested of 33.  (FlightGlobal 15.02)

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1.6  Bill Seeks to Let All Employees Refuse to Work on the Sabbath

The Ministerial Committee for Legislation is discussing a bill that would prohibit employers from compelling secular employees to work on Shabbat.  The bill is an effort to allow all employees, rather than only religiously observant ones, to refuse work on Shabbat, which is mandated by law as a weekly day of rest.  Under the bill, employees who do not observe Shabbat or dietary restriction laws in accordance with Jewish custom would not be treated differently than those who do observe.  They will not risk losing their jobs or being rejected from a potential job on the basis of refusing to work on Shabbat.  The bill states that all employees should be allowed “to refuse to work on their day of rest — for Jewish people, to refuse to work on Shabbat, even if the employee is a traditional Jew who does not observe Shabbat according to Jewish law.”  (IH 21.02)

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2.1  Year of the Monkey Rings in First Israel-China Equity Fund

Israel 21C reported that the ever-growing China-Israel bond just got $200 million stronger via investors in the Catalyst CEL Fund, the first dedicated Israel-China private equity fund.  Catalyst CEL is a partnership between Tel Aviv-based multi-fund firm Catalyst Private Equity and China Everbright Limited (CEL) of Hong Kong.

At its first closing in April 2014, Catalyst CEL Fund invested in Lamina Technologies, an Israeli-founded, Swiss-based maker of sub-micron, precision metal-cutting tools.  In January 2015 it announced an investment in a cutting-edge 3D printing company.  Investments will not be limited to Israeli companies already operating in China, however.  More than half of the $200 million pot is made up of investments from China.

The traffic flows in both directions.  At the beginning of January 2016, 150 corporate leaders from 85 Israeli companies met with potential Chinese investors during a two-day event in Beijing organized by the Israeli Ministry of Economy and Industry.  Catalyst CEL is planned to be active through2026.  (Israel 21C 11.2)

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2.2  Finance Ministry Says Hi-Tech No Longer Israel’s Main Growth Engine

A survey published on 14 February by the Ministry of Finance finds that high-tech is no longer Israel’s major economic growth engine.  The report says, “In the years following the last global crisis (in 2008), there was a significant slowdown in the sector (high-tech) and it ceased being the growth engine of the economy.  Since 2010, the rate of growth of the sector is only half the overall rate of growth in the economy and the sector stopped growing as a proportion of total exports.  The most major challenge facing the sector is the supply of skilled human resources due to the relative size of Israel’s high-tech sector (compared with other developing fields).”

The survey notes that there are 283,000 salaried employees in Israel’s high-tech sector, representing 12% of the overall salaried workforce.  High-tech contributes 9% of Israel’s GDP and is responsible for 40% of exports.

The Ministry of Finance says that after the impressive growth in Israel’s high-tech job market in the 1990’s, “The stagnation in employment figures in recent years raises question marks about the future of the sector.  The rapid growth of salaries in the high-tech sector backs up the assessment that the stagnation in employment reflects limitations on the supply side, in other words a lack of skilled manpower.  In recent years, there has been rapid growth in salaries compared with the US, which is harming the attractiveness of expanding operations in Israel for foreign companies.”

The Ministry of Finance says that the main reason for the lack of skilled employees is the fall in the number of computer science graduates and the rise on the number of college graduates in other disciplines.  The survey notes that this trend is typical of the entire OECD but is more marked in Israel.  The survey says that the lack of skilled employees is not the only problem blighting Israeli high-tech.  The Ministry of Finance also observes that Israel’s status as a leader in innovation is being eroded and that in 2013 South Korea displaced Israel as the world’s top country in terms of R&D expenditure as a percentage of GDP.  (Globes 14.02)

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2.3  Titanium Investments Unveils $50 Million Israel VC Fund

Russia’s Titanium Investments has unveiled its $50 million fund for investing in Israeli startups.  Close to half the sum has already been invested.  Titanium said that it has been investing under the radar for a few months now and is now publicly announcing the scope of its investments for the first time.  In its early stages Titanium was focused on investments in Russia, but has since expanded its scope, investing mainly in Israeli startups since November 2014.  The company is now looking to invest in additional companies as well as to increase its existing investments in its portfolio companies.  Titanium’s portfolio companies are valued at over $350 million, and Titanium Investments holds stakes from 3% to 17% in each company.  Titanium not only supports its portfolio companies with the initial investment, but also continues to increases support in those companies over time, taking part in each and every funding round of performing portfolio companies, from seed to exit.  (Globes 16.02)

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2.4  Cannabics Pharmaceuticals to Raise $4 Million

Israeli company Cannabics Pharmaceuticals, which develops cannabis-based treatments, is planning a $4 million private placement.  The company is currently conducting a roadshow for investors in Israel, the US, and Europe, accompanied by the investment banking division of the Aloni Haft group.  The offering is slated for closure in the coming month.

Cannabics was founded in 2012 by Israeli scientists doing research in cancer and molecular biology.  The company was merged into a US stock exchange shell in 2014, and is currently traded over the counter in the US.  The company’s share price hit its peak in July 2014 with an $80 million market cap, but like other shares in this field, has since lost ground, and the company’s market cap is now only $4.5 million. Turnovers in the share are small, in view of the fact that the founders hold large stakes in the company.  Cannabics’s product is a delayed release pill designed to improve the quality of life of cancer patients at an advanced stage of the disease, which is already being marketed in Colorado in the US.  The company is also developing a technological system for evaluating biopsies using the active ingredient in cannabis; this system can help doctors realize the optimal treatment for a patient (personalized medicine).  (Globes 15.02)

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2.5  YouAppi Closes $13.1 Million Series B Round for Expansion into Asia

YouAppi raised a $13.1 million Series B funding round.  The following investors are participating in this round: Hawk Ventures, Global Brain, Click Ventures, Digital Future, Emery Capital, Altair Capital, and existing investors Glilot Capital Partners, 2B Angels and Flint Capital.  This funding round marks a more than 300% increase from the last funding round secured by YouAppi, driven by the scale of reaching 1.5 billion global mobile profiles accessing 3,500 mobile apps and sites – including The New York Times, Pandora, EA, Orbitz, Zynga, Yandex, Wayfair, and Viber – in 200 countries via 100 billion impressions monthly.  Attaining these metrics was made possible by the company’s mobile customer acquisition technology and teams in San Francisco and New York in the US, and China, India, Israel, Singapore, Germany and the UK.

Since 2012, YouAppi has been combining the power of machine learning with proprietary predictive algorithms, enabling the world’s leading apps to find the right customers at the right conversion price across countries and verticals, based on post-install event analytics.  The company’s OneRun Platform conducts real-time multi variant analysis to understand the KPIs for each app.  This is facilitated by the ongoing management of campaigns that deliver mobile app recommendations while analyzing over 250 terabytes of data daily.  YouAppi drives customer acquisition via 15,000 campaigns for 450 leading advertisers, offering one single point to streamline mobile media buying.

Ra’anana’s YouAppi is a fully managed solution for premium mobile brands, providing one single point to streamline their mobile media buying.  YouAppi’s OneRun platform combines the power of machine learning with our proprietary predictive algorithms, and cohort technology, to analyze the mobile content consumption patterns of over 1.5B users, converting data into profitable users.  (YouAppi 17.02)

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2.6  Israel’s Siemplify Raises $4 Million

Tel Aviv’s cyber security startup Siemplify has raised $4 million.  The investors include 83North Venture Capital (formerly Greylock IL) and angel investors David Strohm (Partner, Greylock Partners), Alex Pinchev (Rackspace president Global Sales and Marketing), Alex Daly, (former ArcSight founder and CEO), Tom Kilroy (EVP Intel), and Moti Gutman (Matrix CEO).  Siemplify has come out of stealth on 20 February with its security operations platform to employ the same advanced cybersecurity methodologies used by leading military intelligence organizations.  The platform automatically correlates security alerts, identifies and prioritizes incidents, and graphically depicts the complete threat chain, setting new standards for time-to-insight and time-to-remediate.  The platform acts as a central hub linking an organization’s existing security, threat intelligence and risk management tools, including Splunk and popular SIEMs, effectively improving the return on those investments.  (Globes 18.02)

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2.7  Mellanox Technologies Completes Acquisition of EZchip

Mellanox Technologies completed the acquisition of EZchip, a leader in high-performance processing solutions for carrier and data center networks, at a total purchase price of approximately $811 million (approximately $606 million net of cash).  Each outstanding share of EZchip ordinary shares shall be deemed to have been transferred to Mellanox, entitling the holder thereof to receive $25.50 in cash without interest and less any applicable withholding taxes.  Following the merger, EZchip shares ceased to be traded on the NASDAQ and Tel-Aviv Stock Exchanges.

The EZchip acquisition is a further step in Mellanox’s strategy to become the leading broad-line supplier of intelligent interconnect solutions for the data center.  The combined company will deliver diverse and robust solutions, enabling customers to meet growing demands of data-intensive applications used in high-performance computing, Web 2.0, cloud, network security, data center, enterprise, telecom, database, financial services and storage environments.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end InfiniBand and Ethernet intelligent interconnect solutions and services for servers and storage.  Mellanox intelligent interconnect and processing solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance capability.  (Mellanox 23.02)

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3.1  Qatar Airways Threatens to Cancel Pratt & Whitney Engine Order

Qatar Airways threatened to cancel an order for Pratt & Whitney engines for a fleet of Airbus narrow-body jets, saying the newly developed power plants had “a lot of problems”.  The Gulf airline has ordered 50 A320neo-family aircraft and was originally due to take the first delivery in December, but rejected the jet due to what it called an engine problem and the first jet went last month to Lufthansa instead.  Pratt & Whitney competes with CFM International, co-owned by General Electric and France’s Safran, to supply engines for the narrow body Airbus jet family.  Pratt & Whitney has acknowledged teething problems on the engine but says they do not affect its 15% fuel savings.  (Reuters 16.02)

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3.2  Emirates Chief Hails ‘Historic’ Deal with LA Dodgers Baseball Team

On 20 February, Emirates Airline announced a new sponsorship deal with the Los Angeles Dodgers.  The Dubai-based airline said it will be the Official Airline Sponsor of the Dodgers in a deal to mark its entry into the world of baseball.  As part of the agreement, Emirates will have home plate and foul pole signage and will open a new Emirates Lounge, a 70 person hospitality space.  In addition, Emirates will feature in-game activations, occasional ceremonial first pitches and fan appreciation activities.  To extend the partnership, the Dodgers will be sponsoring the Dubai Little League All Star Travel Teams, which will now go by the name the Dubai Dodgers.  The new partnership with the Los Angeles Dodgers continues Emirates’ momentum in the realm of sport, with the airline having made its mark on football as a sponsor of some of the world’s premier teams including AC Milan, Real Madrid, Arsenal, Olympiacos FC, Hamburg, and Paris Saint-Germain.  In the US, Emirates is also the main sponsor of the New York Cosmos, the US Rugby Team and the San Francisco Symphony.  (AB 22.02)

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3.3  Chinese Officials Asked Aramco to Dual List in Hong Kong

Chinese officials have approached Saudi Aramco in an attempt to persuade the world’s largest oil company to dual list on both the Saudi and Hong Kong exchanges.  Bloomberg quoted unnamed sources as saying that the proposal was suggested in exchange for anchor investments from Chinese funds.  The approach was made earlier this year, though no decision had been made.  Saudi Deputy Crown Prince Mohammed bin Salman said earlier that Riyadh might sell shares in Aramco as part of a privatization drive.  In January, Aramco said it was considering either listing its entire business, or some of its units.  The company has not clarified where it plans to list, nor has it appointed financial advisers.  (AB 14.02)

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3.4  Morocco Okays Opening of First IKEA Store

Moroccan authorities approved the opening of the first IKEA store in Morocco.  The decision was made by the local authorities of Mohammedia, 30 km south of Casablanca.  The opening of the Swedish retail giant was delayed for several months.  The store was scheduled to open on 29 September 2015, but tensions that developed between the Swedish and the Moroccan governments pushed Rabat to block its opening.  As a reaction to the Swedish government’s alleged decision to recognize the self-proclaimed Saharawi Arab Democratic Republic (SADR), Moroccan authorities said that IKEA was denied the authorization to open its five stores in Morocco, because “it [lacked] conformity permits.”

The IKEA store in Zenata is the first of five stores the Swedish company intends to establish in Morocco.  The furniture giant has reportedly invested €40 million in its new 26,000 square meter plant that will create 1,400 jobs, including 400 direct jobs.  The decision to allow IKEA to open its stores in Morocco comes after the relations between Morocco and Sweden returned to normal following the decision of the Swedish government to refrain from recognizing the so-called SADR.  (MWN 11.02)

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3.5  Redknee to Support Turk Telekom with the Launch of New Services

Toronto’s Redknee Solutions, a leading provider of real-time monetization and subscriber management software, announced the signing of a new multi-year expansion of services contract, including licenses, support and other consulting services, with Turk Telekom, a leading mobile operator in Turkey with over 17 million subscribers.  With signing of this new contract, Turk Telekom will further strengthen its relationship with Redknee and leverage its real-time monetization and subscriber management software to support the impending launch of new LTE services in the coming months.

For Turk Telekom, it is an exciting time in the Turkish telecommunications market with the company set to be among the very first providers of LTE services in the country.  The introduction of LTE services is widely expected to fuel the introduction of new products and services in the Turkish market and lead to stronger penetration of mobile devices and technologies across Turkey to take advantage of the technology.  (Redknee Solutions 22.02)

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4.1  Solar Tower in Desert Promotes Israel’s Renewable Energy Drive

In a vast expanse of open desert in southern Israel, a 240 meter tower is taking shape that its builders hope will help make solar energy much more cost effective.  The tower, being built by Israel-based Megalim Solar Power, whose shareholders include General Electric, will be taller than other solar towers, enabling it to generate up to 121 MW of power.  Due to be completed late next year at a cost of $773 million, the facility will provide around 1% of Israel’s electricity under an agreement with the Israeli government, which aims for 10% of the country’s energy needs to be provided by renewables by 2020.

Megalim’s tower in the Negev desert, which stands out for miles around, is surrounded by 50,000 computer-controlled mirrors, to project the sun’s rays.  They are bigger than in previous projects and controlled over a dedicated Wi-Fi network, rather than with expensive cables used in the past.  The tower is privately funded but when completed the Israeli government has guaranteed to buy the power from it at an above-market price.  (Various 16.02)

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4.2  SolarEdge Surpasses 10 Million Shipped Power Optimizers

SolarEdge Technologies announced that it has shipped its 10 millionth power optimizer.  With systems installed in more than 90 countries, SolarEdge reached its 10 millionth shipped power optimizer in 10 years following its founding and after only 6 years of commercial shipments.  Close to 5 million power optimizers were shipped globally, solely in 2015.  To celebrate, SolarEdge is labeling 10 prize-winning power optimizers, all signed by the company’s founders, in its global shipments.  Each recipient of a prize-winning power optimizer will be entitled to receive $10,000 cash.

Herzliya Pituah’s SolarEdge provides an intelligent inverter solution that has changed the way power is harvested and managed in solar photovoltaic systems.  The SolarEdge DC optimized inverter system maximizes power generation at the individual PV module-level while lowering the cost of energy produced by the solar PV system.  The SolarEdge system consists of power optimizers, inverters, storage solutions, and a cloud-based monitoring platform and addresses a broad range of solar market segments, from residential solar installations to commercial and small utility-scale solar installations.  (SolarEdge 09.02)

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5.1  Lebanon’s Consumer Prices Continues to Drop in the First Month of 2016

According to the Central Administration of Statistics (CAS), the Consumer Price Index (CPI) continued to show signs of deflation in the first month of the year.  The CPI dropped from 97.13 points in January 2015 to 94.45 points by the end of January 2016, recording a 2.76% year-on-year (y-o-y) decrease.  This fall is attributed to the continuing deterioration of oil quotes and the depreciation of Euro during the last year.  In terms of the CPI’s components, “food and non-alcoholic beverages” prices (20.6% of CPI) downturned by 0.73% y-o-y in January 2016. Moreover, “transportation” (13.1% of CPI) and “water, electricity, gas & other fuels” (11.9% of CPI), saw annual declines of 3.12% and 15.67%, respectively.  The “Health” (7.8% of CPI) sub-index posted a yearly drop of 6.31% in January 2016,while “communication” (4.6% of CPI) and “Clothing and Footwear” (5.4% of CPI), posting respective y-o-y falls of 0.77% and 2.59% over the same period.  However, “education” sub-index, constituting 5.9% of the CPI, increased annually by 1.52% in January 2016.  In addition, “restaurant & hotels” (2.6% of CPI) prices went up by 2.12% y-o-y, which might be due to an improving tourist activity during the first month of the year.  (CAS 23.02)

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5.2  US Signs Law to Increase Military Support to Jordan

The US finalized a law that will allow the administration to increase military support to Jordan to $450 million this year.  In 2015, the US provided Jordan with $385 million in foreign military financing support to Jordan, which is an $85 million increase over 2014.  The law, according to a version available online on US government websites, stipulates that the US will help the Kingdom in its response to the Syrian refugee crisis; to provide necessary assistance to alleviate the domestic burden to provide basic needs for the assimilated Syrian refugees; to cooperate with Jordan to combat the terrorist threat of Daesh (IS) or other terrorist organizations; and to help secure the border between Jordan and its neighbors Syria and Iraq.  (JT 21.02)

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5.3  Construction of Jordan’s First Shale Power Plant to Start in June

The construction of a $2.2 billion power plant, Jordan’s first to be fueled by oil shale, is set to start in June.  The Attarat Power Company (APCO) is in the process of securing the remaining finance needed for starting construction on the facility, Minister of Energy and Mineral Resources Ibrahim Saif told The Jordan Times.  APCO is a wholly owned subsidiary of Enefit Jordan BV, which is itself owned by Enefit (Estonia’s Eesti Energia AS), Malaysia’s YTL Power International Berhad and Jordan’s Near East Investments Limited.  In January, the consortium signed a $1.6 billion agreement for the funding of Jordan’s first oil shale-fired power plant, which will be built in the Attarat area with a total capacity of 470 MW.   The agreement was concluded between the conglomerate and the Bank of China and the Industrial and Commercial Bank of China.  The plant is expected to be operational in 2019.  The initial financing agreement was signed when King Abdullah visited China last year.  According to official figures, Jordan has vast reserves of oil shale estimated at more than 70 billion tonnes.  (JT 16.02)

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5.4  Germany to Lend Iraq $566 Million

Germany has agreed to lend €500 million ($566 million) to Iraq to help rebuild the country’s infrastructure.  At a meeting with Iraqi Prime Minister Haider al-Abadi in Berlin, Chancellor Angela Merkel said Germany also wants to help with the demining of cities and towns in Iraq so that the country’s 3 million internally displaced people (IDPs) can return to their homes.  (Deutsche Welle 12.02)

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►►Arabian Gulf

5.5  Qatar Tourism Receipts Forecasted to Grow to $7.2 Billion by 2025

Qatar’s tourism receipts are forecast to grow to $7.2 billion by 2025 as the Gulf state looks to diversify its economy away from oil and gas over the next decade.  The country’s tourism sector is set to grow annually by 4.7% after travel and tourism is estimated to have contributed $4.6 billion for 2015, a rise of 7.3% over the previous year.

Qatar’s tourism industry is building momentum as it enters the second half of the decade, with an ambitious target of four million visitors by 2020, supported by $40-45 billion worth of sector investment under the country’s National Tourism Sector Strategy 2030 plan.  Reports suggest the addition of 11 new hotel properties with a total of 1,400 rooms to the market in 2015 as part of its commitment to reach 50,000 additional rooms by the 2022, when it will host the FIFA World Cup.  Official statistics tally current hotel room capacity at 17,900 keys, 84% of which is four and five-star accommodation.  (AB 17.02)

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5.6  WhatsApp Voice Call Not Banned By Saudi Regulator

The decision to ban WhatsApp voice call in Saudi Arabia was taken by the WhatsApp company, revealed the Communications and Information Technology Commission (CITC).  The CITC, the Kingdom’s telecom regulator, said that the voice call service is not available in many countries, including some GCC states, because its company fails to comply with the countries’ regulations.  The statement was made following media coverage regarding the halt of the WhatsApp voice call in the Kingdom.

The CITC stated its desire to provide the public with the latest the communications technology, but only if they are in line with Saudi’s rules and regulations.  The WhatsApp voice call was first blocked in March last year after telecom companies complained it was causing them big losses.  It was blocked again earlier this year but suddenly resumed.  (AB 10.02)

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5.7  Saudi & Russia Agree to Oil Output Freeze

Russia and Saudi Arabia agreed on 16 February to freeze output levels but said the deal was contingent on other producers joining in – a major sticking point with Iran absent from the talks and determined to raise production.  The Saudi, Russian, Qatari and Venezuelan oil ministers announced the proposal after a previously undisclosed meeting in Doha.  It could become the first joint OPEC and non-OPEC deal in 15 years, aimed at tackling a growing oversupply of crude and helping prices recover from their lowest in over a decade.  Saudi Oil Minister Ali al-Naimi said freezing production at January levels – near record highs – was an adequate measure and he hoped other producers would adopt the plan.  OPEC member Iran, Saudi Arabia’s regional arch rival, has pledged to steeply increase output in the coming months as it looks to regain market share lost after years of international sanctions, which were lifted in January following a deal with world powers over its nuclear program.  (AB 16.02)

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5.8  Saudi Arabia Suspends $3 Billion Lebanese Army Aid Deal

Saudi Arabia has suspended a $3 billion aid package for the Lebanese army to buy French arms, in what an official described as a response to Beirut’s failure to condemn attacks on the kingdom’s missions in Iran.  Saudi Arabia has also cancelled the remainder of $1 billion in aid it had earmarked for Lebanon’s internal security service.  Saudi Arabia pledged the aid package for the Lebanese army in 2013 in what then-Lebanese President Michel Suleiman called the largest grant ever to the country’s armed forces.  The first shipment of French weapons and military equipment had already been delivered to Lebanon in April last year under the Saudi-funded deal to bolster the Lebanese army’s fight against Islamist militants encroaching from neighboring Syria.  (Reuters 19.02)

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►►North Africa

5.9  Egypt’s Dollar Crisis Continues

Egypt’s dollar crisis is persisting despite a series of government measures aimed at strengthening the pound.  Reports that the government has drawn up its draft 2016-2017 budget at an exchange rate of LE8.25 against the dollar, instead of the current official rate of LE7.83, have fueled speculation that it might officially devalue the value of the pound soon.  However, a recent statement from a Ministry of Finance spokesman said that it is normal, when drafting the budget, to take into account several possible exchange rate assumptions and to then revise these during the drafting process.

Predictions of a possible devaluation of the Egyptian pound against the dollar are based on the scarcity of dollars on the local market amid high demand, which led the dollar to trade on the unofficial (or black) market at a record high of LE9 in early February.  The current official price of the dollar is LE7.83, and the CBE allows exchange bureaus to sell it for up to LE0.10 (10 piasters) more than the official value.

Dollar cash deposits have been blamed, along with other factors, for the country’s shortage of foreign currency reserves, which fell to $16.4 billion in December 2015 compared to $36 billion in 2010 before Egypt’s period of political turmoil and economic hardship.  Dollars are not available to cover all local demand, which is why the black market has raised the exchange rate for the dollar.

The drop is backed by a decline in demand from importers as a result of the recent presidential decree to increase customs tariffs on a wide range of imported goods.  The decision was among measures announced made by the authorities to ease pressure on the country’s foreign reserves by reducing spending on imports.  Another decision was taken in January to ban imports of products labelled by the government as “non-essential”, starting in February, with the aim of decreasing the imports bill and easing pressure on the pound.  Egyptian imports amounted to $61 billion in fiscal year 2014-2015, while exports stood at $22 billion in the same period, putting the trade deficit at $39 billion.  (Al Ahram 09.02)

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5.10  Egypt’s Central Bank Widens Exceptions On Import Restrictions

On 22 February, Egypt’s central bank excluded manufacturing inputs, spare parts and computers from a measure requiring importers to provide 100% cash deposits at banks on their letters of credit.  The central bank raised in December the requirement from 50% in an attempt to boost domestic production against foreign competition and shore up limited resources of the hard currency.  Imports of medicines, input materials for pharmaceuticals and babies’ milk were excluded from the decision.  The blow to Egypt’s main sources of foreign currency — tourism and foreign direct investments — following the uprising in 2011, has starved Egypt of hard currency.  As importers sought foreign currency from a growing black market, pressuring the value of the pound, the central bank has taken measures to control the market.  (Ahram Online 23.02)

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5.11  EU-Tunisia Commission Proposes Further €500 Million in Assistance

The European Commission is ready to further assist Tunisia in overcoming its economic difficulties and achieving more sustainable growth.  Following a request by Tunisia, the Commission has proposed additional macro-financial assistance to Tunisia of up to €500 million.  This assistance will take the form of medium-term loans at favorable financing conditions.

The proposal for additional assistance is part of a wider effort by the EU to help Tunisia overcome the severe economic difficulties it has faced since its economic and political transition process began.  Terrorist attacks in 2015 worsened the situation further by affecting key economic sectors such as tourism and transport.  This macro-financial assistance program complements the significant EU development assistance which Tunisia already receives in the framework of the European Neighbourhood Policy through the European Neighbourhood Instrument (ENI) and other EU external financial instruments.  This assistance amounts to more than €1 billion in grants provided to Tunisia since the 2011 revolution, supporting for instance socio-economic development and job creation the democratic transition process, as well as sectorial assistance, for instance to support its olive oil production.

The EU macro-financial assistance program will help to cover Tunisia’s external financing needs in 2016 and 2017, while supporting reform measures aimed at achieving a more sustainable balance of payments and budgetary situation, improving the investment climate, and fostering economic integration and regulatory convergence with the EU.  The ultimate aim is to help Tunisia lay the conditions for sustainable, inclusive and employment-generating economic growth.  (EU 12.02)

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5.12  Nearly One-Third of Moroccans Are Illiterate

A new report shows that 32% of Moroccans are illiterate.  In response, Prime Minister Benkirane called for an increase in the level of institutional coordination in order to succeed in the fight against illiteracy.  Chairing the Board of Directors of the National Agency Against Illiteracy (ANLCA), Benkirane noted that the illiteracy rate remains high in Morocco, despite progress.  According to the Prime Minister, illiteracy “constitutes an obstacle that hinders the economic growth of our country and prevents us from taking advantage of real opportunities that can improve indicators of economic growth.”  Benkirane noted that anti-illiteracy programs reached approximately 747,000 people during the 2014-2015 administrative year, an increase of 20% compared to the previous year.  ANLCA’s projects aim to reduce the illiteracy rate to less than 5% by 2024, both by eradicating illiteracy among young people 15 to 24 years old and by improving the skills of the illiterate or semi-illiterate workforce.  (MWN 23.02)

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6.1  Greece Back In Deflation, January Consumer Prices Drop 0.1%

Greece’s annual EU-harmonized inflation rate turned negative in January after the first positive reading in the previous month that halted 33 straight months of deflation, data from the country’s statistics service showed on 17 February.  January’s -0.1% was below market expectations.  The data showed the headline consumer price index fell 0.7% year-on-year in January, with the annual pace of deflation accelerating from the previous month.  Consumer prices were led lower by apparel and footwear, durable goods and housing costs due to the fall in heating oil costs.  For years an inflation outlier in the eurozone, Greece had been in deflation mode for the last two and a half years as wage and pension cuts and a protracted recession took a heavy toll on Greek households’ income.  (Reuters 17.02)

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7.1  Lebanon Justice Minister Resigns Over Hezbollah Domination

Lebanon’s Justice Minister Rifi, a fierce opponent of the country’s powerful Hezbollah movement, said he was resigning over the group’s “domination” of the government.  Rifi’s decision comes two days after Saudi Arabia announced it was suspending $3 billion in aid to Lebanon’s army in protest over “hostile” positions it said were inspired by Hezbollah.  Rifi accused Hezbollah of being responsible for the political crisis in Lebanon that has left the country without a president for the last 21 months.  And he said the Iranian-backed party was “destroying Lebanon’s relations with the kingdom of Saudi Arabia”.

Lebanon’s political scene is deeply divided, with the government split roughly between a bloc led by Hezbollah and another headed by former prime minister Saad Hariri, to which Rifi belongs.  Hezbollah is a close ally of the Syrian regime and is backed by Tehran, while Hariri’s bloc is close to Iran’s regional rival Saudi Arabia, and is supported by Western powers including Washington.  The schism has been exacerbated by the war in neighboring Syria, with Hezbollah sending fighters to bolster President Assad against an uprising that is supported by Saudi Arabia and Hariri’s political bloc.  (AFP 21.02)

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7.2  UAE’s Sheikh Mohammed Unveils New Cabinet

UAE Prime Minister and Ruler of Dubai Sheikh Mohammed bin Rashid Al Maktoum has approved a new cabinet following a major recent government reshuffle.  He announced the appointments on his official Twitter feed on 10 February.  Under the changes, three new ministerial roles have been created.  The new post of Minister of State for Tolerance has been handed to Lubna bint Khalid Al Qasimi, who was previously Minister of International Cooperation and Development.  Ohood Al Roumi has been awarded the new post of Minister of State for Happiness, responsible for “channeling policies and plans to achieve a happier society”.  Also, 22-year-old Shamma Al Mazrouei has been appointed the new Minister of State for Youth Affairs.  She has degrees from Oxford University and the University of New York.  Al Mazrouei will chair the National Youth Council, providing a public voice for young people.  As part of the ministerial shake-up the ministries of education and higher education have been merged – although two separate ministers will oversee each area.  Under the changes, the UAE plans to outsource “most government services” to the private sector.  (WAM 11.02)

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7.3  Libya’s Revised Unity Government Announced

Libya’s Presidential Council named a revised cabinet for a unity government late on 14 February.  The list comprises 13 ministers and five ministers of state, reduced significantly from the 32 member government previously proposed.  Two of the council’s nine members refused for a second time to put their signatures to the proposed government.  Prime Minister-designate Fayez Seraj told reporters that the latest appointments took into account “experience, competence, geographical distribution, the political spectrum and the components of Libyan society“.  (Reuters 15.02)

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8.1  Breakthrough Israeli Cancer Treatment Praised Worldwide

A breakthrough cancer study in which patients suffering from a form of leukemia saw their diseases go into remission after they were treated with genetically modified T-cells has deep roots in Israel.  One of the first in the world to work on the innovative adaptive immunotherapy technique to treat cancer, which was recently hailed worldwide as a potentially “extraordinary” development, was Weizmann Institute’s Prof. Zelig Eshhar.

In an article in the journal Science Translational Medicine, a team at the University of Pennsylvania’s Abramson Cancer Center and the Perelman School of Medicine reported that 27 out of 29 patients with an advanced blood cancer saw their cancers go into remission or disappear altogether when they received genetically modified T-cells that were equipped with synthetic molecules called chimeric antigen receptors, or CARs.  Those T-cells were able to target and destroy the tumor cells – specifically the ones that were responsible for the acute lymphoblastic leukemia the patients were suffering from.  According to officials at the Fred Hutchinson Cancer Research Center, where the research was carried out, patients in the trial – some of whom were told in 2013 they had barely a few months to live – not only survived, but now, after the therapy, “have no sign of the disease.”

The therapy involves extracting T-cells – the white blood cells that fight foreign or abnormal cells, including cancerous ones.  Under normal circumstances, T-cells try to fight cancerous cells – but because the body has been weakened by the cancer, the response is usually not strong enough to prevent the spread of cancer.  In addition, cancer cells are genetically programmed to evade T-cells.  (ToI 21.02)

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8.2  Israel & California Sign Unique Biotechnology Deal

On 9 February, Science, Technology and Space Minister Akunis signed the first agreement of its kind between his ministry and the California Institute for Regenerative Medicine in the field of biotechnology, with an emphasis on stem cell research.  The agreement was facilitated by the Israeli-American Council, which encourages cooperation between the United States and Israel.  The agreement will deepen the partnership between Israel and California, bringing together the most talented scientists to push the boundaries of stem cell research and advance medical breakthroughs in the treatment of diseases ranging from cancer and diabetes, to Alzheimer’s and HIV-AIDS.  (IH 10.02)

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8.3  BioLight Files Registration Statement for Proposed IPO in the US

BioLight Life Sciences has publicly filed a registration statement on Form F-1 with the U.S. Securities and Exchange Commission (SEC) relating to a proposed initial public offering.  The number of the securities to be offered and the price range for the proposed offering have not yet been determined.  BioLight has applied to list its ordinary shares on the NASDAQ Capital Market under the ticker symbol “BOLT.”  Feltl and Company, Inc. and Rodman & Renshaw, a unit of H.C. Wainwright & Co., are acting as joint book-running managers in the offering.  The offering will be made only by means of a prospectus.

Tel Aviv’s BioLight offers ophthalmic products and a pipeline of product candidates include IOPtiMate, a laser-based non-invasive surgical treatment for glaucoma; TeaRx, a point-of-care multi-parameter diagnostic test for dry eye syndrome; Eye-D, a controlled release drug-delivery insert platform and OphRx’s lyotropic liquid crystals, or LLC, a non-invasive topical drug delivery technology administered through eye drops as an alternative to current ocular delivery modalities.  BioLight has also invested in biomedical innovations in cancer diagnostics, including proprietary tests that are designated for bladder, cervical, multiple myeloma and other cancers.  (BioLight 10.02)

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8.4  BioLight Reports Positive Results for TeaRx Multi-Assay Test for Dry Eye Syndrome

BioLight Israeli Life Sciences Investments announced the completion of a successful U.S. clinical study that was designed to assess the effectiveness of its TeaRx multi-assay test in evaluating tears’ components of healthy subjects as well as of patients suffering from dry eye syndrome (DES).  This prospective study, conducted by Ora, enrolled 74 subjects in the U.S.  All study subjects were evaluated using a composite of four established benchmark tests for the assessment of DES, used in previous U.S. FDA regulatory approval processes for other DES products, to define and distinguish populations of healthy subjects from those with different grades of DES.  Study subjects were also evaluated using TeaRx’s assays.  The selected combination of TeaRx’s assays and the subjects’ demographics data were used to build predictive statistical model as a mean to determine the combination assays which provides the best TeaRx multi-assay test diagnostic power.

Tel Aviv’s BioLight offers ophthalmic products and a pipeline of product candidates include IOPtiMate, a laser-based non-invasive surgical treatment for glaucoma; TeaRx, a point-of-care multi-parameter diagnostic test for dry eye syndrome; Eye-D, a controlled release drug-delivery insert platform and OphRx’s lyotropic liquid crystals, or LLC, a non-invasive topical drug delivery technology administered through eye drops as an alternative to current ocular delivery modalities.  BioLight has also invested in biomedical innovations in cancer diagnostics, including proprietary tests that are designated for bladder, cervical, multiple myeloma and other cancers.  (BioLight 07.02)

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8.5  Hospitech Respiration Gets Clearance for AnapnoGuard System

Hospitech Respiration announced US FDA clearance of a 510(k) pre-market notification for the AnapnoGuard 100 System.  AnapnoGuard 100 system is intended for airway management by oral/nasal intubation while providing continuous endotracheal cuff pressure control using non-invasive measurement and monitoring of carbon dioxide concentration in the subglottic space and evacuation of secretions from above the endotracheal tube’s cuff.  The AnapnoGuard System provides respiratory therapists a new therapeutic approach based on a proprietary system for continuous, closed loop control of trachea sealing and endotracheal cuff pressure.  Over 400 patients at 7 clinical sites in 3 countries have been successfully treated with the AnapnoGuard System under clinical trials or standard-of-care use. AnapnoGuard is currently CE2 cleared.

Petah Tikva’s Hospitech Respiration is an innovative, privately held medical device company that has developed a multi-product platform of airway management solutions aimed at reducing complications arising from mechanical ventilation and reducing hospitalization costs associated with mechanically ventilated patients.  The need for mechanical ventilation is the primary reason for admission to the Intensive Care Units (ICU) with more than 100 million3 patients intubated annually.  (Hospitech 22.02)

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8.6  Rosetta Genomics Gets New York State’s Approval for Thyroid Cancer Diagnostic Assay

Rosetta Genomics announced conditional approval status for RosettaGX Reveal, its novel microRNA classifier for the diagnosis of indeterminate thyroid Fine Needle Aspirate (FNA) smears from the New York State Department of Health (NYSDOH) under the Company’s Molecular Oncology permit.  RosettaGX Reveal is the only molecular test in the thyroid market that has been validated in a multicenter, international, blinded study using convenient, routinely prepared cytology slides.  The assay is CLIA certified, but New York requires an additional license from the NYSDOH for CLIA-certified tests to be offered to patients in the state.  With this conditional approval, RosettaGX Reveal is now available in all 50 states.  In making the assay available pending final approval, the NYSDOH requires the Company to provide any additional information that it may request within 60 business days.

Rehovot’s Rosetta develops and commercializes a full range of microRNA-based and other molecular diagnostics.  Rosetta’s integrative research platform combining bioinformatics and state-of-the-art laboratory processes has led to the discovery of hundreds of biologically validated novel human microRNAs.  Building on its strong patent position and proprietary platform technologies, Rosetta is working on the application of these technologies in the development and commercialization of a full range of microRNA-based diagnostic tools.  (Rosetta Genomics 18.02)

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9.1  IAI Unveils New Civil Aviation Cyber Security Solutions

Israel Aerospace Industries (IAI) unveiled new Civil Aviation Cyber Security solutions aimed at securing the full range of cyber threats including ground, air traffic, avionics and other on-board systems.  Building on its decades of expertise in the domains of civil aviation coupled with state of the art technologies in the cyber domain, IAI offers a unified, state of the art cyber protection suite for the civil aviation industry, including IT networks, Mission Critical Systems (MCS) and Industrial Control Systems (ICS). IAI’s holistic approach views the civil aviation cyber environment as an eco-system including airports, airlines, aircraft manufacturers, and the aircraft itself.  It includes a forensics suite, comprising state-of-the art cyber forensics capabilities, alongside a state of the art, dedicated Cyber Simulation Lab, capabilities for simulated penetration testing and the option for an in-house forensic laboratory.

IAI is Israel’s largest aerospace and defense company and a globally recognized technology and innovation leader, specializing in developing and manufacturing advanced, state-of-the-art systems for air, space, sea, land, cyber and homeland security.  Since 1953, the company has provided advanced technology solutions to government and commercial customers worldwide including: satellites, missiles, weapon systems and munitions, unmanned and robotic systems, radars, C4ISR and more.  (IAI 15.02)

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9.2  IAI’s New UAV Mission Operational & Intelligence Center

Israel Aerospace Industries (IAI) revealed a new UAV Mission Operational and Intelligence Center (MOIC).  The new center allows efficient command and control of advanced and challenging UAV missions. Instead of using separate platforms for each UAV, the MOIC uses numerous platforms and payloads in order to enable improved real-time operation of a fleet of UAVs.  MOIC’s modular layout is based on mission operation cells including upper commander cell, exploitation center, C2 cell, full trainer SATCOM facility, support facility, and data storage center.  The all-inclusive headquarter generates an efficient mission flow which includes planning, commanding, controlling and monitoring mission performance, interpreting offline and online payload data, archiving raw and processed information and reporting to high command.  This mission flow provides a full operational picture of UAV’s, and maximizes the fleet throughput by allocating assets according to operational priorities, enhances coordination of UAV fleet and manned platforms, improves safety, protects ground assets and saves manpower and resources by centralizing and automatizing operations and maintenance.

IAI is Israel’s largest aerospace and defense company and a globally recognized technology and innovation leader, specializing in developing and manufacturing advanced, state-of-the-art systems for air, space, sea, land, cyber and homeland security.  Since 1953, the company has provided advanced technology solutions to government and commercial customers worldwide including: satellites, missiles, weapon systems and munitions, unmanned and robotic systems, radars, C4ISR and more.  (IAI 15.02)

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9.3  IAI’s Newest Members in its Loitering Munitions Family

Israel Aerospace Industries (IAI) unveiled at the Singapore Airshow the newest members in its Loitering Munitions (LM) family.  The first member in the extended family is the Harpy NG (New Generation), which is designed to counter the newer types of air defense radar threats that have evolved since the introduction into service of its former version.  The totally revamped model introduces two major changes: a. Improvement, as well as extension of the covered frequency band to much lower frequencies, to deal with all types of air defense radars, while still building on the extensive capabilities of the former generation Harpy.  b. Packaging the new Anti-Radiation (AR) Seeker in the more advanced airframe of its stablemate – the HAROP. This repackaging enables better flying characteristics – including longer loiter time, extended range, higher altitude as well as commonality in maintenance and training.

An additional new member in IAI’s family of LM’s is the Green Dragon, a tactical, low-cost LM designed to provide small ground units and special operations units with significant situational awareness and firepower in a compact envelope.  Green Dragon is a silent, all electric LM with up to two hours of loitering time, during which its operator can collect visual intelligence of surrounding areas up to a range of 40 km.

IAI is Israel’s largest aerospace and defense company and a globally recognized technology and innovation leader, specializing in developing and manufacturing advanced, state-of-the-art systems for air, space, sea, land, cyber and homeland security.  Since 1953, the company has provided advanced technology solutions to government and commercial customers worldwide including: satellites, missiles, weapon systems and munitions, unmanned and robotic systems, radars, C4ISR and more.  (IAI 15.02)

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9.4  NICE Workforce Management Reduces Costs and Increases Productivity

NICE Systems announced that Oi Telecom Group has achieved a significant cost reduction, higher productivity and increased agent occupancy with NICE Workforce Management (WFM) and consulting services.  A series of NICE WFM workshops on best practices was held in early January 2015 at Brasil Telecom Call Center (BRTCC), the outsourcer that is part of the Oi Telecom Group.  As a result, the BRTCC staff planning team was redesigned both in functionality and processes, leading to reductions of 23% in agent management staff and 2% in FTEs in contact center agents.  These employees were then reassigned to other areas of the organization, improving the value of their contribution at different points of the customer relationship chain.

Oi Telecom Group, which has been using NICE WFM and recording solutions since 2005, wanted to increase call center occupancy, reduce the time spent on generating and reviewing scheduling plans, improve productivity and integrate to both SmartSync and Genesys.  With the help of NICE’s consulting services, Oi attained these goals.

Ra’anana’s NICE Systems is the worldwide leading provider of enterprise software solutions that empower organizations to make smarter decisions based on advanced analytics of structured and unstructured data.  NICE solutions help the world’s largest organizations deliver better customer service, ensure compliance, combat fraud and safeguard citizens.  (NICE 17.02)

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9.5  Indiana University & Beeper Group Collaborate on C2 solutions

 Indiana University of Pennsylvania (IUP) Research Institute has partnered with Beeper Israel in order to co-develop and market next generation integrated Command and Control and Communications systems for the domestic emergency management market.  The cooperation will include: integrating Beeper’s Broadband Wireless Network communications solutions with IUP’s Command and Control (C2) software suite, joint development of a next generation Command and Control system for U.S. responders and municipalities and integration of Beeper’s public alert systems with IUP C2 products.

IUP Research Institute is an affiliate of Indiana University of Pennsylvania and has been involved in providing National Guard units with C2 capabilities for CBRNE (Chemical, Biological, Radiological, Nuclear and High Explosives) forces operating in the U.S. Homeland for over a decade.  Beeper Israel is an industry leader in the communications field, providing multiple emergency management communications solutions including public information alert systems to the Government of Israel and the Israel Defense Forces.  (IUP 17.02)

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9.6  Thirty Five Billion Chips Analyzed in 2015 Via Optimal+ Big Data Highway

The semiconductor industry celebrated a milestone as Optimal+, a global big data analytics provider, announced that it analyzed more than 35 billion semiconductor devices on behalf of its customers in 2015, a 50% increase from 2014.  These 35 billion units represent the largest centralized repository of manufacturing data ever collected and analyzed in the semiconductor industry.  Optimal+ brings unprecedented visibility into the global manufacturing operations of its customers, enabling actionable insights that drive timely business decisions on quality management, and increase yield and productivity.

For the past decade, Optimal+ has been aggregating and analyzing data on semiconductor devices used in tens of thousands of products from cell phones to automotive ECUs.  This has resulted in the accumulation of unmatched operational knowledge and has led to the development of scores of automated rules used within semiconductor manufacturing operations that contribute to significant quality improvements and fewer defective chips shipped for use in next-generation devices.

The company’s big data solutions provide a historical record or “manufacturing DNA” for every chip that is analyzed, providing valuable insights that can be used to determine the root cause of problems in field failures and for preventing future RMAs – a growing concern for semiconductor companies that are tasked by their customers to significantly reduce their DPPM (defective parts per million) rate.

Holon’s Optimal+ is a global provider of manufacturing intelligence software solutions, enabling semiconductor and electronics companies to seamlessly aggregate, organize and act upon the global manufacturing and test data they generate across their internal and external supply chains to measurably improve yield, quality and productivity.  The company’s real-time, Big Data analytics solutions are deployed in virtually every major foundry and OSAT currently serving the semiconductor ecosystem, processing tens of billions of chips every year on behalf of its customers and ushering in an era of unprecedented supply chain visibility that translates into strong and measurable ROI.  (Optimal+ 16.02)

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9.7  VocalZoom & Cobalt Partner on Near-Perfect Speech Recognition Solutions

VocalZoom announced that it will be collaborating with Tyngsborough, Massachusetts’s Cobalt Speech & Language to deliver a disruptive new, end-to-end solution for voice control in the connected car, head-mounted devices and access control applications.  The two companies have signed an agreement to combine VocalZoom’s optical HMC voice sensor technology with Cobalt’s speech recognition engine, creating a comprehensive voice-control development platform for products that deliver near-perfect performance even in noisy environments with other people speaking in the background.

Traditional solutions use one, two or an array of acoustic microphones with noise reduction technology, but performance is generally unsatisfactory and the industry has struggled to achieve even single-digit percentage improvements.  Today’s systems can’t provide clean enough, isolated speaker input that machines can understand.  In contrast, products that incorporate VocalZoom’s HMC optical sensor are able to acquire and measure facial vibrations during speech, and combine this additional data with the output from acoustic microphones to create an isolated, near-perfect reference signal – regardless of noise levels.  VocalZoom and Cobalt have conducted tests under noisy conditions that show an almost 60% improvement for Cobalt’s speech recognition engine with the VocalZoom sensor, using the industry’s most widely adopted architecture featuring an acoustic microphone and noise reduction technology.

Yokneam Illit’s VocalZoom supplies Human-to-Machine Communication (HMC) sensors for delivering a, natural, personalized and secure voice-controlled user experience in today’s increasingly mobile and interconnected world.  The sensors enable accurate and reliable voice control and biometrics authentication in any environment, regardless of noise.  Applications including mobile secure payments, headsets and wearables, mobile phones, access control, smart home solutions, and hands-free automotive voice control.  (VocalZoom 16.02)

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9.8  Allot to integrate Network Data insights into Oracle Communications Analytics

Allot Communications has been working with Oracle to serve as a network data source for Oracle’s new Oracle Communications Analytics suite of products.  By combining Allot’s Smart Data Source and Oracle’s big data methodologies and analytics tools, communication service providers (CSPs) will be able to leverage and monetize their data by correlating network, service and customer information.

Allot Smart Data Source, delivered with Oracle’s Communication Analytics, enables CSPs to answer their network inquiries in a simple and cost-effective manner without the need to export heaps of data records for analysis.  This is achieved by employing a holistic, consolidated and actionable approach which leads to fast time to value for big data projects.  Oracle and Allot can provide CSPs with the powerful ability to capture granular network data and gain greater application visibility into web activity, including location, device details and more for use cases.

Hod HaSharon’s Allot Communications is a leading provider of security and monetization solutions that enable service providers to protect and personalize the digital experience.  Allot’s flexible and highly scalable service delivery framework leverages the intelligence in data networks enabling service providers to get closer to their customers; to safeguard network assets and users; and to accelerate time-to-revenue for value-added services.  (Allot 17.02)

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9.9  IAI Receives Additional F-35 Lightning II Contract to Produce 40 Wing Sets

Israel Aerospace Industries (IAI) received an additional contract from Lockheed Martin to produce 40 wing sets for the F-35 Lightning II multi-role stealth fighter aircraft.  IAI is scheduled to produce more than 800 pairs of F-35 wings, with a potential value of $2.5 billion, during the next 10-15 years.  Since starting production in 2015, IAI has produced six wing sets and is expected to deliver a total of 12 sets during the first half of 2016.  Following execution of the initial contract in 2014, IAI inaugurated a state-of-the-art automated F-35 wing production line, investing in the required advanced systems and technologies to meet the aircraft’s innovative design.  Production is extremely accurate and ensures protection of the environment during all stages of the production process.  The jets wing’s upper and lower skins are made of composite materials, developed especially for the F-35.  The wing production center at IAI’s Lahav Division is renowned for its extensive experience and knowledge in producing wings for the F-16 and T-38 aircraft, as well as aero structure assemblies for other aircraft and customers.

IAI – Israel Aerospace Industries – is Israel’s largest aerospace and defense company and a globally recognized technology and innovation leader, specializing in developing and manufacturing advanced, state-of-the-art systems for air, space, sea, land, cyber and homeland security.  (IAI 15.02)

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9.10  Opgal Announces NDTherm NDT Based on Thermal Imaging

Following several years of R&D and after successfully testing a large number of parts and building a global distribution network, Opgal is officially announcing general availability of NDTherm – its Non-Destructive Testing (NDT) solution based on thermal imaging.  Using active thermography and unique algorithms, NDTherm enables fast, safe, contact-free, cost effective, easy to use, real-time inspection of parts.  It detects deep flaws in various composite materials and structures such as CFRP, sandwich structures, hybrids and porous materials.  NDTherm can be applied on small or large surfaces, including cases where access is only possible from one side of the structure.

The portable system, NDTherm NT is positioned for in-service applications and enables regular maintenance and efficient damage assessment.  Suitable for a one-man operation, this compact system allows easy transportation and quick deployment in the field.  Designed for production lines or testing environments, NDTherm FX offers enhanced image output to enable intuitive and accurate assessments, as well as built-in reporting capabilities.  NDTherm AU is a customized system with a variety of testing capabilities for automatically inspecting large parts and complex shapes.

Karmiel’s Opgal Optronic Industries is a leading global provider of innovative infrared imaging systems and advanced vision and surveillance solutions.  Using state-of-the-art thermal and other imaging technologies, Opgal leverages advanced electro-optics and image processing expertise to create high performance, versatile visualization products.  Founded more than 30 years ago, Opgal is a major supplier to leading contractors and integrators, as well as corporate and professional customers in over 60 countries.  (Opgal 22.02)

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9.11  Altair IoT-based Low-cost Water Quality Monitoring & Contamination Detection

Hod HaSharon’s Altair Semiconductor, a leading provider of LTE chipsets, announced its FourGee-1160 CAT-1 LTE chipset is providing communication and up to ten years of battery life for Ericsson’s low-cost water quality monitoring demo at Mobile World Congress.  The demonstration is based on the Chattahoochee Riverkeeper project in the United States, an initiative dedicated to protecting and preserving the Chattahoochee River Basin. Ericsson and Altair are showing how the Internet of Things can provide solutions that make the world more sustainable.  Altair’s CAT-1 FourGee-1160 chipset extends the battery life of idle devices, when compared to other LTE modules.  An LTE-only option offers low current to improve device battery drain, crucial with an application like river monitoring.  This characteristic, plus Altair’s ability to price its chipsets lower than the competition, helps bring IoT applications to reality.  (Altair 22.02)

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9.12  WakingApp Launches ENTiTi Creator

WakingApp announced the release of a public version of its ENTiTi Creator for PC and Mac.  Prior to this announcement, businesses and content creators had to have the right technical background to develop interactive and advanced VR and AR content.  The ENTiTi Creator has bridged the gap to construct and distribute quality content, by eliminating technical issues and breaking down the walls for a whole new class of VR creators.  ENTiTi Creator enables anyone with no prior programming experience to create advanced interactive VR and AR content once and immediately make it viewable on leading smartphones, HMD like Google Cardboard, light Mobile VR devices such as Zeiss VR One, FreeFly VR, and soon Samsung Gear VR, and the upcoming PC-based Oculus Rift and HTC Vive.  For artists, studios, agencies and SMBs, ENTiTi Creator provides a fast, easy way to create advanced interactive content, allowing resources to focus more on creativity than technical issues.

Tel Aviv’s WakingApp‘s powerful cloud-based ENTiTi platform enables any company or individual to create interactive virtual and augmented reality content without any developer skills.  All content is instantly made available on the ENTiTi app, and integrates with mobile devices, leading smart glasses and peripherals.  WakingApp’s mission is to build and grow the VR & AR ecosystems by providing the tools for anyone to create interactive and advanced content, and enabling the use of cutting-edge technology such as viewers, cameras, head mounts, controllers, and depth sensors.  (WakingApp 22.02)

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9.13  CommuniTake Technologies Announces IntactPhone

CommuniTake Technologies addresses current telecomm challenges with the introduction of the Intact Mobile Security platform.  CommuniTake’s game-changing platform introduces a mobile device that is totally shielded from the ground up, designed to protect the most confidential communications.  The IntactPhone technical specifications include Octa-core CPU, 5.5″ Full HD ultra-bright display and 3GB RAM.  The Intact Mobile Security platform can be deployed by two methods:  A corporate-owned personally-enabled device that constitutes the three-way defense through the hardened device, the proprietary operating system and the application level defense, or a BYOD approach consisting of the application level defense – encrypted communications, central command center, crowd analysis, and remote control.

Yokneam’s CommuniTake crafts security, care and management solutions to provide people and businesses with better, more secure mobile device use.  CommuniTake delivers a natively-integrated mobility platform that unifies hardened devices, a security-rich mobile operating system, encrypted communications, smart command center, Omni-channel support and remote control technology.  (CommuniTake 23.02)

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10.1  Israel’s Inflation Rate Fell by 0.5% in January

Israel’s Consumer Price Index (CPI) fell 0.5% in January, the Central Bureau of Statistics announced, following a 0.1% decline in December and 0.4% in November.  Over the past 12 months, the CPI fell 0.6%.  This is well below the government’s inflation target range of between 1% and 3%.  Outstanding price falls in January included public transport (1.7%), fuel prices (3.8%), clothing (5.7%) and communications (0.7%).  Outstanding price rises in January included municipal taxes (1.2%), and tomatoes (5.9%).  At the same time, the Central Bureau of Statistics published the apartment prices index for December, which rose 0.7%, reflecting an 8% rise in home prices in 2015.  (CBS 15.02)

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10.2  Israel’s Economy Grew at 3.3% in Fourth Quarter

The Israeli economy grew by 3.3% in the fourth quarter of 2015 on an annualized basis, the Central Bureau of Statistics announced, after growing 2.5% in the third quarter, and 0.4% in the second quarter.  The fourth quarter figure was stronger than expected.  The CBS also revised its overall growth figure for 2015 upwards to 2.6%, from its initial estimate of 2.3%.  In H2/15, the Israeli economy grew 2.2% after rising 2.9% in H1/15 and 2.6% in H2/14.  The rise in the GDP in H2/15 is reflected in a 5.2% rise in public consumption and a 3% rise in private consumption.  Exports of goods and services rose 2.2% and investments in fixed assets were up 0.9%.  Imports of goods and services rose 5.2% in the second half of 2015 and per capita spending on durable consumer products rose 3.9%, on an annualized basis, after falling 11.2% in the first half of 2015 and rising 21.6% in the corresponding period of 2014.  (CBS 16.02)

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10.3  Deloitte Says Israel 7th in World for Defense Spending

According to Deloitte, Israel spent 5.2% of its GDP on defense in 2014.  The firm sees an upturn in global defense spending in 2016.  Israel’s defense expenditures in 2014 were 5.2% of the country’s GDP, making Israel 7th in the world for military expenditure as a percentage of GDP.  Oman topped the list (11.6%), followed by Saudi Arabia (10.4%), and South Sudan (9.3%).  Israel was 17th in military spending in absolute terms.  Its military expenditure totaled $15.9 billion in 2014.  The list of 25 countries with the largest defense expenditures was led by the US; the superpower spent $610 billion on defense 40% of the total expenditures worldwide.  In distant second place was China, which spent $216.4 billion.  Russia was an even more distant third, with$84.5 billion.  (Globes 21.02)

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11.1  ISRAEL:  Netanyahu Fights for Israel’s Energy Future

Simon Henderson posted in TWI on 11 February 2016 that even with the low price of oil and natural gas, there are ample business and policy reasons for exploiting Israel’s reserves quickly, so Netanyahu is pushing ahead despite ongoing political constraints.

Israel is on the cusp of moving forward on its next stage of the development of its natural gas resources deep beneath the seabed in the eastern Mediterranean.  Prime Minister Benjamin Netanyahu, meanwhile, is due to testify before the Israeli Supreme Court on why he is pushing through a so-called “gas framework” against political and legal opposition.

The arguments are complicated.  Houston-based Noble Energy, which leads the consortia that have discovered all the gas in Israel’s exclusive economic zone (EEZ), wants to know that its operations are not going to continue to be a political football in Israel before it starts work on developing the huge Leviathan field.

Noble Energy has already invested $2.5 billion in Israel, supplying gas from the now-depleted Mari-B field off Ashkelon and now from the much larger Tamar field, which came on stream in 2013.  Gas from the Tamar field currently produces more than half of Israel’s electricity.  The proportion will rise when the field is further developed.  That development, along with bringing Leviathan on stream, will cost an estimated $6 billion.  Small wonder that Noble wants to be confident of the regulatory environment before going ahead.

Opposition within Israel ranges from the claims that the price being charged is too high – even though it compares favorably with prices in Europe and Asia – and concern about the impact on the environment.  Public opinion is also against Noble’s local partners, principally the Delek group of companies, which will profit from the deal.  Such is the challenge facing Mr. Netanyahu, a one-time management consultant who no doubt understands the economic logic of moving forward quickly to take full advantage of Israel’s energy good fortune.

With the planned extra production, Israel will have enough natural gas for export (There may also be oil to be discovered, if geological evidence proves accurate).  Already later this year a small amount of gas is due to start flowing to two Jordanian industrial plants near the Dead Sea.  Plans are also being discussed for Israeli gas to supply Jordan’s main electricity power network, as well as a pipeline to Egypt, either for local domestic use or for conversion into liquefied natural gas (LNG), which can then be exported anywhere in the world on specially-built tankers.

Other options include gas exports to Cyprus, in whose water Noble has found another gas field, or even undersea gas pipelines to Turkey and/or Greece.  There is also a possibility that spare Israeli electricity could be sent via seabed cable to Greece.

All these technical possibilities are pushing against political constraints.  Last month the leaders of Israel, Cyprus and Greece met to sign cooperation accords.  Israel promptly signaled to Turkey that its cooperation with Greece was not a barrier to also sending gas via pipeline to Turkey.  On the Palestinian front, there is also the option to develop a field offshore Gaza, which makes no commercial sense unless its molecules are mixed with those of Israel gas.

Apart from the political good sense of regional cooperation, Israel’s natural gas also boosts its energy security, a clichéd term of various meanings, the best of which is probably the sense of giving Israel options.  Instead of relying on dirty heavy fuel oil or diesel for its power plants, Israel can use cheaper, and cleaner, natural gas.  At least one major power plant will still use coal, with special filters on its chimneys to minimize the environmental impact.  Commercially, by using its own gas, Israel saves on foreign exchange and also boosts its revenues by taxing Noble and its Israel partners.

Politics can make matters more complicated, especially in Israel.  The uncertainty of the Middle East, especially the future of Syria, whose own waters may also contain viable gas deposits, may prove at least a partial insurmountable barrier.  But even with the low price of oil and natural gas, technically and in business terms, the exploitation of Israel’s reserves makes sound sense.

Simon Henderson is the Baker Fellow and director of the Gulf and Energy Policy Program at The Washington Institute.  (TWI 11.02)

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11.2  ISRAEL:  ‘A+/A-1’ Ratings Affirmed On Economic Resilience; Outlook Stable

On 5 February 2016, Standard & Poor’s Ratings Services affirmed its ‘A+/A-1’ long- and short-term foreign and local currency sovereign credit ratings on the State of Israel.  The outlook is stable.


The ratings are supported by Israel’s prosperous and diverse economy, strong external balance sheet, and flexible monetary framework.  The ratings are constrained by Israel’s high debt and interest burden and significant security and geopolitical risks.

With per capita GDP at an estimated $37,000 in 2015, the economy is prosperous and well diversified, with high value-added manufacturing and service sectors.  This is underpinned by high expenditure in research and development, amounting to 4.2% of GDP in 2013, the highest among member countries of the Organization for Economic Co-operation and Development (OECD).  The information and communication sector has a 9.8% share of gross value added (GVA) and scientific and technical activities have 2.8%.  We assume Israel’s economy will grow at an average rate of about 2.5% in 2016-2019, despite risks of slower world trade and increasing volatility in the international capital market.  We expect the key drivers of this growth will be robust private consumption, continued corporate investment activity, and healthy service exports. In per capita terms, this equates to growth of around 1% per year, reflecting robust population growth.

The March 2015 general elections resulted in a right-wing government coalition with 61 of 120 seats in Israel’s parliament, the Knesset.  It was not until November 2015 that the Knesset passed the biannual budget for 2015 and 2016.  As a provisional budget was in place for most of 2015, meaning only one-twelfth of the 2014 budget could be spent per month, we estimate the general government deficit to be around 2.2% of GDP in 2015.  Despite the political and fiscal concessions made to form a new coalition government, we expect the general government deficit will remain below 3% in the coming years.  Fiscal policy is moderately expansionary in 2016 – additional spending commitments in the 2015/2016 budget include reversing the cuts in entitlements to child allowances and increasing resources in health and education to reduce waiting time and class sizes.  On the revenue side, cuts to VAT and corporate tax are also likely to widen fiscal deficits.  Should there be an increase in defense spending, we expect the government to cut civilian spending to offset the increase.

Subtracting liquid assets (mostly in the form of deposits at the central bank) from gross government debt, we estimate that net general government debt remained at below 64% of GDP at the end of 2015.  Even without taking into account possible land sales and privatization proceeds, which could reduce government financing needs, we expect the net debt ratio will stabilize at below 65% of GDP in 2016-2019.

As a result of Israel’s strong export performance and sustained current account surpluses, its external balance sheet is strong and its net creditor position versus the rest of the world continues to grow.  We forecast that its liquid external assets will outstrip its gross external debt over the next three years.  This dynamic is also lowering the country’s gross external financing needs, indicating low dependency on external financing.

We also consider Israel’s monetary policy flexibility to be a credit strength.  The Bank of Israel (BoI, the central bank) has become increasingly interventionist, over and above its commitment to purchase foreign currencies to offset the impact of domestic natural gas production on the balance of payments.  We view the exchange rate regime as a managed float, which somewhat hampers monetary policy flexibility.

In addition to making frequent interventions in the foreign exchange market, the BoI has eased its stance on monetary policy, countering the strength of the Israeli new shekel in order to maintain the competitiveness of Israeli exports.  It lowered its policy rate to a historical low of 0.1% in March 2015, but the shekel continued to appreciate against Israel’s key trading partners.  Over the course of 2015, the shekel weakened by 0.3% against the dollar, but strengthened by about 7.3% against the currencies of Israel’s main trading partners, in terms of the nominal effective exchange rate.

One of the key challenges to monetary policy continues to be Israel’s rising house prices.  After years of relative stability, real house prices have increased by around 69% since the end of 2007 and the International Monetary Fund (IMF) assesses that the house prices in Israel are currently overvalued by 30%.  The BoI’s earlier attempt to dampen the housing market by raising interest rates yielded little, only pushing up the foreign exchange rate of the shekel significantly.  The new government has implemented a comprehensive set of measures to address supply-side issues, including freeing up more land for development, changing the tendering criteria, and speeding up administrative processes for construction permissions.  Given the capacity constraints in the construction industry, the time needed to build houses, and continued growth in demand, we do not expect the government measures to fully address the supply shortage in the near term.  The tightening of macro-prudential measures has reduced systemic risks to Israel’s banking industry, but any abrupt correction in house prices could still have other negative economic effects.  We expect that the Knesset will pass general legislation to establish a formal Financial Stability Committee, as recommended by the IMF to enhance policy co-ordination, by the end of 2016.

Overall, institutional and governance structures in Israel are generally effective, with a satisfactory degree of transparency and accountability.  However, we consider that the persistent territorial dispute with the Palestinians threatens political stability and weighs on policy predictability.

The ratings remain constrained by geopolitical risks.  Repeated violent clashes with the Palestinians not only inflict social and economic costs, but also risk reactions by the international community.  On the northern border, the conflict in Syria and Iraq, as well as instability in the Sinai region, pose medium-term security risks.  Any significant armed conflict could have a negative impact on the ratings if it significantly deterred investment, weakened the economy’s growth potential, or strained fiscal flexibility.  We do not expect the nuclear deal between Iran and the international community to have a material direct impact on the ratings on Israel, given the continued regional tensions.


The stable outlook on Israel reflects our opinion that the government will maintain prudent macroeconomic policies and ensure the stabilization of government debt over 2016-2019, despite higher spending concessions agreed by the coalition.  We also expect the impact of security risks on the Israeli economy will continue to be contained.

We could consider raising our ratings if fiscal consolidation exceeds our expectations, resulting in a significantly lower net debt burden or interest costs, or if there is marked progress in defusing external security risks.

Conversely, we could lower the ratings if the economic growth outlook were to weaken substantially, due to an abrupt correction in the housing market or unaddressed structural weaknesses.  A downgrade would also become more likely if the government yields to pressures for more social or security spending and allows deficits to widen and government debt to increase significantly above our current expectations. Moreover, if a perceived loss of international support were to further isolate the Israeli economy, we could lower the ratings.  (S&P 05.02)

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11.3  GCC:  Moody’s Says Fuel Subsidy Reforms Offer Only Modest Fiscal Space

While fuel subsidy reforms in members of the Gulf Cooperation Council (GCC) will help address pressure from low oil prices on public finances, these measures alone will not be enough to bring the governments’ budgets back into surplus, says Moody’s Investors Service in a report published on 16 February.

Moody’s reported that “recent moves to reforms subsidies signal political willingness to address the damaging effect of low oil prices on budgets.  However, they fall short of the scale of economic and fiscal reform required to achieve budget balance,” says Mathias Angonin, an analyst at Moody’s.  “While the GCC governments’ balance sheets remain solid on a consolidated basis, we anticipate a sharp deterioration in the governments’ net asset position as a consequence of the decline in oil prices.”

According to the rating agency, the GCC’s savings from increased fuel prices will likely be small – an average of 0.5% of GDP across GCC countries in 2016.  Even if governments opt to link fuel price hikes to global oil prices, the gains would be much lower than the expected fiscal deficit of 12.4% across the GCC, says Moody’s.  This is based on Moody’s forecast of oil prices remaining at around USD33 per barrel in 2016, having fallen by 67% from 2014 levels and 32% from 2015 levels.

However, the price hikes will also lead to efficiency gains, reducing distortions caused by artificially low prices, says the rating agency, noting that domestic oil consumption has been growing at an average of 6.7% annually over the last five years in Kuwait, Qatar, Saudi Arabia and the UAE.  In addition, Moody’s notes that GCC governments are looking to cut other current spending and, in the medium term, increasing revenue streams.

Some of these measures may face stronger resistance in Bahrain, Oman and Saudi Arabia, where per capita incomes on average are lower – and hence purchasing power impact higher – than in Qatar, Kuwait and the UAE, according to Moody’s.  (Moody’s 16.02)

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11.4  KUWAIT:  Ratings Affirmed at ‘AA/A-1+’ Despite Lower Oil Price Assumptions

On 12 February 2016, Standard & Poor’s Ratings Services affirmed its ‘AA/A-1+’ long- and short-term foreign and local currency sovereign credit ratings on Kuwait. The outlook is stable.


In mid-January 2016, Standard & Poor’s materially lowered its oil price assumptions for the period 2016-2019.  Prices for crude oil in spot and futures markets are some 70% below mid-2014 levels, when prices began to slide.  When we last reviewed Kuwait, in August 2015, we expected Brent oil prices to average $55 per barrel (/bbl) in 2016 and $65/bbl in 2016-2019.  We now assume an average Brent oil price of $40/bbl in 2016 and $46/bbl in 2016-2019.  Consequently, we have also revised our forecasts for Kuwait’s macroeconomic indicators, including GDP per capita, fiscal position, and current account.

Kuwait Crude (KEC) trades at about a $5 discount to Brent.  Kuwait derives about 60% of GDP, more than 90% of exports, and over 80% of fiscal receipts from hydrocarbon products.  Kuwait has very large oil reserves, estimated at about 105 billion barrels or 8.4% of global oil reserves.

The sharp fall in oil prices over the past year and a half has significantly affected Kuwait’s fiscal and, to a lesser extent, its current account (flow) positions as well as its wealth levels, measured by GDP per capita.  Nevertheless, our ratings on Kuwait remain unchanged as they continue to be supported by the sovereign’s very high levels of accumulated wealth and very strong external and fiscal asset (stock) positions.  The Kuwaiti government, via the Kuwait Investment Authority (KIA), has accumulated substantial assets through oil and gas production over the years; Kuwait has saved its oil wealth in what we consider to be a prudent manner.  The government’s large net asset position, which we estimate at over four times GDP at the end of 2016, is a significant ratings’ strength providing a substantial buffer to lower oil prices.  Nevertheless, the ratings are constrained by political risk and a very heavy reliance on oil, as well as by regional geopolitical tensions.

The general government budget has averaged a surplus of around 25% of GDP since 2001, if we include investment income from funds held by the KIA.  When we include income from its vast investments and transfers to the KIA’s Reserve Fund for Future Generations (RFFG; the KIA’s long term savings fund for future generations invested abroad) in our forecasts, the Kuwaiti government will continue to run surpluses of around 8% of GDP for the budget years 2016-2019, despite the low oil prices.  Excluding transfers and investment income, we forecast that on average Kuwait will run single-digit fiscal deficits between fiscal years 2015/16 and 2018/19 (April-March).

Kuwait had increased its annual contributions to the RFFG from 10% to 25% of total revenues in the last two fiscal years including in fiscal 2014/15, because higher oil prices had produced very strong revenues.  Now that oil prices are sharply lower, transfers to the fund from 2015/16 onward have reverted back to 10%.  The fund will still continue to grow on reinvested earnings and the continued, albeit lower, contributions.  Disclosure about the size and structure of the fund and KIA’s assets is limited but we estimate them at about $535 billion at end-2015.

Our base-case scenario assumes that, despite the sharp fall in the oil price and the risk of OPEC cuts to production, Kuwaiti oil output will remain at above 2.8 million barrels per day until 2019.  Production is also likely to increase if Kuwait’s planned investment in the sector comes to fruition.

Strong oil exports led to current account surpluses averaging more than 33% of GDP in 2009-2015.  We forecast these surpluses will fall to an average of 11% in 2016-2019.  Given the government’s policy of investing a large portion of its surplus abroad, we estimate Kuwait had a net external asset position of more than 500% of current account receipts (CARs) in 2015.  We believe that external assets will continue to rise in nominal terms – owing to ongoing external surpluses and reinvestment–but we note a significant denominator effect on the ratio due to a sharply declined denominator (CARs).  At the same time, we project that gross external financing needs will remain relatively low, averaging around 80% of CARs plus usable reserves in the next four years.

We estimate real GDP growth to average about 2.4% in 2016-2019, but GDP per capita growth to remain stagnant, partly because of high population growth to an extent linked to the growth in numbers of expatriates.

Kuwait’s exchange rate is pegged to an undisclosed basket of currencies, with a likely bias to the U.S. dollar, which constrains its monetary flexibility.  We view its monetary flexibility as limited although we acknowledge that the exchange rate regime is consistent with Kuwait’s reliance on U.S. dollar-based oil revenues and that Kuwait has sufficient resources to manage the peg.  Kuwait’s financial system remains fairly stable, in our view; its banks operate in a reasonably strong regulatory environment and have healthy capital levels.  We forecast credit growth to slow slightly.

Geopolitical tensions remain, with the IS terrorist group in Iraq and Syria, as well as the ongoing war in Yemen, posing a potential threat to the wider region and Kuwait.  In June 2015, an IS militant detonated a bomb that killed 27 people at a Shia mosque in Kuwait City; the first terrorist attack on Kuwaiti soil since the First Gulf War.  Nevertheless, it did not have wider repercussions and relations between the Sunni majority and Shia minority remain reasonably good.

Domestically, the political system is dominated by a powerful government and vocal parliament (albeit with limited authority over ministerial decisions), which have clashed on many occasions and will continue to disagree on many issues.  Kuwait held its third parliamentary election in 18 months in July 2013 and, owing to the boycott of the election by several opposition groups, a more government-friendly parliament was elected.  Unlike the previous administration, it is more cooperative with the executive and this has led to more progress on long-planned projects.  The next parliamentary elections are due in July 2017. We have factored Kuwait’s political and geopolitical framework into the current rating.


The stable outlook reflects our expectation that Kuwait’s fiscal and external positions will remain strong, 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 a vocal and unpredictable political system, in addition to geopolitical tensions in the region.

We could lower the ratings if a continued fall in oil prices or slow growth were to undermine Kuwait’s wealth levels, measured by GDP per capita, if Kuwait’s domestic political stability were to significantly deteriorate, or if geopolitical risks were to escalate.

We could raise the ratings if political reforms were to enhance institutional effectiveness and improve long-term economic diversification, and if geopolitical risks fade significantly, and prospects for the oil sector improve.  (S&P 12.02)

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11.5  QATAR:  Qatar Ratings Affirmed At ‘AA/A-1+’; Outlook Stable

On 17 February 2016, Standard & Poor’s Ratings Services affirmed its ‘AA’ long-term and ‘A-1+’ short-term foreign and local currency sovereign credit ratings on the State of Qatar.  The outlook is stable.  We also affirmed the ‘AA’ long-term issue ratings on the bonds issued by Qatari Diar Finance Q.S.C. and SoQ Sukuk A Q.S.C.


In mid-January 2016, Standard & Poor’s materially lowered its hydrocarbon price assumptions for 2016-2019.  Our affirmation of our ratings on Qatar reflects our view that Qatar’s large net asset position will help it weather the lower hydrocarbon price environment.

Qatar is a wealthy economy.  The country holds the third-largest proven natural gas reserves in the world, and is the largest exporter of liquefied natural gas (LNG).  We expect Qatar’s reserves to provide many decades of production at the current levels.  Its small citizenry enjoys one of the highest GDP per capita among our rated sovereigns, estimated at $62,000 in 2016.  The hydrocarbon sector creates about 55% of Qatar’s GDP, 90% of government revenues (oil and gas taxes and royalties, plus dividends from Qatar Petroleum) and 85% of exports.  We view Qatar’s economy as undiversified.

Qatar’s economy has grown by about 5.5% annually over the last four years, but we expect this to slow to about 4.0% during 2016-2019.  The hydrocarbon sector will likely continue to stagnate.  The moratorium on new projects in Qatar’s North Field will continue and will only be reviewed once gas prices begin to recover in the medium term, in our view.  Non-oil growth, on the other hand, should remain buoyant, thanks to spending under a $125 billion infrastructure investment program and supported by the growing population.

We note the government’s efforts to diversify the economy, while maintaining its strategic position in the global natural gas market.  In our view, medium-to long-term challenges to Qatar’s competitive position in the liquefied natural gas (LNG) market are likely to come from new shale production, Russia’s gas pipeline to China, and increased pressure to delink LNG contracts from the price of oil.

Nevertheless, Qatar has one of the lowest costs of production – $1.60 to $2.00 per million British Thermal Units – and is a profitable producer of LNG.  Its strategy has been to diversify into all major markets, adjusting the mix of destinations and contract types according to market needs.  Moreover, the majority of its gas exports are under long-term contracts, which provides some certainty regarding the volumes sold.  We expect that Qatar will maintain its cost advantage over many new projects in other countries.  In January 2016, the renegotiation of Qatar and RasGas’ (Qatar’s second-biggest LNG producer) contract with Petronet LNG (India’s biggest gas importer) at a discount of almost 50% indicates an increasingly much more competitive environment for natural gas and LNG sellers over the medium term.  Existing LNG buyers committed to long-term contracts and other potential buyers may try to renegotiate or achieve similar commercial terms amid an environment of persistently low prices.

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

Amid falling oil and gas prices, the government’s public investment program has led to a deterioration of the fiscal balance, beginning in 2014.  We expect the general government balance to fall into a deficit of 4.1% of GDP on average in 2016-2019, after many years of surpluses.  Our outlook assumes that the sharp drop in oil revenues is less likely to be offset by cuts in current spending; capital spending will continue to slightly increase as infrastructure projects advance.  We also project a decline in hydrocarbon income, namely the financial transfers from Qatar Petroleum to the budget, which come to the government budget with a three-to-six month lag.

Nevertheless, we think upcoming budgets could include further measures to contain current expenditures in light of low hydrocarbon prices.  The Qatari  government has just implemented new measures that will help the fiscal situation over time, such as cuts in gasoline, water wastage and utility subsidies.  The government also intends to rationalize and outsource part of its operations and to award more projects to the private sector, though whether the desired level of private sector participation can be achieved remains to be seen, in our view.

In the context of lower hydrocarbon revenues and increasing capital spending, the government is prioritizing existing projects by channeling funding to the most important and most strategic investments.  The government’s investment program focuses on infrastructure, education, and health, and we expect the majority of these projects to be completed ahead of the 2022 FIFA World Cup, which Qatar is hosting.

Alongside government investments funded through the budget, public-enterprise and private-sector spending on the national development strategy is likely to be largely funded by borrowing from domestic financial institutions.  This may cause banks’ net external liability positions to widen and their loan-to-deposit ratios to rise, as we expect deposit growth in the Qatari banking system to gradually decelerate due to low oil prices.  The ratio of domestic credit to total deposits in the Qatari banking system was 103% as of November 2015, substantially up from 93% at end-2014.  Public sector deposits represented about 38.7% of the resident deposit base in November 2015, down from 44.0% at year-end 2014.

We project Qatar’s external surpluses to worsen substantially in the medium term as export receipts fall sharply in 2016, while import demand remains strong.  The transfers and income accounts of the current account will remain in deficit, the former due to remittance outflows as a result of the expatriate population and the latter due to payments to the foreign firms that partner with Qatari companies in the oil and gas industry.

Qatar’s net external asset position will remain strong at about 265% of current account receipts in 2016-2019.  Qatar has accumulated considerable foreign assets over the past decade, as a result of developing its natural resources.  We forecast that the general government net asset position will also stay robust, estimated at about 125% of GDP in 2015.

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

In our view, the fixed exchange rate of the Qatari riyal to the U.S. dollar leads to limited monetary flexibility, and we expect the currency peg to be maintained.  Qatar’s real effective exchange rate has appreciated at 17% since early 2014.  In our view, this represents a deterioration in international competitiveness of the country’s modest tradable sector and a dampening of non-oil GDP growth, absent any offsetting factors such as improved efficiency or technological capacity.  Liquidity conditions in the Qatari banking system and banks’ borrowing costs are expected to further tighten amid falling public deposits, coupled with a modest increase in loans and future increases in U.S. interest rates.


The stable outlook reflects our view that Qatar’s economy will remain resilient, supported by solid macroeconomic fundamentals, although we anticipate continued institutional weaknesses and only a moderate increase in hydrocarbon prices over the next two years.

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

We could raise the ratings on Qatar if we saw domestic institutions mature faster than expected, alongside significant improvements in transparency regarding government assets and external data quality.  (S&P 17.02)

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11.6  OMAN:  Sultanate Ratings Lowered To ‘BBB-/A-3’; Outlook Stable

On 17 February 2016, Standard & Poor’s Ratings Services lowered its long- and short-term foreign and local currency sovereign credit ratings on the Sultanate of Oman to ‘BBB-/A-3’ from ‘BBB+/A-2’.  The outlook is stable.  At the same time, we revised our transfer and convertibility (T&C) assessment on Oman to ‘BBB’ from ‘A-‘.


In mid-January 2016, Standard & Poor’s materially lowered its oil price assumptions for the period 2016-2019.  Prices for crude oil in spot and futures markets are about 70% below mid-2014 levels, when prices began to slide.  When we last reviewed Oman, we expected Brent oil prices to average $55 per barrel (/bbl) in 2016 and to gradually recover to $70/bbl in 2018 and beyond.  We now assume an average Brent oil price of $40/bbl in 2016 and $50/bbl by 2018.

We do not expect the 16 February 2016 agreement between oil ministers from Qatar, Russia, Saudi Arabia and Venezuela to freeze output at the levels reported in January will have a material impact on our oil price assumptions.  We note that the first market reaction to this news was a further decline in oil prices.  On the supply side, we note that the freeze would take place at already record high levels of output for Russia and Saudi Arabia.  We also note that the agreement is conditional on other producers freezing production.  On the demand side, we see China’s economic slowdown and debt load as a continuing top global risk.  Our long-term oil price assumptions will continue to be informed by our view of the marginal cost of oil production.

In November 2015, we said we could lower the ratings on Oman if it appeared we had underestimated the likely negative impact of lower oil prices on the economy.  We now project a more material deterioration in Oman’s economic and fiscal outlook.  We have therefore lowered our long-term ratings on Oman to ‘BBB-‘.

In Oman, the hydrocarbon sector accounted for just under half of GDP in 2014, slightly over half of exports, and three-quarters of government revenues.  However, the hydrocarbon sector’s contribution to the economy fell to about 35% of GDP over the first half of 2015 following the pronounced decline in oil prices.  Given the country’s high dependence on this commodity, we have revised our forecasts for economic growth and the fiscal and external positions to incorporate the lower expected oil prices.  Since our review last November, we have reduced our real GDP growth forecasts for Oman over 2016/19 to an average of 1.4% a year from about 3.0%, while our GDP per capita estimate for 2016 has fallen to $14,600 compared with the $16,300 we had expected at our last review.  We expect only a slow recovery to about $16,000 in 2019 (compared with over $20,000 in 2011-2014).  We anticipate that the GDP deflator will remain negative in 2016 (-7%), compared with -20% in 2015.  Our forecasts for the change in general government debt (which is our preferred fiscal metric because in most cases it is more comprehensive than the reported headline deficit) have also increased to about 5% of GDP compared with about 3% in November.  Furthermore, we now anticipate larger current account deficits, equivalent to 20% of GDP in 2016, compared with 12% of GDP at our November review.

We expect the contribution of domestic demand to real GDP growth to remain weak in 2016/19 but for our assumed modest increase in oil prices to result in a more positive contribution from net exports.  We estimate trend growth in real GDP per capita at negative 1%, which is well below most economies at similar levels of development.  We expect slow progress on the government’s Omanization program – a training program for Omani citizens aimed at easing dependency on foreign labor – due to a skills mismatch between many Omani workers in the private sector; the more attractive pay and conditions that Omanis enjoy working in the public sector.

We estimate Oman’s budget deficit at 13% of GDP in 2016, in line with the government’s own budget forecast.  This compares with a deficit of close to 18% of GDP in 2015.  Oman increased its oil output to a record high of 358 million barrels of oil in 2015, a 4% increase on the previous year, with exports rising by 5.5% to 308 million barrels.  However, this increase failed to effectively mitigate the negative ramifications from lower oil prices, with government oil revenues falling by about 40%.  Our general government balance forecasts include an estimate of the government investment returns.

In 2016, the government has indicated it plans to reduce spending, including subsidy expenditures, raise corporate taxes from 12% to 16%, and increase fees for government services.  Spending is budgeted to fall 11% compared with the 2015 outturn, with the largest cuts expected to come from “other” expenditures such as that on vehicle, travel, and hospitality expenses, followed by cuts to spending on civil ministries and investment.  Total revenues are budgeted to fall 4%, as we expect the oil price to decline in 2016 compared with 2015.  We understand that the 2016 budget is based on an oil price assumption of about $45/bbl compared with $75/bbl in 2015.  Oman’s 2016-2020 five-year plan aims to increase the role of the private sector, and the government has suggested that it could privatize some entities in 2016.  A value-added tax to be imposed across the Gulf Cooperation Council (GCC) could be in place by 2018, which would further support Omani government revenues.  Our 2016/19 general government deficit estimates are in line with those of the five-year plan.

We think that the government has relatively limited room for spending cuts, given that nearly 50% of spending relates to public sector wages and subsidies and exemptions, which are typically difficult to reduce, although we note that some progress has been made with regard to subsidy reduction.  The Omani government has committed to increasing non-hydrocarbon-related tax revenues over the medium term.  As a result, we expect the general government deficit will average 11% of GDP in 2016/19.  We assume that deficit financing will result in an annual average increase in Oman’s government debt of about 5% of GDP a year over 2016-2019.  We also estimate that the government’s net asset position will fall from 61% of GDP in 2015 to 13% in 2019.

Sizable oil receipts in past years have helped maintain Oman’s strong external position.  However, lower oil prices lead us to forecast a current account deficit in 2016 of about 20% of GDP, compared with 14% of GDP in 2015.  We expect the current account deficit will remain in double digits until 2019.  Notwithstanding the related external borrowing and decline in foreign currency reserves, Oman’s external position–as measured by liquid external assets minus external debt – will remain a rating strength.  However, we expect it will deteriorate, to a debtor position of 25% of current account receipts (CARs) in 2019 from a creditor position of about 60% in 2015.  Meanwhile, we expect the country’s gross external financing requirements will rise to 130% of CARs and usable reserves in 2019 from 116% in 2015.

In our view, monetary policy flexibility is limited because the Omani rial is pegged to the U.S. dollar.  That said, the peg has provided a stable nominal anchor for the economy, particularly as contracts for oil, the main export, are typically priced in dollars.  Oman’s real effective exchange rate has appreciated by 12% since early 2014.  In our view, this represents a deterioration in international competitiveness of the country’s modest tradables sector, which is likely to dampen non-oil GDP growth, absent any offsetting factors, such as improved efficiency or technological capacity.

The transmission of monetary policy is constrained by an underdeveloped local capital market, although we expect to see some growth in local debt and sukuk issuance over the next four years.  Nevertheless, we expect the peg to be maintained over the medium term.  We estimate reserve coverage (including government external liquid assets) at 52% of the monetary base and six months of current account payments in 2019.  Rules of thumb for the adequacy of reserve coverage in relation to these measures are 20% and three months, respectively.  We also consider the more qualitative aspects of the GCC currency arrangements.  At a time of already significant change and regional geopolitical instability, politically conservative regimes such as the GCC are unlikely to decide to increase uncertainty about their economic stability by amending this fundamental macroeconomic policy.  We expect these concerns will out-weigh the potential economic benefits of de-pegging.

Under the rule of Sultan Qaboos bin Said Al Said, the country has undergone a remarkable improvement in human development.  Oman now ranks in the 70th percentile of countries in the United Nations Development Program’s Human Development Index.  Although this advancement stems largely from the advent of high hydrocarbon revenues during the sultan’s reign, we think it also results from effective policymaking.  However, the sultan exercises absolute power in governance and decision-making, which poses risks to the effectiveness and predictability of policymaking.

We understand that the sultan remains popular, but the eventual process of succession remains untested, as the country lacks recent experience in smooth transitions of power.  Although we expect the succession process will be smooth, without any radical policy shifts, we do not rule out the possibility that Oman could experience a disruptive period of uncertainty if the royal family does not quickly agree on a successor.  We do not anticipate that the conflict in neighboring Yemen will affect Oman’s creditworthiness, because it appears unlikely to spill over into Oman, which has remained neutral in the conflict.


The stable outlook reflects our expectation that the government will be able to take effective remedial action that would prevent Oman’s fiscal and external positions from deteriorating beyond our current expectations.

We could lower the ratings if we were to expect the annual change in government debt as a share of GDP would remain on an upward trend after 2017, or if the economy’s net external asset position were to weaken at a faster pace.  We could also lower the ratings if we see signs that succession risks have risen and are likely to disrupt governance standards or institutional functioning.

We could consider an upgrade if the foundations of economic growth strengthen, therefore raising per capita income levels, or if our forecasts for Oman’s fiscal and external positions improve substantially compared to our current assumptions.  (S&P 17.02)

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11.7  SAUDI ARABIA:  Ratings Lowered To ‘A-/A-2’; Outlook Stable

On 17 February 2016, Standard & Poor’s Ratings Services lowered its unsolicited long- and short-term foreign- and local-currency sovereign credit ratings on the Kingdom of Saudi Arabia to ‘A-/A-2’ from ‘A+/A-1’.  The outlook is stable.

At the same time, we revised downward our transfer and convertibility (T&C) assessment on Saudi Arabia to ‘A’ from ‘AA-‘.


In mid-January 2016, Standard & Poor’s lowered its oil price assumptions for average Brent by about $20 per barrel (/bbl) over 2016-2019.  We now assume $40/bbl in 2016, with a gradual increase to $50/bbl in 2018 and beyond.  Current prices for crude oil in spot and futures markets are about 70% below mid-2014 levels, when prices began to slide.  When we last reviewed Saudi Arabia, we expected Brent oil prices to average $55/bbl in 2016 and $70/bbl by 2018.

We do not expect the agreement on 16 February 2016 between oil ministers from Qatar, Russia, Saudi Arabia and Venezuela to freeze oil output at the levels reported in January to have a material impact on our oil price assumptions.  The first market reaction to this news was a further decline in oil prices.  On the supply side, we note that the freeze would take place at already record high levels of output for Russia and Saudi Arabia.  In addition, we understand the agreement is conditional on other producers also freezing production.  We view such a change in policy direction as unlikely in Iran and Iraq.  On the demand side, we see China’s economic slowdown and debt load as a continuing top global risk.  Our long-term oil price assumptions will continue to be informed by our view of the marginal cost of oil production.

In October 2015, we stated that we could lower the ratings on Saudi Arabia if the government did not achieve a sizable and sustained reduction in the general government deficit.  In our view, and in light of our updated oil price assumptions, the general government deficit will likely average about 9% of GDP in 2016-2019, approximately 2% of GDP higher than our October projections.  We have also increased our forecasts for the annual change in general government debt (which is our preferred fiscal metric because in most cases it is more comprehensive than the reported headline deficit) to about 7% of GDP.  We take into account the measures included in the government’s 2016 budget.  We acknowledge both upside potential and downside risk to these forecasts.  Upside potential principally stems from oil prices, while we see downside risk principally in the scale of the fiscal consolidation and the broader impact it will likely have on the economy.  We note in particular the rising challenge the government faces in reversing the marked deterioration in Saudi Arabia’s fiscal balance.

The government has budgeted for a central government deficit of about 13% of GDP in 2016 compared with 15% in 2015, with revenues falling by 16% and expenditures by 14%, compared with the 2015 outturn.  This modest deficit adjustment reflects the government’s desire to support economic growth, in our view.

We believe the budget to be based on an oil price of about $45/bbl.  The government has established a support provision line within the budget of Saudi Arabian riyal (SAR) 183 billion (8% of GDP or $49 billion equivalent), which it could use to redirect capital and operating expenditures to both ongoing and new projects and to meet any emerging expenditure needs.  We expect the government’s fiscal consolidation plan will likely include postponing some capital spending projects, increasing non-oil revenues, and controlling current expenditures.  The government has embarked on a program of subsidy reform, with fuel, water and electricity prices set to rise gradually over the next five years.  As a result, we understand it will reduce subsidies that amounted to about 8% of GDP in 2015.  Concurrently, through increased utility tariffs, we expect to see stronger profitability at government-related entities, in turn resulting in higher dividends for the government.

On the revenue side, we understand that the imposition of taxes on undeveloped plots of land in urban areas to encourage their development is at an advanced stage.  The government may also look at imposing value-added tax.  However, we think this is likely to be a medium-term project, in line with discussions already under way with other members of the Gulf Cooperation Council customs union (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates).

Oil major Saudi Aramco has also confirmed that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of part of its shares or a bundle of its downstream subsidiaries.  The timing of implementation of this proposal remains unclear and we have not factored it into our projections.  In our view, given the strategic importance of Saudi Aramco and the perceived reluctance of the company to reveal geological, operational, or financial specifics in the past, we see an IPO of the company as less likely than the listing of its downstream subsidiaries.  If these plans come to fruition, the related receipts could provide significant support to the government budget.

Although Saudi Arabia’s fiscal profile has weakened on a flow basis, on a stock basis it remains strong, in our view.  Net general government assets (that is, the excess of liquid fiscal financial assets over government debt) peaked at 124% of GDP in 2015, partly due to the estimated 13% decline in nominal GDP.  We forecast that the government’s net asset position could decrease to 79% of GDP in 2019.  Consequently, Saudi Arabia is entering a period of adverse terms of trade from a strong position.

Over the next three years, we expect Saudi Arabia will finance its deficits, combining drawing down of fiscal assets and issuing debt.  For the purposes of calculating the annual change in government debt, we have assumed an even split between asset draw-downs and debt issuance, implying an average increase of about 7% of GDP in nominal gross general government debt per year.  Such a split would also imply that Saudi Arabia would report gross liquid financial assets of 110% of GDP by 2019, versus 129% at year-end 2016.  These fiscal assets include the central government’s deposits and reserves on the liabilities side of the balance sheet of the Saudi Arabian Monetary Agency (SAMA, the central bank), government institutions’ deposits, and an estimate of investment income.  We also include an estimate of government pension funds’ liquid assets.

In Saudi Arabia, the hydrocarbon sector accounted for about 28% of nominal GDP in 2015 by our estimate, down from 42% in 2014 due to the sharp fall in oil prices.  Before the drop, the sector represented about 80% of exports and three-quarters of government revenues.  Given the kingdom’s high dependence on hydrocarbons, we have revised downward our forecasts for economic growth and fiscal and external positions to incorporate the lower expected oil prices.  Since our October 2015 review, we have reduced our real GDP growth forecasts for 2016-2019 to an average of 2% a year from about 3%, while our GDP per capita estimate for 2016 is $18,900, down from $21,300.  We anticipate that the GDP deflator will remain negative in 2016, at minus 8%, compared with minus 16% in 2015, alongside population growth of about 2%.

We estimate that trend growth in real per capita GDP, which we measure using 10-year weighted-average growth, will amount to about 0.5% during 2010-2019, which is below that of peers that have similar GDP per capita.

Furthermore, we now anticipate larger current account deficits, equivalent to 14% of GDP in 2016, compared with 6% of GDP in our October review.  Saudi Arabia’s external accounts mirror, in many ways, its fiscal accounts.  Like the fiscal accounts, they shift based on prices of hydrocarbons.  Similar to its fiscal position, Saudi Arabia maintains strong external buffers.  We expect Saudi Arabia’s liquid external assets, net of external debt, will average about 270% of current account receipts (CARs) over 2016-2019.  The kingdom’s gross external financing needs are slightly above 40% of the sum of usable reserves and CARs over 2016-2019, suggesting very strong external liquidity.

King Salman acceded to the throne in January 2015.  He is the sixth son of King Abdulaziz Al-Saud, who established the kingdom in 1932.  In April, King Salman named his nephew, interior minister Mohammed bin Nayef as crown prince, first in line to the throne.  The king has also named his son, Mohammed bin Salman, the defense minister, to the position of deputy crown prince and consequently second in line to the throne.

We analyze Saudi Arabia as an absolute monarchy in which decision-making resides with the king and the ruling family.  In our view, the opacity of decision-making and reconciling intra-family issues around succession reduce the predictability, timeliness, and effectiveness of the kingdom’s economic policy choices.  Two new councils, the Council for Political and Security Affairs and the Council for Economic and Development Affairs, have been created to form government policy more efficiently.  Power is devolved to the crown prince and deputy crown prince, who respectively head these two bodies.  The king approves the decisions of the councils. Broader institutional checks and balances are still at incipient stages of development.

Given the Saudi riyal’s peg to the U.S. dollar, we view monetary policy flexibility as limited.  The long-standing currency peg helps to anchor the population’s inflation expectations, but binds Saudi Arabia’s monetary policy to that of the U.S. Federal Reserve.  We expect that the peg will be maintained over the next few years.  At a time of already significant change and regional geopolitical instability, politically conservative regimes such as those in the GCC are unlikely to increase uncertainty about their economic stability by amending this fundamental macroeconomic policy.

Consequently, the riyal’s real effective exchange rate has appreciated by 16% since early 2014 and stands approximately 40% over the December 2007 level, according to Bruegel data.  The riyal’s long-term real effective appreciation since 2007 has been the most pronounced among all GCC sovereigns.  In our view, this indicates an ongoing deterioration of international competitiveness of the country’s modest tradables sector, which is likely to dampen non-oil GDP growth, absent any offsetting factors such as improved efficiency or technological capacity.  We estimate reserve coverage (including government external liquid assets) at a very high 115% of the monetary base and 22 months of current account payments in 2019.

Notwithstanding Saudi Arabia’s limited monetary flexibility, we regard the Saudi financial system as strong.  We classify the banking sector of Saudi Arabia in group ‘2’ under our Banking Industry Country Risk Assessment methodology, with ‘1’ indicating the lowest risk and ’10’ the highest.


The stable outlook reflects our expectation that the Saudi Arabian authorities will take steps to prevent any further deterioration in the government’s fiscal position beyond our current expectations.

We could lower our ratings on Saudi Arabia if we observed further deterioration of public finances beyond our current expectations that could lead to a drop of liquid government financial assets to below 100% of GDP.  The ratings could also come under pressure if we observed a significant increase in domestic or regional political and economic instability.

We could raise the ratings if Saudi Arabia’s economic growth prospects improved markedly beyond our current assumptions.  (S&P 17.02)

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11.8  EGYPT:  Egypt and China Following Xi’s Visit

Ofir Winter, Assaf Orion and Galia Lavi wrote in INSS Insight No. 795 on 11 February that in the course of the visit by Chinese President Xi Jinping to Egypt on 20-22 January 2016, Egypt and China announced a five-year, multi-sector cooperation agreement.  This agreement injected substance into the “comprehensive strategic partnership” formed during President Abdel Fattah el-Sisi’s trips to China in 2014 and 2015.  For Egypt, China constitutes an optimal strategic partner, as deeper ties serve its economic-security agenda.  The cooperation with China suits Egypt’s desire to forge a sovereign foreign policy that proceeds on the basis of purely Egyptian interests and is not bound to international and regional axes.  Israel views in a favorable light any Egyptian-Chinese cooperation that will improve the economic-security reality in Egypt and contribute to stabilization of the current regime.  Furthermore, an Egyptian foreign policy that lends less weight to historical collective intra-Arab inhibitions may open up new horizons for both Israel and Egypt.  This can foster expanded bilateral cooperative ventures, and perhaps trilateral ones – with China – as well, based on shared economic interests.

The visit to Egypt was a highlight of Xi’s tour of the region, which began in Saudi Arabia and ended in Iran.  From China’s perspective, this tour represented an attempt to strengthen Beijing’s clout in the Middle East, expand its economic activity, and reinforce its political standing at a time of regional views of the diminished United States’ apparent involvement in the Middle East, which has opened the theater to search new sources of strategic support.  The tour reflected China’s increasing concern regarding the threat posed by the Islamic State and its desire both to keep the threat far from its borders and join in the struggle against terrorism.  This threat is fed primarily by the possible return to China of the thousands of Sunni Muslim volunteers from the isolationist Uyghur movement in the Xinjiang region, who left China to fight with the Islamic State in Syria and in Iraq.  China views Egypt as a partner in the war against terrorism, given Egypt’s struggle against Wilayat Sinaa’ (the so called Islamic State province in the Sinai Peninsula), its role within the traditional Sunni camp and its regional and international stature as a non-permanent member of the Security Council.

While for China the closer ties with Egypt bolster its longstanding policy in Africa, for Egypt, the “comprehensive strategic partnership” with China constitutes an interesting development from its traditional foreign policy.  Under Mubarak, Cairo served as an anchor in the regional US-oriented Sunni axis; under el-Sisi, however, Cairo has cultivated a policy that varies its sources of strategic support.  Notwithstanding its relations with Washington, Egypt is tightening its relations with Russia and China – two powers that challenge America’s international hegemony.  Egypt also balances its relationships with Turkey and Qatar – often tense due to these states’ support of the Muslim Brotherhood – yet has no qualms about confronting them, even in face of Washington’s endorsement (reflected, for example, in its opposition to the ceasefire arrangement between Israel and Hamas that Ankara and Doha proposed during Operation Protective Edge).  Egypt even refuses to modify its policy to cater to the interests of Saudi Arabia, despite the fact that in recent years Riyadh has granted it generous and critical economic assistance.  In recent months, the disputes between Egypt and Saudi Arabia have focused on a series of key regional issues, chief among them the Russian involvement in the war in Syria, the attitude toward Iran, and the civil war in Yemen.

Economic Implications

For Egypt, China constitutes an optimal strategic partner, as deeper ties serve its economic-security agenda.  The cooperation with China suits Egypt’s desire to forge a sovereign foreign policy that proceeds on the basis of purely Egyptian interests and is not bound to international and regional axes.  While the US aid brings with it expectations of democratic reforms, and reliance on Saudi Arabia incurs a defined regional orientation, cooperation with China is free of restrictions on Egyptian domestic and foreign policy.  Just as the Chinese President moved easily among rival countries such as Saudi Arabia and Iran, so his Egyptian counterpart seeks maximum room to maneuver in order to extricate Egypt from its current economic crisis and security instability.  It is no wonder that China was lauded by Ahmed El-Sayed al-Naggar, chairman of the Board of Directors of the Egyptian national daily newspaper al-Ahram, for creating a model for “international economic relations based on peaceful cooperation and exchanges of benefits without inclination towards hegemony of one country over others.”

Indeed, concrete economic interests are the primary considerations in the burgeoning relations between Egypt and China.  China sees great potential in the Egyptian market of nearly 90 million consumers for increasing the volume of its exports, particularly in face of increasing production surpluses.  Furthermore, the Suez Canal is an essential trade route for China, including in the framework of the One Belt One Road (OBOR) vision that aims to bridge China, Europe and Africa through infrastructure, transportation, and communications.

For its part, Egypt is endeavoring to position itself as an attractive target for Chinese investments in industrial sectors, minerals, agriculture, fishing, tourism, and the automobile and shipbuilding industries.  Chinese capital is crucial for Egypt’s economic growth and for creating jobs for the millions of unemployed, who are a threat to the regime’s stability.  Among the declared achievements of Xi’s visit are the launch of 15 projects involving 100 Chinese companies, Chinese investments of $15 billion and 21 signed memoranda of understandings for cooperative ventures in the fields of electricity, trade, civil aviation, science and technology, communications and aerospace.  China also undertook to provide $180 million in assistance to Egypt, which is suffering from a severe shortage of foreign currency reserves, as well as two loans totaling $1.7 billion, to strengthen small and medium-sized industries.  The test of these declared agreements will of course be in their implementation.

The Chinese President’s visit allowed the Egyptian regime to announce economic achievements at a highly symbolic time – on the eve of the fifth anniversary of the “January 25 Revolution.”  This year, the festive date was marred by concern about a renewed outbreak of protests and demonstrations against the regime, due to the young generation’s growing frustration with the political and economic situation in Egypt.  An article in al-Ahram alleged that the Egyptian-Chinese summit extricated Egypt from “a foreign plot intended to instigate a civil war on Egyptian streets” on the anniversary of the revolution.  Although this allegation sounds somewhat exaggerated, the fruits of the Chinese visit offered President el-Sisi a golden opportunity to instill hope for a better future among Egypt’s citizens and strengthen the legitimacy of his regime.

The Israeli Angle

For Israel, the deepening ties between Egypt and China have several potential implications.  On the negative side, the Chinese President is liable to forge closer ties to Egypt and Arab countries by paying in “Israeli currency,” as it did in past decades.  In an open letter to the Egyptian public as well as during his visit to the Arab League headquarters, Xi conveyed China’s unconditional support for “the establishment of an independent Palestinian state with full sovereignty based on the 1967 borders, with its capital in East Jerusalem.”  Another disturbing issue relates to Egypt’s weakening affiliation with the United States, in favor of other sources of support.

On the positive side, Israel views in a favorable light any Egyptian-Chinese cooperation that will improve the economic-security reality in Egypt and contribute to stabilization of the country and the current regime.  Furthermore, Egypt’s willingness to forge an independent foreign policy that focuses on its own national interests and lends less weight to historical collective intra-Arab inhibitions may open up new horizons for both Israel and Egypt.  This can foster expanded bilateral cooperative ventures, and perhaps trilateral ones – with China – as well, based on shared economic interests.

Finally, the new partnership between Egypt and China constitutes a reminder of the dynamism that characterizes the current Middle East.  Thus, for example, players in Israel advocating the advancement of the peace process with the Palestinians within the scope of regional architecture should review the viability of the traditional regional alliances, considering the emergence of new strategic alliances that do not adhere to the familiar regional paradigms.  Even if these strategic alliances are not necessarily formed at the expense of old ones, they might be able to shape regional diplomacy that is multi-layered, complex, and more diverse.  Egypt is still a key member of the Sunni axis with ties to the United States, even if this axis is shakier than in the past.  Insofar, Egypt is maintaining this affiliation in tandem with its ties to countries such as Russia and China; in the future, given certain economic and security interests, it is quite possible that Egypt will form additional relations that might challenge a pro-Western affiliation.  (INSS  11.02)

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11.9  EGYPT:  How Egypt Plans to Boost Its Stock Exchange

In an effort to shore up its economy, Egypt plans to list shares of some government-owned banks and companies on its ailing stock exchange.  The Egyptian government’s decision to sell shares of some state-owned banks and companies is drawing both praise and criticism.

Rami Galal posted in Al-Monitor on 11 February that Alaa Youssef, spokesman for the Egyptian presidency, announced on 19 January that shares in “successful” state-owned companies and banks will be listed.  The statement followed a meeting between President Abdel Fattah al-Sisi, the prime minister, the governor of the Central Bank, and the ministers of industry and finance to discuss “the decline of the Egyptian stock market indexes.”

The stock exchange lost $5.6 billion in value in just the first 19 days of 2016.

The Egyptian state owns three of the country’s largest banks either fully or partially, including the National Bank of Egypt and Banque Misr, along with a large number of companies — most notably Arab Contractors and ENPPI, an engineering firm serving the petrochemical and petroleum industries.

The presidency’s announcement was welcomed by investors but raised concerns among those who oppose the privatization of the public sector.  Salah El Din Fehmi, head of the economics department at Al-Azhar University, commented on the issue, stating that the presidency took this step in an attempt to develop these successful companies and banks, attract new investments and create a community partnership between the state and individuals.

Speaking to Al-Monitor, Fehmi stressed the term “successful,” pointing out that loss-making companies will not be listed.  Fehmi said this decision reflects the presidency’s foresight, as loss-making banks and companies need financial and administrative restructuring to be fit for privatization, adding that “those who sell firms in the red reap nothing but crumbs.”

Ambassador Gamal Bayoumi, secretary-general of the Union of Arab Investors, said the decision comes in an attempt to open up new horizons for financing and to expand the portfolios of these banks and companies, which would increase their competitiveness and reduce the burden of the state budget.  Bayoumi told Al-Monitor that anti-privatization has become for some a matter of principle without consideration of the pros and cons or the changes in the economy.  He noted that in many countries — including the United States, which is the world’s largest economy — the government does not own any banks.

He thinks the state should get rid of loss-making companies even if this requires the state to pay investors, which is what Germany did when East Germany was annexed.  He added that some of those companies have employees who get entitlements whether they do their jobs or not, which is a waste of the state’s material resources.  Such companies will continue to incur losses unless the private sector takes over and implements a “reward and punishment” system that ensures the companies’ financial positions will improve.  Bayoumi stressed that those who claim that the privatization process is subject to corruption are crazy, because such deals are monitored by the Central Auditing Organization, the State Council and several control bodies.

In the same vein, former Minister of Finance Fayad Abdel Menhem said markets become more active with the expansion of traded merchandise, and when new merchandise is introduced in the form of shares, especially in an attractive sector such as banking, this would lead to a boom in the economic sector.

Every economic policy has its pros and cons, he noted.  On the bright side, the state will be sending a message to the world pointing out that Egypt promotes a free economy and that the stock market will be refreshed by bringing losses to a halt, increasing the level of financing and attracting investments.  The negative aspect, however, is that the state will be giving up on social responsibility.

For his part, former Minister of Social Solidarity Gouda Abdel Khalek said the decision is vague and does not specify whether the shares will be listed as a percentage of the capital or in the companies’ market value.

The announcement didn’t provide enough information to evaluate the presidency’s decision. When the decision takes effect, there will be objections, which will lead — as did the Civil Service Law — to a state of confusion for both the state and citizens.

Abdel Khalek said that giving away parts of public property to the private sector means partial privatization, and that listing banks and companies in the exchange is currently extremely dangerous, especially in Egypt where the trading activity and investors cannot be controlled.  This allows Israeli-affiliated companies to infiltrate the heart of the Egyptian economy, which poses a threat to Egyptian national security, he told Al-Monitor.

Abdel Khalek also pointed out that this decision represents a major shift in economic policy, which calls for a clarification by the presidency regarding its repercussions, the responsibility of each party as well as what is expected from the decision.  The decision is more political than economic, because the money belongs to the people and the constitution forces the president to protect public funds, he said.  On the bright side, he added, stockholders will be able to question companies’ management decisions and will have access to financial statements, which creates a level of transparency.

Abdel Khalek wondered whether the proceeds will go to the public treasury to cope with the budget deficit or serve to increase the companies’ capital and therefore help with their development and restructuring, which would increase their production capacity.  This was the Chinese experience with privatization, he said.

Stock exchange expert and Acumen Securities & Brokerage Chairman Osama Mourad said privatization requires a paradigm shift, development and a change in the type of administration.  Instead of bearing social responsibility, companies placed on the stock exchange become economic institutions that seek profit, which promotes competitiveness and ends the state’s quasi-monopoly on economic activity.

Mourad told Al-Monitor that proceeds from the sale of those companies should go to the public treasury to cut the budget deficit, and that the talk about development and restructuring should not be considered, because as long as these companies are managed in the same way, the increase in capital will go down the drain.  This is what was seen in the development of Egyptian Iron & Steel Co.  When the state owns economic institutions, this sends bad signals to investors, since no sane investor would compete with the state.  (Al Monitor 11.02)

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11.10  EGYPT:  How Heavy Metal Music is Causing a Stir in Egypt

The loud music, frenzied dancing and powerful sounds of a metal rock concert create an atmosphere that can be scary to some in Egypt — especially since it sometimes results in police raids and accusations of devil worship.

Ahmed Fouad posted in Al Monitor on 18 February that a concert in Cairo scheduled for later this month has revived a decades-long controversy over heavy metal music and accusations of devil worship.  So brace yourselves.

Nader Sadek, an Egyptian metal music performer, said that a Masters of the Middle East concert was held on 20 February at Amoun Hotel in Giza featuring four famous metal bands: Inquisition (United States), Perversion (United Arab Emirates), Smouldering in Forgotten (Bahrain) and Al-Azif (Egypt).

Inquisition, in particular, has raised a lot of eyebrows.  While Al-Monitor could not find any statements by the band members asserting that they are actual Satanists, the band’s frontman, Dagon, said in an interview with the Isolation Grind blog in 2011 that “Black Metal is very satanic.”  “It is individualism, elitism, rebellion against unnecessary control, pride with a cause.  Everything that [the Christian Bible] tells us about ‘the devil’ is in essence what Black Metal is, but through sound waves.  Forget [for] one moment about Christianity in general and think of Satanism as the negative pole.”

Mohammed Mamdouh, a guitarist and singer in the band Salasel, has been organizing metal concerts in Egypt since the 1990s.  He told the Egyptian O News Agency (ONA) in January that controversy arose back then when one metal concert organizer in Alexandria accused another one in Cairo of including satanic rituals in his concert.  The complaint caused panic in the community; some musicians and fans were arrested and some metal concerts were banned, which in turn aroused the ire of metal music fans, and then concerts resumed.

The Manassah website said that metal music started to be linked to Satanism after an article titled “Satanism club in Heliopolis” was published in 1996 by Rose al-Yousef newspaper.  This was followed by a series of articles on the topic with such colorful headlines as “Satanism slogans on the walls of Mansheya El-Bakry,” “The desecration of the tombs of the Commonwealth” and “Satanist prayers in the desert of Saqqara.”  Manassah said those articles clearly sought to instigate wrath against listeners and performers of metal music.

That they did; Egypt’s news website Dotmsr said in a March article that the first time an Egyptian youth was arrested on charges of Satanism was in 1996.  Dotmsr said in 1997 an Egyptian police officer was suspicious about his son’s behavior and found out the youth had joined a group performing rituals such as playing and dancing to heavy metal music.  The officer feared they might be Satanists and arrested the group.  The most famous such case in Egypt’s history happened that same year, when 86 young men and women were arrested for allegedly worshipping Satan at the abandoned Baron Palace.

While security services said they had proof the young people performed rituals worshipping Satan, those arrested denied it.  Some authors and journalists began to sympathize with them, saying the matter was only treated prominently in the press so it would be discussed in the community, not so it would be turned into a crime.

Manassah criticized the Egyptian media for deliberately connecting metal music to Satanism, perhaps at the directives of security services or because journalists were not well-informed about this genre of music.  Back then, metal concerts definitely caused panic in Egypt.  One journalist at Rose al-Yousef wrote that Egyptian security forces had prevented 35 metal bands from entering Egypt.  Hamdiya Hamdi, anchor of the al-Alam Youghanni show, told Rose al-Yousef in 1997 that the genre would lead to hearing loss, was irritating with nonsensical lyrics and was a blind imitation of the West.

Fast-forward to August 2012 when talk was revived about the suspected connection between metal music and Satanism.  Ismail Wishahi, a member of the Freedom and Justice Party, the political arm of the Muslim Brotherhood, charged that El Sawy Culture Wheel, a well-known cultural center in Egypt, held a metal music concert for Satanists.  The case was dismissed following an investigation.

Mahmoud Kbeish, a law professor at Cairo University, told Al-Monitor that it is not surprising that the state security services and judiciary reject satanic rituals.  According to him, the latter are not related to freedom of belief — which is guaranteed by law — but rather involve contempt for other religions.

As Inquisition was at the 20 February concert, metal bands Salasel and Enrage refused to perform.  Salasel’s Mamdouh told ONA in January that the concert could be a reason for new confrontation between metal musicians and security services and the community and could result in distorting the image of this music more than in the past.  This is the very reason the Egyptian Rock & Metal Scene Facebook page called on 13 January for boycotting the concert.

Mahmoud Kamel, a music critic, believes there is no connection between metal music and Satanism.  He said all arts include a certain degree of extremism and should not be judged based on the practices of some extremists.

Ahmed Fouad is an Egyptian journalist working as newsroom assistant manager for Al-Shorouk. He specializes in coverage of Islamists and analysis of the political situation in Egypt.  (Al-Monitor 18.02)

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11.11  MAURITANIA:  IMF Staff Completes 2016 Article IV Mission to Mauritania

An International Monetary Fund (IMF) team visited Nouakchott from 8 to 22 February 2016 to review recent economic developments and outlook in the context of the annual Article IV Consultation.

“Following several years of strong economic performance, Mauritania is facing a severe terms-of-trade shock due to the decline in iron ore prices that has weakened its economic performance and outlook.  The authorities responded initially with counter-cyclical policies using external and fiscal buffers accumulated in the boom years.  As it became apparent that the shock was more persistent than originally envisaged, the authorities started to adjust policies in 2015 by allowing for a more flexible exchange rate and adopting fiscal measures to strengthen revenues.

“The decline in global iron ore prices has substantially lowered export and fiscal mining revenues. With iron ore prices expected to remain low over the medium term, external and fiscal vulnerabilities have risen.

“Economic growth slowed during 2015.  The IMF team estimates real GDP growth at around 2%, from 6.6% achieved in 2014, due in part to lower iron production. Non-extractive GDP growth is estimated to have moderated to 3.1% in 2015 from 6.6% in 2014.  Annual average CPI inflation eased to around 0.5% in 2015, reflecting lower global food prices and the evolution of the exchange rate.  The external current account deficit, which benefitted from lower oil prices, is estimated at 19% of GDP in 2015.  On account of lower mining revenues, the overall fiscal deficit (excluding grants) widened to 5.6% of non-extractive GDP, from 4.1% in 2014, despite higher revenues associated with domestic oil revenues and authorities’ proactive measures to control current spending.  As a result of fiscal and external trends; public and publicly guaranteed debt is estimated at 93% of GDP at end-2015.  The economic slowdown has also affected the financial sector.  The banking system remains well-capitalized and liquid, but liquidity is declining and the sector remains vulnerable to shocks.

“With the prudent economic policies followed by the authorities, real GDP growth is projected to recover to 4.2% in 2016 supported by a rebound in mining production.  Economic activity in the non-extractive sector is expected to remain subdued, with growth slowing marginally to 2.9% in 2016.  Inflation is expected to rise to around 3.6%.  The current account deficit will improve to 15% of GDP and the fiscal deficit is expected to narrow to 3% of non-extractive GDP, on account of the implementation of revenue measures and spending restraint.  The medium-term outlook remains dependent on iron and oil prices, the authorities’ policy response and the resilience of the financial sector.

“Looking ahead, the deteriorating outlook and heightened global uncertainty call for an ambitious adjustment to support the external position and public finances, and to promote economic diversification and more inclusive growth.  This would require accelerating foreign exchange market reforms conducive to higher exchange rate flexibility, and promoting economic diversification and private sector development through reforms that improve competitiveness, trade, and access to credit and foreign exchange.  On the fiscal front, in order to place the public debt on a downward trend, fiscal policy should aim at higher non-extractive revenues through a broader tax base that promotes fair taxation; restraint in current expenditures; and an investment envelope that is consistent with medium-term fiscal sustainability.  Reforms to strengthen the fiscal framework, including through a new organic budget law, would support the process of fiscal consolidation.

“Preserving financial stability in the context of lower economic growth is also needed for the financial sector to support stronger economic diversification and private sector development over the medium term.  Together with adequate macroeconomic policies and a strengthened monetary policy framework, stronger prudential and supervisory frameworks will reduce structural weaknesses and support financial stability.  The Central Bank of Mauritania continues to strengthen its regulatory framework and supervision capacity to support the continued development and stability of the financial system.

“Mauritania can achieve its medium term goals of becoming more prosperous, more diversified and less dependent on commodity cycles despite the uncertain global economic environment. Implementing policies in this direction would require close policy coordination.  Strengthening policy formulation, transparency and governance will reduce uncertainties, help anchor expectations and enhance the credibility of macroeconomic policies.

“The mission met with the Prime Minister, Mr. Yahya Ould Hademine; the Central Bank Governor, Mr. Abdel Aziz Ould Dahi; the Minister of Economy and Finance Mr. El Moctar Ould Djay; the Minister of Petroleum, Energy and Mining, Mr. Mohamed Salem Ould Bechir; the Minister of Fisheries and Maritime Economy, Mr. Nani Ould Chrougha; and other senior officials.  The team also held discussions with representatives of the civil society and the private sector, and development partners.  (IMF 22.02)

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