Fortnightly, 29 July 2015

On 21 July, Prime Minister Benjamin Netanyahu and Canadian Prime Minister Steven Harper met in order to finalize a deal improving the two countries free trade agreement. Officially called the Canada-Israel Free Trade Agreement [CIFTA], the agreement will “reduce or eliminate Israeli tariffs on a large number of products”, according to official statement by the Canadian prime minister’s office, and will allow both countries to mutually expand access to each other’s agricultural and fishing sectors. (Various 23.07)

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1.2 Natural Gas Deal Put on Back Burner After Late Night Meeting

The natural gas deal will not be presented to the government for approval as planned on 28 July. The decision to postpone its presentation was made following a late 27 July meeting convened by Prime Minister Benjamin Netanyahu. As a result, the deal will also not be presented for approval by the Knesset, which goes on recess on 30 July. In accordance with the Deputy Attorney General’s recommendation, due to the short time frame remaining in which to prepare the final deal for presentation to the government … he decided along with the prime minister to postpone the deal’s approval, in order to ensure a proper discussion process. Netanyahu said he intends to get the gas deal approved as soon as possible, along with the state budget. (Various 28.07)

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1.3 Netanyahu Discusses Energy Cooperation With Cyprus

On 28 July, Prime Minister Benjamin Netanyahu flew to Cyprus to meet with Cyprus President Nicos Anastasiades and discuss cooperation on energy, among other issues. Possible cooperative ventures include laying a natural gas pipeline to connect Israel, Cyprus, and Europe. Another possible area of cooperation involves the electricity sector. Last November, Cyprus reported that the European Union would contribute €1.32 million to assessing the viability of an undersea electric cable from Hadera to Vasilikos in Cyprus, and from there to Crete and Athens, as part of the Connecting Europe Facility (CEF) project. This 1,518 kilometer cable is designed to facilitate two-way transmission of electricity, and will have a 2,000 megawatt capacity.

Anastasiades visited Israel last month for a series of meetings with President Reuven Rivlin and Netanyahu. He also met with the Delek Group to promote a plan for development of the Aphrodite natural gas reservoir in Cyprus, held by Delek Group and Noble Energy. (Globes 28.07)

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1.4 Locker Committee Recommends Freezing Defense Budget for Five Years

The Committee to Evaluate the Defense Budget, headed by Maj.-Gen. (res.) Yohanan Locker, recommends in its report released on 21 July to freeze the defense budget to NIS 59 billion a year for the next five years, shorten compulsory military service to two years and cancelling early retirement for non-combatant career military personnel. It also recommends that the amount of the budget be enacted in legislation, and that it could be changed only in the event of war or recession. This is an increase of the defense budget over last year by about NIS 6 billion, but since the committee recommends keeping the budget in place for five years, adopting the recommendations would actually make the budget lower than what the defense establishment is demanding – NIS 62 billion in 2016 alone, with further increases annually.

Locker also recommends shortening compulsory military service for both men and women to only two years (instead of the current two years and 8 months) by 2020. This follows similar recommendations made in 2006. The IDF has already submitted a counter-proposal to shorten service to two years and three months by 2023.

The committee recommended that the IDF reduce its manpower by a further 11%, in addition to the planned reduction in the army’s 5-year efficiency plan. This means some 2,000 additional career officers will be dismissed. In total, the committee recommends that the army reduces its expenses on manpower by some 86% until 2017.

The full report will serve as a backdrop to discussions on the 2015-2016 budget, which is due to pass by the end of the month. (Various 21.07)

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1.5 Israelis to be Allowed Cannabis as Prescription Drug

On 27 July, Deputy Minister of Health Litzman announced that medical cannabis will be available in pharmacies in Israel and that more doctors would be allowed to prescribe it. The announcement was made during a Knesset committee meeting. Marijuana will be sold to patients with prescriptions, and will be controlled like any other prescription medication. However, more doctors will be authorized to write prescriptions for medical marijuana, the deputy minister said. Litzman voiced hope that the High Court of Justice would approve the cultivation of medical marijuana, pledging to “issue a tender for growers, which is currently being studied by the High Court of Justice.” He said placing the sale of medical marijuana under the supervision of pharmacies would help combat the black-market phenomenon. Currently, medical marijuana is distributed by eight companies that grow the plants in Israel, and dispensed by only two bodies. Patients who rely on the drug for medical relief often complain of being forced to jump through hoops to obtain it. (Various 27.07)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Space Florida & Israel’s OCS Announce Innovation Partner Awardees

Space Florida, the Sunshine State’s aerospace and spaceport development authority, and the Israeli Office of the Chief Scientist through MATIMOP, Israel’s Industrial Center for Research and Development, announced second-round winners of industrial research and development funding tied to the Space Florida-Israel Innovation Partnership Program.

In October 2013, Florida and Israel created a $2 million recurring joint fund to support research, development and commercialization of aerospace and technology projects that benefit both Israel and Florida. Seven joint proposals were received and four teams have been selected for second-round awards. They are:

Micro-gRx with the Sanford Burnham Prebys Medical Discovery Institute at Lake Nona, partnered with Space Pharma of Israel to investigate specific changes in protein levels in human muscle and immune cell types to model disease in reduced gravity environments.

Cella Energy, Exploration Park, Florida, and Israel Aerospace Industries (IAI), Israel to develop hydrogen power systems for IAI’s Unmanned Aircraft System platform based on Cella’s unique pelleted hydrogen system.

Lockheed Martin Space Systems and STEMRAD Israel will develop a product to protect astronauts from harmful space-borne radiation that will be a key enabler for the continuing missions of the Lockheed Martin’s Orion spacecraft.

General Capacitor and Elbit Systems Land, Israel proposes to develop a high-energy and low cost Li-ion capacitor (LIC) for certain spacecraft applications.

Each company will receive respective funding awards from Space Florida and Israel’s Office of the Chief Scientist, part of Israel’s Ministry of Economy. The next joint call for applications is expected to be released in autumn 2015. (Space Florida 20.07)

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2.2 Facebook’s Oculus Confirms Pebbles Interfaces Purchase

Facebook’s Oculus division has made another acquisition, acquiring Pebbles Interfaces, a computer vision specialist based out of Kfar Saba, Israel. Financial terms were not disclosed. The key piece of technology that Pebbles has developed is that it lets users see their own hands and fingers in their field of virtual reality. This adds extra dimensions of authenticity to the experience and also opens the door to many more applications of how the VR platform can be used. The two companies already worked together prior to this: Pebbles is one of the many developers that had integrated its technology into Oculus’s headset. Oculus says that the Pebbles team will be joining its hardware engineering and computer vision teams “to help advance virtual reality, tracking, and human-computer interactions.”

Pebbles, which was founded in 2010, raised $11.5 million from investors that included strategic backers like Bosch, SanDisk and Xiaomi, as well as investors like iNetworks360. This is Oculus’ sixth acquisition. The company itself was acquired by Facebook last year for $2 billion. (Oculus 16.07)

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2.3 Como to Acquire Keeprz for $50 Million

Ness Ziona’s Como (formerly ConduIT Mobile) is set to acquire Israeli startup Keeprz, which has developed an app making it possible to enhance the loyalty of customers to small and medium-sized business. The parties have not yet signed the acquisition agreement and a due diligence procedure must be conducted first, but it appears that the price being discussed is $50 million. Following the acquisition, Keeprz’s 17 employees are expected to join Como’s 100 in the latter’s offices. Keeprz will improve Como’s current solution for customer loyalty and small and medium-sized business apps, thereby reinforcing Como’s dominance in the global market in general, and in Israel in particular. Keeprz’s customers include Burger King, Coca Cola, Burgus Burger Bar, BMW, Cafe Joe and others. Keeprz will be the second Israeli startup to be acquired by Como, the first being Wibiya for $45 million. (Globes 16.07)

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2.4 LogDog Raises $3.5 Million A Round; Introduces Support for Twitter

Personal security app LogDog announced the completion of a $3.5 million financing round. The funding will be used to expand R&D efforts, roll out additional features on its Android app and introduce an iOS version of the app. LogDog is also expanding its headcount, expecting to double its team over the next year. The round was led by BRM Group and included existing investors TheTime VC, FirstTime Ventures, Maxfield Capital and Curious Minds Investments. This round of funding follows a seed round that was completed last fall. In addition to the funding round, LogDog is also rolling out support for Twitter. The app is also enabled for Facebook, Dropbox, Gmail, Evernote and Yahoo!, and the company will introduce protection for Instagram and other online accounts in the near future.

Tel Aviv’s LogDog is a personal cyber-security mobile app that protects private online accounts against hacking. The application immediately alerts users whenever it detects any suspicious activity on online accounts. By continuously scanning and monitoring accounts’ sign-in locations, times, device types used and other parameters, LogDog is able to detect anything unusual-such as a breach into the account that can lead to identity theft-and immediately alert users, enabling them to quickly take control of their accounts before hackers do. (LogDog 16.07)

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2.5 Israeli Gaming Company 888 to Buy Bwin.Party For $1.4 Billion

Israeli gaming company 888 Holding plc, which operates the world’s largest online casino and poker operation, has beaten British rival GVC to the acquisition of Bwin.party Digital Entertainment. 888 will buy the British-Austrian gambling company for $1.4 billion. The merger will make 888 one of the most dominant players in the online gambling industry and among other things will strengthen 888’s presence in the sports gambling niche. (Globes 17.07)

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2.6 Nonstop Flights from Tel Aviv to Tokyo Announced

A new aviation agreement between Israeli and Japanese airlines will offer customers up to 14 direct flights between the two countries each week. Representatives from El Al and Japan’s biggest airline, All Nippon, signed the deal at a recent meeting Tokyo. There are currently no direct flights between Israel and Japan, and most passengers traveling between the two countries must make connecting flights in Hong Kong or Seoul. According to the Tourism Ministry, some 13,000 people traveled from Japan to Israel in 2014. (ToI 16.07)

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2.7 WireX Closes $9.3 Million Round

WireX has raised $9.3 million led by Vertex Venture Capital, with participation from existing investor Magma Venture Capital, Entrée Capital and the entrepreneurs and private investors Mickey Boodaei, co-founder of Imperva and Trusteer, Rakesh Loonkar, co-founder of Trusteer, and Idan Plotnik, founder of Aorato (acquired by Microsoft). Funding will be used to expand the Israeli-based R&D center and establish headquarters in the US.

WireX enables businesses to quickly and effectively resolve cyberattacks, while minimizing the need for expert-level security teams. The company’s unique technology translates the enterprise’s entire network traffic into human-readable intelligence that brings full and instant understanding to network security incidents. The WireX Network Forensics platform continuously analyses all parts of the enterprise network and creates a comprehensive source of intelligence for security operations. WireX core technology, the Layer 8 Contextual Analysis, picks up where traditional DPI has failed and automatically reveals the entire set of actions performed within each application and its associated contents. When a malicious activity is detected in the network, the big data platform correlates the analyzed data into a complete “network story” required to handle the incident, thus minimizing exposure time to threats.

Yehud’s WireX was founded in 2010 to deliver cutting-edge security monitoring systems for intelligence agencies across the globe. WireX has since expanded its product offering into the enterprise security market, tailoring its groundbreaking technology to directly address network forensics. (WireX 21.07)

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2.8 Delta Galil Announces Acquisition of P.J. Salvage Brand

Tel Aviv’s Delta Galil Industries, the global manufacturer and marketer of branded and private label apparel products for men, women and children, as well as leisurewear and active wear, announced that it has agreed to acquire the P.J. Salvage brand and other assets of California-based Loomworks Apparel, a leading sleepwear, loungewear and intimates manufacturer and distributor with an international following.

P.J. Salvage is widely known for chic style and luxury fabrics, and pioneered the crossover of bedroom fashion into loungewear and everyday wear. The brand’s meticulous attention to detail, superior quality, rich fabrics and flattering fit have made P.J. Salvage a favorite among celebrities and the fashion-minded. Its “California cool” sensibility is featured in leading high-end department store chains and specialty boutiques. In addition to the P.J. Salvage brand, Delta will acquire all of Loomworks’ operations, including its brand names and trademarks, intangibles, working capital and certain liabilities. The purchased business will become part of U.S. subsidiary Delta Galil USA, in a deal that is expected to close by the end of July 2015 and to be accretive to Delta’s earnings. (Delta Galil 20.07)

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2.9 Revivim Opens First Kibbutz Startup Accelerator

Kibbutz Revivim in the Ramat HaNegev region is set to become Israel’s first kibbutz to launch a startup accelerator. To be called Hamadgera, the first three month program for startups will open in October. Kibbutz Revivim is best known in the businesses world as a manufacturer of plastic components for the automotive industry through its companies Ravel, Raviv and Arkal.

The Revivim accelerator will be unique on the Israeli high-tech landscape not only because of its distance from the high-tech heartlands in central Israel but because it will also offer three months free residential accommodation on the kibbutz for participants in the program. The accelerator will accept early stage startups in the field of Internet and mobile including those yet to reach the proof of viability or beta-site stages. Entrepreneurs will receive assistance and guidance in design and user experience services, help in building business models, marketing strategy and more.

Kibbutz Revivim’s partners in the accelerator include Microsoft, which will grant a package of services worth thousands of dollars to each team of entrepreneurs and Wix.com, which will provide professional support to entrepreneurs, and others. (Globes 26.07)

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2.10 Yahoo! Opens First Startup Accelerator Globally in Israel

Yahoo! has chosen Israel as the location of its first-ever startup accelerator. Yahoo!, which already has a development presence in Israel in Tel Aviv and Haifa, has now decided to open up the SigmaLabs accelerator in collaboration with UK-Israeli venture capital fund Entree Capital. The first program for 4-5 startups will begin in September for early stage companies in the big data, video, fintech and native advertising sectors.

The SigmaLabs accelerator will be located in the Ramat Gan Diamond Exchange district. The SigmaLabs accelerator will work on a ‘pay it forwards’ model whereby graduate startups are expected to contribute to subsequent classes of startups and can decide, at their sole choice, to contribute equity back to the accelerator. Additionally, there are a number of financial incentives that startups can choose from, such as a $250,000 convertible note from a leading VC for the outstanding graduate from the program that has met key metrics and $25,000 convertible notes made available to startups that complete the program with high scores the emphasis being that the startups decides if they want to take advantage of any of these voluntary incentives earned on merit. (Globes 26.07)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Jordanian Consumers Spend JD350 Million on Food During Ramadan

A total of JD350 million was spent on food items during Ramadan across Jordan. This number includes what both Jordanians and non-Jordanians spent on food and beverages during the holy month, according to the Foodstuff Traders Association. This Ramadan’s expenditure is less than the usual figure for previous years by around 20-30%, due to the fact that Ramadan started in the middle of the month, with most consumers relying on their monthly salaries to buy their food needs. Food merchants did not expect such a “significant decrease”, especially since Ramadan is in the summer and most expatriates come back to Jordan for the holiday. The weakening purchasing power has also contributed to declining demand on food. Rice, vegetable oils, canned food, dates, juices and poultry topped the items consumers bought during Ramadan. Poultry was much preferred to red meat for purely economic reasons, as it is cheaper. Some 90% of the consumed food was imported items, while poultry and red meat constituted most of the local foodstuff. (JT 16.07)

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3.2 MEA Smartphone Shipments Surge 66%, to Exceed 150 Million Units

Smartphone shipments in Middle East and Africa (MEA) are set to total 155m units in 2015 after increasing 66% year on year during the first quarter to reach more than 36m units, according to the latest figures by global technology consulting firm, International Data Corporation (IDC). Smartphones accounted for 63% of the handsets shipped to the Middle East and 47% of those shipped to Africa during the quarter. This comes at the expense of feature phones, which suffered year-on-year declines of roughly 20% in both regions and will make up just 27% of the overall MEA handset market by the end of 2019, shows IDC’s “Q1 2015 Mobile Phone Tracker” report.

The growth in the number of Smartphones in the MEA region is being spurred by Google’s Android and Apple’s iOS, with the two platforms accounting for more than 95% of the Smartphones shipped in Q1/15. The shipments of devices featuring these operating systems increased by a combined 67% year on year. In the Middle East, Android currently represents 80% of market’s volume, while iOS accounts for 17%; in Africa, these figures stand at 89% and seven%, respectively. BlackBerry suffered significant year-on-year declines across the region in Q1/15, with its shipments falling 14% in Africa and 29% in the Middle East.

In the Middle East region, Saudi Arabia and Turkey were the biggest markets, with the former accounting for a share of nearly 20% and the latter, 17.6%. Saudi Arabia saw a year-on-year shipment growth of 9.5%, while the Turkish market expanded 33% over the same period. (AME 15.07)

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3.3 Sysorex to Provide Retail Analytics for Saudi Shopping Center

Palo Alto, California’s big data analytics and solutions provider Sysorex announced its AirPatrol platform has been chosen to provide retail analytics for a 540,000 square foot upscale shopping, dining and entertainment center north of Riyadh, Saudi Arabia. Sysorex’s AirPatrol technology will be used to collect detailed insights such as visitor counts, store performance and customer engagement to help mall management better understand its visitors and improve operations. The mall is one of 17 owned and operated by a Saudi-based retail property company. The Saudi Arabian mall will be Sysorex’s first AirPatrol retail center installation in the Middle East. It is expected to be up and running in late August. Last month the company announced another AirPatrol installation in the nearby country of Qatar where it will be used to provide security and asset management within communities housing workers for the country’s World Cup developments. (Sysorex 23.07)

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3.4 Valeant Pharmaceuticals to Acquire Egypt’s Amoun Pharmaceutical

Laval, Québec’s Valeant Pharmaceuticals International has entered into a definitive agreement to acquire Mercury (Cayman) Holdings, the holding company of Amoun Pharmaceutical, for consideration of approximately $800 million, plus contingent payments. Amoun Pharmaceutical is the largest domestic company in the Egyptian pharmaceutical market and currently expects to reach EGP 1.75 billion by 2015, with annual growth of approximately 20%. Amoun operates a large, state-of-the-art manufacturing plant that is considered to be one of the largest and most up-to-date pharmaceutical facilities in Africa and the Middle East and has market leading pharmaceutical brands in therapeutic areas such as anti-hypertensives, broad spectrum antibiotics and anti-diarrheals. Valeant intends for Amoun to serve as a platform for further expansion in the broader Middle East and North Africa pharmaceutical market and expects the transaction to close in the third quarter, subject to customary closing conditions. (Valeant 17.07)

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3.5 Siemens & Egyptian Railway Sign MoU to Develop Major Lines’ Sign Lighting

On 27 July, Egyptian National Railways (ENR) and Germany’s Siemens signed a memorandum of understanding (MoU) to strengthen cooperation in projects developing the electrification systems for the signs of a number of major railways lines, according to Minister of Transport Hany Dahi. The MoU’s signing “comes as part of developing the railway facility and the strategic plan for developing its infrastructure, in order to achieve the goals of upgrading the old infrastructure and develop all its elements, on top of which are the elements related to providing the highest level safety for passengers”. The MoU includes modernizing and developing the signs systems for a number of major railway lines. It also includes developing the signs electrification systems for the Luxor-Aswan, Tanta-Mansoura- Damietta, and the Bahariya Oasis lines. Dahi said the two parties have agreed that, during the designated period, they will present details of the technical and financial offer, which will be fully funded by the German side. (Ahram 27.07)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Lebanese Protesters Blast Politicians Over Garbage Crisis

On 28 July, furious demonstrators descended on downtown Beirut calling for a comprehensive solution to Lebanon’s waste crisis after mountains of garbage piled up for the past week in the streets of the capital and surrounding areas. The recently-formed “You Stink” activist group rallied over 200 people in front of Lebanon’s seat of government in the Grand Serail in central Beirut for a protest that was supposed to coincide with a crunch cabinet meeting that instead was postponed by Premier Tammam Salam, who is considering resigning amid the political paralysis gripping the country.

The protesters aimed their anger at Lebanon’s feuding politicians, chanting, “We need a revolution, the garbage is in the parliament,” while a small group of demonstrators pelted the Grand Serail with eggs. “You Stink” organizer Imad Bazzi said that the protests and road blockings were an “initial warning,” adding that the group would announce escalatory steps. “No to landfilling, no to burning, no to [dumping] trash in the sea,” Bazzi declared, calling instead for more environmentally-friendly methods to manage Lebanon’s garbage.

Lebanon’s garbage crisis exploded on 17 July following the closure of the controversial Naameh landfill in the south, leaving no open facility to dump the country’s waste. The Naameh site was originally supposed to be a temporary facility, however it became the de-facto landfill for Beirut and Mount Lebanon trash, angering residents living near the site. Following the closure of the Naameh site, Sukleen stopped its trash collection service, leaving garbage to pile up in huge mountains that have given off a stench that has prompted many Lebanese to don masks over their mouths and noses.

The political paralysis plaguing the country’s cabinet has only worsened the situation, with the government failing to discuss the waste issue as ministers have locked heads over the Free Patriotic Movement’s demands over the cabinet’s decision-making process. Media reports and politicians have suggested that Salam is prepared to step down as premier – thereby toppling Lebanon’s government – if a solution is not reached over the mechanism of the cabinet’s work. (NOW 28.07)

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5: ARAB STATE DEVELOPMENTS

5.1 Deflationary Pressures on the Lebanese Economy in First Half

According to the Central Administration of Statistics (CAS), the consumer price index (CPI) has been prone to deflationary pressures in H1/15 compared to H1/14. The CPI dropped from 100.61 in June 2014 to 97.22 in June of this year, registering a 3.37% year-on-year (y-o-y) drop. Since “water, electricity, gas & other fuels” and “transportation” constitute two of the major weights in the CPI with a cumulative share of 25%, it’s expected that consumer prices will fall on the back of the approximate 45% yearly decline in the average international oil prices for June 2015. Furthermore, the appreciating dollar versus the Euro influenced the price decrease bearing in mind that a major part of Lebanon’s imports are from Europe. Worth mentioning is that overall prices have also been decreasing year-to-date by 2.09%.

In terms of the CPI’s components, “Food and non-alcoholic beverages” (20.6% of CPI) decreased by a 1.69% y-o-y in H1/15. Moreover, “Transportation” (13.1% of CPI) and “Water, electricity, gas & other fuels” (11.9% of CPI), experienced yearly falls of 9.26% and 18.66%, respectively. In addition, other 2 sub-indices that respectively waned were “Health” (7.8% of CPI) and “Communication” (4.6% of CPI), recording a 4.80% and 3.51% y-o-y decline over the same period. The final sub-index that declined was “Recreation, amusement & culture”, which witnessed an annual downtick of 0.26% from June 2014 to 100.97 in June 2015.

However, the education sub-index, constituting 4.50% of the CPI, augmented by 4.52% y-o-y in H1/15. Furthermore, clothing and footwear (5.4% of CPI) prices went up by an annual 4.13%. In addition, actual rent sub-index for households (old and new rent), with a stake of 3.4% in the CPI, augmented by an annual 9.88% over the above mentioned period. (CAS 21.07)

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5.2 Lebanon’s Trade Deficit Shrunk to $5.83 Billion as of May 2015

According to Lebanese customs, Lebanon’s trade deficit shrunk by a yearly 21% to reach $5.83B by May 2015. The smaller deficit came about as both imports and exports posted yearly declines of 19% and 8% to reach $7.1B and $1.27B in the first five months of 2015, respectively. The exports to imports ratio improved from 16% by May 2014 to 18% by May 2015.

By May 2015, the top import categories were “mineral products” with a share of 16.7% in the total value of imports, “machinery and electrical instruments” with a share of 11.8%, “products of the chemical or allied industries” with a stake of 11.5%, “vehicles, aircraft, vessels and transport equipment” with a share of 9% and “prepared foodstuffs, beverages, tobacco” with a share of 7.8%.

In the first five months of 2015, the top export categories were “prepared foodstuffs, beverages, tobacco” with a share of 16.17% in the total value of exports, “pearls, precious stones and metals” with a share of 16%, “products of the chemical or allied industries” with a share of 14.07%, “machinery and electrical instruments” with a share of 13.83% and “base metals and articles of base metals” with a share of 10.81%.

By May 2015, the top import destinations were China, Italy, Germany and France with stakes of 11.6%, 7%, 6.6% and 5.9% in total imports. As for the top markets for Lebanese exports by May 2015, they were Saudi Arabia, the UAE, Iraq, South Africa and Syria with respective share of 13%, 11%, 8%, 7% and 6%, respectively. (Blominvest 15.07)

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5.3 Lebanese Hotel Occupancy Rate Improved 56% in First Half

According to Ernst & Young Middle East hotel benchmark survey, Lebanon recorded the second largest year-on-year (y-o-y) improvement in its occupancy rate in H1/15, after Egypt. This goes with the fact that tourist activity went up by 13% y-o-y by May of this year, possibly due to the relatively stable security situation in the country, compared to some neighboring nations in the region. Accordingly, Lebanon’s occupancy rate increased by 6% to 56% in the first 6 months of 2015, while Egypt’s occupancy rate edged up by 16% to 48%, registering the highest annual improvement. The latter development mainly is attributed to the better economic and political outlook in Egypt from last year, illustrated by the economic summit that took place in March. The third largest rise in occupancy rates, by June, was depicted in Doha and Kuwait, as they respectively increased by 1 p.p. each to 74% and 55%.

Over the same period, the largest downturn in the occupancy rate was in Amman, Jordan which lost 12% yearly to 54% followed by Mecca, Saudi Arabia which recorded a decrease of 11% y-o-y to 52% by June. These falls might have been due of the enhanced political risk in both countries, following the participation in airstrikes against Houthi rebels in Yemen. (BlomInvest 28.07)

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5.4 King Abdullah Directs Amman to Address Economic Challenges

On 26 July, King Abdullah directed the government to mobilize its various institutions to work towards improving the economic situation in Jordan. During a visit to the Prime Ministry where he met with Prime Minister Ensour, the King said concerned government agencies should pay full attention to economic conditions and double their efforts to improve the investment and business environment. All officials, at all levels, should take part in these efforts, the King told Ensour, stressing the importance of the economic sector, according to a statement by the Royal Court. King Abdullah stressed the importance of implementing additional key reforms and reviewing relevant legislation to boost economic development, so that this can serve as the basis to provide required job opportunities. The King also directed the government to deal with economic challenges facing the private sector as soon as possible and to work in contact with its various entities to find workable solutions to present challenges. (JT 27.07)

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►►Arabian Gulf

5.5 Non-Oil Sector Continues to Underpin Qatar’s Economic Growth

Qatar’s economic diversification continues unabated and is set to push the non-oil sector’s contribution to the country’s GDP higher. A retreat in inflation, healthy fiscal status and massive financial surpluses will provide a macroeconomic environment conducive to spurring growth, Qatar National Bank Group says. Citing government figures, the report notes that Qatar’s national economy posted a robust growth of 4.1% in the first quarter of the current year. The report says the country’s economic growth is driven by an additional expansion in the non-oil sector, which will provide the nation with a buffer against shocks in the oil and gas markets.

The report indicates that the non-oil sector expanded by 8.9% in the first quarter of the current year. The main drivers of growth in the non-oil sector were construction, financial services and industry. Mega infrastructure ventures also remain prime movers of economic growth. The report projects that the oil and natural gas sector will start to recover over the medium term, but crude oil and condensates production will remain stable. (AME 13.07)

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5.6 Qatar Targets 3 Million Visitors by Year’s-End

Qatar has set a target of attracting at least three million visitors over the 12 months to end of 2015. It said it is working towards netting a total of $10.7 billion in tourism spending by 2030. The Qatar Tourism Authority said that the Gulf state has recorded a 10% increase in tourists this year compared to 2014, with more than 1.3 million visitors. However, Bank Audi Group’s Qatar Economic Report 2015, published in June, cited Qatar Tourism Authority research claiming that the figure was actually 2.82 million. Tourism provides over 61,000 jobs in Qatar and directly contributed $3.7 billion to the country’s GDP in 2013, representing 4% of Qatar’s non-hydrocarbon economy. (QNA 19.07)

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5.7 UAE’s Inflation Rate Edges Down to 4.2% in June

The UAE’s inflation rate edged down to 4.2% year-on-year in June but remained near six year highs amid continuing upward pressure from the cost of housing and utilities, according to the UAE National Bureau of Statistics. Inflation slipped to 4.2% from 4.3% the previous month, and is just 0.3% off January’s rate which was the highest level since May 2009. Housing and utility costs, which account for over 39% of consumer expenses, jumped 10.2% from a year earlier in June. Food and soft drink prices, which account for nearly 14% of the basket, gained 1.4% year-on-year and 0.8% month-on-month. (AB 21.07)

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5.8 UAE to Cut State Spending by 4.2% in 2015

The government of the United Arab Emirates is expected to cut spending by 4.2% this year as it begins to retrench because of low oil prices, which are slashing its energy export revenues. The UAE does not regularly reveal consolidated state budget data, and figures released in the quarterly state bank report were the first detailed picture of how authorities in the second biggest Arab economy are responding to cheap oil. They suggest the UAE is retrenching faster than the majority of wealthy Arab oil exporters in the Gulf. Saudi Arabia and most other countries, with the exception of Bahrain, have said they will keep spending high this year, and in some cases have been running down financial reserves to do so.

The UAE also has huge reserves but it is adopting a more cautious fiscal stance. Consolidated government spending, including the federal government and the UAE’s seven individual emirates, is expected to drop to AED 460.6 billion ($125.5 billion) in 2015 from AED 480.8 billion in 2014. This would follow several years in which spending increased at rates of close to 10%. The central bank said its projections were based on a study by the International Monetary Fund, which sent a mission to the UAE in May and June. The projections show the rise in government spending on employee compensation slowing sharply; such spending would increase only 3.4% in 2015 to 48.8 billion dirhams.

Meanwhile, low oil prices are expected to slash consolidated government revenue by 22%, leaving a fiscal deficit of AED 30.6 billion or 2.4% of GDP. It would be the UAE’s first deficit since 2009. The UAE has been more daring than other Gulf states in pushing through politically sensitive reforms to curb spending and raise new revenue in an era of cheap oil. (Reuters 27.07)

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5.9 UAE Non-Oil Foreign Trade Totals AED4.8 Trillion in 5 Years

The value of the United Arab Emirates’ non-oil foreign trade amounted to AED4.876 trillion from 2010 to 2014, new government data reveals. The country’s foreign trade balance is heavily in favor of imports, with AED3.13trn against AED647 billion worth of national exports, while re-exports reached AED1.09trn, the figures released by the UAE’s National Bureau of Statistics show.

The value of the Arab country’s non-oil foreign trade stood at AED754.4b in 2014 and jumped to AED1.07trn in 2014. In 2013, it amounted to AED1.06trn. The upward trend of the UAE’s foreign trade over the past five years is one of the fruits of the country’s economic openness policy and comes as a culmination of efforts to lessen the country’s dependence on oil and diversify its economy. Imports stood at AED485b in 2010 and had reached AED602b in 2011, AED667b in 2012, AED685b in 2013 and hit AED696b in 2014. (AME 12.07)

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5.10 Saudi Arabia Tops List of China’s Oil Suppliers in 2014

Saudi Arabia emerges as a reliable producer for oil importers, topping the list of the largest exporters of oil to China in 2014. The kingdom accounted for 16% of China’s imports of crude oil, surpassing Angola, which ranked second with a market share of 13%, while Russia fell to third place with 11%.

Global Energy Group says that Chinese officials have confirmed that their country has moved to the second stage of the strategy of supplying strategic oil stocks with imported crude oil. Chinese officials add that, at this stage, China is aiming to pump roughly 19 million barrels to stocks in Qingdao province, taking advantage of cheap crude flows from producing countries, to fulfil the need of the Chinese economy for crude oil. China’s appetite for crude imports increased during the past ten years, in light of the growing industrial sectors’ consumption, transport and the expansion of investments in the fields of manufacturing and refineries. (AME 21.07)

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►►North Africa

5.11 Egypt’s Trade Deficit Grows 52.7% in April

Egypt’s trade balance deficit reached LE24.6 billion in April of 2015, representing a 52.7% increase compared to LE16.11 billion in the same month last year, the state-run statistical body CAPMAS reported on 21 July. State exports valued LE14 billion in April, declining from LE17.26 billion in April 2014, due to a drop in the price of certain goods such as crude oil, petroleum products and primary form plastics. Meanwhile, imports’ value rose by 15.67%, jumping to LE38.7 billion, from LE33.37 billion during the same month last year. According to the report, the rise in imports’ value was due to the increase in the value of certain goods such as petroleum products and vehicles.

Egypt’s inflation accelerated after the government decided to cut subsidies in July 2014, increasing fuel prices by as much as 78%. The urban consumer inflation rate dropped to 11.4% in June of this year, from 13.1% in May. (CAPMAS 21.07)

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5.12 Egypt Completes Dredging for New Waterway in Suez Canal

Egypt completed dredging for the new shipping route in the Suez Canal, which will be inaugurated on 6 August. This marks the dredging of a total of 250 million square meters and the digging of 70 million square meters in the expansion of the Ballah Bypass. The Bypass’s width is now 312 meters, compared to the previous 61 meters.

The flagship project of President Abdel-Fattah El-Sisi’s economic program is set to open in August and will be attended by world leaders. Cairo will fund the opening ceremony of the new waterway through donations from the public and contributions from participating dredging companies to avoid any burdens on the state budget.

Since taking office in June of last year, El-Sisi has embarked on an economic reform program, restructuring the state budget in an effort to trim a ballooning deficit. The mega-project to expand the Suez Canal, alongside plans to build an industrial hub and a supplies and logistics center in the vicinity of the canal, are at the heart of El-Sisi’s development plans. (Ahram Online 16.07)

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5.13 Egypt Plans More Oil and Gas Exploration Deals

Egypt’s ministry of petroleum and mineral resources is set to sign a number of agreements to explore oil and gas in various parts of the country. Minister of Petroleum and Mineral Resources Ismail revealed that his ministry is set to sign two new deals to explore oil in the Haleef region in the western desert and northeast of the Ramadan area in the Suez Gulf. The two agreements are currently being revised by the cabinet before they are endorsed. According to the minister, the past period saw the signing of 56 oil-related agreements following a three-year halt. He says he expects these deals to add more crude oil and natural gas to the country’s hydrocarbon output and help to meet the growing demand on energy in the country.

Oilfields and wells in the Western desert account for 51% of Egypt’s crude oil production. Egypt has been seeking to increase its production of oil and gas to meet a growing demand for energy at home. Foreign companies such as British Petroleum, BG Group and Eni control the country’s oil and gas exploration and production activities. (AME 21.07)

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5.14 Egypt Implements First Office in UAE to Revitalize Tourism

The Egyptian General Authority for Tourism Promotion launched its first office in the GCC, located in the UAE’s capital, Abu Dhabi. The newly established office will cooperate with all airlines that have flights to Egypt, to set up direct flights to Sharm El-Sheikh, the Red Sea and the North Coast. Egypt’s Ministry of Tourism is seeking to increase the country’s annual tourist influx to 20 million, whilst also raising tourism income to $26bn by 2020. The tourism sector contributes 11% to the country’s gross national product (GNP), and also participates in providing 7% of foreign currency. According to a report issued earlier by the ministry, it plans to attract tourists with higher spending powers.

The GCC is a main target for Egypt in reviving tourism in the country. Earlier in 2014, a song entitled “Misr Orayba” (“Egypt is Near”) was launched, featuring a number of Egyptian actors and singers. It forms part of a campaign that is targeted at GCC tourists, urging them to spend their holidays in Egypt. Furthermore, during the Eid vacation, hotel occupancy rates reached 100% in Sharm El-Sheikh, Ain Sokhna, Hurghada and Ras Sedr, with GCC tourists contributing the highest percentage.

Egypt’s tourism income reached approximately $7.5b in the last year, $1.5b of which was from Arab Tourism. Meanwhile, in 2013, tourism revenue registered $5.9b. (DNE 28.07)

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5.15 Twenty Percent of Egypt’s Medicines Counterfeit

The value of counterfeit medicines in the Egyptian market is estimated at EGP2.5 million or 20% of the total volume of drugs in the country. The head of the pharmaceuticals division at the Federation of Egyptian Chambers Of Commerce warned of the spread of counterfeit medicines in the market and said this phenomenon deals a blow to the Egyptian pharmaceutical industry. He said some drug manufacturers lower the levels of the active pharmaceutical ingredient, since they buy these substances from unlicensed and untrustworthy places. Some accuse pharmaceutical companies of selling expired medicines. Medicine sales are expected to grow by 15% to EGP35 billion from EGP30b in the past year. There are 150 pharmaceutical companies in Egypt with investments of EGP150b. (AME 21.07)

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5.16 100,000 Egyptians Diagnosed With Cancer Every Year

Around 100,000 Egyptians are diagnosed with cancer annually, Health Minister Adel El-Adawi said on 27 July. On a visit to the National Cancer Institute, El-Adawi said the health ministry was creating a comprehensive database for cancer patients to track the annual increase. The minister was met with complaints from patients at the institute over conditions and administrative procedures. Cancer cases in Egypt, registered according to National Cancer Registry Programme (NCRP), indicate that the incidents are 166 for every 100,000 people in Egypt. Liver cancer comes on top, with 23.8%, followed by breast cancer at 15.4%, then bladder cancer 6.9%. (Ahram Online 27.07)

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5.17 Morocco Received Over 10 Million Tourists in 2014

Morocco welcomed 10.3 million tourists in 2014, a gain of 2.4% compared to 2013, according to the Moroccan National Tourism Office. According to the statistics, revenues reached MAD 59.3 billion. The rate of tourists’ arrivals from Italy, UK and Scandinavian countries grew in 2014, while number of holidaymakers from France decreased.

The Moroccan Ministry of Tourism has organized several activities over the past two years as part of the effort to promote tourism in Morocco, including trips for travel agents and media workshops. The ministry also organized 17 trips for 140 journalists from countries that sent the highest numbers of tourists to the country. Tourism is the second largest economic sector in Morocco. It accounts for around 8% of GDP, employing some 500,000 people, and the government hopes to see the number of visitors rise to 20 million by 2022. (MWN 16.07)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Greece Faces Recession Warning As Bailout Talks Set To Open

Greece’s most influential think tank warned on 23 July of a sharp drop back into recession in a report that came hours after parliament approved a second package of reform measures aimed at securing a new bailout from international lenders. In its quarterly report, the IOBE institute said that capital controls imposed last month to stop a bank run pushing the financial system into collapse would exact a heavy toll across the economy.

Reversing a forecast for growth this year of 1% made as recently as April, it said the economy would contract by as much as 2 – 2.5% after growing 0.7% in 2014 and would remain in recession next year as well. The report underlined the headwinds facing leftwing Prime Minister Alexis Tsipras, who must negotiate a bailout worth up to 86 billion euros with skeptical lenders, while struggling to hold his divided Syriza party together.

While his own personal popularity is high, a renewed drop into recession after a modest recovery last year would test his government’s ability to push through the tough mix of tax hikes, spending cuts and economic reforms demanded by the lenders.

Formal negotiations with officials from the European Commission, European Central Bank and International Monetary Fund began in Athens on 24 July with the aim of wrapping them up by 20 August. But already there have been doubts about whether the severely weakened Greek economy can support the program after a six year-long slump that has cut national output by a quarter and sent unemployment over 25%.

Banks have re-opened after the ECB restored emergency funding but capital controls remain in place, hobbling companies that deal with suppliers outside Greece and highlighting the fragile state of the financial system.

If the talks are not completed in time, European authorities who provided a €7 billion bridging loan to allow Athens to meet debt repayments this week, may have to provide further temporary financing. European Economic Affairs Commissioner Pierre Moscovici said that a change in the rules governing the EFSM, an EU fund that was used to provide the first bridging loan, would enable the fund to be used for a second loan. The new rules provide a guarantee to non-euro member states which had been concerned that the fund, intended for the full 28-member EU rather than the narrower group of countries in the single currency, was being diverted to bailout the euro. (Bloomberg 23.07)

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6.2 Greece Begins Bailout Talks With Dispute On Upfront Actions

Greece’s latest cycle of talks with its creditors started with a quarrel, as officials argued over what upfront commitments the government has yet to implement in order to tap emergency loans next month. Technical experts from the European Central Bank, the IMF, the European Stability Mechanism and the European Commission are in Athens to negotiate with their Greek counterparts on the list of policies that must be legislated over the next three years in exchange for a lifeline of as much as €86 billion ($95 billion).

A so-called Memorandum of Understanding would need to be agreed upon in the next two weeks, so that a bailout can be in place before a payment on bonds held by the ECB comes due on 20 August. Failure to do that might force another bridge loan to avert default, which may also come with strings attached. The latest talks will focus on changes to the Greek pension system, labor market, fiscal policy and market regulation.

Creditors want PM Tsipras to restore trust by legislating some measures now, including sales tax increases, before talks on a new bailout can begin. In two votes over these so-called prior actions, held earlier this month, about a quarter of his Syriza- party lawmakers defected, stripping the premier of his parliamentary majority and forcing him to rely on opposition backing.

Greece imposed capital controls in June following a government decision to hold referendum on a bailout plan offered by the euro area. After voters delivered a resounding “no” vote to the economic conditions attached, Prime Minister Tsipras went on to agree to a plan on similar terms under pressure of financial collapse. Demands for further prior actions from creditors, including tax increases for farmers and pension cuts, could add more strains to the governing coalition. (Bloomberg 28.07)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Hebrew University Listed Among World’s Top 25 Schools

The Saudi Arabia-based Center for World University Rankings has once again ranked the Hebrew University of Jerusalem as one of the world’s top universities, placing it 23rd on its list of 1,000 universities. The university moved down one spot from its 2014 ranking. On its website, the center says it publishes the “only global university ranking that measures the quality of education and training of students, as well as the prestige of the faculty members and the quality of their research, without relying on surveys and university data submissions.”

The Weizmann Institute of Science was ranked 39th and Tel Aviv University placed 86th. The other Israeli universities that appeared in the list are: the Technion – Israel Institute of Technology (136), Ben-Gurion University of the Negev (349), Bar-Ilan University (521) and University of Haifa (700). Harvard University once again topped the world list, with Stanford University in second place and the Massachusetts Institute of Technology in third. Among the top 20 universities, 15 are based in the United States. (Israel HaYom 20.07)

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7.2 Weizmann Institute Ranked Tenth in World

The Weizmann Institute of Science has ranked 10th in an international research study by the Centre for Science and Technology Studies (CWTS) of Leiden University, the Netherlands. The Israeli public research university in Rehovot is the only one of the top 10 research institutes that is outside the US. The CWTS Leiden Ranking is based on numeric indicators including publishing statistics for the scientists of the various universities and citation data for these papers. The ranking looked at scientific papers from 2006-2015. According to the survey, 19% of the research papers published by Weizmann Institute scientists are ranked in the top 10% of scientific papers for impact; 21.4% of papers by Weizmann Institute scientists in the life sciences and medicine are ranked in the top 10% for impact; 2.4% of the Institute’s scientific articles are ranked in the first percentile for highest scientific impact, and 64.7% were in the top half for the impact factor. The report also shows that publications of Weizmann Institute scientists were cited 27,859 times from 2006-2015. The institute’s first ranking a decade ago was 19th place. (Various 22.07)

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7.3 Israeli NBA Player Brings Basketball Stars to Holy Land

NBA player Omri Casspi visited Israel with seven of the league’s top players, who visited Israel as part of a tour organized by a foundation Casspi has formed, which seeks to fight anti-Israel boycott, divestment and sanctions initiatives. Casspi was joined by fellow Sacramento Kings players DeMarcus Cousins, Rudy Gay and Caron Butler, as well as by Chandler Parsons of the Dallas Mavericks, Iman Shumpert of the Cleveland Cavaliers, Tyreke Evans of the New Orleans Pelicans and Alan Anderson of the Washington Wizards. NBA Player Relations Director Roger Mason, formerly of the Sacramento Kings, who played with Israel’s Hapoel Jerusalem during the 2005-2006 season, joined the players, as will Nick U’Ren, special assistant to the Golden State Warriors’ head coach. The National Basketball Association has welcomed the initiative, with NBA Commissioner Adam Silver giving it his personal blessing. (Israel Hayom 23.07)

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*REGIONAL:

7.4 UAE Issues New Law Against Hate Crimes & Discrimination

UAE President Sheikh Khalifa bin Zayed has issued a law against discrimination in any form on the foundation of religion, class, race or ethnicity. No. 02 Law of 2015 bans any form of hate crimes that attack religions through any form, speech, written word, or via online media. The law aims to safeguard the community on the basis of and environment of tolerance and open-mindedness. The new law also criminalizes any vandalism of religious symbols, rituals or holy rites. Citizens are encouraged to report any form of religious-hate incitement or racism to the authorities. Penalties for violation of the various provisions of the law include jail-terms of six months to over 10 years and fines from AED50,000 to AED2 million. (WAM 20.07)

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7.5 Saudi Businesswoman Arrested for Holding Party

A businesswoman in Saudi Arabia is facing a criminal court case for hosting a mixed-sex party to celebrate her company’s first anniversary. Saudi authorities allege she “lied to government agencies” by turning what was supposed to be a simple dinner into a concert, for which she sold tickets. The woman submitted a proposal to authorities to host a celebration with company employees, including an opening ceremony, an introductory presentation, gifts and a dinner, a source at the Bureau of Investigation and Public Prosecution said. Permission was granted on the basis the event remained a private company celebration, with men and women separated, as per Saudi custom.

However, the religious police – the Commission for the Promotion of Virtue and Prevention of Vice (Haia) – claimed it turned into a concert, with tickets sold for SR350 ($93) via an advertisement on Instagram. The woman was arrested by Jeddah Police and a trial is expected to start in a few days. The event did not go ahead and about 300 tickets sold were reportedly reimbursed. (Al Arabia 28.07)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Teva to Acquire Allergan Generics for $40.5 Billion

Teva Pharmaceutical Industries signed a definitive agreement with Ireland’s Allergan plc to acquire Allergan Generics in a transaction valued at $40.5 billion. Upon closing, Allergan will receive $33.75 billion in cash and shares of Teva valued at $6.75 billion, representing an estimated under 10% ownership stake in Teva, with the number of Teva shares determined based on Teva’s volume weighted average trading prices during the 15 days prior to the announcement and five days following the announcement.

Teva believes the acquisition will be significantly accretive to non-GAAP EPS, including expected double-digit non-GAAP EPS accretion in 2016 and more than 20% accretion in year two and year three following the close of the transaction. The transaction was unanimously approved by the Boards of Directors of Teva and Allergan and is expected to close in Q1/16.

This strategic acquisition brings together two leading generics businesses with complementary strengths, brands and cultures, providing patients with more affordable access to quality medicines, and creating significant financial benefits for Teva stockholders. The transaction will create a leader in the branded generics industry with an overall product portfolio that leads the industry in terms of differentiation and durability and offers promising growth opportunities. The new Teva will further transform the global generics space through its best-in-class generics pipeline, R&D capabilities, operational network, supply chain, global commercial deployment and infrastructure to achieve greater efficiencies across the healthcare system and provide patients and consumers across the globe with better access to high quality affordable medicines.

When combined with Teva’s strong generics portfolio, Allergan Generics’ pipeline, which holds a leading position in first-to-file opportunities in the U.S., will further enhance Teva’s goals of delivering the highest quality generic medicines at the most competitive prices and cultivating the best development pipeline in the industry. The resulting world-class product portfolio will be complemented by a significantly expanded and more efficient global footprint, including leadership positions and strengthened operations, sales and R&D platforms in attractive markets around the world. In addition, Teva expects to enhance its financial profile significantly with highly diversified revenues and profits and to unlock substantial, achievable cost synergies by eliminating duplication and inefficiencies on a global scale and capturing economies of scale. The result is a stronger, more competitive Teva, well positioned to thrive in an evolving global marketplace and to deliver enhanced value to its stockholders and other stakeholders.

Teva’s generics R&D is closely integrated with its extensive clinical expertise in developing specialty products. This transaction will afford Teva unrivaled speed and flexibility, creating a company well positioned to transform the growing global generics space in markets throughout the world, delivering even greater value to patients and stockholders, as well as to healthcare systems around the world, and improving adherence and health outcomes in general. The result is a company well positioned to ensure product development activities that support sustainable long-term organic growth.

Teva’s acquisition of Allergan Generics will improve international commercial opportunities by positioning Teva to significantly enhance the global scale of its sales and R&D platforms. Together, Teva and Allergan Generics will have a commercial presence across 100 markets, including a top three leadership position in over 40 markets. (Teva 27.07)

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8.2 Teva Withdraws Proposal to Acquire Mylan

Teva Pharmaceutical Industries announced that it has withdrawn its cash and stock proposal to acquire all of the outstanding ordinary shares of Mylan N.V. Teva does not intend to continue to pursue a transaction with Mylan at this time. Teva’s decision to terminate the proposal to acquire Mylan follows the announcement that Teva has entered into a definitive agreement with Allergan to acquire Allergan Generics. Teva intends to review its options with respect to its ownership of approximately 4.6% of the outstanding ordinary shares of common stock of Mylan.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products. (Teva 27.07)

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8.3 Israel’s SightDx Detects Malaria in Blood in Only Three Minutes

More than half a million people lose their lives to malaria each year and in 2013 alone, West Africa suffered nearly 198 million cases of the disease, according to the World Health Organization. One of the main problems with malaria is its long delays in diagnosis through conventional blood tests. Now, a medical breakthrough means doctors will be able to use computing powers to instantly detect and reduce the prevalence of blood-borne diseases.

Jerusalem’s Sight Diagnostics (or SightDx) utilizes computer vision technology to visually scan “stained” blood samples under a fluorescent microscope and detect the presence of anomalies in blood cells. The whole process takes only three minutes, in contrast to lab results, which can take up to one or two days. SightDx is not the first to use computer-based blood diagnosis, but its vision-based algorithms for identifying blood-borne diseases are unique. These algorithms visually scan and analyze the blood – relying on characteristics such as size, shape, fluorescence intensity, and morphology – and the computer that functions as the human eye in seeking out anomalies is faster, accurate and more efficient.

SightDx claims its recent pilot tests were “99% accurate in sensitivity and 98% in specificity. The firm has already fulfilled orders for 20 malaria-detecting devices, including from India’s largest pathology lab in Delhi. SightDx is also developing a complete blood count test, which is expected to hit the market next year, after further clinical trials, and will include tuberculosis and parasite detection. (NoCamels 20.07)

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8.4 EarlySense & CMS to Further Penetrate Healthcare Markets

EarlySense, together with Minnesota’s Custom Medical Solutions (CMS), a leading provider of Asset Management Solutions servicing LTAC’s, LTC, Acute Care, Rehab Facilities, and Home Care organizations, announced a collaboration agreement establishing CMS and EarlySense as commercial partners. Through this agreement, CMS will be offering rental programs, and direct bundled purchasing of the EarlySense System, along with the multitude of other products and solutions offered currently by CMS. Through the partnership, healthcare systems will have access to EarlySense’s solutions; CMS will offer customers a range of purchasing options including flexible and innovative rental programs.

Ramat Gan’s EarlySense, the market leader in Contact-Free and Continuous patient monitoring, assists clinicians in early detection of patient deterioration and in identifying and preventing potential adverse events such as patient falls and pressure ulcers. The company’s solutions monitor patients’ heart and respiratory rate, as well as movement, with a unique sensor that is placed under the mattress. The system was designed to address safety challenges as well as failure to rescue of those patients who are usually monitored by nursing staff approximately once every four to eight hours in general care floors and alternate care facilities. (EarlySense 17.07)

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8.5 Peritech Pharma’s Novel Hemorrhoids Treatment Shown to be Superior

Peritech Pharma announced positive pivotal trial results for its lead product, PP-110, a novel over-the-counter (OTC) anti-hemorrhoidal product. PP-110 was found to be effective in treating hemorrhoids and superior to conventional treatment. The randomized, open label study compared the safety and efficacy of PP-110, a novel treatment for hemorrhoids, with the US golden standard, Preparation-H Maximum Strength Cream, in the treatment of grade 2–3 hemorrhoids. Over 100 patients participated in the 14 day study. PP-110 (in gel and wipes form) was provided to some patients once daily, while other patients received Preparation-H Extra Strength (Pfizer) per label (i.e. 3-4 times per day). Patients receiving PP-110 gel reported statistically significant better results in the three most prevalent clinical parameters relating to common symptoms of hemorrhoids, namely pain, bleeding and itching, compared to patients treated with the comparator.

The Company also announced the receipt of a U.S. Patent No. 9,072,747 from the United States Patent and Trademark Office (USPTO), which includes claims protecting the use of PP-110’s compositions and methods of treatment for anorectal disorders. The granted patent has a term extending to March 2034.

Founded in 2012, Yavne’s Peritech Pharma is a privately held specialty anal-rectal pharmaceutical company, targeting numerous indications with large markets and clear unmet medical needs. The Company’s lead product, PP-110, a novel OTC anti-hemorrhoidal gel, is ready for commercialization in the US. Additional products include PP-120 for pruritus ani (anal itching) which has recently successfully completed Phase I testing, and is planned to commence a pivotal study by the end of 2015. (Peritech Pharma 21.07)

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8.6 NanoLock to License Additive for Mitigating Antimicrobial Resistance

Herzliya’s NanoLock entered into a license agreement with Hadasit Medical Research Services & Development (Jerusalem, Israel), Hadassah Ein Kerem Medical Center Jerusalem and Yissum Research Development Company of the Hebrew University of Jerusalem. This agreement gives NanoLock the license patents, patent applications and related know-how of anti-biofilm nanoparticles for medical devices and health consumables mitigating antimicrobial resistance (AMR).

NanoLock, a start-up company, has developed a proprietary nano-polymer additive that protects against any microbial infection which transforms regular implantable and non-implantable devices to biofilm-resistant platforms. These anti-biofilm properties reduce or eliminate device or implant-associated infection, improve clinical outcomes and increase device longevity. The nano-polymer additive’s unique features are that they are activated only upon contact, and do not leak or dissolve into the surrounding environment. This makes it completely safe to patients and most importantly, the device’s anti-biofilm properties are preserved indefinitely. (NanoLock 21.07)

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8.7 One World Cannabis to Offer New Alternative Treatment for Chronic Pain

OWC Pharmaceutical Research Corp., a Petah Tikva based developer of cannabinoid-based therapies targeting a variety of different indications, is offering new and alternative hope to patients diagnosed with chronic pain. The company’s wholly owned subsidiary, One World Cannabis, has already filed two provisional patent applications with the USPTO related to the development of two unique formulations that include cannabis extracts and a new delivery system to treat fibromyalgia and migraines, and has begun researching and developing new cannabis-based therapies to help alleviate the suffering of patients experiencing enduring pain.

The news comes about after the FDA recently announced to increase existing heart attack and stroke warnings for both over-the-counter and prescription non-aspirin nonsteroidal anti-inflammatory drugs (NSAIDs), which are typically used to treat chronic pain. The cannabis-based novel treatment employed by One World Cannabis could be an alternative to NSAIDs to treat long-lasting pain and fever from many different long- and short-term medical conditions. In addition, the cannabis-based treatment will provide physicians, as well as patients, with the ability to control and administrate optimal dosage, thus offering an alternative to current delivery systems that are not acceptable to scientists and physicians, such as smoking marijuana, edibles and oil extracts with no substantial dosage control.

The clinical study on fibromyalgia is expected to begin in Q4/15 after receiving IRB (Helsinki Committee) approval. One World Cannabis also plans to start researching the relief of migraine attack symptoms, again by using a formulation comprising, inter alia, a therapeutically effective amount of Tetrahydrocannabinol (THC), Cannabidiol (CBD). (OWC 17.07)

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8.8 Syneron Receives Korean Clearance for PicoWay Picosecond Laser

Syneron Medical received Korean Ministry of Food and Drug Safety (MFDS) regulatory clearance for the PicoWay picosecond laser. With this regulatory clearance, the Company can fulfill PicoWay orders from its Korean distribution partner, with additional commercial launch activity in Korea anticipated later in Q3/15.

PicoWay incorporates picosecond (one trillionth of a second) pulse duration to generate an ultra-short pulse and very high peak power of laser energy on the skin. The high energy, ultra-short picosecond laser pulse creates a strong photo-mechanical impact that optimizes fracturing of tattoo ink or pigmentation. Tattoo colors known to be resistant to nanosecond devices can now be treated. There is also minimal risk of side effects, as the ultra-short pulses require low fluences to break up pigmentation. The innovative PicoWay Technology is the world’s first dual wavelength picosecond laser and is integrated into a proven, reliable Candela platform that offers high reliability, demonstrated performance and low cost of ownership.

Yokneam’s Syneron Candela is a leading global aesthetic device company with a comprehensive product portfolio and a global distribution footprint. The Company’s technology enables physicians to provide advanced solutions for a broad range of medical-aesthetic applications including body contouring, hair removal, wrinkle reduction, tattoo removal, improving the skin’s appearance through the treatment of superficial benign vascular and pigmented lesions, and the treatment of acne, leg veins and cellulite. (Syneron Medical 28.07)

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8.9 Merck Acquires cCAM Biotherapeutics

New Jersey’s Merck, known as MSD outside the United States and Canada, and cCAM Biotherapeutics announced today that the companies have signed a definitive agreement under which Merck will acquire cCAM Biotherapeutics, a privately held biopharmaceutical company focused on the discovery and development of novel cancer immunotherapies. Under terms of the agreement, Merck, through a subsidiary, will acquire all outstanding stock of cCAM in exchange for an upfront payment of $95 million in cash. In addition, cCAM shareholders of record are eligible to receive a total of up to $510 million associated with the attainment of certain clinical development, regulatory and commercial milestones. The transaction is subject to certain closing conditions.

The acquisition provides Merck with several early immunotherapy candidates including cCAM Biotherapeutics’ lead pipeline candidate, CM-24 – a novel monoclonal antibody (mAb) targeting the immune checkpoint protein CEACAM1 that is currently being evaluated in a Phase 1 study for the treatment of advanced or recurrent malignancies, including melanoma, non-small-cell lung, bladder, gastric, colorectal, and ovarian cancers. Based on the transaction, cCAM Biotherapeutics will become a wholly owned subsidiary of Merck and continue to advance the development of CM-24 in its ongoing Phase 1 clinical trial. cCam was originally established under the Israeli Office of Chief Scientist’s incubators program.

Founded in 2010, Misgav’s cCAM is a biopharmaceutical company focused on the discovery and development of novel immunotherapies to treat cancer. Its lead product, CM-24, is a first-in-class humanized anti-CEACAM1 monoclonal antibody undergoing Phase 1 clinical trials. (Merck 28.07)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 ECI Telecom to Modernize TenneT TSO’s High Capacity Network

ECI Telecom and its long term partner, 3M services GmbH, announced that TenneT TSO GmbH Germany deployed ECI’s Neptune (NPT) and Apollo families of packet-optical solutions. This initiative is intended to modernize TenneT’s infrastructure and to advance its smart grid development plans. By choosing ECI and 3M, TenneT will enjoy a new future-proof transmission network, while seamlessly converging legacy with packet traffic and keeping the required strict service availability attributes. For the last 15 years, 3M Services and ECI have worked together to bring the most cost-effective and optimized telecom solutions to their customers.

TenneT TSO is one of Europe’s top 5 electricity transmission system operators (TSO). Located in the Netherlands and Germany, TenneT supplies power to more than 41 million users over 21,000 kilometers of high voltage lines. As millions depend upon the reliability of these services, the need for a resilient and highly robust system is imperative.

Petah Tikva’s ECI is a global provider of ELASTIC network solutions to CSPs, utilities 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 cyber security solution, and a range of professional services. (ECI 15.07)

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9.2 RADCOM Bolsters Its NFV-Based Customer Experience Solution

RADCOM announced the launch of MaveriQ Manager, completing the full virtualization of its MaveriQ solution. With the launch of the MaveriQ Manager, RADCOM has now completed the virtualization of all layers of its MaveriQ solution, enabling the entire solution to reside on Cloud infrastructure. Many Tier I operators are progressing towards virtual architectures, which are proving to be faster and easier to deploy and maintain than traditional network architectures, while also being more flexible and technology-independent. MaveriQ Manager is an ETSI-compliant VNF (Virtual Network Function) manager, responsible for communication between RADCOM’s VNF, the orchestration layer, and the infrastructure layer, providing full lifecycle management of the virtualized solution.

MaveriQ Manager enables full automation for a wide range of procedures including: virtual probe instantiation, automated vertical and horizontal scaling, healing and automated hitless software upgrades – with no data loss. With MaveriQ Manager, RADCOM’s NFV Solution becomes a totally self-managing and self-correcting system, able to identify changes in network topology and traffic levels and adjust itself accordingly, thus saving time and resources.

Tel Aviv’s RADCOM provides innovative service assurance and customer experience management solutions for leading telecom operators and communications service providers. RADCOM specializes in solutions for next-generation mobile and fixed networks, including LTE, VoLTE, IMS, VoIP, UMTS/GSM and mobile broadband. RADCOM’s comprehensive, carrier-grade solutions are designed for big data analytics on terabit networks, and are used to prevent service provider revenue leakage and to enhance customer care management. RADCOM’s products interact with policy management to provide self-optimizing network solutions. (RADCOM 15.07)

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9.3 OriginGPS Enables Geoforce Harsh Environment Tracking

Airport City, Israel’s OriginGPS announced that Dallas’ Geoforce, an international provider of asset management solutions for oil and gas and other industries has integrated OriginGPS technology into its GTx series of GPS tracking devices to minimize GPS power consumption while reducing the time to first fix (TTFF) to make it easier for customers to track their assets, even in harsh environments, remote locations and in motion.

OriginGPS’ Spider module is a miniature GPS receiver that delivers outstanding performance and sensitivity with low power consumption. It achieves a rapid time to first fix (TTFF) of less than one second, with approximately one meter accuracy and -163dBm tracking sensitivity. Because it detects changes in context, temperature, and satellite signals, it achieves a state of near continuous availability, while consuming mere microwatts of precious battery power.

OriginGPS is a world-leading designer, manufacturer and supplier of miniaturized GNSS modules (Spider family), antenna modules (Hornet family) and antenna solutions. OriginGPS introduces unparalleled sensitivity and noise immunity by incorporating its proprietary Noise Free Zone technology for faster position fix and navigation stability even under challenging satellite signal conditions. (OriginGPS 21.07)

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9.4 CYREN Unveils First Mass-Scale Sandbox Service

CYREN launched its CYREN Next Generation Sandbox service. The new service is a key element in the industry’s first complete cloud-based global Web and messaging protection framework that CYREN will release later this year. The CYREN Next Generation Sandbox service is unique in its ability to harness the power of automated, multi-layered sandboxing capabilities that rely on global cyber intelligence instead of traditional human analysis or reactive procedures initiated due to customer infection or attack.

The multi-tenant service automates threat analysis on a mass-scale through a vast array of cloud-based sandboxes. It uses proprietary heuristic logic to direct potential threats through multiple sandboxes, changing the item’s reputation score as it progresses. A fully automated process chooses the best environment to analyze malware samples according to extracted features while another process is responsible for ensuring optimal execution of the analysis and redirecting to better suited environments as needed. Once an item is proven to be a threat, the CYREN global cyber intelligence platform is instantaneously updated and CYREN users are proactively protected against that threat.

Founded in 1991, Herzliya’s CYREN is a long-time innovator in cyber intelligence, offering next generation Security as a Service solutions to enterprises and powering the security solutions of more than 200 of the world’s largest IT and security technology providers. Providing detection of cyber-attacks for many of the largest networks, CYREN maintains the broadest and deepest real-time Internet threat database in the world. (CYREN 27.07)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s CPI Rises by 0.3% in June

Israel’s Consumer Price Index (CPI) rose by 0.3% in June, the Central Bureau of Statistics announced, slightly above market expectations of a 0.2% rise. After a period of negative inflation, the CPI has now risen for four successive months, although it has fallen 0.4% over the past 12 months and by 0.2% since the start of 2015. There were notable price rises in clothing (9.8%), and dairy products (2.6%). Notable declines were in fresh vegetables (2.4%) and fresh fruit (8.3%). (CBS 15.07)

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10.2 Israel Hayom Expands Lead as Israel’s Most Read Paper

Israel Hayom is the most widely read newspaper in Israel on weekdays and it has increased its lead over Yediot Ahronoth, according to the new Target Group Index report, reviewing media consumption in the first half of 2015. The report, which analyzed the Israeli public’s exposure to newspapers and radio, found that 40.8% of the public read Israel Hayom on a regular basis on weekdays in the first half of 2015, up from 38.9% in the second half of 2014. Meanwhile, Yedioth’s weekday exposure rate for the first half of 2015 was 35.5% – giving Israel Hayom a commanding 5.3% margin over its main competitor.

The weekday exposure rates for other daily newspapers in Israel in the first half of 2015 were: The Post (7.7%), Haaretz (4.6%), Globes (4.3%) and Maariv-Hashavua (4.2%). Haaretz’ weekday exposure rate was an all-time low for the newspaper. The exposure rate of Israel Hayom’s weekend edition rose from 34% in the second half of 2014 to 36.9% in the first half of 2015. This increase for Israel Hayom took place as the exposure rate of Yedioth’s weekend edition fell by around 3% and there is now no statistically significant difference between the exposure rates of the Israel Hayom and Yedioth weekend editions. The exposure rates of the weekend editions of Maariv-Sof Hashavua and Haaretz were both 5.9% in the first half of 2015.

The report indicates that around 1.7 million Israelis read Israel Hayom on a daily basis. This is a remarkable accomplishment, given the large number of copies of Yedioth which are handed out for free both on weekdays and weekends. The growth in Israel Hayom’s readership has come even as the overall number of Israelis reading newspapers on a daily basis has fallen. In the first half of 2015, the overall weekday exposure rate for print media was 58.3% – down from 59.9% in the second half of 2014. (Israel Hayom 23.07)

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11: IN DEPTH

11.1 ISRAEL: Summary of Israeli High-Tech Company Capital Raising Q2/15

Key facts:

VC-backed deals shrink to 44%, down from 75% quarterly average in past 6 years
Israeli VC funds involvement down to just 10% of total investments
Late stage companies attract 43% of all capital in Q2/15
Software leads all investments, with $487 million – highest quarterly amount for the sector

On 28 July, IVC and KPMG reported that 179 Israeli high-tech companies raised $1.12 billion in Q2/15. The quarterly amount was remarkably high, exceeding even former record high $1.11 billion invested in Q4/14. This constitutes a 12% increase from the $997 million raised by 163 companies in Q1/15 and 20% more than the $928 million invested in 174 companies in Q2/14.

In the first half of 2015, 342 Israeli high-tech companies attracted the highest amount of $2.1 billion, compared to the $1.6 billion raised by 334 companies in H1/14, and the $878 million invested in 307 companies in H1/13.

The average financing round in H1/15 was $6.2 million, while in H1/14 the average was $4.8 million, and $2.9 million in H1/13.

Ofer Sela, partner at KPMG Somekh Chaikin’s Technology group, commented: “Fifty percent of the amount raised during this quarter and even more since the beginning of 2015, results from large deals of $20 million or more raised per round. The overall number of growth companies attracting investments continues to increase quarter over quarter, reflecting the health of the venture-backed ecosystem in Israel and the patience of investors supporting their portfolio companies to complete homeruns and grow into ‘Unicorns’ that are substantial and mature.”

In Q2/15, investments in VC-backed deals decreased significantly, with 99 deals totaling $486 million – the lowest share for VC-backed deals in six years, at 44%. The amount fell 42% from the $838 million raised in 92 VC-backed deals in Q1/15, and was 9% below the $533 million invested in 107 deals in Q2/14.

The average VC-backed deal dropped to $4.9 million, compared with the previous quarter’s record of $9.1 million, back to the Q2/14 level, which stood at $5 million.

In H1/15, 191 VC-backed deals accounted for $1.3 billion, or 63%, of total investments in the period. The amount was 33% up from $1 billion (62% of total) invested in 183 deals in H1/14, and 97% above the $672 million (77% of total) raised in 182 deals in H1/13.

IVC-KPMG’s analysis of investors by type revealed that foreign private equity funds and corporate investors were responsible for $477 million or nearly 43% of the total investments in Q2/15. Koby Simana, CEO of IVC Research Center, notes: “Most of the increase in capital raising in the second quarter can be attributed to two exceptionally large deals, where private equity funds invested in growth-stage companies. Moreover, an investor profile analysis we conducted shows an impressive increase in the number of foreign private equity funds investing directly in Israeli technology companies – i.e., in deals where the equity capital is placed directly in the company, rather than shareholder equity changing hands.”

Simana believes that the interest shown by private equity investors in growth stage companies is yet another indicator of the Israeli technology- and venture capital industry’s evolvement and maturity. “If we want the local high-tech industry to continue growing and see more large-scale, mature companies emerge, there is room for technology investments from more than just VC funds – local or foreign. The industry needs a variety of investors and investment models to support companies throughout various stages. Private equity funds and international conglomerates are the kind of investors we want to see supporting growth companies, and we have lately found that, indeed, the number of growth stage technology companies in Israel is rapidly increasing. As the number of high growth companies and company valuations climb even further, we expect to see a more diverse investor mix,” concludes Simana.

Sela from KPMG added: “Investors from Asia are investing in an increasing number of Israeli growth companies, adding to the overall amount of cash available for market expansion. Overall, Israeli portfolio companies are priced much more reasonably than Silicon Valley companies, making Israel an attractive location for both investments and acquisitions.”

Israeli VC Fund Investment Activity

In Q2/15, Israeli venture capital funds invested $117 million in Israeli high-tech companies – just 10% of all capital investments. The amount was 35% below the $180 million (18% of total) invested in Q1/15, and 23% down from the $152 million (16% of total) invested in Q2/14.

First investments by Israeli VC funds have slightly increased in Q2/15, and accounted for 38%, compared with 31% in the previous quarter and 35% in Q2/14.

Capital Raised by Sector, Stage

The software industry led capital raising in Q2/15, for the first time since Q1/13, with $487 million (44%) invested in 50 companies. The amount was the largest for the sector, almost triple the last two-years’ average. Internet and life science investments, which led all sectors in Q1/15, decreased reaching 21% and 13%, respectively.

In Q2/15, late stage companies accounted for the majority of investments, with $480 million, followed by mid-stage companies with $379 million. Together, growth stage deals accounted for 77% of all quarterly investments, a noticeable increase compared to the 63% they reached together in each of the last three quarters. Early stage companies followed, with 19%, while seed investments accounted for 4% of the capital, though constituting a quarter of all the deals.

IVC Research Center is the leading online provider of data and analyses on Israel’s high-tech, venture capital and private equity industries. Its information is used by all key decision-makers, strategic and financial investors, government agencies and academic and research institutions in Israel.

KPMG Somekh Chaikin’s technology professionals offer insights and experience accumulated from a long history of work with technology and life science companies. Through a global network of highly qualified professionals in Israel, the Americas, Europe, the Middle East, Africa and Asia-Pacific, KPMG helps clients address the opportunities and challenges driven by new business models such as cloud computing, mobile services and others. KPMG is a global network of professional firms providing Audit, Tax and Advisory services. (IVC 28.07)

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11.2 ISRAEL: Israelis Need Double Number of Salaries to Buy Home

Globes noted a Deloitte Touche Tohmatsu report which found that Israelis must work far longer to buy an apartment than Europeans. Although Israel lies deep within the Middle East, Deloitte Touche Tohmatsu decided that Israel is an interesting enough market to be part of their study examining various criteria and characteristics in the real estate market in the 17 leading countries in Europe for 2014.

Financing: Only three years to buy an apartment in Belgium

The real estate market is a capital intensive market, and its development therefore depends above all on financing concerns. The rates of leverage and local interest rate can indicate the risk in the market, since in a more challenging and problematic market, the bank will charge a higher premium (in the case of Europe, the interest rate beyond the Euro LIBOR rate – the equivalent of the Israeli prime rate).

Unsurprisingly, the faltering Russian market is at the top of this list, with the bank demanding a 10% premium from the developer in order to finance a project. The loan to value ratio (the amount of financing divided by the value of the project) in this market is 80%, one of the highest, compared with the European average of 68%.

The Israeli market is in the middle of the table, with an average premium of 2.5%, lower than the European average of 3.3% above the Euro LIBOR. Belgium is at the bottom of the list, with a banking interest spread of less than 2%, hinting that the risk in this market is moderate, which is confirmed by the fact that the working time required for a Belgian to pay for an average new apartment (70 sq.m.) is the shortest – only three gross yearly salaries.

Italy: First of all, sell half the project

For the second straight year, Italy is at the bottom of the table measuring the number of housing units whose construction has been completed per 1,000 residents. Italy and Hungary are the only two countries in which this ratio is less than 1.

According to this index, Israel enjoys a respectable ratio of 6.1, double the European average, but the index of building starts per 1,000 residents is a more disappointing 4.3. This is still above the European average, but is lower than the Israeli ratio for 2013.

Ireland: A meteoric rise

The study shows that new apartment prices rose across the board in most markets in 2014. At the same time, these figures do not take into account the inflation rate in the markets and the differences in the exchange rates of local currencies against the euro. The study also fails to neutralize trends specific to a given year.

Despite these reservations, it can be stated that the hottest European market, at least in terms of price rises, is Ireland, where the prices of new apartments soared 31.7%. This follows years of stagnation and financial crisis, and it is likely that the market will continue rising in the coming years, because the number of housing units per 1,000 residents is only 342, the lowest of the all the countries examined.

The UK takes second place with a 21.6% rise in prices, while Russia posted an abnormal 16.6% drop in prices, which, combined with the devaluation of over 50% in the ruble against the euro, could hint at opportunities in the Russian housing market for an investor not deterred by high risk.

Prices rose 11.6% in Israel, and 7.8% in Jerusalem, putting Israel in the middle of the table, between Germany and Spain.

Israel stands out in price per sq.m.

Even though the increase in housing prices in Israel is not exceptional, Israel is in second place in price per sq. m., with €4,000 per sq.m. of new construction sold in 2014, between the UK and France.

Tel Aviv is responsible for putting Israel up on the national scale. Tel Aviv is in fourth place among cities, after London, Paris, and Munich, with an average price of €6,042 per sq.m. of new construction. The figures are slightly biased, because they do not take into account the shekel appreciation against the euro, and do not compare similar properties.

One of the most prominent figures, which highlights Israel’s problem, is number of work years a person must work in order to buy an average new (70 sq.m.) apartment. Israel leads the table with 13 years’ gross salary, double the average in the survey, which concludes, among other things, that the property prices in Israel are significantly higher that the correct equilibrium value. At the same time, it should be kept in mind that the figures refer to new apartments only. Almost three times as many secondhand apartments are sold in Israel, and their average prices are cheaper.

The conclusion is obviously that the burden of paying for housing is much heavier for Israelis than for their European counterparts, both in absolute prices and in the ratio of income to prices. At the same time, the Israeli market is much less prominent in other parameters, indicating that the high prices are not a result of periodic one-time market failures that will come to an end; they are objective opening figures indicating that there is no quick solution on the horizon.

“The gaps in a comparison with Europe are due mainly to the special characteristics of the Israeli market – a significantly higher rate of population growth rate than in Europe and the fact that Israel is a small and densely populated country. These gaps highlight the principal difficulties facing the government, the most important of which is increasing the supply of apartments by an extent that will moderate housing prices,” says Deloitte Brightman Almagor Zohar partner and real estate group head Doron Gabor. He adds, “Policy makers should take action to significantly increase the supply of housing: allocate more land at competitive prices, shorten times for obtaining building permits, provide support for appropriate infrastructure, and increase the number of employees in the sector. In addition, it is also important to provide backing for those providing credit in the market in order to facilitate the necessary rise in economic activity in the sector.” (Globes 20.07)

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11.3 ISRAEL: Israel’s Developing Relationship with Cyprus

Simon Henderson wrote on 27 July for the Washington Institute that President Anastasiades will likely use an upcoming summit to build momentum toward the development of offshore gas reserves, with Iran and other issues making the agenda well.

On 28 July, Israeli prime minister Binyamin Netanyahu visited Cyprus for discussions concentrating on natural gas, among other key topics such as Iran, counterterrorism, and the Palestinian peace process. The importance of the talks is evident in their timing: the meeting comes just six weeks after Cypriot president Nicos Anastasiades visited Jerusalem, and it will be Netanyahu’s first trip abroad since his March reelection.

Although the Cypriot media has indicated that no formal agreements are expected to be signed, the agenda will likely include development of the Aphrodite offshore gas field, which lies mainly in the island’s exclusive economic zone but also overlaps Israel’s EEZ. A map on the website of Noble Energy (the Houston-based company that discovered the field as well as various Israeli offshore reserves) indicates that a tiny fraction of Aphrodite, said to be 1-3%, extends into Israeli waters. But even this small amount will eventually require a “unitization agreement” so that there is no dispute over revenues from sale of the gas. Progress on developing the island’s gas resources contrasts with the situation in Israel, where authorities are stalemated over the regulatory framework for expansion of the already producing Tamar field and the yet to be developed Leviathan field (Licenses for these fields and Aphrodite are owned by Noble and a consortium of Israeli companies led by Delek).

More broadly, Netanyahu’s visit reflects the Israeli government’s good relationship with Nicosia. It may even provide an example for possible future agreements with Lebanon on maritime borders and shared hydrocarbon reserves.

Yet the talks are also likely to infuriate Turkey, which does not recognize the government in Nicosia or the EEZ agreement between Cyprus and Israel. Turkish commentators suggest that the best use of the Aphrodite gas would be to send it by seabed pipeline to the Turkish mainland. Currently, Noble is examining a more likely alternative: sending the gas via pipeline to Egypt, where it could be used domestically or converted into liquefied natural gas (LNG) for export. In the past, the Turkish navy and air force have harassed drilling activities in the Cyprus EEZ. But discussions on the Egypt option are more advanced than any Turkish proposals, and Cyprus/Noble/Delek will likely go on ignoring Ankara’s opposition.

Other issues likely to be discussed include the threat posed by Iran – Cypriot police recently discovered a cache of explosives linked to Tehran’s main terrorist proxy, Hezbollah. The subject of Israeli peace talks with the Palestinians will probably surface as well, since President Anastasiades has been anxious to breathe life back into the negotiations. But the gas issue will be at the core of the discussions, and from Nicosia’s perspective, Israel’s status as a counterweight to Turkey will be crucial to setting a tone for Cypriot development efforts.

Simon Henderson is the Baker Fellow and director of the Gulf and Energy Policy Program at The Washington Institute. (TWI 27.07)

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11.4 LEBANON: Lebanon’s Self-Defeating Survival Strategies

In its Middle East Report N°160, the International Crisis Group observed that Lebanon survives against all odds in a troubled environment thanks to a remarkable immune system, but that resilience has become an excuse for a dysfunctionality and laissez-faire attitude by its political class that could ultimately prove the country’s undoing.

Its Syrian neighbor, conjoined as if a Siamese twin, is drowning in blood, pushing waves of refugees across the border. Hezbollah, the Lebanese Shiite political party and armed movement, has been drawn into an increasingly vicious, costly and desperate regional sectarian struggle. Internally, stakeholders, fearing collapse of a flimsy political equilibrium, have failed to elect a president or empower the prime minister, preferring paralysis to anything they believe might rock the boat. Syria’s conflict is bringing out all kinds of problems, old and new, which in the long term have every chance of proving destabilizing. Despite the urgency, expecting bold measures is unrealistic, but politicians could and should take a small number of concrete steps that together would help reduce tensions while waiting the years it may take for the Syrian conflict to abate.

The country “functions” by containing a slowly unfolding crisis through increasingly polarizing security measures and informal arrangements between political rivals. These must compensate for the absence of a president, an efficient executive, a parliament that actively upholds the constitution, an independent judiciary, an economic vision and a refugee policy. While still holding up to external threats and pressures, Lebanon is so absorbed by this strenuous challenge that it is allowing itself, slowly but surely, to decay.

A number of factors play to its advantage. It has ceased to be a primary arena where attempts to shift the regional balance of forces play out; Syria, Iraq, Yemen and Libya have replaced it in that unhappy role. Massive military and organizational strength has discouraged or quelled any attempt to challenge Hezbollah. The bitter memories of the 1975-1990 civil war continue to inoculate polity and society against a recurrence of serious domestic strife.

That said, today’s dynamics bear an uncanny similarity to those that preceded the civil war. The militia culture of old, which on the face of it dissipated as armed groups were partially absorbed into the state, is resurgent. Longstanding socio-economic disparities are deepening. A large Syrian refugee influx evokes the earlier wave of Palestinian refugees, whose rejection by wide segments of society and subsequent politicization gradually turned what started as a concern into a major security threat. Hezbollah has added a highly divisive sectarian regional role to its original raison d’être as a resistance movement against Israel, for which it used to enjoy wide support. The army, a cross-sectarian institution considered the backbone of what remains of the state, is increasingly polarizing.

A new concern is the unprecedented disarray among Sunnis, one of the country’s three dominant communities along with Shiites and Christians. Their presumptive leadership, the Future Current party, echoes the growing frustrations of its base while failing to address them effectively; aloof and disinvested, it has opened space for competing claims, some radical or even violent, to represent this disoriented, fragmented and angry community, bewildered by Hezbollah’s assertiveness, the evolving U.S. attitude toward Iran and the relentless violence used against Sunnis by the regimes in Syria and Iraq. In turn, its gradual radicalization, by stirring existential fears of Sunni fundamentalism among other groups, is contributing to growing Shiite support for Hezbollah and its involvement in Syria, regardless of the cost of that escalating conflict. The army’s reluctance to challenge Shiite militancy while suppressing its more immediately threatening Sunni counterpart is deepening the divide.

The political class, which has emerged from and lived off conflict for several decades, is intent on limiting itself to containing crisis, preferring to avoid a bloody showdown it knows would be unwinnable and costly to all over attempting to address its underlying causes. While the informal domestic agreements it has struck are relatively effective stopgaps, they merely help preserve the status quo, while enabling its gradual erosion. Social and sectarian tensions are rising, as the quality of public services declines dramatically for ordinary Lebanese, and opportunities for jobs and personal fulfilment are available for a decreasing few. Instead of exhorting its politicians to represent their interests via established institutions, a weary population has lowered its expectations, circumventing the state apparatus and resorting to survival strategies. These further invigorate informal networks, relationships based on patronage and corruption and rules of the game that ensure the political class remains entrenched, unaccountable and detrimental to what is left of the state.

Poor governance, along with undemocratic, unconstitutional politics, is likely to make the problems fester to the point at which radical change will be the only means to tackle them. A cynical political class has a vested interest in putting off that moment, but, paradoxically, this is also a motivation that can be turned to the country’s advantage, as long as time and regional circumstances permit. While continuing to dither is a dead-end strategy for fixing the political system, any extensive alternative would be far worse in today’s dangerous environment.

The kinds of small but constructive steps that are feasible, however, include holding long-overdue parliamentary and presidential elections without waiting for an outside intervention to determine their outcomes, as has historically been the case and the excuse for postponement; adopting a policy toward Syrian refugees that both minimizes security threats and ensures respect of their dignity and rights; implementing a fair judicial process for Islamist and other prisoners; and holding security personnel accountable for abuses against prisoners, refugees and other vulnerable groups. Moreover, Lebanon is a country where popular activism is still tolerated; its non-profit organizations involved in promoting common good and public reforms must do more to enhance governance and democratic values, to include fighting corruption and promoting rule of law.

If the political class and others who can influence Lebanon’s course fail to take such basic, self-evident steps, the country will succeed in little more than surviving present-day contingencies by mortgaging its future. (ICG 20.07)

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11.5 IRAQ: Erbil-Baghdad Oil Relations Swing Between Deal, No Deal

Mohammed A. Salih posted in Al Monitor on 27 July that encouraged by more international interest in purchasing its oil, coupled with the apparent failure of the federal Iraqi government to provide agreed-upon budget handouts, the autonomous Kurdistan Regional Government (KRG) has embarked on a new policy of unilateral independent oil sales.

Since the beginning of June, the KRG has unilaterally sold the bulk of oil produced from its zone as well as Kirkuk’s fields, much to the Iraqi government’s ire.

Figures compiled by the KRG’s Ministry of Natural Resources show that out of around 17 million barrels of oil pumped in June to the Turkish Mediterranean port of Ceyhan, almost 12 million barrels were sold directly by the KRG, cutting out the federal authorities in Baghdad. The rest was delivered to Iraq’s State Oil Marketing Company (SOMO).

Multiple KRG sources told Al-Monitor on condition of anonymity that the KRG has continued its independent oil sales in July. The official details of July exports from Kirkuk and the KRG zone are not yet available. A KRG official who asked not to be identified told Al-Monitor in vague terms, “The oil that is supplied to SOMO is … transferred to SOMO’s tanks in Ceyhan.”

But Tariq Gardi, an Iraqi Kurdish member of the Iraqi parliament’s Oil and Energy Committee, told Al-Monitor that in the first 20 days of July, the KRG supplied around 150,000 barrels per day from the Kirkuk fields to SOMO and up to half a million barrels from fields under its official jurisdiction in the Kurdistan Region. If true, those figures would be well below the 550,000 barrels per day (bpd) rate agreed upon by the KRG and the central government. “This is a partial fulfillment of the deal, a new approach taken by the KRG,” said Gardi, who added that the Kurdish government has exported a daily average of slightly over half a million barrels of oil independently in July.

Despite the dramatic shift in policy, the KRG has not closed the door on reaching a solution with the Iraqi authorities, possibly in the form of renegotiating a new deal, a number of Kurdish officials told Al-Monitor.

“This was a decision forced on us by circumstances,” Sherko Jawdat, chairman of Kurdistan parliament’s Energy Committee, told Al-Monitor. “However, we’re still ready to make a deal with Baghdad on the condition that Kurdistan’s financial dues are guaranteed and paid.”

Baghdad and the KRG signed a deal on 2 December 2014, whereby the latter agreed to provide a total of 550,000 bpd from the fields in the Kurdistan region and Kirkuk. The KRG’s peshmerga forces have been in control of Kirkuk after Iraqi army units deserted their positions there in June 2014 in the face of an onslaught by Islamic State (IS) militants.

Iraq’s budget law for 2015 stipulates that if either the KRG or the federal government fails to honor its “oil or financial” commitments in the law, the other side does not have to abide by it either. The budget law stated that the KRG was entitled to 17% of the country’s total budget after certain amounts are deducted, including but not limited to the expenses of the office of president, prime minister, parliament speaker and the military.

The KRG claims it has received less than half of what it was due. In the first three months of this year, it did not deliver the agreed-upon amounts of oil to SOMO. However, KRG officials told Al-Monitor that even when the Kurdish government delivered 562,633 bpd in April and 557,621 bpd in May, the Baghdad government still did not pay its total dues. In May, for instance, Baghdad’s Finance Ministry paid the KRG around $420 million, which Iraq’s finance minister said was just around half of what the KRG was owed.

“The Iraqi government has not honored its commitments in the deal. They say they are short of cash,” Gardi told Al-Monitor. “And if we go by the budget law, if one side does not abide by its obligations, the other side can back off, too.” Gardi said the KRG has currently adopted a “partial fulfillment” approach toward the deal, whereby it’s still giving some oil to SOMO as a sign that it is not willing to scrap the deal altogether.

Authorities in Baghdad, however, insist the KRG has not met its obligations and dispute the figures it has put forward. SOMO head Falah al-Ameri told the Kurdish NRT television channel in early June that the KRG’s daily export levels had not even reached 500,000 bpd.

The absence of a neutral oil export third-party monitor has left the door open to politicization of the deal’s implementation and the presentation of often conflicting figures by each side. Burdened by a heavy economic downturn and almost empty coffers, KRG officials say they need to generate revenue to support the vast number of people who rely on it for sustenance and to ideally fund some of the many halted infrastructure projects.

The Kurdish government is now contemplating a reverse approach. “The KRG wants to turn the equation upside down. … It wants to be in control of its oil and be able to sell it and then give Baghdad [its share],” Sardar Aziz, an energy adviser to the Kurdish parliament, told Al-Monitor. For such a formula to be accepted by Baghdad, it requires renegotiating a new deal between the two sides. Aziz, however, is not optimistic about any new deal’s prospect of success.

“The expiration date on the deals between Baghdad and Erbil is getting shorter due to rapidly changing circumstances in the Middle East,” said Aziz. “You can’t have any long-term deal now because the balance of power keeps shifting all the time.”

But politicians in Baghdad fiercely oppose the KRG’s independent oil exports. “This is not a practical way. Every country should have only one sale outlet,” Ibrahim Bahrolulum, an Iraqi parliamentarian from the major Shiite bloc of the Iraqi National Alliance, told Al-Monitor. “The existence of multiple sale outlets will harm Iraq and its economy.”

When Kurdistan first initiated major independent oil sales in 2013 and 2014, the Iraqi government embarked on a campaign of lawsuits in different countries where the Kurdish oil was headed, including the United States, to dissuade international clients from buying the Kurdish oil. The lawsuits complicated the KRG’s exports and at least one Greek oil shipper halted the transfer of KRG oil.

However, hesitation on the part of international clients appears to have eased up, according to anonymous Kurdish sources who spoke to Al-Monitor. One source, who did not want to be identified because of the sensitivity of the matter, said he knew of three companies — at least two of which are Europe-based — that have expressed readiness to purchase KRG oil with payments made in advance.

But Bahrolulum warns the KRG that legal measures could follow again if it persists with direct oil sales. “The old scenario could occur again, and this would hamper the sale process in the markets,” said Bahrolulum.

Baghdad’s acceptance of Erbil’s approach will have serious ramifications for Iraq’s domestic situation, as well. “The Shiite alliance in Baghdad fears that Kurdistan’s practices will encourage Basra to follow suit as well,” Aziz said. “If Basra manages to become a federal region like Kurdistan, then Iraq will be a totally different country.”

The question for many in Iraq is how far Baghdad is willing to go in confronting the KRG over its independent oil exports, given that both sides are locked in a struggle for survival against the powerful enemy that is IS. (Al Monitor 28.07)

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11.6 UAE: Dubai’s Learning Curve Gets Smoother

Rising student numbers and a broader range of academic choice are driving expansion in Dubai’s private university system. However, according to the Oxford Business Group, institutions are being forced to tackle issues such as affordable student accommodation to drive further growth.

Institutions based in Dubai’s main higher education hub, the Dubai International Academic City (DIAC), are seeing student numbers swell. Enrollments in the 2014/2015 academic year were up 20% year-on-year, according to data issued in April by DIAC. In total, the zone’s student body grew to more than 24,000. “These increases can be directly attributed to a series of student recruitment and sourcing initiatives … in the last 2 years,” stated DIAC.

Some of the impetus for the increase has come from Russia, with a 129% rise in enrolments over the past three years, while Chinese and Filipino student numbers are up by 60% and 50%, respectively, over the same period, DIAC data showed.

This forms part of a wider trend in the emirate where institutions are looking beyond the traditional markets for growth. “Dubai is increasingly being seen as a global higher education destination, as well as a regional one,” Randa Bessiso, director of the Middle East, Manchester Business School, told OBG. “Universities see a lot of potential for expansion here and from our perspective as a global business school, we see growing interest in Dubai from institutions in China and Asia,” she added.

Expansion Plans

Expansion is set to take a number of routes. Higher learning will progress, with more courses being offered and more advanced degrees being added to the curriculum, according to Mohammed Salem, acting president of the University of Wollongong in Dubai. However, universities need to ensure the quality of programs remains high.

“In Dubai, the trend is going toward more comprehensive education,” Salem told OBG. “Many universities now offer PhD and Doctor of Business Administration (DBA) programs, which is good for research but can be risky if those programs are of poor quality because it can really affect the reputation of the university.”

DIAC data shows a 20% increase in the number of students taking masters degrees and a 12% rise in the number of doctorates being undertaken during the last academic year.

Demand for places and a wider course range has seen a number of universities unveiling plans for expansion. On 1 June, DIAC’s Murdoch University Dubai announced plans to double the size of its campus to accommodate 1,800 students at full capacity, up from 900 expected this September. This increase comes on the back of a 44% surge in enrolments in the university’s January intake.

However, the high costs in Dubai associated with student accommodation are a potential constraint to the growth of international student intake. Plans by the authorities to build housing facilities for students across universities have not materialized. Additionally, low cost places for those studying in DIAC and in other institutions across the city are limited.

“Providing reasonably priced student accommodation is a challenge for all universities in Dubai if they wish to expand,” Cedwyn Fernandes, director of Middlesex University Dubai, told OBG.

A similar sentiment was echoed by the Manchester Business School’s Bessiso. “The cost of living in Dubai is what you would expect in any major global city, and the provision of affordable student accommodation is important,” she said. “We have no doubt that Dubai will respond accordingly and facilitate investment and develop facilities to meet this growing demand,” she added.

Some universities are taking matters into their own hands. The Heriot-Watt University Dubai developed the second phase of its Dubai campus in 2013, which features on-campus accommodation. The AED100m ($27m) expansion includes a 700 seat auditorium as well as 160 rooms. Others universities are considering relocating to less costly areas of Dubai to give students a better chance of finding affordable housing.

Creative Growth

Another attraction for foreign students is the potential for finding employment in the emirate’s expanding economy after graduation.

A number of universities are tailoring their programs to better meet the expected future needs of the local economy, in areas such as tourism, art and design, and media studies. That drive could shift up a gear with the creation of the Dubai Creative Clusters Authority, formally established on 15 June to act as the managing and licensing agency in charge of ten of the emirate’s free-zone clusters, including DIAC. One of its mandates is to attract and develop creative businesses in Dubai to help position the emirate as a regional and international destination for industry leaders and talent.

This would help open up more employment doors for graduates of the emirate’s universities and in turn boost the appeal of Dubai as an education hub. (OBG 15.07)

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11.7 EGYPT: Egypt’s Durable Misery: Why Sisi’s Regime Is Stable

Eric Trager posted in the Washington Institute on 21 July that despite the risk of instability posed by ongoing violence, the Egyptian government’s anti-Brotherhood focus is still a political winner and will likely remain so for some time.

The past two years have been the most violent and repressive in Egypt’s contemporary history. Ever since the country’s military responded to mass protests by ousting the country’s first elected president, the Muslim Brotherhood-affiliated Mohamed Morsi, in July 2013, at least 1,800 civilians and 700 security personnel have been killed, tens of thousands have been imprisoned, and severe restrictions have been placed on media, civil society and protest activity. This sorry story is set to worsen.

Following the assassination of Egypt’s prosecutor general on 29 June, President Abdel Fattah el-Sisi blamed the Brotherhood and vowed an ever-harsher crackdown on the group, including tougher laws to ensure that Muslim Brothers on death row are executed sooner. In response, the Brotherhood endorsed the sudden upsurge in attacks on infrastructure, including electricity towers. Jihadists affiliated with the self-proclaimed Islamic State (also known as ISIS) launched a new round of attacks, including the 1 July bombings in North Sinai that killed dozens of troops and the recent attack on the Italian consulate in Cairo.

Yet despite this bleak security outlook, Egypt is more politically stable than it’s been in years. Unlike the divided regimes that collapsed in the face of mass protests in January 2011 and June 2013, the Sisi regime is internally unified. The various state institutions and civil groups that constitute the regime will likely remain tightly aligned for one basic reason: they view the Muslim Brotherhood as a significant threat to their respective interests and thus see the regime’s crackdown on the organization as essential to their own survival. Moreover, as many and perhaps most Egyptians see it, the Sisi regime’s internal unity is the one thing preventing the country from descending into the chaotic statelessness that has overtaken other Arab Spring countries, and they strongly prefer even a repressive and somewhat inept regime to what they see as a far worse alternative. So, even as Egypt’s domestic security becomes more tenuous, the status quo is sustainable, because regime change appears highly unlikely in the near term.

To be sure, the Sisi regime’s durability hardly implies that Sisi himself is durable. If anything, he faces a substantial risk of assassination. Egyptians speak about it so openly that Sisi had to address the matter during an interview prior to his election last year, in which he acknowledged two attempts on his life in the months following Morsi’s ouster. That threat hasn’t dissipated: Muslim Brothers call for Sisi’s death explicitly and the jihadist group Ajnad Misr planted bombs outside the presidential palace last June, only weeks after Sisi took office. Sisi thus sleeps in an undisclosed location – a sharp break in protocol from his predecessors, whose places of residence were well protected but not state secrets.

Yet the regime’s survival does not depend on Sisi’s longevity. Although the regime often presents him as a Nasser-like “strongman,” it is more accurate to think of him as the CEO of the loose coalition of institutions and interest groups that backed Morsi’s ouster in 2013, supported Sisi’s presidential candidacy in 2014, and now make up his regime. This coalition includes state bodies such as the military, intelligence, police, and judiciary, as well as non-state entities that serve as the state’s appendages in the countryside, such as the powerful clans of the Nile Delta and tribes of Upper Egypt. The regime also draws critical support from the business community and the private media, which were particularly influential in rallying the masses against Morsi two years ago. Despite the political uncertainty and severe violence that followed Morsi’s ouster, these power centers have held together for over two years now for one overarching reason: they share an interest in destroying the Muslim Brotherhood, which substantially threatened their interests during Morsi’s 369 days in power.

How To Win Enemies And Alienate People

The Brotherhood’s defenders often depict the organization as “gradualist,” meaning that it seeks to implement its Islamist agenda through formal politics, unlike terrorist groups such as ISIS and al Qaeda. But there was nothing gradualist about the Brotherhood’s attempt to combat, rather than coopt or cooperate with, these power centers after Morsi won the 2012 presidential elections. Morsi sought to undercut the judiciary through his November 2012 edict that placed his own decrees above judicial scrutiny and the Brotherhood-dominated upper parliamentary house tried to retire over 3,000 judges through new legislation. The Brotherhood additionally used its influence over the constitution-writing process in late 2012 to ban all parliamentarians affiliated with former President Hosni Mubarak’s ruling party from participating in elections for ten years, which effectively excluded the rural clans and tribes that make up the major power centers of the countryside, whose leaders often served in the Mubarak-era parliament. The Brotherhood similarly tried to sideline the business community by creating its own business organization, whose leaders accompanied Morsi on his foreign trips.

Meanwhile, as media criticism of Morsi’s increasingly autocratic and incompetent rule mounted in early 2013, Muslim Brothers carried posters of TV anchors’ heads in nooses at their rallies, vowing to “cleanse” the media. By the same token, Brotherhood leaders’ calls for “restructuring and reforming” the Interior Ministry put Egypt’s police on notice, driving many officers to participate in the anti-Morsi uprising in their uniforms. Although Morsi tried to court the military by respecting its autonomy over national security matters and its own internal affairs, he undermined the arrangement through aggressive foreign policy pronouncements during his final month in office. Indeed, from the generals’ standpoint, Morsi usurped the military’s national security responsibilities when he declared that “all options are open” against Ethiopia’s construction of a Nile dam and then endorsed the Syrian jihad at a Cairo Stadium rally alongside a group of radical Salafist clerics in mid-June 2013.

Of course, the alignment of these institutions and interests isn’t new: it goes back to the Mubarak days. But they have never been closer. Under Mubarak, for example, the military viewed the Interior Ministry as its rival, which is why the brass effectively stood to the side as the police collapsed during the first days of the 2011 uprising. Similarly, some of the more popular private media outlets publicized police abuses under Mubarak and were harshly critical of the military junta that ruled Egypt for 16 months following Mubarak’s ouster. There were also divisions within these power centers, such as the rift between the aging military leadership and the younger officers that Morsi repaired in August 2012, when he fired the top generals and appointed Sisi as defense minister.

Intra-regime tensions haven’t entirely dissipated, of course. As Michael Hanna of the Century Foundation noted in a recent report, the leaked phone conversations of top military officials, resurgent media criticism of the Interior Ministry, and the security establishment’s open antipathy toward former air force general and presidential candidate Ahmed Shafik are all signs of elite division. Yet in every instance thus far, the tensions have dissipated quickly, because the regime’s various components are ultimately more unified in their desire to destroy the Muslim Brotherhood than they are divided by anything else.

If they don’t destroy it, they fear, the Brotherhood might reemerge and seek vengeance for the many hundreds of Muslim Brothers who have been killed over the past two years – which is precisely what the Brotherhood has vowed to do. Indeed, as multiple Brotherhood leaders have told me since the coup, the organization seeks to investigate, try, and possibly execute those who participated in the current regime’s anti-Brotherhood crackdown. So for the regime’s constituent power centers, the success of the anti-Brotherhood crackdown is a matter of life and death.

United in Fear and Loathing

As a result of the regime’s single-minded focus on the Muslim Brotherhood, Sisi has far more leeway for issuing edicts and consolidating his legal authority than Morsi ever enjoyed. Sisi’s recent law empowering him to fire the heads of Egypt’s four independent regulatory agencies is a case in point. Morsi’s various power grabs sparked regime-ending protests, yet Sisi’s maneuver passed with nary a peep.

The is ample reason to doubt whether a regime whose primary objective is destroying the Brotherhood can succeed at governing. After all, a regime that spends so much political capital on locking out one organization can never be politically inclusive. Moreover, the regime’s insistence that the Muslim Brotherhood is behind every terrorist incident, including the most severe attacks for which ISIS-affiliated groups have claimed responsibility, means that it is still not viewing the threats it faces realistically. The regime’s broad crackdown in the name of counterterrorism, which has swept up activists and journalists who strongly supported Morsi’s ouster, is creating new enemies and possibly sowing the seeds for more violent revolutionary upheaval down the road.

Yet for the most part, the regime’s anti-Brotherhood bent is still a political winner and will likely remain so for some time. At home, many, and possibly most, Egyptians continue to view the Brotherhood as a destabilizing force, given the significant political uncertainty of Morsi’s tumultuous year in power and the Brotherhood’s endorsement of attacks on infrastructure. These Egyptians are not necessarily enthusiastic about Sisi, but they view his regime’s internal unity as the one thing preventing the country from descending into the stateless chaos that has overtaken Iraq, Libya and Syria. Revolutionary activists feel this stability-first mood very acutely and say that they have stopped protesting because they fear a popular backlash almost as much as they fear getting arrested. “If five people march and chant about a political issue, people will shoot you,” an activist in Port Said told me during a recent trip. The Sisi regime’s anti-Brotherhood position has also aligned Egypt with wealthy Arabian Gulf states, which have kept Egypt afloat by donating over $20 billion since Morsi’s ouster.

Still, it is worth remembering that the elite politics on which the regime’s stability depends are often opaque. Few, if any, external observers knew of the divisions within the Egyptian military that culminated in Sisi’s appointment as defense minister in August 2012, and nobody can know for certain whether there are similar, game-changing divisions beneath the surface now. Yet nobody understands these risks better than the regime’s constituent institutions and interests. Since they all fear that another round of regime change could mean their deaths, they will likely continue focusing on the anti-Brotherhood crackdown that unites them, rather than allowing internal rifts to escalate too far. Egypt’s status quo, in other words, is durable. But should it suddenly break down, watch out: it will be a bloodbath.

Eric Trager is the Esther K. Wagner Fellow at The Washington Institute. (TWI 21.07)

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11.8 EGYPT: Egypt’s Ailing Health Care System

Lorena Rios posted in Al Monitor on 23 July that after some 30 years of governmental neglect, the Egyptian health care system is riddled with unsafe practices and a lack of personnel and facilities.

“What you see in Egypt is typical of a health system that has been neglected by the government,” said Henk Bekedam, the World Health Organization’s (WHO) representative in Egypt. “And this is not since yesterday or since the revolution. This has been happening for the last 20 or 30 years.” The Egyptian government plays a marginal role in the country’s public health care system despite Egypt having the highest prevalence of hepatitis C (14.7% of the population), high rates of obesity and hypertension (17.6% of the adult population) and endemic poverty.

The health care system recently came under scrutiny after images of run-down government hospitals went viral following visits by Prime Minister Ibrahim Mahlab to two government-run hospitals 6 June. The events spurred doctors to share photos revealing the alarming conditions in hospitals throughout the country. Among the images were clogged squat toilets, warnings about poisoned water, cats wandering the halls, animal droppings on hospital paperwork and bloody bandages on the floor.

On average, Egypt, the most populous country in the Arab world, invests 1.5% of its gross domestic product (GDP) on health expenditures for its 82 million citizens, who are subjected to sometimes unsafe and low-quality services. When government fails to adequately invest in health care, the private sector and market step in to fill the void, alleviating problems while also creating new ones. “The market doesn’t invest in safety and quality unless it gets a return,” Bekedam told al-Monitor.

Heba, a doctor doing her rounds at Demerdash Hospital, recalled instances where her colleagues had to act against hygiene protocols. “I’ve seen doctors treat HIV patients without gloves and deliver a baby with bare hands,” she revealed to Al-Monitor. “When there are not enough medical supplies, doctors buy them out of their own pockets.”

If only provided limited funding, health care facilities can deteriorate rapidly. Hepatitis C, transmitted blood-to-blood, is mostly spread in the health sector, where lack of resources paves the way for negligence. “If you don’t get enough money, you start reusing things you shouldn’t be reusing,” Bekedam said. He continued, “You stop cleaning the floors. The curtains won’t be replaced. The crack in the window will not be repaired,” as seen in the photos circulating on social media.

The new constitution mandates that government expenditures on health care increase to 3% of GDP by 2017. For Sharif, a member of the intensive care unit (ICU) team at Demerdash, investment in health should also extend to research. “We don’t have labs,” he said. “Money needs to go toward turning the hospital into a research center.”

The provision of public health care in Egypt is highly fragmented. Without one entity in charge of overseeing the sector, health care policy becomes complicated. According to a WHO presentation, a copy of which Al-Monitor secured, the Ministry of Health provides 30-35% of services, mostly through primary care clinics. The Ministry of Higher Education provides more than 30% of services through respected university hospitals. The third strand of public health care consists of independent ministries – defense, transport, aviation, electricity and interior – and the Health Insurance Organization (HIO), accounting for more than 10% of services.

To address this fragmentation, Bekedam has suggested the creation of a state health council, chaired by the prime minister, who would be able to call on ministries to coordinate and facilitate policy. In addition to the disjointed nature of the system, however, low wages are common. As Bekedam explained, “Clinicians in public hospitals are getting about 25% of the living wage from government salaries and are getting the remaining 75% from patients.” It is not uncommon for a tertiary care doctor to work two or three different jobs, jumping between the public and private sectors to pay the bills. With little incentive, clinicians are more likely to misdiagnose or overprescribe to help feed their families.

There is also a dearth of coverage. “The Ministry of Health doesn’t offer incentives for doctors to go work in remote areas,” said Mahmoud, an ICU doctor at Demerdash. Thus, with the Ministry of Health struggling to staff hospitals in remote areas, like Upper Egypt, people flood into Cairo in search of medical services at government hospitals, like Demerdash.

Heba said that she can see between 200 and 300 patients in one of her typical 12-hour shifts, with only one nurse responsible for 40 patients. “Sometimes doctors also have to act as porters,” she added, so salary increases alone will not solve the problem. “The whole system needs to be changed and doctors should appreciate the work of the staff, make them feel like their job is precious.”

The holy month of Ramadan was particularly hard for Abdallah, 23, who after finishing his compulsory military service had to take his father to Demerdash for symptoms of dysphagia (difficulty or discomfort in swallowing) and weight loss. Abdallah and his family cannot afford Demerdash’s costly services, but the university hospital is one of the best in Egypt, and they are desperate. “Every year, nearly 1 million Egyptians [experience] catastrophic health expenditures,” said Bekedam.

The low value for the money characteristic of primary care clinics creates mistrust among the population. “Clinics only give painkillers,” Abdallah complained, as this results in people having to seek services in expensive tertiary care facilities for ailments that could have easily been treated in a clinic.

“A high number of our patients come for reasons like a simple cold, gastroenteritis, and diarrhea,” said Mahmoud. “They don’t know where to go, and they don’t trust clinics.” One possible solution would be for the government to begin promoting a family health model and a referral system to hospitals.

Unless you have money in your pocket, you are unable to get services in Egypt. “The market does not invest in the poor,” said Bekedam. According to law, the first 48 hours of care in an emergency room, public or private, are free. Regardless, 72% of all health care expenditures are out-of-pocket. To afford treatment for his father, Abdallah had to borrow money from family members, but he knows that even with borrowing, not everyone can afford medical treatment.

When hospitals are overcrowded, patients are referred to other facilities with available space. If they cannot afford the cost at the other hospital, nothing more can be done. The 26% of Egyptians living below the poverty line are likely to face situations in the waiting room involving life and death. Abdallah’s mother experienced this when one of her children died the day he was born because of a lack of available neonatal units at the hospital. Instead of resentment, Abdallah has succumbed to a sense of helplessness. “What can they do?” he asked, defending health care providers.

The social insurance system, administered by the HIO, allegedly covers 60% of the population. It does not, however, cover the majority of clinical services. At the moment, only 6% of health expenditures are covered by the HIO.

The government plans to put the health care system under the knife with a series of reforms. By 2030, Egypt expects to implement a system of universal health insurance for every Egyptian. The system seeks to create a separate body [to disburse payments] that replaces the direct payment of patients to providers. “The body, in turn, will argue in the patient’s behalf to get better services and better quality, for a better price,” Bekedam told Al-Monitor.

Raising wages, guarding safety, improving services and instituting universal health care will not amend the systemic faults — such as administration, structuring and graft — in Egypt’s health care system. For this reason, health care providers must play an active role in reforming the sector, while policymakers have to ensure the public is educated, so they can demand better and affordable services.

Back in Bekedam’s office, nestled in the Ministry of Health, the WHO representative sees “hopeful times” ahead. Not so far from the ministry in a coffee shop engulfed in the city’s loud nightlife, Abdallah is hopeful that his father’s next visit to Demerdash will improve his health, even if he cannot afford it. (Al Monitor 23.07)

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

Fortnightly, 29 July 2015

Fortnightly, 29 July 2015

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