Fortnightly, 30 May 2018

An amendment to the Restrictive Trade Practices Law sponsored by Minister of the Economy and Industry Eli Cohen and the Antitrust Authority passed first reading in the Knesset on 21 May. The main aim of the amendment is to strengthen the deterrent power and the effectiveness of the Antitrust Authority and to focus its activity on promoting competition and reducing the cost of living. Under the provisions of the amendment, the bureaucratic burden on entities that do not harm competition will be removed in order to let businesses that act fairly boost economic growth.

The amendment seeks to update the law to take account of substantial changes that have taken place in the Israeli economy since it was enacted thirty years ago, and also to bring Israeli law closer to international antitrust practice.

The main proposed changes are:

-Broadening of the definition of a monopoly owner subject to the obligations and prohibitions in the Restrictive Trade Practices law so that it will include anyone with significant market power, even if his market share is below 50%. The current law stipulates a market share of over 50% as the sole criterion for being a monopoly owner.

-Reduction in the obligation to report small mergers to the Antitrust Commissioner. The financial threshold necessitating reporting will be raised from a joint turnover of NIS 150 million to a joint turnover of NIS 360 million. The rise in the threshold flows from the substantial growth in the Israeli economy since the current amount was set in 1999, and also from the fact that the regulatory burden of supervision of mergers in Israel is high in comparison to other OECD countries.

-Abolition of the NIS 24.5 million limit on sanctions against those found in breach of the law. Businesses in Israel will subject to a maximum sanction of 8% of sales turnover. The current situation unjustly benefits large corporations, with turnovers in the billions of shekels. The amendment will lead to stronger deterrence and enforcement in relation to the largest businesses in the Israeli economy.

-As far as binding arrangements (cartels) are concerned, the reform will continue the trend of reducing the need for bureaucratic approvals and a switch to a prohibition on arrangements that harm competition.

-Equalization of the examination periods for mergers and cartels: a substantial shortening of the decision time on applications for exemptions for cartels from 90 days to 30 days, similar to the time set for decisions on mergers. The Antitrust Commissioner will have the power to extend the decision period by a further 120 days in cases in which the examination is complex and requires more time.

-The name of the law will be changed from the Restrictive Trade Practices Law to the Competition Law, and similar changes will be made to the names of the Restrictive Trade Practices Tribunal, the Antitrust Commissioner and the Antitrust Authority.

Minister of the Economy and Industry Eli Cohen feels the reform will enable the Antitrust Authority to make its enforcement activity more effective and to devote its resources to promoting competition and strengthening deterrence against monopolies and other entities that harm competition. (Globes 22.05)

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1.2 Tender to be Issued for Haifa – Nazareth Light Rail

After two years of planning, the Haifa-Nazareth light rail project is getting underway. On 28 May, Cross Israel Highway published a tender to select a company to manage the NIS 6 billion project, which will serve residents of the north and connect metropolitan Haifa with the Nazareth-Upper Nazareth municipal bloc. The project combines an interurban public transportation system and a municipal mass transit system.

The 41-kilometer line will have 19 railway stations, park and drive parking lots, a depot and a control center. Thirty-two railway carriages will travel on the line with a maximum frequency of one train every four minutes. A maximum of 10,620 passengers an hour is projected with a planned speed of 100 kilometers per hour on the interurban section. Tram-train technology will facilitate travel on both the interurban and municipal section with no need to switch trains. The operating system for the planned line is based on an electrical feed originating at the Israel Electric Corporation power stations located outside the plan to supply electricity for the railway.

Cross Israel Highway, the government’s leading performance arm in public-private partnership (PPP) projects, was selected to manage and carry out the project. Cross Israel Highway said that the tender was aimed at international and local companies and posed threshold criteria ensuring the financial soundness and proven experience of the selected company and its officeholders in managing projects with similar characteristics and complexity. (Globes 27.05)

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1.3 Updated Canada-Israel Trade Agreement to Strengthen Environment & Gender Rules

Canada and Israel are looking to deepen business ties through a modernized free trade agreement that was revealed during an announcement in Montreal on 28 May. The updated trade pact will include new chapters on gender, labor and the environment, as well as provisions around social responsibility for corporations. The new policy will give both Canada and Israel the power to challenge trade policy decisions that could be seen as discriminatory. Both countries would then have to agree to take the issue through the dispute settlement process. From there, a panel would make a legally binding decision as to whether the terms of the gender chapter had been violated. The offending country would then be given time to change the discriminatory practice, or some of the benefits of the free trade agreement could be suspended.

The original Canada-Israel Free Trade Agreement was signed more than 20 years ago and has tripled trade between the countries, reaching $1.7 billion in 2017. According to the Canadian government, Canada’s top exports to Israel include industrial machinery and aircraft parts. Industrial machinery was also the top Israeli export to Canada, followed by electrical and electronic equipment. (CBC 28.05)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 KELA Group Receives $50 Million Investment from Vector Capital

The KELA Group (KELA), a rapidly growing, Israel-based provider of advanced cyber intelligence software and solutions, announced a $50 million equity investment from San Francisco-based Vector Capital. Vector’s minority investment marks the first institutional funding received by KELA in its 9-year history.

Founded in 2009 by Israeli intelligence veterans from Unit 8200 and its associated R&D units, KELA provides advanced cyber intelligence software and solutions to enterprises and governmental agencies around the world. Its security platform, RaDark, leverages advanced algorithms, data science, and elite Israeli intelligence expertise to provide extremely targeted and automated darknet monitoring and cybersecurity solutions that protect large enterprises and governments around the world. The automated platform provides real-time actionable intelligence about threats specifically targeting the client’s organization, such as leaked user credentials or IT infrastructure vulnerabilities, allowing organizations to thwart attacks before they take place.

Tel Aviv’s KELA is a leading provider of cyber intelligence and cybersecurity solutions, founded by veterans of Unit 8200 and its associated R&D units. KELA’s platform, RaDark, leverages advanced algorithms, data science, and elite Israeli intelligence expertise to provide targeted and actionable cybersecurity intelligence to enterprise security and fraud prevention teams around the world. (KELA 16.05)

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2.2 Volkswagen Opens Tel Aviv Innovation Center

Volkswagen officially opened a Tel Aviv innovation center to promote the development of autonomous vehicles, new mobility services and tailor-made solutions. The VW Group Campus in Tel Aviv will be a co-working space called Konnect, and will provide local partners and mobility based startups close and direct access to the Volkswagen Group including business collaborations as well as support in mentoring and consulting.

The Israeli campus will be looking for solutions in a variety of fields, including sensors, simulation, connectivity, smart navigation, cybersecurity, e-mobility and big data. As part of its activities in Israel, Konnect and Volkswagen are supporting 41 local startups with innovative business ideas connected to the future of mobility. Selected entrepreneurs will have the opportunity to present their ideas to a professional jury of VW experts who will choose one winning start-up. The winner will then spend six months at the Transparent Factory in Dresden and will benefit from professional mentorship and exposure to Volkswagen Brand development divisions and investors. (Volkswagen 22.05)

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2.3 Chakratec Raises $4.4 Million in Series C Round for Fast Charging Technology

Chakratec announced the completion of its third financing round in which it raised $4.4 million from the Israeli iArgento Group and the Singaporean company Goldbell. Chakratec’s first investor was Capital Nature, which remains the company’s largest shareholder. Chakratec has already raised $3.2 million in its previous rounds. The present round will enable the company to conduct its first three pilot projects in Europe with three of Europe’s leading utilities. The success of these pilots will lead to first orders later this year.

Lod’s Chakratec was established in 2013. It has developed a unique, innovative energy storage technology powered by kinetic batteries using a flywheel concept. These batteries provide a high-power energy supply, allowing a large number (tens to hundreds of thousands) of charge and discharge cycles over a lifetime of 20 years.

Until today, fast charging of electric vehicles required a high-power electricity connection, which often necessitates a costly, complicated and lengthy process of upgrading the distribution network infrastructure. The use of kinetic batteries makes it easy to deploy fast EV charging stations anywhere, integrating all kinds of energy sources, at extremely low operating costs. The charging process developed by Chakratec can be compared to the flushing of water in a toilet tank – when a strong flow is needed, a lever is pressed and the tank empties rapidly and then fills up again. Similarly, when a vehicle enters a charging station, the kinetic battery empties, rapidly transferring the energy to the vehicle, and then fills up again. Chemical batteries cannot be used for this application due to the number of cycles and high power required.

Jerusalem’s iArgento is an Israeli multi-family office that provides wealth management, intergenerational wealth transfer, financial planning and equity capital raising services for early stage startups in Israel. iArgento raises capital from Israeli investors, as well as from non-Israeli investors mainly in North and South America.

Rosh HaAyin’s Capital Nature operates a technology incubator, focusing on new energy and smart transportation projects and investing each year in four to five new projects. Apart from investments in early stage ventures, Capital Nature’s incubator operates a test and validation site in the Arava region, and it also provides financing for applied academic research projects in the field of renewable energy conducted by leading Israeli research centers. (Chakratec, iArgento and Capital Nature 21.05)

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2.4 StoreDot Announces Strategic Investment from BP

StoreDot announced a strategic investment in the company from BP. BP Ventures identifies and invests in private, high growth, game-changing technology companies, accelerating cutting edge innovations across the entire energy spectrum. Since 2006, BP Ventures has invested over $400 million in corporate venturing and has 42 active investments in its current portfolio.

The strategic investment will see StoreDot and its partners join forces with BP to strengthen the eco-system around the next generation of Electric Vehicle (EV) ultra-fast charging infrastructure. StoreDot’s lithium ion-based battery technology enables ultra-fast charging for the mobile and industrial markets. Using this technology, StoreDot is also developing a new type of electric-car battery that will aim to achieve a charging experience that is comparable to the time spent to refuel a traditional car, with a charging time of 5 minutes. First sales of its flash batteries for mobile devices are expected as early as 2019.

Herzliya’s StoreDot is a battery and materials innovation leader, developing groundbreaking technologies based on a unique methodology for the design and synthesis of both organic and inorganic compounds. Designed to replace known technologies with enhanced electro-chemical properties, StoreDot’s proprietary compounds, combined with nano-materials, are optimized for various ultra-fast charging battery applications including mobile devices and electric vehicles. (StoreDot 22.05)

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2.5 Electronic Arts Acquires GameFly’s Cloud Gaming Technology & Talent

Redwood City, California’s Electronic Arts has acquired the cloud gaming technology assets and personnel of a wholly owned subsidiary of GameFly, Inc. Based in Israel, the acquired technology and team members deepen EA’s capabilities and expertise in cloud gaming, and enable the company to continue exploring new ways for players to access and experience games from any device. With this acquisition, EA is adding to its strategic focus on advanced technologies that will give players more freedom to access the games they want, and enable the delivery of next-generation experiences at scale.

The team based in Caesarea, Israel, will join EA’s functional teams, including the central technology organization that is responsible for developing and operating the cutting-edge platform that powers EA’s leading games and services. The acquisition closed in May 2018. (EA 22.05)

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2.6 Cymulate Named a Gartner “Cool Vendor” in Application and Data Security

Cymulate was named a “Cool Vendor” in Gartner’s May 2018 “Cool Vendors in Application and Data Security” report. Operating for less than two years with more than 100 customers worldwide, Cymulate’s unique breach & attack simulation (BAS) platform assesses customers’ security posture from an attacker’s perspective using actual attack methods. By exposing hidden vulnerabilities and offering actionable insights, Cymulate helps to identify and resolve security gaps before it is too late. Cymulate provides the industry’ only cloud-based BAS platform.

Rishon LeZion’s Cymulate helps companies to stay one step ahead of cyber attackers with a unique breach and attack simulation (BAS) platform that empowers organizations with complex security solutions to safeguard their business-critical assets. By mimicking myriad strategies hackers deploy, the system allows businesses to assess their true preparedness to handle cyber security threats effectively. An on-demand SaaS-based platform lets users run simulations 24/7 from anywhere, shortening the usual testing cycle, and speeding up time to remediation. Cymulate was established in 2016 by former IDF intelligence officers and leading cyber researchers with extensive experience in offensive cyber solutions. The company serves a broad range of industries, including finance, health care and telecommunication. (Cymulate 22.05)

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2.7 Sapiens DECISION Recognized as a Hot Vendor in Digital Business Platforms 2017

Sapiens International Corporation announced that Sapiens DECISION was recognized as one of the “Hot Vendors in Digital Platforms, 2017” by Arragon Research, an independent research and advisory firm. Using decision management, an enterprise can determine, validate and automate decisions to maximize value and consistency in customer interactions and ensure compliance with regulations. The Sapiens DECISION platform offers a complete business decision management solution to effectively address the pain and complexity of determining and then translating business logic – data and business rules used to make business decisions – to operational code.

“2017 Hot Vendors” identified by Aragon Research Inc. have cutting-edge technologies and are doing something truly new or different in their respective markets.

Holon’s Sapiens International Corporation is a leading global provider of software solutions for the insurance industry, with a 30-year track record of delivering to more than 400 organizations. The company offers software platforms, solutions and services, including a full digital suite, to satisfy the needs of property and casualty/general insurers, and life, pension and annuity providers. Sapiens also services the reinsurance, workers’ compensation, financial and compliance, and decision management markets. The company’s portfolio includes policy administration, billing and claims, underwriting, illustration and electronic application. The digital suite features customer and agent portals, and a business intelligence platform. (Sapiens 23.05)

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2.8 SecBI Announces New Automated Threat Detection & Investigation App

SecBI unveiled its Autonomous Investigation app for the Palo Alto Networks® Application Framework. SecBI’s Autonomous Investigation technology uses network traffic analysis (NTA) based on unsupervised machine learning to detect complex and stealthy cybersecurity threats. Security analysts are presented with the full scope of the suspicious incident’s kill chain, including visibility to all affected users and devices, as well as infection points and malicious communications, enabling fast and complete remediation. As part of the Application Framework, the Autonomous Investigation app will enable customers to easily and quickly deploy SecBI Autonomous Investigation without friction, and respond to detected threats.

When hunting for hidden threats, security analysts are tasked with the daunting challenge of wading through billions of logs, sporadic alerts and anomalies, greatly impeded by the overabundance of false positives. The lack of comprehensive detection often leads to missing an incident, or to missing the full scope of an incident. In contrast, SecBI’s Autonomous Investigation App will identify the full scope of related suspicious behaviors, affected entities and malicious communications, empowering analysts to immediately perform accurate and complete remediation of the most advanced threats.

Tel Aviv’s SecBI has developed a revolutionary approach to network traffic analysis (NTA) to deliver automated threat detection and investigation for security operations centers (SOCs) and managed security service providers (MSSPs). Their value is best understood in contrast to solutions that generate sporadic alerts and anomalies requiring manual correlation and investigation. Their Autonomous Investigation™ technology incorporates machine learning to uncover the full scope on every suspicious incident, including all affected entities (e.g. users, domains, devices) within minutes. (SecBI 22.05)

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2.9 Presenso Recognized as a Gartner Cool Vendor in Artificial Intelligence

Presenso announced its inclusion on the “Cool Vendors” list in the Cool Vendors in Artificial Intelligence Across the Supply Chain report published by Gartner, Inc. The sought-after recognition analyzes five companies that approach Artificial Intelligence across the entire supply chain market with innovative ideas.

Gartner believes that Presenso stands out in the fragmented and nascent Artificial Intelligence for Predictive Maintenance category because by using their Automated Machine Learning approach they eliminate the need for industrial plants to hire Big Data scientists. Presenso’s cloud-based AI solution for Predictive Maintenance is based on Automated Machine Learning (Auto-ML). As industrial manufacturers adopt Industry 4.0 manufacturing practices, many struggle to quickly onboard and then scale predictive maintenance programs across their organizations. Presenso automates Machine Learning processes and provides a Software as a Service AI solution that requires no support at a plant level.

Within the exabytes of sensor data generated by industrial machines are micro-patterns that can tell us when a machine is likely to fail. Until now these patterns were imperceptible to even the most advanced statistical packages. Data scientist lacked the tools to find these patterns and industrial plants lacked the data scientists to even try. Haifa’s Presenso develops tools for IoT Predictive Maintenance using advances in data science such as Auto Machine Learning (AutoML). (Presenso 22.05)

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2.10 Intesa Sanpaolo & OurCrowd Launch International Alliance

Intesa Sanpaolo Innovation Center, subsidiary of the Intesa Sanpaolo Group that promotes innovation development processes and plans, and OurCrowd signed a Memorandum of Understanding with the aim to promote startup access to international capital markets.

Over the past year, OurCrowd has made significant strides in Western Europe, expanding its leadership in London and Madrid, increasing its investor base across multiple regions and introducing formal relationships with key multinational corporations such as Halma in the UK and Innogy in Germany.

As an institutional partner, Intesa will provide tailored access for its corporate and SME clients into OurCrowd’s high tech portfolio, leveraging synergies with strong potential to deliver faster go-to-market traction. The alliance aims to catalyze innovation in multiple technologies and industrial sectors.

Jerusalem’s OurCrowd is the leading global equity crowdfunding platform for accredited investors. Managed by a team of seasoned investment professionals. OurCrowd vets and selects opportunities, invests its own capital, and brings companies to its accredited membership of global investors. OurCrowd provides post-investment support to its portfolio companies, assigns industry experts as mentors, and takes board seats. The OurCrowd community consists of almost 25,000 accredited investors from over 150 countries. OurCrowd has raised over $700m and invested in 150 portfolio companies and funds. (OurCrowd 23.05)

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2.11 indeni Raises $14 Million

Israeli network and security systems company indeni has raised $14 million in a financing round led by RTP and including State of Mind Ventures, Caremi Partners and existing investor Sequoia Capital.

indeni’s dream is to make running network and security systems easier. Many all rely on them. When we use our credit card at the store, book a hotel or share an exciting moment, our desire turns into 0’s and 1’s and gets transported across these systems. Behind the scenes, hundreds of thousands of people around the world are trusted to keep these systems running smoothly. These people are now looking to new automation technologies, such as the Python programming language, to help them do their jobs.

Tel Aviv’s Indeni is the crowd-sourced automation platform for network and security infrastructure. With Indeni Crowd and Indeni Insight organizations gain access to living repository of scripts to automate tasks across maintenance, high availability, network visibility, security, compliance and vendor best practices. Learn DevOps best practices alongside the largest community of certified IT professionals to improve business agility. (indeni 22.05)

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2.12 Jabil Expands in Israel with the Opening of Optics Technology Innovation Center

Green Point, a division of Jabil Inc., announced the opening of its new 2,000 square meter Optics Technology Innovation Center in Haifa, Israel. This development and manufacturing center will provide the Israel tech community – already recognized for driving worldwide innovations – with additional opportunities in computational cameras, projection systems and combined solutions.

The new Jabil Optics facility – located in the Matam Park in Haifa – meets the growing demands of Jabil customers who are looking for specialized expertise and resources for complex assembly and integration of optoelectronic systems. This includes optical design; development and manufacturing capabilities for camera modules; and projection systems being produced in this facility. These solutions are important assets for smartphones, tablets, e-readers and laptops as they prepare to serve mobile, virtual, augmented and extended reality products seeing rapid growth and adoption. The Center will also create leading-edge automotive products and solutions including advanced driver-assistance components, DMS systems, head-up display units and LiDAR systems.

Today, Jabil employs more than 600 people in Israel and expects that number to continue to grow in the future. One of the compelling incentives for Jabil Optics to locate its Innovation Center in Haifa was to access the strong stream of technology resources and talent in the surrounding area.

Jabil’s commitment to Israel’s innovation economy began when the company established a presence in Israel in 2012 with the opening of its office in Ramat Ha’Chayal, Tel Aviv to focus on partnering with start-up and emerging companies. Jabil’s presence expanded with the acquisition of Shemer Bar Lev and Shemer Yokneam in 2015, followed by the inclusion of Jabil’s state-of-the-art manufacturing facility in Kiryat Gat in 2016. This announcement of the new Optics facility in Haifa is the latest milestone in Jabil’s dedication to doing business in Israel.

Jabil’s strategy includes the participation of numerous ecosystem partners in Israel. As recently as July, 2017, Jabil entered into a strategic partnership with Israel-based eyeSight Technologies, to bring vision-based Driver Monitoring Systems (DMS) to market.

San Jose, California’s Jabil is a product solutions company providing comprehensive design, manufacturing, supply chain and product management services. Jabil delivers innovative, integrated and tailored solutions to customers across a broad range of industries. (Jabil 23.05)

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2.13 El Al Delays Launch of Tel Aviv – San Francisco Flights

El Al Israel Airlines announced on 23 May that it is postponing the launch of its new Tel Aviv – San Francisco route. The flights had been scheduled to begin in the fourth quarter of 2018 but will now commence in May 2019. The decision to delay the inauguration of the route is due to fleet changes will El Al speeding up the process of taking older aircraft out of service including a Boeing 767 aircraft which was damaged on the ground at Ben Gurion airport two months ago. El Al will take care of all passengers who have already purchased tickets during the period of the postponement. (El Al 23.05)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Andersen Global’s Middle East Expansion Continues with Solutions Bridge in Kuwait

Solutions Bridge, an Accounting and Corporate Secretarial Services firm in Kuwait City, has signed a Collaboration Agreement with San Francisco’s Andersen Global. The addition of a location in Kuwait demonstrates Andersen Global’s growth in the Middle East, which is a significant market for the organization. Formed by former professionals of Andersen in Kuwait, Solutions Bridge provides accounting and corporate secretarial services for both individuals and corporations in a broad range of industries.

Andersen Global is an international association of legally separate, independent member firms comprised of tax and legal professionals around the world. Established in 2013 by U.S. member firm Andersen Tax, Andersen Global now has more than 2,500 professionals worldwide and a presence in over 96 locations through its member firms and collaborating firms. (Andersen Global 24.05)

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3.2 Papa John’s International Reaches Milestone with 50th Restaurant Opening in Turkey

Louisville, Kentucky’s Papa John’s International is expanding its presence in the Middle East and Asia with the opening of the 50th Papa John’s restaurant in Turkey. PJ Gida Islatmeleri (PJ Gida), is the master Papa John’s franchisee in Turkey.

Papa John’s International is the world’s third-largest pizza delivery company. For 16 of the past 18 years, consumers have rated Papa John’s No. 1 in customer satisfaction among all national pizza chains in the American Customer Satisfaction Index (ACSI). (Papa John’s 16.05)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Minrav & Nextcom to Build Golan Wind Turbine Farm

Minrav Holdings and Nextcom plan to build a wind turbine farm in the Golan Heights through a joint venture owned in equal shares. The two companies announced that the venture would include 30 3.2 MW wind turbines – a total capacity of 96 MW. The project was commissioned by Emek Habacha Wind Energy, owned by Enlight Renewable Energy and AA Ben-Dov Wind Energy (40%). The joint venture has also signed a contract to operate and maintain the project for 20 years after construction is completed. The total proceeds in the project are NIS 136 million plus VAT, while construction is slated to take 25 months from when the order to begin the work is received.

Nextcom designs, constructs, and maintains communications and renewable energy infrastructure. Minrav engages in infrastructure construction. The project is the largest of its type in Israel in wind energy. At full capacity it will be able to supply electricity to a medium-sized city. (Globes 27.05)

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4.2 SEED Agriculture to Establish a State-of-the-Art Hydroponic Farm at UAE’s RAKEZ

SEED Agriculture, an innovator in agriculture methods and technology, has announced plans to set up the largest hydroponic farm in Ras Al Khaimah. The company, a unit of Abu Dhabi’s Pegasus Food Futures, signed an agreement with Ras Al Khaimah Economic Zone (RAKEZ) to acquire a total of 670,000 m2 of land where it will establish the farm. Located in Al Ghail area, the land will be used to grow crops in water, without the use of soil.

Pegasus Food Futures chose Ras Al Khaimah emirate based on a common goal of committing to food security and sustainability within the region. Ras Al Khaimah has always been integral to the agricultural development in the United Arab Emirates (UAE) and with SEED joining, the emirate’s agriculture legacy continues. The hydroponic farming hub is expected to launch on the last quarter of 2018 where it will produce a fresh selection of leafy greens, tomatoes, cucumbers, peppers, herbs, soft fruits and berries for the rest of the region. (RAKEZ 13.05)

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4.3 Revolta Egypt to Complete Electric Vehicle Charging Stations by 2020

Revolta Egypt’s founder announced that the company will be able to charge electric cars everywhere in Egypt by 2020. He explained that the first phase of building electric vehicle charging stations started on 11 February 2018, with the first station on Cairo-Suez Road. The phase also includes establishing 65 stations in Cairo, Giza, Alexandria, Port Said, Ismailia, Suez and the Red Sea at a total cost of EGP 60 million. It will also see the entry of 1,000 electric cars to Egypt. The second phase will begin in 2019, set to cover the Delta, followed by the third phase to cover Sinai and Upper Egypt. Collectively, there will be 300 stations covering most areas of Egypt. The first batch of electric cars have already arrived in Egypt, but only for display in showrooms. The list of cars include Tesla S, Tesla X, VW e-Golf at EGP and Nissan Leaf. The company will only open on 1 June. The first batch of cars for sale will be received after Eid Al-Fitr. It will include 25 cars, five new units and the rest used. (Various 22.05)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanon’s Average Prices Rose by an Annual Rate of 5.47% to April 2018

According to the Central Administration of Statistics (CAS), the Consumer Price Index (CPI) of Lebanon rose by 5.47% by April 2018. The average price of the clothing and footwear industry, accounting for 5.20% of the CPI, witnessed a yearly rise of 16.94% Y-o-Y. The average costs of Housing and utilities (including: water, electricity, gas and other fuels), which grasped a share of 28.4% of the (CPI), rose by 6.45% by April 2018. In addition, the average prices for transportation (13.10% of the CPI) and health (7.7% of the CPI) increased by 6.02% and 6.6% respectively. The average prices for Food and non-alcoholic beverages (constituting 20% of the CPI) registered a yearly uptick of 3.75% by April 2018. Lastly, the average prices for the Education (which accounts for 6.6% of the total CPI) rose by 4% by April 2018, mostly due to the increase of tuition of the private schools which is a consequence of the new salary scale law which upped teachers’ salaries. (CAS 21.05)

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5.2 Number of Tourists to Lebanon Rises by 5% y-o-y to 362,398 in First Quarter

According to the Ministry of Tourism, the total number of tourists in Lebanon rose from 345,168 in Q1/17 to 362,398 in Q1/18, owing it to the annual increase recorded in tourist arrivals from Europe and America which together comprised 49.56% of total tourists in Lebanon. According to a geographic breakdown, the number of tourists from Europe (constituting 35.38% of total tourists) grew by an annual 19.7% to stand at 128,231 by March 2018. Specifically, French tourists increased by 1.59% year-on-year (y-o-y) to 32,305 and similarly, German tourists rose by a yearly 16.61% to 17,600 by March 2018. Tourists from the US (14.17% of total arrivals) also recorded a yearly 9.44% increase to 51,362 tourists by March 2018.

On the contrary, Lebanon witnessed a decrease in the number of arrivals from the Arab countries from 126,525 in Q1/17 to 117,523 in Q2/18. This was mainly driven by the 15.34% and 27.73% y-o-y declines in the number of Iraqi and Saudi tourists which stood at 48,754 and 9,837 tourist arrivals, respectively, over the same period. Moreover, Asian tourists decreased by an annual 3.02% to 29,205 by March 2018. (BLOM 17.05)

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5.3 Total Number of Lebanon’s Registered New Cars Fell by 5.65% by April 2018

According to the Association of Lebanese Car Importers (AIA), the number of newly registered “commercial” and “passenger” cars recorded a 5.65% annual downtick to settle at 10,909 cars by April 2018. The breakdown of the AIA’s statistics revealed that the number of newly registered “passenger” cars dropped by 4.41% year-on-year (y-o-y) to settle at 10,184 cars. In turn, the number of newly registered “commercial” vehicles contracted by a yearly 20.15% to 725 cars. The AIA emphasizes that this is due to the dramatic economic, political and safety situation prevailing in the country, whereby 90% of the registered cars are small cars with low selling prices (less than $15,000) due to the absence of an adapted and structured public transport.

In terms of brands, Kia grasped the lion’s share of the market as its sales amounted to 17.13% of the total newly registered cars. Hyundai and Toyota followed with the respective stakes of 14.07% and 12.51% of the newly registered cars, while Nissan came next with 10.13% of the total. (AIA 20.05)

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5.4 Amman Ranked Most Expensive Arab City, 28th Worldwide

Amman was ranked most expensive city in the Arab world and 28th worldwide, exceeding some of the main Arabian Gulf, European and North American cities such as Abu Dhabi, Dubai, London, Rome, Washington DC and San Francisco, according to a recent report by The Economist. Titled “Worldwide Cost of Living Survey”, the study was conducted by The Economist Intelligence Unit, which compared the prices of over 150 items in 133 cities around the world.

According to the report, Madrid and Barcelona both ranked 34th, compared with Amman, which seized the 28th place. The problem lies in the low income residents receive. As well, the inflation rates have increased by 50% between 2006 and 2017, but the incomes did not increase at a proportionate pace. Others say the huge influx of refugees has increased the pressure on products and resources, playing a major role in lowering the per capita share in GDP.

The latest report on poverty rates issued by the Department of Statistics in 2010 showed that 14.4% of Jordanians live under the poverty line, which stands at JD813.7 annually per individual. Continued hikes in fuel prices consequently affects all other vital sectors and contributes to increased prices. (JT 29.05)

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5.5 Jordan Slightly Improves in World’s Most Competitive Economies Ranking

The 30th edition of the IMD World Competitiveness yearbook saw a slight increase in the ranking of Jordan, moving up 4 places to rank 52nd. This boost in the Kingdom’s competitiveness is due to “better government and business efficiency, as well as improved performance in several of the measured indicators such as public finance, tax policy, business legislation and digital transformation. All of which facilitate the creation and development of business in Jordan, especially so in the digital work frame which the world is in today, which changes the work we do and the way our economies work”. However, the path ahead for Jordan to rank among the world’s most competitive economies is long.

“The country still ranks low in labor force and even more so in the inclusion of women in the workforce. Additionally, the Kingdom’s domestic economy’s performance remains the same as last year … In order for Jordan to strengthen its economic resilience, it should work towards a more inclusive growth and sustainable development, including poverty reduction and creation of jobs, particularly for women and youth.”

Amman is currently developing an executive action plan that aims to improve Jordan’s ranking in the report by focusing on the government, business and infrastructure efficiency. The government will also continue updating related legislation to improve the business and investment environment, all in accordance with the Jordan Vision 2025, the Executive Development Programme and the Economic Stimulation Plan 2018-2022. (JT 23.05)

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5.6 Jordan’s Exports Increase by 0.9% & Imports Decrease by 2.2% During March 2018

The statistical data issued by Jordan’s Department of Statistics indicate that the value of total exports reached JD.1221.1 million during first quarter of 2018 (a decrease of 1.5%) compared with the same period of 2017. Meanwhile, the national exports value reached JD.1007.6 million during Q1/18, marking an increase by 0.9% compared with the same period of 2017. The value of re-exports reached JD 213.5 million during first quarter of 2018 which indicates a decrease by (11.2%) as compared with the same period of 2017. The imports value reached JD.3370.1 million during the first quarter of 2018, thus decreasing by (2.2%) compared with the same period of 2017. (DoS 23.05)

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5.7 Jordan’s Trade Deficit Narrows to $3 Billion in First Quarter

Jordan’s trade deficit fell by 2.6% to JD 2.1 billion ($3 billion) in the first quarter of 2018 compared with the same period last year. The Department of Statistics data showed the value of imports in the first three months of the year fell by 2.2% from a year earlier to JD 3.3 billion. The kingdom’s total exports reached JD 1.2 billion, dropping 1.5% from the same period in 2017 as the value of fertilizers supplied to long-term Asian customers fell. A chronic trade deficit and spiraling budget deficit have for years been among the biggest concerns for Jordanian economic policymakers. Jordan’s trade deficit rose 9.9% to JD 9.2 billion in 2017 against the previous year with the cost of imported oil alone rising 23%. (AmmonNews 22.05)

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5.8 Jordanian Cabinet Approves Bill Amending Income Tax Law

The Jordanian government, in a cabinet meeting chaired by Prime Minister Hani Mulki on 21 May, approved a draft law amending the Income Tax Law No. 34 of 2014. The new law aims at addressing avoidance, tax evasion, improving tax administration, enhancing the voluntary commitment of taxpayers and expanding the tax base, and will be sent to the Lower House of Parliament to be proceeded with the constitutional stages for approval.

The government approved the Income Tax Bill and will continue the dialogue on the draft bill, which the government sent to the Lower House and the parliamentary blocs and committees. The dialogue aims at reaching a fair bill that addresses avoidance and tax evasion and would able to finance basic services that citizens need, the prime minister added. The income tax bill is part of a comprehensive economic and financial reform process and part of a set of decisions and policies adopted by the government to reach the self-reliance. Some 90% of Jordanians under the draft income tax law won’t be subjected to tax and it was agreed that the tax exemption will include individuals who earn JD8000 a year and JD16000 for families.

In another cabinet decision, the government approved a draft law amending the Information Systems Crime Law for 2018. The bill came in light of the spread of cybercrimes on money and people. (AmmonNews 21.05)

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►►Arabian Gulf

5.9 UAE Federal Government Spending Exceeds$13.2 Billion in 2017

The actual spending of the UAE’s federal government reached AED 48.572 billion ($13.22 billion) in 2017, according to a new report from the Ministry of Finance. According to the figures, spending on the ‘general public services’ sector accounted for 33.3% of the total expenditure, or AED 16.19 billion ($4.41 billion), while public order and safety sector spending was 21.5%, or AED 10.453 billion ($2.85 billion). Collectively, the two sectors accounted for 54.8% of total spending.

The Ministry’s figures also show that AED 6.574 billion ($1.79 billion) went into the education sector (13.5%), compared to AED 3.943 billion ($1.07 billion) or 8.1% to the education sector and AED 3.314 billion ($902.2 million) or 6.5% for social protection. Total spending on the economic affairs sector amounted to AED 1.021 billion ($277.9 million), while another AED 621 million ($169 million) was spent on the housing sector, AED 290 million ($78.9 million) on the environmental sector and AED 194 million ($52.8 million) on the recreation, culture and religion sector. (AB 22.05)

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5.10 French Firm Hired to Oversee Expansion of UAE Rail Network

The French firm Egis has been awarded a project management consultancy contract for the development of the UAE’s railway network. The company will assist Etihad Rail, tasked with developing and operating the network, in developing stages 2 and 3. The existing and currently operated network of 264 km. will be expanded between now and 2024 by over 600 km. in stage 2 and 250 km. in stage 3. The UAE network is part of the Gulf Cooperation Council (GCC) rail network and aims to play a key role in the ongoing growth of conventional rail in the Middle East region.

The rail network is a combination of freight and passenger lines which extends over 1,000 km. and has nearly 40 railway facilities – logistics sites for freight, passenger stations, stabling and maintenance depots. On completion in 2024, the network will link Saudi Arabia to the UAE and Oman. This is the Egis’s third major guided transportation project in the region, the other two being the Qatar metro and an autonomous transportation system in Dubai. (AB 29.05)

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5.11 Sharjah Seeks Closer Dutch Ties Following Trade Mission

A high-level trade delegation from Sharjah, representing its government’s key investment and business entities, travelled to Amsterdam and Rotterdam in the Netherlands on a two-day trade mission. The aim of the mission was to introduce Dutch investors to new business opportunities in sectors including logistics, tourism, environment, healthcare, education, media and digital productions.

The visit organized by Invest in Sharjah – the investment promotion agency of the emirate – is a follow up to the business roundtable in February, where Sharjah hosted over 150 Dutch investors. Invest in Sharjah looks for partnerships in key sectors like healthcare, maritime, food and water sustainability. Some 150 Dutch businesses are currently based out of Sharjah. (AB 19.05)

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►►North Africa

5.12 Egypt’s Economy Near-Term Outlook Bright, 5.3-5.5% Expected Growth In 2018-20

The flotation of the Egyptian pound in November 2016 took its toll on Egypt’s economy. Yet, as fiscal consolidation slows and inflation and interest rates minimize, growth should remain robust over the next two years, according to Capital Economics’ MENA Economics Update report issued on 28 May. The report forecasted a 5.3 – 5.5% growth rate in the period between 2018-20, leading the performance of the Egyptian economy since 2011.

In 2017, the Egyptian economy witnessed its best performance in five years, growing 5% year-over-year. According to the IMF, the government is now on track to record a primary fiscal surplus for the first time in a decade. As the public debt-to-GDP ratio begins to drop, there should be room for the authorities to ease austerity measures. Moreover, inflation and interest rates continue to fall further, as the headline inflation rate has already nosedived from a 30-year high of 33.0% y-o-y in July 2017 to 13.1% y-o-y in April, which is just slightly above the central bank’s target for the end of 2018. However, the oil price hike, which took place recently, has stoked fears that inflation will rise again. Consequently, the government will need to increase administered prices by more than the previously planned amount in order to meet IMF-mandated fiscal targets, the report indicated.

Egyptian exports are expected to drive growth. Since the devaluation, the report indicates that Egypt’s real effective exchange rate—that is, its trade-weighted exchange rate deflated by inflation differentials—has fallen sharply and it is now around 25% below its long-run average. As a result, Egyptian goods are now more competitive on international markets and consumption has started to shift from imports to domestically-produced goods. Exports will also receive a boost as production from the mega Zohr gas field comes on stream. Gas output will almost double over the next few years, which will directly boost GDP by around 2.8%. The report concludes that bolder reforms will be needed to raise the country’s perilously low investment rate and sustain strong economic growth. (Capital Economics 28.05)

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5.13 Egypt & Russia Sign Russian Industrial Zone Agreement

Egypt’s Minister of Trade and Industry Tarek Kabil and his Russian counterpart Denis Manturov signed on 23 May in Moscow an agreement to establish a Russian industrial zone in the Suez Canal Economic Zone. The zone, set to attract $7 billion in investments, will be located in East Port Said. The 50-year agreement will be automatically renewed for five consecutive years if both sides agree. The agreement’s signing came at the plenary session of the 11th Joint Russian-Egyptian Intergovernmental Commission on Trade-Economic, Industrial and Scientific and Technological Cooperation in Moscow.

As per the agreement, both sides will cooperate in manufacturing competitive products that cater to the needs of the Egyptian market as well as foreign markets. The Russian industrial zone is set to be established over three phases on a 5.25 million m² plot of land, with the first phase to cost $190 million. Land in the industrial zone, which is expected to generate 35,000 jobs, will be offered to investors on a usufruct basis.

Egypt and Russia will also cooperate in offering training to experts in various industrial sectors, will exchange expertise in establishing and managing industrial zones, and will provide service for companies who will invest in the zone. The General Authority of the Suez Canal Economic Zone will be responsible for providing data for the zone’s location, which is necessary for the establishment of the infrastructure and utilities. The Authority will provide a one-stop shop to offer licenses, permits and legal consulting and will be responsible for providing the zone with the necessary infrastructure to access roads, ports, railway, as well as electricity and gas. (Ahram Online 23.05)

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5.14 Egypt’s Suez Canal Revenues Rise to $479.3 Million in April

Egypt’s Suez Canal revenues rose to $479.3 million in April, up from $463 million in March, official statistics released on 22 May showed. The Suez Canal is the fastest shipping route between Europe and Asia and one of the main sources of foreign currency for the Egyptian government. (Reuters 22.05)

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5.15 Egypt’s Tourism Revenues Jump 83.3% to $2.2 Billion in First Quarter

The revenues of Egypt’s tourism sector have pivotally jumped 83.3% in Q1/18 to $2.2 billion, a government official told Reuters, adding that the number of tourists who visited Egypt in the same time span increased 37.1% to 2.383 million.

Tourism sector represents the main source of foreign currency income in the country in addition to being an important building block to stabilizing Egypt’s economy. Following the 25 January 2011 revolution, the Egyptian economy had suffered and the rate of tourists’ influx significantly dropped due to the political unrest and terror attacks that hit the country. The crash of a Russian plane in October 2015 shortly after it had taken off from Sharm al-Sheikh airport further exacerbated the problem, leading to a sharp decrease in the number of tourists in 2016.

However, relevant progress in the revenues and the number of tourists have been noted in recent months. Additionally, Egypt floated its currency in November 2016 against all the foreign countries, a measure that attracted even more tourists to the Red Sea resorts and all the tourist attractions in Egypt due to the relatively cheap prices and the increased competitiveness in the sector. In 2010, at its peak, around 14.7 million visitors were entering Egypt, providing nearly $12.5 billion in revenue. (Egyptian Streets 24.05)

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5.16 Egypt Signs $200 Million Funding Agreement with EBRD

Egyptian Minister of Investments and International Cooperation Nasr signed a $200 million agreement with the director of natural resources at the European Bank for Reconstruction and Development (EBRD), to provide finance to the Suez Oil Processing Company (SOPC). The fund will finance a project that includes installing a new vapor recovery unit (VRU), renovating the old coker unit, as well as a number of energy efficiency investments. The project aims to improve SOPC’s operational performance, utilization rate, and environmental footprint, according to the EBRD. Before the signing, the two met to review the steps taken to turn Egypt into a regional oil and gas trading hub. EBRD officials praised Egypt’s progress in delivering the project. They also affirmed their full support for the project, which will play an important role in finding additional sources to contribute to securing Europe’s natural gas demands. (EOG 23.05)

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5.17 Egypt’s Natural Gas Production Increases by 20.5% YoY

Egypt’s production of natural gas increased by around 20.64% year-on-year (YoY), reaching 3.437 million tons in March 2018 compared to 2.849 million tons in March 2017. Statistics published by the Central Agency for Public Mobilization and Statistics (CAPMAS) reveal that consumption of natural gas in Egypt rose by around 9.3% YoY to 3.551 million tons in March 2018, up from the 3.249 million tons consumed during the same month in 2017. Natural gas output rose by 7.71% in March 2018, up from the 3.191 million tons produced in February 2018. Natural gas consumption increased by 9.3% in March 2018, compared to the 3.249 million tons consumed in February 2018. (EOG 28.05)

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5.18 Egypt’s Ministry of Social Solidarity Announces National Strategy for Birth Control

On 26 May, Egypt’s Ministry of Social Solidarity launched a national project for birth control to limit overpopulation, dubbed “two is enough”, as part of the Takaful and Karama program, according to a statement from the cabinet. The project will cost EGP 100 million.

The program covers 1.15 million women who benefit from Takaful and Karama. It will be funded by the Ministry of Social Solidarity and the United Nations Population Fund (UNFPA). The first phase of the project will be implemented in 10 governorates: Aswan, Luxor, Qena, Sohag, Assiut, Minya, Beni Suef, Fayoum, Giza, and Beheira. These governorates are the neediest and have the highest birth rates and the biggest number of women who benefit from Takaful.

Minister of Social Solidarity Waly said that the project will be implemented through 100 civil society organizations as part of the national strategy to limit population growth, aiming at raising awareness of small families among women. The project aims to reach 112 million people in Egypt by 2030. (DNE 27.05)

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5.19 Prices Increased on Fuel and Fresh Produce in Morocco in April

Morocco’s High Commission for Planning (HCP) announced that the consumer price index (CPI) rose in April 2018 by 0.3%, after rising by just 0.1% in March. The food index increased by 0.7% and the non-food index rose by 0.3%. Production of fruits and vegetables increased in both March and April, by 4.4% in March and by 2.1% in April. Meat production also increased by 1.1% in April. In the non-food index, fuel prices increased by 2.8%, nearly ten times the price increases in the overall CPI. Meanwhile, some products decreased slightly in price, including mineral and soft drinks by 0.8%, fish and seafood by 1.4%, and oils and fats by 0.4%.

In the twelve months since April 2017, CPI has increased by 2.7%. The food index increased by 3.7%, non-food products by 1.7%, and services (excluding communication services) by 6.8%. Communication services prices remained stable in the last year. The core inflation indicator, which excludes products with volatile prices and products with public tariffs, remained stable in April compared to March, and has increased only 0.8% since April 2017. (HCP 23.05)

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5.20 Moroccan State Revenues Rise to MAD 76.4 Billion in April

According to the latest statistics of the General Treasury of Morocco, the state’s ordinary revenue has increased, alleviating its under-performance in March with a revenue of MAD 76.4 billion in April. Revenue in March had declined by 2.6% since February, but revenue in April is up 5% since March. Corporate tax revenues, which declined by 17% in March, went down again by 14.6% in April to MAD 16.1 billion.

The decrease is explained by the tax returns for the year 2017 distributed in March 2018, which was less than expected due to the inflation base effect. Income tax revenues increased by 2.4% to MAD 14.7 billion. Regarding indirect taxes, Value Added Tax increased by 7.6% to MAD 21.9 billion, and Consumption Internal Tax (TIC) increased by 6.1% to MAD 8.9 billion. Investment income taxes dropped 4.7% to MAD 22.5 billion.

Government spending has remained stable at MAD 73.3 billion per month, mainly due to the fall in debt interest payments, which offset the slight increase in the government’s salary expenses. Morocco spends MAD 3.5 billion repaying external debt. (MWN 23.05)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Cyprus’s Competitiveness Ranking Falls

The competitiveness of Cyprus’s economy was ranked 41st last year out of 63 countries surveyed, a drop of four positions from 2016, the University of Cyprus announced. The fall resulted from a lower ranking in the area of government and corporate efficiency and infrastructure, the Economic Research Centre (ERC) of the academic institution said, citing the findings of the 2018 IMD World Competitiveness Ranking. Cyprus’s overall drop was partly offset by economic performance.

A public opinion poll demonstrated that what makes the Cypriot economy attractive is its tax regime, its high level of education, the specialized labor force, and the business-friendly environment, the ERC added.

The island was 22nd among 63 countries in terms of economic performance, mainly on international investment and the comparably low cost of living. On the other hand, the current account deficit, poor diversification of the economy, the high unemployment rate, including youth, had the opposite effect.

This year, Cyprus was ranked 28th in terms of government efficiency, down from 22 last year, mainly on the deterioration in the areas of the central bank policy, the country’s credit rating, which remains in the non-investment grade area for almost six years, bureaucracy, justice, disposable income, and legislation on competition and immigration, the ERC said. Last year’s fiscal surplus, helped in partly containing the slippage aided by the island’s tax regime, despite a small drop. The decline in business efficiency to 53 this year from 50 last year, was mainly the result of deterioration in financial criteria such as financial risk factor, stock market, corporate debt, and the digital transformation of companies, partly offset by a minor improvement in administrative practices, the center added. Lastly, in terms of infrastructure, Cyprus fell one place to 41 mainly on technological and scientific infrastructure, the ERC said. Criteria related to education had a positive impact on infrastructure ranking. (CM 24.05)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Louisiana Becomes 25th US State to Pass Anti-BDS Law

Louisiana’s Governor John Bel Edwards issued an executive order 22 May prohibiting the state’s agencies from executing contracts with businesses involved in the anti-Israel BDS (Boycott, Divestment and Sanctions) movement. The order directs the state commissioner of administration to examine existing contracts with companies to determine if they are currently boycotting Israel or supporting those who do so. The order also stipulates that in the future, companies seeking to engage in a state contract will be required to sign an agreement certifying that they are not boycotting Israel.

Edwards issued the order on the same night he held a special celebration honoring Israel’s 70th anniversary at the governor’s mansion. The Louisiana House also honored Israel at the opening of a special session on 22 May.

With this order, Louisiana became the 25th US state to enact official measures condemning BDS or prohibiting government business with entities that boycott Israel. The governors of all 50 US states have signed a declaration condemning the BDS movement as antithetical to American values. Montana, Arizona, Colorado, Florida, Georgia, Illinois, Ohio, Indiana, Iowa, South Carolina, Pennsylvania, New Jersey, Rhode Island, Michigan, Texas, Nevada, Kansas and Wisconsin have all passed bills fighting BDS. (UwI 23.05)

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7.2 Study Says 59% of Israeli Children Are Exposed To Secondhand Smoke

A new Health Ministry report showed that nearly 60% of Israel’s children are exposed to secondhand smoke. In 2016, the Ministry examined urine samples from 103 children and sent them for analysis abroad. When the results came in, they showed that 59% contained cotinine, a byproduct of nicotine which serves as a reliable way to measure exposure to cigarette smoke. The study also compared the Israeli children’s results to those of children in other countries. Israeli children were found to have a higher level of cotinine than their counterparts in Canada, Germany, and England, but lower levels than their counterparts in Poland. Even more worrying is that Israeli children from a low socioeconomic status have higher levels of cotinine than their higher-SES counterparts.

A new Health Ministry department will be responsible for monitoring biological issues, including exposure to environmental tobacco, secondhand smoke, pesticides, heavy metals, and other toxins. These levels will be used to determine and advance Health Ministry policies in the future. The new department is partially funded by the Environment and Health Fund. (IH 25.05)

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*REGIONAL:

7.3 Greece-Macedonia “Name Dispute” Compromise Faces Stiff Opposition

Greece and Macedonia have been working for months toward a rapprochement and an end to the name dispute that has dragged on since 1991. “Republic of Ilindenska Macedonia” is the new suggestion; neither side was fully satisfied with alternatives such as “North Macedonia” or “New Macedonia.” The new proposal was put forward during an EU summit recently in Sofia, Bulgaria, where a meeting also took place between the leaders of the two countries. Zoran Zaev, the prime minister of Macedonia, suggested the name, a reference to the Ilinden Uprising, and made it known that his government had given it the green light. This 1903 uprising against the Ottoman Empire took place in the small town of Krusevo in the territory of what is now the Republic of Macedonia. It was brutally suppressed by the Ottomans. Macedonia’s Republic Day commemorates the anniversary of the uprising on 2 August.

Greek Prime Minister Alexis Tsipras failed to secure support from his coalition ally and opposition parties on Saturday, and the Greek people are also less than enthused. Greece accuses Macedonia of co-opting its history to create a questionable national identity. Every nationalist attempt by Macedonia is perceived as an affront.

But it is not only Greeks who could view the supposed breakthrough with skepticism. The 1903 Ilinden Uprising is also commemorated in neighboring Bulgaria, where it helped to sow the seeds of independence. Sofia will reject the idea of Macedonia using it to end the name dispute with Greece. Athens is not the only one to accuse Skopje of cultural theft; Bulgarian officials, too, often deny the existence of a specifically Macedonian culture and history.

When the Ilinden Uprising broke out, modern-day Bulgaria and Macedonia, as well as the provinces of Macedonia and Thrace in northern Greece, were all still part of the Ottoman Empire. The rebellion was organized by parts of the Slavic population in Thessaloniki, namely Bulgarians, Slavic Macedonians and Albanians who banded together in a Secret Macedonian-Adrianople Revolutionary Organization. They would ultimately fail.

Tsipras will struggle to persuade ideological hard-liners in Greece to accept the new name. There are elections set for 2019, with a lot at stake for the incumbent prime minister. His rival, the conservative Kyriakos Mitsotakis, has a clear lead in the polls. Support for Tsipras has fallen drastically after he broke his election promise and supported the austerity policy laid out by EU lender countries. So right now he is trying to score some successes. A rapprochement with the Balkan countries, which have all too often been neglected by Greece, is part of this strategy. (Deutsche Welle 22.05)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Triventures Supports Genoox in $6 Million Funding Round

Genoox has secured $6 million in a funding round. The round was led by Triventures, a venture capital fund that invests in healthcare startups, and was joined by Inimiti Capital and Glilot Capital Partners. The introduction of next-generation sequencing technology by companies such as Genoox, which employ machine learning algorithms to analyze large amounts of genetic data to enable precision medicine, is transforming this market from point testing solutions to broader tests that can cover large parts of the genome. The Genoox platform analyzes complex genetic data and runs these data points through a proprietary search engine that combines the company’s database with multiple public databases in order to provide more personalized, actionable recommendations.

Additionally, Genoox allows users across research and medical facilities to securely share complex research using a set of customizable tools, and identify variants and mutations that have never been found before. Genoox advances precision medicine by helping clinicians understand and treat the root of the disease and not just the symptoms. Especially for patient populations such as children, who can’t always vocalize their symptoms, Genoox peels back the layers to understand a person’s genome – what’s causing the disease, how to best treat it – based on a person’s unique DNA.

Tel Aviv’s Genoox is a global company founded by an experienced team of geneticists, bio-informaticians, engineers and technology experts with a passion for life science, big data, high-performance computing and a clear vision to revolutionize the way genomic data is shared, stored and analyzed. Genoox has an international footprint, with U.S. offices in Palo Alto, CA. The company was founded in 2014. (Genoox 16.05)

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8.2 Nanit Raises $14 Million

Nanit announced it has secured $14 million in Series B financing led by new investor Jerusalem Venture Partners (JVP) with participation from existing investors Upfront Ventures RRE Ventures, Vulcan Capital and Vaal Investment Partners. This latest round of funding brings the total raised by the company to nearly $30 million and will be used to expand its team of world-class computer vision and machine learning engineers and scale production to meet growing retail demand domestically and abroad.

Since launching in 2016, Nanit’s smart baby monitor has helped thousands of children – and their parents – get more sleep, thanks to its exclusive sleep insights, behavioral analysis, expert guidance and nightly video summaries. The company has established a strong base of customers in the U.S. through national retail partnerships with buybuy BABY and Amazon, and plans to use the funding to further expand distribution domestically and internationally in key markets including Canada and Europe.

Ramat Gan’s Nanit is a tight-knit collection of scientists, parents and designers – experts in the first beautiful months of human life. They have developed advanced computer vision and machine learning algorithms to help us measure human behavior. They use this knowledge and technology to create innovative products that are safer and smarter, for parents and babies everywhere. (Globes 21.05)

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8.3 MaxQ-AI Gets CE Approval for AccipioIx Intracranial Hemorrhage AI Software Platform

MaxQ Artificial Intelligence (MaxQ-AI) has received the CE Mark approval for its revolutionary Accipio software platform. MaxQ-AI has developed a broad machine vision and deep learning platform to support the assessment of multiple clinical indications. The first of these applications will be the detection of intracranial hemorrhage (ICH), commonly known as a brain bleed. Accurate and timely detection of ICH is a critical step in clinical decision making for stroke assessment and head trauma.

AccipioIx, the first of multiple Accipio versions, is now approved for commercial sale within the European Union. AccipioIx is based on deep learning technologies which automatically analyzes non-contrast head computed tomography (CT) images. The artificial intelligence AccipioIx algorithm is uniquely designed to be highly sensitive to the presence of ICH, identifying and prioritizing patients with ICH for the treating physician. It provides a case-level signal allowing rapid triage and prioritization of patient and can be natively integrated into PACS systems, medical imaging hardware, or healthcare clouds. When minutes count, Accipio makes all the difference.

Tel Aviv’s MaxQ-AI is a leading medical AI company, MaxQ-AI’s team of deep learning and machine vision experts, are working with world-class clinical and industry partners to yield unprecedented insights into medical data; empowering physician decision making to improve patient outcomes in acute medical scenarios. (MaxQ AI 22.05)

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8.4 Ferring Invests $15 Million in Bio-Technology General

Switzerland’s Ferring Pharmaceuticals announced that it is investing $15 million to expand biotech production capabilities at its Israeli subsidiary Bio-Technology General (BTG). Over the next three years, Ferring will incorporate new production lines and innovative technologies at the BTG facility in the Beer Tuvia’s industrial park south of Tel Aviv. These technologies will support the development of new treatments in reproductive medicine and women’s health, in addition to the manufacturing of the active pharmaceutical ingredient (API) for Rekovelle (follitropin delta), Ferring’s latest fertility treatment.

Bio-Technology General (BTG) was founded in 1980 and is the longest-standing bio-pharmaceutical company in Israel. BTG has an R&D and manufacturing facility for female fertility, growth hormone and osteoarthritis of the knees. BTG is also one of the few pharmaceutical companies in Israel that have brought a product to the market. BTG employs some 300 people in its plant in Beer Tuvia Industrial Park, of whom 50 are involved in research. (Various 23.05)

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8.5 Zebra Announces CE Approval of Its 7th AI Imaging Algorithm – Mammography Lesion Detection

Zebra Medical Vision announced the CE regulatory approval of its newest algorithm to be included in its growing Deep Learning Imaging Analytics platform. The algorithm, capable of detecting suspected malignant lesions in Mammography scans – is the latest addition to other automated tools announced in the past as part of its “All-In-One” AI1 business model, among them algorithms that automatically detect brain bleeds, vertebral fractures, coronary artery disease, osteoporosis and more.

Existing software solutions, called Mammo CAD (computer aided-detection) have been marketed for a number of years – attempting to assist mammographers in identifying suspicious lesions in mammography scans. Unfortunately, the large number of false alarms, coupled with a price tag that has placed these products within reach of only wealthier healthcare economies, have not led to widespread adoption globally. Zebra-Med’s Mammography algorithm aims to change that dynamic, by providing a state of the art clinical decision support product at a previously unprecedented price point. The first version to be released supports 2D Hologic devices, and Zebra Medical Vision expects to add support for additional vendors, as well as 3D support during the course of 2019. The algorithm broadens Zebra-Med’s AI1 “All-In-One” Imaging Analytics package, which has already analyzed more than 1M scans in over 5 countries.

Headquartered in Kibbutz Shefayim, Zebra Medical Vision uses deep learning to create and provide next generation products and services to the healthcare industry. Its Imaging Analytics Platform allows healthcare institutions to identify patients at risk of disease and offer improved, preventative treatment pathways to improve patient care. (Zebra Medical Vision 24.05)

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8.6 NEMIS Develops Rapid Diagnostic Tests for Food Safety & Clinical Applications

Biosynth, a Swiss-based developer of reagents and biologically active chemicals, and RAMOT, the Tel Aviv University Business Engagement Center, announced the incorporation of a Joint Venture, NEMIS Technologies. The jointly developed technology platform AquaSpark forms the basis of NEMIS Technologies’ development of diagnostic kits and solutions for rapid pathogenic bacteria detection in food safety, hospital and clinical applications and water treatment.

AquaSpark enables highly sensitive chemi-luminescence probes for research and diagnostic applications. Pathogenic, potentially life threating bacteria are made visible with light signals at much faster speed than with current standard methods, thus reducing effectively important safety risks at highly competitive cost.

Ramot is the Business Engagement Center at Tel Aviv University, Israel’s largest research and teaching university. Tel Aviv University (TAU) – Israel’s largest and most comprehensive institution of higher learning – is home to over 30,000 students studying in nine faculties and over 125 schools and departments across the spectrum of sciences, humanities and the arts. It is consistently ranked in the top 20 in the world in terms of scientific citations and among the top 100 universities internationally. (RAMAT 25.05)

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8.7 BASF & Evogene Announce Multiyear Collaboration for the Development of Novel Insecticides

BASF, one of the world’s leading chemical companies, and Evogene announced a new collaboration focusing on the development of novel insecticides based on new binding areas (Site-of-Action or ‘SoA’) on key insecticidal target proteins. The parties also announced that the collaboration achieved its first project milestone, with the joint nomination of a set of novel SoAs, discovered by Evogene that will advance to the discovery phase of relevant bioactive compounds.

In the initial phase of the collaboration, using their strong background in computational methods, Evogene has developed a smart process to identify potential novel compounds that act on new proteins and binding sites. In the next phase of this collaboration, Evogene will utilize its Computational Predictive Biology (CPB) platform for the discovery of the relevant chemistry to address the new SoAs. Compounds discovered by Evogene will then enter BASF’s insecticide discovery platform for insect efficacy screening and testing to determine the chemistry’s ability to modulate the respective target proteins. The financial terms of the collaboration have not been disclosed.

Rehovot’s Evogene is a leading biotechnology company developing novel products for major life science markets through the use of a unique predictive biology platform incorporating deep scientific understandings and advanced computational technologies. This platform is utilized by the Company to discover and develop innovative ag-chemical, ag-biological and ag-seed products (GM and non GM), and by two subsidiaries; Evofuel, focused on castor seeds, and Biomica, focused on human microbiome therapeutics. (Evogene 29.05)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Orbit Unveils its 12-inch Multi-Purpose Airborne Satcom Terminal

Orbit Communications Systems announced its revolutionary 12-inch Multi-Purpose Terminal (MPT 30) for airborne sitcom. Orbit’s MPT was designed to address the regional and global coverage needs of the military mobile market. By providing outstanding RF performance and dynamic response under the harshest environmental conditions, it meets the broadband requirements of mission aircraft, unmanned aerial systems, helicopters and more.

Orbit’s 30-cm Multi-Purpose Terminal (MPT 30) delivers Internet-based data communications via satellite to fixed/rotary-wing aircraft and UAVs. Built to military standard (MIL-STD), it features minimal Size, Weight and Power consumption (SWaP). The ultra-compact and cost-effective terminal has been ruggedized to overcome the many challenges posed by mission-critical platforms. MPT 30 is the latest in the MPT series, which also includes 46- and 60-cm terminals.

Netanya’s Orbit Communications Systems is wholly-focused on precision tracking-based communications – in the areas of satcom, telemetry and remote sensing – and provides an innovative solution for airborne audio management. With certification by defense, government and commercial agencies, they deliver tailor-made, turnkey solutions at sea, on land and in the air. (Orbit 17.05)

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9.2 TechSee Named a 2018 “Cool Vendor” by Gartner

TechSee has been selected as a “Cool Vendor” in Gartner’s May 2018 Cool Vendors in CRM Customer Service and Support Report. TechSee’s patent pending technology combines deep learning image recognition and augmented reality to help enterprises deliver a fundamentally new way of providing technical support to their customers in the smart home era. TechSee’s technology has effectively created a holistic solution that enables companies to maximize their time and resources, while enhancing customer experience. TechSee’s scalable cognitive platform becomes smarter with every customer support interaction. It crowdsources expertise and builds the world’s largest repository of visual technical issues. The result is an AI-based platform that over time, provides smart decision support tools for agents and visual self service solutions for consumers powered by a ‘virtual technician’ for onboarding, operational guidance or troubleshooting.

Tel Aviv’s TechSee revolutionizes the customer support domain by providing the first intelligent visual support solution powered by artificial intelligence and augmented reality. TechSee empowers support teams across the globe to deliver a better customer experience and reduce costs. TechSee is led by industry veterans in call centers and customer care with years of experience in mobile technologies, computer vision, machine learning and big data. The company headquartered has offices in New York and Madrid. (TechSee 17.05)

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9.3 ZOOZ Launches Its New Platform: PaymentsOS

Tel Aviv’s ZOOZ is excited to announce the official launch of its new payments platform, a robust online payments platform providing a cloud-based globally distributed infrastructure for businesses to easily connect and manage multiple payment service providers through one platform. During the past 18 months ZOOZ re-created and built the new generation of global payment platforms, PaymentsOS, catering to payment teams by supporting the scale, volumes and complexity of today’s largest e-commerce players. With PaymentsOS, merchants and payment teams are now able to control and manage all their payments through a unified platform:

-Monitor all your payment activity in a single unified dashboard

-Analyze all your payment behavior via flexible reports and analytics tools

-Optimize your payment flows using a real-time self-serve decision engine

-Make the right decisions based on comparative benchmarks and machine learning driven insights

The new cloud architecture is designed as a distributed system that is more than capable of handling today’s global merchants super-high peak volumes (over 4000 transactions per second).

PaymentsOS went live a few months ago and has already processed many millions of transactions with leading global merchants and Payment Service Providers. PaymentsOS agnostic technology is a giant step towards the future of online payments. (ZOOZ 17.05)

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9.4 Blox.io Launches “Quickbooks for Crypto”

Tel Aviv-based Blox.io launched Blox Business – “Quickbooks for Crypto” – managing, tracking and reporting platform for crypto assets. Blox Business is currently tracking and helping companies manage over $2B in various crypto assets and is on track to manage more than 10% of all crypto assets by the end of 2018. The new platform is already being used by several market leaders such as eToro, Wings, CIVIC, Coinsilium, Aeternity, Chainlinker capital, Startup Token and many others.

Companies like QuickBooks introduced a simplified, easy to use and intuitive set of tools to the world in order to help manage and organize the financial needs of a company. This includes helping to manage cash flows, payments, salaries and tax reports. Blox.io offers automatic and intuitive integrations for multiple exchanges and wallet accounts including Ethereum, Bitcoin, Binance, Kraken and many more. The platform is available on iOS, Web and Android, accessible with a single, cross-device login and high level asset performance reports.

Blox.io is a Tel Aviv-based company, employing over 25 employees through three offices in Israel and China. Founded in June 2017, the company has grown rapidly and looking for further expansion. Its clients include Civic, eToro, Coinsilium, Aeternity and other industry leaders. Blox’s official partners are NEO, eToro, Coinsilium, RSK and others. (Blox.io 16.05)

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9.5 DSIT Invited to Demonstrate its Underwater Security Systems to the US Navy

DSIT Solutions was invited by the Stiletto Maritime Demonstration Program to demonstrate its Underwater Security Systems at a US Navy base. The Stiletto program, sponsored by the US Assistant Secretary of Defense for Research and Engineering, Rapid Reaction Technology Office, coordinated and executed the demonstration. The capability demonstration was specifically aimed at Counter Unmanned Underwater Vehicles (UUVs) operations.

For the demonstration, DSIT deployed its AquaShield long range Diver Detection Sonar (DDS) and PointShield Portable Diver Detection Sonar (PDDS) off a pier at a US Navy base. The systems were calibrated by the company to support automatic detection, tracking, classification and alert of various underwater threats including UUVs and divers. During the four-day demonstration, DSIT’s systems successfully monitored the underwater surroundings and alerted when UUVs penetrated the guarded zone. The capability demonstration included various types and sizes of UUVs approaching DSIT’s systems from different angles and at changing diving altitudes.

Givat Shmuel’s DSIT provides detection solutions for HLS, Naval and Critical infrastructure markets. Their product lines include the Shield family of Diver Detection sonars, Blackfish Hull mounted sonar, portable acoustic range and SeaShield Coastal Surveillance system. On the ground, DSIT also offers a long-range Fiber Optic sensing solution called Lightline. (DSIT 21.05)

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9.6 Rafael Unveils EPIK Add-On Precision Guidance Kit for Rocket Artillery

Haifa’s Rafael Advanced Defense Systems released details of its EPIK (Electro-Optical Precision Integration Kit) technology development – a capability enhancement designed to furnish unguided surface-to-surface rocket system effectors with autonomous stand-off precision guidance and increased range. EPIK is an add-on precision guidance kit (PGK) that leverages the electro-optical sensor and scene-matching/signal processing technologies developed for Rafael’s Spice family of air-to-surface munitions. The EPIK add-on architecture includes an uncooled infrared (IR) sensor, a laser sensor to enable engagement of moving targets, as well as an onboard inertial navigation system (INS) and a global positioning system (GPS) only used for back-up. (Rafael 21.05)

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9.7 Wally Smart Wall Breaks the Mold in Event Advertising

The traditional interview backdrop has long served as an attractive marketing tool. It’s a permanent fixture reaching a captive audience, generating expansive exposure during global events. Now, Tel Aviv’s Wally has shattered the mold.

As the first and only interview backdrop of its kind, the Wally Smart Wall enables sponsors to communicate directly with their target market through video content and dedicated interactive messages. Comprised of a row of screens situated within the exact frame of the ongoing interview, Wally can carry out active marketing with any crowd. The result is a more effective, better looking branding experience.

This is the new standard in event advertising. Wally has taken the age-old model and amplified its success. Like so many of today’s smart tools and technologies, the Wally adapts to your wants and needs as they change. It provides you with the freedom to control your message in real-time. Instead of a singular stale logo, Wally provides a dynamic, elastic and engaging platform for optimal message delivery. As the newest media platform model, the Wally Smart Wall is an integration of state of the art technologies. Together, these tools make the Wally a fully synchronized wall display of commercial messaging on a collection of screens. (Wally Smart 22.05)

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9.8 AudioCodes Selected by TetraVX for Hosted Unified Communications Services

AudioCodes announced that its 400HD series of high definition IP phones have been selected by TetraVX, a leading provider of cloud-based unified communications and collaboration (UCC) solutions. TetraVX supplies AudioCodes IP phones to customers of its hosted UCC services, which include Skype for Business based offerings, both on-premises and in the cloud, as well as an in-house developed UC platform.

AudioCodes 400HD family of IP phones is a range of robust desktop devices that offer a rich feature set, simple workflow design and usability. The broad range of models covers all customer needs from entry-level, common area devices up to advanced, executive models with color touch screens. The phones provide extensive SIP protocol support that ensures seamless interoperability with leading UC platforms. They also deliver high definition voice quality with support for adaptive and wideband codecs such as SILK, Opus and G.722. TetraVX also uses the AudioCodes One Voice Operations Center (OVOC) to facilitate management of its entire AudioCodes IP phone deployment from a centralized network operations center.

Lod’s AudioCodes is a leading vendor of advanced voice networking and media processing solutions for the digital workplace. AudioCodes enables enterprises and service providers to build and operate all-IP voice networks for unified communications, contact centers, and hosted business services. AudioCodes offers a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world. (AudioCodes 22.05)

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9.9 IFF Partners in Amkiri’s Visual Fragrance™ Technology

International Flavors & Fragrances, a leading innovator of sensory experiences that move the world, announced its partnership in Amkiri’s Visual Fragrance Technology – a new ‘ink’ that can be drawn on the skin that also delivers a long-lasting fragrance, thus connecting the senses of sight and smell. The innovative product’s launch was announced on 22 March 2018 by Amkiri, an Israeli-based start-up that was founded in 2014.

Amkiri’s patented Visual Fragrance is applied to the skin using specially designed applicators, allowing the user to adorn themselves with individual multisensory body art. The formula is long-wearing, and can work with any fragrance or color. The partnership with IFF signals Amkiri’s commitment to product excellence and establishing Visual Fragrance as a part of consumers’ daily beauty regimen. The company will continue to develop more ground-breaking technologies that will continue to serve and disrupt the beauty industry.

Tel Aviv’s Amkiri began with an idea of trying to visualize (the traditional and transparent) fragrance on one’s own body, in a colorful way. With a team of savvy business, design, engineering and chemistry experts, Amkiri began creating the product – scientifically formulating fragrance into a color form, and inventing proprietary beauty tools and applicators. Today Amkiri has now brought fragrance into the 21st century, carving out a brand-new, patented product category for the beauty and cosmetics industry which enables consumers the complete freedom of multi-sensory self-expression. (IFF 24.05)

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9.10 Elbit Systems Displays Advanced Solutions in Ottawa at CANSEC 2018

Elbit Systems showcased a range of solutions at the Canadian Association of Defence and Security Industries (CANSEC) exhibition in Ottawa on 30-31 May 2018. Solutions displayed represent a vast portfolio addressing the modern battlefield’s challenges. Among these are advanced solutions in the areas of Sonar and Anti-Submarine Warfare (ASW) to be displayed for the first time, training and simulation systems, Intelligence Surveillance and Reconnaissance (ISTAR) systems, Electronic Warfare (EW) solutions, Command, Control, Communication, Computers & Intelligence (C4I) solutions as well as Degraded Visual Environments (DVE) solutions.

Presented for the first time at the show is TRAPS, an innovative fully operational Low Frequency (LF) variable-depth-sonar intended for detection, tracking and classification of submarines, midget submarines, surface vessels and torpedoes. The TRAPS system is comprised of a vertical projector and a receive array. TRAPS’ projector array is reel-able and stows on the winch drum with the receive array and tow cable, thus removing the need for a dedicated, heavy and costly deployment/recovery system. TRAPS answers the need for a cost-effective compact ASW sensor that can be delivered stand-alone or as part of an integrated sonar suite onboard the Seagull multi-mission suite Unmanned Surface Vessel (USV).

PNR-1000 is a lightweight personal network radio (PNR) with automatic voice and data relay, offering 64-member ad-hoc networking including full-duplex voice conferencing, data and video. As the newest generation of PNR at the full NATO RF spectrum 225-512 MHz, the PNR-1000 is the lightest of its kind in the market.

The E-LynX™ Family of Mobile Tactical Communications Solutions provides highly advanced Mobile Ad-hoc Networking (MANET) capabilities to a variety of platforms over any terrain type and are already operational with numerous customers worldwide.

Haifa’s Elbit Systems is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world. The company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems. The Company also focuses on the upgrading of existing platforms, developing new technologies for defense, homeland security and commercial applications and providing a range of support services, including training and simulation systems. (Elbit 24.05)

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9.11 SafeRide Technologies Selected as Finalist for Two 2018 TU-Automotive Awards

SafeRide announced that its solution, vSentry™, has been chosen as a finalist in the Best Auto Cybersecurity and Data/AI Product/Service categories. The TU-Automotive Awards are considered one of the most prestigious awards, recognizing innovation, excellence and industry engagement in the connected car industry. Carefully selected by a panel of top industry experts, over 400 nominations were received and analyzed across ten categories.

SafeRide’s solution provides known threat prevention, in addition to an AI, machine learning and deep learning framework for discovering the onset of unknown threats and anomalies. The platform includes an in-vehicle cybersecurity suite for real-time, multi-layer granular protection and unmediated monitoring of vehicle applications and networks, and a cloud layer for real-time security alerts, updates and remediation of new incipient risks and problems.

Tel Aviv’s SafeRide is a leading provider of anomaly uncovering and cyber threat prevention solution for connected and autonomous vehicles. In addition to conventional threat detection and prevention, the company’s unique software uses an AI machine-learning and deep learning framework to analyze the untapped ocean of hints that lie in seemingly disconnected sources of in-vehicle data, to uncover unknown anomalies, threats and insights systematically, and at scale. SafeRide provides automotive vendors including Tier 1 Suppliers and OEMs with the means to lead the connected vehicle revolution and the freedom to develop differentiated vehicle value-add applications with complete peace of mind. (SafeRide 24.05)

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9.12 ECI’s Muse Helps Telcos Gear Up for Intent Based Networking

ECI, building off the success of its ELASTIC Network® solutions for service providers, critical infrastructures and data center operators, announced the availability of its Muse modular software suite for the Elastic Services Platform. A cloud-native solution designed to support existing and future network infrastructure, Muse leverages automation and real-time programmatic control to simplify and streamline key components of the service and network lifecycles including service creation, planning, provisioning and analytics.

The first wide-scale implementation of Muse is commencing now, at a large Tier-1 service provider with an incredibly complex and extensive network consisting of tens of thousands of nodes. Critical tasks like service provisioning and workflow automation often require long, unwieldy, manual processes, which are prone to errors. After implementing Muse applications, the customer will be able to simplify the process to reduce required time from hours to mere minutes and better utilize network resources.

Muse automates each step of the service provisioning process, including obtaining the service order, identifying resources, performing multi-constraint path computation, configuring the end-points, verifying that the service meets its SLA, activating the service and updating relevant databases and systems. Automation can be implemented in stages, with as many – or as few – steps as desired before eliminating human intervention completely. The software supports carriers using ECI networking equipment as well as 3rd part equipment with open SDN control interfaces.

Petah Tikva’s ECI is a global provider of ELASTIC network solutions to CSPs, critical infrastructures as well as data center operators. Along with its long-standing, industry-proven packet-optical transport, ECI offers a variety of SDN/NFV applications, end-to-end network management, a comprehensive cybersecurity solution, and a range of professional services. ECI’s ELASTIC solutions ensure open, future-proof, and secure communications. (ECI Telecom 23.05)

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9.13 DustPhotonics Announces Availability of 100Gbps QSFP28-SR4 Optical Transceivers

DustPhotonics announced production ramp and volume availability of QSFP28-SR4 optical transceivers. The 100Gbps transceivers incorporate DustPhotonics’s patented passive alignment technology eliminating manual active alignment allowing for a vast reduction in manufacturing costs. The QSFP28-SR4 is the industry’s most highly competitive solution for short reach, high-density applications over multimode optical fiber in data centers, cloud and HPC applications. DustPhotonics is driving the mass adoption of optics to 400Gpbs by demonstrating next generation optical connectivity with its QSFPDD-SR8 transceiver at the Optical Fiber Conference (OFC) in March 2018. The 400Gbps product line of transceivers complies with the QSFPDD and OSFP Multi-source Agreements (MSA) and leverages years of design expertise. DustPhotonics is currently accepting volume orders for the shipment of QSFP28-SR4 and will be sampling 400Gbps transceivers later this year.

Modi’in’s DustPhotonics enables mass adoption of optical connectivity in next generation data center, cloud, HPC and enterprise networks by offering unprecedented low-cost solutions. The Company’s short to midrange optical transceivers and active optical cables (AOC) support all form factors at data rates up to 400Gbps. Founded in 2017 with venture funding from leading private technology investors, DustPhotonics is headquartered in Modi’in, Israel with business operations located in Cupertino, California. (DustPhotonics 29.05)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s Economy Grew by 4.2% During First Quarter

The Central Bureau of Statistics announced on 16 April that Israel’s economy remains robust, with the Gross Domestic Product (GDP) growing at an annualized rate of 4.2% in Q1/18. This follows 4.4% growth in Q4/17 and 4.1% growth in Q3/17. The Central Bureau of Statistics emphasized that this is only a preliminary estimate.

An analysis of the growth finds double-digit growth in almost of parameters. Private consumption rose 10% in the first quarter, investment in fixed assets grew 12.8%, exports of goods and service rose 11.4% and public expenditure also rose 11.4%. Import of goods and services rose 23.4% after rising by only 6.1% in Q4/17. High-tech remains the growth engine of the economy. Exports of software and communications products rose 26.8% in the first quarter. (CBS 16.04)

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10.2 UBS Ranks Tel Aviv as World’s 20th Most Expensive City

According to the UBS Global Wealth Management’s Chief Investment Office (CIO), Tel Aviv is the world’s 20th most expensive city, according to research on prices and earnings of 77 international cities and how they fare against each other. Tel Aviv is ranked 19th in the world (not including rent), 32nd in terms of income levels and 28th in purchasing power. The report shows that an average person in Tel Aviv needs to work twice as much as in New York to purchase an iPhone X.

According to the study’s Purchasing Power Index, residents of European and North American cities typically enjoy the best buying power overall, with Bahrain’s capital Manama and Hong Kong the only non-transatlantic contenders in the Top Ten. Global financial capitals New York and London rank 10th and 23rd respectively. Zurich tops the list as the world’s most expensive city, closely followed by Swiss rival Geneva. (Globes 29.05)

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11: IN DEPTH

11.1 ISRAEL: Israel’s Banking System Performance in International Perspective

The Bank of Israel announced that international comparisons are a useful tool for assessing banks’ stability and activities, and for monitoring the challenges and risks in their conduct. Using them, the Banking Supervision Department at the Bank learns how banks and regulators worldwide deal with a range of challenges, most of which are also characteristic of the domestic banking system.

For a considerable time, the credit quality of Israeli banks has been higher than banks in most countries in Europe and is similar to that of US banks. This is due to, among other things, Israel’s underwriting processes being stricter, and against the background of the supportive domestic economic conditions and the active steps taken by banks and the Banking Supervision Department in the area of credit, primarily reducing credit concentration and decreasing exposure to large and leveraged borrowers.

Israeli banks’ profitability is slightly lower than that of the leading banks in Europe and the US, primarily because Israel’s banks take on lower risks; their range of activities is smaller (banks worldwide deal in, for example, marketing insurance and market making); their efficiency is lower; and the tax rate in Israel is higher.

Most banks in Israel are less efficient than similar banks in other OECD countries, though their efficiency is on a trend of improvement in view of the requirements set by the Banking Supervision Department and the significant steps taken. The gap in efficiency derives from, among other things, wage expenses (affected by a high tax on salaries) and related benefits in Israel taking up a larger share in total operating expenses.

In Israel, as in most advanced economies, the retail banking business model has adjusted itself in recent years to a world of technology and of change in customer preferences. This process includes, among other things, a reduction in the number of bank branches (though at a slower pace than other countries) and a switch to digital banking.

The physical accessibility of banking services in Israel (through branches and tellers) is similar to what is generally seen in OECD countries and even exceeds it. To illustrate, the number of bank branches per 1,000 square kilometers in Israel is markedly higher than the figure for OECD countries.

Israeli banks are similar to leading banks in terms of the implementation of the advanced and stricter capital allocation standards as set by the Basel rules. The level of the leverage ratio in Israeli banks is higher than the level at global systemically important banks and indicates that the Israeli banks have a higher level of safety due to the high capital buffers.

In terms of liquidity, Israeli banks implement advanced standards, and, like leading banks in Europe, they exceed the minimum threshold requirement (100%) established in the Basel III principles. In Israel, these principles have been implemented in Proper Conduct of Banking Business Directive no. 221 regarding the Liquidity Coverage Ratio (LCR).

The dividend payout ratio (out of net income) among banks in Israel is lower than the ratio among leading banks worldwide, but it is on a rising trend. As the banks are converging to regulatory capital and liquidity goals, the Banking Supervision Department has approved an increase in the payout ratio for most of them this year. (BoI 29.05)

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11.2 LEBANON: Is Lebanon’s New Recycling Project a Bunch of Garbage?

Hanan Hamdan posted in Al-Monitor on 15 May that Prime Minister Saad Hariri on 24 April announced Warak Beirut, a recycling project that promotes source sorting of paper and cardboard at government and other public institutions in Beirut. The Beirut municipality will implement the project in cooperation with Live Lebanon, a program of the United Nations Development Program (UNDP) that encourages Lebanese citizens living abroad to help fund development projects in the poorest areas of the country. About a week after the announcement, on 1 May, the company contracted to sweep the city’s streets and collect and transport trash began operations.

The aim of Warak Beirut is to reduce the amount of waste sent from the city to the landfills in Costa Brava, in the southern suburb of Choueifat and Bourj Hammoud, in the Metn district of Mount Lebanon governorate. Both were opened in March 2016 by ministerial order to help deal with the garbage crisis that gripped the city for almost a year.

In July 2015, garbage began piling up in Beirut and Mount Lebanon after residents living near the region’s only landfill, in Naameh, south of Beirut, staged demonstrations demanding the site’s closure. The landfill had been expanded many times, and locals complained of the stench and fear of the spread of diseases. In 2016, the national government announced a plan to get a handle on the garbage situation, but in 2017 the Beirut municipality decided to take matters into its own hands and implement a separate waste collection and disposal plan of its own.

Moughir Sinjaba, a member of the Beirut municipal council, explained to Al-Monitor that Warak Beirut will include distributing sorting and collection containers for offices and corridors in public buildings, running an awareness campaign about the sorting system and its importance, and developing an application that organizes sorting, collection and transportation of garbage to recycling factories.

Meanwhile, the company Ramco was supposed to start sweeping streets and collecting and transporting household solid waste in March, but it had failed to do so until 1 May due to its inadequate preparation, including providing workers with trucks and other equipment. Part of the service to be provided by Ramco calls for sourcing and placing containers on Beirut streets for collecting recyclable paper and glass, organic material and non-recyclable trash. Moreover, it was to install containers for the different types of refuse at 250 underground collection spots for its own use. With these provisions unfulfilled, Ramco for the time being is collecting and transporting unsorted waste.

Ramco’s purview includes collecting garbage from street containers as well as paper waste from schools and universities, food leftovers from restaurants, hotels and hospitals, and garbage from industrial facilities. A recycling plant will be contracted to collect cardboard and paper recycling from government buildings under Warak Beirut.

At the press conference announcing Warak Beirut, Hariri noted the importance of government employees sorting at the source as the first step toward solving the garbage crisis. He encouraged the private sector to invest in constructing recycling facilities. Hariri issued a circular asking government employees to be sure to sort properly to avoid making recyclables non-recyclable. Departments are to appoint liaison officers to coordinate the system’s implementation. “Each ton of recycled paper saves 17 trees in Lebanon, 27.2 kilograms of air emissions, 2.45 square meters of landfill, 4,100 kilowatts of power and 91 cubic meters of water,” Hariri said.

Also at the press conference, Celine Moyroud, UNDP project director in Lebanon, said that paper and cardboard waste account for 16% of the country’s total waste. “In Beirut alone,” she remarked, “this amount equals 100 tons, only 25% of which is sorted from the source.” The remaining 75% of paper and cardboard waste gets mixed in with other types of garbage.

Al-Monitor spoke about Warak Beirut and the municipality’s other waste management plan with members of the Waste Management Coalition, which advocates environmentally sound solutions for dealing with waste products. Coalition members include groups such as Greenpeace, Sohet Wledna Khat Ahmar (Our Children’s Health Is a Red Line) and Beirut Madinati. The group representatives did not view the programs favorably.

They questioned the timing of Warak Beirut and the waste management plan, noting that waste sorting has not yet begun. They also questioned the sincerity of the recycling effort because part of the municipality’s waste management plan includes waste treatment at thermal decomposition factories, that is, by incineration. This approach contradicts the idea of recycling as a solution to waste disposal because the thermal decomposition factories require paper and cardboard waste for fuel and for mixing with organic waste to incinerate it because of organic waste’s high water content.

Samar Khalil, a professor at the American University of Beirut and member of Sohet Wledna Khat Ahmar, told Al-Monitor, “Any sorting and recycling project is a positive step, but since we are aware of the performance of the Lebanese government and Beirut municipality, we believe that the timing of the project, before the [6 May] elections, is an act [for show]. Besides, resorting to thermal decomposition factories to dispose of waste asserts the impossibility of dispensing with [recycled] paper and cardboard since operating incinerators requires burning recyclable material due to the type of waste, 60% of which is organic.”

Zeina Abla, a member of Beirut Madinati, expressed skepticism about the timing as well as the limited geography of the sorting process. “Under the tender awarded to Ramco, 250 containers should be put underground, which hasn’t happened since the tender was awarded in 2017,” she told Al-Monitor. “Besides, the garbage transportation vehicles should not press the collected paper and cardboard [as is occurring] so as to allow a secondary sorting. Why was a $70.89 million tender signed for five years [if not to meet the conditions]? Why did the company start working before the distribution of all of the required equipment?”

Abla added, “This [how the waste is being collected] proves that source sorting will not happen. At the CEDRE conference in Paris, on 6 April, aimed to support the Lebanese economy, the Lebanese government asked for $1.4 billion to fund three incinerators in Beirut, Tripoli and the south. The Ministry of Environment notified municipalities that they have to announce their waste management plan within two months, or otherwise implement the central plan based on incinerators. All indicators show that the [Beirut] government plan is not a sorting plan. If there were a real inclination toward sorting, the Beirut municipality would have launched awareness campaigns two years ago and expanded the waste treatment factories.”

Although refuse in Beirut is being transported to the Costa Brava and Bourj Hammoud landfills, residents are afraid the streets might once again brim with garbage if the landfills become full. The government has not found an adequate substitute to landfills — for example, eco-friendly alternatives like recycling plants and organic waste fertilization plants — and is instead expected to expand the landfills, as it did in January 2018 with Costa Brava, until thermal decomposition factories are built.

Hanan Hamdan is a journalist based in Beirut. She reports on local social and economic issues for local and international media outlets such as Al Modon, Raseef22 and Legal Agenda. She holds master’s degrees in finance and political science. (Al-Monitor 15.05)

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11.3 IRAQ: Inconclusive Elections Leave Iraqis Searching for Compromise

Hamid Alkifaey posted on 24 May in the Arab Gulf States Institute in Washington that although the 12 May Iraqi parliamentary election was the country’s fifth since 2005, it was remarkably different from the previous ones in many ways. For the first time since the beginning of the democratic process in Iraq following the removal of Saddam Hussein’s dictatorship in 2003, Iraqi electoral lists, by and large, did not use sectarian, tribal or regional concerns for political advantage. According to the campaign rhetoric of all lists, even the previously sectarian ones, the election was about building a modern democratic Iraq that’s strong, civil, free of corruption, and fair to all its citizens. It’s questionable, however, if these groups will keep their promises, especially those known for corruption, if they do come to power once again.

Notwithstanding this shift, most of the Iraqi electorate decided not to vote, perhaps believing that however they voted, the “same old faces” would come back to the scene. Voter turnout, around 45%, was the lowest in the country’s democratic history, despite the presence of a multitude of distinct choices in candidates. On the Islamist side, the old lists, albeit with many new names, were competing in full force: Sairoon, or Marchers, led by Muqtada al-Sadr with his new allies, the Iraqi Communist Party, won 54 seats; Fatah, or Conquest, led by the head of the Badr Organization, Hadi al-Amiri, won 47 seats; Nasr, or Victory, led by incumbent moderate Islamist Prime Minister Haider al-Abadi, won 42 seats; State of Law, led by former Prime Minister Nuri al-Maliki, won 25 seats; and Hikma, or Wisdom, led by cleric Ammar al-Hakim, won 19 seats.

While Fatah, Hikma, and State of Law are backed by Iran, Sairoon and Nasr present themes that support a popular Iraqi dynamic that is against corruption and for a strong independent state that enjoys good relations with all neighboring countries, including Iran, and the international community. Both lists are newly formed, although the candidates are not necessarily new.

On the secular side, the Wataniya coalition, led by Ayad Allawi, dominated, although it won only 21 seats, the same as in the last election. Other secular lists, such as Civility (which won two seats), Civil Democratic Alliance (which won one seat), and provincial lists in Anbar (which won five seats), Salahuddin (with two local lists, one won seven seats and the other one seat), and Nineveh (with two local lists, one won three seats, while the other won two seats) are largely secular.

The results of the elections are inconclusive, leaving all lists, great and small, a lot to play with. Due to the multiplicity of lists, there will be hard and lengthy bargaining time before an agreement to form a parliamentary coalition can be reached.

Each list has a role to play since the largest, Sairoon, has only 54 seats. Forming a new government requires a simple majority of 165 seats, and this will require at least four major lists. But in Iraq, political coalitions tend to include representatives from all lists, otherwise they will disappear from the political map. Iraqis won’t vote for candidates who have no leverage or influence.

There are still sectarian lists in the sense that they are made up of all-Shia or all-Sunni members. Fatah, State of Law and Hikma are all-Shia lists, while Qarar, or Decision, and other small regional lists in the provinces of Anbar, Salahuddin and Nineveh are all-Sunni. But the other major lists, Sairoon, Nasr, and Wataniya, are cross-sectarian and cross-ethnic.

A potential alliance to form a government would be Nasr with the Sairoon and Wataniya lists, together with the two main Kurdish parties, the Patriotic Union of Kurdistan and Kurdistan Democratic Party, which hold 43 seats between them, and the Sunni regional lists in Anbar, Salahuddin and Nineveh. A possible list to add would be the all-Sunni seemingly secular Qarar list. But this means excluding the pro-Iranian Fatah, Hikma, and State of Law lists. Iran, influential as it is, won’t allow this combination and can disrupt the process in many ways, not least through the pro-Iranian lists in Parliament. This means, Fatah, at least, will have to be part of any coalition government. However, the conflicting political agendas would be a destabilizing factor in the government.

The biggest hurdle will be to achieve an agreement among all the parties on the “three presidencies,” as they are called in Iraq (speaker, president and prime minister), before Parliament could even be convened. In the past, the position of speaker was given to the Sunnis, president to the Kurds and prime minister to the Shia. This combination is not stipulated by the constitution, and it may change this time. The constitution stipulates that the president call Parliament to convene within 15 days of the ratification of the election’s results by the Federal Court. Parliament will have 15 days to elect a speaker (with two deputies), and then elect a president. The president will then receive a nomination for prime minister from the largest alliance in Parliament. The prime minister-designate will have 30 days to form a government. If he or she fails, the president will ask the nominee of the second largest alliance to try. It’s a lengthy and cumbersome process and usually takes place after hard bargaining, and regional and international mediation.

Thus far, Abadi stands out as the most likely to be chosen as prime minister, given that he enjoys one characteristic that others don’t: universal acceptability. He is broadly acceptable to Iraqis, regional powers, and the United States. Further, Iran can work with him if he is the agreed-upon choice. He possesses national, Islamic and Shia credentials and were Iran to openly oppose him it would risk alienating Iraqis. Most Iraqi leaders can work with him, too, except perhaps his predecessor, Maliki. But the strings that Maliki can pull are no longer strong enough to influence the choice of prime minister. He only has 25 parliamentary seats (two of them are held by his sons-in-law) and is still officially the secretary general of the Islamic Dawa Party, of which Abadi is the chairman of the politburo. Although Maliki is more senior in the party hierarchy than Abadi, he will risk alienating many members of the party, and Iraqis at large, if he is seen to be impeding the appointment of a senior party figure as prime minister. That’s why he won’t stand in Abadi’s way, at least publicly.

Forming a coalition is going to be a long and arduous process and it will require some mediation, perhaps arm-twisting, by the United States and other regional powers to reach a successful conclusion. In 2010, the process lasted nine months, even with U.S. and Iranian mediation, and it may take just as long this time.

Hamid Alkifaey is an Iraqi writer, academic, and expert on democratization. (AGSIW 24.05)

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11.4 UAE: Moody’s Credit Profile Reflects Support From Abu Dhabi & Large Hydrocarbon Reserves

On 21 May, Moody‘s announced that the United Arab Emirates’ (Aa2 stable) credit profile reflects its financial support from Abu Dhabi, large hydrocarbon reserves and very high wealth levels, Moody’s Investors Service said in an annual report. Its credit challenges relate to the country’s fiscal reliance on oil and gas and limited institutional transparency.

“The UAE’s superior infrastructure, very high per capita income and vast hydrocarbon reserves support its creditworthiness,” said Thaddeus Best, a Moody’s Analyst and co-author of the report. “These strengths are balanced against challenges which include limited institutional transparency and the absence of public data around offshore assets and some of the emirates’ public finances.”

Despite the UAE’s relatively high exposure to hydrocarbons, the oil price drop did not dramatically alter the economy’s medium-term real growth trajectory. Moody’s expects GDP growth of 2.1% in 2018 and 3.9% in 2019. Moody’s forecasts non-oil growth to recover gradually in 2018-2021, supported by government spending after three years of cuts.

The UAE’s very high fiscal strength reflects the country’s record of large fiscal surpluses and build-up of very large financial assets in Abu Dhabi’s sovereign wealth fund (ADIA).

Although the general government fiscal position deteriorated significantly between 2015 and 2017, the large stock of financial assets means that the government can easily finance its deficits without resorting to debt issuance.

As a result of Abu Dhabi’s fiscal consolidation and the recovery in oil prices, Moody’s expects the UAE’s consolidated government deficit to decrease to 0.8% of GDP in 2018, from an expected 2.3% in 2017.

The UAE’s consolidated fiscal position shows a diverging path between Abu Dhabi, where broad spending cuts were enacted, and Dubai, which has continued to increase spending ahead of the World Expo 2020.

Further improvements in policy transparency and data availability at the emirate and Federal level would support a rating upgrade, although at the current rating level the threshold is high. A material appeasement in regional geopolitical tensions would also be credit positive.

Conversely, Moody’s would downgrade the UAE’s rating if a prolonged period of lower oil prices and the crystallization of contingent liabilities placed the consolidated fiscal accounts under sustained pressure, or if an escalation of regional tensions were to affect the UAE’s economy. (Moody’s 21.05)

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11.5 SAUDI ARABIA: IMF Staff Completes 2018 Article IV Mission to Saudi Arabia

An International Monetary Fund (IMF) team held discussions from 2 – 14 May for the 2018 Article IV Consultation with Saudi Arabia. At the conclusion of the mission, the following statement was made:

“Saudi Arabia is making good progress in implementing its ambitious reform program under Vision 2030. The government remains committed to wide-ranging economic and social reforms to transform the economy away from its traditional reliance on oil and to create a more dynamic private sector that creates jobs for the growing working age population. Growth is expected to pick-up this year and over the medium-term as reforms take hold.

“The primary challenges for the government going forward are to sustain the implementation of the bold structural changes that are underway, meet the medium-term fiscal targets it has set, and resist the temptation to re-expand government spending in line with higher oil prices.

“Targeting a balanced budget in 2023 is appropriate. The government should now focus on delivering on this objective. Limiting the growth of government spending will be necessary to achieve the fiscal targets. Major progress has been made in implementing new revenue initiatives. The VAT is a milestone achievement in strengthening the tax culture and tax administration of the country. The recent energy price reforms and the introduction of the citizens’ accounts are welcome. Further gradual energy price increases should continue, while the citizens’ accounts should be reviewed periodically to confirm they are adequately compensating low and middle-income households for the higher energy/VAT costs.

“Reforms to strengthen the budget process and the fiscal framework, increase fiscal transparency, and develop macro-fiscal analysis are making good progress. Broadening the coverage of fiscal data beyond the central government would ensure a more complete assessment of the government’s impact on the economy. A strong asset/liability management framework should also be developed to enable a full evaluation of the impact of decisions being taken on and off-budget on the public sector balance sheet.

“The respective roles of the public and private sectors in developing the non-oil economy need to be carefully considered. While the public sector can be a catalyst for the development of some new sectors, it is important that it does not crowd-out private sector involvement, nor remain a long-term player in markets where private enterprises can thrive on their own.

“The government is focused on job creation for nationals in the private sector, particularly for youth and women. Policies should focus on sending clear signals about the limited prospects for public employment, easing restrictions on expatriate worker mobility, further strengthening education/training, and continuing to support increased female participation.

“Considerable progress is being made to improve the business climate. Recent efforts have focused on the legal system and business licensing and regulation. The public procurement law that is being updated has a key role to play in strengthening anti-corruption policies. The privatization/PPP program, which was recently approved, should be accelerated.

“A balance is needed between pursuing financial development and inclusion and financial stability. Increased SME finance, more developed debt markets, and improved financial access especially for women as envisaged under the Financial Sector Development Program will support growth and equality. Reforms should focus on removing structural impediments that may dissuade financial institutions from entering these markets.

“The exchange rate peg to the U.S. dollar continues to serve Saudi Arabia well given the structure of the economy. While progress has been made in increasing data availability, more needs to be done to ensure that an accurate and timely assessment of economic developments is possible. (IMF 22.05)

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11.6 EGYPT: IMF Staff Reaches Staff-Level Agreement on the Third Review for Egypt’s EFF

An International Monetary Fund (IMF) team visited Egypt on 2-17 May 2018 to conduct the third review for Egypt’s reform program supported by a three-year Extended Fund Facility.

“The IMF staff team and the Egyptian authorities have reached a staff-level agreement on the third review of Egypt’s economic reform program, which is supported by the IMF’s SDR 8.597 billion (about $12 billion) arrangement. The staff-level agreement is subject to approval by the IMF’s Executive Board. Completion of this review would make available SDR 1,432.76 million (about US$2 billion), bringing total disbursements under the program to about $8 billion.

“Egypt has begun to reap the benefits of its ambitious and politically difficult economic reform program. While the process has required sacrifices in the short-term, the reforms were critical to stabilize the economy and lay the foundation for strong and sustained growth that will improve living standards for all Egyptians.

“Egypt’s growth has continued to accelerate during 2017/18, rising to 5.2% in the first half of the year from 4.2% in 2016/17. The current account deficit has also declined sharply, reflecting the recovery in tourism and strong growth in remittances, while improved investor confidence has continued to support portfolio inflows. In addition, gross international reserves rose to $44 billion by end-April, equal to 7 months of imports.

“Annual headline inflation has declined from 33% in mid-2017 to around 13% in April, anchored by the well-calibrated monetary policy of the Central Bank Egypt (CBE). The CBE remains committed to reducing inflation to single digits over the medium term, with monetary policy underpinned by a flexible exchange rate regime that is critical for maintaining competitiveness and adjusting to external shocks. Egypt’s banking sector remains liquid, profitable and well-capitalized.

“Egypt is on track to achieve a primary budget surplus excluding interest payments in 2017/18, with general government debt as a share of GDP expected to decline for the first time in a decade. The budget for 2018/19 targets a primary surplus of 2% of GDP, which would keep public debt on a firmly downward path. The government also remains committed to continuing energy subsidy reforms to achieve cost-recovery prices for most fuel products by 2019. Together with raising revenues through tax policy reforms, this will help create fiscal space for important infrastructure projects, targeted social protection measures and essential spending on health and education.

“The government continues to move forward with structural reforms to modernize the economy and tap the potential of Egypt’s growing population. This includes steps to support exports and reduce non-tariff barriers, streamline and enhance industrial land allocation process, support small and medium enterprises, strengthen public procurement, improve transparency and accountability of state owned enterprises, and tackle corruption. These reforms will help attract private investment, which is essential to raise growth and make it more inclusive.

“Strengthening the social safety net remains a top priority for the Egyptian authorities and is strongly supported by the IMF. We welcome the plan to further expand the “Takafol” and “Karama” programs to help protect Egypt’s most vulnerable. The school meals program for children as well as expansion of child care centers also aim to increase women’s participation in the labor force, which will be essential to sustaining strong and inclusive growth over the medium term. (IMF 17.05)

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11.7 EGYPT: Egypt & Ethiopia Fail to Reach Breakthrough in Dam Negotiations

Ayah Aman posted in Al-Monitor on 25 May that while the recent round of negotiations on Ethiopia’s Renaissance Dam ended with a new document aimed at entrenching cooperation between Egypt, Sudan and Ethiopia, it did not resolve the differences over the water filling and dam operation process.

In an effort to break the stalemate between Egypt, Ethiopia and Sudan over the Grand Ethiopian Renaissance Dam, the round of negotiations held between the three countries’ foreign ministers, irrigation and water ministers, and heads of intelligence ended 15 May in Addis Ababa with the signing of a document containing five clauses.

The aim of the document is to create a new road map that would avoid procrastination and have the three countries renew their pledge to cooperate in accordance with the Declaration of Principles signed in March 2015.

However, while the document was issued after 16 hours of back-to-back meetings, it failed to resolve the fundamental differences between Egypt and Ethiopia over the technical studies aimed at determining the negative effects of the dam on Egypt. It also failed to reach an agreement over a storage and operation mechanism in the dam that would avoid causing severe damage to Cairo.

Yet still, Egyptian Foreign Minister Sameh Shoukry said the document was a success. “We have set a course to break the deadlock, and I trust that sincerity will lead to the conclusion of technical studies that will be of benefit to the three countries,” he said during a press conference following the signing of the document. Shoukry was referring to the deadlock that emanated from the last round of talks between the three countries and that led them to exchange media accusations.

The document stipulates five clauses, the first of which provides for holding a tripartite summit between Egypt, Ethiopia and Sudan every six months. The second clause stipulates the establishment of a tripartite infrastructure fund. While the third and fourth clauses failed to resolve differences based on technical studies, they said that the two French consultancy firms chosen by the three countries shall submit to the Technical National Committee within three weeks a proposal regarding these technical studies based on a compilation of queries and observations made by each country. This proposal shall be deliberated during another round of discussions held 16 June among the nine parties in Cairo.

The fifth clause provides for the establishment of a national independent scientific research study group tasked with discussing and developing various scenarios related to the filling and operation rules of the dam in accordance with the principle of equitable and reasonable utilization of shared water sources while taking all of the appropriate measures to prevent the causing of serious harm to Egypt and Sudan. The document says that this group shall submit the outcome of its deliberations within three months to the water ministers of the three countries.

This document is to be added to a number of documents signed by the three countries regarding the Renaissance Dam ever since a report issued by the International Committee of Experts in May 2013 stressed the importance of studying the environmental, economic and social impact of the dam on downstream countries. Examples of such documents include the Declaration of Principles signed by the presidents of the three countries in March 2015 and the document of the Khartoum meeting signed in December 2015.

Of note, the Khartoum document set timetables for the completion of studies and for reaching an agreement on the filling and operation rules of the dam within a maximum period of one year. However, disagreements over technical details prevented the implementation of any of the commitments stipulated by these documents.

The main differences lie in the obstructed technical studies conducted by the French consulting firms BRL and Artelia, one and a half years following the signing of the contracts for the assessment studies by the three water ministers in September 2016. This is due to Ethiopia and Sudan’s rejection of the consultancy firms’ inception report and attempts on the part of Ethiopia and Sudan to introduce amendments that would invalidate the studies, as per a statement by the Egyptian Ministry of Irrigation in November 2017.

Of note, Egypt agreed on the inception report as it was in line with the contracts for the assessment studies, but Sudan and Ethiopia rejected it.

Also, there are differences that emanate from the reference that should be used in the studies. For example, Cairo believes that the studies should strictly follow the wording of the contracts, which use as a reference the current water status in the Eastern Nile, including the area behind the Aswan High Dam up until the Nile Delta.

Meanwhile, Ethiopia awaits the upcoming rainy season that begins in July in order to start storing water, complete the construction process at the Renaissance Dam site, conduct safety tests and start operating power turbines. The initial amount of stored water is estimated at 14 billion cubic meters of water, which is the volume of water that the dam will prevent from reaching Egypt and Sudan.

An Egyptian official who participated in the meetings told Al-Monitor on condition of anonymity, “The main determinant of the success of this round will be the implementation of the terms stipulated by the meeting’s document, respecting the deadlines for resolving the dispute over the inception report of the consultancy offices’ studies and developing consensual scenarios for water storage in the dam.”

The source said that “the document is not a radical solution to the existing differences over the inception report or the filling and operation rules of the dam. However, the continuation of the dispute after the failure of the round of negotiations in April almost threatened the Egyptian interests in the Nile waters, especially with the beginning of the storage operations in Ethiopia, the continued intransigence against any proposals put forth by Egypt to push for the completion of the technical studies of the effects of the dam and the inability to accept the Ethiopian individual plan to fill the reservoir dam.”

“Breaking out of the circle of dispute by working on new areas of cooperation that would achieve common interests such as the tripartite infrastructure fund is a new policy adopted by Cairo. This policy shows great flexibility in the context of policies aimed at securing interests in the eastern Nile and protecting the annual share of Nile water against any individual and intransigent decisions,” the source said.

Although observers expected these negotiations to achieve a breakthrough and agree on outstanding points, the outcome of the meetings held in Khartoum on 5 April and Addis Ababa on 15 May failed to produce specific results that would prove the negative effects of the dam on Egypt and prevent any serious harm resulting from the filling and dam operation process.

According to international law, advance notification is required from Ethiopia before engaging in any construction process that could harm the downstream countries. However, Ethiopia started building the Renaissance Dam in 2011, thus sparking a long conflict with Egypt over the dam and its impact on the Egyptian share of the Nile water. Egypt, Ethiopia and Sudan failed to give a mandatory status to the report that will be issued by the new scientific group that will develop several filling scenarios. In other words, the work of this team will merely serve as a suggestion.

Ayah Aman is an Egyptian journalist for Al-Shorouk specializing in Africa and the Nile Basin, Turkey and Iran and Egyptian social issues. (Al-Monitor 25.05)

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11.8 EGYPT: From War Room to Boardroom – Military Firms Flourish in Sisi’s Egypt

On 16 May, Reuters reported that In a four-decade military career, Osama Abdel Meguid served in the first Gulf War and was an assistant military attaché in the United States. These days he issues orders from an office that overlooks the Nile, as chairman of the Maadi Co. for Engineering Industries, owned by the Ministry of Military Production.

Maadi was founded in 1954 to manufacture grenade launchers, pistols and machine guns. In recent years the firm, which employs 1,400 people, has begun turning out greenhouses, medical devices, power equipment and gyms. It has plans for four new factories. “There are so many projects we are working on,” said Abdel Meguid, a 61-year-old engineer, listing orders including a EGP 495 million ($28 million) project for the Ministry of Electricity and an Algerian agricultural waste recycling contract worth $400,000.

Maadi is one of dozens of military-owned companies that have flourished since Abdel Fattah al-Sisi, a former armed forces chief, became president in 2014, a year after leading the military in ousting Islamist President Mohamed Mursi.

The military owns 51% of a firm that is developing a new $45 billion capital city 75 km east of Cairo. Another military-owned company is building Egypt’s biggest cement plant. Other business interests range from fish farms to holiday resorts.

In interviews conducted over the course of a year, the chairmen of nine military-owned firms described how their businesses are expanding and discussed their plans for future growth. Figures from the Ministry of Military Production – one of three main bodies that oversee military firms – show that revenues at its firms are rising sharply. The ministry’s figures and the chairmen’s accounts give rare insight into the way the military is growing in economic influence.

Some Egyptian businessmen and foreign investors say they are unsettled by the military’s push into civilian activities and complain about tax and other advantages granted to military-owned firms. The International Monetary Fund warned in September 2017 that private sector development and job creation “might be hindered by involvement of entities under the Ministry of Defense.”

Egypt’s government counters that private companies are operating on an even playing field and that the military is filling gaps in the market, as it did during a shortage of infant formula in 2016. Then the military helped by importing supplies and has since announced plans to build a formula plant. Sisi says the military can deliver large, complicated projects faster than the private sector.

In 2016, the military and other security institutions were given exemptions in a new value-added tax (VAT) law enacted as part of IMF-inspired reforms. The law states that the military does not have to pay VAT on goods, equipment, machinery, services and raw materials needed for the purposes of armament, defense and national security.

The Ministry of Defense has the right to decide which goods and services qualify. Civilian businessmen complain that this can leave the system open to abuse. Receipts for a cup of coffee at private sector hotels, for example, add 14% VAT. Receipts at military hotels do not. Employees at the military-owned Al-Masah Hotel in Cairo told Reuters that no VAT was charged when renting venues for weddings and conferences. Neither the Egyptian government nor the military responded to Reuters requests for comment for this article.

From Guns to Greenhouses

Military commercial ventures fall under one of three main bodies – the Ministry of Military Production, which oversees 20 businesses, the Ministry of Defense, which controls dozens, and the Egyptian government-owned Arab Organization for Industrialization, which has responsibility for at least 12.

Estimates vary on the scale of the military’s role in the economy. Sisi said in December 2016 that the military accounts for up to 2% of output. “It has been said that the military’s economy is worth 20 or even 50% of the economy. I wish,” he said at the opening of a military facility to produce chlorine for water sanitation. A leading political scientist, who asked not to be named, put the figure at about 3% of GDP. The World Bank estimated Egypt’s GDP at $336 billion in 2016.

President Gamal Abdel Nasser established the Ministry of Military Production in 1954 to help Egypt achieve self-sufficiency in arms production. In the decades that followed, its fortunes were mixed. It was abolished by Nasser, only to be revived by President Anwar Sadat in 1971, according to a 1985 CIA report. Revenues from its firms declined in much of the 1990s and 2000s. When Sisi took power the picture changed again.

The Ministry of Military Production is projecting that operating revenues from its 20 firms will reach EGP 15 billion in 2018/19, five times higher than in 2013/14, according to a ministry chart. The ministry does not disclose what happens to the revenues. The chairmen of two of the firms said profits go to the ministry or are reinvested in the business.

The chairman of one firm that falls under the Ministry of Military Production, Major General Mammdouh Badawy, recalled with distaste the days of economic liberalization under President Hosni Mubarak in the 1990s and mid 2000s when “businessmen were eating up the country.” Badawy’s enterprise, Heliopolis Co. for Chemical Industries, was set up in 1949 to produce hand grenades, mortars, fuses and chemicals. These days it has ambitions to become Egypt’s number one supplier of paint.

In 2017 Heliopolis teamed up with another Egyptian paint maker, Pachin, which is majority owned by the state. The two firms plan to work together to compete with the paint market leader, Norway’s Jotun, Badawy said. Over time, Heliopolis aims to increase the share of paint production it sends to the private sector to 80% of its output from 20% now, he added. “Pachin and I can compete with Jotun, but I can’t compete with Jotun alone,” said Badawy, a man of military bearing and with a greying moustache. “I don’t want to be a local shop. I want to be a company that has the capacity to export and compete internationally.” Jotun said in a statement it hadn’t seen “any influence on our business up to now.” Its products were aimed at the top end of the market, it added, while Pachin tended to target middle and budget buyers.

The chairmen of two military engineering companies, Abu Zaabal Engineering Industries Co and Helwan Engineering Industries Co, said in recent years it had become much easier to access financing through the Ministry of Military Production. In 2015 the government appointed Major General Mohamed El Assar to run the ministry. Assar was a member of the Supreme Council of the Armed Forces that ruled Egypt after a popular uprising toppled Mubarak in Feb. 2011.

Abu Zaabal chairman, Major General Magdy Shawky Abdel Moneim, said his firm used to have to borrow from the banks. “We had to wait for our turn at the bank to get the money we needed. But now, as soon as I submit a request to the ministry and say I need EGP 60 million or 40 million to buy such and such raw materials to manufacture such and such, the following day Major General Assar approves the request.” The ministry did not respond to a request for comment about the financial approval process.

Helwan was established in 1954 to make metal components for heavy ammunition. In the 1980s it began making cooking pots, cutlery, fire extinguishers and gas canisters. Its chairman, Major General Shokry Al-Qamary, said sales of kitchen utensils were booming since Egypt devalued its currency in 2016, pushing up the price of imported goods. “We can’t keep up with demand.”

One of the most visible symbols of the military’s commercial ambitions is in the city of Beni Suef, at the edge of the desert south of Cairo, where workers are putting the finishing touches to Egypt’s largest cement plant, owned by the military’s El Arish Cement Co. The cement industry is feeling the full force of the military’s expanding activities. It took 8,000 workers 18 months to build the $1 billion dollar plant. At full capacity, it will produce 12.6 million tons of cement a year.

An executive at a foreign-owned cement company said Egypt’s annual production capacity already stood at 79 million tons last year, far above consumption of 52 million. An official at an Egyptian company said his firm’s sales had dropped by a fifth since January because of the new plant.

Egypt’s majority state-owned National Cement Co. shut production in Nov. 2017 after suffering heavy losses in the second half. Suez Cement, majority owned by Germany’s Heidelberg, reported that its consolidated 2017 loss nearly doubled to EGP 1.14 billion, while Alexandria Cement, majority owned by Greece’s Titan, reported its consolidated loss rose tenfold to EGP 513.9 million.

The military did not respond to a request for comment about the cement market. It has said previously that housing and other major construction projects will create new demand for cement. In addition to the new capital, the military is involved in the development of two new cities – New Alamein on the Mediterranean coast and Gabal Galala in the mountains above the northern Red Sea.

The executive at a foreign-owned firm disagreed with the military’s demand projection. To absorb all the new capacity Egypt, already one of the world’s highest per capita cement consumers, would have to double its consumption, the executive said.

Among projects the Ministry of Military Production announced in 2017 was a plan to plant 20 million palm trees with an Emirati company and build a factory to make sugar from their dates. It agreed with a Saudi company to jointly manufacture elevators. The military inaugurated the Middle East’s biggest fish farm on the Nile Delta east of Alexandria. The Ministry of Military Production signed a memorandum of understanding with China’s GCL Group last week to build a solar panel factory worth up to $2 billion. The military has taken over much of the construction of intercity roads from the Ministry of Transport and now controls the toll stations along most major highways.

“It Is Competition”

Egypt’s economy has been struggling ever since the popular uprising that toppled Mubarak in 2011. Political instability and Islamist violence have damaged Egypt’s crucial tourism industry.

Economists and investors say reforms tied to a $12 billion three-year IMF program signed in Nov. 2016 should lay the ground for economic expansion. But foreign investors are still shying away from Egypt, apart from those focusing on the more resilient energy sector. Non-oil foreign direct investment fell to about $3 billion in 2017 from $4.7 billion in 2016, according to Reuters calculations based on central bank statistics.

A commercial officer at a Western embassy said foreign investors were reluctant to invest in sectors where the military is expanding or in one they might enter, worried that competing against the military with its special privileges could expose their investment to risk. If an investor had a business dispute with the military, the commercial officer said, there was no point in taking it to arbitration. “You just leave the country,” he said.

Other economists, however, are less troubled by the military’s expanding role. “The government is simply securing its interest in strategic sectors, and the way it’s done is far from the mandatory partnerships or nationalizations of the 1960s. The government is determined to have private sector-led growth,” said Hany Farahat, senior economist at Egyptian investment bank CI Capital.

Minister of Military Production Minister Assar told Reuters Egypt needs private companies, which he considers “the backbone of our industry and economy.” But he believes his ministry also has a place. “It is competition.”

Sisi, speaking at an 8 February inauguration of 1,300 greenhouses built by military engineers, said the armed forces were invaluable for the economy. “I will tell you simply, as you have seen, it would take the private sector three to four years to complete the executive procedures to do something this big, such as roads and water projects, and to this standard.”

Egypt’s military, the biggest in the Arab world, has advantages.

It enjoys financial support from Saudi Arabia and the United Arab Emirates, staunch supporters of Sisi since he toppled the group they see as a threat to the Middle East, the Muslim Brotherhood. Western powers see Cairo as a bulwark against Islamist militancy. Egypt receives $1.3 billion in military aid annually from the United States alone.

In addition to the law exempting the military from value added tax, some of Egypt’s other laws also work to the military’s advantage. In 2015, the defense minister issued a decree exempting nearly 600 hotels, resorts and other properties owned by the military from real estate taxes. Military companies receive an exemption from import tariffs under a 1986 law and from income taxes under a 2005 law. Cargoes sent to military companies do not have to be inspected.

It’s not just the military’s big ventures that are making some private sector companies uneasy. The Military Production Company for Projects, Engineering Investments and General Supplies grew out of a team of five employees in a small office in the Ministry of Military Production back in 2012. A ministry decree established the company in 2015. There are now 70 staff working in its new headquarters in the Nasr City area in northern Cairo, home to many military officers.

The company is striking deals with the ministries of education and youth and is involved in sewage and irrigation projects. It built a swimming pool for a leading sports club, is developing railways, constructed more than 60 schools and has built offices for organizations connected to Al Azhar, Egypt’s top religious institution. “The ministries deal with us because they trust the armed forces. We will deliver on time, prices are not exaggerated and quality is high,” said company chairman Maged El Serty, who aims to build concrete and asphalt mixing plants to aid expansion.

At bustling Cairo squares, people line up to buy subsidized meat and other food handed out from trucks sponsored by the military. Sisi said he had instructed the military to enter the market “to supply more chicken to push down prices.”

Some disagree with such measures on the grounds the military’s mission is to protect the country from external threats. “We have reached a point where they are competing even with street vendors,” said Hazem Hosny, a political scientist and economist at Cairo University and spokesman for retired general Sami Anan, who briefly sought to compete in Egypt’s 2018 presidential election. “I believe that any military officer who respects himself will be upset from seeing even one soldier standing on the street selling chicken legs.” (Reuters 16.05)

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11.9 EGYPT: Egypt’s Education System Set for Major Overhaul

May El Habachi posted on 25 May in Al-Monitor that Egyptians hope the new education reforms announced by the Ministry of Education will bring about major changes to address longstanding problems in public schools.

Egypt’s Education Minister Tarek Shawki announced in April the implementation of new reforms to improve education in Egypt. The reforms, which are in part funded by the World Bank with a $500 million loan for five years, will cost a total of $2 billion and are expected to replace the existing education system with a new one to better equip Egyptian youth for the current job market.

Starting in September this year, the reforms will be implemented for kindergarten and primary school students, and for secondary students the following academic year. The reforms include introducing a new curriculum that focuses on character building and critical thinking skills, improving teachers’ working conditions and development through training and workshops, changing secondary assessment systems and introducing electronic learning platforms, such as tablets, to students and teachers. So far, the reforms have been well received by educators and families.

It is no secret that Egypt suffers from a poor education system. The World Economic Forum Global Competitiveness Report of 2013-14 placed Egypt last in terms of quality of primary education offered in public schools. Al-Watani newspaper reported that although Egypt’s public education is free, it is currently under significant pressure to operate efficiently given the large number of students entering schools each year, and that the education budget falls short in providing state schools with adequately trained teachers.

The current system also relies on memorization and fierce competition among students to score high grades on exams and secure a university education. As a result, many parents resort to costly private lessons to supplement their children’s education.

Changing the curriculum to do away with memorization and costly private lessons is welcomed by many families whose children attend public schools. But changing the curriculum alone will not solve problems inherent in public schools. For the new education system to succeed, teachers must undergo training and professional development. Therefore, the ministry aims to train about 500,000 teachers across all governorates through Teachers First, a development program for teacher training. To date, more than 30,000 teachers have undergone the training and many more are expected to complete the training in the next few months.

According to Teachers First, educators are taught to use specific applications to learn new teaching approaches in the classroom, track their development and even award themselves and their peers for completing milestones. This approach helps teachers embrace the idea of continuous development as well as create a supportive environment where experiences are shared.

Another aspect of the reform is introducing tablets to high school students. As part of the Education Ministry’s goal to encourage learning in the 21st century, it will distribute 1.5 million tablets to students and teachers for free, which they can keep. Although this move has been welcomed by some educators and families, it is not without controversy.

It seems, however, that giving away the tablets was decided in order to support the national high school exams going digital. The electronic exams will consist of multiple-choice questions and will be based on a cumulative grading system of three high school years instead of a single standardized test. In August 2017, Egypt Independent reported that according to Shawki, this “new system aims to reduce the importance of rote memorization.”

Alongside these technological developments, the high school curriculum is also expected to receive a face-lift. However, according to Reda Hegazy, head of the general education sector at the Ministry of Education, this will be implemented later, as textbooks for next year have already been printed.

While these reforms are the latest to be introduced by the Ministry of Education, they are not the first. There have been several attempts in the last few years to improve education in the country, but they have been met with limited success. These reforms, however, seem to be far more comprehensive and elaborate than previous ones. Will they succeed? Time will tell, but Egyptians are hoping that they will bring about real change to better the lives and increase the contributions of the next generation.

As a freelance writer, May specializes in development and social issues. She has been published in international publications including Newsweek Middle East, Ms. Magazine, Global Living, Expat Go Malaysia and Kuwait Bazaar, among others. (Al-Monitor 25.05)

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11.10 LIBYA: Libya’s Election Dilemma

Ben Fishman posted in The Washington Institute For Near East Policy‘s PolicyWatch 2972 on 21 May that since endorsing the UN-sponsored “Action Plan for Libya” in September 2017, the international community has remained focused on holding elections in 2018 as a requirement for stabilizing the country. But as a 2 May Islamic State suicide attack targeting Libya’s High National Election Commission (HNEC) demonstrated, protecting balloting across the war-torn land will be a major hurdle. Moreover, an electoral law still needs to be passed, but this will depend on an agreement between the rival eastern-based House of Representatives (HOR) and the Tripoli-based High State Council (HSC). Unless such an agreement can be reached during Ramadan, which ends 14 June, the parties will not have enough time in 2018 to hold a constitutional referendum and a round of elections.

Fortunately, some positive alternatives to elections exist through the work of the UN Support Mission in Libya (UNSMIL) and its partners. These include convening a national conference; improving economic development and service delivery through implementing UN Development Programme (UNDP) and other assistance initiatives; conducting municipal elections; and pressing forward with a dialogue among militias. For its part, the United States is contributing to some of these efforts but should do so even more actively.

Mixed Record Since the Revolution

After having conducted no elections since its independence in 1951, save for restricted parliamentary polls under the monarchy, Libya has held three national votes since the 2011 revolution: the July 2012 election for a parliament, known as the General National Congress (GNC); the February 2014 vote for a separate Constitution Drafting Assembly (CDA); and the June 2014 contest for a successor parliament to the GNC, the HOR. This free exercise of the ballot, however, has not ensured the country’s move toward stability. To the contrary, many observers have attributed the current national polarization to the timing, sequencing, and problematic design of Libya’s post-2011 elections.

Debate persists over whether the UN and its Western backers were right to push Libya toward elections in July 2012, less than a year after the demise of strongman Muammar al-Gaddafi. Beforehand, skeptics argued that the country needed more time to prepare for elections and to create conditions that would enable the success of a newly elected parliament. In the end, the former concern proved to be unwarranted while the latter was prescient. Libya’s electoral commission, with support from outside elections specialists, organized a universally praised round of balloting. However, after the parliament was seated, problems emerged at once. Namely, it took months to elect a prime minister and appoint a government. The complicated electoral law, which split seats between party-affiliated and independent members, created confusion and dysfunction.

Between the GNC contest in July 2012 and the February 2014 CDA and June 2014 HOR votes, registration and participation dropped significantly. Whereas 62% of registered voters participated in the GNC election, less than half that figure registered in early 2014, and less than a third actually cast ballots for the CDA election. The HOR balloting in June drew a similarly low turnout and, with it, challenges to the vote’s legitimacy. Ultimately, several primarily western-Libya-based members boycotted the HOR, precipitating the separate governments that remain in place today despite efforts by the international community to recognize just one.

Challenges to a 2018 Election

Although HNEC increased voter registration from 1.5 to 2.5 million by March 2018, close to the number registered in 2012, significant obstacles remain to implementing elections this year, including matters related to sequencing, passing an electoral law, and security:

Sequencing: UNSMIL still has not specified exactly what it envisions Libyans voting for in 2018 and in what order: a constitutional referendum, parliament, or the presidency. In his 13 April address to Arab foreign ministers, UN special envoy for Libya Ghassan Salame described a constitutional referendum and parliamentary elections as equally important. Further, he burdened the HOR and HSC with producing an agreement on how to proceed, effectively enabling either or both bodies to block an agreed electoral or referendum law. Similarly, a 30 April meeting of the UN, European Union, Arab League and African Union, known as the Quartet, “emphasized the importance of holding parliamentary and presidential elections in accordance with the requisite legal framework.” Still undecided, though, is whether Libyans would go forward with elections before or after a constitutional referendum.

A referendum will require its own law and a public awareness campaign covering the contents of the proposed constitution. Moreover, holding parliamentary or presidential elections before the constitutional referendum risks electing a body before knowing what constitutional authorities it will possess. As for the time crunch noted earlier, the post-Ramadan 2018 calendar simply does not have enough days to accommodate both a referendum and an election, while allowing for sufficient campaign periods, let alone the logistical requirements for preparing, printing and distributing ballots.

Electoral Law & Design: Each of Libya’s three prior elections was conducted under a different law with varying voter awareness initiatives, political campaigns and ballot preparation. The 2012 law, the most successfully implemented with the highest voter turnout, reserved 80 seats for national political parties and 120 for independents running in the country’s sixty-nine districts. The CDA election, held in February 2014, encompassed 60 individual seats for candidates divided into three geographic regions. The HOR vote four months later saw 200 individual candidates spread across seventy-five constituencies, each fielding 1 to 16 candidates. Additional ballots were provided to ensure female and minority representation as well as out-of-country voting. For the next election, the HOR and HSC will likely have different preferences for a system that would include some role for political parties and district-based candidates. For example, Islamist-affiliated candidates have been more successful running as independents unattached to an Islamist-affiliated party.

Security: As the 2 May terrorist attack against the HNEC headquarters demonstrated, conducting elections in Libya poses a serious security problem. Whereas HNEC and its data storage facilities can be better secured, protecting more than 1,500 polling centers – the number used during the 2014 HOR election – along with distributing and collecting ballots could produce major logistical strains. Security will inevitably derive from a series of ad hoc arrangements, presenting opportunities for militia and terrorist spoilers. Further, Libya currently has two active combat zones around Darnah and Sebha. While balloting could possibly be postponed in a handful of constituencies, the exclusion of growing numbers of districts could call into question the overall validity of an election.

Alternatives

Instead of preparing for three potential national elections this year, UNSMIL – with the backing of its key Western and regional partners, including the United States – should consider focusing on implementing an already ambitious set of projects at the core of Salame’s action plan: convening a national conference this summer to develop a better sense of Libyan identity and shared priorities; facilitating municipal elections, as occurred in Zawiyah on 13 May (the terms for 75 of 104 municipal councils in Libya expire this year); expanding the funding and work of the UNDP and other development agencies to implement infrastructure and service-delivery projects; and continuing the militia dialogue, with the aim of producing an agreed action plan for militia unification and a framework for election security. On this last count, Egypt has dubious credentials for producing such an agreement, given its history of supporting the Libyan National Army and Khalifa Haftar, whose illness and disappearance to France in April make a dialogue even more urgent.

The United States should support each of these lines of effort, and has done so quietly in a number of cases. In particular, Washington has in recent weeks provided technical support to HNEC, signed an agreement to expand the capacity of the General Electricity Company of Libya, and endorsed the local elections in Zawiyah. It should, however, increase the scale of these efforts. Past work with municipal councils, for example, should be further developed so that newly elected councils play larger roles in designing and implementing development projects. The United States should also contribute to the militia dialogue by sending a team of experienced officers from Iraq to advise the UN on brokering factional alliances. But most important of all, the United States may need to provide a reality check if no agreement on an electoral law has emerged after Ramadan, urging UNSMIL and its European partners to shift focus away from elections in 2018 and toward the pressing action items already on the UN agenda.

Ben Fishman, an associate fellow with The Washington Institute, served as director for North Africa at the National Security Council from 2011 to 2013. (WINES 21.05)

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11.11 TUNISIA: Fitch Revises Tunisia’s Outlook to Negative; Affirms at ‘B+’

On 27 May 2018, Fitch Ratings revised the Outlook on Tunisia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable and affirmed the IDR at ‘B+’.

Key Rating Drivers

Tunisia’s rating is weighed down by high and growing public and external debt, reflecting wide twin deficits, subdued economic growth and sluggish reform momentum against a background of social and political tensions. This is balanced against strong structural features relative to ‘B’ peers, including high GDP per capita and governance indicators and a clean debt service record.

The revision of the Outlook to Negative reflects increased pressures on external finances and the high uncertainty surrounding the government’s capacity to advance the required policies to reduce macroeconomic imbalances amid social discontent, political tensions and busy electoral agenda. Slow progress on largely unpopular fiscal reforms and continued upward pressures on wages will lead to a persistently wide saving-investment gap. Thin external and fiscal buffers exacerbate the economy’s susceptibility to exogenous shocks. The rebound in oil prices and tightening US dollar financing conditions on international markets raise downside risks for Tunisia’s external and public finances.

Greater pressures on external finances are mitigated by strong official creditor support for Tunisia, reflecting the international community’s backing for the country’s democratic transition and its strategic importance in a precarious regional context. We expect Tunisia to meet the quantitative performance criteria of its current arrangement with the IMF for the upcoming review of Q1/18 in June. Official lending will cover the bulk of external financing needs in 2018, although we also expect the government to also tap the international market. Tunisia’s performance under the arrangement with the IMF was weak in 2016 and 2017, leading to recurrent delays in disbursements of the Fund’s loans. This is a source of liquidity risk given that portions of official financing are directly or indirectly tied to meeting the milestones of the IMF program.

Inflation surged to a 26-year high of 7.7% in April. We project it to remain well above its long-term average of 4% for the foreseeable future, reflecting Banque Centrale de Tunisie’s (BCT) gradualist approach in tightening its policy stance and the broad nature of price pressures in the economy. The central bank has raised its policy rate three times by a cumulative 150bp over the last 12 months, causing an increase in the cost of financing with the money market rate fluctuating close to the upper bound of the interest rate corridor. However, real interest rates are still negative and money supply growth is buoyant, at 12% in March.

The current account deficit (CAD) will remain wide, averaging 9.5% in 2018-2019 based on our forecasts, down from 10.4% in 2017 and against a ‘B’ median of 4.2%. Non-energy imports are stabilizing in volume, while exports are gathering pace. However, the energy import bill is swelling due to rising oil prices and the durable drop in domestic production of hydrocarbons.

The upsurge in inflation and the rise in unit labor costs are aggravating the overvaluation of the dinar. BCT’s interventions and the wide CAD have resulted in a fall in foreign-currency reserves to the equivalent of 72 days of imports in May down from 111 days at end-2016 and 93 days at end-2017. We project net external debt to rise to 75.6% of GDP in 2019, almost double its level five years earlier and well above the ‘B’ median of 24%.

GDP growth is gradually picking up momentum and will average 2.7% in 2018-2019, up from 1.5% in 2016-2017, under our baseline. Tourism is rebounding from the slump that followed the 2015 terrorist attacks, aided by an improved security environment. Agricultural output is expected to achieve strong growth and the revival of external demand is supporting manufacturing activity. Over the medium term, the tightening of the policy mix, pressures on purchasing power and rising costs of inputs will increasingly constrain domestic demand.

The government enacted significant permanent direct and indirect tax increases in 2018, despite social protests against the provisions of the budget law taking place early January. It notably increased several VAT rates by 1%, introduced a 1% social solidarity contribution on corporate and individual income and raised custom duties and other direct and indirect taxes.

Fiscal consolidation is yet to be entrenched on the spending side of the budget. The government plans to gradually phase out energy subsidies by 2021, but incremental increases to gas and electricity tariffs will not be sufficient to offset additional cost pressures due to rising oil prices. Budget transfers to bridge the pension funds’ liquidity shortfall will continue as the pension reform has been further delayed. The strain on liquidity faced by the two pension funds has led to the accumulation of arrears to the national health insurance fund, which has in turn accumulated unpaid bills to the health sector.

The public payroll is a key constraint for consolidation efforts as it absorbed 68% of tax revenues, equivalent to 15% of GDP in 2017. The government’s plans to reduce the headcount in the civil service through a restrictive hiring policy will only bear fruit over the medium term. Participation in the negotiated redundancy scheme targeting 10,000 departures in 2018 has been weak, according to preliminary results.

We project the central government (CG) deficit narrow from 6% of GDP in 2017 to 5.6% in 2018, against a budget projection of 4.5% (4.9% excluding grants), and further to 5% in 2019. This will result in an improvement in the general government (GG) deficit (including social security and local government balances) to 5.4% from 6.3% in 2017. GG debt will continue rising albeit at a slower pace than in previous years, reaching 75% of GDP in 2019, up from 70% in 2017, under our baseline. With 70% of CG debt denominated in foreign currencies, the debt trajectory is highly vulnerable to shocks on the exchange rate.

The financial health of several major state-owned enterprises (SOEs) is undermined by governance shortcomings, low autonomy and their quasi-fiscal roles resulting in underpricing of services and ballooning payroll. Transfers to ailing SOEs are a burden for the budget and the restructuring of several loss-making public companies, including the national carrier Tunisair, are a source of contingent liabilities for the sovereign. Government guarantees on SOE debt were 13% of GDP at end-2016.

The banking sector is currently reliant on BCT financing, as the growth in loans has outpaced deposit inflows. The sector’s financial health metrics are below ‘B’ medians. Profitability is relatively weak and might be further eroded by the expected monetary tightening. The ratio of non-performing loans (NPL) to total loans receded to 13.8% at end-2017 from a peak of 16.6% two years earlier, reflecting a decline in public sector banks’ NPL ratio from 26% to a still high level of 20%. A new law to facilitate the resolution and write-off of NPLs in public bank has recently been approved. Contingent liabilities for the sovereign arise from the protracted litigation over Banque Franco-Tunisienne (BFT).

Party positioning ahead of the 2019 legislative and presidential elections is a source of policy risk and could lead to renewed government instability. The signatories of the current government coalition pact are expected to reach an agreement on a new common platform of economic policies in the coming days, probably leading to a cabinet reshuffle. The new pact and the composition of the new cabinet will be key for the government’s ability to advance the reform agenda over the coming 18 months.

Rating Sensitivities

The main factors that may individually, or collectively, lead to a downgrade:

-Continued weakening in external finances, such as widening of the current account deficit and further drawdown in international reserves, leading to pressures on external liquidity.

-Failure to narrow the fiscal deficit or materialization of contingent liabilities, for example from the weak state-owned enterprises, leading to a faster rise in government debt/GDP than our current projections.

-Instability at the government level or social unrest hindering further progress on macroeconomic adjustment policies and reforms or resulting in the IMF program going off-track.

The current Outlook is Negative. Consequently, Fitch does not currently anticipate developments with a material likelihood of leading to an upgrade. However, the main factors that may individually, or collectively, result in the Outlook being revised to Stable include:

-Stronger implementation of adjustment policies and reforms supporting macroeconomic stability and reducing downside risks for the economy.

-Reduction in budget deficits consistent with stabilizing the public debt/GDP ratio over the medium term.

-A sustainable improvement in Tunisia’s current account deficit, leading to lower external financing needs and stronger international liquidity buffers. (Fitch 27.05)

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11.12 TURKEY: Fitch Says Rhetoric Heightens Risks to Policy Framework

Fitch Ratings noted on 22 May 2018 that comments from the Turkish president raise the possibility that discretionary policymaking and policy predictability will come under pressure after June’s elections. This would be likely to come at a time when tougher global financing conditions will test the vulnerability created by Turkey’s large external financing requirement.

The lira continued its recent weakness, hitting fresh record lows against both the dollar and the euro. Its decline this year is due to a number of factors including a widening current account deficit ($16.4 billion in Q1/18 against $8.4 billion in Q1/17), inflation remaining in double digits, and political and geopolitical stresses. Turkey’s central bank raised the lending rate at its late liquidity window by 75bp in April, but the lira continued to fall after President Erdogan said that rates should be cut and that he would take more responsibility for monetary policy if he wins June’s election.

The Central Bank of the Republic of Turkey (CBRT) subsequently said it was “closely monitoring” market developments and that “necessary steps will be taken.” Recent developments do not alter our view that the central bank remains willing to respond to currency weakness, as it has at times of previous market pressure, albeit not always in the most timely or effective fashion. Last month’s rate rise suggested an acknowledgment of intensifying risks from tighter global financing conditions and rising oil prices (the CBRT noted the impact of higher import prices in April), and those associated with Turkey’s election campaign.

President Erdogan last month called snap elections for 24 June, well ahead of the November 2019 deadline. Bringing the elections forward removes the fiscal risk of pre-election stimulus running for much of 2018-2019. Public debt is low and fiscal policy has been strong and credible in comparison to ‘BB’ category peers.

However, the president’s comments in a Bloomberg TV interview, in which he said that the CBRT would not be able to ignore his views on interest rates, highlight the significance of the elections, which will trigger the change to an executive presidency system narrowly approved in a referendum last year. This will entrench the erosion of checks and balances and institutional independence in Turkey that has taken place in recent years, and which was one reason we downgraded Turkey’s sovereign rating to ‘BB+’/Stable in early 2017.

Monetary policy in Turkey has long been subject to political constraints, but an explicit threat to curb the central bank’s independence increases risks to the policymaking environment and to policy effectiveness, not only from political interference but from the greater pressure on the CBRT to prove its independence. The president’s comments also raise the possibility of overall economic policy, not just monetary policy, becoming less predictable after the elections. Greater erosion of monetary policy independence would put further pressure on Turkey’s sovereign credit profile, particularly if it contributed to serious external financing stresses and a deterioration in the macroeconomic environment, or undermined wider economic policymaking credibility and the country’s business environment. (Fitch 22.05)

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11.13 TURKEY: Turkish Defense Industry at Critical Juncture

Metin Gurcan posted in Al-Monitor of 25 May that after significant progress on the domestic level, the Turkish defense industry has reached a challenging phase in which it needs to enhance its export capacity to ensure sustainable growth.

Rarely a day passes in Turkey without newspapers trumpeting another success story in the defense industry. In the past two years, in particular, the defense and aviation sectors have become rich propaganda material in a government rhetoric exalting nativism and nationalism in almost every realm.

Amid the avalanche of exaggerated praise, realistic assessments of the state of the Turkish defense industry are also available. The Defense and Aerospace Industry Manufacturers Association released its 2017 sectoral performance report, which, in a sense, is the report card of the Turkish defense industry for last year. The document paints a generally successful year, but indicates that the sector should now focus on sustaining growth, drawing a cautiously optimistic picture of the future.

According to the report — a compilation of individual figures provided by members — the sector’s turnover was nearly $6.7 billion last year, a 12% increase from 2016. In the breakdown, the biggest turnover — some $2.4 billion — came from the sale of land vehicles and systems followed by military aviation products with $1.13 billion; weapons, ammunition and missiles with $828 million; civil aviation products with $650 million; naval products with $569 million; military maintenance with $171 million; and logistics with $134 million. Another $650 million was listed under the “other” category.

Exports were worth $1.82 billion, a 6.6% decrease from 2016, including $684 million worth of final products sold to end users, with the rest intermediate products sold to foreign companies.

The report does not indicate how much of the exports were part of offset arrangements in government procurements from foreign manufacturers. If all sales to foreign companies are presumed to be offsets, the remaining $684 million — or 37% of export revenues — are supposed to have come from contracts won in a competition environment. According to this figure, the Turkish defense industry is still weak in terms of international competitiveness.

Stressing that exports had been slowing since 2014, the report notes that the sector has reached a phase of sustaining growth, with domestic sales — primarily to the Turkish military — at a point of saturation. Aside from traditional offset sales to European and US companies, the report underlines the importance of boosting sales to the Middle East, the Turkic republics of Central Asia and the South Asia-Pacific region.

As of the end of 2017, the sector employed 44,740 people, a 30% increase from 2016, according to the report. The increase, which corresponds to about 10,000 new jobs, is indicative of the many Turkish companies that have moved from other sectors into the defense industry, driven by political winds and economic incentives.

The report notes that imports in the sector are on the rise, standing at $1.54 billion in 2017, up 20% from the previous year. The spike in imports stems from the foreign-made components required for the increasing domestic production and the need companies feel to stock some products in the face of covert embargoes by the United States and European countries.

Half of the sector’s imports are from Europe and 35% from the United States, indicating how reliant the Turkish defense industry remains on Western technology, including intermediate products and subsystems, despite Ankara’s native and national bombast. The West’s 85% share in the imports must be disappointing to Russia, which has sought to cash in on Turkey’s souring ties with its NATO allies.

With such high reliance on imports from the United States, Turkish defense industry companies are following with concern the rising calls in Congress to curtail military sales to Turkey. In another downside, the report notes that efforts to reverse the brain drain by luring qualified Turkish expatriates back home have failed to bear fruit, underscoring the sector’s dire need for highly skilled technology workers. Commenting on the sector’s outlook, defense industry insider Arda Mevlutoglu told Al-Monitor that the increase in turnover despite the general deterioration in the Turkish economy was commendable, but he stressed that “difficulties obviously persist on the side of exports, which are critical for sustainable growth.”

The drop in exports is the result of a slowdown trend since 2014, Mevlutoglu said, pointing to a combination of factors. Due to Turkey’s military campaign in northern Syria and ongoing security operations at home, military needs have increased, boosting the turnover of the sector, he explained. “The production priority has been on meeting domestic demand, while export-oriented business development and marketing capacities remain insufficient and the sector’s productivity problem persists; hence, exports remain below the desired level,” he said.

“Still, the more than expected increase in turnover is good news. I guess the amount of exports will increase in 2018, given the contracts signed with Qatar. The picture looks good in the long term,” he added.

In March, Turkish companies sealed contracts worth some $400 million with Qatari counterparts during the Doha International Marine Defense Exhibition and Conference. The deals involve the sale of armed drones, armored vehicles, assault boats, special operations boats and electronic surveillance systems, among others.

The prospect of sales to Pakistan is also boosting optimism that the decline in exports will be reversed this year. A major deal just closed involves the sale of 30 T129 ATAK attack helicopters to Pakistan, which has also shown interest in buying four MILGEM Ada-class anti-submarine warfare corvettes from Turkey.

An Ankara-based defense industry expert who wished to remain anonymous stressed that self-sufficiency and sustainability would be critical for the growth of the sector. “Turkey cannot become a major regional power without military deterrence, but at the same time, it cannot trust weapons suppliers from traditional Western allies,” the source said. “Therefore, for the sake of better deterrence, Turkey should rely on its own capabilities in developing arms and seek all opportunities to export [to achieve sustainability]. Without self-sufficiency and sustainability, the sector can hardly grow with just hollow bluster.”

Indeed, defense autarky appears to be a major driver in the efforts to expand the industry, along with other objectives such as economic gains, international prestige and political grandstanding for domestic consumption.

Ankara, however, still lacks a clear-cut political vision or a road map on how to effectively manage the sustainability phase. A number of serious downsides stand in the way of progress, calling for urgent solutions. Along with institutional challenges within the sector, extreme political interference and nepotism hinder merit-based development. Coordination between the military and civilian bureaucracy remains poor, in addition to inadequate cooperation between the sector, policymakers and universities. Due to the domination of big state-backed firms, small and medium-sized companies have little room to survive, which, on top of the problem of human capital deficiency, has a killing effect on innovation.

Metin Gurcan is a columnist for Al-Monitor’s Turkey Pulse. He served in Afghanistan, Kazakhstan, Kyrgyzstan and Iraq as a Turkish military adviser from 2002 to 2008. After resigning from the military, he became an Istanbul-based independent security analyst. Gurcan obtained his PhD in 2016 with a dissertation on changes in the Turkish military over the preceding decade. (Al-Monitor 28.05)

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Fortnightly, 30 May 2018

Fortnightly, 30 May 2018

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