Fortnightly, 24 January 2018

Fortnightly, 24 January 2018

January 24, 2018


24 January 2018
8 Shevat 5778
7 Jumada Al-Awwal 1439




1.1  Netanyahu Government Passes NIS 400 Billion 2019 Budget
1.2  Prime Minister Netanyahu Visits India
1.3  TASE Reaches Dual-Listing Agreements with Hong Kong, Singapore & Toronto


2.1  Intel Unveils 40% Faster Wi-Fi Chip Developed in Israel
2.2  Renault-Nissan-Mitsubishi’s Alliance Ventures Launches $1 Billion Innovation Fund with Office in Tel Aviv
2.3  ECI Chosen to Upgrade India’s Optical Networks to Meet Rising Demand for Data
2.4  OurCrowd Launches $100 Million Cognitiv Fund
2.5  UST Global Buys Israeli Cybersecurity Firm BISEC
2.6  Allot Expands Security Offering With Acquisition of Netonomy
2.7  Nova’s Metrology Solution Selected by Two Leading Memory IC Manufacturer
2.8  Palo Alto Networks Opens New Tel Aviv Office and R&D Center
2.9  With $13 Million in Initial Funding, VDOO Aims to Secure the Internet of Things (IoT)


3.1  Melted Sandwich Concept, Melt Shop, Opens Inaugural Kuwait Franchise
3.2  IBM Signs $85 Million Private Cloud Deal with Emirates Airlines
3.3  DMCC Free Zone Hires US Designer for Uptown Dubai Mega Project
3.4  Sheppard Mullin Announces Strategic Relationship with Law Firm Turkistani & Alabbad
3.5  Turkey World’s Number One Flour Exporter
3.6  Turkish Defense Giant ASELSAN Seals Long-Range Defense System Deal


4.1  TATA Projects & Israel’s Watergen Enter an MoU to Extract Drinking Water from Air
4.2  Middle East Renewable Energy Output to Triple by 2035
4.3  Abu Dhabi Reveals World’s Largest Water Reserve Project
4.4  Saudi ACWA Power to Develop Three Solar Plants in Upper Egypt’s Benban
4.5  Saudi to Invest $530 Million in Red Sea Desalination Plants5


5.1  Average Lebanese Inflation Up by 4.44% in 2017
5.2  Tourist Spending in Lebanon Up by 5.5% in 2017
5.3  Lebanon’s Total Number of Registered New Cars up by 2.54% in December 2017
5.4  Lebanon Ranked 137th on the Global Gender Gap Index 2017
5.5  Amman Announces Economic Measures & Cash Subsidy Mechanism

♦♦Arabian Gulf

5.6  Dubai’s State Utility Firm Approves $7.2 Billion Budget for 2018
5.7  Oman – F-16 Operational Flight Profile and Identification Friend or Foe Mode 5 Upgrade
5.8  IMF Raises Saudi Growth Prospects Over High Oil Prices
5.9  Saudi Handouts’ Cost May Exceed Government Estimates
5.10  Saudi Expat Workers to Bear Brunt of Rising Prices

♦♦North Africa

5.11  World Bank Says Egypt’s Growth Rate Forecast at 4.5% in 2018
5.12  Egypt’s Heady Inflation Drops as Election Season Approaches
5.13  Morocco Adopts More Flexible Exchange Rate to Boost Standing


6.1  Unemployment Rate in Turkey Falls to 10.3% in October
6.2  Greece Still Faces Painful Reforms Despite Bailout Funding
6.3  Debt of Greeks to the State Exceeds €100 Billion
6.4  Greece to Approve Use of Medical Cannabis



7.1  Train to Take 28 minutes from Jerusalem to Tel Aviv
7.2  Tel Aviv University Hosts Record Number of Foreign Students


7.3  Jordan to Allocate JD72 Million to Public Universities in 2018
7.4  Saudi Arabia Opens First Women-Only Car Showroom


8.1  Evogene Reports Positive 2nd Year Field Trial Results in Corn Bio-Stimulant Ag-Biologicals Program
8.2  FieldIn Completes a $4 Million Funding Round
8.3 Announces CE Mark for the First AI Powered Direct-to-Intervention System
8.4  Check-Cap Receives CE Mark Approval for C-Scan®
8.5  BioProtect International Multi-Center Clinical Study Following FDA Exemption (IDE)
8.6  Teva Gets FDA Approval of TRISENOX for Treatment of Acute Promyelocytic Leukemia
8.7  EZbra Presented to the SESPRS 34th Annual 2018 Atlanta Breast Surgery Symposium


9.1  Wi-Charge Wins CES 2018 Best of Innovation Award
9.2  SecurityDAM Expands Cloud Security Offering with Vulnerability Assessment Solution
9.3  Nova Launches Breakthrough Machine Learning Software to Enhance Modelling Capabilities
9.4  OTI’s UNO-8 (SATURN 8700) Granted EMVCo Visa & Mastercard Modular Type Approval
9.5  Sapiens Announces that Equitable Life of Canada Selects StoneRiver’s LifeSuite
9.6  Telrad Networks and Federated Wireless Sign CBRS Agreement
9.7  Kornit Digital Launches New HD Printing Technology for the Avalanche Series
9.8  Raicol Crystals Announcing a New SKTP Crystal


10.1  Israel’s Foreign Exchange Reserves Rise to Record $113 Billion in 2017
10.2  Israel’s Debt-GDP Ratio Falls Below 60%


11.1  ISRAEL: Israeli Companies Raised Over $5.2 Billion in Capital in 2017
11.2  SAUDI ARABIA: Fitch Says Saudi Fiscal Reform Progresses but Framework Incomplete
11.3  EGYPT: Fitch Revises Egypt’s Outlook to Positive; Affirms at ‘B’
11.4  EGYPT: Egypt’s Food Industry Achieved $22.5 Billion in Revenues in 2017
11.5  EGYPT: Cairo Turns to World Bank to Mediate Ethiopian Dam Dispute
11.6  TURKEY: Fitch Affirms Turkey at ‘BB+’; Outlook Stable
11.7  TURKEY: Turkey’s National Booze Under Government Siege
11.8  GREECE: Long-Term Ratings on Greece Raised to ‘B’; Outlook Positive


1.1  Netanyahu Government Passes NIS 400 Billion 2019 Budget

The Israeli government unanimously approved the 2019 state budget, which includes NIS 397.3 billion ($117 billion) in spending.  Coalition members gathered for the vote on 12 January on the budget plan laid out by Finance Minister Moshe Kahlon (Kulanu).  While a number of ministers protested spending cuts included in the budget, the cabinet passed Kahlon’s proposed budget unanimously.  Despite some spending cutbacks on programs, overall, the Ministry of Culture and Sports received a significant funding increase – with NIS 1 billion ($290 million) compared to less than NIS 725 million ($213 million) in 2017.

The plan which includes income tax cuts for middle class wage earners, boosts spending for education and disability benefits. For the first time in Israel’s history, the government will spend more on education than defense.  The budget includes a NIS 20 billion ($5.9 billion) net increase in expenditures, and raises the state deficit to 2.9% – up from last year’s 1.97% and 2.15% in 2016.

According to the new budget plan, the state will spend NIS 60 billion ($17.6 billion) on education in 2019, compared to NIS 63 billion ($18.5 billion) for defense.  Healthcare spending will reach NIS 38 billion ($11.2 billion) under the Kahlon budget, compared to NIS 18 billion ($5.3 billion) in welfare spending.  New immigrants to Israel will face a cut in benefits starting in 2019, when the Ministry of Aliyah and Absorption will cease to provide absorption basket benefits – including a monthly stipend payment.  The cut will mostly affect immigrant families, and higher-income immigrants, with benefits eliminated for all new immigrants in households with total assets greater than NIS 500,000 ($147,000).  The budget also includes steep cuts to the World Zionist Organization’s settlement division, which will be reduced by nearly a third, from NIS 36 million ($10.6 million) to NIS 26 million ($7.7 million).  (IH 12.01)

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1.2  Prime Minister Netanyahu Visits India

On 14 January, Indian Prime Minister Narendra Modi, who visited Israel in 2017, dispensed with protocol by greeting Prime Minister Netanyahu personally at the airport on Netanyahu’s arrival for a state visit to India.  In 2004, late Prime Minister Ariel Sharon became the first Israeli prime minister to visit India.  Relations between Israel and India were cold or non-existent until 1992, but have gradually warmed since then.  In recent years, and especially since Indian Prime Minister Narendra Modi’s visit to Israel in the summer of 2017, relations between the two countries have become very cordial, accompanied by a personal relationship between Netanyahu and Modi, including gestures of friendship on both sides.

Netanyahu signed bilateral agreements in oil and gas exploration, production and research.  Among other things, the agreements includes a decision on joint activity by the two countries on development of oil exploration startups.  The two countries also signed a civil aviation agreement for revising flight rates and developing air services between Israel and India.  Another agreement is in the cyber industry.  The two countries agreed to expand and bolster cooperation in this sphere, develop joint training programs, and promote conferences and academic meetings between the corresponding industries in India and Israel.

Israel and India signed a memorandum of understanding to promote a free trade agreement between the two countries.  The free trade agreement would allow for the bilateral removal of tariffs and regulatory barriers and for coordination on investments and taxation, all steps that would make it easier for Israeli exporters to do business with India.  The memorandum of understanding also includes the possibility for collaboration and the exchange of information.

The Israeli business delegation that accompanied Prime Minister Netanyahu represented some 70 Israeli companies from various fields.  It comprised a dozen CEOs and 18 business leaders representing the Innovation Authority’s Bridge to Innovation project that aims to increase innovation in Israel and India, among others.  Apart from cultural differences, one of the central problems faced by Israeli manufacturers interested in exporting products is that while Indians are interested in importing technological know-how, they prefer their products to be manufactured locally.  One of the delegation’s goals was to initiate preliminary meetings in an effort to help manufacturers establish business ties in India.

Israeli exports to India in 2016 amounted to $1.5 billion, 12.5% less than in 2015. Most of the exports comprised machinery and electrical equipment (37%), chemical industry products (26%), simple metals (18%), and optical appliances (11.5%).  In 2016, Indian exports to Israel amounted to $800 million, a 12.6% decrease from 2015. Most of these comprised chemical industry products (29.5%), textiles (18%), plastic and rubber (12%), and machinery and electrical equipment (11%).

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1.3  TASE Reaches Dual-Listing Agreements with Hong Kong, Singapore & Toronto

On 14 January, the Israel Securities Authority announced that its dual-listing arrangements would be expanded.  Pending approval by the Ministry of Finance and the Knesset Finance Committee, the arrangements will now include stock exchanges in Hong Kong, Singapore and Toronto.

The dual-listing arrangement that came into force in 2000 in response to worldwide globalization, allows companies whose securities are listed for trade on certain foreign stock exchanges to list their securities for trade also in Israel, based on disclosure according to the foreign law that applies to them, rather than Israeli law.  This arrangement is based on the understanding that nowadays companies are driven by globalization to trade on more than one market, while financial markets are competing to attract major international companies.

Israeli companies have recently expressed interest in dual-listing in Far Eastern markets including Singapore and Hong Kong, due to their business ties to these markets or their appreciation of the capital raising potential that these markets represent.  Similar interest has also been expressed with respect to the Toronto stock exchange.  Against this backdrop, the ISA conducted a comprehensive study of the financial markets in these three countries with the aim of extending the dual-listing arrangement.  ISA staff held meetings with representatives of the foreign exchanges, regulators, and other senior officials in the three countries, to learn about the regulatory framework in these markets, and to confirm that the standards of regulation in those markets are on par with the regulation in the existing dual-listing exchanges, and will provide appropriate protection for the investor public.

Extending the dual-listing arrangement is also aimed at promoting the “return” of Israeli companies to trading on TASE, and also allow non-Israeli companies that are already listed on the exchanges in question to list for trade on the TASE as well.  The ISA intends to continue promoting collaborations in this field through actions such as establishing foundation for mutual recognition of markets.  There are currently 60 dual-listed companies that trade both on the TASE and on exchanges in London or New York. In recent years, these companies have accounted for between 40% to 60% of the total market cap of the TASE, and over 50% of the value of its TA-35 Index, and are responsible for a considerable share of the TASE’s trading volume.  Most of the dual-listed companies were not traded in Tel Aviv prior to the dual listing arrangement and were motivated to do so by it.  The proposal will come into force subject to the approval of the Ministry of Finance and the Knesset Finance Committee.  (ISA 14.01)

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2.1  Intel Unveils 40% Faster Wi-Fi Chip Developed in Israel

At the CES consumer electronics show in Las Vegas, Intel unveiled a new generation of Wi-Fi chips that were developed in Israel and enable surfing at a speed 40% faster than the previous generation.  Intel will begin shipping the new 802.11ax chips this year.  Intel is expected to broaden its Wi-Fi production line this year with the new 802.11ax chips for popular 2×2 and 4×4 household routers and cable communications gateways, xDSL, consumer fiber optics and devices for consumers.  Development of the Wi-Fi chips was carried out in Israel by the Wireless infrastructure Group and Israeli engineers are responsible for the chips in the computers and the routers.

In order to help original equipment manufacturers move to the new standard, programs based on the Intel 802.11ac infrastructure chips (Intel Home Wi-Fi chipset WAV500 series) can upgrade to 802.11ax WAV600 series without changing the host processor.  Intel’s new 802.11ax home Wi-Fi chips will also offer adaptation to older technologies in order to support a wide range of customer devices.  (Globes 09.01)

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2.2  Renault-Nissan-Mitsubishi’s Alliance Ventures Launches $1 Billion Innovation Fund with Office in Tel Aviv

Renault-Nissan-Mitsubishi, also known as Alliance Ventures, announced on 14 January that it was launching a new $1 billion venture capital fund for “next-generation mobility,” with offices in Tel Aviv, Silicon Valley, Paris, Yokohama and Beijing.  The alliance says the locations were chosen based on proximity “to the technology and research centers of the Alliance member companies, as well as to areas with strong innovation ecosystems.”  The fund will prioritize “open innovation in new mobility, including electrification, autonomous systems, connectivity and artificial intelligence.”  The funds will be invested over the next five years.  The first deal will be a strategic investment in Ionic Materials, a US company developing cobalt-free solid-state battery materials.  Renault (40%), Nissan (40%) and Mitsubishi Motors (20%) will jointly fund the venture.  Renault opened an innovation center in Israel in 2016.  (NoCamels 14.01)

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2.3  ECI Chosen to Upgrade India’s Optical Networks to Meet Rising Demand for Data

ECI was chosen by Idea Cellular, the third largest mobile operator in India and sixth-ranked in the world, to upgrade its optical network.  Idea is upgrading its network to support ever increasing customer demand for bandwidth and data. ECI’s access DWDM solution will be rolled out across more than half of the operators’ network.  As mobile phone penetration in India grows, so too has the demand for mobile data as the country is considered one of the world’s largest consumers of mobile data.  The ECI solution will ensure maximum utilization of Idea’s existing infrastructure, while creating a future-proof solution that already accounts for additional upgrades.  This will ultimately help Idea meet the evolving demand across the market, while fulfilling its commitment to Digital India, the country’s initiative to connect rural and underserved areas of the population with high-speed internet access.

Petah Tikva’s ECI is a global provider of ELASTIC network solutions to CSPs, critical infrastructures as well as data center operators.  Along with its long-standing, industry-proven packet-optical transport, ECI offers a variety of SDN/NFV applications, end-to-end network management, a comprehensive cybersecurity solution, and a range of professional services.  ECI’s ELASTIC solutions ensure open, future-proof, and secure communications.  With ECI, customers have the luxury of choosing a network that can be tailor-made to their needs today while being flexible enough to evolve with the changing needs of tomorrow.  (ECI 10.01)

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2.4  OurCrowd Launches $100 Million Cognitiv Fund

OurCrowd announced the launch of Cognitiv, a specialized $100 million global fund focused on early-stage companies that leverage AI, deep-learning, IoT, robotics and digital manufacturing to become tomorrow’s category leaders.  Cognitiv is the 12th fund to launch for funding on OurCrowd’s platform and will give investors access to approximately 20 companies, with initial investments in EquityX, KolGene and FreshKeep.

OurCrowd First’s diverse portfolio represents multiple exponential tech sectors including Ag-Tech, 3D Printing and Digital Health. Companies include deep learning imaging company Zebra Medical Vision, Ag-Tech disruptors Taranis and Centaur, AI powered visual service provider TechSee and Ultrafast 3D printing company Nexa3D, and more. OurCrowd First invested alongside leading investors including Softbank, Khosla Ventures, Finistre, Salesforce CEO Marc Benioff, and Artis Ventures. Several of the portfolio’s seed investments have already converted into larger Series A rounds of significant size.

Cognitiv Ventures invests in early-stage cognitive AI companies with strong teams, disruptive business models and technologies that have a real use case for a big market.  Cognitiv believes that in the sectors where AI has already been implemented at scale, it has been shown to deliver returns, increase profit margins and distinctively widen competitive advantages.  Cognitiv is part of OurCrowd, the leading global equity crowdfunding platform for accredited investors, and the third fund offering of OurCrowd First (OCF), one of Israel’s leading seed stage funds.

Jerusalem’s OurCrowd is the leading global equity crowdfunding platform for accredited investors.  OurCrowd vets and selects opportunities, invests its own capital, and brings companies to its accredited membership of global investors.  OurCrowd provides post-investment support to its portfolio companies, assigns industry experts as mentors, and takes board seats.  The OurCrowd community consists of almost 20,000 accredited investors from over 112 countries.  (OurCrowd 11.01)

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2.5  UST Global Buys Israeli Cybersecurity Firm BISEC

Holon’s BISEC is being acquired by California’s UST Global through Cyberproof, which is fully owned by US Global.  UST Global announced it is acquiring BISEC for $5.8 million.  BISEC, which was founded two years ago, has developed a platform for the management and automation of incident response rooms as well as cyber security services.  The aim of the platform, according to BISEC, is to solve the difficulties confronting organizations operating tools and teams not connected between them, meaning that cyber security incidents are handled inefficiently.  (Various 09.01)

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2.6  Allot Expands Security Offering With Acquisition of Netonomy

Allot Communications signed a definitive agreement to acquire Tel Aviv’s Netonomy, a developer of software-based cyber security for the connected home, with closing anticipated to occur in a very short period.  The acquisition is in line with Allot’s strategy of providing Communications Service Providers (CSPs) with comprehensive security solutions for their customers.  As the adoption of IoT and connected devices at home continues to grow rapidly, it is becoming increasingly difficult to manage and prevent security breaches on these devices.  Netonomy’s technology integrates a unique software component onto existing routers, enabling device management as well as a variety of protective security functionality on those devices.

Allot’s leading mobile protection solutions are already deployed widely by CSPs to protect their mobile customers.  Leveraging Netonomy’s technology in concert with Allot’s solutions will provide CSPs the ability to offer comprehensive and seamless security to the consumer anywhere, anytime.

Hod HaSharon’s Allot Communications is a provider of leading innovative network intelligence and security solutions for service providers worldwide, enhancing value to their customers.  Their solutions are deployed globally for network and application analytics, traffic control and shaping, network-based security services, and more.  Allot’s multi-service platforms are deployed by over 500 mobile, fixed and cloud service providers and over 1000 enterprises.  Their industry leading network-based security as a service solution has achieved over 50% penetration with some service providers and is already used by over 18 million subscribers in Europe.  (Allot 16.01)

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2.7  Nova’s Metrology Solution Selected by Two Leading Memory IC Manufacturers

Nova announced that two leading memory IC manufacturers recently selected Nova’s most advanced integrated metrology solution for their new DRAM and 3D-NAND production lines.  Nova’s integrated metrology solution was selected, following a comprehensive competitive evaluation, due to superior metrology performance, better productivity and roadmap extendibility to address future technical challenges.  As a result of these selections, Nova recently received over $5 million in orders to be delivered in Q1/18.  Nova expects to receive and deliver multiple additional orders during the remainder of 2018.  Included in the solution is Nova’s newest release, the cutting-edge NOVA i550 integrated metrology platform combined with the most advanced MARS and NOVAFit SW algorithmic solutions.

Rehovot’s Nova delivers continuous innovation by providing advanced metrology solutions for the semiconductor manufacturing industry.  Deployed with the world’s largest integrated-circuit manufacturers, Nova’s products deliver state-of-the-art, high-performance metrology solutions for effective process control throughout the semiconductor fabrication lifecycle.  Nova’s product portfolio, which combines high-precision hardware and cutting-edge software, supports the development and production of the most advanced devices in today’s high-end semiconductor market.  (Nova 16.01)

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2.8  Palo Alto Networks Opens New Tel Aviv Office and R&D Center

Palo Alto Networks announced the opening of a new office and research and development center in Tel Aviv.  The company’s new operations will be located near the Hashalom train station, the company said in a press release on January 11.  The Santa Clara, California-based firm said its Israel team has grown significantly over the past 3.5 years since Palo Alto acquired Cyvera, an Israel-based cyber firm for some $200 million in 2014.  The company also acquired LightCyber in 2017 for a total of $105 million, further growing its Israel team as other teams have grown and new functions are now housed in Israel, including customer support, sales and DevOps.  Palo Alto said the new offices will host over 200 employees across several operational functions, including IT, HR, facilities and finance.  Tel Aviv is the only R&D site for Palo Alto outside of its Santa Clara global headquarters.  (NoCamels 18.01)

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2.9  With $13 Million in Initial Funding, VDOO Aims to Secure the Internet of Things (IoT)

VDOO, a cybersecurity company innovating in the movement to secure the Internet of Things (IoT), has raised $13 million in initial funding.  The venture round was led by 83North (formerly Greylock IL) and included participation by Dell Technology Capital and other strategic individual investors, including David Strohm, Joe Tucci, and Victor Tsao.  The funding will be used to develop and commercialize VDOO’s first-of-its-kind IoT security platform which provides an automated, end-to-end process that analyzes devices, delivers the right security requirements and implementation guidance based on that analysis, and provides security certification for a full range of connected devices.

VDOO has developed an end-to-end platform – from security analysis to implementation to certification and post-deployment security enablement – that allows IoT makers to quickly add the right level of security to their devices with minimal resources required.  The challenge is that with thousands of device types in the market, each has a different set of security features required in order to protect its users.  The foundation of VDOO’s solution is its comprehensive IoT Security Taxonomy engine that analyzes and then classifies tens of thousands of connected devices, to eventually determine the appropriate level of security for each, based on risk factors, threat landscape, and technology attributes.

The VDOO solution performs a security gap analysis on IoT devices, against the specific security requirements for each device type, and provides a detailed recommended plan of action to fill security gaps.  Once security features have been implemented, VDOO validates that security requirements have been met and provides physical and digital certifications.  The on-device digital certification agent monitors the security state of the device and communicates it to other systems such as gateways, firewalls, and edge solutions; which provides post-deployment security, ensuring the device is not being compromised.  VDOO is currently working with design partners on its initial release.  An early beta program will be available to a broader group of beta customers in June 2018.

Tel Aviv’s VDOO is securing the Internet of Things ecosystem.  It provides an end-to-end platform that enables IoT makers to identify the right security requirements for their device(s), take action to implement those security features, and certify their devices in a way that enables post-deployment protection.  Founded by a team of proven entrepreneurs and security researchers, VDOO is located in Israel, the UK and the US, and backed by major VC’s and IoT market leaders.  (VDOO 17.01)

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3.1  Melted Sandwich Concept, Melt Shop, Opens Inaugural Kuwait Franchise

Melt Shop, the pioneers of the melted sandwich movement, has opened its first international franchise location in Kuwait City, Kuwait.  Located at Al Hamra Mall & Luxury Center, Melt Shop’s newest restaurant is the first of a seven-location development deal in the Middle East with Ali Alghanim & Sons.  Three additional locations are expected to open in Kuwait within the next four to six months.

Melt Shop has spent the last seven years tirelessly perfecting the brand and business model.  The details have been choreographed to perfection so the product and experience are best-in-class and none of the standards were compromised with its first international launch.  Melt Shop Al Hamra follows the same standard operating procedures and features the same menu as their domestic locations with the addition of three unique breakfast sandwiches, a full coffee program and a localized signature menu item — the Halloumi Melt, made with halloumi and pepper jack cheese, roasted and sliced tomatoes, caramelized onions, arugula, za’atar and sherry vinaigrette on country white bread.

New York’s Melt Shop launched its franchise model in September 2017 and has already signed multiple deals placing the company well ahead of its goal to open 100 locations by 2022.  Melt Shop’s focus is simple: melted sandwiches made with high-quality ingredients.  Melt Shop is a part of Aurify Brands, a company equal parts hospitality group and restaurant incubator.  (Melt Shop 22.01)

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3.2  IBM Signs $85 Million Private Cloud Deal with Emirates Airlines

Under a new $85 million agreement, IBM will manage Emirates airline’s enterprise IT infrastructure for its mission-critical global operations.  The ten year plan will see IBM manage the day-to-day oversee the airline’s IT infrastructure allowing Emirates to focus on its strategic initiatives, such as improved business application performance, a resilient, scalable, and agile environment and operational savings.  Additionally, IBM will manage Emirates’ back-up environment and implement a private cloud solution at the two data centers in Dubai, which will be managed by IBM.  Also, IBM will provide data center networking services to enable employees to have access to Emirates’ core IT environment and business critical applications remotely, at any time of the day, regardless of their geographical location.

The deal is part of the ten-year and approximately $300m agreement Emirates signed with IBM in 2016 to provide IT Infrastructure delivered as a service, allowing the airline to improve the efficiency of its passenger support systems and functions.  (IBM 11.01)

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3.3  DMCC Free Zone Hires US Designer for Uptown Dubai Mega Project

DMCC, Dubai’s free zone for trade and enterprise, announced that it has hired a US firm to be interior architect for the first part of its Uptown Dubai mega project.  Rockwell Group, a New York based architecture and design firm, has been appointed for one of Uptown Dubai’s two super tall towers that will anchor the 10 million sq. ft. development.  The super tall tower, whose name is to be revealed later this year, will comprise luxury hotel rooms and suites, high-end restaurants, health spas, extensive conference facilities, grade A offices, and 237 branded residences.  DMCC began the construction of its Uptown Dubai District in September.  Shortlisted among six bidders, Rockwell Group’s Uptown Dubai project includes the design of the super tall tower’s first premium 5-star hotel and branded residences, set for sale in early 2018.  Over the next decade, the landmark development will create over 10,000 new jobs in Dubai, according to DMCC.  (AB 11.01)

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3.4  Sheppard Mullin Announces Strategic Relationship with Law Firm Turkistani & Alabbad

Los Angeles’ Sheppard, Mullin, Richter & Hampton announced it has entered into an agreement to work as a team with Saudi Arabia-based law firm Turkistani & Alabbad.  This new relationship enables Sheppard Mullin to work closely with a dynamic Saudi Arabian law firm to provide legal services to clients who have Saudi Arabia-related business.  Turkistani & Alabbad specializes in complex litigation and arbitration, government contracts, and corporate transactions, including real estate franchising and licensing.

Turkistani & Alabbad is a Saudi-based law firm that provides high quality, full range legal services for both domestic and international businesses.  The firm possesses the in-depth local knowledge and commercial background our clients require, in addition to the capability to deliver results while maintaining best international practices and standards.  Members of the firm include fluent English and Arabic speaking professionals who have a deep understanding of clients’ business needs, and can provide them with high quality, customized and creative solutions for complex legal issues.  (SM 19.01)

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3.5  Turkey World’s Number One Flour Exporter

Turkey has been the world’s top flour seller over the last five years, making one-third of all flour exports, with 3.6 million tons of flour exports worth $1.1 billion in 2017, the Turkish Flour Industrialists’ Federation (TUSAF) said on 10 January.  Turkey sends around 70% of its flour exports to Iraq, Sudan and Syria, as well as Angola, Benin and Somalia.  Over the last decade, the country exported flour to 160 countries, including the United States, China, Japan and Russia.

Turkey’s 2018 targets are to expand its market, raise production capacity and to export four million tons of flour worth $1.25 billion.  The country exports many varieties of flour, including rye, whole wheat, diabetic, pizza, bran, pastry and pasta.  Turkey’s annual average of wheat production is 21 million tons, but its consumption is 19 million.  The overproduction is used to export flour.  Turkey produced 22.5 million tons of wheat in 2015 and 20.5 million tons in 2016.  Turkey’s exports in 2017 were the second-highest in the republic’s history, worth $157.1 billion.  (Various 11.01)

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3.6  Turkish Defense Giant ASELSAN Seals Long-Range Defense System Deal

Turkish defense giant ASELSAN said on 16 January that it had signed, along with Roketsan, TUBITAK SAGE business partnership, an accord for a national long-range defense system project for defense industries undersecretariat.  It said in a statement to the Turkish stock exchange Borsa Istanbul (BIST) that ASELSAN’s share under the agreement was $227 million and $342 million and that the deliveries will be completed in 2021.  In November, ASELSAN became Turkey’s most valuable company as its market capitalization reached $11.56 billion.  ASELSAN designs, develops and manufactures military communication systems, radar and electronic warfare systems, electro-optical systems and defense and weapon systems for the Turkish military, in addition exports abroad.  The company is ranked 58th in the list of the world’s top 100 defense giants in 2016, according to the prestigious U.S. weekly, Defense News.  (Daily Sabah 16.01)

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4.1  TATA Projects & Israel’s Watergen Enter an MoU to Extract Drinking Water from Air

Rishon LeZion’s Watergen and India’s TATA Projects Limited marked the visit of Israeli Prime Minister Netanyahu to India with the signing of a memorandum of understanding.  The intent of the MoU’s between these two organizations, is to deepen business ties and help solve India’s drinking water challenge, by providing safe, clean and cost-efficient drinking water across India.

This first-time MoU between the two organizations is another step towards fulfilling the vision of India’s Prime Minister Narendra Modi’s ‘Make in India’ campaign.  The MoU seeks to also create a mutual entity in India, to manage local operations and manufacture Watergen units in India.  This process will create jobs and fuel economic growth, while providing local and regional drinking water supply when needed, as well as the deployment of a distributed water grid chain across the country.

Watergen’s revolutionary technology is an immediate, quick, permanent, low cost, energy efficient, accessible, clean and safe drinking ‘water from the air’ solution for India.  Watergen’s two models of AWG (atmospheric water generators) can serve clean and safe drinking water, with no other additional infrastructure, and can fulfil the needs of drinking water across villages and cities of India.  The large-scale AWG unit produces up to 6,000 liters of water from the air every day, while the medium scale AWG unit produces up to 600 liters of water every day.

This ground-breaking cooperation between the two organizations will drive far-reaching impact across India. A pilot program is planned to utilize the mid-size GEN-350G unit.  Last year, Watergen instituted a GEN-350G pilot in New Delhi’s Connaught Place, where nearly 2,000 people received drinking water from the air every day.  The various applications of Watergen units, include use in both public and private sectors; schools, hospitals, universities, villages, and community centers and military applications.

Making available clean, safe drinking water across India, Watergen and TATA Projects can help improve the health and well-being of its citizens.  Producing water from the air also has wide-ranging sustainability and environmental benefits, by reducing need for plastic water bottles and the associated reduction in plastic waste disposal.  (TATA 16.01)

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4.2  Middle East Renewable Energy Output to Triple by 2035

Siemens’ ‘Middle East Power: Outlook 2035’ report says that the Middle East region will acquire 483 gigawatts (GW) of power generation in the same time frame, up from 277GW.  The Middle East is expected to more than triple its share of renewable energy from 5.6% in 2016 to 20.6% in 2035.

Despite the growing share of renewable energy, natural gas is expected to remain the primary source of power generation in the region, accounting for 60% of installed capacity through 2035, predominantly through increasingly efficient natural gas-fired power plants.  The capacity additions that the region will see, according to Siemens, are primarily through highly efficient combined cycle power plants.

Wind power potential

Additionally, Siemens believes that upgrades to existing facilities older than 30 years could lead to an additional 45GW of capacity.  By 2035, solar power is expected to account for around 61GW of capacity.  The report also notes that there is significant potential for wind power generation in Saudi Arabia and Egypt, but which is not entirely reflected in the moderate capacity additions expected.  (AB 14.01)

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4.3  Abu Dhabi Reveals World’s Largest Water Reserve Project

 On 15 January, Abu Dhabi unveiled the world’s largest reserve of high quality desalinated water, secured in a network of 315 recovery wells lying up to 80 meters below the Liwa Desert.  The wells are fed by one of the UAE’s longest water pipeline networks which runs the water from Shuweihat desalination plant at a rate of 7 million imperial gallons per day over 27 months.  The reserve, which has at its core an infiltration and recovery system sitting atop a natural fresh water underground aquifer, was first investigated in 2002 and has been extensively researched by the Environment Agency – Abu Dhabi (EAD).

Established in one of the world’s driest areas where rainfall rarely exceeds 10 cm. a year, the project has been completed at an estimated cost of AED1.61 billion ($435.6 million) to deliver a fallback pumping capacity of 100 million gallons of water per day to the emirate if required.  The project ensures continuous water supply for Abu Dhabi city and Al Dhafra region and secures the reserve for future generations.  The reserve now holds more than 26 million cubic meters of water that can bolster drinking water supply when needed.  The Liwa desert was chosen for the project after it met strict specification criteria.  Water quality is ensured through strict control, heat and salinity monitoring equipment and a range of other metrics.  (AB 15.01)

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4.4  Saudi ACWA Power to Develop Three Solar Plants in Upper Egypt’s Benban

Saudi developer ACWA Power reached financial close for the development, construction and operation of three photovoltaic projects worth $190 million and set for peak total output of 165.5 megawatts at the Benban complex in Upper Egypt’s Aswan.  Out of the $190 million, 75% will be financed through a non-recourse project debt from the European Bank for Reconstruction and Development and the Industrial and Commercial Bank of China.  The Multilateral Investment Guarantee Agency is covering the remaining 25% of the project’s cost which is financed with equity capital.

Construction of the three power plants will begin in Q1/18 and the projects will be operational by Q4/18.  The projects will power 80,000 houses and will save 156,000 tons of CO2 per year, the company said.  ACWA Power is also contracted for other energy development projects in Egypt, including the Dairut 2250 MW combined-cycle gas turbine power plant, and a series of more than 500 MW wind projects and 1 GW of photovoltaic projects.  (Ahram Online 08.01)

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4.5  Saudi to Invest $530 Million in Red Sea Desalination Plants

Saudi Arabia plans to build nine desalination plants for more than $530 million on the Red Sea coast, Environment Minister al-Fadhli said on 21 January.  The plants will have capacity of 240,000 cubic meters of water per day and will be completed in less than 18 months.  The project, which the minister said was ordered by King Salman in a royal decree, will help government-owned Saudi Saline Water Conversion Corp (SWCC) raise production efficiency and cut operating and capital costs.  He gave no details on funding.

Saudi Arabia said in 2016 it planned to use public-private partnerships (PPP) with local and foreign companies to fund infrastructure projects.  In August, it said it would develop resorts on about 50 Red Sea islands, completing the first phase of that project – which is backed by its Public Investment Fund (PIF) – in the fourth quarter of 2022.  (AB 21.01)

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5.1  Average Lebanese Inflation Up by 4.44% in 2017

According to the Central Administration of Statistics (CAS), average inflation increased by 4.44% by December 2017, compared to an average deflation rate of 0.78% recorded by Dec. 2016.  All sub sections of the Consumer price index (CPI) recorded yearly upticks in 2017.  Average prices of food and non-alcoholic beverages (20% of CPI) rose by an annual 3.67% by Dec. 2017.  The average costs of Housing and utilities (including: water, electricity, gas and other fuels), which grasped a combined 28.4% of the CPI, rose by 5.18% year-on-year (y-o-y) by the end of 2017.  Specifically, owner-occupied rental costs constituted 13.6% of this category and increased by 3.84% y-o-y, and the average prices of water, electricity, gas, and other fuels constituting 11.8% of the same category rose by an annual 10.84% over the same period.  Also, the average price of transportation grasping 13.1% of the CPI, gained an annual 5.54%, which can be attributed to the continuing recovery in the average international price of oil which attained $54.74/barrel by December 2017, up from $45.13/barrel by the end of 2016.  In turn, the average costs of Health (7.7% of the CPI) and Education (6.6% of the CPI) respectively climbed by 0.55% and 2.75% y-o-y by Dec. 2017.  In December 2017, the monthly inflation rate stood at 5.01% compared to 3.14% in Dec. 2016.  The increase this year was driven by the upticks of 4.09% and 3.69% registered in the two largest CPI components housing and utilities and food and non-alcoholic, respectively.  (CAS 18.01)

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5.2  Tourist Spending in Lebanon Up by 5.5% in 2017

According to Global Blue, tourist spending in Lebanon rose by a yearly 5.5% by December 2017, compared to end 2016.  The rise is mainly attributed to increasing tourist spending by Syrians, Kuwaitis, and Saudis.  Similarly, the occurrence of the New Year and Christmas holidays during the last quarter of the year encouraged the spending habits of visitors for the period.  On a year-to-date basis, tourist spending by Syrian, Kuwaiti and Saudi visitors particularly grew, recording annual upticks of 32.07 %, 28.46%, and 15.37%, respectively, by December 2017.  Similarly, spending by American and Qatari tourists in 2017 increased respectively by 10.59% and 7.18% compared to last year.  Meanwhile, tourist spending by Egyptian and Emirati tourists was slashed by 18.5% and 9%, respectively.

During 2017, fashion and clothing accounted for 69% of the spending distribution by category, followed by 16% for watches and jewelry.  Spending on fashion and clothing, watches and jewelry and in department stores witnessed respective yearly rises of 3.9%, 5.5%, and 19.5%.  (Global Blue 23.01)

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5.3  Lebanon’s Total Number of Registered New Cars up by 2.54% in December 2017

According to the Association of Lebanese Car Importers (AIA), the total number of newly registered commercial and passenger cars slightly rose by an annual 2.54% to stand at 39,863 by December 2017.  In details, the number of registered commercial cars increased by 3.65% year-on-year (y-o-y) to reach 2,641 by December 2017, and the number of registered passenger vehicles rose by 2.47% y-o-y to reach 37,222 cars by December 2017.  As for sales per importer, Natco, importer of Kia, acquired the largest stake of newly registered cars with 19.12% of the total, followed by RYMCO with 14.16%, Century Motor Co. and BUMC with 12.71% and 11.88%, respectively.  (AIA 13.01)

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5.4  Lebanon Ranked 137th on the Global Gender Gap Index 2017

According to the 2017 World Economic Forum’s Global Gender Gap Index Report, Lebanon ranked 137th out of 144 countries just before Saudi Arabia.  With this rank, Lebanon earned a score of 0.596, where 0 represents complete gender inequality and 1 represents complete equality.  On the political empowerment sub index, Lebanon has one of the lowest rankings having closed less than 2% of its political gender gap.  Indeed it is ranked 142nd out of 144.  In the fields of economic participation and opportunity, Lebanon is also way behind, ranking 133rd with a score of 0.44.  However, in terms of education and health, the country ranked 109th in each of these categories with scores of 0.956 and 0.957, respectively.  (Various 11.01)

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5.5  Amman Announces Economic Measures & Cash Subsidy Mechanism

The Jordanian cabinet on 15 January set JD26.4 as the per capita annual support to offset the impact of lifting the bread subsidy.  At a meeting chaired by Prime Minister Mulki, the Cabinet set the threshold annual household income for the segments eligible for the cash support at JD12,000, while individuals who apply for the subsidy should prove that their yearly income does not exceed JD6,000.

For beneficiaries from the National Aid Fund (whose number is around 340,000), the per capita value of the cash subsidy is JD33, while children of Jordanian women married to non-Jordanians and residents who come from Gaza Strip are eligible to receive the JD27, if they meet the conditions applied to Jordanians.

The 2018 draft state budget includes, for the first time, a social safety network/cash subsidy with a value of JD171 million to make up for rising cost of living brought by lifting subsidies on bread and other commodities, whose sales tax is below 16% with a list of exceptions announced by the Cabinet.  The Cabinet said the net would cover 6.2 million Jordanians, out of 7.8 million citizens, while the rest of around 10 million are non-Jordanians.

According to the Cabinet, the total revenues expected from the corrective measures amount to JD540 million plus, which will be generated from lifting the bread subsidy and levying JD500 – 1,500 on each importing car, depending on its weight, while vehicle ownership transfer fees will be reduced to range from JD30-200.  Meanwhile, the government has raised the special tax on carbonated drinks from 10-20%, and on Octane 95 and 98 gasoline to 30% while JD0.20 has been added on cigarette packets, while all sales tax exemptions (zero and 4%) have been modified at a unified rate of 10%.

The reduced taxes on essential commodities remain unchanged, including sugar, rice, flour, cooking oil, lamb, beef, chicken, fish, fresh milk, children’s milk, eggs, tea, school stationery, pesticides, fertilizers and veterinary medicines, in addition to equipment used by disabled persons for mobility and orthopedic devices.

The Cabinet’s statement noted that the government has allocated JD25 million in 2018 to increase support for the National Aid Fund (by JD10 million), the civil and military consumer outlets (JD10 million), and school nutrition program (JD5 million).  It also highlighted other previously announced decisions including the age segment (60-69) to the free medical insurance and keeping electricity subsidy for households that consume less than 300km/h a month, among other measures to mitigate the impact of the new changes.  (JT 16.01)

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►►Arabian Gulf

5.6  Dubai’s State Utility Firm Approves $7.2 Billion Budget for 2018

Dubai Electricity & Water Authority (DEWA) has approved a total budget of AED26.4 billion ($7.2 billion) for 2018, up by more than AED2 billion compared to last year.  The state utility firm said the 2018 budget incorporates investments in conventional and non-conventional energy sources, advanced technologies and innovative projects.  The 2018 budget also includes AED2.7 billion for electricity and water generation, AED5 billion for power transmission, AED1.7 billion for power distribution and AED500 million for water transmission and distribution projects, he added.  To increase DEWA’s water storage capacity, AED165 million has been allocated for constructing a reservoir in Hatta and upgrading pumping stations at Jebel Ali – Habab and Khawaneej.  (AM 13.01)

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5.7  Oman – F-16 Operational Flight Profile and Identification Friend or Foe Mode 5 Upgrade

The State Department approved a possible Foreign Military Sale to Oman of items and services to support an incremental Operational Flight Profile (OFP) software upgrade for F-16 subsystems, as well as Identification Friend or Foe (IFF) and secure communications equipment for Mode 5 operations for an estimated cost of $62 million.  The Defense Security Cooperation Agency delivered the required certification notifying Congress of this possible sale today.

The Government of Oman has requested a possible sale of items and services to support an incremental Operational Flight Profile (OFP) software upgrade for F-16 subsystems, as well as Identification Friend or Foe (IFF) and secure communications equipment for Mode 5 operations on twenty-three (23) F-16 aircraft.  Non-MDE items and services consist of twenty-nine (29) KIV-78 cryptographic/timing modules (twenty-three (23) installed and six (6) spares); twenty-nine (29) KY-100M cryptographic radio encryptors (twenty-three (23) installed and six (6) spares); twenty-nine (29) AN/APX-126 Combined Interrogator Transponders (twenty-three (23) installed and six (6) spares); Classified and Unclassified Computer Program Identification Numbers (CPINS) upgrades; OFP upgrades for IFF Mode 5 capable systems, Joint Mission Planning (JMPS) upgrade; Sniper Advanced Targeting Pod software, service support, support equipment, spares, and training; systems support and test equipment; spare and repair parts; publications and technical documentation; training and training equipment; U.S. Government and contractor engineering; logistics and technical support services; and other related elements of logistics and program support.  The estimated cost is $62 million.

The proposed sale allows the U.S. military to support the Royal Air Force of Oman, further strengthen the U.S.-Omani military-to-military relationship, and ensure continued interoperability of forces and opportunities for bilateral training and exercises with Oman’s military forces.

The prime contractor will be Lockheed Martin of Fort Worth, Texas.  There are no known offset agreements proposed in conjunction with this potential sale.  The proposed sale will not require the long-term assignment of any additional U.S. Government or contractor representatives to Oman.  (DSCA 05.01)

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5.8  IMF Raises Saudi Growth Prospects Over High Oil Prices

On 22 January, the International Monetary Fund raised its growth projection for the deficit-hit Saudi economy on the back of higher oil prices but retained its estimates for the region.  In its World Economic Outlook update, the IMF said the Saudi economy – which shrank 0.7% last year – is expected to grow by 1.6% in 2018, up 0.5% on its October estimates.  The Saudi economy is also projected to grow by 2.2% next year, up 0.6% on the previous estimate, it said.

The IMF however maintained its October projections for growth in the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region at 3.6% and 3.5% for this year and 2019, respectively.  It said oil prices rose 20% between August and October of last year.  The Saudi economy, the largest in the region, contracted last year for the first time since 2009 when it dove into negative territory due to the global financial crisis. The kingdom has posted budget deficits in the past four fiscal years since oil prices began to plunge. It is projected to remain in the red until 2023.  Riyadh has introduced a series of austerity measures to boost non-oil income, raising the prices of fuel and power, imposing fees and charges on expatriate labor and introducing a value-added tax (VAT) of 5%.  Economic growth in the oil-dependent Gulf states has plummeted due to a sharp drop in oil revenues.  (AB 22.01)

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5.9  Saudi Handouts’ Cost May Exceed Government Estimates

Saudi authorities may have underestimated the financial cost of royal handouts doled out to citizens complaining about rising prices, according to Bank of America Merrill Lynch.  Riyadh will spend 61.8 billion riyals ($16.48 billion) on a package that included paying civil servants a monthly 1,000-riyal ($266) allowance for a year and restoring annual pay raises suspended in 2017.  Officials said the package would cost about 50 billion riyals.  King Salman issued the royal order this month after public complaints about the impact of higher fuel prices and the introduction of a 5% value-added tax.  The measures will likely make the government more reliant on higher oil prices to boost revenue, chipping at the credibility of Crown Prince Mohammed bin Salman’s plan to end the economy’s addiction to hydrocarbons.

Riyadh will also pay part of the newly introduced VAT recently implemented to help diversify state revenue.  The measures will almost wipe out savings planned in this year’s budget, according to Cairo-based investment bank EFG-Hermes.  (AB 14.01)

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5.10  Saudi Expat Workers to Bear Brunt of Rising Prices

The impact of VAT and fuel price rises in Saudi Arabia will be felt most strongly by expatriate workers, according to a new report by Capital Economics.  While Saudi citizens will be compensated with increased salaries and, for civil servants and military servicemen, one-off bonuses, there are no such mitigating measures for non-nationals.  Indeed, there is an increased “expat levy” for employment in Saudi Arabia, which is now SAR400 per month, and increased fees for their dependents.

The price rises and VAT will come hand in hand with inflation, which could rise by more than 6% in 2018.  Energy prices will be the main drivers of this, specifically petrol and electricity.  The price of fuel at the pump has risen by up to 127%, while electricity tariffs for the low-end consumption of most Saudi households have increased by 260%.  VAT on its own will add 2.5% to the inflation rate.

In 2017, the inflation rate in Saudi Arabia hovered around zero, helped by the stagnant oil prices and its impact on the economy as a whole.  Economists believe that it will fall again in 2019.  (AB 15.01)

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►►North Africa

5.11  World Bank Says Egypt’s Growth Rate Forecast at 4.5% in 2018

Egypt’s growth is anticipated to reach 4.5% during Fiscal year (FY) 2017/ 2018 from 4.2% in last FY 2016/2017, according to World Bank (WB) report.  The Global Economic Prospects 2018: Middle East & North Africa report attributed the expected increase to ongoing reforms and improved business climate which provide further impetus to industrial activity and exports.  The government expects economic growth for FY2018 to reach a rate of no less than 4.6%.

Egyptian Minister of Finance Amr El-Garhy said in previous statements that the government targets achieving growth rates exceeding 6% over the medium term, in addition to overall growth and sustainability.  El-Garhy attributed the increase in Egypt’s growth in FY2018 to some elements pushing the growth such as the increase in natural gas production. Important discoveries made recently, he explained, will reach the production stage, where natural gas production is expected to increase from about 30% – about 42b to 43b cubic meters during the FY2017 to reach 55b cubic meters in the FY2018.  This, in addition to providing all the country’s needs of electricity required for various investment projects after the entry of Siemens power stations into service, which adds about 50% capacity to the sector.

The report projected that Egypt’s growth rate reaches 5.9% by 2019, noting that the devaluation of the currency had a positive impact on competitiveness in the country, contributing to strong industrial production, investment, and exports in the second half of the fiscal year.  (WB 13.01)

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5.12  Egypt’s Heady Inflation Drops as Election Season Approaches

Egypt’s annual inflation rates dropped in December to their lowest levels since the country floated its pound currency in November 2016, sending prices shooting up.  Bringing down inflation is key for President Abdel Fattah Al Sisi, who has yet to announce his intention to run for a March election, but is expected to win himself another term.

Urban consumer price inflation eased to 21.9% in December year-on-year from 26% in November, with its month-on-month rate falling to -0.2%, the first time prices decreased since December 2015, according to official data.  Core inflation, which strips out volatile items such as food, fell to 19.86% in December from 25.53% the previous month.

Inflation reached a record high of 35% in July after energy subsidies were cut in line with reforms agreed with the International Monetary Fund (IMF) for a $12 billion loan, but has gradually eased since then.  Egypt’s finance minister said on 10 January he expected the rate to fall below 20% next month and to 10-12% during 2018 before falling below 10% in 2019.  Egypt’s central bank has raised key interest rates by 700 basis points since November 2016 in an attempt to ease soaring inflation.

Egypt hiked fuel prices by up to 50% in June and electricity prices by up to 42% in July in an effort to tighten its spending as part of the three-year IMF deal.  Another wave of energy cuts is expected this year as per the recommendation of the IMF.  Sisi has to balance between pushing with economic reforms to revive an economy hit hard by political turmoil and maintaining support to win the upcoming election.  (Reuters 10.01)

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5.13  Morocco Adopts More Flexible Exchange Rate to Boost Standing

On 14 January, Morocco adopted a more flexible exchange rate as part of a long-awaited plan aimed at boosting the competitiveness of the North African nation’s economy.  Bank Al-Maghrib, Morocco’s central bank, said it would widen the official band within which the dirham fluctuates to 5%, with a maximum daily moves of 2.5% above or below the official rate.  The dirham is currently allowed to fluctuate within a much narrower band of 0.3% either side of the peg.  The International Monetary Fund had urged Morocco to move ahead with its plan as soon as possible.  The central bank said the measure was part of a broader plan to open up the Moroccan economy and aimed to make it more resistant to external shocks as well as helping to boost growth.

The dirham is pegged to a two-currency basket weighted 60% to the euro and 40% to the U.S. dollar.  Morocco’s central bank has been promising exchange rate liberalization for years and the move had been expected in the second half of 2017.  As the year went on, it became increasingly clear that the step would be delayed.  Unlike nearby Egypt, which floated its pound in November 2016, Morocco isn’t facing a currency crisis and wasn’t under pressure to take immediate action.  It has an investment-grade credit rating and an expanding private sector.

Economic growth is expected to have averaged 4.1% in 2017. Headline inflation is estimated at 0.7% in 2017, down from 1.6% in 2016. Foreign exchange reserves, which faced pressure in 2017 due to uncertainty over the move, have stabilized at a level sufficient to cover five and a half months’ worth of imports.

Egypt, by contrast, faced plummeting foreign reserves and a severe dollar shortage that all but paralyzed trade. Imbalances led to a ballooning black market for dollars, piling downward pressure on the pound before most controls were lifted.  The pound has halved in value since the float, driving inflation to record levels above 30%.  Morocco isn’t imminently expected to float the dirham.  (Various 12.01)

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6.1  Unemployment Rate in Turkey Falls to 10.3% in October

Turkey’s unemployment decreased 1.5%age point to 10.3% in October year-on-year, Turkish Statistical Institute (TurkStat) said on 15 January.  The number of unemployed people aged 15 and above declined to nearly 3.3 million last October, a decrease of 360,000 from October 2016, when the unemployment rate stood at 11.8%.  The figure also showed a 0.3% drop from the previous month, when unemployment stood at 10.6%.  October’s employment rate rose by 1.4%, from the same period previous year, to 47.6%.  The labor force participation rate was also up by 0.7% year-on-year, going up to 53.1%.  The number of women participating in the workforce climbed 1.1% from the previous year to 34.2%.  (TurkStat 15.01)

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6.2  Greece Still Faces Painful Reforms Despite Bailout Funding

The 22 January Eurogroup meeting concluded that the Greek government needs to implement 88 prior actions for its third bailout review to be completed, 15 of which remain outstanding.  Among the most painful of the actions in the list presented to the government is the provision of a further cutback of the lowest tax-free income in case Greece’s lenders conclude that the primary surplus of 3.5% of GDP is unattainable in 2019.  The approved €5.7 billion ($6.9 billion) tranche is to be dispersed in February.

An additional €1 billion bailout tranche for the payment of outstanding state debt has been approved and will be dispersed in April or May.  Apart from a potential cutback of the lowest tax-free income, the unfulfilled actions also include a recalculation of the property tax (ENFIA) codes, so that a deficit caused by crisis-induced lower property values can be addressed.  Others include the abolition of the lower-VAT status for the remaining five Aegean islands, a further cutback in state medical expenses and the conclusion of the privatization process of the Hellenikon airport in Athens and other projects.

Most of these unpopular prior actions do not need to be presented for a vote in the Greek parliament, thus causing friction among lawmakers but will prove politically painful for the government.  (eKathimerini 23.01)

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6.3  Debt of Greeks to the State Exceeds €100 Billion

The debt of Greek taxpayers to the state reached €100,739 billion at the end of November 2017, according to figures by the Independent Authority for Public Revenue (AADE).  New overdue debts for the January-November 2017 period stood at €11,631 billion, with the biggest part of the debt being unpaid taxes.  Old arrears to the State (generated before 31/12/2016) amounted to €89 billion in November, bringing the total outstanding debts to €100.7 billion.

The total number of Greek citizens who are in arrears to the state is 4,207,117, a number increased by 36,364 taxpayers in just one month (November).  The debtors who may be subject to compulsory recovery measures amount to 1,783,858 while those under compulsory recovery measures amount to 1,035,296, showing an increase of about 21,000 debtors in one month.  The tax office has the ability to impose forced recovery measures on some other 750,000 debtors, an action expected to take place in the coming months.

On the other hand, government debt arrears to private individuals fell to €3,141 billion in November, compared with €3,460 billion in October, according to data from the Finance Ministry. (eKathimerini 06.01)

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6.4  Greece to Approve Use of Medical Cannabis

The Greek parliament is expected to approve the medical use of cannabis in the coming weeks, Deputy Agricultural Development Minister Yannis Tsironis said, adding that the change would attract investment to the country.  Tsironis said the legalization of medical cannabis could attract investments of €1.5 to 2 billion, with Greek, Israeli and Canadian companies already expressing interest.  The deputy minister, along with other government officials, attended Greece’s first medical cannabis trade fair in mid-January.  Over 100 local and foreign businesses took part in the event, which was held near Athens.  The government last year authorized the import of several pharmaceutical products based on medical marijuana, as well as hemp cultivation for industrial purposes.  Over a dozen EU countries have authorized the use of medical cannabis.  (AFP 15.01)

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7.1  Train to Take 28 minutes from Jerusalem to Tel Aviv

A new train linking Jerusalem and Tel Aviv will travel at a speed of 160 kilometers per hour (99.4 miles per hour), and will begin running on 30 March – exactly as predicted in 2014; just in time for Passover.  During the first three months, Rav Kav holders will be able to use the line for free.

During the first stage, the train will run from Jerusalem’s Central Bus Station to Tel Aviv’s HaHagana Railway Station.  There will be two trains per hour in each direction and the duration of the trip is expected to be 28 minutes.  During the second stage, which will begin a few months later, the train will run three times an hour in each direction during rush hour.  In the future, trains may run up to six times an hour during rush hour.

The new Jerusalem train station is the largest transportation center in Israel and includes two stops for the city’s light rail train, a taxi stop, and a parking lot with over 1,200 parking spaces.  The underground building is over 80 meters (262.46 feet) underground and includes tunnels, shafts, four platforms 300 meters (984.252 feet) long each.  Three express elevators, each with a capacity of 35 people, will connect the underground station to street level in a matter of seconds.  The elevators and some of the escalators are working and ready for use. The station’s upper portion is made of glass, and includes 40 steel poles 13 meters (42.65 feet) high, and a skylight 21 meters (68.89 feet) in diameter.

Running on a double track 56 kilometers (34.79 miles) long, the express station will pass through Ben Gurion Airport, Modi’in and Sha’ar Hagai on its way to Jerusalem.  It is expected to make four million trips in its first year and cost a total of $2,032,940,000.  (Various 11.01)

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7.2  Tel Aviv University Hosts Record Number of Foreign Students

Some 370 international students landed in Israel recently to begin the spring semester at Tel Aviv University – a record number of foreign students to register at the university since 2000.  Most of the students are slated to join the study abroad program at Tel Aviv University’s International School. Study abroad students have the option of staying for the year-long program or just one semester.  The students are on average 20 years old and 69% of them are female.  Most come from the U.S., but the group is diverse, including students hailing from Australia, Brazil, Canada, Greece, Panama and England.  (IH 22.01)

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7.3  Jordan to Allocate JD72 Million to Public Universities in 2018

The Higher Education Council on 11 January approved the allocation of JD72 million for the support of public universities during the year 2018, Higher Education Minister Tweisi announced.  Both the University of Jordan and Al Balqa Applied University were assigned grants of JD10 million, while Tafila Technical University and Al Hussein Bint Talal University were granted JD9 million in support funds.  Al al Bayt University was allocated a total of JD8.6 million, followed by Mutah University (JD8.143 million), Yarmouk University (JD7 million), Hashemite University (JD3 million), the Jordanian University for Science and Technology (JD1.6 million) and the German-Jordanian University (JD1 million).

The distribution of the support funds will start this month and will continue throughout the year with 12 monthly instalments.  The amount of the support funds was determined considering the 10% of the deficit in the budget of each university, the 25% of the deficit in their tuition fees, the amount of registered students exempted of the fees according to the Military Retirement Law, the university’s position in international rankings, the percentage of students to faculty and the age of the university.  (JT 15.01)

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7.4  Saudi Arabia Opens First Women-Only Car Showroom

On 11 January, a Saudi private company opened the first car showroom for women, only just five months before a decision allowing females to drive takes effect.  The showroom was opened in a shopping mall in the western Red Sea port city of Jeddah to allow women the freedom to choose their own cars before they hit the road.  In a historic decision late last year, King Salman gave Saudi women the right to drive, abolishing an almost three-decade ban based on religious reasons.  The showroom offers a wide selection of vehicles from various makes and is staffed by women only.  It also provides women with solutions to finance their purchase provided by leading banks and financial companies.  The company plans to open more automobiles showrooms for women in the oil-rich kingdom.  (AB 12.01)

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8.1  Evogene Reports Positive 2nd Year Field Trial Results in Corn Bio-Stimulant Ag-Biologicals Program

Evogene announced highly promising second year field trial results for its bio-stimulant microbial seed treatments for the improvement of corn yield, which are under exclusive license to DuPont Pioneer.  The bio-stimulant seed treatments tested in these recent trials conducted by Evogene demonstrated up to 20% increases in corn yield under moderate drought conditions.  These seed treatments were based on Evogene identified microbial strains that had demonstrated yield improvement in previous field trials, as disclosed in late 2016, following a discovery process which included in-silico prediction and prioritization.  Following 2016 field results, the strains underwent optimization of microbial formulation and fermentation processes, and the combination of multiple microbial strains into microbial teams which demonstrated the promising results during 2017.  The next level of field testing will be undertaken as part of our multiyear research collaboration with DuPont-Pioneer.

In addition to the bio-stimulants collaboration for corn yield with DuPont Pioneer, Evogene has an internal bio stimulant program focused on wheat yield, which is now moving forward with second year field trials following positive results in its 1st year trials in wheat.

Rehovot’s Evogene is a leading biotechnology company developing novel products for life science markets through the use of a unique computational predictive biology platform.  The Company has developed a proprietary innovative technology platform, leveraging scientific understanding & computational technologies to harness Ag ‘Big Data’ for developing improved seed traits (via: GM and non-GM approaches), as well as innovative ag-chemical and novel ag-biological products.  (Evogene 10.01)

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8.2  FieldIn Completes a $4 Million Funding Round

FieldIn is disrupting the $65 billion agricultural pesticide (AgPest) market utilizing IoT devices connected to its powerful analytics platform, providing growers with unprecedented control over their farming operations, while constructing the largest AgPest dataset in existence.  Over the past two years FieldIn has successfully monitored over 1 million sprayed acres in real-time, to discover that more than 25% of sprays were performed with consequential errors.  FieldIn’s innovative technology allows growers, as well as the entire AgPest supply chain (from growers to retailers), to improve yields, decrease costs and dramatically reduce the impact of pesticides on our entire environment.

In order to support its rapid growth, Fieldin has secured a strategic partnership with Adama, a global leader in crop protection solutions, as well as a distribution agreement with Kern Machinery, John Deer’s largest distributor in California.

Amid these accomplishments, FieldIn is now announcing that it has successfully closed $4M in funding. The round was co-lead by Gal Ventures and Germin8 Ventures along with participation of early investors, Terra Ventures. Additional participants in this round include prominent international angels and the Israel Innovation Authority (formerly the Office of the Chief Scientist of Israel’s Ministry of Economy).

Yokneam Elite’s FieldIn is a data software service that provides real time management of AgPest usage, patterns and efficacy.  Utilizing advanced data analytics and artificial intelligence, FieldIn computes geospatial, chemical, biological, weather and other parameters, to provide growers the ability to dramatically improve yields, adapt to evolving pest resistance and reduce costs.  FieldIn has created the largest and most comprehensive AgPest dataset in the world, enabling data driven improvements of field execution, application methods and chemicals efficacy for the AgPest supply chain. No less important, this new transparency positively impacts the environment through diminished pesticide contamination.  (FieldIn 10.01)

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8.3 Announces CE Mark for the First AI Powered Direct-to-Intervention System, a leader in artificial intelligence imaging and workflow software, today announced the CE Mark of its Direct-to-Intervention system, ContaCT, a novel approach to stroke care that automatically analyzes brain CTs and notifies a specialist that a suspected large vessel occlusion has been identified.’s Direct-to-Intervention system utilizes deep learning algorithms to automatically identify large vessel occlusions that are responsible for the most devastating of strokes, and involves a stroke specialist in the care of that patient earlier than possible through conventional means.’s approach recognizes the importance of timely intervention by stroke specialists as supported by the American Stroke Association’s updated guidelines.  From the latest STRATIS registry, current workflows can result in a door-to-treatment time of several hours resulting in poor patient outcomes.’s software has demonstrated its potential in a clinical trial, where it was able to correctly notify stroke specialists of a suspected large vessel occlusion in a matter of minutes thus potentially reducing the time to intervention.

Based in San Francisco and Tel Aviv, is a Direct-to-Intervention healthcare company that uses artificial intelligence and deep learning algorithms to analyze medical data and improve medical workflow.  Direct-to-Intervention care leverages AI to communicate information about treatable patients straight to a specialist.  They remove much of the friction in today’s stroke workflow by providing the right information to the right doctor at the right time.  ( 10.01)

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8.4  Check-Cap Receives CE Mark Approval for C-Scan®

Check-Cap announced it has received CE Mark approval for the C-Scan system.  The C-Scan system offers an alternative to current colon cancer screening methods that require laxative preparation and invasive endoscopic procedures.  This novel platform consists of a fully autonomous system that utilizes an ingestible, ultra-low dose X-ray capsule combined with a state of the art wireless tracking system, enabling generation of structural information on the lumen of the colon.  This information is used to create 2D and 3D maps of the colon, allowing physicians to identify pre-cancerous polyps and other abnormalities.  C-Scan is designed to improve the patient experience and increase the number of adults screened by eliminating procedural requirements frequently cited as barriers to adherence to screening guidelines such as bowel preparation, fasting, and sedation.

Usifiya’s Check-Cap is a clinical-stage medical diagnostics company developing C-Scan®, the first capsule-based system for preparation-free colorectal cancer screening.  Utilizing innovative ultra-low dose X-ray and wireless communication technologies, the capsule generates information on the contours of the inside of the colon as it passes naturally.  This information is used to create a 3D map of the colon, which allows physicians to look for polyps and other abnormalities.  (Check-Cap 10.01)

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8.5  BioProtect International Multi-Center Clinical Study Following FDA Exemption (IDE)

BioProtect announced the launch of its clinical trial following Investigational Device Exemption (IDE) approval granted by the FDA in November 2017.  FDA has granted investigational Device Exemption approval (IDE) to conduct a pivotal clinical study examining the use of the ProSpace Balloon System to prevent rectal toxicity following prostate cancer radiotherapy.  The trial is a prospective, randomized study to demonstrate the safety and efficacy of the ProSpace biodegradable spacer to protect the rectum and lower GI tract during radiation therapy for prostate cancer compared to patients without any spacers.

The ProSpace is a novel, biodegradable polymer balloon spacer designed to safely and temporarily separate the rectum from the prostate during prostate cancer radiation therapy.  Rectal radiation exposure is a major limiting factor in prostate radiation oncology and a cause for acute and chronic rectal toxicity, manifested in rectal pain and bleeding.  The ProSpace is designed for trans perineal implantation, possibly during markers implantation.  ProSpace is approved for sale in Europe under CE regulations. The company believes it could be used to spare the rectum in hundreds of thousands of patients who are undergoing prostate cancer radiotherapy every year.

Tzur Yigal’s BioProtect is a privately held, multinational company headquartered in Israel, with offices in the USA and Germany, developing proprietary biodegradable implantable balloon solutions that help protect organs at risk during radiation oncology treatments and solve other surgical needs.  The Company’s focus is the commercialization of the ProSpace Balloon System for patients receiving prostate cancer radiotherapy.  (BioProtect 10.01)

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8.6  Teva Gets FDA Approval of TRISENOX for Treatment of Acute Promyelocytic Leukemia

Teva Pharmaceutical Industries announced that the U.S. FDA has approved the use of TRISENOX (arsenic trioxide) injection in combination with tretinoin for the treatment of adults with newly-diagnosed low-risk acute promyelocytic leukemia (APL) whose APL is characterized by the presence of the t(15;17) translocation or PML/RAR-alpha gene expression.  The approval was based on a Priority Review by the FDA on data from published scientific literature and a review of Teva’s global safety database for arsenic trioxide.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions used by approximately 200 million patients in 100 markets every day.  Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,800 molecules to produce a wide range of generic products in nearly every therapeutic area.  In specialty medicines, Teva has the world-leading innovative treatment for multiple sclerosis as well as late-stage development programs for other disorders of the central nervous system, including movement disorders, migraine, pain and neurodegenerative conditions, as well as a broad portfolio of respiratory products.  (Teva 15.01)

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8.7  EZbra Presented to the SESPRS 34th Annual 2018 Atlanta Breast Surgery Symposium

EZbra, developer of a patented disposable post-surgical breast dressing that provides tailor-made sterile, absorbent protection and compression, presented the benefits of EZbra at the SESPRS 34th Annual 2018 Atlanta Breast Surgery Symposium, January 19-21 at the Intercontinental Hotel in Atlanta, GA.  EZbra will be launched during 2018.

The EZbra breast dressing is an all-in-one medical device created to address the various needs and challenges that arise from all breast procedures: aesthetic, biopsy, lumpectomy, mastectomy, and reconstruction.  EZbra’s innovative design enhances the quality of care in accordance with surgeon post-op requirements, while allowing an independent patient dressing change and empowering patients to recover with dignity.  EZbra allows the physician to adjust compression levels to any patient’s specific breast shape and requirements, it can be adjusted for each breast side separately, providing a solution in cases of asymmetry, and can be used with implants as well as with DIEP flaps and autologous procedures.  EZbra defines and fixates breast folds, stabilizes implants and holds drains, and can reduce OR and recovery room time, as well as recurring clinic visits.

Tel Aviv’s Ezbra aspires to create a uniformly accepted high-quality breast dressing for over 13 million women who undergo various types of breast procedures and surgeries annually.  The company’s flagship product, of the same, is an innovative and patented disposable post-surgical breast dressing that provides soft absorbent protection and compression.  EZbra has commenced regulatory approval processes in North America.  (EZbra 23.01)

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9.1  Wi-Charge Wins CES 2018 Best of Innovation Award

Wi-Charge unveiled the first ever solution of room lighting combined with wireless charging that is FDA cleared.  Earlier in 2017 the company’s product was approved for commerce in the US by the FDA. Wi-Charge is the first company to ever receive regulatory safety approval for long range wireless power.  Wi-Charge is also announcing that the company has won the CES 2018 Innovation Award in the Smart Energy Product category.

Wi-Charge’s technology utilizes infrared beams to transfer power between a charging hotspot and client devices within a 10-meter range.  The hotspot easily mounts on a wall or ceiling, providing full room coverage, so that devices can recharge automatically without any user intervention.  Similar concepts have been attempted by others, but so far no one could offer a solution that is powerful enough to charge a phone, have sufficient reach to cover a room, and be radiation-safe.  Wi-Charge is the first company to achieve the power/range/safety level required for a commercial wireless power solution.

Rehovot’s Wi-Charge is a wireless power company, founded with the goal of enabling automatic charging of smartphones.  Their infrared wireless power technology can deliver power to client mobile devices up to 10 meters away.  Leveraging the proprietary wireless power transmission technology, the company developed remote charging solutions that essentially enable mobile and wireless devices to seamlessly recharge themselves without user intervention.  (Wi-Charge 11.01)

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9.2  SecurityDAM Expands Cloud Security Offering with Vulnerability Assessment Solution

SecurityDAM announced the availability of CyberDAM.VA, a Vulnerability Assessment cloud solution to facilitate the discovery, prioritization and remediation of cybersecurity risks.  The new solution joins SecurityDAM’s CyberDAM.DDoS – the strong DDoS protection offering already adopted by top enterprises, MSSPs, and service providers worldwide.  SecurityDAM offers Managed Security Service providers (MSSPs) to expand their service portfolio by joining CyberDAM.VA service and offer it to their enterprise customers using a customized white label solution.  For Enterprises, the CyberDAM.VA solution provides a quick, efficient way to identify security vulnerabilities, repair weaknesses and ensure security standards compliance with a simple login to a powerful web portal providing a dashboard facility, reports and alerts.

Tel Aviv’s SecurityDAM is a leading provider of best-in-class cloud-based security solutions, helping organizations gain the highest possible level of security.  The CyberDAM robust solutions suite secures many of the most complex networks globally, addressing cyber security challenges such as Distributed Denial of Service (DDoS) attacks and network/application Vulnerability Assessment. Using our multi-tenant management platform, a global network of scrubbing centers and SOC services-we offer unmatched protection solutions for networks and services.  (SecurityDAM 10.01)

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9.3  Nova Launches Breakthrough Machine Learning Software to Enhance Modelling Capabilities

Nova launched its NOVAFit engine, which enhances traditional modelling capabilities with advanced machine learning algorithms.  The new software improves metrology capabilities and accelerates time to solution in complex 3D and High Aspect Ratio devices.  Together with Nova’s Fleet Management big data solution, NOVAFit utilizes fleet-wide information to provide adaptive advanced metrology solutions based on continuous training.  The new suite of software capabilities will complement all of Nova’s fleet and will work in conjunction with Nova’s advanced modelling engine -NovaMARS.  These new solutions were adopted by multiple customers and have begun to generate revenue.

The new solution, which embeds the most advanced machine learning and big data architecture into optical modelling, revolutionizes the way customers utilize metrology measurement data and expands the metrology performance envelope to tighten process windows, avoid process excursions and improve yield.  The platform was designed to interface with other process control tools for accuracy improvement and shorter training and control cycles. With this new significant supplement, NOVAFit, in conjunction with Nova’s Fleet Management, is now connecting all of Nova’s metrology fleet to one big data cluster, which applies smart algorithms to improve the measurements’ accuracy and process feedback across multiple fabrication steps.  This new approach enhances Nova’s capability in measuring multiple parameters in a much more robust method and improves its competitive position.

Rehovot’s Nova delivers continuous innovation by providing advanced metrology solutions for the semiconductor manufacturing industry.  Deployed with the world’s largest integrated-circuit manufacturers, Nova’s products deliver state-of-the-art, high-performance metrology solutions for effective process control throughout the semiconductor fabrication lifecycle. Nova’s product portfolio, which combines high-precision hardware and cutting-edge software, supports the development and production of the most advanced devices in today’s high-end semiconductor market.  Nova acts as a partner to semiconductor manufacturers from its offices around the world.  (Nova 10.01)

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9.4  OTI’s UNO-8 (SATURN 8700) Granted EMVCo Visa & Mastercard Modular Type Approval

On Track Innovations’ UNO-8 (SATURN 8700) has been granted EMVCo Contactless Level 2 Type Approval for EntryPoint module, and for Visa and Mastercard (Kernels C2 and C3).  These approvals were provided under the new EMVCo modular architecture. These new additions to the UNO-8 add to the previous FeliCa certification.  The advanced Modular structure provides OTI’s customers with the ability to deploy upgrades or additional applications and features to its existing reader installation base without requiring recertification of the entire terminal.  The Modular architecture including Visa and Mastercard, enables OTI’s Original Equipment Manufacturer (OEM) customers to leverage existing Level 2 approvals for their use while optimizing the certification process.  EMVCo approval of the Contactless Product contained in this product shall mean only that the Contactless Product has been tested in accordance and for sufficient conformance with the EMV Specifications, Version 2.6, as of the date of testing.

Rosh Pina’s On Track Innovations (OTI) is a global leader in the design, manufacture, and sale of secure cashless payment solutions using contactless NFC technology with an extensive patent and IP portfolio.  OTI’s field-proven innovations have been deployed around the world to address cashless payment and management requirements for the Internet of Things (IoT), wearables, unattended retail and petroleum markets.  (OTI 10.01)

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9.5  Sapiens Announces that Equitable Life of Canada Selects StoneRiver’s LifeSuite

Sapiens International Corporation announced that Equitable Life of Canada (Equitable Life) has selected LifeSuite, an award-winning, web-based automated insurance underwriting and new business case management system from Sapiens’ fully owned subsidiary StoneRiver.  Equitable Life’s goal is to transform its underwriting process with enhanced automation, improving their ability to make fast, consistent, and high-quality decisions.  Key to the insurer’s selection of StoneRiver was LifeSuite’s combination of an underwriters’ workbench and a highly flexible underwriting rules engine.  StoneRiver’s experience enabling automated underwriting, especially in the Canadian insurance market, was also a contributing factor.

Holon’s Sapiens International Corporation is a leading global provider of software solutions for the insurance industry, with a growing presence in the financial services sector.  Sapiens offers core, end-to-end solutions to the global general insurance, property and casualty, life, pension and annuities, reinsurance and retirement markets, as well as business decision management software.  (Sapiens 09.01)

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9.6  Telrad Networks and Federated Wireless Sign CBRS Agreement

Telrad Networks and Arlington, Virginia’s Federated Wireless, the industry leader in shared spectrum technology, announced a long-term partnership agreement to deliver LTE fixed wireless services using the Federal Communications Commission’s (FCC) new Citizen’s Broadband Radio Service (CBRS) band.  The partnership agreement comes after the successful completion of several customer trials over the past few months, and signals the commercial readiness of both companies to scale the solution to Telrad customers across the U.S.

Passed in 2015, the CBRS rules make a total of 150 MHz of contiguous spectrum (3550-3700 MHz) available for shared use.  Operators currently leveraging Telrad solutions to deliver fixed wireless services via the 3650-3700 MHz band, will now be able to leverage their existing infrastructure to take advantage of the entire band.  As a result, operators are positioned for increased growth and better service delivery because of the bigger data pipe and increased power allotments that significantly increase capacity and range.

The solution is based on the Telrad flagship BreezeCOMPACT base station which supports the 3.4-3.7 GHz frequency band.  Telrad also supplies fixed end user devices, such as its CPE9000, which are specifically useful in the CBRS environment, where channel allocation may not be contiguous. The CPE9000 is capable of aggregating two non-contiguous channels.  The Telrad solution incorporates the Federated Wireless Spectrum Controller to deliver software-defined spectrum through a cloud-based SAS while protecting Federal incumbents with a redundant network of Environmental Sensing Capability (ESC) sensors.  The solution includes a robust set of spectrum lifecycle management tools with real-time visibility for optimizing and monetizing CBRS services.  The joint solution will comply with and receive FCC certification once made available to vendors.

Lod’s Telrad Networks is a global provider of innovative LTE broadband solutions, boasting over 300 4G deployments in 100 countries.  Telrad stands at the forefront of the technology evolution of next-generation TD-LTE solutions in the sub-6 GHz market.  Since 1951, the company has been a recognized pioneer in the telecom industry, facilitating the connectivity needs of millions of end-users through operators, ISPs and enterprises around the world.  (Telrad Networks 17.01)

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9.7  Kornit Digital Launches New HD Printing Technology for the Avalanche Series

Kornit Digital announced the introduction of a new HD printing technology for its Avalanche platform of direct-to-garment printing systems.  The Avalanche HD6, the successor of the Avalanche Hexa, is equipped with Kornit’s HD print engine and NeoPigment Rapid ink, which leads to significant reductions in ink consumption – and therefore cost per print – in comparison to the company’s existing Avalanche systems.  The HD6 will reduce the ink consumption by up to 30% compared to the current “R-Series” version and up to 46% compared to the previous Non R-Series versions of the Avalanche Hexa.  In addition, Kornit is launching an HD version of the Avalanche 1000 which will be called Avalanche HDK.  The company also announced that existing Kornit customers now have an upgrade path for their Avalanche Hexa and Avalanche 1000 systems.

The new systems are the result of Kornit’s experience gained from 15 years of direct-to-garment printing innovation and a very large installed base of systems.  The new cost per print levels make the new HD systems an attractive choice for screen printers for print runs between one and 500 copies.  The new systems are running with 4l bulk ink containers of Kornit’s NeoPigment Rapid ink.  This ink, which has been specifically developed for Kornit’s HD technology, offers an improved gamut for spot and brand color matching, increased opacity and saturation of the white ink, as well as improved hand feel – an important requirement by screen printers.  The print quality is further enhanced by ColorGATE’s Professional RIP solution, adding advanced color management and screening capabilities, improved white base creation and pre-defined color libraries for ultimate color matching.

Kornit’s state of the art NeoPigment meets the highest environmental regulations, including Oeko-Tex Standard 100 and GOTS V5 pre-approval.  Suitable for printing on multiple fabric types, its versatility is unmatched. NeoPigment prints have an excellent hand feel, a wide gamut of bright and intense colors, as well as long-term durability and wash-fastness.

Rosh HaAyin’s Kornit Digital develops, manufactures and markets industrial digital printing technologies for the garment, apparel and textile industries.  Kornit delivers complete solutions, including digital printing systems, inks, consumables, software and after-sales support.  Leading the digital direct-to-garment printing market with its exclusive eco-friendly NeoPigment printing process, Kornit caters directly to the changing needs of the textile printing value chain.  Kornit’s technology enables innovative business models based on web-to-print, on-demand and mass customization concepts.  (Kornit Digital 16.01)

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9.8  Raicol Crystals Announcing a New SKTP Crystal

Raicol Crystals has become the first to develop SKTP flux-grown KTP crystals.  These new crystals are a part of the HGTR product line, and have a revolutionary combination of features – they can function at high average power densities, retaining high efficiency, and can also be produced in a larger aperture, up to 25×25 (mm2).  SKTP crystals are designed for use in medium power green lasers for medical, industrial, scientific, and other applications.

The SKTP crystal is superior to both KTP and LBO crystals.  SKTP can work with high average power densities up to 3 kW/ cm², at 532 nm, enabling effective gray track resistance. Its expected life-time is at least 8x that of standard KTP. SKTP is also four times more efficient than LBO.  The greatest innovation, however, lies in the ability to produce the SKTP crystal in any size, for apertures up to an impressive 25×25 mm².  For applications where large crystals are required, SKTP is the only effective solution that also provides excellent grey track resistance.

Rosh HaAyin’s Raicol Crystals specializes in the manufacture of high quality nonlinear optical crystals and electro-optic devices.  Raicol’s site boasts a state-of-the-art, brand-new manufacturing facility, equipped with the latest technologies – proprietary growth systems, cutting equipment, polishing machines, X-ray measurement systems, clean rooms, an optical shop, and a coating facility.  In addition, the site features high-end internal testing capabilities (LDT, spectrophotometer, and absorption).  This advanced equipment, together with unparalleled knowledge and expertise, enables Raicol to achieve maximum quality and reliability for each and every product manufactured.  (Raicol 23.01)

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10.1  Israel’s Foreign Exchange Reserves Rise to Record $113 Billion in 2017

Israel’s foreign exchange reserves at the end of December 2017 stood at a record $113.01 billion, up $931 million from their level at the end of November, the Bank of Israel reported.  The reserves represent 33.2% of GDP.

Despite the ongoing strengthening of the shekel, the Bank of Israel bought only $100 million in foreign currency in December 2017.  The increase was also the result of: a revaluation that increased the reserves by about $600 million; government transfers from abroad totaling about $172 million and private sector transfers of about $59 million.  Israel’s foreign exchange reserves have risen to $113 billion from $98.47 billion at the end of 2016.  (BoI 10.01)

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10.2  Israel’s Debt-GDP Ratio Falls Below 60%

Globes reported on 22 January that 2017 will be remembered as the year in which Israel met the Maastricht criterion for government debt in European Union (EU) countries.  An initial estimate published by the Accountant General put the ratio of Israel’s government debt to GDP at 59.4%, the first time it has ever been below 60%.  If local government debt is included, the ratio is 61.1%.  The figures published by the Ministry of Finance are similar to those published three weeks ago by the Central Bureau of Statistics in its 2017 summary.

The decline in the debt ratio resulted from Israel’s 3% economic growth in 2017 and to a large extent, from the large-scale tax revenue surpluses during the year, which Minister of Finance Kahlon decided not to use for increased government spending or tax cuts (except for NIS 1 billion in lower customs duties and purchase taxes).  Additional factors that affected the debt ratio were the strengthening of the shekel against the dollar and the ongoing fall in the accrued interest on the government debt.

The ratio of debt to GDP is a key indicator of Israel’s financial soundness, and in determining the country’s credit rating.  According to the 1992 Maastricht criterion, EU members are required to meet two main fiscal criteria: a budget deficit lower than 3% of GDP and a government debt lower than 60% of GDP.  The fall of government debt below 60% therefore has great symbolic value.  The S&P credit rating agency recently revised Israel’s rating forecast to “positive,” a measure that means that a credit rating upgrade of Israel in the coming year is very likely.  Lowering the ratio of debt to GDP, one of Israel’s main achievements, has been consistent since 2003.  At the same time, economists in Jerusalem predict that Israel will find it difficult to continue lowering the ratio in the coming years, given the major tax cuts planned by Netanyahu and Kahlon in the future.  (Globes 22.01)

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11.1  ISRAEL:  Israeli Companies Raised Over $5.2 Billion in Capital in 2017

Israeli high-tech firms in 2017 raised over $5.2 billion in venture capital funds from foreign and local investors with 620 recorded transactions and an average financing round of $8.5 million, according to a new report published this week by Israel Venture Capital (IVC) Research Center and Israeli-American law firm ZAG S&W.  The report notes the figures mark an increase of 9% from 2016’s total of $4.83 billion, with 673 deals.

The amount raised from Israel-based venture capitalists also saw an increase, with Israeli VCs investing $814 million in 2017, an increase of 25% from $651 million in 2016.  It was the highest recorded sum since 2013.

Four Israeli companies – Cybereason, Via, Lemonade and Skybox – raised over $100 million each in funding respective rounds, amounting to 12% of the total raised for the year, the study shows.

The most active period in 2017 was Q4 with Israeli companies raising a total of $1.44 billion in 159 deals, a 34% increase from same period in 2016.

The report noted that companies in mid- to late-stages attracted more capital – $3.9 billion of the total $5.24 billion – than firms in earlier stages, a pattern IVC says it first noted two years ago.  Seed and early-stage companies raised $1.36 billion in 2017, a drop from 2016’s $1.43 billion, according to the study.  The number of deals for seed-stage companies also decreased by 17% in 2017 compared with 2016.

IVC’s Research Director Marianna Shapira said in a statement that “investors poured more capital into fewer selected companies, providing portfolio companies the necessary means to mature.”

Managing Partner leading the high-tech sector at ZAg, Adv. Shmulik Zysman said, “In 2017, the capital raising volume increased, continuing the consistent growth trend of the past five years.  The high-tech industry matures and settles as the source of innovation and interest for investors and entrepreneurs from all over the world.

Software First

Israeli software companies led all sectors in capital-raising, according to the survey, garnering $1.9 billion in 208 deals, as life sciences companies followed closely behind with $1.2 billion raised, an increase of 41% compared with the $850 million raised in the field in 2016. Semiconductor companies raised $348 million, a sharp increase from a year prior, with $124 million in funds raised.  Communication companies, meanwhile, showed a decline in the amount raised and the number of deals, with $569 million invested in just 72 transactions.  It marked a significant drop from the $872 million raised in 106 deals in 2016.

Initial Coin Offerings

The report also noted the rise in Israeli companies going through Initial Coin Offerings (ICO), in which the firms raised money in return for in-house cryptocurrencies.  Leading the pack was Sirin Labs, the Israeli-founded, Switzerland-based blockchain firm known for developing a $17,000 secure smartphone for high-end clients, which raised close to $158 million in December in a crowd sale for the SRN token.  Sirin Labs’ new project — a blockchain-secured, open-source phone and PC called FINNEY.  Bancor, an Israeli startup that developed a virtual currency conversion platform, raised $153 million in a matter of hours last June.

“From a financial perspective, a coin offering is not considered an investment, but has some characteristics of a financial asset,” the report says, adding that a similar pattern of blockchain-based companies seeking “capital and recognition” may emerge over the course of 2018, “or a change in the dynamics and a tremendous crash.”  (NoCamels 17.01)

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11.2  SAUDI ARABIA:  Fitch Says Saudi Fiscal Reform Progresses but Framework Incomplete

Fitch Ratings said on 18 January 2018, recent fiscal measures in Saudi Arabia will raise government revenues sustainably, but spending increases highlight that commitment to consolidation is constrained by the desire to support economic growth.  The credibility of the Kingdom’s fiscal framework, including new spending control mechanisms announced in the updated Fiscal Balance Programme published in December 2017, is still limited.

The Saudi government recently raised fuel prices (following an initial rise two years ago), increased expat levies (after introducing fees for expats’ dependents in July 2017) and introduced value-added tax.  These measures are largely in line with earlier commitments.  They contribute to a forecast 1.0% of GDP rise in non-oil revenues in the 2018 budget, released in December.

However, the budget projects this will largely be offset by a 0.8% of GDP increase in spending, including measures to compensate poorer households for rising utility and fuel costs.  The ratio of the non-oil deficit to non-oil GDP will fall only marginally, to 36.6%, according to our calculations.

The budget nonetheless forecasts the central government fiscal deficit to narrow to 7.3% of GDP in 2018 from 8.9% of GDP in 2017 (the 2017 budget target was 7.7%).  This will be driven by a 1.6% of GDP rise in oil revenues, which in 2017 still accounted for 63% of total government revenues.  Revenues in 2018 may also get a one-off boost from settlements with wealthy individuals following the anti-corruption campaign launched in November, although the value and use of the receipts has not been officially confirmed and they are not included in official budget projections.

The limited progress on underlying fiscal consolidation reflects a greater focus on GDP growth targets, which the government explicitly mentioned as the reason for pushing back the year for achieving a balanced budget to 2023 from 2020.  This is more realistic than earlier targets. However, the emphasis on growth, combined with a focus on mega projects of uncertain long-term impact and other extra-budgetary spending financed through the Public Investment Fund and National Development Fund, could undermine progress on improving the non-oil fiscal position in the medium term.

The government highlighted its commitment to medium-term fiscal planning and spending ceilings in the Fiscal Balance Programme. However, its announcement of a one-year household stimulus program in early January undermines confidence in this framework, although the impact on the deficit is likely to be offset by additional one-off revenue.  We estimate this stimulus will cost around 2% of GDP, effectively breaching the expenditure ceilings only weeks after they were introduced.  Weak commitment to the ceilings suggests recent progress on fiscal discipline could still evaporate in response to the current period of higher oil prices.  (Fitch 18.01)

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11.3  EGYPT:  Fitch Revises Egypt’s Outlook to Positive; Affirms at ‘B’

Om 16 January Fitch Ratings revised the Outlook on Egypt’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Positive from Stable and affirmed the IDR at ‘B’.

Key Rating Drivers

The revision of the Outlook to Positive reflects the following key rating drivers:

The government made significant progress with its reform program in 2017 and remains on track with the $12 billion three-year Extended Fund Facility (EFF) signed with the IMF in November 2016.  Fiscal consolidation is proceeding, although it will require a multi-year effort to reverse the increase in general government debt/GDP witnessed since the Arab Spring uprisings.  The Central Bank of Egypt’s (CBE) exchange rate reform has proved a turning point for the economy and Egypt’s external finances; and macroeconomic stability has started to improve following an inflationary spike.

In December 2017, the IMF board approved the second review of the EFF and disbursed $2 billion, bringing total disbursements to $6 billion.  This leaves $6 billion to be disbursed in 2018-19. The IMF was positive about the budget for the current fiscal year ending June 2018 (FY18), while highlighting the risk from oil prices to outlays on fuel subsidies, and is broadly satisfied with the transition to a floating exchange rate regime.

Public finances will remain a key weakness of Egypt’s credit profile, but we expect continued fiscal consolidation to start to reduce government debt/GDP in FY18.  The general government primary deficit halved to 2.6% of GDP in FY17 from 5.3% of GDP in FY16.  At the beginning of FY18, the government enacted another round of fuel and electricity price increases and raised the VAT rate to 14% from 13%.  We forecast the budget sector deficit to narrow again in FY18, to 9.7% with a primary deficit close to balance.  We expect Egypt to achieve a primary surplus in FY19 for the first time in more than 15 years.  Budget sector primary deficits averaged 3.6% in FY11 to FY17.

On the spending side, there has been restraint of the wage bill, which grew by 6.4% year-on-year in July-December, well below inflation rates.  This reflects ongoing implementation of wage reforms under the civil service law of 2016.  The wage bill is budgeted to amount to around 5.8% of GDP in FY18, down from more than 8% in FY14 and FY15.

We forecast general government debt/GDP to fall to 93% in FY18 from a peak of 103% in FY17, marking an inflection point in the strong upward trend since the 2011 revolution.  By the end of FY19, which is likely to also mark the end of the current IMF program, we forecast general government debt/GDP to have fallen to 88%.  The key risk to this outlook is that reform momentum weakens.  Furthermore, guaranteed debt has increased in recent years (26% of GDP at end-June 2017).

International reserves have risen sharply and the current account deficit (CAD) has started to narrow since the CBE’s exchange rate reform in November 2016.  The EGP averaged 17.82 against the $ in 2017 (from a rate of EGP8.9/$1 prior to the reform).  The CBE’s stock of international reserves reached $37 billion in November (compared with $19.1 billion in October 2016).  This equates to around six months of current external payments, up from less than three months during 2012-15.

The CAD had narrowed to $1.6 billion in 3Q17 from $4.8 billion in Q3/16.  Remittances and tourism credits have strengthened significantly, while non-oil imports have been static in US dollar terms.  FDI inflows have remained fairly strong, buoyed by investments in the oil and gas sector. In January-September net FDI inflows covered 67% of the CAD.  In addition, there has been a surge in non-FDI inflows into the financial account, given substantial bond issuance, multilateral and bilateral loans as well as other commercial loans and portfolio inflows.

We expect the CAD to narrow further in 2018-19, assuming a stable trade deficit in US dollar terms and further growth, albeit much more moderate, in tourism and remittances.  Large increases in gas output will help the trade deficit.  The government estimates that Egypt will no longer need to import gas from 2H18, given higher output from existing gas fields and the start of production in December 2017 at the giant Zohr gas field.

Macroeconomic stability is starting to improve from a fragile state.  High inflation will remain a rating weakness, but the inflationary spike following the exchange rate depreciation and fiscal reforms is starting to subside.  Consumer price inflation fell to 21.9% year-on-year in December from a peak of 33% in July, largely due to base effects.  We expect inflation to average around 13%-14% in 2018, ending the year within the CBE’s inflation target of 13% (+/- 3%).

In FY17 real GDP growth was 4.2%, accelerating to 5% in the final quarter (April-June) and 5.2% in Q1/18.  Despite fiscal consolidation, we forecast stronger GDP growth in FY18, at 4.8%, as the exchange rate adjustment beds in and gas production increases.  The government is trying to boost growth with a number of structural reforms, including a new investment law and licensing law, with the bankruptcy law currently in the parliament.

Egypt’s ‘B’ IDRs also reflect the following key rating drivers:

Relatively weak governance together with security and political risks continue to weigh on the rating. Egypt scores below the ‘B’ median on the composite World Bank governance indicator.  The potential for political instability remains a risk given ongoing structural problems including high youth unemployment, the deficiencies in governance, as well as ongoing security issues, both in North Sinai and, intermittently, in Cairo and elsewhere

Nevertheless, fiscal and monetary reforms have so far not prompted a visible social backlash.  The government has sought to mitigate this risk by bolstering social safety nets (including cash transfer schemes).  The government has also restricted the space for political opposition and freedom of expression, in Fitch’s view.  Food subsidy allocations have increased and electricity provision has improved markedly.  It is likely that the political status quo will be preserved in the upcoming presidential election scheduled for March 2018, with Abdel Fattah el-Sisi set to be re-elected.

A large chunk of external debt continues to be on concessional terms.  We estimate that gross external debt was close to $100 billion by end-2017 or 44% of GDP, sharply up from around 23% of GDP a year earlier.  Foreign holdings of T-bills were $19 billion in December, up from around $0.6 billion at end of FY16.  Nevertheless, as of June 2017, there was $32.5 billion of bilateral and multilateral debt and $18.5 billion of GCC deposits – around half of total external debt.

Rating Sensitivities

The main factors that, individually or collectively, could lead to an upgrade are:

-Continued progress on fiscal consolidation leading to a downward path in government debt/GDP

-Sustained stronger economic growth

-Maintenance of a high level of international reserves in line with a narrowing current account deficit and robust net foreign direct investments

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

-Failure to narrow the fiscal deficit and put government debt/GDP on a downward path

-Reversal of fiscal and/or monetary reforms, for example in the face of social unrest

-Renewed downward pressure on international reserves due to strains on the balance of payments

Key Assumptions

The political environment is assumed to be more stable than in 2011-2013, although sporadic, and at times serious, attacks on security forces are assumed to continue and underlying political and social tensions will remain.  (Fitch Ratings 16.01)

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11.4  EGYPT:  Egypt’s Food Industry Achieved $22.5 Billion in Revenues in 2017

Egypt is one of the most populous countries in Africa and the Middle East with a population of around 100 million; the country’s population grows by about 2.5% annually.  This also makes Egypt one of the world’s fastest growing markets for food and agricultural products.  However, in the last decade, Egypt has been struggling with economic challenges, government austerity measures, soaring youth unemployment and double-digit inflation.  The Egyptian food industries sector has been growing in recent years, accounting for about 4.7% of the total GDP in 2016.

Egypt’s GDP in 2017 has an estimated value of about $193b and is forecasted to reach around $251b in 2018.  The country has seen real GDP grow of 4.2% in 2017, yet millions of low and middle income Egyptian consumers have seen their living standards deteriorate due to soaring inflation – which has just started to decrease – as well as stagnant incomes and high unemployment.

Consequently, the increase witnessed in retail prices of nearly all goods and services took its toll on consumer behavior.  This is limiting disposable income, which was already low.  Food prices soared 40% in June 2017 compared to the same period of 2016, while food inflation reportedly reached 44% in April 2017.

On the other hand, the currency floatation that took place in November 2016, which was the main driver behind inflationary pressures, is also pressuring importers to raise the prices charged for imported products.  However, as the saying goes, one man’s loss is another man’s gain; these events provided the optimum opportunity for Egypt’s food industry sector to prosper, according to the annual report published by the United States Department of Agriculture (USDA).

Egypt’s Processed Food Industry

The growth of Egypt’s food processing and manufacturing sector is associated with the market being price sensitive. The main driver behind the sector growth has been the shift to increased production for domestic consumption and exports.  The average Egyptian consumer’s consumption of processed and manufactured foods has grown to reach $45b in 2017, up from $32b in 2008, reflecting around a 40% increase in less than a decade.

The USDA report indicates that Egypt’s central location in the Middle East North Africa (MENA) region acted as an edge for Egyptian food processors and manufacturers, allowing them to increase exports to nearby regional markets.  In almost every Arab and African country, Egyptian processed and manufactured food products are import duty exempt.  Consequently, the sector’s exports reached around $2.6b through November 2017, of which about $1.1b were to regional markets such as Saudi Arabia ($289m), Libya ($144m) and Jordan ($123m).  Top exports were edible oils ($397m), processed cheese ($152m), and sugar and confectioneries ($143m), the report mentions.

Egypt is estimated to have 5,200 food companies, which reportedly generated a turnover of $22.5b in the calendar year (CY) 2017 (January-August), increasing by 55% compared to the same period of 2016.  This makes the sector’s share of Egypt’s GDP stand at approximately 4.7%.  The report indicates that the new registration requirements for food products in 2018 may generate greater clarity, supposedly facilitating a more accurate account of the number of players and actual turnover.

Furthermore, the USDA’s foreign agriculture service (FAS), believes that there are opportunities for US manufactures to supply Egypt’s food processing and manufacturing sectors, which grew with a compound annual growth rate of almost 15% from 2011 – 2016.  Product groups offering the highest potential in 2017 were baked goods, rice, pasta and noodles, dairy, as well as processed meats, seafood, edible oils, sauces, dressings and condiments.  US food and agricultural product exports to Egypt in CY 2016 accounted for $775m, making Egypt the 32nd largest export market for these products.

Egypt has numerous trade agreements with different parties, such as the European Union (EU); Egypt signed an Association Agreement with the EU which entered into force on 1 June 2004.  The agreement allows immediate duty-free access for Egyptian products into EU markets, while duty-free access for EU products was phased in over a twelve-year period.  In 2010, Egypt and the EU completed an agricultural annex to their Free Trade Agreement (FTA), liberalizing trade for over 90% of agricultural goods.

Moreover, Egypt’s trade agreements and operating conventions for facilitating trade include The General Agreement on Tariffs and Trade (GATT), The General Agreement on Trade in Services (GATS), Egyptian-European Mediterranean Partnership Agreement, The Common Market for Eastern and Southern Africa (COMESA), Pan-Arab Free Trade Area (PAFTA), Turkey-Egypt Free Trade Agreement, Egypt-Mercosur Free Trade Agreement (effective June 22, 2017), and several bilateral agreements with Arab countries such as Jordan, Libya, Morocco and Syria.

However, despite low entry barriers, US food ingredients face a distance and tariff disadvantage for countries that have trade arrangements with Egypt.  Yet, US food ingredients are widely recognized as being innovative, high quality, and readily available.

In terms of general import inspection procedures and regulations, Egypt requires that every component of a product be inspected, regardless of the compliance history of the product, country of origin, exporter, or the importer.  No imported product can be sold in Egypt without first proving that it conforms to Egyptian standards.  In the case that there are no Egyptian standards in place for the imported product, an international standard can be applied such as the Codex Alimentarius (Codex).

According to the USDA report, the Egyptian market structure is fairly straightforward. Importers can be food processors, manufacturers, or agents and distributors.  Large companies prefer to source their food ingredients or products directly from abroad.  They do this in order to obtain reasonable pricing, guaranteed continuous product flow, and for quality assurance purposes.

In the Egyptian market, agents and distributors play a critical role, since Egypt’s food processing and manufacturing sectors are highly fragmented with many small and medium enterprises depending exclusively on these agents for their imported ingredients, due to different reasons.  First, they only purchase small quantities.  Second, they seek to refrain from the risks associated with importing products directly.  Third is the fact that they pay for their purchases in local currency, and finally, because they do not maintain large inventories.

Egypt’s food processing and manufacturing sector in 2012-16 grew with a compound annual growth rate of about 12%, slightly above the longer 2011-16 interval’s growth of almost 15%.  The main driver behind this was the 2016 currency floatation.  Sources indicate that total sales reached EGP 104b (or about $11.7b based on the pre-November 3, 2016 exchange rate).

According to the report, product groups that have experienced the greatest growth during the 2011-16 period include milk, savory snacks and yoghurt and sour milk.  Processed fruits and vegetables, meats, seafood, rice, and pasta and noodles experienced growth of between 13-14% during this period.

The report forecasts that the sector will grow during the 2017-21 period in Egyptian pounds terms, albeit at a slower 5%.  Some estimates, prior to the 2016 currency floatation, were forecasting total sales to reach about EGP 140b by 2021.

The witnessed sector growth can be attributed to Egypt’s time-starved middle class consumers adopting a more westernized lifestyle.  Adopting a faster and more hectic pace of life is leading a growing number of consumers to turn increasingly to ready-to-eat frozen meals and instant noodles.  Egyptians are also becoming more aware of the availability and convenience of packaged food products, the report indicates.

Moreover, another factor driving the sector’s growth has been the pound’s depreciation against the dollar. Which has impacted all segments of Egyptian society, leading them to turn to less costly local brands that feature greater amounts of local content and are sold largely through hyper- and supermarkets.  It is very noticeable that such brands are increasingly being picked up by middle class consumers who are pinching piasters.  On the other hand, low income consumers continue to purchase mainly at traditional grocery stores; this explains why traditional grocery stores remain the strongest distribution channel despite hyper- and supermarket expansions.

Egypt has a large middle class consumer segment, which accounted for roughly 40% of the population prior to the pound’s November 2016 floatation, or about 38 million people.  However, currently, according to the data released by importers of consumer-oriented foodstuffs deriving indications based on their own sales, the middle class is actually shrinking due to high unemployment, double-digit inflation, and the halving of income and purchasing power.

The average Egyptian middle class household has four people and, reportedly, food and groceries purchases use up to 50% of household incomes.  The middle class pre-floatation reportedly accounted for 45% of total consumption in the Egyptian economy.  Some estimates currently place the Egyptian middle class today at less than 20% of the population (or roughly 19.4 million consumers), according to the report.

The report forecasts that Egyptian processed and manufactured foods export sales will increase in the 2017-21 period, by around 4%.  Exports previously grew with a compound annual growth rate of around 2% in the period from 2012 to 2016, registering $1.6b in 2016.  Egypt’s top export destinations in 2016 were its Arab neighbors, Russia, and the Arab Gulf states.  Saudi Arabia was the largest destination ($614m), then Russia ($229m), Kuwait ($212m) and Libya ($205m).  The country’s main exports were processed vegetables ($520m), dairy products ($317m), and snack foods ($185m).  (Daily News Egypt 15.01)

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11.5  EGYPT:  Cairo Turns to World Bank to Mediate Ethiopian Dam Dispute

Al-Monitor reported that Egypt is awaiting Ethiopian and Sudanese reaction to its proposal that the World Bank mediate negotiations on the controversial Grand Ethiopian Renaissance Dam (GERD).  Egypt wants the World Bank to serve as a neutral party in the country’s lengthy but fruitless negotiations with Ethiopia and Sudan over the dam’s construction.  Egyptian Foreign Minister Sameh Shoukry proposed the idea during a Dec. 26 meeting with his Ethiopian counterpart in the latter country’s capital, Addis Ababa.

Cairo fears the upstream dam at the head of the Blue Nile will interfere with its critical water supply from the Nile River.  Ethiopia wants water to satisfy its need for electricity.  Sudan, which wants more water for agricultural purposes, stands to benefit from the dam and has sided with Ethiopia on most issues.

The negotiations are stalled, but construction is humming right along.  Ethiopia has already completed more than 60% of the $4.8 billion mega dam, despite disputes over its environmental impact and basic technical issues — topics that ideally are resolved before construction begins on such projects.  Frustrated with the lack of progress despite years of debate, Egypt pulled out of the tripartite negotiations in November.

Now, by recommending the World Bank as a fourth impartial party, Egypt seems to be putting on the table a possible diplomatic solution to the dispute.  It also would create a wider audience for Egypt’s grievances and perhaps pressure Ethiopia and Sudan.  “Seeking the help of the World Bank falls within the scope of a diplomatic campaign initiated by Cairo,” an Egyptian official in charge of the Nile water issue told Al-Monitor on condition of anonymity.  “This would allow Egypt to expose the stalled negotiations and disclose Egyptian concerns before the international community.  The participation of World Bank experts in the negotiations will add transparency and unveil any attempts by Ethiopia or Sudan to derail the GERD impact studies.”

Egypt, Sudan and Ethiopia had hired two French consultancy firms in September 2016 to conduct a technical study on the likely hydraulic, environmental, economic and social impacts of the dam on Egypt and Sudan.  The study was to be completed in 11 months.  A year and a half have elapsed and the parties are still disputing the basic introductory technical report, with officials unable to agree even on which scenarios to study.  “Egypt remains convinced that direct negotiations with Ethiopia are the shortest way to reach guarantees easing Egyptian concerns over water storage in the dam.  But this approach still needs external support for the Egyptian position,” the Egyptian official added.

Hoping this matter will be resolved during the expected visit of Ethiopian Prime Minister Hailemariam Desalegn to Cairo this month, he said, “We have yet to receive any reply from Sudan and Ethiopia on the World Bank recommendation.  But the World Bank has expressed its initial willingness to act as mediator in the negotiations.”

The GERD agreement in the Declaration of Principles, signed by all the parties in 2015, states: “The three countries commit to settling any dispute resulting from the interpretation or application of the declaration of principles through talks or negotiations based on the goodwill principle.  If the parties involved do not succeed in solving the dispute through talks or negotiations, they can ask for mediation or refer the matter to their heads of state or prime ministers.”

Hani Raslan, an expert on Sudanese affairs at Al-Ahram Center for Strategic Studies in Cairo, told Al-Monitor, “Ethiopia’s stalling in the GERD negotiations is contrary to the rules of international law. Involving the World Bank as an impartial international mediator will pave the way for solutions. …  This will protect the interests of the downstream countries.”  He added, “Refusing the World Bank as a mediator would unveil Ethiopia’s policies of intransigence against Egyptian interests and its intention to disrupt negotiations to gain more time to complete the dam construction and store water. … Ethiopia wants to continue imposing a de facto situation.”

Safwat Abdel-Dayem, the secretary-general of the Arab Water Council, told Al-Monitor, “The World Bank has a wealth of experience in Nile water-related issues. Its presence as a neutral party will be in Egypt’s interest because it will act as an eyewitness to Ethiopia’s departure from the negotiation path set by the Declaration of Principles.”

Al-Monitor spoke with Ana Elisa Cascao, an independent researcher on Nile hydro-politics and editor of “The Grand Ethiopian Renaissance Dam and the Nile Basin: Implications for Transboundary Water Cooperation.”  Asked whether the World Bank has the experience and could be a neutral third party in the negotiations at this stage, she said, “The question is not if the World Bank has the experience or credentials to be a mediator, but rather if there is a logic for third-party intervention at this stage.  Because a golden rule for successful mediation is that it must be requested and carefully mandated by all parties involved.”

She told Al-Monitor, “Any GERD-related conciliation or mediation procedures must be in line with Article 10 of the Declaration of Principles.  There are clear joint procedures to be followed, but only in case of disputes and when all other means have been exhausted.  Divergences in technical studies should be dealt with at the appropriate level.”  She said the negotiations have always been driven by three equal sovereign states, and she asserted that much progress has been achieved in past years.  “The three countries will successfully lead the talks to reach an agreement on filling the dam, which is the most pressing issue,” she said.

Ethiopia has said it could begin filling the dam this summer.

Salman Mohammad Salman, a former water law adviser to the World Bank, told Al-Monitor, “The World Bank is the most suitable and competent [entity] to mediate the GERD negotiations and other disputes over the Nile waters. But the World Bank cannot intervene upon the request of Egypt alone.  All three parties — Egypt, Sudan and Ethiopia — must request its intervention.”

He explained that the World Bank has played a key role in the Nile Basin Initiative, which was formally established in 1999.  He added, “The World Bank also facilitated the negotiations on the Nile Basin Cooperative Framework Agreement (CFA).  But the World Bank dropped its Nile water-related efforts after disputes over water security issues [pitted] the upstream states that signed the CFA in May 2010 against the downstream countries that still reject it.”  Salman concluded, “Egypt’s call on the World Bank to act as mediator will be an opportunity for the World Bank to resume its Nile water efforts after an eight-year hiatus.”

Ayah Aman is an Egyptian journalist for Al-Shorouk specializing in Africa and the Nile Basin, Turkey and Iran and Egyptian social issues.  (Al-Monitor 12.01)

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11.6  TURKEY:  Fitch Affirms Turkey at ‘BB+’; Outlook Stable

On 19 January 2018, Fitch Ratings affirmed Turkey’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BB+’ with a Stable Outlook.

Key Rating Drivers

Turkey’s IDRs reflect the following key rating drivers:

Turkey’s ratings balance high external financing vulnerabilities, pronounced political and geopolitical risks and high levels of inflation and macroeconomic volatility against low public debt ratios backed by a long commitment to fiscal stability and strong growth performance.  Structural indicators are generally better than peers.

Fiscal performance deteriorated in 2017 due to various counter-cyclical measures (worth an estimated 0.34% of GDP on the central government budget), with the central government deficit officially projected at 2% of GDP, up from 1.6% in 2016, and in line with the peer median.  Policy tightening is planned for 2018, with taxes being raised and stimulus scaled back.  However, Fitch expects this to be reversed in 2019 as policy is loosened ahead of elections.

Government debt levels remain well below peers despite the widening of the deficit.  Debt/GDP is estimated at 28.4% of GDP at end-2017, compared with a peer median of 47.8%.  Turkey’s large and diversified revenue base means that debt/revenue is less than half the ‘BB’ and ‘BBB’ medians.  Debt/GDP is expected to rise over the forecast period, but should stay below 30%.  Contingent liabilities are rising, but from a low base and are unlikely to have a material impact on government finances over the forecast period.

Political and geopolitical risks weigh on Turkey’s ratings and World Bank governance indicators have fallen below the ‘BB’ median.  The domestic political scene remains focused on presidential and legislative elections, the first under the constitution that was approved in the April 2017 referendum.  Fitch assumes the polls will be held in November 2019, the deadline under the new constitution.  Tolerance of dissenting political views is reducing in the opinion of independent observers.  A state of emergency was extended for another three months in January and a purge of followers of the group that the government considers responsible for the coup attempt in July 2016 continues.  Security incidents in 2017 were confined to the unresolved conflict in the south east.

Bouts of tense rhetoric with key bilateral partners are becoming regular events, potentially souring relations with the EU and US and bringing economic risks.  The conviction of an employee of a state-owned bank for evading Iranian sanctions in January 2018 brings the risk of fines for the institutions implicated, which could have broader implications for the external financing of the financial sector.

The current account deficit is large and persistent, and has resumed widening.  Fitch estimates a deficit of 5.3% of GDP in 2017, pushed up by higher commodity imports, from 3.8% in 2016.  The deficit will remain on an upward trend, despite a recovery in tourism, reflecting rising import growth.  With FDI likely to remain at around 1% of GDP, the deficit will remain largely debt financed.  Net external debt is forecast to rise to 34% of GDP by 2019, compared with a peer median of 14.1%.

External financing requirements are large, both in absolute and relative terms, and are a major weakness in the sovereign credit profile.  The external financing requirement (including short-term debt) is projected to rise to $214 billion in 2018, 226% of projected end-2017 reserves.  Turkey’s strained international liquidity ratio (81.6% at end-2017) makes it vulnerable to shifts in investor sentiment.  However, the private sector has a track record of meeting its FX obligations and banks diversified the nature and tenor of their external market funding sources in 2017.  The combination of likely tighter global financial conditions over 2018 and particularly 2019 and a potentially more heated pre-election political environment could again test this resilience.

Monetary policy has persistently proven unable to bring inflation near to target and a complex policy framework undermines transmission mechanisms, in Fitch’s opinion.  Inflation averaged 11.1% in 2017 making Turkey one of only two Fitch-rated sovereigns that are rated above the ‘B’ category to record double digit inflation last year.  Inflation expectations have risen and Fitch expects inflation to stay in double digits for the bulk of 2018.

Economic growth was very strong in 2017, at an estimated 6.8%, and five-year average growth, at 5.6% is well in excess of the peer median of 3.5%.  Growth was boosted by stimulus measures in 2017, supported by solid growth in major trading partners and a gradual recovery in tourism.  A slowdown in growth to 4.1% is expected in 2018 due to tighter fiscal and monetary policy and reduced availability of credit.  Growth should rebound in 2019 to 4.7%, reflecting Fitch’s expectation of renewed stimulus ahead of the elections.

Fitch has a stable outlook for the banking sector reflecting resilience in banks’ credit profiles and financial metrics despite a challenging operating environment and macro volatility.  Headline non-performing loans are low and stable at around 3% of total loans.  However, the volume of at-risk restructured and watch-list loans has increased.  Sector capitalization (capital adequacy ratio 17.2% at end-September) is underpinned by solid internal capital generation, low unreserved NPLs and regulatory forbearance.  Turkey scores a ‘3’ on Fitch’s macro-prudential risk indicator, based on past rises in house prices and real credit growth.  These increases are now moderating, but rapid credit growth and its financing are a potential source of vulnerability to the banking sector.  Credit growth picked up in 2017 reflecting government initiatives to stimulate the economy, but has slowed, and in the absence of further stimulus will be constrained by a loan-to-deposit ratio of 126% (148% for TRY) and rising financing costs.

Turkey is a large and diversified economy with a vibrant private sector.  Human Development and Doing Business indicators, as measured by the World Bank, are in excess of the ‘BB’ median.  GDP per capita is double the peer median, although the volatility of economic growth is well in excess of peers reflecting a vulnerability to regular domestic and external shocks.

Rating Sensitivities

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

-Heightened stresses stemming from external financing vulnerabilities, potentially reflecting deteriorating bilateral political relations.

-Weaker public finances reflected by a deterioration in the government debt/GDP ratio to a level closer to the peer median.

-A serious deterioration in the political or security situation.

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

-Implementation of reforms that address structural deficiencies and reduce external vulnerabilities.

-A political and security environment that supports a pronounced improvement in key macroeconomic data.  (Fitch 19.01)

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11.7  TURKEY:  Turkey’s National Booze Under Government Siege

Mehmet Cetingulec wrote in Al-Monitor on 12 January that on top of sky-high taxes on liquor, the Turkish government has moved to thwart the home brewing of raki, the much-coveted national booze.

“We have only raki left to relax. It brings us together with friends to chat.  They cannot tolerate even that,” grumbled Selim Kaygusuz, a retired public servant in Ankara, disgruntled over the latest price hikes on the anise-flavored national booze.  He recounted the good old days when he would meet with friends over a raki table four evenings a week or polish off a 70 cc bottle by himself.  Now, he said, he has to make do with two evenings a week at most and only a few glasses of his favorite drink.

Despite its status as a national drink, raki is becoming increasingly out of reach for the ordinary Turk.  The ruling Justice and Development Party, which promotes piety and a conservative way of life, has actively sought to discourage alcohol consumption, raining down taxes on booze, especially raki.  True to form, the government raised liquor taxes at the beginning of the year, but this time went a step further, introducing a new regulation to trammel the home brewing of raki, which has flourished over the past several years in response to the soaring prices.

Under the regulation published 30 December in the Official Gazette, ethyl alcohol, an ingredient widely used in the home brewing of raki, is now required to contain a certain amount of denatonium benzoate, an extremely bitter chemical compound that effectively makes it undrinkable.

The new requirement, however, does not apply to methyl alcohol, which is cheaper and often used by bootleg raki makers who care nothing for its poisonous effects, as evidenced by a series of deadly disasters in the past.  In other words, the regulation deprives amateur raki makers of the harmless ethyl alcohol while leaving the door open to the use of the dangerous methyl alcohol.

The financial daily Dunya recalls how a similar spike in raki prices in the 1940s – a result of the economic fallout of World War II – led many boozers to turn to cheaper but hazardous substances such as methylated spirits.  Alarmed over the risk of deadly consequences, then-Prime Minister Recep Peker lowered the raki price by 29%, which led to a two-fold increase in the consumption of raki and put an end to the demand for methylated spirits.

Seven decades later, the tax hikes, coupled with the latest move to curtail home brewing, may be pushing Turks to similar dangerous alternatives.  Yet today’s government shows no intention of reducing the market price of raki.  On the contrary, the barrage of price hikes seems bound to continue.

From 2003 to 2016, overall consumer prices in Turkey increased 181%, while the price of raki shot up 500%.  The government, however, must have thought this was not enough to deter the tipplers.  The raki has seen another two price hikes since then — in mid-2017 and earlier this year.  In July, the special consumption tax (OTV) levied on a 70 cc bottle of raki increased from 46.7 liras to 50.3 liras, and the value added tax (VAT) rose from 8.4 liras to 9.6 liras.  As a result, the price of a 70 cc bottle hit 93 liras ($24.60), including 60 liras in taxes.

For raki lovers, the new year began with more bad news.  On 3 January, the government hiked the OTV on alcoholic beverages by 7.1%, which, together with the corresponding increase in the VAT, brought the price of a 70 cc bottle of raki to 97.2 liras ($25.7).  A minimum wage currently buys 16 bottles.

Can the bitter ethyl alcohol stop the home brewing of raki?  It could certainly have a deterrent effect, but a total halt seems unlikely with prices running sky-high.  Raki lovers have a reputation for strong loyalty to their drink, and many refuse to even consider alternative spirits, coveting the raki’s distinct anise flavor and the unique social culture that surrounds it.  Home brewers are likely to seek ways to get hold of ethyl alcohol free of the bitter substance, which could give rise to a black market of its own.

In 2016, formal raki sales in Turkey fell to 35.4 million liters per year, down from 48.8 million liters in 2011, which was a record year.  No doubt, the decrease did not mean that Turks had suddenly decided to abstain.  Formal sales were down because of the flurry of price hikes, but home brewing was booming.  For the market price of one 70 cc bottle of raki, amateur brewers are able to produce five 70 cc bottles at home.  Retired people, in particular, have taken on the endeavor as a hobby, with aspirants exchanging know-how and experience on the internet.  The home production of wine and beer has also proliferated, driven by a similar spike in market prices.

In sum, the government’s obstructive measures seem to curtail only the formal sales and thus its own tax revenues rather than the consumption.  The home brewing boom has created an area of “unregistered consumption,” which is impossible to measure.  Last year, Finance Minister Naci Agbal, who hails from the finance bureaucracy, conceded that taxes on several items, including alcoholic beverages, had reached a “really high” level, stressing that the government should focus on pursuing tax evaders rather than raising taxes.  Yet given the ongoing tax hikes, his advice seems to have fallen on deaf ears in Ankara.

It should come as no surprise if the raki interventions intensify in the coming period.  The home brewing of wine, beer and other fermented spirits is legally allowed, subject to a 350 liter limit per year, but the individual production of distilled spirits such as raki, whiskey and vodka remains illicit.  Home brewers of raki risk fines and even prison sentences, yet with a critical election cycle looming next year, Ankara — for now — refrains from brandishing the threat of penalties.

Mehmet Cetingulec is a Turkish journalist with 34 years professional experience, including 23 years with the Sabah media group during which he held posts as a correspondent covering the prime minister’s and presidential offices, economy news chief and parliamentary bureau chief.  For nine years, he headed the Ankara bureau of the daily Takvim, where he also wrote a regular column.  He has published two books.  (Al-Monitor 12.01)

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11.8  GREECE:  Long-Term Ratings on Greece Raised to ‘B’; Outlook Positive

On 19 January, S&P Global Ratings raised its foreign and local currency long-term sovereign credit ratings on the Hellenic Republic (Greece) to ‘B’ from ‘B-‘.  The ‘B’ foreign and local currency short-term sovereign credit ratings were affirmed. The outlook is positive.


The positive outlook on Greece reflects further upside rating potential from the policy and financing environment over the next year.  We could consider an upgrade if upon its exit from the third Economic Adjustment Program (the program or the ESM program), Greece builds up liquidity buffers to pre-finance future government debt repayments.  We could also consider an upgrade if:

-Business confidence and policy predictability strengthen after Greece’s exit from the ESM program;

-Greece’s official creditors approve additional debt relief measures;

-Market access for non-sovereign entities, particularly for Greek banks, improves further;

-The banking system materially reduces its reliance on official and short-term funding; or

-Greek exports accelerate, leading to stronger current account surpluses than we currently project.

We could revise the outlook to stable if, contrary to our expectations, there are large policy shifts that reverse the reform process, or if growth outcomes are significantly weaker than we expect, which would restrict Greece’s ability to continue fiscal consolidation and debt reduction.


The upgrade reflects Greece’s steadily improving general government finances and its gradually recovering economic prospects.  The government ran primary fiscal surpluses in 2016 and 2017 while the economy exited a multiyear recession last year.  We project real GDP growth of 2% in 2018.  Our ratings on Greece are supported by the unusually low cost of servicing much of its general government debt burden and official creditors’ ongoing support in the form of very long-dated concessional loans and debt relief.  At more than 18 years, the average maturity of Greece’s overall debt stock is the longest of the sovereigns we rate.

Still, the size of Greece’s general government debt is an important ratings constraint.  After Japan, Greece has the second highest debt-to-GDP ratio of the sovereigns we rate.  Greece’s history of policy uncertainty and cronyism has also weighed on its creditworthiness by prolonging economic weakness and uncertainty, deterring inflows of foreign capital, and prompting sizable deposit outflows from the banking sector, a process that intensified in June – August 2015.  As a consequence of this loss of retail funding, Greece’s financial sector today remains dependent on European Central Bank (ECB) financing.  Future prospects for Greece’s banks, and their ability to improve their loan books, also depend on additional actions to improve the efficiency of Greece’s judiciary.

Institutional and Economic Profile: Greece will exit the ESM program this year, with an improving growth and labor market outlook:\

-Greece’s official creditors will likely announce further debt relief measures and a liquidity buffer when Greece exits the ESM program in August 2018.

-A post-program surveillance framework is probable, while debt relief and a continuation of an ECB waiver will incentivize Greek policymakers to commit to a reform path, albeit a narrower one than before.

-We project that the economy will grow by 2.4% on average over 2018-2021.

Policy uncertainty in Greece has receded since 2015 and absent any large shifts in the policymaking environment – which have in the past weighed considerably on growth – we anticipate a stronger economic recovery will take root.  In 2017, Greece posted three quarters of positive growth for the first time in more than a decade.  We estimate that the economy grew by 1.3% in real terms during the year, on the back of private consumption and investment.  The unemployment rate contracted to 20.5% in 2017 from its 27.9% peak in 2013.  This is the lowest unemployment rate in Greece in the past six years.

We project average annual real GDP growth of 2.4% in 2018-2021.  This would bring real GDP in euro terms back to its 2002 level. Investment activity will likely be boosted by the ongoing privatization process and further investment commitments associated with some of the asset sales and by the need for maintenance and capacity augmentation in some sectors.  Investment collapsed by 65% over the past decade, falling more than any other GDP component.  We anticipate continuing employment growth will aid private consumption and offset the dampening effect of further tax rises and expenditure cuts.

Greece is set to complete the ongoing ESM program in August this year.  Between now and August 2018, we anticipate two reviews, the first of which is currently in progress.  The program has frontloaded much of the difficult structural reform.  We therefore expect the remaining actions that the Greek government is required to take will be relatively less onerous than the tasks it has faced to date.  A smooth conclusion of the remaining reviews will aid Greece’s efforts to bolster its liquidity buffers through bonded debt issuance ahead of its exit from the program.

Greece’s official creditors are due to decide on additional debt relief measures toward the end of the program.  At the same time, we expect further details will emerge on the size and availability of a liquidity buffer, and a post-program surveillance framework.  We believe that the framework would be designed in a way that would continue to allow Greek banks to access liquidity from the ECB against collateral.  We also expect further clarity from the official creditors regarding the use, if at all, of the remaining undisbursed amount at the conclusion of the program.

Given the considerable financial and political capital invested in Greece by its European creditors since the start of the crisis, we think that support – in the form of technical assistance and further measures toward long-term debt relief – is likely to remain strong in the years to come, albeit tied to conditions.  We also consider that the incentives of further debt relief and continued liquidity access for the banking system will prevent a significant reversal of reforms in the post-program period.

We project that in 2018-2021 Greece will report general government primary surpluses that should allow gross general government debt to decrease to 154% of GDP in 2021 from an estimated 178% in 2017.  Even in nominal terms, we project gross general government debt to decline.  We project lower primary surpluses than targeted because we don’t rule out the possibility of a more flexible approach from Greece’s creditors toward its compliance with the highly ambitious and potentially self-defeating medium-term primary surplus target of 3.5% of GDP.  Greece achieved primary surpluses in 2016 and in the first 11 months of 2017, well over target.  Although revenues grew, a large part of the adjustment was due to expenditure restraint.

Despite the size of its debt, the cost of new loans for Greece, under the current program, is significantly lower than the average cost of refinancing for the majority of sovereigns rated in the ‘B’ category.  We anticipate that even with the Greek sovereign’s reentry into commercial bond markets, the proportion of commercial debt will remain less than 20% of total general government debt through year-end 2021.  We therefore expect a gradual reduction in interest costs relative to government revenues. We estimate the average remaining term of Greece’s debt at over 18 years.

Greece returned to commercial debt markets in 2017, after a three-year hiatus, and successfully issued a €3 billion sovereign bond, while partially buying back debt maturing in 2019.  Later in the year, Greece swapped about €25 billion of outstanding debt, held in 20 bonds, into five newly created bonds via a voluntary exchange.  This was a debt management exercise aimed at increasing the liquidity of outstanding Greek commercial obligations

We observe a pronounced decrease in Greek bond yields in recent months.  This could augur well for further issuance as it exits the program and seeks to bolster its cash buffers to meet debt obligations maturing over the next few years.  There is a risk that a large cash buffer might induce complacency on the part of Greek policymakers. But at the same time, it would reduce risks to debt service over the next few years.  Based on the current schedule, debt repayments will peak at €11.7 billion in 2019 (6% of projected GDP) and 2.5% of GDP in 2020 and 2021.

The Greek banking system remains impaired, but we do not view as imminent the risk of a fresh round of recapitalization by the sovereign.  Nonperforming exposures (NPEs) still constitute nearly one-half of system wide loans, despite recent reductions.  Initiatives to tackle the high stock of NPEs are underway, including the implementation of out-of-court restructuring, the development of a secondary market, and electronic auctions.  We think, however, that write-offs are likely to remain the biggest impetus to reducing these exposures.

Three systemically important Greek banks–National Bank of Greece, Eurobank and Piraeus – followed the sovereign and issued covered bonds during 2017.  Piraeus’ covered bond was a private placement with the European Bank for Reconstruction and Development (EBRD).  Like the sovereign, this was the banks’ first market foray since 2014.  From January to November 2017, we note that Greek banks halved their reliance on official ECB financing, including on the more costly emergency liquidity assistance.  A small uptick in deposits has helped, as have repurchase transactions with international banks.  The financing remains predominantly short term, though.

Greece has had a significant adjustment in its external deficit.  The current account narrowed toward balance in 2017, from a deficit of 14% in 2008, with much of the adjustment coming via significant import compression.  Preliminary balance-of-payments data for January to October 2017 indicate a small current account surplus.  The trade deficit appears to have widened over this period, prompted by a higher oil deficit and import growth.  This wider trade deficit was more than offset by the surplus on the services account.  We project the current account surplus will remain close to balance over our four-year forecast horizon as investments in tourism capacity benefit export receipts while offsetting greater imports from strengthening domestic demand.  (S&P 19.01)

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